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EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT is made as of July 5, 2000 by and among
Applied Imaging Corp., a Delaware corporation ("BUYER"), Perceptive Scientific
Instruments, LLC, a Delaware limited liability company ("SELLER"), and
International Remote Imaging Systems, Inc., a Delaware corporation ("PARENT").
Certain other capitalized terms used in this Agreement are defined in EXHIBIT A
attached hereto.
WHEREAS, Seller desires to sell the Purchased Assets (as defined below)
to Buyer, subject to the terms and conditions set forth herein;
WHEREAS, Buyer desires to purchase the Purchased Assets from Seller,
subject to the terms and conditions set forth herein;
WHEREAS, the League City Employees (as defined below), who provide
services exclusively for Seller, are employed by Parent;
WHEREAS, Parent shall obtain substantial direct and indirect benefit
from the transactions contemplated by this Agreement and the other Transaction
Agreement (as defined below); and
WHEREAS, Buyer would not enter into this Agreement without the
agreements of Parent hereunder;
NOW THEREFOR, in consideration of the premises hereinabove set forth and
the terms, covenants and conditions hereinafter set forth, the parties hereto
agree as follows:
1. ASSETS BEING PURCHASED; LIMITED ASSUMPTION OF LIABILITIES.
1.1 PURCHASED ASSETS. Subject to the terms and conditions of this
Agreement, Buyer hereby agrees to purchase and acquire from Seller, and Seller
hereby agrees to sell, convey, transfer and assign to Buyer, at the Closing (as
defined below), all of Seller's right, title and interest in and to all rights,
properties, assets, claims, contracts and agreements of Seller, other than
Excluded Assets (as defined below) (the "PURCHASED Assets"), including, without
limitation, the assets described below:
(a) All of Seller's personal property (the "PERSONAL
PROPERTY"), including, without limitation, machinery, equipment (including,
without limitation, demonstration equipment), computer hardware, software (other
than the Software), servers, inventory, spare parts, work-in-progress,
prototypes, files, records, artwork, correspondence, memoranda, logs, lab
notebooks, advertising and promotional materials, exhibition and display
materials, software, Internet domains, source code and databases (including,
without limitation, associated software and hardware);
(b) All of Seller's Intellectual Property and all goodwill
associated with such Intellectual Property, including, without limitation, (i)
the right to use, copy, modify,
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exploit, license, assign, convey and pledge the Intellectual Property, (ii) the
right to exclude others from using the Intellectual Property, (iii) the right to
sue others and collect damages for past, present and future infringement of the
Intellectual Property, (iv) the right to create derivatives of the Intellectual
Property and retain full ownership thereof and (v) the right to file and
prosecute applications for registration, now pending or hereinafter initiated,
to protect any rights in the Intellectual Property, including, without
limitation, such Intellectual Property described on SCHEDULE 1.1(b) attached
hereto;
(c) All of (i) Seller's rights under its contracts and
agreements, including, without limitation, capital and equipment leases, service
contracts, non-competition agreements, non-solicitation agreements,
non-disclosure agreements and employee invention agreements, and (ii) Parent's
rights under its contracts with any of the League City Employees, including,
without limitation, non-competition agreements, non-solicitation agreements,
non-disclosure agreements and employee invention agreements (collectively, the
"SELLER CONTRACTS");
(d) All of Seller's and Parent's rights to employ the
employees of Seller identified on SCHEDULE 3.16(a) attached hereto, other than
those identified thereon as being retained by Seller (the "LEAGUE CITY
EMPLOYEES");
(e) All of Seller's rights and interests in the League City
Facility Lease (as defined below);
(f) All of Seller's claims, causes of action, warranties,
guarantees, refunds, rights of recovery and set-offs of every kind and character
(other than such claims, causes of action warranties, refunds, rights and
set-offs with respect to the Excluded Assets);
(g) All of Seller's accounts receivable (whether or not
billed), other than those specifically identified on SCHEDULE 1.2 attached
hereto; provided, however, that if Seller shall receive or shall have received
any amounts with respect to accounts receivable on or after the date hereof,
such amounts shall be remitted to Buyer in accordance with the provisions of
Section 7.10; and
(h) All books and records of Seller.
1.2 EXCLUDED ASSETS. Notwithstanding anything in Section 1.1 to the
contrary, the following assets and properties of Seller are expressly excluded
from the purchase and sale contemplated by this Agreement (collectively, the
"EXCLUDED ASSETS"):
(a) All cash on hand of Seller at the Closing;
(b) All shares of capital stock of Perceptive Scientific
International Ltd., a company organized under the laws of the United Kingdom
("PSI/UK");
(c) All intercompany and notes receivables specifically
identified on SCHEDULE 1.2 attached hereto;
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(d) All of Seller's accounts receivable (whether or not
billed) primarily related to the Research Projects (as defined below)
specifically identified on SCHEDULE 1.2 attached hereto;
(e) All logs, lab notebooks, furniture, equipment and other
assets and properties primarily used for the Research Projects conducted by
Seller at the League City Facility, as specifically described on SCHEDULE 1.2(e)
attached hereto, together with the rights of Seller and Parent described in
Section 7.5;
(f) All distribution, sales and agency agreements of Seller;
and
(g) All of Seller's corporate governance records and
documents.
1.3 LIMITED ASSUMPTION OF LIABILITIES. Notwithstanding anything
herein to the contrary, Seller agrees that Buyer shall not be obligated to
assume or perform and is not assuming or performing any liabilities or
obligations of Seller, whether known or unknown, fixed or contingent, certain or
uncertain, and regardless of when such liabilities or obligations may arise or
may have arisen or when they are or were asserted (the "RETAINED LIABILITIES"),
and Seller shall remain responsible for all Retained Liabilities, except solely
for the following (the "ASSUMED LIABILITIES"):
(a) Seller's liabilities for (i) accounts payable, other
than such accounts payable specifically identified on SCHEDULE 1.2 attached
hereto and any accounts payable for line items identified on SCHEDULE 1.2
attached hereto as having a $0 balance, and (ii) outstanding purchase orders
issued in the ordinary course of business but not yet reflected in the accounts
payable because the vendor has not yet invoiced Seller; provided, however, that
Buyer shall not assume more than $73,894 of such liabilities in the aggregate;
(b) Seller's residual liabilities as of the Closing Date (as
defined below) with respect to service contracts of Seller acquired by Buyer
hereunder;
(c) Seller's warranty obligations arising with respect to
equipment sold in the normal and ordinary course of business by Seller on or
prior to the Closing Date, which obligations shall not have been satisfied in
connection therewith as of the Closing Date;
(d) Seller's liabilities and obligations under the Seller
Contracts constituting Purchased Assets, excluding such liabilities and
obligations resulting from or arising in connection with any breach of contract,
breach of warranty, tort, injury caused to another, infringement claim, lawsuit
or violation of law arising prior to, or otherwise related to the period prior
to, the Closing;
(e) Seller's (i) liabilities with respect to vacation and
personal time leave accrued but not used as of the Closing Date for each League
City Employee and (ii) costs agreed in writing by Buyer at or prior to the
Closing or costs otherwise required by law resulting from Buyer's failure to
hire any League City Employee.
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2. PURCHASE PRICE; CLOSING.
2.1 PURCHASE PRICE. The consideration for the sale to Buyer of the
Purchased Assets shall be (a) 385,371 shares of Buyer's common stock, par value
$0.001 per share (the "SHARES") and (b) the assumption by Buyer of the Assumed
Liabilities.
2.2 CLOSING. The closing of the purchase and sale of the Acquired
Assets and the other transactions contemplated by this Agreement (the "CLOSING")
shall take place within three business days after satisfaction or waiver of the
conditions to closing set forth in Sections 8 and 9, or on such other date as
shall be mutually agreed by Buyer and Seller (the date of the Closing being, the
"CLOSING DATE"), at the offices of Georgopoulos Pahlavan & Prince, LLP, 935
Hamilton Avenue, Menlo Park, California 94025.
3. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and
warrants to Buyer, subject to the exceptions specifically disclosed with
particular references to the relevant sections of this Section 3 in the
DISCLOSURE SCHEDULE attached hereto, as follows:
3.1 AUTHORITY AND BINDING EFFECT.
(a) Seller has the full power and authority to execute and
deliver this Agreement and the other Transaction Agreements to which it is a
party. This Agreement and the other Transaction Agreements and the consummation
by Seller of its obligations contained herein and therein have been duly
authorized by all necessary action on the part of Seller and its members. This
Agreement has been, and the other Transaction Agreements to which Parent is a
party shall be, duly executed and delivered by Seller. This Agreement is and the
other Transaction Agreements when executed and delivered shall be valid and
binding agreements of Seller, enforceable against Seller in accordance with
their terms. It is not necessary for Seller to take any action or to obtain any
approval, consent or release by or from any third person, governmental or other,
to enable Seller to enter into or perform its obligations under this Agreement,
except those that have already been taken or obtained.
(b) Parent has the full corporate power and authority to
execute and deliver this Agreement and the other Transaction Agreements to which
it is a party. This Agreement and the other Transaction Agreements and the
consummation by Parent of its obligations contained herein and therein have been
duly authorized by all necessary corporate action on the part of Parent and its
stockholders. This Agreement has been, and the other Transaction Agreements to
which Parent is a party shall be, duly executed and delivered by Parent. This
Agreement is and the other Transaction Agreements when executed and delivered
shall be valid and binding agreements of Parent, enforceable against Parent in
accordance with their terms. It is not necessary for Parent to take any action
or to obtain any approval, consent or release by or from any third person,
governmental or other, to enable Parent to enter into or perform its obligations
under this Agreement, except those that have already been taken or obtained.
3.2 ORGANIZATION AND STANDING.
(a) Seller is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Seller is qualified to do
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business in each jurisdiction where such qualification is necessary and where
the failure to be so qualified would have a Material Adverse Effect on Seller.
Seller has the requisite corporate power and authority to conduct its business
as now conducted and to own or lease the Purchased Assets, and to use such
Purchased Assets in the conduct of its business.
(b) Parent is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Parent is
qualified to do business in each jurisdiction where such qualification is
necessary and where the failure to be so qualified would have a Material Adverse
Effect on Parent. Parent has the requisite corporate power and authority to
conduct its business as now conducted and to own or lease its assets, and to use
such assets in the conduct of its business.
3.3 FINANCIAL STATEMENTS, ETC.
(a) Set forth on SCHEDULE 3.3(a) attached hereto is a true,
correct and complete copy of the following financial statements of Seller: (i)
the unaudited balance sheet as of May 31, 2000 and the related statements of
operations, income statements and cash flows for the applicable fiscal period
then ended (the "MAY 31, 2000 FINANCIAL STATEMENTS") and (ii) the consolidating
balance sheet as of December 31, 1999 and the related statement of operations,
income statements and cash flows for the fiscal year then ended, which were used
in the preparation of Parent's audited financial statements (together with the
May 31, 2000 Financial Statements, the "FINANCIAL STATEMENTS"). The Financial
Statements have been prepared from the books and records of Seller in accordance
with United States generally accepted accounting principles ("GAAP")
consistently applied and fairly present Seller's financial condition, assets and
liabilities as of their respective dates and the results of operations and cash
flows of Seller for the periods related thereto, except for the effects of
excluding PSI/UK (which would normally be consolidated with Seller under GAAP)
from the balance sheets and statements of operations included in the Financial
Statements. The Financial Statements include adequate reserves for warranties as
required by GAAP.
(b) The accounts receivable of Seller (excluding accounts
receivable constituting Excluding Assets) are $250,471 and the related allowance
for doubtful accounts is $8,500 as of the Closing Date. The accounts receivable
are valid and genuine, have arisen solely out of bona fide sales, performance of
services and other business transactions in the normal and ordinary course of
business consistent with past practice. Buyer acknowledges that it has
responsibility for collection of the accounts receivable and that Seller and
Parent have not warranted or guaranteed collection of the accounts receivable.
(c) Seller is not a guarantor or indemnitor of any
indebtedness of any other person.
(d) Set forth on SCHEDULE 3.3(d) attached hereto is a the
fixed asset schedule of the Seller and the reconciliation to ledger for the
fiscal periods ended December 31, 1999 and May 31, 2000, which were used in
connection with the preparation of the Financial Statements and which are true,
correct and complete in all material respects.
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3.4 NO PREBILLINGS OR PREPAYMENTS. Seller has not billed, and
Seller has not received any payments (in the form of retainers or otherwise)
from, any of its customers or potential customers for services to be rendered or
for expenses to be incurred subsequent to the Closing, except for warranty
obligations and service contracts reflected in the May 31, 2000 Financial
Statements and a service contract, effective July 1, 2000 for $11,846.
3.5 ABSENCE OF UNDISCLOSED LIABILITIES. Seller does not have any
debts, liabilities or obligations of any nature (whether accrued, absolute,
contingent, direct, indirect, perfected, unliquidated or otherwise and whether
due or to become due whether known or unknown) arising out of transactions
entered into on or prior to the Closing Date, or any transaction, series of
transactions, action or inaction occurring on or prior to the Closing Date, or
any state of facts or condition existing on or prior to the Closing Date
(regardless of when such liability or obligation is asserted), which could
reasonably be expected to result in such debt, liability or obligation,
including but not limited to, governmental charges or penalties, assessments,
interest or fines thereon or in respect thereof, except for debts, liabilities
or obligations (a) that are identified in the Financial Statements and (b) under
Seller Contracts (none of which relates to any breach of contract, breach of
warranty, tort, injury caused to another, infringement, claim, lawsuit or
violation of law). Since May 31, 2000, Seller has not incurred any obligation,
contingent or otherwise, to refund or rebate any amounts paid or payable to it
for equipment sold or services rendered prior to Closing Date.
3.6 BOOKS AND RECORDS. All books, records and accounts of Seller
relating to its business and the Purchased Assets are accurate and complete in
all material respects, accurately reflect all matters normally entered into the
books, records or accounts maintained by similar businesses, are in all respects
in accordance with good business practice and all laws, regulations and rules
applicable to Seller, its business or the Purchased Assets and accurately
present and reflect in all material respects all of the transactions described
therein.
3.7 ABSENCE OF CERTAIN CHANGES. Except the commencement of a
voluntary bankruptcy filing for PSI/UK, since December 31, 1999, (a) there has
not (i) been any sale, transfer, or other disposition of, or the incurrence or
imposition of any Encumbrance of any kind on or affecting, any of the Purchased
Assets, except sales in the ordinary course of business consistent with past
practice, or (ii) occurred any event or condition that could result in a
Material Adverse Effect on Seller (other than conditions that have generally
affected the industry in which the Seller conducts its business) and (b) Seller
has conducted its business in the normal and ordinary course consistent with
past practice.
3.8 CONFLICTS. Neither the execution and delivery of nor the
consummation of the transactions contemplated by this Agreement could result in
any of the following: (a) a default or an event that, with notice or lapse of
time, or both, would be a default, breach or violation of the Certificate of
Formation, Bylaws or other governing instruments of Seller; (b) the creation or
imposition of any Encumbrance on any of the Purchased Assets; (c) the violation
or breach of any writ, injunction or decree that would become or is now
applicable to or binding on any of the Purchased Assets or Seller's business;
(d) a loss or adverse modification of any license, franchise, permit or other
authorization or right (contractual or other) to operate its business or to own
any of the Purchased Assets, granted to or otherwise held by Seller or used in
its business;
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or (e) the right of any third party to cease or terminate any other business
relationship or arrangement between Seller and any such third party.
3.9 COMPLIANCE WITH LAW/PERMITS. Seller is in compliance with all,
and is not in violation of any, law, ordinance, order, decree, rule or
regulation of any governmental agency or authority, the violation of or
noncompliance with which could have a Material Adverse Effect on Seller. Seller
has made all filings, notices, requests for approval and other similar
requirements required by law for the conduct of its business and the execution,
delivery and performance of its obligations under this Agreement. No unresolved
(a) charges of violations of laws or regulations relating to its business have
been made or threatened, (b) proceedings or investigations relating to its
business are pending or, to Seller's knowledge, have been threatened and (c)
citations or notices of deficiency have been issued or have been threatened
against Seller relating to or arising out of its business by any governmental
authorities; and, to Seller's knowledge, there are no facts or circumstances
upon which any such charges, proceedings, investigations, or citations or
deficiency notices, could be instituted, issued or brought hereafter.
3.10 LITIGATION AND PROCEEDINGS. There is no action, suit,
proceeding or investigation (or any counter or cross-claim in an action brought
by or on behalf of Seller), whether at law or in equity, or before or by any
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, or before any arbitrator of any kind, that is pending or,
to Seller's knowledge, threatened, against Seller, which (i) could adversely
affect Seller's ability to perform its obligations under this Agreement or
complete any of the transactions contemplated hereby or (ii) to Seller's
knowledge, involves the possibility of any judgment or liability, or which may
become a claim, against Buyer, its business or the Purchased Assets. Seller is
not subject to any judgment, order, writ, injunction, decree or award of any
court, arbitrator or governmental department, commission, board, bureau, agency
or instrumentality having jurisdiction over Seller or its business or any of the
Purchased Assets that affects, involves or relates to the Purchased Assets.
3.11 PURCHASED ASSETS. Seller has, and on the Closing Date shall
convey and transfer to Buyer, good and marketable title to all of the Purchased
Assets, free and clear of all Encumbrances of any nature whatsoever. All of the
Purchased Assets are in the exclusive possession and control of Seller, and
Seller has the unencumbered right to use, and to sell to Buyer in accordance
with the terms and provisions of this Agreement and the other Transaction
Agreements, all of the Purchased Assets without interference from and free of
the rights and claims of others.
3.12 REAL PROPERTY. Seller owns no real property and, except for
the lease for the League City Facility, which is attached hereto (together with
all amendments, supplements and other modifications thereto) as SCHEDULE 3.12
(the "LEAGUE CITY FACILITY LEASE"), Seller has no other interest in any real
property.
3.13 CONTRACTS.
(a) True, correct and complete copies of all written Seller
Contracts and written summaries of all oral Seller Contracts, if any, have
previously been furnished to Buyer. Neither Seller nor, to the best knowledge of
Seller, the other party or parties to any such
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Seller Contract, is in default under any of such Seller Contracts and no event
has occurred which with the giving of notice or passage of time or both could
constitute a default by Seller, or to the knowledge of Seller, any other party
under any of such Seller Contracts. Seller is current on its payment obligations
under each Seller Contract. The continuation, validity and effectiveness of all
Seller Contracts shall in no way be affected by the transactions contemplated
hereby and there are no negotiations pending to revise the terms of any such
Seller Contracts.
(b) Seller is not party to or obligated under any
distribution, sales, agency or similar agreement or arrangement.
(c) Seller is not obligated to make any payments and has no
other liabilities with respect to claims with respect to any warranty
obligations described in Section 1.3(c) that were known or should have been
known by Seller at or prior to the Closing.
3.14 INTELLECTUAL PROPERTY.
(a) Seller owns all right, title and interest in and to all
Intellectual Property free and clear of all Encumbrances (including without
limitation any distribution rights and royalty rights), other than the liens
held by Foothill Capital Corporation ("FOOTHILL"), which liens shall be released
at or prior to the Closing, and the rights of the United States government to
use any intellectual property developed under government sponsored research and
development programs (such as the Small Business Innovative Research program)
conducted by Seller (the "SBIR AND OTHER SIMILAR RIGHTS").
(b) Seller has the exclusive right to use, sell, license and
dispose of, and has the right to bring actions for infringement of, all
Intellectual Property, including, without limitation, the right to collect
damages for past, present and future infringements.
(c) To the best of Seller's knowledge, Seller has valid
copyrights in all material copyrightable material used in connection with its
business and included in the Purchased Assets whether or not registered with the
U.S. Copyright Office. Consummation of the transactions contemplated hereby
shall not alter or impair the validity of any such copyrights or copyright
registrations.
(d) No claims have been asserted against Seller by any
person challenging Seller's use or distribution (including, without limitation,
manufacture, marketing license or sale) of any Intellectual Property or
challenging or questioning the validity or effectiveness of any license or
agreement relating thereto, other than (i) a claim in 1996 by Vysis, Inc.
asserting infringement of their patent(s) for Comparative Genomic Hybridization
(CGH) software algorithms and (ii) a claim in March 1999 by Applied Spectral
Imaging asserting infringement of U.S. Patent No. 5,798,262 alleging covering
any technology using a device and algorithms to display chromosomes or portions
of chromosomes in different colors. Seller is not aware of any valid basis for
any claim of the type specified in this Section 3.14(d).
(e) The execution, delivery and performance of this
Agreement and the transactions contemplated hereby shall not (i) breach, violate
or conflict with any instrument, agreement or other right governing any of the
Intellectual Property or portion thereof, (ii) cause the forfeiture or
termination, or give rise to a right of forfeiture or termination, of any
Intellectual
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Property or portion thereof, (iii) in any way impair the right of Buyer to use
(including, without limitation, distribute, manufacture, marketing, license,
sale or other disposition) any Intellectual Property or portion thereof, or (iv)
give rise to any right to bring any action for infringement of any Intellectual
Property or any portion thereof.
(f) To the best of Seller's knowledge, the operation by
Seller of its business (including, without limitation, design, manufacture,
marketing, license or sale) does not violate, and has not violated, any
intellectual property rights of any third party, including, without limitation,
infringement of or misappropriation of intellectual property or other
proprietary rights, and no third party has provided notice to Seller of a
possible such violation.
(g) Seller is not aware that any party to any contract,
commitment or restriction relating to any Intellectual Property intends to
cancel, withdraw, modify or amend such contract, commitment or restriction.
(h) (i) Other than the SBIR and Other Similar Rights and the
rights of Seller and Parent under Section 7.5, no third party (including,
without limitation, PSI/UK) has any right to manufacture, reproduce, distribute,
sell, sublicense, market or exploit any of the Intellectual Property or any
adaptations, translations, or derivative works based on the Intellectual
Property, or any portion thereof; (ii) Seller has no agreements, contracts or
commitments that provide for the manufacture, reproduction, distribution, sale,
sublicensing, marketing, development, exploitation or supply by Seller of any
Intellectual Property or any adaptation, translation, or derivative work based
on the Intellectual Property, or any portion thereof or otherwise material to
its business; (iii) Seller has not granted to any third party any exclusive or
non-exclusive rights of any kind with respect to any of the Intellectual
Property; and (iv) Seller has not granted any third party any right to market
any product utilizing any Intellectual Property under any "private label"
arrangements pursuant to which Seller is not identified as the source of such
goods.
(ii) Seller has not knowingly altered its data, or any
Intellectual Property, in a manner that may damage data, whether stored in
electronic, optical, magnetic or other form.
3.15 TAXES
(a) All Tax Returns required to be filed by or on behalf of
Seller have been properly prepared and duly and timely filed with the
appropriate taxing authorities in all jurisdictions in which such Tax Returns
are required to be filed (after giving effect to any valid extensions of time in
which to make such filings), and all such Tax Returns were true, complete and
correct in all material respects.
(b) All Taxes for all periods up to the Closing Date that
are due and payable by Seller on or before the Closing Date have been fully and
timely paid, and adequate reserves or accruals for any and all Taxes for which
Seller is liable with respect to any period ending on or before the Closing Date
for which Tax Returns have not yet been filed or for which Taxes are not yet due
and owing have been made in the Financial Statements.
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(c) Seller has timely withheld from employee salaries, wages
and other compensation and paid over to the appropriate taxing authorities all
amounts required to be so withheld and paid over for all periods under all
applicable laws ending on or before the Closing Date.
(d) Seller has delivered to Buyer complete copies of any
audit report relating to Taxes due from Seller.
(e) Seller has not executed or filed with the Internal
Revenue Service (the "IRS") or any other taxing authority any agreement, waiver
or other document or arrangement extending or having the effect of extending the
period for assessment or collection of Taxes (including, without limitation, any
applicable statute of limitation).
(f) No written claim has been made by a taxing authority in
a jurisdiction where Seller does not file Tax Returns that Seller is or may be
subject to taxation by that jurisdiction.
(g) All deficiencies asserted or assessments made as a
result of any examinations by the IRS or any other taxing authority of the Tax
Returns of or covering or including Seller have been fully paid, and there are
no other audits or investigations by any taxing authority in progress, nor has
Seller received any written notice from any taxing authority that it intends to
conduct such an audit or investigation.
(h) Neither Seller nor any other person has filed a consent
pursuant to Section 341(f) of the Internal Revenue Code of 1986, as amended (the
"CODE"), or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a "subsection (f) asset" (as such term is defined in Section
341(f)(4) of the Code) owned by Seller.
(i) None of the Assets is (i) property required to be
treated as being owned by another person pursuant to the provisions of Section
168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect
immediately prior to the enactment of the Tax Reform Act of 1986, (ii)
constitutes "tax-exempt use property" within the meaning of Section 168(h)(1) of
the Code or (iii) is "tax-exempt bond financed property" within the meaning of
Section 168(g) of the Code.
(j) There are no Encumbrances as a result of any unpaid
Taxes upon any of the Assets.
(k) No Tax is required to be withheld by Buyer or its
affiliates under Section 1445 of the Code as a result of the sale of the Assets
or the granting of the License contemplated hereby.
3.16 EMPLOYEES
(a) Set forth on SCHEDULE 3.16(a) is a true, complete and
correct list of the League City Employees setting forth each such League City
Employee's (i) name, (ii) job title, (iii) current base salary and bonus
compensation, (iv) vacation and personal time accrual rate, (v) accrued vacation
and personal time as of the Closing Date, (vi) date of hire, (vii) full- or
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part time status and (viii) exempt or non-exempt status. Seller is not a party
to any outstanding contract or agreement with employees, agents, consultants or
advisors with respect to its business or the Purchased Assets.
(b) Except as set forth on SCHEDULE 3.16(b), there are no
employee benefit plans, contracts or arrangements of any type currently in
effect for the benefit of the League City Employees (or any beneficiaries of any
such League City Employees), including, without limitation, (i) any employee
benefit plans described in Section 3(3) of the Employee Retirement, Income and
Security Act of 1974, as amended ("ERISA"), and (ii) any deferred compensation
plans, incentive plans, bonus plans or arrangements, stock option plans, stock
purchase plans, severance pay plans, dependent care plans, cafeteria plans,
employee assistance programs, scholarship programs and other compensatory plans,
agreements and arrangements which are not so described, which are currently in
effect for the benefit of the Seller's current employees (or beneficiaries of
such employees). Each of such employee benefit plans, contracts or arrangements
is herein referred to as an "EMPLOYEE BENEFIT PLAN".
(c) Seller has not incurred any liability, directly or
indirectly, for any accumulated funding deficiency within the meaning of Section
302(a)(2) of ERISA or Section 412 of the Code, which has resulted or could
result in the imposition of a Encumbrance upon any of the Purchased Assets; and
no event has occurred and no circumstance exists under which Seller has incurred
or may incur, directly or indirectly, liability under the provisions of Title IV
of ERISA which shall not have been satisfied prior to the Closing Date.
(d) Seller is not a party to any collective bargaining
agreement covering the employment of any of its current employees.
(e) Except for the Assistant Director of R&D of Seller,
Seller has not received any notice and has no knowledge that any of its current
employee is terminating his or her employment with Seller on account of the
acquisition of the Purchased Assets by Buyer or otherwise.
3.17 CUSTOMERS.
(a) Set forth on SCHEDULE 3.17(a) attached hereto is a true,
correct and complete list of all Seller's material customers and the names,
titles and phone numbers of Seller's contacts at such customers. Since December
31, 1999, no material customer has cancelled, or otherwise terminated, or, to
the knowledge of Seller, threatened to cancel or otherwise terminate, its
relationship with Seller or materially reduced, or, to the knowledge of Seller,
threatened to materially reduce its business with Seller. Seller has not
received any notice and has no knowledge that any material customer intends to
cancel or otherwise modify its relationship with Seller or its on account of the
acquisition of the Purchased Assets by Buyer or otherwise.
(b) Set forth on SCHEDULE 3.17(b) attached hereto is a true,
correct and complete list of all service contracts and agreements and warranty
obligations of Seller.
3.18 CERTAIN TRANSACTIONS. Neither Seller nor any of its affiliates
has any direct or indirect interest in any competitor, supplier or customer of
Seller or in any person from
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whom or to whom Seller leases any real or personal property or in any other
person with whom Seller has any business relationship. There are no (i)
management, administrative, computer, telephone or other services provided by
any of Seller's affiliates to Seller or by Seller to any of Seller's affiliates
or (ii) other contracts, agreements, arrangements or transactions (including the
purchase and sale of inventory or supplies, as well as any loan agreements)
between Seller, on the one hand, and any of Seller's affiliates on the other
hand, currently in effect, including, without limitation, any agreement or
arrangement relating to indebtedness of Seller to any such individual or entity
or the indebtedness of any such individual or entity to Seller. As used in this
Agreement, the term "affiliate" shall mean, with respect to any person or
entity, any person or entity which, directly or indirectly, is in control of, is
controlled by, or is under common control with, such person or entity.
3.19 NO BROKER. Seller has not retained or used the services of an
agent, finder or broker in connection with the transactions contemplated by this
Agreement.
3.20 INVESTMENT REPRESENTATIONS.
(a) Seller is acquiring the Shares for its own account, not
as nominee or agent, for investment and not with a view to, or for resale in
connection with, any distribution or public offering thereof within the meaning
of the Securities Act.
(b) Seller understands that (i) the Shares has not been
registered under the Securities Act by reason of a specific exemption therefrom,
that it must be held by Seller indefinitely, and that Seller must, therefore,
bear the economic risk of such investment indefinitely, unless a subsequent
disposition thereof is registered under the Securities Act or is exempt from
such registration; (ii) each certificate representing the Shares shall be
endorsed with a legend in substantially the following form:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT COVERING SUCH
SECURITIES UNLESS SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION
IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF THE ACT.
and (iii) Buyer will instruct any transfer agent not to register the transfer of
any of the Shares unless the conditions specified in the foregoing legend are
satisfied.
(c) Seller acknowledges that it is able to fend for itself,
can bear the economic risk of its investment and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Shares and has independently satisfied
itself as to such merits and risks.
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(d) Seller understands that the Shares it is acquiring is
characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from Buyer in a transaction not involving a
public offering and that under such laws and applicable regulations such
securities may be resold without registration under the Securities Act, only in
certain limited circumstances, and it represents that it is familiar with Rule
144 under the Securities Act and understands the resale limitations imposed
thereby and by the Securities Act.
3.21 REPRESENTATIONS AND WARRANTIES OF SELLER. The representations
and warranties of Seller contained herein, and the disclosures contained in the
Disclosure Schedule do not contain any statement of a material fact that was
untrue when made or omits any information necessary to make any such statement
contained therein, in light of the circumstances under which such statement was
made, not misleading.
4. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to Seller as follows:
4.1 AUTHORITY AND BINDING EFFECT. Buyer has the full power and
authority to execute and deliver this Agreement and the other Transaction
Agreements to which it is a party. This Agreement and the other Transaction
Agreements and the consummation by Buyer of its obligations contained herein and
therein have been duly authorized by all necessary corporate action on the part
of Buyer. This Agreement has been, and the other Transaction Agreements to which
Parent is a party shall be, duly executed and delivered by Buyer. This Agreement
is and the other Transaction Agreements when executed and delivered shall be
valid and binding agreements of Buyer, enforceable against Buyer in accordance
with their terms. It is not necessary for Buyer to take any action or to obtain
any approval, consent or release by or from any third person, governmental or
other, to enable Buyer to enter into or perform its obligations under this
Agreement, except those that have already been taken or obtained.
4.2 ORGANIZATION AND STANDING. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Buyer is qualified to do business in each jurisdiction where such
qualification is necessary and where the failure to be so qualified would have a
Material Adverse Effect on Buyer. Buyer has the requisite corporate power and
authority to conduct its business as now conducted.
4.3 CONFLICTS. Neither the execution and delivery of nor the
consummation of the transactions contemplated by this Agreement shall or could
result in a default or an event that, with notice or lapse of time, or both,
would be a default, breach or violation of the Certificate of Incorporation,
Bylaws or other governing instruments of Buyer.
4.4 LITIGATION AND PROCEEDINGS. There is no action, suit,
proceeding or investigation (or any counter or cross-claim in an action brought
by or on behalf of Buyer), whether at law or in equity, or before or by any
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, or before any arbitrator of any kind, that is pending or,
to Buyer's knowledge, threatened, against Buyer, which could reasonably be
expected to affect adversely Buyer's ability to perform its obligations under
this Agreement or complete any of the transactions contemplated hereby.
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4.5 NO BROKER. Buyer has not retained or used the services of an
agent, finder or broker in connection with the transactions contemplated by this
Agreement.
4.6 BUYER STOCK. The Shares to be issued to Seller, when issued
pursuant to this Agreement, shall be duly authorized, validly issued and
nonassessable.
4.7 REPORTS AND FINANCIAL STATEMENTS. All reports required to be
filed by Buyer (the "SEC REPORTS") with the SEC under the Exchange Act since
December 31, 1998 have been previously furnished or made available to Seller and
Buyer shall promptly deliver to Seller any SEC Reports filed between the date
hereof and the Closing Date. All of such SEC Reports complied at the time they
were filed in all material respects with applicable requirements of the
Securities Act and the Exchange Act and the rules and regulations thereunder.
None of such SEC Reports, as of their respective dates (as amended through the
date hereof), contained or, with respect to SEC Reports filed after the date
hereof, shall contain any untrue statement of a material fact or omitted or,
with respect to SEC Reports filed after the date hereof, shall omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The audited financial statements of Buyer included in the SEC
Reports comply in all material respects with the published rules and regulations
of the SEC with respect thereto, and such audited financial statements (i) were
prepared from the books and records of Buyer, (ii) were prepared in accordance
with GAAP applied on a consistent basis (except as may be indicated therein or
in the notes or schedules thereto) and (iii) present fairly the financial
position of Buyer as of the dates thereof and the results of operations and cash
flows for the periods then ended. The unaudited financial statements included in
the SEC Reports comply in all material respects with the published rules and
regulations of the SEC with respect thereto; and such unaudited financial
statements (i) were prepared from the books and records of Buyer, (ii) were
prepared in accordance with GAAP, except as otherwise permitted under the
Exchange Act and the rules and regulations thereunder, on a consistent basis
(except as may be indicated therein or in the notes or schedules thereto) and
(iii) present fairly the financial position of Buyer as of the dates thereof and
the results of operations and cash flows (or changes in financial condition) for
the periods then ended, subject to normal year-end adjustments and any other
adjustments described therein or in the notes or schedules thereto. The
foregoing representations and warranties shall also be deemed to be made with
respect to all filings made with the SEC on or before the Closing Date.
4.8 ACQUISITION OF INVENTORY FOR RESALE. Buyer is purchasing the
inventory constituting Purchased Assets hereunder for resale.
5. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyer and Seller contained in this Agreement shall survive the
Closing for one year.
6. PRE-CLOSING COVENANTS OF SELLER. From and after the date hereof until
the Closing Date, Parent shall cause Seller to, and Seller shall, except with
the prior written consent of Buyer (which shall not be unreasonably withheld),
conduct the business of Seller only in the normal and ordinary course of
business, consistent with past practice. In furtherance, and not in limitation,
of the foregoing, Seller shall not (whether in the ordinary course or
otherwise), without the prior written consent of Buyer (which shall not be
unreasonably withheld):
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6.1 Issue or sell, or contract to issue or sell, any of its capital
stock or its other securities, or any securities convertible into or
exchangeable with shares of its capital stock or any of its other securities,
including without limitation any warrants, options or other rights to purchase
or otherwise acquire any of its capital stock or its other securities;
6.2 Redeem any of its shares of capital stock;
6.3 Declare or pay any distribution with respect to any of its
shares of capital stock;
6.4 Amend any of its Certificate of Formation, Bylaws or other
governing instruments;
6.5 Enter into any license agreement (i) with respect to any of its
Intellectual Property with any third party or (ii) with respect to the
intellectual property of any third party;
6.6 Enter into any distribution, sales or agency agreement or
arrangement;
6.7 Sell, lease, lend, dispose of or ship, or agree to sell, lease,
lend, dispose of or ship, any inventory of Seller;
6.8 Propose, discuss or enter into an agreement with any person
providing for the possible acquisition (whether by way of merger, purchase of
capital stock, purchase of assets or otherwise) of any material portion of the
capital stock or assets of another entity;
6.9 Incur or guarantee any indebtedness or other liabilities;
6.10 Terminate any relationships with any of its customers;
6.11 Hire or terminate employees or encourage employees to resign;
6.12 Permit or suffer to exist any Encumbrance on any of the
Purchased Assets;
6.13 Make any capital expenditures;
6.14 Permit any insurance on or with respect to the Purchased
Assets to lapse or terminate in any way;
6.15 Sell or otherwise transfer, or offer, agree or commit (in
writing or otherwise) to sell or otherwise transfer, any of the Purchased
Assets, or subject any of the Purchased Assets to any Encumbrance or otherwise
permit or suffer to exist any such Encumbrance; and
6.16 Permit any of its material assets to become subject to or
bound by any contract, agreement or other commitment of any kind.
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7. OBLIGATIONS SURVIVING THE CLOSING.
7.1 FURTHER ASSURANCES. Each party hereto shall execute and deliver
after the date hereof such instruments and take such other actions as the other
party may reasonably request in order to carry out the intent of this Agreement,
including, without limitation, the transfer of the Purchased Assets, or to
better evidence or effectuate the transactions contemplated herein.
7.2 EXPENSES. Each party shall pay all of its respective costs and
expenses incurred or to be incurred by it in negotiating and preparing this
Agreement and in carrying out and closing the transactions contemplated by this
Agreement whether or not this Agreement or the transactions contemplated hereby
are ever consummated.
7.3 PURCHASE PRICE ADJUSTMENT. Subject to any reduction described
in Section 7.4, Buyer shall pay to Seller on a quarterly basis until the fifth
anniversary of the Closing Date (the "ADJUSTMENT PERIOD"), as an adjustment to
the purchase price hereunder, an amount up to $1,000,000 in the aggregate,
calculated on the basis described on SCHEDULE 7.3 attached hereto. During the
Adjustment Period and for one year after the Adjustment Period, Parent shall,
upon reasonable notice and during normal business hours of Buyer, have the right
to inspect and audit the accounting and sales books and records of Buyer that
are directly necessary to verify the accuracy of any payment paid under this
Section 7.3; provided, however, that Parent may not conduct more than one audit
per year. Parent shall bear the cost of each such audit, unless in the course of
such audit it shall be determined that such payments have been underpaid $50,000
or more, individually or in the aggregate, in which event Buyer shall bear the
cost of such audit.
7.4 RESIDUAL AMOUNTS RECEIVED UNDER SERVICE CONTRACTS. The payments
required under Section 7.3 shall be reduced by $116,572 if and to the extent
amounts are payable pursuant to Section 7.3; provided, however, that no
quarterly payment paid pursuant to Section 7.3, if any, shall be reduced by more
than 50% due to the payment of any amount described in this Section 7.4.
7.5 CERTAIN COVENANTS. To preserve and protect the Purchased Assets
and the assets of Buyer, and to preserve and protect Buyer's goodwill and
business interests going forward, and in consideration for Buyer entering into
and perform its obligations under this Agreement and to induce Buyer to enter
into this Agreement, Seller agrees that, for five years after the Closing Date,
neither Parent nor Seller nor any of their affiliates shall, directly or
indirectly engage in the conduct set forth in this Section 7.5.
(a) COVENANT NOT TO COMPETE. Neither Parent nor Seller nor
any of their affiliates shall engage in, engage in the business of or invest in,
own, manage, operate, finance, control or participate in the ownership,
management, operation or control of, any person or entity that engages in, or in
the business of, anywhere in the world, developing, marketing, sales and/or
distributing testing instruments, software products or applications for Buyer's
Business; provided, however, that Seller and Parent shall be permitted to do any
of the following:
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(1) COMPLETION OF RESEARCH GRANTS. Seller and Parent
shall be permitted to continue (or, in the case of pending grants, begin) the
grant-based research projects described on SCHEDULE 7.5(a) attached hereto (the
"RESEARCH PROJECTS"). In furtherance of the foregoing, Buyer hereby grants to
Seller and Parent a license for the right to access and use of the source code
identified as M-FISH, MacProbe and MacKType on SCHEDULE 1.1(b) attached hereto
(the "BUYER'S SOFTWARE") solely for the purpose of completing the Research
Projects. This license shall terminate at the earlier of (A) the third
anniversary of the Closing Date and (B) completion of all Research Projects that
are using any of the Buyer's Software.
(2) RIGHTS TO PRODUCTS DEVELOPED UNDER THE RESEARCH
PROJECTS. Subject to the provisions of paragraph (3) below, Seller and Parent
shall own the right, title and interest in and to any products developed under
the Research Projects, except and to the extent they include any of the Buyer's
Software (the "RESEARCH PRODUCTS"). Except as provided in this Section 7.5,
Buyer shall own all right, title and interest in and to the Software, including,
without limitation, the Buyer's Software.
(3) BUYER'S RIGHT TO LICENSE THE RESEARCH PRODUCTS.
Seller and Parent shall negotiate in good faith to license to Buyer any and all
Research Products on mutually acceptable terms and conditions. Notwithstanding
the foregoing, Buyer shall not have any obligation to license any Research
Product that Buyer determines in its sole discretion is not necessary or
desirable for its business. In the event that the parties do not agree on the
terms and conditions of a license for any particular Research Product, (i) Buyer
may not use or market such Research Product, (ii) Seller and Parent shall not
have the right to market such Research Product for any applications in Buyer's
Business and (iii) Seller and Parent shall have the right to market (and license
others to market) such Research Product solely for applications other than for
Buyer's Business. If the parties enter into a license for a particular Research
Product with respect to less than all of the applications thereof, Seller and
Parent shall have the right to market (and license others to market) the
applications for such Research Product not covered by such license solely for
applications other than for Buyer's Business.
(4) The covenant not to compete set forth in Section
7.5(a) shall apply to any successor in interest of Parent any of its affiliates
or any of their respective operations (including the Research Projects),
provided that, upon the acquisition of all or substantially all of the capital
stock or assets of Parent, the acquiror shall not be subject to the provisions
of such covenant not to compete if, at the time of such acquisition, such
acquiror derives less than 10% of its revenues and less than 10% of the assets
of such acquiror are engaged or used in any business that would otherwise
violate the provisions of Section 7.5(a), provided further, however, that this
exception set forth in the first proviso of this paragraph (2) shall not apply
to the personnel engaged in the Research Projects or product or products
developed under the Research Projects.
(5) Seller and Parent may purchase or otherwise acquire
up to, but not more than, 1% in the aggregate of any class of securities of any
enterprise (but without otherwise participating in the activities of such
enterprise), if such securities are listed on any national or regional
securities exchange or have been registered under Section 12(g) of the Exchange
Act.
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(b) COVENANT NOT TO SOLICIT. Neither Seller nor Parent nor any of
their affiliates shall either for itself or for any other person, (i) induce or
attempt to induce any employee of Buyer or any entity under the control of Buyer
to leave the employ of Buyer or such other entity, (ii) in any way interfere
with the relationship between the Buyer (or any entity under the control of
Buyer) and any employee of Buyer (or such entity) or (iii) induce or attempt to
induce any customer, supplier, licensee or any other entity with whom Buyer or
any entity under the control of Buyer has a business relationship to cease doing
business with Buyer or such entity or in any way knowingly interfere with the
relationship between such customer, supplier, licensee or other entity and Buyer
or such entity under the control of Buyer.
(c) COVENANT NOT TO DISCLOSE INFORMATION. Neither Seller nor Parent
nor any of their affiliates shall use or disclose Proprietary or Confidential
Information, except as expressly and specifically provided herein or otherwise
authorized in writing by Buyer.
7.6 CERTAIN TAXES. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by Seller when due, and Seller will, at its
expense, file all necessary Tax Returns and other documentation with respect to
all such transfer, documentary, sales, use, stamp, registration and other Taxes
and fees, and, if required by applicable law, Seller will, and will cause its
affiliates to, join in the execution of any such Tax Returns and other
documentation. Notwithstanding the foregoing or any other provision set forth in
this Agreement, however, Seller and Buyer shall each bear and be responsible for
one-half of any sales tax (including any penalties and interest) incurred in
connection with this Agreement and the transactions contemplated hereby with
respect to the transfer of the Purchased Assets other than those described on
SCHEDULE 3.3(d) or fixed assets acquired after May 31, 2000.
7.7 CLOSING BALANCE SHEET; ACCESS TO RECORDS AFTER CLOSING.
(a) CLOSING BALANCE SHEET; SELLER ACCESS. Seller shall
prepare and deliver to Buyer, within 10 business days after the Closing, a final
balance sheet as of the Closing Date (the "CLOSING BALANCE SHEET"). From and
after the Closing, Buyer shall, upon reasonable notice and during normal
business hours, provide Seller and Parent with such access to the business
records and other non-proprietary or confidential information acquired from them
or either of them pursuant to the terms of this Agreement as may be reasonably
necessary for the preparation and review of the Closing Balance Sheet or any tax
filings, audits or similar matters.
(b) BUYER ACCESS. From and after the Closing for a period of
90 days, Seller and Parent shall, upon reasonable notice and during normal
business hours, provide Buyer with such access to the records and files relating
to the Research Grants as may be reasonably necessary for Buyer to determine
that that all Purchased Assets shall have been delivered to Buyer at Closing.
This provision shall in no way limit or otherwise affect any other rights of
Seller hereunder with respect to the Purchased Assets or otherwise. If Buyer
shall discover that any of the Purchased Assets have been included in the
records and files relating to the Research Grants retained by Seller, Seller
shall promptly deliver such Purchased Assets to Buyer.
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7.8 SUBLEASE. Promptly after the Closing, and in any event no later
than 30 days after the Closing Date, Buyer and Seller shall enter into a
sublease under the League City Facility Lease (the "SUBLEASE"), approved by the
landlord thereunder, pursuant to which Buyer shall sublease to Seller for the
portion of its business engaged in the Research Grants that portion of the
premises covered by the League City Facility Lease identified on SCHEDULE 7.8
attached hereto, upon the following terms and conditions: (a) Seller shall pay
one-third of rental payments due under the League City Lease, which is currently
$11,882.01, (b) the Sublease shall be terminable at will by either party upon 60
days' written notice to the other party, (c) the Sublease shall be subject to
the terms and conditions of the League City Lease, including, without
limitation, such landlord's right to terminate the portion of the League City
Facility Lease that is terminable upon 30 days' notice, and (d) the Sublease
shall contain other terms and conditions that are mutually and reasonably
acceptable to the parties thereto.
7.9 RESALE CERTIFICATE. Buyer shall promptly (but in no event later
than 90 days after the Closing Date) provide Buyer with a copy of Buyer's resale
certificate obtained from the State of Texas.
7.10 LOCKBOX ACCOUNT. If Seller shall receive on or after the date
hereof, or any person shall receive on or after the date hereof for the benefit
of Seller, any amounts in lockbox account # 0391839 maintained by Seller and/or
Parent with Moody National Bank ("MOODY") or otherwise constituting Purchased
Assets, Seller shall remit such amounts to Buyer within 48 hours after receipt
of such amounts by or on behalf of Seller.
8. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER. The obligation of
Buyer to consummate the purchase of the Purchased Assets from Seller and the
other transactions contemplated by this Agreement is subject to the fulfillment,
or the waiver in writing by Buyer, at or prior to the Closing, of each of the
following conditions precedent:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by Seller in this Agreement shall be true and correct in all
material respects when made and at and as of the Closing Date.
8.2 PERFORMANCE OF OBLIGATIONS. Seller and Parent shall have
performed and complied in all material respects with all of the covenants
required by this Agreement to have been performed at or prior to the Closing.
8.3 CERTIFICATES. Buyer shall have received from Seller a
certificate executed by an authorized officer of Seller, dated as of the Closing
Date and reasonably satisfactory in form and substance to Buyer, certifying that
(i) each of the representations and warranties of Seller contained in this
Agreement is true and correct in all material respects when made and on and as
of the Closing Date, (ii) Seller and Parent has performed and complied in all
material respects with all of the convents of Seller and Parent required to have
been performed or complied with by Seller or Parent at or prior to the Closing,
and (iii) all of the conditions precedent to Buyer's obligations, the
satisfaction of which was the responsibility of Seller or Parent, have been
satisfied, except to the extent waived by Buyer.
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8.4 ABSENCE OF MATERIAL LITIGATION. There shall be (a) no pending
or overtly threatened litigation (other than litigation which is determined by
the parties in good faith, after consulting their respective attorneys, to be
without legal or factual substance or merit), whether brought against Seller,
Parent or Buyer, that seeks to enjoin the consummation of any of the
transactions contemplated by this Agreement or (b) no order that has been issued
by any court or governmental agency having jurisdiction that restrains or
prohibits the consummation of the purchase and sale of the Purchased Assets
hereunder and the other transactions contemplated by this Agreements and no
proceedings pending which are reasonably likely to result in the issuance of
such an order.
8.5 DELIVERY OF ADDITIONAL INSTRUMENTS. On the Closing Date, Seller
shall deliver, or cause to be delivered, to Buyer the following documents and
instruments, in form and substance satisfactory to Buyer and its counsel, unless
waived in writing by Buyer:
(a) a registration rights agreement in substantially the
form of EXHIBIT B attached hereto (the "REGISTRATION RIGHTS AGREEMENT"), duly
executed by Seller;
(b) The bill of sale and assumption agreement in
substantially the form of EXHIBIT C attached hereto (the "BILL OF SALE");, duly
executed by Seller;
(c) assignment documents sufficient for recording purposes
relating to all Intellectual Property, including, without limitation, assignment
documents in the form of EXHIBIT D attached hereto (the "ASSIGNMENT") relating
to Copyrights, Patents and Trademarks, duly executed by Seller;
(d) assignment of the League City Facility Lease, duly
executed by Seller and the landlord under the League City Facility Lease;
(e) Buyer's form of Employment, Confidential Information and
Invention Assignment Agreement (an "INVENTION AGREEMENT"), duly executed by each
League City Employee (other than such League City Employees specifically
identified on SCHEDULE 3.16 attached hereto or otherwise agreed to by the Buyer
at or Prior to the Closing);
(f) Consent and release, duly executed by Foothill;
(g) UCC Termination Statements, and such instruments and
other documents as Buyer may reasonably request, from all persons holding any
security interests in or with respect to any of the Purchased Assets,
terminating and discharging all of such security interests;
(h) good standing certificates, dated as of a date that is
not more than ten days prior to the Closing Date, from the Secretary of State of
Delaware, for Seller and Parent; and
(i) such other documents reasonably satisfactory to Buyer as
Buyer may reasonably request in good faith for the purpose of (A) evidencing the
accuracy of any representation or warranty made by Seller, (B) evidencing the
compliance by Seller and Parent with, or the performance by Seller and Parent
of, any covenant or obligation set forth in this
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Agreement or any other Transaction Agreement, (C) evidencing the satisfaction of
the conditions set forth in this Section 7 or (D) otherwise facilitating the
consummation of the purchase and sale of the Purchased Assets and the other
transactions contemplated by this Agreement.
8.6 CORPORATE ACTION. All corporate action required to be taken on
the part of Seller, Parent and their respective members and stockholders in
connection with this Agreement and the other Transaction Agreements, and all
documents incident thereto, shall be reasonably satisfactory in form and in
substance to Buyer and its counsel.
8.7 USE OF TRADEMARKS. Seller shall cease using or in any way
exploiting any of the Trademarks transferred to Purchaser hereunder; provided,
however, that Seller shall be permitted to use the name "Perceptive Scientific
Instruments, Inc." until such time (but in no event later than 90 days after the
Closing Date) as Seller shall be able to transfer all Research Grants to the
successor name for Seller; provided further, however, Seller shall use all
reasonable efforts to cause such transfer.
8.8 LOCKBOX ACCOUNTS. The lockbox accounts of Seller with Foothill
and/or Moody shall have been assigned to Buyer or such other actions as shall be
acceptable to Buyer shall have been taken to transfer the contents of such
lockbox accounts promptly to Buyer.
8.9 ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE. Buyer shall be
satisfied with the amount of the Accounts Receivable and Accounts Payable of
Seller as of the Closing Date.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND PARENT. The
obligation of Seller to consummate the sale of the Purchased Assets to Buyer is
subject to the fulfillment, or the waiver by Seller, at or prior to the Closing,
of each of the following conditions precedent:
9.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by Buyer in this Agreement shall be true and correct in all
material respects when made and at and as of the Closing Date.
9.2 PERFORMANCE OF OBLIGATIONS. Buyer shall have performed and
complied in all material respects with all of the covenants required by this
Agreement to have been performed at or prior to the Closing.
9.3 CERTIFICATES. Seller shall have received from Buyer a
certificate executed by an authorized officer of Buyer, dated as of the Closing
Date and reasonably satisfactory in form and substance to Seller, certifying
that (i) each of the representations and warranties of Buyer contained in this
Agreement is true and correct in all material respects when made and on and as
of the Closing Date, (ii) Buyer has performed and complied in all material
respects with all of the convents of Buyer required to have been performed or
complied with by Buyer at or prior to the Closing and (iii) all of the
conditions precedent to Seller's obligations, the satisfaction of which was the
responsibility of Buyer, have been satisfied, except to the extent waived by
Seller.
9.4 ABSENCE OF MATERIAL LITIGATION. There shall be (a) no pending
or overtly threatened litigation (other than litigation which is determined by
the parties in good faith, after consulting their respective attorneys, to be
without legal or factual substance or merit), whether brought against Seller,
Parent or Buyer, that seeks to enjoin the consummation of any of the
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transactions contemplated by this Agreement or (b) no order that has been issued
by any court or governmental agency having jurisdiction that restrains or
prohibits the consummation of the purchase and sale of the Purchased Assets
hereunder and the other transactions contemplated by this Agreements and no
proceedings pending which are reasonably likely to result in the issuance of
such an order.
9.5 DELIVERY OF ADDITIONAL INSTRUMENTS. On the Closing Date, Buyer
shall deliver, or cause to be delivered, to Seller the following documents and
instruments, in form and substance satisfactory to Seller and its counsel,
unless waived in writing by Seller:
(a) the Registration Rights Agreement, duly executed by
Buyer;
(b) Consent and release, duly executed by Foothill;
(c) good standing certificates, dated as of a date that is
not more than ten days prior to the Closing Date, from the Secretary of State of
Delaware, for Buyer; and
(d) such other documents reasonably satisfactory to Seller
as Seller may reasonably request in good faith for the purpose of (A) evidencing
the accuracy of any representation or warranty made by Buyer, (B) evidencing the
compliance by Buyer with, or the performance by Buyer of, any covenant or
obligation set forth in this Agreement or any other Transaction Agreement, (C)
evidencing the satisfaction of the conditions set forth in this Section 8 or (D)
otherwise facilitating the consummation of the purchase and sale of the
Purchased Assets and the other transactions contemplated by this Agreement.
9.6 CORPORATE ACTION. All corporate action required to be taken on
the part of Buyer and its stockholders in connection with this Agreement and the
other Transaction Agreements, and all documents incident thereto, shall be
reasonably satisfactory in form and in substance to Seller and its counsel.
9.7 DELIVERY OF INSTRUCTION LETTER TO TRANSFER AGENT. Seller shall
have received a copy of the instruction letter delivered to the transfer agent
for Buyer instructing such transfer agent to transfer the Shares from Buyer to
Seller.
10. TERMINATION. This Agreement may be terminated and the transactions
herein contemplated may be abandoned at any time prior to the Closing (a) by
mutual written consent of Buyer and Seller or (b) Buyer or Seller if (i) if
there has been a material breach by the other party of any of its material
representations, warranties, agreements or covenants set forth herein or (ii)
there has been a failure of any material condition to its obligations to
consummate this Agreement.
11. INDEMNIFICATION.
11.1 SELLER AND PARENT INDEMNIFICATION. Seller and Parent shall
indemnify Buyer from and against any and all damages, losses, liabilities and
expenses, including, without limitation, reasonable expenses of investigation
and reasonable attorneys' fees and expenses in connection with any action, suit
or proceeding (collectively, "LOSSES"), incurred or suffered by Buyer (a)
arising out of any breach of the representations, warranties, covenants or
agreements of
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Seller or Parent set forth herein or in any other Transaction Agreement, (b)
arising out of or in any way connected with the Retained Liabilities or (c)
arising out of or in any way connected with PSI/UK or the ownership by Seller or
Parent of the capital stock of PSI/UK; provided, however, that Buyer shall not
be entitled to seek indemnity under this Section 11.1 or any other recovery or
remedy for any Loss under this Agreement (i) for more than $750,000 in the
aggregate, (ii) unless and until the aggregate amount of the losses exceeds
$50,000 (in which case such indemnification obligations shall apply to only to
the extent such Losses exceed $50,000 and (iii) at any time after (A) one year
after the Closing Date with respect to Losses described in clause (a) above and
(B) three years after the Closing Date for any Losses described in clause (b) or
(c) above.
11.2 BUYER INDEMNIFICATION. Buyer shall indemnify Seller and Parent
from and against any and all Losses incurred or suffered by Seller or Parent
arising out of any breach of the representations, warranties, covenants or
agreements of Buyer set forth herein or in any other Transaction Agreement;
provided, however, that Buyer shall not be entitled to seek indemnity under this
Section 11.2 or any other recovery or remedy for any Loss under this Agreement
(i) for more than $750,000 in the aggregate, (ii) unless and until the aggregate
amount of the losses exceeds $50,000 (in which case such indemnification
obligations shall apply to only to the extent such Losses exceed $50,000 and
(iii) at any time after one year after the Closing Date.
12. MISCELLANEOUS.
12.1 PUBLIC ANNOUNCEMENTS. The parties shall agree on a joint or
separate press releases announcing the consummation of the transactions
contemplated by this Agreement. Except as provided in the immediately preceding
sentence, no party shall make any public announcements or other public
disclosures concerning matters set forth in this Agreement or the negotiation
thereof for a period of six months after the Closing Date without the prior
written consent of other parties, unless such disclosure is required by law.
12.2 ASSIGNMENT. Neither Seller nor Buyer may assign this
Agreement, or assign its rights or delegate its duties hereunder, without the
prior written consent of the other party hereto. This restriction shall not
prohibit Buyer from assigning, selling or disposing of the Purchased Assets
after the closing.
12.3 SEVERABILITY. Any provision of this Agreement which is
illegal, invalid or unenforceable shall be ineffective to the extent of such
illegality, invalidity or unenforceability, without affecting in any way the
remaining provisions hereof.
12.4 GOVERNING LAW. This Agreement is made in the State of
California and its interpretation, its construction and the remedies for its
enforcement or breach are to be applied pursuant to, and in accordance with, the
laws of the State of California for contracts made and to be performed in that
state.
12.5 ENTIRE AGREEMENT; AMENDMENT. This Agreement, the
Confidentiality Agreement and the Exhibits and Schedules hereto, and each
additional agreement and document to be executed and delivered pursuant hereto
constitute all of the agreements of the parties with
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respect to, and supersede all prior agreements and understandings relating to
the subject matter of, this Agreement or the transactions contemplated by this
Agreement. This Agreement may not be modified or amended except by a written
instrument specifically referring to this Agreement signed by the parties
hereto.
12.6 WAIVER. No waiver by one party of the other party's
obligations, or of any breach or default hereunder by any other party, shall be
valid or effective, unless such waiver is set forth in writing and is signed by
the party giving such waiver; and no such waiver shall be deemed a waiver of any
subsequent breach or default of the same or similar nature or any other breach
or default by such other party.
12.7 INTERPRETATION; HEADINGS. This Agreement is the result of
arms-length negotiations between the parties hereto and no provision hereof,
because of any ambiguity found to be contained therein or otherwise, shall be
construed against a party by reason of the fact that such party or its legal
counsel was the draftsman of that provision. The section, subsection and any
paragraph headings contained herein are for the purpose of convenience only and
are not intended to define or limit or affect, and shall not be considered in
connection with, the interpretation of any of the terms or provisions of this
Agreement.
12.8 COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.9 NOTICES. All notices, requests, demands or other
communications hereunder shall be in writing and shall be deemed to have been
duly given to the person designated below (i) on the date of delivery if
delivered in person; (ii) on the first business day after being sent by fax,
provided that the successful transmission of the fax has been confirmed through
a confirmation function sheet provided by the fax machine used for such
transmission; (iii) on the third business day following the deposit thereof in
the United States Mail, provided it is mailed by certified mail, return-receipt
requested and postage prepaid and properly addressed; or (iv) on the second
business day after being sent by overnight air courier. Any party hereto may
from time to time, by written notice to the other parties, designate a different
address, which shall be substituted for the one specified below:
(a) If to Buyer:
Applied Imaging Corp.
2380 Walsh Avenue, Building B
Santa Clara, CA 95051
Attn: President
Fax: (408) 562-0264
with a copy to:
Georgopoulos Pahlavan & Prince, LLP
935 Hamilton Avenue
Menlo Park, CA 94025
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Attn: Paul G. Prince, Esq.
Fax: (650) 473-9060
(b) If to Seller, care of Parent as set forth in paragraph (c) below.
(c) If to Parent:
International Remote Imaging Systems, Inc.
9162 Eton Avenue
Chatsworth, CA 91311
Attn: President
Fax: (818) 700-9661
with a copy to:
Guth Rothman & Christopher LLP
10866 Wilshire Boulevard
Suite 1250
Los Angeles, CA 90024
Attn: Daniel G. Christopher, Esq.
Fax: (310) 470-8354
12.10 BULK SALES LAW. Buyer and Seller hereby agree to waive
compliance by the other with the provisions of any applicable bulk sales law of
any jurisdiction. Seller agrees to defend, indemnify and hold Buyer and the
Purchased Assets harmless from and against any claim, liability, obligation,
cost and expense, including reasonable attorneys' fees, which arises from or as
a result of such non-compliance by the parties.
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IN WITNESS WHEREOF, each of the parties hereto has caused a duly
authorized representative to execute this Agreement on the date first written
above.
"BUYER": APPLIED IMAGING CORP.
a Delaware corporation
By /s/ Carl W. Hull
------------------------------------
Name: Carl W. Hull
Title: President and Chief Operating
Officer
"SELLER": PERCEPTIVE SCIENTIFIC
INSTRUMENTS, LLC
a Delaware limited liability company
By /s/ John A. O'Malley
------------------------------------
Name: John A. O'Malley
Title: President
"PARENT": INTERNATIONAL REMOTE
IMAGING SYSTEMS, INC.
a Delaware corporation
By /s/ John A. O'Malley
------------------------------------
Name: John A. O'Malley
Title: Chairman, Chief Executive
Officer and President
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LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
- --------
Exhibit A Definitions
Exhibit B Form of Registration Rights Agreement [OMITTED]
Exhibit C Form of Bill of Sale [OMITTED]
Exhibit D Form of Assignment [OMITTED]
SCHEDULES
Schedule 1.1(b) Intellectual Property [OMITTED]
Schedule 1.2 Excluded Assets and Liabilities [OMITTED]
Schedule 1.2(e) Research Grants Assets and Properties [OMITTED]
Schedule 3.3(a) Financial Statements [OMITTED]
Schedule 3.3(d) Fixed Assets and Reconciliation to Ledger [OMITTED]
Schedule 3.12 League City Facility Lease [OMITTED]
Schedule 3.16(a) Employees [OMITTED]
Schedule 3.16(b) Employee Benefit Plans [OMITTED]
Schedule 3.17(a) Customers [OMITTED]
Schedule 3.17(b) Services Contracts [OMITTED]
Schedule 7.3 Purchase Price Adjustment [OMITTED]
Schedule 7.5(a) Research Projects [OMITTED]
Schedule 7.8 Sublease Boundaries [OMITTED]
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EXHIBIT A
DEFINITIONS
For the purposes of the Asset Purchase Agreement, dated as of July 5,
2000 (the "PURCHASE AGREEMENT"), by and among Applied Imaging Corp., a Delaware
corporation ("BUYER"), Perceptive Scientific Instruments, LLC, a Delaware
limited liability company ("SELLER"), and International Remote Imaging Systems,
Inc, a Delaware corporation ("PARENT"), the following terms shall have the
respective meanings set forth below and grammatical variations of such terms
shall have corresponding meanings:
"BUYER'S BUSINESS" shall mean (a) the measurement or testing of
chromosomal materials or (b) cancer genetics applications that involve the use
of imaging or scanning instrumentation used to analyze microscope slide-based
specimens for the presence of cancer (other than (i) bright field imaging
analysis used to detect cancer of the lung or cervix or leukemia or (ii)
flow-based imaging microscopy).
"CONFIDENTIAL INFORMATION" shall mean all Proprietary Information not
generally known outside of Buyer's organization, and all Proprietary Information
so known only through improper means.
"CONFIDENTIALITY AGREEMENT" means the Confidential Disclosure and
Non-Use Agreement, dated as of December 28, 1998, between Buyer and Parent.
"COPYRIGHTS" mean all copyrights, copyrights applications and
copyrightable subject matter, whether or not registration for any such copyright
exists or is pending, any renewal or extension thereof, together with all other
copyright interests accruing by reason of international copyright conventions
and any moral rights pertaining thereto, including the right to sue for, settle,
or release any past, present, or future infringement thereof, developed for or
acquired in connection with Seller's business including, without limitation,
those copyrights and copyright registrations set forth on SCHEDULE 1.1(b)
attached to the Purchase Agreement.
"ENCUMBRANCE" means any encumbrance, lien, charge, hypothecation,
pledge, mortgage, title retention agreement, security interest of any nature,
adverse claim, exception, right of set-off, reservation, easement, right of
occupation, any matter capable of registration against title, option, right of
pre-emption, privilege or any contract to create any of the foregoing.
"EXCHANGE ACT" shall mean the Securities and Exchange Act of 1934, as
amended.
"INTELLECTUAL PROPERTY" shall mean all Copyrights, Trademarks (including
the Circulation mark) and Patents, Software, licenses, domain names, business
plans, financial data, marketing plans, advertising and promotional materials,
exhibition and display materials, supplier or customer lists, manufacturing and
quality assurance plans and specifications, files, records, artwork, releases,
permits, approvals, correspondence, logs, memoranda, forecasts (including,
without limitation, sales forecasts), know-how, trade-secrets, databases,
algorithms, concepts, inventions, techniques, system designs, prototypes,
engineering models, ideas or other
29
intellectual property and proprietary rights of Seller, developed for or
acquired in connection with the Seller's business, and all documentation and
files relating thereto (including files held by lawyers or agents of Seller).
"LEAGUE CITY FACILITY" shall mean the offices and manufacturing
facilities located at 2525 South Shore Boulevard, Suite 100, League City, Texas
77573, subject to the lease set forth in SCHEDULE 3.12 attached to the Purchase
Agreement.
"MATERIAL ADVERSE EFFECT ON BUYER" shall mean a circumstance, state of
facts, event, consequence or result that materially and adversely affects, or
could reasonably be expected to affect materially and adversely the ability of
Buyer to consummate the transactions which it is required to consummate
hereunder.
"MATERIAL ADVERSE EFFECT ON PARENT" shall mean a circumstance, state of
facts, event, consequence or result that materially and adversely affects, or
could reasonably be expected to affect materially and adversely the ability of
Buyer to consummate the transactions which it is required to consummate
hereunder.
"MATERIAL ADVERSE EFFECT ON SELLER" shall mean a circumstance, state of
facts, event, consequence or result that materially and adversely affects, or
could reasonably be expected to affect materially and adversely the Purchased
Assets or the Seller's business, or the Seller's assets, liabilities, financial
condition or operating results of its business or the ability of Seller to
consummate the transactions which it is required to consummate hereunder.
"PATENTS" shall mean all foreign and domestic patents, patent
applications and patents pending that Seller or any subsidiary of Seller owns or
has the right to sublicense hereunder, including, without limitation, those
patents, patent applications and patents pending set forth on SCHEDULE 1.1(b)
attached to the Purchase Agreement, developed for or acquired in connection with
the Seller's business.
"PROPRIETARY INFORMATION" shall mean all information and ideas in
whatever form, tangible or intangible, pertaining in any manner to the business
of Buyer or any of its affiliates, or its employees, customers, suppliers,
licensees or other entities with whom Buyer or any entity under the control of
Buyer has a business relationship, relating to the Purchased Assets or which was
produced by any employee of Buyer.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SOFTWARE" means any and all computer software, in object code and
source code, including without limitation, all versions and revisions thereof,
and all underlying Intellectual Property in connection therewith and any
derivative Software developed therefrom on or prior to the Closing Date,
including, without limitation, the Buyer's Software and the other Software
described on SCHEDULE 1.1(b).
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"TAX" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Section 59A of
the Code), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever, including any interest,
penalty or addition thereto, whether disputed or not.
"TAX RETURN" shall mean any return, declaration, report, claim for
refund or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"TRADEMARKS" shall mean all United States and foreign registered and
common law trademarks, trade names, service marks and logos, or applications
therefore, whether or not registration for such mark exists or is pending, that
Seller may own, or have the right to sublicense hereunder, together with all
other trademark, trade name, service mark or logo interests accruing by reason
of international trademark conventions, accompanied by the goodwill of all
business connected with the use of and symbolized by such marks including the
right to sue for, settle, or release any past, present, or future infringement
thereof or unfair competition involving the same, which were developed for or
acquired in connection with the Seller's business, including, without
limitation, those marks set forth on SCHEDULE 1.1(b) attached to the Purchase
Agreement.
"TRANSACTION AGREEMENTS" shall mean the Registration Rights Agreement,
the Bill of Sale, the Assignment, the Sublease and the Invention Agreements.
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