Exhibit 99.1 Purchase Agreement
ASSET SALE AND PURCHASE AGREEMENT
THIS ASSET SALE AND PURCHASE AGREEMENT is made and entered into on April
14, 2004, by and among APA Optics, Inc., a Minnesota corporation (the "Seller"),
and P.N.E., Inc. (d/b/a IRD), a Minnesota corporation (the "Buyer").
W I T N E S S E T H :
WHEREAS, Buyer desires to buy and assume, and the Seller is willing to sell
and assign, certain of the assets, rights and obligations of the Seller's
business division known as "optics manufacturing" free and clear of all liens,
claims and encumbrances whatsoever, for the purchase price and on the terms and
conditions set forth herein.
NOW, THEREFORE, in order to consummate the transaction set forth above and
in consideration of the mutual covenants, representations and warranties herein
contained, and subject to the conditions herein contained, the parties hereto
agree as follows:
1. Agreement to Purchase and Sell Assets. On the Closing Date (as
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hereinafter defined), Buyer agrees to purchase from Seller and Seller agrees to
sell, assign, transfer, convey and deliver, on the terms and subject to the
conditions set forth in this Agreement, all of the tangible assets specifically
identified on Schedule 1 (collectively, the "Assets").
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2. Excluded Assets. Notwithstanding anything contained in the
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Agreement to the contrary, Buyer will not purchase, and Seller will not sell,
any of the following assets (the "Excluded Assets"):
a. Any assets of Seller not listed on Schedule 1. For clarity, the
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Assets specifically do not include, without limitation, the
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following:
(i) Solar UV Simulator;
(ii) Lap Top Computer Tom Jun;
(iii) Optics Water Line; and
(iv) KO Lee Saw.
b. Seller's cash on hand.
c. Any tax credits or refunds of Seller in respect of the Assets or
otherwise.
d. Any intellectual property or other intangible property (except
that the Assets shall include processes, drawings, written test procedures
and other documentation supplied by Honeywell and DSI (customers) in
connection with products ordered by them and produced using the equipment
comprising the Assets).
3. Escrow Payment. Buyer will place $15,000.00 in escrow ("Escrow
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Payment") with Sunbelt Business Brokers ("Broker") while completing due
diligence. Due diligence shall be completed on or before April 9, 2004 (the
"Contingency Expiration Date"). The Escrow Payment shall be refunded to the
Buyer upon Buyer's notification to Seller in writing, via Broker, prior to said
date, that Buyer is canceling this Agreement. The Assets shall remain on the
market until the Escrow Payment becomes non-refundable; however, Buyer may
notify Seller, in writing, via Broker, that the Escrow Payment is non-refundable
prior to the Contingency Expiration Date. In such event, the Assets shall be
removed from the market until the Contingency Expiration Date after which the
Assets may again be marketed. If Seller receives an offer to purchase from
another buyer prior to the Escrow Payment becoming non-refundable, and Seller
wishes to accept such offer, Seller shall notify Buyer in writing, via Broker,
of said other bona fide offer. Buyer shall have until the earlier of three (3)
business days from the date of the notice of the offer or the Contingency
Expiration Date to notify Seller in writing, via Broker, that the Escrow Payment
is non-refundable or this Agreement shall become null and void and Escrow
Payment shall be fully refunded to Buyer. The Escrow Payment shall be disbursed
to Seller at Closing and credited against the purchase price. After April 30,
2004, if there has been no Closing and the Escrow Payment has become
nonrefundable in accordance with this paragraph 3, the Escrow Payment shall be
disbursed to Seller upon Seller's demand.
4. Purchase Price. The total purchase price (the "Purchase Price") for
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the Assets is $220,000 (including the Escrow Payment) payable in cash, by check,
or by wire transfer.
5. Occupancy Agreement. Buyer shall be allowed to store and use the
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Assets at Seller's facility located at 2950 Northeast 84th Lane, Blaine,
Minnesota, for a period of up to twelve (12) months following the date of
Closing at a cost of $3,000.00 per month. During such period, Buyer shall be
entitled to the exclusive use of that portion of Seller's facility that has
historically been used by Seller for its spherical optics business (the
"Premises"), solely for the purpose of operating a similar business by Buyer.
The parties hall execute and deliver an Occupancy Agreement in this regard at
Closing.
6. Allocation of Purchase Price. The parties shall agree at Closing as
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to the content of IRS Form 8594 respecting allocation of the Purchase Price and
Additional Consideration among the Assets.
7. Closing. The closing of the transactions set forth herein (the
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"Closing") shall occur at the offices of Moss & Barnett, A Professional
Association, not later than April 30, 2004 (the "Closing Date"), or at such
other time and/or place as the parties hereto may agree.
8. Limitation on Assumption of Liabilities. Seller shall transfer the
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Assets to Buyer on the Closing Date free and clear of all liens and
encumbrances, and Buyer shall not, by virtue of its purchase of the Assets,
assume or become responsible for any debts, liabilities or obligations of
Seller, whether fixed, contingent, known, unknown or otherwise.
9. Representations and Warranties of Seller. Seller represents and
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warrants as follows:
a. Seller is a corporation, existing and in good standing under
the laws of the State of Minnesota, and has the requisite power and
authority to carry on its business and enter into this Agreement.
b. At Closing, Seller will own all right, title and interest in
and to the Assets to be delivered hereunder, free and clear of all liens,
encumbrances, equities or claims.
c. All authorizations, approvals and consents necessary for the
execution and delivery by the Seller of this Agreement and for the
consummation by the Seller of the transaction contemplated hereby, have
been given, and the Seller has full right, power and authority to execute,
deliver and perform this Agreement.
d. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not to the best
knowledge of the Seller materially violate any law, rule or regulation or
court or administrative order, or result in a material breach or violation
of, or constitute a material default (or event which with notice or lapse
of time, or both, would constitute a default) under any material agreement
or instrument or any decree, judgment or order to which the Seller is a
party or by which it or its properties may be bound.
e. To Seller's best knowledge, (i) as of the Closing Date, the
Assets, normal wear-and-tear and obsolescence excepted, are in good
condition and working order and (ii) as of the Closing Date, Seller will
have good and marketable title or good and marketable leasehold interest,
as the case may be, free and clear of all claims, liens and encumbrances,
to all Assets, except as set forth on Schedule 9, attached, and except for
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Assets which may be sold or disposed of in the ordinary course of business.
f. There are no material legal actions, suits or
administrative or governmental proceedings existing or pending which affect
the Assets.
10. Representations, Warranties and Covenants of the Buyer. Buyer
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represents and warrants to Seller that:
a. Buyer is a corporation duly organized, existing and in good
standing under the laws of the State of Minnesota, and has the requisite
power and authority to carry on its business and enter into this Agreement.
b. All authorizations, approvals and consents necessary for the
execution and delivery by the Buyer of this Agreement and for the
consummation by the Buyer of the transaction contemplated hereby, have been
given, and the Buyer has full right, power and authority to execute,
deliver and perform this Agreement
c. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not violate any
law, rule or regulations or court or administrative order, or result in a
breach or violation of, or constitute a default (or event which with notice
or lapse of time, or both, would constitute a default) under any agreement,
instrument, decree, judgment or order to which the Buyer is a party or by
which it may be bound.
11. Indemnification and Other Remedies.
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a. Seller shall indemnify and hold Buyer harmless against any loss,
costs, expense, deficiency, liability or damage incurred by Buyer from:
(i) The material incorrectness of any representation made by
Seller in this Agreement, the material breach of any warranty of
Seller contained in this Agreement, or the nonfulfillment by Seller of
any material agreement or covenant made by Seller in this Agreement;
(ii) Any material liabilities of Seller, not expressly
assumed by Buyer for which Buyer becomes liable, whether accrued,
absolute, contingent or otherwise, and whether due or to become due
and not disclosed to Buyer by Seller, unless Seller had no knowledge
of such liabilities;
(iii) Any and all actions, suits, proceedings, demands,
judgments, costs and legal and other expenses incident to any of the
matters referred to in this paragraph, or any claims with respect
thereto.
b. Buyer agrees to indemnify and hold Seller harmless against any
loss, cost, expense, deficiency, liability or damage incurred by Seller
arising from:
(i) Debts, liabilities, claims or causes of action concerning
the Assets incurred or arising after the Closing Date;
(ii) The incorrectness of any representation made by Buyer in
this Agreement, the breach of any representation, warranty or covenant
of Buyer contained in this Agreement, or the nonfulfillment by Buyer
of any agreement or covenant made by it in this Agreement; and
(iii) Any and all actions, suits, proceedings, demands,
judgments, costs and legal and other expenses incident to any of the
matters referred to in this paragraph, or any claims with respect
thereto.
c. With respect to matters involving third party claims:
(i) If any third party shall notify any party (the
"Indemnified Party") with respect to any matter (a "Third Party
Claim") which may give rise to a claim for indemnification against
another party (the "Indemnifying Party") under this paragraph II, then
the Indemnified Party shall promptly notify the Indemnifying Party
thereof in writing, provided that no delay on the part of the
Indemnified Party in notifying the Indemnifying Party shall relieve
the Indemnifying Party from any obligation hereunder unless (and then
solely to the extent) that the Indemnifying Party thereby is
prejudiced.
(ii) The Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its
choice satisfactory to the Indemnified Party so long as (a) the
Indemnifying Party notifies the Indemnified Party in writing within
ten business days after the Indemnified Party has given notice of the
Third Party Claim that the Indemnifying Party will indemnify the
Indemnified Party in accordance with this paragraph 11 with respect to
the Third Party Claim, and (b) the Indemnifying Party conducts the
defense of the Third Party Claim actively and diligently.
(iii) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with paragraph 11
(c)(ii) above, (a) the Indemnified Party may retain separate
co-counsel at its sole cost and expense, (b) the Indemnified Party
will not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the prior
written consent of the Indemnifying Party (not to be withheld
unreasonably), and (c) the Indemnifying Party will not consent to the
entry of any judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the Indemnified
Party (not to be withheld unreasonably).
(iv) If the Indemnifying Party does not conduct the defense
of the Third Party Claim in accordance with paragraph 11 (c)(ii)
above, then (a) the Indemnified Party may assume the defense of the
Third Party Claim with counsel which shall be reasonably satisfactory
to the Indemnifying Party, (b) the Indemnified Party shall act
reasonably and in accordance with its good faith business judgment and
shall not effect any settlement without the consent of the
Indemnifying Party, which consent shall not be withheld or delayed
unreasonably, and (c) the Indemnifying Party shall be entitled to
participate in such defense with its own counsel and at its own
expense.
d. Neither Buyer nor Seller shall have a right to indemnification
hereunder or otherwise unless and until the indemnitee shall have incurred
on a cumulative basis since the Closing Date aggregate claims otherwise
entitled to indemnification in an amount exceeding $25,000, in which event
the right to be so indemnified shall apply only to the extent that such
losses exceed $25,000. The sum of all losses pursuant to which
indemnification is payable by Seller or Buyer shall not exceed $200,000.
For purposes hereof, claims shall be determined by deducting therefrom the
amount of benefits obtained under federal tax laws, amounts recovered under
insurance policies net of deductibles and incidental expenses and premium
increases resulting therefrom, and recovery by setoffs or counterclaims
realized by Buyer which is measurable in dollars with reasonable certainty
(net of all costs and expenses of recovering such amount) occurring in
connection with such loss.
e. All of the representations, warranties, covenants and agreements
contained in this Agreement and in any certificate, schedule, document or
other writing delivered pursuant to this Agreement have been relied upon
and shall survive the Closing, provided that any representation and
warranty contained in paragraphs 9 and 10 hereof shall be fully effective
and enforceable only for a period from the Closing Date through and until
270 days thereafter and shall thereafter be of no further force or effect,
except as to claims for indemnification timely made pursuant to this
paragraph 11 which shall survive until resolved or judicially determined.
f. Seller and Buyer acknowledge that any breach or evasion of any
provisions of this Agreement will result in immediate and irreparable
injury and harm and may cause the aggrieved party to suffer damages in
amounts difficult to ascertain. Accordingly, upon any breach which has not
been timely cured, an aggrieved party shall be entitled to the remedies of
injunction and/or specific performance, as well as other legal or equitable
remedies to which it may be entitled. All such rights and remedies shall be
cumulative and the exercise of any one of them shall not be deemed to be a
waiver of any other.
12. Performance by Seller Pending Closing. Seller shall give Buyer and
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Buyer's officers and agents, upon reasonable notice, full access during
reasonable hours to the fiber optics manufacturing business, and all of the
books, records, contracts, commitments and agreements of the APA business
related to the Assets as any of such officers or agents shall reasonably
request. Any information obtained by Buyer shall be treated by Buyer as
confidential and Buyer will take all necessary steps to ensure that the
information gained by it is restricted to those of its employees that need to
have the information in order to carry out the transactions contemplated by this
Agreement. In the event that the transaction contemplated by this Agreement is
not completed, Buyer will return to Seller any documents acquired by it from
Seller, together with all copies thereof and notes and memoranda prepared
therefrom.
13. Covenants, Agreements and Acknowledgments Concerning
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Representations of Seller. Seller and Buyer hereby covenant, agree and
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acknowledge with respect to the representations and warranties of Seller set
forth herein as follows:
a. Notwithstanding anything contained in this Agreement to the
contrary, if Buyer has knowledge prior to Closing that any of the
representations and warranties of Seller set forth herein are untrue or
incorrect in any material respect, Buyer may, at its option (i) invoke as
unsatisfied the conditions to Closing and may terminate this Agreement, in
which event none of the parties shall have any further rights or
obligations hereunder, or (ii) Buyer may waive its right with respect to
such breach and the failure to satisfy such condition and proceed with the
transaction contemplated hereby, in which event Buyer shall have no claim
(whether for indemnification or otherwise) against Seller.
b. To the extent disclosure made in any one schedule sets forth the
information required to be disclosed on another schedule, such information
shall be deemed to be reported on such other schedule.
c. The representations and warranties of Seller set forth in
paragraph 9 hereof constitute all of the representations and warranties
made by Seller. Buyer specifically acknowledges and agrees that it has not
relied or proceeded upon any other representations or warranties by Seller
and that Seller is not responsible for any representations or warranties
made herein or otherwise by any other persons, or any projection as to the
future earnings potential or value of the Assets.
d. Whenever a statement herein is qualified by the phrase "to its
best knowledge," "to its knowledge" or by other words to the same or
similar effect, it is intended to signify that no information has come to
the attention of Anil K. Jain, the president and chief executive officer of
Seller, which would give him actual knowledge or notice of the inaccuracy
of such statement.
14. Documents to be Delivered by Seller and Certain Persons at Closing.
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At the Closing, Seller and certain other persons, identified below, shall
execute, where necessary or appropriate, and deliver to Buyer each of the
following:
a. A certificate signed by a duly authorized officer of Seller,
dated as of the Closing Date, to the effect that (i) all of the
representations and warranties made by Seller in this Agreement are to the
best of Seller's knowledge true and correct at and as of the Closing Date,
and (ii) confirming that Seller has approved this Agreement and authorized
the execution and delivery of this Agreement and any other document or
instrument executed in connection herewith;
b. A Bill of Sale duly executed by Seller;
c. Evidence of satisfaction of any lien or encumbrance on any of
the Assets not expressly being assumed by Buyer;
d. Occupancy Agreement for the Premises; and
e. All consents, releases, assignments and permissions of any kind
or nature which reasonably may be required to effectively sell, assign and
transfer the Assets to the Buyer, consistent with the terms of this
Agreement.
15. Documents to be Delivered by Buyer at Closing. At the Closing,
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Buyer shall execute and deliver each of the following:
a. A certified or bank cashier's check or checks, or wire transfer,
payable to Seller in the amounts provided for in paragraph 4 of this
Agreement;
b. A certified copy of resolutions adopted by Buyer's Board of
Directors authorizing the execution and delivery of this Agreement and the
other documents and instruments executed in connection herewith;
c. Occupancy Agreement for the Premises; and
d. A certified or bank cashier's check, or wire transfer, payable
to Seller, for (i) one-half of the legal fees incurred by Seller in
connection with preparation of the documents for this transaction and
Closing, or (ii) $1,000, whichever is less.
16. Notices. All notices and other communications from any of the
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parties to the other shall be in writing and shall be considered to have been
duly given or served as sent by reputable overnight carrier or verified
facsimile to the other party at his or their address as provided below, or to
such other address as such party may hereafter designate by written notice to
the other party or parties:
If to Seller: APA Optics, Inc.
2950 Northeast 84th Lane
Blaine, MN 55449
Attn: Anil K. Jain, PhD
Telephone #: (612) 894-3680
Fax #: (612) 894-2463
With a copy to: Janna R. Severance
Moss & Barnett
4800 Wells Fargo Center
90 South Seventh Street
Minneapolis, MN 55402-4129
Telephone #: (612) 347-0367
Fax #: (612) 339-6686
If to Buyer: P.N.E., Inc. d/b/a IRD
810 East St. Paul Street
Litchfield, MN 55355
Attn: Dennis F. Rutledge, President
Telephone #: (320) 693-7217
Fax #: (320) 693-7216
With a copy to: Johnston Law Office
Easton Place
510 22nd Avenue East, Suite 101
Alexandria, MN 56308
17. Amendment. This Agreement may be altered or amended by a writing
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signed by all of the parties.
18. Governing Law. This Agreement shall be subject to and governed by
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the laws of the State of Minnesota.
19. Parties in Interest. This Agreement shall be binding upon the
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parties and their respective heirs, executors, administrators, successors and
assigns. Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned or delegated by any of the parties without the prior
written consent of all the other parties.
20. Counterparts. This Agreement may be executed in any number of
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counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same instrument.
21. Severability. The invalidity or partial invalidity of any portions
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of this Agreement shall not invalidate the remainder hereof, and said remainder
shall remain in full force and effect.
22. Entire Agreement. This Agreement and its Exhibits constitute the
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entire agreement between the parties on the subject matter hereof and supersedes
any prior agreement or understanding between the parties on the subject matter
hereof.
23. Captions. Captions at the beginning of the paragraphs of this
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Agreement are designated for convenience of reference only and are not to be
resorted to for the purpose of interpreting any provisions of this Agreement.
SELLER: APA OPTICS, INC.
By /s/ Anil K. Jain
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Anil K. Jain, PhD
Its President
BUYER: P.N.E. INC., (D/B/A IRD)
By /s/ Dennis F. Rutledge
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Dennis F. Rutledge
Its President
SCHEDULE 1 ASSETS