Exhibit 2.1
Form 8-K
August 6, 2004
Viking Systems, Inc.
File No. 00-49636
ASSET PURCHASE AGREEMENT
by and among
Lighthouse Imaging Corporation
and
Dennis Leiner
and
Viking Systems, Inc.
dated August 6, 2004
TABLE OF CONTENTS
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ARTICLE I DEFINITIONS........................................................1
1.1 Defined Terms....................................................1
1.2 Construction of Certain Terms and Phrases........................6
ARTICLE II PURCHASE AND SALE OF ASSETS.......................................6
2.1 Purchase and Sale of Certain Assets of Seller....................6
2.2 Excluded Assets..................................................7
2.3 Assumed Liabilities/Excluded Liabilities.........................8
2.4 Purchase Price...................................................8
2.5 Allocation of Aggregate Purchase Price...........................8
2.6 Private Placement................................................9
2.7 Sales, Use and Other Taxes.......................................9
2.8 Bulk Sales Compliance............................................9
2.9 Closing..........................................................9
2.10 Consents........................................................10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER........................12
3.1 Organization of Seller..........................................12
3.2 Authority.......................................................12
3.3 Financial Statements............................................12
3.4 No Conflicts....................................................13
3.5 Consents, Approvals and Filings.................................13
3.6 No Undisclosed Liabilities......................................13
3.7 Purchased Assets................................................13
3.8 Benefit Plans; ERISA............................................13
3.9 Real Property...................................................14
3.10 Intellectual Property Rights....................................14
3.11 Litigation......................................................15
3.12 Compliance with Law.............................................16
3.13 Contracts.......................................................16
3.14 Environmental Matters...........................................17
3.15 Inventory.......................................................17
3.16 Plants, Buildings, Structures, Facilities and Equipment.........17
3.17 Customer Lists and Accounts.....................................17
3.18 Relationships with Suppliers and Licensors......................17
3.19 Tax Matters.....................................................18
3.20 Permits.........................................................18
3.21 Brokers.........................................................18
3.22 Material Misstatements and Omissions............................18
3.23 Investment Representations......................................19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER......................19
4.1 Organization....................................................19
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TABLE OF CONTENTS (Continued)
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4.2 Capital Stock of Purchaser......................................19
4.3 Authority.......................................................20
4.4 Litigation......................................................20
4.5 Financial Statements and Reports................................20
4.6 No Undisclosed Liabilities......................................21
4.7 Brokers.........................................................21
4.8 No Conflicts....................................................21
4.9 Consents and Governmental Approvals and Filings.................21
4.10 Compliance with Law.............................................21
4.11 Closing Shares..................................................22
4.12 Material Misstatements and Omissions............................22
ARTICLE V COVENANTS OF THE PARTIES..........................................22
5.1 Operation of Business Prior to Closing Date.....................22
5.2 Investigation by Purchaser......................................23
5.3 Consents........................................................23
5.4 Notification of Certain Matters.................................23
5.5 Cooperative Efforts.............................................23
5.6 Filings.........................................................24
5.7 Public Announcements............................................24
5.8 Employee Matters................................................24
5.9 Prorations......................................................25
5.10 Confidentiality.................................................25
5.11 Approval of Seller's Stockholders...............................25
5.12 Updating of Disclosure Schedules................................25
5.13 Appointment of Leiner as CTO....................................26
5.14 No Negotiation..................................................26
ARTICLE VI CONDITIONS TO THE OBLIGATIONS OF SELLER..........................26
6.1 No Material Adverse Effect......................................26
6.2 Closing Deliveries..............................................26
6.3 Accuracy of Representations.....................................26
6.4 Purchaser's Performance.........................................26
6.5 No Injunction...................................................27
ARTICLE VII CONDITIONS TO THE OBLIGATIONS OF PURCHASER......................27
7.1 Material Adverse Effect.........................................27
7.2 Stockholder Approval............................................27
7.3 Closing Deliveries..............................................27
7.4 Accuracy Of Representations.....................................27
7.5 Seller's and Shareholder's Performance..........................27
7.6 Consents........................................................27
7.7 Additional Documents............................................27
7.8 No Proceedings..................................................28
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TABLE OF CONTENTS (Continued)
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7.9 No Conflict.....................................................28
7.10 Completion of Due Diligence.....................................28
ARTICLE VIII ACTIONS BY THE PARTIES AFTER THE CLOSING.......................28
8.1 Survival of Representations, Warranties, Etc....................28
8.2 Indemnification.................................................28
8.3 Further Assurances..............................................30
8.4 Transfer of Rights to Name......................................31
8.5 Access to Records...............................................31
ARTICLE IX MISCELLANEOUS....................................................31
9.1 Termination.....................................................31
9.2 Notices.........................................................32
9.3 Entire Agreement................................................33
9.4 Waiver..........................................................33
9.5 Amendment.......................................................33
9.6 No Third Party Beneficiary......................................33
9.7 No Assignment; Binding Effect...................................34
9.8 Headings........................................................34
9.9 Severability....................................................34
9.10 Governing Law...................................................34
9.11 Consent to Jurisdiction and Forum Selection.....................34
9.12 Expense.........................................................34
9.13 Construction....................................................35
9.14 Counterparts....................................................35
9.15 Disclosure Schedules............................................35
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Schedules and Exhibits
Schedules
Schedule 2.1(a) Description of Products
Schedule 2.1(b) List of Fixed Assets and Tangible Personal
Property
Schedule 2.1(c) Customer Lists and Accounts
Schedule 2.1(d) Assumed Contracts
Schedule 2.1(e) Permits
Schedule 2.1(f) Seller Records
Schedule 2.1(g) Inventory
Schedule 2.1(h) Intellectual Property
Schedule 2.1(i) Intangible Rights
Schedule 2.1(j) Insurance Benefits
Schedule 2.1(k) Claims
Schedule 2.1(l) Deposits
Schedule 2.2(e) Excluded Assets - Seller Contracts Retained By
Seller
Schedule 2.2(k) Excluded Assets
Schedule 2.3 Assumed Liabilities
Schedule 2.5 Allocation of Purchase Price
Schedule 3.4 Conflicts
Schedule 7.6 Consents
Disclosure Schedules
Exhibits
Exhibit A Permitted Encumbrances
Exhibit B Bill of Sale
Exhibit C Assignment and Assumption Agreement
Exhibit D Registration of Rights and Lockup Agreement
Exhibit E Employment Agreement
Exhibit F Escrow Agreement
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is made and entered into as of
August 6, 2004, by and among Viking Systems, Inc., a Nevada corporation
("Purchaser") and Lighthouse Imaging Corporation, a Maine corporation (the
"Seller") and Dennis Leiner, a resident of Maine (Leiner is referred to herein
as "Shareholder").
RECITALS
Purchaser desires to acquire from Seller, and Seller desires to sell to
Purchaser, substantially all of the assets of Seller's optical engineering and
design services business for the medical device industry (the "Business") on the
terms and subject to the conditions set forth in this Agreement.
Purchaser has agreed to assume certain liabilities of the Business as more
fully described herein.
Certain assets and liabilities of Seller will remain with Seller and not be
transferred to Purchaser, all as more particularly set forth herein.
Purchaser and Seller acknowledge that this Agreement and the agreements
attached as exhibits hereto, collectively constitute the agreements necessary to
accomplish the transactions contemplated by this Agreement ("Contemplated
Transactions") and are parts of an integrated arrangement between the parties
with respect to the purchase and sale of the Purchased Assets (as defined in
Section 1.1) and other relationships between the parties, and that separate
agreements have been used for the sake of convenience.
Shareholder owns one hundred (100) shares of the common stock, no par
value, of Seller, which constitutes one hundred percent (100%) of the issued and
outstanding shares of capital stock of Seller.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and promises contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following defined terms
have the meanings indicated below:
"Actions or Proceedings" means any action, suit, proceeding, arbitration,
Order, inquiry, hearing, assessment with respect to fines or penalties or
litigation (whether civil, criminal, administrative, investigative or informal)
commenced, brought, conducted or heard by or before, or otherwise involving, any
Governmental or Regulatory Authority.
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"Affiliate" means, with respect to any Person, another Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with such Person.
"Assumed Contracts" has the meaning set forth in Section 2.1(d) below.
"Assumed Liabilities" has the meaning set forth in Section 2.3(a) below.
"Best Efforts" means the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to achieve that result as
expeditiously as possible, provided, however, that a Person required to use Best
Efforts under this Agreement will not be thereby required to take actions that
would result in a material adverse change in the benefits to such Person of this
Agreement and the Contemplated Transactions or to dispose of or make any change
to its business, expend any material funds or incur any other material burden.
"Books and Records" of any Person means all files, documents, instruments,
papers, books, computer files (including but not limited to files stored on a
computer's hard drive or on floppy disks), electronic files and records in any
other medium relating to the business, operations or condition of such Person.
"Business Day" means a day other than Saturday, Sunday or any day on which
banks located in the State of Maine are authorized or obligated to close.
"Cash Purchase Price" means the sum of $270,000
"Claim Notice" has the meaning set forth in Section 8.2(c).
"Closing" has the meaning set forth in Section 2.9(a) below.
"Closing Date" has the meaning set forth in Section 2.9(a) below.
"Closing Shares" means 750,000 shares of Purchaser's $,001 par value common
stock .
"Code" means the Internal Revenue Code of 1986, as amended.
"Contemplated Transactions" has the meaning set forth in the Recitals.
"Seller" has the meaning set forth in the first paragraph of this
Agreement.
"Confidentiality Agreement" has the meaning set forth in Section 5.11
below.
"Customer Lists and Accounts" has the meaning set forth in Section 2.1(f)
below.
"Damages" has the meaning set forth in Section 8.2(a) below.
"Dispute Notice" has the meaning set forth in Section 8.2(c).
"Encumbrances" means any mortgage, pledge, assessment, security interest,
deed of trust, lease, lien, adverse claim, levy, charge or other encumbrance of
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any kind, or any conditional sale or title retention agreement or other
agreement to give any of the foregoing in the future.
"Environment" means any surface water, ground water, drinking water supply,
land surface or subsurface strata, ambient air and any indoor workplace.
"Environmental Laws" means all national, state, local and foreign laws,
codes, regulations, common law, requirements, directives, Orders, and
administrative or judicial interpretations thereof, all as in effect on the date
hereof or on the Closing Date, that may be enforced by any Governmental or
Regulatory Authority, relating to pollution, the protection of the Environment
and the safety of workers and the public, or the regulation of the emission,
discharge, disposal, release or threatened release of Materials in or into the
Environment.
"Environmental Notice" means any written notice by any Person alleging
potential liability (including, without limitation, potential liability for
investigatory costs, cleanup costs, governmental costs, harm or damages to
person, property, natural resources or other fines or penalties) arising out of,
based on or resulting from (a) the emission, discharge, disposal, release or
threatened release in or into the Environment of any Materials or (b)
circumstances forming the basis of any violation, or alleged violation, of any
applicable Environmental Law.
"Escrow Agreement" has the meaning set forth in Section 2.9(vi) below and a
form of which is attached hereto as Exhibit F.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Assets" has the meaning set forth in Section 2.2 below.
"GAAP" means United States generally accepted accounting principles.
"General Assignment" has the meaning set forth in Section 2.9(b)(iii)
below.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States or other country, any state, county, city or other political
subdivision.
"Indemnity Shares" means 675,000 of the Closing Shares, all of which are to
be held in Escrow in accordance with the terms of this Agreement.
"Intellectual Property" means (i) trademarks, service marks, trade names,
trade dress, labels, product configurations, logos, and all other names and
slogans associated with any products or embodying the goodwill of the Business,
whether or not registered, and any applications or registrations therefor
(including any goodwill or common law rights associated therewith), (ii) plans,
design drawings, specifications and performance criteria, operating instructions
and maintenance manuals, manufacturing information (including production
documentation, methods, layouts and supplier and cost information), copies of
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on-site computer software and related documentation (including, without
limitation, source and object code to the extent available), prototypes, models
or samples, ideas, concepts and data, research records, all promotional
literature, customer and supplier lists and similar data and information and all
other confidential or proprietary technical and business information, (iii)
copyrights, copyright registrations and applications for registration, (iv)
patent and patent applications (including all reissues, divisions,
continuations, continuations-in-part, renewals, and extensions of the foregoing)
owned by Seller and (v) all other intellectual property rights and goodwill
related thereto.
"Knowledge of a Party" or "Known to a Party" means the actual knowledge of
any executive officer of a party and the actual knowledge of Dennis Leiner after
reasonable inquiry.
"Leased Real Property" has the meaning set forth in Section 3.9 below.
"Liabilities" means any liability, debts, obligations of any kind or nature
(whether known or unknown, whether asserted, or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due), including but not limited to any liability
for Taxes.
"Leiner Employment Agreement" has the meaning set forth in Section 5.13
below.
"Materials" means pollutants, contaminants or chemical, industrial,
hazardous, radioactive or toxic materials or wastes, including, without
limitation, petroleum, petroleum products and radiation.
"Material Adverse Effect" means, for any Person, a material adverse effect,
whether individually or in the aggregate, (a) on the business, operations,
financial condition, Assets and Properties, Liabilities or prospects of such
Person, or (b) on the ability of such Person to consummate the transactions
contemplated hereby. For an event or condition to have a Material Adverse Effect
hereunder, such event or condition must specifically and particularly affect the
Person in question as opposed to affecting generally the economy, an industry or
society (or a segment thereof).
"Offer Recipients" has the meaning set forth in Section 5.8(a) below.
"Order" means any writ, judgment, decree, injunction or similar order of
any Governmental or Regulatory Authority (in each such case whether preliminary
or final).
"Ordinary Course of Business" means the action of a Person that is
consistent with the past practices of such Person and is taken in the ordinary
course of the normal day-to-day operations of such Person.
"Permits" means all licenses, permits, certificates of authority,
authorizations, approvals, registrations and similar consents granted or issued
by any Governmental or Regulatory Authority relating to the Business, the
Purchased Assets or the Assumed Liabilities.
"Permitted Encumbrances" means (i) any Encumbrance set forth on Exhibit A,
(ii) any minor imperfection of title or similar Encumbrances which individually
or in the aggregate with other such Encumbrances does not impair the value of
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the property subject to such Encumbrance or the use of such property in the
conduct of the Business, (iii) statutory liens of landlords and workmen's,
repairmen's, warehousemen's and carriers' liens arising in the Ordinary Course
of Business, statutory requirements and (iv) Encumbrances constituted by the
terms of (A) any equipment lease; (B) any capital lease; (C) any license and (D)
any real property lease assumed by Purchaser.
"Person" means any natural person, corporation, general partnership,
limited partnership, limited liability company, proprietorship, other business
organization, trust, union, association or Governmental or Regulatory Authority.
"Products" has the meaning set forth in Section 2.1(a) below.
"Property" has the meaning set forth in Section 2.1(b) below.
"Purchased Assets" has the meaning set forth in Section 2.1 below.
"Purchaser" has the meaning set forth in the first paragraph of this
Agreement.
"Purchaser Disclosure Schedule" means the disclosure schedule of the
Purchaser attached hereto which sets forth the exceptions to the representations
and warranties contained in Article IV hereof and certain other information
called for by this Agreement.
"Purchaser Group" has the meaning set forth in Section 8.2(a) below.
"Registration Rights and Lockup Agreement" means the agreement
substantially in the form of Exhibit D attached hereto.
"SEC" means the United States Securities and Exchange Commission, or any
successor entity.
"Securities" means, collectively, the Closing Shares and Indemnity Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller Disclosure Schedule" means the disclosure schedule of Seller
attached hereto which sets forth the exceptions to the representations and
warranties contained in Article III hereof and certain other information called
for by this Agreement.
"Seller Records" has the meaning set forth in Section 2.1(f) below.
"Survival Period" has the meaning set forth in Section 8.1 below.
"Tax" (and, with correlative meaning, "Taxes," "Taxable" and "Taxing")
means all sales and use taxes, real and personal property taxes, income taxes,
gross receipts taxes, documentary transfer taxes, employment taxes, withholding
taxes, unemployment insurance contributions and other taxes or governmental
charges of any kind, however denominated, including any Liability in respect
thereto, under any federal, state, local, foreign or other applicable tax law.
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"Tax Return" means any return, report, information return, schedule or
other document (including any related or supporting information) filed or
required to be filed with respect to any taxing authority with respect to Taxes.
"Updated Capitalization Representation" has the meaning set forth in
Section 4.2 below.
"Updated Seller Disclosure Schedule" has the meaning set forth in Section
5.12 below.
"Updated Purchaser Disclosure Schedule" has the meaning set forth in
Section 5.13 below.
1.2 Construction of Certain Terms and Phrases. Unless the context of this
Agreement otherwise requires, (a) words of any gender include each other gender;
(b) words using the singular or plural number also include the plural or
singular number, respectively; (c) the terms "hereof," "herein," "hereby" and
derivative or similar words refer to this entire Agreement; (d) the terms
"Article" or "Section" refer to the specified Article or Section of this
Agreement; (e) the term "or" has, except where otherwise indicated, the
inclusive meaning represented by the phrase "and/or"; and (f) "including" means
"including without limitation." Whenever this Agreement refers to a number of
days, such number shall refer to calendar days unless Business Days are
specified. All accounting terms used herein and not expressly defined herein
shall have the meanings given to them under GAAP.
ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1 Purchase and Sale of Certain Assets of Seller. Upon the terms and
subject to the conditions set forth in this Agreement, at the Closing, Seller
shall sell, convey, assign, transfer and deliver to Purchaser, and Purchaser
shall purchase and acquire from Seller, free and clear of any Encumbrances other
than Permitted Encumbrances, all of Seller's right, title and interest in and to
all of Seller's property and assets, real, personal or mixed, tangible and
intangible, of every kind and description, wherever located, including, but not
limited to, the following (but excluding the Excluded Assets):
(a) Products. All products listed on Schedule 2.1(a), including
without limitation all specifications, documentation, supplements,
improvements, modifications, updates, corrections and enhancements to past
versions of such products, shipping versions of such products and versions
of such products currently under development (the "Products");
(b) Property. All fixed assets and tangible personal property used
exclusively in the operation of the Business and set forth in Schedule
2.1(b) attached hereto (the "Property");
(c) Customer Lists. All customer lists and customer accounts owned by
Seller and used primarily in operation of the Business and set forth in
Schedule 2.1(c) attached hereto (the "Customer Lists and Accounts");
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(d) Assumed Contracts. All rights of Seller under the agreements
entered into between Seller and third parties named therein in the
operation of the Business and listed in Schedule 2.1(d) attached hereto
(the "Assumed Contracts");
(e) Permits. All Permits (other than Permits that are not assignable
pursuant to applicable laws) issued to or held by Seller relating to the
Purchased Assets, the Business or Assumed Liabilities as forth in Schedule
2.1(e) attached hereto;
(f) Seller Records. All of the Books and Records of Seller exclusively
related to the Business, Purchased Assets and Assumed Liabilities (the
"Seller Records") as set forth in Schedule 2.1(f);
(g) Inventory. All inventory of the Business as set forth in Schedule
2.1(g);
(h) Intellectual Property. All Intellectual Property as set forth in
Schedule 2.1(h);
(i) Intangible Rights. All of the intangible rights and property of
Seller, including going concern value, goodwill, telephone, telecopy,
e-mail addresses, web sites, domain names, listings and those items listed
in Schedule 2.1(i);
(j) Insurance Benefits. All insurance benefits, including rights and
proceeds, arising from or relating to the Assets or the Assumed
Liabilities;
(k) Claims. All claims of Seller against third parties relating to the
Assets, whether known or unknown, contingent or noncontingent, including
all such claims listed in Schedule 2.1(k); and
(l) Deposits. All rights of Seller relating to deposits and prepaid
expenses, claims for refunds and rights to offset in respect thereof except
those listed in Schedule 2.1(l).
All of the property and assets to be transferred to Purchaser hereunder are
herein referred to collectively as the "Purchased Assets."
Notwithstanding the foregoing, the transfer of the Assets pursuant to this
Agreement shall not include the assumption of any Liability related to the
Assets unless Purchaser expressly assumes that Liability pursuant to Section
2.3(a).
2.2 Excluded Assets. Notwithstanding anything to the contrary contained in
Section 2.1 or elsewhere in this Agreement, the following assets of Seller
(collectively, the "Excluded Assets") are not part of the sale and purchase
contemplated hereunder, are excluded from the Assets and shall remain the
property of Seller after the Closing:
(a) all cash, cash equivalents and short-term investments;
(b) accounts receivable;
(c) all minute books, stock records and corporate seals;
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(d) the shares of capital stock of Seller held in treasury;
(e) all insurance policies and rights thereunder (except to the extent
specified in Section 2.1(j));
(f) all of the Seller Contracts listed in Schedule 2.2(f), if any;
(g) all personnel Records and other Records that Seller is required by
law to retain in its possession;
(h) all claims for refund of Taxes and other governmental charges of
whatever nature;
(i) all rights in connection with and assets of the Employee Plans;
(j) all rights of Seller under this Agreement, the Bill of Sale, the
Assignment and Assumption Agreement, and the Escrow Agreement; and
(k) the property and assets expressly designated in Schedule 2.2(k).
2.3 Assumed Liabilities/Excluded Liabilities.
(a) As of the Closing Date, Purchaser agrees to assume, satisfy or
perform when due those liabilities and obligations of Seller listed in
Schedule 2.3 (the "Assumed Liabilities").
(b) Other than the Assumed Liabilities, Purchaser shall not assume, or
be deemed to have assumed or guaranteed, or otherwise be responsible for
any liability, obligation or claims of any nature of Seller, whether
matured or unmatured, liquidated or unliquidated, fixed or contingent,
known or unknown, or whether arising out of acts or occurrences prior to,
at or after the date hereof. Without limiting the generality of the
foregoing, Seller shall remain liable for all Tax liabilities, litigation
matters involving Seller and the payment of all Liabilities and obligations
to personnel of Seller with respect to the notice and continuation coverage
requirement of Section 4980B(e) of the Code and regulations thereunder,
payroll, overtime, accrued vacation time, holiday time, severance
arrangements or worker's compensation of any nature which are accrued but
unpaid as of the Closing Date.
2.4 Purchase Price. On the Closing Date, as consideration for the Purchased
Assets, Purchaser agrees:
(a) To pay and deliver to Seller the Cash Purchase Price of $270,000.
(b) To deliver to Seller a certificate evidencing the Closing Shares.
(c) To assume the Assumed Liabilities.
2.5 Allocation of Aggregate Purchase Price. The allocation of the purchase
price set forth in Section 2.4 above shall be as set forth on Schedule 2.5
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attached hereto. Purchaser and Seller agree (a) to report the sale of the
Purchased Assets for federal and state Tax purposes in accordance with the
allocations set forth on Schedule 2.5 hereto and (b) not to take any position
inconsistent with such allocations on any of their respective tax returns.
2.6 Private Placement. The Closing Shares to be issued to Seller will be
exempt from the registration requirements of the Securities Act pursuant to the
private placement exemption provided by Rules 505 and/or 506 of Regulation D
promulgated under the Securities Act and/or Section 4(2) of the Securities Act
and applicable state securities laws, based in part upon the representations and
warranties of Seller contained herein. Seller hereby agrees to take all actions
and execute all subscription and other documents which Purchaser reasonably
deems necessary to qualify the issuance of the Closing Shares for such
exemption.
2.7 Sales, Use and Other Taxes. Seller shall be responsible for all sales,
income use, documentary stamp and other Taxes, if any, arising out of the sale
of the Purchased Assets to Purchaser pursuant to this Agreement or any of the
transactions contemplated by this Agreement.
2.8 Bulk Sales Compliance. The Purchaser hereby waives compliance by Seller
with the provisions of any and all laws relating to bulk transfers in connection
with the sale of the Purchased Assets. Seller covenants and agrees to indemnify
and hold harmless Purchaser from and against any and all Damages arising out of
noncompliance with such bulk transfers laws.
2.9 Closing.
(a) Time and Place. The consummation of the purchase and sale of the
Purchased Assets under this Agreement (the "Closing") shall take place at
the offices of Seller, at such time and date agreed to by the parties
(the"Closing Date").
(b) Closing Deliveries by Seller. At the Closing, Seller shall have
delivered or caused to be delivered to Purchaser:
(i) possession of all of the Purchased Assets;
(ii) a Bill of Sale substantially in the form of Exhibit B
attached hereto, conveying good and marketable title in and to all of
the Purchased Assets, duly executed by Seller;
(iii) an Assignment and Assumption Agreement substantially in the
form of Exhibit C attached hereto (the "General Assignment"), duly
executed by Seller;
(iv) the Registration Rights and Lockup Agreement substantially
in the form of Exhibit D attached hereto, duly executed by Seller;
(v) the Leiner Employment Agreement substantially in the form of
Exhibit E attached hereto, duly executed by Shareholder;
(vi) the Escrow Agreement substantially in the form of Exhibit F
attached hereto, duly executed by Seller;
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(vii) the Updated Seller Disclosure Schedule;
(viii) a certificate of an officer of Seller with respect to the
matters set forth in Section 7.1 hereof;
(ix) a certificate of the Secretary of Seller, certifying as of
the Closing Date (A) a true and complete copy of the Certificate of
Incorporation of Seller, (B) a true and complete copy of the
resolutions of the stockholders of Seller authorizing the execution,
delivery and performance of this Agreement by Seller and the
consummation of the transaction contemplated hereby, (C) a certificate
of good standing as of a recent date of Seller in the State of Maine
and (D) incumbency matters; and
(x) consents to assignment of the Assumed Contracts in form and
substance satisfactory to Purchaser and its counsel.
(c) Closing Deliveries By Purchaser. At the Closing, Purchaser shall
have delivered or caused to be delivered:
(i) the Cash Purchase Price to Seller;
(ii) the Closing Shares to Seller;
(iii) the General Assignment, duly executed by Purchaser;
(iv) the Registration Rights Agreement and Lockup Agreement, duly
executed by Purchaser;
(v) the Updated Purchaser Disclosure Schedule;
(vi) the Leiner Employment Agreement duly executed by Purchaser;
(viii) The Escrow Agreement
(vii) a certificate of an officer of Purchaser with respect to
the matters set forth in Section 6.1 hereof;
(viii) a certificate of the Secretary of Purchaser, certifying as
of the Closing Date (A) a true and complete copy of the Certificate of
Incorporation of the Purchaser, (B) a true and complete copy of the
resolutions of the board of directors of the Purchaser authorizing the
execution, delivery and performance of this Agreement by the Purchaser
and the consummation of the transactions contemplated hereby, (C) a
certificate of good standing as of a recent date of the Purchaser in
the State of Nevada and (D) incumbency matters; and
(ix) such other documents as Seller may reasonably request for
the purpose of facilitating the consummation of the transactions
contemplated herein.
2.10 Consents. If there are any Material Consents that have not yet been
obtained (or otherwise are not in full force and effect) as of the Closing, in
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the case of each Seller Contract as to which such Material Consents were not
obtained (or otherwise are not in full force and effect) (the "Restricted
Material Contracts"), Purchaser may waive the closing conditions as to any such
Material Consent and either:
(i) elect to have Seller continue its efforts to obtain the
Material Consents; or
(ii) elect to have Seller retain that Restricted Material
Contract and all Liabilities arising therefrom or relating thereto.
If Purchaser elects to have Seller continue its efforts to obtain any Material
Consents and the Closing occurs, neither this Agreement nor the Assignment and
Assumption Agreement nor any other document related to the consummation of the
Contemplated Transactions shall constitute a sale, assignment, assumption,
transfer, conveyance or delivery or an attempted sale, assignment, assumption,
transfer, conveyance or delivery of the Restricted Material Contracts, and
following the Closing, the parties shall use Best Efforts, and cooperate with
each other, to obtain the Material Consent relating to each Restricted Material
Contract as quickly as practicable. Pending the obtaining of such Material
Consents relating to any Restricted Material Contract, the parties shall
cooperate with each other in any reasonable and lawful arrangements designed to
provide to Purchaser the benefits of use of the Restricted Material Contract for
its term (or any right or benefit arising thereunder, including the enforcement
for the benefit of Purchaser of any and all rights of Seller against a third
party thereunder).
Once a Material Consent for the sale, assignment, assumption, transfer,
conveyance and delivery of a Restricted Material Contract is obtained, Seller
shall promptly assign, transfer, convey and deliver such Restricted Material
Contract to Purchaser, and Purchaser shall assume the obligations under such
Restricted Material Contract assigned to Purchaser from and after the date of
assignment to Purchaser pursuant to a special-purpose assignment and assumption
agreement substantially similar in terms to those of the Assignment and
Assumption Agreement (which special-purpose agreement the parties shall prepare,
execute and deliver in good faith at the time of such transfer, all at no
additional cost to Purchaser).
If there are any Consents not listed on Schedule 7.6 necessary for the
assignment and transfer of any Seller Contracts to Purchaser (the "Nonmaterial
Consents") which have not yet been obtained (or otherwise are not in full force
and effect) as of the Closing, Purchaser shall elect at the Closing, in the case
of each of the Seller Contracts as to which such Nonmaterial Consents were not
obtained (or otherwise are not in full force and effect) (the "Restricted
Nonmaterial Contracts"), whether to:
(i) accept the assignment of such Restricted Nonmaterial
Contract, in which case, as between Purchaser and Seller, such
Restricted Nonmaterial Contract shall, to the maximum extent
practicable and notwithstanding the failure to obtain the applicable
Nonmaterial Consent, be transferred at the Closing pursuant to the
Assignment and Assumption Agreement as elsewhere provided under this
Agreement; or
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(ii) reject the assignment of such Restricted Nonmaterial
Contract, in which case, (A) neither this Agreement nor the Assignment
and Assumption Agreement nor any other document related to the
consummation of the Contemplated Transactions shall constitute a sale,
assignment, assumption, conveyance or delivery or an attempted sale,
assignment, assumption, transfer, conveyance or delivery of such
Restricted Nonmaterial Contract, and (B) Seller shall retain such
Restricted Nonmaterial Contract and all Liabilities arising therefrom
or relating thereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller and Shareholder represent and warrant, jointly and severally to
Purchaser as of the date hereof, except as set forth on the Seller Disclosure
Schedule, as follows:
3.1 Organization of Seller. Seller is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Maine. Seller has
the requisite corporate power and corporate authority to carry on its business
and own its Assets and Properties except where failure to have such power and
authority would not have a Material Adverse Effect on the Business. Seller is
duly qualified to conduct its respective business and is in good standing under
the laws of each jurisdiction where such qualification is required except for
any jurisdiction where failure so to qualify would not have a Material Adverse
Effect upon the Business.
3.2 Authority. Seller has all necessary corporate power and corporate
authority and has taken all corporate action necessary to enter into this
Agreement, to consummate the transactions contemplated hereby and to perform its
respective obligations hereunder and no other proceedings or corporate or
stockholder action on the part of Seller is necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by Seller and (assuming due
authorization, execution and delivery by the other parties to this Agreement)
constitutes a legal, valid and binding obligation of Seller enforceable against
Seller in accordance with its terms except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally and (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies.
3.3 Financial Statements. Seller has delivered to Purchaser: (a) reviewed
or compiled balance sheets of Seller as of December 31, 2003 and 2002 (including
the notes thereto, the "Balance Sheets"), and the related statements of income,
changes in shareholders' equity and cash flows for the fiscal years then ended,
including in each case the notes thereto, (b) balance sheet of Seller as at June
30, 2004 (the "Interim Balance Sheet") and the related statement of income,
changes in shareholders' equity, and cash flows for the six (6) months then
ended. Such financial statements fairly present the financial condition and the
results of operations, changes in shareholders' equity and cash flows of Seller
as at the respective dates of and for the periods referred to in such financial
statements, all in accordance with GAAP. The financial statements referred to in
this Section 3.3 reflect and will reflect the consistent application of such
accounting principles throughout the periods involved, except as disclosed in
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the notes to such financial statements. The financial statements have been and
will be prepared from and are in accordance with the accounting Records of
Seller.
3.4 No Conflicts. Except as set forth in Schedule 3.4, the execution and
delivery by Seller of this Agreement does not, and the performance by Seller of
its obligations under this Agreement and the consummation of the transactions
contemplated hereby will not:
(a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the Certificate of Incorporation or
Bylaws of Seller;
(b) conflict with or result in a violation or breach of any term or
provision of any law, Order, Permit, statute, rule or regulation of a
Governmental or Regulatory Authority applicable to the Business or the
Purchased Assets;
(c) result in a breach of, or default under (or give rise to right of
termination, cancellation or acceleration under) any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
permit, agreement, lease or other similar instrument or obligation to which
the Business or the Purchased Assets may be bound; or
(d) result in an imposition or creation of any Encumbrance on the
Business or any of the Purchased Assets.
3.5 Consents, Approvals and Filings. No consent, approval or action of,
filing with or notice to any Governmental or Regulatory Authority or other
Persons on the part of Seller is required in connection with the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby other than approval by Seller's stockholders in
accordance with Seller's bylaws and the Maine Corporation Law.
3.6 No Undisclosed Liabilities. Except as disclosed in the Seller financial
statements, there are no Liabilities, nor any basis for any claim against Seller
for any such Liabilities, relating to or affecting the Business or the Purchased
Assets, other than Liabilities incurred after the date of the latest Seller
Balance Sheet in the Ordinary Course of Business which have not had, and could
not reasonably be expected to result in, individually or in the aggregate, a
Material Adverse Effect on the Business or the Purchased Assets.
3.7 Purchased Assets. Section 3.7 of Seller Disclosure Schedule contains a
complete and accurate schedule specifying the location of all of the Purchased
Assets, as of the Closing Date. Seller has good and marketable title to, or a
valid leasehold interest in all of the Purchased Assets, free and clear of all
Encumbrances (other than Permitted Encumbrances). The Purchased Assets (together
with the Excluded Assets), constitute all property of any nature owned by Seller
used in, or useful to, the operation of the Business as conducted as of the date
hereof. All tangible personal property of Seller and/or used in or useful to the
operation of the Business is in good operating condition and repair, ordinary
wear and tear excepted. Seller shall be in actual possession of all of the
Purchased Assets at the Closing.
3.8 Benefit Plans; ERISA. Except as set forth on Section 3.8 of Seller
Disclosure Schedule, Purchaser will incur no liability with respect to, or on
account of, and Seller will retain any liability for, and on account of, any
employee benefit plan of Seller, including, but not limited to, liabilities
13
Seller may have to such employees under all incentive compensation plans, bonus
plans, pension and retirement plans, profit-sharing plans (including, any
profit-sharing plan with a cash-or-deferred arrangement subject to Section
401(k) of the Code) stock purchase and option plans, savings and similar plans,
medical, dental, travel, accident, life, disability and other insurance and
other plans or arrangements, whether written or oral and whether "qualified" or
"non-qualified" under the Code, or to any employee as a result of termination of
employment by Seller as contemplated by this Agreement. Seller has not, with
respect to any Offer Recipients, maintained, contributed to, or been obligated
or required to contribute to, a "multiemployer plan," as such term is defined in
Section 3(37) of ERISA. Seller is not a party to any collective bargaining
agreement covering any Offer Recipients and Seller knows of no effort to
organize any such employee as a part of any collective bargaining unit.
3.9 Real Property. Seller does not own any real property. Section 3.9 of
Seller Disclosure Schedule contains the complete and accurate street address of
each parcel of real property leased by Seller or any of its Affiliates in the
conduct of the Business (as lessee or lessor) (the "Leased Real Property").
Seller has a valid leasehold interest in all real property used in or relating
to the conduct of the Business, free and clear of all Encumbrances (other than
Permitted Encumbrances). Each lease with respect to the Leased Real Property is
a legal, valid and binding agreement subsisting in full force and effect
enforceable in accordance with its terms, and except as set forth in Section 3.9
of Seller Disclosure Schedule, there is no, and Seller has not received notice
of any, default (or any condition or event which, after notice or lapse of time
or both, would constitute a default) thereunder. Such leases in effect allow the
particular use of the premises involved, and no provision of any lease prohibits
or unduly limits Seller's ability to conduct the Business so as to have a
Material Adverse Effect on the Business if enforced. Seller does not owe any
brokerage commissions with respect to any such Leased Real Property.
3.10 Intellectual Property Rights.
(a) Section 3.10(a) of Seller Disclosure Schedule contains a true,
correct, complete and current list and summary of all patents, trademarks
and copyright registrations or applications comprising Seller Intellectual
Property. Seller owns and has good and exclusive title to (or valid right
to use) each item of Seller Intellectual Property free and clear of any
Encumbrance (other than Permitted Encumbrances).
(b) Section 3.10(b) of Seller Disclosure Schedule lists all Actions or
Proceedings before any Governmental or Regulatory Authority (including the
United States Patent and Trademark Office or equivalent authority anywhere
in the world) related to any Seller Intellectual Property. No Seller
Intellectual Property or product or service of the Business is subject to
any proceeding or outstanding decree, order, judgment, agreement, or
stipulation restricting in any manner the use, transfer, or licensing
thereof by Seller, or which may affect the validity, use or enforceability
of such Seller Intellectual Property.
(c) To the Knowledge of Seller and Shareholder, each item of Seller
Intellectual Property is valid and subsisting, all necessary registration,
maintenance and renewal fees in connection with such Seller Intellectual
Property have been made and all necessary documents and certificates in
connection with Seller Intellectual Property have been filed with the
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relevant patent, copyright, trademark or other authorities in the United
States or foreign jurisdictions, as the case may be, for the purposes of
maintaining such Seller Intellectual Property.
(d) To the extent that any Seller Intellectual Property has been
developed or created by a third party for Seller, Seller has a written
agreement with such third party with respect thereto and Seller thereby has
obtained ownership of, and is the exclusive owner of, or has a valid
license to use, all Intellectual Property in such work, material or
invention by operation of law or by valid assignment.
(e) Except as set forth in Section 3.10(e) of Seller Disclosure
Schedule, Seller has not transferred ownership of, or granted any license
(exclusive or non-exclusive) with respect to any Seller Intellectual
Property to any third party.
(f) Section 3.10(f) of Seller Disclosure Schedule lists all contracts,
licenses and agreements to which Seller is a party that are currently in
effect (i) with respect to Seller Intellectual Property licensed or offered
to any third party; or (ii) pursuant to which a third party has licensed or
transferred any Seller Intellectual Property to Seller. Each of the
contracts, licenses and agreements listed in Section 3.10(f) of Seller
Disclosure Schedule is in full force and effect. The consummation of the
transactions contemplated by this Agreement will neither violate nor result
in the breach, modification, cancellation, termination or suspension of
such contracts, licenses and agreements. Seller is in compliance with, and
has not breached any term of any of such contracts, licenses and
agreements. To the Knowledge of Seller and Shareholder, following the
Closing Date, Purchaser will be permitted to exercise all of Seller's
rights under the contracts, licenses and agreements required to be listed
in Section 3.10(f) to the same extent Seller would have been able to had
the transactions contemplated by this Agreement not occurred and without
the payment of any additional amounts or consideration other than ongoing
fees, royalties or payments which Seller would otherwise be required to
pay.
(g) To the Knowledge of Seller and Shareholder, the operation of the
Business, as currently conducted, has not, does not and will not infringe
or misappropriate the Intellectual Property of any third party or
constitute unfair competition or trade practices under the laws of any
jurisdiction.
(h) Seller has not received notice from any third party that the
operation of the Business or any act, product or service of the Business
infringes or misappropriates the Intellectual Property of any third party
or constitutes unfair competition or trade practices under the laws of any
jurisdiction.
(i) To the Knowledge of Seller and Shareholder, (i) no Person has or
is infringing or misappropriating any Company Intellectual Property and
(ii) there have been, and are, no claims asserted against Seller or against
any customer of Seller, related to any product or service of the Business.
3.11 Litigation. Except as set forth in Section 3.11 of Seller Disclosure
Schedule, there are no Actions or Proceedings pending or, to the Knowledge of
Seller, threatened or anticipated against, relating to or affecting (i) the
Business or the Purchased Assets or (ii) the transactions contemplated by this
Agreement, and, to the Knowledge of Seller and Shareholder, there is no basis
15
for any such Action or Proceeding. Seller is not in default with respect to any
Order, and there are no unsatisfied judgments against Seller.
3.12 Compliance with Law. To the Knowledge of Seller and Shareholder,
Seller is in compliance with all applicable laws, statutes, Orders, ordinances
and regulations, whether federal, state, local or foreign, except where the
failure to comply, in each instance and in the aggregate, would not reasonably
be expected to have a Material Adverse Effect on the Business. Seller has not
received any notice to the effect that, or otherwise has been advised that, it
is not in compliance with any of such laws, statutes, Orders, ordinances or
regulations, where the failure to comply could reasonably be expected to result
in a Material Adverse Effect on the Business.
3.13 Contracts.
(a) Section 3.13 of the Disclosure Schedule contains a true and
complete list of each of the following contracts, agreements or other
arrangements to which Seller is a party and by which any of the Purchased
Assets are bound:
(i) all loan agreements, indentures, debentures, notes or letters
of credit relating to the borrowing of money or to mortgaging,
pledging or otherwise placing an Encumbrance on any Purchased Assets;
(ii) all leases or agreements under which Seller is lessee or
lessor of, or holds, or operates, any property, real or personal,
owned by any other party used in connection with the conduct of the
Business;
(iii) all commitments, contracts, sales contracts, purchase
orders, mortgage agreements or groups of related agreements with the
same party or any group or affiliated parties which require or may in
the future require payment of any consideration by Seller;
(iv) all license agreements, distribution agreements or any other
agreements involving any of Seller Intellectual Property;
(v) all contracts or commitments that in any way restrict Seller
from carrying on the Business;
(vi) all other contracts and agreements pertaining to the conduct
of the Business or by which any of the Purchased Assets is bound that
(A) involve the payment or potential payment, pursuant to the terms of
any such contract or agreement, by Seller and (B) cannot be terminated
within thirty (30) days after giving notice of termination without
resulting in any cost or penalty to Seller; and
(vii) all contracts or commitments that in any way grants a third
party a right of first refusal for the purchase of any of the
Purchased Assets.
(b) A correct and complete copy of each contract, agreement or other
arrangement disclosed in Section 3.13 of Seller Disclosure Schedule has
been previously provided to Purchaser. Each contract, agreement or other
16
arrangement disclosed in Section 3.13 of Seller Disclosure Schedule is in
full force and effect and constitutes a legal, valid and binding agreement,
enforceable in accordance with its terms.
3.14 Environmental Matters. To the knowledge of Seller and Shareholder, the
Business is in compliance with, and has at all times complied with, all
applicable Environmental Laws in all respects and, to the Knowledge of Seller
and Shareholder, there are no circumstances which may prevent or interfere with
such compliance in the immediate future. In the last five (5) years, Seller has
not received any communication (whether written or oral), whether from a
Governmental or Regulatory Authority, citizen group, employee or otherwise, that
alleges that Seller or any predecessor of any of the Leased Real Property or
Purchased Assets is not in full compliance with Environmental Laws. All Permits,
licenses, registrations and other governmental authorizations currently held by
Seller pursuant to Environmental Laws are identified in Section 3.14 of Seller
Disclosure Schedule and are in good standing and without any violation and
represent all such environmental Permits necessary for the conduct of the
Business as currently conducted. Seller has not been notified by any
Governmental or Regulatory Authority that any environmental Permit will be
modified, suspended or revoked or cannot be renewed, reissued or transferred,
and, to the Knowledge of Seller and Shareholder, no environmental Permit will be
modified, suspended or revoked, or cannot be renewed, reissued or transferred.
3.15 Inventory. All items included in the Inventories consist of a quality
and quantity usable and, with respect to finished goods, saleable, in the
Ordinary Course of Business of Seller except for obsolete items and items of
below-standard quality, all of which have been written off or written down to
net realizable value in the Balance Sheet or the Interim Balance Sheet or on the
accounting Records of Seller as of the Closing Date, as the case may be. Seller
is not in possession of any inventory not owned by Seller, including goods
already sold. All of the Inventories have been valued on the basis of average
cost. Inventories now on hand that were purchased after the date of the Balance
Sheet or the Interim Balance Sheet were purchased in the Ordinary Course of
Business of Seller at a cost not exceeding market prices prevailing at the time
of purchase. The quantities of each item of Inventories (whether raw materials,
work-in-process or finished goods) are not excessive but are reasonable in the
present circumstances of Seller. Work-in-process Inventories are now valued, and
will be valued on the Closing Date, according to GAAP.
3.16 Plants, Buildings, Structures, Facilities and Equipment. To the
Knowledge of Seller and Shareholder, all the facilities and equipment used by
Seller in the conduct of the Business are structurally sound with no known
material defects and are in good operating condition and repair (subject to
normal wear and tear) so as to permit the operation of the Business as presently
conducted. To the Knowledge of Seller and Shareholder, the current condition of
such plants, buildings, structures and facilities comply with applicable zoning
and permit requirements.
3.17 Customer Lists and Accounts. The Customer Lists and Accounts set forth
in Schedule 2.1(b) is a true and correct list of Seller's customers and accounts
as of the date hereof.
17
3.18 Relationships with Suppliers and Licensors. No current supplier to
Seller with the respect to the Business has notified Seller of an intention to
terminate or substantially alter its existing business relationship with Seller
nor has any licensor under a license agreement with Seller that constitutes part
of the Assumed Contracts notified Seller of an intention to terminate or
substantially alter Seller's rights under such license.
3.19 Tax Matters. All Taxes of Seller have been or will be paid on a timely
basis. Seller has duly and timely filed (or will file prior to the Closing) all
Tax Returns required to be filed prior to Closing, and all such Tax Returns and
reports are true, correct, and complete in all material respects. There are no
Encumbrances (other than Permitted Encumbrances) for Taxes on any of the
Purchased Assets. Seller has complied with all record keeping and tax reporting
obligations relating to income and employment taxes due with respect to
compensation paid to employees or independent contractors. Seller is not a
"foreign person" within the meaning of Section 1445(f)(3) of the Code. There are
no pending or, to the Knowledge of Seller, threatened proceedings with respect
to Taxes for which Purchaser could bear successor liability beyond what is set
forth in the Disclosure Schedule or which could become a charge against the
Purchased Assets, and there are no outstanding waivers or extensions of statutes
of limitations with respect to assessments of Taxes, of Seller for which
Purchaser could bear successor liability beyond what is set forth in the
Disclosure Schedule or which could become a charge against the Purchased Assets.
3.20 Permits. Section 3.20 of the Disclosure Schedule contains a true and
complete list of all Permits used by Seller in the conduct of the Business. All
such Permits are currently effective and valid and have been validly issued and
are freely transferable to Purchaser at the Closing. To the Knowledge of Seller,
no additional Permits are necessary to enable Seller to conduct the Business in
compliance with all applicable federal, state and local laws. To the Knowledge
of Seller, the execution, delivery or performance of this Agreement will not
have any effect on the continued validity or sufficiency of the Permits, nor
will any additional Permits be required by virtue of the execution, delivery or
performance of this Agreement to enable Seller to conduct the Business as now
operated. To the Knowledge of Seller, there is no pending Action or Proceeding
by any Governmental or Regulatory Authority which could affect the Permits or
their sufficiency for the current conduct of the Business or of the conduct of
the Business after the Closing.
3.21 Brokers. Seller has not retained any broker in connection with the
transactions contemplated hereunder. Purchaser has, and will have, no obligation
to pay any broker's, finder's, investment banker's, financial advisor's or
similar fee in connection with this Agreement or the transactions contemplated
hereby by reason of any action taken by or on behalf of Seller.
3.22 Material Misstatements and Omissions. The statements, representations
and warranties of Seller contained in this Agreement (including the exhibits and
schedules hereto) and in each document, statement, certificate or exhibit
furnished or to be furnished by or on behalf of Seller pursuant hereto, or in
connection with the transactions contemplated hereby, taken together, do not
contain and will not contain any untrue statement of a material fact and do not
or will not omit to state a material fact necessary to make the statements or
facts contained herein or therein, in light of the circumstances made, not
misleading.
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3.23 Investment Representations. Seller is a sophisticated investor as is
able to determine the merits and risks of an investment in Purchaser. Seller is
aware that the Closing Shares have not been registered under the Securities Act
or any applicable state securities laws, and hereby agrees that the Closing
Shares may not be offered or sold (i) in the absence of registration under the
Securities Act and any applicable state securities laws or an exemption from the
registration requirements of the Securities Act and any applicable state
securities laws and (ii) unless in compliance with the terms and provisions of
this Agreement. Seller represents that Seller is familiar with Rule 144
promulgated by the SEC pursuant to the Securities Act, as presently in effect,
and understands the resale limitations imposed thereby and by the Securities
Act. Seller understands that the offering and sale of the Closing Shares is
intended to be exempt from registration under the Securities Act, by virtue of
the private placement exemption provided by Rule 505 and/or 506 of Regulation D
promulgated under the Securities Act and/or Section 4(2) of the Securities Act,
based, in part, upon the representations, warranties and agreements contained in
this Agreement, and Purchaser may rely on such representations, warranties and
agreements in connection therewith.
Seller agrees that it will be acquiring the Closing Shares for its own
account and for investment, and not with a view to the distribution thereof or
with any present intention of distributing or selling any of the Closing Shares
except in compliance with the Securities Act, applicable state securities laws
and this Agreement. Seller represents that by reason of its business and
financial experience, Seller has knowledge, sophistication and experience in
business and financial matters as to be capable of evaluating the merits and
risk of the prospective investment. The financial condition and investments of
Seller are such that Seller is in a financial position to hold the Closing
Shares for an indefinite period of time and to bear the economic risk of, and
withstand a complete loss of, the investment in the Closing Shares.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as of the date hereof, except
as set forth on the Purchaser Disclosure Schedule furnished separately to
Seller, which exceptions shall be deemed to be representations and warranties as
if made hereunder, as follows:
4.1 Organization. Purchaser is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Nevada. Purchaser
has the requisite corporate power and corporate authority to carry on its
business and own its Assets and Properties except where failure to have such
power and authority would not have a Material Adverse Effect on Purchaser.
Purchaser is duly qualified to conduct its respective business and is in good
standing under the laws of each jurisdiction where such qualification is
required except for any jurisdiction where failure so to qualify would not have
a Material Adverse Effect upon Purchaser.
4.2 Capital Stock of Purchaser. The authorized capital stock of Purchaser,
consists of (i) 20,000,000 shares of common stock, par value $0.001 per share,
of which 10,598,650_ shares were issued and outstanding as of the date hereof;
(ii) no shares of capital stock of Purchaser in treasury; and (iii) 5,000,000
shares of Preferred Stock, $0.001 par value per share, all of which have been
designated Series A Preferred Stock and all of which were issued and outstanding
19
as of the date hereof (each of which shares is convertible into four shares of
common stock). Each share of the issued and outstanding capital stock of
Purchaser is duly authorized, validly issued, fully paid and nonassessable.
Purchaser will provide at Closing an updated version of this Section 4.2,
updated and accurate as of the Closing (the "Updated Capitalization
Representation"). Purchaser intends to amend its Articles of Incorporation to
increase the number of shares of its common stock authorized to 100,000,000 and
the number of shares of preferred stock authorized to 25,000,000.
Except for outstanding options to purchase up to 2,970,000 shares of common
stock, there are no outstanding options, warrants, rights (including conversion
or preemptive rights) or agreements for the purchase or acquisition from
Purchaser of any shares of its capital stock.
4.3 Authority. Purchaser has all necessary corporate power and corporate
authority and has taken all corporate action necessary to enter into this
Agreement, to consummate the transactions contemplated hereby and to perform its
respective obligations hereunder and no other proceedings or corporate or
stockholder action on the part of Purchaser is necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by Purchaser and (assuming due
authorization, execution and delivery by the other parties to this Agreement)
constitutes a legal, valid and binding obligation of Purchaser enforceable
against Purchaser in accordance with its terms except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors' rights generally and
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies.
4.4 Litigation. Except as set forth in the Purchaser Disclosure Schedule,
there are no Actions or Proceedings pending or, to the Knowledge of Purchaser,
threatened or anticipated against, relating to or affecting (i) Purchaser or
(ii) the transactions contemplated by this Agreement, and, to the Knowledge of
Purchaser, there is no basis for any such Action or Proceeding. Purchaser is not
in default with respect to any Order, and there are no unsatisfied judgments
against Purchaser.
4.5 Financial Statements and Reports. Purchaser is required to file reports
and documents under Section 13 or subsections (a) or (c) of Section 14 of the
Exchange Act with the SEC (such reports are collectively referred to herein as
the "Purchaser Reports"). Purchaser is current with respect to filing the
Purchaser Reports. To the Knowledge of Purchaser, all of such Purchaser Reports
are in compliance in all material respects with the requirements of the Exchange
Act and the rules and regulations thereunder and are complete and correct in all
material respects as of the applicable filing dates. To the Knowledge of the
Purchaser, the Purchaser Reports do not contain any untrue statement of a
material fact or 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 and
unaudited interim financial statements of Purchaser included in the Purchaser
Reports (i) comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto when filed, (ii) be prepared in accordance with GAAP applied on
a consistent basis throughout the periods covered thereby (except as may be
indicated therein or in the notes thereto, and in the case of quarterly
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financial statements, as permitted by Form 10-QSB under the Exchange Act), (iii)
fairly present the consolidated financial condition, results of operations and
cash flows of Purchaser as of the respective dates thereof and for the periods
referred to therein, and (iv) be consistent with the books and records of
Purchaser. Seller acknowledges that it has access to, and has reviewed (to the
extent it has deemed necessary) Purchaser's Reports.
4.6 No Undisclosed Liabilities. Purchaser has no material liabilities and
knows of no material contingent liabilities not disclosed in its financial
statements, except current liabilities incurred in the ordinary course of
business subsequent to the statement date which have not been, either in any
individual case or in the aggregate, materially adverse.
4.7 Brokers. Purchaser has not retained any broker in connection with the
transactions contemplated hereunder. Purchaser will have no obligation to pay
any broker's, finder's, investment banker's, financial advisor's or similar fee
in connection with this Agreement or the transactions contemplated hereby.
4.8 No Conflicts. The execution and delivery by Purchaser of this Agreement
does not, and the performance by Purchaser of its respective obligations under
this Agreement and the consummation of the transactions contemplated hereby will
not:
(a) conflict with or result in a violation or breach of any of the
terms, conditions or provisions of the Certificate of Incorporation or
Bylaws of Purchaser;
(b) conflict with or result in a violation or breach of any term or
provision of any law, Order, Permit, statute, rule or regulation of a
Governmental or Regulatory Authority applicable to Purchaser, the business
or Assets or Properties of Purchaser or the capital stock of Purchaser; or
(c) result in a breach of, or default under (or give rise to a right
of termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
agreement, lease or other similar instrument or obligation to which
Purchaser may be bound; or
(d) result in an imposition or creation of any Encumbrance (other than
a Permitted Encumbrance) on the business or Assets or Properties of
Purchaser except as contemplated by this Agreement.
4.9 Consents and Governmental Approvals and Filings. No consent, approval
or other action of, filing with or notice to any Governmental or Regulatory
Authority on the part of Purchaser is required in connection with the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated hereby.
4.10 Compliance with Law. To the Knowledge of Purchaser, it is in
compliance with all applicable laws, statutes, Orders, ordinances and
regulations, whether federal, state, local or foreign, except where the failure
to comply, in each instance and in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on Purchaser and its business
operations. Purchaser has not received any notice to the effect that, or
otherwise has been advised that, it is not in compliance with any of such laws,
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statutes, Orders, ordinances or regulations, where the failure to comply could
reasonably be expected to result in a Material Adverse Effect on Purchaser or
its business operations.
4.11 Closing Shares. The Closing Shares, upon issuance thereof, will be
duly authorized, validly issued, fully paid, nonassessable, and not subject to
any Encumbrance. The Closing Shares shall be issued in compliance with all
applicable securities laws.
4.12 Material Misstatements and Omissions. The statements, representations
and warranties of Purchaser contained in this Agreement (including the exhibits
and schedules hereto) and in each document, statement, certificate or exhibit
furnished or to be furnished by or on behalf of Purchaser pursuant hereto, or in
connection with the transactions contemplated hereby, taken together, do not
contain and will not contain any untrue statement of a material fact and do not
or will not omit to state a material fact necessary to make the statements or
facts contained herein or therein, in light of the circumstances made, not
misleading.
ARTICLE V
COVENANTS OF THE PARTIES
Each of the parties covenants with the others to act, as follows:
5.1 Operation of Business Prior to Closing Date. Except as otherwise
contemplated by this Agreement, between the date hereof and the Closing Date (or
earlier termination of this Agreement), Seller will operate the Business in the
Ordinary Course of Business and, to the extent consistent therewith, with no
less diligence and effort than would be applied in the absence of this
Agreement, use all commercially reasonable efforts to seek to preserve intact
its current Business organizations, keep available the service of current
managers, officers and employees of the Business and preserve relationships with
customers, suppliers, distributors, lessors, employees, contractors and others
having business dealings with the Business with the intention that the Business
shall be unimpaired at the Closing Date. Without limiting the generality of the
foregoing, except as otherwise expressly provided in this Agreement, prior to
the Closing Date (or earlier termination of this Agreement), Seller:
(a) will not create, incur or assume any obligation which would
adversely affect the Purchased Assets or Purchaser's ability to conduct the
Business in substantially the same manner and condition as conducted by
Seller on the date of this Agreement;
(b) except to the extent an obligation is established in a written
agreement in existence prior to the date hereof, will not change in any
manner the compensation of, or agree to provide additional benefits to, or
enter into any employment agreement with, any Offer Recipient, except as
contemplated in Section 5.8 below and except for such benefits provided to
substantially all of Seller's similarly situated employees;
(c) will maintain insurance coverage in amounts adequate to cover the
reasonably anticipated risks of the Business;
(d) except for Inventory sold or disposed of in the ordinary course of
business, will not sell, dispose of or encumber any of the Purchased Assets
or license any Purchased Assets to any Person;
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(e) will not enter into any material agreements or commitments
relating to the Business, except on commercially reasonable terms in the
Ordinary Course of Business of the Business;
(f) will comply in all material respects with all laws and regulations
applicable to the Business;
(g) will not enter into any agreement with any third party for the
distribution of any of the Purchased Assets;
(h) will not materially amend its Certificate of Incorporation or
Bylaws (except as necessary to comply with the terms of this Agreement)
5.2 Investigation by Purchaser. Subject to all applicable patient
confidentiality laws and confidentiality obligations of Seller, Seller shall
allow Purchaser or its authorized representatives, at Purchaser's own expense
during regular business hours, or otherwise with the consent of Seller (which
consent shall not be unreasonably withheld), to make such inspection of Seller
and to inspect (and, if applicable, make copies of) Books and Records, plants,
offices, warehouses and other facilities of Seller as reasonably requested by
Purchaser or its authorized representatives.
5.3 Consents. As soon as practicable after execution of this Agreement,
each party will commence all action required hereunder to obtain all applicable
Permits, consents, approvals and agreements of, and to give all notices and make
all filings with, any third parties as may be necessary to authorize, approve or
permit the full and complete consummation of the transactions contemplated
hereby by the Closing Date.
5.4 Notification of Certain Matters. Each of the parties shall give prompt
notice to the other party, of (i) the discovery of a fact or facts of which the
notifying party has actual knowledge which cause it to conclude that any of the
representations, warranties or statements made by it or in an any exhibit,
schedule or other document delivered pursuant to this Agreement, may be false or
misleading or omission of any facts necessary in order to make such
representations, warranties or statements not false or misleading; (ii) the
occurrence, or failure to occur, of any event which occurrence or failure would
be likely to cause any representation or warranty made by them in this Agreement
to be untrue or inaccurate any time from the date hereof to the Closing Date;
and (iii) any failure of the notifying party to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder. Each party hereto shall use all reasonable efforts to remedy any
failure on its part to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder.
5.5 Cooperative Efforts. Subject to the terms and conditions of this
Agreement, each of the parties hereto will use its Best Efforts to take, or
cause to be taken, all action, or to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, obtaining all consents and approvals of all
Persons and Governmental or Regulatory Authorities and removing any injunctions
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or other impairments or delays or otherwise which are necessary to the
consummation of the transactions contemplated by this Agreement.
5.6 Filings. Each of the parties hereto will use its Best Efforts to make
or cause to be made all such filings and submissions as may be required under
applicable laws and regulations for the consummation of the transactions
contemplated by this Agreement. Seller and Purchaser will coordinate and
cooperate with one another in exchanging such information and provide each other
such assistance as any other party may reasonably request in connection with the
foregoing.
5.7 Public Announcements. Except as may be required by applicable law,
including any determination that a press release or other public statement or
filing is required under applicable securities or regulatory rules, prior to the
Closing, none of the parties hereto shall issue or cause the publication of any
press release or otherwise make any public statement with respect to the
transactions contemplated hereby without the prior written consent of each of
the other parties hereto.
5.8 Employee Matters.
(a) Offer of Employment. Subject to and in accordance with the
provisions of this Section 5.8, Purchaser will offer employment to all
employees who are employed in the Business as of the date of this Agreement
(such employees to receive offers of employment are referred to as the
"Offer Recipients"). Seller has delivered to Purchaser a list setting forth
the names, home addresses, compensation levels, stock option position, if
any, and job titles of all Offer Recipients. Prior to the Closing,
Purchaser, after notice to Seller as to the timing and method of contact,
shall have the right to contact each of the Offer Recipients for the
purposes of making offers of employment with Purchaser to be effective
after the Closing Date and receiving written acceptances of such employment
(in each case contingent on consummation of the transactions contemplated
by this Agreement). Upon Closing, Purchaser shall hire all Offer Recipients
who accept such offer in the manner and within the time frame reasonably
established by Purchaser. Each such employee who is employed by Seller on
the Closing Date and who actually transfers to employment with Purchaser at
or after the Closing Date as a result of an offer of employment made by
Purchaser is hereafter referred to as a "Transferred Employee." On a
periodic basis following the date hereof and prior to the Closing,
Purchaser shall advise Seller of its intentions with respect to Offer
Recipients it desires to extend or has extended offers to and the general
status of discussions with such employees.
(b) Transition. The employment of the Transferred Employees by Seller
shall end at the close of business on the Closing Date and the employment
of the Transferred Employees by Purchaser shall commence at 12:01 a.m. on
the day after the Closing Date, except as to those Transferred Employees
who are on disability leave of less than twenty-six (26) weeks, authorized
leave of absence or military service as of the Closing Date, in which case
such Transferred Employees shall remain employees of Seller until, and will
commence employment with Purchaser as of, 12:01 a.m. on the date they
return to active employment. Transferred Employees shall not include any
person on a disability leave of more than twenty-six (26) weeks. The terms
of employment with Purchaser shall be as mutually agreed to between each
Transferred Employee and Purchaser, subject to the succeeding provisions of
this Section 5.8.
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(c) Retention of Employees Prior to Closing. Seller agrees to use
reasonable efforts to (i) retain the Offer Recipients as employees of the
Business until the Closing Date, and (ii) assist Purchaser in securing the
employment after the Closing Date of the Offer Recipients. Seller shall
notify Purchaser promptly if any Offer Recipient terminates employment with
Seller after the date of this Agreement but prior to the Closing.
(d) Employees Other than Transferred Employees. Any employees of
Seller who do not become Transferred Employees will remain employees of
Seller after the Closing. Any severance obligations to such employees shall
be Seller's responsibility.
5.9 Prorations. The Purchaser and Seller agree to make customary prorations
(as of the Closing Date) in respect of items customarily prorated in connection
with the sale of assets similar to the Purchased Assets, including, without
limitation, if applicable, real estate taxes and power and utility charges.
5.10 Confidentiality. Each of the parties hereto will maintain in
confidence, and will cause its respective directors, officers, members,
managers, employees, agents, Affiliates and advisors to maintain in confidence
any written, oral or other information furnished at any time by another party to
this Agreement in connection with the transactions contemplated by this
Agreement, unless (a) such information is already known to such party or to such
others other than on a confidential basis, (b) such information becomes publicly
available through no fault of such party, (c) the use of such information is
necessary or appropriate in making any filing or obtaining any consent or
approval required for the consummation of the transactions contemplated by this
Agreement, or (d) the furnishing or use of such information is required by law.
If the transactions contemplated hereby are not consummated, the confidentiality
obligations of each party pursuant to this Section 5.10 will continue, and each
party will, at the request of the party supplying the information, return or
destroy (and provide appropriate certification thereof) any and all such
written, electronic or computer-based information.
5.11 Approval of Seller's Stockholders. Seller shall take the actions
necessary to conduct a special meeting of Seller's stockholders to consider and
vote on the transactions contemplated by this Agreement at the earliest
practicable date after the date of this Agreement and in connection therewith
Seller's Board of Directors shall recommend to Seller's Stockholders that they
approve this Agreement and the transactions contemplated thereby. Seller agrees
to use its commercially reasonable efforts to take all necessary steps to obtain
approval of Seller's stockholders, including the filing and distribution of a
proxy statement, calling of a special meeting and the holding of that meeting.
Such a special meeting shall be called, held and conducted and proxies shall be
solicited, in compliance with Seller's Certificate of Incorporation and Bylaws,
both as amended, and in compliance with applicable law.
5.12 Updating of Disclosure Schedules. Seller shall prepare and deliver an
updated version of Seller Disclosure Schedule (the "Updated Company Disclosure
Schedule") and all schedules and exhibits thereto to include all information
necessary to make the representations and warranties of Seller contained in this
Agreement, as supplemented by the Updated Company Disclosure Schedule, accurate
as of the Closing Date. Seller shall deliver a reasonably complete version of
the Updated Company Disclosure Schedule to Purchaser approximately five (5) days
prior to Closing. Purchaser shall prepare and deliver an updated version of the
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Purchaser Disclosure Schedule (the "Updated Purchaser Disclosure Schedule") and
all schedules and exhibits thereto to include all information necessary to make
the representations and warranties of Purchaser contained in this Agreement, as
supplemented by the Updated Purchaser Disclosure Schedule, accurate as of the
Closing Date. Purchaser shall deliver a reasonably complete version of the
Updated Purchaser Disclosure Schedule to Seller approximately five (5) days
prior to Closing.
5.13 Appointment of Leiner as CTO. Purchaser shall take all necessary steps
such that, upon the Closing, Dennis Leiner will be appointed as Chief Technology
Officer of the Purchaser. The Purchaser shall provide Leiner with an employment
agreement substantially in the form of Exhibit E, attached hereto (the "Leiner
Employment Agreement").
5.14 No Negotiation. Until such time as this Agreement shall be terminated
pursuant to Section 9.1, neither Seller nor Shareholder shall directly or
indirectly solicit, initiate, encourage or entertain any inquiries or proposals
from, discuss or negotiate with, provide any nonpublic information to or
consider the merits of any inquiries or proposals from any Person (other than
Purchaser) relating to any business combination transaction involving Seller,
including the sale by Shareholder of Seller's stock, the merger or consolidation
of Seller or the sale of Seller's business or any of the Assets (other than in
the Ordinary Course of Business). Seller and Shareholder shall notify Purchaser
of any such inquiry or proposal within twenty-four (24) hours of receipt or
awareness of the same by Seller or Shareholder.
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF SELLER
The obligations of Seller to effect the transactions contemplated hereby
are subject to the satisfaction, at or before the Closing, of each of the
following conditions:
6.1 No Material Adverse Effect. Purchaser shall not have acted or caused
any Person to have acted in any manner which has created or could reasonably be
expected to create (individually or in the aggregate), a Material Adverse Effect
on Purchaser or the business operations thereof.
6.2 Closing and Closing Deliveries. Purchaser shall have executed and
delivered the documents required to be executed and delivered by Purchaser
pursuant to Section 2.9(c) above and the Closing shall have taken place on or
before August 31, 2004.
6.3 Accuracy of Representations. All of Purchaser's representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), shall have been
accurate in all material respects as of the date of this Agreement and shall be
accurate in all material respects as of the time of the Closing as if then made.
6.4 Purchaser's Performance. All of the covenants and obligations that
Purchaser is required to perform or to comply with pursuant to this Agreement at
or prior to the Closing (considered collectively), and each of these covenants
and obligations (considered individually), shall have been performed and
complied with in all material respects.
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6.5 No Injunction. There shall not be in effect any legal requirement or
any injunction or other Order that (a) prohibits the consummation of the
Contemplated Transactions and (b) has been adopted or issued, or has otherwise
become effective, since the date of this Agreement.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF PURCHASER
The obligation of Purchaser to effect the transactions contemplated hereby
is subject to the satisfaction, at or before the Closing, of each of the
following conditions:
7.1 Material Adverse Effect. Seller shall not have acted or caused any
Person to have acted in any manner which has created or could reasonably be
expected to create (individually or in the aggregate), a Material Adverse Effect
on the Business or the Purchased Assets.
7.2 Stockholder Approval. Seller shall have obtained the approval of its
stockholders for the consummation of the transactions contemplated by this
Agreement.
7.3 Closing and Closing Deliveries. Seller shall have executed and
delivered the documents required to be executed and delivered by Seller pursuant
to Section 2.9(b) above and the Closing shall have taken place on or before
August 31, 2004.
7.4 Accuracy Of Representations. All of Seller's and Shareholder's
representations and warranties in this Agreement (considered collectively), and
each of these representations and warranties (considered individually), shall
have been accurate in all material respects as of the date of this Agreement,
and shall be accurate in all material respects as of the time of the Closing as
if then made, without giving effect to any supplement to the Disclosure
Schedule.
7.5 Seller's and Shareholder's Performance. All of the covenants and
obligations that Seller and Shareholder are required to perform or to comply
with pursuant to this Agreement at or prior to the Closing (considered
collectively), and each of these covenants and obligations (considered
individually), shall have been duly performed and complied with in all material
respects.
7.6 Consents. Each of the Consents identified in Schedule 7.6 (the
"Material Consents") shall have been obtained and shall be in full force and
effect.
7.7 Additional Documents. Seller and Shareholders shall have caused the
documents and instruments required by Section 2.7(a) and the following documents
to be delivered (or tendered subject only to Closing) to Purchaser:
(a) A statement from the holder of any Assumed Liability, setting
forth the principal amount then outstanding on the indebtedness represented
by such note or secured by such mortgage, the interest rate thereon and a
statement to the effect that Seller, as obligor under such Assumed
Liability, is not in default under any of the provisions thereof;
27
(b) Releases of all Encumbrances on the Purchased Assets, other than
Permitted Encumbrances, and;
(c) Such other documents as Purchaser may reasonably request.
7.8 No Proceedings. Since the date of this Agreement, there shall not have
been commenced or threatened against Purchaser, or against any related person of
Purchaser, any Proceeding (a) involving any challenge to, or seeking Damages or
other relief in connection with, any of the Contemplated Transactions or (b)
that may have the effect of preventing, delaying, making illegal, imposing
limitations or conditions on or otherwise interfering with any of the
Contemplated Transactions.
7.9 No Conflict. Neither the consummation nor the performance of any of the
Contemplated Transactions will, directly or indirectly (with or without notice
or lapse of time), contravene or conflict with or result in a violation of or
cause Purchaser or any related person of Purchaser to suffer any adverse
consequence under (a) any applicable legal requirement or Order or (b) any legal
requirement or Order that has been published, introduced or otherwise proposed
by or before any Governmental Body.
7.10 Completion of Due Diligence. Purchaser shall have completed its due
diligence on the Contemplated Transactions by August 15, 2004, and shall have
elected to complete the Contemplated Transactions.
ARTICLE VIII
ACTIONS BY THE PARTIES AFTER THE CLOSING
8.1 Survival of Representations, Warranties, Etc. The representations,
warranties and covenants contained in or made pursuant to this Agreement or any
certificate, document or instrument delivered pursuant to or in connection with
this Agreement in the transactions contemplated hereby shall survive the
execution and delivery of this Agreement and the Closing hereunder
(notwithstanding any investigation, analysis or evaluation by any party hereto
or their designees of the Assets and Properties, business, operations or
condition (financial or otherwise) of the other party), and thereafter the
representations and warranties of the Parties herein shall continue to survive
in full force and effect for a period of twelve (12) months after the Closing
Date (the "Survival Period").
8.2 Indemnification.
(a) By Seller and Shareholder. Seller and Shareholder shall indemnify,
defend and hold harmless Purchaser and each of its officers, directors,
employees, agents, successors and assigns (collectively the "Purchaser
Group") from and against any and all costs, losses, Liabilities, damages,
lawsuits, deficiencies, claims and expenses, including without limitation,
penalties, costs of mitigation, clean-up or remedial action, reasonable
attorneys' fees and all amounts paid to third parties in investigation,
defense or settlement of any of the foregoing (collectively, the
"Damages"), suffered by Purchaser, incurred in connection with, arising out
of, resulting from or incident to (i) any breach of any covenant,
representation, warranty or agreement or the inaccuracy of any
28
representation, made by Seller in or pursuant to this Agreement and (ii)
Liabilities that are not Assumed Liabilities.
(b) By Purchaser. Purchaser shall indemnify, defend and hold harmless
Seller, its officers, managers, employees, agents, successors and assigns
(the "Seller Group") from and against any and all Damages suffered by
Seller or Shareholder incurred in connection with, arising out of,
resulting from or incident to any (i) breach of any covenant,
representation, warranty or agreement or the inaccuracy of any
representation made by Purchaser in or pursuant to this Agreement and (ii)
Assumed Liabilities.
(c) Resolution of Claims. A claim for indemnification for any matter
not involving a third-party claim may be asserted by written notice to the
party from whom indemnification is sought to the other party (the "Claim
Notice"). Upon receipt of a Claim Notice, the party from whom
indemnification is sought shall have fifteen (15) Business Days to object,
in writing, to such claim (the "Dispute Notice"); otherwise the party
seeking indemnification shall have the right to enforce its indemnity
rights as defined hereunder. If the party from whom indemnification is
sought provides the other party with a Dispute Notice in a timely fashion,
the parties shall attempt in good faith to agree upon the rights or the
respective parties with respect to such claim. If the parties agree as to
the resolution of such claim, they shall prepare a memorandum setting forth
the terms of such resolution signed by each of the parties hereto and
enforce the indemnification rights hereunder. If no agreement is reached
within thirty (30) days after delivery of the Dispute Notice, the dispute
resolution provisions of this Agreement shall govern.
(d) Third Party Claims; Defense of Claims. If any Action or Proceeding
is filed or initiated against any party entitled to the benefit of
indemnity hereunder, written notice thereof shall be given to the
indemnifying party as promptly as practicable (and in any event within ten
(10) days after the service of the citation or summons); provided, however,
that a delay or failure of any indemnified party to give timely notice
shall not affect rights to indemnification hereunder except to the extent
that the indemnifying party demonstrates actual damage caused by such
failure. Any such notice shall state (with reasonable specificity) the
basis on which indemnification is being asserted, the amount of Damages for
which indemnification is being asserted and copies of all relevant
pleadings, demands and other papers being served on the indemnified party.
After such notice, the indemnifying party may, if it so elects, take
control of the defense and investigation of such Action or Proceeding and
to employ and engage attorneys of its own choice to handle and defend the
same, such attorneys to be reasonably satisfactory to the indemnified
party, at the indemnifying party's sole cost, risk and expense (unless the
indemnifying party has failed to assume the defense of such Action or
Proceeding), and compromise or settle such Action or Proceeding, which
compromise or settlement shall be made only with the written consent of the
indemnified party, such consent not to be unreasonably withheld. The
indemnified party may withhold such consent if such compromise or
settlement would adversely affect the conduct of business or requires less
than an unconditional release to be obtained.
If the indemnifying party fails to assume the defense of such Action
or Proceeding within fifteen (15) days after receipt of notice thereof
pursuant to this Section 8.2, the indemnified party against which such
29
Action or Proceeding has been filed or initiated will (upon delivering
notice to such effect to the indemnifying party) have the right to
undertake, at the indemnifying party's own cost and expense, the defense,
compromise or settlement of such Action or Proceeding on behalf of and for
the account and risk of the indemnifying party; provided, however, that
such Action or Proceeding shall not be compromised or settled without the
written consent of the indemnifying party, which consent shall not be
unreasonably withheld. In the event the indemnified party assumes defense
of the Action or Proceeding, the indemnified party will keep the
indemnifying party reasonably informed of the progress of any such defense,
compromise or settlement and will consult with, when appropriate, and
consider any reasonable advice from, the indemnifying party of any such
defense, compromise or settlement. The indemnifying party shall be liable
for any settlement of any action subject to indemnification and effected
pursuant to and in accordance with this Section 8.2 and for any final
judgment (subject to any right of appeal), and the indemnifying party
agrees to indemnify and hold harmless the indemnified party from and
against any Damages by reason of such settlement or judgment.
The indemnified party shall cooperate in all reasonable respects with
the indemnifying party and its attorneys in the investigation, trial and
defense of such Action or Proceeding and any appeal arising therefrom;
provided, however, that the indemnified party may, at its own cost,
participate in the investigation, trial and defense of such Action or
Proceeding and any appeal arising therefrom.
(e) Limitations on Indemnity.
(i) Seller and Shareholder shall have no liability to Purchaser
for amounts payable pursuant to its indemnification obligations in
this Section 8.2 until the total of all such Damages incurred by any
member of the Purchaser Group, individually or in the aggregate,
exceed Twenty Five Thousand Dollars ($25,000) (the "Threshold
Amount"), and then indemnification by the indemnifying party shall
apply to all such Damages exceeding the Threshold Amount. Purchaser
shall have no liability to Seller for amounts payable pursuant to its
indemnification obligations in this Section 8.2 until the total of all
such Damages incurred by any member of Seller Group, individually or
in the aggregate, exceed Twenty Five Thousand Dollars ($25,000) (the
"Threshold Amount"), and then indemnification by the indemnifying
party shall apply to all such Damages exceeding the Threshold Amount.
The maximum amount payable by a party for indemnification damages
hereunder is Two Hundred Seventy Thousand Dollars ($270,000).
(ii) Upon notice to Seller specifying in reasonable detail the
basis therefore, Purchaser may give notice of a claim in such amount
under the Escrow Agreement. Purchaser's sole remedy hereunder shall be
the exercise of Purchaser's rights under the Escrow Agreement.
(iii) The limitations on Seller's, Shareholder's and Purchaser's
indemnification obligations in 8.2(e)(i) above shall not apply to any
Damages arising out of or in connection with any fraud or intentional
breach by a party of any representation, warranty, covenant or
agreement or obligation of such party.
8.3 Further Assurances. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
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each of the parties will take such further action (including the execution and
delivery of such further instruments and documents) as the other party
reasonably may request, at the sole cost and expense of the requesting party
(unless the requesting party is entitled to indemnification therefor under this
Article VIII).
8.4 Transfer of Rights to Name. Subject to approval of Seller's
stockholders, Seller shall transfer and assign to Purchaser all rights in the
name "Lighthouse Imaging Corporation," as the same may be used in whole.
8.5 Access to Records. After the Closing Date, Purchaser shall retain for a
period consistent with Purchaser's record-retention policies and practices those
records of Seller relating to the Purchased Assets. Purchaser also shall provide
Seller (including Seller's accountants and auditors) reasonable access thereto,
during normal business hours and on at least three days' prior written notice,
to enable them to prepare financial statements or Tax Returns or deal with Tax
audits. After the Closing Date, Seller shall provide Purchaser (including
Purchaser's accountants and auditors) reasonable access to records relating to
Excluded Assets, during normal business hours and on at least three days' prior
written notice, for any reasonable business purpose specified by Purchaser in
such notice.
ARTICLE IX
MISCELLANEOUS
9.1 Termination.
(a) This Agreement may be terminated and the transactions contemplated
hereby abandoned:
(i) at any time prior to the Closing, by mutual written consent
of Purchaser and Seller;
(ii) at any time after August 31, 2004 (the "Termination Date"),
by the Purchaser or Seller in writing, if the transactions
contemplated by this Agreement have not been consummated on or before
the Termination Date and such terminating party is not then in
material breach of this Agreement; provided that no party may
terminate this Agreement pursuant to this clause (ii) if such party's
failure to fulfill any of its obligations under this Agreement shall
have been a principal reason that the Closing shall not have occurred
on or before said date;
(iii) by Seller on written notice to the Purchaser if (i) there
shall have been a material breach of any representations or warranties
on the part of Purchaser set forth in this Agreement or if any
representations or warranties of Purchaser shall have become untrue in
any material respect, provided that Seller has not breached any of its
obligations hereunder in any material respect; or (ii) there shall
have been a breach by Purchaser of any of its covenants or agreements
hereunder in any material respect or materially adversely affecting
(or materially delaying) the ability of Purchaser or Seller to
consummate the transactions contemplated hereby, and Purchaser has not
cured such breach within ten (10) Business Days after notice by Seller
thereof, provided that Seller has not breached any of its obligations
hereunder in any material respect;
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(iv) by Purchaser on written notice to Seller if (i) there shall
have been a material breach of any representations or warranties on
the part of Seller set forth in this Agreement or if any
representations or warranties of Seller shall have become untrue in
any material respect, provided that Purchaser has not breached any of
its obligations hereunder in any material respect; or (ii) there shall
have been a breach by Seller of any of its covenants or agreements
hereunder in any material respect or materially adversely affecting
(or materially delaying) the ability of Purchaser to consummate the
transactions contemplated hereby, and Seller has not cured such breach
within ten (10) Business Days after notice by Purchaser thereof,
provided that Purchaser has not breached any of its obligations
hereunder in any material respect; and/or;
(v) by Purchaser, if Seller becomes insolvent or seeks protection
under any bankruptcy, receivership, trust deed, creditors arrangement,
composition or comparable proceeding, or if any such proceeding is
instituted against Seller.
(b) In the event of the termination of this Agreement as provided in
this Section 9.1, except as otherwise provided in this Agreement or the
instruments and agreements executed in connection herewith, no party shall
have any other liability hereunder of any nature whatsoever to any other
party, including any liability for Damages; provided, however, that if, at
the time of such termination, any party is in default under its obligations
hereunder, the party in default shall be liable to the other parties for
such default; and provided, further, that the provisions of Section 5.11
and Article IX shall continue in full force and effect.
(c) In the event that a condition precedent to its obligations is not
satisfied, nothing contained herein shall be deemed to require any party to
terminate this Agreement, rather than to waive such condition precedent and
proceed with the Closing.
9.2 Notices. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if
delivered personally against written receipt or by facsimile transmission
with answer back confirmation or mailed (postage prepaid by certified or
registered mail, return receipt requested) or by overnight courier to the
parties at the following addresses or facsimile numbers:
If to Seller, to: Lighthouse Imaging Corporation.
477 Congress Street
Portland, ME 04101
Facsimile No.: (207) 253-5603
Attention: Dennis Leiner
with copies to: Daina J. Nathanson
Drummond Woodsum & MacMahon
245 Commercial Street, P.O. Box
9781
Portland, Maine 04104-5081
Facsimile No.: (207) 772-3627
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If to Purchaser, to: Viking Systems, Inc.
7514 Girard Ave., Suite 1509
La Jolla, CA 92037
Facsimile No.: (858) 225-0467
Attention: Thomas B. Marsh
with copies to: A.O. "Bud" Headman, Jr.
Cohne, Rappaport & Segal, P.C.
525 E. 100 S., Suite 500
Salt Lake City, Utah 84102
Facsimile No.: (801) 355-1813
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section 9.2, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section 9.2, be deemed given upon receipt, and (iii) if
delivered by mail in the manner described above to the address as provided in
this Section 9.2, be deemed given upon receipt (in each case regardless of
whether such notice, request or other communication is received by any other
Person to whom a copy of such notice, request or other communication is to be
delivered pursuant to this Section 9.2). Any party from time to time may change
its address, facsimile number or other information for the purpose of notices to
that party by giving notice specifying such change to the other parties hereto.
9.3 Entire Agreement. This Agreement (and all Exhibits and Schedules
attached hereto, all other documents delivered in connection herewith and the
Confidentiality Agreement) supersedes all prior discussions and agreements among
the parties with respect to the subject matter hereof and contains the sole and
entire agreement among the parties hereto with respect hereto.
9.4 Waiver. Any term or condition of this Agreement may be waived at any
time by the party that is entitled to the benefit thereof, but no such waiver
shall be effective unless set forth in a written instrument duly executed by or
on behalf of the party waiving such term or condition. No waiver by any party
hereto of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under
this Agreement or by law or otherwise afforded, will be cumulative and not
alternative.
9.5 Amendment. This Agreement may be amended, supplemented or modified only
by a written instrument duly executed by or on behalf of each party hereto.
9.6 No Third Party Beneficiary. The terms and provisions of this Agreement
are intended solely for the benefit of each party hereto and their respective
successors or permitted assigns, and it is not the intention of the parties to
confer third-party beneficiary rights upon any other Person other than any
Person entitled to indemnity under Section 8.2 above.
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9.7 No Assignment; Binding Effect. Neither this Agreement nor any right,
interest or obligation hereunder may be assigned by any party hereto without the
prior written consent of the other parties hereto and any attempt to do so
without such consent will be void, except that any party's rights to
indemnification under Section 8.2 may be freely assigned. This Agreement is
binding upon, inures to the benefit of and is enforceable by the parties hereto
and their respective successors and assigns.
9.8 Headings. The headings used in this Agreement have been inserted for
convenience of reference only and do not define or limit the provisions hereof.
9.9 Severability. If any provision of this Agreement is held to be illegal,
invalid or unenforceable under any present or future law, and if the rights or
obligations of any party hereto under this Agreement will not be materially and
adversely affected thereby, (i) such provision will be fully severable, (ii)
this Agreement will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof, (iii) the remaining
provisions of this Agreement will remain in full force and effect and will not
be affected by the illegal, invalid or unenforceable provision or by its
severance herefrom and (iv) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible and mutually acceptable to
the parties herein.
9.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California applicable to contracts
executed and performed in such State, without giving effect to conflicts of laws
principles.
9.11 Consent to Jurisdiction and Forum Selection. The parties hereto agree
that all actions or proceedings arising in connection with this Agreement shall
be initiated and tried exclusively in the State and Federal courts located in
the County of San Diego, State of California. The aforementioned choice of venue
is intended by the parties to be mandatory and not permissive in nature, thereby
precluding the possibility of litigation between the parties with respect to or
arising out of this Agreement in any jurisdiction other than that specified in
this Section 9.11. Each party hereby waives any right it may have to assert the
doctrine of forum non conveniens or similar doctrine or to object to venue with
respect to any proceeding brought in accordance with this paragraph, and
stipulates that the State and Federal courts located in the County of
Cumberland, State of Maine shall have in personam jurisdiction and venue over
each of them for the purposes of litigating any dispute, controversy or
proceeding arising out of or related to this Agreement. Each party hereby
authorizes and accepts service of process sufficient for personal jurisdiction
in any action against it as contemplated by this Section 9.11 by registered or
certified mail, return receipt requested, postage prepaid, to its address for
the giving of notices as set forth in this Agreement, or in the manner set forth
in Section 9.2 of this Agreement for the giving of notice. Any final judgment
rendered against a party in any action or proceeding shall be conclusive as to
the subject of such final judgment and may be enforced in other jurisdictions in
any manner provided by law.
9.12 Expense. Each of the parties hereto shall pay the fees, expenses and
costs incurred by such party incidental to the preparation of this Agreement and
to the consummation of the transactions contemplated hereby.
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9.13 Construction. No provision of this Agreement shall be construed in
favor of or against any party on the ground that such party or its counsel
drafted the provision. Any remedies provided for herein are not exclusive of any
other lawful remedies which may be available to either party. This Agreement
shall at all times be construed so as to carry out the purposes stated herein.
9.14 Counterparts. This Agreement may be executed in any number of
counterparts and by facsimile, each of which will be deemed an original, but all
of which together will constitute one and the same instrument.
9.15 Disclosure Schedules. The information in the Disclosure Schedules
constitutes (i) exceptions to particular representations, warranties, covenants
and obligations of Seller and Shareholder as set forth in this Agreement or (ii)
descriptions or lists of assets and liabilities and other items referred to in
this Agreement. If there is any inconsistency between the statements in this
Agreement and those in the Disclosure Schedules (other than an exception
expressly set forth as such in the Disclosure Schedules with respect to a
specifically identified representation or warranty), the statements in this
Agreement will control. The statements in the Disclosure Schedules and those in
any supplement thereto, relate only to the provisions in the Section of this
Agreement to which they expressly relate and not to any other provision in this
Agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the parties hereto, or their duly authorized officer, as of the date first above
written.
PURCHASER SELLER
Viking Systems, Inc., Lighthouse Imaging Corporation,
a Nevada corporation a Maine corporation
By /s/ Thomas B. Marsh By /s/ Dennis Leiner
Thomas B. Marsh, President Dennis Leiner, CEO and President
SHAREHOLDER
/s/ Dennis Leiner
Dennis Leiner
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