EXHIBIT 10
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of October 17, 2003, among LifeStyle
Innovations, Inc., a Nevada corporation ("LIFESTYLE"), FutureSmart Systems,
Inc., a Delaware corporation and wholly owned subsidiary of LifeStyle
("FUTURESMART" or "SELLER"), and Honeywell International Inc., a Delaware
corporation ("PURCHASER").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Seller is engaged as of the date hereof in the business of
designing, manufacturing, marketing, selling and distributing residential
networking systems and equipment (collectively, the "BUSINESS"), which Business
constitutes the entirety of the operations of FutureSmart, and is operated by
Lifestyle and Seller entirely through FutureSmart;
WHEREAS, Seller wishes to sell the Assets and Purchaser wishes to purchase the
Assets on the terms and conditions and for the consideration described in this
Agreement (all defined terms in this Agreement having the meanings indicated in
Article XI); and WHEREAS, Seller wishes to assign and Purchaser wishes to assume
the Assumed Liabilities on the terms and conditions and for the consideration
described in this Agreement; NOW, THEREFORE, in consideration of the mutual
promises, covenants, representations and warranties made herein and of the
mutual benefits to be derived herefrom, the sufficiency of which the Parties
hereby acknowledge, the Parties hereto agree as follows:
ARTICLE I
SALE AND PURCHASE
SALE AND PURCHASE OF THE ASSETS.
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Subject to the terms and conditions of this Agreement, at the Closing, Seller
will sell, and Purchaser will purchase, all of the Assets for an aggregate
initial purchase price of One and One-half Million Dollars ($1,500,000.00)(the
"INITIAL PURCHASE PRICE"). The Initial Purchase Price is subject to adjustment
pursuant to Section 1.3 (as adjusted, the "FINAL PURCHASE PRICE").
CLOSING.
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The closing of the transaction contemplated hereunder (the "CLOSING")
will take place on the date stated in the Preamble to this Agreement (the
"CLOSING DATE"). The "Effective Time" of the consummation of the transactions
contemplated by this Agreement and the Closing Date shall be deemed to take
place at 11:59 p.m. Eastern Standard Time on the Closing Date;
At the Closing, Seller will convey, transfer, assign and deliver to
Purchaser, free and clear of all Liens, all of Seller's right, title and
interest in and to the Assets, accompanied by any necessary bills of sale,
assignment agreements or other instruments of transfer reasonably requested by
Purchaser;
All amounts set forth in the Agreement shall be paid in United States
Dollars. At Closing, the aggregate sum of One Million Dollars
($1,050,000.00)("ESCROW AMOUNT") shall be deposited into an escrow account, with
an institution agreed to by the Seller and the Purchaser, to secure the
indemnification obligations of the Seller and of LifeStyle hereunder, and
subject to the Escrow Agreement as set forth in Annex A. The disbursement of the
Escrow Amount shall be subject to reduction in an amount equal to any Losses (as
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defined in Sections 9.2 and 9.3 below) incurred by the Purchaser for which the
Purchaser is entitled to indemnification pursuant to Article IX, and/or in an
amount equal to the Closing Deficit as defined in Section 1.3(d) below. In the
event of a dispute between the Seller and/or LifeStyle, on the one hand, and the
Purchaser, on the other hand, in connection with any scheduled disbursement of
the Escrow Amount, the parties shall resolve such dispute pursuant to Section
10.11 hereof; and
The remaining portion of the Initial Purchase Price, the aggregate sum
of Five Hundred Thousand Dollars ($450,000.00), shall be paid by the Purchaser
at the Closing by wire transfer of immediately available funds to an account or
accounts previously designated by the Seller. This portion of the Initial
Purchase Price shall also be available to Purchaser to secure the
indemnification obligations of the Seller and of LifeStyle hereunder as set
forth in the Intercreditor Agreement as set forth in Annex B.
POST-CLOSING PURCHASE PRICE ADJUSTMENT.
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(a) Within two business days after the Closing Date, Seller
shall deliver to Purchaser a proposed balance sheet (the "PROPOSED CLOSING
BALANCE SHEET") of the Business on a stand-alone basis as of the Closing Date
reflecting only the Assets (as defined in Section 2.1 below) and the Assumed
Liabilities (as defined in Section 3.1 below), prepared on a basis consistent
with the principles used to prepare the Reference Balance Sheet and in
accordance with GAAP consistently applied by Seller; PROVIDED, HOWEVER, for
purposes of the determination of the amount of the post-Closing purchase price
adjustment (i) that no Excluded Assets or Retained Liabilities shall be
considered on either the Closing Balance Sheet or Reference Balance Sheet, and
(ii) that goodwill shall be deemed to have a value of zero on both the Closing
Balance Sheet and the Reference Balance Sheet. Purchaser and its representatives
shall be permitted full access to observe at all times the preparation of the
Proposed Closing Balance Sheet and to ask questions of Seller and its
representatives. The Parties shall conduct a joint physical count of the
Inventories as of the Closing Date, the results of which shall be used in the
preparation of the Proposed Closing Balance Sheet.
(b) Seller agrees to provide Purchaser and Purchaser's
accountants, at no cost to Purchaser, access to any books, records and personnel
of the Business retained by Seller after the Closing Date to the extent
reasonably requested by Purchaser for purposes of reviewing the Proposed Closing
Balance Sheet. Unless Purchaser notifies Seller in writing within thirty (30)
days after receipt of the Proposed Closing Balance Sheet that it disagrees with
any aspect of the Proposed Closing Balance Sheet (such notice to include all
Purchaser's specific objections and reasonably detailed proposed revisions
thereto and a description in reasonable detail of the basis therefor along with
any relevant supporting data), the Proposed Closing Balance Sheet shall be
deemed to constitute the Closing Balance Sheet (as defined below) and shall be
conclusive and binding on Seller and Purchaser. If Purchaser so notifies Seller
in writing within such thirty (30) day period, then Seller and Purchaser shall
attempt to resolve their differences with respect thereto within fifteen (15)
days after Seller's receipt of Purchaser's written notice of disagreement. Any
disputes not resolved by Seller and Purchaser within such fifteen (15) day
period regarding the Proposed Closing Date Balance Sheet will be resolved by a
nationally recognized accounting firm to be mutually agreed upon by the Parties
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(the "FIRM"). If the Parties cannot agree on an accounting firm or if such
accounting firm shall be unable or decline to act, the respective auditing firms
of Seller, on the one hand, and Purchaser, on the other, shall cooperate to
select an accounting firm after eliminating one accounting firm unacceptable to
Seller, on the one hand, and one that is unacceptable to Purchaser, on the
other. The Firm shall make a determination on the disputes so submitted as well
as such modifications, if any, to the Proposed Closing Balance Sheet as reflect
such determination, and the same shall be conclusive and binding upon the
Parties. The determination of the Firm for any item in dispute cannot, however,
be in excess of, or less than, the greatest or lowest value, respectively,
claimed for that particular item in the Proposed Closing Balance Sheet prepared
by Seller, in the case of Seller, or in the notice described in the second
sentence of this paragraph, in the case of Purchaser. The Firm shall have no
right to make any determination with respect to the undisputed portions of the
Proposed Closing Balance Sheet, and no such determination with respect to the
undisputed portions of the Proposed Closing Balance Sheet shall be binding on
Seller or Purchaser. The Proposed Closing Balance Sheet of the Business as
finally determined pursuant to the procedures set forth in this Section 1.3 is
hereinafter referred to as the "CLOSING BALANCE SHEET" and the net book value of
the Assets set forth on the Closing Balance Sheet are hereinafter referred to as
the "FINAL NET BOOK VALUE". The fees and expenses of the Firm shall be paid
equally by Seller and Purchaser.
(c) Not later than thirty (30) days after the engagement of
the Firm (as evidenced by its written acceptance by facsimile or otherwise to
the Parties), the Parties shall submit simultaneous briefs to the Firm (with a
copy to the other Parties) setting forth their respective positions regarding
the issues in dispute and their respective calculations of the net book value of
the Assets of the Business as of the Closing Date. Rebuttal briefs shall be
submitted within fifteen (15) days after the submission of the initial briefs.
The Firm shall render its decision resolving the dispute within thirty (30) days
after submission of the rebuttal briefs. If additional briefing, a hearing, or
other information is required by the Firm, the Firm shall give notice thereof to
the Parties as soon as practicable before the expiration of such thirty (30) day
period, and the Parties shall promptly respond; PROVIDED, HOWEVER, that, without
the written consent of Seller and Purchaser, no request for additional briefing,
a hearing or other information shall act as an extension of the thirty (30) day
period in which the Firm must render its decision.
(d) If the Final Net Book Value is less than $(784,000.00)
(such deficiency, the "CLOSING DEFICIT"), then Seller shall pay to Purchaser an
amount equal to the Closing Deficit, plus interest accrued thereon since the
Closing Date computed using an interest rate equal to the "prime rate" as set
forth in THE WALL STREET JOURNAL on the Closing Date (the "BASE RATE"), within
five (5) business days of the final determination of the Closing Balance Sheet.
At Purchaser's option, Purchaser may elect to receive reimbursement for any
Closing Deficit determined hereunder by a reduction in the Escrow Amount
pursuant to Section 1.2(c) of this Agreement.
(e) Payments pursuant to this Section 1.3 shall be made by
wire transfer of immediately available funds in Dollars to a bank account
designated in writing by Purchaser or Seller, as applicable. If at any time
after Seller's delivery of the Proposed Closing Balance Sheet pursuant to
Section 1.3(a), any portion of any adjustment is in dispute between Purchaser
and Seller or, if following any such dispute, the Parties resolve their
difference with respect to all or any portion thereof without a determination by
the Firm, Seller or Purchaser, as applicable, shall within five (5) business
days pay to Purchaser or Seller, as applicable, the amount of the adjustment not
previously paid by Seller or Purchaser, as applicable, and not in dispute
(except to the extent the resolution of the disputed amount could affect whether
the party owing any undisputed amount is obligated to pay such undisputed
amount). Such payment shall be made by a wire transfer of immediately available
funds in Dollars to a bank account designated in writing by Purchaser or Seller,
as the case may be.
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(f) The purpose of this Section 1.3 is to determine the
purchase price to be paid by Purchaser under this Agreement. Accordingly, any
adjustment pursuant to this Section 1.3 shall not be deemed to be an
indemnification by Seller pursuant to Article IX, nor preclude Purchaser from
exercising any indemnification rights pursuant to Article IX.
ARTICLE II
PURCHASE AND SALE
2.1 PURCHASE AND SALE. Upon the terms and subject to the conditions
contained herein, except as otherwise provided in Section 2.2 hereof, at the
Closing, Seller shall sell, convey, transfer and assign to Purchaser, and
Purchaser shall purchase, assume and acquire from Seller, all of Seller's right,
title and interest in and to all of Seller's tangible and intangible assets,
properties and rights used, developed or held for use in the Business as of the
Closing Date, other than the Excluded Assets (the "ASSETS"). For purposes of
this Agreement, "ASSETS" shall include, but not be limited to, the following:
(a) all cash (including without limitation cash overdrafts), cash
equivalents and other similar types of investments, certificates of deposit,
U.S. Treasury bills and other marketable third-party securities;
(b) all inventory, including raw materials, work-in process, finished
goods, and consignment inventories of the Business ("INVENTORY") other than
Inventory disposed of after the date hereof in the ordinary course of business
in accordance with Section 6.1;
(c) all Personal Property used, developed or held for use by Seller in
the conduct of the Business;
(d) all Intellectual Property and IP License Agreements used in
connection with the Business;
(e) all rights under all Contracts, including the items listed on
Schedule 4.10(a), entered into by Seller relating to the Assets and/or the
Business and in effect as of the date hereof, except (i) the Excluded Employment
Contracts as sets forth in Section 3.2(b), and (ii) any contracts entered into
in violation of Section 7.1(h) below (collectively, the "TRANSFERRED
CONTRACTS");
(f) all goodwill associated with the Business;
(g) all Permits used or held for use by Seller in the conduct of the
Business;
(h) all of Seller's customer and vendor lists to the extent relating to
the Business, all of Seller's files and documents (including credit information)
to the extent relating to customers and vendors of the Business, and all of
Seller's production data, equipment maintenance data, accounting records,
inventory records, sales and sales promotional data, advertising materials, cost
and pricing information, business plans, reference catalogs, information
(including but not limited to design specifications) on Seller's computer
systems or maintained in electronic format, and any other such data and records,
in each case to the extent relating to the Business; PROVIDED, HOWEVER, that
Seller shall be entitled to retain copies of any such materials which are solely
necessary for, and may use such copies solely in connection with, their tax,
accounting or legal purposes;
(i) all rights of Seller pursuant to any express or implied warranties,
representations or guarantees made by suppliers furnishing goods or services to
the extent furnished to or on behalf of the Business;
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(j) all of Seller's trade accounts receivable and trade notes
receivable of the Business, whether recorded or unrecorded, including without
limitation all such trade receivables from divisions or Affiliates of Seller,
and including all bank accounts of FutureSmart for the purpose of collecting the
Accounts Receivable (the "ACCOUNTS RECEIVABLE");
(k) all of Seller's prepaid expenses and deposits relating to the
Business, but only to the extent that economic value is transferred to Purchaser
at Closing;
(l) Seller's leases for real property listed on Schedule 2.1(l), and
specifically excluding the San Jose Lease (the "TRANSFERRED LEASES");
(m) all Confidentiality Agreements that have been executed by any
Person in connection with Seller or any Affiliate of Seller seeking to sell
FutureSmart and/or the Business;
(n) all rights to use the FutureSmart, Future Smart and Future Proof
names and trademarks, as well as the WWW.FUTURESMART.COM domain name; and
(o) all other Assets used in connection with the Business that are not
expressly indicated herein to be Excluded Assets (as defined in Section 2.2
below).
2.2 EXCLUDED ASSETS. Notwithstanding anything to the contrary contained
in this Agreement, the following assets, properties and rights (the "EXCLUDED
ASSETS") shall not be sold, assigned, transferred or conveyed to Purchaser
hereunder, and such assets, properties and rights shall not be deemed Assets
hereunder:
(a) assets of employee benefit plans of Seller;
(b) all Tax refunds (and credits) attributable to the Business for
periods on or prior to the Closing Date;
(c) all rights of Seller under this Agreement;
(d) any employee data which relates to employees of the Business who
are not transferred to Purchaser or which Seller is prohibited by law or legal
agreement from disclosing or delivering to Purchaser;
(e) all of Seller's and/or Seller's Affiliates' equity interests in any
legal entity (including but not limited to any predecessor and/or subsidiary of
Seller or Seller's Affiliates), including without limitation any and all shares,
derivatives and/or derivative obligations of LifeStyle and/or FutureSmart;
(f) all real property or interests in real property owned or leased by
Seller other than the Transferred Leases;
(g) all contracts, arrangements, licenses and commitments of Seller
except for the Transferred Contracts (collectively, the "EXCLUDED Contracts");
(h) all of FutureSmart's and/or LifeStyle's right, title and interest
in and to any of FutureSmart's and/or LifeStyle's tangible and intangible
assets, properties and rights to the extent not used, developed or held for use
in the Business; and
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(i) all claims, rights, benefits and interests arising under or
resulting from any Excluded Asset or Retained Liability.
2.3 ASSIGNMENT OF ASSETS.
(a) Notwithstanding anything to the contrary in this Agreement, to the
extent that any sale, conveyance, transfer or assignment or attempted sale,
conveyance, transfer or assignment of any Asset, or any claim, right or benefit
arising thereunder or resulting therefrom (collectively, the "Interests"), would
constitute a violation of any applicable law or such Interest is not capable of
being sold, conveyed, transferred or assigned without any Consent which has not
been obtained by (or does not remain in full force and effect at) the Closing,
this Agreement shall not constitute a sale, conveyance, transfer or assignment
thereof, or an attempted sale, conveyance, transfer or assignment thereof,
unless and until such Interest (a "RETAINED INTEREST") can be sold, conveyed,
transferred and assigned in accordance with Section 2.1 without such a breach or
violation of law or such Consent is obtained, at which time such Retained
Interest shall be deemed to be sold, conveyed, transferred and assigned in
accordance with Section 2.1 and shall cease to be a Retained Interest.
(b) To the extent that any Interest cannot be sold, conveyed,
transferred or assigned without a breach or violation of law, or any of the
Consents necessary to sell, convey, transfer or assign any Interest has not been
obtained (or does not remain in full force and effect) as of the Closing Date,
Seller and Purchaser shall, while such Interest remains a Retained Interest, use
their reasonable best efforts to (i) cooperate in any reasonable and lawful
arrangements designed to provide the benefits of such Retained Interest to
Purchaser, and Purchaser shall promptly pay or satisfy the corresponding
liabilities and obligations to the extent Purchaser would have been responsible
therefor if there had been no such breach or violation of law, or such Consent
had been obtained, and such Retained Interest had been transferred to Purchaser
as of the Closing, but only to the extent Purchaser obtains the benefits of such
Retained Interest and (ii) enforce, at the request of Purchaser, any rights of
Seller arising from such Retained Interest against the issuer thereof or the
other party or parties thereto (including the right to elect to terminate any
such Retained Interest in accordance with the terms thereof upon the advice of
Purchaser).
ARTICLE III
ASSUMPTION OF LIABILITIES AND OBLIGATIONS.
3.1 ASSUMED LIABILITIES. From and after the Closing Date, Purchaser
shall, without any further responsibility of or recourse to Seller, any of its
Affiliates, or any of its directors, shareholders, officers, employees, agents,
consultants, representatives, successors or assigns, absolutely and irrevocably
assume and be liable and solely responsible for any and all Liabilities arising
from or relating to the conduct of the Business or the ownership of the Assets
after the Closing Date, other than those liabilities identified herein as
Retained Liabilities, including without limitation the following (the "ASSUMED
LIABILITIES"):
(a) all obligations and Liabilities related to the ownership, use,
possession or condition of the Assets or operation or conduct of the Business
arising after the Closing Date;
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(b) Seller's obligations incurred in the ordinary course of business as
conducted by Seller prior to the Closing Date to purchase goods and services, to
the extent such obligations relate to goods and services received or to be
received after the Closing Date by Purchaser, but only where there exists no
breach of any such obligation as of the Closing Date;
(c) Seller's obligations incurred in the ordinary course of business as
conducted by Seller prior to the Closing Date to purchase goods and services, to
the extent such obligations relate to goods and services received prior to the
Closing Date, but only to the extent set forth on the Closing Balance Sheet;
(d) Seller's obligations under the Transferred Contracts to be
performed after the Closing Date, except to the extent defined as a Retained
Liability in Section 3.2(j);
(e) Seller's obligations under the Transferred Leases to be performed
after the Closing Date;
(f) all obligations and Liabilities for Taxes related to the ownership,
use, possession or condition of the Assets or operation or conduct of the
Business with respect to any period or part thereof commencing immediately after
the Closing Date; and
(g) all other Liabilities properly reflected on the Closing Balance
Sheet according to the terms of this Agreement, but only to the extent set forth
on the Closing Balance Sheet, whether or not such Liabilities were incurred or
relate to activities prior to Closing.
3.2 RETAINED LIABILITIES. Seller shall at all times, without any
responsibility of or recourse to, Purchaser, any of its Affiliates or any of its
directors, shareholders, officers, employees, agents, consultants,
representatives, successors or assigns, absolutely and irrevocably be and shall
remain solely liable and responsible for any and all Liabilities to the extent
arising from or relating to the conduct of the Business or the ownership of the
Assets prior to and on the Closing Date (collectively the "RETAINED
LIABILITIES") unless the terms of this Agreement explicitly state that such
Liability or obligation shall transfer to or be the responsibility of Purchaser.
The Retained Liabilities shall also include, without limitation:
except as specifically set forth in Section 3.1(c), all obligations and
Liabilities related to the ownership, use, possession or condition of the Assets
or operation or conduct of the Business arising out of any action, omission,
fact, matter, event or circumstance occurring on or before the Closing Date;
(b) Except as otherwise expressly provided in Section 7.15 below, all
liabilities, obligations or responsibilities to any current or former employees
of Seller and their dependents or beneficiaries relating to or arising (i) under
any Plans of Seller (as defined in Section 4.13(c) below), (ii) in relation to
employees not offered employment by the Purchaser, (iii) out of the employment
or termination of employment of any such current or former employee with Seller,
(iv) out of the failure of any employee to accept Purchaser's offer of
employment in connection with the transactions contemplated by this Agreement
and (v) under all employment contracts between Seller, or an Affiliate of
Seller, and any employee thereof (the "EXCLUDED EMPLOYMENT Contracts");
(c) all intercompany payables other than intercompany trade accounts
payable and trade notes payable;
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(d) all obligations and Liabilities for Taxes related to the ownership,
use, possession or condition of the Assets or operation or conduct of the
Business with respect to any period or part thereof occurring on or prior to the
Closing Date, or relating to the consummation of the transactions contemplated
by this Agreement;
(e) all obligations and Liabilities for any design defect or product
liability including, without limitation, by operation of applicable law, in
connection with any product or good of the Business manufactured by Seller on or
prior to the Closing Date;
(f) all repair, replacement and redesign obligations with respect to
product warranty Liabilities relating to the Business and all Liabilities for
any product recall, product liability claim, express or implied representation,
warranty contract or guarantee made or allegedly made or which is imposed or
allegedly imposed, including without limitation by operation of applicable law,
in connection with any product or good of the Business manufactured by Seller on
or prior to the Closing Date to the extent not reflected on the Closing Balance
Sheet;
(g) any Environmental, Health and Safety Liability arising out of the
operation of the Business, or relating to the real property which is the subject
of the Transferred Leases and/or under the terms of the Transferred Leases,
arising out of any action, omission, fact, matter, event or circumstance
occurring on or before the Closing Date;
(h) all obligations and Liabilities resulting from any violation or
alleged violation by Seller or any of its Affiliates of any law relating or
applicable to the ownership, use or possession of the Assets or operation or
conduct of the Business on or prior to the Closing Date, including but not
limited to defective product laws, pricing laws, employment and labor laws and
labor grievances thereunder;
(i) all obligations and Liabilities arising from any litigation,
proceeding, consent order or investigation relating to the ownership, use or
possession of the Assets or operation or conduct of the Business which arises
from or relates to any action, omission, fact, matter, event or circumstance
occurring on or prior to the Closing Date;
(j) Seller's obligations under the sales orders and unfilled purchase
orders of the Business, the Transferred Contracts, the Transferred Leases, and
other commitments of Seller constituting Assets for which Seller received the
benefit on or prior to the Closing Date, and any breach thereof by any Seller on
or prior to the Closing Date, as well as Seller's obligations under the
Contracts described in Sections 4.10(a)(i) and 4.10(a)(v), to the extent not
reflected on the Closing Balance Sheet;
(k) Seller's obligations under the Excluded Contracts;
(l) Seller's obligations under the San Jose Lease and under any other
leases for real property other than the Transferred Leases;
(m) all obligations and Liabilities related to the ownership, use,
possession or condition of the Assets or operation or conduct of the Business
arising from any infringement or any investigation of infringement of any
intellectual property right or interest arising out of any action, omission,
fact, matter, event or circumstance occurring on or prior to the Closing Date;
(n) all obligations and Liabilities required to be but not reflected on
the Closing Balance Sheet (as defined in Section 1.3(b) above), and with respect
to matters set forth on the Closing Balance Sheet, all obligations and
Liabilities for such matters in excess of the amount set forth therein;
(o) all Indebtedness (other than any lease obligation under any capital
lease of property or assets included in the Assets) of the Business or of
Seller, except to the extent set forth on the Closing Balance Sheet, except that
in no event shall any amount of the Secured Creditor Claims be included on the
Closing Balance Sheet;
(p) the Secured Creditor Claims;
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(q) all obligations and Liabilities related to the ownership, use,
possession or condition of the Excluded Assets; and
(r) any claims made relating to any obligation or Liability for which
Seller or one of its Affiliates has insurance coverage as of the Closing Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER
Seller represents and warrants to Purchaser as of the date hereof and
as of the Closing Date as follows:
4.1 CORPORATE STATUS, AUTHORITY AND DUE EXECUTION.
Seller is a legal entity duly formed, validly existing and in good
standing under the laws of the jurisdiction of its formation and has the
requisite power and authority to own the Assets, to operate the Business and to
execute and deliver this Agreement and perform its obligations hereunder. The
execution and delivery by Seller of this Agreement and the consummation by
Seller of the transactions contemplated hereby have been duly authorized by all
necessary action on the part of Seller. The Assets constitute all or
substantially all of the assets of FutureSmart, but do not constitute all or
substantially all of the assets of LifeStyle. Seller is duly qualified to
transact business in any jurisdiction where the ownership of the Assets and the
conduct of the Business require it to be so qualified, except where the failure
to be so qualified would not be material.
(b) This Agreement has been duly executed and delivered by Seller, and
constitutes the legal, valid and binding obligation of Seller, enforceable
against Seller in accordance with its terms, except to the extent that (i) such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors' rights generally and is
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law) and (ii)
specific performance may not be available in certain jurisdictions outside the
United States (the foregoing clauses (i) and (ii), collectively, the
"ENFORCEABILITY EXCEPTIONS"). As of the Closing Date, each of the documents
delivered by Seller at Closing pursuant to Section 8.3 hereof will have been
duly and validly executed and delivered by Seller and will be enforceable
against Seller in accordance with its terms, except to the extent of the
Enforceability Exceptions.
4.2 NO CONFLICTS, CONSENTS AND APPROVALS, ETC.
(a) Except as set forth on Schedule 4.2, the execution, delivery and
performance of this Agreement by Seller, and the consummation of the
transactions contemplated hereby, do not and will not conflict with, contravene,
result in a violation or breach of or default (with or without the giving of
notice or the lapse of time or both), or result in the creation of any Lien upon
any of the properties or assets of Seller under:
any provision of the charter, by-laws or any other formative
document of Seller;
any statute, rule or regulation or judgment, order or decree
of any court or other Governmental Authority or Permit applicable to
Seller or any of its properties or assets; or
any contract, agreement, or other instrument to which Seller
is a party or by which its properties or assets may be bound,
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except, in the case of clauses (ii) and (iii), for conflicts, violations,
breaches and defaults that, individually and in the aggregate, would not impair
the ability of Seller to perform its obligations hereunder.(b) Except as set
forth on Schedule 4.2, no Consent or filing with any Governmental Authority is
required on the part of Seller in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby.
4.3 TITLE TO ASSETS. Seller has good and marketable title to the Assets
and full legal right and power to transfer and deliver the Assets to Purchaser
in the manner contemplated by this Agreement; upon delivery of the Assets
against payment therefor pursuant to the terms of this Agreement, Purchaser will
receive good and marketable title thereto, free and clear of all Liens and
rights of others of any kind, except for the Permitted Liens. Schedule 4.3 sets
forth all Liens of the Business and of FutureSmart except for the Permitted
Liens.
4.4 FINANCIAL STATEMENTS.
(a) Seller has delivered to Purchaser an audited consolidated statement
of income, audited consolidated statement of cash flow and audited consolidated
balance sheet of FutureSmart for the period ended December 31, 2002, and an
unaudited consolidated statement of income, unaudited consolidated statement of
cash flow and unaudited consolidated balance sheet of FutureSmart for the
nine-month period ended September 30, 2003, together with the notes thereto (the
"FINANCIAL STATEMENTS"). Schedule 4.4 sets forth (i) a balance sheet for the
Business (the "REFERENCE BALANCE SHEET") that includes only the Assets and the
Assumed Liabilities as of September 30, 2003 and does not reflect any liability
or reserve for income taxes; and (ii) notes to the Reference Balance Sheet
reflecting the basis of preparation thereof and any deviation from GAAP.
(b) The Financial Statements and the Reference Balance Sheet have been
prepared in accordance with GAAP consistently applied throughout the periods
indicated. The Reference Balance Sheet presents fairly in all material respects
the financial condition and results of operations of the Business on a
stand-alone basis, and the Financial Statements present fairly in all material
respects the financial condition, results of operations and consolidated
financial position of FutureSmart, in each case at the respective dates and for
the respective periods indicated, except in each case as noted in Schedule 4.4,
and are correct, complete and consistent with the financial books and records of
Seller and the Business (which books and records are correct and complete).
4.5 ABSENCE OF UNDISCLOSED LIABILITIES. With respect to the Business,
there is no Indebtedness of the Business, and there are no other liabilities or
obligations of any nature, whether absolute, accrued, contingent or otherwise,
and whether due or to become due, and there is no existing condition, situation
or set of circumstances which would reasonably be expected to result in such a
liability or obligation, except (a) as set forth on Schedule 4.5, (b) as
disclosed and reserved against in the Financial Statements or notes thereto and
(c) for liabilities or obligations that were incurred in the ordinary course of
business since September 30, 2003 and that are immaterial in amount.
4.6 ABSENCE OF CHANGES. Except as set forth on Schedule 4.6, other than
in connection with the transactions contemplated by this Agreement, since
September 30, 2003, the Business taken as a whole has been conducted in the
ordinary course consistent with past practice, there has been no Material
Adverse Effect, and neither Seller, nor any Affiliate of Seller, has:
(a) with respect to the Business incurred any material liabilities or
obligations, except liabilities and obligations incurred in the ordinary course
of business;
(b) mortgaged, pledged or subjected to any Lien any of the Assets,
except for Permitted Liens;
(c) with respect to the Business incurred capital expenditures in
excess of $10,000 and/or not in the ordinary course of business;
(d) disposed or agreed to dispose of any of the assets of Seller,
except in the ordinary course of business; canceled or forgiven any debts or
claims of the Business;
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materially increased the compensation of any officer or employee of the
Business;
made any change in any method of accounting or accounting practice with
respect to the Business;
incurred any damage, destruction or other casualty, loss (whether or
not covered by insurance) which individually or in the aggregate has had or
could reasonably be expected to have a Material Adverse Effect on the Business;
or
entered into any agreement to take any of the actions described in
clauses (a) through (h) above.
4.7 GOVERNMENTAL AUTHORIZATIONS; COMPLIANCE WITH LAW.
(a) With respect to the Business and the Assets, Seller and its
Affiliates are in material compliance with all applicable laws, rules,
regulations, judgments, orders, decrees and Permits. Except as set forth on
Schedule 4.7(a), there have been no outstanding orders, judgments or decrees
issued by, and there has been no receipt by Seller or any Seller Affiliate of
any notice alleging any defaults or violations of law from, any Governmental
Authority with respect to the Business or the Assets.
(b) Seller holds all Permits. Schedule 4.7(b) sets forth a list of all
Permits as of the date of this Agreement.
(c) Except as set forth on Schedule 4.7(c), there are no pending or, to
the knowledge of Seller, threatened, proceedings with any Governmental Authority
that may result in the revocation, cancellation or suspension or any
modification of any Permit.
(d) Except as set forth on Schedule 4.7(d), all of the Permits are
assignable and at the Closing will be assigned to Purchaser, and no Consents are
required for such assignment.
(e) The sale of the Assets and the Business hereunder will not result
in a material default under, or the termination of, any Permit.
4.8 LITIGATION. Except as set forth on Schedule 4.8, there is no
action, claim, suit or proceeding pending or, to the knowledge of Seller,
threatened against Seller or any of its Affiliates with respect to the Business
and there is no investigation by any Governmental Authority pending or, to the
knowledge of Seller, threatened against Seller, or any of its Affiliates with
respect to the Business.
4.9 REAL PROPERTY.
(a) Schedule 4.9(a) lists all real property leased by Seller in
connection with the Business (the "LEASED REAL PROPERTY") and all real property
leases and subleases relating to the Leased Real Property (the "LEASES").
(b) The Leased Real Property, together with easements appurtenant to
such real property, include all of the real property used or held for use in
connection with or otherwise required to carry on the Business taken as a whole.
(c) Seller has a valid leasehold estate in each of the Transferred
Leases, in each case free and clear of all Liens, except Permitted Liens.
(d) Seller has delivered to Purchaser correct and complete copies of
the Transferred Leases. Except as set forth on Schedule 4.9(d):
each Transferred Lease is a legal, binding and enforceable
obligation against Seller, and Seller is not, and to the knowledge of
Seller, no other party is, in default in any material respect under any
such Transferred Lease;
each Transferred Lease grants the tenant under such
Transferred Lease the exclusive right to use and occupy the premises
and rights demised and intended to be demised thereunder;
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Seller enjoys peaceful and undisturbed possession under the
Transferred Leases;
no condition exists which with notice or lapse of time or both
would constitute a default by Seller under any Transferred Lease;
Seller has not subleased, assigned, transferred, conveyed,
mortgaged, deeded in trust or encumbered any of its interests in the
Transferred Leases; and
except as set forth on Schedule 4.9(d), the consummation of
the transactions contemplated hereby will not result in the loss or
impairment of any rights of the Business to use any of the premises
demised under the Transferred Leases or give rise to a right of any
party thereto to cancel, modify, amend, accelerate or terminate.
(e) Seller has not received written notice of any proceeding in eminent
domain or other similar proceeding materially affecting any premises demised
under any Transferred Lease. There exists no writ, injunction, decree, order or
judgment outstanding relating to the ownership, lease, use, occupancy or
operation by any Person of the premises demised under the Transferred Leases.
(f) To the knowledge of Seller, the premises demised under the
Transferred Leases and the operations of the Business on such properties do not
violate any applicable building code, zoning requirement or classification. The
use and operation of such properties in the conduct of the Business, as
currently conducted, do not violate any instrument of record or agreement
affecting such property. There is no violation of any covenant, condition,
restriction, easement or agreement or order of any Governmental Authority that
affects such properties or the ownership, operation, use or occupancy thereof.
4.10 CONTRACTS.
(a) Schedule 4.10 lists all agreements, contracts, purchase orders and
commitments ("CONTRACTS") of the following types to which Seller or any
Affiliate of Seller is a party or by which Seller, or any of Seller's Assets is
bound as of the date of this Agreement, relating to the Business (other than
Leases, IP License Agreements and labor or employment-related agreements, which
are provided for in Sections 4.9, 4.11 or 4.13, respectively) including without
limitation:
(i) loan agreements, notes, mortgages, indentures, security
agreements, and/or any guarantees of the obligations of LifeStyle, any
other Affiliate of Seller, or any third party;
(ii) joint venture and limited partnership agreements;
(iii) contracts and other instruments and arrangements for the
purchase by Seller of materials, supplies, products or services, and
contracts, agreements and other instruments in connection with the
Business or arrangements for the sale or provision by Seller of
materials, supplies, products or services in connection with the
Business (including, distribution and marketing agreements), in each
case, (A) not terminable on notice of 120 days or less without penalty,
and (B) under which the amount that would reasonably be expected to be
paid or received by Seller exceeds $10,000 per annum or $50,000 in the
aggregate;
(iv) contracts prohibiting or restricting Seller's use of the
Assets or conduct of the Business to compete with any Person, engage in
any business or operate in any geographical area;
(v) stock purchase agreements, asset purchase agreements and
other acquisition or divestiture agreements relating to the
acquisition, lease or disposition of FutureSmart or any of the Assets
(other than in the ordinary course of business), in each case (A) which
was entered into after January 1, 2001, or (B) under which Seller or
any Affiliate of Seller has any executory indemnification or other
material obligations;
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(vi) any contract entered into other than in the ordinary
course of business involving aggregate payments in excess of $10,000,
to be made by or to Seller in connection with the Business after the
date of this Agreement;
(vii) contracts of Seller pertaining to the Business or the
Assets with any Affiliate of Seller or any of their officers,
directors, shareholders or members;
(viii) contracts of Seller with any sales representative,
manufacturer representative or other third party who performs services
in connection with the Business;
(ix) settlement agreements to which Seller or any Affiliate of
Seller is a party entered into in connection with the conduct of the
Business or the ownership of the Assets; and
(x) contracts that are or could be material to the Business,
including but not limited to any OEM relationships of the Business.
(b) Seller has delivered to Purchaser complete and correct copies of
the Contracts as in effect on the date of this Agreement.
(c) Each Contract is a legal, binding and enforceable obligation, and
to the knowledge of Seller, neither Seller, nor any Affiliate of Seller, nor any
other party to any Contract is, in default in any material respect under any
such Contract.
(d) No condition exists which with notice or lapse of time or both
would constitute a material default by Seller under its Contracts.
(e) Except as set forth on Schedule 4.10(e), the consummation of the
transactions contemplated hereby will not result in the loss or impairment of
any rights under the Contracts or give rise to a right of any party thereto to
cancel, modify, amend, accelerate or terminate, nor will such consummation
require the Consent of any third party in respect of any Contract.
4.11 INTELLECTUAL PROPERTY.
(a) Schedule 4.11 sets forth, for the following Intellectual Property
owned by Seller and used or held for use in the Business, a complete and
accurate list as of the date of this Agreement of all U.S. and foreign: (i)
patents, patent applications, invention registration and invention disclosures;
(ii) trademark and service mark registrations (including Internet domain name
registrations), trademark and service mark applications and common law
trademarks; (iii) copyright registrations and applications; (iv) trade secrets;
and (v) mask work registrations and applications, as well as all other
technology and software that is material to the Business (but not including
commercial, off-the-shelf software used in the ordinary course).
(b) Seller owns all right, title and interest in and to the
Intellectual Property, and the Intellectual Property is free and clear of all
Liens (but not including commercial, off-the-shelf software used in the ordinary
course).
(c) Schedule 4.11 lists as of the date of this Agreement all agreements
relating to any Intellectual Property to which Seller, or any Affiliate of
Seller on behalf of the Business, is a party or is otherwise bound
(collectively, the "IP LICENSE AGREEMENTS").
(d) Except as set forth in Schedule 4.11:
(i) no claims, or to the knowledge of Seller, threats of
claims, have been asserted by any third party against Seller or any
Affiliate of Seller related to the use in the conduct of the Business
of such third party's intellectual property rights or challenging or
questioning the validity or effectiveness of any IP License Agreement,
and, to the knowledge of Seller, the use of the Intellectual Property
in the conduct of the Business does not infringe, misappropriate or
violate any valid and asserted intellectual property rights of any
third party;
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(ii) Seller has not received any written claim from a third
party asserting that Seller is not the sole and exclusive owner of all
right, title and interest in and to the Intellectual Property;
(iii) Seller has no obligation to indemnify any third party
for any claims of any infringement, misappropriation or violation
relating to any intellectual property right;
(iv) no claims, demands or proceedings are pending charging
any third party with infringement, misappropriation, dilution or
violation of any Intellectual Property owned by Seller, and to the
knowledge of Seller, no third party is misappropriating, infringing,
diluting or violating any Intellectual Property owned by Seller,
(v) no settlement agreements, consents, judgments, orders,
forbearance to sue or similar obligations limit or restrict any rights
of Seller in and to any Intellectual Property;
(vi) each IP License Agreement is a valid and binding
obligation of Seller, enforceable in accordance with its terms, and to
the knowledge of Seller no event or condition has occurred that will
result in a material violation or breach of, or constitute a default by
Seller under any such IP License Agreement;
(vii) no condition exists which with notice or lapse of time
or both would constitute a default by Seller under any IP License
Agreement;
the consummation of the transactions contemplated hereby will
not result in the loss or impairment of any rights of the Business to
own or use any of the Intellectual Property or give rise to a right of
any party thereto to cancel, modify, amend, accelerate or terminate,
nor will such consummation require the Consent of any third party in
respect of any Intellectual Property (but not including commercial,
off-the-shelf software used in the ordinary course); and
no facts exist that could reasonably be expected to serve as
the basis for litigation against Seller, any Affiliate of Seller, or
their present or former directors, officers or employees, affecting,
involving, or relating to any third-party intellectual property.
(e) The Intellectual Property shall, at the Closing, include such
intellectual property rights as are sufficient to operate the Business as
conducted at the Closing.
4.12 TAXES. Except as set forth on Schedule 4.12:
(a) All Returns required to be filed by or with respect to Seller on or
prior to the Closing Date, to the extent relating to the Business, have been
filed (or will have been filed prior to the Closing Date).
(b) Except for Taxes disclosed, reflected or reserved against in the
Financial Statements or notes thereto, all Taxes relating to the Business due
and payable by Seller prior to the Closing Date have (or by the Closing Date
will have) been duly paid.
(c) All Employment and Withholding Taxes required to be withheld or
paid prior to the Closing Date have (or by the Closing Date will have) been duly
paid to the proper Governmental Authority or properly set aside in accounts for
such purpose.
(d) Purchaser will not be required to deduct and withhold any amount
pursuant to section 1445(a) of the Code upon the transfer of the Assets to
Purchaser under this Agreement.
(e) None of the Assumed Liabilities is an obligation to make a payment
that will not be deductible under Code Section 280G.
(f) None of the Assets (i) is property that is required to be treated
as owned by another person pursuant to the "safe harbor lease" provisions of the
former Section 168(f)(8) of the Code, (ii) is "tax-exempt use property" within
the meaning of Code Section 168(h), or (iii) directly or indirectly secures any
debt the interest on which is tax-exempt under Code Section 103(a).
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4.13 EMPLOYMENT AND BENEFITS, ETC.
(a) Schedule 4.13(a) sets forth a true, correct and complete list of
the following:
(i) All arrangements, written or oral, which compel
the employment of any person in the status of "employee" by
Seller with respect to the Business ("EMPLOYEES");
(ii) Separately by location, the names, job titles,
dates of birth, dates of service with the Seller, and current
salary or wage rates of all of the Employees and their hourly
or yearly salary, together with a summary of all bonus,
incentive compensation or other additional compensation or
similar benefits paid to such persons for the 2002 calendar
year and estimated for the 2003 calendar year; and
(iii) Separately by location, the names, job titles
and current salary or wage rates of all independent
contractors, including any consultants, and leased employees
who perform services for the Business.
(b) Except as set forth on Schedule 4.13(b), (i) there have been no
union organizing efforts with respect to the Business conducted within the last
five years and there are none now being conducted; (ii) during the five years
prior to the date of this Agreement there has not been, nor, to the best of
Seller's knowledge after due inquiry, is there now threatened, a strike, work
stoppage, work slowdown or other material labor dispute with respect to, or
affecting, the Business; (iii) no Employee is represented by any union or other
labor organization; (iv) there is no charge or complaint, including any unfair
labor practice charge or any claim of discrimination, which is pending with any
governmental agency, commission, or court, to the best of Seller's knowledge
after due inquiry, threatened against Seller relating to any of the Employees;
and (v) there is no commitment or agreement to increase wages or modify the
terms and conditions of employment of any Employee. Seller has provided
Purchaser with copies of any collective bargaining agreement or other agreement
with any union or other labor organization representing any Employee.
(c) Schedule 4.13(c) sets forth a true, correct and complete list of
all of (i) the employee benefit plans, arrangements or policies (whether or not
written, whether U.S. or foreign, and whether or not subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), including,
without limitation, any stock option, stock purchase, stock award, retirement,
early retirement, pension, deferred compensation, profit sharing, savings,
incentive, bonus, health, dental, hearing, vision, drug, life insurance,
cafeteria, flexible spending, dependent care, fringe benefit, vacation pay,
holiday pay, disability, sick pay, workers compensation, unemployment, severance
pay, retirement or termination indemnity, employee loan, educational assistance
plan, policy or arrangement, and (ii) any employment, indemnification,
consulting or severance agreement, in each case, maintained, contributed to or
to which there is (or, during the six year period ending on the Closing Date,
was) an obligation to contribute to by Seller or any entity that is or was a
member of a controlled group with, under common control with, or otherwise
required to be aggregated with, Seller as set forth in Section 414(b), (c) or
(m) of the Code (an "ERISA Affiliate" ) for any current or former Employee
(collectively, the "PLANS").
(d) Seller has delivered to Purchaser a complete and current copy of
each Plan document or a written description of any unwritten plan; the most
recent summary plan description for any Plan; and any employee handbook
applicable to current or former Employees.
(e) Except as set forth on Schedule 4.13(e):
40
(i) Seller has not communicated to current or former
Employees, or formally adopted or authorized, any additional
Plan or any change in or termination of any existing Plan.
(ii) Each Plan has been operated and administered in
accordance with its terms, the terms of any applicable
collective bargaining agreement, and all applicable laws.
(iii) Each "group health plan" subject to the
continuation coverage requirements of Section 4980B of the
Code and Part 6 of Title I of ERISA ("COBRA") which is
maintained by Seller has been operated and administered in
accordance with such requirements.
(f) Except for COBRA coverage required under Section 4980B of the Code
and Part 6 of Title I of ERISA, or applicable state law, there are no
obligations under any Plan to provide welfare benefits after termination of
employment.
(g) Each Plan that is intended to be qualified under section 401(a) of
the Code, and the trust (if any) forming a part thereof, (i) has received a
favorable determination letter from the IRS as to its qualification under the
Code and to the effect that each such trust is exempt from taxation under
section 501(a) of the Code, and nothing has occurred since the date of such
determination letter that could adversely affect such qualification or
tax-exempt status, and (ii) has been timely amended and restated for "GUST" and
has received a determination letter from the Internal Revenue Service that such
Plan as amended and restated continues to be qualified under section 401(a) of
the Code or has been submitted to the Internal Revenue Service for a
determination as to its qualified status after such amendment and restatement.
For purposes of the preceding sentence, "GUST" shall collectively refer to the
changes affecting qualified retirement plans made by the Uruguay Round
Agreements Act, the Uniformed Services Employment and Reemployment Rights Act of
1994, the Small Business Job Protection Act of 1996, the Taxpayers Relief Act of
1997, the Internal Revenue Service Restructuring and Reform Act of 1998 and the
Community Renewal Tax Relief Act of 2000.
(h) No Plan is currently under governmental investigation or audit, and
to the best of Seller's knowledge after due inquiry, no such investigation or
audit is contemplated or under consideration.
(i) None of the Assets is subject to a lien under ERISA or the Code.
(j) To Seller's knowledge, no event has occurred and no condition
exists that could subject Purchaser or any of its employees, officers,
directors, agents or affiliates to any tax, fine, penalty or other liability
(including, but not limited to Title IV of ERISA) arising under, or with respect
to, the employment or termination of employment of any current or former
Employee, any current or former Plan, or any employee benefit plan of any entity
that is or was a member of a controlled group with, under common control with,
or otherwise required to be aggregated with, Seller as set forth in Section
414(b), (c) or (m) of the Code.
(k) No Plan is a "multiemployer plan" within the meaning of Section
3(37)(A) of ERISA, and Seller does not have any outstanding liability with
respect to any such plan (contingent or otherwise).
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4.14 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 4.14:
(a) Seller is in compliance with all applicable Environmental Laws and
Occupational Safety and Health Laws;
(b) Seller has obtained, and are in compliance with, all permits and
authorizations required under applicable Environmental Laws and Occupational
Safety and Health Laws required for the operation of the Business;
(c) Seller has not received from any Governmental Authority any written
notice of violation, alleged violation, non-compliance, liability or potential
liability regarding compliance with applicable Environmental Laws concerning
operation of the Business or any Leased Real Property, other than matters that
have been resolved or that are no longer outstanding;
(d) no judicial proceeding or governmental or administrative action is
pending, or to Seller's knowledge, threatened, under any applicable
Environmental Law or Occupational Health and Safety Law pursuant to which Seller
have been named as a party;
(e) Seller has not entered into any agreement with any Governmental
Authority pursuant to which Seller has assumed responsibility for the
remediation of any condition resulting from the release or threatened release of
Hazardous Substances;
(f) all environmental, health and safety site assessments, compliance
audits and similar environmental reports relating to environmental conditions of
the Leased Real Properties or of any property previously owned or operated by
the Business have been delivered to Purchaser; and
(g) notwithstanding any of the representations and warranties contained
elsewhere in this Agreement, environmental, health and safety matters are
governed exclusively by this Section 4.14.
4.15 SUPPLIERS AND CUSTOMERS. Schedule 4.15 sets forth the ten largest
suppliers and ten largest customers of the Business based on aggregate value of
products and services purchased or supplied, as the case may be, for the
12-month period ended September 30, 2003. To the knowledge of Seller, none of
such suppliers and customers has ceased, or given notice to Seller of any
intention to cease, to supply or purchase products and services from the
Business.
4.16 PERSONAL PROPERTY AND INVENTORY. Seller's Personal Property has
been maintained in accordance with normal industry practice and is suitable for
the purposes for which it is presently used. The Inventory, except for obsolete
items which have been fully written off or adequately reserved for (and which
will be reflected on the Closing Balance Sheet), consists of items of a quantity
and quality currently good, usable and merchantable and saleable in the ordinary
course of the Business as currently conducted by Seller, without markdown or
discount. Inventory is recorded on the books and records of the Business, and
will be recorded on the Closing Balance Sheet, in accordance with GAAP at the
lower of cost or market value. Schedule 4.16 sets forth true, correct and
complete lists of all slow moving and obsolete raw materials, and finished
goods.
4.17 SUFFICIENCY OF ASSETS; INTERCOMPANY SERVICES. The Assets
constitute all of the assets used, developed or held for use in the Business,
except for (i) assets set forth on Schedule 4.17 and the Excluded Assets, and
(ii) dispositions in the ordinary course of business and are sufficient to
permit Purchaser to conduct the Business after the Closing Date substantially as
conducted by Seller prior thereto. None of the Assets are held by any entity
other than Seller, and there are no assets used or held for use in the Business
owned by LifeStyle or any affiliate of LifeStyle and/or FutureSmart other than
Seller. Schedule 4.17 sets forth all services provided in the twelve months
ended September 30, 2003 by any Affiliate of Seller to the Business, or provided
by the Business to any Affiliate of Seller.
4.18 ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLE. All Accounts Receivable
reflected on the books and records of the Business, and which will be reflected
on the Closing Balance Sheet, represent or will represent valid obligations
arising from sales made or services performed by the Business in the ordinary
course of business and are not subject to any offset. All such Accounts
Receivable will, as of the Closing Date, be current and collectible in full net
of the reserves therefor reflected on the Closing Balance Sheet. Schedule 4.18
contains a true, correct and complete list and aging report of all Accounts
Receivable as of the last day of the month immediately preceding the date
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hereof. All accounts payable reflected on the books and records of the Business,
and which will be reflected on the Closing Balance Sheet, represent or will
represent valid obligations arising from purchases made or services received by
the Business in the ordinary course of business. All such accounts payable will
be current as of the Closing Date except to the extent subject to a BONA FIDE
dispute with the obligee thereof. Schedule 4.18 contains a true, correct and
complete list and aging report of all accounts payable as of the last day of the
month preceding the date hereof.
4.19 FOREIGN CORRUPT PRACTICES ACT. Seller has not at any time made or
committed to make any payments for illegal political contributions or made any
bribes, kickback payments or other illegal payments in connection with the
conduct of the Business. With respect to the Business, Seller has not made,
offered or agreed to offer anything of value to any governmental official,
political party or candidate for governmental office (or any Person that Seller
knows or has reason to know, will offer anything of value to any governmental
official, political party or candidate for political office), such that Seller
has violated the Foreign Corrupt Practices Act of 1977, as amended from time to
time, and all applicable rules and regulations promulgated thereunder. There is
not now nor has there ever been any employment with respect to the Business by
Seller of any governmental or political official in any country while such
official was in office.
4.20 WARRANTY AND RELATED MATTERS. Except as disclosed on Schedule
4.20, there are no existing or, to the knowledge of Seller, threatened product
liability, warranty or other similar material claims against Seller or any
Affiliate of Seller for products or services of the Business which are defective
or fail to meet any product or service warranties. Seller has not received any
statements, citations or decisions or orders by any Governmental Authority
stating that any product manufactured, sold, designed, marketed or distributed
at any time by the Business ("PRODUCTS"), is defective or unsafe or fails to
meet any product warranty or any standards promulgated by any such Governmental
Authority. Except as set forth on Schedule 4.20, there is no (i) material latent
or overt design, manufacturing or other defect in any Product or (ii) material
Liability for warranty claims or returns with respect to any Product. None of
the Products has been subject to recall. All Products sold by the Business
comply in all material respects with all industry and trade association
standards and legal standards applicable to such Products, including, without
limitation, consumer product, manufacturing, labeling, quality, purity and
safety laws of the United States and each state in which the Business sells the
Products and each other jurisdiction (including foreign jurisdictions) in which
the Business sells the Products. No claim has been asserted against Seller for
renegotiation or price redetermination of any Business transaction, and to the
knowledge of Seller, there are no facts upon which any such claim could be
based.
4.21 INSURANCE. The physical properties relating to the Business and
the other Assets are insured to the extent disclosed on Schedule 4.21. Such
insurance policies and arrangements are in full force and effect, all premiums
with respect thereto are currently paid, and Seller is in compliance in all
material respects with the terms thereof. To the knowledge of Seller, such
insurance is adequate and customary for the Business and is sufficient for
compliance with all requirements of applicable laws. No notice of cancellation
or non-renewal of any such policies or binders has been received by Seller, nor,
to the knowledge of Seller, is any cancellation or non-renewal threatened.
4.22 EQUITY AND DEBT INTERESTS. Except as set forth on Schedule 4.22,
the Assets do not include any equity or debt interest in any domestic or foreign
legal entity.
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4.23 BROKERS. Except as set forth on Schedule 4.23, all negotiations
relating to this Agreement and the transactions contemplated by this Agreement
have been carried out without the intervention of any Person acting on behalf of
Seller in such manner as to give rise to any valid claim against Purchaser for
any brokerage or finder's commission, fee or similar compensation.
4.24 NO MATERIAL OMISSIONS. Neither this Agreement, including the
Schedules hereto, nor any certificate of Seller contemplated hereby, contains
any untrue statement of a material fact or omits to state a material fact
necessary to make the statements made, in light of the circumstances in which
they are made, not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF LIFESTYLE
Lifestyle represents and warrants to Purchaser as of the date hereof
and as of the Closing Date as follows:
5.1 CORPORATE STATUS, AUTHORITY AND DUE EXECUTION.
LifeStyle is a legal entity duly formed, validly existing and in good
standing under the laws of the jurisdiction of its formation and has the
requisite power and authority to execute and deliver this Agreement and perform
its obligations hereunder. The execution and delivery by LifeStyle of this
Agreement and the consummation by LifeStyle and FutureSmart of the transactions
contemplated hereby have been duly authorized by all necessary action on the
part of LifeStyle and FutureSmart, including obtaining the approval and
authorization of the Board of Directors of LifeStyle. The Assets constitute all
or substantially all of the assets of FutureSmart, but do not constitute all or
substantially all of the assets of LifeStyle.
(b) This Agreement has been duly executed and delivered by LifeStyle,
and constitutes the legal, valid and binding obligation of LifeStyle,
enforceable against it in accordance with its terms, except to the extent that
(i) such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to creditors' rights
generally and is subject to general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law) and (ii)
specific performance may not be available in certain jurisdictions outside the
United States (the foregoing clauses (i) and (ii), collectively, the
"ENFORCEABILITY EXCEPTIONS"). As of the Closing Date, each of the documents
delivered by LifeStyle and FutureSmart at Closing pursuant to Section 8.3 hereof
will have been duly and validly executed and delivered and will be enforceable
against LifeStyle and/or FutureSmart in accordance with its terms, except to the
extent of the Enforceability Exceptions.
5.2 NO CONFLICTS, CONSENTS AND APPROVALS, ETC.
(a) Except as set forth on Schedule 5.2, the execution, delivery and
performance of this Agreement by LifeStyle, and the consummation of the
transactions contemplated hereby, do not and will not conflict with, contravene,
result in a violation or breach of or default (with or without the giving of
notice or the lapse of time or both), or result in the creation of any Lien upon
any of the properties or assets of LifeStyle under:
any provision of the charter, by-laws or any other formative
document of LifeStyle;
any statute, rule or regulation or judgment, order or decree
of any court or other Governmental Authority or Permit applicable to
LifeStyle or any of its properties or assets; or
any contract, agreement, or other instrument to which
LifeStyle is a party or by which its properties or assets may be bound,
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except, in the case of clauses (ii) and (iii), for conflicts, violations,
breaches and defaults that, individually and in the aggregate, would not impair
the ability of LifeStyle to perform its obligations hereunder.
(b) Except as set forth on Schedule 5.2, no Consent or filing with any
Governmental Authority is required on the part of LifeStyle in connection with
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
5.3 ABSENCE OF UNDISCLOSED LIABILITIES. To the knowledge of LifeStyle,
with respect to the Business, there is no Indebtedness of the Business, and
there are no other liabilities or obligations of any nature, whether absolute,
accrued, contingent or otherwise, and whether due or to become due, and there is
no existing condition, situation or set of circumstances which would reasonably
be expected to result in such a liability or obligation, except (a) as set forth
on Schedule 5.3, (b) as disclosed and reserved against in the Financial
Statements or notes thereto and (c) for liabilities or obligations that were
incurred in the ordinary course of business since September 30, 2003 and that
are immaterial in amount.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Purchaser represents and warrants to Seller as follows:
6.1 CORPORATE STATUS AND AUTHORITY.
(a) Purchaser is a corporation duly incorporated, validly existing and
in good standing under the laws of Delaware and has the corporate power and
authority to execute and deliver this Agreement and perform its obligations
under this Agreement.
(b) This Agreement has been duly executed and delivered by Purchaser
and constitutes the legal, valid and binding obligation of Purchaser,
enforceable against Purchaser in accordance with its terms except for the
Enforceability Exceptions. As of the Closing Date, each of the documents
delivered by Purchaser at Closing pursuant to Section 8.2 hereof will have been
duly and validly executed and delivered by Purchaser and will be enforceable
against Purchaser in accordance with its terms, except to the extent of the
Enforceability Exceptions. As of the Closing Date, each of the documents
delivered by Purchaser at Closing pursuant to Section 8.2 hereof will have been
duly and validly executed and delivered by Purchaser and will be enforceable
against Purchaser in accordance with its terms, except to the extent of the
Enforceability Exceptions.
6.2 NO CONFLICTS.
(a) The execution, delivery and performance of this Agreement by
Purchaser, and the consummation of the transactions contemplated by this
Agreement, do not and will not conflict with, contravene, result in a violation
or breach of or default (with or without the giving of notice or the lapse of
time or both), or result in the creation of any Lien upon any of the properties
or assets of Purchaser, under:
(i) any provisions of any of the charter, by-laws or other
organization document of Purchaser;
(ii) any statute, rule or regulation or judgment, order,
decree, license, permit or other authorization of any court or other
Governmental Authority applicable to Purchaser or any of its properties
or assets; or
(iii) any contract, agreement, or other instrument to which
Purchaser is a party or by which its properties or assets may be bound,
except, in the case of clauses (ii) and (iii), for conflicts,
violations, breaches and defaults that, individually and in the
aggregate, would not impair the ability of Purchaser to perform its
obligations under this Agreement.
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(b) No Consent of or filing with any Governmental Authority is required
on the part of Purchaser in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated by this
Agreement, except Consents which, if not made or obtained, would not impair the
ability of Purchaser to perform its obligations under this Agreement.
6.3 FINANCIAL ABILITY TO PERFORM. Purchaser has, and will have at the
Closing, available cash or existing borrowing facilities that together are
sufficient to enable it to consummate the transactions contemplated by this
Agreement.
6.4 LITIGATION. There is no action, claim, suit or proceeding pending
or, to Purchaser's knowledge, threatened, and there is no investigation pending
or, to Purchaser's knowledge, threatened, in each case, by or before any
Governmental Authority, that would reasonably be expected to materially impair
the ability of Purchaser to perform its obligations under, or to consummate the
transactions contemplated by, this Agreement.
6.5 BROKERS. All negotiations relating to this Agreement and the
transactions contemplated by this Agreement have been carried out without the
intervention of any Person retained by Purchaser in such manner as to give rise
to any valid claim against Seller or any of Seller' Affiliates for any brokerage
or finder's commission, fee or similar compensation.
ARTICLE VII
CERTAIN COVENANTS
7.1 ACCESS AND INFORMATION. Following the Closing, Seller shall give to
Purchaser and its representatives reasonable access during normal business hours
to such of the offices, properties, books, contracts, commitments, reports and
records relating to the Business, including without limitation the work papers
and written reports of Seller's auditors and all other written communications
from Seller's auditors to the extent related to the Business or the, and shall
furnish them or provide them with access to all such documents, financial data,
records and information with respect to the Business, as Purchaser shall from
time to time reasonably request;
7.2 PUBLIC ANNOUNCEMENTS. On and after the date of this Agreement,
except as required by applicable law or stock listing requirements, each party
shall not, and shall not permit any of their respective Affiliates or
representatives to, make any public announcement in respect of this Agreement or
the transactions contemplated by this Agreement without the prior written
consent of the other party (which consent shall not be unnecessarily withheld or
delayed); PROVIDED, HOWEVER, that if disclosure shall be required pursuant to
applicable law or a stock listing agreement, the Parties shall seek to make such
disclosure in a form mutually acceptable to them.
7.3 FURTHER ACTIONS.
(a) Seller shall use reasonable best efforts to obtain all Consents
required in connection with the transactions contemplated by this Agreement.
Purchaser shall cooperate with Seller in its efforts to obtain such Consents.
(b) Each party shall pay its respective costs and expenses in
connection with obtaining any Consents required by it to consummate the
transactions contemplated by this Agreement.
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7.4 PAYMENTS RECEIVED. Seller agrees that, after the Closing Date, it
shall hold and shall promptly transfer and deliver to Purchaser, from time to
time as and when received by it and in the currency received by it, any cash,
checks with appropriate endorsements (using its commercially reasonable efforts
not to convert such checks into cash), or other property that it may receive
after the Closing Date which properly belongs to Purchaser, including any
payments of accounts receivable and insurance proceeds, and shall account to
Purchaser for all such receipts. In the event of a dispute between the Parties
regarding Seller's obligations hereunder, the Parties shall cooperate and act in
good faith to promptly resolve such dispute and, in connection with such
cooperation, allow each other reasonable access to the records of the other
relating to such disputed item.
7.5 ACQUISITION OF RIGHTS TO CONFIDENTIALITY. At the Closing, Seller
shall hereby assign to Purchaser, to the extent assignable, all rights, if any,
of Seller and its Affiliates under any confidentiality agreements, standstill
agreements, non-solicitation agreements or like agreements ("CONFIDENTIALITY
AGREEMENTS") between Seller or any Affiliate of Seller and Persons other than
Purchaser that were entered into in connection with or relating to the possible
purchase or sale of all or any portion of the Business or the Assets, including,
without limitation, the right to enforce all terms of such confidentiality
agreements. At the Closing, Seller shall deliver to Purchaser the original
executed copies of all such confidentiality agreements. If the rights of Seller
or its Affiliates under any confidentiality agreement are not assignable, Seller
and its Affiliates shall cooperate in a commercially reasonable manner with
Purchaser at Purchaser's expense in taking any action reasonably requested by
Purchaser, including, without limitation, instituting litigation, to enforce for
the benefit of Purchaser any and all rights of Seller and its Affiliates against
a third party thereto.
7.6 NON-SOLICITATION FOR EMPLOYMENT. For a period of two (2) years
after the Closing Date, without the prior approval of Purchaser, Seller shall
not, and shall cause its Affiliates not to, solicit for employment or hire any
employee employed by the Business on the date hereof, or on the Closing Date or
on the date of such proposed solicitation or hiring.
7.7 COOPERATION IN LITIGATION. Purchaser and Seller shall reasonably
cooperate with each other at the requesting party's expense in the prosecution
or defense of any claim, litigation or other proceeding arising from their
respective conduct of the Business acquired by Purchaser pursuant to this
Agreement and involving one or more third parties. Unless the party requesting
such cooperation is entitled to indemnification from the other party under the
terms of Article VIII hereof, the requesting party shall pay the reasonable
out-of-pocket expenses incurred in providing such cooperation (including
reasonable legal fees and disbursements) by the party providing such cooperation
and by its officers, directors, employees and agents, but shall not be
responsible for reimbursing such party or its officers, directors, employees and
agents for their time spent in such cooperation.
7.8 COVENANT NOT TO COMPETE. For a period of three (3) years from and
after the Closing Date (the "COVENANT PERIOD"), Seller and its Affiliates (other
than RCG) will not directly or indirectly anywhere in the world (i) engage in
the business of manufacturing, performing final assembly, selling or
distributing products that compete with products manufactured, assembled, sold
and/or distributed by FutureSmart at the time of Closing, and/or during the ten
(10) years prior to Closing, or (ii) own or have a financial interest in
(whether stock, shares, beneficial partnership or other similar financial
interest) a Person that engages in the manufacture, performance of final
assembly, sale or distribution of the foregoing products described in subsection
(i) above. Notwithstanding the foregoing, it is agreed by and between the
Parties that nothing herein shall prevent or preclude LifeStyle from operating
its business as historically conducted by LifeStyle apart from FutureSmart prior
to the Closing.
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7.9 CONFIDENTIALITY.
(a) For a period of five (5) years from the Closing Date, Seller and
its Affiliates shall maintain the confidentiality of, and shall not use for the
benefit of themselves or others, any confidential information concerning the
Business or the Assets (the "CONFIDENTIAL INFORMATION"); PROVIDED, HOWEVER, that
the immediately foregoing restriction shall not restrict (i) disclosure by
Seller or any Affiliate thereof of any Confidential Information (x) insofar as
it relates to the Excluded Assets or the Excluded Liabilities or (y) required by
applicable Law or any court of competent jurisdiction, (ii) any disclosure on a
confidential basis to Seller's attorneys, accountants, lenders and investment
bankers, (iii) any disclosure of information (w) which is available publicly as
of the date of this Agreement, (x) which, after the date of this Agreement,
becomes available publicly through no fault of the disclosing party, (y) which
is disclosed to Seller or any Affiliate thereof by another Person who acquired
it from a third party without an obligation of confidentiality to Purchaser or
Seller or (z) which is independently developed by an employee of Seller or any
Affiliate thereof who had no access to such information, (iv) Seller's use of
such Confidential Information to protect or enforce its rights or perform its
obligations under this Agreement or in connection with tax or other regulatory
filings, litigation, financial reporting or other reasonable business purposes,
and (v) Seller's and Seller's Affiliates' use of such Confidential Information
in the conduct of their own businesses if and to the extent not otherwise
prohibited by Sections 7.6 and 7.8.
(b) Any and all information disclosed by Purchaser to Seller or by
Seller to Purchaser as a result of the negotiations leading to the execution of
this Agreement, or in furtherance thereof, which information was not already
known to Seller or to Purchaser, as the case may be, shall for a period of five
(5) years remain confidential to Seller and Purchaser and their respective
employees and agents; PROVIDED, HOWEVER, that this paragraph (b) shall not
restrict (i) disclosure of any such information required by applicable statute,
rule or regulation or any court of competent jurisdiction, provided that the
non-disclosing party is given notice and an adequate opportunity to contest such
disclosure, (ii) any disclosure on a confidential basis to the Parties'
attorneys, accountants, lenders and investment bankers, (iii) any disclosure of
information (w) which is available publicly as of the date of this Agreement,
(x) which, after the date hereof, becomes available publicly through no fault of
the disclosing party or any Person controlled directly or indirectly by the
disclosing party, (y) which is disclosed to the disclosing party by another
Person who acquired it from a third party without an obligation of
confidentiality to Purchaser or Seller, as the case may be, or (z) which is
independently developed by an employee of the disclosing party who had no access
to such information, (iv) the use of such information to protect such party's
rights under this Agreement or in connection with tax or other regulatory
filings, financial reporting or other reasonable business purpose or such
party's use of such information to protect its rights against any third party
and (v) the use by Purchaser and its Affiliates of any such information in the
operation of their businesses after the Closing Date.
7.10 PURCHASE PRICE ALLOCATION. Seller and Purchaser have agreed to the
allocation of the Purchase Price (plus those Assumed Liabilities that, on the
Closing Date, constitute liabilities for federal income tax purposes) among the
Assets, including the Covenant Not to Compete in Section 7.8, in accordance with
Section 1060 of the Code and the Treasury Regulations promulgated thereunder.
Such allocation is set forth at Schedule 7.10 to this Agreement. Within 30 days
after the Closing Balance Sheet is finally determined pursuant to Section 1.3
hereof, Seller and Purchaser shall adjust the allocation on Schedule 7.10 to
reflect any adjustment to the Final Purchase Price pursuant to Sections 1.2 and
1.3 and the Assets and Assumed Liabilities as finally determined and reflected
on the Closing Balance Sheet. Each of the Parties agrees to report the
transactions contemplated herein for Tax purposes in accordance with such
allocation, including without limitation, for all purposes on any federal or
state income or franchise Tax return filed by any party after the Closing Date.
7.11 COOPERATION ON TAX MATTERS. Seller and Purchaser shall reasonably
cooperate, and shall cause their respective Affiliates, officers, employees,
agents, auditors and representatives reasonably to cooperate, in preparing and
filing all Returns (including amended Returns), handling any Tax audits and
making any claims for Tax refunds, in each case relating to the Business or the
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Assets for all Pre-Closing Tax Periods and Straddle Periods, including
maintaining and making available to each other all records necessary in
connection with such Taxes and in resolving all disputes with respect to all
such taxable periods, PROVIDED that the foregoing shall be done in a manner so
as not to interfere unreasonably with the conduct of the business of the
Parties. Purchaser and Seller recognize that Seller and Purchaser and their
respective Affiliates will need access, from time to time after the Closing
Date, to certain accounting and tax records and information relating to the
Business and the Assets to the extent such records and information pertain to
events occurring prior to the Closing Date. Accordingly, Purchaser and Seller
agree that (I) from and after the Closing Date, Purchaser and Seller shall and
shall cause their respective Affiliates and successors to retain and maintain
such records for the longer of (A) the seven-year period beginning on the
Closing Date or (B) the full period of the applicable statute of limitations
with respect to such Taxes, including any extension thereof, and to abide by all
record retention agreements entered into with any Taxing Authority and to give
the other party reasonable notice prior to transferring, discarding or
destroying any such records and information, and, if the other party so
requests, to allow the other party to take possession of such materials, and
(ii) allow Purchaser and Seller and their respective agents and representatives
(and agents or representatives of any of their respective Affiliates), to
inspect, review and make copies of such records as such party may deem necessary
or appropriate from time to time.
7.12 TRANSFER TAXES. Notwithstanding any other provision of this
Agreement to the contrary, all sales, use, transfer, stamp, duties, gains,
recording and similar taxes, if any, required to be paid in connection with the
transactions contemplated by this Agreement shall be borne by Seller.
7.13 EMPLOYEES.
(a) Purchaser shall offer employment effective as of the Closing Date
to each of the Employees listed on Schedule 7.13(a). The period of such
employment shall begin on the Closing Date. Employees who accept Purchaser's
offer of employment and who become employees of Purchaser shall be referred to
herein collectively as the "TRANSFERRED EMPLOYEES." Seller shall be responsible
for any obligation to provide employee benefits to a Transferred Employee prior
to such Employee's date of hire by Purchaser.
Seller agrees to use reasonable efforts to facilitate the transition of
Employees listed on Schedule 7.13(a) to employment with Purchaser. Such
reasonable efforts shall include affording Purchaser reasonable opportunities to
review employment and personnel records of such Employees, to discuss with such
Employees terms and conditions of employment with Purchaser as of the Closing
Date and to distribute to such Employees forms and documents relating to
employment with Purchaser.
Except to the extent prohibited by law, Seller shall deliver to
Purchaser originals or copies of all personnel files and records relating to
Employees listed on Schedule 7.13(a), and Seller shall have reasonable
continuing access to such files and records thereafter.
It is expressly agreed and understood that nothing in this Agreement
shall, or shall be construed to, limit the ability of Purchaser to terminate the
employment of any Employee listed on Schedule 7.13(a) at any time or to amend or
terminate any such Employee's benefit plan or arrangement.
(b) Purchaser shall provide Transferred Employees with compensation and
employee benefits in accordance with Purchaser's policies and in Purchaser's
sole and absolute discretion.
(c) Purchaser shall (i) recognize each Transferred Employee's length of
service with FutureSmart up to the Closing Date for purposes of vesting and
eligibility to participate, but not for purposes of benefit accrual or
calculation of contributions, under any pension, savings or severance plan of
Purchaser that may be extended to Transferred Employees after the Closing Date
(except as may otherwise be required by law), (ii) recognize the co-payments and
deductible expenses of each Transferred Employee and each Transferred Employee's
eligible dependents incurred under Seller's Plans identified on Schedule 4.13(c)
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(provided that a Transferred Employee or eligible dependent shall provide
documentation of any such co-payment or deductible as may be reasonably required
by Purchaser), and (iii) waive all pre-existing conditions and exclusions for
each Transferred Employee and each Transferred Employee's eligible dependents.
(d) Seller shall be responsible for any claims for medical or dental
benefits incurred by a Transferred Employee or his or her covered dependents
prior to the Transferred Employee's date of hire by Purchaser in accordance with
the terms of Seller's medical and dental plans, and Purchaser shall be
responsible for any medical or dental claims incurred by any Transferred
Employee or his or her covered dependents after the Transferred Employee's date
of hire by Purchaser in accordance with the terms of Purchaser's medical and
dental plans. For purposes of this Section 7.13(d), a medical or dental claim
shall be deemed to be incurred when the services giving rise to the claim are
performed and not when the Transferred Employee is billed for such services or
submits a claim for benefits.
Purchaser shall be responsible in accordance with its applicable
disability plans for all short-term and long-term disability income benefits
payable to any Transferred Employee with respect to a disability incurred after
such Transferred Employee's date of hire by Purchaser. Seller shall be
responsible in accordance with its applicable disability plans for all other
short-term and long-term disability benefits payable with respect to a
disability incurred by any Transferred Employee or any current or former
Employee.
(e) Transferred Employees shall be eligible to effect a direct rollover
(as described in Section 401(a)(31) of the Code) of all or a portion of any such
Transferred Employee's balance under any defined contribution plan (as defined
in Section 3(34) of ERISA) of Seller to the defined contribution plan maintained
by Purchaser for Transferred Employees, provided, however, that any such direct
rollover shall be subject to the terms and conditions of Purchaser's defined
contribution plan applicable to rollover contributions.
(f) Seller shall be responsible for providing any COBRA coverage
required under Section 4980B of the Code or Sections 601 through 608 of ERISA
with respect to any current or former Employee of Seller and any "qualified
beneficiary" (as defined in Section 4980B of the Code) of any such current or
former Employee who incurred a "qualifying event" (as defined in Section 4980B
of the Code) on or before the Closing Date.
(g) Seller agrees to pay and be responsible for all liability, cost or
expense for severance, retirement or termination indemnity payments, salary
continuation, special bonuses and like costs arising under Seller's severance
pay plans, policies or arrangements, with respect to any of the current or
former Employees, including, but not limited, to any such liability, cost or
expense that arises out of or relates to the transactions described in or
contemplated by this Agreement. For the avoidance of doubt, Seller shall be
responsible for and pay any severance liability that may arise under any
agreements between Seller and any Employee and any payments due as a direct or
indirect result of (i) the entry of Seller into any such agreement, (ii)
approval of any such agreement by the LifeStyle stockholders or any Affiliate of
LifeStyle or (iii) the consummation of the transactions contemplated by this
Agreement.
(h) Seller agrees to pay and be responsible for all liability, cost,
expense and sanctions resulting from any failure to comply with the WARN Act, or
any similar state or local law, in connection with the consummation of the
transactions described in or contemplated by this Agreement.
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(i) The Purchaser shall be responsible for the administration and the
financial obligation of all Workers' Compensation claims with respect to
Transferred Employees arising out of or relating to occurrences on or after the
Closing Date and the Seller shall be responsible for the administration and the
financial obligation of any Workers' Compensation claims arising out of or
relating to occurrences before the Closing Date; provided, however, that the
following specific principles will apply to the following specific claims:
(A) MODIFIED DUTY. In the event that the Purchaser
fails to continue to accommodate the modified or alternative
work arrangements that are currently in place for each of the
Transferred Employees (hereinafter, any such Transferred
Employee is referred to as a "MODIFIED DUTY EMPLOYEE"), except
if such failure to accommodate is the result of a termination
of such Modified Duty Employee's employment for cause, then
the Purchaser shall reimburse to the Seller for the remaining
share of the applicable Workers' Compensation liability as
determined by the applicable Workers' Compensation state law.
If such modified or alternative work accommodation is
discontinued by the Purchaser for a Transferred Employee as a
result of a termination of employment for cause, then the
Seller shall assume the remaining workers compensation
liability. If such failure to accommodate occurs as a result
of a Modified Duty Employee voluntarily leaving employment for
any reason other than an unjustified failure by the Purchaser
to accommodate, then the Seller shall bear all applicable
Workers' Compensation liability with respect to such a
Modified Duty Employee and the Purchaser shall not bear any of
such liability with the Seller.
(B) AGGRAVATED INJURY/OCCUPATIONAL DISEASE. In the
event that a Transferred Employee notifies the Purchaser after
the Closing Date of a workers' compensation injury that is the
result of an aggravation of an injury that occurred prior to
the Closing, the responsibility for the administration and
financial obligation of this claim (i.e., the allocation
between the Seller's Workers' compensation coverage and the
Purchaser's workers' compensation coverage) will be determined
by the applicable Workers' Compensation Law and is subject to
the final interpretation of an appropriate court.
(j) Except with respect to accrued vacation as set forth on the Closing
Balance Sheet and on Schedule 7.13(j), and then only to the extent such accrued
vacation is taken by any Transferred Employee on or before December 31, 2004,
Seller shall retain all liabilities and obligations arising under or with
respect to any compensation and benefit plans and arrangements sponsored,
maintained or contributed to by Seller for current or former Employees and their
dependents and beneficiaries, including, but not limited to, any retirement,
pension, savings, deferred compensation, incentive, bonus, retention, severance,
stock option, welfare or fringe benefit plan or arrangement, and Purchaser shall
have no liability or obligation under or with respect to any such plan or
arrangement.
(k) To the extent requested by Purchaser and permissible under
applicable law, Purchaser shall be a successor employer for purposes of the
Federal Insurance Contributions Act, as codified at 26 U.S.C. ss.ss. 3101-3128,
the Federal Unemployment Tax Act, as codified at 26 U.S.C. ss.ss. 3301-3311,
and, to the extent elected by Purchaser, for purposes of any applicable state
workers compensation, disability or unemployment compensation laws. Seller
agrees to provide Purchaser with such wage, tax and other information with
respect to Transferred Employees as Purchaser may reasonably require for such
purposes.
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(l) Seller and Purchaser agree to furnish each other with such
information concerning Employees and Plans and to take all such other action as
is necessary and appropriate to effect the transactions contemplated by this
Section 7.13.
7.14 ASSIGNMENT OF CONTRACTS, LEASES AND PERMITS. Seller shall have
used reasonable best efforts to obtain prior to Closing the Consent of each
applicable customer, supplier, lessor and Governmental Authority to the
assignment to Purchaser of each of the Contracts, Leases and Permits set forth
on Schedule 7.14. To the extent such Consents cannot be obtained prior to
Closing after Seller has exercised its reasonable best efforts to do so, (i)
with respect to each unassigned Contract, Seller shall enter into subcontracts
or other arrangements with Purchaser as set forth in Section 2.3 above so as to
provide Purchaser with the commercial value of such contract, (ii) with respect
to each unassigned Lease, Seller shall provide Purchaser with a sublease or
other license to use the real property to the extent necessary for Purchaser to
operate and conduct the Business at such facility, which sublease or license
shall contain terms and conditions agreeable to Purchaser and Seller. To the
extent Seller cannot obtain by the Closing the Consent of any Governmental
Authority to the assignment to Purchaser of any Permit included on Schedule 7.14
after using its reasonable best efforts to do so, Seller shall at the request of
Purchaser continue to cooperate with Purchaser to provide the applicable
Governmental Authority with all necessary information and documentation required
to assign any such Permit after the Closing.
7.15 CUSTOMER REFERRALS. Seller agrees that for a period of three (3)
years from and after the Closing Date, Seller will refer solely to Purchaser any
and all customer and potential customer leads and inquiries it may obtain or
have access to relating to the sale or distribution of any products sold by the
Business.
7.16 DISSOLUTION OF FUTURESMART. Immediately subsequent to the Closing,
the Seller shall change its name, and the name of any subsidiary of Seller, to a
name not including "Future Smart" or any other Seller trademarks or trade names
by filing all required forms with any and all applicable state agencies and
regulatory bodies. Within ninety (90) days after payment to Seller of the
Purchase Price, and subject to the adjustments and setoffs pursuant to this
Agreement, LifeStyle and FutureSmart shall begin to wind-down FutureSmart's
operations under applicable state law and shall cease all business operations of
FutureSmart no later than September 30, 2004.
7.17 INSOLVENCY PROCEEDINGS. If at any time before (a) Purchaser has
paid the Final Purchase Price under this Agreement; or (b) Seller ceases all
business operations pursuant to applicable state law, Seller becomes a debtor in
a bankruptcy case or insolvency proceeding under Chapter 11 of Title 11 of the
United States Code or otherwise, then, as a condition to Purchaser's obligations
to pay any then unpaid Purchase Price, or otherwise to comply with its
obligations under this Agreement, which condition may be waived only by
Purchaser in its sole discretion, Seller shall obtain an order from the
bankruptcy court approving this Agreement under Bankruptcy Rule 9019 and
authorizing the assumption by Seller of this Agreement under Bankruptcy Code
Section 365, or in the event that Seller becomes the party of an insolvency case
or proceeding under other law, shall obtain a similar order from the court
overseeing the insolvency case approving this Agreement and confirming the
binding effect thereof. Absent a waiver in whole or in part by Purchaser of this
provision, until such an order is obtained, Purchaser shall be relieved of its
obligations to pay any unpaid part of the Purchase Price or otherwise comply
with its obligations under this Agreement.
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ARTICLE VIII
CONDITIONS PRECEDENT
8.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The obligations of Seller
and Purchaser under this Agreement shall be subject to the fulfillment on or
prior to the Closing Date of the following conditions:
(a) NO INJUNCTION, ETC. Consummation of the transactions contemplated
by this Agreement shall not have been restrained, enjoined or otherwise
prohibited in any material respect by any applicable law, including any order,
injunction, decree or judgment of any court or other Governmental Authority, and
there shall not have been promulgated, entered, issued or determined by any
court or other Governmental Authority to be applicable to this Agreement any
applicable law making illegal the consummation of the transactions contemplated
by this Agreement; and
(b) GOVERNMENTAL CONSENTS. All Consents of Governmental Authorities
shall have been made or obtained.
8.2 CONDITIONS TO OBLIGATIONS OF SELLER. The obligation of Seller under
this Agreement shall be subject to the fulfillment, on or prior to the Closing
Date, of the following additional conditions:
(a) CORPORATE PROCEEDINGS. All corporate proceedings of Purchaser in
connection with the transactions contemplated by this Agreement, and all
documents and instruments incident thereto, shall be reasonably satisfactory in
form and substance to Seller and its counsel, and Seller and its counsel shall
have received all such documents and instruments, or copies thereof, certified
if requested, as may be reasonably requested.
(b) ASSIGNMENTS. Purchaser shall have delivered to Seller executed
copies of the Assignment of Lease and the Assignment and Assumption Agreement
(each as defined below in Sections 8.3(c) and (d), respectively).
(c) OTHER DOCUMENTATION AND INSTRUMENTS OF TRANSFER. Purchaser shall
have delivered to Seller all such other documents and instruments of assumption,
in form reasonably acceptable to Seller, as shall be reasonably necessary for
Purchaser to assume the Assumed Liabilities in accordance herewith.
8.3 CONDITIONS TO OBLIGATIONS OF PURCHASER. The obligations of
Purchaser under this Agreement shall be subject to the fulfillment on or prior
to the Closing Date of the following additional conditions, which Seller and
LifeStyle agree to use commercially reasonable efforts to cause to be fulfilled:
(a) DELIVERY OF ASSETS. Seller shall have delivered the Assets free and
clear of all Liens, except for the Permitted Liens. Seller shall have provided
Purchaser with fully executed releases and waivers from each of the secured
creditors listed on Schedule 8.3(a) as to any and all claims (the "Secured
Creditor Claims"), in the form of the Intercreditor Agreement, which shall be
annexed hereto as Annex B.
(b) CORPORATE PROCEEDINGS. All corporate and other proceedings of
Seller and LifeStyle and/or any Affiliate thereof in connection with this
Agreement and the transactions contemplated by this Agreement, and all documents
and instruments incident thereto, shall be reasonably satisfactory in substance
and form to Purchaser and its counsel, and Purchaser and its counsel shall have
received all such documents and instruments, or copies thereof, certified if
requested, as may be reasonably requested.
(c) LEASED REAL PROPERTY ASSIGNMENTS. Seller shall have delivered to
Purchaser the executed Assignment of Lease with respect to each Transferred
Lease (collectively, the "ASSIGNMENT OF LEASE"), which shall be annexed hereto
as Annex C.
(d) CONTRACT ASSIGNMENTS. Seller shall have delivered to Purchaser the
executed Assignment and Assumption Agreement, between Seller and Purchaser, with
respect to the Transferred Contracts and other Assets (collectively, the
"ASSIGNMENT AND ASSUMPTION AGREEMENT"), which shall be annexed hereto as Annex D
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(e) BILLS OF SALE. Seller shall have delivered to Purchaser the
executed Bill of Sale with respect to all of the Inventory, Personal Property,
Permits and any other Assets not transferred or assigned by any other document
or instrument described in this Section, which Bill of Sale shall be annexed
hereto as Annex E.
(f) LEGAL OPINION. Seller shall have delivered to Purchaser an executed
legal opinion of Seller's counsel, which shall be annexed hereto as Annex F.
(g) CONSENTS. Seller shall have obtained and delivered to Purchaser, in
form reasonably acceptable to Purchaser, those additional Consents to the
assignment of the contracts, leases and permits listed on Schedule 7.14 to
Purchaser.
(h) SHAREOWNER WAIVER. Purchaser shall have received a waiver and
release from eResource Capital Group ("RCG"), as the majority shareowner of
LifeStyle, indicating that it waives any and all rights RCG may have, now or in
the future, to challenge the transaction(s) contemplated by this Agreement,
which waiver shall be annexed hereto as Annex G.
(i) OTHER DOCUMENTATION AND INSTRUMENTS OF TRANSFER. Seller shall have
delivered to Purchaser all such other documents and instruments of assignment as
shall be reasonably necessary to transfer to Purchaser the Assets in accordance
herewith.
ARTICLE IX
INDEMNIFICATION
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND COVENANTS. The
Parties agree that, regardless of any investigation made at any time by the
Parties, the representations and warranties made by Seller and LifeStyle in this
Agreement (and any related indemnity obligations) shall survive the Closing and
shall terminate, and be of no further force and effect, and no claims with
respect thereto may be made by Purchaser, after the date which is the one-year
anniversary of the Closing Date; PROVIDED, HOWEVER, that, notwithstanding the
foregoing, (i) claims for indemnification relating to Losses (as defined in
Section 9.2 below) arising out of any breach of the representations and
warranties set forth in Section 4.12 (Taxes), Section 4.13 (Employment and
Benefits), and Section 4.14 (Environmental) shall survive to the end of the
sixtieth day following the expiration of the applicable statute of limitations
including any extensions or waivers thereof and (ii) claims for indemnification
relating to Losses arising out of any defect in the title to any Assets shall
survive indefinitely. Further, if any claim for indemnification hereunder, which
has been previously asserted by either party to this Agreement pursuant to a
notice of claim in accordance with Section 9.6 below, is still pending at the
expiration of the applicable survival period, such claim shall continue to be
subject to the indemnification provisions of this Agreement until resolved. For
the avoidance of doubt, all covenants and agreements made hereunder shall
survive until satisfied in full unless the Agreement explicitly provides for a
specific termination date.
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9.2 INDEMNIFICATION BY SELLER. On and after the Closing, Seller shall
defend and indemnify and hold harmless Purchaser and its directors, officers,
employees and Affiliates from and against and in respect of any and all claims,
Liabilities, obligations, losses, damages, costs, and out of pocket expenses
(including, without limitation, legal, accounting and similar expenses
reasonably incurred) (individually, a "LOSS" and, collectively, "LOSSES") which
any of them may incur which are the direct and proximate result of any one or
more of the following:
(a) any breach of any covenant or agreement on the part of
Seller in this Agreement;
(b) any breach of any representation or warranty on the part
of Seller in this Agreement;
(c) any claim that a product first designed, manufactured,
sold or offered for sale by Seller, or a method first used by Seller
before the Effective Time, infringes any patent, copyright, trademark
or other intellectual property right, except where and to the extent
that such claim is based upon (i) any modifications to a product or
method made by Purchaser after the Effective Time, where such claim
would not have been made but for such modification; or (ii) any third
party patent, copyright or trademark first filed or registered, as the
case may be, after the Effective Time; and
(d) any of the Retained Liabilities.
9.3 INDEMNIFICATION BY LIFESTYLE. On and after the Closing, LifeStyle
shall defend and indemnify and hold harmless Purchaser and its directors,
officers, employees and Affiliates from and against and in respect of any and
all claims, Liabilities, obligations, losses, damages, costs, and out of pocket
expenses (including, without limitation, legal, accounting and similar expenses
reasonably incurred) (individually, a "LOSS" and, collectively, "LOSSES") which
any of them may incur which are the direct and proximate result of any one or
more of the following:
(a) any breach of any covenant or agreement on the part of
LifeStyle in this Agreement; and
(b) any breach of any representation or warranty on the part
of LifeStyle in this Agreement.
9.4 INDEMNIFICATION BY PURCHASER. On and after the Closing, Purchaser
shall defend, indemnify and hold harmless Seller and its directors, officers,
employees and Affiliates from and against and in respect of any and all Losses
which any of them may incur which are the direct and proximate result of any one
or more of the following:
(a) any breach of any covenant or agreement on the part of
Purchaser in this Agreement;
(b) any breach of any representation or warranty on the part
of Purchaser in this Agreement; and (c) any of the Assumed Liabilities.
9.5 LIMITATIONS ON INDEMNITY. Except as provided in this Section 9.5,
Seller shall not be required to indemnify and hold harmless Purchaser with
respect to a claim pursuant to Section 9.2(b) unless and until the cumulative
aggregate amount of all Losses which are otherwise recoverable by Purchaser
under Section 9.2(b) exceeds $50,000.00 (the "BASKET"). If Purchaser brings an
eligible claim or eligible claims for an amount in excess of the Basket, Seller
shall be obligated to indemnify Purchaser for the full amount of all Losses
under Section 9.2(b). Notwithstanding the foregoing, the Basket shall not be
applicable with respect to any eligible claim brought by Purchaser under Section
9.2(b) with respect to any breach of Sections 4.3 (Title to Assets), 4.5
(Absence of Undisclosed Liabilities), 4.12 (Taxes) or 4.24 (No Material
Omissions) of this Agreement. Except as provided in this Section 9.5, LifeStyle
shall not be required to indemnify and hold harmless Purchaser with respect to a
claim pursuant to Section 9.3(b) unless and until the cumulative aggregate
amount of all Losses which are otherwise recoverable by Purchaser under Section
9.3(b) exceeds $50,000.00 (the "BASKET"). If Purchaser brings an eligible claim
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or eligible claims for an amount in excess of the Basket, LifeStyle shall be
obligated to indemnify Purchaser for the full amount of all Losses under Section
9.3(b). Notwithstanding the foregoing, the Basket shall not be applicable with
respect to any eligible claim brought by Purchaser under Section 9.3(b) with
respect to any breach of Section 5.3 (Absence of Undisclosed Liabilities) of
this Agreement. In addition, and notwithstanding the foregoing, it is agreed by
and between the Parties that (i) the aggregate amount of any and all Losses
claimed by Purchaser pursuant to Section 9.2 and Section 9.3 hereunder shall not
exceed the amount of the Final Purchase Price, and (ii) any and all
indemnification claims made by Purchaser with respect to such aggregate Losses
shall be notified to Seller and/or LifeStyle, as the case may be, pursuant to
Section 9.6(a) hereunder, on or before the one (1) year anniversary of the
Closing Date.
9.6 INDEMNIFICATION PROCEDURE.
(a) Any party making a claim for indemnification hereunder (an
"INDEMNITEE") shall notify the indemnifying party (an "INDEMNITOR") of the claim
in writing promptly after receiving written notice of any action, lawsuit,
proceeding, investigation or other claim against it (if by a third party) or
discovering the liability, obligation or facts which may reasonably be expected
to give rise to such claim for indemnification, describing the claim, the amount
thereof (if known and quantifiable), and the basis thereof (a "NOTICE OF
CLAIM"), provided that the failure to so notify an Indemnitor shall not relieve
the Indemnitor of its obligations hereunder except to the extent such failure
shall have actually prejudiced the Indemnitor.
(b) With respect to any third party action, lawsuit, proceeding,
investigation or other claim which is the subject of a Notice of Claim (a "THIRD
PARTY CLAIM"), an Indemnitor shall be entitled to assume and control (with
counsel of its choice) the defense of such Third Party Claim at the Indemnitor's
expense and at its option by sending written notice of its election to do so
within fifteen (15) days after receiving the Notice of Claim from the Indemnitee
as aforesaid; PROVIDED, HOWEVER, that:
The Indemnitee shall be entitled to participate in the defense
of such Third Party Claim and to employ counsel of its choice for such
purpose (the fees and expenses of such separate counsel shall be borne
by Indemnitee unless the Indemnitor and the Indemnitee have agreed to
the retention of the same counsel or the named parties to the Third
Party Claim include both the Indemnitor and the Indemnitee and
representation of such parties by the same counsel would be
inappropriate (due to actual or potential differing interests between
them); and to assert against any third party (other than Indemnitor or
any of its Subsidiaries or Affiliates) any and all crossclaims and
counterclaims Indemnitee may have, subject to Indemnitor's consent,
which consent shall not be unreasonably withheld;
If the Indemnitor elects to assume the defense of any such
Third Party Claim, the Indemnitor shall be entitled to compromise or
settle such Third Party Claim in its sole discretion so long as either
(x) such compromise or settlement is purely monetary and provides an
unconditional release of the Indemnitee with respect to such claim or
(y) the Indemnitor shall obtain the prior written consent of the
Indemnitee (which shall not be unreasonably withheld); and
If the Indemnitor shall not have assumed the defense of such
Third Party Claim within the fifteen (15) day period set forth above,
the Indemnitee may assume the defense of such Third Party Claim with
counsel selected by it and may make any compromise or settlement
thereof or otherwise protect against the same and be entitled to all
amounts paid as a result of such Third Party Claim or any compromise or
settlement thereof, provided that, in the case of any such compromise
or settlement, (x) such compromise or settlement is purely monetary and
provides an unconditional release of the Indemnitor with respect to
such claim or (y) the Indemnitee shall obtain the prior written consent
of the Indemnitor (which shall not be unreasonably withheld). The
Indemnitee shall give the Indemnitor notice of the name of counsel
selected by it prior to the time of assuming the defense and the
Indemnitor shall have five (5) business days in which to object to such
counsel. In the event of such objection, the Indemnitor shall have the
obligation to defend on the terms specified in Section 9.6(b)(ii).
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(c) The Indemnitee shall at all times cooperate, at its own expense, in
all reasonable ways with, make its relevant files and records available for
inspection and copying by, and make its employees available or otherwise render
reasonable assistance to, the Indemnitor. The Indemnitor shall provide, at the
Indemnitee's request, copies of all documents relevant to any Third Party Claim
for which an indemnification is provided hereunder.
9.7 INJUNCTIVE REMEDY. If either or both of Seller and/or any Affiliate
of Seller breaches any covenant in Section 7.8 (Covenant not to Compete) or 7.9
(Confidentiality), Seller acknowledges such violation or breach will cause
irreparable injury to Purchaser, the amount of which will be impossible to
estimate or determine and which cannot be adequately compensated. Accordingly,
if any such breach occurs, Purchaser shall be entitled to specific performance,
temporary and permanent injunctive relief or such other equitable remedies as
may be available from any court of competent jurisdiction without the necessity
of proving actual damage.
ARTICLE X
GENERAL PROVISIONS
10.1 MODIFICATION; WAIVER. This Agreement may be modified only by a
written instrument executed by the Parties. Any of the terms and conditions of
this Agreement may be waived in writing at any time on or prior to the Closing
Date by the party entitled to their benefits.
10.2 ENTIRE AGREEMENT. This Agreement, including the Schedules (which
are hereby incorporated by reference and made a part of this Agreement), the
Exhibits hereto, and the Confidentiality Agreement contain the entire agreement
of the Parties with respect to the subject matter of this Agreement, and the
Confidentiality Agreement, and supersedes all other prior agreements,
understandings, statements, representations and warranties, oral or written,
express or implied, between the Parties and their respective Affiliates,
representatives and agents in respect of the subject matter of this Agreement;
PROVIDED, HOWEVER, that the Confidentiality Agreement shall terminate and be of
no further force or effect at the Closing.
10.3 BULK SALES. Purchaser hereby waives compliance with any applicable
bulk sales law; PROVIDED, HOWEVER, that Seller hereby agrees to indemnify
Purchaser against, and to hold Purchaser harmless from, at all times after the
Closing Date, any and all loss, damage or liability, and all expenses (including
reasonable legal fees) incurred or arising out of the failure to comply with
such bulk sales laws. Nothing in this Agreement shall be construed as an
admission by any party as to the applicability of any bulk sales laws.
10.4 EXPENSES. Except as expressly provided in this Agreement, each
party hereto will be responsible for its own fees and expenses incident to the
preparation and performance of this Agreement and the transactions contemplated
hereby.
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10.5 FURTHER ASSURANCES. Each party will execute and deliver such
certificates and other documents and take such other actions as may reasonably
be requested by the other party in order to consummate or implement the
transactions contemplated by this Agreement.
10.6 NOTICES. All notices, requests, demands and other communications
under this Agreement must be in writing and will be deemed to have been duly
given or made as follows: (A) if sent by registered or certified mail in the
United States return receipt requested, upon receipt; (B) if sent by reputable
overnight air courier two business days after mailing; (C) if sent by facsimile
transmission, with a copy mailed on the same day in the manner provided in (a)
or (b) above, when transmitted and receipt is confirmed by telephone; or (D) if
otherwise actually personally delivered, when delivered, and shall be delivered
as follows:
if to Seller and/or LifeStyle:
LifeStyle Innovations, Inc.
3801 William D. Tate Avenue, Suite 100
Grapevine, TX 76051
Fax: 817-442-1882
Attn: Paul Johnson
with a copy to:
G. David Gordon & Associates, P.C.
One Memorial Place
7633 East 63rd Place, Suite 210
Tulsa, Oklahoma 74133
Fax: 918-254-2988
Attn: G. David Gordon, Esq.
if to Purchaser:
Honeywell International Inc.
263 Old Country Road
Melville, NY 11747
Fax: 631-692-3025
Attn: Phil Caputo
with a copy to:
Honeywell International Inc.
101 Columbia Road
Morristown, New Jersey 07962
Attn: Vice President & Secretary
Fax: 973-455-4413
or to such other address or to such other Person as either party may have last
designated by notice to the other party.
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10.7 ASSIGNMENT. This Agreement will be binding upon and inure to the
benefit of the Parties and their respective successors and permitted assigns,
but will not be assignable, by operation of law or otherwise, by any party
without the prior written consent of the other party and any purported
assignment or other transfer will be void and unenforceable; PROVIDED, HOWEVER,
that Purchaser may assign this Agreement in whole or in part or any of its
rights hereunder without consent to one or more subsidiaries of Purchaser
provided that Purchaser shall remain liable for the obligations of the assignee
or assignees under this Agreement.
10.8 NO THIRD-PARTY BENEFICIARIES. Except as otherwise provided in this
Agreement, nothing in this Agreement will confer any rights upon any Person who
is not a party or a successor or permitted assignee of a party to this
Agreement.
10.9 COUNTERPARTS. This Agreement may be executed in counterparts, both
of which will constitute one and the same instrument.
10.10 GOVERNING LAW. This Agreement will be construed, performed and
enforced in accordance with the laws of the State of New York without giving
effect to its principles or rules of conflict of laws thereof to the extent such
principles or rules would require or permit the application of the laws of
another jurisdiction.
10.11 ARBITRATION. In the event of any dispute between the Parties
arising after the Closing Date in connection with this Agreement or the
transactions contemplated hereby or the breach, termination, enforcement,
interpretation or validity hereof, the Parties shall first use their reasonable
efforts to resolve such dispute among themselves. If the Parties are unable to
resolve the dispute within thirty (30) calendar days of the initiation of such
procedure, the dispute shall be settled by arbitration as hereinafter provided
which shall be the sole and exclusive procedure for the resolution of any such
dispute. Within ten (10) calendar days after receipt of written notice from one
party that it is submitting the matter to arbitration, each party shall
designate in writing one arbitrator to resolve the dispute who shall, in turn,
jointly select a third arbitrator within twenty (20) calendar days of their
designation, with the third arbitrator to be selected in accordance with the
procedure established by the American Arbitration Association. The arbitrators
so designated shall each be a lawyer experienced in commercial and business
affairs who is not an employee, consultant, officer or director of any party
hereto or any Affiliate of any party to this Agreement and who has not received
any compensation, directly or indirectly, from any party hereto or any Affiliate
of any party to this Agreement during the two (2) year period preceding the
Closing Date. The arbitration shall be governed by the rules of the American
Arbitration Association; PROVIDED, HOWEVER, that the arbitrators shall have sole
discretion with regard to the admissibility of evidence. The arbitrators shall
use their best efforts to rule on each disputed issue within thirty (30)
calendar days after the completion of the hearings. The determination of the
arbitrators as to the resolution of any dispute shall be binding and conclusive
upon all Parties hereto. All rulings of the arbitrators shall be in writing,
with the reasons for the ruling given, and shall be delivered to the Parties
hereto. Each party shall pay the fees of its respective designated arbitrator
and its own costs and expenses of the arbitration. The fees of the third
arbitrator shall be paid pro rata by each of the Parties. Any arbitration
pursuant to this Section 10.11 shall be conducted in New York, New York. Any
arbitration award may be entered in and enforced by any court having
jurisdiction thereof and the Parties hereby consent and commit themselves to the
jurisdiction of the courts of any competent jurisdiction for purposes of the
enforcement of any arbitration award. Any party may seek from any court interim
or provisional relief that is necessary to protect the rights or property of
that party, pending the appointment of the arbitrator or pending the
arbitrator's determination of the merits of the controversy. None of the Parties
shall be required to use the foregoing procedures to enforce the provisions of
Sections 7.7, 7.9 or 7.10 above.
10.12 CONSENT TO JURISDICTION, ETC.
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(a) Subject to Section 10.11 above, each of the Parties hereby
irrevocably and unconditionally submits, for itself and its property, to the
exclusive jurisdiction of any New York State court or Federal court of the
United States of America sitting in New York City, and any appellate court from
any thereof, in any action or proceeding arising out of or relating to this
Agreement or the transactions contemplated by this Agreement or for recognition
or enforcement of any judgment relating to this Agreement, and each of the
Parties hereby irrevocably and unconditionally agrees that all claims in respect
of any such action or proceeding may be heard and determined in such New York
State court or, to the extent permitted by law, in such Federal court. Each of
the Parties agrees that a final judgment in any such action or proceeding will
be conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law.
(b) Each of the Parties hereby irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, any objection which
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the transactions
contemplated by this Agreement in any New York State or Federal court sitting in
New York City. Each of the Parties hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 10.6. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
ARTICLE XI
DEFINITIONS AND INTERPRETATION
11.1 DEFINITIONS.
As used in this Agreement, the following terms have the following meanings:
ACCOUNTS RECEIVABLE: as defined in Section 2.1(j).
AFFILIATE: of a Person means any other Person that directly or indirectly
controls, is controlled by, or is under common control with, the first Person.
The terms "CONTROLLED BY" and "UNDER COMMON CONTROL WITH" mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management policies of a Person, whether through the ownership of voting
securities, by contract or credit arrangement, as trustee or executor, or
otherwise. Notwithstanding the foregoing, it is understood that, for purposes of
this definition, the creditors in the Intercreditor Agreement are not considered
Affiliates of FutureSmart and/or LifeStyle.
AGREEMENT: this Agreement, including the Schedules and Annexes to this
Agreement.
ASSETS: as defined in Section 2.1.
ASSIGNMENT OF LEASE: as defined in Section 8.3(c).
ASSUMED LIABILITIES: as defined in Section 3.1.
BASKET: as defined in Section 9.5.
BUSINESS: as defined the preamble hereto.
CLOSING: as defined in Section 1.2(a).
CLOSING BALANCE SHEET: as defined in Section 1.3(b).
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CLOSING DATE: as defined in Section 1.2(a).
CLOSING DEFICIT: as defined in Section 1.3(d).
COBRA: as defined in Section 4.13(e)(iii).
CODE: the Internal Revenue Code of 1986, as amended.
CONFIDENTIAL INFORMATION: as defined in Section 7.9(a).
CONSENT: any action, approval, consent or authorization.
CONTRACTS: as defined in Section 4.10(a).
COVENANT PERIOD: as defined in Section 7.8.
EFFECTIVE TIME: as defined in Section 1.2(a).
EMPLOYEES: as defined in Section 4.13(a)(i).
EMPLOYMENT AND WITHHOLDING TAXES: any federal, state, provincial, local, foreign
or other employment, unemployment insurance, social security, disability,
workers' compensation, payroll, health care or other similar tax, duty or other
governmental charge or assessment or deficiencies thereof and all Taxes required
to be withheld by or on behalf of Seller in connection with amounts paid or
owing to any employee, independent contractor, creditor or other party, in each
case, on or in respect of the business or assets thereof.
ENVIRONMENT: means soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES: means any cost, damages, expense,
liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or conditions (including
on-site or off- site contamination, occupational safety and health, and
regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and
response, investigative, remedial, or inspection costs and expenses
arising under Environmental Law or Occupational Safety and Health Law;
(c) financial responsibility under Environmental Law or Occupational Safety
and Health Law for cleanup costs or corrective action, including any
investigation, cleanup, removal, containment, or other remediation or
response actions ("Cleanup") required by applicable Environmental Law
or Occupational Safety and Health Law (whether or not such Cleanup has
been required or requested by any Governmental Body or any other
Person) and for any natural resource damages; or
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(d) any other compliance, corrective, investigative, or remedial measures
required under Environmental Law or Occupational Safety and Health Law.
The terms "removal," "remedial," and "response action," include the
types of activities covered by the United States Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. ss. 9601 et seq., as
amended ("CERCLA").
ENVIRONMENTAL LAW: means any Law that requires or relates to:
(a) advising appropriate authorities, employees, and the public of intended
or actual releases of pollutants or hazardous substances or materials,
violations of discharge limits, or other prohibitions and of the
commencements of activities, such as resource extraction or
construction, that could have significant impact on the Environment;
(b) preventing or reducing to acceptable levels the release of pollutants
or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or minimizing the
hazardous characteristics of wastes that are generated;
(d) assuring that products are designed, formulated, packaged, and used so
that they do not present unreasonable risks to human health or the
Environment when used or disposed of;
(e) reducing to acceptable levels the risks inherent in the transportation
of hazardous substances, pollutants, oil, or other potentially harmful
substances;
(f) cleaning up pollutants that have been released, preventing the threat
of release, or paying the costs of such clean up or prevention; or
(g) making responsible parties pay private parties, or groups of them, for
damages done to their health or the Environment, or permitting
self-appointed representatives of the public interest to recover for
injuries done to public assets.
ERISA: as defined in Section 4.13(c).
EXCLUDED ASSETS: as defined in Section 2.2.
EXCLUDED CONTRACTS: as defined in Section 2.2(g).
EXCLUDED EMPLOYMENT CONTRACTS: as defined in Section 3.2(b).
FINAL NET BOOK VALUE: as defined in Section 1.3(b).
FINAL PURCHASE PRICE: as defined in Section 0.
FINANCIAL STATEMENTS: as defined in Section 4.4(a).
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FIRM: as defined in Section 1.3(b).
FUTURESMART: as defined in the preamble hereto.
GAAP: United States generally accepted accounting principles.
GOVERNMENTAL AUTHORITY: any foreign or national government, any state, local or
other political subdivision thereof, and any entity, commission, board, bureau,
agency, authority or instrumentality exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
HAZARDOUS MATERIAL: means any pollutant, contaminant, waste or chemical or any
toxic, radioactive, ignitable, corrosive, reactive or otherwise hazardous
substance, waste or material, or any substance, waste or material having any
constituent elements displaying any of the foregoing characteristics, including
any substance, material or waste that is characterized, classified, designated
or regulated under any Environmental Law, petroleum, its derivatives,
by-products, and other hydrocarbons, asbestos, and polychlorinated biphenyls.
INDEBTEDNESS: means, with respect to any Person, without duplication, (i) all
obligations of such Person for borrowed money, or with respect to deposits or
advances of any kind, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (iii) all obligations of such Person
upon which interest charges are customarily paid (other than trade payables
incurred in the ordinary course of business consistent with past practice), (iv)
all obligations of such Person under conditional sale or other title retention
agreements relating to any property purchased by such Person, (v) all
obligations of such Person issued or assumed as the deferred purchase price of
property or services (excluding obligations of such Person to creditors for raw
materials, inventory, services and supplies incurred in the ordinary course of
business consistent with past practice), (vi) all lease obligations of such
Person capitalized on the books and records of such Person, (vii) all
obligations of others secured by a Lien or property or assets owned or acquired
by such Person, whether or not the obligations secured thereby have been
assumed, (viii) all obligations of such Person under interest rate or currency
hedging transactions (valued at the termination value thereof) (other than
forward or spot foreign currency exchange contracts entered into in the ordinary
course of business consistent with past practice), (ix) all letters of credit
issued for the account of such Person (excluding letters of credit issued for
the benefit of suppliers to support accounts payable to suppliers incurred in
the ordinary course of business consistent with past practice) and (x) all
guarantees and arrangements having the economic effect of a guarantee of such
Person of any Indebtedness of any other Person.
INDEMNITEE: as defined in Section 9.6(a).
INDEMNITOR: as defined in Section 9.6(a).
INITIAL PURCHASE PRICE: as defined in Section 0.
INTELLECTUAL PROPERTY: the United States and foreign trademarks, service marks,
trade names, domain names, trade dress, copyrights, and similar rights,
including registrations and application to register or renew the registration of
any of the foregoing, the United States and foreign letters patent and patent
applications, and inventions conceived and/or reduced to practice, research,
development, processes, designs, formulae, trade secrets, know-how, confidential
information, computer software, mask works, business methods, data and
documentation, and all similar intellectual property rights, tangible
embodiments of any of the foregoing (in any medium including electronic media),
and licenses of any of the foregoing developed, used or held for use by any
Seller in connection with or relating to the Business.
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INTERESTS: as defined in Section 2.3(a).
INVENTORY: as defined in Section 2.1(b).
IP LICENSE AGREEMENTS: as defined in Section 4.11(c).
IRS: the U.S. Internal Revenue Service.
LEASED REAL PROPERTY: as defined in Section 4.9(a).
LEASES: as defined in Section 4.9(a).
LIABILITIES: liabilities, claims, obligations, costs and expenses of any kind or
nature whatsoever whether known or unknown, fixed or contingent, matured or
unmatured.
LIEN: any mortgage, pledge, deed of trust, hypothecation, claim, security
interest, title defect, encumbrance, burden, charge or other similar
restriction, lease, sublease, claim, title retention agreement, option,
easement, covenant, encroachment or other adverse claim.
LIFESTYLE: as defined in the preamble hereto.
LOSSES: as defined in Sections 9.2 and 9.3.
MATERIAL ADVERSE EFFECT: a material adverse effect on the Assets, operations,
financial condition, results of operations, prospects or conduct of the business
of the Business taken as a whole, but excluding effects attributable to (a) the
announcement by Seller of its intention to sell the Business or to enter into
this Agreement, (b) the transactions contemplated by this Agreement, or (c)
changes in general economic or market conditions or prevailing interest rates,
including, without limitation, changes affecting the industries in which the
Business operates (provided that such changes do not adversely affect the
Business or the Assets in a disproportionate manner).
NOTICE OF CLAIM: as defined in Section 9.6(a).
OCCUPATIONAL SAFETY AND HEALTH LAW: means any Law designed to provide safe and
healthful working conditions to reduce occupational safety and health hazards.
PERMITS: licenses, permits, waivers and other authorizations from all
Governmental Authorities necessary to own the Assets or conduct the Business as
currently conducted.
PERMITTED LIENS: (a) Liens for Taxes (i) not due and payable or (ii) which are
being contested in good faith by appropriate proceedings and (b) Liens of
warehousemen, mechanics and materialmen and other similar statutory Liens
incurred in the ordinary course of business.
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PERSON: any natural person, firm, limited liability company, general
partnership, limited partnership, joint venture, association, corporation,
trust, Governmental Authority or other entity.
PERSONAL PROPERTY: all furnishings, furniture, computer equipment, office
equipment and supplies, vehicles, tooling, patterns, dies, jigs, machinery and
equipment and other tangible personal property (other than Inventory).
PLANS: as defined in Section 4.13(c).
PRODUCTS: as defined in Section 4.20.
PURCHASER: as defined in the preamble hereto.
REFERENCE BALANCE SHEET: as defined in Section 4.4(a).
RETAINED INTEREST: as defined in Section 2.3(a).
RETAINED LIABILITIES: as defined in Section 3.2.
RETURN: any return, report, declaration, form, claim for refund or information
return or statement relating to Taxes, including any schedule or attachment
thereto, and including any amendment thereof.
SAN JOSE LEASE: means that Standard Sublease dated July 26, 2000, between EHI,
Inc (Med-Cor Health Information Solutions, Inc.), as Sublessor, and FutureSmart,
as Sublessee, with regard to approximately 5,524 square feet of space located at
6155 Almaden Expressway, San Jose, CA 95120, and specifically including the
further Sublease Agreement, dated February 1, 2003, by which FutureSmart
subleased this property to HomeWeb Inc., dba California Properties, GMAC Real
Estate.
SECURED CREDITOR CLAIMS: defined in Section 8.3(a).
SELLER: as set forth in the preamble hereto.
TAX: any federal, state, provincial, local, foreign or other income,
alternative, minimum, accumulated earnings, personal holding company, franchise,
capital stock, net worth, capital, profits, windfall profits, gross receipts,
sales, use, value added, transfer, registration, stamp, premium, excise, customs
duties, severance, real property, personal property, ad valorem, occupancy,
license, occupation, business and occupation, employment, payroll, social
security, disability, unemployment, workers' compensation, health care,
withholding, estimated or other similar tax, duty or other governmental charge
or assessment or deficiencies thereof (together with all interest and penalties
thereon and additions thereto).
TAXING AUTHORITY: any federal, state, provincial, local, foreign or other
Governmental Authority responsible for any Tax.
THIRD PARTY CLAIM: as defined in Section 9.6(b).
TRANSFERRED CONTRACTS: as defined in Section 2.1(e).
TRANSFERRED EMPLOYEES: as defined in Section 7.13(a).
TRANSFERRED LEASES: as defined in Section 2.1(l).
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11.2 INTERPRETATION.
In this Agreement, the following rules of interpretation apply:
(a) references to Sections, Schedules, Annexes and Parties are
references to sections or sub-sections of, schedules, annexes and parties to
this Agreement;
(b) references to any law, regulation or statutory provision include
references to such law or regulation or provision as modified, codified or
re-enacted;
(c) references to the knowledge of Seller mean the actual knowledge of
the directors and officers of Seller, obtained after due inquiry;
(d) references to the knowledge of LifeStyle mean the actual knowledge
of the directors and officers of LifeStyle, obtained after due inquiry;
(e) words importing the singular include the plural and vice versa; (f)
words importing one gender include the other genders;
(g) references to the word "including" do not imply any limitation; and
(h) references to months are to calendar months.
11.3 SCHEDULES.
Certain information set forth in the Schedules is included solely for
informational purposes and may not be required to be disclosed pursuant to this
Agreement, and the disclosure of any information shall not be deemed to
constitute an acknowledgment that such information is required to be disclosed
in connection with the representations and warranties made by Seller or
Purchaser, as the case may be, in this Agreement or that it is material, nor
shall such information be deemed to establish a standard of materiality.
[INTENTIONALLY LEFT BLANK - SIGNATURES TO FOLLOW]
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly executed
as of the date first above written.
LIFESTYLE INNOVATIONS, INC.
- ----------------------------------
By:
Name:
Title:
FUTURESMART SYSTEMS, INC.
- ----------------------------------
By:
Name:
Title:
HONEYWELL INTERNATIONAL INC.
- ----------------------------------
By:
Name:
Title:
67
ASSET PURCHASE AGREEMENT
between
LifeStyle Innovations, Inc.,
FutureSmart Networks, Inc.
and
Honeywell International Inc.
dated as of October 17, 2003
68
LIST OF SCHEDULES
-----------------
SCHEDULE 2.1(l) - TRANSFERRED LEASES
SCHEDULE 4.2 - CONFLICTS, CONSENTS AND APPROVALS, ETC.
SCHEDULE 4.3 - LIENS
SCHEDULE 4.4 - FINANCIAL STATEMENTS
SCHEDULE 4.5 - ABSENCE OF UNDISCLOSED LIABILITIES
SCHEDULE 4.6 - ABSENCE OF CHANGES
SCHEDULE 4.7(a) - GOVERNMENTAL AUTHORIZATIONS; COMPLIANCE WITH LAW, ETC.
SCHEDULE 4.7(b) - PERMITS
SCHEDULE 4.7(c) - PROCEEDINGS AFFECTING PERMITS
SCHEDULE 4.7(d) - ASSIGNMENT OF PERMITS
SCHEDULE 4.8 - LITIGATION
SCHEDULE 4.9(a) - LEASED REAL PROPERTY AND LEASES
SCHEDULE 4.9(d) - LEASE EXCEPTIONS
SCHEDULE 4.10(a) - CONTRACTS
SCHEDULE 4.10(e) - CONTRACTS - POTENTIAL LOSS OR IMPAIRMENT OF ANY RIGHTS OF
THE BUSINESS
SCHEDULE 4.11 - INTELLECTUAL PROPERTY
SCHEDULE 4.12 - TAXES
SCHEDULE 4.13(a) - EMPLOYEES
SCHEDULE 4.13(b) - LABOR DISPUTES
SCHEDULE 4.13(c) - EMPLOYMEE BENEFIT PLANS
SCHEDULE 4.13(e) - CHANGES TO EMPLOYEE BENEFIT PLANS.
SCHEDULE 4.14 - ENVIRONMENTAL MATTERS
69
SCHEDULE 4.15 - SUPPLIERS AND CUSTOMERS
SCHEDULE 4.16 - PERSONAL PROPERTY AND INVENTORY
SCHEDULE 4.17 - INTERCOMPANY SERVICES
SCHEDULE 4.18 - ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLE
SCHEDULE 4.20 - WARRANTY AND RELATED MATTERS
SCHEDULE 4.21 - INSURANCE
SCHEDULE 4.22 - EQUITY AND DEBT INTERESTS
SCHEDULE 4.23 - BROKERS
SCHEDULE 5.2 - NO CONFLICTS, CONSENTS AND APPROVALS, LIFESTYLE
SCHEDULE 5.3 - ABSENSE OF UNDISCLOSED LIABILITIES, LIFESTYLE
SCHEDULE 7.10 - PURCHASE PRICE ALLOCATION
SCHEDULE 7.13(a) - TRANSFERRED EMPLOYEES
SCHEDULE 7.13(j) - ACCRUED VACATION
SCHEDULE 7.14 - ASSIGNMENT OF CONTRACTS, LEASE AND PERMITS
SCHEDULE 8.3(a) - SECURED CREDITORS TO PROVIDE RELEASES
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LIST OF ANNEXES
ANNEX A - ESCROW AGREEMENT
ANNEX B - INTERCREDITOR AGREEMENT
ANNEX C - LEASE ASSIGNMENT
ANNEX D - ASSIGNMENT AND ASSUMPTION AGREEMENT
ANNEX E - BILL OF SALE
ANNEX F - SELLER'S LEGAL OPINION
ANNEX G - RCG WAIVER
71