Exhibit 99.1
ASSET PURCHASE AGREEMENT
between
ESCENT SYSTEMS, INC.,
a Oregon corporation
and
CELERITY SYSTEMS, INC.
a Nevada corporation
Dated as of November 4, 2004
TABLE OF CONTENTS
SECTION 1. SALE AND PURCHASE OF INVENTORY....................................1
1.1 Purchase of Inventory............................................1
1.2 Stock Consideration..............................................1
1.3 Payment of Purchase Price........................................1
1.4 Transfer Taxes...................................................1
1.5 Working Capital..................................................1
SECTION 2. CLOSING...........................................................2
SECTION 3. REPRESENTATIONS AND WARRANTIES OF CELERITY-NEVADA.................2
3.1 Good Standing and Corporate Power of Celerity-Nevada.............2
3.2 Title to Purchased Inventory.....................................2
3.3 Notices of Title Defects.........................................2
3.4 Litigation.......................................................2
3.5 Authorization....................................................2
3.6 Acquisition of Purchased Stock...................................2
3.7 Brokers..........................................................2
SECTION 4. REPRESENTATIONS AND WARRANTIES OF ESCENT..........................3
4.1 Good Standing and Corporate Power................................3
4.2 Capitalization...................................................3
4.3 Title to Stock...................................................3
4.4 Access...........................................................3
4.5 Authorization....................................................3
4.6 Litigation.......................................................3
4.7 Brokers..........................................................3
SECTION 5. PRE-CLOSING COVENANTS OF CELERITY-NEVADA..........................4
5.1 Conduct of STB Business..........................................4
5.2 Access...........................................................4
5.3 Cooperation......................................................4
5.4 Investigation....................................................4
SECTION 6. PRE-CLOSING COVENANTS OF ESCENT...................................4
6.1 Conduct of Business..............................................4
6.2 Cooperation......................................................5
6.3 Access...........................................................5
6.4 Confidentiality..................................................5
6.5 Investigation....................................................5
SECTION 7. CONDITIONS TO OBLIGATION OF ESCENT TO CLOSE.......................5
7.1 Accuracy of Representations and Warranties.......................5
7.2 Performance......................................................5
7.3 No Injunction....................................................5
SECTION 8. CONDITIONS TO OBLIGATION OF CELERITY-NEVADA TO CLOSE..............6
8.1 Accuracy of Representations and Warranties.......................6
8.2 Performance......................................................6
8.3 No Injunction....................................................6
SECTION 9. POST-CLOSING COVENANTS OF ESCENT..................................6
9.1 Preemptive Rights................................................6
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9.2 Financial Statements.............................................7
9.3 Existing Clients.................................................7
9.4 Content Providers................................................7
SECTION 10. TERMINATION OF AGREEMENT.........................................7
10.1 Right to Terminate Agreement.....................................7
10.2 Effect of Termination............................................7
SECTION 11. INDEMNIFICATION AND RELATED MATTERS..............................8
11.1 Indemnification by Celerity-Nevada...............................8
11.2 Indemnification by Escent........................................8
11.3 Maximum Liability of Celerity-Nevada.............................8
11.4 Knowledge of Specified Individuals...............................8
11.5 Knowledge of Breach..............................................8
11.6 No Implied Representations.......................................8
11.7 Indemnification Claims...........................................8
11.8 Defense of Third Party Actions...................................9
11.9 Subrogation.....................................................10
11.10 Exclusivity.....................................................10
SECTION 12. MISCELLANEOUS PROVISIONS........................................10
12.1 Time of Essence.................................................10
12.2 Materiality.....................................................10
12.3 Compliance with Laws............................................10
12.4 Publicity.......................................................10
12.5 Governing Law...................................................10
12.6 Notices.........................................................11
12.7 Table of Contents and Headings..................................11
12.8 Assignment......................................................11
12.9 Parties in Interest.............................................11
12.10 Severability....................................................11
12.11 Entire Agreement................................................12
12.12 Waiver..........................................................12
12.13 Amendments......................................................12
12.14 Interpretation of Agreement.....................................12
EXHIBIT A....................................................................A-1
EXHIBIT B....................................................................B-1
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ASSET PURCHASE AGREEMENT
THIS ASSET -PURCHASE AGREEMENT (the "Agreement") is entered into as of November
__, 2004, by and between ESCENT SYSTEMS, INC., an Oregon corporation ("Escent"),
and CELERITY SYSTEMS, INC., a Nevada corporation ("Celerity-Nevada"). Certain
capitalized terms used in this Agreement are defined on Exhibit A.
RECITALS
WHEREAS, Celerity-Nevada is engaged, either directly or indirectly
through third parties, in the production, sale and distribution of digital set
top boxes and digital video services, and
WHEREAS, Celerity Nevada desires to sell to Escent and Escent desires
to purchase from Celerity-Nevada, all inventory associated with
Celerity-Nevada's digital set top box business (the "STB Business"), upon the
terms and conditions set forth herein.
AGREEMENT:
NOW, THEREFORE, in consideration of the mutual promises herein contained, and
for other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties agree as follows:
SECTION 1.
SALE AND PURCHASE OF INVENTORY
1.1 PURCHASE OF INVENTORY.
At the Closing (as defined below), Celerity-Nevada shall sell to Escent, and
Escent shall purchase from Celerity-Nevada, all of the inventory associated with
the STB Business, as identified on Exhibit B (the "Purchased Inventory") in
accordance with this Agreement.
1.2 STOCK CONSIDERATION.
Celerity-Nevada shall receive a twenty-five percent (25%) equity ownership
interest in Escent, in the form of Two Hundred and Fifty (250) shares of
Escent's common stock, no par value (the "Stock Consideration"), in exchange for
the Purchased Inventory.
1.3 PAYMENT OF PURCHASE PRICE.
The Stock Consideration shall be paid by Escent to Celerity-Nevada on the
Closing Date.
1.4 Transfer Taxes.
Any transfer taxes, stamp duties, filing fees, registration fees, recordation
expenses, or other similar taxes, fees, charges or expenses incurred by
Celerity-Nevada or any other party in connection with the transfer of the
Purchased Inventory to Escent, the transfer of the Stock Consideration to
Celerity-Nevada or in connection with any of the other transactions contemplated
by this Agreement shall be borne and paid exclusively by Escent.
1.5 WORKING CAPITAL.
Celerity-Nevada will provide Escent with Fifteen Thousand Dollars
($15,000) working capital (the "Working Capital") on the Closing Date by wire
transfer of immediately available funds to an account or accounts to be
designated by Escent. The Working Capital shall be used by Escent in the STB
Business.
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SECTION 2.
CLOSING
The closing of the transactions contemplated by Section 1 (the "Closing") shall
be held at the offices of _________________, at 10:00 a.m. (Eastern Standard
Time) on November __, 2004, or at such other place, time and/or date as may be
jointly designated by Escent and Celerity-Nevada; provided, however, that
Celerity-Nevada may, at its election, postpone the Scheduled Closing Time by up
to sixty (60) days.
SECTION 3.
REPRESENTATIONS AND WARRANTIES OF CELERITY-NEVADA
Subject to the limitations set forth in Section 11 and elsewhere in this
Agreement, Celerity-Nevada represents and warrants to Escent that the following
statements are, to the best of the actual knowledge of the Specified
Individuals, accurate in all material respects:
3.1 GOOD STANDING AND CORPORATE POWER OF CELERITY-NEVADA.
Celerity-Nevada is validly existing and in good standing as a corporation under
the laws of the State of Nevada, and has all necessary corporate power to
perform its obligations under this Agreement.
3.2 TITLE TO PURCHASED INVENTORY.
On the Closing Date, Escent will acquire good title to the Purchased Inventory
free of any material encumbrances, except for any encumbrances created by or
through Escent or any of Escent's Associates.
3.3 NOTICES OF TITLE DEFECTS.
Celerity-Nevada has not received any written notice from any Person alleging,
that any of the Purchased Inventory is subject to any material title defect or
other material encumbrance, except for notices referring to defects or other
encumbrances (i) created or arising in the ordinary course of business or (ii)
relating to any taxes or other governmental charges or levies that are not yet
due and payable.
3.4 LITIGATION.
There is no material lawsuit or other material legal proceeding that is pending
against Celerity-Nevada before any court or other tribunal and that is likely to
have a material adverse effect on the STB Business.
3.5 AUTHORIZATION.
As of the Closing Date, the execution, delivery and performance of this
Agreement on behalf of Celerity-Nevada will have been duly authorized by all
necessary action on the part of Celerity-Nevada and its board of directors.
3.6 ACQUISITION OF PURCHASED STOCK.
Celerity-Nevada is acquiring the Stock Consideration for its own account and for
investment, and not with a view to, or for sale in connection with, any
distribution of any such Stock Consideration.
3.7 BROKERS.
Celerity-Nevada has not retained any broker or finder in connection with any of
the transactions contemplated by this Agreement, and Celerity-Nevada has not
incurred or agreed to pay, or taken any other action that would entitle any
Person to receive, any brokerage fee, finder's fee or other similar fee or
commission with respect to any of the transactions contemplated by this
Agreement.
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SECTION 4.
REPRESENTATIONS AND WARRANTIES OF ESCENT
Subject to the limitations set forth in Section 11 and elsewhere in this
Agreement, Escent represents and warrants that the following statements are
accurate in all material respects:
4.1 GOOD STANDING AND CORPORATE POWER.
Escent is validly existing and in good standing as a corporation under the laws
of the State of Oregon, and has all necessary corporate power to perform its
obligations under this Agreement.
4.2 CAPITALIZATION.
Escent is authorized to issue One Thousand (1,000) shares of common
stock and no shares of preferred stock. There are no shares of the Escent's
common stock outstanding. Said One Thousand (1,000) shares of common stock
constitute all of the Escent's outstanding capital stock and there are no
outstanding obligations, options, warrants, rights, calls, commitments,
conversion rights, plans or other agreements of any character to which Escent is
a party or by which it is otherwise bound that provide for the repurchase or
issuance by Escent of any shares of its capital stock or permit any Person to
share or participate in any of the profits, revenues or sales of Escent. There
are no preemptive rights, rights of first refusal or first offer, stock option
grant or exercise rights, voting or veto rights, change of control or similar
rights, anti-dilution protections or other rights that any Person is (or would
be) entitled to invoke as a result of the transfer of the Stock Consideration
pursuant to this Agreement or otherwise. As of the date hereof and through the
Closing, the Stock Consideration shall equal twenty-five percent (25%) of the
total number of shares of Escent then-outstanding.
4.3 Title to Stock.
On the Closing Date, Celerity-Nevada will acquire good and valid title
to the Stock Consideration free of any encumbrances.
4.4 ACCESS.
Escent and its Associates have been given full access to the books, records and
contracts related to the STB Business, and have been given the opportunity to
meet with officers and other representatives of Celerity-Nevada for the purpose
of investigating and obtaining information regarding the STB Business.
4.5 AUTHORIZATION.
The execution, delivery and performance of this Agreement on behalf of Escent
have been duly authorized by all necessary action on the part of Escent and its
board of directors.
4.6 LITIGATION.
There is no lawsuit or other legal proceeding that is pending against
Escent before any court or other tribunal and that (a) is likely to result in a
final judgment adverse to Escent, and (b) is likely to have a material adverse
effect on Escent's business.
4.7 BROKERS.
Escent has not retained any broker or finder in connection with any of the
transactions contemplated by this Agreement, and Escent has not incurred or
agreed to pay, or taken any other action that would entitle any Person to
receive, any brokerage fee, finder's fee or other similar fee or commission with
respect to any of the transactions contemplated by this Agreement.
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SECTION 5.
PRE-CLOSING COVENANTS OF CELERITY-NEVADA
Celerity-Nevada agrees that, between the date of this Agreement and the Closing
Date:
5.1 CONDUCT OF STB BUSINESS.
Except as contemplated by this Agreement and except as may be necessary to carry
out the transactions contemplated by this Agreement, Celerity-Nevada shall not,
without Escent's consent (which shall not be unreasonably withheld by Escent):
(a) enter into any material transaction outside the ordinary course of
business with regard to the STB Business, or
(b) conduct the STB Business in a manner that departs materially from the
manner in which the STB Business was being conducted prior to the date of this
Agreement.
5.2 ACCESS.
Subject to the provisions of Section 6, Celerity-Nevada shall, after receiving
reasonable advance notice from Escent, give Escent reasonable access (during
normal business hours) to the books, records and contracts related to the STB
Business for the purpose of enabling Escent to further investigate and inspect,
at Escent's sole expense, the business, operations and legal affairs of the STB
Business.
5.3 COOPERATION.
Celerity-Nevada shall cooperate fully with Escent, and shall provide Escent with
such assistance as Escent may reasonably request, for the purpose of
facilitating the performance by Escent of its obligations under this Agreement.
5.4 INVESTIGATION.
In conducting its investigation of the business, operations and legal affairs of
Escent, Celerity-Nevada shall not interfere in any manner with the business or
operations of Escent or with the performance of any of Escent's employees.
SECTION 6.
PRE-CLOSING COVENANTS OF ESCENT
Escent agrees that, between the date of this Agreement and the Closing Date:
6.1 CONDUCT OF BUSINESS.
Except as contemplated by this Agreement and except as may be necessary to carry
out the transactions contemplated by this Agreement, Escent shall not, without
Celerity-Nevada's consent (which shall not be unreasonably withheld by
Celerity-Nevada):
(a) adopt any amendment to its articles of incorporation or bylaws;
(b) issue any capital stock;
(c) merge or combine with any unaffiliated entity;
(d) pay any dividends to its stockholders;
(e) enter into any material transaction outside the ordinary course of business;
or
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(f) conduct its business in a manner that departs materially from the manner in
which such business was being conducted prior to the date of this Agreement.
6.2 COOPERATION.
Escent shall cooperate fully with Celerity-Nevada, and shall provide
Celerity-Nevada with such assistance as Celerity-Nevada may reasonably request,
for the purpose of facilitating the performance by Celerity-Nevada of its
obligations under this Agreement.
6.3 ACCESS.
Subject to the provisions of Section 5, Escent shall, after receiving reasonable
advance notice from Celerity-Escent, give Celerity-Nevada reasonable access
(during normal business hours) to the books, records and contracts of Escent for
the purpose of enabling Celerity-Nevada to further investigate and inspect, at
Celerity-Nevada's sole expense, the business, operations and legal affairs of
Escent.
6.4 CONFIDENTIALITY.
Escent shall hold in strict confidence, and shall cause, each of its Associates
to hold in strict confidence, all documents and information obtained with
respect to Celerity-Nevada, Celerity-Nevada's stockholder and Celerity-Nevada's
other Associates. Escent shall not permit any of such documents or information
to be improperly utilized or to be disclosed or conveyed to any other Person.
Without limiting the generality of the foregoing, Escent shall not disclose to
any Person, and shall not permit any of its Associates to disclose to any
Person, the existence of this Agreement or any of the terms or provisions
hereof.
6.5 INVESTIGATION.
In conducting its investigation of the business, operations and legal affairs of
the STB Business, Escent shall not interfere in any manner with the business or
operations of Celerity-Nevada or with the performance of any of
Celerity-Nevada's employees.
SECTION 7.
CONDITIONS TO OBLIGATION OF ESCENT TO CLOSE
The obligation of Escent to purchase the Purchased Inventory and otherwise
consummate the transactions that are to be consummated at the Closing is subject
to the satisfaction, as of the Scheduled Closing Time, of the following
conditions (any of which may be waived by Escent in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties of Celerity-Nevada set forth in Section 3
shall be accurate in all material respects as of the Scheduled Closing Time,
except to the extent that any of such representations and warranties refers
specifically to a date other than the Closing Date, and except to the extent
that the accuracy of any of such representations and warranties is affected by
any of the transactions contemplated by this Agreement.
7.2 PERFORMANCE.
Celerity-Nevada shall have performed, in all material respects, all obligations
required by this Agreement to be performed by Celerity-Nevada on or before the
Closing Date.
7.3 NO INJUNCTION.
There shall not be in effect, at the Scheduled Closing Time, any injunction or
other binding order of any court or other tribunal having jurisdiction over
Escent that prohibits the purchase of the Purchased Inventory by Escent.
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SECTION 8.
CONDITIONS TO OBLIGATION OF CELERITY-NEVADA TO CLOSE
The obligation of Celerity-Nevada to cause the Purchased Inventory to be sold to
Escent and otherwise consummate the transactions that are to be consummated at
the Closing is subject to the satisfaction, as of the Scheduled Closing Time, of
the following conditions (any of which may be waived by Celerity-Nevada in whole
or in part):
8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties of Escent set forth in Section 4 shall be
accurate in all material respects as of the Scheduled Closing Time.
8.2 PERFORMANCE.
Escent shall have performed, in all material respects, all obligations required
by this Agreement to be performed by Escent on or before the Closing Date.
8.3 NO INJUNCTION.
There shall not be in effect, at the Scheduled Closing Time, any injunction or
other binding order of any court or other tribunal having jurisdiction over
Celerity-Nevada or the Company that prohibits (a) the sale of the Purchased
Inventory to Escent and/or (b) the transfer of the Stock Consideration to
Celerity-Nevada.
SECTION 9.
POST-CLOSING COVENANTS OF ESCENT
Escent agrees after the Closing to the following:
9.1 PREEMPTIVE RIGHTS.
Prior to the earlier of a Qualified Public Offering or a Sale of
Escent, and for so long Celerity-Nevada owns any stock of Escent, each time
Escent proposes to issue, sell, exchange, or enter into any agreement to issue,
sell or exchange (i) any common stock (for cash or otherwise), (ii) any other
equity security of Escent, (iii) any debt security of Escent which by its terms
is convertible into or exchangeable for any equity security of Escent or has any
other equity feature (or is a combination of debt and equity) that is not issued
to third party financial institutions on an arms length basis or (iv) any
option, warrant or other right to subscribe for, purchase or otherwise acquire
any equity security or any such debt security of Escent that is not issued to
third party financial institutions on an arms length basis, Escent shall also
make an offering of such shares Celerity-Nevada in accordance with the following
provisions:
(a) The Corporation shall deliver a notice to Celerity-Nevada stating
the number of shares to be offered and the price and the terms on which it
proposes to offer such shares.
(b) Within thirty (30) days after delivery of the notice,
Celerity-Nevada may contractually commit to purchase, at the price and on the
terms specified in the notice, up to its pro rata portion of such shares by
delivering an irrevocable subscription agreement to Escent within such thirty
(30) calendar days.
(c) Any shares referred to in the notice that are not elected to be
purchased as provided in subsection (b) above may, during the 180-day period
thereafter, be offered by Escent to any other person or persons at a price not
less than, and on terms no more favorable to the offeree than, those specified
in the notice.
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9.2 FINANCIAL STATEMENTS.
As long as Celerity-Nevada has an ownership interest in Escent, Escent
shall provide Celerity-Nevada with Audited Financial Statements of the Escent
complied as to form in all material respects with applicable accounting
requirements.
9.3 Existing Clients.
Escent shall obtain STB Business relationships with its primary and
secondary education institutional clients and university clients (collectively,
the "STB Business Clients") by proving these clients with customer and technical
support.
9.4 CONTENT PROVIDERS.
Escent will use its reasonable best efforts to engage content providers
to service the STB Business Clients.
SECTION 10.
TERMINATION OF AGREEMENT
10.1 RIGHT TO TERMINATE AGREEMENT.
This Agreement may be terminated prior to the Closing:
(a) by the mutual agreement of Celerity-Nevada and Escent;
(b) by Escent at any time after the Scheduled Closing Time, if any condition set
forth in Section 7 shall not have been satisfied or waived; or
(c) by Celerity-Nevada at any time after the Scheduled Closing Time.
10.2 EFFECT OF TERMINATION.
Upon the termination of this Agreement pursuant to Section 10.1:
(a) Escent shall promptly cause to be returned to Celerity-Nevada and
Celerity-Nevada's Associates all documents and information obtained in
connection with this Agreement and the transactions contemplated by this
Agreement and all documents and information obtained in connection with Escent's
investigation of the STB Business' operations and legal affairs, including any
copies made by Escent or any of Escent's Associates of any such documents or
information;
(b) Celerity shall promptly cause to be returned to Escent and Escent's
Associates all documents and information obtained in connection with this
Agreement and the transactions contemplated by this Agreement and all documents
and information obtained in connection with Escent's investigation of Escent's
business, operations and legal affairs, including any copies made by
Celerity-Nevada or any of Celerity-Nevada's Associates of any such documents or
information;
(b) neither party hereto shall have any obligation or liability to the other
party hereto, except that (i) Escent and Celerity-Nevada shall remain bound by
the provisions of Sections 10.2 and 12 and this Agreement, and (ii) Escent shall
remain bound by Section 6.4 of this Agreement.
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SECTION 11.
INDEMNIFICATION AND RELATED MATTERS
11.1 INDEMNIFICATION BY CELERITY-NEVADA.
Subject to the limitations set forth in this Section 11 and elsewhere in this
Agreement, Celerity-Nevada shall indemnify Escent against any Damages that
Escent actually incurs during the one-year period commencing on the Closing Date
as a result of any material breach by Celerity-Nevada of any representation or
warranty of Celerity-Nevada set forth in this Agreement.
11.2 INDEMNIFICATION BY ESCENT.
Subject to the limitations set forth in this Section 11 and elsewhere in this
Agreement, Escent shall indemnify Celerity-Nevada against any Damages that
Celerity-Nevada actually incurs during the one-year period commencing on the
Closing Date as a result of any material breach by Escent of any representation
or warranty of Escent set forth in this Agreement.
11.3 MAXIMUM LIABILITY OF CELERITY-NEVADA.
The total amount of the payments that Celerity-Nevada can be required to make
under or in connection with this Agreement (including all indemnification
payments required to be made to Escent and all amounts payable to any counsel
retained by Celerity-Nevada in accordance with Section 11.8) shall be limited in
the aggregate to a maximum of $100,000.
11.4 KNOWLEDGE OF SPECIFIED INDIVIDUALS.
For purposes of this Agreement, a Specified Individual shall not be deemed to
have any knowledge of the inaccuracy of any representation, warranty or other
statement unless such Specified Individual actually knows that such
representation, warranty or other statement is materially inaccurate. No
knowledge shall be imputed to any Specified Individual, and no Specified
Individual shall be expected or required to undertake any investigation or
inquiry of any nature for the purpose of verifying the accuracy of any
representation, warranty or other statement set forth in this Agreement.
11.5 KNOWLEDGE OF BREACH.
For purposes of this Section 11, Celerity-Nevada shall not be deemed to have
breached any representation or warranty if Escent had or could have obtained (by
means of a diligent investigation), on or prior to the Closing Date, any
knowledge of the breach of, or of any facts or circumstances constituting or
resulting in a breach of, such representation or warranty.
11.6 NO IMPLIED REPRESENTATIONS.
Escent and Celerity-Nevada acknowledge that, except as expressly provided in
Sections 3 and 4, neither party hereto, and none of the Associates of either
party hereto, has made or is making any representations or warranties
whatsoever, implied or otherwise.
11.7 INDEMNIFICATION CLAIMS.
If either party hereto (the "Claimant") wishes to assert an indemnification
claim against the other party hereto, the Claimant shall deliver to the other
party a written notice (a "Claim Notice") setting forth:
(a) the specific representation and warranty alleged to have been breached by
such other party;
(b) a detailed description of the facts and, circumstances giving rise to the
alleged breach of such representation and warranty; and
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(c) a detailed description of, and a reasonable estimate of the total amount of,
the Damages actually incurred or expected to be incurred by the Claimant as a
direct result of such alleged breach.
Notwithstanding anything to the contrary contained in this Agreement, Escent
shall not be permitted to deliver any Claim Notice to Celerity-Nevada (and shall
not be entitled to assert any indemnification claim set forth in any Claim
Notice) unless:
(i) the indemnification claim set forth in such Claim Notice shall have
arisen from a bona fide lawsuit or other bona fide legal proceeding that was
instituted by a third party against Escent prior to the delivery of such Claim
Notice to Celerity-Nevada; or
(ii) Escent shall have demonstrated to Celerity-Nevada's reasonable
satisfaction, before the delivery of such Claim Notice to Celerity-Nevada, that
Escent has theretofore actually incurred substantial Damages as a direct result
of the alleged breach described in such Claim Notice.
Any Claim Notice that is delivered to Celerity-Nevada in contravention of the
prohibition set forth in the preceding sentence shall not be deemed to have been
duly delivered and shall be of no force or effect.
11.8 DEFENSE OF THIRD PARTY ACTIONS.
If either party hereto (the "Indemnitee") receives notice or otherwise obtains
knowledge of any Matter or any threatened Matter that may give rise to an
indemnification claim against the other party hereto (the "Indemnifying Party"),
then the Indemnitee shall promptly deliver to the Indemnifying Party a written
notice describing such Matter in reasonable detail. The timely delivery of such
written notice by the Indemnitee to the Indemnifying Party shall be a condition
precedent to any liability on the part of the Indemnifying Party under this
Section 11 with respect to such Matter. The Indemnifying Party shall have the
right, at its option, to assume the defense of any such Matter with its own
counsel. If the Indemnifying Party elects to assume the defense of any such
Matter, then:
(a) notwithstanding anything to the contrary contained in this Agreement, the
Indemnifying Party shall not be required to pay or otherwise indemnify the
Indemnitee against any attorneys' fees or other expenses incurred on behalf of
the Indemnitee in connection with such Matter following the Indemnifying Party's
election to assume the defense of such Matter;
(b) the Indemnitee shall make available to the Indemnifying Party all books,
records and other documents and materials that are under the direct or indirect
control of the Indemnitee or any of the Indemnitee's Associates and that the
Indemnifying Party considers necessary or desirable for the defense of such
Matter;
(c) the Indemnitee shall execute such documents and take such other actions as
the Indemnifying Party may reasonably request for the purpose of facilitating
the defense of, or any settlement, compromise or adjustment relating to, such
Matter;
(d) the Indemnitee shall otherwise fully cooperate as reasonably requested by
the Indemnifying Party in the defense of such Matter;
(e) the Indemnitee shall not admit any liability with respect to such Matter;
(f) the Indemnifying Party shall have the exclusive right to settle, adjust or
compromise such Matter, on such terms as it may deem appropriate, without the
consent or approval of the Indemnitee or any other Person.
If the Indemnifying Party elects not to assume the defense of such Matter, then
the Indemnitee shall proceed diligently to defend such Matter with the
assistance of counsel satisfactory to the indemnifying Party; provided, however,
that the Indemnitee shall not settle, adjust or compromise such Matter, or admit
any liability with respect to such Matter, without the prior written consent of
the Indemnifying Party.
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11.9 SUBROGATION.
To the extent that either party hereto (the "Indemnitor") makes or is required
to make any indemnification payment to the other party hereto (the "Indemnified
Party"), the Indemnitor shall be entitled to exercise, and shall be subrogated
to, any, rights and remedies (including rights of indemnity, rights of
contribution and other rights of recovery) that the Indemnified Party or any of
the Indemnified Party's Associates may have against any other Person with
respect to any Damages, circumstances or Matter to which such indemnification
payment is directly or indirectly related. The Indemnified Party shall permit
the Indemnitor to use the name of the Indemnified Party and the names of the
Indemnified Party's Associates in any transaction or in any proceeding or other
Matter involving any of such rights or remedies, and the Indemnified Party shall
take such actions as the Indemnitor may reasonably request for the purpose of
enabling the Indemnitor to perfect or exercise the Indemnitor's right of
subrogation hereunder.
11.10 EXCLUSIVITY.
The right of each party hereto to assert indemnification claims and receive
indemnification payments pursuant to this Section 11 shall be the sole and
exclusive right and remedy exercisable by such party with respect to any breach
by the other party hereto of any representation or warranty.
SECTION 12.
MISCELLANEOUS PROVISIONS
12.1 TIME OF ESSENCE.
Time is of the essence of this Agreement.
12.2 MATERIALITY.
For purposes of Sections 3, 4, 5, 6, 7, 8, and 11 of this Agreement and for
purposes of Exhibit A to this Agreement, a contract, obligation, liability,
transaction, change, breach, encumbrance, proceeding or other. matter or event
shall not be deemed to be "material" unless the existence or occurrence of such
matter or event would, by itself, (a) cause a reasonable purchaser or seller to
reverse its decision to enter into a transaction of the type contemplated by
this Agreement, and (b) reduce the value of the Purchased Inventory or Stock
Consideration by more than $50,000.
12.3 COMPLIANCE WITH LAWS.
Escent shall execute such agreements and other documents, and shall take such
other actions, as Celerity-Nevada may reasonably request (prior to, at or after
the Closing) for the purpose of ensuring that the transactions contemplated by
this Agreement are carried out in full compliance with the provisions of all
applicable laws and regulations.
12.4 PUBLICITY.
No press release, publicity, disclosure or notice to any Person concerning any
of the transactions contemplated by this Agreement shall be issued, given, made
or otherwise disseminated by Escent or any of its Associates at any time
(whether prior to, at or after the Closing) without the prior written approval
of Celerity-Nevada.
12.5 GOVERNING LAW.
This Agreement shall be construed in accordance with, and governed in all
respects by, the laws of the State of New Jersey (without giving effect to
principles of conflicts of law).
12.6 JURY WAIVER.
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EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
12.6 NOTICES.
All notices and other communications under this Agreement shall be in writing
and shall be deemed to have been duly given and duly delivered when received by
the intended recipient at the following address (or at such other address as the
intended recipient shall have specified in a written notice given to the other
party hereto):
If to Escent: Escent Systems, Inc.
29125 Southwest Meek Loop, Suite 223
Wilsonville, Oregon 97070
Attn: Keith Woodman, President
With a copy to: Martin, Elliott & Snell, P.C.
P.O. Box 575
Tualatin, Oregon 97062
Attn: Susan Snell, Esq.
If to Celerity-Nevada: Celerity Systems, Inc.
122 Perimeter Park Drive
Knoxville, TN 37922
Attn: Robert B. Legnosky, President
With a copy to: Kirkpatrick & Lockhart LLP
201 South Biscayne Blvd.
Suite 2000
Miami, Florida 33131
Attn: Clayton E. Parker, Esq.
12.7 TABLE OF CONTENTS AND HEADINGS.
The table of contents of this Agreement and the underlined headings contained in
this Agreement are for convenience of reference only, shall not be deemed to be
a part of this Agreement and shall not be referred to in connection with the
construction or interpretation of this Agreement.
12.8 ASSIGNMENT.
Neither party hereto may assign any of its rights or delegate any of its
obligations under this Agreement to any other Person without the prior written
consent of the other party hereto.
12.9 PARTIES IN INTEREST.
Nothing in this Agreement is intended to provide any rights or remedies to any
Person (including any employee or creditor of the parties) other than the
parties hereto.
12.10 SEVERABILITY.
In the event that any provision of this Agreement, or the application of such
provision to any Person or set of circumstances, shall be determined to be
invalid, unlawful, void or unenforceable to any extent, the remainder of this
Agreement, and the application of such provision to Persons or circumstances
other than those as to which it is determined to be invalid, unlawful, void or
unenforceable, shall not be affected and shall continue to be valid and
enforceable to the fullest extent permitted by law.
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12.11 ENTIRE AGREEMENT.
This Agreement sets forth the entire understanding of Escent and Celerity-Nevada
and supersede all other agreements and understandings between Escent and
Celerity-Nevada relating to the subject matter hereof and thereof.
12.12 WAIVER.
No failure on the part of either party hereto to exercise any power, right,
privilege or remedy under this Agreement, and no delay on the part of either
party hereto in exercising any power, right, privilege or remedy under this
Agreement, shall operate as a waiver thereof; and no single or partial exercise
of any such power, right, privilege or remedy shall preclude any other or
further exercise thereof or of any other power, right, privilege or remedy.
12.13 AMENDMENTS.
This Agreement may not be amended, modified, altered or supplemented except by
means of a written instrument executed, on behalf of both Escent and
Celerity-Nevada.
12.14 INTERPRETATION OF AGREEMENT.
(a) Each party hereto acknowledges that it has participated in the drafting of
this Agreement, and any applicable rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall not be applied
in connection with the construction or interpretation of this Agreement.
(b) Whenever required by the context hereof, the singular number shall include
the plural, and vice versa; the masculine gender shall include the feminine and
neuter genders; and the neuter gender shall include the masculine and feminine
genders.
(c) As used in this Agreement, the words "include" and "including," and
variations thereof, shall not be deemed to be terms of limitation, and shall be
deemed to be followed by the words "without limitation."
(d) References herein to "Sections" and "Exhibits" are intended to refer to
Sections of and Exhibits to this Agreement.
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IN WITNESS WHEREOF, the Escent and Celerity-Nevada have caused this
Asset Purchase Agreement to be executed by the undersigned, thereunto duly
authorized, as of the date first set forth above.
ESCENT SYSTEMS, INC., AN OREGON CORPORATION
By: /s/ Keith Woodman
---------------------------
Name: Keith Woodman
Title: President
CELERITY SYSTEMS, INC., A NEVADA CORPORATION
By: /s/ Robert Lenosky
---------------------------
Name: Robert Legnosky
Title: President
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EXHIBIT A
TO ASSET PURCHASE AGREEMENT
DEFINED TERMS
For purposes of this Agreement:
"AGREEMENT" shall mean the Stock Purchase Agreement to which this Exhibit A is
attached.
"ASSOCIATES" of a Person shall include:
(a) such Person's affiliates, stockholders, directors, officers, employees,
agents, attorneys, accountants and representatives; and
(b) all stockholders, directors, officers, employees, agents, attorneys,
accountants and representatives of each of such Person's affiliates.
"AUDITED FINANCIAL STATEMENTS" shall mean the audited balance sheet of Escent as
of the end of each fiscal year and the related audited statements of operations
of Escent for the year then ended, including the notes thereto.
"CELERITY-NEVADA" shall mean Celerity Systems, Inc., a Nevada corporation.
"CLAIM NOTICE" shall have the meaning specified in Section 12.8.
"CLAIMANT" shall have the meaning specified in Section 12.8.
"CLOSING" shall have the meaning specified in Section 2.
"CLOSING DATE" shall mean the time and date as of which the Closing actually
takes place.
"DAMAGES" shall mean out-of-pocket losses and damages; provided, however, that
for purposes of computing the amount of Damages incurred by any Person, there
shall be deducted:
(a) an amount equal to the amount of any tax benefit directly or indirectly
received or receivable by such Person or any of such Person's affiliates in
connection with such Damages or the circumstances giving rise thereto; and
(b) an amount equal to the amount of any insurance proceeds, indemnification
payments, contribution payments or reimbursements directly or indirectly
received or receivable by such Person or any of such Person's affiliates in
connection with such Damages or the circumstances giving rise thereto.
"DEDUCTIBLE AMOUNT" shall have the meaning specified in Section 12.3.
"ESCENT" shall mean Escent Systems, Inc., a Oregon corporation.
"INDEMNIFIED PARTY" shall have the meaning specified' in Section 12.10.
"INDEMNIFYING PARTY" shall have the meaning specified in Section 12.9.
"INDEMNITEE" shall have the meaning specified in Section 12.9.
"INDEMNITOR" shall have the meaning specified in Section 12.10.
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"INDEPENDENT" THIRD PARTY" shall mean any person who, immediately prior to the
contemplated transaction, does not own in excess of 5% of Escent's common stock
on a fully-diluted basis (a "5% Owner)", who is not controlling, controlled by
or under common control with any such 5% Owner and who is not the spouse or
descendent (by birth or adoption) of any such 5% Owner or a trust for the
benefit of such 5% Owner and/or such other persons.
"MATTER" shall mean any claim, demand, dispute, action, suit, examination,
audit, proceeding, investigation, inquiry or other similar matter.
"PERSON" shall mean any individual, corporation, association, general
partnership, limited partnership, limited liability company, venture, trust,
association, firm, organization, company, business, entity, union, society,
government (or political subdivision thereof) or governmental agency, authority
or instrumentality.
"PURCHASED INVENTORY" shall have the meaning specified in Section 1.1.
"QUALIFIED PUBLIC OFFERING" shall mean the sale in an underwritten
public offering registered under the Securities Act of shares of Escent's
capital stock having an aggregate value of at least $15 million.
"SALE OF ESCENT" shall mean the sale of Escent to an Independent Third
Party or group of Independent Third Parties pursuant to which such party or
parties acquire (i) capital stock of Escent possessing the voting power under
normal circumstances to elect a majority of Escent's Board of Directors (whether
by merger, consolidation or sale or transfer of Escent's capital stock) or (ii)
all or substantially all of Escent's assets determined on a consolidated basis.
"SCHEDULED CLOSING TIME" shall mean the time and date as of which the Closing is
scheduled to take place (as such time and date may be postponed by
Celerity-Nevada pursuant to Section 2 or by the mutual agreement of the parties
hereto).
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended from time to
time.
"SPECIFIED INDIVIDUALS" shall mean the following executive officers of
Celerity-Nevada: Robert Legnosky.
"STB BUSINESS" shall have the meaning specified in the Recitals to the
Agreement.
"STB BUSINESS CLIENTS" shall have the meaning specified in Section 9.1.
"STOCK CONSIDERATION" shall have the meaning specified in Section 1.2.
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EXHIBIT B
All inventory used in Celerity-Nevada's STB Business.
B-1