As filed with the Securities and Exchange Commission on August 26, 2005
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
---------------
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, for the use of the Commission only (as permitted by Rule
14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-12
---------------
ROBOCOM SYSTEMS INTERNATIONAL INC.
(Name of Registrant as Specified in Its Charter)
(Name(s) of Person Filing Proxy Statement, if Other than Registrant)
---------------
Payment of Filing Fee (Check the appropriate box):
|X| No fee required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials:
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-1l(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
ROBOCOM SYSTEMS INTERNATIONAL INC.
NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS TO BE HELD ON OCTOBER 11, 2005
September 9, 2005
To Our Shareholders:
Notice is hereby given that a special meeting of shareholders of Robocom
Systems International Inc., a New York corporation (referred to herein as "we"
or "us"), will be held in the Executive Conference Room of our corporate offices
located at 511 Ocean Avenue, Massapequa, New York 11758, on October 11, 2005, at
10:00 a.m., local time, for the following purposes:
1. To approve the proposed sale of substantially all of our assets to
Avantce RSI, LLC pursuant to the asset purchase agreement annexed to
the accompanying proxy statement.
2. To transact such other business as may properly come before the
special meeting and any adjournments thereof.
The foregoing items of business are more fully described in the proxy
statement accompanying this notice.
Our board of directors has fixed August 19, 2005 as the record date for
the determination of our shareholders entitled to notice of, and to vote at, the
special meeting. A list of such shareholders will be available for examination
by a shareholder for any purpose germane to the special meeting during ordinary
business hours at our corporate office located at 511 Ocean Avenue, Massapequa,
New York 11758, during the ten (10) business days prior to the special meeting
and during the special meeting.
Whether or not you plan to attend the special meeting, you should
complete, sign, date and promptly return the enclosed proxy card, to ensure that
your shares will be represented at the meeting. If you attend the special
meeting and wish to vote in person, you may withdraw your proxy and vote in
person. You should not send any certificates representing stock with your proxy
card.
For the Board of Directors
Irwin Balaban
Chairman of the Board
and Chief Executive Officer
TABLE OF CONTENTS
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING................................i
INFORMATION CONCERNING SOLICITATION AND VOTING.................................1
Record Date and Voting Securities...........................................1
Revocability of Proxies.....................................................1
Voting and Solicitation.....................................................1
Quorum; Abstentions; Broker Non-Votes.......................................2
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS..............................2
PROPOSAL NO. 1 TO APPROVE THE PROPOSED ASSET SALE..............................3
General.....................................................................3
Background of the Asset Sale; Information about the Buyer...................4
Our Reasons for the Asset Sale..............................................4
Obligations to be Assumed by Avantaee.......................................7
Indemnification.............................................................7
Other Terms.................................................................8
Interests of our Directors and Executive Officers...........................9
Regulatory Approvals........................................................9
Use of Proceeds from the Proposed Asset Sale................................9
Business of the Company Following the Asset Sale...........................10
Appraisal Rights...........................................................11
Vote Required and Board Recommendation.....................................14
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................14
OTHER MATTERS.................................................................14
EXPERTS.......................................................................15
ANNUAL REPORT.................................................................15
INCORPORATION OF DOCUMENTS BY REFERENCE.......................................15
WHERE YOU CAN FIND MORE INFORMATION...........................................15
ANNEX A - Asset Purchase Agreement
ANNEX B - Copy of Section 623 and 910 of the New York Business Corporation Law
regarding Appraisal Rights
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING
Q: What proposal will be voted on at the special meeting?
A: The proposal to be voted on at the special meeting is whether to approve
the sale of substantially all of our assets to Avantce RSI, LLC, a
Delaware limited liability company ("Avantce"). The assets that we propose
to sell to Avantce primarily consist of our RIMS software product, all of
our intellectual property rights, contracts, accounts receivables and
tangible personal property and certain cash, all pursuant to the terms of
the Asset Purchase Agreement attached to the accompanying proxy statement
as Annex A. The proposed sale of assets is referred to as the "asset
sale". The assets to be sold in the asset sale are substantially all of
the assets of our company.
Q: Who is the purchaser?
A: The purchaser of our assets will be Avantce RSI, LLC, a Delaware limited
liability company. Avantce is a private investment company focused on
investments in mature segments of the information technology industry. Its
principal place of business is 508 Ashley Way, Peachtree City, Georgia.
For more information regarding Avantce, you may visit Avantce's website at
www.avantce.com. See "Proposal No. 1 - To Approve the Proposed Asset Sale
- Information about the Buyer."
Q: What is the purchase price for our company's assets?
A: Avantce will pay us a total purchase price of $3,170,000 for our assets,
subject to certain adjustments. Of such amount, $2,970,000 will be paid in
cash at the closing, subject to certain 90-day deferrals, and $200,000 of
the purchase price will be paid pursuant to a promissory note that will be
payable over a period not to exceed two years. The cash portion of the
purchase price payable at closing will be reduced, dollar-for-dollar, to
the extent the value of our working capital (defined as the sum of our
cash on hand plus the amount of our accounts receivable minus the amount
of our accounts payable assumed by Avantce) at the time of closing is less
than a targeted amount of $1,025,000. See "Proposal No. 1 - To Approve the
Proposed Asset Sale - Purchase Price."
Q: What are the interests of the Company's officers and directors in the
asset sale?
A: Upon consummation of the asset sale, Irwin Balaban, our Chairman of the
Board and Chief Executive Officer, and Herbert Goldman and Lawrence Klein,
members of our Board of Directors, will each receive $76,667, payable in
four equal quarterly installments, in consideration of their willingness
(i) to agree not to compete with Avantce for a five-year period and (ii)
to make certain representations and warranties in the Asset Purchase
Agreement about our company and the assets being sold. Messrs. Balaban,
Goldman and Klein beneficially own approximately 24%, 22% and 16%,
respectively, of our outstanding shares of common stock and also were
founders of our company. As shareholders of our company, Messrs. Balaban,
Goldman and Klein will receive their pro rata portion of the dividends, if
any, paid to our shareholders of certain proceeds of the asset sale.
Q: What will happen if the asset sale is approved?
A: If the asset sale is approved, we will proceed to consummate the sale of
assets subject to the satisfaction of the closing conditions set forth in
the Asset Purchase Agreement. We anticipate the transaction will close
shortly following the special meeting; however, the timing of the closing
is dependent upon the satisfaction of such closing conditions. See
"Proposal No. 1 - To Approve the Proposed Asset Sale - Summary Terms of
the Asset Purchase Agreement."
i
Q: Will our company continue to operate after consummation of the asset sale?
A: We have not yet made any determination about future business plans once
the asset sale is consummated. Our Board of Directors is evaluating
several possible directions, including (i) the liquidation and dissolution
of our company, including the payment of a liquidating cash dividend to
our shareholders or (ii) the payment of a cash dividend equal to a portion
of the proceeds of the asset sale and a transaction in which we merge our
"public shell" corporation with a privately-held operating business and
our shareholders retain some ownership interest in the surviving public
corporation. We have not determined which option we will pursue.
Furthermore, we may not choose any of the foregoing options and may,
instead, pursue one or more options not yet considered.
Immediately following the consummation of the asset sale, we will have no
operating business or source of revenues. Furthermore, we have agreed
that, for a period of five (5) years following the consummation of the
asset sale, we will not engage in any business that develops or markets
computer software products that perform functions substantially similar to
the RIMS software product being sold to Avantce in the asset sale. Irwin
Balaban, our Chairman of the Board and Chief Executive Officer, and
Herbert Goldman and Lawrence Klein, members of our Board of Directors,
have also agreed to be bound by such restrictions. See "Proposal No. 1 -
To Approve the Proposed Asset Sale - Business of the Company Following the
Asset Sale."
Q: What will happen if the asset sale is not approved?
A: We will review all options for continuing operations, and we will
potentially seek to sell our stock or assets to a third party. There can
be no assurance that any third party will offer to purchase our stock or
assets for a price equal to or greater than the price proposed to be paid
by Avantce in the asset sale, or that our stock or assets can be sold at
all. See "Proposal No. 1 - To Approve the Proposed Asset Sale - Other
Terms."
Q: What is our Board of Directors' recommendation with respect to the asset
sale proposal?
A: Our Board of Directors recommends a vote "FOR" approval of the asset sale.
See "Proposal No. 1 -To Approve the Proposed Asset Sale - Vote Required
and Board Recommendation."
Q: Why does our Board of Directors believe the asset sale is in the best
interest of our company's shareholders?
A: The Board considered the risks and challenges facing our company in the
future as compared to the opportunities available to our company in the
future and concluded that the asset sale was the best alternative for
maximizing value to our shareholders. See "Proposal 1 - To Approve the
Proposed Asset Sale - Background of the Asset Sale" and "Proposal 1 - To
Approve the Proposed Asset Sale Reasons for the Asset Sale."
Q: Do I have any appraisal rights in connection with the asset sale?
A: Yes. Under Section 910 of the New York Business Corporation Law,
shareholders that duly exercise their appraisal rights in connection with
the proposed asset sale will be entitled to have their shares of our
common stock appraised by a New York State Court and to receive the "fair
value" of such shares. Each party in any appraisal proceeding will bear
its own costs and expenses, including the fees of counsel and any experts
employed by it, unless the court determines otherwise. See "Proposal No. 1
- To Approve the Proposed Asset Sale - Appraisal Rights."
ii
Q: What vote is required to approve the asset sale?
A: The proposal to approve the asset sale to Avantce requires the affirmative
vote of our shareholders holding two-thirds (2/3) of our outstanding
shares of common stock. See "Proposal No. 1 - To Approve the Proposed
Asset Sale - Vote Required and Board Recommendation."
Q: What do I need to do now?
A: After carefully reading and considering the information contained in the
accompanying proxy statement, you should complete and sign your proxy and
return it in the enclosed return envelope as soon as possible so that your
shares may be represented at the special meeting. A majority of shares
entitled to vote must be represented at the meeting to enable our company
to conduct business at the special meeting. See "Information Concerning
Solicitation and Voting."
Q: Can I change my vote after I have mailed my signed proxy?
A: Yes. You can change your vote at any time before proxies are voted at the
special meeting. You can change your vote in one of three ways. First, you
can send a written notice via registered mail to our Secretary at our
executive offices, stating that you would like to revoke your proxy.
Second, you can complete and submit a new proxy. If you choose either of
these two methods, you must submit the notice of revocation or the new
proxy to us. Third, you can attend the meeting and vote in person. See
"Information Concerning Solicitation and Voting."
Q: If my broker holds my shares in "street name", will the broker vote the
shares on my behalf?
A: A broker will vote shares ONLY if the holder of the shares provides the
broker with instructions on how to vote. Shares held in "street name" by
brokers or nominees who indicate on their proxies that they do not have
discretionary authority to vote such shares as to a particular matter,
referred to as "broker non-votes," will not be voted in favor of such
matter. The proposal to approve the asset sale is a proposal that requires
the affirmative vote of two-thirds (2/3) of our outstanding shares to be
approved by our shareholders. Accordingly, broker non-votes will have the
effect of a vote against the proposal. We encourage all shareholders whose
shares are held in street name to provide their brokers with instructions
on how to vote. See "Information Concerning Solicitation and Voting -
Quorum; Abstentions; Broker Non-Votes."
Q: Who can help answer my questions?
A: If you have any questions or need assistance with regard to voting your
shares, please contact our proxy solicitor at:
The Altman Group, Inc.
1275 Valley Brook Avenue
Lyndhurst, NJ 07071
Telephone No.: (201) 806-2214
Facsimile No.: (201) 460-0050
If you have any questions about the special meeting or the proposals to be
voted on at the special meeting, or if you need additional copies of the
accompanying proxy statement or copies of any of our public filings
referred to in the accompanying proxy statement, you should contact our
Investor Relations Department at (516) 795-5100. Our public filings can
also be accessed at the Securities and Exchange Commission's web site at
www.sec.gov. See "Where You Can Find More Information."
iii
ROBOCOM SYSTEMS INTERNATIONAL INC.
511 Ocean Avenue
Massapequa, New York 11758
PROXY STATEMENT
FOR THE SPECIAL MEETING OF
SHAREHOLDERS TO BE HELD ON OCTOBER 11, 2005
Proxies in the form enclosed with this proxy statement are solicited by
the Board of Directors of Robocom Systems International Inc. for use at our
special meeting of Shareholders (the "special meeting") to be held on October
11, 2005 at 10:00 a.m., local time, or at any adjournments or postponements
thereof, for the purposes set forth in the accompanying Notice of Special
Meeting of Shareholders. The special meeting will be held in the Executive
Conference Room of our corporate offices located at 511 Ocean Avenue,
Massapequa, New York 11758.
This proxy statement and the enclosed proxy card are first being mailed on
or about September 9, 2005 to our shareholders entitled to vote at the meeting.
Accompanying this proxy statement is a copy of our Annual Report on Form 10-KSB
for the fiscal year ended May 31, 2005.
INFORMATION CONCERNING SOLICITATION AND VOTING
Record Date and Voting Securities
Shareholders of record as of August 19, 2005 (the "record date") are
entitled to notice of and to vote at the special meeting. As of the record date,
4,540,984 shares of our common stock were issued and outstanding.
Revocability of Proxies
Execution of a proxy will not in any way affect a shareholder's right to
attend the special meeting and vote in person. Any shareholder giving a proxy
has the right to revoke it by written notice delivered to our Secretary at our
principal executive offices at any time before it is exercised, by completing
and submitting a new proxy, or by voting in person at the special meeting.
Voting and Solicitation
Each share of common stock outstanding as of the record date will be
entitled to one vote and shareholders may vote in person or by proxy. At the
special meeting, we will be asking our shareholders to vote on a proposal to
approve the sale of substantially all of our assets to Avantce RSI, LLC., a
Delaware limited liability company ("Avantce"). We are soliciting shareholders
to authorize proxies to vote with respect to this proposal. The proposed sale of
assets to Avantce is referred to as the "asset sale". Our Board of Directors
knows of no other matters to be presented at the special meeting. If any other
matter should be presented at the special meeting upon which a vote may be
properly taken, shares represented by all proxies received by the Board of
Directors will be voted with respect thereto in accordance with the judgment of
the persons named as proxies.
The solicitation of proxies in the accompanying form is made by, and on
behalf of, our Board of Directors and we will bear the cost of soliciting
proxies. We have retained The Altman Group, Inc. to assist us in soliciting
proxies, and estimate that their fees for such service will be approximately
$4,500 plus an amount for reimbursable expenses. There will be no solicitation
of proxies other than through the proxy solicitor or by mail or personal
solicitation by our officers, directors and employees, and no additional
compensation will be paid to such persons in connection with such services. We
or the proxy solicitor will make arrangements with brokerage houses and other
custodians, nominees and fiduciaries for the forwarding of proxy material to the
beneficial owners of shares held of record by such persons, and such persons
will be reimbursed for reasonable expenses incurred by them.
Quorum; Abstentions; Broker Non-Votes
The presence in person or by proxy of the holders of at least a majority
of the outstanding shares of common stock entitled to vote at the special
meeting is necessary to establish a quorum for the transaction of business. The
Inspector of Elections will tabulate votes cast by proxy or in person at the
special meeting with the assistance of our transfer agent. The Inspector of
Elections will also determine whether or not a quorum is present. Abstentions
are included in the number of shares present or represented at the special
meeting.
Shares held in "street name" by brokers or nominees who indicate on their
proxies that they do not have discretionary authority to vote such shares as to
a particular matter, referred to as "broker non-votes," and shares which abstain
from voting as to a particular matter, will not be voted in favor of such
matters. The proposal to approve the asset sale to Avantce also requires the
affirmative vote of shareholders holding at least two-thirds (2/3) of our
outstanding shares. Accordingly, abstentions and broker non-votes will have the
effect of a vote against the proposal to approve the asset sale to Avantce.
Broker non-votes will be counted for purposes of determining the absence or
presence of a quorum. We encourage all shareholders whose shares are held in
street name to provide their brokers with instructions on how to vote.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS MADE IN THIS PROXY STATEMENT ARE "FORWARD-LOOKING STATEMENTS"
WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.
FORWARD-LOOKING STATEMENTS CAN BE IDENTIFIED BY TERMINOLOGY SUCH AS "MAY",
"WILL", "SHOULD", "EXPECTS", "INTENDS", "ANTICIPATES", "BELIEVES", "ESTIMATES",
"PREDICTS", OR "CONTINUE" OR THE NEGATIVE OF THESE TERMS OR OTHER COMPARABLE
TERMINOLOGY AND INCLUDE, WITHOUT LIMITATION, STATEMENTS BELOW REGARDING:
COMPLETION OF THE ASSET SALE, POSSIBLE ADJUSTMENTS TO THE PURCHASE PRICE,
ASSESSMENT OF PROSPECTS OF CONTINUING IN BUSINESS, OUR COMPANY'S DIFFICULTY IN
RAISING CAPITAL, OUR COMPANY'S RIGHTS TO ITS TECHNOLOGIES, PROSPECTIVE TAX
TREATMENT UNDER U.S. AND OTHER LAW OF ASSET SALE, OUR COMPANY'S NET-OPERATING
LOSS CARRY-FORWARDS, OTHER POTENTIAL ACQUIRORS, REGULATORY APPROVALS RELATING TO
THE ASSET SALE, POTENTIAL INDEMNIFICATION PAYMENTS RELATING TO THE ASSET SALE,
EFFECTS OF THE ASSET SALE, REASONS FOR THE ASSET SALE, OUR COMPANY'S PLANS
FOLLOWING COMPLETION OF THE ASSET SALE, OR SUFFICIENCY OF CASH RESERVES
FOLLOWING THE ASSET SALE. BECAUSE FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND
UNCERTAINTIES, THERE ARE IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY THESE FORWARD-LOOKING
STATEMENTS. ALTHOUGH WE BELIEVE THAT EXPECTIONS REFLECTED IN THE FORWARD-LOOKING
STATEMENTS ARE REASONABLE, WE CANNOT GUARANTEE FUTURE RESULTS, PERFORMANCE OR
ACHIEVEMENTS. MOREOVER, NEITHER WE NOR ANY OTHER PERSON ASSUMES RESPONSIBILITY
FOR THE ACCURACY AND COMPLETENESS OF THESE FORWARD-LOOKING STATEMENTS. WE ARE
UNDER NO DUTY TO UPDATE ANY FORWARD-LOOKING STATEMENTS AFTER THE DATE OF THIS
PROXY STATEMENT TO CONFORM SUCH STATEMENTS TO ACTUAL RESULTS.
2
PROPOSAL NO. 1
TO APPROVE THE PROPOSED ASSET SALE
General
On August 16, 2005, our Board of Directors unanimously approved the Asset
Purchase Agreement between our company and Avantce RSI, LLC, under which we
agreed to sell substantially all of our assets to Avantce for a total purchase
price of $3,170,000 (subject to certain adjustments), to be paid by Avantce by a
combination of cash and the delivery of a promissory note. The material terms of
the Asset Purchase Agreement are summarized below. A copy of the Asset Purchase
Agreement is attached as Annex A to this proxy statement. We encourage you to
read the Asset Purchase Agreement in its entirety.
Background of the Asset Sale
On an ongoing basis, our Board of Directors and senior management
periodically reviewed the outlook for the inventory and warehouse management
services industry, as well as our company's financial condition and growth
prospects. Based on the belief that future growth would require a significant
investment of cash for operations, updates and enhancements to our RIMS product
offerings and marketing, senior management proposed to the Board of Directors
that our company explore alternative strategies for maximizing shareholder
value.
In November 2004, we retained Brummel Holdings LLC, an investment banking
advisory firm based in Sands Point, New York ("Brummel"), to assist us in
developing a plan for the future of our company. We asked Brummel to conduct
research in three alternative areas: mergers and acquisitions, institutional
investment and financing, and sales enhancements. At a meeting of our Board of
Directors on December 8, 2004, Brummel made a presentation that outlined the
proposed scope of its services and cited examples of transactions in each of the
areas mentioned above.
Between November 2004 and February 2005, Brummel contacted several
companies about a possible transaction with our company. On November 4, 2005,
Brummel presented senior management with an offer by a privately-held financial
firm to make an investment of $1 million in our company through the purchase of
shares of convertible preferred stock representing approximately 60% of our
outstanding shares of common stock on as as-converted basis. After negotiations,
our senior management deemed the terms unacceptable and declined to proceed with
the transaction.
During late January 2005, Brummel entered into discussions with a private
equity group that held a controlling interest in another company in the
warehouse management systems field about a possible stock sale transaction.
Brummel informed senior management of its discussions and a conference call was
held on February 2, 2005 among Mr. Irwin Balaban, Mr. Lawrence Balaban of
Brummel and certain executive officers of the private equity group. After
several additional conversations, in early February 2005, the private equity
group advised us that it would not pursue further negotiations.
In February 2005, Irwin Balaban, our Chief Executive Officer, received an
unsolicited telephone call from a representative of Avantce who indicated an
interest on the part of Avantce in exploring a possible acquisition transaction
with our company. The inquiry was referred to Lawrence Balaban of Brummel, who
contacted Mr. Aivars Lode, a Managing Director of Avantce. Following the
telephone call, Brummel conducted preliminary research on Avantce and contacted
Irwin Balaban to inform him of the conversation with Mr. Lode. Our senior
management agreed to further explore a sale transaction with Avantce and
subsequently signed a mutual non-disclosure agreement. A conference telephone
call was held on March 1, 2005 among Mr. Lawrence Balaban of Brummel, Mr. Irwin
Balaban, Mr. Lode and Mr. Jonathan Scheumann, a Managing Director of Avantce,
wherein the parties discussed the state of the inventory and warehouse
management services industry, among other related topics. The parties agreed to
meet in person at our corporate offices to further explore the possibility of a
transaction and to allow Avantce to conduct its initial due diligence on our
business. Avantce also immediately prepared and sent to Brummel a draft of a
non-binding letter of intent that provided for a purchase price not to exceed
$3.5 million, among other terms. The Board was notified telephonically of
management's discussions with Avantce and the terms contained in the draft
letter of intent. The letter of intent was signed on March 1, 2005.
3
From March 28, 2005 through March 30, 2005, Messrs. Lode and Scheumann and
other representatives of Avantce visited our corporate offices in Massapequa,
New York and performed due diligence on our operations, financial information
and personnel, among other areas. Following the visit, our senior management had
a telephone conference with Mr. Scheumann of Avantce and Mr. Balaban of Brummel
for the purpose of answering Avantce's follow-up questions. On April 6, 2005 and
April 15, 2005, Mr. Scheumann and Mr. Balaban of Brummel had telephone
discussions to review Avantce's revised offer price, which was based upon its
due diligence review of our company.
On April 18, 2005, the Board of Directors met to consider the asset sale
on the terms set forth in the letter of intent, as modified by subsequent
telephone discussions, and to discuss a counter-proposal with regard to certain
terms, including purchase price. The Board discussed financial terms and other
aspects of the asset sale and agreed on certain additional terms that would be
required in the asset purchase agreement for it to be acceptable to the Board.
Following a full discussion, the Board approved the proposed asset sale on the
terms generally described in the letter of intent, provided the agreed upon
additional terms were included in the asset purchase agreement, and authorized
officers of our company to negotiate the asset purchase agreement. At this
meeting the Board also authorized Brummel, on behalf of our company, to
negotiate a revised letter of intent with Avantce and convey the terms of the
counter proposal.
Following the meeting, Mr. Balaban of Brummel had a telephone conference
with representatives of Avantce to provide the terms of the counter-proposal.
Ultimately, Avantce agreed to the purchase price and payments terms described
elsewhere in this proxy statement.
Representatives of Avantce again visited our corporate offices on May 2,
2005 and May 3, 2005 to conduct further due diligence. Following the visit,
Avantce prepared and sent to us a revised, non-binding letter of intent,
reflecting the new purchase price and payment terms, that was executed on May
18, 2005. On June 9, 2005, Avantce prepared and sent us a draft asset purchase
agreement. During the next five weeks, our senior management, along with our
attorneys, negotiated the terms of the asset purchase agreement and prepared and
negotiated the related disclosure schedules and exhibits.
On August 16, 2005, the Board of Directors met to consider the proposed
draft of the asset purchase agreement. Following a full discussion, the Board
unanimously approved the proposed asset purchase agreement and authorized
officers of our company to execute the definitive asset purchase agreement. The
Board also determined that the financial terms of the asset sale were fair to
our company's shareholders.
On August 17, 2005, the definitive asset purchase agreement was executed
by the parties.
Information about the Buyer
The purchaser of our assets will be Avantce RSI, LLC, a Delaware limited
liability company. Avantce is a private investment company focused on
investments in mature segments of the Information Technology industry. Its
principal place of business is 508 Ashley Way, Peachtree City, Georgia.
According to its principals, Avantce's investment strategy is to purchase equity
interests in mature companies and apply additional capital for growth
opportunities and acquisitions. The three principals of Avantce collectively
have over 60 years of experience in the supply chain execution, software and
professional services industries. Seeking to leverage this experience, Avantce
is focused on additional acquisitions within the warehouse management software
industry. For more information regarding Avantce, you may visit Avantce's
website at www.avantce.com.
Our Reasons for the Asset Sale
In approving the proposed asset sale to Avantce, our Board of Directors
considered a number of factors before recommending that our shareholders approve
the proposed asset sale, including the following:
* Future growth will require significant investments of cash for
operations and marketing and we have been unsuccessful in
raising any significant new cash;
4
* We have explored other strategic alternatives and received no
offers;
* The value of our assets, particularly of our intellectual
property and certain contracts and customer relationships, may
decline with the passage of time;
* Avantce will assume substantially all of our liabilities and,
therefore, we will be free of any significant liabilities
after consummation of the asset sale, other than (i) a certain
contingent liability in connection with a dispute with one of
our former distributors, (ii) a certain contingent "change of
control" liability to Judy Frenkel, our Senior Vice President
and Chief Operating Officer, and (iii) surviving
indemnification obligations to Messrs. Balaban, Klein and
Goldman (see "Use of Proceeds From the Proposed Asset Sale").
Our Board of Directors believes this fact will increase our
attractiveness to private companies that might be interested
in a business combination transaction with a "public shell"
company, upon which our shareholders would retain an equity
interest in the new public company;
* As a result of the asset sale, our shareholders will be
foregoing any opportunity to share in the future growth or
increase in value of our company under its current line of
business;
* Public interest in our common stock has been low as reflected
by the low trading activity of our common stock over the past
few years and low price per share of our common stock. As
such, our Board of Directors perceived that the current
business is not attractive to the investing public and that
the we might be better off divesting ourselves of our current
business and assets in favor of distributing the net proceeds
of such divestiture in the form of a dividend to our
shareholders and/or acquiring or operating a new business with
broader appeal to the investing public;
* The cost of being a publicly-traded company is becoming more
expensive due to recent increases in compliance requirements,
including the requirements of the Sarbanes-Oxley Act of 2002.
Such requirements have increased legal and accounting expenses
and placed a strain on our limited personnel resources; and
* In the event that we receive an offer from a third party to
purchase our assets at a price higher than $3,170,000, we can
elect to terminate the asset sale with the payment of
liquidated damages of $340,000 and sell the assets to a third
party.
The foregoing discussion of the information and factors considered by our
Board of Directors is not intended to be exhaustive, but includes the material
factors considered. In view of the variety of factors considered in connection
with its evaluation of the transaction and the purchase price, our Board of
Directors did not find it practicable to, and did not, quantify or otherwise
assign relative weight to the specific factors considered in reaching its
determination and recommendations, and individual directors may have given
different weight to different factors.
Our Board of Directors did not engage an independent financial advisor to
determine the fairness of the asset sale to our shareholders and determined,
based on the factors set forth above, that the asset sale contemplated by the
Asset Purchase Agreement is fair to our shareholders. Further, based on the
procedural safeguards provided under the New York Business Corporation Law,
including the required approval of our Board of Directors, the required approval
of our shareholders owning at least two-thirds (2/3) of our outstanding common
stock and the availability of appraisal rights to our shareholders, our Board of
Directors believes that the asset sale is procedurally fair to our shareholders.
A fairness opinion from an independent financial advisor typically entails a
substantial fee to the requesting company. In the context of an asset sale, the
financial advisor would typically review a company's historical and projected
revenues, and the operating results of the company and those of comparable
public companies, and make certain assumptions regarding the value of the assets
and liabilities of the associated business or assets, which may be difficult to
predict in order to render its opinion. In addition to the speculative nature of
such analysis, our Board of Directors believes that undertaking these analyses
would involve a significant unnecessary expense that would reduce the amount of
proceeds available to our company from the proposed asset sale. For the
foregoing reasons, our Board of Directors believes that the asset sale, as
contemplated by the Asset Purchase Agreement, is fair to our shareholders.
5
Summary of the Terms of the Asset Purchase Agreement
The following sets forth a summary of the material provisions of the Asset
Purchase Agreement. The summary description does not purport to be completed and
is qualified in its entirety by reference to the Asset Purchase Agreement, a
copy of which is attached hereto as Annex A. All shareholders are urged to read
the Asset Purchase Agreement in its entirety.
Assets to be Sold
The Asset Purchase Agreement provides that, subject to approval by our
shareholders and satisfaction of certain other conditions described below, we
will sell substantially all of our assets to Avantce.
The assets proposed to be sold to Avantce, referred to as "the assets,"
consist of the assets currently used to operate our business, including, without
limitation:
* all intellectual property of any kind owned or used by our
company;
* our RIMS computer software product;
* all software licenses, maintenance agreements, distributor
agreements, vendor contracts and other material contracts;
* all accounts receivable;
* all rights under our benefit plans;
* all permits;
* all tangible assets, including furniture and equipment;
* all cash on hand, subject to certain holdbacks;
* all documents related to these assets, including all
technical, regulatory, marketing and sales related documents;
and
* other designated assets.
The assets to be sold do not include:
* any working capital in excess of $1,025,000;
* all claims, rights and interest to any tax refunds;
* all life insurance policies of officers or employees of our
company; and
* corporate assets, such as qualifications to do business,
taxpayer identification numbers and minute books.
If on the closing date of the asset sale our working capital (defined as
the sum of our cash on hand plus the amount of our accounts receivable minus the
amount of our accounts payable assumed by Avantce) exceeds $1,025,000, we will
retain, and the assets sold to Avantce will not include, an amount of cash equal
to the amount by which our working capital exceeds $1,025,000. If, after
deducting such cash, the amount of our cash on hand to be transferred to Avantce
is less than $770,000, then the amount of the cash purchase price to be
delivered on the
6
closing date shall be reduced by the amount of such difference, and Avantce
shall be required to deliver to us within 90 days of the closing date, the
difference between $770,000 and the actual amount transferred.
Obligations to be Assumed by Avantce
At the closing, Avantce will agree to assume, undertake, pay, perform or
discharge all of the liabilities pertaining to our business and the assets to be
sold, except for those specifically excluded. Excluded liabilities will include
only the following:
* any expenses and liabilities relating to any existing
litigation;
* income tax liabilities of our company relating to the asset
sale;
* our legal, investment banking and broker fees relating to the
asset sale;
* any payments owed by our company under any existing employment
contracts; and
* any indebtedness to third parties other than accounts payable
incurred in the ordinary course of business.
Purchase Price
Avantce will pay us a total purchase price of $3,170,000 for the assets,
subject to adjustments set forth in the Asset Purchase Agreement. Of such
amount, $2,970,000 will be paid in cash at the closing; provided, however, that
such cash portion of the purchase price payable at closing will be reduced,
dollar-for-dollar, to the extent the value of our working capital (defined as
the sum of our cash on hand plus the amount of our accounts receivable minus the
amount of our accounts payable assumed by Avantce) at the time of closing is
less than a targeted amount of $1,025,000. If the amount of our cash on hand to
be transferred to Avantce is less than $770,000, then the amount of the purchase
price payable in cash on the closing date shall be reduced by an amount equal to
the difference between $770,000 and the actual amount of cash transferred to
Avantce on the closing date, and Avantce shall be required to pay to us within
90 days of the closing date the amount of such reduction. Each of the three
principals of Avantce has agreed to personally guarantee the payment of such
amount to our company.
The purchase price will be paid as follows (1) $2,970,000 in cash at the
closing (subject to the adjustments described above) and (2) $200,000 through
the payment of a promissory note. The promissory note will provide that Avantce
shall make quarterly principal payments equal to 2.75% of the gross receipts
derived from the assets purchased by Avantce, until the full amount of the note
shall have been paid. In addition, Avantce will pay $76,667, payable in four
equal quarterly installments, to each of Messrs. Balaban, Klein and Goldman in
consideration of certain representations, warranties and covenants to be made by
such persons in the Asset Purchase Agreement. Each of the three principals of
Avantce has agreed to personally guarantee the payment of such amount to Messrs.
Balaban, Klein and Goldman.
Indemnification
Under the terms of the Asset Purchase Agreement, each of Irwin Balaban,
Herbert Goldman and Lawrence Klein (collectively, the "Principal Shareholders")
has agreed to indemnify Avantce and its affiliates against any damages, losses
or liabilities, including reasonable legal fees and expenses, that Avantce may
incur (1) resulting from any material misrepresentation by our company or the
Principal Shareholders contained in the Asset Purchase Agreement or any other
certificate, instrument or agreement delivered in connection with the asset sale
or (2) any material breach of warranty or any default in the performance of any
covenant or obligation of our company under or in connection with the Asset
Purchase Agreement. The indemnification obligations of the Principal
Shareholders are capped at a total of $2,500,000 for claims relating to
intellectual property and $500,000 for all other claims. The representations and
warranties of the Principal Shareholders survive for one year after the closing.
Furthermore, the Principal Shareholders are not required to indemnify Avantce
unless and until its losses exceed $50,000, and then only to the extent the
losses exceed such amount up to the applicable cap.
7
Under an indemnification agreement dated as of August 17, 2005, our
company has agreed to indemnify each of the Principal Shareholders for any
damages, losses or liabilities, including reasonable legal fees and expenses,
that any Principal Shareholder may incur as a result of the indemnification
obligations undertaken by the Principal Shareholders in the Asset Purchase
Agreement.
The Principal Stockholders agreed to assume the indemnification
obligations to Avantce in the Asset Purchase Agreement, rather than to permit
such indemnification obligations to run directly from our company to Avantce, in
an effort to make our company more attractive as a "public shell" company
following the asset sale. The indemnification obligations in the Asset Purchase
Agreement will continue for a period of one year following the date of closing
of the asset sale, and we believe our company will be less attractive to
potential merger partners so long as we remain contingently liable for such
indemnification obligations during such one-year period. While our company has
retained an indemnification obligation to the Principal Shareholders during such
one-year period, based on discussions with the Principal Shareholders, we
believe it is possible that the Principal Shareholders will release us from our
indemnification obligation to the Principal Shareholders if an attractive merger
transaction is identified, although there can be no assurance that they will do
so.
Termination
The Asset Purchase Agreement provides that it may be terminated by us or
Avantce by mutual written consent or if we fail to obtain shareholder approval
of the asset sale. The Asset Purchase Agreement may also be terminated by
Avantce if (1) we breach any of our representations, warranties or covenants in
any material respect and such breach is not cured within 15 days of our receipt
of written notice of such breach or (2) the closing of the asset sale shall not
have occurred on or before October 31, 2005 because one or more of the
conditions to Avantce's obligation to close has not been met. In addition, the
Asset Purchase Agreement may be terminated by us if (1) Avantce breaches any of
its representations, warranties or covenants in any material respect and such
breach is not cured within 15 days of Avantce's receipt of written notice of
such breach or (2) the closing of the asset sale shall not have occurred on or
before October 31, 2005 because one or more of the conditions to our obligation
to close has not been met.
If, prior to termination of the Asset Purchase Agreement in accordance
with the termination provisions of the agreement, we consummate an alternative
transaction involving the sale of all or substantially all of our assets, we
will be obligated to pay Avantce, as liquidated damages, the amount of $340,000.
Other Terms
In the Asset Purchase Agreement, the Principal Shareholders make
representations and warranties to Avantce, including representations and
warranties regarding our corporate status, authority to complete the asset sale,
contracts being assumed by Avantce, intellectual property, financial statements,
liabilities, litigation, insurance, accounts receivable, customers, distributors
and suppliers, tax matters, and title to the assets being sold. Avantce makes
representations and warranties to us regarding Avantce's corporate status and
authority to complete the asset sale. We also agree that between signing the
Asset Purchase Agreement and closing the transaction we will carry on our
business in the ordinary course consistent with past practice, we will use
commercially reasonable efforts to preserve for Avantce's benefit the relations
with our customers and suppliers, we will not modify any material contracts or
enter into new contracts for the distribution, sale or marketing of our products
other than in the ordinary course of business, we will not sell, lease or
encumber our assets except in the ordinary cause of business, and we will not
enter into any settlement agreement for any litigation, except as approved by
Avantce.
The Asset Purchase Agreement contains closing conditions related to the
following: each party's representations and warranties remain true, each party
has complied with its covenants, we shall have no previously undisclosed
liabilities in excess of $20,000, the parties shall have received any third
party or governmental consents required for the consummation of the transaction
and consents pertaining to the transfer of certain of the assumed contracts, no
legal action is pending that would prevent the closing, we shall have received
shareholder approval of the asset sale, and each party shall have delivered
appropriate documents and certificates set forth in the Asset Purchase
Agreement.
8
If the asset sale is not approved by our shareholders at the special
meeting, we will review all options for continuing operations, and we will
potentially seek to sell our stock or assets to a third party. There can be no
assurance that any third party will offer to purchase our stock or assets for a
price equal to or greater than the price proposed to be paid by Avantce in the
asset sale, or that our stock or assets can be sold at all.
The following resolution will be offered at the special meeting:
"RESOLVED, THAT THE ASSET SALE, PURSUANT TO THE ASSET PURCHASE AGREEMENT,
TO AVANTCE RSI, LLC BE APPROVED."
Interests of our Directors and Executive Officers
Upon consummation of the asset sale, the Principal Shareholders will each
receive $76,667 in consideration of their willingness to (i) agree not to
compete with Avantce for a five-year period and (ii) to make certain
representations and warranties about our company and the assets being sold as
provided in the Asset Purchase Agreement.
Although no formal offer of employment has been extended, we anticipate
that, on or prior to the date we consummate the asset sale, Avantce will make an
offer of employment to Judy Frenkel, our Senior Vice President and Chief
Operations Officer, following which an employment agreement may be executed. We
cannot determine or anticipate the amount of any compensation that may
ultimately be agreed upon. Under the terms of an existing agreement between our
company and Ms. Frenkel, if Ms. Frenkel is not offered employment with Avantce
or she terminates her employment with Avantce for `good reason' (as defined in
the agreement) or Avantce terminates the employment of Ms. Frenkel for `cause'
(as defined in the agreement) on or prior to the first anniversary of the
closing date, we will be obligated to pay to Ms. Frenkel the sum of $67,500,
payable in three equal installments. Ms. Frenkel's cash and non-cash
compensation for our fiscal ended May 31, 2005 is set forth in the accompanying
Annual Report on Form 10-KSB.
In connection with the consummation of the asset sale, we will pay a fee
in the amount of $130,000 to Brummel Holdings, LLC, a principal of which is Mr.
Larry Balaban, in consideration of the performance of business advisory services
to our company. Larry Balaban is the son of Irwin Balaban, our Chairman of the
Board and Chief Executive Officer.
Regulatory Approvals
No United States Federal or state regulatory requirements must be complied
with or approvals obtained as a condition of the proposed asset sale other than
the federal securities laws.
Use of Proceeds from the Proposed Asset Sale
As a result of the consummation of the asset sale, we will be entitled to
receive a purchase price of up to $3,170,000. On the closing date, we will
receive approximately $2,970,000 less an amount equal to the amount by which our
cash on hand is less than $770,000, of which
o an estimated $75,000 will be used to pay expenses related to
the asset sale transaction, including legal, accounting and
printing costs and fees; and
o $130,000 will be used to pay the fee of Brummel Holdings, LLC.
Any remaining proceeds will be used for general business purposes, such as
maintaining a corporate office as we seek a merger partner for our remaining
"public shell" company, and, if necessary, for the settlement or satisfaction of
our retained liabilities.
Following the asset sale, we will have surviving indemnification
obligations to the Principal Shareholders for a period of one year following the
consummation of the asset sale. In addition, we will have the following retained
liabilities:
9
o We will continue to be a respondent in an arbitration
commenced in London by Robocom UK Ltd., an unaffiliated
company, under the UNCITRAL arbitration rules. In this
proceeding, Robocom UK Ltd. alleges that it was terminated
without cause by our company as a non-exclusive distributor in
the United Kingdom and Ireland, and it is purportedly seeking
damages of (pound)200,000. We have denied all claims and have
asserted counterclaims alleging that Robocom UK Ltd. was
properly terminated and that we suffered actual damages in
excess of US$30,000 and damages in excess of US$100,000
relating to lost opportunities. We are now in the process of
selecting arbitrators.
o Under the terms of an existing agreement between our company
and Ms. Judy Frenkel, our Senior Vice President and Chief
Operations Officer, if Ms. Frenkel is not offered employment
with Avantce or she terminates her employment with Avantce for
`good reason' (as defined in the agreement) or Avantce
terminates the employment of Ms. Frenkel for `cause' (as
defined in the agreement) on or prior to the first anniversary
of the closing date, we will be obligated to pay to Ms.
Frenkel the sum of $67,500, payable in three equal
installments.
o Under an indemnification agreement dated as of August 17,
2005, our company has agreed to indemnify each of the
Principal Shareholders for any damages, losses or liabilities,
including reasonable legal fees and expenses, that any
Principal Shareholder may incur as a result of the
indemnification obligations undertaken by the Principal
Shareholders in the Asset Purchase Agreement. See "Summary of
the Terms of the Asset Purchase Agreement - Indemnification".
Management believes we have sufficient usable net operating losses to
offset substantially all of any federal income or gain recognized by us for
federal income tax purposes as a result of the asset sale. Therefore, we will
not set aside any material amounts specifically for the payment of any tax
liability.
We anticipate that the remaining proceeds from the asset sale, together
with any interest on such proceeds, will provide us with sufficient liquidity
until such time as we determine to pay a dividend equal to all or a portion of
such proceeds to our shareholders prior to the merger of our company as a
"public shell" company with another operating business or the liquidation and
dissolution our company in the absence of any attractive business opportunities.
Business of Our Company Following the Asset Sale
Our Board of Directors has not yet determined what our strategic direction
will be following the consummation of the asset sale and is considering several
alternatives. Immediately following the closing, we will have no material
liabilities other than the retained liabilities described above and ordinary
course payables, including payables for the maintenance of directors and
officers insurance policies, and payments to professionals in connection with
the maintenance of our reporting obligations under the Securities Exchange Act
of 1934, as amended.
Currently, our Board of Directors is evaluating several possible
directions following the asset sale, including (i) the liquidation and
dissolution of our company, including the payment of a liquidating cash dividend
to our shareholders or (ii) the payment of a cash dividend equal to a portion of
the proceeds of the asset sale and a transaction in which we merge our "public
shell" company with a privately-held operating business and our shareholders
retain some ownership interest in the surviving public corporation. We have not
determined which option we will pursue. Furthermore, we may not choose any of
the foregoing options and may, instead, pursue one or more options not yet
considered.
Our Board of Directors currently favors attempting to identify new
strategic business opportunities. In doing so, our Board of Directors will
attempt to find a privately-held company that seeks to achieve the status of a
reporting company without having to undertake an initial public offering and the
filing of a registration statement in connection therewith. Our Board of
Directors intends to explore opportunities with only those companies that have
10
already successfully operated their businesses or have commenced doing business
in an area or industry in which the Board of Directors considers to be
promising. When evaluating potential targets for a business combination, we will
consider the operating history of the target, the anticipated cash needs of the
target during the short-term and long-term, the experience of the target's
management team in the target's business, and the short-term and long-term
prospects of the business of the target. When making its decision on a future
business combination, our Board of Directors will also consider the percentage
of ownership in the surviving company that our shareholders will retain.
Material United States Federal Income Tax Consequences
Federal Income Taxation of the Company. Following the consummation of the
asset sale, we will continue to be subject to Federal income taxation on our
taxable income, if any, such as interest income, gain from the sale of our
assets or income from operations. We will recognize gain or loss with respect to
the sale of our assets in an amount equal to the fair market value of the
consideration received for each asset over our adjusted tax basis in the asset
sold. Management believes that we have sufficient usable net operating losses to
offset substantially all of any federal income or gain recognized by us for
federal income tax purposes.
Federal Income Taxation of our Shareholders. We do not expect that our
shareholders will recognize any gain or loss for United States Federal income
tax purposes as a result of the asset sale, other than shareholders who choose
to exercise appraisal rights as provided under the New York Business Corporation
Law to the extent such shareholders receive cash for their shares of our common
stock. The procedures for exercising appraisal rights are discussed below.
Shareholders choosing to exercise appraisal rights should consult their own tax
advisor for a full understanding of the tax consequences of exercising such
rights.
In the event we determine to liquidate and dissolve our company, amounts
received by shareholders pursuant to the dissolution will be treated as full
payment in exchange for their shares of our common stock. Shareholders will
recognize gain or loss equal to the difference between (1) the sum of the amount
of cash distributed to them and the fair market value (at the time of
distribution) of property, if any, distributed to them, and (2) their tax basis
for their shares of our common stock. A shareholder's tax basis in his, her or
its shares will depend upon various factors, including the shareholder's cost
and the amount and nature of any distributions received with respect thereto.
The tax consequences of any such dissolution may vary depending upon the
particular circumstances of the shareholder. We recommend that each shareholder
consult his, her or its own tax advisor regarding the Federal income tax
consequences of the plan of dissolution as well as the state, local and foreign
tax consequences.
Treatment of Outstanding Stock Options
The asset sale will constitute the sale of substantially all of our assets
and, as such, will have certain effects under our 1997 Stock Option and Long
Term Incentive Compensation Plan, as amended (the "Plan"). Under the Plan, in
the event of a sale of substantially all of our assets, the Compensation
Committee of our Board of Directors (the "Committee"), in its absolute
discretion, has the power to cancel, effective immediately prior to the
consummation of the asset sale, each option to purchase shares of our common
stock (an "Option") outstanding immediately prior to such event (whether or not
then exercisable), and, in full consideration of such cancellation, pay to the
employee, officer, director or consultant to whom the Option was granted (a
"Participant") an amount in cash, for each share of our common stock subject to
such Option equal to the excess of (A) the value, as determined by the Committee
in its absolute discretion, of the property (including cash) received by the
holder of a share of our common stock as a result of such event over (B) the
exercise price of such Option (subject to applicable withholding payment
requirements).
On August 16, 2005, the Committee adopted a resolution pursuant to which
it resolved to exercise such authority, effective immediately prior to
consummation of the asset sale. Until such time, all outstanding Options will
remain subject to their existing terms and conditions.
Appraisal Rights
Pursuant to Section 910 of the New York Business Corporation Law
("NYBCL"), holders of our company's common stock who follow the procedures set
forth in Section 623 of the NYBCL (the "Appraisal Statute") will be
11
entitled to have their common stock appraised by a New York State Court and to
receive payment of the "fair value" of such shares as determined by such court.
The Appraisal Statue is reprinted in its entirety as Annex B to this proxy
statement. While the following discussion summarizes all material terms of the
law pertaining to appraisal rights under the NYBCL, it is qualified in its
entirety by the full text of the Appraisal Statute. Any shareholder who wishes
to exercise such appraisal rights or to preserve the right to do so, should
review the following discussion and Annex B carefully because failure to timely
and properly comply with the procedures specified will result in the loss of
dissenters' appraisal rights under the NYBCL.
All references in the Appraisal Statute and in this summary to a
"shareholder" are to the record holder of our company's common stock on the
record date specified in the Notice of Special Meeting. A person having a
beneficial interest in shares of our company's common stock that are held of
record by another person such as a broker or nominee must act promptly to cause
the record holder to follow the steps summarized below properly and in a timely
manner to perfect whatever appraisal rights the beneficial owner may have.
A shareholder wishing to exercise appraisal rights must (i) deliver to us,
prior to or at the special meeting but before the vote is taken on this Proposal
1, a written objection to the proposed sale of our company's assets as provided
in this Proposal 1 (the "Notice of Election"), which must include a notice of
his election to dissent, the shareholder's name, residence address, the number
of shares as to which the shareholder dissents and a demand for payment of the
fair value of such shares (which Notice of Election must be in addition to and
separate from any proxy or vote against the proposed asset sale contemplated by
this Proposal 1) and (ii) not vote for approval of the asset sale. BECAUSE A
PROXY WHICH DOES NOT CONTAIN VOTING INSTRUCTIONS WILL, UNLESS REVOKED, BE VOTED
FOR APPROVAL OF THE ASSET SALE, A SHAREHOLDER WHO VOTES BY PROXY AND WHO WISHES
TO EXERCISE APPRAISAL RIGHTS MUST (A) VOTE AGAINST APPROVAL OF THE ASSET SALE OR
(B) ABSTAIN FROM VOTING ON THE ASSET SALE. Neither a vote against the asset
sale, in person or by proxy, nor a proxy directing such vote for an abstention,
will in and of itself constitute a written objection to the asset sale under the
Appraisal Statute (shareholders who timely file such Notice of Election and who
do not vote in favor of the asset sale are referred to as "Dissenting
Shareholders").
A shareholder may not dissent as to less than all of the shares, as to
which such shareholder has a right to dissent, held by such shareholder of
record and owned beneficially. A nominee or fiduciary may not dissent on behalf
of any beneficial owner as to less than all of the shares held of record by such
nominee or fiduciary on behalf of such owner and as to which such nominee or
fiduciary has a right to dissent. All Notices of Election should be addressed to
Robocom Systems International Inc., 511 Ocean Avenue, Massapequa, New York,
11758, Attn: Secretary.
Within 10 days after the date on which shareholders approve the asset
sale, we must send written notice by registered mail to each Dissenting
Shareholder to such effect (the "Dissenting Shares"). At the time of the
completion of the asset sale (the "Effective Time"), each Dissenting Shareholder
will cease to have any rights of a shareholder of our company except the right
to be paid the fair value of his shares and rights under the Appraisal Statute.
A Notice of Election may be withdrawn by a Dissenting Shareholder prior to
his acceptance in writing of an offer made by us to pay the value of such
Dissenting Shares, except that a Notice of Election may not be withdrawn later
than 60 days following the Effective Time unless we fail to make a timely offer
to pay such value, in which case such Dissenting Shareholder shall have 60 days
from the date an offer is made to withdraw his election. In either event, after
such time, a Notice of Election may not be withdrawn without our written
consent. In order to be effective, withdrawal of a Notice of Election must be
accompanied by a return to us of any advance payment made by us to the
Dissenting Shareholder as described below.
Upon filing the Notice of Election, or within one month thereafter,
Dissenting Shareholders must submit to us the certificates representing their
shares of common stock, at the address set forth above or to our transfer agent,
Continental Stock Transfer and Trust Company, 2 Broadway, 19th Floor, New York,
New York 10004 and there will be noted thereon that a Notice of Election has
been filed and the certificates will be returned to the Dissenting Shareholders.
Any Dissenting Shareholders who fail to submit such certificates for such
notation will, at our option exercised by written notice to such Dissenting
Shareholders within 45 days of the date of filing of such Notice of Election,
lose their appraisal rights unless a court, for good cause shown, shall
otherwise direct.
12
Within 15 days after the expiration of the period within which
shareholders may file their Notice of Election, or within 15 days after the
Effective Time, whichever is later (but in no case later than 90 days after the
shareholders' vote to approve the asset sale), we must make a written offer to
pay for the Dissenting Shares held by such Dissenting Shareholder at a price
which we consider to be their fair value. This offer will be accompanied by a
statement setting forth the aggregate number of shares, which will be at the
same price for all Dissenting Shares, with respect to which Notices of Election
to dissent have been received and the aggregate number of holders of such
shares.
If the Effective Time has occurred at the time the offer is made, the
offer will be accompanied by (i) advance payment to each Dissenting Shareholder
who has submitted certificates for notation thereon of the election to dissent
of an amount equal to 80% of such offer or (ii) as to each Dissenting
Shareholder who has not yet submitted certificates for notation thereon of the
election to dissent, a statement that advance payment of an amount equal to 80%
of the amount of such offer will be made by us promptly upon submission of
certificates. If the Effective Time of the asset sale has not occurred at the
time of the making of such offer, such advance payment or statement as to
advance payment will be sent to each Dissenting Shareholder entitled thereto
upon the Effective Time. Acceptance of such advance payment by a Dissenting
Shareholder will not constitute a waiver of dissenter's rights. If the asset
sale transaction is not completed within 90 days after approval of the asset
sale by shareholders, such offer will be conditioned upon consummation of the
asset sale.
If within 30 days after making such offer, we and any Dissenting
Shareholder agree on the price to be paid for such Dissenting Shareholder's
Dissenting Shares, we will pay the agreed price to such holder within 60 days
after the later of the date such offer was made or the Effective Time, upon
surrender of certificates representing such holder's shares of common stock.
If we fail to make an offer within the 15-day period described above, or
if we make an offer and any Dissenting Shareholder fails to agree within 30 days
of the making of such offer, we must, within 20 days thereafter, institute a
special proceeding in an appropriate court to determine the rights of Dissenting
Shareholders and to fix the fair value of the shares. If we do not institute
such a proceeding within such 20-day period, any Dissenting Shareholder may,
within 30 days after such 20-day period expires, institute a proceeding for the
same purpose. If such proceeding is not instituted by any Dissenting Shareholder
within such 30-day period, all dissenters' rights will be extinguished unless
the New York Supreme Court, for good cause shown, otherwise directs. All
Dissenting Shareholders, other than those who agree with us to the price to be
paid for their shares, will be made parties to such proceeding.
With respect to Dissenting Shareholders entitled to payment, the court
will proceed to fix the value of our common stock, which will be the fair value
as of the close of business on the day prior to the special meeting. In fixing
the fair value of the shares of our common stock, the court will consider the
nature of the asset sale and the effects on us and our shareholders, the
concepts and methods then customary in relevant securities and financial markets
for determining fair value of shares of a corporation engaging in a similar
transaction under comparable circumstances and all other relevant factors.
The court will determine the fair value of such shares without a jury and
without referral to an appraiser or referee. The final order by the court will
include an allowance for interest (unless the court finds the refusal of any
Dissenting Shareholder to accept our offer thereof as arbitrary, vexatious, or
otherwise not in good faith) of such rate as the court finds to be equitable,
accruing from the Effective Time of the asset sale to the date of payment.
Each party in the appraisal proceeding will bear its own costs and
expenses, including the fees of counsel and any experts employed by it. The
court may, however, in its discretion, assess any of the costs, fees and
expenses incurred by us against Dissenting Shareholders (including those who
withdraw their Notice of Election) if the court finds that their refusal to
accept our offer was arbitrary, vexatious or otherwise not in good faith.
Similarly, the costs, fees and expenses incurred by Dissenting Shareholders may
be assessed by the court in its discretion, against us if the fair value of the
shares as determined by the court materially exceeds the amount that we offered
to pay, we failed to follow certain procedures of the Appraisal Statute or our
manner of compliance with the Appraisal Statue was arbitrary, vexatious or not
otherwise in good faith.
Within 60 days after the final determination of the proceeding, we will
pay to each Dissenting Shareholder the amount found in such proceeding to be due
such shareholder, upon the Dissenting Shareholder's surrender of certificates of
the our common stock.
13
Any shareholder who duly demands, prior to the special meeting, an
appraisal in compliance with the Appraisal Statute will not, after the Effective
Time, be entitled to vote the shares subject to such demand for any purpose or
to the payment of dividends or other distributions on those shares, except
dividends or other distributions payable to shareholders of record as of a date
prior to the Effective Time.
Failure to follow the steps required by the Appraisal Statute for
perfecting appraisal rights may result in the loss of such rights. IN VIEW OF
THE COMPLEXITY OF THE PROVISIONS OF THE APPRAISAL STATUTE, SHAREHOLDERS WHO ARE
CONSIDERING DISSENTING FROM THE ASSET SALE SHOULD CONSULT THEIR LEGAL ADVISORS.
Vote Required and Board Recommendation
The approval of the asset sale to Avantce requires the affirmative vote of
the shareholders holding at least two-thirds (2/3) of the outstanding shares of
our common stock. All members of the Board of Directors and each of our
executive officers who hold (or are deemed to hold) as of the record date an
aggregate of approximately 2,587,300 shares of our common stock (approximately
56.36% of the outstanding shares of common stock as of the record date) have
indicated that they will vote in favor of the proposal.
The Board of Directors believes that the asset sale is in the best
interests of our company and our shareholders and recommends a vote "FOR" this
proposal. It is intended that the shares represented by the enclosed form of
proxy will be voted in favor of this proposal unless otherwise specified in such
proxy.
SHAREHOLDER PROPOSALS
Proposals of shareholders intended for presentation at our 2006 annual
meeting and intended to be included in our proxy statement and form of proxy
relating to that meeting must be received at our executive offices by May 29,
2006 and comply with the requirements of Rule 14a-8(e) promulgated under the
Securities Exchange Act of 1934. The proxy rules of the Securities and Exchange
Commission limit the circumstances under which the proxy card distributed by
registered companies to their shareholders may permit those companies to cast
the votes represented by the proxy voting cards in their sole discretion. As
applied to us, the most important limitation is that for proposals made by a
shareholder at the 2006 annual meeting that are not properly submitted by the
shareholder for inclusion in our own proxy materials, we may vote proxies in our
discretion with respect to those proposals only if we have not received notice
from the shareholder by May 29, 2006 at the latest that the shareholder intends
to make those proposals at the next annual meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of August 19, 2005, the names,
addresses and number of shares of our common stock beneficially owned by (i) all
persons known to the our management to be beneficial owners of more than 5% of
the outstanding shares of our common stock, (ii) each director of our company,
(iii) each named executive officer and (iv) all executive officers and directors
of our company as a group (except as indicated, each beneficial owner listed
exercises sole voting power and sole dispositive power over the shares
beneficially owned):
Number of Shares
Name and Address of Beneficially Percentage of Outstanding
Beneficial Owner (1) Owned (2) Shares Beneficially Owned (2)
-------------------- --------- -----------------------------
Irwin Balaban............................................. 1,111,100(3) 23.81%
Judy Frenkel.............................................. 108,200(4) 2.34
Robert B. Friedman........................................ 160,000(5) 3.44
Herbert Goldman........................................... 1,004,000(6) 21.54
Lawrence B. Klein......................................... 754,000(7) 16.21
14
Number of Shares
Name and Address of Beneficially Percentage of Outstanding
Beneficial Owner (1) Owned (2) Shares Beneficially Owned (2)
-------------------- --------- -----------------------------
All executive officers and directors as a group (5
persons)............................................... 3,137,300(8) 61.62
- ----------
(1) The address of each beneficial owner of more than 5% of the outstanding
shares of our common stock is c/o Robocom Systems International Inc., 511
Ocean Avenue, Massapequa, New York 11758.
(2) Except as indicated in the footnotes to this table, we believe that all
persons named in the table have sole voting and investment power with
respect to all shares of our common stock shown as beneficially owned by
them. In accordance with the rules of the Securities and Exchange
Commission, a person or entity is deemed to be the beneficial owner of our
common stock that can be acquired by such person or entity within 60 days
upon the exercise of options or warrants or other rights to acquire our
common stock. Each beneficial owner's percentage ownership is determined
by assuming that options and warrants that are held by such person (but
not those held by any other person) and which are exercisable within 60
days have been exercised. The inclusion herein of such shares listed as
beneficially owned does not constitute an admission of beneficial
ownership.
(3) Includes 564,000 shares held by I&T Balaban L.P. and 125,000 shares
subject to options that are presently exercisable.
(4) Includes 36,667 shares subject to options that are presently exercisable.
(5) Includes 115,000 shares subject to options that are presently exercisable.
(6) Includes 564,000 shares held by H & N Goldman L.P., 160,000 shares held by
the Herbert Goldman Revocable Trust, 160,000 shares held by the Naomi J.
Goldman Revocable Trust and 120,000 shares subject to options that are
presently exercisable.
(7) Includes 110,000 shares subject to options that are presently exercisable.
(8) Includes 550,000 shares subject to options that are presently exercisable.
OTHER MATTERS
Other than as described above, our Board of Directors knows of no matters
to be presented at the special meeting, but it is intended that the persons
named in the proxy will vote your shares according to their best judgment if any
matters not included in this proxy statement do properly come before the meeting
or any adjournment thereof.
EXPERTS
Our audited financial statements for the fiscal years ended May 31, 2005
and 2004 incorporated by reference into this proxy statement have been included
in reliance on the report of Eisner and Lubin LLP, independent accountants,
given on the authority of said firm as experts in accounting and auditing.
ANNUAL REPORT
The information contained in our Annual Report on Form 10-KSB for the
fiscal year ended May 31, 2005, as filed with the Securities and Exchange
Commission on August 29, 2005 is incorporated herein by reference. A copy of
such Annual Report is enclosed herewith. If, for any reason, you wish to receive
another copy of the Annual Report, please contact Robocom Systems International
Inc., 511 Ocean Avenue, Massapequa, New York 11758, Attention: Shareholder
Relations, and another copy will be sent to you.
15
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This proxy statement incorporates by reference the materials and
information contained in our Annual Report on Form 10-KSB for the fiscal year
ended May 31, 2005, including audited financial statements.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements, and other
information with the United States Securities and Exchange Commission (the
"SEC"). You may read and copy any document filed by our company at the SEC's
public reference room at 450 Fifth Street, N.W. , Washington, D.C. 20549. Please
call the SEC at 1-800-SEC-0330 for further information on the public reference
room. You can review our electronically filed reports, proxy statements and
other information on the SEC's website at http://www.sec.gov. Our common stock
is traded under the symbol "RIMS.OB."
By Order of the Board of Directors,
/s/ Irwin Balaban
Irwin Balaban Chairman of the Board
and Chief Executive Officer
Dated: August 26, 2005
Massapequa, New York
16
REVOCABLE PROXY
ROBOCOM SYSTEMS INTERNATIONAL INC.
|_| X PLEASE MARK VOTES
AS IN THIS EXAMPLE
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) Irwin Balaban and Lawrence B. Klein or
any of them, lawful attorneys and proxies of the undersigned with full power of
substitution, for and in the name, place and stead of the undersigned to attend
the special meeting of Shareholders of Robocom Systems International Inc. to be
held in the Executive Conference Room of our corporate offices located at 511
Ocean Avenue, Massapequa, New York 11758 on Tuesday, October 11, 2005 at 10:00
a.m., local time, and any adjournment(s) or postponement(s) thereof, with all
powers the undersigned would possess if personally present and to vote the
number of votes the undersigned would be entitled to vote if personally present.
The Board of Directors recommends a vote "FOR" the proposal set forth
herein.
PROPOSAL 1: Proposal to approve the sale of substantially all of our assets to
Avantce RSI, LLC.
For Against Abstain
|_| |_| |_|
______________________________________________________
In accordance with their discretion, said Attorneys and Proxies are
authorized to vote upon such other matters or proposals not known at the time of
solicitation of this proxy which may properly come before the meeting.
This proxy when properly executed will be voted in the manner described
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted for the Proposal set forth herein. Any prior proxy is hereby revoked.
Please be sure to sign and date
this Proxy in the box below. ___________________
______________________________________________________
Shareholder sign above Co-holder (if any) sign above
- --------------------------------------------------------------------------------
ROBOCOM SYSTEMS INTERNATIONAL INC.
Please sign exactly as your name appears on this proxy card. When shares are
held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or corporation, please sign in full corporate name by
president or other authorized person. If a partnership, please sign in
partnership name by authorized person.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD
- --------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement") is made and entered into
as of August 17, 2005, by and between Avantce RSI, LLC, a Delaware limited
liability company ("AVANTCE"), and Robocom Systems International, Inc., a
corporation duly organized and existing under the laws of the State of New York,
U.S.A. (the "Company").
RECITALS:
WHEREAS, the Company is in the business of developing, marketing,
distributing, licensing, and maintaining software and other products and
services for the provision of warehousing and supply chain management solutions
(collectively, the "Business");
WHEREAS, subject to the terms and conditions set forth in this Agreement,
the Company desires to sell to AVANTCE for the consideration set forth below,
and AVANTCE desires to purchase from the Company, substantially all of the
assets of the Company used or useful in the operation of the Business, all as
more fully described in Section 2.02, and the Company desires to cause AVANTCE
to assume and AVANTCE has agreed to assume from the Company certain liabilities
and obligations of the Company arising in connection with the Business, as
described in Section 2.03;
NOW, THEREFORE, in reliance upon the representations, warranties and
agreements made herein and in consideration of the premises and covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION
Section 1.01 Definitions. Except as otherwise specified or as the context
may otherwise require, in addition to the capitalized terms defined elsewhere
herein, the following terms shall have the respective meanings set forth below
whenever used in this Agreement:
"AAA" has the meaning assigned to such term in Section 11.13 hereof.
"Accounts Receivable" means any and all amounts and other obligations owed
to the Company by reason of a sale of a good or provision of a service in the
ordinary course of its conduct of the Business;
"Affiliate" means, when used with respect to a specified Person, another
Person that, directly, or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with the Person
specified. For purposes of this Agreement, the term "control" (including, with
its correlative meanings, "controlled by" and "under common control with") shall
mean possession, directly or indirectly, of the power to direct or cause the
direction of
management or policies (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise).
"Agreement" means this Asset Purchase Agreement, as it may from time to
time be amended, supplemented or otherwise modified in accordance with the terms
hereof.
"Avantce's Damages" means all Damages sustained, incurred or suffered by
AVANTCE and/or its shareholders, officers, directors, affiliates or employees
resulting from or arising in connection with: (a) any material misrepresentation
by the Company contained in or made pursuant to this Agreement or in any
certificate, instrument or agreement delivered to AVANTCE pursuant to or in
connection with this Agreement; or (b) any material breach of warranty or any
default in the performance of any covenant or obligation of the Company under or
in connection with this Agreement.
"Assigned Contracts" has the meaning assigned to such term in Section
2.02(b) hereof.
"Assumed Liabilities" has the meaning assigned to such term in Section
2.03 hereof.
"Assumption Agreement" means the Assumption Agreement, to be dated the
Closing Date, executed by the Company and AVANTCE, substantially in the form of
Exhibit A hereto.
"Bill of Sale" means the Bill of Sale, to be dated the Closing Date,
executed by the Company and accepted by AVANTCE, substantially in the form of
Exhibit B hereto.
"Business" has the meaning assigned to such term in the recitals to this
Agreement.
"Cash Adjustment Payment" has the meaning assigned to such term on
Schedule 2.01 of this Agreement
"Closing" has the meaning assigned to such term in Section 6.01 hereof.
"Closing Date" has the meaning assigned to such term in Section 6.01
hereof.
"Company's Damages" means all Damages sustained, incurred or suffered by
the Company and/or its shareholders, officers, directors, affiliates or
employees, resulting from or arising in connection with: (a) any material
misrepresentation by AVANTCE contained in or made pursuant to this Agreement or
in any certificate, instrument or agreement delivered to the Company pursuant to
or in connection with this Agreement; (b) any material breach of warranty or any
default in the performance of any covenant or obligation of AVANTCE under or in
connection with this Agreement; or (c) the Assumed Liabilities.
"Company Intellectual Property" means the Intellectual Property used by
the Company (whether owned or licensed by the Company) in connection with the
Business, including without limitation, Computer Documentation, RIMS Software,
Know-how, Records, Trademarks, Copyrights and Patents.
2
"Company Stockholder Approval" has the meaning assigned to such term in
Section 3.02 hereof.
"Computer Documentation" means the technical documentation pertaining to
the Business including, without limitation, any end-user manuals, product
specifications, algorithms, diagrams, bug lists, and electronic machine readable
versions of such manuals, product answer books and other related documentation
and additionally any marketing or sales materials.
"Contract" means any note, bond, mortgage, indenture, lease, permit,
contract, agreement or other instrument or obligation, whether written or oral,
or any amendment, supplement or restatement of any of the foregoing.
"Contract Assignment" means the Assignment and Assumption of Contracts, to
be dated the Closing Date, executed by AVANTCE and the Company, substantially in
the form of Exhibit C hereto.
"Copyrights" has the meaning assigned to such term in Section 2.02(f)
hereof.
"Copyright Assignment" means the Copyright Assignment, to be dated the
Closing Date, executed by the Company and accepted by AVANTCE, substantially in
the form of Exhibit D hereto.
"Damages" means any and all damages, losses, liabilities, obligations,
penalties, fines, claims, litigation, demands, defenses, judgments, suits,
proceedings, costs, disbursements or expenses (including, without limitation,
reasonable attorneys' and experts' fees and disbursements) of any kind or of any
nature whatsoever (whether based in common law, statute or contract; fixed or
contingent; known or unknown) suffered or incurred by a party hereto, its
employees, affiliates, successors and assigns and, if applicable, any Liens on
the Transferred Assets.
"Disputes" has the meaning assigned to such term in Section 11.13 hereof.
"Governmental Entity" means any government, any governmental,
administrative or regulatory entity, authority, commission, board, agency,
instrumentality, bureau or political subdivision and any court, tribunal or
judicial or arbitral body (whether U.S. or any other foreign, federal, state or
local entity or, in the case of an arbitral body, whether governmental, public
or private).
"Guaranty Agreement" means a Guaranty Agreement, to be dated as of the
Closing Date, executed by the Principal AVANTCE Members, substantially in the
form attached hereto as Exhibit J.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" has the meaning assigned to such term in Section 3.02
hereof.
3
"Excluded Assets" means any the assets and other property of the Company
set forth on Schedule 2.02-1 hereto.
"Indemnified Party" has the meaning assigned to such term in Section 10.03
hereof.
"Indemnitor" has the meaning assigned to such term in Section 10.03
hereof.
"Intellectual Property" means all copyrights, patents, trademarks, trade
names, and applications for any of the foregoing, whether registered or
unregistered, of any party, or to which it has rights.
"Know-how" has the meaning assigned to such term in Section 2.02(g)
hereof.
"Knowledge" means an individual will have "Knowledge" of a particular fact
or other matter if such individual is actually aware or should be aware of such
fact or other matter and a Person (other than an individual) will have
"Knowledge" of a particular fact or other matter if an individual who is serving
as a director, officer or manager of such Person has actual awareness or should
have awareness of such fact or other matter.
"Leased Tangible Property" means shall mean all telephone equipment,
computers or computer equipment, furniture and fixtures and other tangible
personal property that are necessary for the Company to conduct the Business as
it relates to the Transferred Assets, in each case which is subject to a
leasehold interest held by the Company.
"Liabilities" mean, with respect to any Person, (i) any right against such
Person to payment, whether or not such right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured, (ii) any right against such Person to an
equitable remedy for breach of performance if such breach gives rise to a right
to payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured, and (iii) any obligation of such Person for the performance of any
covenant or agreement (whether for the payment of money or otherwise).
"Licensed Intellectual Property" shall mean Company Intellectual Property
that the Company uses or has the right to use, in each case pursuant to Third
Party Licenses.
"Lien" means any lien, charge, claim, pledge, security interest,
conditional sale agreement or other title retention agreement, lease, mortgage,
security agreement, right of first refusal, option, right of way, easement or
any other encumbrance of any nature whatsoever.
"Major Shareholders" shall mean each of Irwin Balaban, Lawrence Klein and
Herbert Goldman.
"Material Permits" has the meaning assigned to such term in Section 3.10
hereof.
4
"Owned Intellectual Property" shall mean Company Intellectual Property (i)
created or developed by employees of the Company in connection with the Business
or (ii) to which the Company has acquired, by purchase, assignment or other
transfer the unconditional, unrestricted, exclusive right to control or prevent
any and all use of such Intellectual Property by others without any consent, or
approval of or payment to, any other Person.
"Owned Tangible Property" shall mean all telephone equipment, computers or
computer equipment, furniture and fixtures and other tangible personal property
that are necessary for the Company to conduct its business as it relates to the
Transferred Assets, in each case which is owned by the Company and relating to
the Business.
"Patents" has the meaning assigned to such term in Section 2.02(e) hereof.
"Patent Assignment" means the Patent Assignment, to be dated the Closing
Date, executed by the Company and accepted by AVANTCE, substantially in the form
of Exhibit E hereto.
"Person" means any individual, corporation, partnership, limited
partnership, firm, joint venture, association, joint stock company, trust,
estate, limited liability company, unincorporated association, government or
regulatory body (or any agency or political subdivision thereof) or other
entity.
"Principal AVANTCE Members" shall mean each of Ivers Lode, Kristi Kennedy
and Jon Scheumann.
"Promissory Note" has the meaning assigned to such term on Schedule 2.01
hereto.
"Purchase Price" has the meaning assigned to such term in Section 2.01
hereof.
"Records" has the meaning assigned to such term in Section 2.02(c) hereof.
"RIMS Software" has the meaning assigned to such term in Section 2.02(i)
hereof.
"SEC" has the meaning assigned to such term in Section 3.04 hereof.
"Tangible Property" shall mean the Owned Tangible Property and the Leased
Tangible Property.
"Third Party License" shall mean all licenses, agreements, obligations or
other commitments under which a Person has granted the Company a right to use
any Licensed Intellectual Property in connection with the Transferred Assets,
but retains one or more rights to use such Intellectual Property,
"Trademarks" has the meaning assigned to such term in Section 2.02(d)
hereof.
5
"Trademark Assignment" means the Trademark Assignment, to be dated the
Closing Date, executed by the Company and accepted by AVANTCE, substantially in
the form of Exhibit F hereto.
"Transaction Documents" means this Agreement, the Assumption Agreement,
the Bill of Sale, the Contract Assignment, the Copyright Assignment, the
Trademark Assignment, the Patent Assignment and the Promissory Note.
"Transferred Assets" has the meaning assigned to such term in Section 2.02
hereof.
"Transferred Benefit Plan" means any 401K Plan, vacation pay, sickness,
hospitalization or other medical, dental, vision, disability or death benefit
plan (whether provided through insurance, on a funded or unfunded basis or
otherwise), employee stock option purchase plan, and each other employee benefit
plan, program or arrangement, whether or not an employee benefit plan within the
meaning of Section 3(3) of ERISA which since January 1, 1993 has been maintained
or contributed to by the Company for the benefit of or relating to any of its
employees or to any former employee of the Company or his/her dependents,
survivors or beneficiaries.
"Transferred Employee" has the meaning assigned to such term in Section
9.03(a) hereof.
"Warranties" mean those obligations of the Company based upon, or arising
from, warranties, whether of material, design, workmanship and/or fitness for
use, covering parts or products manufactured, delivered, installed or sold by
the Company on or before the Closing Date.
Section 1.02 Rules of Construction. This Agreement and the other
Transaction Documents shall be deemed to have been drafted by both the Company
and AVANTCE and neither this Agreement nor any other Transaction Document shall
be construed against any party as the principal draftsperson hereof or thereof.
The Exhibits and Schedules attached hereto are incorporated herein by reference
and shall be considered part of this Agreement. Other capitalized terms used in
this Agreement and not defined in Section 1.01 shall have the meanings assigned
to them elsewhere in this Agreement. The definitions contained in this Agreement
are applicable to the singular as well as the plural forms of such terms and to
the masculine as well as to the feminine and neuter genders of such term. The
words "hereof", "herein" and "hereunder" and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. When a reference is made in this
Agreement to an Article, Section, Exhibit or Schedule, such reference shall be
to an Article or Section of, or an Exhibit or Schedule to, this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation". All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein. Any agreement, instrument or statute defined
or referred to herein or in any agreement or instrument that is referred to
herein means such agreement, instrument or statute as from time to time amended,
modified or supplemented, including (in the case of agreements or instruments)
by waiver or consent and (in the case of statutes) by succession of
6
comparable successor statutes and references to all attachments thereto and
instruments incorporated therein. References to a Person are also to such
Person's predecessors (to the extent applicable) and permitted successors and
assigns.
ARTICLE II
TERMS OF THE TRANSACTION
Section 2.01 Purchase Price. The Transferred Assets shall be sold,
assigned, granted, transferred, conveyed and delivered by the Company and shall
be purchased, acquired and accepted by AVANTCE in consideration for the purchase
price as set forth in Schedule 2.01 (the "Purchase Price").
Section 2.02 Transfer of Assets. On and subject to the terms and
conditions of this Agreement, at the Closing, the Company shall sell, grant,
convey, transfer, assign and deliver to AVANTCE, and AVANTCE shall purchase,
acquire and accept from the Company, all of the Company's right, title and
interest in, the assets and rights of the Company, other than the Excluded
Assets, with such additions thereto or deletions therefrom as may be permitted
by the terms of this Agreement (collectively, the "Transferred Assets"),
including without limitation:
(a) all of the Company's right, title and interest in the Computer
Documentation;
(b) all of the Company's rights in, to and under all Contracts
relating to the Business, except for those Contracts which are listed on
Schedule 3.09, which Schedule the parties may mutually agree to amend through
Exhibit C hereto (each an "Assigned Contract" and collectively, the "Assigned
Contracts");
(c) all originals or, to the extent originals are not available,
copies of papers, sales and business files and records, contract records, test
and design records, product specifications, drawings, engineering, maintenance,
supplier and customer lists and other business records and documents used in
connection with the Business, whether maintained in electronic or physical form
(the "Records");
(d) the trademarks, trade names, service marks, trade styles, trade
dress and such unregistered rights as may exist through use, and foreign
counterparts thereof, owned by the Company and used primarily in the Business
including as set forth in Schedule 2.02(d) which the parties may mutually agree
to amend through Exhibit F hereto (the "Trademarks");
(e) all domestic and foreign unregistered patent rights, patent
applications, patent registrations, letters patent or similar legal protection
issuing thereon, and all rights and benefits under any applicable treaty or
convention held and/or owned by the Company and used in conjunction with the
Business and the RIMS Software, including as set forth in Schedule 2.02(e) which
the parties may mutually agree to amend through Exhibit E hereto (the
"Patents");
(f) all domestic and foreign common law and statutory rights
associated with the copyrights, copyright applications, copyright registrations
and the moral rights that now or hereafter exist in the RIMS Software, Records
and Computer Documentation, including all of the Company's associated copyright
registrations and application, which are set forth in Schedule
7
2.02(f) which the parties may mutually agree to amend through Exhibit D hereto
(the "Copyrights");
(g) the technologies, trade-secrets, designs, improvements,
formulae, manufacturing methods, practices, processes, technical data, product
development data, research data, specifications, or methods and know-how,
whether or not patentable, whether or not a secret and whether or not reduced to
writing that are used in the Business (the "Know-how");
(h) the Owned Intellectual Property and all of the Company's right,
title and interest in, to and under the Licensed Intellectual Property;
(i) the computer software of the Company known as "RIMS", including
source code, binary executable code, object code, compilers, assemblers and
algorithms, (the "RIMS Software");
(j) with regard to the Business, all other assets, including any
cash or cash equivalents, Accounts Receivable, any and all Owned Tangible
Property and all of the Company's right, title and interest in and to all Leased
Tangible Property, that are necessary for the Company to conduct its business;
and
(k) all of the Company's right, title and interest in, to and under
the Material Permits; and
(l) the Transferred Benefit Plans and the assets attributable or
related to any such Transferred Benefit Plans.
Section 2.03 Assumption of Liabilities. AVANTCE shall assume,
undertake to pay, perform or discharge the liabilities of the Company, except
those liabilities which are excluded in Schedule 2.03,(all of which are
hereinafter referred to collectively as the "Assumed Liabilities"), all of which
AVANTCE will assume and pay, discharge or perform, as appropriate, in a timely
manner as and when required from and after the Closing Date: AVANTCE shall be
under no obligations to assume any liabilities of the Company that are excluded
in Schedule 2.03,
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to AVANTCE, that:
Section 3.01 Organization; Authority. The Company is duly approved,
validly existing and in good standing under the laws of the State of New York.
The Company has all necessary corporate power and authority to operate all its
properties and to carry on its business as it is now being conducted. The
Company has all necessary corporate power and authority to sell, convey,
transfer, assign and deliver the Transferred Assets to AVANTCE as contemplated
by this Agreement, and to execute, deliver and perform its obligations hereunder
and under the other Transaction Documents to which it is a party.
8
Section 3.02 Authorization of Transaction. The board of directors of the
Company has duly authorized and approved the transactions contemplated by this
Agreement and has resolved that the transactions contemplated hereby are fair
to, advisable and in the best interests of the Company's stockholders. The Major
Shareholders have irrevocably agreed to vote all shares owned or controlled by
them in favor of the transactions contemplated by this Agreement. The Major
Shareholders have agreed that they will not vote any shares owned or controlled
by them in favor of any other competing offer to purchase either the assets or
stock of the Company. The affirmative vote (in person or by duly authorized and
valid proxy at a Company stockholders' meeting or by written consent) of the
holders of two-thirds of the outstanding shares of each of the Company's common
stock, in favor of the adoption of this Agreement is the only vote of the
holders of any class or series of the Company's capital stock required by
applicable law and the Company's organizational instruments to duly effect such
adoption (the "Company Stockholder Approval"). Other than the actions required
to obtain the Company Stockholder Approval and filings necessary for the Company
to comply with any applicable requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act")), the Company has taken all action
required by law, its articles of incorporation, its bylaws or otherwise to
authorize and to approve the execution, delivery and performance of this
Agreement, the other Transaction Documents to which it is to be a party and the
documents, agreements and certificates executed and delivered by it or to be
executed and delivered by it in connection herewith and therewith.
This Agreement is, and each other Transaction Document to which the Company is
to be a party, when executed and delivered by the Company at the Closing and,
assuming due authorization, execution and delivery by AVANTCE, will be duly
executed and delivered by the Company, and shall constitute a valid and legally
binding obligation of the Company, enforceable against the Company, in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy laws or creditors' rights generally or by general
principles of equity. All persons who have executed this Agreement on behalf of
the Company or who will execute on behalf of the Company any other Transaction
Document or other documents, agreements or certificates in connection herewith
or therewith, have been duly authorized to do so by all necessary corporate
action.
Section 3.03 Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under
applicable law (including, without limitation, filings necessary for the Company
to comply with any applicable requirement of the Exchange Act), neither the
execution, delivery or performance of this Agreement by the Company nor the
consummation by the Company of the transactions contemplated hereby will require
any filing with, notice to, or permit, authorization, consent or approval of,
any Governmental Entity. Except as set forth on Schedule 3.03, neither the
execution, delivery or performance of this Agreement by the Company nor the
consummation by the Company of the transactions contemplated hereby will (a)
conflict with or result in any breach of any provision of the articles of
association or other organizational documents of the Company, (b) result in the
creation or imposition of any Liens upon the Transferred Assets, (c) result in a
material violation or material breach of, require any notice to any party
pursuant to, or constitute (with or without due notice or lapse of time or both)
a material default (or give rise to any right of termination, amendment,
cancellation, acceleration or right of non-renewal or contractually require any
prepayment or offer to purchase any debt or give rise to the loss of a material
benefit) under, any of the terms, conditions or provisions of any Contract by
which the Transferred Assets may be
9
bound, or (d) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Company or the Transferred Assets.
Section 3.04 Financial Statements; Other Financial Information. The
financial statements of the Company included in the reports filed by the Company
with the Securities and Exchange Commission (the "SEC") pursuant to the Exchange
Act (including the related notes) complied as to form, as of their respective
dates of filing with the SEC, in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, fairly present the consolidated financial condition of the
Company and its subsidiaries at the dates thereof and the consolidated results
of operations and cash flows of the Company and its subsidiaries for the periods
then ended (subject, in the case of unaudited statements, to notes and normal
year-end audit adjustments that were not material in amount or effect).
Section 3.05 Transferred Assets. (a) The Company has good and marketable
title to, or a valid leasehold interest in, all of the Transferred Assets. All
such Transferred Assets are free and clear of all Liens other than (a) Liens
which shall be discharged or removed by Seller prior to or at Closing and which
are specifically noted on Schedule 3.05 and (b) such imperfections of title or
encumbrances, if any, which are not, individually or in the aggregate, material
in character, amount or extent, and which do not detract from the value, or
interfere with the present use, of the Transferred Assets subject thereto or
affected thereby.
(b) All of the Tangible Property included in the Transferred Assets
are in good repair and operating condition, reasonable wear and tear excepted.
The RIMS Software performs in all material respects all of the functions as
previously disclosed to AVANTCE in writing and presentations and as outlined in
the relevant product manuals and presentations in accordance with their written
specifications.
(c) The Accounts Receivable included in the Transferred Assets are,
to the Company's Knowledge, good and collectible in accordance with past
practices (less the amount of any provision, reserve or similar adjustment
therefor on the books and records of the Company).
Section 3.06 Intellectual Property. (a) The Company has disclosed to
AVANTCE or its counsel correct and complete copies of all applications, filings,
licenses, agreements and related correspondence and documents embodying the
Company Intellectual Property.
(b) Except as set forth in Schedule 3.06(b): (i) the Company owns or
has the right to use all of the Company Intellectual Property necessary for the
Company to conduct its business as presently conducted, including the right to
sell and distribute the products of the Company; (ii) no proceedings have been
instituted, are pending or, to the best of the Company's Knowledge, threatened,
which challenge the Company's rights in respect of the aforesaid or the validity
thereof; (iii) none of the Owned Intellectual Property used by the Company is
the subject of any Lien or (except as specifically identified and disclosed in a
Schedule to this Agreement) other agreement granting rights therein to any third
party; (iv) the Company has not received notice of any charges of interference
or infringement of any Company Intellectual Property; (v) (A) the RIMS product
line does not infringe upon or otherwise violates the Intellectual Property
10
rights of others and the Company has not received any claims of such
infringements or violation; and (B)to the Company's Knowledge, none of the
Company Intellectual Property are being infringed by others and none are subject
to any outstanding order, decree, judgment, stipulation or charge; (vi) the
employees, consultants and contractors who have been and are engaged to develop
the Company Intellectual Property have been required to sign assignable and
legally binding confidentiality and, as applicable, assignment-of-invention
and/or work-for-hire agreements; (vii) the Company does not have Knowledge of
any facts or claims which would cause any of the Company Intellectual Property
to be invalid; and (viii) the Owned Intellectual Property was not developed
under a grant from any Governmental Entity or private source.
Section 3.07 Operations Since the Financial Statements. Since the
date of the audited 2005 year end financial statements which have been provided
to AVANTCE, there has not been, and there will not be as of the Closing Date:
(a) Any change in the business, results of operations, assets,
financial condition, or manner of conducting the business of the Company which
has or may be reasonably expected to have a material adverse effect on such
business, results of operations, Transferred Assets, or financial condition;
(b) Any damage, destruction, or loss (whether covered by insurance)
which has, or may reasonably be expected to have, a material adverse effect upon
any of the Transferred Assets and/or the business operations of the Company;
(c) Any amendment or termination by the Company of any material
Contract, franchise, permit, license or other agreement that relates to the
Transferred Assets;
(d) Except with the prior written consent of AVANTCE, which consent
shall not be unreasonable withheld, any settlement resulting in payment or a
promise to make payment by the Company of any threatened litigation or claim,
including but not limited to, any settlement of any outstanding issues with
Company's former distributor in the United Kingdom; or
(e) The imposition of any Lien on the Transferred Assets.
Section 3.08 Litigation. Except as set forth on Schedule 3.08, there is no
claim, court recorded settlement, suit, action, proceeding or investigation
pending, or to the Knowledge of the Company, threatened against or affecting the
Transferred Assets and there is no judgment, decree, injunction, rule or order
of any Governmental Entity or arbitrator outstanding against the Company that
could reasonably be expected to have a material adverse effect on the
Transferred Assets or could affect the performance of the Company's obligations
under this Agreement. The Company is not presently engaged in any legal action
to recover monies due or damages relating to the Transferred Assets.
Section 3.09 Additional Assigned Contracts and Commitments. Schedule 3.09
lists (a) all distribution agreements that the Company is a party to and the
revenue associated with each such distribution agreement applicable to the
Business during the period of the most recent audited annual financial
statements of the Company and (b) all the obligations of the Company to provide
maintenance and support to the Company's customers. [Except as set forth on
Schedule
11
3.09, there is nothing contained in any customer agreement that would restrict
or limit AVANTCE's ability to establish the level of maintenance fees under
these agreements.] The Company is not and, to the Knowledge of the Company, no
other party is, in violation of or in default under (nor, to the Knowledge of
the Company, does there exist any condition which upon the passage of time or
the giving of notice or both would reasonably be expected to cause such a
violation of or default under) any material Assigned Contract to which it is a
party or by which it or any of its properties or assets is bound. Each Assigned
Contract constitutes a valid and binding obligation of the Company and, to the
Knowledge of the Company, each other party thereto, enforceable against such
other party in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy laws or creditors' rights generally or by
general principles of equity.
Section 3.10 Compliance with Laws. The Company is in compliance in all
material respects with all applicable statutes, laws, codes, ordinances,
regulations, rules, Material Permits, judgments, decrees and orders of any
Governmental Entity applicable to the Transferred Assets. The Company has not
received, and to the Company's Knowledge, there does not exist, any notice of
any action, suit, hearing, charge or investigation to the effect that the
Transferred Assets are, were or may be in violation of any requirement of law or
any order of any Governmental Entity. The Company has in effect all material
permits and licenses necessary for it to own, lease or operate the Transferred
Assets and to carry on such business as now conducted (and the Company has
timely made appropriate filings for issuance or renewal thereof) and Schedule
3.10 contains a list of all such material permits and licenses (the "Material
Permits").
Section 3.11 Insurance. The Company maintains adequate insurance with
qualified insurance carriers with respect to liability and property loss or
damage as it relates to Transferred Assets. Copies of all such policies have
been provided to AVANTCE.
Section 3.12 Transactions with Affiliates. Except as set forth on Schedule
3.12 or otherwise disclosed pursuant to this Article III: (a) no Affiliate,
director, or officer of the Company owns any interest in any asset or property
(real or personal, tangible or intangible), business or Contract, used or
intended for use or otherwise relating to the business currently conducted or
proposed to be conducted by the Company relating to the Transferred Assets and
(b) there are no arrangements or agreements related to the Transferred Assets
between the Company, on the one hand, and any of its respective Affiliates,
directors or officers, on the other hand, providing for the receipt of any
payments or benefits to such Affiliates, directors or officers
Section 3.13 Finders or Brokers. Except as set forth on Schedule 3.13, no
broker, investment banker, financial advisor or other Person is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company. The Company shall be solely
responsible to pay any fees the named entity and/or person and any other third
party related to this transaction retained by Company. The Company shall
indemnify and hold AVANTCE harmless from any claims for failure to pay any such
fees.
Section 3.14 Complete Disclosure. None of the representations and
warranties made by the Company in this Agreement or made in any certificate or
other document furnished hereunder will contain any untrue statement of material
fact, or omit to state a material fact necessary in
12
order to make the statement contained herein or therein, in light of the
circumstances under which such statements were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF AVANTCE
AVANTCE represents and warrants to the Company, that:
Section 4.01 Authority. AVANTCE is duly organized, validly existing and in
good standing under the laws of the State of Delaware, U.S.A. AVANTCE has all
necessary corporate power and authority to execute and deliver this Agreement
and the other Transaction Documents to which it is a party and to consummate the
transactions contemplated hereby or thereby. The execution, delivery and
performance of this Agreement, and the other Transaction Documents to which it
is a party, by AVANTCE and the consummation by AVANTCE of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of AVANTCE and no other corporate proceeding on the
part of AVANTCE is necessary to authorize this Agreement and the other
Transaction Documents to which it is a party or to consummate the transactions
contemplated hereby and thereby to which AVANTCE is a party. This Agreement has
been, and each other Transaction Document to which AVANTCE is to be a party will
be, when executed and delivered by the AVANTCE at the Closing, duly executed and
delivered by AVANTCE and, assuming due authorization, execution and delivery by
the Company, constitutes a valid and binding obligation of AVANTCE enforceable
against AVANTCE in accordance with its terms, except as such enforceability may
be limited by applicable bankruptcy laws or creditors' rights generally or by
general principles of equity.
Section 4.02 Brokers. No broker, investment banker, financial advisor or
other Person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of AVANTCE. AVANTCE
shall be solely responsible to pay any fees to any third party related to this
transaction retained by AVANTCE. AVANTCE shall indemnify and hold the Company
harmless from any claims for failure to pay any such fees.
Section 4.03 No Violation. The execution and delivery of this Agreement
and each Transaction Document by the signatories thereto, and the consummation
of the transactions contemplated hereby and thereby and compliance with the
terms hereof and thereof does not and will not, conflict with, or result in any
violation of or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a material benefit under or result in the creation
of any Lien of any kind upon any of the properties or assets of AVANTCE under,
any provision of (i) the Articles/Certificate of Incorporation or By-laws of
AVANTCE, (ii) any note, bond, mortgage, indenture, deed of trust, license,
lease, contract, commitment or loan or other agreement to which AVANTCE is a
party or by which any of its properties or assets are bound, or (iii) any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to AVANTCE or its property or assets.
Section 4.04 Financing Commitment. AVANTCE has received term sheets
indicating a
13
willingness to finance the Purchase Price from its lender(s) in connection with
the purchase of the Transferred Assets and does not anticipate any issues in
obtaining the necessary financing to consummate the Transactions contemplated
hereby.
Section 4.05 Complete Disclosure. None of the representations and
warranties made by AVANTCE in this Agreement, or made in any certificate or
other document furnished hereunder will contain any untrue statement of material
fact, or omit to state a material fact necessary in order to make the statement
contained herein or therein, in light of the circumstances under which such
statements were made, not misleading.
ARTICLE V
CONDITIONS TO CLOSING
Section 5.01 (a) Conditions to the Obligations of AVANTCE. The obligation
of AVANTCE to consummate the transactions contemplated by this Agreement shall
be subject to the following conditions precedent (the "AVANTCE Purchase
Conditions") (any of which may be waived in whole or in part in writing by
AVANTCE in its sole discretion):
(i) The representations and warranties of the Company set forth in
this Agreement, or in any other document delivered in connection herewith, shall
be true and correct as of the date hereof and as of the Closing Date as though
made on or as of such date (except for representations and warranties made as of
a specified date).
(ii) No court action shall have been instituted or threatened to
restrain or prohibit the acquisition by AVANTCE, or the conveyance by the
Company, of the Transferred Assets.
(iii) The Company shall have performed and complied with all of its
obligations under this Agreement required to be completed prior to Closing and
all documents and instruments required to be delivered by the Company shall be
in form and substance reasonably satisfactory to AVANTCE.
(iv) As of the Closing, there shall be no previously undisclosed
liabilities of the Company in excess of twenty thousand dollars ($20,000). For
the purposes hereof, the liabilities and obligations of the Company that are
deemed to have been disclosed to AVANTCE, include (i) those disclosed on
Schedule 2.03 hereto, (ii) those disclosed in the Company's audited financial
statements for the year ended May 31, 2005, (iii) those arising in the ordinary
course of business consistent with past practice under any Assigned Contract or
(iv) those incurred in the ordinary course of business consistent with past
practice since May 31, 2005.
(v) The Company shall have obtained the Company Stockholder Approval
to this Agreement and the transactions contemplated hereby.
(vi) AVANTCE shall have obtained financing necessary to close the
14
transactions contemplated by this Agreement.
(b) Conditions to the Obligations of the Company. The obligation of the
Company to consummate the transactions contemplated by this Agreement shall be
subject to the following conditions precedent (the "Company Purchase
Conditions") (any of which may be waived in whole or in part in writing by the
Company in its sole discretion):
(i) The representations and warranties of AVANTCE set forth in this
Agreement, or in any other document delivered in connection herewith, shall be
true and correct as of the date hereof and as of the Closing Date as though made
on or as of such date (except for representations and warranties made as of a
specified date).
(ii) No court action shall have been instituted or threatened to
restrain or prohibit the acquisition by AVANTCE, or the conveyance by the
Company, of the Transferred Assets.
(iii) AVANTCE shall have performed and complied with all of its
obligations under this Agreement required to be completed prior to Closing and
all documents and instruments required to be delivered by AVANTCE shall be in
form and substance reasonably satisfactory to the Company.
(iv) The Company shall have obtained the Company Stockholder
Approval to this Agreement and the transactions contemplated hereby.
Section 5.02 Termination. (a) This Agreement may be terminated at any time
prior to Closing as follows:
(i) by the mutual consent of the Company and AVANTCE;
(ii) by either party, in the event that the Closing does not occur
at or before 5:00 p.m. New York time, on October 31, 2005; provided, however,
that the right to terminate this Agreement pursuant to this Section 5.02(a)(i)
shall not be available to any party whose failure to perform any of its
obligations under this Agreement results in the failure of the transaction to be
consummated by such time and date;
(iii) by either party, in the event the Company fails to obtain the
Company Stockholder Approval;
(iv) by AVANTCE, if the Company shall have breached any of its
representations, warranties, covenants or other agreements contained in this
Agreement, which breach (X) would give rise to the failure of a condition set
forth in Section 5.01(a)(i) or (iii), and (Y) is either incapable of being cured
by the Company or, if curable, is not cured within 15 days of receipt from
AVANTCE of written notice thereof; or
15
(v) by the Company, if AVANTCE shall have breached any of its
representations, warranties, covenants or other agreements contained in this
Agreement, which breach (X) would give rise to the failure of a condition set
forth in Section 5.01(b)(i) or (iii), and (Y) is either incapable of being cured
by AVANTCE or, if curable, is not cured within 15 days of receipt from the
Company written notice thereof.
(b) In the event of a termination of this Agreement pursuant to
Section 5.02, this Agreement shall forthwith become void and there shall be no
liability or obligation on the part of AVANTCE or the Company or their
respective shareholders, officers or directors; provided, however, that nothing
herein shall relieve any party for liability for any for any knowing or willful
breach by such party of any of its representations, warranties, covenants or
agreements set forth in this Agreement or in respect of fraud by any party.
Notwithstanding the foregoing, the provisions of this Section 5.02 and Sections
8.02, 8.03 and 9.01 hereof shall survive any termination of this Agreement.
(c) In the event that, prior to the date that this Agreement is duly
terminated pursuant to Section 5.02, the Company enters into a transaction under
which a third party acquires, or obtains an option to acquire, all or
substantially all of the capital stock or assets of the Company, the Company
covenants and agrees to pay to AVANTCE immediately upon entry into such
alternative transaction the principal sum of three hundred and forty thousand
dollars ($340,000) as liquidated damages to compensate AVANTCE for its direct
and indirect costs and expenses in connection with the transactions contemplated
by this Agreement, including AVANTCE's management time devoted to negotiation
and preparation for the transactions contemplated by this Agreement and
AVANTCE's loss as a result of such transactions not being consummated.
ARTICLE VI
CLOSING
Section 6.01 Closing. (a) The closing of all transactions contemplated by
this Agreement (the "Closing") will occur and will be deemed to be effective on
the fifth business day after all conditions to the Closing have been satisfied
or waived or such other date as the parties may mutually agree (the "Closing
Date"). All actions to be taken at Closing will be considered to be taken
simultaneously and no documents will be considered to be delivered until all
documents to be delivered at the Closing have been executed and delivered.
(b) The following actions will occur at the Closing:
(i) An officer of each party will execute a certificate, in
substantially the form attached hereto as Exhibit G, stating that all
representations and warranties made by such party in this Agreement are true and
complete as of the Closing Date (each, an "Officer Certificate").
(ii) The Company will deliver to AVANTCE an opinion of counsel
in form and substance satisfactory to AVANTCE which shall be substantially in
the form attached
16
hereto as Exhibit H ("Company's Counsel's Letter").
(iii) The Company shall execute and deliver to AVANTCE the
Company's remaining Transaction Documents, including the Written Approvals for
Assignment or Change-of-Control under Annex 1.2 to Exhibit C, and any other
endorsements and other good and sufficient instruments and documents of transfer
and assignment, all dated as of the Closing Date and in a form reasonably
satisfactory to AVANTCE, as shall be necessary and effective to transfer and
assign to and to further vest in AVANTCE all of the Transferred Assets.
(iv) AVANTCE shall execute and deliver to the Company
AVANTCE's remaining Transaction Documents and shall accept each of the Bill of
Sale, Copyright Assignment, Patents Assignment, Trademark Assignment and the
Company certificates provided for herein.
(v) AVANTCE shall make a wire transfer of same day funds in
the amount of the Initial Purchase Price as set forth on Schedule 2.01.
(vi) The Company shall, in cooperation with AVANTCE, take all
steps reasonably required to put AVANTCE in actual possession and operating
control of the Transferred Assets.
(vii) Each of the Principal AVANTCE Members shall have
executed and delivered to the Company a Guaranty Agreement.
(viii) The parties shall also execute, if applicable, and
deliver to the other party (A) such other certified charters, incumbency
certificates, good standing certificates and other instruments reasonably
requested by the other party and (B) all other documents necessary to effectuate
the transactions contemplated by, and the terms of, this Agreement.
Section 6.02 Further Assurances. From time to time, pursuant to the
request of a party delivered to the other party after the Closing Date, such
party shall execute, deliver and acknowledge such other instruments and
documents of conveyance and transfer or assumption and, at the expense of the
requesting party, shall take such other actions and shall execute and deliver
such other documents, certifications and further assurances as the other party
reasonably may request in order to vest and confirm more effectively in AVANTCE
title to or to put AVANTCE more fully in legal possession of, or to enable
AVANTCE to use, any of the Transferred Assets, or to enable AVANTCE to complete,
perform or discharge any of the Assumed Liabilities or otherwise enable the
parties to carry out the purposes and intent of this Agreement.
ARTICLE VII
COVENANTS
Section 7.01 Non-Competition. (a) For a period of five (5) years after the
Closing Date, the Company and the Major Shareholders shall not, directly or
indirectly, engage in a business or enterprise that includes the development or
marketing of any competing computer software, and
17
during such period shall not solicit or attempt to solicit sales or licenses of
any competing computer software, interfere with, disrupt or attempt to disrupt
the relationship, contractual or otherwise between AVANTCE and its customers,
suppliers, agents, consultants, officers or employees. This Section 7.01 shall
be enforceable on a worldwide basis. For the purposes of this Agreement, the
phrase "competing computer software" means any software products which has the
same or substantially similar purposes as the RIMS Software, which performs
functions substantially similar to the RIMS Software, and the marketing of which
would tend to inhibit licensing or marketing of such software. The provisions of
this Section shall prevent the Company from investing its assets in securities
of any corporation engaged in business competitive to that of the Business;
provided, however, that the Company shall not be prevented from owning up to
five percent (5%) of the total shares of all classes of stock outstanding of any
corporation.
(b) The undertaking of this non-competition covenant is an integral
part of this transaction and the consideration paid by AVANTCE pursuant to this
Agreement shall be consideration not only for the purchase of the Transferred
Assets and the other transactions contemplated by this Agreement, but also for
the undertaking of this non-competition clause. If this covenant is
unenforceable in any jurisdiction, it shall not render the covenant
unenforceable in any other jurisdiction. If this covenant is deemed too broad in
any jurisdiction, the covenant shall be altered to meet the requirements of that
jurisdiction, but in no event shall the covenant be rendered null and void.
(c) In consideration of the agreement of the Major Shareholders set
forth in Section 7.01 and the indemnities of the Major Shareholders set forth in
Section 10.01 Avantce shall pay to each of the Major Shareholders an amount
equal to $76,667. These payments shall be made in four equal installments within
10 days of the end of the first four fiscal quarters after the Closing Date.
These payments shall be personally guaranteed by the Principal AVANTCE Members
pursuant to the Guaranty Agreement.
Section 7.02 Conduct of Business. From the date hereof to the Closing, the
Company shall carry on its business in the ordinary course consistent with past
practice. Without limiting the generality of the foregoing, from the date hereof
to the Closing, the Company shall not (except in the ordinary course consistent
with past practice or unless AVANTCE shall otherwise approve in writing, and
which approval should not be unreasonably withheld, and except as expressly
permitted by this Agreement):
(a) sell, lease, license, mortgage or otherwise encumber or subject
to any Lien or otherwise dispose of any of the Transferred Assets;
(b) modify, amend or terminate any material Contract relating to the
Transferred Assets, or waive, release or assign any rights or claims;
(c) enter into any Contact relating to the distribution, sale or
marketing by third parties of the products and services of the Business
18
(d) enter into any settlement agreement resulting in payment or a
promise for payment by the Company relating to any threatened litigation or
claims, including but not limited to, any settlement of any outstanding issues
with Company's former distributor in the United Kingdom; or
(e) authorize any of, or commit or agree to take any of, the
foregoing actions.
Section 7.03 Transition. Prior to the Closing Date, the Company will use
commercially reasonable efforts to preserve for the benefit of AVANTCE the
relations between the Company and its customers, suppliers and other Persons
having business relations with the Company with respect to the Transferred
Assets.
Section 7.04 Post-Closing Access to Book and Records. From and after the
Closing Date, AVANTCE shall permit the Company and its officers and
representatives to have reasonable access to the facilities and property
comprising the Business or the Transferred Assets, to consult with and obtain
the assistance (including, without limitation, reasonable travel in connection
with court proceedings) of such of AVANTCE's employees as shall be familiar with
the relevant facts in connection with Tax and accounting matters, the
prosecution or defense by the Company of claims and proceedings and other legal,
contractual and regulatory matters and to review and to have access to the
books, files and records related to the Business for the period ending on the
Closing Date (and the right to make copies thereof at the expense of the
Company) as the Company shall from time to time reasonably request. The Company
shall reimburse any employee of AVANTCE for its out-of-pocket expenses
reasonably incurred in connection with this Section 7.04.
ARTICLE VIII
NON-DISCLOSURE
Section 8.01 Publicity. All notices to third parties and all other
publicity concerning the transactions contemplated by this Agreement shall be
jointly planned and coordinated by and between the Company and AVANTCE. Neither
of the parties shall act unilaterally in this regard without the prior written
approval of the other party, which approval shall not be unreasonably withheld.
Section 8.02 Non-Disclosure of Agreement. Except by mutual agreement or as
may be required to obtain financing for the transactions contemplated by this
Agreement or, the Company Stockholder Approval, or unless compelled to disclose
by judicial or administrative process or by other requirements of law, no party
shall disclose any of the terms and conditions of this Agreement except as may
be necessary to enforce its terms, or as ordered by a court of competent
jurisdiction.
Section 8.03 Confidentiality. The Company and AVANTCE acknowledge that any
information that it has learned about the other during the course of this
transaction is confidential and may contain valuable proprietary trade secrets
and, accordingly, its use and disclosure, must be strictly controlled. All
parties, their officers, directors, employees, and other representatives will
hold any information in strict confidence and will not use, disclose, or
proliferate any information derived about the other during the course of this
transaction prior to the date of
19
Closing. After the date of the Closing, the Company shall not disclose any
information learned about AVANTCE or the Transferred Assets without the written
approval of AVANTCE, unless compelled to disclose by judicial or administrative
process or by other requirements of law. Notwithstanding the foregoing, the
following information regarding any party shall not be deemed to be confidential
information subject to the provisions of this Section 8.03: information publicly
known or generally known in the industry of the Business through no act of the
disclosing party, information obtained from independent sources, information
required to be disclosed to the disclosing party's representatives for the
purposes of this transaction or information known by the disclosing party on a
non-confidential basis prior to the disclosure to such party.
ARTICLE IX
ADDITIONAL AGREEMENTS
Section 9.01 Costs and Expenses. Each of the parties shall pay all of
their respective costs and expenses incurred or to be incurred by each of them
in negotiating and preparing this Agreement and in closing and carrying out the
transactions contemplated by this Agreement provided, however, that AVANTCE
shall pay to the Company an amount equal to the costs and expenses of the
Company's third party advisors incurred in connection with the transactions
contemplated by this Agreement, not to exceed $150,000 in the aggregate, in the
event of a termination of this Agreement pursuant to Section 5.02 (a) (v).
Section 9.02 Bulk Sales Law. The parties hereby waive the other party's
compliance with the provisions of Article 6 of the Uniform Commercial Code -
Bulk Transfers and the Bulk Sales Act and any other applicable United States,
state or provincial bulk sales act or statute, if applicable.
Section 9.03 Employees; Benefit Plans.
(a) Employees. AVANTCE shall offer employment, effective as of the
Closing Date, to all officers (other than any Major Shareholder), employees,
agents and consultants of the Company employed primarily in connection with the
Business (the "Business Employees") who are employed as of the Closing on such
terms and conditions generally comparable to those in effect immediately prior
to the Closing. Each such Business Employee who accepts AVANTCE's offer of
employment effective as of the Closing Date shall be referred to herein as a
"Transferred Employee". Nothing herein shall, or shall be construed to, limit
AVANTCE's right at any time to terminate the employment of any Transferred
Employee or to amend or terminate any employee benefit plan or otherwise change
terms and conditions of employment of any Transferred Employee.
(b) Employee Benefits.
(i) The parties agree that, to the extent permissible under
applicable law, AVANTCE 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, if AVANTCE so elects, under any applicable state workers
20
compensation and unemployment compensation laws. The Company agrees to provide
AVANTCE with such wage, tax and other information with respect to Transferred
Employees as AVANTCE may reasonably require for such purposes.
(ii) AVANTCE shall assume and be bound by, obligated and responsible
for any and all duties, responsibilities, commitments, expenses, obligations or
liabilities of the Company relating to the Business (or which may be asserted
against or imposed upon AVANTCE as a successor or transferee of the Company as
an acquirer of the Business or the Transferred Assets or otherwise as a matter
of law) which arise from, or relate to, any Transferred Benefit Plan, including
the Transferred Benefit Plans, liabilities for salaries, wages, sick pay, COBRA
continuation coverage or benefits under any other employee benefit plan or
arrangement, workers compensation or unemployment insurance premiums, tax
withholding, occupational injury, illness or disability, or claims arising under
any employment, labor or discrimination laws whether payable prior to or after
the Closing.
(iii) The parties agree to furnish each other with such information
concerning Business Employees and Transferred Benefit Plans, and to take all
such other action, as is necessary and appropriate to effect the transactions
contemplated by this Section 9.03.
ARTICLE X
INDEMNIFICATION
Section 10.01 Indemnification by the Company. The Major Shareholders,
personally, jointly and severally, shall be liable for, shall indemnify AVANTCE,
and its officers, directors, Affiliates and employees for, shall hold harmless,
protect and defend AVANTCE and its officers, directors, Affiliates or employees
from and against, and shall reimburse AVANTCE, and its officers, directors,
Affiliates and employees for, any and all of AVANTCE's Damages; provided,
however, that the foregoing indemnification obligation shall only be available
in the event and to the extent that AVANTCE's Damages exceed $50,000, and
provided further, that the total amount of AVANTCE's Damages for which AVANTCE
may be indemnified pursuant this Article X shall not exceed $2,500,000 for any
Intellectual Property claim and $500,000 for any other claims, in the aggregate
regardless of whether the Company receives any insurance proceeds covering such
Damages and net of any tax benefits to AVANTCE.
Section 10.02 Indemnification by AVANTCE. AVANTCE shall be liable for,
shall indemnify the Company, and its officers, directors, Affiliates and
employees for, shall hold harmless, protect and defend the Company and its
officers, directors, Affiliates and employees, from and against, and shall
reimburse the Company, and its officers, directors, Affiliates and employees
for, any and all of the Company's Damages.
Section 10.03 Matters Involving Third Parties, Etc. (a) If any legal
proceeding shall be instituted, or any claim or demand made, against an
indemnified party or a party which proposes to assert that the provisions of
this Article X apply (the "Indemnified Party") such Indemnified Party shall give
prompt written notice of the claim to the party obliged or alleged to be so
obliged so to indemnify such Indemnified Party (the "Indemnitor"). The omission
so to notify, or notify promptly, such Indemnitor, however, shall not relieve
such Indemnitor from any duty to
21
indemnify which otherwise might exist with regard to such claim unless (and only
to the extent that) the omission to notify, or notify promptly, materially
prejudices the ability of the Indemnitor to assume the defense of such claim.
After any Indemnitor has received notice from an Indemnified Party that a claim
has been asserted against such Indemnified Party, the Indemnitor shall within
thirty (30) days pay to the Indemnified Party the amount of such Damages in
accordance with and subject to the provisions of this Section; provided,
however, that no such payment shall be due during any period in which the
Indemnitor is contesting in good faith either its obligation to make such
indemnification or the amount of Damages payable, or both. After any Indemnitor
has received notice from an Indemnified Party that a claim has been asserted
against it by a third party, the Indemnitor shall have the right, upon giving
written notice to the Indemnified Party, to participate in the defense of such
claim and to elect to assume the defense against the claim, at its own expense,
through the Indemnified Party's attorney or an attorney selected by the
Indemnitor and approved by the Indemnified Party, which approval shall not be
unreasonably withheld. If the Indemnitor fails to give prompt notice of such
election, then the Indemnitor shall be deemed to have elected not to assume the
defense of such claim and the Indemnified Party may defend against the claim
with its own attorney.
(b) If the Indemnitor so elects to participate in the defense of
such claim or to assume the defense against a claim, then the Indemnified Party
will cooperate and make available to the Indemnitor (and its representatives)
all employees, information, books and records in its possession or under its
control which are reasonably necessary or useful in connection with such
defense; and if the Indemnitor shall have elected to assume the defense of a
claim, then the Indemnitor shall have the right to compromise and settle in good
faith any such claim provided such release or settlement contains an
unconditional release of the Indemnified Party. If such conditions are not
satisfied and such unconditional release not obtained, then the Indemnitor will
not compromise or settle such action, suit, proceeding, or claim without the
prior written consent of the Indemnified Party, which consent shall not be
unreasonably withheld or delayed. If the Indemnitor is conducting the defense of
a claim, the Indemnified Party may retain separate co-counsel at its cost and
expense and participate in such defense.
(c) If the Indemnitor does not elect to assume or is deemed to have
elected not to assume the defense of a claim then: (i) the Indemnified Party
shall have the right to conduct such defense; (ii) the Indemnified Party shall
have the right to compromise and to settle, in good faith, the claim without the
prior consent of the Indemnitor; (iii) the Indemnitor will periodically
reimburse the Indemnified Party for costs (including reasonable legal fees); and
(iv) if it is ultimately determined that the claim of loss which shall form the
basis of such judgment or settlement is one that is validly an obligation of the
Indemnitor that elected not to assume the defense, then such Indemnitor shall be
bound by any ultimate judgment or settlement as to the existence and the amount
of the claim and the amount of said judgment or settlement (including the
attorneys' fees, costs and expenses of defending such claims) shall be
conclusively deemed for all purposes of this Agreement to be a liability on
account of which the Indemnified Party is entitled to be indemnified hereunder,
subject to any limits on the right to be so indemnified hereunder. Upon the
determination of liability under and subject to Section 9.01 or 9.02 hereof, the
appropriate party shall within thirty (30) days of such determination, pay the
amount of such claim.
22
Section 10.04 Credits Against Future Payment. If AVANTCE is determined to
be entitled to indemnification by the Major Shareholders under the terms of this
Agreement, then AVANTCE shall first credit such amount for which it is entitled
to indemnification against any payments (if any such payments are due and owing
at that time), which it may be required to make to the Company pursuant to the
Promissory Note.
ARTICLE XI
MISCELLANEOUS
Section 11.01 Notices. All notices, requests, demands or other
communications hereunder shall be in writing, hand delivered or mailed by
certified mail, return receipt required, or by overnight courier, receipt
signature required or by facsimile transmission with verification of
transmission received by the sender, to each party at the address that follows
or at such other place as any party may, by written notice to the other parties
hereto, direct:
23
Addresses for the Company:
Prior to the Closing:
Irwin Balaban
Chief Executive Officer
511 Ocean Avenue
Massapequa, New York 11758
Facsimile: 516-795-6933
After the Closing:
c/o Irwin Balaban
17 Fairbanks Boulevard
Woodbury, New York 11797
Facsimile: 516-367-9588
In each case, with a copy to:
Pryor Cashman Sherman & Flynn LLP
Attn: Eric Hellige, Esq.
410 Park Avenue
New York, New York 10022
Facsimile: 212-326-0806
Address for AVANTCE:
Kristi Kennedy
Jon Scheumann
508 Ashley Way
Peachtree City, GA 30269
Facsimile: 240 368-4874
Addresses for the Major Shareholders:
Mr. Irwin Balaban
17 Fairbanks
Boulevard Woodbury, New York 11797
Facsimile: 516-367-9588
Mr. Lawrence Klein
P.O. Box 232
67 Fairview Road
Monterey, Massachusetts 01245
24
Mr. Herbert Goldman
68 Beaumont Drive
Plainview, New York 11803
In each case, with a copy to:
Pryor Cashman Sherman & Flynn LLP
Attn: Eric Hellige, Esq.
410 Park Avenue
New York, New York 10022
Facsimile: 212-326-0806
Any such notice, when sent in accordance with the provisions hereof, shall
be deemed to have been given and received (a) on the day personally delivered or
faxed (with confirmation) or (b) on the second day after the day overnight
delivered or (c) on the fifth day following the date mailed.
Section 11.02 Modification and Waiver/Entire Agreement. This Agreement,
and the exhibits, schedules and other documents referenced herein, constitutes
the entire Agreement between the parties pertaining to the subject matter
contained herein and supersedes all prior and contemporaneous agreements,
representations and understanding of the parties. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by the
parties. No waiver of any of the provisions of this Agreement shall be deemed,
or shall constitute, a waiver of any other provision nor shall any waiver
constitute a continuing waiver. No waiver shall be binding unless executed in
writing by the party making the waiver.
Section 11.03 Counterparts. This Agreement may be executed simultaneously
in one or more counterparts, including telecopy facsimiles, each of which shall
be deemed an original, but all of which together shall constitute one and the
same Agreement.
Section 11.04 Rights of Parties. Nothing in this Agreement, whether
express or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any Persons other than the parties hereto and their
respective successors, heirs, executors and assigns, nor is anything in this
Agreement intended to relieve or discharge the obligation or liability of any
third persons to any party to this Agreement, nor shall any provision give any
third persons any right of subrogation or action over or against any party to
this Agreement; provided, however, that in the event the Company assigns the
Promissory Note to any third Person established for the benefit of the Company's
shareholders on the Closing Date, such third Person shall have such rights
hereunder and under the Promissory Note as have been assigned by the Company to
such third Person.
25
Section 11.05 Successor Liability. This entire Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors, heirs, executors and assigns.
Section 11.06 Specific Performance. Each of the parties hereto
acknowledges that the rights, benefits and obligations of such party pursuant to
this Agreement are unique and that no adequate remedy exists at law if any such
party shall fail to perform any of its obligations hereunder, and each party
therefore confirms and agrees that each such party's right to specific
performance is essential to protect the interests of each party hereto.
Accordingly, each party hereby agrees that each party shall, in addition to any
other remedies which the parties may have hereunder or at law or in equity or
otherwise, have the right to have all obligations, undertakings, agreements and
other provisions of this Agreement specifically performed by each other party
hereto. Notwithstanding any breach or default by any of the parties of any of
their representations, warranties, covenants or agreements under this Agreement,
if the transactions contemplated by it shall be consummated at the Closing, each
of the parties waives any rights that it may have to rescind this Agreement or
the transactions contemplated hereby; provided, however, that this waiver shall
not affect any other rights or remedies available to the parties under this
Agreement or under applicable law.
Section 11.07 Costs. If any legal action or other proceeding is brought or
any Dispute arising regarding the enforcement or interpretation of this
Agreement or because of an alleged Dispute, breach, default or misrepresentation
in connection with any of the provisions of this Agreement, the successful or
prevailing party shall be entitled to recover reasonable costs, including
attorney's fees, incurred in that action or proceeding, in addition to any other
relief to which it may be entitled.
Section 11.08 Taxes. All sales, use, transfer and purchase taxes and fees,
if any, arising out of the transfer of the Transferred Assets pursuant to this
Agreement shall be shared equally by the Company and AVANTCE. The Company and
AVANTCE agree to cooperate with each other and to file all necessary
documentation (including, without limitation, all tax returns) with respect to
such amounts in a timely manner.
Section 11.09 Assignability. This Agreement may not be assigned by either
party without the prior written consent of the other party hereto, which consent
shall not be unreasonably withheld.
Section 11.10 Severability of Provisions. If any provision, or a part
thereof, of this Agreement is prohibited, unenforceable or invalid under
applicable law, then the provision or part thereof shall be ineffective to the
extent of such prohibition, unenforceability or invalidity under such law
without affecting the enforceability or validity of such provision in any other
jurisdiction and without invalidating the remainder of such provision or other
provisions of this Agreement.
Section 11.11 Cooperation of Parties. Each party shall give its full
cooperation to the other in achieving and fulfilling the terms of this Agreement
and to that end each party shall give all consents and information and execute
all such documents as may reasonably be required to so
26
fulfill and achieve these purposes, including such as may be required by
governmental laws or regulations.
Section 11.12 Survival; Remedies. All representations and warranties, of
the parties contained in this Agreement, or any instrument, certificate, opinion
or other writing provided for in it, shall survive the Closing for a period of
one year (the "Survival Period"). Notwithstanding anything to the contrary
contained herein, the parties acknowledge and agree that the indemnification
provisions contained in Article X hereof shall be the sole and exclusive remedy
for Company's Damages or AVANTCE's Damages, as the case may be. Expiration of
the Survival Period shall not affect the rights of any party under Article X
hereof in respect of any specific claim for Damages made in writing by such a
party and received by the other party prior to such expiration.
Section 11.13 Mediation; Arbitration; Governing Law. (a) If any disputes,
claims or controversies arise in connection with, pursuant to, or related to,
this Agreement ("Disputes"), the parties agree to use their commercially
reasonable efforts to have their respective management resolve such Dispute
within a reasonable time through negotiations and efforts by the affected
parties. If such Dispute cannot be resolved by negotiation, the parties agree to
subject the Dispute to a sole mediator selected by the parties, or, if the
parties are unable to agree to the sole mediator, the parties agree to submit
the Dispute to mediation under the rules of the American Arbitration Association
("AAA"). If not thus resolved, within ninety (90) days after the conclusion of
mediation, the Dispute will be referred to arbitration under an arbitral
tribunal composed of an agreed upon number of arbitrators by the AAA in
accordance with the rules of the AAA.
(b) The place of mediation or arbitration shall beWilmington,
Delaware, U.S.A.
(c) This Agreement shall be governed and construed according to the
laws of the State of Delaware, excluding conflict of laws principles, provided
that any Dispute relating to the validity or effect of this arbitration clause,
or to any arbitration arising thereunder, shall be governed by the arbitration
law of the arbitral situs.
(d) The award may grant any relief appropriate under the applicable
law, including without limitation declaratory relief and/or specific
performance. However, the parties agree that notwithstanding the applicable law,
the arbitral tribunal shall not be empowered to award punitive damages against
either party.
(e) Nothing contained in this arbitration clause shall prevent
either party from seeking conservatory or interim measures from the arbitral
tribunal or courts of competent jurisdiction. Such limited recourse to the
courts shall be in furtherance of the arbitration and shall not affect the
jurisdiction of the arbitral tribunal to determine the Dispute, claim or
controversy at issue.
(f) In the event that any Dispute arises under both this present
Agreement and any other agreement, document or instrument executed by the
parties in connection with the transactions contemplated hereby, such Disputes
shall be resolved in a consolidated proceeding
27
by a single arbitral tribunal appointed by the AAA. The parties recognize that
Disputes involving AVANTCE, the Company and a third party may not necessarily be
consolidated with such proceeding without the consent of such third party.
However, the parties agree to consolidation of such Disputes with the principal
arbitration if the third party agrees.
(h) The parties shall disclose and produce to each other all
documents on which they intend to rely in the arbitration and all documents
directly relevant to claims or defenses in the case. The arbitral tribunal shall
have the power to order production of such documents.
(i) The parties hereby agree there shall be no right of appeal to
any court on the merits of any Dispute.
(j) Judgment on the award may be entered in any court having
jurisdiction over the award or any of the parties or their assets.
[signature page follows]
28
IN WITNESS WHEREOF, this Asset Purchase Agreement has been duly executed by the
parties hereto as of the day and year first above written.
AVANTCE RSI, LLC
By: /s/ Jonathan D. Scheumann
-------------------------------
Name: Jonathan D. Scheumann
Title: Managing Director
ROBOCOM SYSTEMS INTERNATIONAL, INC.
By: /s/ Irwin Balaban
-------------------------------
Name: Irwin Balaban
Title: Chief Executive Officer
Major Shareholders for the purposes of Section 7.01 and Article X
/s/ Irwin Balaban
- --------------------------------------
Irwin Balaban
/s/ Lawrence Klein
- --------------------------------------
Lawrence Klein
/s/ Herbert Goldman
- --------------------------------------
Herbert Goldman
29
ANNEX B
Section 623. Procedure to enforce shareholder's right to receive payment for
shares
(a) A shareholder intending to enforce his right under a section of this chapter
to receive payment for his shares if the proposed corporate action referred to
therein is taken shall file with the corporation, before the meeting of
shareholders at which the action is submitted to a vote, or at such meeting but
before the vote, written objection to the action. The objection shall include a
notice of his election to dissent, his name and residence address, the number
and classes of shares as to which he dissents and a demand for payment of the
fair value of his shares if the action is taken. Such objection is not required
from any shareholder to whom the corporation did not give notice of such meeting
in accordance with this chapter or where the proposed action is authorized by
written consent of shareholders without a meeting.
(b) Within ten days after the shareholders' authorization date, which term as
used in this section means the date on which the shareholders' vote authorizing
such action was taken, or the date on which such consent without a meeting was
obtained from the requisite shareholders, the corporation shall give written
notice of such authorization or consent by registered mail to each shareholder
who filed written objection or from whom written objection was not required,
excepting any shareholder who voted for or consented in writing to the proposed
action and who thereby is deemed to have elected not to enforce his right to
receive payment for his shares.
(c) Within twenty days after the giving of notice to him, any shareholder from
whom written objection was not required and who elects to dissent shall file
with the corporation a written notice of such election, stating his name and
residence address, the number and classes of shares as to which he dissents and
a demand for payment of the fair value of his shares. Any shareholder who elects
to dissent from a merger under section 905 (Merger of subsidiary corporation) or
paragraph (c) of section 907 (Merger or consolidation of domestic and foreign
corporations) or from a share exchange under paragraph (g) of section 913 (Share
exchanges) shall file a written notice of such election to dissent within twenty
days after the giving to him of a copy of the plan of merger or exchange or an
outline of the material features thereof under section 905 or 913.
(d) A shareholder may not dissent as to less than all of the shares, as to which
he has a right to dissent, held by him of record, that he owns beneficially. A
nominee or fiduciary may not dissent on behalf of any beneficial owner as to
less than all of the shares of such owner, as to which such nominee or fiduciary
has a right to dissent, held of record by such nominee or fiduciary.
(e) Upon consummation of the corporate action, the shareholder shall cease to
have any of the rights of a shareholder except the right to be paid the fair
value of his shares and any other rights under this section. A notice of
election may be withdrawn by the shareholder at any time prior to his acceptance
in writing of an offer made by the corporation, as provided in paragraph (g),
but in no case later than sixty days from the date of consummation of the
corporate action except that if the corporation fails to make a timely offer, as
provided in paragraph (g), the time for
withdrawing a notice of election shall be extended until sixty days from the
date an offer is made. Upon expiration of such time, withdrawal of a notice of
election shall require the written consent of the corporation. In order to be
effective, withdrawal of a notice of election must be accompanied by the return
to the corporation of any advance payment made to the shareholder as provided in
paragraph (g). If a notice of election is withdrawn, or the corporate action is
rescinded, or a court shall determine that the shareholder is not entitled to
receive payment for his shares, or the shareholder shall otherwise lose his
dissenters' rights, he shall not have the right to receive payment for his
shares and he shall be reinstated to all his rights as a shareholder as of the
consummation of the corporate action, including any intervening preemptive
rights and the right to payment of any intervening dividend or other
distribution or, if any such rights have expired or any such dividend or
distribution other than in cash has been completed, in lieu thereof, at the
election of the corporation, the fair value thereof in cash as determined by the
board as of the time of such expiration or completion, but without prejudice
otherwise to any corporate proceedings that may have been taken in the interim.
(f) At the time of filing the notice of election to dissent or within one month
thereafter the shareholder of shares represented by certificates shall submit
the certificates representing his shares to the corporation, or to its transfer
agent, which shall forthwith note conspicuously thereon that a notice of
election has been filed and shall return the certificates to the shareholder or
other person who submitted them on his behalf. Any shareholder of shares
represented by certificates who fails to submit his certificates for such
notation as herein specified shall, at the option of the corporation exercised
by written notice to him within forty-five days from the date of filing of such
notice of election to dissent, lose his dissenter's rights unless a court, for
good cause shown, shall otherwise direct. Upon transfer of a certificate bearing
such notation, each new certificate issued therefor shall bear a similar
notation together with the name of the original dissenting holder of the shares
and a transferee shall acquire no rights in the corporation except those which
the original dissenting shareholder had at the time of transfer.
(g) Within fifteen days after the expiration of the period within which
shareholders may file their notices of election to dissent, or within fifteen
days after the proposed corporate action is consummated, whichever is later (but
in no case later than ninety days from the shareholders' authorization date),
the corporation or, in the case of a merger or consolidation, the surviving or
new corporation, shall make a written offer by registered mail to each
shareholder who has filed such notice of election to pay for his shares at a
specified price which the corporation considers to be their fair value. Such
offer shall be accompanied by a statement setting forth the aggregate number of
shares with respect to which notices of election to dissent have been received
and the aggregate number of holders of such shares. If the corporate action has
been consummated, such offer shall also be accompanied by (1) advance payment to
each such shareholder who has submitted the certificates representing his shares
to the corporation, as provided in paragraph (f), of an amount equal to eighty
percent of the amount of such offer, or (2) as to each shareholder who has not
yet submitted his certificates a statement that advance payment to him of an
amount equal to eighty percent of the amount of such offer will be made by the
corporation promptly upon submission of his certificates. If the corporate
action has not been consummated at the time of the making of the offer, such
advance payment or statement as to advance payment shall be sent to each
shareholder entitled thereto forthwith upon consummation of the corporate
action.
Every advance payment or statement as to advance payment shall include advice to
the shareholder to the effect that acceptance of such payment does not
constitute a waiver of any dissenters' rights. If the corporate action has not
been consummated upon the expiration of the ninety day period after the
shareholders' authorization date, the offer may be conditioned upon the
consummation of such action. Such offer shall be made at the same price per
share to all dissenting shareholders of the same class, or if divided into
series, of the same series and shall be accompanied by a balance sheet of the
corporation whose shares the dissenting shareholder holds as of the latest
available date, which shall not be earlier than twelve months before the making
of such offer, and a profit and loss statement or statements for not less than a
twelve month period ended on the date of such balance sheet or, if the
corporation was not in existence throughout such twelve month period, for the
portion thereof during which it was in existence. Notwithstanding the foregoing,
the corporation shall not be required to furnish a balance sheet or profit and
loss statement or statements to any shareholder to whom such balance sheet or
profit and loss statement or statements were previously furnished, nor if in
connection with obtaining the shareholders' authorization for or consent to the
proposed corporate action the shareholders were furnished with a proxy or
information statement, which included financial statements, pursuant to
Regulation 14A or Regulation 14C of the United States Securities and Exchange
Commission. If within thirty days after the making of such offer, the
corporation making the offer and any shareholder agree upon the price to be paid
for his shares, payment therefor shall be made within sixty days after the
making of such offer or the consummation of the proposed corporate action,
whichever is later, upon the surrender of the certificates for any such shares
represented by certificates.
(h) The following procedure shall apply if the corporation fails to make such
offer within such period of fifteen days, or if it makes the offer and any
dissenting shareholder or shareholders fail to agree with it within the period
of thirty days thereafter upon the price to be paid for their shares:
(1) The corporation shall, within twenty days after the expiration of
whichever is applicable of the two periods last mentioned, institute a
special proceeding in the supreme court in the judicial district in which
the office of the corporation is located to determine the rights of
dissenting shareholders and to fix the fair value of their shares. If, in
the case of merger or consolidation, the surviving or new corporation is a
foreign corporation without an office in this state, such proceeding shall
be brought in the county where the office of the domestic corporation,
whose shares are to be valued, was located.
(2) If the corporation fails to institute such proceeding within such
period of twenty days, any dissenting shareholder may institute such
proceeding for the same purpose not later than thirty days after the
expiration of such twenty day period. If such proceeding is not instituted
within such thirty day period, all dissenter's rights shall be lost unless
the supreme court, for good cause shown, shall otherwise direct.
(3) All dissenting shareholders, excepting those who, as provided in
paragraph (g), have agreed with the corporation upon the price to be paid
for their shares, shall be made parties to such proceeding, which shall
have the effect of an action quasi in rem against
their shares. The corporation shall serve a copy of the petition in such
proceeding upon each dissenting shareholder who is a resident of this
state in the manner provided by law for the service of a summons, and upon
each nonresident dissenting shareholder either by registered mail and
publication, or in such other manner as is permitted by law. The
jurisdiction of the court shall be plenary and exclusive.
(4) The court shall determine whether each dissenting shareholder, as to
whom the corporation requests the court to make such determination, is
entitled to receive payment for his shares. If the corporation does not
request any such determination or if the court finds that any dissenting
shareholder is so entitled, it shall proceed to fix the value of the
shares, which, for the purposes of this section, shall be the fair value
as of the close of business on the day prior to the shareholders'
authorization date. In fixing the fair value of the shares, the court
shall consider the nature of the transaction giving rise to the
shareholder's right to receive payment for shares and its effects on the
corporation and its shareholders, the concepts and methods then customary
in the relevant securities and financial markets for determining fair
value of shares of a corporation engaging in a similar transaction under
comparable circumstances and all other relevant factors. The court shall
determine the fair value of the shares without a jury and without referral
to an appraiser or referee. Upon application by the corporation or by any
shareholder who is a party to the proceeding, the court may, in its
discretion, permit pretrial disclosure, including, but not limited to,
disclosure of any expert's reports relating to the fair value of the
shares whether or not intended for use at the trial in the proceeding and
notwithstanding subdivision (d) of section 3101 of the civil practice law
and rules.
(5) The final order in the proceeding shall be entered against the
corporation in favor of each dissenting shareholder who is a party to the
proceeding and is entitled thereto for the value of his shares so
determined.
(6) The final order shall include an allowance for interest at such rate
as the court finds to be equitable, from the date the corporate action was
consummated to the date of payment. In determining the rate of interest,
the court shall consider all relevant factors, including the rate of
interest which the corporation would have had to pay to borrow money
during the pendency of the proceeding. If the court finds that the refusal
of any shareholder to accept the corporate offer of payment for his shares
was arbitrary, vexatious or otherwise not in good faith, no interest shall
be allowed to him.
(7) Each party to such proceeding shall bear its own costs and expenses,
including the fees and expenses of its counsel and of any experts employed
by it. Notwithstanding the foregoing, the court may, in its discretion,
apportion and assess all or any part of the costs, expenses and fees
incurred by the corporation against any or all of the dissenting
shareholders who are parties to the proceeding, including any who have
withdrawn their notices of election as provided in paragraph (e), if the
court finds that their refusal to accept the corporate offer was
arbitrary, vexatious or otherwise not in good faith. The court may, in its
discretion, apportion and assess all or any part of the costs, expenses
and
fees incurred by any or all of the dissenting shareholders who are parties
to the proceeding against the corporation if the court finds any of the
following:
(A) that the fair value of the shares as determined materially
exceeds the amount which the corporation offered to pay;
(B) that no offer or required advance payment was made by the
corporation;
(C) that the corporation failed to institute the special proceeding
within the period specified therefor; or
(D) that the action of the corporation in complying with its
obligations as provided in this section was arbitrary, vexatious or
otherwise not in good faith.
In making any determination as provided in clause (A), the court may
consider the dollar amount or the percentage, or both, by which the fair
value of the shares as determined exceeds the corporate offer.
(8) Within sixty days after final determination of the proceeding, the
corporation shall pay to each dissenting shareholder the amount found to
be due him, upon surrender of the certificates for any such shares
represented by certificates.
(i) Shares acquired by the corporation upon the payment of the agreed value
therefor or of the amount due under the final order, as provided in this
section, shall become treasury shares or be cancelled as provided in section 515
(Reacquired shares), except that, in the case of a merger or consolidation, they
may be held and disposed of as the plan of merger or consolidation may otherwise
provide.
(j) No payment shall be made to a dissenting shareholder under this section at a
time when the corporation is insolvent or when such payment would make it
insolvent. In such event, the dissenting shareholder shall, at his option:
(1) Withdraw his notice of election, which shall in such event be deemed
withdrawn with the written consent of the corporation; or
(2) Retain his status as a claimant against the corporation and, if it is
liquidated, be subordinated to the rights of creditors of the corporation,
but have rights superior to the non-dissenting shareholders, and if it is
not liquidated, retain his right to be paid for his shares, which right
the corporation shall be obliged to satisfy when the restrictions of this
paragraph do not apply.
(3) The dissenting shareholder shall exercise such option under
subparagraph (1) or (2) by written notice filed with the corporation
within thirty days after the corporation has given him written notice that
payment for his shares cannot be made because of the restrictions of this
paragraph. If the dissenting shareholder fails to exercise such option as
provided, the corporation shall exercise the option by written notice
given to him within twenty days after the expiration of such period of
thirty days.
(k) The enforcement by a shareholder of his right to receive payment for his
shares in the manner provided herein shall exclude the enforcement by such
shareholder of any other right to which he might otherwise be entitled by virtue
of share ownership, except as provided in paragraph (e), and except that this
section shall not exclude the right of such shareholder to bring or maintain an
appropriate action to obtain relief on the ground that such corporate action
will be or is unlawful or fraudulent as to him.
(l) Except as otherwise expressly provided in this section, any notice to be
given by a corporation to a shareholder under this section shall be given in the
manner provided in section 605 (Notice of meetings of shareholders).
(m) This section shall not apply to foreign corporations except as provided in
subparagraph (e) (2) of section 907 (Merger or consolidation of domestic and
foreign corporations).
Section 910. Right of shareholder to receive payment for shares upon merger or
consolidation, or sale, lease, exchange or other disposition of assets, or share
exchange
(a) A shareholder of a domestic corporation shall, subject to and by complying
with section 623 (Procedure to enforce shareholder's right to receive payment
for shares), have the right to receive payment of the fair value of his shares
and the other rights and benefits provided by such section, in the following
cases:
(1) Any shareholder entitled to vote who does not assent to the taking of
an action specified in clauses (A), (B) and (C).
(A) Any plan of merger or consolidation to which the corporation is
a party; except that the right to receive payment of the fair value
of his shares shall not be available:
(i) To a shareholder of the parent corporation in a merger
authorized by section 905 (Merger of parent and subsidiary
corporations), or paragraph (c) of section 907 (Merger or
consolidation of domestic and foreign corporations); or
(ii) To a shareholder of the surviving corporation in a merger
authorized by this article, other than a merger specified in
subclause (i), unless such merger effects one or more of the
changes specified in subparagraph (b) (6) of section 806
(Provisions as to certain proceedings) in the rights of the
shares held by such shareholder; or
(iii) Notwithstanding subclause (ii) of this clause, to a
shareholder for the shares of any class or series of stock,
which shares or depository receipts in respect thereof, at the
record date fixed to determine the shareholders entitled to
receive notice of the meeting of shareholders to vote upon the
plan of merger or consolidation, were listed on a national
securities exchange or designated as a national market system
security on an interdealer quotation system by the National
Association of Securities Dealers, Inc.
(B) Any sale, lease, exchange or other disposition of all or
substantially all of the assets of a corporation which requires
shareholder approval under section 909 (Sale, lease, exchange or
other disposition of assets) other than a transaction wholly for
cash where the shareholders' approval thereof is conditioned upon
the dissolution of the corporation and the distribution of
substantially all of its net assets to the shareholders in
accordance with their respective interests within one year after the
date of such transaction.
(C) Any share exchange authorized by section 913 in which the
corporation is participating as a subject corporation; except that
the right to receive payment of the fair value of his shares shall
not be available to a shareholder whose shares have not been
acquired in the exchange or to a shareholder for the shares of any
class or series of stock, which shares or depository receipt in
respect thereof, at the record date fixed to determine the
shareholders entitled to receive notice of the meeting of
shareholders to vote upon the plan of exchange, were listed on a
national securities exchange or designated as a national market
system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc.
(2) Any shareholder of the subsidiary corporation in a merger authorized
by section 905 or paragraph (c) of section 907, or in a share exchange
authorized by paragraph (g) of section 913, who files with the corporation
a written notice of election to dissent as provided in paragraph (c) of
section 623.
(3) Any shareholder, not entitled to vote with respect to a plan of merger
or consolidation to which the corporation is a party, whose shares will be
cancelled or exchanged in the merger or consolidation for cash or other
consideration other than shares of the surviving or consolidated
corporation or another corporation.