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ASSET PURCHASE AGREEMENT

Asset Purchase Agreement

ASSET PURCHASE AGREEMENT | Document Parties: NATURE VISION, INC. | Cass Creek International, LLC | Nature Vision, Inc You are currently viewing:
This Asset Purchase Agreement involves

NATURE VISION, INC. | Cass Creek International, LLC | Nature Vision, Inc

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Title: ASSET PURCHASE AGREEMENT
Governing Law: Minnesota     Date: 9/25/2007
Industry: Photography     Law Firm: Gray Plant     Sector: Consumer Cyclical

ASSET PURCHASE AGREEMENT, Parties: nature vision  inc. , cass creek international  llc , nature vision  inc
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Exhibit 10.5

 

EXECUTION

 

ASSET PURCHASE AGREEMENT

 

This Asset Purchase Agreement (this “ Agreement ”) among Nature Vision, Inc., a Minnesota corporation (the “ Buyer ”), and Cass Creek International, LLC, a New York limited liability company (“ Cass Creek ”) and Gary R. Lynn (“ Lynn ”), John T. Bergstue (“ Bergstue ”), and James G. Streib (“ Streib ”) (where Lynn, Bergstue and Streib are individuals, each of whom may be referred to as a “ Member ” or collectively as “ Members ,” and where Members and Cass Creek referred to collectively as the “ Sellers ”), takes effect on September 20, 2007 (the “ Closing Date ”). The Buyer, Cass Creek, Bergstue, Streib and Lynn are referred to individually as a “ Party ” and collectively as the “ Parties .”

 

RECITALS

A.

Cass Creek manufactures and distributes electronic game calling devices (the “ Business ”).

B.

The Sellers desires to sell, transfer and otherwise convey, and the Buyer desires to purchase and assume, all of the assets of the Sellers related to the Business, on the terms and subject to the conditions of this Agreement.

AGREEMENT

In consideration of the above recitals and the promises set forth in this Agreement, the Parties agree as follows.

1.

Basic Transaction .

 

1.1

Purchase and Sale of Assets . On the terms and subject to the conditions of this Agreement, the Buyer hereby purchases from the Sellers, and the Sellers hereby sell, transfer, convey and deliver to the Buyer, all right, title and interest in, to and under all of the assets of the Sellers related to the Business (collectively, the “ Acquired Assets ”), free and clear of all security interests, liens, claims, charges, restrictions and encumbrances of any nature except the Assumed Liabilities defined in Section 1.3 below, in exchange for the Purchase Price (defined below), including the following:

 

(a)

all of the equipment, tools, molds, dies and other items and materials owned by the Sellers and related to the Business, wherever located, including the assets identified on Schedule 1.1(a) to this Agreement, together with all related warranties, accessories and spare parts (collectively, the “ Equipment ”);

 

(b)

all inventories of supplies, raw materials, parts, finished goods, work-in-process, product prototypes, samples, product labels and packaging materials of the Sellers related to the Business, including the inventories identified on Schedule   1.1(b) (collectively, the “ Inventory ”);

 




 

(c)

all of the intellectual property related to the Business and its associated goodwill, including (a) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all improvements, and all patents, patent applications and patent disclosures, together with all reissuances, continuations, continuations-in-part, revisions, extensions and reexaminations; (b) all trademarks, service marks, trade dress, logos, trade names and corporate names, together with all translations, adaptations, derivations and combinations and including all associated goodwill, and all applications, registrations and renewals; (c) all copyrightable works, all copyrights and all applications, registrations and renewals; (d) all mask works and all applications, registrations and renewals in connection therewith; (e) all trade secrets and confidential business information (including ideas, research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals); (f) all computer software (including data and related documentation); (g) all other proprietary rights; and (h) all copies and tangible embodiments (in whatever form or medium) (collectively, “ Intellectual Property ”) owned by, licensed to or otherwise controlled by the Sellers or used in, developed for use in or necessary to the conduct of the Business as now conducted or presently proposed to be conducted, including the Intellectual Property listed on Schedule   1.1(c) ;

 

(d)

the current telephone numbers, e-mail addresses, uniform resource locators, domain names and websites of the Seller and the listings for each related to the Business, including the website and related content found at www.CassCreek.com and any rights to software related to the foregoing, identified on Schedule   1.1(d) (collectively, “ Addresses ”);

 

(e)

all of the Sellers’ books, records and other documents and information related to the Business, including, all customer, prospect, dealer and distributor lists, sales literature, inventory records, purchase orders and invoices, sales orders and sales order log books, customer information, product data, price lists, product demonstrations, quotes and bids and product advertising and brochures;

 

(f)

to the extent assignable, all permits, licenses and other governmental approvals held by the Sellers and related to the Business;

 

(g)

all accounts receivable, customer deposits, notes receivable or other amounts receivable arising from sales of merchandise or services to customers of the Business set forth on Schedule   1.1(g) (the “ Receivables ”);

 

(h)

the licenses, contracts and agreements listed as assumed contracts on Schedule 1.3 ;

 

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(i)

all of Cass Creek’s cash and cash equivalents (including marketable securities and short term investments) calculated in accordance with GAAP applied on a consistent basis;

 

(j)

all claims, causes of action, rights of recovery, rights of set off and rights of recoupment related to the Business; and

 

(k)

all goodwill and general intangibles associated with the Business.

 

1.2

Excluded Assets . The Buyer will not purchase and the Sellers will not sell any accounts receivable over 90 days old as of the Closing Date and the assets set forth on Schedule   1.2 (collectively, the “ Excluded Assets ”).

 

1.3

Assumed Liabilities . On the terms and subject to the conditions of this Agreement, the Buyer will assume only those liabilities of the Sellers which are set forth on Schedule   1.3 , as of and from after the Closing Date (collectively, the “ Assumed Liabilities ”). The Seller is solely responsible and liable for making all payments due under, and curing all defaults arising under or relating to, the Assumed Liabilities prior to the Closing Date. The Assumed Liabilities exclude all other claims, indebtedness, liabilities or warranty work of any kind, whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, whether secured or not secured and whether due or to become due, including any liability for taxes. Buyer will reduce the principal amount outstanding on the Promissory Note defined in Section 1.4(b) (and the next scheduled annual payment of principal) by the cost of parts and labor to service warranty claims, which exceed an aggregate of $10,000, on products sold by Sellers prior to the Closing.

In the event that the cost of parts and labor to service these warranty claims exceed such $10,000 amount, the Buyer agrees to give Sellers 30 days to rectify these warranty claims in a manner acceptable to the Buyer after notifying the Sellers of the same in writing.

 

1.4

Purchase Price . Each of the Members acknowledges that all consideration due to Sellers will be paid to Cass Creek. The Buyer agrees to pay to Cass Creek the following (the “ Purchase Price ”):

 

(a)

$1,560,000.00, as adjusted pursuant to Section 1.4(d)(i), on the Closing Date in cash by wire transfer or other immediately available funds (the “ Closing Payment ”);

 

(b)

$500,000, as adjusted pursuant to Sections 1.3, 1.4(c)(iv), 1.4(d) and Section 6.5, by a five year unsecured promissory note, which will be guaranteed by an individual acceptable to the Sellers, payable in annual payments on the first through fifth anniversaries of the Closing Date of $100,000 of principal plus interest accrued at 8% per annum (the “ Promissory Note ”) in the form attached hereto as Exhibit   A . Payments

 

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will be made in cash by wire transfer or other immediately available funds; and

 

(c)

For purposes of this Agreement, the following capitalized terms will have the meanings set forth, unless the context clearly implies otherwise:

 

(i)

Estimated Working Capital ” means the current assets less the current liabilities of Cass Creek according to an estimated interim balance sheet as of the Closing Date prepared by the Sellers seven- ( 7) days before the Closing Date, estimating the Cass Creek balance sheet as of the Closing Date using generally accepted accounting principles (“ GAAP ”) consistently applied in comparison to Cass Creek’s most recent audited financial statements, except that all accounts receivable older than 90 days as of the Closing Date and all stale and obsolete inventory will be valued at zero dollars ($0).

 

(ii)

Final Working Capital ” means the current assets less the current liabilities of Cass Creek according to a final interim balance sheet as of the Closing Date, prepared by the Buyer within [ 60 ] days after the Closing Date using GAAP consistently applied in comparison to Cass Creek’s most recent audited financial statements, except that all accounts receivable older than 90 days as of the Closing Date and all stale and obsolete inventory as determined by Buyer in its sole discretion will be valued at zero dollars ($0).

 

(iii)

Target Working Capital ” means $505,000.00.

 

(iv)

Working Capital Reconciliation ” means the process by which Sellers may dispute the Final Working Capital. If the Sellers dispute the amount determined as Final Working Capital, and any changes to the Purchase Price and Promissory Note arising from determination of the Final Working Capital, they must notify the Buyer in writing on or before the 75th day following the Closing Date, and Sellers and Buyer must attempt to resolve the dispute. If they cannot resolve this dispute within 90 days after the Closing Date, the Buyer and the Sellers will submit this dispute to an “ Independent Accountant ” as defined in Section 1.4(c)(v) below. The Independent Accountant will render a decision regarding the Final Working Capital, which decision will be final and binding on the Buyer and the Sellers. The Independent Accountant will conduct such arbitration by reviewing the Estimated Working Capital and Final Working Capital calculations and their components with the understanding that the Estimated Working Capital and Final Working Capital amounts were calculated in accordance with this Section 1.4 applied on a consistent basis.

 

4




Each of the Sellers and the Buyer will bear their own costs and expenses for such arbitration (including legal and accounting fees and expenses). The fees and expenses of the Independent Accountant will be borne 50% by the Buyer and 50% jointly and severally by the Sellers.

 

(v)

Independent Accountant ” means the mutually acceptable accounting firm in Hennepin County, Minnesota to be appointed by Sellers and Buyer if they have not agreed to the Final Working Capital amount within 90 days after the Closing Date, to arbitrate the dispute and render a decision regarding the Final Working Capital, which decision will be final and binding on the Buyer and the Sellers. If no Independent Accountant is appointed within 110 days after the Closing Date, then, either Buyer or Sellers may petition the Hennepin County District Court to appoint the Independent Accountant.

 

(d)

The components of the Purchase Price will be adjusted as follows:

 

(i)

If the Estimated Working Capital is less than the Target Working Capital, the amount of the Closing Payment will be reduced by the difference of Target Working Capital less Estimated Working Capital and such adjustment will be a decrease to the Purchase Price (“ Closing Payment Adjustment ”). If Estimated Working Capital is greater than Target Working Capital, no change will be made to the Purchase Price or Closing Payment.

 

(ii)

If the Final Working Capital is greater than the Estimated Working Capital, Buyer will pay Sellers the difference of Final Working Capital less Estimated Working Capital (but in no event more than the Closing Payment Adjustment) within [ 10 ] days of Buyer’s receiving the Working Capital Reconciliation which will be an increase to the Purchase Price.

 

(iii)

If the Final Working Capital is less than the Estimated Working Capital, Buyer will reduce the amount of the Promissory Note (and the first payment of principal under the Promissory Note) by the difference of Target Working Capital less Final Working Capital within 10 days of Buyer’s receiving the amount of the Final Working Capital, and such adjustment will be a decrease to the Purchase Price.

 

1.5

Allocation of Purchase Price . The Parties agree to allocate the Purchase Price and all other capitalizable costs among the Acquired Assets for all purposes, including financial and tax purposes, in accordance with the allocation schedule set forth on Schedule   1.5 , which will be adjusted as necessary to agree with the Final Working Capital determination.

 

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1.6

The Closing . The closing of the transactions contemplated by this Agreement (the “ Closing ”) will be effective as of 12:01 a.m. on the date set forth in the preface above (the “ Closing Date ”).

 

1.7

Buyer’s Deliveries at the Closing . The Buyer will make the following deliveries at the Closing:

 

(a)

Executed and acknowledged (if appropriate) certificates, instruments and documents that the Sellers and their counsel may reasonably request;

 

(b)

The Closing Payment to the Sellers;

 

(c)

The Promissory Note;

 

(d)

Executed Inventions Royalty Agreement (as defined in Section 2.1 below); and

 

(e)

Assignment and Assumption Agreement in the form attached as Exhibit   B .

 

1.8

Sellers’ Deliveries at the Closing . The Sellers will make the following deliveries at the Closing:

 

(a)

Executed and acknowledged (if appropriate) certificates, instruments and documents that the Buyer and its counsel may reasonably request;

 

(b)

Executed Bill of Sale for the Acquired Assets in the form attached as Exhibit   C .

 

(c)

Executed Inventions Royalty Agreement (as defined in Section 2.1 below);

 

(d)

Noncompetition Agreements from the Members and Todd E. Hallquist in the form attached as Exhibit   D ;

 

(e)

Technology Transfer Agreement in the form attached as Exhibit   E ; and

 

(f)

Opinion of Sellers’ Counsel in substantially the form attached as Exhibit   F .

2.

Related Parties .

 

2.1

Inventions Royalty Agreement . Each of the Members (and an entity to be formed by them) (collectively “ Inventors ”) and Buyer will enter into an agreement providing that the Inventors expect to invent products intended for sale in the hunting, fishing and other outdoor recreation markets (“ Invented Products ”), for which will Buyer will be granted a right of first purchase (“ Inventions Royalty Agreement ”) in the form attached hereto as Exhibit   G .

 

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The Inventions Royalty Agreement will have a term of five years and will provide for Buyer to acquire any of the Invented Products for a 5% royalty on Buyer’s net wholesale invoice amounts to be paid to Inventors.

 

2.2

Bergstue Agreement . For a period of one year following the Closing Date, Buyer will make good faith efforts to enter into an agreement with Bergstue providing that Bergstue will provide advertising and promotion to Buyer on matters related to the products of the Business. The Buyer may ask Bergstue to attend trade shows, assist in key account sales presentations and or interface with outside designers on new products. Failure to finalize an agreement with Bergstue in spite of Buyer’s good faith efforts is not a breach of this Agreement.

3.

Representations and Warranties of the Sellers . Sellers, jointly and severally, represent and warrant to the Buyer that the statements contained in this Section 3 are correct and complete as of the Closing Date, except as set forth in the attached disclosure schedule accompanying this Agreement (the “ Sellers’ Disclosure Schedule ”). The Seller’s Disclosure Schedule will be arranged in paragraphs corresponding to the sections contained in this Section 3. For the purposes of this Section 3, “Knowledge” shall mean the actual knowledge of a Member or what a Member reasonably should have known if such Member used due care in the performance of his duties or could be expected to discover in the course of conducting a reasonable investigation regarding the accuracy of a representation or warranty.

 

3.1

Organization, Qualification and Power . Cass Creek is a limited liability company duly organized, validly existing and in good standing under the laws of the State of New York. Cass Creek is duly authorized to conduct business and is in good standing under the laws of each jurisdiction where qualification is required. Cass Creek has full organizational power and authority and all permits and licenses necessary to carry on the businesses in which it is engaged and in which it presently proposes to engage, and to own and use the properties owned and used by it. Lynn, Bergstue, and Streib are the only members and holders of issued and outstanding membership interests of Cass Creek.

 

3.2

Authorization of Transaction; Shareholders . Cass Creek has full power and authority, corporate or otherwise, to enter into and perform its obligations under this Agreement. In addition, the members, board of managers and managers of Cass Creek have duly authorized the execution and performance of this Agreement and the ancillary documents to which Cass Creek is a party. This Agreement and the ancillary agreements to which any the Sellers is a party constitute valid and legally binding obligations of the Sellers, as applicable, enforceable in accordance with their respective terms and conditions.

 

3.3

Noncontravention . To Sellers’ Knowledge, neither the execution and the delivery of this Agreement or the ancillary documents to which any of the Sellers is a party, nor the consummation of the contemplated transactions will (a) violate any law, order or regulation to which any of the Sellers is subject; (b) violate any provision of the organizational documents of Cass Creek; or (c) conflict with,

 

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result in a breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify or cancel, or require any notice under any agreement, contract, lease, license, instrument or other arrangement to which any of the Sellers is a party or is bound or to which any of the Sellers’ assets are subject.

 

3.4

Broker Fees . To Sellers’ Knowledge, none of the Sellers has any liability or obligation to pay any fees or commissions to any broker, finder or agent with respect to the transactions contemplated by this Agreement for which the Buyer could become liable or obligated.

 

3.5

Title to Assets; Sufficiency of Assets . On the Closing Date, the Acquired Assets are free and clear of all security interests, liens, encumbrances of any nature, infringements, licenses, liens or claims of third parties. Cass Creek or Members, as applicable, have good and marketable title to, a valid license to or a valid leasehold interest in the Acquired Assets. To Sellers’ Knowledge, the Acquired Assets constitute all of the assets used in or necessary for the operation of the Business as presently conducted.

 

3.6

Financial Statements . Attached to the Sellers’ Disclosure Schedule are the following financial statements (collectively, the “ Financial Statements ”): (a) audited consolidated and unaudited consolidating balance sheets and statements of income, changes in members’ equity and cash flow as of and for the fiscal years ended December 31, 2005, and December 31, 2006, (the “ Most Recent Fiscal Year End ”) for the Seller and its Subsidiaries; and (b) unaudited consolidated and consolidating balance sheets and statements of income, changes in members’ equity and cash flow (the “ Most Recent Financial Statements ”) for the seven months ended July 31, 2007, (the “ Most Recent Fiscal Month End ”) for Cass Creek and its subsidiaries. To Sellers’ Knowledge, the Financial Statements (including the notes) have been prepared in accordance with GAAP applied on a consistent basis throughout the periods covered, present fairly the financial condition and the results of operations of Cass Creek and its Business for those periods, are correct and complete and are consistent with the books and records of Sellers related to the Business (which books and records are correct and complete). The Most Recent Financial Statements, however, are subject to normal year-end adjustments (which will not be material individually or in the aggregate) and lack footnotes and other presentation items.

 

3.7

Events Subsequent to Most Recent Fiscal Year End; Undisclosed Liabilities . To Sellers’ Knowledge, since January 1, 2007, there has been no material adverse change in the business, financial condition, operations, and results of operations or future prospects of Cass Creek. To Sellers’ Knowledge, except as set forth on the Financial Statements, the Seller has no obligations or liabilities of any kind that would have a material adverse effect upon the Acquired Assets or to which the Acquired Assets are subject.

 

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3.8

Legal Compliance; Litigation . To Sellers’ Knowledge, the Sellers have complied with all applicable laws related to the Business, and no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand or notice has been filed, commenced or, to the knowledge of the Sellers, alleged against them in any way related to the Business. To Sellers’ Knowledge, there are no pending or threatened claims, actions, suits, proceedings, hearings or investigations affecting the Acquired Assets. To Sellers’ Knowledge, the Sellers and the Business are not operating under or subject to, or in default with respect to, any order, writ, injunction or decree of any court or governmental agency.

 

3.9

Tax Matters . The Sellers have filed all tax returns that they were required to file related to the Business. All such tax returns were correct and complete. The Sellers have paid all federal, state, local or foreign taxes owed by the Sellers, whether or not disputed.

 

3.10

Intellectual Property .

 

(a)

Sellers collectively own or have the right to use pursuant to license, sublicense, agreement or permission all Intellectual Property necessary for the operation of the Business of Sellers as presently conducted. Each item of Intellectual Property owned or used by Sellers immediately before the Closing will be owned or available for use by the Buyer on identical terms and conditions immediately after the Closing.

 

(b)

To the Seller’s Knowledge, none of the Sellers has interfered with, infringed upon or misappropriated any Intellectual Property rights of third parties. To Sellers’ Knowledge, none of Sellers has received any charge, complaint, claim, demand or notice alleging any such infringement or misappropriation (including any claim that any of the Sellers must license or refrain from using any Intellectual Property rights of any third party). As of the Closing Date, to the Seller’s Knowledge, no third party is interfering or misappropriating any Intellectual Property rights of the Sellers.

 

(c)

To Sellers’ Knowledge, Schedule   3.10(c) attached to this Agreement and incorporated by reference, identifies the following: (i) each patent, copyright, trademark or registration that has been issued to the Sellers for any Intellectual Property; (ii) each pending patent, copyright or trademark application or application for registration that Sellers has made for any of their Intellectual Property; (iii) each license, agreement or other permission that each of the Sellers has granted to any third party with respect to Intellectual Property (together with any exceptions); (iv) each trade name or unregistered trademark used by the Sellers in connection with the Business; and (v) each trade secret used by the Sellers in connection with the Business.

 

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(d)

To Sellers’ Knowledg


 
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