EXHIBIT 10(r)
ASSET PURCHASE AGREEMENT
ASSET
PURCHASE
AGREEMENT
(the
"
Agreement
")
made as of August 31,
2007
between ER Acquisition
Corporation,
a Kansas corporation ("
Buyer
"),
and Radix
International
Corporation ("RIC"), a Delaware corporation and Radix Corporation
("RC"), a Delaware corporation (collectively "
Seller
").
Preliminary Statement
WHEREAS,
Seller desires to sell, assign,
transfer,
convey and deliver to
Buyer and Buyer desires to purchase
from Seller the Assets (as defined
below),
subject to the terms and conditions of this Agreement; and
WHEREAS,
Seller desires to assign,
transfer,
convey and deliver to Buyer
and Buyer desires to assume all of Seller's
rights and
obligations
related to
(i) the Seller's Assets (as defined below) and (ii) the Assumed
Liabilities (as
defined below), subject to the terms and conditions of this
Agreement.
NOW THEREFORE, the parties,
intending to be legally bound, and in reliance
upon the
representations,
warranties and other terms set forth herein,
hereby
agree as follows:
1.
Assets Purchased and Sold
. Subject to the terms and conditions contained
in this
Agreement,
on the Closing
Date Seller shall sell,
assign,
transfer,
convey and deliver to Buyer all of Seller's right,
title and interest in and to
the following assets (collectively, the "
Assets
"):
(a) All
inventories
of raw material,
work-in-progress
and finished
goods of the Seller existing on the Closing Date (as defined
below);
(b) All fixed assets that are either: (i) listed on Seller's
financial
statements
as
"Property
and
Equipment",
or (ii) any tools and fixtures
necessary to the
operation of Seller's
business
and,
that are in either
case, listed on
"Schedule 1(b)"
hereto;
(c) All intellectual
property of Seller,
including,
but not limited
to, all patents,
patent
applications,
trade names,
trademarks,
service
names, service marks, software,
business processes,
engineering drawings,
art work,
customer lists, vendor lists, the Radix Internet URL, names, and
phone
number,
all
marketing
and
collateral
material,
and
any
other
intellectual property of the Seller;
(d) All purchase
orders from or contracts with existing
customers as
listed on
"Schedule 1(d)"
;
(e) All
deposits
paid by the Seller and
listed on
"Schedule
1(e)"
hereto;
(f) All accounts
receivable of the Seller,
including those listed on
"Schedule 1(f)"
hereto; and
(g) All records and files
necessary or
appropriate to own or operate
the Assets
or perform the obligations explicitly assumed by Buyer.
Any of the assets of Seller not listed above shall be retained by
Seller and are
referred to herein as the excluded assets (the
"Excluded Assets"
).
2.
Assignment and Assumption of the
Liabilities
.
Subject to the terms and
conditions
contained
in this
Agreement,
on the Closing
Date,
Seller
shall
assign,
transfer,
convey and deliver to Buyer, and Buyer shall assume and pay,
all of Seller's right, title and interest in and to (i) all of
Seller's accounts
payable
and certain of Seller's
accrued
liabilities,
each as existing on the
Closing Date,
provided that such
payables and
liabilities
are also listed on
(and only to the extent of the amount reflected on)
"Schedule 2.1"
hereto,
(ii)
all of
Seller's
purchase
orders
(except
those
that are not
related to the
Operating Business and are cancelable) and contracts with vendors,
customers and
distributors
existing on the Closing Date,
provided that such purchase
orders
and
contracts
are
also
listed
on
"Schedule
2.2"
hereto,
and
(iii)
the
compensation
and severance
benefits owed to Seller's
employees,
based on the
data listed on
"Schedule 2.3"
and the severance
benefits
generally provided to
employees of Seller. The items referred to in clauses (i), (ii),
and (iii) above
are collectively referred to as the "Assumed
Liabilities".
On the Closing Date
Buyer shall assume sole
responsibility
to perform,
satisfy and
discharge all
duties,
obligations,
terms, conditions and covenants arising after the Closing
Date that the Seller is
otherwise
bound to
perform,
discharge
or
otherwise
satisfy,
to the extent
and only to the extent
such
responsibilities,
duties,
obligations,
terms,
conditions
and covenants are
explicitly
included in the
Assumed
Liabilities.
Except as set forth above,
Buyer shall not assume, or in
any way be liable or responsible for, any of the liabilities,
accounts payable,
orders,
contracts,
agreements,
leases,
or other
obligations
of any
nature
whatsoever of Seller. As to the severance
benefits owed to Seller's
employees,
Buyer
agrees that as to any employee of Seller to whom it either does not
offer
employment
initially
following
the Closing or that it
terminates
within six
months following the Closing for any reason other than
non-performance
by such
employee or for cause,
Buyer shall pay severance benefits based on Schedule 2.3
for such employee.
3.
Premises Lease
.
Buyer shall not assume any obligations
pursuant to the
lease for the premises
currently
occupied by Seller (the "Premises") but shall
be granted
the right by Seller on the Closing
Date to occupy such
Premises on
the temporary basis described below. At Closing,
Buyer will pay Seller a fee of
$32,670 for the right to access and use the Premises
for thirty days
following
the Closing
Date.
Following
that thirty day period,
Buyer will pay Seller in
advance a fee of
$8,167.50
for the right to access
and use the
Premises
for
successive
seven day
periods.
Buyer may vacate the
Premises
at any time and
cease
payments
upon 30 days'
notice
to
Seller.
Buyer
shall
have no other
obligation
related to the
Premises,
and Seller
agrees to indemnify
and hold
Buyer
harmless
against
any and all claims by any third
party
related to the
Premises;
provided,
however,
Buyer shall not be held harmless from any claims
caused by the acts or negligence of Buyer or its employees or
agents.
4.
Purchase
Price
.
In
consideration
of Seller's
sale of the Assets to
Buyer,
Buyer
unconditionally
agrees, in addition to assumption of the Assumed
Liabilities,
to pay to Seller at Closing a total of $1,000
(hereinafter called
the "Purchase Price").
2
5.
Contingent Payments
.
(a) In addition
to the
Purchase
Price to be paid at
Closing,
upon
satisfaction of the conditions set forth in this Section 5, Buyer
will make
payments
("Contingent
Payments")
to Seller
based
upon 10% of the gross
receipts
as
accrued
by Buyer that
exceed
$7,500,000
during an Earnout
Period (the
"Annual
Threshold")
as a result of the sale of products
and
services that use or are based,
in whole or in part,
on the
intellectual
property
transferred
by
Seller to Buyer
(the
"Ongoing
Business").
An
"Earnout
Period" is a
12-month
period.
The first
Earnout
Period
will
commence on the first day of the calendar month following the
Closing Date.
The Contingent
Payment may be payable for up to five Earnout Periods.
The
maximum amount of Contingent Payment payable by Buyer to Seller,
during all
Earnout Periods together, is $2,200,000.
(b)
Subject
to the credit
described
in the last
sentence
of this
Section 5(b) and the aggregate
maximum
amount
described in Section 5(a),
the Contingent Payments following the Closing Date, will be made in
cash on
a quarterly
basis during the first three
quarters of each Earnout
Period
using
$1,875,000 as the quarterly
threshold
gross
revenue
target.
The
amount of the final quarterly
payment will be determined
using the Annual
Threshold and the actual annual gross
revenues
during such Earnout Period
and will subtract any quarterly payments
previously made for such year. If
at the end of each Earnout Period (other than the first Earnout
Period) it
is
determined
that the sum of the
quarterly
payments
for such
Earnout
Period
exceeds the actual
payment due as
determined
on an annual
basis
("Excess
Payments"),
such Excess
Payments may be retained by the Seller,
but will be credited against amounts due in future Earnout Periods.
(c) The
Contingent
Payment,
if any,
due to
Seller
for the
first
quarterly
period of the first Earnout Period shall be paid to Seller.
The
first
$200,000
of
Contingent
Payments
due to Seller for the second and
subsequent
quarterly periods (the "Holdback Amount") will be held by Buyer
in a
segregated
interest
bearing
account
and
may
be
unconditionally
released,
upon five (5) days advanced written notice to Seller
describing
such
liabilities,
to compensate
Buyer for any
liabilities
of Seller to
Buyer under this Agreement and to compensate
Buyer for any Excess Payments
made during the first Earnout Period.
The amount,
if any, of the Holdback
Amount
remaining at the end of the ninth
earnout
quarter will be paid to
Seller on such date.
(d) In the event the net working capital as of the Closing Date of
the
Ongoing Business is less than $(658,000) (the "Target Number"),
then Buyer
shall be
entitled
to offset
the
amount of the
difference
against
any
Contingent
Payments
payable in
accordance
with this
Section 5, thereby
reducing
the
Contingent
Payments
payable
and
the
maximum
amount
of
Contingent Payments payable by the difference. In the event the net
working
capital as of the Closing Date is more than the Target Number,
then Seller
shall be entitled to an increase in the amount of the
Contingent
Payments
payable
at the end of the first
Earnout
Period in
accordance
with this
Section
5 equal to the
amount in excess
of the
Target
Number,
thereby
increasing
the
maximum
amount
of
Contingent
Payments
payable
by the
difference. Net working capital shall be the sum of
3
accounts
receivable
and
inventory
minus
accounts
payable,
accrued
liabilities, and unearned revenue.
(e) Any amounts paid by Buyer to Seller
hereunder shall be used first
to satisfy any claims for payment made by any third party against
Seller.
6.
Closing
.
The
closing
("Closing")
shall take place at the offices of
Blackwell
Sanders
LLP in Kansas
City,
Missouri
on
September
14, 2007 (the
"Closing
Date").
The Closing shall be effective as of 12:01 a.m. local time on
the Closing Date.
7.
Representations and Warranties of Seller and Buyer
.
(A) In addition to any other
representations and warranties contained
in this Agreement, Seller represents and warrants to Buyer that:
(1)
There are no provisions of any existing
agreements
binding
on Seller or affecting
the Assets that
conflict with or in
any way prevent the
execution,
delivery or carrying out of
the terms of this Agreement.
(2)
Except as set forth in Seller's
Schedule of Exceptions Part
7(A)(2),
Seller
is the sole
owner of all
Assets
and all
Assets will be assigned, transferred, conveyed and delivered
to Buyer
free
and
clear
of any and all
liens,
pledges,
claims
or
other
encumbrances
of
any
kind
(each,
an
"Encumbrance").
(3)
Radix
International
Corporation and Radix
Corporation are
each
corporations
duly organized,
validly existing and in
good
standing
under
the laws of the
state
of
Delaware.
Seller
has the full
power and
authority
to
execute
and
deliver
this
Agreement,
to
perform
hereunder,
and
to
consummate the transactions contemplated hereby, without the
necessity
of any act,
approval,
or
consent
of any other
person, entity, or governmental
authority.
This Agreement,
when
executed,
will
constitute
the
valid
and
binding
obligation
of
the
Seller,
enforceable
against
Seller
according to its terms.
(4)
Except as set forth in Seller's
Schedule of Exceptions Part
7(A)(4),
Seller is not, and
performance of its obligations
hereunder
will not cause it to be, in violation of any law,
rule,
regulation
or court
order,
local state or federal,
pertaining
to the
operation
or conduct
of its
business.
There are no judgments,
suits,
actions,
investigations or
proceedings
pending
or
threatened
in any court or by any
governmental
authority
or
private
arbitration
tribunal
against
Seller
or
the
completion
of
the
transaction
contemplated
herein,
nor is there any basis for any of the
foregoing.
4
(5)
Except as set forth in Seller's
Schedule of Exceptions Part
7(A)(5),
Seller
has
filed
in true and
correct
form all
federal,
state
and
local tax
returns
and other
reports
required to be filed, and has paid all taxes and assessments
which have become due and
payable,
whether or not so shown
on any such return or report.
Seller has received no notice
of, nor does
Seller
have any
knowledge
of, any notice of
deficiency
or
assessment
or
proposed
deficiency
or
assessment from any taxing governmental authority. There are
no audits
pending
with
respect to Seller and there are no
outstanding
agreements
or
waivers
by or with
respect to
Seller
that
extend
the
statutory
period of
limitations
applicable
to any
federal,
state,
local or
foreign
tax
returns or taxes for any period. There are no determined tax
deficiencies or proposed tax assessments against Seller.
(6)
Except
with
respect to the
accounts
payable
and
