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EXHIBIT 10.1
ASSET PURCHASE AGREEMENT THIS ASSET
PURCHASE AGREEMENT (“ Agreement ”) is made as of
the Effective Date provided for below between CLEARONE
COMMUNICATIONS, INC. , a Utah corporation (the “
Company ”), and KEN-A-VISION MFG. CO.,
INC. , a Missouri corporation (the “ Buyer
”), who agree as follows: 1. Sale of
Assets . a. Subject to the representations,
warranties and agreements of the parties hereto and the terms and
conditions herein set forth, the Company agrees that, at the
Closing (as herein defined), the Company shall sell, transfer and
deliver to the Buyer, for the consideration hereinafter provided,
the following assets and property owned by Company and used by it
in the conduct, as presently operated, of its Camera Business (as
defined in Section 15 below) (excluding, however, the
“Excluded Assets” described below) (collectively, the
“ Assets ”): 1. All of the
Company’s machinery, equipment, tools and other tangible
personal property described on Schedule 1.a.1 attached
hereto (“ Equipment ”); 2. All of
the Company’s rights, benefit, interest and obligations
(collectively, the “ Warranty Obligations ”)
with respect to the warranties (“ Warranties ”)
issued by the Company with respect to the Products (as such term is
defined immediately below). The obligations of the Buyer with
respect to the Warranties are subject to the terms of Section 2.b.
below. 3. All of the Company’s (i) customer
lists, records and files, (ii) production records, (iii) technical
drawings, specifications and manuals and other information related
to the production of the products (“ Product ”
or “ Products ”) produced and sold as a part of
the Camera Business, (iv) marketing plans and reports, (v) supplier
and vendor lists, contacts and information (vi) sales records,
(vii) pricing sheets, (viii) customer proposals and bids, (ix)
records pertaining to product warranty inquiries concerning
Warrantied Products (as defined in Section 2.b.i. below) and (x)
other pertinent and material sales information and records, insofar
as the items referenced in clauses (i) - (x) relate solely to
the Camera Business (such items referenced in clauses (i) - (x)
being hereinafter collectively referred to as the “ Camera
Business Records ”); 4. Subject to Section
1.d below, all of the Company’s inventories (raw and
finished), work in process and sub-assemblies held for sale,
consumption or otherwise used in the operation of the Camera
Business, as selected by the Buyer in its sole discretion, provided
that there shall be no adjustment to the Purchase Price hereunder
in respect of any available inventories not so selected by the
Buyer; and
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5. All of the Company’s computer software utilized
solely in the Camera Business (“ Software ”),
including but not limited to, drivers for the Products, and the
Intellectual Property, all as listed on Schedule 1.a.5 , but
subject to the provisions of Section 1.e. below (as so qualified
and together with the Software, the “ Conveyed
Intellectual Property ”). b. To avoid
doubt, the following assets of the Company (collectively, the
“ Excluded Assets ”), among others, shall be
retained by the Company, and are not being sold or assigned to the
Buyer hereunder: 1. All corporate names and trade
names, trademarks or service marks that are used in connection with
any of the Company’s businesses other than the Camera
Business; 2. All taxpayer and other identification
numbers and minute books, stock transfer books, tax returns,
corporate seals and all other documents relating to the
organization, maintenance and existence of the Company as a
corporation; 3. The Company’s rights under this
Agreement, the agreements to be executed by the Company in
connection herewith and any agreements relating to the Camera
Business, including any rights with respect to rebates and market
development funds under certain agreements between the Company and
its customers; 4. All cash and cash equivalents of the
Company; 5. The name and mark “ClearOne”
and all combinations or derivations thereof; 6. The
Company’s accounts receivable as of the Closing Date, but
including in all events any amount owing on account of Products
shipped by the Company prior to Closing or in connection with Open
Purchase Orders (as defined in Section 1.d.); 7. Copies
of such Camera Business related records as it deems appropriate;
8. Any telephone numbers; and 9. Any
websites. c. The sale of the Assets shall be made
free and clear of all liabilities, obligations, security interests,
and other encumbrances or liens of any and every kind and nature
whatsoever except (i) the Security Interest referenced in Section
2.a.2. below, (ii) the Assumed Liability referenced in Section 2.b.
below, (iii) the Permitted Encumbrances, and (iv) Buyer’s
Assumed Tax Liability (as referenced below). 2
d. The Buyer acknowledges that the Company, to
the extent possible, is depleting raw inventory and finished goods
relating to the Camera Business. Accordingly, the Company has been
and will be seeking to obtain purchase orders from its customers
for the Products up to the date of Closing. In regard to all such
purchase orders that are obtained prior to the Closing and not
filled as of the Closing (“ Open Purchase Orders
”), the Buyer agrees that (i) inventory required to fill such
purchase orders (but only so much inventory as is so required) will
comprise part of the Excluded Assets and will be retained by the
Company and not sold to the Buyer, and (ii) inventory on order and
in process required to fill such purchase orders will be completed
and delivered to the Company. The Company agrees to fill such
purchase orders and deliver the Products required thereunder within
a commercially reasonable time. If the Company receives a
cancellation of an Open Purchase Order subsequent to Closing, the
Company shall promptly deliver the Products subject to such Open
Purchase Orders to the Buyer F.O.B. Buyer’s facility in
Raytown, Missouri. e. The Company shall continue
to use its best efforts to obtain the consent of ArcSoft, Inc.
(“ ArcSoft ”) to the assignment to the Buyer of
the License Agreement (the “ ArcSoft Agreement
”) between the Company and ArcSoft pertaining to the ArcSoft
Software (as defined in Schedule 1.a.5. hereto). The Company
maintains the position that the ArcSoft Agreement is valid and in
force, but has been notified by ArcSoft that ArcSoft considers the
agreement to be expired. Buyer acknowledges that the Company may be
unable to obtain ArcSoft’s consent to the assignment of the
ArcSoft Agreement and that ArcSoft may insist that the Buyer enter
into a new license agreement with respect to the ArcSoft Software
and that, in either case, any rights of the Company to the ArcSoft
Software will not comprise part of the Assets being sold and
conveyed hereunder. 2. Purchase Price .
a. Payment of Purchase Price . The
purchase price which the Buyer shall pay to the Company for the
assets to be sold and transferred to the Buyer hereunder (“
Purchase Price ”) shall be Seven Hundred and Fifty
Thousand Dollars ($750,000.00), subject to being adjusted as
provided in Schedule 2.a attached hereto (the “ Price
Adjustment ”), to be paid as follows, plus the assumption
of the Assumed Liability and Buyer’s Assumed Tax Liability:
1. Delivery at the Closing of the sum of Three Hundred
Seventy-Five Thousand Dollars ($375,000.00), subject to the Price
Adjustment, by immediately available funds payable to the Company
(the “Down Payment”); and 2. Delivery at
the Closing of the Buyer’s promissory note (the “
Note ”) in the form attached as Exhibit
“A” , in the principal amount of Thousand Dollars
($375,000.00), subject to the Price Adjustment, bearing interest at
the rate of eight percent (8%) per annum and, subject to the Price
Adjustment, payable in twenty-four (24) monthly installments of
$16,960.23 to be secured by a first lien security interest in all
of the Assets (the “ Security Interest ”), as
provided in that certain Security Agreement in the form attached as
Exhibit “B ,” to also be delivered to the
Company at Closing. 3
b. Assumed Liability .
i. At the Closing, the Buyer will assume and perform the
Company’s Warranty Obligations under the Warranties issued by
the Company with respect to Products sold within two (2) years
prior to the Closing Date, along with any Products sold pursuant to
Open Purchase Orders (all of which Products are collectively
referred to hereinafter as “ Warrantied Products
”), provided that the cost of such performance (as the term
“cost” is referenced below) shall not exceed $100,000
in the 730-day period following the Closing Date, the Company
hereby agreeing to be responsible, to pay or reimburse the Buyer
and to indemnify and hold the Buyer harmless to the extent that all
costs of performing the Company’s obligations under the
Warranties with respect to the Warrantied Products exceed $100,000
in the 730-day period following the Closing Date (the obligation of
the Buyer under this Section 2.b being referred to herein as the
“ Assumed Liability ”). For the absence of
doubt, the Company will only reimburse for costs that exceed One
Hundred Thousand Dollars ($100,000.00) during the 730-day period,
which costs shall be strictly limited to the sum of a) repair costs
at the Buyer’s normal and customary labor charges and b)
reasonable cost of material that need to be purchased subsequent to
the Closing Date in order to permit the Buyer to perform the
referenced Warranty obligations hereunder. A description of the
Company’s standard warranty terms is set forth in Schedule
2.b . From the date hereof until Closing, the Company will
continue to process warranty claims and inquiries in accordance
with its historical practice and in the normal course of its
business. At the Closing, the Company will deliver, as part of the
Camera Business Records, records pertaining to inquiries received
by the Company pertaining to Warrantied Products. Within ten (10)
days of the Closing Date, the Company will deliver to the Buyer a
list of Warrantied Products sold within the two years prior to and
including the Closing Date to which the Warranty provisions of this
paragraph shall apply; and so long as any Open Purchase Orders
remain to be filled, the Company will update the Buyer on a weekly
basis with information pertaining to Products shipped pursuant to
such Open Purchase Orders. ii. The foregoing
notwithstanding, to the extent that the cost of the Buyer’s
performance pursuant to this Section 2.b. in the 365-day period
following the Closing Date (see "First Year") exceeds $50,000, the
Buyer shall be entitled to set-off such excess against the monthly
payments next due to the Company under the Note until the full
amount of such excess has been set-off or the First Year shall have
elapsed, whichever is the first to occur, and interest shall cease
to accrue under the Note with respect to all such amounts so offset
onto the end of the First Year. In the event of any such set-off,
the unpaid balance of the Note shall be reamortized effective with
the thirteenth (13 th) monthly payment due thereunder so
as to be repaid in full in twelve (12) monthly installments with
interest thereon at the rate of eight percent (8%) per annum from
and after the first to day the following the end of the First Year.
iii. The Company agrees to use its reasonable
best efforts, without spending money or making any binding
agreements or commitments, to forward all customer contacts
concerning Warranty Obligations to the Buyer. Without limiting the
generality of the foregoing, the Company shall use its reasonable
best efforts to cause all telephone contacts received by it
concerning the Warrantied Products to be forwarded and referred to
the Buyer at (800) 627-1953 and shall, within ten (10) business
days of Closing, alter its website to include hot links from the
sale and warranty sections of the website to the Buyer’s
website with respect to such Warrantied Products.
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c. Assumed Tax Liability . The Company
will pay all personal property taxes due and payable with respect
to the Assets as of the Closing. At the Closing, the Buyer shall
assume and be liable to timely pay the pro-rated portion of
personal property taxes not yet due and payable with respect to
Assets acquired by it hereunder. All personal property taxes with
respect to Assets acquired hereunder shall be pro-rated as of the
Closing Date between the Company and the Buyer (“
Buyer’s Assumed Tax Liability ”).
d. Allocation of Purchase Price . One Hundred
Fifty Thousand Dollars ($150,000.00) of the purchase price for the
Assets shall be allocated to the non-compete agreement set forth
below and the balance of the purchase price shall be allocated
among the Assets in accordance with the Form 8594 attached hereto
as Exhibit “C ”, and the parties will report the
same accordingly for tax purposes. e. Escrow
Agreement . Following Closing, if the Buyer reasonably believes
in good faith that there has been a misrepresentation or breach of
a warranty, agreement or covenant under this Agreement, other than
with respect to the warranties (“ Product Warranties
”) set forth in the first sentence of Section 3.e. (a “
Breach ”), having a Material Adverse Effect (as
defined in Section 15.e.), then in addition to all other rights and
remedies of the Buyer hereunder, but subject to the terms of
Section 12, (i) if the amount of all losses, damages, costs and
expenses reasonably anticipated to be incurred by the Buyer as a
result of the Breach (“ Loss Estimate Amount ”)
is $5000.00 or less, the Buyer shall be entitled, upon written
notice to the Company of such Breach (a “Set-Off
Notice”) to retain and set-off such Loss Estimate Amount (the
“ Set-Off Remedy ”) against any of the amounts
owed by the Buyer under the Note, provided, however, that if the
Breach resulting in a Set-Off Remedy is subsequently cured by the
Company, then the Buyer shall promptly pay to the Company any
amount by which a Set-Off Remedy amount exceeds any loss, damages,
costs or expenses actually incurred by the Buyer with respect to
the Breach; and provided further that, upon receipt of a Set-Off
Notice, the Company may give written notice that it disputes such
Set-Off Remedy (“Dispute Notice”), in which case the
Buyer shall pay the relevant Loss Estimate Amount in respect of
such Set-Off Remedy into the Escrow Account under the Escrow
Agreement; and (ii) if the Loss Estimate Amount is more than
$5000.00 (alone or in the aggregate with all prior Loss Estimate
Amounts not previously claimed in a Set-Off Remedy under this
section), the Buyer may elect to (a) give written notice (an
“ Escrow Notice ”) to Company of such Breach and
of the amount of the Loss Estimate Amount reasonably anticipated to
be incurred by the Buyer as a result of such Breach and (b)
thereafter pay into the Escrow Account referenced in the Escrow
Agreement attached as Exhibit “D ” and to be
executed simultaneously herewith, amounts otherwise falling due
under the Note, but in no event to exceed the Loss Estimate Amount.
Thereafter, any dispute between the parties with respect to any
Loss Estimate Amount paid into the Escrow Account shall be resolved
as provided in the Escrow Agreement and Section 13 below
(collectively, the “ Escrow Agreement Remedy ”).
As to Product Warranties, the Buyer shall be liable,
notwithstanding any breach by Company of the first sentence of
Section 3.e., or anything herein to the contrary, to honor the
Warranties as set forth in Section 2.b., and the Company shall have
no further liability in connection therewith except as provided in
Section 2.b. 5
f. The Company shall indemnify and save and hold
the Buyer harmless from and against, and shall pay upon demand, any
damage, liability, loss, deficiency, settlement, fees, penalties,
or expenses (including without limitation, reasonable
attorneys’ fees and other reasonable costs and expenses
incident to any suit, action, proceeding, demand, assessment,
judgment, penalty or investigation or defense of any claim) arising
out of or resulting from any sales, use, withholding or other taxes
other than the Assumed Tax Liability for which the Buyer may have
successor liability based on the transaction. 3.
Representations and Warranties . The Company represents and
warrants as follows: a. The Company is a
corporation duly organized, validly existing and legally operating
in the State of Utah and has all requisite power and authority to
(1) own its properties, including the Assets; (2) make, execute and
perform this Agreement and all documents to be executed in
connection herewith; and (3) conduct the Camera Business as and
where now being conducted; however, without limiting any other
representation or warranty made by the Company in this Agreement,
the Company does not hereby make any representation or warranty
that it is not in violation of any third-party patents, trade
secret or know-how in the production or manufacture of the
Products. b. The execution and delivery of this
Agreement and the sale contemplated hereby have been duly
authorized by the Company. c. Except as otherwise
described in Section 1.e. and Schedule 3.f, the Company has, and as
of the Closing Date will have, good and marketable title to all of
its properties and assets which are being sold, transferred, and
conveyed hereunder, subject to no mortgage, pledge, lien,
encumbrance, security interest, agreement, claim, covenant,
easement, restriction, reservation, exceptions or charge, other
than with respect to the Assumed Liability, the Security Interest,
the Permitted Encumbrances and the Buyer’s Assumed Tax
Liability. d. There has been no person employed
or retained by the Company, or who is entitled to be paid under any
agreement, express or implied, with it, as a finder or broker in
connection with the transactions contemplated hereunder, and the
Company will indemnify and hold harmless the Buyer from and against
any liability for any claim, demand, or payment of any
broker’s or finder’s commission, fee, or expenses in
connection with this Agreement claimed under alleged agreement with
the Company. e. Other than with respect to repair
or other work the Company is performing arising out of its
obligations with respect to Product Warranties, each of the
Products has been manufactured, sold or delivered by the Company in
conformity with all applicable contractual commitments, all express
and implied representations and warranties, all Product literature,
all applicable laws, regulations and other governmental
requirements, excluding any of the same governing patents,
copyrights or trade secrets, and to the Company’s Knowledge,
all applicable laws, regulations and other governmental
requirements governing patents, copyrights or trade secrets. With
respect to contractual restrictions, the Products are subject only
to the Warranties and the Company’s standard terms and
conditions of sale. The Company’s
standard terms and conditions of sale for each of the Products are
as set forth in the attached Schedule 3.e . 6
f. Schedule 1.a.5. sets forth a
complete and correct list of the Intellectual Property used or held
for use in the Camera Business. Except as set forth in Section 1.e.
and in Schedule 3.f. attached hereto, the Company owns and
possesses all right, title and interest in and to, or has a valid,
enforceable and transferable license to use the Intellectual
Property. Except as set forth in Schedule 3.f. attached
hereto, no claim by any third party contesting the validity,
enforceability, use or ownership of any of the Intellectual
Property has been made or is currently outstanding or, to
Company’s Knowledge, is threatened. Except as set forth in
Schedule 3.f. attached hereto, the Company has not received
any notices of and is not aware of any facts that indicate a
likelihood of any infringement or misappropriation by, or conflict
with, any Person with respect to the Intellectual Property,
including any demand or request that Company license rights from,
or make royalty payments to, any Person. Except as set forth in
Schedule 3.f. attached hereto, to the Company’s
Knowledge, the Company has not infringed, misappropriated or
otherwise conflicted with any proprietary rights of any third
parties and the Company is not aware of any infringement,
misappropriation or conflict that will occur as a result of the
continued operation of the Camera Business or the Assets.
g. The Company is in compliance where it engages in the
Camera Business, to the extent a failure to comply would have a
Material Adverse Effect, with all applicable federal, state, local
and international laws, ordinances and regulations relating to the
Camera Business and the Assets, including, without limitation all
environmental, labor, employment, health and safety and other laws,
statutes and regulations, but excluding (i) Intellectual Property
laws, rules and regulations which matters are the subject of a
separate warranty hereunder, (ii) tax laws, rules and regulations,
which matters are the subject of a separate warranty hereunder,
(iii) the matters which are the subject of subsection 3.a., and
(iv) current or planned ROHS environmental requirements imposed by
the European Union. The Company will complete the process of
updating existing compliance reports for FlexCam iCam and the
DocCam Pro to the following reports: FCC Part 15, Subpart B;
ICES-003; EN55022:1998; EN55024:1998; EN61000-3-2; EN61000-3-3; and
IEC/EN 60950-1:2001 1st Edition. h. To the
Company’s Knowledge and based on its understanding and
interpretations of relevant law (the “ Tax
Qualification ”), the Company has filed all tax returns,
including, without limitation, estimated tax returns, withholding
and quarterly sales/use tax returns required to be filed by it
under the laws of the United States, the State of Utah and each
other state or jurisdiction in which the Company is required to
file tax returns. Subject to the Tax Qualification, the Company has
paid and/or deposited all taxes for the periods covered by such
returns and all taxes for which the laws of any state or other
taxing jurisdiction impose successor liability. The Company's
federal and state tax returns have not been audited by the Internal
Revenue or any state department of revenue, no agreements are
currently in effect by or on behalf of the Company for the
extension of time for the assessment of any tax. There are no tax
liens, whether imposed by any federal, state or local taxing
authority, outstanding against any of the Assets.
4. Representations and Warranties of the Buyer .
The Buyer represents and warrants as follows: 7
a. The Buyer is a corporation duly organized,
validly existing and legally operating in the State of Missouri and
has all requisite power and authority to make, execute and perform
this Agreement and all documents to be executed in connection
herewith; furthermore, neither the Buyer nor the Buyer’s
principals are party to or subject to any non-competition agreement
that would preclude or prohibit the Buyer’s operation of the
Camera Business following Closing. b. The
execution and delivery of this Agreement and the sale contemplated
hereby have been duly authorized by the Buyer.
c. There has been no person employed or retained by the
Buyer or who is entitled to be paid under any agreement, express or
implied, with it, as a finder or broker in connection with the
transactions contemplated hereunder, and the Buyer will indemnify
and hold harmless the Company from and against any liability for
any claim, demand or payment of any broker’s or
finder’s commission, fee or expenses in connection with this
Agreement claimed under alleged agreement with the Buyer.
5. Responsibility for Other Party’s
Liabilities . a. Except for the Assumed
Liability, the Security Interest, the Permitted Encumbrances, the
Buyer’s Assumed Tax Liability and the Buyer’s
indemnification obligations hereunder, the Buyer does not have, and
will not have after the Closing Date, any liability or
responsibility whatsoever for any liability or obligation of any
nature, whether accrued, absolute, contingent, or otherwise,
including, without limitation, tax deficiencies or other tax
liabilities of
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