ASSET PURCHASE AGREEMENT

Exhibit 10.8

 

ASSET PURCHASE AGREEMENT

 

THIS ASSET PURCHASE AGREEMENT (the “Agreement”) dated as of May 6, 2004 (the “Effective Date”) by and between ClearOne Communications, Inc., a Utah corporation (“Seller”), and M:SPACE, Inc., a Minnesota corporation (“Buyer”).

 

WHEREAS, Seller operates a division (“Division”) which is engaged in the marketing and sale of audiovisual integration products and services throughout the United States and internationally which is partially based in Golden Valley, Minnesota; and

 

WHEREAS, the business of the Division, as conducted only in the United States and not internationally, is herein referenced as the “Business”; and

 

WHEREAS, Seller desires to sell and Buyer desires to purchase certain assets of Seller (and not the liabilities of Seller, except as herein provided) which are utilized exclusively or predominantly by the Division in connection with the Business, and not internationally, all on the terms set forth herein;

 

NOW, THEREFORE, in consideration of the promises and of the mutual covenants and conditions contained herein, the parties hereby agree as follows:

 

1.   PURCHASE AND SALE OF ASSETS.

 

1.1   Generally . Subject to the terms of this Agreement, including the qualifications set forth below, Seller shall sell, transfer, convey and deliver to Buyer, and Buyer shall purchase from Seller, on and as of the Closing Date, all property and assets of Seller, tangible or intangible, owned (not leased) by Seller and used exclusively or predominantly by the Division in connection with the Business, but excluding the Excluded Assets, as such term is defined below (the “Assets”), including but not limited to the following:

 

(a)   All equipment, demonstration equipment, machinery, computers and other tangible personal property exclusively or predominantly used in or related to the Business, owned (not leased) by Seller, including but not limited to those items identified in Schedule 1.1(a), but, notwithstanding anything herein to the contrary, excluding (i) all furniture and fixtures other than the furniture listed in Schedule 1.1(a), and (b) those items listed as excluded in the “Notes” column of Schedule 1.1(a).

 

(b)   All finished goods and work, inventory, materials in final form, work-in-process, raw materials and supplies owned by Seller and exclusively or predominantly used in or related to the Business including but not limited to the items listed in Schedule 1.1(b) (the “Inventory”);

 

(c)   The intellectual property listed in Schedule 1.1(c) (the “Transferred Intellectual Property”).

 

(d)   All books, records and datafiles associated with a particular software program, owned by Seller and, notwithstanding anything to the contrary herein, used exclusively in the conduct of the Business, including but not limited to the items listed in Schedule 1.1(d) (the

 

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“Business Books, Records and Datafiles”) although Seller shall be entitled to retain copies of the same for record keeping purposes;

 

(e)   Seller’s transferable and assignable non-compete, non-disclosure, confidentiality and non-solicitation agreements with former employees of Seller, but only with respect to such employees who worked exclusively for the Division (the “Non-Compete Contracts”) but only to the extent locatable by Seller using reasonable diligence;

 

(f)   All rights of Seller under any warranty or guarantee (collectively, the “Warranties”) by any manufacturer, supplier or other transferor of the Assets, and all Licenses and Permits, as such term is defined in Section 7.9, but only to the extent they are assignable but, with respect to the Warranties, only to the extent locatable by Seller using reasonable diligence;

 

(g)   All rights (but no obligations except the Assumed Liabilities, as such term is defined in Section 2 below) of Seller under any purchase orders, contracts, guarantees, license agreements, commitments, and SBC maintenance agreement, other maintenance agreements commonly known as the “legacy” agreements, or other agreements, all as specifically listed on Schedule 1.1(g), but notwithstanding anything herein to the contrary, no other contracts (the “Assigned Contracts”);

 

(h)   All sales records, purchase records, customer lists, salespersons’ lists, sales reports, costs sheets, bills of material, technical information, supplier lists, advertising and promotional materials, blueprints and specifications, vendor records and information, and production records relating exclusively to the Business or the Assets, although Seller shall be entitled to retain and use copies of these records;

 

(i)   Notwithstanding anything to the contrary herein, Seller’s rights in and to only those Internet Web site locations (together with all content, information and data located on such websites and all copyrights thereto) and/or Internet domains and telephone and facsimile numbers identified on Schedule 1.1(h), subject to the qualifications therein.

 

The Assets shall be transferred by Seller to Buyer in accordance with this Agreement with all required consents of any and all third parties and free and clear of all liabilities, obligations, claims, liens, security interests or encumbrances, except (a) as otherwise provided herein with respect to the Assigned Contracts and related Assumed Liabilities and (b) that Seller need not furnish copies of the Non-Compete Contracts, the Business Books, Records and Data files or Warranties at Closing. Rather, Buyer shall be entitled to request copies following Closing on an as needed basis, and Seller shall then use reasonable diligence to locate the same and furnish copies to Buyer. All Assets are sold in an “as is and with all faults” condition.

 

1.2   Excluded Assets . Notwithstanding anything in this Agreement to the contrary, Seller is not selling, assigning, transferring or conveying to Buyer any of the following assets or intangible property interests described in this Section 1.2, which were first referred to hereinabove as the “Excluded Assets”:

 

(a)   Cash and cash equivalents;

 

(b)   All of Seller’s minute books, stock transfer journals, tax returns and the corporate seal of Seller;

 

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(c)   All books and records of Seller except (i) the Business Books, Records and Datafiles, (ii) as provided in Sections 1.1(d) with respect to copies being retained by Seller, and (iii) the items listed in Section 1.1(h), although Seller shall be permitted to retain copies of such items;

 

(d)   The rights of Seller under this Agreement;

 

(e)   The name “ClearOne Communications” and all combinations thereof;

 

(f)   All intellectual property other than the Transferred Intellectual Property.

 

(g)   All accounts receivable of Seller, whether or not related to the Business.

 

(h)   All prepaid deposits of Seller, whether or not related to the Business.

 

(i)   All claims of Seller against third parties, known or unknown, asserted or unasserted, which arise before or after the Closing Date, including claims for payment, except claims for payment arising out of Assigned Contracts and for which Buyer is entitled to payment hereunder by the counterparties thereto, in connection with services to be performed by Buyer thereunder following the Closing Date.

 

(j)   All of Seller’s rights to tax refunds, known or unknown, choate or inchoate, whether or not related to the Business.

 

(k)   All assets and finished goods relating to the operation of the Division’s woodshop.

 

(l)   The Spectrologic Tape Library.

 

(m)   All furniture and fixtures other than the furniture listed in Schedule 1.1(a).

 

(n)   All real and personal property leases.

 

(o)   All assets of Seller, tangible or intangible, other than the Assets.

 

2.   ASSUMPTION OF LIABILITIES . Except as hereinafter specifically provided, Buyer shall not and does not assume any liabilities or obligations of Seller. Seller shall be solely liable for its liabilities and obligations arising from ownership of the Assets, operation of the Division and Business and incidents and occurrences prior to the Closing Date, whether or not reflected in Seller’s books and records and whether or not such incidents or occurrences first became known following the Effective Date, except as follows: Subject to the terms and conditions of this Agreement, as of the Closing Date, Buyer assumes only the following:

 

(a)   the liabilities and obligations of Seller arising before or after the Closing Date and related to the period of time after the Closing Date, but such liabilities and

 

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obligations must relate to services or obligations to be performed by Buyer as assignee of the Assigned Contracts following the Closing Date, which by their terms are to be performed following the Closing Date; and

 

(b)   any liability first asserted after the Closing Date under or in respect of the Assigned Contracts relating to the period prior to the Closing Date, to the extent such liability is asserted after a period of two years following the Closing Date.

 

(c)   any liability arising out of the use by Buyer of the telephony listed in Schedule 1.1(h) following the Closing.

 

The liabilities referred to in subsection (a), (b) and (c) are herein referenced as the “Assumed Liabilities.”

 

3.   INSTRUMENTS OF CONVEYANCE . At the Closing, pursuant to the terms and subject to the conditions of this Agreement, Seller shall:

 

(a)   Execute and deliver an Assignment and Assumption Agreement in substantially the form attached hereto as Schedule 3 (“Assignment”), which document shall be without warranty, except as to title and except as otherwise specifically set forth herein;

 

Execute and deliver such additional instruments of conveyance as may be reasonably required to transfer the Assets. At the Closing, pursuant to the terms and subject to the conditions of this Agreement, Buyer shall also execute and deliver to Seller, the Assignment.

 

4.   CLOSING . The Closing with respect to the transactions provided for herein shall take place at such place and time as the parties may mutually agree, on (a) the earlier to occur of (i) a day which is 5 business days after the fulfillment of the conditions precedent referenced in Sections 13 and 14, or (ii) May 6, 2004, or (b) at such other date as the parties may mutually agree (the “Closing Date”). Notwithstanding the foregoing, neither party shall be obligated to close the transactions contemplated by this Agreement unless all conditions precedent referenced in this Agreement have been satisfied or waived.

 

5.   PURCHASE PRICE . The total purchase price for the Assets and the performance of Seller’s obligations under this Agreement is Buyer’s assumption of the Assumed Liabilities.

 

6.   LABOR AND EMPLOYMENT MATTERS . Buyer shall not assume any employment obligations, wage or salary payment obligations, including without limitation those arising under any pension, profit sharing, deferred compensation, severance, welfare, sick leave, accrued or earned vacation, wage or other employee benefit plan, procedure, policy or practice of Seller regardless of whether such plan, procedure, policy or practice is disclosed in this Agreement. Notwithstanding the foregoing, Buyer may make offers of employment to certain of Seller’s employees, pursuant to terms determined by Buyer. Seller will furnish to Buyer such information in their personnel files as Buyer may reasonably request and with respect to which it is lawful for Seller to disclose.

 

7.   REPRESENTATIONS AND WARRANTIES OF SELLER . Seller hereby represents and warrants to Buyer that:

 

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7.1   Incorporation . Seller is a corporation duly incorporated, validly existing and in good standing under the laws of the State of its incorporation, and has the corporate power to own or lease its properties and to carry on the Business as it is now being conducted.

 

7.2   Authority Relative to this Agreement . The execution, delivery and performance of this Agreement by Seller, including without limitation the sale, conveyance, transfer and delivery and other transactions contemplated herein or hereby: (a) have been or will be, prior to Closing, duly and effectively authorized by the Board of Directors of Seller, with respect to the Assets sold by Seller hereunder; and (b) have been or will be, prior to Closing, authorized and approved by all of Seller’s shareholders, if necessary.

 

7.3   Conflicting Agreements, Governmental Consents . Except as disclosed on Schedule 7.3, the execution, delivery and performance by Seller of this Agreement and all of the other agreements and instruments to be executed and delivered pursuant hereto (collectively, the “Transaction Documents”), the consummation of the transactions contemplated hereby, and the performance or observance by Seller of any of the terms or conditions hereof or thereof, will not (with or without notice or lapse of time) (a) conflict with, or result in a breach or violation of the terms or conditions of, or constitute a default under, or result in the creation of any lien on any of the Assets pursuant to any award of any arbitrator, or any indenture, contract or agreement, instrument, order, judgment, decree, statute, law, rule or regulation to which Seller or any of the Assets is subject, or (b) require any filing or registration with, or any consent or approval of, any federal, state or local governmental agency or authority, or (c) contravene, conflict with, or result in a violation or breach of any provision of, or give any person or entity the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate, or modify, any contract or other arrangement to which Seller is a party or by which Seller is bound or to which any of the Assets is subject (or result in the imposition of any security interest upon any of such Assets).

 

7.4   Restrictive Covenants . Seller is not a party to nor are the Assets bound or affected by any agreement or document containing any covenant limiting the freedom of Seller to compete in the Business or which materially or adversely affects the business practices, operations or conditions of the Business or the continued operation of the Business after the Closing Date on substantially the same basis and on substantially the same terms and conditions as the Business is presently carried on.

 

7.5   Binding Obligation . This Agreement and the Transaction Documents are, or when delivered will be, legally valid and binding obligations of Seller, enforceable in accordance with their respective terms, subject to the qualification that such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally and by general equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law).

 

7.6   Actions, Suits, Proceedings . Except as disclosed in Schedule 7.6, there are no actions, suits or proceedings pending or, to the knowledge of Seller, threatened against Seller or any of the Assets in any court or before any federal, state, municipal or other governmental agency or before any other private or public tribunal or quasi-tribunal which, (a) if decided adversely to Seller, would have a material adverse effect upon the Business or Assets, (b) seek to restrain or prohibit the transactions contemplated by this Agreement or obtain any damages in connection therewith, or (c) in any way call into question the validity of this Agreement or the other agreements and instruments

 

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to be executed and delivered by Seller; nor is Seller in default with respect to any order of any court or governmental agency entered against it in respect of the Business or Assets. Seller has not has received notice, formally or otherwise, of any judgments, orders, decrees, stipulations, settlement agreements, liens or injunctions, relating in any way to the Assets, which have not been wholly and completely settled, complied with and discharged.

 

7.7   No Material Violations . Except as disclosed in Schedule 7.7, Seller is not in violation of any applicable law, rule or regulation relating to the Business that would reasonably be expected to have a material adverse effect on the Business, and, to the knowledge of Seller, there are no requests, claims, notices, investigations, demands, administrative proceedings, hearings or other governmental claims against Seller alleging the existence of any such violation that would have a material adverse effect on the Business. For purposes of this Agreement, “material adverse effect” means any change in or effect (i) that is or will be materially adverse to the Business taken as a whole, or (ii) that will prevent or materially impair Seller’s ability to consummate the transaction contemplated by this Agreement, provided that a material adverse effect shall not include changes or effects (a) relating to economic conditions or financial markets in general, (b) resulting from the voluntary termination of employment by employees of Seller between the date of this Agreement and the Closing Date or (c) resulting from actions required to be taken by the terms of this Agreement.

 

7.8   Title to Assets and Absence of Encumbrances . Except as noted otherwise in this Agreement or any schedule thereto with respect to qualifications as to assignability or transferability, (i) Seller owns and has good and marketable title to all of the Assets; (ii) the delivery to Buyer of the instruments of transfer of ownership contemplated by this Agreement will vest good and marketable title to the Assets in Buyer, free and clear of any and all liabilities (except as otherwise provided in this Agreement with respect to Assigned Contracts and the Assumed Liabilities), liens, claims, and encumbrances of every kind and character whatsoever; and (iii) the Assets include all assets necessary for the operation of the Business as it has been operated by Seller, except with respect to contracts which are not being assigned hereunder.

 

7.9   Licenses and Permits . All material licenses, permits, franchises, approvals and governmental authorizations (collectively the “Licenses and Permits”) required for Seller in connection with the operation of the Business, except with respect to qualifications of Seller to do business as a foreign corporation in states other than Utah, as to which Seller makes no warranty, are listed in Schedule 7.9. Except for the Licenses and Permits, no other such licenses, permits, franchises, approvals and governmental authorizations (other than qualifications of Buyer to do business as a foreign corporation in states outside of Minnesota) are required for the operation of the Business.

 

8.   Labor and Employment Agreements . The Division is not subject to any collective bargaining agreement.

 

8.1   Environmental Matters . Except as set forth in Schedule 8.1:

 

(a)   Seller is conducting and has conducted its Business in compliance with all applicable Environmental Laws and pursuant to all necessary government permits;

 

(b)   There is no pending litigation and no pending or threatened Environmental Claim by any person (including, but not limited to, any governmental authority) with respect to the Business;

 

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(c)   Seller has not received any written notification from the United States Environmental Protection Agency advising Seller of any potential liability under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), as amended, with respect to the Business;

 

(d)   Throughout this Agreement, the following terms shall have the meanings set forth below:

 

(i)   “Environmental Claim” shall mean any claim or demand, or notice thereof, alleging potential liability (including, without limitation, liability for investigative costs, clean-up costs, monitoring costs, governmental response costs, natural resources damages, property damages, liability for nuisance or damage to property values, personal injuries or penalties) arising out of, based on or resulting from: (A) noncompliance with Environmental Laws by Seller in connection with the Business.

 

(ii)   “Environmental Laws” shall mean any federal, state or local statute, regulation, rule, ordinance or common law pertaining to the protection of human health or the environment and any applicable orders, judgments, decrees, permits, licenses or other authorizations or mandates under such laws.

 

8.2   Employee Plans .

 

(a)   After the Closing, Seller warrants that Buyer shall not have any responsibility or liability under any:

 

(i)   employee benefit plan, as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), maintained or contributed to by Seller or any subsidiary for any of its employees, former employees or directors (or their respective beneficiaries), including without limitation any group insurance or self-insured health plan, severance pay plan, non-qualified deferred compensation plan or retirement plan intended to be qualified under Internal Revenue Code (the “Code”) Section 401(a) (collectively, the "ERISA Plans");

 

(ii)   trust fund maintained by Seller or any subsidiary in connection with any such ERISA Plan;

 

(iii)   "cafeteria plan" ("125 Plan") maintained by Seller and governed by Code Section 125; or

 

(iv)   other plan maintained by Seller providing compensation, benefits or perquisites to any employees, former employees or directors (or their respective beneficiaries) of Seller or any subsidiary, including without limitation any incentive, bonus, stock option, restricted stock, vacation pay or sick pay plan.

 

(b)   Seller represents that Seller and its subsidiaries have timely complied with all of its "COBRA" obligations under ERISA Section 602, Code Section 4980B and applicable state insurance laws, with respect to any group life insurance and health benefit continuation coverage required to be provided by those of its ERISA Plans and any 125 Plan that provide such benefits for employees (and their respective beneficiaries) that are or have been employed in

 

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connection with the Assets being acquired by Buyer hereunder; and Seller warrants that Seller and its subsidiaries will continue, after the Closing, to comply with such obligations with respect to any of their employees, former employees or their respective beneficiaries who are or become entitled to such continuation coverage, to the extent required by applicable laws.

 

8.3   Assigned Contracts . Seller and, to the knowledge of Seller, each other party thereto, has substantially performed all obligations required to be performed under the Assigned Contracts to date, and are not in default under any Assigned Contract. The Assigned Contracts are each in full force and effect and, except as set forth in Schedule 8.3(a), are assignable to Buyer without the consent of third parties, and Seller has not waived or assigned to any other person any of its rights thereunder. The Assigned Contracts are complete and accurate or prior to Closing will be complete and accurate, and complete copies of such contracts including all amendments or supplements thereto have been or will be delivered to Buyer prior to Closing. No such contract shall prohibit or limit the ability of Seller to engage in any business activity or compete with any person in connection with the Business and/or other activities of the Buyer. Seller has delivered to Buyer three basic forms of maintenance contracts (copies of which are attached as Schedule 8.3(b), and each of the Assigned Contracts is substantially identical in form to at least one of such forms of maintenance contracts, recognizing that each such maintenance contract may vary from one another as to details.

 

8.4   Intellectual Property Rights . All Intellectual Property included in the Assets are solely registered (if at all) in the name of Seller, of which Seller has all right, title and interest, and have not been licensed or otherwise been made available by Seller for use by others except in the ordinary course of Seller’s Business. To Seller’s knowledge, all such registered intellectual property rights are in full force and effect. Except as listed elsewhere in this Agreement, Seller does not license from others the right to use any industrial or intellectual property rights in the Business. To Seller’s knowledge there has been no unauthorized use or disclosure or misappropriation of any of its intellectual properties utilized in connection with the Business, and Seller has taken reasonable steps in its view, to protect against the unauthorized use or disclosure of its intellectual property.

 

8.5   Inventory . The Inventory is being sold and transferred hereunder in an “as is, with all faults” condition, inspected and accepted by Buyer.

 

8.6   Taxes . Seller has paid all taxes, including federal, state and local income, profits, franchise, sales, use, property, excise, payroll, and other taxes and assessments (including interest and penalties) relating to or for Seller, the Assets or the Business, in each case to the extent that such have become due and are not being contested in good faith. No claims for additional taxes have been asserted against Seller