EXHIBIT 10.5
PURCHASE AND SALE OF BUSINESS ASSETS
This
Agreement (the "Agreement") is made on August 1, 2004, (the
"Effective Date") between National Abrasive
Systems, Co. ("Seller"), and
AmeriChip Tool and Abrasives, LLC,
("Purchaser"), a wholly owned subsidiary of
AmeriChip International, Inc.
(collectively, the "Parties").
Recitals
This
Agreement is made with reference to the following facts and
circumstances:
A. Seller owns and
operates a certain industrial abrasives sales business and
the assets used in connection with such
business (the "Business") under the name
of National Abrasive Systems, Co. (the
"Name"), located at 12933 West Eight Mile
Road, Detroit, Michigan 48235.
B. Seller desires to sell
and Purchaser desires to purchase Seller's
interest in the "Purchased Assets," as
defined in this Agreement.
C. Richard Zyla and
Thomas Howard, the shareholders ("Shareholders") of
Seller will receive a substantial economic
benefit derived from Purchaser's
purchase of the Purchased Assets from
Seller. In exchange, Shareholders agree to
make the representations, warranties, and
covenants set forth in this Agreement.
In addition, Seller and Shareholders agree
not to compete with Purchaser in the
conduct of the Business as provided in a
non-competition agreement attached to
this Agreement as Exhibit 1 and as a
condition to Purchaser's purchase of the
Purchased Assets from Seller. D. The
Parties agree as follows:
Agreement
1.
Agreement to Purchase and Sell.
1.1.
Assets Purchased and Sold. At the Closing (as defined in this
Agreement), Purchaser shall buy and Seller
shall sell, assign, convey, transfer,
set over, and deliver (by appropriate
instrument of transfer) to Purchaser all
of the assets, rights, and interests of
every conceivable kind or character
whatsoever, whether tangible or intangible,
that on the Closing Date (as defined
in this Agreement) are owned by Seller or
in which Seller has an interest of any
kind. These include, without limitation,
the following, (collectively, the
"Purchased Assets"):
A. Trade Fixtures. Trade
fixtures and equipment, as defined in the Michigan
Uniform Commercial Code, MCLA
440.1101-.1102 (the "UCC"), including but not
limited to those items listed in Exhibit
2;
B. Inventory. All
inventory of any kind or description, whatsoever, wherever
located, which is owned by the Seller at
the time of closing;
C. Miscellaneous Items.
All patents, logos, slogans, trademarks, copyrights,
know-how, processes, trade secrets,
formulae, inventions, telephone numbers,
telephone listings, computer programs,
software programs, software and technical
libraries, engineering data, electronic
data bases, all drawings, license
agreements and all other intellectual
and/or proprietary information and
property and applications therefore or
-1-
<PAGE>
licenses thereof, used in connection with
the Business, including Internet
address for the Business, if any
(collectively, the "Miscellaneous Items");
D. Purchase Orders. Any
existing customer purchase orders which have not
completed prior to the Closing (the
"Purchase Orders");
E. Customer List and
Miscellaneous Records. Any records, files, lists and
other tangible assets that pertain to the
Business, including lists and records
pertaining to any one or more of the
following: Seller's customers, suppliers,
advertising, promotional material, sales,
services, delivery, and/or operations,
except those items, if any, required to be
retained by law, including accounting
records and returns (collectively, the
"Customer List and Miscellaneous
Records");
F. Remote Assets. All assets
located off site from the Location or in the
possession of others, but used in
connection with the Business (collectively,
the "Remote Assets"). The situs of the
Remote Assets and the person or entity in
possession or control thereof shall be
delivered by Seller to Purchaser at the
Closing;
G. Contracts. All contracts and
service agreements (collectively, the
"Contracts") shall be delivered by Seller
to Purchaser at the Closing;
H. Sales, Contracts and Service
Records. All contracts and service records for
sales, services, or leasing relating to the
Business (collectively, the "Sales
Contracts/Service Records") shall be
delivered by Seller to Purchaser at the
Closing; and
I. Goodwill. The goodwill,
telephone fax numbers, yellow-page advertisements,
and Seller's right to use the registered
name, and all related names and
derivations, including the Business
Internet address, if any (collectively, the
"Goodwill").
1.2.
Excluded Assets. Except as otherwise set forth in this
Agreement,
this Agreement contemplates the purchase
and sale, inclusive of assignments, of
the Purchased Assets. This Agreement
specifically excludes, however, the
following assets (collectively, the
"Excluded Assets"):
A. The miscellaneous
items of personal property and possessions of
Shareholders including any policy of life
insurance and cash surrender value of
such life insurance upon life of any
Shareholder; and
B. Seller's assets not
specifically or by inference included in the above
paragraphs or attached Exhibit.
1.3.
Liabilities Excluded. Purchaser does not assume nor shall
Purchaser
be obligated for any liabilities or
responsibilities whatsoever of Seller or the
Business as conducted by Seller through the
Closing Date, inclusive of
obligations or liabilities resulting from
Seller's total or partial withdrawal
from any pension, profit sharing, or
retirement plans (the "Excluded
Liabilities").
2.
Purchase Price. Purchase Price
-2-
<PAGE>
The
purchase price for the Purchased Assets is Two Hundred Fifty
Thousand
Dollars ($250,000.00); additionally Richard
Zyla shall transfer his One Thousand
shares of common stock in the Seller back
to Seller and receive One Hundred
Twenty Five Thousand (125,000) shares of
free trading common stock of AmeriChip
International, Inc.; and Thomas Howard
shall transfer his One Thousand shares of
common stock in the Seller back to the
Seller and receive Twenty Five Thousand
(25,000) shares of free trading common
stock of AmeriChip International, Inc.,
(the "Purchase Price"). This shall take
place at time of closing.
3. Terms
of Payment
3.1
Promissory Note. Two Hundred Fifty Thousand Dollars
($250,000.00)
shall be paid pursuant to the terms and
provisions of a promissory note (the
"Note") that Purchaser shall execute at the
Closing. The Note will provide for
monthly installment payments of Seven
Hundred Twenty Nine and 17/100 Dollars
($729.17) representing interest only for
the first six months commencing one
month after the date of execution of the
note at the option of the Purchaser;
thereafter monthly payment shall be Two
Thousand Four Hundred Seventeen
($2,417.00) Dollars or more, at the option
of the Purchaser; the payments shall
include interest on the unpaid balance.
Interest shall accrue on the unpaid
balance at a rate of three and one-half
percent (3-1/2%) per annum. The
installment payments of the Note shall
continue monthly until the principal and
interest are fully paid; provided, however,
that the unpaid principal and
interest shall be fully paid no later than
ten (10) years from the effective
date of the Note. There shall be no penalty
for prepayment of the note. A copy
of the Note is attached as Exhibit 3.
3.2
Security Agreement. As security for the payment of the Note owed
to
Seller, by Purchaser, the Purchaser shall
execute a security agreement granting
a security interest to Seller in the assets
described in this Agreement (the
"Security Agreement") together with a UCC-1
financing statement (the "Financing
Statement"). A copy of the Security
Agreement is attached as Exhibit 4, and a
copy of the Financing Statement is attached
as Exhibit 5.
4.
Adjustments.
At the
Closing, the following shall be adjusted or apportioned and, to
the
extent practicable, all such prorations
shall be computed and paid at the
Closing, and to the extent not practicable,
as soon as practicable after the
Closing:
4.1 Taxes
on Purchased Assets. Purchaser shall pay all taxes and
assessments, extraordinary as well as
ordinary, that may be levied on any
Purchased Assets which become due after the
Closing Date and which arise from
actions of Purchaser after the Closing;
provided that Seller shall pay for all
taxes upon Purchased Assets that arise from
Seller's ownership or operation of
the Business on or before the Closing and
which may be due on, before, or after
the Closing Date. Current personal property
taxes shall not be prorated.
4.2
Miscellaneous Business Taxes. All Social Security, sales, use,
withholding, and single business taxes for
all years up to and including the
last completed tax year and all quarters
for the current tax year immediately
preceding the Closing Date shall be paid in
full by Seller when payment of such
amounts shall become due.
4.3
Miscellaneous. If applicable, adjustments shall be made for
payroll
and any other prepaid items, and any other
unspecified unpaid taxes.
4.4
Transfer Fees; Sales Taxes. Purchaser shall pay all transfer fees
and
applicable sales taxes, if any, (but
excluding Seller's income or other taxes in
the nature thereof) arising under or on
account of the purchase and sale of the
Purchased Assets.
-3-
<PAGE>
5.
Title.
The assets
described in this agreement are subject to a lien in favor of
Huntington Bank, Mt. Clemens, Michigan, See
Exhibit 6.
5.1
Agreement of Payment. In addition to the warranties and
representations contained in this
Agreement, if for any reason any taxing
authority, creditor or third party, in
addition to Huntington Bank, who is owned
a debt by Seller on or before the Closing,
or who otherwise possesses any type
of right or interest in the Purchased
Assets arising from ownership or operation
of the Business, including the Purchased
Assets, by Seller prior to the Closing,
holds or obtains a lien on the Purchased
Assets, then the following shall apply:
A. Seller, on written
notice given by Purchaser to Seller, shall pay such
monies arising from the ownership or
operation of the Business, including the
Purchased Assets, by Seller prior to the
Closing required to prevent the seizure
of the property;
B. In the event of
default by Seller as to the foregoing, Purchaser, shall
have the right to pay for the same and/or
obtain the release of lien, if any,
and receive a credit toward the payment of
any obligations owing by Purchaser to
Seller until the indebtedness is paid in
full or satisfied; and
5.2
Disclosure. Before the Closing, Seller shall furnish to Purchaser
a
true and complete list of all existing
creditors. This list shall set forth the
names and addresses of all of Seller's
creditors and shall contain information
regarding the nature and extent of the
claim or claims of each creditor. Seller
shall afford to Purchaser or Purchaser's
authorized representatives access to
Seller's books and records related to each
claim and shall furnish Purchaser
with such financial and operating data and
other information regarding each such
claim as Purchaser may from time to time
reasonably request.
6.
Representations, Covenants, and Warranties of Seller.
Seller and
Shareholders (as evidenced by the signature of Shareholders)
represent, covenant, and warrant the
following to be true, which
representations, covenants, and warranties
shall survive the Closing:
6.1 Status of
Seller. Seller is a Michigan corporation duly organized,
validly existing and in good standing under
the laws of the State of Michigan;
and, further, is properly authorized,
according to its Articles of Incorporation
and Bylaws and duly adopted Resolutions, to
enter into and carry out the
transactions contemplated by this
Agreement. See Exhibit 7.
6.2
Authority. When executed, this Agreement and all instruments
necessary
to carry out the transactions contemplated
by this Agreement (the "Related
Documents") will be legal, valid, and
binding obligations of each party signing
such instruments on behalf of Seller.
6.3
Absence of Undisclosed Liabilities. Notwithstanding anything
contained
in this Agreement to the contrary, except
to the extent stated in paragraph 5,
above, Seller has no undisclosed
liabilities or obligations. Seller represents
that Seller does not know or have
reasonable grounds to know of any basis for
the assertion against Seller, as of any
liability of any nature or in any amount
not fully reflected in Exhibit 6.
6.4 Title
to Properties. Seller has good and marketable title to all its
properties and assets, including those
reflected in the Financial Statements
(except those since sold or otherwise
disposed of in the ordinary course of
business), subject to no lien, encumbrance,
security interest except as
disclosed in paragraph 5, above. Further,
except as set forth in this Agreement,
there are no imperfections of title that
would affect the marketability of title
of Seller's assets.
-4-
<PAGE>
6.5
Seller's Name. Seller agrees that from and after the Closing
Date,
Purchaser shall have the right to use in or
in connection with the conduct of
any business (whether carried on by
Purchaser directly to through any affiliate)
(1) the Name; or (2) any part or portion of
the Name, either alone or in
combination with one or more other words.
Seller warrants to Purchaser that it
has taken all necessary action to protect
the Name in the State of Michigan and
agrees to take or cause to be taken any and
all steps or actions that shall be
or become permissible, proper, or
convenient to enable or permit Purchaser to
use the Name, or any portion of the Name,
either alone or in combination with
one or more other words, except as
presently restricted. It is contemplated that
on or as soon as practicable after the
Closing Date, Seller will terminate
Seller's interest in the Name. After the
Closing Date, Seller agrees that it
will not use the Name directly or
indirectly, either alone or in combination
with one or more other words, in or in
connection with any business, activities,
or operations that Seller directly or
indirectly may carry on or conduct.
6.6 Status
of Contracts. Seller has, to the best of Seller's knowledge,
complied with all of the provisions of
contracts described in this Agreement and
of all other contracts and commitments to
which Seller is a party. Further,
other than those contracts or agreements
specifically described in this
paragraph, Seller has
