Document:

EX-4.4

 

EXHIBIT 4.4

ASSET PURCHASE AGREEMENT

PROCAM MACHINE LLC

and

MONROE MACHINED PRODUCTS, INC.

May 24, 2005

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page
	1.0 Purpose
	 	 	1	 
	 
	 	 	 	 
	2.0 Purchase and Sale
	 	 	1	 
	2.1 Equipment
	 	 	1	 
	2.2 Inventories
	 	 	1	 
	2.3 Contracts
	 	 	1	 
	2.4 Intellectual Property
	 	 	1	 
	2.5 Accounts Receivable/Cash
	 	 	1	 
	2.6 Miscellaneous Assets
	 	 	1	 
	2.7 Excluded Assets
	 	 	1	 
	 
	 	 	 	 
	3.0 Assumption of Liabilities
	 	 	2	 
	3.1 Inventory/Purchasing
	 	 	2	 
	3.2 Customer Obligations
	 	 	2	 
	3.3 Retained Liabilities
	 	 	2	 
	 
	 	 	 	 
	4.0 Purchase Price
	 	 	2	 
	4.1 Purchase Price
	 	 	2	 
	4.2 Holdback
	 	 	3	 
	4.3 Purchase Price Allocation
	 	 	4	 
	4.4 Taxes
	 	 	4	 
	 
	 	 	 	 
	5.0 Closing
	 	 	4	 
	 
	 	 	 	 
	6.0 Seller’s Representations and Warranties
	 	 	4	 
	6.1 Organization
	 	 	4	 
	6.2 Authorization
	 	 	4	 
	6.3 No Violations
	 	 	4	 
	6.4 Absence of Changes
	 	 	5	 
	6.5 Taxes
	 	 	5	 
	6.6 Title
	 	 	5	 
	6.7 Compliance with Laws
	 	 	5	 
	6.8 Litigation
	 	 	5	 
	6.9 No Broker Arrangement
	 	 	5	 
	6.10 Material Misrepresentations or Omissions
	 	 	5	 
	 
	 	 	 	 
	7.0 Buyer’s Representations and Warranties
	 	 	5	 
	7.1 Organization
	 	 	5	 
	7.2 Authorization
	 	 	5	 
	7.3 No Violations
	 	 	6	 
	7.4 No Finders
	 	 	6	 
	7.5 Material Representations or Omissions
	 	 	6	 
	7.6 Available Funds
	 	 	6	 
	7.7 No Broker Arrangement
	 	 	6	 
	 
	 	 	 	 
	8.0 Closing Conditions
	 	 	6	 
	8.1 Buyer’s Conditions
	 	 	6	 

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	 	 	Page
	8.2 Seller’s Conditions
	 	 	7	 
	 
	 	 	 	 
	9.0 Further Agreements
	 	 	7	 
	9.1 Additional Documents and Assistance
	 	 	7	 
	9.2 Use of Facilities
	 	 	8	 
	9.3 Non-Solicitation
	 	 	8	 
	9.4 Employees
	 	 	8	 
	9.5 Non-Competition
	 	 	8	 
	9.6 Indemnification by Seller
	 	 	8	 
	9.7 Indemnification by Buyer
	 	 	8	 
	9.8 Transition Assistance
	 	 	8	 
	 
	 	 	 	 
	10.0 Miscellaneous Terms
	 	 	9	 
	10.1 Publicity
	 	 	9	 
	10.2 Notice
	 	 	9	 
	10.3 Confidentiality
	 	 	9	 
	10.4 Successors and Assigns
	 	 	9	 
	10.5 Titles and Subtitles
	 	 	9	 
	10.6 Counterparts
	 	 	9	 
	10.7 Advice of Counsel
	 	 	10	 
	10.8 Expenses
	 	 	10	 
	10.9 Governing Law
	 	 	10	 
	10.10 Dispute Resolution
	 	 	10	 
	10.11 Severability
	 	 	10	 
	10.12 Survival
	 	 	10	 
	10.13 Complete Agreement
	 	 	11	 

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	SCHEDULES

	 	 	 
	Schedule 2.1

	 	Equipment
	 
	 	 
	Schedule 2.3(A)

	 	Included Contracts
	 
	 	 
	Schedule 2.3(B)

	 	Excluded Contracts
	 
	 	 
	Schedule 3.3

	 	Retained Liabilities
	 
	 	 
	Schedule 4.2

	 	Purchase Price Allocation
	 
	 	 
	Schedule 6

	 	Seller’s Disclosure Memorandum
	 
	 	 
	Schedule 7

	 	Buyer’s Disclosure Memorandum
	 
	 	 
	Schedule 9.5

	 	Employees Subject to Non-Competes

 

 

ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement (“Agreement”) is entered into as of May 24, 2005, by and between
ProCam Machine LLC, a Washington limited liability company with its principal place of business at
18421 Bothell-Everett Hwy, Suite 150, Mill Creek, WA 98012 (“Seller”), and Monroe Machined
Products, Inc., a Washington corporation with its principal offices at 1422 S. 192nd,
Seatac, WA 98148 (“Buyer”).

1.0 Purpose

     Buyer desires to buy and Seller desires to sell all of Seller’s rights and assets (“the
Assets”) and to assume certain liabilities (“Liabilities”) used or related to Seller’s precision
machining and tooling business (the “Business”), and which are described in Sections 2.0 and 3.0
below.

2.0 Purchase and Sale of Assets

     Upon the terms and subject to the conditions of this Agreement, Buyer agrees to purchase from
Seller and Seller agrees to sell, transfer, assign and deliver to Buyer at Closing, the Assets,
including:

     2.1 Equipment. All machinery, equipment, tools, dies, molds, fixtures, furniture,
furnishings, and similar personal property (the “Equipment”) related to the Business, including
without limitation the Equipment identified in Schedule 2.1 to this Agreement.

     2.2 Inventories. All finished goods, work in progress, raw materials, spare
replacement and component parts, loaners and demonstration products, supplies and similar goods
(the “Inventories”) related to the Business.

     2.3 Contracts. All contracts, purchase orders, customer orders, quotations and
agreements related to the Business, including without limitation those identified in Schedule
2.3(A) to this Agreement, and excluding those identified in Schedule 2.3(B).

     2.4 Intellectual Property. All intangible assets and intellectual property of the
Seller related to or used or useful in connection with the Business, including without limitation
the patents, trademarks, copyrights and applications therefore, and goodwill, trade names, trade
dress, logos, domain names, designs, programs, drawings, instructions, specifications, know how,
trade secrets, in each instance related to, used or useful in connection with the Business.

     2.5 Accounts Receivable. All of Seller’s accounts receivable and pre-paid expenses.

     2.6 Miscellaneous Assets. All consents of government entities (including applications
therefor), service materials, purchasing records, manufacturing, quality control and regulatory
records, design and development records, accounting records, customer records, and all other books
and records, warranties and indemnities, and similar rights related to the Business, subject only
to Seller’s rights as set forth in Section 9.1 below.

     2.7 Excluded Assets. With the exception of the documents referenced in Section 9.1
hereto, all other assets are included in the sale.

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3.0 Assumption of Liabilities

     Upon the terms and subject to the conditions of this Agreement, Seller assigns and Buyer
agrees to pay, perform and otherwise discharge certain of Seller’s liabilities related to the
Business, to the extent incurred or accrued prior to the Closing, including:

     3.1 Inventory/Purchasing. Seller’s obligations and liabilities related to commitments
for inventories for the Business ordered by Seller in the ordinary course of business and not yet
delivered as of Closing, and to supplier and subcontractors for services or work performed or to be
performed in connection with the Business.

     3.2 Customer Obligations. Subject to the provisions of Section 4.2 herein, Seller’s
obligations and liabilities related to customers or prospective customers for quotations, orders or
contracts for products or services of the Business, or guarantees or warranties or other claims
related thereto.

     3.3 Retained Liabilities. All other of Seller’s liabilities, including without
limitation, those identified in Schedule 3.3 to this Agreement, are retained by Seller.

4.0 Purchase Price

     4.1 Purchase Price. In full consideration for purchase of the Assets and assumption
of the Liabilities, subject to the terms and conditions of this Agreement, including specifically
Section 4.2 herein, the Buyer shall pay to Seller the following amounts at Closing (the “Purchase
Price”):

          4.1.1 ONE MILLION THREE HUNDRED THOUSAND DOLLARS ($1,300,000.00) for the Assets other than
inventory and accounts receivable.

          4.1.2 The net difference, if positive, between, any accounts receivable of the Business
collected during the six (6) months subsequent to Closing and earned by the Business prior to
Closing, on the one hand, and any accounts payable of the Business paid by Buyer during the six (6)
months subsequent to Closing, and accrued as the result of services or products provided to the
Business prior to Closing (the “Net Accounts”). If, however, the Net Accounts shall result in a
negative number, then that amount shall be deducted from the Purchase Price.

          4.1.3 The total value of the Inventories, calculated as the sum of the following:

                   4.1.3.1 For “Finished Goods” associated with the Business, the jointly audited values at
Closing of such goods, to be calculated as follows:

	 	o  	if more then 18 months has passed since the
last sale of such goods, and the Finished Good is not a repeating
Customer Program part, then 5% of last offered price;
	 
	 	o  	if more then 18 months has passed since the
last sale of such goods and the Finished Good is a repeating Customer
Program part, then 75% of last offered price;

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	 	o  	if a Finished Good is jointly deemed by the
parties to be obsolete, useful only for purpose of research and
development, or hardware/parts without certification, then zero;
	 
	 	o  	all repeating Customer Program parts with or
without requirements, then the lesser of 85% of last price or cost of
production of the part;
	 
	 	o  	all hardware or parts usable for GD, Simula or
Aerojet projects, then 75% of last purchase price;
	 
	 	o  	all hardware not described above shall be
valued at 5% of last purchase price;

                  4.1.3.2 For all “Works-In-Progress” associated with the Business, the jointly audited value at
Closing of such works, to be calculated as follows:

	 	o  	the value of current jobs with open
requirements shall be calculated based on the % of completion
multiplied by the proposed sale price;
	 
	 	o  	the value of any excess or “overbuilt”
repeating Customer Program parts and incomplete parts in stores shall
be calculated based on the % of completion multiplied by the proposed
sale price;
	 
	 	o  	all Works-In-Progress for repeating Customer
Program parts without requirements shall be attributed a value based on
the % of completion multiplied by 50% the proposed sale price;.
	 
	 	o  	All Works-In-Process not described above shall
be attributed a value of zero.

                  4.1.3.3 For all “Raw Materials” associated with the Business, the jointly audited value at
Closing of such material, to be calculated as follows:

	 	o  	all Raw Material capable of filling an open
requirement shall be valued at 100% of purchase price;
	 
	 	o  	all Raw Material to be used on repeating
Customer Program parts shall be valued at 85% of purchase price;
	 
	 	o  	all other Raw Materials not described above
shall be valued at 5% of purchase price.

     4.2 Holdback. At Closing, the amount of FIFTY THOUSAND DOLLARS ($50,000.00) (the
“Holdback Amount”) shall be held back from Seller by Buyer and transmitted to Seller’s Counsel (as
identified in Section 10.2) for retention in its trust account. On the six (6) month anniversary
of the Closing (the “Holdback Period”), subject to the prior reasonable mutual agreement of
Seller’s Counsel and Buyer’s Counsel (as identified in Section 10.2), Seller’s Counsel shall
transmit to Seller the Holdback Amount, as that amount is calculated after deduction of the
following amounts:

          4.2.1 any amounts reasonably paid by Buyer during the Holdback Period for documented claims by
customers against warranties or guarantees offered by the Business or

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Seller prior to Closing; provided that Buyer will provide Seller and Seller’s Counsel with fax
notification of any such claims, and Seller shall provide Buyer with any objections or reasonable
requests for further information regarding any such claim within five (5) business days of receipt
of such notice, or such claim will be deemed to have been to be allowed for payment; and

          4.2.2 the purchase price of any inventory purchased from Seller and reasonably found by both
parties to be obsolete (and not having been profitably sold at the conclusion of the Holdback
Period after reasonable effort to do so), under Buyer’s standard, and commercially reasonable
inventory practices and procedures.

     4.3 Purchase Price Allocation. The Purchase Price shall be allocated by the parties
among the Assets in a manner which shall be mutually agreed upon and which shall be set forth in
Schedule 4.2 to this Agreement, and shall be utilized by the parties for purposes of completing and
filing Internal Revenue Service Form 8594 and for compliance with filing or reporting requirements
of any other taxing authority.

     4.4 Taxes. Buyer shall be responsible for all sales, use or transfer taxes, if any,
due and payable to any government entity as a result of the transactions contemplated by this
Agreement.

5.0 Closing

     Provided the Closing Conditions identified in Section 8.0 below have been satisfied, the
Closing shall take place on May 31, 2005 (the “Closing”) at the offices of Leary Franke Droppert,
Suite 600, 1500 Fourth Avenue, Seattle, WA 98101, at 10:00 a.m., or on such other date, time and
place as the parties may mutually agree.

6.0 Seller’s Representations and Warranties

     Except as is otherwise identified in Seller’s Disclosure Memorandum, which is attached to this
Agreement as Schedule 6, Seller represents and warrants to Buyer as of the date of this Agreement,
and shall represent and warrant as of the date of Closing, that:

     6.1 Organization. Seller is a limited liability company, duly organized and validly
existing under the laws of the State of Washington, and in good standing under the laws of the
State of Washington.

     6.2 Authorization. Seller has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated thereby. This Agreement has
been, and each document to be delivered under this Agreement, at Closing shall be, duly executed
and constitute the valid, binding obligation of Seller, enforceable against Seller in accordance
with its respective terms.

     6.3 No Violations. Neither the execution nor the delivery of this Agreement or any
other document or agreement contemplated by it, will materially violate or breach any of Seller’s
(i) corporate documents, (ii) the provisions of any other agreement to which Seller is a party, or
(iii) any order, injunction, statute, rule, regulation by which Seller is bound, and by which any
Asset may be affected or encumbered. The Sellers are not required to give notice to, make a filing
with, or obtain the authorization, consent or approval of any third party, including without
limitation any governmental entity or court, in order for the parties to consummate the
transactions contemplated by this Agreement.

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     6.4 Absence of Changes. Seller has conducted the Business in the ordinary course
since April 1, 2005 until Closing, including without limitation not causing or suffering any event,
change or effect that is materially adverse to the Business.

     6.5 Taxes. Seller has paid all taxes owing and filed all returns required to be filed
with respect to the Assets and Business as of the date of this Agreement, and will have done so as
of the date of Closing, except to the extent Seller is not yet required to do so or has, in good
faith, timely filed an objection or opposition to payment of same (with respect to which Seller
shall retain responsibility to file and pay when due, and shall indemnify Buyer from all liability
with respect thereto, including but not limited to personal property taxes for the period prior to
Closing).

     6.6 Title. Seller has, and shall deliver to Buyer at Closing, good and marketable
title to the Assets, free and clear of any lien, security interest, encumbrance or other
restriction on transfer.

     6.7 Compliance with Laws. Seller has and shall until Closing, conduct the Business in
compliance with all applicable statutes, rules, regulations, permits, licenses and similar
requirements of any applicable government entity or court, and compliance with hazardous material
and other environmental compliance requirements.

     6.8. Litigation. The Assets, Business, and the transactions contemplated by this
Agreement are not subject to any pending, or to Seller’s knowledge, threatened, action, suit,
proceeding, hearing, investigation, claim, judgment, order, decree, injunction, charge or similar
requirement, in law or equity, civil, criminal or otherwise.

     6.9 No Broker Arrangement. Seller has made no arrangement, agreement or contract
with any broker or agent with respect to the transaction contemplated by this Agreement. Should
any claim for a commission or finder’s fee be asserted by any third party as a result of the act or
omission of either party, then the party alleged to have agreed to pay such commission or fee shall
be solely responsible therefore, and shall indemnify, defend, and hold the other party harmless
from any and all loss, damage, liability, cost, or expense, including, without limitation,
attorneys’ fees, suffered or incurred by it arising out of or relating to any claim for commission
or fee made by any such agent or broker.

     6.10 Material Misrepresentations or Omissions. To the best of Seller’s knowledge, no
material information provided to the Buyer in connection with this Agreement, or with respect to
the Assets or Business is false or misleading in any material respect, including without
limitation, all Schedules to this Agreement.

7.0 Buyer’s Representations and Warranties

     Except as is otherwise identified in Buyer’s Disclosure Memorandum, which is attached to this
Agreement as Schedule 7, the Buyer represents and warrants to Seller as of the date of this
Agreement, and shall represent and warrant as of the date of Closing, that:

     7.1 Organization. Buyer is a corporation, duly organized, validly existing and in
good standing under the laws of the State of Washington.

     7.2 Authorization. Buyer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated thereby. This Agreement has
been, and each document to be delivered under this Agreement at Closing shall

5

 

be duly executed and constitute the valid, binding obligation of Buyer, enforceable against Buyer
in accordance with its terms.

     7.3 No Violations. Neither the execution nor the delivery by Buyer of this Agreement
or any other document or agreement contemplated by it, will constitute any violation or breach of
Buyer’s corporate documents or of the provisions of any other agreement to which Buyer is a party.
Buyer is not required to give notice to, make a filing with, or obtain the authorization, consent
or approval of any third party, including without limitation any governmental entity or court, in
order for the parties to consummate the transactions contemplated by this Agreement.

     7.4 No Finders. Buyer has not taken any action that will result in any liability of
or claim against Seller for a broker’s commission, finder’s fee or other like payment related to
the transactions contemplated by this Agreement.

     7.5 Material Representations or Omissions. To the best of Buyer’s knowledge, no
material information provided to the Seller in connection with this Agreement is false or
misleading in any material respect.

     7.6 Available Funds. Buyer has sufficient funds available to consummate the
transactions contemplated by this Agreement.

     7.7 No Broker Arrangement. Buyer has made no arrangement, agreement or contract with
any broker or agent with respect to the transaction contemplated by this Agreement. Should any
claim for a commission or finder’s fee be asserted by any third party as a result of the act or
omission of either party, then the party alleged to have agreed to pay such commission or fee shall
be solely responsible therefore, and shall indemnify, defend, and hold the other party harmless
from any and all loss, damage, liability, cost, or expense, including, without limitation,
attorneys’ fees, suffered or incurred by it arising out of or relating to any claim for commission
or fee made by any such agent or broker.

8.0 Closing Conditions

     8.1 Buyer’s Conditions. Buyer’s conditions to Closing or its obligations under this
Agreement shall be subject to Seller’s fulfillment (or Buyer’s waiver) prior to Closing of each of
the following conditions:

          8.1.1 Seller shall have provided Buyer with a certified Resolution of its Board of Directors
approving and authorizing the transactions contemplated by this Agreement.

          8.1.2 Seller shall have provided the Buyer with bills of sale, assignments, consents and such
other instruments of transfer or approval, all in a form reasonably satisfactory to Buyer, as are
reasonably necessary to convey fully and effectively to Buyer the Assets and the Liabilities in
accordance with the terms of this Agreement.

          8.1.3 Seller shall have provided Buyer with audited financial statements for the period ending
December 31, 2004, and unaudited financial statements for the period ending April 30, 2005, and
thereafter on a monthly basis, as soon as they are reasonably available, all prepared in accordance
with GAAP.

          8.1.4 Buyer shall have obtained a UCC search in the State of Washington, confirming that there
are no liens outstanding against the Assets, except those which shall be satisfied at Closing, or
which are otherwise waived by Buyer.

6

 

          8.1.5 Seller shall have adopted an amendment to its Charter changing Seller’s name so that it
does not include the words “ProCam Machine”, and shall have executed and delivered to Buyer a
Certificate of Amendment to that effect, appropriate for filing with the Washington Secretary of
State.

          8.1.6 No litigation shall have been instituted or threatened against Seller to restrict or
prohibit the transactions contemplated by this Agreement.

          8.1.7 Buyer shall have entered into an Employment Agreement with Bruce Campbell with terms and
conditions to be negotiated by them.

          8.1.8 All representations and warranties of the Seller shall be true as of the Closing, and
Seller shall have delivered to Buyer a certificate to that effect.

          8.1.9 Seller shall have in all material respects duly performed and complied with its
respective obligations under this Agreement.

     8.2 Seller’s Conditions. Seller’s obligations under this Agreement shall be subject
to Buyer’s fulfillment (or Seller’s waiver) prior to Closing of each of the following conditions:

          8.2.1 Buyer shall have provided Seller with a certified Resolution of its Board of Directors
approving and authorizing the transactions contemplated by this Agreement.

          8.2.2 Buyer’s delivery to Seller of the Purchase Price in a form consistent with the terms of
Section 4.1.

          8.2.3 Buyer shall have executed an Escrow Agreement pursuant to Section 4.2 hereto.

          8.2.4 No litigation shall have been instituted or threatened against Buyer to restrict or
prohibit the transactions contemplated by this Agreement.

          8.2.5 All representations and warranties of the Buyer shall be true as of the Closing, and
Buyer shall have delivered to Seller a certificate to that effect.

          8.2.6 Buyer shall have in all material respects duly performed and complied with its
respective obligations under this Agreement.

9.0 Further Agreements

     9.1 Additional Documents and Assistance. Each of the parties shall execute and
deliver such other instruments and documents and provide such other assistance as the other party
may reasonably request in furtherance of the transactions contemplated by this Agreement.
Notwithstanding any other provision of this Agreement, Seller shall also be entitled to retain a
copy of such books and records of the Business, and be provided access to Seller’s former employees
related to the Business to the extent they remain in Buyer’s employ, as it may reasonably require
for the limited purpose of concluding its operations, and the preparation and filing of Seller’s
financial statements, tax returns, and applicable government and shareholder reports and
disclosures. Buyer shall preserve and keep the books and records of Seller that Buyer obtains
pursuant to the transactions contemplated hereby, and Seller shall preserve and keep any such books
and records that they may retain with respect to the Business, for a period

7

 

of five (5) years after Closing. All such records shall be made reasonably available to Seller or
Buyer, as the case may be, in accordance with this Section 9.1.

     9.2 Use of Facilities. For a period from Closing through July 31, 2005, Seller shall
provide to Buyer, at no additional cost (including no cost for routine use of utilities),
commercially reasonable access to Buyer’s facilities located at 18421 Bothell-Everett Hwy., Mill
Creek, Washington (the “Facilities”). Buyer shall be permitted to use the Facilities to store
equipment, material and inventories and to conduct business operations, and will take due care to
abide by and conform to Seller’s then current lease obligations with respect to use of the
Facility. Buyer also hereby agrees to indemnify and hold Seller, and Seller’s owners, officers,
directors and employees, harmless from any claim, liability or cost (other than the cost of rent or
routine utilities) arising in any way related to Seller’s use or conduct of operations in the
Facilities, including without limitation, related to or arising from Buyer’s employment of
individuals in the Facilities.

     9.3 Non-Solicitation. Prior to any termination of this Agreement, Seller agrees to
deal exclusively with Buyer with respect to the matters referred to in this Agreement, and Seller
will not directly or indirectly solicit or otherwise encourage any offer, offer to negotiate or
enter into any agreement with a third party related to the Assets or the Business (other than
transactions in the ordinary course of business).

     9.4 Employees. Buyer will offer employment to the employees of Seller who are
involved with the Business. As of the Closing Date, Seller shall (i) terminate the employment of
all employees business with the exception of Bob Hawks and Dennis Speer; (ii) pay-out to such
employees any and all amounts owed against earned or accrued compensation and benefits; and (iii)
will not take any action to induce its employees not to accept employment with Buyer or otherwise
hinder their potential employment with Buyer. For any employee of Seller so hired by Buyer, Seller
agrees not to solicit or hire any such employee so long as such employee is an employee of Buyer.

     9.5 Non-Competition. In consideration of the transactions contemplated by this
Agreement, Seller agrees, for a period of three years from Closing, not to compete with Buyer by
engaging in a business which in any way competes with the Business (as defined in Section 1.0); by
using, or facilitating use by any other party of any information related to the Business for a
purpose competitive with the Business; or by directly or indirectly incenting, influencing or
otherwise inducing any entity to any way either not do business with or cease doing business with
Buyer. To further facilitate enforcement of this provision, Seller agrees to provide Buyer at
Closing with written assignment of all non-compete covenants of Buyer’s present employees, which
employees are identified in Schedule 9.5.

     9.6 Indemnification by Seller. Effective as of Closing, Seller will defend,
indemnify, and hold harmless Buyer from and against any and all losses, costs, damages,
liabilities, fees, (including without limitation, attorney’s fees) and expenses (collectively
“Damages”) that Buyer incurs directly or indirectly as a result of: (i) any breach (or alleged
breach) of Seller’s representations, warranties and obligations in and under this Agreement, or
(ii) any liabilities or obligations of Seller not assumed by Buyer.

     9.7 Indemnification by Buyer. Effective as of Closing, Buyer will defend, indemnify,
and hold harmless Seller from and against any and all losses, costs, damages, liabilities, fees,
(including without limitation, attorney’s fees) and expenses (collectively Damages) that Seller
incurs directly or indirectly as a result of: (i) any breach (or alleged breach) of Buyer’s
representations, warranties and obligations in and under this Agreement, or (ii) any obligations

8

 

or liabilities of Seller assumed by Buyer or otherwise arising in relation to the Business
following the Closing, or related to Buyer’s use of the Facilities pursuant to Section 9.2 herein.

     9.8 Transition Assistance. For a period from Closing through July 31, 2005, the
Seller shall cause Dennis Speer to provide to Buyer, at no charge to Buyer, up to 40 hours per week
of transition consulting services.

10.0 Miscellaneous Terms

     10.1 Publicity. The parties agree that any public announcement(s) of the transactions
contemplated by this Agreement shall be in a form and at a time to be mutually agreed upon by the
parties, which agreement shall not be unreasonably withheld or delayed.

     10.2 Notice. Any notice required or permitted by this Agreement shall be in writing
and shall be deemed sufficient upon receipt, when delivered personally, by a receipted overnight
courier, by confirmed facsimile, or seventy-two (72) hours after being deposited in the regular
mail, as certified or registered mail with postage prepaid, if such notice is addressed to the
party to be notified at such party’s address or facsimile as set forth below, or as subsequently
modified by a written notice:

	 	 	 	 	 
	

	 	If to Buyer to:
	 	If to Seller to:
	

	 	 	 	 
	

	 	ProCam Machine, LLC
	 	Monroe Machined Products, Inc.
	

	 	18421 Bothell Everett Hwy.
	 	1422 S. 192nd
	

	 	Suite 150
	 	Seatac, WA 98148
	

	 	Mill Creek, WA 98012	 	 
	

	 	Fax: (425) 488-6554
	 	Fax: (206) 242-9551
	

	 	Attention: President
	 	Attention: President
	 
	 	 	 	 
	

	 	With a copy to Seller’s Counsel:
	 	With a copy to Buyer’s Counsel:
	 	 	 	 	 
	

	 	Leary Franke Droppert
	 	William F. Almon, P.S.
	

	 	1500 Fourth Avenue, Suite 600
	 	111 S. 33rd Street, Suite 100
	

	 	Seattle, WA 98101
	 	Yakima, WA 98901
	

	 	Fax: 206-343-8895
	 	Fax: 509-966-7183
	

	 	Attention: V. Marc Droppert
	 	Attention: William F. Almon

     10.3 Confidentiality. The parties agree they will disclose and exchange confidential
and commercially sensitive information concerning their respective finances and operations only to
the extent such information is reasonably necessary to negotiate and accomplish the transaction
contemplated by this Agreement. The information so obtained may only be used by the parties for
purposes of this transaction and for no other purpose, and will not be conveyed or communicated to
any employee or agent of the other party unless the employee or agent has a need to know the
information in connection with these transactions. In the event this Agreement is terminated for
any reason, all confidential information provided by one party to the other will be either returned
to the party which produced it or destroyed in a manner which renders it unusable by any party.

     10.4 Successors and Assigns. The terms and conditions of this Agreement will inure to
the benefit of and be binding upon the respective successors and permitted assigns of the parties.
Nothing in this Agreement, expressed or implied, is intended to confer upon any person, other than
the parties and their successors and permitted assigns, any right, remedy or claim under or by
reason of this Agreement.

9

 

     10.5 Titles and Subtitles. The titles and subtitles used in this Agreement are used
for convenience only, and are not to be considered in construing or interpreting this Agreement.

     10.6 Counterparts. This Agreement may be executed in two or more counterparts, each
of which will be deemed an original and all of which together will constitute one instrument.

     10.7 Advice of Counsel. Each party acknowledges and represents that, in executing
this Agreement, it has had the opportunity to seek legal advice or has waived the right thereto,
and that the person signing on its behalf has read and understood all of the terms and provisions
of this Agreement. This Agreement will not be construed against any party by reason of the
drafting or preparation thereof.

     10.8 Expenses. Each party shall pay all costs and expenses incident to negotiation
and preparation of this Agreement and to its performance, including the fees, expenses and
disbursements of its counsel and accountants, whether or not the transactions contemplated by this
Agreement are consummated.

     10.9 Governing Law. This Agreement, and all acts and transactions pursuant to it, and
the rights and obligations of the parties under it, shall be governed and construed and interpreted
in accordance with the laws of the State of Washington, without giving effect to principles of
conflicts of law.

     10.10 Dispute Resolution. Any dispute between the parties to this Agreement shall be
exclusively determined according to the following procedures:

          10.10.1 Upon either party providing the other with written notice summarizing the dispute and
requesting a meeting of the Presidents of each party. Such meeting shall be scheduled within
twenty (20) days of the receipt of notice, unless extended by mutual agreement. If such meeting is
not held within twenty (20) days of the receipt of notice (or within a mutually agreed upon
extended period), and if such meeting does not result in a mutually acceptable resolution within
thirty (30) days following receipt of notice, either party may, by written notice to the other,
refer the dispute for mediation.

          10.10.2 The parties shall mutually agree on the appointment of mediator within thirty (30)
days following receipt of notice of mediation (or if they are unable to do so, either party may
petition the American Arbitration Association for the appointment of a mediator) and a nonbinding
mediation shall occur within sixty (60) days of such notice.

          10.10.3 If the parties are unable to reach a mutually acceptable resolution of the dispute
through mediation, the parties shall submit any dispute to binding arbitration in accordance with
the rules and procedures of the American Arbitration Association. The arbitrator shall award the
prevailing party a reasonable allowance for attorneys’ fees and arbitration expenses. Any
arbitration shall be held in King County, Washington.

     10.11 Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, the parties agree to renegotiate such provision in good faith,
in order to maintain the economic position enjoyed by each party as close as possible to that under
the provision rendered unenforceable. In the event the parties cannot reach a mutually agreeable
and enforceable replacement for such provision, (i) such provision will be excluded from this
Agreement, (ii) the balance of the Agreement will be interpreted as if such

10

 

provision were so excluded, (iii) the balance of the Agreement will be enforceable in accordance
with its terms.

     10.12 Survival. Seller’s and Buyer’s representations, warranties, indemnities and
guaranties shall come, where applicable, be deemed be made again at, and as of Closing, and shall
survive the Closing of this transaction for a period of one year.

     10.13 Complete Agreement. This Agreement, and any schedules and exhibits referred to
in it constitute the entire agreement between the parties pertaining to the subject matter of it,
and merge all prior negotiations related to the transactions contemplated by it. Except for
continuing obligations of confidentiality, any payment of obligations incurred by one party to the
other prior to Closing according to their terms, and except as otherwise expressly set forth in
this Agreement, any and all other written or oral agreements existing between the parties hereto,
either directly or as successor in interest, regarding such transactions are expressly cancelled,
and have no force and effect. Any term of this Agreement may be amended or waived only with the
written consent of all parties or their respective successors and permitted assigns.

This Agreement is hereby executed by the parties to be effective as of the date first indicated
above.

	 	 	 	 	 	 	 	 	 	 	 
	PROCAM MACHINE, LLC	 	MONROE MACHINED PRODUCTS, INC
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/S/ DENNIS SPEER
	 	By:
	 	/S/ BHRETT MONROE	 	 	 	 
	

	 	 
	 	 	 	 	 	 	 	 
	Name:

	 	DENNIS SPEER
	 	Name:
	 	BHRETT MONROE	 	 	 	 
	Title:

	 	GENERAL MANAGER
	 	Title:
	 	PRESIDENT	 	 	 	 

11

 

ADDENDUM TO THE ASSET PURCHASE AGREEMENT

This Addendum to the Asset Purchase Agreement (“Agreement”), previous entered into as of May 24,
2005, by and between ProCam Machine LLC (“Seller”) and Monroe Machined Products, Inc. (“Buyer”), is
entered into effective as of May 31, 2005, as follows:

	1.  	As the Buyer may not be able to make necessary arrangements to provide payroll and employee
benefits to former employees of ProCam, which Buyer wishes to employ as of June 1, 2005,
ProCam agrees to employ, compensate and provide employee benefits to any such individuals as
designated by Buyer, from among those identified on Attachment A, for a period not to
exceed June 30, 2005, subject to the following further understandings:

	 	1.1  	All individuals, so designated, will be compensated at the compensation rates
identified on Attachment A. Compensation will include applicable overtime for
any employee eligible for overtime hours.
	 
	 	1.2  	ProCam will additionally provide any such employees with statutory, health and
welfare and other employee benefits, consistent with those provided to them by Seller
prior to the Closing, and Buyer agrees to reimburse Seller for all costs incurred by
Seller in providing such benefits, including without limitation, employment taxes,
insurance premiums, and vacation accruals. It is recognized by Buyer that some of such
benefits may directly relate to the level of compensation paid (e.g. social security
withholding), and that periodic costs may apply to others (e.g., health benefits accrue
and are payable in month increments), and that Buyer will be responsible for all
related costs incurred by Seller.
	 
	 	1.3  	Buyer retains the right to request Seller to terminate the services of any such
employee by providing Seller with not less than 3 business days prior written notice.
Seller agrees to provide Buyer with notice of any employee termination as soon as it is
reasonably able to do so.
	 
	 	1.4  	Buyer shall provide Seller with advance funding of any payroll and benefits
amounts, based Seller’s reasonable projections, (and subject to adjustment to actual
costs incurred) and shall reimburse Seller for any other related costs incurred
immediately upon Buyer’s receipt of Seller’s invoice.
	 
	 	1.5  	In consideration for Seller’s providing contract employment services under this
Addendum, Buyer agrees to indemnify and hold Seller, its owners, officers and directors
harmless against any claim, loss or liability incurred by Seller as a result of
providing contract employment services to Buyer under this Addendum, including any
claims by third parties related to any such employee’s actions or failures to act
during the period after Closing.

	2.  	Except as expressly amended in this Addendum, the Agreement shall remain in full force and effect.

This Addendum has been executed by the parties to be effective as of the date indicated above.

	 	 	 	 	 	 	 	 	 	 	 
	PROCAM MACHINE, LLC	 	MONROE MACHINED PRODUCTS, INC
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/S/ DENNIS SPEER
	 	By:
	 	/S/ BHRETT MONROE	 	 	 	 
	

	 	 
	 	 	 	 	 	 	 	 
	Name:

	 	DENNIS SPEER
	 	Name:
	 	BHRETT MONROE	 	 	 	 
	Title:

	 	GENERAL MANAGER
	 	Title:
	 	PRESIDENT	 	 	 	 

12

 

Attachment A

EmployeesEX-4.5

 

EXHIBIT 4.5

	 	 	 	 	 
	

	 	Metal Storm Limited

ACN 064 270 006

Level 34 Central Plaza One

345 Queen Street

Brisbane Qld 4000

GPO Box 1097

Brisbane Qld 4001 Australia

Tel: 61 7 3221 9733

Fax: 61 7 3221 9788

Web Sit: www.metalstorm.com

Email Address: msau@metalstorm.com
	 	

31 January 2005

Mr David A Smith

9619 Potters Hill Circle

LORTON VA 22079

Dear David

I am delighted that you have decided to accept the position of CEO with Metal Storm.

I am writing to outline the terms of the company’s employment offer for the position of Chief
Executive Officer for Metal Storm Limited, which is located in Brisbane, Australia1 1
but has its main US location in DC. Your office will be in the DC premises (see below). In
this capacity you will be reporting directly to the Metal Storm Limited Board of Directors.

If you accept this position you will be nominated for membership on the Board of Directors of Metal
Storm Limited and Metal Storm, Inc. (hereinafter collectively referred to as “Metal Storm”). Your
election to the board of Metal Storm will be decided upon by a vote of its shareholders at the
Company’s General Meeting which is scheduled to occur on or about May 20, 2005 in Brisbane. Your
assigned office location will be in the Metal Storm facilities located in Suite 810, 4350 N.
Fairfax Drive, Arlington, VA.

Your monthly base salary will be $20,000, which is equivalent to a rate of $240,000 per year. We
would like you to start work on Monday, February 7, 2005. As the senior member of the Metal Storm
management team, you will be eligible to participate in our annual incentive compensation plan
which has both short term and long term components. Your target shortterm performance bonus goal
for the Metal Storm fiscal year which ends on December 31, 2005, will be 75% of your base salary.
Short-term bonuses are payable in cash and/or fully vested stock. You will also be eligible for a
long-term performance bonus in the form of stock granted on option, the details of which will be
explained in a separate letter. In general, the option would be a right to acquire 1,000,000 shares
of Metal Storm Limited common stock based upon grants of 125,000 shares per quarter over a two year
period. Your bonus will be based on both corporate performance and achievement of your objectives
(as determined by the Metal Storm Limited Board), and may be pro-rated based on the number of
months you are employed during the Metal Storm Limited fiscal year.

If your employment is terminated during your first 90 days of employment you will not be eligible
to receive any severance payments whatsoever. Thereafter, if you employment by Metal Storm is
terminated for reasons other than cause,2  Metal Storm will provide you with
separation benefits equal to six months

	1	 	Your duties will also include acting as the
CEO of Metal Storm, Inc., which is a wholly owned subsidiary of Metal Storm
Limited doing business in the United States.
	 
	2	 	“Cause” shall be defined as (i) a willful
failure to substantially perform your duties, (ii) gross misconduct or, (iii)
conviction
of a felony.

U.S. Office

4350 N Fairfax Drive, Suite 810, Arlington VA 22203     Tel: 703 248 8218  Fax: 703 248 8262

 

 

	 	 	 	 	 
	

	 	Metal Storm Limited

ACN 064 270 006

Level 34 Central Plaza One

345 Queen Street

Brisbane Qld 4000

GPO Box 1097

Brisbane Qld 4001 Australia

Tel: 61 7 3221 9733

Fax: 61 7 3221 9788

Web Sit: www.metalstorm.com

Email Address: msau@metalstorm.com
	 	

of your base salary paid as a lump sum. The severance benefits described in this letter will be
Metal Storm’s sole and exclusive obligation to you in the event you are terminated for reasons
other than cause in which case you will not be entitled to any severance benefits whatsoever. In
return for these separation benefits, you will release and discharge any claims whatsoever that you
might have against Metal Storm and its officers, directors, employees and agents.

As an employee of Metal Storm, you will be eligible to receive fringe benefits, which I will
discuss with you. The following documents which must be accepted/completed by you as a condition
of your employment will be sent to you under separate covers:

	 	Ø  	Employee Agreement Regarding Intellectual Property and Confidentiality
	 
	 	Ø  	Employment Application
	 
	 	Ø  	Employment Eligibility Verification (I-9) (w/required documents)
	 
	 	Ø  	Fair Credit Reporting Act Disclosure

If these terms are acceptable to you please indicate your willingness to acceptance of this offer
by return email.

David,

I would like to provide additional verbal information before you begin. Could you be available for
a telephone call at 7.30pm on your Monday evening? Could you provide a call number and another
time if that is more convenient?

Yours sincerely

Metal Storm Limited

Terry O’Dwyer

Chairman

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