Asset Purchase Agreement

EXHIBIT 10.1


ASSET PURCHASE AGREEMENT


This Asset Purchase Agreement (this "Agreement") is made and entered into as of the 30th day of August, 1996, by and among 3D SYSTEMS, INC., a California corporation ("Buyer"), KELTOOL, INC., a Minnesota corporation ("Seller"), and WAYNE DUESCHER, an individual ("Duescher"), on the following terms and conditions:


1. DEFINITIONS.


(a) 3M PATENTS. "3M Patents" shall have the meaning set forth in Paragraph 7(s)(ii).


(b) ADJUSTED BOOK VALUE. "Adjusted Book Value" shall mean the aggregate book value of all Purchased Assets on the Asset list which would, in accordance with generally accepted accounting principles ("GAAP"), be classified as assets on financial statements of the Seller prepared on a basis and recorded in a manner consistent with the June 30, 1996 balance sheet of Seller, decreased by any amounts reflected on the June 30, 1996 balance sheet with respect to goodwill, contracts, trade secrets, patents, trademarks or service marks and other Intangible Property and assets.


(c) ASSET LIST. "Asset List" shall mean the list setting forth the categories and book values of the Purchased Assets, in form and substance reasonably satisfactory to Buyer, dated as of June 30, 1996.


(d) ASSUMED LIABILITIES. "Assumed Liabilities" shall mean only those liabilities of Seller assumed by Buyer as identified on SCHEDULE 3(b) hereto.


(e) CLOSING. "Closing" shall mean the purchase and sale of the Assets on the Closing Date.


(f) CLOSING ASSET LIST. "Closing Asset List" shall mean the revised list setting forth the categories and book values of the Purchased Assets, consistent in all respects in form and substance with the Asset List, adjusted to reflect changes in the values of the items set forth on the Asset List through the Closing, which shall include a deduction for a fixed monthly depreciation for fixed assets (which shall be in the amount of $1,800 per month for production equipment and $114 per month for office equipment) and adjustments to reflect all inventory and/or equipment acquired or sold between the date of the Asset List through the Closing.


(g) CLOSING DEDUCTION LIST. "Closing Deduction List" shall mean the revised list setting forth the categories and book values of the Deduction Items, consistent in all respects in form and substance with the Deduction List, adjusted to reflect changes in the values of the items set forth on the Deduction List through the Closing.


(h) CLOSING DATE. "Closing Date" shall mean September 9, 1996.


(i) EMPLOYEES. "Employees" shall mean the current employees of Seller.


(j) ERISA. "ERISA" shall mean the Employee Retirement Income Security Act of 1974.


(k) EVALUATOR. "Evaluator" shall have the meaning set forth in Section 4(d).


(l) EXCLUDED ASSETS. "Excluded Assets" shall have the meaning set forth in Section 2.


(m) FINANCIAL STATEMENTS. "Financial Statements" shall mean and include both the unaudited financial statements reflecting the results of operations and financial positions of Seller at and for the fiscal year ended December 31, 1995, and the unaudited financial statements and for the 6-month period ended June 30, 1996, which financial statements shall include balance sheets and statements of income and expenses.


(n) HAZARDOUS MATERIAL. "Hazardous Material" shall mean any flammables, asbestos, explosives, radioactive materials, hazardous wastes, toxic substances or related materials, including without limitation of any substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "toxic substances" under any applicable federal, state, or local laws, rules, regulations or orders or which federal, state or local laws, rules, regulations or orders designate as potentially dangerous to public health and/or safety when present in the environment.


(o) INTELLECTUAL PROPERTY. "Intellectual Property" shall mean any and all information, trademarks (including the name "KELTOOL", but excluding the name "KELTECH"), trade names, service marks, patents, patent rights, licenses (United States or foreign), copyrights (including any registrations, applications, licenses or rights relating to any of the foregoing), software, programs, proprietary rights, proprietary processes, technology, trade secrets, inventions, know-how, designs, computer programs, franchises, certificates of public convenience and necessity, and all other intangible assets, properties and rights.


(p) KELTOOL PROCESS. "Keltool Process" shall mean a tooling process used to make durable composite metal parts, which process was originally developed by 3M, and was licensed by 3M to Seller in 1991 pursuant to the License Agreement.


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(q) LEASE. "Lease" shall have the meaning as set forth in Section 10(f).


(r) LICENSE AGREEMENT. "License Agreement" shall mean, collectively, that certain License Agreement entered into by and between Seller and 3M dated January 25, 1991, that certain Addendum of License Agreement dated February 18, 1992, and that certain Second Addendum of License Agreement dated February 18, 1992.


(s) NON-COMPETITION AGREEMENT. "Non-Competition Agreement" shall have the meaning set forth in Section 10(f).


(t) OTHER AGREEMENTS. "Other Agreements" shall mean the Non-Competition Agreement, the Warrant Agreement, and the Lease.


(u) PREMISES. "Premises" shall mean Seller's facility located at 561 Shoreview Park Road, St. Paul, MN 55126.


(v) PURCHASED ASSETS. "Purchased Assets" shall have the meaning set forth in Section 2.


(w) SECOND PAYMENT. "Second Payment" shall mean that portion of the Purchase Price described in Section 3(a)(ii), to be adjusted pursuant to the provisions of Section 4.


(x) WARRANT AGREEMENT. "Warrant Agreement" shall have the meaning set forth in Section 11(b).

2. PURCHASE AND SALE OF ASSETS. On the terms and subject to the conditions set forth in this Agreement, Seller agrees to sell and deliver to Buyer, and Buyer agrees to purchase and acquire from Seller, free and clear of any and all liens, claims and encumbrances of any kind, other than those set forth on SCHEDULE 7(c) to this Agreement, all of the business, assets, properties, goodwill and rights of Seller as a going concern of every nature, kind and description, tangible or intangible, wherever located and whether or not carried or reflected on the books and records of Seller (the "Purchased Assets"), including without limitation, as shall exist at the date hereof, the following business assets: equipment; supplies; software (including the furnace profiling program on disk (exclusive of the LOTUS software used to run such program), and excluding any accounting software packages owned and operated by Keltech, but including floppy disks which contain all databases of such accounting software packages); fixtures; inventories; personal property and other goods; accounts receivable; notes; drafts and other documents; leasehold improvements; customer lists; internet addresses and domain names to the extent existing; patents; permits; trademarks, trade names and service marks, including the name "KELTOOL"; inventions, patents, patent applications, contract rights, including rights to license patents, "know-how" and trade secrets Seller has under the License Agreement, and Seller's rights


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under Non-Disclosure Agreements, and any and all rights under any and all insurance policies ever purchased by Sellers, whether in effect at the Closing or not; goodwill and other general intangibles of whatever kind or nature, including all Intellectual Property. The Purchased Assets shall not include, and Seller shall retain for its own use and benefit, the assets of Seller listed on SCHEDULE 2 attached hereto (the "Excluded Assets"), which Excluded Assets include only cash, and certain personal, non-business related assets owned by Seller and the name "KELTECH".


3. PURCHASE PRICE. The Purchased Assets shall be purchased by Buyer from Seller for a purchase price consisting of:


(a) $1,737,000, payable as follows:


(i) a fixed amount of $875,000 to Seller on the Closing Date by wire transfer, and


(ii) an amount equal to $862,000, subject to adjustment as set forth in Section 4 hereof, to Seller on the last to occur of (a) expiration of 30 days after the Closing Date, or (b) resolution of any dispute as to the amount of any adjustment required pursuant to Section 4 below, by wire transfer;


(b) the assumption of only those current liabilities of Seller set forth on SCHEDULE 3(b) hereto (the "Assumed Liabilities"); and


(c) Warrants to purchase 50,000 shares of Buyer's Common Stock, pursuant to the Warrant Agreement (collectively, the "Purchase Price").


The Purchase Price shall be allocated among the Purchased Assets as set forth in SCHEDULE 3(c) to this Agreement, and such allocation shall be used for federal and state tax purposes; provided, however, that Buyer may modify and amend the allocation set forth on SCHEDULE 3(c) prior to the Closing. With respect to the allocation of the purchase price to the noncompetition covenant of Duescher as set forth in the Non-Competition Agreement, in the event such allocation causes Duescher to incur an amount of combined federal and state income taxes higher than he would incur if there were no such allocation of the Purchase Price to the Non-Competition Agreement, Buyer shall reimburse Duescher such premium over Duescher's resulting tax liability as if there had been no such allocation. In addition, in the event Buyer allocates a portion of the Purchase Price to any purchased depreciable equipment which results in the recapture of such depreciation, Seller shall reimburse Duescher such amount as is necessary to make Duescher "tax neutral," i.e., Seller shall reimburse Duescher the incremental increase in combined federal and state tax liabilities due to such recapture (at ordinary income tax rates) over the combined federal and state income tax liabilities Duescher would incur if an allocation causing such recapture were not made (at capital gains tax rates).


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4. ADJUSTMENT TO PURCHASE PRICE.


(a) ADJUSTMENT BASED ON ADJUSTED BOOK VALUE OF PURCHASED ASSETS. The Second Payment shall be adjusted based upon the Adjusted Book Value of the Purchased Assets listed on the Asset List as of the Closing Date, as follows: (i) if the Adjusted Book Value of the Purchased Assets as of the Closing Date is less than $243,000, then the Second Payment shall be decreased by the amount by which the Adjusted Book Value is less than $243,000, and (ii) if the Adjusted Book Value of the Purchased Assets as of such date is greater than $243,000, the Second Payment shall be increased by the amount by which the Adjusted Book Value of the Purchased Assets as of the Closing Date exceeds $243,000.


(b) PROCEDURES FOR ADJUSTMENTS TO THE SECOND PAYMENT. The Purchase Price shall be adjusted as follows (the "Adjusted Purchase Price"): Attached hereto as SCHEDULE 4(b) is the Asset List. Not later than five (5) days following the Closing Date, Seller shall deliver to Buyer (i) the Closing Asset List, and (ii) the Closing Deduction List. The parties hereto hereby covenant and agree that no adjustment shall be made to the Purchase Price in respect of the Closing Asset List unless (i) the value of the assets as set forth on the Asset List is greater than the value of the assets set forth on the Closing Asset List by an amount of $5,000 or more, or (ii) the value of the assets as set forth on the Asset List is less than the value of the assets set forth on the Closing Asset List by an amount of $5,000 or more, in which case the Purchase Price shall be reduced or increased, as the case may be, on a dollar-for-dollar basis in an amount equal to the entire difference. Each of the Asset List, the Closing Asset List and the Closing Deduction List shall be prepared by Seller from Seller's books and records, consistent with Seller's past accounting practices consistently applied, and, so prepared, shall be presumptively valid unless Buyer shall give written notice to Seller of any disagreement or disagreements with the Closing Asset List or the Closing Deduction List within ten (10) days following its receipt of the Closing Asset List and Closing Deduction List, specifying in reasonable detail the nature and extent of such disagreement.


(c) MANNER OF AJUSTMENTS. The Second Payment shall be reduced to reflect customer deposits made to Seller for orders which have not been delivered by the Seller prior to the Closing. In addition, it is acknowledged and agreed that (1) with respect to production and office equipment, the value of such assets in the Closing Asset List shall be determined by adding to the value of such assets on the Asset List the cost of any acquisitions between June 30, 1996 and the Closing Date and subtracting from the value of the Assets on the Asset List depreciation at a monthly rate of $1,800 and $114 for production and office equipment, respectively, and (2) with respect to inventory, the value of such asset on the Closing Asset List shall be determined by adding acquisitions to inventory and subtracting cost of sales from the value of the inventory on the Asset List, and (3) with respect to accounts receivable and prepaid expenses, the value on the Closing Asset List shall be the value of such assets on the Closing Date.


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(d) DISAGREEMENT OVER ADJUSTED PURCHASE PRICE. If Seller and Buyer are unable to resolve any disagreement with respect to the Closing Asset List which would result in an adjustment to the Purchase Price or with respect to the Closing Deduction List within five (5) days following receipt by Seller of the notice referred to in Section 4(b) above, the disagreement shall be submitted for resolution to Coopers & Lybrand LLP (the "Evaluator"); provided, however, that all undisputed amounts will be paid within two (2) business days after that portion of the adjustment to the Second Payment is determined hereunder. The Evaluator shall act as an arbitrator to determine and resolve such disputes, based solely on presentations by Buyer and Seller and not by independent review. The Evaluator's resolution shall be made within fifteen (15) business days of the submission of the dispute, shall be in accordance with this Agreement, shall be set forth in a written statement delivered to Seller and Buyer and shall be final, binding and conclusive. Seller and Buyer shall each pay one half of all fees, costs and expenses of the Evaluator incurred in connection with the resolution of any dispute.


5. THE CLOSING. The Closing shall take place on the Closing Date and may be effected by means of facsimile transmissions (with same day delivery of executed counterparts among all parties) and wire transfer of the Purchase Price and shall, unless otherwise agreed to by the parties hereto, take place on September 9, 1996. If all conditions to the Closing have not been satisfied or waived on or prior to September 9, 1996, the Closing shall take place on that date which is five business days following the date on which all conditions to the Closing have been satisfied or waived. In the event the Closing does not occur on or prior to October 15, 1996 (the "Drop Dead Date"), the parties' rights and duties with respect to the transaction contemplated in this Agreement and the other Agreements shall cease.


6. NO ASSUMPTION OF LIABILITIES.


(a) LIABILITIES NOT ASSUMED. Buyer shall not and does not assume any liabilities, obligations or commitments of Seller of any kind, known or unknown, contingent or otherwise, of whatsoever kind or nature, other than those Assumed Liabilities specifically identified on SCHEDULE 3(b) hereto, which Schedule shall include only (a) the obligation of Seller under the License Agreement to pay royalties to 3M (as to which Seller is responsible for all obligations incurred by Seller prior to Closing); (b) the obligation to pay 3M the balloon payment in the amount of Eleven Thousand Seven Hundred Seventy-Nine Dollars and Seventy-Nine cents ($11,779.79) on January 25, 1998; (c) the assumption of up to $1,000 for accrued sick leave and vacation payable to employees of Seller who Buyer may employ following the Closing; and (d) any open purchase and/or sales orders of Seller as set forth on SCHEDULE 3(b). Any obligations or commitments of Seller not identified on SCHEDULE 3(b) shall remain the sole responsibility of Seller and Seller and Duescher will jointly and severally indemnify and hold Buyer, its officers, directors and shareholders, and each of them, harmless from and against any and all such liabilities, expenses or obligations, including, but not limited to, (i) deferred expenses, trade account liabilities and capitalized lease; (ii) product liability claims; (iii) liabilities in respect of salaries, employee benefit plans, including obligations to employees for bonus and/or severance


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payments upon the sale of the Purchased Assets; (iv) income, sales, transfer or other taxes, including taxes arising out of the transactions contemplated by this Agreement; (v) any claims related to environmental matters; or (vi) legal expenses or other transaction costs associated with the transactions contemplated by this Agreement. Buyer may offer to hire, on its customary basis, any or all of the Employees (defined herein), but Buyer shall not assume or be bound by any of Seller's employment contracts or other obligations with respect to such Employees. Buyer shall have no obligation whatsoever to hire or otherwise employ any or all of the Employees.


(b) CLAIMS BROUGHT AGAINST BUYER. From and after the Closing Date, Buyer shall notify Seller promptly of any claim made upon Buyer with respect to any liabilities, obligations or commitments of Seller and Buyer shall have no obligation to make any payment of, settle or offer to settle, or otherwise satisfy such claim.


7. REPRESENTATIONS AND WARRANTIES OF SELLER AND DUESCHER. As a material inducement to Buyer to enter into this Agreement and the Other Agreements to which it is a party, and to perform its obligations hereunder and thereunder, Seller and Duescher jointly and severally represent, warrant, and covenant to Buyer as follows:


(a) ORGANIZATION AND STANDING; ARTICLES AND BY-LAWS. Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Minnesota. Copies of the Articles of Incorporation (as certified by the Secretary of State of the State of Minnesota) and Bylaws of Seller have been delivered to Buyer and are accurate and complete as of the date of this Agreement.


(b) AUTHORIZATION OF SELLER AND DUESCHER. Seller has all requisite corporate power and authority to enter into and carry out the terms and conditions of this Agreement and the Other Agreements to which it is a party and all the transactions contemplated hereunder and thereunder. All proceedings have been taken and all authorizations have been secured which are necessary to authorize the execution, delivery and performance by Seller of this Agreement and each of the Other Agreements to be executed by Seller. Duescher has the legal capacity to enter into this Agreement and each Other Agreement to which Duescher is a party in any capacity. This Agreement has been duly and validly executed and delivered by Seller and by Duescher and constitutes, and the Other Agreements to which Seller or Duescher is a party, when executed and delivered by them will constitute, the valid and binding obligations of Seller and Duescher, as the case may be, enforceable in accordance with their respective terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting creditors' rights generally.


(c) TITLE TO THE PURCHASED ASSETS. Seller has, and will transfer to Buyer at the Closing, good and marketable title to all of the Purchased Assets, free and clear of all mortgages, pledges, liens (including, without limitation, tax liens), charges, security interests, claims, conditions, restrictions, encumbrances and obligations, of any type, kind or nature whatsoever


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other than those specifically described on SCHEDULE 7(c) hereto. Seller and Duescher are not parties to, nor are any of the Purchased Assets bound by or subject to, any leases or other agreements or instruments except as may be referred to herein or set forth on SCHEDULE 7(c) to this Agreement.

(d) FINANCIAL STATEMENTS. Seller has delivered to Buyer the Financial Statements. The Financial Statements are true, complete and accurate in all material respects, present fairly the financial condition of Seller for the periods therein specified, and were prepared in accordance with GAAP consistently applied throughout the periods involved, subject to year-end adjustments which will not be materially adverse, and except that the unaudited financial statements may not contain all footnotes required by GAAP. Except as set forth in the June 30, 1996 balance sheet of Seller included in the Financial Statements or on SCHEDULE 7(d), there are no liabilities, debts, claims or obligations, whether accrued, absolute, contingent or otherwise, whether due or to become due, which could materially and adversely affect the Purchased Assets or the rights of Seller therein and thereto.


(e) ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the June 30, 1996 balance sheet, there has not been any change in, or event affecting, the business condition, properties, assets, liabilities, operations or prospects of Seller's business other than changes in the ordinary course of its business, none of which has (either when taken by itself or when taken in conjunction with any other or all such other changes) been materially adverse to Seller's business. Except as set forth in SCHEDULE 7(e), since the date of the June 30, 1996 balance sheet, Seller's business has not suffered any adverse change in, and no events have occurred which, individually or in the aggregate, have had, or may have, any material adverse effect on, the financial condition, results of operations, business or prospects of Seller's business other than as reflected in the June 30, 1996 balance sheet and statements of income and expenses.


(f) EFFECT OF AGREEMENT. The execution and delivery by each of Seller and Duescher of this Agreement and the agreements referred to herein, the sale by Seller of the Purchased Assets to Buyer, the performance by each of Seller and Duescher of their respective obligations pursuant to the terms of this Agreement and the Other Agreements, and the consummation of the transactions contemplated hereby and under such Other Agreements, do not and will not, with or without the giving of notice or lapse of time, or both:


(i) violate any judgment, order, writ or decree of any court of administrative body applicable to Seller;


(ii) accelerate or constitute an event entitling the holder of any indebtedness of Seller or Duescher to accelerate the maturity of such indebtedness or to increase the rate of interest presently in effect with respect to such indebtedness; or


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(iii) result in the breach of (with the exception of the License Agreement), constitute a default under, constitute an event which with notice or lapse of time, or both, would become a default under, or result in the creation of any lien, security interest, charge or encumbrance upon any of the Purchased Assets or other properties of Seller or Duescher under any agreement, commitment, contract (written or oral) or other instrument to which Seller or Duescher is a party, or by which the Purchased Assets or other properties of Seller or Duescher are bound or affected.


(g) LITIGATION. Except as set forth on SCHEDULE 7(g) to this Agreement, there is no claim, legal action, suit, arbitration, investigation or hearing of which Seller or Duescher has received notice, notice of claim or other legal, administrative or governmental proceedings pending or, to Seller's or Duescher's best knowledge, threatened against Seller or Duescher (or in which Seller is a plaintiff or otherwise a party thereto) relating to the Purchased Assets or the Keltool Process.


(h) ACCOUNTS RECEIVABLE. The accounts receivable reflected in the 1995 Financial Statements and subsequently arising arose from valid sales and transactions in the ordinary course of business and represent valid obligations due Seller, and have been collected or are collectible in the ordinary course of business consistent with past practice. Within one year from the Closing, at Buyer's request and upon 30 days written demand, Seller agrees to purchase from Buyer all materially delinquent accounts receivable, defined as those accounts for which credit was extended by Seller prior to the Closing and are more than 180 days past due (applying any payment made by a debtor to such debtor's invoices on a first-in first out basis), and for which Buyer has made reasonable collection attempts from the debtor.


(i) EMPLOYEES. SCHEDULE 7(i) contains a true and complete list of all current employees (the "Employees") of Seller and all written or oral employment contracts and collective bargaining agreements and all other agreements or arrangements providing for employee compensation, to which Seller is a party or by which Seller is bound. Seller is not delinquent in payments to any of its directors or employees or former directors or employees for any wages, salaries, commissions, bonuses or other direct compensation for any services performed by them or amounts required to be reimbursed to such directors or employees. There are no labor disputes, troubles or controversies of any type or character between Seller and any of its Employees or former employees.


(j) EMPLOYEE BENEFIT PLANS, ETC. Except as set forth on SCHEDULE 7(j), with respect to Employees or former employees of Seller, Seller does not maintain or contribute to any (i) nonqualified deferred compensation, bonus or retirement plans or arrangements, (ii) qualified defined contribution or defined benefit plans or arrangements which are employee pension benefit plans (as defined in Section 3(2) of ERISA, or (iii) employee welfare benefit plans, (as defined in Section 3(1) ERISA), or material fringe benefit plans or programs (the "Plans"). Seller does not and has not within the last five years contributed to any defined benefit plan (as defined in


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Section 3(35) of ERISA) or multiemployer pension plan (as defined in Section 3(37) of ERISA). Seller does not maintain or contribute to any employee welfare benefit plan which provides health, accident or life insurance benefits to former employees, their spouses or dependents, other than in accordance with Section 4980B of the Internal Revenue Code of 1986, as amended.


(k) CUSTOMERS AND SUPPLIERS. SCHEDULE 7(k) contains a correct and complete list of each of the 20 largest customers of Seller's business who have purchased from the Seller goods and/or services during the twelve months prior to the date hereof and indicates the dollar value of goods and/or services purchased by, and the pricing to, each such customer. SCHEDULE 7(k) also contains a list of each of the 10 top suppliers of the Seller who have supplied goods and/or services to Seller's business and indicates the dollar value and pricing of the goods and/or services supplied by each such supplier during such calendar year. Except as set forth on SCHEDULE 7(k), to Seller's and Duescher's best knowledge, no such customer or supplier, or any other person or entity having material business dealings with the Seller, will or may cease to ...