EXHIBIT 10
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
VIDEOLABS, INC. A DELAWARE CORPORATION
AND
VIDEO DYNAMICS, INC., A FLORIDA CORPORATION,
XX. XXXXXXX XXXX, AND
XX. XXXXX XXXXX
Dated:
April 6, 1998
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("AGREEMENT") is entered into April 6, 1998,
by and between VideoLabs, Inc., a Delaware corporation ("BUYER"), Video
Dynamics, Inc., a Florida corporation ("SELLER"), and Xx. Xxxxxxx Xxxx and Xx.
Xxxxx Xxxxx (collectively, the "SHAREHOLDERS"). Buyer, Seller, and Shareholders
are referred to collectively as the "PARTIES."
RECITALS:
A. Seller is engaged in the design, manufacture and distribution of image
capture, transmission and manipulation devices, including video cameras and
accessory components, designed primarily for use in the medical industry (the
"BUSINESS"). The Business is conducted from 00000 X.X. 0xx Xx., Xxxxx 000,
Xxxxxxx Xxxxxxx 00000 (the "PREMISES").
B. Shareholders together own 100% of the voting and equity interest of
Seller. In addition to this interest, Shareholders also individually or
collectively own certain patents, trademarks, trade secrets, and other
intellectual property rights (both registered, nonregistered, pending, etc.)
which are or have been used by the Seller in conducting the Business
(collectively, the "SHAREHOLDERS' INTELLECTUAL PROPERTY").
C. Buyer desires to purchase and Seller desires to sell all of the assets
related to the Business upon the terms and conditions as set forth in this
Agreement. In addition, Buyer desires to purchase and the Shareholders desire to
sell the Shareholders' Intellectual Property upon the terms and conditions set
forth in this Agreement.
AGREEMENTS:
NOW THEREFORE, in consideration of the foregoing Recitals and the mutual
covenants, representations and warranties contained in this Agreement, the
receipt and sufficiency of which are acknowledged, the Parties agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS
1.1 PURCHASE AND SALE OF ASSETS. On the terms and subject to the conditions
of this Agreement, Buyer shall purchase from Seller, and Seller shall sell,
assign, transfer, convey and deliver to Buyer, on the Closing Date, all of the
assets of the Business as of the Closing Date, wherever located (the "ASSETS"),
including, but not limited to, the following:
(a) All cash on hand and all amounts in any checking,
savings or investment accounts including, without limitation, all
amounts in the checking, savings and investment accounts listed on
Schedule 1.1(a);
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(b) All accounts receivable, other receivables, prepaid
assets and intangible assets owned by the Seller including, without
limitation, the other receivables, prepaid assets and intangible
assets listed on Schedule 1.1(b);
(c) All inventory, work in process, raw materials and
component parts of the Seller;
(d) All manufacturing, shop and office equipment used by
the Seller including, without limitation, the equipment listed on
Schedule 1.1(d);
(e) All customer lists, contracts, sales orders in
process, business records, advertising pieces and materials,
licenses, trade names, trademarks, service marks, assumed or
fictitious names, the name "Video Dynamics", trade secrets, shop
rights, and all vendor and supplier lists owned by Seller;
(f) All plans, specifications, drawings, schematics,
designs, prototypes, procedures, creations, methods and related
materials owned by Seller, regardless of their stage of completion;
(g) All business telephone numbers (to be reassigned by
Seller to Buyer at Closing); and
(h) Patent No. 4,963,903 (Camera Positioning System)
dated October 16, 1990.
The sale and delivery of all cash and accounts receivable is subject to
adjustment and limitation pursuant to the provisions of Section 1.4 below. The
corporate entity, Video Dynamics, Inc., a Florida corporation, its books and
records, are not included in this sale.
1.2 PURCHASE AND SALE OF SHAREHOLDERS' INTELLECTUAL PROPERTY. On the terms
and subject to the conditions of this Agreement, Buyer shall purchase from
Shareholders, and Shareholders shall sell, assign, transfer, convey and deliver
to Buyer, on the Closing Date, all of their interests in the Shareholders'
Intellectual Property, which includes, but is not limited to, all of their
respective rights, privileges and goodwill worldwide associated with the
following:
(a) Trademark Reg. No. 1,573,105 (Flexi-Cam) Registered
December 26, 1989;
(b) Trademark Reg. No. 1,551,762 (Flexi-Mount)
Registered August 15, 1989;
(c) Patent No. 5,239,984 (Hand-Held Opto-Diagnostic
Instrument System) dated August 31, 1993;
(d) Patent No. Des. 363,778 (Coupler for Adapting a Beam
Splitter to an Otoscope) dated October 31, 1995; and
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(e) Pending Application No. 08/565,176 (Ergonomic
Hand-Held Optical Diagnostic Instrument) filed November 30, 1995.
1.3 ASSUMPTION OF SPECIFIC LIABILITIES BY BUYER. Subject to adjustment
pursuant to the provisions of Section 1.4 below, Buyer shall assume as of the
Closing Date the following, but only the following, liabilities of the Seller as
of the Closing Date (collectively the "Assumed Liabilities):
(a) all unpaid trade payables incurred by Seller in the
ordinary course of the Business prior to Closing;
(b) all unpaid accrued payroll liabilities of the Seller
incurred in the ordinary course of the Business prior to the
Closing;
(c) all unpaid other ordinary and necessary business
liabilities of the Seller as of the Closing of the types listed on
Schedule 1.3(c); and
(d) Seller's obligations under the Standard Office
Building Net Lease dated January 15, 1998 between Seller and Coral
Sawgrass Associates relating to Suite 112, 00000 X.X. 0xx Xxxxxx,
Xxxxxxx, Xxxxxxx 00000 (the "Lease"), which has been provided to and
approved by Buyer.
Excepting only those debts, liabilities and other obligations of the Seller set
out above, the Buyer is not, and shall not assume or be responsible for, any
debts, liabilities or other obligations of the Seller, the Shareholders, or the
Business. Seller and Shareholders shall be solely liable for and shall indemnify
and hold Buyer harmless against all such other debts, liabilities and
obligations arising from the ownership, use and operation of the Business, the
Assets and/or the Shareholders' Intellectual Property prior to the Closing Date,
whether contingent or fixed, and whether or not reflected on the books and
records of Seller or Shareholders. Likewise, Buyer shall be solely liable for
and shall indemnify and hold Seller and Shareholders harmless from and against
all such other debts, liabilities and obligations arising from the ownership,
use and operation of the Business, the Assets and/or the Shareholders'
Intellectual Property beginning after the Closing Date.
1.4 CLOSING ADJUSTMENTS TO ASSETS OR ASSUMED LIABILITIES.
(a) Five (5) days prior to the Closing, the Seller shall
prepare and deliver to Buyer a projected balance sheet estimated as
of the Closing Date (the "CLOSING BALANCE SHEET"), which shall
include the Assets, at their respective book value as of the
Closing, and the Assumed Liabilities in the amounts to be assumed by
Buyer at the Closing. The Closing Balance Sheet shall, with respect
to the items to be included thereon, be prepared in accordance with
generally accepted accounting principles, consistently applied
("GAAP"). During the five (5) days preceding the Closing, the Seller
shall permit the Buyer full and complete access to the Business and
the books and records of the Seller to verify the Closing Balance
Sheet. Up to and at the Closing, Seller shall adjust the Closing
Balance Sheet for any errors discovered by Buyer prior to the
Closing and for any changes in the balances
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thereof to the Closing Date. At the Closing, the Seller shall
represent and certify to the Buyer that the Closing Balance Sheet
is true, correct and complete as of the Closing Date, and has
been prepared in accordance with this Section 1.4.
(b) If, as reflected on the Closing Balance Sheet as of
the Closing Date, the book value of the Assets less the amount of
the Assumed Liabilities (the "NET EQUITY") exceeds $365,000, then
effective as of the Closing Date the Seller will be entitled to
retain (and the Assets shall exclude) first cash, and then accounts
receivable to the extent there is insufficient cash, in an amount
that will reduce the Net Equity as assigned to the Buyer to
$365,000.
(c) If, as reflected on the Preliminary Closing Balance
Sheet as of the Closing Date, the Net Equity is less than $335,000,
then effective as of the Closing Date the Buyer will have the
following options, one of which shall be selected by the Buyer at or
prior to the Closing:
(i) the Seller's Assumed Liabilities shall
be reduced (and among them as the Buyer shall
determine), and the Seller shall retain a sufficient
amount of the Seller's liabilities to increase the Net
Equity to $335,000; or
(ii) the Buyer may terminate the purchase
and sale and this Agreement, without liability or
penalty to the Buyer.
1.5 ASSET PURCHASE PRICE. Subject to the terms and conditions of this
Agreement, the total consideration to be paid by Buyer to Seller at the Closing
for the Assets shall be $300,000 (the "ASSET PURCHASE PRICE"), payable in
capital stock of the Buyer pursuant to Section 1.6 below.
1.6 PAYMENT OF ASSET PURCHASE PRICE. The Asset Purchase Price shall be paid
in Buyer's common stock, par value $.01 per share (the "Common Stock"), by
delivery at closing of an equivalent number of shares of Common Stock, valued as
the average of the closing bid and asked prices of the Common Stock over the
twenty (20) trading days preceding the Closing Date (the "SHARES"). Such Shares
shall not be registered Shares, will be restricted Shares within the meaning of
the Securities Act of 1933, as amended, and any applicable state blue sky laws
(collectively, the "SECURITIES ACT"), and will be imprinted with a restrictive
legend which declares the unregistered nature of the Shares, consistent with the
attached Exhibit A. The Buyer agrees to cause the Shares to be registered under
the Securities Act within one (1) year after the Closing. Notwithstanding
Article 10 of this Agreement, in the event the Buyer does not so register the
Shares within such time period, the Shareholders may pursue their rights and
remedies in a court of competent jurisdiction in the State of Florida or Federal
court sitting in Florida.
1.7 SHAREHOLDERS' INTELLECTUAL PROPERTY PURCHASE PRICE. Subject to
the terms and conditions of this Agreement, the total consideration to be paid
by Buyer to Shareholders at the Closing for the Shareholders' Intellectual
Property Rights shall be $200,000 (the "INTELLECTUAL
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PROPERTY PURCHASE PRICE"), to be allocated between them as they shall request in
writing to Buyer prior to the Closing, or one-half to each if no such notice is
provided.
1.8 PAYMENT OF THE INTELLECTUAL PROPERTY PURCHASE PRICE. Payment of the
Intellectual Property Purchase Price shall be made at Closing by cashiers or
certified check, or by wire transfer in immediately available funds to such
accounts as are specified by the Shareholders to Buyer prior to Closing.
ARTICLE 2
TAXES
Seller or Shareholders, as applicable, shall pay any sales, use, excise or
similar taxes or governmental charges, if any, with respect to the transfer of
the Assets or Shareholders' Intellectual Property under this Agreement. Buyer
agrees to execute and deliver to Seller any certificates reasonably requested by
Seller relating to sales and use tax exemptions.
ARTICLE 3
CLOSING
Subject to the terms and conditions contained in this Agreement, including
the satisfaction or waiver of the conditions to Closing set forth in Section 7
hereof, the closing of the transactions to be effected hereunder (the "CLOSING")
shall be held at the offices of Xxxxxxx & Xxxxxxxxxx, One East Broward
Boulevard, Suite 1010, Xxxx Xxxxxxxxxx, Xxxxxxx 00000 at 10:00 a.m. on April 6,
1998, or at such other time and place or on such other date as shall be mutually
agreed upon in writing by Buyer and Seller (the actual date of such Closing is
herein called the "CLOSING DATE"). Time is of the essence, however, and Buyer,
Seller, and Shareholders agree that if all conditions to Closing cannot be
satisfied by the targeted Closing Date of April 6, 1998, they will each consent
to a reasonable extension of such date to allow necessary conditions to be
satisfied. If all conditions to Closing cannot be satisfied or are not waived
prior to April 15, 1998, neither Seller, Buyer, nor Shareholders shall have any
obligation to proceed with Closing; provided that the foregoing shall not
terminate, release or be deemed a waiver of any right or remedy a party may have
as a result of a breach of this Agreement by the other.
ARTICLE 4
ADDITIONAL COVENANTS
4.1 PRE-CLOSING COVENANTS. Buyer, Seller, and Shareholders each agree as
follows with respect to the period between execution of this Agreement and the
Closing:
(a) General. Each of the Parties will use all reasonable
commercial efforts to take all actions, and to do all things
necessary, proper, or advisable, to consummate and make effective
the transactions contemplated by this Agreement (including, without
limitation, satisfying the conditions precedent to Closing).
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(b) Buyer's Access to Records and Employees. Seller
shall allow Buyer and its representatives full and complete access
to the books and records and business premises of Seller related to
the Business for purposes of conducting a due diligence
investigation, as determined to be necessary by Buyer, and shall
allow Buyer full access to interviewing, discussing and offering
employment possibilities to Seller's employees employed exclusively
in the Business. All employment decisions, as well as the terms and
conditions of employment, shall be solely within the discretion of
the Buyer. The Seller shall not hinder the efforts of the Buyer in
employing any such personnel.
(c) Maintenance of Assets and Continued Operations.
Seller shall maintain the Assets in good repair, order and
condition, reasonable wear and use excepted. Seller shall continue
to operate the Business to the best of its abilities, but only in
the ordinary course of business and in a manner consistent with the
operations of the Business during the twelve month period prior to
the date of this Agreement. Seller shall take no action which would
or could be detrimental to the Assets or the Business, except in the
ordinary course of business and in furtherance of Seller's
obligations under this Agreement. Seller shall maintain the books
and records of the Business in the usual, regular and ordinary
manner on the basis consistent with prior periods.
(d) Protection of Shareholders' Intellectual Property.
Shareholders shall maintain and protect the rights and security of
the Shareholders' Intellectual Property to the best of their ability
and in a manner consistent with their past conduct. Shareholders
shall take no action which would or could be detrimental to the
Shareholders' Intellectual Property, or the rights to be acquired by
Buyer thereunder as contemplated in this Agreement.
(e) Notice of Developments/Risk of Loss. Seller and
Shareholders shall give prompt written notice to Buyer of any
material developments affecting the Business, Assets, or the
Shareholders' Intellectual Property prior to Closing. Seller and
Shareholders, as applicable, shall bear the risk of loss as to any
or all of the Assets and Shareholders' Intellectual property prior
to Closing.
4.2 CONFIDENTIALITY AND NONDISCLOSURE. From and after the Closing, Seller
and Shareholders each agree to maintain the confidentiality of all information
concerning the Business, the Assets, the Shareholders' Intellectual Property,
and the Assumed Liabilities. Except as required by law or legal or
administrative process, Seller and Shareholders shall not disclose any such
information to any third party and shall not permit any such information to be
used by them other than in connection with the transactions contemplated by this
Agreement, the operation of the Business up to the Closing, and the preparation
of financial statements and tax returns for such parties. The Seller and each of
the Shareholders shall cooperate with the Buyer's disclosure requirements by
reasonably and timely approving any press releases or other disclosures to be
made by Buyer. While this Agreement remains in effect, Seller and Shareholders
shall not negotiate for the sale of the Business or any substantial portion of
the Assets of the Business, or the Shareholders' Intellectual Property, with any
other party, and each of Seller or the Shareholders, as applicable, shall
promptly notify Buyer of any offers or inquiries received by them prior to the
Closing.
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4.3 NONCOMPETITION AGREEMENT. As additional consideration for the payment
of the Asset Purchase Price and the Intellectual Property Purchase Price
hereunder, and as an inducement to the Buyer to enter into this Agreement, the
Seller hereby agrees that for a period of six (6) years after the Closing Date,
and each of the Shareholders, jointly and severally, hereby covenants and agrees
that for a period equal to the lesser of (i) six (6) years from the Closing
Date, or (ii) one (1) year after the expiration or earlier termination
(regardless of fault or the reason for such termination) of their respective
Employment Agreement (as applicable, the "RESTRICTED TERM"), the Seller and the
Shareholders will not, directly or indirectly, own, manage, operate, control, be
employed by, act as an advisor or consultant to, or participate in, the
ownership, management, operation, or control of any business involving image
capture solutions or image capture, transmission and/or manipulation devices, or
any other business similar to that heretofore conducted by the Seller in the
United States of America; provided, however, that any services provided by the
Shareholders to Buyer shall not be subject to the restrictions of this Section
4.3; and provided further that the foregoing shall not prevent the Shareholders
(a) from owning the Shares; or (b) from owning not more than a one percent (1%)
interest in any entity engaged in the foregoing restricted businesses whose
securities are traded on any securities exchange or in the over-the-counter
markets. Seller, Shareholders, and Buyer agree that in the event the above
covenant against competition shall be construed by any court of competent
jurisdiction to be too broad in time or area or both or otherwise to be
enforceable, or any portion thereof is otherwise held invalid, then to the
extent that the same is valid and enforceable it shall remain in full force and
effect, and to the extent any provision or portion is unenforceable or invalid,
the same shall be deemed modified and limited to the extent necessary to make
the same enforceable and valid and to give effect to the expressed intent of the
parties to the maximum extent possible.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
OF SELLER AND SHAREHOLDERS
Seller and Shareholders, individually and collectively, represent, warrant,
covenant and agree with Buyer that the following representations and warranties
are true, correct and complete as of the date hereof and will be true, correct
and complete as of the Closing Date:
5.1 ORGANIZATION OF SELLER; AUTHORITY OF SELLER. Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
state of Florida. Seller has all requisite power and authority, licenses and
permits, to own and operate the Assets and to carry on the Business as currently
conducted. Seller has full corporate power and authority to make the
representations, warranties and agreements made in this Agreement, to execute
and deliver this Agreement and the other documents delivered by Seller in
connection with this Agreement at or prior to Closing (the "ANCILLARY
DOCUMENTS"), and to perform its obligations under this Agreement and the
Ancillary Documents.
5.2 AUTHORIZATION OF AGREEMENT AND ENFORCEABILITY. This Agreement has been,
and the Ancillary Documents will be, duly and validly authorized, executed and
delivered by Seller and
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Shareholders, and constitute legal, valid and binding obligations of Seller and
Shareholders, enforceable against Seller and Shareholders in accordance with
their respective terms.
5.3 EFFECT OF AGREEMENT. Neither the execution, delivery and performance of
this Agreement or the Ancillary Documents by Seller or Shareholders, nor the
consummation by Seller or Shareholders of the transactions contemplated herein
or therein, will (a) conflict with or result in a breach of any provision of the
articles of incorporation or bylaws of Seller, (b) constitute or result in the
breach of, conflict with or give rise to a right of forfeiture, termination,
cancellation or acceleration with respect to, any term, condition or provision
of any note, bond, mortgage, indenture, license or other contract or obligation
to which Seller or either Shareholder is a party or by which Seller or either
Shareholder or any of their respective assets may be bound, or (c) violate any
law, statute, regulation, judgment, order, writ, injunction, or decree
applicable to Seller, Shareholders, any of the Assets or any of the
Shareholders' Intellectual Property.
5.4 FINANCIAL STATEMENTS AND FINANCIAL PERFORMANCE. Seller has provided
Buyer with copies of balance sheets and statements of income for the Business
for the fiscal years ended September 30, 1997 and 1996. The foregoing financial
statements ("FINANCIAL STATEMENTS") have been prepared on a basis consistent
with that of prior years or periods, are correct and complete, and fairly
present the financial position and results of operations of the Business as of
the dates and for the periods indicated.
5.5 TITLE TO ASSETS; ABSENCE OF LIENS AND ENCUMBRANCES. Seller and
Shareholders have good and marketable title to the Assets and Shareholders'
Intellectual Property, as applicable, free and clear of all security interests,
claims, liens, mortgages, charges and encumbrances, excepting only the interests
listed on Schedule 5.5, which will be released in full at the Closing. All
Assets and physical representations and records of the Shareholders'
Intellectual Property are located at the Premises.
5.6 CONDITION OF ASSETS. All Assets which are inventory are in good and
merchantable condition, and were purchased by Seller for manufacture and resale
to customers in the ordinary course of its Business. All Assets which are
tangible personal property other than inventory were properly maintained in
accordance with normal and customary business practice and are in good working
order and condition, ordinary wear and tear excepted. All accounts receivable
included in the Assets arose from bona fide transactions in the ordinary course
of conducting the Business and are, to the best knowledge of the Seller and the
Shareholders, fully collectible at their respective face value without offset or
deduction.
5.7 INTELLECTUAL PROPERTY. The Shareholders are the sole owners of all of
the Shareholders' Intellectual Property, in all cases free and clear of any
license or other right of any other party to use the same. The Seller and the
Shareholders, as applicable, have taken all action necessary to protect each
material items of intellectual property included in the Assets or the
Shareholders' Intellectual Property. Neither the Seller nor the Shareholders
have been sued or charged in writing with or been a defendant in any claim,
action or proceeding relating to the
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Business or any intellectual property used in the Business which has not been
finally terminated prior to the date of this Agreement and which involves a
claim of interference, infringement, misappropriation, or violation of
intellectual property rights of third parties. To the best knowledge of Seller
and the Shareholders, no third party has a claim to, interest in, interfered
with, infringed upon or misappropriated any intellectual property rights of the
Seller or the Shareholders with respect to any intellectual property being
purchased by the Buyer hereunder. The intellectual property included in either
the Assets or the Shareholders' Intellectual Property collectively constitute
all of the intellectual property necessary to operate the Business as currently
or heretofore conducted, and to the best of Seller's and Shareholders' knowledge
the Shareholders' Intellectual Property is the only intellectual property used
by the Seller which is not owned by the Seller.
5.8 ASSUMED LIABILITIES; CONTRACTS. All Assumed Liabilities arose from bona
fide transactions conducted in the ordinary course of the Business prior to the
Closing. Other than the Lease, there are no written contracts or agreements to
which Seller is a party and which are necessary to the operation of the Business
as conducted by Seller since September 30, 1997. The Lease is in full force and
effect, and the Seller is not in default (and there has not occurred any event
which with the passage of time, the giving of notice, or both, which would
constitute a default by Seller) thereunder. To the best knowledge of the Seller
and the Shareholders, the Lease is the valid and binding obligation of the
landlord thereunder, enforceable against the landlord in accordance with its
terms, and the landlord thereunder is not in default (and there has not occurred
any event which with the passage of time, the giving of notice, or both, which
would constitute a default by the landlord) thereunder.
5.9 TAX MATTERS. Seller and Shareholders have each accurately completed and
timely filed all federal, state, local and other tax and information returns as
required by law, and have paid all amounts for income, sales, use, gross
receipts, property, employment and any other taxes, charges, levies or other
assessments (collectively, "TAXES") shown as due on such returns.
5.10 INSURANCE. Seller carries business casualty and general liability
insurance in amounts commercially reasonable for a business engaged in the
operation of the Business. To the extent required by law, Seller carries
worker's compensation insurance in at least the amount required. The premiums on
all such insurance policies have been paid and such policies shall remain in
full force and effect through the Closing Date.
5.11 PERMITS, LICENSES, COMPLIANCE WITH LAWS. Seller has all material
permits, licenses, orders, consents and approvals of federal, state, local or
foreign governmental or regulatory bodies that are required in order to permit
Seller to carry on the Business as currently conducted, all of which are listed
on Schedule 5.11 hereto. To the best knowledge of Seller, the Business has been
and is being conducted in accordance and in material compliance with all
applicable federal, state, local or foreign laws, codes and ordinances (and all
rules and regulations of agencies thereof), including, without limitation, all
environmental, health, safety and employment laws.
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5.12 LITIGATION. There is no claim, action, suit, proceeding, arbitration,
investigation or inquiry pending before any federal, state, local, or other
court or governmental, administrative, or self-regulatory body or agency, or any
private arbitration tribunal, or to the knowledge of Seller or Shareholders
threatened against, Seller, Shareholders, relating to the Business, any of the
Assets, any of the Shareholders' Intellectual Property, or the transactions
contemplated by this Agreement.
5.13 EMPLOYEES. Seller has made all required payments for Social Security
and other payroll withholding taxes and unemployment compensation insurance and
all required contributions or premium payments related to all employment related
benefit plans. No employees of Seller are subject to a collective bargaining
agreement.
5.14 BOOKS AND RECORDS. To the best of Seller's and Shareholders'
knowledge, all of the books of account and other financial records of Seller
and/or Shareholders related to the Business, the Assets, and the Shareholders'
Intellectual Property have been made available to Buyer and its representatives
and are, in all material respects, complete and correct, are maintained in
accordance with good business practices, and are accurately reflected in
Seller's Financial Statements.
5.15 SUBSEQUENT EVENTS. Since September 30, 1997, there has not been any
change in the operations, financial condition, results of operations or assets
of the Seller or Shareholders' Intellectual Property that has had a material
adverse effect on the Assets or the Business. In addition, and not in
limitation, since that date:
(a) the Seller has not sold, leased, transferred or
assigned any of the assets of the Business other than for fair value
in the ordinary course of business;
(b) no party has accelerated, terminated, modified, or
canceled any material agreement to which Seller is a party or by
which it is bound relating to the Business;
(c) the Seller has not made any investment in or loan to
any person involved in the Business and outside of the ordinary
course of business; and
(d) except as provided in Section 5.17 below, the Seller
has not received from a customer or supplier any notice or other
communication terminating or threatening to terminate any material
business relationships or agreements between Seller and any of its
customers or suppliers and with respect to the Business.
5.16 ENVIRONMENTAL COMPLIANCE. The Business and its operations and
properties are in compliance with all environmental laws. No government agency
or third party has submitted to the Seller any notification, demand, request for
information, citation, summons, or complaint, and no order has been issued, no
complaint has been filed, no penalty has been assessed and no investigation or
review is pending or threatened, relating to any environmental law. Except in
substantial compliance with applicable environmental laws, hazardous materials
have not been generated, used, treated or stored on, transported to or from,
disposed of or released on any property owned or operated at any time by the
Company.
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5.17 CUSTOMERS. Schedule 5.17 sets forth the 10 largest customers of the
Business as of the date hereof based on revenues generated during the 12 months
ended September 30, 1997. The relationships of the Seller with each of such
customers are satisfactory commercial working relationships, and no such
customer has cancelled or otherwise terminated, or threatened in writing, or to
Seller's knowledge, threatened orally, to cancel or otherwise terminate, its
relationship with the Business, except that Buyer acknowledges that Seller's
former business relationship with Xxxxxxx Xxxxxx has been substantially reduced.
Seller does not in its ordinary course of business maintain written contracts
with its customers and, indeed, has none.
5.18 OTHER INFORMATION. To the best of Seller's and Shareholders'
knowledge, none of the information and documents which have been or may be
furnished by Seller, Shareholders, or either of their representatives to Buyer,
or to any of its representatives, in connection with the transactions
contemplated by this Agreement, is or will be materially false or misleading or
contains or will contain any material misstatements of fact or omits or will
omit any material fact necessary to be stated in order to make the statements
therein not misleading, nor has Seller or Shareholders withheld from Buyer any
material facts relating to the Assets or the Business as conducted by the
Seller, or the Shareholders' Intellectual Property.
5.19 BROKERS. Neither Seller nor Shareholders have engaged any broker,
investment banker or other finder who may be entitled to a fee as a result of
the transactions contemplated in this Agreement.
5.20 INVESTMENT INTENT. The Seller acknowledges that the Shares have not
been registered under the Securities Act. The Shares may not be sold or
otherwise transferred unless registered under the Securities Act and any
applicable state securities laws or unless an exemption from such registration
is available. The Seller has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
Shares in connection with this Agreement, and has been given the opportunity to
inspect such books and records, and to ask such questions, as the Seller has
determined appropriate in connection with acquiring the Shares. The Seller is
acquiring the Shares for investment and not with a view toward or for sale or
distribution thereof within the meaning of the Securities Act, or with any
present intention of distributing or selling the Shares within the meaning of
the Securities Act. The Seller acknowledges and agrees that the Shares may be
not sold, transferred, offered for sale, pledged, hypothecated or otherwise
disposed of without registration under the Securities Act, except pursuant to an
exemption from such registration available under the Securities Act.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents, warrants, covenants and agrees with Seller and each of
the Shareholders that the following representations and warranties are true,
correct and complete as of the date hereof and will be true, correct and
complete as of the Closing Date:
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6.1 ORGANIZATION AND GOOD STANDING OF BUYER. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all requisite corporate power and authority to make the
representations, warranties and agreements made hereunder, to execute and
deliver this Agreement and the other documents delivered by Buyer in connection
with this Agreement or prior to closing (the "BUYER'S ANCILLARY DOCUMENTS") and
to perform its obligations under this Agreement and the Buyer's Ancillary
Documents.
6.2 AUTHORIZATION OF AGREEMENT AND ENFORCEABILITY. This Agreement has been,
and the Buyer's Ancillary Documents will be, duly and validly authorized,
executed and delivered by Buyer and constitute the valid and legally binding
obligation of Buyer enforceable against Buyer in accordance with their
respective terms.
6.3 EFFECT OF AGREEMENT. Neither the execution, delivery, and performance
of this Agreement or the Buyer's Ancillary Documents nor the consummation of the
transactions contemplated hereby or thereby by Buyer will (a) conflict with or
result in a breach of any provision of the articles of incorporation or bylaws
of Buyer or (b) constitute or result in the breach of, conflict with or give
rise to a right of forfeiture, termination, cancellation or acceleration with
respect to, any term, condition or provision of, any note, bond, mortgage,
indenture, license or other contract or obligation to which Buyer is a party or
by which Buyer or any of its properties or assets may be bound, except for such
conflicts, breaches or defaults as to which written waivers or consents shall
have been obtained on or prior to the Closing Date, or (c) violate any law,
statute, regulation, judgment, order, writ, injunction, or decree applicable to
Buyer or any of its properties or assets.
6.4 LITIGATION. There is no claim, action, suit, proceeding, arbitration,
investigation or inquiry pending before any federal, state, local, or other
court or governmental, administrative, or self-regulatory body or agency, or any
private arbitration tribunal, or to the knowledge of Buyer threatened against,
Buyer, relating to the transactions contemplated by this Agreement.
6.5 BROKERS. Buyer has not engaged any broker, investment banker or other
finder who may be entitled to a fee as a result of the transactions contemplated
in this Agreement.
ARTICLE 7
CONDITIONS PRECEDENT TO CLOSING
7.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER TO PROCEED WITH
CLOSING. The obligations of Buyer under this Agreement are subject to the
fulfillment at or prior to Closing of each of the following conditions to the
reasonable satisfaction of Buyer; provided that Buyer, in its discretion, may
waive any one or more of such conditions in writing:
(a) Accuracy of Representations and Warranties. The
representations and warranties of Seller and Shareholders contained
in this Agreement or any Ancillary Documents shall be true in all
material respects on and as of the Closing Date.
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(b) Performance of Agreements. Seller and Shareholders
shall have performed all obligations and agreements and complied in
all material respects with all covenants and conditions contained in
this Agreement to be performed or complied with by Seller or
Shareholders at or prior to the Closing.
(c) Deliveries. Seller and Shareholders shall have
delivered or caused to be delivered to Buyer at or prior to Closing
all of the following:
(i) a certified copy of the Articles of
Incorporation of Seller and a certificate of good
standing of Seller issued by the Florida Secretary of
State dated within five (5) days of Closing;
(ii) one or more bills of sale and all other
necessary instruments of transfer conveying good and
marketable title to the Assets and the Shareholders'
Intellectual Property to Buyer, in the form attached as
Exhibits B and C;
(iii) a properly authorized and executed
Assignment and Assumption Agreement between Seller and
Buyer, in the form attached as Exhibit D;
(iv) such Patent and trademark
assignment/transfer documents as are prepared by the
Buyer;
(v) The written consent of the landlord to
the assignment of the Lease, in form and substance
reasonably acceptable to Buyer; and
(vi) such other documents and certificates
as may be required under this Agreement or reasonably
requested by Buyer.
7.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLER AND SHAREHOLDERS
TO PROCEED WITH CLOSING. The obligations of Seller and Shareholders under this
Agreement are subject to the fulfillment at or prior to the Closing of each of
the following conditions to the reasonable satisfaction of Seller and
Shareholders; provided that both, in their independent discretion, may jointly
waive any one or more of such conditions in writing:
(a) Accuracy of Representations and Warranties. The
representations and warranties of Buyer contained in this Agreement
or in any Buyer's Ancillary Document shall be true in all material
respects on and as of the Closing.
(b) Performance of Agreement. Buyer shall have performed
all obligations and agreements and complied in all material respects
with all covenants and conditions contained in this Agreement to be
performed or complied with by Buyer at or prior to the Closing Date.
(c) Deliveries by Buyer. Buyer shall have delivered to
Seller at or prior to the Closing the following:
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(i) a certified copy of the Articles of
Incorporation of Buyer and a certificate of good
standing of Buyer issued by the Delaware Secretary of
State dated within five (5) days of Closing; and
(ii) payment of the Asset Purchase Price by
delivery of the unregistered Shares in accordance with
Section 1.6;
(iii) payment of the Intellectual Property
Purchase Price in accordance with Sections 1.7 and 1.8;
(iv) a properly authorized and executed
Assignment and Assumption Agreement between Seller and
Buyer, in the form attached as Exhibit D; and
(v) such other documents and certificates as
may be required under this Agreement or reasonably
requested by Seller or Shareholders.
ARTICLE 8
TERMINATION
8.1 TERMINATION PRIOR TO CLOSING. This Agreement may be terminated prior to
Closing as follows:
(a) By mutual written consent of the Parties.
(b) By Buyer (i) pursuant to Section 1.4(c)(ii) above
(relating to inadequate Net Equity), and (ii) if any of the
conditions set forth in Section 7.1 of this Agreement have not been
met and have not been waived in writing by Buyer.
(c) By Seller if any of the conditions set forth in
Section 7.2 of this Agreement have not been met and have not been
waived in writing by Seller.
ARTICLE 9
INDEMNIFICATION
9.1 INDEMNIFICATION BY SELLER OR SHAREHOLDERS. Seller, on the one hand, and
Shareholders on the other hand, severally but not jointly, shall indemnify,
defend and hold harmless Buyer from, against and in respect of, any and all
costs, losses, claims, liabilities, fines, penalties, damages and expenses
(including without limitation interest which may be imposed in connection
therewith, and court costs and reasonable fees and disbursements of counsel)
resulting from, arising out of or incurred by Buyer in connection with either of
the following:
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(a) any breach of any of their respective
representations or warranties made in this Agreement, or their
respective breach, failure or default under any of their respective
covenants or agreements in this Agreement; or
(b) their respective debts, obligations, liabilities,
claims, penalties, fines or damages pertaining to the Assets, the
Shareholders' Intellectual Property, or the Business arising before
the Closing Date or related to incidents and occurrences prior to
the Closing Date, whether or not known to Seller or disclosed to
Buyer, and their respective liabilities arising after the Closing,
in each case excluding only the Assumed Liabilities.
9.2 INDEMNIFICATION BY BUYER. Buyer shall indemnify, defend and hold
harmless Seller and Shareholders, and each of them, from, against and in respect
of, any and all costs, losses, claims, liabilities, fines, penalties, damages
and expenses (including without limitation interest which may be imposed in
connection therewith, and court costs and reasonable fees and disbursements of
counsel) resulting from, arising out of or incurred by Seller or Shareholders in
connection with either of the following:
(a) any breach of any of the representations or
warranties made by Buyer in this Agreement, or breach, failure or
default by Buyer in respect of any of the covenants or agreements
made by Buyer in this Agreement; or
(b) the Assumed Liabilities and any debts, obligations,
liabilities, claims, penalties, fines or damages pertaining to Buyer
or the Business as operated by Buyer after the Closing Date.
9.3 REMEDIES; NO WAIVER. In addition to all other rights and remedies
available to the parties at law, in equity or under this Agreement, each party
shall have a right to seek injunctive relief or specific performance for a
violation by the other of its obligations under this Agreement. Each of the
Parties acknowledges and agrees that the rights being transferred by both Seller
and Shareholders are special, valuable, and unique assets of the Business.
Seller, Shareholders, and Buyer agree that it would be difficult to measure the
damage to the Business from any improper disclosure or from any breach of this
Agreement, that injury to the Business from any such breach would be impossible
to calculate, and that money damage would therefore be an inadequate remedy for
any such breach. Accordingly, the parties agree that in the event of any breach
of this Agreement, the damaged party shall be entitled, in addition to all other
remedies it may have including money damages, to such full and complete remedies
as a court of equity can provide including the remedies of specific performance
and an injunction or other appropriate order to restrain any such breach without
showing or proving any actual damage to the Business. No failure or delay on the
part of any party in exercising any right, power or remedy under this Agreement,
or available to such party at law or in equity, shall operate as a waiver of
such right, power or remedy, nor shall any single or partial exercise of any
such right, power or remedy preclude any or further exercise thereof or the
exercise of any other right, power or remedy available to such party. The
remedies provided in this Agreement are cumulative and not exclusive of any
remedies available at law or equity.
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9.4 THIRD PARTY CLAIMS. If a claim by a third party is made against Buyer,
Seller or Shareholders (the "INDEMNIFIED PARTY"), and the Indemnified Party
intends to seek indemnity against the other party (the "INDEMNIFYING PARTY")
under this Article 9, the Indemnified Party shall promptly notify the
Indemnifying Party of such claim. The Indemnifying Party shall have thirty (30)
days after receipt of the above-mentioned notice to undertake, conduct and
control, through counsel chosen by the Indemnifying Party or its insurer
(subject to the consent of the Indemnified Party, such consent not to be
unreasonably withheld) and at the Indemnifying Party's expense, the settlement
or defense of the claim, and the Indemnified Party shall reasonably cooperate
with the Indemnifying Party in connection with such efforts. The Indemnifying
Party shall permit the Indemnified Party to participate in such settlement or
defense through counsel chosen by the Indemnified Party, provided that the fees
and expenses of such counsel shall be borne by the Indemnified Party. The
Indemnifying Party shall not settle or compromise any such claim unless it shall
have given the Indemnified Party not less than fifteen (15) days' prior written
notice of the proposed settlement or compromise and afforded the Indemnified
Party an opportunity to consult with the Indemnifying Party regarding the
proposed settlement or compromise. If the Indemnifying Party does not notify the
Indemnified Party within thirty (30) days after receipt of the Indemnified
Party's notice of a third party claim that the Indemnifying Party elects to
undertake the defense of such claim, the Indemnified Party shall have the right
to contest, settle or compromise the claim in the exercise of the Indemnified
Party's exclusive discretion, but exercising reasonable business judgment, at
the expense of the Indemnifying Party.
ARTICLE 10
DISPUTE RESOLUTION
10.1 MANDATORY ARBITRATION. Except as set forth in Section 1.6 of this
Agreement, in the event any dispute arises out of or in relation to this
Agreement, or a breach hereof, including any dispute regarding the existence,
validity, interpretation, scope or termination of this Agreement, and if such
dispute cannot be settled within a reasonable time through direct negotiations
between the parties, which the parties agree to pursue in good faith, such
dispute shall be submitted to binding arbitration conducted in Broward County,
Florida, in accordance with the then-current Commercial Rules of the American
Arbitration Association ("AAA"). Any arbitration hereunder shall be conducted by
a panel of arbitrators consisting of three members constituted with the
assistance of the AAA, one of whom shall be a senior or retired judge of the
Florida State or Federal court system, one of whom shall be a mutually
acceptable member of the image capture solutions industry, and one of whom shall
be a mutually acceptable member of the accounting industry. The costs and
expenses of the arbitration shall be paid by the party against whom the
arbitrators render a decision, if a decision is rendered against a party,
otherwise the costs and expenses shall be shared equally between the Buyer, on
the one hand, and the Seller and the Shareholders, on the other hand. The
arbitrators shall have full power and authority to rule on any question of law
in the same manner as any judge of any court of competent jurisdiction, and the
decision of the arbitrators shall be final and conclusive upon the parties, and
shall not be subject to any appeal or review if the arbitrators have followed
the Commercial Rules of the AAA. The arbitrators shall have full power to make
any award (including the award of equitable remedies) that shall under the
circumstances presented to
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them be deemed to be proper; provided that the arbitrators shall not have the
power to award punitive damages or to limit, expand or otherwise modify the
terms of this Agreement. Judgment may be entered upon any award rendered by the
arbitrators in accordance with applicable law in any court of competent
jurisdiction.
ARTICLE 11
GENERAL
11.1 EXPENSES, ETC. Buyer on the one hand, and Shareholders on the other
hand, shall each pay their respective fees and expenses and the fees and
expenses of their own respective counsel, accountants and other advisors or
agents arising in connection with the negotiation and preparation of this
Agreement and the Ancillary Documents and the consummation of the transactions
contemplated.
11.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each of the Parties
covenants and agrees that all of the representations, warranties, covenants, and
agreements set forth in this Agreement and in any Ancillary Document shall
survive the Closing and shall not be merged into any instruments of transfer or
other Ancillary Documents delivered by any of the Parties at Closing or at any
other time.
11.3 NO THIRD PARTY BENEFICIARIES. Nothing in this Agreement, expressed or
implied, is intended to confer on any person other than the Parties or their
respective heirs, successors and assigns any rights, remedies, obligations, or
other liabilities under or by reason of this Agreement.
11.4 NOTICES. All notices, requests, demands and other communications which
are required to be or may be given under this Agreement shall be in writing and
shall be deemed to have been duly delivered (a) on the date of delivery if by
personal delivery or by confirmed facsimile transmission; or (b) on the date on
which return receipt is signed or delivery is refused if dispatched by certified
or registered first class mail, Federal Express or similar service, postage
prepaid, return receipt requested, to the party to whom the same is so given or
made:
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If to Seller or Shareholders to: If to Buyer, to:
Xxxxxxx Xxxx VideoLabs, Inc.
Xxxxx Xxxxx 0000 Xxxxxx Xxxxx Xxxxx
Video Dynamics, Inc. Xxxxxx Xxxxxx, Xxxxxxxxx 00000
00000 X.X. 0xx Xx., Xxxxx 000 Attn: Xxxxx X. Xxxxxx
Xxxxxxx, XX 00000 Telephone: (000) 000-0000
Telephone: (000) 000-0000 Telecopier: (000) 000-0000
Telecopier: (000) 000-0000
With a copy to: With a copy to:
Xxxxxx Xxxxx & Xxxxx Xxxxxxx & Xxxxxxxxxx
0000 Xxxxxxxxx Xxxxxxxxx 0000 Xxxxx Xxxxxxx Xxxxx
Xxxxxxxxx, XX 00000 000 Xxxxx Xxxxx Xxxxxx
Attn: Xxxxxxx Xxxxxx Xxxxxxxxxxx, XX 00000
Telephone: (000) 000-0000 Attn: Xxxxx X. Xxxxxx
Telecopier: (000) 000-0000 Telephone: (000) 000-0000
Telecopier: (000) 000-0000
or to such other address as such party shall have specified by notice to the
other party.
11.5 FURTHER ASSURANCES. After the Closing, Seller or Shareholders shall,
at Buyer's request, execute and deliver to Buyer without further consideration,
all such further assignments, conveyances, endorsements, deeds, special powers
of attorney, consents and other documents, and take such other action, as Buyer
may reasonably request (a) to transfer to, vest and protect in Buyer its right,
title and interest in the Assets, and (b) otherwise to consummate or effectuate
the transactions contemplated by this Agreement.
11.6 ENTIRE AGREEMENT. This Agreement (including the Schedules and Exhibits
hereto, if any, all of which are incorporated into this Agreement by this
reference) supersedes all prior agreements and understandings, oral and written,
between the parties hereto with respect to the subject matter hereof and
thereof, and this Agreement, together with the Ancillary Documents, constitutes
the entire agreement of the parties as to the matters set forth herein and
therein.
11.7 HEADINGS. The article and section and other headings contained in this
Agreement are for reference purposes only and shall not be deemed to be a part
of this Agreement or to affect the meaning or interpretation of this Agreement.
11.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties on different counterparts, each of which,
when executed, shall be deemed to be an original, and all of which together
shall be deemed to be one and the same instrument. This Agreement shall be
effective once one or more counterparts hereof have been executed by all parties
hereto.
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11.9 GOVERNING LAW. This Agreement shall be construed as to both validity
and performance and governed by and enforced in accordance with the laws of the
State of Minnesota, without giving effect to the choice of law principles
thereof; provided, however, that in the event of any action concerning this
Agreement, such action shall only be commenced in the State or Federal courts
sitting in the State of Florida.
11.10 SEVERABILITY. If any term, covenant, condition, or provision of this
Agreement or the application thereof to any circumstance shall be invalid or
unenforceable to any extent, the remaining terms, covenants, conditions, and
provisions of this Agreement shall not be affected thereby and each remaining
term, covenant, condition, and provision of this Agreement shall be valid and
shall be enforceable to the fullest extent permitted by law. If any provision of
this Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only as broad as is enforceable.
11.11 AMENDMENTS. This Agreement may not be modified or changed except by
an instrument or instruments in writing signed by all Parties.
11.12 ASSIGNMENT. Neither the Seller nor the Shareholders may assign their
respective rights or obligations under this Agreement without the prior written
consent of the Buyer.
11.13 SUCCESSORS AND ASSIGNS. Subject to the provisions of Section 10.12
hereof, the covenants, agreements, and conditions contained or granted shall be
binding upon and shall inure to the benefit of the Parties and their respective
heirs, estates, successors, and permitted assigns.
11.14 CONSTRUCTION OF AGREEMENT. This Agreement and the Ancillary Documents
are the results of arm's-length negotiation between the Parties and their
respective advisors. Neither this Agreement or any of the Ancillary Documents
shall be construed as having been "drafted" by any one Party and shall not be
construed against any Party as a drafting party.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as
of the date first above written.
BUYER: SELLER:
VIDEOLABS, INC. VIDEO DYNAMICS, INC.
By ____________/s/__________________ By ____________/s/__________________
Xxxxx X. Xxxxxx Xxxxxxx X. Xxxx
Its President Its President
SHAREHOLDER: SHAREHOLDER:
XXXXXXX XXXX XXXXX XXXXX
By __________/s/____________________ By ________/s/______________________
Xxxxxxx X. Xxxx Xxxxx X. Xxxxx
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