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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
AXCESS INC.,
AND
PRISM VIDEO, INC.
JULY 15, 1999
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is made this 15th day
of July, 1999, by and between AXCESS Inc., a Delaware corporation (the
"Purchaser"), and Prism Video, Inc., a Delaware corporation (the "Seller").
The following recitals are true and constitute the basis for this
Agreement.
A. The Seller has developed and acquired certain technical
information, know how, data, product designs, materials,
formulas and like business information of a confidential and
proprietary nature, as well as intellectual property rights
including patent applications, patents, copyrights and/or
trade secret rights relating to digital video compression
technology for the design, construction and marketing of
remote telephone line video and digital video storage products
(collectively, the "Video Technology");
B. The Seller is engaged in the business of designing and selling
video products worldwide which utilize the Video Technology
(the "Video Products Business"); and
C. Subject to the terms and conditions of this Agreement, the
Seller desires to sell and the Purchaser desires to purchase
from Seller, substantially all of the assets used by the
Seller in the Video Products Business and to assume certain
liabilities of the Video Products Business.
NOW, THEREFORE, in consideration of the foregoing recitals, the mutual
covenants contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
ARTICLE I.
PURCHASE AND SALE OF ASSETS
1.1 THE CLOSING. The consummation of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of Xxxxxx &
Lidji, P.C., 4400 Renaissance Tower, 0000 Xxx Xxxxxx, Xxxxxx, Xxxxx at 10:00
a.m., cst, on the later of (a) July 30, 1999, or (b) the first business day
after all of the conditions set forth in Articles 9 and 10 hereof have been
satisfied or waived, or such other place and time as the parties may mutually
agree (the "Closing Date"). All of the deliveries and other transactions
required to take place at the Closing and all documents relating thereto shall
be interdependent and none shall be effective unless and until all are effective
(except to the extent that the party entitled to the benefit thereof has waived
satisfaction or performance thereof as a condition precedent hereto).
1.2 PURCHASE AND SALE OF ASSETS. On the terms and subject to the
conditions of this Agreement, the Seller agrees to sell, transfer, convey,
deliver and assign to the Purchaser, and the Purchaser agrees to purchase,
acquire and accept from the Seller, on and as of the Closing, for the
consideration hereinafter provided, all of the Seller's rights, property and
assets of every kind, character and description, whether
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tangible or intangible, whether real, personal or mixed, whether accrued,
contingent or otherwise of the Seller which are in the possession of Seller and
used by it in the Video Products Business, wherever located and whether or not
reflected in its books and records, other than the Excluded Assets (as
hereinafter defined). The rights, property and assets to be transferred to the
Purchaser as set forth in the preceding sentence (the "Video Technology Assets")
shall include, without limitation, the following to the extent owned by the
Seller and used in the Video Products Business on the date hereof:
(a) Personal Property. All equipment, computer hardware,
fixtures, furnishings and other personal property, including, without
limitation, the assets, properties and rights reflected on the
unaudited balance sheet of the Seller dated May 31, 1999, and the
personal property listed on Schedule 1.2(a) hereto for use in
connection with the operation of the Video Products Business;
(b) Intellectual Property. To the extent they exist as of the
date of this Agreement: (i) written copies of the formulas, processes,
diagrams, flow charts, schematics and source code which detail in a
step-by-step manner the precise instructions to enable the Purchaser to
duplicate the Video Technology for use in connection with the design,
production and installation of video products on a commercial basis,
including all enhancements and/or modifications, as well as the
hardware and all necessary proprietary information related to the Video
Technology and potential intellectual property, including, but not
limited to the description set forth on Schedule 1.2(b) attached
hereto; (ii) all inventions, invention disclosures, know-how, show-how,
all domestic and foreign patents and registrations, licenses,
trademarks, trade names (including the tradename Prism Video and the
Mole trademark), service marks, domain names, copyrights (and
applications and registrations for any of the foregoing); (iii)
confidential information and other similar intangible assets, owned and
used by the Seller in connection with the Video Products Business and
the goodwill associated with all of the foregoing; and (iv) the right
to register, perfect and enforce any rights embodied therein and to
collect damages for any past, infringement of such rights by third
parties (collectively, (i) through (iv) above, the "Intellectual
Property");
(c) Contracts. (i) The customer contracts to provide video
products entered into in the ordinary course of business and set forth
on Schedule 1.2(c) hereto, (ii) customer orders for video products
entered into in the ordinary course of business and (iii) all other
contracts listed on Schedule 1.2(c) which relate to or effect the Video
Technology and which Purchaser will be assuming at the Closing
(collectively, the "Assumed Contracts");
(d) Documents. Copies of records, computer software and
documents, books, supplier and customer lists in possession of the
Seller (including, without limitation, the logic involved in the
programs, algorithms used, file layouts, record contents, coding
schemes, sample reports) relating to the Video Products Business and/or
the Video Technology Assets;
(e) Accounts Receivable. All trade and other accounts
receivable owned by the Seller as of the date hereof relating to the
Video Products Business (collectively, the "Accounts Receivable");
(f) Inventory. All inventories of any kind in the possession
of Seller and used in the operation of the Video Products Business as
of the date hereof;
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(g) Licenses and Permits. All of Seller's rights in all
governmental licenses, permits and authorizations (and applications for
any of the foregoing) necessary for the operation of the Video Products
Business, if any, but only to the extent transferable; and
(h) Cash and Cash Equivalents. All of Seller's cash and cash
equivalents related to the Video Products Business as of the date
hereof.
1.3 ASSETS EXCLUDED FROM SALE. Notwithstanding any other provision of
this Agreement to the contrary, the following property and assets of the Seller
are excluded from the sale to the Purchaser (collectively, the "Excluded
Assets"):
(a) Insurance Policies. All casualty, liability or other
insurance policies owned or obtained on behalf of Seller and all claims
or rights under any such insurance policies;
(b) Tax Refunds. Any federal, state or local income tax
refunds or claims related to the operation of the Seller prior to
Closing;
(c) Corporate Records. Articles of Incorporation, Bylaws and
original corporate minute book of Seller (it being agreed that copies
of those minutes relating to the Video Products Business shall be
supplied to the Purchaser upon request of the Purchaser); and
(d) Other Assets. Any asset of the Seller not used, directly
or indirectly, in the conduct of the Video Products Business.
1.4 TRANSFER OF VIDEO TECHNOLOGY ASSETS. At the Closing, the Seller
shall deliver or cause to be delivered to the Purchaser good and sufficient
instruments of transfer transferring to the Purchaser title to all of the Video
Technology Assets, including without limitation, the assignment of all patents
and agreements, together with any required consents to assignment. Such
instruments of transfer (a) shall be in the form which is usual and customary
for transferring the type of property involved under the laws of the
jurisdictions applicable to such transfers, (b) shall be in form and substance
reasonably satisfactory to the Purchaser and its counsel, (c) shall effectively
vest in the Purchaser good and marketable title to all of the Video Technology
Assets free and clear of all liens, claims and encumbrances, and (d) where
applicable, shall be accompanied by evidence of the discharge of all liens,
claims and encumbrances against the Video Technology Assets.
1.5 PURCHASE PRICE. The Purchaser shall pay to the Seller the
following at the Closing for the Video Technology Assets and shall assume the
Assumed Liabilities, as defined below (collectively, the "Purchase Price"):
(a) by delivering to the Seller a non-interest bearing Promissory
Note in substantially the form of Exhibit "A" attached hereto at Closing to be
executed by the Purchaser payable to the Seller in the aggregate stated
principal amount of $4,000,000 (the "Purchase Note"), which shall be due and
payable in full on December 31, 2002, unless paid earlier in accordance with the
terms of the Purchase Note;
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(b) by issuing to the Seller at Closing 125 shares of the
Purchaser's Series 1999 convertible preferred stock (the "Preferred Stock"), in
accordance with the Designations, Preferences, Powers and Rights of the
Preferred Stock in substantially the form of Exhibit "B" attached hereto; and
(c) by transferring to the Seller at Closing a warrant (the
"Warrant") to purchase 500,000 shares of the common stock, $0.01 par value, of
the Purchaser (the "Voting Common Stock") in accordance with the terms of the
Warrant in substantially the form of Exhibit "C" attached hereto.
As security for the timely performance of all of the Purchaser's obligations
under the Purchase Note, the Purchaser shall (a) grant to the Seller at Closing,
a first priority security interest in and to that certain Promissory Note dated
April 30, 1999, executed by Amphion Ventures L.P. payable to the Purchaser in
the stated principal amount of $4,000,000 (the "Collateral Note") and (b) secure
an assignment of all payments of principal by Amphion Ventures L.P. under the
Collateral Note. Regarding the Preferred Stock and the Warrant, Seller hereby
agrees that it shall not, without the prior written consent of the Purchaser,
convert any shares of Preferred Stock to shares of Voting Common Stock or
exercise its rights to purchase Voting Common Stock under the Warrant until the
Purchaser receives stockholder approval to issue such Voting Common Stock to
Seller. The Purchaser hereby agrees to submit such a proposal to its
stockholders for approval at the Purchaser's annual meeting of stockholders in
2000 and agrees to use its best efforts to obtain such approval.
1.6 ASSUMPTION OF LIABILITIES. In partial payment of the Purchase
Price, Purchaser shall, subject to this Section 1.6, assume, as of the Closing
Date, the trade and other payables and accrued liabilities reflected on the
Seller's balance sheet dated as of the Closing Date, and listed on Schedule 1.6,
as well as the Assumed Contracts described on Schedule 1.2(c). The specific
liabilities to be assumed by the Purchaser pursuant to this Agreement are
hereinafter sometimes collectively referred to as the "Assumed Liabilities."
Anything in this Agreement to the contrary notwithstanding, the Purchaser shall
not assume, or in any way be liable or responsible for, any liabilities or
obligations of the Seller except as specifically provided in this Section 1.6.
Without limiting the generality of the foregoing, the Purchaser shall not assume
the following: (a) all other obligations, liabilities and commitments (fixed or
contingent) of the Seller and the Video Products Business that exist as of the
Closing Date or arise after the Closing Date from actions taken or circumstances
existing on or therein through the Closing Date; (b) any liability or obligation
of the Seller arising out of or in connection with the negotiation and
preparation of this Agreement and the consummation and performance of the
transactions contemplated hereby, including without limitation of the foregoing,
any liabilities with respect to Taxes (as hereinafter defined) or obligations of
the Seller to fund any of its employee benefit plans with funds previously
contributed by its employees through payroll deductions; (c) any liability or
obligation under contracts and other agreements to which the Seller is a party
or by which it or its assets, properties or rights are bound or subject which
are not described on schedule 1.2(c) and which exist as of the Closing Date or
arise thereafter from actions taken or circumstances existing on or therein
through the Closing Date; (d) any liability or obligation of the Seller to any
of its stockholders or its affiliates; (e) any liability or obligation of the
Seller arising out of or relating to any breach of a representation, warranty,
covenant or agreement of the Seller contained herein; (f) any liability or
obligation of the Seller to comply with any applicable Bulk Sales Act; and (g)
any liability or obligation relating to any severance payment, change of control
payment or other payment or obligation to any employee of the Seller becomes
entitled to as a result of the transaction contemplated hereby.
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1.7 PURCHASE PRICE ADJUSTMENT.
(a) Within sixty (60) days after the Closing Date, the Purchaser
shall prepare and deliver to the Seller a balance sheet of the Video Products
Business as of the Closing Date (the "Proposed Balance Sheet"). The Proposed
Balance Sheet shall be in the form of Schedule 1.7 and shall be prepared (to the
extent applicable) in accordance with generally accepted accounting principles
applied consistently with past practices without giving effect to the
transactions contemplated by this Agreement.
(b) Within thirty (30) days of receipt of the Proposed Balance
Sheet, if the Seller believes that the Proposed Balance Sheet does not present
fairly the financial condition of the Seller, then the Seller will deliver a
written notice to the Purchaser specifying those items or amounts as to which
the Seller disagrees, and the basis therefor (the "Disputed Adjustments"). The
Purchaser and the Seller shall, during the thirty (30) day period following such
delivery, use diligent and good faith efforts to reach agreement or resolve all
the Disputed Adjustments. If the parties are unable to agree upon the resolution
of the Disputed Adjustments, then Purchaser and the Seller shall engage the
services of a nationally recognized independent accounting firm reasonably
acceptable to the Purchaser and the Seller to resolve any Disputed Adjustments
not acceptable to the Seller. The determination of any such firm shall be final
and binding on the parties, and the costs and expenses of such firm shall be
shared equally by the Purchaser and the Seller.
(c) Within fifteen (15) days after the completion of the procedures
set forth in Sections 1.7(a) and 1.7(b) above, the Purchaser shall make any
adjustments to the Proposed Balance Sheet as required pursuant to Section
1.7(b), and shall prepare the "Final Balance Sheet." The Final Balance Sheet
shall be the Proposed Balance Sheet after giving effect to the adjustments, if
any, agreed to by the Purchaser and the Seller or resolved according to Section
1.7(b) hereof.
(d) Based upon the unaudited balance sheet of the Seller dated May
31, 1999, the net working capital of the Seller as of that date was $1,073,000
(the "Estimated Net Working Capital") and is set forth on Schedule 1.7 hereof.
If the Closing Net Working Capital (as defined below) of the Company, as
reflected on the Final Balance Sheet, is less than the Estimated Net Working
Capital, the Seller shall pay to the Purchaser an amount equal to the amount by
which the Closing Net Working Capital is less than the Estimated Net Working
Capital. Such payment shall be effected by a reduction to the principal balance
of the Purchase Note. If the Closing Net Working Capital is greater than the
Estimated Net Working Capital, Purchaser shall pay Seller an amount equal to the
amount by which the Closing Net Working Capital is more than the Estimated Net
Working Capital. Such payment shall be effected by increasing the principal
balance of the Purchase Note. For purposes hereof, "Closing Net Working Capital"
of the Seller shall mean the difference (whether a positive or negative result)
between (i) the current assets of the Seller minus (ii) the current liabilities
of the Seller which are Assumed Liabilities, all in accordance with Schedule 1.7
hereof
1.8 ALLOCATION OF PURCHASE PRICE. Prior to the Closing, the Purchaser
and the Seller shall agree on the allocation of the Purchase Price, which
allocation shall be set forth on Schedule 1.8. Such allocation shall be made in
accordance with (a) the respective fair market values of the Video Technology
Assets being purchased and sold and (b) the provisions of Section 1060 of the
Internal Revenue Code of 1986, as amended, and the rules and regulations
thereunder, and shall be binding upon the Purchaser and Seller for all purposes
(including financial accounting purposes, financial and regulatory reporting
purposes and tax purposes). The Purchaser and the Seller further agree to file
their Federal income tax returns and their other tax returns
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reflecting such allocation, Form 8594 and any other reports required by Section
1060 of the Code, in accordance with said allocation.
1.9 TRANSFER TAXES. All sales and transfer taxes, fees and duties, if
any, under applicable law incurred in connection with the sale and transfer of
the Video Technology Assets pursuant to this Agreement will be shared equally by
the Seller and the Purchaser, and each party shall promptly reimburse the other
for any such tax, fee or duty which any of them is required to pay under
applicable law.
1.10 AUDIT FEES. All fees incurred in connection with the preparation
of audited financial statements of the Seller required by the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder and in form and substance acceptable for filing with the Securities
and Exchange Commission, will be shared equally by the Seller and the Purchaser,
and each party shall promptly reimburse the other for any such fees which any of
them is required to pay.
ARTICLE II.
ADDITIONAL AGREEMENTS
2.1 EMPLOYMENT AGREEMENT. The Purchaser shall agree to employ Xx. Xxxxx
Xxxxxxxxx under the terms of an Employment Agreement in substantially the form
of Exhibit "D" attached hereto.
2.2 NONCOMPETE, NONSOLICITATION AND CONFIDENTIALITY. For purposes of
this Article 2, the following definitions shall apply:
(a) "Purchaser Activities" shall mean all activities of the
type currently conducted, offered, or provided by the Purchaser as of
the date hereof, including the Video Products Business to be acquired
by the Purchaser under the terms of this Agreement. For purposes of
reference, such activities as of the date of this Agreement include the
development and sale of RFID based security products.
(b) "Confidential Information" shall mean any data or
information (whether written or not), of the Purchaser, other than
Trade Secrets (as defined below), which is valuable to the Purchaser
and not generally known to competitors.
(c) "Noncompete Period" and the "Nonsolicitation Period" shall
mean for a period of two (2) years after the date of this Agreement.
(d) "Territory" as used herein shall mean worldwide.
(e) "Trade Secrets" shall mean information related to the
Purchaser Activities, including, but not limited to, technical or
nontechnical data, formulas, patterns, compilations, or programs,
including, without limitation, computer software and related source
codes, devices, methods, techniques, drawings, processes, financial
data, financial plans, product plans, lists of actual or potential
customers or suppliers, or other information similar to any of the
foregoing, which derives economic value, actual or potential, from not
being generally known to, and not being readily
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ascertainable by proper means by, other persons who can derive economic
value from its disclosure or use.
2.3 CONFIDENTIALITY. The Seller and the Purchaser agree that each party
shall hold in confidence the terms and conditions of this Agreement and the
transactions contemplated hereby as well as all information and documents
received by one party from the other party pursuant to this Agreement; provided
however, that the parties' respective obligations under this Section 2.3 shall
not apply to (a) any information or document required to be disclosed by law,
(b) any information or document already in the public domain or (c) any
information or document that becomes public by means other than the party of
whom confidentiality is required by this Section 2.3.
2.4 TRADE SECRETS. The Seller shall hold in confidence at all times
after the date hereof all Trade Secrets, and shall not disclose, publish or make
use of Trade Secrets at any time after the date hereof, without the prior
written consent of the Purchaser, except (a) any information or document
required to be disclosed by law or (b) information that becomes public knowledge
through means other than an act of the Seller. Nothing in this Agreement shall
diminish the rights of the Seller or the Purchaser regarding the protection of
Trade Secrets and other intellectual property pursuant to applicable law.
2.5 TRADE NAME AND CONFIDENTIAL INFORMATION. During the Noncompete
Period:
(a) The Seller shall not, directly or by assisting others,
own, manage, operate, join, control or participate in the ownership,
management, operation or control of any business conducted under any
corporate or trade name of either the Purchaser, Prism Video or any
name similar thereto without the prior written consent of the
Purchaser; and
(b) The Seller shall hold in confidence all Confidential
Information and shall not disclose, publish or make use of Confidential
Information without the prior written consent of the Purchaser, except
(i) any information or document required to be disclosed by law or (ii)
information that becomes public knowledge through means other than an
act of any of the Seller.
2.6 NON-COMPETITION.
(a) Coverage. The Seller hereby acknowledges that the
Purchaser, either directly or indirectly through one or more of its
subsidiaries or affiliates, conducts the Purchaser Activities
throughout the Territory, and acknowledges that to protect adequately
the interest of the Purchaser in the operation of the Purchaser
Activities after the date of this Agreement, it is essential that any
noncompete covenant with respect thereto cover all Purchaser Activities
and the entire Territory.
(b) Covenant. During the Noncompete Period, the Seller shall
not in any manner (other than as a consultant to the Purchaser or any
affiliate of Purchaser), directly or by assisting others, engage in,
have an equity or profit interest in, or render services (of an
executive, marketing, manufacturing, research and development,
administrative, financial or consulting nature) to any business that
conducts any of the Purchaser Activities in the Territory.
Notwithstanding anything herein to the contrary, nothing in this
Agreement shall prevent or prohibit the Seller from owning not
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more than 5% of a class of equity securities issued by any entity
listed on any national securities exchange or interdealer quotation
system.
2.7 NONSOLICITATION OF EMPLOYEES AND CUSTOMERS. During the
Nonsolicitation Period, the Seller shall not in any manner, directly or by
assisting others:
(a) solicit or attempt to solicit, any business from any
customers of the Purchaser, including actively through prospective
customers, for purposes of providing products or services that are
competitive with the Purchaser Activities; or
(b) recruit or hire away or attempt to recruit or hire away,
on his behalf or on behalf of any other person, firm or corporation,
any employee of the Purchaser, for purposes of providing products or
services that are competitive with the Purchaser Activities.
For the purposes of this section, a person shall be considered an employee at
the time of solicitation or recruitment if they were an employee of the
Purchaser or one of its affiliates during the six (6) month period prior to such
solicitation or recruitment.
2.8 ACKNOWLEDGMENT. The Seller and the Purchaser each acknowledge and
agree that the covenants set forth in Sections 2.3, 2.4, 2.5, 2.6 and 2.7 are
reasonable as to time, scope and territory given the Purchaser's need to protect
its Trade Secrets, Confidential Information and its substantial investment in
its customer base, particularly given the complexity and competitive nature of
the Purchaser's business. The Seller further acknowledges that (a) it would be
difficult to calculate damages to the Purchaser and its affiliates from any
breach of the Seller's obligations under Sections 2.3, 2.4, 2.5, 2.6 or 2.7, (b)
that injuries to the Purchaser and its affiliates from any such breach would be
irreparable and impossible to measure, and (c) that the remedy at law for any
breach or threatened breach of the Seller's obligations under Sections 2.3, 2.4,
2.5, 2.6 or 2.7 of this Agreement would therefore be an inadequate remedy and,
accordingly, the Purchaser shall, in addition to all other available remedies
(including without limitation seeking such damages as it can show it and its
affiliates have sustained by reason of such breach or the exercise of all other
rights it has under this Agreement), be entitled to injunctive and other similar
equitable remedies.
2.9 FURTHER ASSURANCES. Each party hereto from time to time hereafter
at any other party's request and without further consideration shall execute and
deliver to such other party such instruments of transfer, conveyance and
assignment in addition to those delivered pursuant to this Agreement as shall be
reasonably requested to transfer, convey and assign more effectively the Video
Technology Assets to the Purchaser, the costs of which shall be paid by the
requesting party.
2.10 EXPENSES. Except as otherwise provided herein, the Purchaser and
the Seller shall each be responsible for their own expenses incurred in
connection with the negotiations among the parties, and the authorization,
preparation, execution and performance of this Agreement and the transactions
contemplated hereby.
2.11 BROKERS. The Purchaser shall indemnify the Seller and hold it
harmless from and against all claims or demands for commissions or other
compensation by any broker, finder, or similar agent claiming to have been
employed by or on behalf of the Purchaser. The Seller shall indemnify the
Purchaser and hold
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it harmless from and against all claims or demands for commissions or other
compensation by any broker, finder or similar agent claiming to have been
employed by or on behalf of the Seller.
2.12 PUBLICITY. All press releases and other public announcements
respecting the subject matter hereof shall be made only by Purchaser; provided,
however, that the Seller may make any disclosure required to be made under
applicable law if it has determined in good faith that it is necessary to do so
and used its best efforts, prior to the issuance of the disclosure, to provide
Purchaser with a copy of the proposed disclosure and to discuss the proposed
disclosure with Purchaser.
2.13 NAME CHANGE. The Seller shall execute and deliver a Certificate of
Amendment to its Certificate of Incorporation to change its name to other than
Prism Video or any variant thereof in acceptable form to be filed with the
Delaware Secretary of State's office within three (3) days following the
Closing.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
OF THE SELLER
As a material inducement to Purchaser to enter into this Agreement and
purchase the Video Technology Assets, the Seller hereby represents, warrants,
covenants and agrees to and with the Purchaser as follows:
3.1 ORGANIZATION. The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the state of Delaware and is
duly qualified to do business as a foreign corporation in each jurisdiction
where the conduct of its business so requires, except where the failure to so
qualify would not have a material adverse effect on the Seller's business,
financial condition or results of operations taken as a whole.
3.2 EXECUTION AND ENFORCEABILITY. The Seller has full right, authority
and power to enter into this Agreement and each agreement, document and
instrument to be executed and delivered by Seller pursuant to this Agreement and
to carry out the transactions contemplated hereby and thereby. The execution,
delivery and performance by Seller of this Agreement and each such other
agreement, document and instrument has been duly authorized by all necessary
action of Seller and no other action on the part of Seller is required in
connection therewith. This Agreement and each agreement, document and instrument
contemplated hereby to which Seller is a party constitute, or when executed and
delivered by Seller will constitute, valid and binding obligations of Seller
enforceable against Seller in accordance with their terms, except as limited by
(a) applicable bankruptcy, insolvency, reorganization, moratorium or other laws
of general application affecting enforcement of creditors' rights and (b)
general principles of equity that restrict the availability of equitable
remedies. The execution, delivery and performance by Seller of this Agreement
and each such agreement, document and instrument does not and will not, except
as set forth in Schedule 3.2, violate any federal, state or local laws
applicable to Seller or require Seller to obtain any approval, consent or waiver
of, or make any filing with, any person or entity (governmental or otherwise)
that has not been obtained or made.
3.3 CERTAIN PROCEEDINGS. There is no pending action, arbitration,
audit, hearing, investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) commenced, brought,
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conducted, or heard by or before, or otherwise involving, any governmental body
or arbitrator that has been commenced against the Seller and that challenges, or
may have the effect of preventing, delaying, making illegal, or otherwise
interfering with, any of the transactions contemplated in this Agreement.
3.4 BROKERS AND FINDERS FEES. Neither the Seller nor anyone acting on
its behalf has done anything to cause or incur any liability to any party for
any brokers' or finders' fees or the like in connection with this Agreement or
any transaction contemplated hereby.
3.5 ABSENCE OF RESTRICTIONS AND CONFLICTS. The execution, delivery and
performance of this Agreement, the consummation of the transactions contemplated
by this Agreement and the fulfillment of and compliance with the terms and
conditions of this Agreement do not, with or without the passing of time or the
giving of notice or both, violate or conflict with, constitute a breach of or
default under, result in the loss of any benefit under, or permit the
acceleration of any obligation under, (a) any term or provision of the charter
documents or bylaws of the Seller, (b) any judgment, decree or order of any
court or governmental authority or agency to which the Seller is a party or by
which the Seller or any of its respective properties is bound, (c) any federal,
state, county or local statute, law, rule or regulation applicable to the
Seller, or (d) any instrument, contract or other agreement to which the Seller
is a party, or by which it or any of its respective properties is bound, or
result in the creation of any lien, security interest, charge, or encumbrance
upon any of such properties.
3.6 CONDUCT OF BUSINESS; LIABILITIES. Except as set forth in Schedule
3.6, the Seller is not in default under, and no condition exists that with
notice or lapse of time would constitute a default of the Seller under (a) any
mortgage, loan agreement, evidence of indebtedness, or other instrument
evidencing borrowed money to which the Seller is a party or by which the Seller
or the properties of the Seller are bound or (b) any judgment, order, or
injunction of any court, arbitrator, or governmental agency that would
reasonably be expected to affect materially and adversely the business,
financial condition, or results of operations of the Seller taken as a whole.
3.7 FINANCIAL STATEMENTS. The audited balance sheet and unaudited
income statement of the Seller as of June 30, 1998, in the form attached to this
Agreement as Schedule 3.7(A) (the "Annual Financial Statements") fairly present
the financial position of the Seller at June 30, 1998, and were prepared in
accordance with generally accepted accounting principles, consistently applied,
and in a manner substantially consistent with prior financial statements of the
Seller. The unaudited balance sheet, income statement and other financial
information of the Seller as of May 31, 1999, and for the month then ended, in
the form attached hereto as Schedule 3.7(B) (the "Interim Financial
Statements"), fairly present the financial position of the Seller at May 31,
1999 and the results of operations for the one month then ended and have been
prepared in accordance with generally accepted accounting principles
consistently applied and in a manner substantially consistent with the Annual
Financial Statements, except for differences resulting from normally occurring
audit adjustments, including, but not limited to, income tax and tax accrual
adjustments, or as noted in the Interim Financial Statements or the notes
thereto. Except as contemplated by or permitted under this Agreement, there are
no adjustments that would be required on review of the Interim Financial
Statements that would, individually or in the aggregate, have a material
negative effect upon the Seller's reported financial condition.
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3.8 NO UNDISCLOSED LIABILITIES. Except for (a) liabilities and
obligations incurred in the ordinary course of business since May 31, 1999 (the
"Statement Date"), and (b) liabilities or obligations described in Schedule 3.8,
neither the Seller nor any of the property of the Seller is subject to any
material liability or obligation that was required to be included or adequately
reserved against in the Interim Financial Statements or described in the notes
thereto and was not so included, reserved against, or described.
3.9 ACCOUNTS RECEIVABLE. Attached as Schedule 3.9 is a true, correct
and complete list of the accounts receivable of the Seller (the "Accounts
Receivable") as of the date of the Interim Financial Statements and, except as
disclosed in Schedule 3.9, the Accounts Receivable arose from bona fide
transactions in the ordinary course of business, have been executed on terms
consistent with the past practice of the Seller, and except for the amount of
any applicable existing reserves for uncollectability, counterclaims or setoffs
shown on the Financial Statements are, to Seller's knowledge after due inquiry,
(i) validly due, good and collectible at the recorded amounts thereof, (ii) not
subject to any valid defenses, counterclaims or setoffs and (iii) not otherwise
in dispute. No accounts receivable have been factored, pledged, turned over for
collection, or assigned to any person or third party.
3.10 NONDISCLOSED PAYMENTS. Neither the Seller nor any of its officers
or directors, nor anyone acting on behalf of it, has made or received any
material payments not correctly categorized and fully disclosed in the books and
records of the Seller in connection with or in any way relating to or affecting
the Seller or its Video Products Business.
3.11 ABSENCE OF CERTAIN CHANGES. Except as contemplated or permitted by
this Agreement or as described in Schedule 3.11, since the Statement Date there
has not been:
(A) any material adverse change in the business,
financial condition, operations, or assets of the
Seller;
(B) any damage, destruction, or loss, whether covered by
insurance or not materially adversely affecting the
properties or business of the Seller;
(C) any sale or transfer by the Seller of any tangible or
intangible asset other than in the ordinary course of
business, any mortgage or pledge or the creation of
any security interest, lien, or encumbrance on any
such asset, or any lease of property, including
equipment, other than tax liens with respect to taxes
not yet due and contract rights of customers in
inventory;
(D) any declaration, setting aside, or payment of a
distribution in respect of or the redemption or other
repurchase by the Seller of any stock of the Seller;
(E) any material transaction not in the ordinary course
of business of the Seller;
(F) the lapse of any material patent, trademark, assumed
name, trade name, service xxxx, copyright, or license
or any application with respect to the foregoing;
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(G) the grant of any increase in the compensation of
officers or employees (including any such increase
pursuant to any bonus, pension, profit-sharing, or
other plan) other than customary increases on a
periodic basis or required by agreement or
understanding in the ordinary course of business and
in accordance with past practice;
(H) the discharge or satisfaction of any material lien or
encumbrance or the payment of any material liability
other than current liabilities in the ordinary course
of business;
(I) any change in accounting methods or practices, credit
practices or collection policies used by the Seller;
(J) the making of any material loan, advance, or guaranty
to or for the benefit of any person except the
creation of accounts receivable in the ordinary
course of business; or
(K) an agreement to do any of the foregoing.
3.12 TITLE AND RELATED MATTERS. Except as set forth in Schedule 3.12,
the Seller has good and marketable title to all of its property, real and
personal, and other assets included in the Interim Financial Statements and
listed on Schedule 1.2(a) (except properties and assets sold or otherwise
disposed of subsequent to the Statement Date in the ordinary course of business
or as contemplated in this Agreement), free and clear of all security interests,
mortgages, liens, pledges, charges, claims, or encumbrances of any kind or
character, except (a) statutory liens for property taxes not yet delinquent or
payable subsequent to the date of this Agreement and statutory or common law
liens securing the payment or performance of any obligation of the Seller, the
payment or performance of which is not delinquent, or that is payable without
interest or penalty subsequent to the date on which this representation is
given, or the validity of which is being contested in good faith by the Seller;
(b) the rights of customers of the Seller with respect to Video Technology
Assets under orders or contracts entered into by the Seller in the ordinary
course of business; (c) claims, easements, liens, and other encumbrances of
record pursuant to filings under real property recording statutes; and (d) as
described in the Interim Financial Statements or the notes thereto.
3.13 PERSONAL PROPERTY. Without material exception, Schedule 1.2(a)
lists all of the tangible personal property and assets owned or held by the
Seller and used or useful in the conduct of the Video Products Business. Except
as set forth in Schedule 3.13, the Seller owns and has good title to such
properties and none of such properties is subject to any security interest,
mortgage, pledge, conditional sales agreement, or other lien or encumbrance
(except for liens for current taxes, assessments, charges, or other governmental
levies not yet due and payable). The Seller has delivered to Purchaser copies of
all leases and other agreements relating to property described in Schedule 3.13
(including any and all amendments and other modifications to such leases and
other agreements) all of which are valid and binding, and the Seller is not in
material default under any such leases or agreements. Except as set forth in
Schedule 3.13, all material properties listed therein are generally in good
operating condition and repair (ordinary wear and tear excepted), are performing
satisfactorily, and are available for immediate use in the conduct of the Video
Products Business. All such tangible personal property is in compliance in all
material respects with all applicable statutes, ordinances, rules, and
regulations. The properties listed in Schedule 3.13 include
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substantially all such properties necessary to conduct the Video Products
Business as now conducted by the Seller.
3.14 STATUS OF LEASES. All leases of leased personal property are
identified in Schedule 3.14, and true and complete copies thereof which have or
shall be delivered to the Purchaser at or prior to Closing. Each of said leases
has been executed by the Seller and is in full force and effect. The Seller is
not in default under any of said leases or has received any notice thereof, nor
has any event occurred which, with notice or the passage of time, or both, would
give rise to such a default. After giving effect to the transactions
contemplated by this Agreement, to the Seller's knowledge, each of said leases
will be fully enforceable by the Purchaser against the other party thereto.
3.15 CONSENTS. Except as set forth in Schedule 3.15, no approval is
required with respect to the transactions contemplated by this Agreement from
the other parties to any lease of any real or personal property, including any
Intellectual Property, and to the extent that any such approval is required, the
Seller will obtain or complete them before the Closing. No approval or consent
of any foreign, federal, state, county, local or other governmental or
regulatory body is required in connection with the execution and delivery by the
Seller of this Agreement and the consummation and performance by the Seller of
the transactions contemplated hereby.
3.16 REAL PROPERTY. Schedule 3.16 contains a list of all real property
currently owned or leased by the Seller and used or useful in the conduct of the
Video Products Business. Except as set forth in Schedule 3.16, the Seller has
good and marketable fee simple title, insurable at standard rates, to all of the
real property listed as owned in Schedule 3.16 free and clear of all liens,
mortgages, pledges, covenants, easements, restrictions, leases, charges, and
other claims and encumbrances of any nature whatsoever, and without reservation
or exclusion of any mineral, timber, or other rights or interests, except liens
for real estate taxes, assessments, charges, or other governmental levies not
yet due and payable and except for easements, rights of way, and restrictions of
record. The Seller has delivered to the Purchaser copies of all leases listed in
Schedule 3.16 (including any and all amendments and other modifications of such
leases), which leases are valid and binding. The Seller is not in material
default under any such leases. To the best of Seller's knowledge, all property
listed in Schedule 3.16 (including improvements thereon) is in satisfactory
condition and repair consistent with its present use and is available for
immediate use in the conduct of the Video Products Business. Except as set forth
in Schedule 3.16 and to the best of Seller's knowledge, none of the property
listed in Schedule 3.16 or subject to leases listed in Schedule 3.16 violates in
any material respect any applicable building or zoning code or regulation of any
governmental authority having jurisdiction. The property and leases described in
Schedule 3.16 include all such property or property interests necessary to
conduct the Video Products Business as they are presently conducted by the
Seller.
3.17 LITIGATION. Except as set forth in Schedule 3.17, there are no
material actions, suits, proceedings, orders, investigations, or claims pending
or overtly threatened against the Seller or any of its properties, at law or in
equity, or before or by any governmental department, commission, board, bureau,
agency, or instrumentality; the Seller is not subject to any arbitration
proceedings under collective bargaining agreements or otherwise or any
governmental investigations or inquiries; and, to the best knowledge of the
Seller, there is no basis for any of the foregoing.
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3.18 TAX MATTERS. Except as set forth on Schedule 3.18, (a) the Seller
has prepared in a substantially correct manner and has filed all tax returns and
reports heretofore required to be filed by it and has paid all taxes shown as
due thereon and (b) no taxing authority has asserted any deficiency in the
payment of any tax or informed the Seller that it intends to assert any such
deficiency or to make any audit or other investigation of the Seller for the
purpose of determining whether such a deficiency should be asserted against the
Seller. To the knowledge of the Seller, the Seller has paid or caused to be paid
all federal, state, local, foreign and other taxes, including, without
limitation, income taxes, estimated taxes, capital gains taxes, alternative
minimum taxes, excise taxes, sales taxes, goods and services taxes, use taxes,
value-added taxes, gross receipts taxes, franchise taxes, capital stock taxes,
employment and payroll-related taxes, withholding taxes, stamp taxes, transfer
taxes, windfall profit taxes, environmental taxes and property taxes, whether or
not measured in whole or in part by net income, and all deficiencies, or other
additions to tax, interest, fines and penalties owed by it (collectively,
"Taxes"), required to be paid by it through the date hereof whether disputed or
not. To the knowledge of the Seller, all Taxes and other assessments and levies
the Seller is required to withhold or collect have been withheld and collected
and have been paid over to the proper governmental authorities within the time
required by applicable law.
3.19 COMPLIANCE WITH LAWS. The Seller is, in the conduct of its
business, in substantial compliance with all laws, statutes, ordinances,
regulations, orders, judgments, or decrees applicable to it, the enforcement of
which, if the Seller was not in compliance therewith, would have a materially
adverse effect on the business of the Seller, taken as a whole. The Seller has
not received any notice of any asserted present or past failure by the Seller to
comply with such laws, statutes, ordinances, regulations, orders, judgments, or
decrees.
3.20 INSURANCE. Schedule 3.20 contains a list of each insurance policy
maintained by the Seller with respect to its properties, assets, and businesses,
and each such policy is in full force and effect. The Seller is not in material
default with respect to its obligations under any such policy maintained by it.
The Seller has not been notified of the cancellation of any of the insurance
policies listed on Schedule 3.20 or of any material increase in the premiums to
be charged for such insurance policies. Schedule 3.20 lists all pending claims
submitted by Seller under each policy.
3.21 EMPLOYEES AND LABOR RELATIONS MATTERS. Except as set forth in
Schedule 3.21 or as provided in this Agreement:
(A) the Seller is not aware that any executive or key
employee or any group of employees of the Seller has
any plans to terminate employment with the Seller;
(b) the Seller has substantially complied in all material
respects with all labor and employment laws,
including provisions thereof relating to wages,
hours, equal opportunity, collective bargaining,
Americans With Disabilities Act, and the payment of
social security and other taxes;
(c) there is no unfair labor practice charge, complaint,
or other action against the Seller pending or, to
Seller's best knowledge, threatened before the
National Labor Relations Board and the Seller is not
subject to any order to bargain by the National Labor
Relations Board;
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(d) no questions concerning representation have been
raised or, to Seller's best knowledge, are threatened
with respect to employees of the Seller;
(e) no grievance that might have a material adverse
effect on the Seller and no arbitration proceeding
arising out of or under any collective bargaining
agreement is pending and, to the best knowledge of
the Seller and the directors and responsible officers
of the Seller, no basis exists for any such grievance
or arbitration proceeding; and
(f) to the best knowledge of the Seller and the directors
and responsible officers of the Seller, no employee
of the Seller is subject to any noncompetition,
nondisclosure, confidentiality, employment,
consulting, or similar agreements with persons other
than the Seller relating to the present business
activities of the Seller.
3.22 AGREEMENTS AND COMMITMENTS. Schedule 3.22 contains a complete and
accurate list of each agreement, contract, instrument, and commitment (including
license agreements) to which the Seller is a party and indicates each agreement,
contract, instrument, and commitment that provides for payments in excess of
$10,000 per year or whose term is in excess of one year and is not cancelable
upon thirty (30) or fewer days' notice without any liability, penalty, or
premium, other than a nominal cancellation fee or charge (collectively, the
"Third Party Agreements"). The Seller has delivered a true and correct copy of
each Third Party Agreement to the Purchaser and its counsel. Except as otherwise
set forth in Schedule 3.22:
(A) the Seller has no collective bargaining or union
contracts agreement in effect or being negotiated;
(B) the Seller is not in material default under any Third
Party Agreement, nor, to Seller's best knowledge,
does there exist any event that, with notice or the
passage of time or both, would constitute a material
default or event of default by the Seller under any
Third Party Agreements; and
(C) all of the Third Party Agreements set forth on
Schedule 3.22 or elsewhere referred to in this
Agreement are, to Seller's knowledge after due
inquiry, in full force and effect and the Seller has
paid in full or accrued all amounts due thereunder
and has satisfied in full or provided for all of its
liabilities and obligations thereunder.
3.23 PERSONNEL. Schedule 3.23 sets forth a true and complete list of:
(a) the names, title, and current salaries of all
officers of the Seller;
(b) the names of all directors of the Seller;
(c) the wage rates (or ranges, if applicable) for each
exempt and nonexempt, salaried and hourly employees
of the Seller;
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(d) all scheduled or contemplated increases in
compensation or bonuses; and
(e) all scheduled or contemplated employee promotions.
3.24 ERISA AND RELATED MATTERS. Schedule 3.24 sets forth a description
of all "Employee Welfare Benefit Plans" and "Employee Pension Benefit Plans" (as
defined in Sections 3(1) and 3(2), respectively, of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) existing on the date hereof
that are or have been maintained or contributed to by the Seller. Except as
listed on Schedule 3.24, the Seller does not maintain any retirement or deferred
compensation plan, savings, incentive, stock option or stock purchase plan,
unemployment compensation plan, vacation pay, severance pay, bonus or benefit
arrangement, insurance or hospitalization program or any other fringe benefit
arrangement for any employee, consultant or agent of the Seller, whether
pursuant to contract, arrangement, custom or informal understanding, which does
not constitute an "Employee Benefit Plan" (as defined in Section 3(3) of ERISA),
for which the Seller may have any ongoing material liability after Closing. The
Seller does not maintain nor has it ever contributed to any Multiemployer Plan
as defined by Section 3(37) of ERISA. The Seller does not currently maintain any
Employee Pension Benefit Plan subject to Title IV of ERISA. There have been no
"prohibited transactions" (as described in Section 406 of ERISA or Section 4975
of the Code) with respect to any Employee Pension Benefit Plan or Employee
Welfare Benefit Plan maintained by the Seller as to which the Seller has been
party a party. As to any employee pension benefit plan listed on Schedule 3.24
and subject to Title IV of ERISA, there have been no reportable events (as such
term is defined in Section 4043 of ERISA).
3.25 INTELLECTUAL PROPERTY.
(a) Except as described in Schedule 3.25, the Seller has
exclusive ownership of, or a license to use, all Intellectual Property used or
to be used in its Video Products Business as presently conducted or contemplated
and listed in Schedule 1.2(b). All of the rights of the Seller in such
Intellectual Property are freely transferable. There are no claims or demands of
any other person pertaining to any of such Intellectual Property and no
proceedings have been instituted, or are pending or threatened, which challenge
the rights of Seller in respect thereof. To the knowledge of Seller, and except
as described in Schedule 3.25, the Seller has the right to use, free and clear
of claims or rights of other persons, all customer lists, designs, manufacturing
or other processes, computer software, systems, data compilations, research
results and other information required for or incident to its products or its
business as presently conducted or contemplated.
(b) All patents, patent applications, trademarks, trademark
applications and registrations and registered copyrights which are owned by or
licensed to Seller pertaining to the Video Products Business are listed in
Schedule 3.25. All of such patents, patent applications, trademark
registrations, trademark applications and registered copyrights have been duly
registered in, filed in or issued by the United States Patent and Trademark
Office or such other applicable governmental office of any jurisdiction in which
any patent or other protection is being sought and, except as listed on Schedule
3.25, have been properly maintained and renewed in accordance with all
applicable provisions of applicable law and administrative regulations.
(c) All licenses or other agreements under which Seller is
granted rights in Intellectual Property, pertaining to the Video Products
Business, are listed in Schedule 3.25. All said licenses or other
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agreements are in full force and effect, there is no material default by any
party thereto, and, except as set forth in Schedule 3.25, all of the rights of
Seller thereunder will continue in full force and effect upon consummation of
the transactions contemplated hereby such that Purchaser will continue to
benefit from all of Seller's rights thereunder as of the Closing Date. To the
knowledge of the Seller, the licensors under said licenses and other agreements
have and had all requisite power and authority to grant the rights purported to
be conferred thereby. True and complete copies of all such licenses or other
agreements, and any amendments thereto, have been or shall be provided to
Purchaser prior to the Closing.
(d) All licenses or other agreements under which the Seller
has granted rights to others in Intellectual Property, with respect to the Video
Products Business, owned or licensed by Seller are listed in Schedule 3.25. All
of said licenses or other agreements are in full force and effect and, to the
knowledge of the Seller, there is no material default by any party thereto, and,
except as set forth in Schedule 3.25, all of the rights of the Seller thereunder
will continue in full force and effect upon consummation of the transactions
contemplated hereby. True and complete copies of all such licenses or other
agreements, and any amendments thereto, have been or shall be provided to
Purchaser prior to Closing.
(e) The Seller has taken all steps required in accordance with
sound business practices to establish and preserve its ownership of all material
Intellectual Property rights with respect to each Video Technology Asset,
services and Video Technology, each with respect to the Video Products Business.
Except as set forth on Schedule 3.25, the Seller has not made any valuable
non-public information of Seller available to any person other than its
employees, except pursuant to written agreements requiring the recipients to
maintain the confidentiality of such information and appropriately restricting
the use thereof. Seller has no knowledge of any infringement by others of any
material Intellectual Property rights, with respect to the Video Products
Business.
(f) To Seller's knowledge after due inquiry, the present
business, activities, products and services of the Seller do not infringe any
intellectual property of any other person. To Seller's knowledge after due
inquiry, no proceeding charging the Seller with infringement of any intellectual
property held by any third party has been filed or is threatened to be filed. To
Seller's knowledge after due inquiry, the Seller is not making unauthorized use
of any confidential information or trade secrets of any person, including,
without limitation, any former employer of any past or present employee of the
Seller. Except as set forth in Schedule 3.25, no employee of Seller has any
agreement or arrangement with any person other than the Seller related to
confidential information, restriction on employment activities or trade secrets
of such persons or restricting any such employee's ability to engage in business
activities of any nature. The activities of its employees on behalf of the
Seller do not violate any such agreements or arrangements known to Seller.
3.26 YEAR 2000 COMPLIANCE. The Seller has reviewed the Video Technology
with a view to assessing whether it will, in the receipt, transmission,
processing, manipulation, storage, retrieval, retransmission or other
utilization of data, be vulnerable to any significant risk that computer
hardware, software or any equipment containing embedded microchips used in the
Video Products Business will not, in the case of dates or time periods occurring
after December 31, 1999, function at least as effectively as in the case of
dates or time periods occurring prior to January 1, 2000. The Seller has taken
all reasonable action necessary to assure that there will be no material adverse
effect to the Video Technology by reason of the advent of the year 2000. To
Seller's knowledge after due inquiry, the Video Technology can currently and
shall, on and after December 31, 1999, continue to manage and manipulate data
involving all dates on and
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after December 31, 1999 (including the fact that the year 2000 is a leap year)
without functional, data abnormality or reduction in performance related to such
dates.
3.27 ENVIRONMENTAL MATTERS.
(a) Except as set forth in Schedule 3.27,(i) the Seller has
never generated, transported, used, stored, treated, disposed of or managed any
Hazardous Waste (as defined below); (ii) no Hazardous Material (as defined
below) has ever been spilled, released or disposed of at any site presently or
formerly owned, operated, leased or used by the Seller, or has ever been located
in the soil or groundwater at any such site; (iii) no Hazardous Material has
ever been transported from any site presently or formerly owned, operated,
leased or used by the Seller for treatment, storage or disposal at any other
place; (iv) the Seller does not presently own, operate, lease or use, nor has it
previously owned, operated, leased or used any site on which underground storage
tanks are or were located; and (v) no lien has ever been imposed by any
governmental agency on any property, facility, machinery or equipment owned,
operated, leased or used by the Seller in connection with the presence of any
Hazardous Material.
(b) Except as set forth in Schedule 3.27, (i) the Seller has
no material liability under, nor has it ever violated, any Environmental Law (as
defined below); (ii) any property owned, operated, leased or used by the Seller,
and any facilities and operations thereon, are presently in compliance with all
applicable Environmental Laws; (iii) the Seller has never entered into or been
subject to any judgment, consent decree, compliance order or administrative
order with respect to any environmental or health and safety matter or received
any request for information, notice, demand letter, administrative inquiry or
formal or informal complaint or claim with respect to any environmental or
health and safety matter or the enforcement of any Environmental Law; and (iv)
the Seller has no reason to believe that any of the items enumerated in clause
(iii) of this Subsection will be forthcoming.
(c) Except as set forth in Schedule 3.27, no site owned,
operated, leased or used by the Seller contains any asbestos or
asbestos-containing material, any polychlorinated biphenyls ("PCB"s) or
equipment containing PCBs, or any urea formaldehyde foam insulation.
(d) The Seller shall provide at or prior to the Closing to the
Purchaser copies of all documents, records, and information available to it
concerning any environmental or health and safety matter relevant to the Seller,
whether generated by the Seller or others, including, without limitation,
environmental audits, environmental risk assessments, site assessments,
documentation regarding off-site disposal of Hazardous Materials, spill control
plans and reports, correspondence, permits, licenses, approvals, consents and
other authorizations related to environmental or health and safety matters
issued by any governmental agency.
(e) For purposes of this Section 3.27, (i) "Hazardous
Material" shall mean and include any hazardous waste, hazardous material,
hazardous substance, petroleum product, oil, toxic substance, pollutant,
contaminant or other substance which may pose a threat to the environment or to
human health or safety, as defined or regulated under any Environmental Law;
(ii) "Hazardous Waste" shall mean and include any hazardous waste as defined or
regulated under any Environmental Law; and (iii) "Environmental Law" shall mean
any environmental or health and safety-related law, regulation, rule, ordinance
or bylaw at the foreign, federal, state or local level, whether existing as of
the date hereof, previously enforced or subsequently enacted.
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3.28 INVESTMENT REPRESENTATIONS.
(a) The Seller is acquiring the Preferred Stock and the
Warrant for its own account for purposes of investment and without expectation,
desire, or need for resale and not with the view toward distribution, resale,
subdivision, or fractionalization of the Preferred Stock or the Warrant.
(b) The Purchaser has or will prior to the Closing delivered
to the Seller a true and complete copy of (i) Purchaser's Annual Report on Form
10-KSB for the year ended December 31, 1998, (ii) Purchaser's definitive proxy
statement relating to its 1999 annual stockholders meeting and (iii) all other
filings (other than preliminary registration and proxy statements) made by the
Purchaser with the Securities and Exchange Commission between December 31, 1998
and the date hereof (collectively, the "SEC Documents"). In addition to the SEC
Documents, the Purchaser has provided the Seller with opportunities to become
familiar with the business, financial condition, management, prospects and
operations of the Purchaser, including reasonable opportunities to ask questions
of, receive answers from and obtain information regarding the Purchaser and its
business which is material to the Seller's investment decision. During the
course of the negotiation of this Agreement, the Seller has reviewed all
information provided to it by the Purchaser and has had the opportunity to ask
questions of and receive answers from representatives of the Purchaser
concerning the Purchaser, the securities offered and sold hereby, and to obtain
certain additional information requested by the Seller.
(c) Seller understands that the offer and sale of the
Preferred Stock and the Warrant are not being registered under Securities Act of
1933 ("1933 Act"), or under any applicable state securities law and are being
offered and sold in reliance on the so-called "private offering" exemption
provided by Section 4(2) of the Securities Act and/or Regulation D promulgated
pursuant to the Securities Act, and similar exemptions under applicable state
securities laws, and that the Purchaser is basing its reliance on that exemption
in part on the representations, warranties, statements and agreements contained
herein.
(d) Seller understands that the Preferred Stock and the
Warrant cannot be resold in a transaction to which the 1933 Act and state
securities laws apply unless (i) subsequently registered under the 1933 Act and
applicable state securities laws or (ii) exemptions from such registrations are
available. Seller is aware of the provisions of Rule 144 promulgated under the
1933 Act which permit limited resale of shares purchased in a private
transaction subject to the satisfaction of certain conditions.
(e) Seller understands that no public market now exists for
the Preferred Stock or the Warrant and that it is uncertain that a public market
will ever exist for the Preferred Stock and the Warrant.
(f) Seller understands that the certificates for the Preferred
Stock and the Warrant will bear the following legend:
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THE CORPORATION WILL NOT TRANSFER THIS CERTIFICATE UNLESS (i)
THERE IS AN EFFECTIVE REGISTRATION COVERING THE SHARES REPRESENTED BY
THIS CERTIFICATE UNDER THE SECURITIES ACT OF 1933 AND ALL APPLICABLE
STATE SECURITIES LAWS, (ii) IT FIRST RECEIVES A LETTER FROM AN
ATTORNEY, ACCEPTABLE TO THE BOARD OF DIRECTORS OR ITS AGENTS, STATING
THAT IN THE OPINION OF THE ATTORNEY THE PROPOSED TRANSFER IS EXEMPT
FROM REGISTRATION UNDER THE
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SECURITIES ACT OF 1933 AND UNDER ALL APPLICABLE STATE SECURITIES
LAWS, OR (iii) THE TRANSFER IS MADE PURSUANT TO RULE 144 UNDER THE
SECURITIES ACT OF 1933.
3.29 DISCLOSURE. This Agreement and the schedules, attachments, written
statements, documents, certificates, or other items prepared or supplied to
Purchaser by or on behalf of the Seller with respect to the transactions
contemplated in this Agreement are to the Seller's knowledge after due inquiry
true, complete and authentic; and all contracts and other agreements or
instruments included thereunder are, to Seller's knowledge after due inquiry,
valid, subsisting and binding on the parties thereto in accordance with their
terms. Neither this Agreement nor any of the schedules, attachments, written
statements, documents, certificates, or other items prepared or supplied to
Purchaser by or on behalf of the Seller with respect to the transactions
contemplated in this Agreement contain any untrue statement of a material fact
or omit a material fact necessary to make each statement contained herein or
therein not misleading. Neither the Seller nor any responsible officer or
director has intentionally concealed any fact known by such person to have a
material adverse effect upon the Seller's existing or expected financial
condition, operating results, assets, customer relations, employee relations, or
business prospects taken as a whole. The representations and warranties
contained in this Section 3 shall be true and complete on and as of the Closing
Date with the same force and effect as though such representations and
warranties had been made on and as of the Closing Date.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
As a material inducement to the Seller to enter into this Agreement and
sell the Video Technology Assets, the Purchaser hereby represents and warrants
to the Seller as follows:
4.1 ORGANIZATION. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and is
duly qualified to do business as a foreign corporation in each jurisdiction
where the conduct of its business so requires, except where the failure to so
qualify would not have a material adverse effect on the Purchaser's business,
financial condition or results of operations taken as a whole.
4.2 EXECUTION AND ENFORCEABILITY. The Purchaser has full corporate
power and authority to enter into and perform this Agreement and each other
agreement, instrument, and document required to be executed by the Purchaser in
connection herewith. The execution, delivery, and performance of this Agreement
and such other agreements, instruments, and documents have been duly authorized
by the board of directors of the Purchaser. This Agreement has been duly and
validly executed and delivered by the Purchaser and constitutes a valid and
binding obligation of the Purchaser enforceable in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency or other
laws affecting creditors' rights generally or general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
4.3 ABSENCE OF RESTRICTIONS AND CONFLICTS. The execution, delivery and
performance of this Agreement, the consummation of the transactions contemplated
by this Agreement and the fulfillment of and compliance with the terms and
conditions of this Agreement do not, with or without the passing of time or the
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giving of notice or both, violate or conflict with, constitute a breach of or
default under, result in the loss of any benefit under, or permit the
acceleration of any obligation under, (a) any term or provision of the charter
documents or bylaws of the Purchaser, (b) any judgment, decree or order of any
court or governmental authority or agency to which the Purchaser is a party or
by which the Purchaser or any of his respective properties is bound, (c) any
federal, state, county or local statute, law, rule or regulation applicable to
the Purchaser, or (d) any instrument, contract or other agreement to which the
Purchaser is a party, or by which it or any of its respective properties is
bound, or result in the creation of any lien, security interest, charge, or
encumbrance upon any of such properties.
4.4 CERTAIN PROCEEDINGS. There is no pending action, arbitration,
audit, hearing, investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) commenced, brought, conducted, or
heard by or before, or otherwise involving, any governmental body or arbitrator
that has been commenced against Purchaser and that challenges, or may have the
effect of preventing, delaying, making illegal, or otherwise interfering with,
any of the transactions contemplated in this Agreement.
4.5 BROKERS AND FINDERS FEES. Neither Purchaser nor anyone acting on
its behalf has done anything to cause or incur any liability to any party for
any brokers' or finders' fees or the like in connection with this Agreement or
any transaction contemplated hereby.
4.6 CAPITAL STOCK OF THE PURCHASER. The authorized capital stock of the
Purchaser consists of 12,000,000 shares of Voting Common Stock, 2,250,000 shares
of non-voting common stock, $.01 par value per share (the "Non-Voting Common
Stock") and 7,000,000 shares of preferred stock, $.01 par value per share (the
"Preferred Stock") of which 3,179,368 shares of Voting Common Stock, 112,942
shares of Non-Voting Common Stock and 148,247 shares of Preferred Stock are duly
and validly issued, outstanding, fully paid and nonassessable and of which
8,820,632 shares of Voting Common Stock, 2,237,508 shares of Non-voting Common
Stock and 6,851,753 shares of Preferred Stock are authorized but unissued.
Except as set forth in Schedule 4.6, there are no outstanding options, warrants,
rights, commitments, preemptive rights or agreements of any kind for the
issuance or sale of, or outstanding securities convertible into, any additional
shares of capital stock of any class of the Purchaser. No capital stock of the
Purchaser has been issued in violation of any federal or state law. Except for
the proposed arrangement described in Section 9.11 hereof, there are no voting
trusts, voting agreements, proxies or other agreements, instruments or
undertakings with respect to the voting of the Purchaser's capital stock to
which the Purchaser is a party.
4.7 PURCHASER'S CAPITAL STOCK. At the time of issuance, the Preferred
Stock and the Voting Common Stock to be delivered to the Seller pursuant to this
Agreement or the Warrant will be duly authorized, validly issued, fully paid,
nonassessable, free of any liens or encumbrances, and not subject to any
preemptive rights or rights of first refusal created by statute or the
Certificate of Incorporation or Bylaws of Purchaser or any contract or
arrangement. The Series Preferred Stock and the Voting Common Stock to be
delivered to the Seller upon the exercise of the Warrant will be issued in
compliance with all applicable federal and state securities laws. The Purchaser
has all requisite corporate authority to issue the Preferred Stock and the
Warrant to the Seller.
4.8 REPRESENTATIONS AND WARRANTIES ON THE CLOSING DATE. The
representations and warranties contained in this Section 4 shall be true and
complete on and as of the Closing Date with the same force and effect as though
such representations and warranties had been made on and as of the Closing Date
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ARTICLE V.
CONDUCT OF BUSINESS PENDING THE CLOSING
From the date hereof until the Closing, and except as otherwise
consented to or approved by the Purchaser, the Seller covenants and agrees with
the Purchaser as follows:
5.1 REGULAR COURSE OF BUSINESS. The Seller will operate its business in
accordance with the reasonable judgment of its management diligently and in good
faith, consistent with past management practices, and the Seller will continue
to use its reasonable efforts to keep available the services of present officers
and employees (other than planned retirements) and to preserve its present
relationships with persons having business dealings with it.
5.2 DISTRIBUTIONS. The Seller will not declare, pay, or set aside for
payment any dividend or other distribution in respect of its capital stock.
5.3 CAPITAL CHANGES. The Seller will not issue any shares of its stock,
or issue or sell any securities convertible into, or exchangeable for, or
options, warrants to purchase, or rights to subscribe to, any shares of its
stock or subdivide or in any way reclassify any shares of its capital stock, or
repurchase reacquire, cancel, or redeem any such shares.
5.4 ASSETS. The assets, property, and rights now owned by the Seller
will be used, preserved, and maintained, as far as practicable, in the ordinary
course of business, to the same extent and in the same condition as said assets,
property, and rights are on the date of this Agreement, and no unusual or novel
methods of manufacture, purchase, sale, management, or operation of said
properties or business or accumulation or valuation of inventory will be made or
instituted. Without the prior consent of Purchaser, the Seller will not encumber
any of its assets or make any commitments relating to such assets, property, or
business, except in the ordinary course of its business.
5.5 INSURANCE. The Seller will keep or cause to be kept in effect and
undiminished the insurance now in effect on its various properties and assets,
and will purchase such additional insurance, at Purchaser's cost, as Purchaser
may request.
5.6 EMPLOYEES. The Seller will not grant to any employee any promotion,
any increase in compensation, or any bonus or other award other than promotions,
increases, or awards that are regularly scheduled in the ordinary course of
business or contemplated on the date of this Agreement or that are, in the
reasonable judgment of management of the Seller, in the Seller's best interest.
5.7 NO VIOLATIONS. The Seller will comply in all material respects with
all statutes, laws, ordinances, rules, and regulations applicable to it in the
ordinary course of business.
5.8 PUBLIC ANNOUNCEMENTS. No press release or other announcement to the
employees, customers, or suppliers of the Seller related to this Agreement or
this purchase will be issued without the joint approval of the parties, unless
required by law, in which case Purchaser and Seller will consult with each other
regarding the announcement.
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5.9 CONTINUED EFFECTIVENESS OF REPRESENTATIONS AND WARRANTIES OF THE
SELLER. From the date hereof through the Closing Date, the Seller shall conduct
its business to the best of its ability and in such a manner so that the
representations and warranties contained in Section 3 shall continue to be true
and correct on and as of the Closing Date as if made on and as of the Closing
Date, and the Purchaser shall promptly be given notice of any event, condition
or circumstance occurring from the date hereof through the Closing Date which
would constitute a violation or breach of this Agreement.
5.10 CORPORATE EXAMINATIONS AND INVESTIGATIONS. Prior to the Closing
Date, the Purchaser shall be entitled, through its employees and
representatives, including, without limitation, KPMG LLP and Xxxxxx & Lidji, to
make such investigation of the property and plant and such examination of the
books, records and financial condition of the Seller as the Purchaser reasonably
desires. Any such investigation and examination shall be conducted at reasonable
times and under reasonable circumstances and the Seller shall cooperate fully
therein. No investigation by the Purchaser shall, however, diminish or obviate
in any way any of the representations, warranties, covenants or agreements of
the Seller under this Agreement. In order that the Purchaser may have full
opportunity to make such business, accounting and legal review, examination or
investigation as it may wish of the business and affairs of the Seller, the
Seller shall furnish the representatives of the Purchaser during such period
with all such information concerning the affairs of the Seller as such
representatives may reasonable request and cause its officers, employees,
consultants, agents, accountants and attorneys to cooperate fully with such
representatives in connection with such review and examination and to make full
disclosure to the Purchaser of all material facts affecting the financial
condition and business operation of the Seller. If this Agreement terminates,
the Purchaser and its affiliates shall keep confidential and shall not use in
any manner any information obtained from the Seller concerning its assets,
properties, operations and business, unless readily ascertainable from public or
published information, or trade sources, or already known or subsequently
developed by the Purchaser independently of any investigation of the Seller, or
received from a third party not under an obligation to the Seller to keep such
information confidential. Notwithstanding the foregoing, the Purchaser shall not
contact any customers or vendors of the Seller regarding the Video Products
Business without advance approval of the Seller, which approval shall not be
unreasonably withheld or delayed.
ARTICLE VI.
COVENANTS OF THE SELLER
The Seller covenants and agrees with the Purchaser as follows:
6.1 SATISFACTION OF CONDITIONS. The Seller will use reasonable efforts
to obtain as promptly as practicable the satisfaction of the conditions to
Closing set forth in Article 8 and any necessary consents or waivers under or
amendments to leases and other agreements by which the Seller is bound.
6.2 SUPPLEMENTS TO SCHEDULES. From time to time prior to the Closing,
Seller will promptly supplement or amend the Schedules with respect to any
matter hereafter arising that, if existing or occurring at the date of this
Agreement, would have been required to be set forth or described in any Schedule
and will promptly notify Purchaser of any breach by Seller that it discovers of
any representation, warranty, or covenant contained in this Agreement. No
supplement or amendment of any Schedule made pursuant to this section will be
deemed to cure any breach of any representation of or warranty made in this
Agreement unless Purchaser specifically agrees thereto in writing; provided,
however, that if this purchase is closed,
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Purchaser will be deemed to have waived its rights with respect to any breach of
a representation, warranty, or covenant or any supplement to any Schedule of
which it shall have been notified pursuant to this Section 6.2.
6.3 NO SOLICITATION. Until the Closing or termination pursuant to
Section 11 of this Agreement, neither the Seller nor any of its respective
directors, officers, employees, or agents shall, directly or indirectly,
encourage, solicit, initiate, or enter into any discussions or negotiations
concerning any disposition of any of the capital stock or all or substantially
all of the assets of the Seller (other than pursuant to this Agreement), or any
proposal therefor, or furnish or cause to be furnished any information
concerning the Seller to any party in connection with any transaction involving
the acquisition of the capital stock or assets of the Seller by any person other
than Purchaser. Seller will promptly inform Purchaser of any inquiry (including
the terms thereof and the person making such inquiry) received by any
responsible officer or director of the Seller after the date hereof and believed
by such person to be a bona fide, serious inquiry relating to any such proposal.
6.4 ACTION AFTER THE CLOSING. Upon the reasonable request of any party
hereto after the Closing, any other party to this Agreement will take all action
and will execute all documents and instruments necessary or desirable to
consummate and give effect to the purchase and sale of the Video Technology
Assets.
6.5 CONSUMMATION OF AGREEMENT. Seller shall use its best efforts to
perform and fulfill all conditions and obligations on their parts to be
performed and fulfilled under this Agreement, to the end that the transactions
contemplated by this Agreement shall be fully carried out. To this end, Seller
will obtain prior to the Closing all necessary authorizations or approvals of
its stockholders and board of directors.
ARTICLE VII.
COVENANTS OF THE PURCHASER
The Purchaser will use its best efforts to cause the conditions set
forth in Article 9 to be satisfied.
ARTICLE VIII.
CONDITIONS TO PURCHASER'S OBLIGATIONS
Each and every obligation of Purchaser under this Agreement is subject
to the satisfaction, at or before the Closing, of each of the following
conditions:
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE. Each of the
representations and warranties made by the Seller herein will be true and
correct in all material respects as of the Closing with the same effect as
though made at that time except for changes contemplated, permitted, or required
by this Agreement; Seller will have performed and complied with all agreements,
covenants, and conditions required by this Agreement to be performed and
complied with by them prior to the Closing; and Purchaser will have received, at
the Closing, a certificate of the Seller, signed by an authorized representative
of the Seller, stating that each of the representations and warranties made by
the Seller herein is true and correct in all material respects as of the Closing
except for changes contemplated, permitted, or required by this Agreement and
that Seller has performed and complied with all agreements, covenants, and
conditions required by this Agreement to be performed and complied with by them
prior to the Closing.
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8.2 LITIGATION. No material action, suit, or proceeding before any
court, governmental or regulatory authority will have been commenced and be
continuing, and no investigation by any governmental or regulatory authority
will have been commenced and be continuing, and no action, investigation, suit,
or proceeding will be threatened at the time of Closing, against Seller, or
Purchaser or any of their affiliates, associates, officers, or directors,
seeking to restrain, prevent, or change the transactions contemplated hereby,
questioning the validity or legality of the transactions contemplated hereby, or
seeking damages in connection with the transactions contemplated hereby.
8.3 LEGAL OPINION. The Purchaser will have received an opinion of Xxxx
Xxxx Xxxx & Freidenrich LLP, in form and content reasonably acceptable to
Purchaser and its legal counsel, to the effect that (a) the Seller's
organization and valid existence as stated herein, that this Agreement has been
authorized and is consistent with law and, except as specified in the opinion,
such counsel does not know of any litigation, claim, proceeding, or governmental
investigation pending or threatened against the Seller or its properties; (b)
the execution, delivery, and performance of this Agreement and all other
agreements contemplated hereby to which the Seller is a party have been duly
authorized by the Seller; (c) this Agreement and each other agreement
contemplated hereby, when executed and delivered by the parties thereto, will
constitute the legal, valid, and binding obligation of the Seller, enforceable
against Seller in accordance with its terms except as the enforceability thereof
may be limited by the application of bankruptcy, insolvency, moratorium, or
similar laws affecting the rights of creditors generally or judicial limits on
the right of specific performance, equitable remedies or indemnification; and
(d) except as set forth in Schedule 8.3, the execution and delivery by the
Seller of this Agreement and all other agreements contemplated hereby to which
the Seller is a party, the offering and sale of the Video Technology Assets
hereunder and the fulfillment of and compliance with the respective terms hereof
and thereof by the Seller, do not and will not (i) conflict with or result in a
breach of the terms, conditions or provisions of, (ii) constitute a default
under, (iii) result in the creation of any lien, security interest, charge, or
encumbrance upon the capital stock or assets of Seller, (iv) give any third
party the right to accelerate any obligation under, (v) result in a violation
of, or (vi) require any authorization, consent, approval, exemption, or other
action by or notice to any court or administrative or governmental body pursuant
to the charter or bylaws of Seller, or any law, statute, rule, or regulation to
which Seller is subject, or to such counsel's knowledge any agreement,
instrument, order, judgment, or decree to which Seller is subject.
8.4 MATERIAL CHANGE. From the date of this Agreement to the Closing,
neither the Seller nor the Video Products Business shall not have suffered any
material adverse change (whether or not such change is referred to or described
in any supplement to any Exhibit or Schedule to this Agreement) in their
business prospects, financial condition, working capital, assets, liabilities
(absolute, accrued, contingent, or otherwise), or operations.
8.5 CORPORATE ACTION. Seller will have furnished to Purchaser:
(a) the corporate charter and all amendments thereto and
restatements thereof of the Seller certified by the
official having custody over corporate records in the
jurisdiction of incorporation of the corporation in
question;
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(b) the current bylaws and minutes of all meetings and
consents of stockholders and directors of the Seller
which relate, either directly or indirectly to the
transactions contemplated by this Agreement;
(c) each certificate of qualification to do business as a
foreign corporation of the Seller;
(d) a certificate of the Secretary or Assistant Secretary
of the Seller as to the accuracy, currency, and
completeness of each of the above documents, the
incumbency and signatures of officers of the Seller,
the absence of any amendment to the charter documents
of the Seller, and the absence of any proceeding for
dissolution or liquidation of the Seller; and
(e) a certificate signed by Seller's President dated as
of the Closing Date to the effect that each of the
statements in this Article 8 are true and correct.
8.6 EMPLOYMENT AGREEMENT. The Purchaser and Xxxxx Xxxxxxxxx shall have
executed and delivered the Employment Agreement in substantially the form
attached hereto as Exhibit "D."
8.7 NONCOMPETITION, NONSOLICITATION AND CONFIDENTIALITY AGREEMENT.
Seller and Xxxx Xxxxxxxxx shall each have executed and delivered a
Noncompetition, Nonsolicitation and Confidentiality Agreement in substantially
the form attached hereto as Exhibit "E."
8.8 XXXX OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT. Seller shall
have executed and delivered a Xxxx of Sale, Assignment and Assumption Agreement
in substantially the form attached hereto as Exhibit "F."
8.9 NAME CHANGE. Seller shall have executed and delivered a Certificate
of Amendment to its Certificate of Incorporation to change its name to other
than Prism Video or any variant thereof in acceptable form to be filed with the
Delaware Secretary of State's office within three (3) days following the
Closing.
8.10 CONSENTS. Seller shall have made all filings with and
notifications of governmental authorities, regulatory agencies and other
entities required to be made by it, including any necessary filings in
accordance with any applicable Bulk Sales Act in connection with the execution
and delivery of this Agreement, the performance of the transactions contemplated
hereby and the continued operation of the Video Products Business by the
Purchaser subsequent to the Closing. Seller and the Purchaser shall have
received all authorizations, waivers, consents and permits, in form and
substance reasonably satisfactory to the Purchaser, from all third parties,
including, without limitation, the landlord of each of the Seller's facilities,
applicable governmental authorities, regulatory agencies, lessors, lenders and
contract parties, required to permit the continuation of the Video Products
Business and the consummation of the transactions contemplated by this
Agreement, and to avoid a breach, default, termination, acceleration or
modification of any material agreement, contract, lease, permit or authorization
as a result of, or in connection with, the execution and performance of this
Agreement.
8.11 APPROVAL OF PURCHASER'S COUNSEL. All actions, proceedings,
instruments and documents required to carry out this Agreement and the
transactions contemplated hereby and all related legal matters
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contemplated by this Agreement shall have been approved by Xxxxxx & Lidji, as
counsel for Purchaser, and such counsel shall have received on behalf of
Purchaser such other certificates, opinions and documents in form satisfactory
to such counsel, as Purchaser may reasonably require from the Seller to evidence
compliance with the terms and conditions hereof as of the Closing and the
correctness as of the Closing of the representations and warranties of the
Seller and the fulfillment of their respective covenants.
8.12 RELEASES. The Seller shall have delivered to the Purchaser general
releases signed by BIL Far East Holdings Ltd, as the principal stockholder of
the Seller, of all claims which it may have against the Seller or its assets in
substantially the form acceptable to the parties.
8.13 RELEASE OF LIENS. All encumbrances on the Video Technology Assets
shall have been terminated and released and Purchaser shall have received UCC-3
termination statements and such other documents evidencing such terminations
including, but not limited to, the release of liens which Holdings holds on any
of the Video Technology Assets.
8.14 ASSET TRANSFER. Seller shall have delivered to Purchaser such
other instruments of transfer, including without limitation a Patent Assignment
in form and substance acceptable for filing in the United States Patent and
Trademark Office or such other applicable governmental office of any
jurisdiction and substantially in accordance with the provisions hereof,
transferring to Purchaser all of Seller's right, title and interest in and to
the Video Technology Assets, free and clear of all liens, claims and
encumbrances.
8.15 DUE DILIGENCE. Purchaser and its representatives shall have
completed their due diligence review of the Seller's books, records,
governmental filings, agreements, plans and other matters relating to the Video
Products Business, properties, assets, liabilities and affairs, and shall be
reasonably satisfied with the results thereof.
ARTICLE IX.
CONDITIONS TO SELLER'S OBLIGATIONS
Each and every obligation of the Seller under this Agreement is subject
to the satisfaction, at or before the Closing, of each of the following
conditions:
9.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE. Each of the
representations and warranties made by the Purchaser herein will be true and
correct in all material respects as of the Closing with the same effect as
though made at that time except for changes contemplated, permitted, or required
by this Agreement; Purchaser will have performed and complied with all
agreements, covenants, and conditions required by this Agreement to be performed
and complied with by it prior to the Closing; and Seller will have received, at
the Closing, a certificate of Purchaser, signed by the President and the Chief
Financial Officer of Purchaser, stating that each of the representations and
warranties made by Purchaser herein is true and correct in all material respects
as of the Closing except for changes contemplated, permitted, or required by
this Agreement and that Purchaser has performed and complied with all
agreements, covenants, and conditions required by this Agreement to be performed
and complied with by it prior to the Closing.
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9.2 CORPORATE ACTION. Purchaser will have furnished to Seller a copy,
certified by the Secretary or an Assistant Secretary of Purchaser, of the
resolutions of Purchaser authorizing the execution, delivery, and performance of
this Agreement.
9.3 CONSUMMATION OF CLOSING. All acts, deliveries, and confirmations
comprising the Closing regardless of chronological sequence shall be deemed to
occur contemporaneously and simultaneously upon the occurrence of the last act,
delivery, or confirmation of the Closing and none of such acts, deliveries, or
confirmations shall be effective unless and until the last of the same shall
have occurred.
9.4 PURCHASE NOTE. Purchaser shall have executed and delivered the
Purchase Note in substantially the form attached hereto as Exhibit "A."
9.5 SERIES 1999 PREFERRED STOCK. Purchaser shall have executed and
delivered, the Designations of Preferences Powers and Rights of the Preferred
Stock in substantially the form attached hereto as Exhibit "B."
9.6 WARRANT. Purchaser shall have executed and delivered the Warrant to
acquire restricted Voting Common Stock in substantially the form attached hereto
as Exhibit "C."
9.7 EMPLOYMENT AGREEMENT. Purchaser shall have executed and delivered
the Employment Agreement in substantially the form attached hereto as Exhibit
"D."
9.8 NONCOMPETITION, NONSOLICITATION AND CONFIDENTIALITY AGREEMENT.
Purchaser shall have executed and delivered, the Noncompetition, Nonsolicitation
and Confidentiality Agreements in substantially the form attached hereto as
Exhibit "E."
9.9 XXXX OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT. Purchaser shall
have executed and delivered a Xxxx of Sale, Assignment and Assumption Agreement
in substantially the form attached hereto as Exhibit "F."
9.10 SECURITY AGREEMENT. Purchaser shall have executed and delivered a
Security Agreement in form and substance reasonably acceptable to Seller and
Purchaser securing Purchaser's obligations to Seller under the Purchase Note
with the Collateral Note and Purchaser and Amphion Ventures L.P. shall have
executed an agreement to assign to Seller all payments of principal by Amphion
Ventures L.P. under the Collateral Note until the balance of the Collateral Note
is paid in full or the balance due under the Purchase Note is paid, whichever
occurs first.
9.11 VOTING ARRANGEMENT AND CO-SALE RIGHTS. Amphion Ventures L.P. shall
have agreed to vote its shares of Voting Common Stock and Preferred Stock in
favor of, and use its best efforts to assist the Purchaser with effecting the
authorization of, the proposal to be submitted to the Purchaser's stockholders
at Purchaser's 2000 annual meeting of stockholders which shall permit the
Purchaser to issue shares of Voting Common Stock to Seller upon either (a)
Seller's conversion of any Series 1999 Preferred Stock in accordance with the
Designations of Preferences Powers and Rights of the Series 1999 Preferred Stock
or (b) Seller's exercise of the Warrant in accordance with the terms thereof.
Amphion Ventures L.P. shall have
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further agreed to use its best efforts to grant co-sale rights to Seller in the
event Amphion Ventures L.P. is a selling stockholder in any registered public
offering of the Purchaser's Voting Common Stock.
ARTICLE X.
TERMINATION
10.1 TERMINATION FOR CAUSE. If, pursuant to the provisions of Articles
8 or 9 of this Agreement, Seller or Purchaser is not obligated at the Closing to
consummate this Agreement, then the party who is not so obligated may terminate
this Agreement.
10.2 TERMINATION WITHOUT CAUSE. Anything herein or elsewhere to the
contrary notwithstanding, this Agreement may be terminated and abandoned at any
time without further obligation or liability on the part of any party in favor
of any other by mutual consent of Purchaser and Seller.
10.3 TERMINATION PROCEDURE. Any party having the right to terminate
this Agreement due to a failure of a condition precedent contained in Articles 8
or 9 hereto may terminate this Agreement by delivering to the other party
written notice of termination, and thereupon, this Agreement will be terminated
without obligation or liability of any party.
ARTICLE XI.
INDEMNIFICATION
11.1 OBLIGATION OF THE SELLER TO INDEMNIFY. The Seller agrees to
indemnify, defend and hold harmless the Purchaser (and any of its officers,
directors, employees, affiliates, successors and assigns) from and against any
losses, liabilities, damages, judgments, assessments, fines, costs, expenses or
deficiencies (including interest, penalties, fees, expenses and disbursements of
attorneys, experts, personnel and consultants incurred by the indemnified party)
("Losses") based upon, arising out of or due to or otherwise in respect of:
(a) any inaccuracy in or any breach of any representation by the
Seller contained in this Agreement or in any or other writing delivered pursuant
hereto;
(b) any breach of any covenant or agreement of the Seller
contained in this Agreement; and
(c) any liability or obligation not assumed by the Purchaser
pursuant to Section 1.6, including, without limitation, any liability to which
it may become subject as a result of the fact that the transactions contemplated
by this Agreement are being effected, at the request of the Seller, without
compliance with the provisions of any Bulk Sales Act or any similar statute as
enacted in any jurisdiction, domestic or foreign.
11.2 OBLIGATION OF THE PURCHASER TO INDEMNIFY. The Purchaser shall
indemnify, defend and hold harmless the Seller from and against any Losses
arising out of or due to (a) any inaccuracy in or any breach of any
representation, warranty, covenant or agreement of the Purchaser contained in
this Agreement or in
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any document or other writing delivered pursuant hereto; and (b) any liability
or obligation assumed by the Purchaser pursuant to Section 1.6.
11.3 NOTICE TO INDEMNIFYING PARTY.
(a) Notice of Asserted Liability. The party making a claim under
this Article 11 is referred to as the "Indemnitee," and the party against whom
such claims are asserted under this Article 11 is referred to as the
"Indemnifying Party." All claims by any Indemnitee under this Article 11 shall
be asserted and resolved as follows: Promptly after receipt by the Indemnitee of
notice of any claim or circumstances which, with the lapse of time, would or
might give rise to a claim or the commencement (or threatened commencement) of a
claim for indemnification under this Article 11, including any action,
proceeding or investigation (an "Asserted Liability") that may result in a Loss,
the Indemnitee shall give notice thereof (the "Claims Notice") to the
Indemnifying Party; provided, that, the failure to give notice shall not effect
the Indemnifying Party's obligations hereunder except to the extent it is
materially prejudiced thereby. The Claims Notice shall describe the Asserted
Liability in reasonable detail, and shall indicate the amount (estimated, if
necessary, and to the extent feasible) of the Loss that has been or may be
suffered by the Indemnitee.
(b) Opportunity to Defend. The Indemnifying Party may elect to
compromise or defend, at its own expense and by its own counsel, any Asserted
Liability arising from any third party claim. If the Indemnifying Party elects
to compromise or defend such Asserted Liability, it shall within 30 days (or
sooner, if the nature of the Asserted Liability so requires) notify the
Indemnitee of its intent to do so, and the Indemnitee shall cooperate, at the
expense of the Indemnifying Party, in the compromise of or defense against, such
Asserted Liability. If the Indemnifying Party elects not to compromise or defend
the Asserted Liability, fails to notify the Indemnitee of its election as herein
provided or contests its obligation to indemnify under this Agreement, the
Indemnitee may pay, compromise or defend such Asserted Liability.
Notwithstanding the foregoing, neither the Indemnifying Party nor the Indemnitee
may settle or compromise any Asserted Liability over the objection of the other;
provided, however, consent to settlement or compromise shall not be unreasonably
be withheld. In any event, the Indemnitee and the Indemnifying Party may
participate, at their own expense, in the defense of such Asserted Liability. If
the Indemnifying Party chooses to defend any Asserted Liability, the Indemnitee
shall make available to the Indemnifying Party any books, records or other
documents within its control that are necessary or appropriate for such defense.
11.4 LIMITATION ON INDEMNIFICATION. Anything in this Agreement to the
contrary notwithstanding, no indemnification payment shall be made to the
Purchaser pursuant to this Section 11.4 of this Agreement, except those based
upon, arising out of or otherwise in respect of Sections 3.18, 3.24, 3.26 and
3.27, or in respect of Taxes, until the amounts which the Purchaser would
otherwise be entitled to receive as indemnification under this Agreement
aggregate at least $10,000 (the "Basket Amount"), at which time the Purchaser
shall be entitled to receive the amount of any such payments in excess of the
Basket Amount. Indemnification in respect of Taxes shall include the amount of
such Tax, interest, penalties, fees and disbursements of attorneys, experts
personnel and consultants incurred by the indemnified party but shall not
include any other consequential damages. Anything in this Agreement to the
contrary notwithstanding, the liability of the Seller shall in no event exceed
the Purchase Price received by the Seller pursuant to this Agreement.
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11.5 SET-OFF RIGHTS. The Seller agrees that the Purchaser shall have
the right, but not the obligation, to set-off against any of its payment
obligations hereunder or under the Purchase Note, the full amount of any Losses
required to be paid by the Purchaser pursuant to Section 11.1 if such Losses are
not otherwise paid within thirty (30) days after the Purchaser has requested
payment. If Purchaser elects to exercise its set-off rights hereunder against
any payment obligation under this Agreement or the Purchase Note, it will give
to the Seller written notice of such election which includes the amount to be
set off and, upon giving such notice, the amount of the obligations under this
Agreement or the Purchase Note, as the case may be, shall automatically be
reduced by the amount set forth in such notice. In the event there is a final
determination by a court of competent jurisdiction that the Purchaser was not
entitled to indemnification under this Article 11 with respect to the set-off
amount, the Purchaser shall promptly thereafter credit the Purchase Note by all
such amounts which are so determined to have been incorrectly set-off. For
purposes of this Section 11.4, a determination shall be final if any and all
appeals therefrom shall have been resolved or if thirty days shall have passed
from the rendering of such determination (or of any determination on appeal
therefrom) and no party shall have commenced any such appeal therefrom.
11.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties, covenants, agreements and indemnifications made by each of the
parties contained in this Agreement or in any writing delivered pursuant to the
provisions of this Agreement shall survive the investigation heretofore or
hereafter made by the Purchaser and the consummation of the transactions
contemplated herein and shall continue in full force and effect for the period
beginning on the Closing Date and continuing and including the first business
day after the expiration of three (3) months following the completion of the
first audit of the Purchaser's financial statements after the Closing Date (the
"Survival Period"); provided that, representations and warranties contained in
Sections 3.18, 3.24, 3.26 and 3.27 shall survive for the period of the
applicable statute of limitations. The survival period shall be extended
automatically to include any time period necessary to resolve a claim for
indemnification which was made before expiration of the Survival Period but not
resolved prior to its expiration; provided, however, that any such extension
shall apply only as to claims asserted and not so resolved within the Survival
Period. Without limiting the generality of the foregoing, each of the Seller
specifically acknowledges that the representations, warranties, covenants and
agreements set forth herein are not affected in any way by Purchaser's review of
any of the Seller's minute books, stock books or corporate records of any sort,
by any prior discussions among Purchaser and the Seller or any investigation
heretofore or hereafter made by, or on behalf of, Purchaser.
ARTICLE XII.
MISCELLANEOUS
12.1 NOTICES. All notices, communications and deliveries hereunder
shall be made in writing signed by the party making the same, shall specify the
Section hereunder pursuant to which it is given or being made, and shall be
delivered personally, by telecopy or by registered or certified mail or by any
express mail or courier delivery service (with postage and other fees prepaid)
as follows:
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To the Purchaser: AXCESS Inc.
0000 Xxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Chief Financial Officer
Telecopy: 972.407.0814
with a copy to: Xxxxxx & Lidji, A Professional Corporation
4400 Renaissance Tower
0000 Xxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Telecopy: 214.939.8787
To the Seller: Prism Video, Inc.
00000 Xxxxxx Xxxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attention: President
Telecopy: 972.770.7991
with a copy to: Xxxx Xxxx Xxxx & Freidenrich LLP
000 "X" Xxxxxx, Xxxxx 0000
Attention: Xxxxxx X. Xxxxxx
Telecopy: 000.000.0000
or to such other representative or at such other address of a party as such
party hereto may furnish to the other parties in writing. Such notice shall be
effective upon the date of delivery or the intended recipient's refusal to
accept delivery, if sent by personal delivery, registered, certified or express
mail, courier delivery or by telecopy (with confirmation of transmission).
12.2 ATTACHMENTS. All Annex(es), Schedules and Exhibits attached hereto
are hereby incorporated into this Agreement and are hereby made a part hereof as
if set out in full in this Agreement.
12.3 ASSIGNMENT; SUCCESSORS IN INTEREST. No assignment or transfer by
any party of its respective rights and obligations hereunder shall be made
except with the prior written consent of the other parties hereto, except the
Purchaser shall be permitted to assign its rights and obligations hereunder to
one of its affiliates. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their successors and permitted assigns and
any reference hereto shall also be a reference to a permitted successor or
assign.
12.4 NUMBER; GENDER. Whenever the context so requires, the singular
number shall include the plural and the plural shall include the singular, and
the gender of any pronoun shall include the other genders.
12.5 CAPTIONS. The titles and captions contained in this Agreement are
inserted herein only as a matter of convenience and for reference and in no way
define, limit, extend or describe the scope of this Agreement or the intent of
any provision hereof. Unless otherwise specified to the contrary, all references
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to Articles and Sections are references to Articles and Sections of this
Agreement and all references to Exhibits are references to Exhibits to this
Agreement.
12.6 CONTROLLING LAW; INTEGRATION: AMENDMENT. This Agreement shall be
governed by and construed in accordance with the laws of the State of Texas
without regard to choice of law provisions, statutes, regulations or principles
of this or any other jurisdiction. This Agreement (and the related written
agreements to be entered into in connection with this Agreement) supersedes all
negotiations, agreements and understandings among the parties with respect to
the subject matter hereof and constitutes the entire agreement among the parties
hereto. This Agreement may not be amended, modified or supplemented except by
written agreement of the Seller and the Purchaser.
12.7 COUNTERPARTS. This Agreement may be executed in counterparts,
including the signature pages, each of which shall be deemed an original and all
of which together shall constitute one and the same agreement.
12.8 ENFORCEMENT OF CERTAIN RIGHTS. Nothing expressed or implied in
this Agreement is intended, or shall be construed, to confer upon or give any
person, firm or corporation other than the parties hereto, their successors or
permitted assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement, or result in such person, firm or corporation being
deemed a third party beneficiary of this Agreement.
12.9 WAIVER. Any agreement on the part of a party hereto to any
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. A waiver by one party of the performance of any
covenant, agreement, obligation, condition, representation or warranty shall not
be construed as a waiver of any other covenant, agreement, obligation,
condition, representation or warranty. A waiver by any party of the performance
of any act shall not constitute a waiver of the performance of any other act or
an identical act required to be performed at a later time.
12.10 ARBITRATION; LEGAL PROCEEDINGS.
(a) The parties shall attempt in good faith to resolve any
dispute arising out of or relating to this Agreement, the breach,
termination or validity hereof or the transactions contemplated herein
promptly by negotiation between a representative of the Purchaser, the
Seller who has authority to settle the controversy. Either the Seller
or the Purchaser may give the other written notice that a dispute
exists (a "Notice of Dispute"). The Notice of Dispute shall include a
statement of such party's position and the name and title of the
representative who will represent the Purchaser. Within ten (10) days
of the delivery of the Notice of Dispute, a representative from each
party hereto shall meet at a mutually acceptable time and place, and
thereafter as long as they reasonably deem necessary, to attempt to
resolve the dispute. All documents and other information or data on
which each party relies concerning the dispute shall be furnished or
made available on reasonable terms to the other party at or before the
first meeting of the parties as provided by this paragraph.
(b) Any controversy or claim arising out of or relating to
this Agreement, the breach, termination or validity hereof, or the
transactions contemplated herein, if not settled by negotiation as
provided in paragraph (a) of this Section 12.10, shall be settled by
arbitration in accordance with
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the Commercial Arbitration Rules ("CAR") of the American Arbitration
Association ("AAA"), by one arbitrator selected by mutual agreement of
the parties from the AAA panel of arbitrators in Dallas, Texas. In the
event the parties cannot agree to an arbitrator, the arbitrator shall
proceed before an arbitrator selected by the director of the AAA in
Dallas, Texas. Either party may initiate arbitration twenty (20) days
following the delivery of a Notice of Dispute if the dispute has not
then been settled by negotiation, or sooner if the other party fails to
participate in negotiation in accordance with paragraph (a) above. The
three arbitrators shall be appointed as provided by the CAR, Selection
of Arbitrators. The arbitration procedure shall be governed by the
United States Arbitration Act, 9 U.S.C. Section 1-16 (the "Act"), and
the award rendered by the arbitrator shall be final and binding on the
parties and may be entered in any court having jurisdiction thereof,
subject to the court's authority to modify or review the award as
provided in the Act.
(c) Each party shall bear its own costs and shall share
equally the fees and expenses of the arbitrators.
12.11 RELIANCE ON COUNSEL AND OTHER ADVISORS. Each party has consulted
such legal, financial, technical or other experts as it deems necessary or
desirable before entering into this Agreement. Each party represents and
warrants that it has read, knows, understands and agrees with the terms and
conditions of this Agreement.
12.12 INJUNCTIVE RELIEF. The parties to this Agreement hereby agree
that any remedy at law for any breach of the provisions contained in this
Agreement shall be inadequate and that any party, to the extent permitted by
applicable law, shall be entitled to injunction relief in addition to any other
remedy such party might have under this Agreement.
12.13 SEVERABILITY. If a judicial or arbitral determination is made
that any of the provisions of this Agreement constitutes an unreasonable or
otherwise unenforceable restriction against the Seller the provisions of this
Agreement shall be rendered void only to the extent that such judicial or
arbitral determination finds such provisions to be unreasonable or otherwise
unenforceable with respect to the Seller.
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IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement as of
the date first above written.
PURCHASER: SELLER:
AXCESS INC. PRISM VIDEO, INC.
By: /s/ Xxxxxxx X.X. Xxxxxx By: /s/ Xxxxx Xxxxxxxxx
------------------------------------------ --------------------------
Xxxxxxx X.X. Xxxxxx, Chairman of the Board Xxxxx Xxxxxxxxx, President
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