ASSET PURCHASE AGREEMENT
EXHIBIT
2.2
This
Asset Purchase Agreement (the “Agreement”) is made and entered into this 2nd day of
April, 2008, by and between Visual Management Systems, Inc. a Nevada
corporation, with an address of 0000 Xxxxxxxxxx Xxx Xxxxx Xxxxx X, Xxxx Xxxxx,
XX 00000 (“VMS”), Intelligent Digital Systems, LLC, a Delaware limited liability
company, with an address of 000 Xxxxxxxx, Xxxxxxxxxx, Xxx Xxxx 00000, (“IDS”),
IDS Patent Holding LLC, a New York limited liability company with an address of
000 Xxxxxxxx, Xxxxxxxxxx, Xxx Xxxx 00000 (“IPH”) and, solely with respect to
Section 9 of this Agreement, Xxx Xxxx, an individual maintaining a business
address at 000 Xxxxxxxx, Xxxxxxxxxx, Xxx Xxxx 00000 (the “Member”).
RECITALS
A. IDS is
the owner of certain assets including but not limited to digital video recorder
(“DVR”) software source code and computer hardware, product inventory,
intellectual property rights including trademarks (but excluding patent
applications), existing customers accounts and lists, and other things of value,
a list of which is attached hereto and incorporated herein by reference as Exhibit A (the
“Assets”).
B. IDS is
also the owner of certain other assets including but not limited to certain
intellectual property including pending patent applications and any patents
issued in respect thereof, claims for infringement in respect thereof and other
things of value, a list of which is attached hereto and incorporated herein by
reference as Exhibit
B (the “Other Assets”).
C. VMS
desires to purchase and acquire from IDS the Assets, and to direct the
contribution of the Other Assets to IPH, a new entity to be jointly owned by VMS
and IDS, and IDS desires to transfer and convey the Assets to VMS and to
contribute the Other Assets to IPH, in accordance with the terms and conditions
of this Agreement.
NOW,
THEREFORE, in consideration of the mutual representations, warranties and
covenants contained herein, and on the terms and subject to the conditions
herein set forth, the parties hereby agree as follows:
Section 1
Definitions
As used
in this Agreement, the following terms shall have the meanings set forth
below:
1.1 Closing.
“Closing” shall mean the closing of the transaction contemplated by this
Agreement, which shall occur at 5:00 p.m., on the Closing Date in the offices of
VMS, or at such other time and place as shall be mutually agreed in writing by
the parties hereto.
1.2 Closing
Date. “Closing Date” shall mean the date hereof.
1.3 The
Assets. “The Assets” shall mean, such property belonging to IDS,
listed in Exhibit
A of this Agreement, which shall be conveyed to VMS pursuant to this
Agreement.
1.4 The
Other Assets. “The Other Assets” shall mean, such property belonging
to IDS, listed in Exhibit B of this
Agreement, which shall be contributed by IDS to IPH pursuant to this
Agreement.
Section 2 Purchase , Sale
and Contribution
2.1 Sale
and Purchase of Assets. Subject to and upon the terms and conditions contained
herein, IDS shall, at the Closing, sell, transfer, assign, convey, and deliver
to VMS, free and clear of all liens, claims and encumbrances, and VMS shall, at
the Closing, purchase, accept and acquire from IDS the Assets listed in Exhibit A of this
Agreement.
2.2 Assets
Purchase Price. The total purchase price for the Assets shall be ONE MILLION
FIVE-HUNDRED EIGHTY-SIX THOUSAND DOLLARS ($1,586,000.00), payable by VMS to IDS
in the form of (a) cash in the amount of $42,000, payable in seven equal monthly
installments with the first payment being made on the Closing Date and each
subsequent monthly payment thereafter being made on the last day of each month
until paid in full, and (b) an unsecured convertible promissory note issued by
VMS in the amount of ONE MILLION FIVE-HUNDRED FORTY FOUR THOUSAND DOLLARS
($1,544,000.00) (the “Note”) in the form annexed as Exhibit C
hereto.
2.3 Contribution
of Other Assets. Subject to and upon the terms and conditions
contained herein, for the good and valuable consideration conferred by VMS upon
IDS pursuant to Section 2.2 of this Agreement, and conferred upon VMS by IPH
pursuant to Section 2.4 of this Agreement, IDS shall, at the Closing contribute
to IPH, free and clear of all liens and encumbrances created by IDS, and IPH
shall, at the Closing accept and acquire from IDS the Other Assets listed in
Exhibit B of
this Agreement.
2.4 Issuance
of Membership Interest. Subject to and upon the terms and conditions
contained herein, for the good and valuable consideration conferred by VMS upon
IDS pursuant to Section 2.2 of this Agreement, IDS shall, at the Closing, cause
IPH to issue and deliver in whatever form necessary to VMS, a 50% membership
interest in IPH, with the rights and on the terms set forth in the Operating
Agreement of IPH (the “IPH Operating Agreement”) a copy of which is annexed
hereto as Exhibit
D.
2.5 Grant
of License. Subject to and on the terms and conditions contained
herein, for good and valuable consideration conferred by VMS upon IDS pursuant
to Section 2.2 of this Agreement, IPH shall, at the Closing, grant to VMS an
exclusive perpetual license to use the technology and know how covered by such
patent applications conveyed to IPH by IDS as part of the Other Assets pursuant
and subject to an Exclusive Patent and Trade Secret License Agreement in the
form annexed hereto as Exhibit E (the
“License Agreement”). The license granted to VMS pursuant to the
License Agreement shall be exclusive except as otherwise set forth in the
License Agreement.
2.6 Instruments
of Transfer; Further Assurances.
2.6.1 At
the Closing, IDS shall deliver to VMS:
2.6.1.1 An
Assignment and Assumption Agreement and Xxxx of Sale with respect to the Assets,
in form and substance satisfactory to VMS;
2.6.1.2 Such
other instrument or instruments of transfer as shall be necessary or
appropriate, as VMS shall reasonably request, to vest in VMS good and marketable
title to the Assets.
2.6.1.3 The
IPH Operating Agreement, duly executed by IDS.
2
2.6.2 At
the Closing, IDS shall deliver to IPH:
2.6.2.1 Assignment
of Patent Applications with respect to the Other Assets, in form and substance
satisfactory to VMS;
2.6.2.2 Such
other instrument or instruments of transfer as shall be necessary or
appropriate, as VMS shall reasonably request, to vest in IPH good and marketable
title to the Other Assets.
2.6.3 At
the Closing, VMS shall deliver to IDS:
2.6.3.1 The
Note duly executed by VMS;
2.6.3.2 The
IPH Operating Agreement, duly executed by VMS;
2.6.3.3 The
Registration Rights Agreement, between VMS and IDS, in the form annexed as Exhibit F hereto,
duly executed by VMS;
2.6.3.4 Consulting
Agreement, between VMS and Member, in the form annexed as Exhibit G hereto,
duly executed by VMS;
2.6.3.5 An
Assignment and Assumption Agreement and Xxxx of Sale with respect to the Assumed
Liabilities, in form and substance satisfactory to IDS; and
2.6.3.6 Such
other instrument or instruments as shall be necessary or appropriate, as IDS
shall reasonably request.
2.6.4 At
the Closing IPH shall deliver to VMS:
2.6.4.1 The
License Agreement, duly executed by IPH.
2.7 Allocation. The
purchase price for the Assets (and all other capitalized costs, including all
Assumed Liabilities) shall be allocated as mutually determined by VMS and IDS in
accordance with applicable requirements of the Internal Revenue Code of 1986, as
amended from time to time, and reflecting the value of the various Assets being
purchased and sold pursuant to this Agreement. These allocations will
be binding on VMS and IDS for federal and state income tax purposes in
connection with the purchase and sale of the Assets, and will be consistently
reflected by each party on its federal, state and local income tax
returns.
Section 3 Assumed
Liabilities
3.1. Assumed
Liabilities. At the Closing and upon the terms and conditions
contained in this Agreement, VMS shall assume and agree to discharge and perform
the following (and only the following) liabilities of IDS (the "Assumed
Liabilities"):
3.1.1. Trade
Payables. All current trade accounts payable of Seller outstanding as of the
Closing Date, but only to the extent such payables (i) were incurred
in the ordinary course of business consistent with past practice; and (ii) do
not result from any failure to pay when and as due or any other
breach of the terms and conditions of any agreement (written or oral) by and
between Seller and the vendor or supplier to which such payable is
due, including, without limitation, any penalties, late charges
or interest accrued on or before the Closing Date. A full
accounting of assumed payables is disclosed in the Schedule of Payables attached
hereto as Exhibit
H to this Agreement. At the Closing, IDS shall be responsible
for the production of any and all agreements necessary to effectuate assignment
of the relevant assumed payables.
3
3.1.2. Warranty
Obligations. Warranty obligations of IDS in respect of the equipment
listed on Exhibit
I, which (i) were made in the ordinary course of business consistent with
past practice, and (ii) are assigned to VMS pursuant to this Agreement, in each
case to the extent such liabilities relate to performance on or after the
Closing Date and do not result from any breach of warranty lawsuit that existed
before the Closing Date. For purposes of clarification and without in
any way affecting the generality of the foregoing sentence , the term “Assumed
Liabilities” includes any warranty repairs or services in process as of the
Closing Date. At closing IDS shall be responsible for the production
of any and all agreements necessary to effectuate assignment by IDS and
assumption by VMS of the relevant assumed warranty obligations.
3.1.3. Customer
Contracts. Liabilities of IDS under any written customer contract by
which IDS is bound on the Closing Date (each, a “Contract”), which (i) were made
in the ordinary course of business consistent with past practice, (ii) were
disclosed in the Schedule of Contracts attached hereto as Exhibit J, and (iii)
are assigned to VMS pursuant to this Agreement, in each case to the extent such
liabilities relate to performance on or after the Closing Date and do not result
from any breach of contract, tort, claim or lawsuit arising out of or related to
any matter that existed or occurred before the Closing Date.
3.2. Excluded
Liabilities. Other than the Assumed Liabilities, VMS shall have no
responsibility whatsoever with respect to any liabilities, contracts,
commitments, and other obligations of IDS of any nature or kind, liquidated or
contingent, whether or not incurred in the ordinary course of business, which
shall remain obligations and liabilities of IDS (the "Excluded
Liabilities") including, without limitation: (i) accrued expenses as
of the Closing Date, including, without limitation, salaries,
vacation accrual, severance liabilities, bonus and commission accrual and
deductions payable, and other employee-related liabilities; (ii)
notes payable; (iii) liabilities for Taxes (as defined below) either
accruing or relating to the periods before the Closing Date; (iv)
claims, liabilities, or other obligations that relate to injuries,
actions, omissions, conditions or events that occurred or existed on or prior to
the Closing Date, and any liabilities for any claim, judgment, penalty,
settlement agreement or other obligation to pay in respect of any
such claims or events.
3.3 Taxes. As
used in this Agreement, "Tax" shall mean all taxes, charges, fees,
levies or other assessments, including, without limitation,
income, excise, gross receipts, personal property, real property,
sales, use, ad valorem, transfer, franchise, profits, license, withholding,
payroll, employment, severance, stamp, occupation, windfall profits,
social security and unemployment or other taxes imposed by the United
States or any agency or instrumentality thereof, any state, county, local or
foreign government, or any agency or instrumentality thereof, and any interest
or fines, and any and all penalties or additions relating to such
taxes, charges, fees, levies
or other assessments.
Section 4 Representations
and Warranties of VMS
VMS
represents and warrants to IDS that the following are true and correct as of
this date and will be true and correct through the Closing Date as if made on
that date:
4.1
Organization and Good Standing. VMS is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada, with all
the requisite power and authority to carry on the business in which it is
engaged, to own the properties it owns and to execute and deliver this Agreement
and to consummate the transactions contemplated hereby.
4
4.2
Authorization and Validity. The execution, delivery and performance by VMS of
this Agreement and the other agreements contemplated hereby, and the
consummation of the transactions contemplated hereby, have been duly authorized
by VMS. This Agreement and each other agreement contemplated hereby have been or
will be prior to Closing duly executed and delivered by VMS and constitute or
will constitute legal, valid and binding obligations of VMS, enforceable against
VMS in accordance with their respective terms, except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement of creditors’
rights generally and by general equitable principles.
4.3
No Violation. Neither the execution and performance of this Agreement or the
other agreements contemplated hereby, nor the consummation of the transactions
contemplated hereby or thereby, will (a) conflict with, or result in a breach of
the terms, conditions and provisions of, or constitute a default under, the
Articles of Incorporation or Bylaws of VMS or any agreement, indenture or other
instrument under which VMS is bound, or (b) violate or conflict with any
judgment, decree, order, statute, rule or regulation of any court or any public,
governmental or regulatory agency or body having jurisdiction over VMS or the
properties or assets of VMS.
4.4
Consents. No further authorization, consent, approval, waiver, permit or
license of, or filing with, any governmental or public body or authority, any
lender, lessor or holder of securities or any other person or entity is required
to authorize, or is required in connection with, the execution, delivery and
performance of this Agreement or the agreements contemplated hereby on the part
of VMS.
Section 5 Representations
and Warranties of IDS
IDS
represents and warrants to VMS that the following are true and correct as of
this date and will be true and correct through the Closing Date as if made on
that date:
5.1
Organization and Good Standing. IDS is a limited liability company duly formed,
validly existing and in good standing under the laws of the State of Delaware
and has all the requisite power and authority to carry on the business in which
it is engaged, to own the properties it owns and to execute and deliver this
Agreement and to consummate the transactions contemplated hereby.
5.2
Authorization and Validity. The execution, delivery and performance by IDS of
this Agreement and the other agreements contemplated hereby, and the
consummation of the transactions contemplated hereby, have been duly authorized
by all requisite action on the part of IDS. This Agreement and each other
agreement contemplated hereby have been or will be prior to Closing duly
executed and delivered by IDS and constitute or will constitute legal, valid and
binding obligations of IDS, enforceable against IDS in accordance with their
respective terms, except to the extent that enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors’ rights generally and by general
equitable principles.
5.3
Title. (i) IDS has good and marketable title to the Assets which are the subject
of this Agreement. Upon consummation of the transactions contemplated hereby,
VMS shall receive good, valid and marketable title to all the Assets free and
clear of all liens, claims, and encumbrances. (ii) IDS has good and
marketable title to the Other Assets which are the subject of this Agreement.
Upon consummation of the transactions contemplated hereby, IPH shall receive
good, valid and marketable title to all the Other Assets free and clear of all
liens and encumbrances created by IDS, including tax liens.
5
5.4
Commitments. IDS has not entered into, nor are the Assets or Other Assets of IDS
bound by, whether or not in writing, any (i) partnership or joint venture
agreement; (ii) deed of trust or other security agreement; (iii) guaranty or
suretyship, indemnification or contribution agreement or performance bond; (iv)
employment, consulting or compensation agreement or arrangement; (v) labor or
collective bargaining agreement; (vi) debt instrument, loan agreement or other
obligation relating to indebtedness for borrowed money or money lent to another;
(vii) deed or other document evidencing an interest in or contract to purchase
or sell real property; (viii) agreement with dealers or sales or commission
agents, public relations or advertising agencies, accountants or attorneys; (ix)
lease of real or personal property, whether as lessor, lessee, sublessor, or
sublessee; (x) agreement relating to any material matter or transaction in which
an interest is held by a person or entity which is an affiliate of IDS; (xi)
powers of attorney; or (xii) contracts containing noncompetition
covenants.
5.5
Adverse Agreements. IDS is not a party to any agreement or instrument or any
judgment, order, writ, injunction, decree, rule or regulation which materially
and adversely affects or, so far as IDS can now reasonably foresee, will in the
future materially and adversely affect the Assets as listed in Exhibit A, or the
Other Assets as listed in Exhibit
B.
5.6
No Violation. Neither the execution and performance of this Agreement or the
other agreements contemplated hereby, nor the consummation of the transactions
contemplated hereby or thereby, will (a) conflict with, or result in a breach of
the terms, conditions and provisions of, or constitute a default under, any
agreement, indenture or other instrument under which IDS may be bound, or (b)
violate or conflict with any judgment, decree, order, statute, rule or
regulation of any court or any public, governmental or regulatory agency or body
having jurisdiction over IDS or the properties or assets of IDS.
5.7
Consents. No authorization, consent, approval, permit or license of, or filing
with, any governmental or public body or authority, any lender or lessor or any
other person or entity is required to authorize, or is required in connection
with, the execution, delivery and performance of this Agreement or the
agreements contemplated hereby on the part of IDS.
5.8
[Reserved]
5.9
Proceedings. No action, proceeding or order by any court or governmental body or
agency has been threatened in writing, asserted, instituted or entered against
IDS to restrain or prohibit the carrying out of the transactions contemplated by
this Agreement.
5.10
Financial Statements. IDS has delivered to VMS audited balance sheets
as of December 31, 2007, 2006 and 2005 and statements of operations and cash
flows for the fiscal years ended December 31, 2007, 2006 and 2005 (collectively,
the “Financial Statements”). The Financial Statements are based upon
the information contained in the books and records of IDS, have been prepared in
accordance with U.S. generally accepted accounting principles (“GAAP”)
consistently applied throughout the periods indicated and fairly present the
financial condition and results of operations of IDS as of the dates and for the
respective periods presented.
6
5.11
Absence of Certain Changes. Since December 31, 2007, there has not
been any damage, destruction or other casualty loss with respect to
any asset or property owned, leased or otherwise used by it, whether or not
covered by insurance, which damage, destruction or loss is reasonably likely,
individually or in the aggregate, to have a material adverse effect on IDS’
financial condition, properties, assets, business or results of
operations.
5.12
Litigation and Liabilities. There are no (i) civil, criminal or
administrative actions, suits, claims, hearings, investigations or proceedings
pending or, to the knowledge of IDS, threatened against IDS or (ii) obligations
or liabilities, whether or not accrued, contingent or otherwise, or any other
facts or circumstances, in either such case, of which IDS has knowledge that are
reasonably likely to result in any claims against or obligations or liabilities
of IDS.
5.13
Compliance with Laws. The business of IDS has not been, and is not
being, conducted in violation of any law, statute, ordinance, regulation,
judgment, order, decree, injunction, arbitration award, license, authorization,
opinion, agency requirement or permit (collectively, “Laws”) of any governmental
or regulatory authority, court, agency, commission, body or other governmental
entity (“Governmental Entity”). No investigation or review by any
Governmental Entity with respect to IDS is pending or, to the knowledge of IDS,
threatened, nor has any Governmental Entity indicated in writing an intention to
conduct the same, except for tax proceedings. To the knowledge of
IDS, no material change is required in IDS’ processes, properties or procedures
in connection with any such Laws, and it has not received any notice or
communication of any material noncompliance with any such Laws that has not been
cured as of the date hereof. IDS has all permits, licenses,
franchises, variances, exemptions, orders and other governmental authorizations,
consents and approvals necessary to conduct its business as presently
conducted.
5.14
Taxes. IDS has prepared in good faith and duly and timely filed
(taking into account any extension of time within which to file) all material
tax returns required to be filed by it and all such filed tax returns are
complete and accurate in all material respects and: (i) IDS has paid all taxes
that are shown as due on such filed tax returns or that IDS is obligated to
withhold from amounts owing to any employee, creditor or third party, except
with respect to matters contested in good faith or for such amounts that, alone
or in the aggregate, are not reasonably likely to have a material adverse effect
on it; (ii) except as otherwise specified on Schedule 5.14 annexed hereto, as of
the date hereof, there are no pending or, to the knowledge of IDS, threatened,
any audits, examinations, investigations or other proceedings in respect of
taxes or tax matters; and (iii) except as otherwise specified on Schedule 5.14
annexed hereto, there are not, to the knowledge of IDS, any unresolved questions
or claims concerning IDS’ tax liability that are reasonably likely to have a
material adverse effect on IDS.
5.15
Labor Matters. IDS is not the subject of any proceeding asserting
that it has committed an unfair labor practice or is seeking to compel it to
bargain with any labor union or labor organization nor is there pending or, to
the knowledge of its executive officers, threatened, nor has there been for the
past five years, any labor strike, dispute, walkout, work stoppage,
slow-down or lockout involving it.
5.16
No Default. IDS is not currently and does not expect to be
in the future, in violation or breach of or in default under, and no conditions
exist that, with the giving of notice or the lapse of time or both, would
constitute a default under any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, lease, license, contract, agreement or other
instrument or obligation to which IDS is a party or by which it or any of its
properties or assets may be bound, except any such violation, breach or default
that is not reasonably likely to have a material adverse effect on its financial
condition, properties, assets, business or results of operations.
7
5.17
Intellectual Property Rights. Schedule 5.17 contains an
accurate and complete description of all material domestic and foreign patents,
trademarks, trademark registration, service marks, service marks registration,
logos, trade names, assumed names, copyrights and copyright registrations and
all applications therefor, presently owned or held by IDS or under which IDS
owns or holds any license, or in which IDS owns or holds any direct or indirect
interest, and to IDS’ knowledge no others are necessary for the use of the
Assets or Other Assets in accordance with past practice. To the
knowledge of IDS, no products sold or services provided by IDS, nor any patents,
formulae, know-how, secrets, trademarks, trademark registrations, service marks,
service marks registration, logos, trade names, assumed names, copyrights,
copyright registrations, or designation used or licensed for use in connection
with the Assets or Other Assets, infringe on any patents, trademarks, licenses,
or copyrights, or any other rights, of any person. IDS is the sole
owner of, has the sole and exclusive right to use, has the right and power to
sell, and has taken all reasonable measures to maintain and protect, the
patents, trademarks, trademark registrations, logos, trade names, assumed names,
copyrights, copyright registrations, service marks and service xxxx
registrations listed in Schedule 5.17 as owned by it. Except as set
forth in Schedule 5.17, no claims have been asserted against IDS in writing by
any person and received by it challenging the use of any such patents,
trademarks, trademark registrations, service marks, service xxxx registrations,
logos, trade names, assumed names, copyrights and copyright registrations or
challenging or questioning the validity or effectiveness of any such license or
agreement, or the use of any formula, know-how or secrets used in connection
with the Assets or Other Assets and, to the knowledge of IDS, there
is no valid basis for any such claim. To IDS’
knowledge, no other party is infringing on the patents, trademarks,
trademark registrations, logos, tradenames, assumed names, copyrights copyright
registrations, service marks and service xxxx registrations listed in Schedule
5.17.
5.18
Accounts Receivable. The value of all IDS accounts receivable do not
exceed $20,000 in the aggregate.
5.19
Brokerage. No third party shall be entitled to receive any brokerage
commissions, finder’s fees, fees for financial advisory services or similar
compensation in connection with the transactions contemplated by this Agreement
based upon any arrangement or agreement made by IDS or the Member.
Section 6 Representations
and Warranties of IPH
IPH
represents and warrants that the following are true and correct as of this date
and will be true and correct through the Closing Date as if made on that
date:
6.1
Organization and Good Standing. IPH is a limited liability company duly formed,
validly existing and in good standing under the laws of the State of New York
and has all the requisite power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. IPH
has engaged in no business other than its organizational activities and actions
related to this Agreement and the transactions contemplated hereby, and, other
than this Agreement, is not a party to any agreement, indenture or other
instrument under which it or its properties may be bound.
6.2
Authorization and Validity. The execution, delivery and performance by IPH of
this Agreement and the other agreements contemplated hereby, and the
consummation of the transactions contemplated hereby, have been duly authorized
by all requisite action on the part of IPH. This Agreement and each other
agreement contemplated hereby have been or will be prior to Closing duly
executed and delivered by IPH and constitute or will constitute legal, valid and
binding obligations of IPH, enforceable against IPH in accordance with their
respective terms, except to the extent that enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors’ rights generally and by general
equitable principles.
8
6.3
Adverse Agreements. IPH is not a party to any agreement or instrument or any
judgment, order, writ, injunction, decree, rule or regulation which materially
and adversely affects or, so far as IPH can now reasonably foresee, will in the
future materially and adversely affect its membership rights.
6.4
No Violation. Neither the execution and performance of this Agreement or the
other agreements contemplated hereby, nor the consummation of the transactions
contemplated hereby or thereby, will violate or conflict with any judgment,
decree, order, statute, rule or regulation of any court or any public,
governmental or regulatory agency or body having jurisdiction over IPH or the
properties or assets of IPH.
6.5
Consents. No authorization, consent, approval, permit or license of, or filing
with, any governmental or public body or authority, any lender or lessor or any
other person or entity is required to authorize, or is required in connection
with, the execution, delivery and performance of this Agreement or the
agreements contemplated hereby on the part of IPH.
6.6
Compliance with Laws. There are no existing violations by IPH of any applicable
federal, state or local law or regulation, except to the extent that any such
violations would not have a material adverse effect on the property or business
of IPH.
6.7
[Reserved]
6.8 Proceedings.
No action, proceeding or order by any court or governmental body or agency has
been threatened in writing, asserted, instituted or entered against IPH to
restrain or prohibit the carrying out of the transactions contemplated by this
Agreement.
Section 7
Indemnification
7.1
IDS’s Indemnity. Subject to the terms of this Section 7, IDS hereby agrees, to
indemnify, defend and hold harmless VMS and its officers, directors, employees,
agents, attorneys, accountants and affiliates from and against any and all
losses, claims, obligations, demands, assessments, penalties, liabilities,
costs, damages, reasonable attorneys’ fees and expenses (“Damages”) asserted
against or incurred by VMS or IPH by reason of or resulting from (i) a breach by
IDS of any representation, warranty or covenant contained herein, or in any
agreement executed pursuant hereto or (ii) any claim, action, suit or proceeding
arising out of the conduct of IDS’ business prior to the Closing Date, other
than with respect to the Assumed Liabilities;.
7.2
VMS’s Indemnity. Subject to the terms of this Section 7, VMS hereby agrees
to indemnify, defend and hold harmless IDS and its members, employees, agents,
attorneys, accountants and affiliates from and against any and all Damages
asserted against or incurred by IDS or IPH by reason of or resulting from (i) a
breach by VMS of any representation, warranty or covenant contained herein, or
in any agreement executed pursuant hereto or (ii) a failure to timely pay or
perform any Assumed Liability or (iii) any claim, action, suit or proceeding
arising out of the conduct of any aspect of the business of IDS acquired by VMS
hereunder, including (without limitation) the possession, use or application of
any of the Assets, on or after the Closing Date.
9
7.3
IPH’s Indemnity. Subject to the terms of this Section 7, IPH hereby agrees to
indemnify, defend and hold harmless VMS and its officers, directors, employees,
agents, attorneys, accountants and affiliates from and against any and all
Damages asserted against or incurred by VMS or IDS by reason of or resulting
from a breach by IPH of any representation, warranty or covenant contained
herein, or in any agreement executed pursuant hereto.
7.4
Indemnification Procedures. In the case of any claim asserted by a
third party against a party entitled to indemnification under this Agreement
(the “Indemnified Party”), notice shall be given by the Indemnified Party to the
party required to provide indemnification (the “Indemnifying Party”) promptly
after such Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and the Indemnified Party shall permit the Indemnifying
Party (at the expense of such Indemnifying Party) to assume the defense of any
claim or any litigation resulting therefrom, provided, that (i)
counsel for the Indemnifying Party who shall conduct the defense of such claim
or litigation shall be reasonably satisfactory to the Indemnified Party, and the
Indemnified Party may participate in such defense at such Indemnified Party’s
expense, and (ii) the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its indemnification
obligation under this Agreement except to the extent that such failure results
in a lack of actual notice to the Indemnifying Party and such Indemnifying Party
is materially prejudiced as a result of such failure to give
notice. Except with the prior written consent of the Indemnified
Party, no Indemnifying Party, in the defense of any such claim or litigation,
shall consent to entry of any judgment or enter into any settlement that
provides for injunctive or other nonmonetary relief affecting the Indemnified
Party or that does not include as an unconditional term thereof the giving by
each claimant or plaintiff to such Indemnified Party of a release from all
liability with respect to such claim or litigation. In no event shall
a party guilty of fraud or willful misconduct be entitled to indemnity with
respect to any matter involving such fraud or willful misconduct. In
the event that the Indemnified Party shall in good faith determine that the
Indemnified Party may have available to it one or more material defenses or
counterclaims that are inconsistent with one or more of those that may be
available to the Indemnifying Party in respect of such claim or any litigation
relating thereto, the Indemnified Party shall have the right at all times to
take over and assume control over the defense, settlement, negotiations or
litigation relating to any such claim at the sole cost of the Indemnifying
Party, provided, that if the
Indemnified Party does so take over and assume control, the Indemnified Party
shall not settle such claim or litigation without the written consent of the
Indemnifying Party, such consent not to be unreasonably withheld. In
the event that the Indemnifying Party does not accept the defense of any matter
as above provided, the Indemnified Party shall have the full right to defend
against any such claim or demand, and shall be entitled to settle or agree to
pay in full such claim or demand, subject to the written consent of the
Indemnifying Party such consent not to be unreasonably withheld. In
any event, except to the extent that they have an interest adverse to the other,
the parties hereto shall cooperate in the defense of any claim or litigation
subject to this Section 7 and the records of each shall be available to the
other with respect to such defense.
7.5 Remedies
Not Exclusive. The remedies provided for in this Section shall not be exclusive
of any other rights or remedies available by one party against the other, either
at law or in equity. Notwithstanding the foregoing, the parties
hereto hereby acknowledge and agree that with respect to any Damages for which
VMS is entitled to indemnification from IDS pursuant to Section 7.1 above, in
the event that VMS makes demand for indemnification for any such Damages in
accordance with the terms of this Section 7 and IDS fails to provide
indemnification required to be made by it under the terms of this Section 7, VMS
shall be entitled, as its sole and exclusive remedy under this Section 7, (i)
first, to reduce the principal amount and any accrued interest thereon payable
by VMS to IDS under the terms of the Note by the amount of such Damages, and if
after application of the such reduction of the principal amount of the Note, any
amount of Damages remain unpaid, then (ii) second, if all or any portion of the
Note has been converted by IDS into shares of common stock of VMS (the
“Conversion Shares”), to apply the remaining amount of such Damages to the
repurchase by VMS of Conversion Shares having an aggregate value equal to the
remaining amount of any such Damages (with each Conversion Share having a value
equal to the greater of its then most recent closing sales price on the OTC
Bulletin Board or other applicable trading market or the Conversion Price (as
defined in the Note)) (each such reduction described in (i) or (ii) above, a
“Set-off”). VMS agrees that prior to application of any such Set-off
pursuant to this Section 7, it shall provide ten (10) days advance written
notice of such Set-off and the basis for such Set-off to IDS in accordance with
the terms of Section 10.3 hereof.
10
Section 8
Closing
8.1
The Closing. The closing shall occur on the Closing Date at the the
offices of VMS outside Counsel Xxxxxxxx, Xxxxxxxx & Xxxxxx, 000 Xxxx Xxxx
Xxxx, Xxx Xxxx, XX 00000.
8.2
Modification of Closing. Any desired modifications to the time or
location of the Closing must be made in writing, with timely notification to all
parties. Upon the mutual written agreement of the parties following
such notification, the Closing may be rescheduled, approval of such rescheduling
not being unreasonably withheld by any party.
Section 9 Non-Competition
and Non-Solicitation
9.1
Non-Competition. Each of IDS and Member agrees that during the
five year period beginning on the date of this Agreement (the “Restricted
Period”), neither IDS nor Member shall, directly or indirectly, be employed by,
serve as an advisor or consultant to, or have an ownership interest in any
Competing Business. For purposes of this Agreement, the term
“Competing Business” shall mean: (a) the business of developing, marketing,
selling or installing video surveillance systems or (b) furnishing technical
and/or assistance to anyone who engages in a business described in clause (a)
above; provided, however, that this Section 9.1 shall not prevent either IDS or
Member from owning any interest in IPH or 5% or less of the capital stock of any
publicly held entity.
9.2
Non-Solicitation of Customers. Each of IDS and Member agrees that
during the Restricted Period neither IDS nor Member shall (a) interfere with
VMS’ business relationship with any of its customers, (b) encourage any such
customer to cease or reduce its business with VMS or (c) solicit the business of
any such customer (or any party that has been a customer of VMS within the prior
two years) on behalf of a Competing Business.
9.3
Non-Solicitation of Employees. Each of IDS and Member agrees that
during the Restricted Period, neither IDS nor Member shall, directly or
indirectly, on behalf of themselves or a Competing Business, solicit or induce
or attempt to solicit or induce any employee of VMS to leave VMS for any reason,
or hire any person who was employed by VMS at any time during the two year
period preceding the date of hiring.
9.4
Severability. The covenants contained in this Section 9 herein shall
be construed as a series of separate and severable covenants which are identical
in terms except for subject matter and temporal duration. If any
court of competent jurisdiction determines that any such separate covenant is
not fully enforceable, such covenant shall be deemed modified or severed and
that the remainder of such covenant and of this Agreement shall be enforced to
the fullest extent permitted by applicable law.
11
9.5 Injunctive
Relief. IDS and Member acknowledge and agree that breach of the
covenants herein would cause irreparable harm. VMS shall have the
right to injunctive relief, in addition to all of its other rights and remedies
at law or in equity, to enforce the provisions of this Section 9.
9.6 Early
Termination of Restrictions. In the event that, at any time during
the Restricted Period, any “event of default” (as such term is defined in the
Note) occurs under the Note, all obligations of and restrictions on IDS under
this Section 9 shall terminate and be of no further effect effective as of the
date of such “event of default” under the Note.
9.7
Permitted Activities. The parties hereto acknowledge that Xxx Xxxx,
Managing Member of IDS (“Xxxx”), is a licensed and practicing attorney-at-law,
currently practicing with the law firm Xxxx & Xxxx
P.C. Notwithstanding anything to the contrary contained in this
Agreement, Xxxx shall in no way be prohibited, restricted or otherwise limited
from practicing law or otherwise providing legal services of any kind or nature
to any person or entity, whether directly or indirectly through any firm or
organization.
Section 10 Miscellaneous
Provisions
10.1
Amendment and Modification. Subject to applicable law, this Agreement may
be amended, modified or supplemented only by a written agreement signed by VMS,
IDS and IPH.
10.2
Waiver of Compliance; Consents.
10.2.1
Any failure of any party to comply with any obligation, covenant, agreement or
condition herein may be waived by the party entitled to the performance of such
obligation, covenant or agreement or who has the benefit of such condition, but
such waiver or failure to insist upon strict compliance with such obligation,
covenant, or agreement or condition will not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure.
10.2.2
Whenever this Agreement requires or permits consent by or on behalf of any party
hereto, such consent will be given in a manner consistent with the requirements
for a waiver of compliance as set forth above.
10.3 Notices.
All Notices, requests, demands and other communications required or permitted
hereunder will be in writing and will be deemed to have been duly given when
delivered by (i) hand; (ii) reliable overnight delivery service; or (iii)
facsimile transmission.
If to
VMS, to: 0000 Xxxxxxxxxx Xxx Xxxxx Xxxxx X, Xxxx Xxxxx, XX 00000
If to
IDS, via facsimile addressed to IDS at the facsimile number (000)
000-0000.
If to
IPH, via facsimile addressed to IPH at the facsimile number (000)
000-0000.
10.4
Titles and Captions. All section titles or captions contained in this Agreement
are for convenience only and shall not be deemed part of the context nor effect
the interpretation of this Agreement.
12
10.5
Entire Agreement. This Agreement contains the entire understanding between and
among the parties and supersedes any prior understandings and agreements among
them respecting the subject matter of this Agreement.
10.6
Agreement Binding. This Agreement shall be binding upon the heirs, executors,
administrators, successors and assigns of the parties hereto.
10.7
Attorneys’ Fees. In the event a suit or action is brought by any party under
this Agreement to enforce any of its terms, or in any appeal therefrom, it is
agreed that each party thereto shall pay its own respective legal fees, with no
contribution from any other party.
10.8 Computation
of Time. In computing any period of time pursuant to this Agreement, the day of
the act, event or default from which the designated period of time begins to run
shall be included, unless it is a Saturday, Sunday or a legal holiday, in which
event the period shall begin to run on the next day that is not a Saturday,
Sunday or legal holiday.
10.9
Pronouns and Plurals. All pronouns and any variations thereof shall be deemed to
refer to the masculine, feminine, neuter, singular or plural as the identity of
the person or persons may require.
10.10
Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HERETO SHALL BE GOVERNED, CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK. THE PARTIES AGREE THAT ANY LITIGATION RELATING DIRECTLY
OR INDIRECTLY TO THIS AGREEMENT MUST BE BROUGHT BEFORE AND DETERMINED BY A COURT
OF COMPETENT JURISDICTION WITHIN THE STATE OF NEW YORK.
10.11
Presumption. This Agreement or any Section thereof shall not be construed
against any party due to the fact that said Agreement or any section thereof was
drafted by said party.
10.12
Further Action. The parties hereto shall execute and deliver all documents,
provide all information and take or forbear from all such action as may be
necessary or appropriate to achieve the purposes of the Agreement.
10.13
Confidentiality. The parties shall keep this Agreement and its terms
confidential, but any party may make such disclosures as it reasonably considers
are required by law or necessary to obtain financing. In the event that the
transactions contemplated by this Agreement are not consummated for any reason
whatsoever, the parties hereto agree not to disclose or use any confidential
information they may have concerning the affairs of other parties, except for
information which is required by law to be disclosed. Confidential information
includes, but is not limited to, financial records, surveys, reports, plans,
proposals, financial information, information relating to personnel contracts,
stock ownership, liabilities and litigation.
10.14
Costs, Expenses and Legal Fees. Whether or not the transactions contemplated
hereby are consummated, each party hereto shall bear its own costs and expenses
(including attorneys’ fees).
10.15
Severability. If any provision of this Agreement is held to be illegal,
invalid or unenforceable under present or future laws in effect during the term
hereof, such provision shall be fully severable and this Agreement shall be
construed and enforced as if such illegal, invalid or unenforceable provision
never comprised a part hereof; and the remaining provisions hereof shall remain
in full force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance herefrom. Furthermore, in lieu of
such illegal, invalid and unenforceable provision, there shall be added
automatically as part of this Agreement a provision as similar in nature in its
terms to such illegal, invalid or unenforceable provision as may be possible and
be legal, valid and enforceable.
13
10.16
Continuing Nature. All representations and warranties contained in this
Agreement shall survive the Closing for a period of two (2) years and, if
applicable, all covenants, which, according to their terms are to be performed
after the execution of this Agreement, shall survive the Closing for a period of
two (2) years.
10.17
Counterparts. This Agreement may be executed in any number of
counterparts (which may be delivered by facsimile), each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
[Signature
page follows]
14
IN
WITNESS WHEREOF, the parties hereto have set their hands this 2nd day of
April, 2008.
VISUAL
MANAGEMENT SYSTEMS, INC.
By:___________________________________
Name: Xxxxx
Xxxxxxxx
Title: President
INTELLIGENT
DIGITAL SYSTEMS, LLC
By:___________________________________
Name: Xxx
Xxxx
Title: Managing
Member
IDS
PATENT HOLDING, LLC
|
By:
|
INTELLIGENT
DIGITAL SYSTEMS, LLC, its Managing Member
|
|
|
By:___________________________________
|
||
|
Name: Xxx
Xxxx
|
||
|
Title: Managing
Member
|
||
Xxx Xxxx,
on his own behalf and solely with respect to Section 9 hereof
___________________________________
Name: Xxx
Xxxx
Certain Schedules and
Exhibits to the Asset Purchase Agreement are not presented herein or delivered
herewith. Copies of such Schedules and Exhibits will be provided to the
Securities Exchange Commision upon request.
15
EXHIBIT
A
Assets
1.
All IDS DVR software source code.
2.
All IDS DVR inventory located at 000X Xxxxxx Xxxx, Xxxx Xxxxx, XX, including but
not limited to video capture boards, hardware, spare parts, but excluding any
and all equipment.
3.
All IDS accounts receivable.
4.
The following IDS owned trademarks:
TECHEYE (Reg. No.
2,757,211)
SEEITLIVE (Reg. No.
3,034,652)
XXXXXXXXX.XXX (Reg. No.
2,955,550)
16
EXHIBIT
B
Other
Assets
1. The
following patent applications and any related trade secrets or
know-how:
U.S. Patent Application Serial
Number 10/145,058
U.S. Patent Application Serial
Number 10/279,279
2.
All rights to assert claims or collect damages or seek other relief in respect
of the items listed in item 1.
3. All
goodwill associated with the items listed in item 1.
17
