ISO BASE PURCHASE AGREEMENT
PURCHASE AGREEMENT dated as of December 31, 1995, by and between EXECUTONE
INFORMATION SYSTEMS, INC., a Virginia corporation ("Seller") and Kansas
Communications, Inc. ("ISO").
WHEREAS, Seller desires to transfer its rights in and certain liabilities of the
Base Assets (as that term is defined below) to ISO and ISO desires to acquire
Seller's rights and is willing to assume certain liabilities of the Base Assets
for and in consideration of the payments specified hereinafter, all in
accordance with the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the mutual promises herein made and the
mutual benefits to be derived from the transactions provided for herein, the
parties hereto represent, warrant, covenant, agree and understand as follows:
ARTICLE I
Definitions
The following terms shall, for the purposes of this Agreement, have the
following meanings:
"Assumed Liabilities" shall have the meaning set forth in Section 2.4.
"Backlog Orders" shall mean orders for the sale and/or installation of new
systems and/or MAC work which includes Base equipment, which orders are
accepted by Seller on or prior to the Transfer Date in the ordinary course
of business on terms no less favorable than Seller's standard terms as of
the date hereof and which are not completed by the Transfer Date.
"Base" shall mean telephone systems or voice processing systems and
healthcare communication systems sold or manufactured by Seller and related
peripheral equipment attached to or interfacing with such equipment, and
installed at the customer sites on the Customer List.
"Base Assets" shall have the meaning set forth in Section 2.1.
"Base Business" shall mean the business conducted by Seller on and from the
Premises (as hereafter defined), including the business of distributing,
selling, reselling, installing and maintaining Base equipment and related
peripheral equipment to customers listed on the Customer List.
"Benefit Plan" shall have the meaning set forth in Section 7.2.
"Closing Date Book Value" shall mean the book value of the Base Assets
minus the book value of the Assumed Liabilities determined as of the
Closing Date in accordance with generally accepted accounting principles,
consistently applied with the balance sheet attached as Schedule 4.7.
"COBRA" shall have the meaning set forth in Section 7.3.
"Contracts" shall mean all contracts or agreements of Seller that are (i)
listed on Schedule 1.1, and (ii) not listed on Schedule 1.1 but that relate
to the Base Business and that are assumed by ISO pursuant to a written
election from ISO to Seller on or after the Transfer Date.
"Customer List" shall mean the list of customer sites on Schedule 4.5
hereto. The Customer List shall contain, as to each customer, at least the
following information: the customer's name and the address, telephone
number of Its installation location where Base equipment is located, and
the name of the contact person employed by the customer who deals with the
Base equipment.
"Dispute Notice" shall have the meaning set forth in Section 2.3(b).
"employee pension benefit plans" shall have the meaning set forth in
Section 7.2.
"employee welfare benefit plans" shall have the meaning set forth in
Section 7.2. "Financial Statements" shall have the meaning set forth in
Section 4.7.
"Fixed Assets" shall mean the assets listed on Schedule 4.6.
"indemnified party" shall have the meaning set forth in Section 9.3.
"indemnifying party" shall have the meaning set forth in Section 9.3.
"Independent Auditor" shall have the meaning set forth in Section 2.3(b).
"Inventory" shall mean all inventory of Seller located at or in transit to
the Premises, including parts, materials, supplies and finished goods.
"ISO Employees" shall have the meaning set forth in Section 7.1.
"Licenses and Permits" shall have the meaning set forth in Section 4.13.
"MAC" shall mean moves, adds and changes work with respect to the Base
equipment in the ordinary course of business.
"Maintenance Contracts in Force" shall mean all Contracts entered Into In
the ordinary course of business for the maintenance of the Base expiring on
or after the Transfer Date.
"Nontransferred Base Assets" shall have the meaning set forth in Section
2.8(a).
"Office Lease" shall have the meaning set forth in Section 2.4.
"Preliminary Purchase Price" shall have the meaning set forth in Section
2.3.(b)
"Premises" means the premises leased by Seller pursuant to the Office
Lease.
"Purchase Price" shall have the meaning set forth in Section 2.3(a).
"Regulatory Authority" shall mean any court, arbitrator or federal, state,
municipal or other local or foreign government or any department,
commission, board, agency or taxing authority, whether governmental or
quasi-governmental.
"Schedules" shall have the meaning set forth in Section 4.1.
"Settlement Statement" shall have the meaning set forth in Section 2.3(b).
"T & M" shall mean time and material work (billable service) in the
ordinary course of business related to the Base equipment.
"Territory" shall mean the counties of Wisconsin listed In Schedule 3.4.
"Transfer" shall have the meaning set forth in Section 3.1 hereof.
"Transfer Date" shall mean December 31, 1995, or such other date agreed by
the parties.
ARTICLE II
Transfer of the Base Assets to ISO in Exchange for Cash
and the Assumption by ISO of Certain Liabilities of Seller
2.1 Transfer of Assets.
(a) On the Transfer Date, Seller shall sell, transfer, assign, grant,
convey and deliver, as the case may be, to ISO, free and clear of all
mortgages, security interests, liens, pledges and other encumbrances, all
Seller's right, title and interest in and to all assets, properties and
rights relating primarily to the operation of the Base Business (the Base
Assets.) including the following:
(i) All bids and proposals to customers made with respect to the
Base Business as of the Transfer Date;
(ii) All orders placed by customers with respect to the Base
Business which have not yet been approved or rejected by Seller as of
the Transfer Date;
(iii) All rights under the Contracts in effect on the Transfer
Date, whether or not partially performed; and In each case of (i),
(ii) and (iii), whether for purchase of Base equipment, or for MAC,
for installation or for maintenance of same, and whether on a fixed
fee or T & M basis, or otherwise;
(iv) All customer records and files, the Customer List, product
literature and information, reference manuals, and other books and
records ordinarily located at the Premises;
(v) All Backlog Orders;
(vi) All property, plant and equipment located on the Premises,
including the Fixed Assets;
(vii) All Inventory;
(viii) All accounts receivable relating to the Base Business;
(ix) All prepaid commissions relating to the Base Business;
(x) All prepaid advertising relating to the Base Business;
(xi) All prepaid rent and security deposits relating to the Base
Business;
(xii) All other prepaid expenses relating to the Base Business;
and
(xiii) All other assets, properties and rights reflected on the
balance sheet attached as Schedule 4.7 (subject to additions or
deletions in the ordinary course of business since the date thereof)
or ordinarily located at the Premises.
2.2 Excluded Assets. Notwithstanding anything herein to the contrary, ISO shall
not purchase or acquire hereunder any right, title or interest in or to the
properties, rights and assets of Seller other than the Base Assets.
2.3 Consideration. Upon the terms and subject to the conditions set forth in
this Agreement and in exchange and in consideration for the Base Assets to be
purchased and acquired by ISO, ISO agrees to pay to Seller the following
Purchase Price.
(a) The Purchase Price shall be an amount equal to S1,924.000, minus
the amount by which the Closing Date Book Value is less than $433,800, or
plus the amount by which the Closing Date Book Value exceeds $530,200, if
any.
(b) Payment of Purchase Price. On the Transfer Date, ISO shall pay and
remit to Seller $100,000 by wire transfer or check and the balance of the
Preliminary Purchase Price by delivery of a note in form of Exhibit A (the
"Note"). The Preliminary Purchase Price shall be $1,924,000. Within thirty
(30) days after the Closing Date, ISO shall cause the employees of ISO to
deliver to ISO and Seller a statement (the "Settlement Statement") setting
forth in detail a determination of the Purchase Price including its
determination of Closing Date Book Value. In connection therewith, from and
after Closing, each party shall provide the other party and its
representatives with full access to all assets, records and work papers
necessary to compute and verify the Purchase Price. This Settlement
Statement as delivered to ISO and Seller shall be final for purposes of
determining the Purchase Price unless, within sixty (60) days after
delivery to ISO and Seller, either ISO or Seller shall deliver to the other
party a Dispute Notice. After delivery of a Dispute Notice, Seller and ISO
shall promptly thereafter negotiate in good faith with respect to the
subject of the Dispute Notice, and if they are unable to reach an agreement
within fifteen (15) business days after receipt of a Dispute Notice, the
dispute shall be submitted to the Independent Auditor. The Independent
Auditor shall be directed to issue a final and binding decision within
thirty (30) days of submission of the Dispute Notice, as to the issues of
disagreement referred to in the Dispute Notice and not resolved by the
parties. Within five (5) days after final determination of the Settlement
Statement, (i) If necessary the Note shall be amended to reflect the amount
of the Purchase Price. The Settlement Statement shall be prepared in
accordance with generally accepted accounting principles as historically
applied by Seller on a basis consistent with the balance sheet attached as
Schedule 4.7. In connection with the Settlement Statement, a "Dispute
Notice" shall mean a written notice from ISO or Seller, as the case may be,
indicating disagreement with the initial statement. The "Independent
Auditor" shall mean one of the "Big Six" public accounting firms with no
material relationship to either of the parties chosen by agreement of the
parties, or if they are unable to agree, shall mean one of the "Big Six"
firms with no such material relationship chosen by lot. The fees and
expenses of the Independent Auditor retained as a result of any dispute
related to any statement shall be equitably allocated by the Independent
Auditor. The decision of the Independent Auditor with respect to the
Settlement Statement shall be final and binding on the parties.
2.4 Liabilities Assumed by ISO. ISO shall assume only the following (the
"Assumed Liabilities"): (i) performance of the express terms of Contracts that
are part of the Base Assets, which performance is, by contract, to occur on or
after the Transfer Date and which performance does not result from any
misperformance or failure to perform by Seller; (ii) accounts payable that are
not intercompany accounts payable to the extent reflected on the balance sheet
attached as Schedule 4.7; and (iii) performance of Seller's obligations under
its lease of 000 Xxxxx Xxxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxxxx (the
"Office Lease"), which performance is according to such lease to occur on or
after the Transfer Date and which performance does not result from any
misperformance or failure to perform by Seller.
2.5 Excluded Liabilities. Any obligations or liabilities (whether accrued,
absolute, contingent or otherwise) of Seller that are not expressly assumed by
ISO as Assumed Liabilities shall continue to be obligations and liabilities of
Seller.
2.6 Allocation of Purchase Price. The Purchase Price shall be allocated as
set forth on Schedule 2.6 for federal, state and local income tax purposes among
the business, properties, rights, assets and liabilities of Seller acquired by
ISO. The parties shall report the agreed allocation to the Internal Revenue
Service pursuant to Section 1060 of the Internal Revenue Code of 1986, as
amended, and in accordance with regulations or notices thereunder, as required.
2.7 Right to Contest. The assumption and agreement by ISO to pay, perform,
and discharge, as the case may be, the Assumed Liabilities specified in Section
2.4 hereof shall not prohibit ISO from contesting, in good faith and at the
expense of ISO in ISO's name, the amount, validity or enforceability of any
thereof; provided, however, that ISO shall indemnify, hold harmless and defend
Seller against any damage, liability, suit, loss, cost or fees (including
attorneys' fees) incurred by Seller resulting from such contest if such debts,
liabilities or obligations do not arise as a result of a breach by Seller of its
obligations in connection with such Assumed Liabilities arising prior to the
Transfer Date.
2.8 Non-Assignable Contracts and Rights.
(a) Anything herein to the contrary notwithstanding, at the written
election of ISO, no Contracts shall be sold, transferred or assigned to ISO
pursuant to this Agreement if the sale, transfer or assignment of the same
to ISO requires the consent or approval of another party or governmental
entity and such consent or approval has not been obtained as of the
Transfer Date. Seller shall, subject to the terms and conditions of this
Agreement, hold any and all such Contracts in trust for the benefit of ISO,
its successors and assigns, and Seller shall at ISO's request continue to
use all reasonable efforts to obtain and secure any and all such consents
or approvals (but without making any payments or incurring any penalties in
connection therewith) or to subcontract rights under executory contracts to
ISO. Contracts meeting all of the above requirements are herein referred to
as the "Nontransferred Base Assets". In accordance with the foregoing,
Seller shall permit ISO to utilize any trucks covered by leases included in
the Nontransferred Base Assets for a period of thirty days after Closing
and ISO shall be responsible for all liabilities it incurs in using such
trucks.
(b) To the extent that ISO obtains the benefit of a Nontransferred
Base Asset pursuant to Section 2.8(a), then ISO shall assume the
obligations and liabilities of such Nontransferred Base Asset to the same
extent that ISO has assumed Contracts under Section 2.1 (a).
2.9 Bulk Sales Act Waiver. ISO hereby waives compliance by Seller with the
bulk sales provisions of the Uniform Commercial Code or similar statutory
scheme, if applicable, provided that Seller shall indemnify ISO against any
loss, damage or expense to ISO resulting from Seller's failure to comply.
ARTICLE III
Transfer Date
3.1 Transfer. Consummation of the purchase and sale and the other
transactions provided for in this Agreement (the "Transfer") shall take place at
the offices of XxXxxxxxx, Will & Xxxxx, 000 Xxxx Xxxxxx Xxxxxx, Xxxxxxx,
Xxxxxxxx 00000, commencing at 9:00 AM, local time on December 31, 1996, or on
such other date or at such other time or place as the parties hereto may
mutually agree upon in writing and that shall be simultaneous with or following
the transfer of the Base Assets to Seller (the "Transfer Date"), and all
transactions provided for herein to occur on and as of the Transfer Date shall
be deemed to have occurred simultaneously and to be effective, and the Transfer
shall be deemed to have occurred, as of the Transfer Date. ISO's obligation to
effect the Transfer shall be subject to the following conditions: (i) there
shall have been no material adverse change in the Base Assets or the Base
Business after the date hereof, (ii) Seller's representations and warranties
shall remain true and correct as if made on the Transfer Date, and (iii) Seller
shall have performed its obligations hereunder required to be performed on or
prior to the Transfer Date.
3.2 Deliveries by Seller on the Transfer Date. On the Transfer Date, Seller
shall deliver to ISO:
(a) Instruments of Transfer. A general Xxxx of Sale and assignment of
Contracts, and such other specific assignments, bills of sale, endorsements
and other good and sufficient instruments of conveyance and transfer,
conveyance and assignment, in form and substance reasonably satisfactory to
ISO and its counsel, as shall be effective to vest in ISO, title to all of
the Base Assets.
(b) Consents. All third party consents necessary to transfer the Base
Assets and assign the Contracts to ISO, as well as the consent of the
landlord to the assignment of the Office Lease.
(c) Other Documents. All other documents and agreements required to be
delivered at or before the Transfer Date by Seller to ISO under the terms
of this Agreement, or as ISO shall reasonably request in order to
consummate this transaction.
3 3 Deliveries by ISO on the Transfer Date. On the Transfer Date, ISO shall
deliver to Seller:
(a) Purchase Price. The Preliminary Purchase Price in accordance with
Section 2.3(b) hereof.
(b) Instruments of Assumption. An assumption agreement and such other
instruments of assumption, in form and substance reasonably satisfactory to
Seller and its counsel, for ISO to assume and agree to pay, perform and
discharge, as the case may be, those liabilities and obligations of Seller
to be assumed by ISO as provided in Section 2.4.
(c) Other Documents. All other documents and agreements required to be
delivered at or before the Transfer Date by ISO to Seller under the terms
of this Agreement, as Seller shall reasonably request in order to
consummate this transaction.
3.4 Distributorship Agreement. On the Transfer Date or as soon as
practicable thereafter, the parties will enter into a Distributorship Agreement
in form agreed by the parties granting ISO exclusive rights to the healthcare
market in the Territory set forth in Schedule 3.4 and non-exclusive rights to
the telephone
market in the Territory, as well as the right to market products under the
"Executone" name as provided therein (with a $1 million aggregate quota).
ARTICLE IV
Representations and Warranties of Seller
Seller hereby represents and warrants to ISO as follows, which
representations and warranties shall be deemed reaffirmed and republished on the
Transfer Date as if made again on and as of such date:
4.1 Schedules. Seller has delivered to ISO the schedules attached hereto
(the "Schedules") setting forth certain disclosures, exceptions and other
information, data and documents referred to at various places throughout this
Agreement.
4.2 Corporate.
(a) Due Organization and Qualification. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Virginia and in good standing in Wisconsin.
(b) Power and Authority to Enter into Agreement. Seller has the
complete and unrestricted power and authority to (i) own, lease and operate
the Base Assets, (ii) carry on the Base Business, (iii) enter into this
Agreement and (iv) consummate the transactions contemplated hereby and
thereby.
(c) Due Execution and Enforceability. The execution, delivery and
performance of this Agreement and the other agreements and instruments
between and among the parties referred to herein and the consummation of
the transactions contemplated under this Agreement and such other
agreements and instruments have been duly and validly authorized. No other
actions or proceedings on the part of Seller are necessary to authorize the
execution, delivery and performance of this Agreement and the other
Instruments and agreements between the parties provided for herein. None of
such actions have been modified or rescinded and all are in full force or
effect. The execution, delivery and performance of this Agreement, the
agreements and instruments contemplated under this Agreement, and the
consummation of the transactions contemplated under this Agreement, such
other agreements and instruments (a) will not require the consent, approval
or authorization of any person or Regulatory Authority; (b) will not
require any notice or filing under United States or any state statute,
regulations or other provision of law or any order, judgement or other
direction of any court or tribunal of competent jurisdiction; and (c) will
not give rise to any lien, security interest, claim, encumbrance or
restriction on any of the Base Assets. This Agreement, such other
agreements and instruments to be executed by Seller in connection with this
Agreement, constitutes (or will constitute when executed by Seller) a valid
and binding obligation enforceable against Seller in accordance with its
terms. The execution, delivery and performance of this Agreement and the
other agreements and instruments contemplated under this Agreement, and the
consummation of the transactions contemplated under this Agreement and such
other agreements and instruments on the part of Seller will not breach or
violate any statute, law, ordinance, rule or regulation of any governmental
authority, domestic or foreign, or any of the terms, conditions or
provisions of the articles of incorporation or by-laws of Seller or any
judgment, order, injunction, decree, contract, agreement or other
instrument to which Seller is a party or by which Seller or any of its
properties, rights or assets is bound.
4.3 Base Assets. Seller has title to each of the Base Assets, free and
clear of all liens, security interests, claims or encumbrances of any kind. On
the Transfer Date, Seller shall have and ISO shall receive, free and clear of
all liens, security interests, claims or encumbrances of any kind, good and
marketable title to the Base Assets. All of the Base Assets may be transferred
to ISO without the consent or approval of any person. The Base Assets will
furnish ISO with all of the capacity and rights to operate the Base Business in
the same manner as presently operated by Seller.
4.4 Contracts and Commitments. All of the Contracts are duly and validly
executed by all parties, are in full force and effect and are binding and
enforceable in accordance with their terms. Accurate and complete copies of each
Contract have been delivered to ISO. The consummation of the transactions
contemplated hereby, without notice to or consent or approval of any party
(except for such consents as are obtained at or prior to the Closing), will not
constitute a default under or a breach of any provision of any Contract. With
respect to each Contract which is to be assigned to ISO pursuant to the terms
hereof, ISO will succeed to all the rights and benefits of Seller. No event has
occurred which, with or without notice or the passage of time, or both,
constitutes or would constitute a default by Seller under any Contract, and no
event has occurred which (with or without notice or the passage of time, or
both) constitutes or would constitute a default by any other party. With the
exception of the Contracts assigned to ISO, there are no contracts or agreements
material to the operation of the Base Business. None of the Contracts (i) is
with Seller or any affiliate of Seller, (ii) includes any covenant not to
compete or will otherwise restrict ISO's activities, (iii) contains a
requirement to indemnity any party for any tax, environmental or other
liability, (iv) will require ISO to provide goods, services or benefits on terms
substantially less favorable than fair market terms, or (v) will permit ISO to
obtain goods, services or benefits on terms substantially more favorable than
fair market terms.
4.5 Customer Lists. Set forth on Schedule 4.5 hereto an accurate and
complete copy of the Customer List.
4.6 Fixed Assets. Set forth on Schedule 4.6 is an accurate and complete
list of the property, plant and equipment ordinarily located at the Premises.
The property, plant and equipment are in good operating condition, ordinary wear
and tear excepted.
4.7 Financial Statements and Taxes. The balance sheet and income statement
of the Base Business as of and for the year ended December 31, 1994 and the ten
months ended October 31, 1995 attached hereto as Schedule 4.7 (the "Financial
Statements") are (i) in accordance with the books of account and records of
Seller, (ii) fair presentations of the financial condition and the results of
operations as of the dates and for the periods indicated and (iii) prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods covered thereby (except as specified therein and
except for the lack of footnotes, and in the case of interim Financial
Statements subject to year-end audit adjustments consisting only of normally
recurring accruals which in the aggregate are not material). The Base Business
is not subject to any liability or obligation (whether absolute, accrued,
contingent or otherwise) which is not shown or provided for on the Financial
Statements or on Schedule 4.7 except which has been incurred in the ordinary
course of business since the date of such financial statements or which are not
Assumed Liabilities. All federal, foreign, state, county and other tax returns,
reports and declarations of every nature (including income, employment, excise,
property, sales and use taxes) required to be filed by or on behalf of Seller
(as related to the Base Business) and the Base Business have been filed and such
returns are complete and accurate in all material respects and disclose all
taxes required to be paid for the periods covered thereby. All taxes shown on
such returns as being owed by the Seller (as related to the Base Business) and
the Base Business and any deficiency assessments, penalties and interest have
been paid or set aside for payment. All tax payments related to employees,
including income tax withholding,
FICA, FUTA, unemployment and worker's compensation, required to be made by
Seller (relating to the Base Business) and the Base Business have been fully and
properly paid, withheld, accrued or recorded.
4.8 Interim Change. Since October 31, 1995, Seller has operated the Base
Business in the ordinary course, consistent with past operations.
4.9 Environmental Matters. Seller has previously and is currently complying
in all respects with its obligations under all laws relating to the environment
in connection with the operation of the Base Business and its occupancy of the
Premises. No hazardous chemicals, materials, substances, wastes, petroleum,
petroleum products, radioactive materials, or other pollutants or contaminants
regulated under any environmental laws have ever been generated, treated,
stored, or disposed of at the Premises. No underground storage tanks are present
at the Premises, and, to Seller's knowledge, no such tanks were previously
abandoned or removed.
4.10 Premises. Seller has all easements and rights, including easements for
all utilities, services, roadways and other means of ingress and egress, to the
extent necessary to conduct the Base Business and operate the Premises as
presently operated and conducted. The zoning of each parcel of the Premises
permits the existing improvements and the continuation of business as presently
conducted thereon. There is no construction work being done at, or construction
materials being supplied to the Premises.
4.11 Customers. Seller has no knowledge of any fact, condition or event
which would cause ISO's relationship with any customer to be materially and
adversely different than the current relationship of such customer with respect
to the Base Business.
4.12 Employees. Schedule 4.12 is an accurate and complete schedule
containing, with respect to the Base Business:
(a) a list of all employees (including name, title and position);
(b) the employee's length of service;
(c) a list of all agreements, arrangements or understandings, written
or oral, regarding services to be rendered, terms and conditions of
employment and confidentiality (with respect to such items listed on
Schedule 4.12, accurate and complete copies have been delivered to ISO);
and
(d) the compensation (including terms of payment, bonuses, commissions
and deferred compensation, as well as any benefits) of each employee.
All employees of the Base Business are employees at will. No collective
bargaining unit represents any employee of Seller.
4.13 Licenses and Permits. There is no license, permit, certificate,
approval or similar item necessary to conduct the Base Business as conducted by
Seller.
4.14 Compliance with Law. The Base Business, the Premises and the Base
Assets conform to all applicable statutes, codes, laws, ordinances, rules and
regulations and Seller has complied and is complying with all statutes, codes,
laws, ordinances, rules and regulations in connection with the conduct of the
Base Business, including those relating to employment matters, environmental
matters and work place safety and health. Neither Seller, nor, to the knowledge
of Seller, any employee or representative
thereof
has made any unlawful gratuities or other payments (or taken similar actions)
for the purpose of benefiting Seller with respect to the Base Business.
4.15 Inventory. All Inventory included in the Base Assets (i) is of good
and merchantable quality, salable and usable for the purposes intended in the
ordinary course of business, (ii) is not excess or obsolete (except to the
extent reflected in the reserve on the balance sheet attached as Schedule 4.7),
and (iii) is in conformity with applicable warranties express and implied.
4.16 Products. ISO will not incur any liability or obligation for any
product sold by Seller prior to Closing except to the extent of liabilities and
obligations reflected in the deferred warranty, accrued warranty and accrued
factory repair reserves on the balance sheet attached as Schedule 4.7 which
arise pursuant to the terms of the warranties and Maintenance Contracts in Force
included in the Contracts.
4.17 Disclosure. All information furnished by or on behalf of Seller to ISO
in connection with the transactions contemplated by this Agreement is accurate
in all material respects and Seller is not aware of any fact of material
significance to Seller or the assets, properties, business, operations or
financial condition of the Base Business that is not disclosed in this Agreement
or the Schedules or Exhibits hereto.
4.18 Pending Claims. Litigation and Governmental Proceedings. There is no
claim, complaint, suit, action, arbitration or regulatory, administrative, or
governmental proceeding or any other proceeding pending against Seller (i) which
might individually or in the aggregate adversely affect the Base Business or the
Base Assets, or any of the properties, rights or assets included in the Base
Assets, or (ii) which could result in the restraint, prohibition or the
obtaining of substantial damages or other relief in connection with this
Agreement or consummation of the transactions contemplated hereby.
4.19 Broker's or Finder's Fees. No person other than Seller and its
affiliated companies (and their respective directors, officers, employees and
outside accountants and attorneys) has arranged, or participated in arranging,
on behalf of Seller the transactions provided for herein. There are no broker's
or finder's fees to be paid by Seller, and Seller has no knowledge (or the
reasonable basis therefor) of any claim by any person claiming through Seller
for a broker's or finder's fee to be paid by ISO in connection with the
consummation of the transactions provided for herein.
ARTICLE V
Representations and Warranties of ISO
ISO represents and warrants to Seller as follows, which representations and
warranties shall be deemed reaffirmed and republished on the Transfer Date as if
made again on and as of such date:
5.1 Corporate.
(a) Due Organization. ISO is a corporation duly organized, validly
existing and in good standing under the laws of its state of incorporation.
(b) Power and Authority to Enter into Agreement. ISO has the complete
and unrestricted corporate power and authority to enter into this Agreement
and the Note and to consummate the transactions contemplated hereby and
thereby.
(c) Due Execution and Enforceability. The execution, delivery and
performance of this Agreement and the Note, and the other instruments and
agreements between the panics referred to herein and the consummation of
the transactions contemplated under this Agreement and the Note, and such
other agreements and instruments have been duly and validly authorized and
approved. No other corporate actions or proceedings on the pare of ISO are
necessary to authorize the execution, delivery and performance of this
Agreement and the Note, and the other agreements between the panics
provided for herein or the consummation of the transactions contemplated
under this Agreement and the Note and such other agreements and
instruments. None of such corporate actions has been modified or rescinded
and all are in full force and effect. Upon execution and delivery hereof,
this Agreement and the Note and the other agreements between the panics
hereto referred to herein shall constitute the valid and legally binding
obligations of ISO.
5.2 No Breach of Statute or Contract. The execution, delivery and
performance of this Agreement and the Note and the other agreements and
instruments contemplated under this Agreement and the Note, and the consummation
of the transactions contemplated under this Agreement and the Note and such
other agreements arid instruments on the pan of ISO will not breach or violate
any statute, law, ordinance, rule or regulation of any governmental authority,
domestic or foreign, or any of the terms, conditions or provisions of the
articles of incorporation or by-laws of ISO or any judgment, order, Injunction,
decree, contract, agreement or other instrument to which ISO is a party or by
which ISO or any of its properties' rights or assets is bound.
5.3 Broker's or Finder's Fees. No person other than ISO (and its directors,
officers, employees and outside accountants and attorneys) has arranged, or
participated in arranging, on behalf of ISO, the transactions provided for
herein. There are no broker's or finder's fees to be paid by ISO and ISO does
not have any knowledge (or the reasonable basis therefor) of any claim by any
person claiming through ISO for a broker's or finder's fee to be paid by Seller
in connection with consummation of the transactions provided for herein.
ARTICLE VI
Covenants
6.1 Cooperation: Further Assurances. ISO and Seller agree to cooperate
fully with the other and their counsel and accountants and other
representatives, will use reasonable efforts to cause consummation of the
transactions contemplated herein as promptly as possible, and will refrain from
a course of action inconsistent with this Agreement. From and after the Transfer
Date, Seller and ISO shall, from time to time, execute and deliver or cause to
be executed and delivered such further instruments of transfer, assignment and
conveyance or assumption, and perform such other acts, as they may reasonably
require to more effectively carry out the sale, transfer, assignment and
conveyance to ISO of the Base Assets and the Base Business and to confirm and
assure ISO the title thereto.
6.2 Non-Disclosure by Seller. Seller covenants and agrees from and after
the date hereof to hold in confidence, and not to use for any purpose unrelated
to this Agreement without the prior written consent of ISO, all proprietary,
confidential or secret information or data of or in respect of the Base Assets
and the Base Business, and to use all reasonable efforts to cause its directors,
officers, employees and representatives to hold same in confidence, including
disclosure only to those employees of Seller having a need to know such
information, until either (i) this Agreement and the transactions provided for
herein shall be terminated or abandoned for whatever reason, or (ii) the same
has been theretofore publicly disclosed by ISO or has otherwise ceased to be
secret or confidential through no breach by Seller of this Section.
Except as provided herein, nothing shall prevent Seller from using or disclosing
information that it (i) independently developed; (ii) received rightfully
without obligation of confidentiality from third parties; or (iii) already
possesses without obligation of confidentiality.
6.3 Litigation Cooperation. In the event that any party hereto shall
participate in any suit, action, proceeding or investigation concerning the
business or affairs of the Base Business conducted on or prior to the Transfer
Date, the other parry hereto shall, upon the request of such party, cooperate
fully with such party in connection therewith, which cooperation shall include
without limitation making reasonably available the employees engaged in the Base
Business or the relevant employees of Seller, in return for payment of the
internal cost to the provider.
6.4 Exclusivity. From the date hereof through January 31, 1996, Seller
shall not (and shall cause its officers, representatives, agents and advisors
not to) solicit, encourage or negotiate any proposal from or with, or supply
information to, persons other than ISO or its representatives with respect to,
or in connection with, the sale, lease or other transfer of the Base Business or
the Base Assets or any material portion thereof, and Seller shall promptly
advise ISO of any acquisition proposal or inquiry that Seller receives.
6.5 Operation of the Base Business. From the date hereof until the Transfer
Date, Seller shall operate the Base Business in the ordinary course. Without
limiting the foregoing, Seller shall not (i) sell any of the Base Assets except
sales of inventory on terms and in amounts consistent with past practice, (ii)
increase the compensation of any employee, (iii) enter into any contract or
arrangement or make any offer except on terms consistent with past practice, or
(iv) make any intercompany transfers of any cash generated by the Base Business.
ARTICLE VII
Employees
7.1 Continued Association with the Business. ISO shall have the right but
not the obligation to offer employment to all current employees of the Base
Business. Seller will use all reasonable efforts to retain all present employees
through the Transfer Date. Except for Nick Esaylan, Seller has not offered and
will not offer employment to any employees of the Base Business in respect of
any period after the Transfer Date without the prior written consent of ISO.
Seller shall promptly pay all accrued wages and other compensation payable to
the employees of the Base Business as of the Transfer Date. ISO shall not incur
any liability or obligation with respect to any employee that does not accept
employment with ISO. ISO will not incur as a result of the transfer of the Base
Assets, any present, future or contingent liability or obligation to pay any
pension benefits, medical benefits, compensation for loss of employment or other
compensation or benefits to any employee terminated at or prior to the Transfer
Date. The employees of the Base Business hired by ISO are referred to herein as
the "ISO Employees"
7.2 Benefit Plans. ISO shall have no liability under any "employee welfare
benefit plans" (as defined In Section 3(1) of ERISA), Employee pension benefit
plans. (as defined in Section 3(2) of ERISA), bonus, profit sharing, deferred
compensation, incentive or other compensation plans or arrangements, and other
employee fringe benefit plans whether funded or unfunded, qualified or
unqualified (all the foregoing being herein called Benefit Plans.) maintained or
contributed to for the benefit of any of the employees or other persons
performing services at or for the Premises or for the Base Business.
7.3 COBRA Obligations. Seller shall retain all liabilities, perform all
obligations and maintain all insurance under the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA") with respect to its employees and former
employees of the Base Business and their covered dependents, whether or not such
employees accept employment with ISO.
7.4 Workers Compensation. Seller shall be liable for the administration and
payment of all workers' compensation liabilities and benefits with respect to
(i) ISO Employees resulting from claims, events, circumstances, exposures,
conditions or occurrences occurring prior to the Transfer Date, and (ii)
employees and former employees of Seller that do not become ISO Employees. ISO
shall be responsible for the administration and payment of all workers'
compensation liabilities and benefits with respect to ISO employees resulting
from claims reported following the Transfer Date, and resulting from events,
circumstances, exposures, conditions, or occurrences after the Transfer Date.
ARTICLE VIII
Termination and Abandonment
8.1 Termination. This Agreement may be terminated and the purchase and sale
and the other transactions provided for by this Agreement may be abandoned prior
to the Transfer Date, without liability on the part of any party to the other,
except to the extent of any breach of any provision hereof prior to termination:
(a) By mutual written consent of the parties;
(b) By either party, if the purchase and sale provided for by this
Agreement has not been consummated For any reason other than a breach of
any representation, warranty, covenant or agreement contained herein or in
any Schedule or Exhibit hereto or thereto by the party seeking to so
terminate) on or before January 31, 1996; or
(c) By ISO; if Seller shall, or by Seller, if ISO shall: (i) apply for
or consent to the appointment of a receiver, trustee, liquidator or
custodian or the like with respect to itself or any of its property, (ii)
admit in writing its inability to pay its debts generally as they become
due, (iii) make a general assignment for the benefit of creditors, (iv) be
adjudicated a bankrupt or insolvent, or (v) commence, or have commenced
against It, a case under the Federal bankruptcy laws of the United States
of America (or similar law in any other jurisdiction) or file or have filed
against it a petition or answer seeking reorganization, an arrangement with
creditors or an order for relief or seeking to take advantage of any
insolvency law or file an answer admitting the material allegations of a
petition filed against it in any bankruptcy, reorganization or insolvency
proceeding.
8.2 Notice of Termination. Prompt written notice shall be given of
termination and abandonment pursuant to Section 8.1 hereof, such termination or
abandonment to be effective upon such notice.
ARTICLE IX
Indemnification and Reimbursement
9.1 Indemnification by Seller. In order to induce ISO to enter
Into this Agreement and to consummate the transactions contemplated hereby,
Seller covenants and agrees to and shall defend,
indemnify and hold harmless ISO and its respective officers, directors,
employees and agents, against and with respect to all liability, loss, damage,
cost or expense (including without limitation all settlements, judgments and
reasonable attorneys' fees and costs relating thereto) suffered or incurred by
each of them, and any and all claims, actions, suits and proceedings resulting
from or arising out of:
(a) Misrepresentation or Breach of Warranty. Any misrepresentation by
Seller or any breach by Seller of any of its representations or warranties
set forth in this Agreement or any Schedule or Exhibit hereto or any claims
of third parties which if true would constitute such a breach or
misrepresentation;
(b) Breach of Covenant or Agreement. Any breach or nonfulfillment by
Seller of any of its covenants, agreements or other obligations set forth
in this Agreement, or any Schedule or Exhibit hereto or thereto;
(c) Bulk Sales Liability. The failure by Seller to comply with the
bulk sales provisions of the Uniform Commercial Code or similar statutory
scheme, if applicable;
(d) Unassumed Liabilities. Any and all debts, liabilities and
obligations of, or claims against, Seller that are not expressly included
in the Assumed Liabilities assumed by ISO pursuant to Section 2.4 hereof;
and
(e) Severance. Any claims for compensation or severance pay or
benefits by employees of Seller whose employment terminates prior to two
weeks following the Transfer Date, except to the extent specifically agreed
by the parties otherwise;
provided, however, that indemnification pursuant to paragraphs 9.1 (a) and 9.1
(b) hereof shall be conditioned upon notice of claims in respect thereof being
submitted, if at all, by ISO to Seller within two (2) years after the Transfer
Date.
9.2 Indemnification by ISO. In order to induce Seller to enter Into this
Agreement and to consummate the transactions contemplated hereby, ISO covenants
and agrees to and shall defend, indemnity and hold harmless Seller and its
respective officers, directors, employees and agents, against and with respect
to all liability, loss, damage, cost or expense (including without limitation
all settlements, judgements and reasonable attorneys' fees and costs relating
thereto) suffered or incurred by each of them, and any and all claims, actions,
suits and proceedings resulting from or arising out of:
(a) Misrepresentation or Breach of Warranty. Any misrepresentation by
ISO or any breach by ISO of any of its representations or warranties set
forth in this Agreement or any Schedule or Exhibit hereto or thereto or any
claims of third parties which if true would constitute such a breach or
misrepresentation;
(b) Breach of Covenant or Agreement. Any breach or nonfulfillment by
ISO of any of its covenants, agreements or other obligations set forth in
this Agreement, or any Schedule or Exhibit hereto or thereto;
(c) Assumed Liabilities. Any and all debts, liabilities and
obligations of Seller that are expressly included in the Assumed
Liabilities assumed by ISO pursuant to Section 2.4 hereof;
(d) Operations After Transfer Date. Liabilities of Seller arising
solely from ISO's failure to perform the Assumed Liabilities after the
Transfer Date; and
(e) Severance. Any claims for compensation or severance pay or
benefits payable under ISO's compensation, severance or benefits policies
to former employees of Seller who become employed by ISO as of or after the
Transfer Date and continue such employment beyond two weeks following the
Transfer Date;
provided, however, that indemnification pursuant to paragraphs 9.2(a) and 9.2(b)
hereof shall be conditioned upon notice of claims in respect thereof being
submitted, if at all, by Seller to ISO within two (2) years after the Transfer
Date.
9.3 Claims for Reimbursement. In the event that a party shall have suffered
any liability, loss, damage, cost or expense with respect to any claim, action,
suit or proceeding to which it believes the foregoing indemnity relates, that
party (the "indemnified party), shall give the other party, prompt written
notice of the nature and, if known, amount of such liability, loss, damage, cost
or expense and demand for reimbursement made therefor. The party against whom
the claim for indemnification shall be made (the indemnifying party7 shall have
thirty (30) days from the date of said notice to investigate and dispute the
nature, validity or amount of any such claim. During said thirty (30) day
period, the indemnifying party shall have reasonable access, during normal
business hours, to the books and records of the indemnified party for the
purpose of such investigation. In the event that the indemnifying party shall
dispute the nature, validity or amount of said claim, it shall give the
indemnified party written notice of such dispute pursuant to Article X hereof.
In the absence of a dispute, the indemnifying party shall promptly, and in any
event not later than the expiration of said thirty (30) day period, reimburse
the indemnified party in full for any such liability, loss, damage, cost or
expense as set forth in the indemnified party's notice. In the event that the
indemnifying party shall dispute only part of the claim, the indemnifying party
shall, concurrently with the delivery of their notice of dispute, pay to the
indemnified party the undisputed portion of the claim.
9.4 Third-Party Claims. Upon notice of any claim, action, suit or
proceeding by a third party giving rise to a claim for indemnification under
Section 9.1 or 9.2 hereof, the indemnifying party shall proceed, at its own
expense, to resist and dispose of such claim, action, suit or proceeding in such
manner as they deem appropriate, provided, however, that any indemnified party
shall have the right to employ separate legal counsel in any such claim, action,
suit or proceeding and participate in the defense thereof, but the fees and
expenses of such other counsel shall be at the expense of the indemnified party
and not subject to indemnification under this Agreement unless (i) the
employment of such other counsel has been authorized by the indemnifying party;
(ii) the indemnifying party has failed to defend such claim, action, suit or
proceeding diligently; or (iii) the parties to such action (including any
impleaded party) include the indemnified party and the indemnifying party, and
the indemnified party has been advised by legal counsel that there may be legal
defenses available to it which are different from, in addition to or
inconsistent with, the legal defenses available to the indemnifying party, or
that the indemnified party's interest may be adverse in whole or in part to the
interest of the indemnifying party. The indemnifying party shall not, in the
defense of any such claim, action, suit or proceeding, except with the prior
written consent of each indemnified party affected, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term the release by the claimant or plaintiff of such indemnified party from all
further liability in respect to such claim, action, suit or proceeding.
9.5 Limitation on Indemnity. Notwithstanding anything herein to the
contrary, neither Seller nor ISO shall have any obligation to indemnify and hold
harmless the other hereunder in respect of any liability, loss, damage, cost or
expense resulting from or arising out of a misrepresentation or breach of
warranty or covenant as provided in Section 9.1 (a) and (b) hereof or Section
9.2(a) and (b) hereof, as the case may be, until the aggregate amount of claims
hereunder against Seller, or ISO, as the case may be, In respect thereof exceeds
Five Thousand Dollars ($5,000) and at that point the liability to the
indemnified party shall include any amount in excess of the initial Five
Thousand Dollars ($5,000) aggregate claim amount;
provided, however, that neither Seller nor ISO shall have any further obligation
to indemnify and hold harmless the other after the aggregate amount of claims
paid to ISO or Seller in respect thereof equals an aggregate amount equal to the
total Purchase Price set forth in Section 2.3(a) herein plus the amount of the
Assumed Liabilities.
ARTICLE X
Miscellaneous Provisions
10.1 Confidentiality. The parties hereto covenant and agree that, except as
provided for hereinbelow, each will not from and after the date hereof make,
issue or release any public announcement, press release, statement or
acknowledgment of the existence of, or disclose (except to those of its
employees and agents who have a need to know for the purposes of this Agreement)
the terms, conditions and status of, the transactions provided for herein, or
any prior proposals related to the subject matter hereof without the prior
written consent of the other party, except to the extent such party is required
by law to make, issue or release, any such announcement, statement,
acknowledgment or revelation.
10.2 Costs and Expenses. Each party covenants and agrees that it shall bear
its respective costs and expenses in connection with the negotiation and
execution of this Agreement and consummation of the transaction provided for
herein.
10.3 Amendment and Modification. This Agreement may be amended, modified or
supplemented only in a writing executed by each of the parties.
10.4 Notices. All notices, requests, demands or other communications
hereunder must be in writing, and must be given, and shall be effective (i) when
delivered by hand or by courier, (ii) when five (5) days have elapsed after its
transmittal by registered or certified mail, postage prepaid, return receipt
requested, or (iii) when transmitted by facsimile (with a copy simultaneously
sent by registered or certified mail, return receipt requested). Notices of
change of address shall be effective only upon receipt notwithstanding the
previous sentence. Notices shall be sent to the addresses and person set forth
below, or to such different addresses and persons as to which a party has given
notice, in the manner provided in this Section:
If to Seller: EXECUTONE INFORMATION SYSTEMS, INC.
000 Xxxxxxxx Xxxxx Xxxx
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxxxx
Vice President and Chief Financial Officer
If to ISO: Kansas Communications, Inc.
0000 Xxxxxxxx Xxxxx
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xx. Xxxx Xxxxxxxx
10.5 Successors: Assignment. This Agreement shall inure to the benefit of,
and be binding upon, the respective panics hereto and thereto and their
successors and may be assigned thereby in whole or in pan to any of their
respective affiliates, but otherwise this Agreement is not assignable by any
party hereto or thereto, either in whole or in pan, without the prior written
consent of the other party hereto or thereto. Any attempt to assign this
Agreement in whole or in part, including the attempted assignment of any
obligation of any party hereunder or thereunder, to any assignee (other than an
affiliate of the assignor) without the consent of each other party hereto or
thereto shall be null and void.
10.6 Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument.
10.7 Headings. Section and paragraph headings in this Agreement are
provided for convenience of reference only and shall not be deemed to constitute
a pan hereof or be referred to in the construction or interpretation of its
terms.
10.8 Schedules and Exhibits. One complete set of the Schedules and Exhibits
hereto has been delivered to each of the panics hereto prior to the execution
and delivery of this Agreement.
10.9 Waiver: Remedies. No waiver of any breach of any provision of this
Agreement shall be held to be a waiver of any other provision or subsequent
breach of the same provision, and the failure of a party to enforce at any time
any provision hereof shall not be deemed a waiver of any right of such party to
subsequently enforce such provision or any other provision hereof. Ail remedies
afforded in this Agreement shall be taken and construed as cumulative; that is,
in addition to every other remedy provided herein or by law.
10.10 Governing Law. This Agreement shall be construed, interpreted and
enforced in accordance with the laws of the State of Illinois applicable to
contracts executed and to be wholly performed In such State.
10.11 Severability. In the event that any provision or any portion of any
provision of this Agreement shall be held invalid, illegal or unenforceable
under applicable law, the remainder of this Agreement shall remain valid and
enforceable, unless such invalidity, illegality or unenforceability
substantially diminishes the rights and obligations, taken as a whole, or any
party hereunder.
10.12 Survival of Representations, Warranties. Covenants and Agreements.
Subject to the limitations of Section 9.1 and 9.2 hereof, all representations,
warranties, covenants and agreements of the panics hereto contained herein, or
in any Schedule or Exhibit hereto or thereto shall survive the execution and
delivery hereof and thereof and consummation of the transactions provided for
herein and therein
notwithstanding any investigation, audit or review made at any time by any party
and notwithstanding the delivery of any documents.
10.13 Entire Agreement. This Agreement and the Schedules and Exhibits
hereto and thereto set forth the entire agreement and understanding between the
panics hereto with respect to the transactions provided for herein and therein
and supersede and cancel any and all prior discussions, correspondence,
agreements or understandings between the panics hereto with respect to such
matters.
