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SHARE EXCHANGE AGREEMENT
IMAGEWORKS MEDIA GROUP, INC.
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SHARE EXCHANGE AGREEMENT
This Share Exchange Agreement ("Agreement") is entered into effective the
1st of May, 2004, by and among Vivid Learning Systems, Inc., a Delaware
corporation ("Vivid"), with its principle office at 0000 Xxxxxxx Xxxxx,
Xxxxxxxx, Xxxxxxxxxx 00000 and ImageWorks Works Media Group, Inc. ("Seller" or
"ImageWorks"), with its principle office at 0000 Xxxxxxx Xxxxxx, Xxxxx,
Xxxxxxxxxx 00000.
RECITALS
A. ImageWorks is the owner of Two Thousand (2,000) voting common shares of
ImageWorks, constituting all of the issued and outstanding stock of ImageWorks.
Specifically, ImageWorks is held equally by Xxxx Xxxxxx and Xxxx Xxxxx, who are
the sole shareholders of ImageWorks.
B. Xxxx Xxxxxx and Xxxx Xxxxx desire to sell and Vivid desires to purchase
the ImageWorks shares in accordance with the terms and conditions contained in
this Agreement.
AGREEMENTS
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth together with other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties agree as follows:
SECTION ONE
SELLER AGREEMENT
1.1 Seller Shares. Subject to the terms and conditions of this Agreement,
on the Closing Date, Seller hereby sells to Vivid, and Vivid hereby purchases
from Seller, Two Thousand (2,000) shares voting common stock in ImageWorks
("Shares").
1.2 Consideration. In exchange for the Shares sold by Seller, Vivid shall:
a) pay Seller Three Hundred Thousand Dollars ($300,000) payable in full within
ten (10) business days after closing; b) pay Seller Three Hundred Fifty Thousand
Dollars ($350,000) payable in fourteen (14) equal monthly payments, said
payments to begin June 2004; c) issue to Seller One Hundred Thousand (100,000)
shares of common stock of Vivid ("Vivid Shares"), said Vivid Shares to be issued
on December 31, 2004, and further, said Vivid Shares subject to a buyback,
wherein if by May 24, 2008, the Common Stock received in this transaction does
not have a public market value of $300,000, then ImageWorks will have the option
to have Vivid buy the Common Stock back for $300,000, and further said buyback
may be subject to staggered payments of at least Fifty Thousand Dollars
($50,000), per month over a six (6) month period; and, d) shall grant to Seller
a warrant to purchase an additional Two Hundred Thousand (200,000) shares of
common stock of Vivid at an exercise price of Three Dollars ($3.00)
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per share ("Vivid Warrant"). The warrant shall be in the form attached hereto as
Exhibit "A". The warrant will have attached a buyback provision in accordance
with the term sheet executed by Vivid and Seller on April 9, 2004. The
afore-noted consideration will be issued to the two shareholders of Seller on a
50-50 basis in their individual capacity. DEFAULT PROVISION: In the event of a
default by Vivid, such as failure to make a required payment or failure to
execute on an action required of Vivid by this Agreement, Vivid shall have sixty
(60) days to cure. If after the sixty (60) days the default has not been cured,
Seller may provide Vivid notice that it is considered in default and that Seller
has elected to reverse the transaction herein. In the event of a second default
by Vivid, Vivid will have thirty (30) days to cure. In the event of a third
default by Vivid, the Seller may provide Vivid notice immediately that it is
considered in default and that the Seller has elected to reverse the transaction
herein. Specifically, to effect the reverse of the transaction, Seller must
relinquish all stock and warrants granted hereunder and Vivid will: (a) return
the corporate entity ImageWorks to Seller on a reasonably equal basis to its
condition as represented in the April 30, 2004 balance sheet, including but not
limited to all assets in the corporate entity at the time of transfer (except
for consumables and subject to normal wear and tear) and the payment of all
current liabilities with the exception of the cash and receivables already paid
to the Seller; and, (b) cancel the non-compete agreements signed by Seller, with
the exception that Seller will be prohibited from soliciting clients that Vivid
brought to Seller. In the event of non-performance by Seller, such shall be
considered a default on the part of Seller. Said non-performance is to be
specifically delineated in the notice of default from Vivid. Seller shall have
one (1) year to cure the default. If at such time the default has not been
cured, Vivid will terminate Seller from its employment.
1.3 Offer Letters. Offer letters for the two principals of Seller,
specifically Xxxx Xxxxxx and Xxxx Xxxxx, will address matters associated with
this transaction that are typically considered personnel matters.
1.4 Closing. The purchase of Seller's Shares by Vivid shall occur as soon
as practicable following the fulfillment of the conditions specified in Section
6 hereof ("Closing Date") at such place as the parties shall agree, but in no
event later than May 24, 2004; however, regardless of closing on or before April
30, 2004, said date of April 30, 2004 shall be the cutoff date for the
calculations necessary to effect the exchange. Upon Closing (a) the Seller shall
deliver to Vivid certificates representing the Shares, duly endorsed to Vivid or
accompanied by duly executed stock powers, in transferable form on December 31,
2004; (b) Vivid shall deliver the appropriate cash payment, the Vivid Shares,
and the Vivid Warrant; and, (c) the parties shall deliver all other documents or
agreements required by this Agreement.
SECTION TWO
REPRESENTATIONS AND WARRANTIES OF IMAGEWORKS
ImageWorks, to the best of its knowledge represents and warrants to Vivid
the following:
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2.1 Title to Stock. ImageWorks is the record and beneficial owners of the
Shares being sold by ImageWorks to Vivid, free and clear of any security
interest, claim, lien, pledge, option, encumbrance, or restriction (on
transferability or otherwise) whatsoever in law or in equity, and its delivery
to Vivid on the Closing Date of certificates for the Shares will convey to Vivid
lawful, valid, and indefeasible title thereto, free and clear of any security
interest, claim, lien, pledge, option, encumbrance, or restriction whatsoever.
2.2 Necessary Authority: Enforceability. The execution and delivery of
this Agreement has been duly authorized by the shareholders of ImageWorks. No
other corporate proceedings on the part of ImageWorks are necessary to authorize
this Agreement. ImageWorks has full power, and authority to enter into, deliver,
and perform this Agreement and to consummate the transactions contemplated
herein. ImageWorks has duly executed and delivered this Agreement, and this
Agreement constitutes its legal, valid, and binding obligations, enforceable
against ImageWorks in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency, reorganization, or other laws affecting the
enforcement of creditors' rights generally now or hereafter in effect and
subject to the availability of equitable remedies.
2.3 No Conflicts. The execution, delivery, and performance of this
Agreement by Seller and the consummation of the transactions contemplated herein
do not and will not (a) require the consent, approval, authorization, order,
filing, registration, or qualification of or with any court, governmental
authority, or third person, except that which already has been obtained; (b)
conflict with or result in any violation of or default under any provision of
any mortgage, indenture, lease, agreement, or other instrument, permit,
concession, grant, franchise, or license to which Seller is a party or by which
the Shares are or may be bound; (c) violate any law, ordinance, rule,
regulation, judgment, order, or decree applicable to Seller; or (d) result in
the creation of any security interest, claim, lien, charge, or encumbrance upon
any of the Shares.
2.4 Organization and Good Standing. ImageWorks is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Washington. ImageWorks has all power and authority to execute and deliver this
Agreement.
2.5 Articles of Incorporation and Bylaws. ImageWorks has previously
furnished to Vivid complete and correct copies of (a) its Articles of
Incorporation, and (b) its Bylaws, as amended.
2.6 Capitalization. The authorized capital stock of ImageWorks consists of
Ten Thousand (10,000) shares of voting common stock of which Two Thousand
(2,000) shares are issued and outstanding. No unissued shares of Seller or any
other securities of Seller are subject to any warrants, options, rights, or
commitments of any character, kind, or nature that would obligate Seller to
issue any additional shares of its common stock or any other equity security to
any person.
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2.7 No Restrictions on Securities. ImageWorks is not a party to any
written or oral agreement creating rights in any person (a) with respect to
shares of capital stock or any other securities of ImageWorks, or (b) relating
to the voting of shares of ImageWorks stock on any matter.
2.8 Financial Statements. The most recent two (2) years of Financial
Statements of the Seller are hereby incorporated by reference. The Financial
Statements (including the Notes thereto) (i) have been prepared in accordance
with basic tax accounting principles and in good faith in a manner consistent
with past practice applied on a consistent basis throughout the periods covered
thereby; (ii) present fairly the financial condition of ImageWorks as of such
dates and the results of operations of ImageWorks for such periods; (iii) are
correct and complete; and, (iv) are consistent with the books and records of
ImageWorks (which books and records are correct and complete).
2.9 Tax Matters. For all periods prior to the date of this Agreement:
2.9.1 All federal, state, local, and foreign tax returns and tax
reports required to be filed by ImageWorks have been timely filed with the
appropriate governmental agencies in all jurisdictions in which such
returns and reports are required to be filed and all of the foregoing are
true, correct, and complete;
2.9.2 All federal, state, local, and foreign income, profits,
franchise, sales, use, occupation, property, excise, highway use, and
other taxes (including interest and penalties) due from ImageWorks have
been fully paid or adequate provisions made therefor;
2.9.3 Proper and accurate amounts have been withheld by ImageWorks
from its employees for all periods prior to the Closing Date in compliance
with the tax withholding provisions of applicable federal, foreign, state,
and local laws;
2.9.4 Proper and accurate federal, foreign, state, and local returns
have been filed by ImageWorks for all periods for which returns were due
with respect to employee income tax withholding, social security, and
unemployment taxes, and the amounts shown thereon to be due and payable
have been paid in full or adequate provisions therefor included in the
Financial Statements;
2.9.5 No issues have been raised or proposed with respect to any tax
return of ImageWorks; and
2.9.6 ImageWorks has not been audited by any federal taxing
authority. ImageWorks has been audited by the Washington State Department
of Revenue.
2.10 Liabilities. Seller has no liabilities or obligations of any nature
or kind, whether absolute or contingent, known or unknown, accrued or unaccrued,
due or to become due, or otherwise, except: (a) to the extent reflected in the
ImageWorks Financial Statements, (b) as disclosed on Schedule 2.10 attached
hereto, and (c) those that will be incurred in or as a result of the ordinary
course of business, consistent with past practices, prior to the Closing Date.
Seller acknowledges that it is currently a Subchapter S corporation and as a
result of this transaction the Subchapter S election will terminate. Seller
specifically warrants that it will be responsible for any and all obligations
which may occur as a result of the Subchapter S termination.
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2.11 Litigation. Xxxx Xxxxxx and Xxxx Xxxxx were sued by Tri-Rivers
construction over a dispute on the construction contract for the building at
0000 Xxxxxxx Xxxxxx. Hammer and Xxxxx won the case and are now working with an
arbitrator and the contractor to repair final punchlist issues. No other claim,
action, suit, proceeding, arbitration, investigation, hearing, or notice of
hearing is pending nor, insofar as is known to Seller, threatened, before any
court or governmental or administrative authority, or private arbitration
tribunal, against, relating to, or affecting Seller, any of its properties or
businesses, or the transactions contemplated by this Agreement; nor are any
facts, known to Seller that may give rise to any such claim, action, suit,
proceeding, arbitration, investigation, or hearing that may have any material
adverse effect upon the properties or business of Seller or the transactions
contemplated by this Agreement to the best of its knowledge. Seller has not
waived any affirmative defense with respect to any of its liabilities, including
any liability for any income, excise, or other taxes. There is no continuing
order, injunction, or decree of any court, arbitrator or governmental or
administrative authority to which Seller or any of its businesses, properties,
or assets is a party or subject. No material infringement of any proprietary
right owned or licensed by Seller is known to Seller.
2.12 Material Contracts. All material contracts, agreements, commitments,
and instruments to which Seller is subject and by which it is bound are listed
on Schedule 2.12, and true and correct copies of them have been delivered to
Vivid. All such contracts are in full force and effect, there have been no
threatened cancellations thereof, there are no outstanding disputes thereunder,
and to the best of the warrantors' knowledge, there does not exist any default
in any material respect or event which is a breach or default in any material
respect of the terms of any such contract. Seller is not a party to any material
oral agreements. Seller has in all respects performed all the obligations
required to be performed by it to date and is not in default or alleged to be in
default in any respect under any agreement, lease, or contract to which it is a
party, and to the best of the warrantors' knowledge, there exists no event,
condition, or occurrence which, after notice or lapse of time, or both, would
constitute such a default by it of any of the foregoing.
2.13 Absence of Certain Changes. Except as disclosed in its Financial
Statements and Reports, (a) Seller has conducted its business only in the
ordinary and usual course of the business, and (b) no change or development or
combination of changes or developments has occurred that, individually or in the
aggregate, is reasonably likely to result in a Material Adverse Effect with
respect to Seller. For purposes of this Agreement, "Material Adverse Effect"
means an effect that: (1) is materially adverse to the business, financial
condition, results of operations, or prospects of Seller taken as a whole; (2)
significantly and adversely affects the ability of Seller to consummate the
transactions contemplated by this Agreement or to perform its material
obligations under this Agreement; or (3) enables any persons to prevent the
consummation of the transactions contemplated by this Agreement.
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2.14 Brokers, Finders. No agent, broker, investment banker, person, or
firm acting on behalf of Seller is or will be entitled to any broker's or
finder's fee or any other commission or similar fee, directly or indirectly, in
connection with the transactions contemplated hereby.
2.15 Personal Liabilities/Conflicting Interests. Except as set forth on
Schedule 2.15, no officer, director, or partner of Seller has (i) any material
interest in any property used in or pertaining to the business of Seller, or
(ii) any loan, lease, contract, commitment, arrangement, or understanding with
Seller.
2.16 Tangible Assets. Seller owns or leases all buildings, machinery,
equipment, and other tangible assets necessary for the conduct of its business
as presently conducted and as presently proposed to be conducted. To the best of
the warrantors' knowledge, each such tangible asset is free from defects (patent
and latent), has been maintained in accordance with normal industry practice, is
in good operating condition and repair (subject to normal wear and tear), and is
suitable for the purposes for which it presently is used and presently is
proposed to be used.
2.17 Employees, Compensation, Etc. The names, dates of hire, positions,
and base salary for all ImageWorks employees are set forth in Schedule 2.17. No
employee of ImageWorks has a written or oral employment agreement. There is no
pending or threatened dispute, including, but not limited to, claims for sexual
harassment, discrimination claims of any kind, employment disputes, or
otherwise, between or involving ImageWorks, and any employee or group of
employees of ImageWorks or any union representing or claiming to represent any
employees or former employees of ImageWorks. There have never been any strikes
or work stoppages in effect or threatened against ImageWorks which had or would
have a material adverse effect on ImageWorks, nor have any strikes or work
stoppages which would have or have had such effect been enjoined by any order,
writ, injunction, or decree of any court or federal, state, municipal, or other
governmental agency or instrumentality, domestic or foreign. No employee of
ImageWorks is, or on the Closing Date will be, represented by any labor union in
connection with its employment by ImageWorks. To the best of the warrantors'
knowledge, hours worked by and payments made to the respective employees of
ImageWorks has not been in violation of the Fair Labor Standards Act or any
applicable laws of the United States or any state or other jurisdiction dealing
with such matters.
2.18 Employee Benefit Plans. Seller maintains no pension, profit-sharing,
stock bonus, or other plan which is "qualified" or intended to be "qualified"
under Section 401(a) of the Code. Schedule 2.18 attached hereto contains a list
of each
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bonus, deferred compensation, hospitalization, or other medical, stock purchase,
life, or other insurance, and each other employee benefit plan or arrangement of
Seller (collectively, the "Plans"). Seller has heretofore delivered to Vivid
true and complete copies of the documents governing all such Plans as in effect
on the date hereof. Each of the Plans has been administered in material
compliance with its terms and all filing, reporting, disclosure, and other
requirements of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). Seller has no plans or commitments, whether formal or informal and
whether legally binding or not, to create any additional such Plan or modify or
change any existing plan or arrangement. None of the Plans, nor any trust
created thereunder, nor any trustee or administrator thereof, has engaged in a
transaction in connection with which any of the Plans, any such trust, or any
trustee or administrator thereof, or any party dealing with the Plans or any
such trust could be subject to either a civil penalty assessed pursuant to
Section 502(i) of ERISA or a tax imposed by Section 4975 of the Code. To the
best of the warrantors' knowledge, each of the employee benefit plans maintained
or contributed to by Seller, including, without limitation, the Plans, is in
material compliance with applicable federal laws, including but not limited to
ERISA. Each of the Plans required to be has been determined to be "qualified"
within the meaning of Section 401(a) of the Code, and no facts or circumstances
exist which would materially adversely affect the qualified status of the Plans.
No matter relating to any Plan is pending before any court or government agency.
Seller is unaware of any withdrawal liability under Section 4201 of ERISA.
2.19 Environmental. Seller has no liability under, has never violated, and
is presently in compliance with (a) all terms and conditions of its permits,
licenses, and other authorizations; and (b) to the best of the warrantors'
knowledge, all requirements, limitations, restrictions, conditions, standards,
prohibitions, obligations, schedules, and timetables provided for by any
Environmental, Health, and Safety Laws, and no events or conditions exist that
may prevent continued compliance. Seller has not (a) entered into or been
subject to any consent decree, compliance order, administrative order, court
order, or judgment with respect to any of its activities or operations; (b)
received notice under the citizen suit provision of any Environmental, Health,
or Safety Law; (c) received any request for information, notice, demand letter,
administrative inquiry, or formal or informal complaint or claim with respect to
its activities or operations; or (d) been subject to or threatened with any
governmental or citizen litigation, administrative, or judicial proceeding
pursuant to the Environmental, Health, and Safety Laws and has no reason to
believe that any of the above will be forthcoming.
No use, exposure, generation, manufacture, storage, treatment,
transportation, or disposal of Hazardous Substances is occurring or has occurred
other than as necessary in the ordinary course of business and in compliance
with all applicable federal, state and local laws, ordinances, and regulations.
The terms "Environmental, Health, or Safety Laws" and "Hazardous Substances"
shall have the meanings set forth on Exhibit 2.19.
2.20 Insurance. All physical properties and assets of Seller and the
premises are covered by fire and other extended coverage insurance with
companies licensed in the relevant jurisdictions against casualty and other
losses customarily obtained to cover comparable properties and assets by
businesses in the regions in which such properties are located. Based on its own
experience, Seller has no reason to believe that such coverage is not reasonable
in amounts, scope, and coverage in light of existing conditions. Seller carries
public liability and workmen's compensation insurance in amounts believed by
Seller to be reasonable. A complete and correct list of all the policies of
insurance (including binders) and surety bonds carried by Seller is included in
Schedule 2.20, all of which are in full force and effect as of the date hereof.
Seller has not received notice of cancellation or non-renewal of any such policy
or bond. Seller does not have knowledge of any inaccuracy in any application for
such policies or bonds, any failure to pay premiums when due, or any similar
events that would form the basis for termination of any such insurance.
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2.21 Intellectual Property. Except as set forth in Schedule 2.21, Seller
owns or has the right to use pursuant to license, sublicense, agreement, or
permission all Intellectual Property necessary or desirable for the operation of
the business of Seller as presently conducted and as presently proposed to be
conducted. Seller has taken all necessary and desirable action to maintain and
protect each item of Intellectual Property that it owns or uses. To the best of
the warrantors' knowledge, Seller has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of third parties. Seller has never received any charge, complaint, claim,
demand, or notice alleging any such interference, infringement,
misappropriation, or violation (including any claim that Seller must license or
refrain from using any Intellectual Property rights of any third party). To the
best of the warrantors' knowledge, no third party has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any Intellectual
Property rights of Seller. Seller has delivered to Vivid correct and complete
copies of all patents, registrations, applications, licenses, agreements, and
permissions (as amended to date) and has made available to Vivid correct and
complete copies of all other written documentation evidencing ownership and
prosecution (if applicable) of the Intellectual Property. Schedule 2.21 also
identifies each trade name or unregistered trademark used by Seller in
connection with any of its businesses. No shareholder, partner, officer,
director, or any employee of Seller or any affiliate owns directly or
indirectly, in whole or in part, any Intellectual Property (a) which Seller is
presently using in its business, or (b) without which such business of Seller
could not be conducted as presently conducted.
"Intellectual Property" means (a) all inventions (whether patentable
or unpatentable and whether or not reduced to practice), all improvements
thereto, and patents, patent applications, and patent disclosures, together with
all reissuances, continuations, continuations-in-part, revisions, extensions,
and reexaminations thereof; (b) all trademarks, service marks, trade dress,
logos, trade names, and corporate names, together with all translations,
adaptations, derivations, and combinations thereof and including all goodwill
associated therewith, and all applications, registrations, and renewals in
connection therewith; (c) all copyrightable works, all copyrights, applications,
registrations, and renewals in connection therewith; (d) all mask works and all
applications, registrations, and renewals in connection therewith; (e) all trade
secrets and confidential business information (including ideas, research and
development know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals); (f) all computer software (including data and
related documentation); (g) all other proprietary rights; and, (h) all copies
and tangible embodiments thereof (in whatever form or medium).
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2.22 Opportunity to Investigate. Seller has been afforded the opportunity
to ask questions of, and receive answers from Vivid or persons acting on its
behalf concerning the terms and conditions of the transaction and to obtain any
additional information necessary to verify the accuracy of the information
furnished; and has availed itself of such opportunity to the extent it considers
appropriate in order to permit it to evaluate the merits and risks of the
proposed transaction. Seller has sufficient knowledge and experience in
financial and business matters to be capable of evaluating the merits and risks
of the investment contemplated by this Agreement. Seller acknowledges that no
oral representations have been made and no information has been furnished to it
in connection with the negotiation of this Agreement that have been in any way
inconsistent with the foregoing specified information and the information and
representations incorporated into this Agreement.
2.23 Disclosure. To the best knowledge of Seller, neither this Agreement
nor any schedule, exhibit, list, certificate, or other instrument or document
delivered to Vivid pursuant to this Agreement by or on behalf of Seller contains
any untrue statement of material fact or omits to state any material fact
required to be stated herein or therein or necessary to make the statements,
representations, or warranties, and information contained herein or therein not
misleading.
SECTION THREE
REPRESENTATIONS AND WARRANTIES OF VIVID
Vivid represents and warrants to Seller the following:
3.1 Organization and Good Standing. Vivid is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware.
Vivid has all the power and authority to execute and deliver this Agreement and
consummate the transactions contemplated hereby.
3.2 Capitalization. The authorized capital stock of Vivid consists of Two
Hundred Million (200,000,000) shares of voting common stock and Five Million
(5,000,000) shares of voting preferred stock. There are Ten Million Eighty-seven
Thousand Nine Hundred Ninety-six (10,087,996) shares of voting common stock
issued and outstanding as of the date of this Agreement. There are no preferred
shares issued as of the date of this Agreement. Vivid has Two Million Four
Hundred Thousand (2,400,000) shares allocated to its stock option plan, of which
Seven Hundred Sixty-six Thousand Three Hundred Thirty-four (766,334) options
have been issued.
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3.3 Authority to Perform Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by the Board of Directors of Vivid. No other corporate
proceedings on the part of Vivid are necessary to authorize its officers to
perform this Agreement. The execution and performance of this Agreement by Vivid
does not violate, or result in a breach of, or constitute a default under, any
judgment, order, or decree to which Vivid may be subject, nor does such
execution or performance violate any provision of the Articles of Incorporation
or Bylaws of Vivid.
3.4 Subsidiaries, Affiliates, No Other Interests. Vivid is the sole owner
of Vivid Washington.
3.5 Financial Statements. The most recent two (2) years of Financial
Statements of Vivid Washington are hereby incorporated by reference. The
Financial Statements (including the Notes thereto) (i) have been prepared in
accordance with GAAP and in good faith in a manner consistent with past practice
applied on a consistent basis throughout the periods covered thereby; (ii)
present fairly the financial condition of Vivid as of such dates and the results
of operations of Vivid for such periods; (iii) are correct and complete; and
(iv) are consistent with the books and records of Vivid (which books and records
are correct and complete).
3.6 Tax Matters. For all periods prior to the date of this Agreement:
3.6.1 All federal, state, local, and foreign tax returns and tax
reports required to be filed by Vivid have been timely filed with the
appropriate governmental agencies in all jurisdictions in which such
returns and reports are required to be filed and all of the foregoing are
true, correct, and complete;
3.6.2 All federal, state, local, and foreign income, profits,
franchise, sales, use, occupation, property, excise, highway use, and
other taxes (including interest and penalties) due from Vivid have been
fully paid or adequate provisions made therefor;
3.6.3 Proper and accurate amounts have been withheld by Vivid from
its employees for all periods prior to the Closing Date in compliance with
the tax withholding provisions of applicable federal, foreign, state, and
local laws;
3.6.4 Proper and accurate federal, foreign, state, and local returns
have been filed by Vivid for all periods for which returns were due with
respect to employee income tax withholding, social security, and
unemployment taxes, and the amounts shown thereon to be due and payable
have been paid in full or adequate provisions therefor included in the
Financial Statements;
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3.6.5 No issues have been raised or proposed with respect to any tax
return of Vivid; and
3.6.6 Vivid has not been audited by any federal or state taxing
authority.
3.7 Liabilities. Vivid has no liabilities or obligations of any nature or
kind, whether absolute or contingent, known or unknown, accrued or unaccrued,
due or to become due, or otherwise, except: (a) to the extent reflected in the
Vivid Financial Statements, (b) as disclosed on Schedule 3.7 attached hereto,
and (c) those that will be incurred in or as a result of the ordinary course of
business, consistent with past practices, prior to the Closing Date.
3.8 Litigation. No claim, action, suit, proceeding, arbitration,
investigation, hearing, or notice of hearing is pending nor, insofar as is known
to Vivid, threatened, before any court or governmental or administrative
authority, or private arbitration tribunal, against, relating to, or affecting
Vivid, any of its properties or businesses, or the transactions contemplated by
this Agreement; nor are any facts known to Vivid, that may give rise to any such
claim, action, suit, proceeding, arbitration, investigation, or hearing that may
have any material adverse effect upon the properties or business of Vivid or its
subsidiaries or the transactions contemplated by this Agreement to the best of
its knowledge. Vivid has not waived any affirmative defense with respect to any
of its liabilities, including any liability for any income, excise, or other
taxes. There is no continuing order, injunction, or decree of any court,
arbitrator, or governmental or administrative authority to which Vivid or its
subsidiaries or any of their businesses, properties, or assets is a party or
subject. No material infringement of any proprietary right owned or licensed by
Vivid is known to Vivid.
3.9 Absence of Certain Changes. Except as disclosed in its Financial
Statements and Reports (a) Vivid has conducted its business only in the ordinary
and usual course of the business, and (b) no change or development or
combination of changes or developments has occurred that, individually or in the
aggregate, is reasonably likely to result in a Material Adverse Effect with
respect to Vivid. For purposes of this Agreement, "Material Adverse Effect"
means an effect that: (1) is materially adverse to the business, financial
condition, results of operations, or prospects of Vivid taken as a whole; (2)
significantly and adversely affects the ability of Vivid to consummate the
transactions contemplated by this Agreement or to perform its material
obligations under this Agreement; or (3) enables any persons to prevent the
consummation of the transactions contemplated by this Agreement.
3.10 Environmental. Vivid has no liability under, has never violated, and
is presently in compliance with (a) all terms and conditions of its permits,
licenses, and other authorizations; and (b) to the best of the warrantors'
knowledge, all requirements, limitations, restrictions, conditions, standards,
prohibitions, obligations, schedules, and timetables provided for by any
Environmental, Health, and Safety Laws, and no events or conditions exist that
may prevent continued compliance. Vivid has not (a) entered into or been subject
to any consent decree, compliance order, administrative order, court order, or
judgment with respect to any of its activities or operations; (b) received
notice under the citizen suit provision of any Environmental, Health, or Safety
Laws; (c) received any request for information, notice, demand letter,
administrative inquiry, or formal or informal complaint or claim with respect to
its activities or operations; or (d) been subject to or threatened with any
governmental or citizen litigation, administrative, or judicial proceeding
pursuant to the Environmental, Health, and Safety Laws and has no reason to
believe that any of the above will be forthcoming.
-11-
No use, exposure, generation, manufacture, storage, treatment,
transportation, or disposal of Hazardous Substances is occurring or has occurred
other than as necessary in the ordinary course of business and in compliance
with all applicable federal, state, and local laws, ordinances, and regulations.
The terms "Environmental, Health, or Safety Laws" and "Hazardous Substances"
shall have the meanings set forth on Exhibit 2.19.
3.11 Brokers, Finders. No agent, broker, investment banker, person, or
firm acting on behalf of Vivid is or will be entitled to any broker's or
finder's fee or any other commission or similar fee directly or indirectly in
connection with the transactions contemplated hereby.
3.12 Opportunity to Investigate. Vivid has been afforded the opportunity
to ask questions of, and receive answers from ImageWorks or persons acting on
their behalf concerning the terms and conditions of the transaction and to
obtain any additional information necessary to verify the accuracy of the
information furnished; and has availed itself of such opportunity to the extent
it considers appropriate in order to permit it to evaluate the merits and risks
of the proposed transaction. Vivid has sufficient knowledge and experience in
financial and business matters to be capable of evaluating the merits and risks
of the investment contemplated by this Agreement. Vivid acknowledges that no
oral representations have been made and no information has been furnished to it
in connection with the negotiation of this Agreement that have been in any way
inconsistent with the foregoing specified information and the information and
representations incorporated into this Agreement.
3.13 Disclosure. To the best knowledge of Vivid, neither this Agreement
nor any schedule, exhibit, list, certificate, or other instrument or document
delivered to Seller pursuant to this Agreement by or on behalf of Vivid,
contains any untrue statement of material fact or omits to state any material
fact required to be stated herein or therein or necessary to make the
statements, representations or warranties, and information contained herein or
therein not misleading.
-12-
SECTION FOUR
SECURITIES LAW MATTERS AND REGISTRATION RIGHTS
4.1 Purchase for Investment. Seller covenants and agrees that the Vivid
Shares and Vivid Warrant to be issued to Seller as provided in Section 1.2 will
be held by Seller for investment and not with a view to distribute all or any
part thereof in any transaction which would constitute a "distribution" within
the meaning of the Securities Act of 1933 ("Securities Act). Seller will not,
directly or indirectly, offer, transfer, sell, assign, pledge, hypothecate, or
otherwise dispose of any of the Vivid Shares or Vivid Warrant except in
compliance with the Securities Act. Seller agrees that no transfer of assignment
of any Vivid Shares or Warrants shall be effective if the assignment would
violate the provisions of the securities laws. If Vivid so requires, no
assignment shall be effective unless Seller delivers an opinion of counsel to
Vivid, which opinion must be satisfactory to Vivid in all respects, to the
effect that such transfer will not violate the securities laws. Seller
understands that all stock certificates will bear a legend noting these transfer
restrictions.
4.2 Registration Rights. In the event Vivid shall undertake to provide
registration rights to its shareholders in general, Seller shall have the right
to participate in such registration rights upon the terms and conditions
applicable to all shareholders.
4.3 Shareholder Information. So long as Seller owns the Vivid Shares or
Vivid Warrant, Seller will be provided with a copy of any information that Vivid
sends to its shareholders in general.
SECTION FIVE
CONDUCT AND TRANSACTIONS BEFORE CLOSING
5.1 Cooperation. From the date hereof through the Closing Date, Vivid and
Seller will each cooperate in good faith and use their best efforts to close the
purchase and sale of Shares.
5.2 ImageWorks Contracts. Prior to Closing, Vivid and ImageWorks will work
to jointly market ImageWorks in order to secure new contracts. Any expenses
incurred in connection with these marketing efforts shall be borne by the party
incurring such expenses.
5.3 Announcements. Subsequent to the date hereof, Vivid and ImageWorks
will consult with each other prior to any public announcement relating to
transactions contemplated hereby and will not make any public announcements
without the express approval of the other.
-13-
5.4 Efforts to Consummate. Subject to the terms and conditions herein
provided, Vivid and Seller agree to use their reasonable best efforts to take,
or cause to be taken, all action and to do, or cause to be done, all things
necessary, proper, or advisable to consummate, as promptly as practicable, the
transactions contemplated hereby, including, but not limited to, the obtaining
of all necessary consents, waivers, authorizations, orders, and approvals of
third parties, whether private or governmental, required of it to enable it to
comply with the conditions precedent to consummating the transactions
contemplated by this Agreement. Vivid and Seller agree to cooperate fully with
the other in performing this Agreement.
SECTION SIX
CONDITIONS TO CLOSING
6.1 Conditions to Obligation of Vivid. The obligation of Vivid to
consummate the transactions to be performed by it hereunder is subject to
satisfaction of the following conditions. Vivid may waive any condition
specified in this Section via a written document so stating at or prior to the
Closing Date.
6.1.1 Seller shall have performed and complied with all of their
covenants and agreements hereunder in all material respects through the
Closing Date.
6.1.2 All representations, warranties, disclosures, and statements
of Seller contained in this Agreement will be true and complete as of the
date of this Agreement and the Closing Date. Any amendments to the
exhibits and schedules to this Agreement which are proposed to be
delivered after the date of this Agreement must be satisfactory to Vivid
in its sole discretion.
6.1.3 Vivid shall have completed its due diligence review of Seller
and its business (including, but not limited to confirmation that Seller
is in compliance with all applicable environmental laws) with results
reasonably satisfactory to Vivid. Vivid agrees that such due diligence
shall be complete by May 11, 2004.
6.1.4 Seller shall make appropriate accounting and expense
adjustments to the Seller's balance sheet prior to the Closing Date, which
adjustments must be approved by Vivid.
6.1.5 All actions to be taken by Seller in connection with
consummation of the transactions contemplated hereby, and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to Vivid.
6.2 Conditions to Obligation of Seller. The obligation of Seller to
consummate the transactions to be performed by it hereunder is subject to
satisfaction of the following conditions. Seller may waive any condition
specified in this Section via a written document so stating at or prior to the
Closing Date.
-14-
6.2.1 Vivid shall have performed and complied with all of its
covenants and agreements hereunder in all material respects through the
Closing Date.
6.2.2 All representations, warranties, disclosures, and statements
of Vivid contained in this Agreement will be true and complete as of the
date of this Agreement and the Closing Date. Any amendments to the
exhibits and schedules to this Agreement which are proposed to be
delivered after the date of this Agreement must be satisfactory to Seller
in its sole discretion.
6.2.3 All actions to be taken by Vivid in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form
and substance to Seller.
SECTION SEVEN
TERMINATION OF AGREEMENT
This Agreement may be terminated at any time before the Closing Date, as
follows, and in no other manner:
7.1 Mutual Consent. By mutual consent of the parties, if the Board of
Directors, or similar governing body, of each party so determines.
7.2 Conditions of Vivid Not Met. By Seller if, by the Closing Date, any of
the conditions set forth in Section 6.2 hereof have not been met or if, in the
exercise of its best judgment, Seller determines in good faith that any such
conditions reasonably cannot be met by such date.
7.3 Conditions of Seller Not Met. By Vivid, if by the Closing Date, any of
the conditions set forth in Section 6.1 hereof shall not have been met or if, in
the exercise of its judgment, the Board of Directors of Vivid determines in good
faith that any such conditions reasonably cannot be met by such date.
SECTION EIGHT
INDEMNIFICATION
8.1 Indemnification of Vivid. Without in any way limiting or diminishing
the warranties, representations, or agreements herein contained or the rights or
remedies available to Vivid for a breach by Seller hereunder, Seller agrees to
indemnify, defend, and hold harmless Vivid and its designees, successors, and
assigns from and against all losses, judgments, liabilities, claims, damages, or
expenses (including reasonable attorneys' fees) of every kind, nature, and
description in existence before or on the Closing Date, whether known or
unknown, absolute or contingent, joint or several, either arising out of any
failure of any representation or warranty by Seller contained in this Agreement
to have been correct and materially complete when made or arising out of or
relating to the breach of any covenant or agreement of Seller contained in this
Agreement.
-15-
8.2 Indemnification of Seller. Without in any way limiting or diminishing
the warranties, representations, or agreements herein contained or the rights or
remedies available to Seller for a breach by Vivid hereunder, Vivid hereby
agrees, with respect to this Agreement, to indemnify, defend, and hold harmless
Seller from and against all losses, judgments, liabilities, claims, damages, or
expenses (including reasonable attorneys' fees) of every kind, nature, and
description in existence before, on, or after the Closing Date, whether known or
unknown, absolute or contingent, joint or several, either arising out of any
failure of any representation or warranty by Vivid contained in this Agreement
to have been correct and materially complete when made or arising out of or
relating to the breach of any covenant or agreement of Vivid contained in or
arising out of this Agreement.
8.3 Indemnification Limitations. Without in any way diminishing the
warranties, representations, or agreements herein contained or the rights or
remedies available to either party for a breach by the other party hereunder,
the parties hereby agree, with respect to this Agreement, that any claim for
indemnity under either of the preceding sections 8.1 and 8.2 must be asserted in
writing to the other on or before the second anniversary of the Closing Date.
Further, with the exception of circumstances wherein an indemnification is
warranted as a result of misconduct or gross negligence, the indemnifications
offered under this Agreement shall be limited to the value of the consideration
provided herein. In instances of misconduct or gross negligence, there is no
limit to the level of indemnification to be provided by a party.
8.4 Indemnification Procedure for Claims of Third Parties.
Indemnification, with respect to claims resulting from the assertion of
liability by those not parties to this Agreement (including governmental claims
for penalties, fines, and assessments), shall be subject to the following terms
and conditions:
8.4.1 The party seeking indemnification (the "Indemnified Party")
shall give prompt written notice to the party or parties from which it is
seeking indemnification (the "Indemnifying Party") of any assertion of
liability by a third party which might give rise to a claim for
indemnification based on the foregoing provisions of this Section, which
notice shall state the nature and basis of the assertion and the amount
thereof, to the extent known; provided, however, that no delay on the part
of the Indemnified Party in giving notice shall relieve the Indemnifying
Party of any obligation to indemnify unless (and then solely to the extent
that) the Indemnifying Party is prejudiced by such delay.
8.4.2 If any action, suit, or proceeding (a "Legal Action") is
brought against the Indemnified Party with respect to which the
Indemnifying Party may have liability under the foregoing provisions of
this Section, the Legal Action shall be defended (such defense to include
all proceedings for appeal or review which counsel for the Indemnified
Party shall reasonably deem appropriate) by the Indemnifying Party.
-16-
8.4.3 Notwithstanding the provisions of the previous subparagraph of
this Agreement, until the Indemnifying Party shall have assumed the
defense of the Legal Action, the defense shall be handled by the
Indemnified Party and the Indemnifying Party shall pay all legal and other
expenses reasonably incurred by the Indemnified Party in conducting such
defense. Furthermore, (i) if the Indemnified Party shall have reasonably
concluded that there are likely to be defenses available to it that are
different from or in addition to those available to the Indemnifying
Party; (ii) if the Legal Action involves other than money damages and
seeks injunctive or other equitable relief; or (iii) if a judgment against
the Indemnified Party in the Legal Action will, in the good faith of the
Indemnified Party, establish a custom or precedent which will be adverse
to the best interest of its continuing business, the Indemnified Party
shall have the right to defend such Legal Action, provided, however, the
Indemnified Party shall pay all legal and other expenses incurred by the
Indemnified Party in conducting such defense.
8.4.4 In any Legal Action initiated by a third party and defended by
the Indemnifying Party (i) the Indemnified Party shall have the right to
be represented by advisory counsel and accountants, at its own expense;
(ii) the Indemnifying Party shall keep the Indemnified Party fully
informed as to the status of such Legal Action at all stages thereof,
whether or not the Indemnified Party is represented by its own counsel;
(iii) the Indemnifying Party shall make available to the Indemnified Party
and its attorneys, accountants, and other representatives, all books and
records relating to such Legal Action; and (iv) the parties shall render
to each other such assistance as may be reasonably required in order to
ensure the proper and adequate defense of such Legal Action.
8.4.5 In any Legal Action initiated by a third party and defended by
the Indemnifying Party, the Indemnifying Party shall not make settlement
of any claim without the written consent of the Indemnified Party, which
consent shall not be unreasonably withheld. Without limiting the
generality of the foregoing, it shall not be deemed unreasonable to
withhold consent to a settlement involving injunctive or other equitable
relief against Vivid or its assets, employees, or business, or relief
which Vivid reasonably believes could establish a custom or precedent
which will be adverse to the best interests of its continuing business.
-17-
SECTION NINE
CONFIDENTIAL AND PROPRIETARY INFORMATION
9.1 Confidential Information. Each of the parties will treat and hold all
of the Confidential Information of the others as such, refrain from using any of
the Confidential Information except in connection with this Agreement, and
deliver promptly to the others or destroy, at the request and option of the
others, all tangible embodiments (and all copies) of the Confidential
Information which are in his, her, or its possession; provided, however, that
the parties may disclose such Confidential Information as is necessary to comply
with any information or disclosure requirements of any governmental agency. In
the event that any of the parties is requested or required (by oral question or
request for information or documents in any legal proceeding, interrogatory,
subpoena, civil investigation demand, or similar process) to disclose any
Confidential Information, the Party who has been requested to disclose such
Confidential Information (the "Withholding Party") will notify the Party whose
Confidential Information is being sought (the "Confidential Party") promptly of
the request so that the Confidential Party may seek an appropriate protective
order or waive compliance with the provisions of this Section 9.1. If, in the
absence of a protective order or the receipt of a waiver hereunder, any
Withholding Party is, on the advice of counsel, compelled to disclose any
Confidential Information to any tribunal or else stand liable for contempt, the
Withholding Party may disclose the Confidential Information to the tribunal;
provided, however, that the Withholding Party shall use his, hers, or its
reasonable best efforts to obtain, at the reasonable request of Confidential
Party, an order or other assurance that confidential treatment will be accorded
to such portion of the Confidential Information required to be disclosed as the
Confidential Party shall designate.
9.2 Definition. "Confidential Information" means any information
concerning the businesses and affairs of Vivid on the one hand and ImageWorks on
the other hand that is not already generally available to the public.
SECTION TEN
MISCELLANEOUS PROVISIONS
10.1 Survival of Representations. The representations and warranties given
under this Agreement shall be continuing and survive the Closing Date.
10.2 Modification. This Agreement may be altered or amended in whole or in
part at any time but only in a written instrument signed by the parties hereto.
10.3 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties named herein and their respective successors
and permitted assigns. Neither party may assign either this Agreement or any of
its rights, interests, or obligations hereunder without the prior written
approval of the other party.
10.4 Expenses. Vivid and Seller shall be responsible for their respective
costs and expenses incurred in connection with this Agreement.
-18-
10.5 Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the parties and supersedes any
prior understandings, agreements, or representations by or between the parties,
written or oral, to the extent they relate in any way to the subject matter
hereof. The parties acknowledge that a lease agreement for the building at 0000
Xxxxxxx Xxxxxx, Xxxxx, Xxxxxxxxxx will be executed between Vivid and the two
shareholders of Seller in their individual capacity.
10.6 Governing Law. This Agreement shall be governed by the laws of the
State of Washington.
10.7 Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties, and no presumption or burden of proof
shall arise favoring or disfavoring any party by virtue of the authorship of any
of the provisions of this Agreement. Nothing in any Schedule to this Agreement
shall be deemed adequate to disclose an exception to a representation or
warranty made herein unless the Schedule identifies the exception with
reasonable particularity and describes the relevant facts in reasonable detail.
Without limiting the generality of the foregoing, the mere listing (or inclusion
of a copy) of a document or other item shall not be deemed adequate to disclose
an exception to a representation or warranty made herein (unless the
representation or warranty has to do with the existence of the document or other
item itself). The parties intend that each representation, warranty, and
covenant contained herein shall have independent significance. If any party has
breached any representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the party has not breached shall not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty, or covenant.
10.8 Survival of Representations and Covenants. The representations and
covenants in this Agreement will not survive the termination of this Agreement
if terminated pursuant to Section 7, except that Section 10 (confidentiality)
and Section 10.4 (expense allocation) will survive such termination.
10.9 Notices. Any notice required hereunder shall be deemed to have been
validly given if delivered by certified mail, return receipt requested, postage
prepaid, and addressed to the parties at the following addresses:
If to Vivid: Xxxxxx Xxxxxx
000 Xxx Xxxxxxx
Xxxxxxxx, XX 00000
If to ImageWorks: Xxxx Xxxxxx
000 Xxxxxxxx Xxxxx Xxxxx
Xxxxxxxx, XX 00000
-19-
10.10 Severability. Should any one or more of the provisions hereof be
determined to be illegal or unenforceable, all other provisions hereof shall be
given effect separately therefrom and shall not be affected thereby.
10.11 Attorney Fees. In any action at law or in equity to enforce any of
the provisions or rights under this Agreement, the unsuccessful party of such
litigation, as determined by the tribunal in a final judgment or decree, shall
pay the successful party's or parties' costs, expenses, and reasonable attorney
fees incurred therein by such party or parties (including without limitation
such costs, expenses, and fees on any appeals), and if such successful party
shall recover judgment in any such action or proceeding, such costs, expenses,
and attorney fees shall be included as part of such judgment.
10.12 Separate Counterparts. This Agreement may be executed in separate
counterparts, which shall collectively and separately be considered one and the
same Agreement.
10.13 Mediation and Arbitration. In the event a dispute should arise under
this Agreement, as a condition precedent to arbitration, the dispute shall be
submitted first to mediation. If a party fails or refuses to participate in
mediation, or if the parties fail to resolve their dispute through mediation,
then the parties shall seek arbitration in the following manner: Arbitration
shall be commenced by one party submitting to the other party a statement of
issue(s) to be arbitrated and shall designate such party's nominated arbitrator.
The responding party shall respond with any additional or counterstatement of
the issue(s) to be arbitrated and shall designate the responding party's
arbitrator, all within fourteen (14) days after receipt of the initial notice.
If the responding party fails to designate an arbitrator, an arbitrator shall be
appointed by the Washington Arbitration & Mediation Service. The two (2)
arbitrators thus nominated shall proceed promptly to select a third arbitrator.
The arbitrators shall, as promptly as the circumstances will allow and within a
time established by a majority vote of the arbitrators, conduct a hearing on the
issues(s) submitted to them and shall render their decision in writing. Any
decisions as to procedure and substance made by a majority of the arbitration
panel shall be final and binding. A decision by a majority of the arbitrators on
any issue submitted shall be the decision of the arbitration panel as to that
issue. The arbitrators have authority to award attorney fees and costs to either
party in accordance with the merits and good faith of the positions asserted by
the parties and the terms of this Agreement. In lieu of appointing three (3)
arbitrators in the manner set forth above, the parties may, by agreement,
designate a single arbitrator. Judgment upon the award rendered by arbitration
may be entered in any court of competent jurisdiction. Each party shall pay the
cost of the arbitrator it appointed and one-half of the costs of the third
arbitrator. Except as provided herein, the arbitration proceedings shall be
conducted in accordance with the rules of the American Arbitration Association
and the statutes of the State of Washington pertaining to binding arbitration
(if any).
10.14 Publicity. With the exception of information releases required in
the normal course of business (such as regulatory filings, financial statements,
et cetera), any news releases, public announcement, advertisement, or publicity
released by either party concerning this Agreement, shall be subject to prior
approval of the other Party for a period of ninety (90) days from the date of
Closing,
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IN WITNESS WHEREOF, the parties have executed this Agreement this 25th
day of May, 2004.
VIVID LEARNING SYSTEMS, INC. IMAGEWORKS MEDIA GROUP, INC.
/s/Xxxxx X. Xxxxx /s/Xxxx Xxxxxx
--------------------------------- ----------------------------------------
Xxxxx X. Xxxxx Xxxx Xxxxxx
President & CEO President & Shareholder
"Vivid" "ImageWorks" and "Seller"
/s/Xxxx Xxxxx
----------------------------------------
Xxxx Xxxxx
Creative Director & Shareholder
"ImageWorks" and "Seller"
-21-
EXHIBIT 2.10
SELLER'S LIABILITIES
DATA AS OF 4/30/04
PAID THRU APRIL ACCRUAL
A-1 Landscaping 16-Apr $ 102.89
AT&T Wireless 5-Apr $ 164.33
Big Bend Electric 21-Apr $ 68.00
Xxxxx & Xxxxx 29-Dec $ 2,400.00
City of Pasco 19-Mar $ 115.21
Cascade Natural Gas 6-Apr $ 28.00
Nova 5-Apr $ 64.06
Safeco Insurance 22-Apr $ 978.07
Tri City Water 14-Apr $ 23.00
Visa 12-Apr $ 1,098.28
Sales Tax 30-Apr $ 58.63
B&O Tax 30-Apr $ 1,996.82
----------
$ 7,097.29
-22-
EXHIBIT 2.12
SELLER'S MATERIAL CONTRACTS
XXXXXXX NATIONAL
POP: 1/1/2004 - 12/31/2004
Current Authorized Amount: $33,500
Scope: Media production services for WTP communications
department and training material development
support for WTP training department
ADVANCEMED CORPORATION
POP: 6/1/2004 - 5/31/2006
Current Authorized Amount: $50,000
Scope: Media communications including computer based
training, e-learning, and web site development
-23-
EXHIBIT 2.15
PERSONAL LIABILITIES/CONFLICTING INTERESTS
Xxxx Xxxxxx:
1. Investment in cousin's business in Portland, OR. Cousin's business
could become a competitor of Vivid. Xx. Xxxxxx agrees to have said
business pay him back his initial investment of $15,000 + $5,000
over the next two years. Xx. Xxxxxx will not participate in any
additional financial gain of the company. Company may continue as a
reseller of ImageWorks products and services, as long as the
agreement is an "arms length" transaction between company and
reseller.
2. Serves on the board of a sales training-employee learning start-up
company in Spokane, WA. Xx. Xxxxxx shall recuse himself from this
board. As a representative of ImageWorks and Vivid Learning Systems,
Xx. Xxxxxx may pursue business development opportunities for
ImageWorks and or Vivid with start-up company.
Xxxx Xxxxx
1. Provide videos/graphic work for church using ImageWorks equipment
during off-hours.
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EXHIBIT 2.17
EMPLOYEE LIST
NAME DATE OF HIRE POSITION BASE SALARY
Xxxx Xxxxxx Inception Director of Business
Development $60,000
Xxxx Xxxxx Inception Creative Director $60,000
Xxxxxx Xxxxxxxxxx 4-15-02 Operations Manager $60,000
D'Xxxxx Xxxxxxxx 1-26-04 Programmer $30,000
Xxxx Xxxxxxx 12-0-02 Senior Video Producer $41,500
Xxxxxxxx XxXxxxx 6-1-04 Video Producer $25,000
Xxxxx Xxxxxx 4-8-02 Senior Designer $53,000
Xxxxxx X'Xxxx 8-1-01 Senior Designer/
Programmer $50,000
Xxxxx Xxxxx 1-26-04 Senior Designer $40,000
Xxxxxxx Xxxxxxxx 3-16-04 Designer/Writer $30,000
Xxx Xxxxxx 3-20-00 Photographer $19,912*
*hourly- estimated annual wage
-25-
EXHIBIT 2.18
EMPLOYEE BENEFIT PLANS
ImageWorks offers health insurance and a SEP XXX for their employees.
-26-
EXHIBIT 2.19
DEFINITIONS
"ENVIRONMENTAL, HEALTH, AND SAFETY LAWS" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C.
ss. 9601 et seq., the Resource Conservation and Recovery Act of 1976, 42
U.S.C. ss. 6901 et seq., the Occupational Safety and Health Act of 1970,
29 U.S.C. ss. 651 et seq., the Toxic Substances Control Act, 15 U.S.C. ss.
2601 et seq., the Federal Insecticide, Fungicide, and Rodenticide Act, 7
U.S.C. ss. 136 et seq., the Clean Water Act, 33 U.S.C. ss. 1251 et seq.,
the Clean Air Act, 42 U.S.C. ss. 7401 et seq., the National Environmental
Policy Act, ss. 42 U.S.C. ss. 4321 et seq., the Safe Drinking Water Act,
33 U.S.C. ss. 300 et seq., the Emergency Planning & Community
Right-to-Know Act, 42 U.S.C. ss. 11011 et seq., the Endangered Species Act
of 1973, 16 U.S.C. 1531 et seq., each as amended, or any other applicable
statute, code, enactment, ordinance, rule, regulation, permit, consent,
approval authorization, license, judgment, order, writ, common law rule
(including without limitation the common law respecting nuisance and
tortious liability), decree, injunction, or other requirement having the
force and effect of law, whether local, state, territorial, or national,
at any time in force or effect relating to:
(a) emissions, discharges, spills, releases, or threatened
releases of Hazardous Substances into ambient air, surface water,
ground water, watercourses, publicly or privately owned treatment
works, drains, sewer systems, wetlands, septic systems, or onto
land;
(b) the use, treatment storage, disposal, handling,
manufacturing, transportation, or shipment of Hazardous Substances;
(c) the regulation of storage tanks; or,
(d) otherwise relating to pollution or the protection of human
health or the environment.
"HAZARDOUS SUBSTANCES" means at any time any substance, waste,
pollutant, contaminant, or material, in solid, liquid, or gaseous form,
which:
(a) is a substance regulated or defined or designated as
hazardous, extremely or imminently hazardous, dangerous, or toxic
pursuant to any law, by any local state, territorial, or federal
governmental authority; or,
(b) is a substance with respect to which such a governmental
authority otherwise requires environmental investigation,
monitoring, reporting, or remediation including but not limited to,
(i) all substances, wastes, pollutants, contaminants,
and materials regulated, or defined or designated as
hazardous, extremely or imminently hazardous, dangerous or
toxic, under the following federal statutes and their state
counterparts, as well as these statutes implementing
regulations: the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. ss. 9601 et seq.,
the Clean Air Act, 42 U.S.C. ss. 7401 et seq., the Clean Water
Act, 33 U.S.C. ss. 1251 et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. ss. 6901 et seq., the Emergency
Planning and Community Right-to-Know Act, 42 U.S.C. ss. 11011
et seq., the Safe Drinking Water Act, 33 U.S.C. 300 et seq.,
the Federal Insecticide, Fungicide, and Rodenticide Act, 7
U.S. C. ss. 136, et seq., the Atomic Energy Act, 42 U, S. C.
ss. 2011 et seq., and the Hazardous Materials Transportation
Act, 42 U.S.C. ss. 1801 et seq.
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(ii) petroleum and petroleum products including crude
oil and any fractions thereof;
(iii) natural gas, synthetic gas, and any mixtures
thereof;
(iv) radon;
(v) radioactive substances;
(vi) asbestos;
(vii) urea formaldehyde;
(viii) polychlorinated biphenyls; and,
(ix) electromagnetic field radiation.
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EXHIBIT 2.20
LIST OF INSURANCE POLICIES & SURETY BONDS
Seller has insurance through Xxxxxxx Insurance. Policy # 02CD076598 addresses:
on-site property and equipment; the 0000 Xxxxxxx Xxxxxx, Xxxxx, XX building;
general liability; and business auto coverage.
Seller does not have any surety bonds.
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EXHIBIT 2.21
INTELLECTUAL PROPERTY
Seller does not hold any intellectual property rights with the exception of the
url associated with the business; specifically, xxxxxxxxxxxxxxxxx.xxx.
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EXHIBIT 3.7
VIVID'S LIABILITIES
N/A
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EXHIBIT A
WARRANT TO PURCHASE
SHARES OF COMMON STOCK
OF VIVID LEARNING SYSTEMS, INC.
This certifies that ______________ (the "Holder"), for value received, is
entitled to purchase from Vivid Learning Systems, Inc., a Delaware corporation
(the "Company"), a maximum of One Hundred Thousand (100,000) shares of the
Company's common stock ("Common Stock") for cash at a price of Three Dollars
($3.00) per share (the "Stock Purchase Price") at any time or from time to time
up to and including 4 p.m. (Pacific Standard Time) on December 31, 2008 (the
"Expiration Date") The Stock Purchase Price and the number of shares purchasable
hereunder are subject to adjustment as provided in Section 3 of this Warrant.
The Holder may only make an exercise of one-fourth (1/4) of the total number of
shares of Common Stock represented by this Warrant on December 31, 2004, and
thereafter an additional one-fourth (1/4) each December 31st thereafter.
This Warrant is subject to the following terms and conditions:
1. Exercise; Issuance of Certificates; Payment for shares. This Warrant is
exercisable at the option of the Holder, at any time or from time to time, up to
the Expiration Date for all or any part of the shares of Common Stock (but not
for a fraction of a share) that may be purchased hereunder. To exercise this
Warrant, Holder must surrender this Warrant to the Company at its principal
office (or at such other location as the Company may advise the Holder in
writing) together with a properly endorsed Form of Subscription attached hereto
as Exhibit A-1. Holder must also tender payment in cash or by check of the
aggregate Stock Purchase Price for the number of shares for which this Warrant
is being exercised determined in accordance with the provisions hereof. The
Company agrees that the shares of Common Stock purchased under this Warrant
shall be and are deemed to be issued to the Holder as the record owner of such
shares as of the close of business on the date on which (a) this Warrant shall
have been surrendered and properly endorsed; (b) the Form of Subscription shall
have been completed, executed, and endorsed; and, (c) the payment for such
shares shall have been delivered. Certificates for the shares of Common Stock so
purchased shall be delivered to the Holder by the Company at the Company's
expense within a reasonable time after the rights represented by this Warrant
have been so exercised. Each stock certificate so delivered shall be in such
denominations of Common Stock as may be requested by the Holder and shall be
registered in the name of such Holder. In the event of a purchase of less than
all the shares which may be purchased under this Warrant, the Company shall
cancel this Warrant and execute and deliver a new Warrant for the balance of the
shares purchasable under the Warrant surrendered upon such purchase to the
Holder within a reasonable time.
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Notwithstanding the foregoing provisions of this Section 1, the Holder
shall be entitled to the benefit of the following provisions upon the occurrence
of each of the specified events:
(i) If, at the time the Holder exercises any portion of this Warrant,
the Common Stock is publicly traded and the Stock Purchase Price is
lower than the then-current market price of the Common Stock as of
the exercise date ("Market Price"), then, in lieu of tendering
payment of the required Stock Purchase Price, the Holder may
surrender the exercised portion of this Warrant in exchange for that
number of shares of Common Stock which could be purchased that date
at the Market Price utilizing the difference obtained by subtracting
(A) the Stock Purchase Price for the shares which would have been
issued upon exercising that portion of the Warrant from (B) the
Market Price of that same number of shares as of that date.
(ii) If, at any time prior to the Expiration Date, the Company declares
an extraordinary dividend, which shall not include dividends from
earnings but rather be defined as a dividend associated with a major
asset sale wherein the dividend is made from the proceeds of said
sale and decreases the assets of the Company or is one wherein the
asset value of the Company is decreased in excess of the current
years' net earnings, to its shareholders ("Special Dividend"), then
the Holder shall be entitled to receive as of that Special Dividend
payment date a payment from the Company equal in value to the amount
that the Holder would have received from that Special Dividend if
the Holder, as of the day before the effective date of the Special
Dividend, had been issued 50% of the maximum number of shares of
Common Stock that the Holder could have acquired if it had exercised
the entire Warrant as of that date.
(iii) If, each December 31st as a portion of the Warrant becomes eligible
for exercise, should Holder elect to not exercise such right, then
the Company will cancel that portion and provide a cash payment to
Holder of Thirty-seven Thousand Five Hundred Dollars ($37,500) in
lieu of the exercise by Holder of the then eligible for exercise
portion of the Warrant. The Company shall have sixty (60) days to
make said payment after receipt of notice from Holder that they have
elected to not exercise the portion of the Warrant eligible for
exercise that December 31st. Such an election to receive a payment
instead of exercising a portion of the Warrant in one year does not
effect Holder's ability to make an exercise in a later year.
2. Shares to be Fully Paid; Reservation of Shares. The Company covenants
and agrees that all shares of Common Stock that may be issued upon the exercise
of the rights represented by this Warrant will, upon issuance, be duly
authorized, validly issued, fully paid, and nonassessable and free from all
preemptive rights of any shareholder and free of all taxes, liens, and charges
with respect to the issue thereof. The Company further covenants and agrees that
during the period within which the rights represented by this Warrant may be
exercised, the Company will at all times have authorized and reserved, for the
purpose of issue or transfer upon exercise of the subscription rights evidenced
by this Warrant, a sufficient number of shares of authorized but unissued Common
Stock, or other securities and property, when and as required to provide for the
exercise of the rights represented by this Warrant. The Company will take all
such action as may be necessary to assure that such shares of Common Stock may
be issued as provided herein without violation of any applicable law or
regulation; provided, however, that the Company shall not be required to effect
a registration under Federal or State securities laws with respect to such
exercise.
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3. Adjustment of Stock Purchase Price and Number of Shares. In the event
that the outstanding shares of the Company's Common Stock are changed into or
exchanged for a different number or kind of shares of the Company or other
securities of the Company or a successor entity by reason of merger, corporate
reorganization, recapitalization, reclassification, stock split-up, stock
dividend, combination of shares, or otherwise, the Board of Directors of the
Company, or the governing body of any successor entity, shall make an
appropriate and equitable adjustment in the number and kind of shares as to
which this Warrant is then unexercised and the Stock Purchase Price to the end
that, after such event, the shares as to which this Warrant is then unexercised
shall represent the same potential ownership interest in the Company (or that
part of the successor entity which consists of the Company) immediately after
such event as they represented immediately before such event. Any such
adjustment by the Board of Directors or such governing body shall be conclusive
and shall bind the Holder, the Company, any successor entity, and any other
interested persons.
4. No Voting or Dividend Rights; Limitation of Liability. Nothing
contained in this Warrant shall be construed as conferring upon the Holder the
right to vote or to consent or to receive notice as a shareholder of the Company
or any other matters or any rights whatsoever as a shareholder of the Company.
No dividends or interest shall be payable or accrued in respect of this Warrant
or the interest represented hereby or the shares purchasable hereunder until,
and only to the extent that, this Warrant shall have been exercised. No
provisions hereof, in the absence of affirmative action by the Holder to
purchase shares of Common Stock, and no mere enumeration herein of the rights or
privileges of the Holder, shall give rise to any liability of such Holder for
the Stock Purchase Price or as a shareholder of the Company, whether such
liability is asserted by the Company or by its creditors.
5. Representations and Warranties of Holder. The Holder represents,
warrants, and agrees:
5.1 The Holder will acquire the shares pursuant to this Warrant with
the Holder's own funds and not with the funds of anyone else. The shares
will be acquired for the Holder's own account, not as a nominee or agent
and not for the account of any other person or firm, and no one else has
or will have any interest, beneficial or otherwise, in any of the shares.
The Holder is not obligated to transfer any of the shares or any interest
therein to anyone else other than its partners nor has it any agreement or
understanding to do so. The Holder will acquire the shares, if at all, for
investment for an indefinite period and not with a view to the sale or
distribution of any part or all thereof, by public or private sale or
other disposition, and has no intention of selling, granting any
participation in, or otherwise distributing or disposing of any shares or
any interest therein.
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5.2 The Holder is (or will be at the time of any acquisition of
shares) able to bear the economic risk of any investment in shares and is
aware that the Holder must be prepared to hold any shares received for an
indefinite period and that such shares have not been registered under the
Securities Act of 1933, as amended (the "Act").
5.3 The Holder has such knowledge and experience in financial and
business matters that the Holder is capable of evaluating the merits and
risks of the prospective investment by the Holder contemplated by this
Warrant and the Holder has carefully reviewed and will carefully review
all the information regarding the Company, access to which has been or
will be accorded to the Holder hereunder, is thoroughly familiar with the
business, operations, and properties of the Company by virtue of such
review and has discussed with the officers of the Company any questions
the Holder may have had with respect to the Company. Holder has sought
outside professional advice as to any information or material it was not
competent to evaluate personally.
5.4 Without in any way limiting the Holder's representations as set
forth herein, the Holder further agrees that the Holder shall in no event
make any disposition of all or any part of or interest in this Warrant or
the shares and that the shares shall not be encumbered, pledged,
hypothecated, sold, or transferred by the Holder nor shall the Holder
receive any consideration for the shares or for any interest therein from
any person, unless and until prior to any proposed transfer, encumbrance,
disposition, pledge, hypothecation, or sale of any of the shares, either
(a) a registration statement under the securities laws with respect to the
shares proposed to be transferred is then effective; or, (b)(i) the Holder
notifies the Company of the proposed disposition, (ii) the Holder
furnishes the Company with an opinion of counsel in form and substance
satisfactory to the Company to the effect that such disposition will not
require registration of any of the shares under the Act or qualification
of the shares under any other securities law, and (iii) such opinion of
counsel shall have been concurred in by counsel for the Company and the
Company shall have advised the Holder of such concurrence.
5.5 The Holder hereby agrees to indemnify the Company and hold it
harmless from and against any and all liability, damage, cost, or expense
incurred on account of or arising out of (a) any inaccuracy in any of the
representations, warranties, or agreements set forth in this Section 5;
(b) the disposition of any shares which the Holder may receive, contrary
to the Holder's representations, warranties, and agreements set forth in
this Section 5; or, (c) any action, suit, or proceeding based on a claim
that said representations, warranties, or agreements were inaccurate or
misleading or otherwise cause for obtaining damages or redress from the
Company under the Federal or State securities laws.
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6. Miscellaneous.
6.1 The Holder understands and agrees that certificates representing
any shares received on exercise of this Warrant will bear a legend which
restricts the sale, transfer, or disposition of the shares otherwise than
in accordance with the provisions of this Warrant.
6.2 This Warrant may not be assigned by the Holder whether by
operation of law or otherwise, without the prior written consent of
Company; provided that such consent shall not required if the assignee is
a partner of the Holder and then only if such assignee acknowledges to be
bound in the future by the restriction of this 6.2.
6.2 This Warrant and any provision hereof may be changed, waived,
discharged, or terminated only by an instrument in writing signed by the
party against which enforcement of the same is sought.
6.3 Any notice, request or other document required or permitted to
be given or delivered to the Holder or the Company shall be delivered or
shall be sent by certified mail, postage prepaid, to such Holder at its
address as shown on the books of the Company or to the Company at its
principal office or such other address as either may from time to time
provide to the other.
IN WITNESS WHEREOF, the parties have signed this Warrant as of the date
below.
VIVID LEARNING SYSTEMS, INC. [NAME OF WARRANT HOLDER]
------------------------------------- --------------------------------------
Xxxxx X. Xxxxx [Insert Name of Warrant Holder]
President & CEO An Individual
"Company" "Holder"
Date: Date:
-------------------------------- ---------------------------------
-00-
XXXXXXX X-0
SUBSCRIPTION FORM
Date: _________
The undersigned hereby elects to exercise the warrant issued to it by
Vivid Learning Systems, Inc. (the "Company"), dated May ________, 2004 (the
"Warrant") and to purchase thereunder ___________ shares of the Common Stock of
the Company (the "Common Stock") at a purchase price of Three Dollars ($3.00)
per share for an aggregate purchase price of Dollars ($________________) (the
"Purchase Price").
Pursuant to the terms of the Warrant the undersigned has delivered the
Purchase Price herewith in full in cash or by certified check. The undersigned
also makes the representations set forth in Section 5 of the Warrant.
-------------------------------------------
[Insert name of warrant holder]
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