1
Exhibit 2.1
ASSET PURCHASE AGREEMENT
DATED: December 17, 1996
BETWEEN: Protection One Alarm Monitoring, Inc.,
a Delaware corporation
0000 X.X. Xxxxxx Xxxx.
Xxxxxxxxx, Xxxxxx 00000 ("Buyer")
AND: Xxxxxxxx Electronics, Inc.
0000 X.X. Xxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxx 00000 ("Seller")
AND: Xxxxxx X. Xxxxxxxxx and Xxxxxxx X. Xxxxxxxxx, Trustees
of the XXXXXXXXX LIVING TRUST dated November 21, 1989,
and any amendments thereto
0000 Xxxxx Xxxx Xxxxx
Xxxxxxxxxxx, Xxxxxx 00000 ("Stockholder")
AND: Xxxxxx X. Xxxxxxxxx, also known as
Xxxxxx X. Xxxxxxxx
0000 Xxxxx Xxxx Xxxxx
Xxxxxxxxxxx, Xxxxxx 00000 ("Chairman")
Seller owns and operates a business engaged in the sale or
leasing, installation, maintenance and monitoring of alarm systems (the "Alarm
Systems") for residential and commercial customers (the "Business"). Buyer
desires to acquire certain of Seller's assets used in connection with the
Business, and Seller desires to sell such assets, all on the terms and subject
to the conditions contained in this Agreement. In addition, Seller and
Chairman are willing to enter into nonsolicitation and noncompetition covenants
as set forth in this Agreement.
Therefore, the parties agree as follows:
1. Definitions. The following terms shall be defined as follows:
1.1 The term "Accounts Receivable" means all obligations
for alarm, fire, surveillance, monitoring or access services invoiced by Seller
to Customers as of the Closing, created in the ordinary course of Seller's
business. An aging of Accounts Receivable, including the next billing date for
each Customer, which is current through not more than five (5) days prior to
the Closing Date will be attached to the Addendum to this Agreement as EXHIBIT
1.1 and incorporated herein.
1.2 The term "Assets" means the Customer Accounts,
Telephone Lines, Equipment, Buyer's Work in Progress and Other Property being
sold to Buyer by Seller. Accounts Receivable shall be retained by Seller and
are not included in the Assets.
1.3 The term "Closing" or "Closing Date" means January 3,
1997, or such later date which immediately follows the effective date of the
Registration Statement described in Section 2.5, when the closing of the
purchase and sale of the Assets is consummated.
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1.4 The term "Closing Value" means the average per share
closing price of Protection One, Inc.'s shares of common stock for the ten (10)
trading days ending two (2) trading days prior to the Closing Date.
1.5 The term "Customer" means any person, business,
corporation or other entity that has a Customer Account with the Seller for the
provision of alarm, fire, surveillance, monitoring or access services.
1.6 The term "Customer Accounts" means alarm contracts,
including all Alarm System equipment for the provision of alarm, fire,
surveillance, monitoring or access services owned by Seller, and goodwill
related thereto, and any and all related agreements, records and files for
sale, deferred purchase, installation, maintenance, servicing and/or monitoring
of Alarm Systems between Seller and its Customers. The Alarm System equipment
for each Customer Account has been installed and to the best of Seller's
knowledge is operational, except as to the Buyer's Work in Progress described
in EXHIBIT 1.13. All of the Customer Accounts which are included in the
determination of the QRR are described in EXHIBIT 1.6A, which is attached
hereto and incorporated herein. The Customer Accounts described in EXHIBIT
1.6B, which will be attached hereto and incorporated herein, are not included
in the determination of QRR and may also be referred to as the "Unqualified
Accounts." The Unqualified Accounts will include the agreements and records
for those Customers of Seller for which Seller does not perform monitoring
services, but for which Seller performs repair and other service work on a time
and materials basis. Unless expressly stated to the contrary, all other
references in this Agreement to the "Customer Accounts" shall mean the Customer
Accounts described in EXHIBITS 1.6A AND 1.6B.
1.7 The term "Equipment" means all vehicles, inventory
and equipment which are owned by Seller and described in EXHIBIT 1.7, which is
attached hereto and incorporated herein.
1.8 The term "Execution Date" means the date on which
this Agreement is signed by the parties, which is anticipated to be December
17, 1996, or such other date mutually agreed to by the parties.
1.9 The term "Other Property" means Seller's trademarks,
patents, tradenames and intellectual property rights.
1.10 The term "Qualified Recurring Revenue" ("QRR") means
the gross monthly recurring revenue of the Customer Accounts for the deferred
purchase or servicing of Alarm Systems and for providing monitoring, fire,
surveillance and access control services as of the Execution Date. QRR shall
only include those recurring amounts derived from Customer Accounts that are:
(i) provided service pursuant to Seller's standard contract forms to which
there have been no material alterations as to any Customer; (ii) billed as
stipulated in the applicable written agreement between Seller and its Customer;
(iii) not more than ninety (90) days past due as of the Execution Date;
provided however, that certain regular slow paying Customer Accounts which are
more than ninety (90) days past due shall be acceptable to Buyer for inclusion
in QRR and shall be identified in EXHIBIT 1.6A as "Slow Pay Accounts;" (iv)
assignable to Buyer without the consent of any third party or for which consent
has been obtained prior to the Execution Date; and (v) in effect on the Closing
Date, and as of the Closing Date had not been canceled and with respect to
which no notice of cancellation had been received. QRR shall not include any
amounts derived from or which are expected to be derived from: (a)
reimbursement for or prepayment of private line telephone line charges
associated with any monitored Customer
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Account; (b) reimbursement for or prepayment of any false alarm assessment; (c)
reimbursement for or prepayment of any amounts equal to taxes, fees, monitoring
charges or other charges imposed by any governmental authority relative to the
furnishing of alarm services; (d) services to be provided under any written
agreement, which by its terms is terminable and has been terminated by Seller's
Customer as a result of the consummation of the transaction contemplated
hereby; (e) time and material service revenue, or other revenues that are not
received on a regular and recurring basis; or (f) charges paid to Seller or
third party response agencies for patrol or alarm response.
1.11 The term "Telephone Lines" means Seller's interest in
all of the telephone lines, voice service lines, call back lines and numbers on
which the Customer Accounts are being monitored or which are otherwise used or
owned by Seller in connection with the Business. The telephone line accessed
by (000) 000-0000, which is not used for monitoring any of the Customer
Accounts, will be referred to herein as the "Business Line." All of the
telephone numbers for the Telephone Lines are listed in EXHIBIT 1.11, which
will be attached hereto and incorporated herein.
1.12 The term "Unearned Revenue" means (i) all Accounts
Receivable billed by Seller for services to be rendered after the Closing Date
to the Customer Accounts by Buyer; (ii) all payments and deposits received by
Seller prior to the Closing for services to be rendered or work to be performed
after the Closing Date for the Customer Accounts by Buyer. Unearned Revenue
will be prorated as of the close of business on the Closing Date. The Unearned
Revenue is set forth in EXHIBIT 1.12, which will be attached hereto and
incorporated herein.
1.13 The term "Buyer's Work in Progress" means the orders
for servicing, repair or maintenance of alarm systems or for providing alarm
services received by Seller as of the Closing Date and such upgrades, add-ons
or replacements of alarm system equipment which Seller in the normal course of
its business does not schedule its installation department to perform and which
have not been completed by Seller as of the Closing Date. The Buyer's Work in
Progress as of the Closing Date, including a description of all further work
which needs to be performed by Buyer after the Closing Date, all amounts
received by Seller prior to the Closing Date relating to the Buyer's Work in
Progress and all amounts which will be due and owing after the Closing Date
relating to the Buyer's Work in Progress are described in EXHIBIT 1.13, which
will be attached to the Addendum to this Agreement and incorporated herein.
1.14 The term "Seller's Work in Progress" means the sales
leads, referrals and orders for the installation, upgrades, add- ons and
replacements of alarm system equipment which Seller in the normal course of its
business schedules its installation department to perform and is described in
EXHIBIT 1.14, which will be attached to the Addendum to this Agreement and
incorporated herein.
1.15 The term "Prepaid Expenses" means the expenses
described in EXHIBIT 1.15, which will be attached to the Addendum to this
Agreement and incorporated herein, which have been paid by Seller prior to the
Closing Date in relation to Assets and which will benefit Buyer after the
Closing Date. The Prepaid Expenses will be prorated as of the Closing Date.
2. Purchase and Sale of Assets.
2.1 Sale of Assets. Seller agrees to sell to Buyer, and
Buyer agrees to purchase from Seller, in accordance with the terms of this
Agreement on the Closing Date all of Seller's right, title and interest in all
Assets.
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2.2 Assumption of Monitoring, Support Services and Other
Obligations.
2.2.1 Assumption. As of the Closing, Buyer agrees
to assume and accept the assignment of Seller's duties and obligations (i) to
perform monitoring services and support services described in Section 2.2.2
("Support Services"), pursuant to the Customer Accounts to the extent such
obligations relate to performance after the Closing Date and agrees to perform
such obligations when due for all Customer Accounts; and (ii) to complete
performance of all Buyer's Work in Progress described in EXHIBIT 1.13 to the
extent such obligations relate to performance after the Closing Date. In
addition, Buyer agrees to sublease Seller's business premises located at 0000
X.X. Xxxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxx 00000 from and after the Closing Date
for six (6) months, at the end of which Buyer shall have the option to continue
to sublease the premises on a month-to-month basis for up to one year after the
Closing Date. The form of sublease agreement is attached hereto as EXHIBIT
2.2.1.
2.2.2 Support Services. Except as otherwise set
forth herein, Buyer shall provide the following Support Services after the
Closing Date with regard to the Customer Accounts: (a) install additional
equipment as requested by any Customer; (b) provide all warranty services
requested by the Customer for equipment located on the premises of each
Customer after the Closing Date in accordance with the applicable warranty
terms of the Customer Account; (c) respond to notices of equipment failure or
requests for service from the Customer; (d) monitor each Customer Account; and
(e) any other duties and obligations arising on or after the Closing Date
pursuant to the written agreements with the Customers.
2.2.3 No Other Liabilities. Except as provided in
Section 2.2.1, Buyer does not, and will not, assume, or be deemed to assume,
under this Agreement or otherwise, any debt, liability or obligation of Seller
or Stockholder of any nature whatsoever, whether arising by tort or contract or
otherwise, including, without limitation, (a) liability arising out of actions
or omissions of Seller prior to or after the applicable Closing Date; (b)
liability resulting from breach of contract arising out of actions of Seller or
as a result of the sale of the Assets pursuant to this Agreement; (c) liability
in connection with contracts not assumed by Buyer under this Agreement or in
connection with obligations under the Customer Accounts where performance was
required prior to the applicable Closing Date; (d) liability of Seller for any
taxes, including sales or use taxes arising in connection with the sale or
leasing of Alarm System equipment by Seller prior to the Closing Date; (e) any
liability in connection with representations, promises or warranties made by
Seller to Customers which are not described in the written Contracts with
Customers, forms of which are attached hereto in EXHIBIT 4; and (f) subject to
the provisions contained in Section 7.2 hereof, liability in connection with
any of Seller's employees, including salaries, benefits, commissions or any
employee benefit plan of Seller. All liabilities of Seller that are not
assumed by Buyer hereunder shall be paid, performed and discharged by Seller.
2.3 Purchase Price; Payment; Adjustments.
2.3.1 Amount. At the Closing the purchase price
("Purchase Price") for the Assets purchased hereunder shall be calculated as
follows:
(a) The base purchase price is $15,000,000.00;
(b) Less: Unearned Revenue determined on the Execution Date
in the sum of $530,000;
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(c) Plus: Sublease payments for the
six-month term in the sum of $24,000.00;
(d) Less: The value of Seller's Work in
Progress, determined at the Closing based upon the formula set forth in Section
2.3.3;
(e) Less: The amount of salary, wages
and other compensation which Buyer shall pay to the employees of Seller who are
hired by Buyer for the period starting as of January 1, 1997 through the
Closing Date; and
(f) Plus: The amount of the Prepaid
Expenses determined at the Closing.
Subject only to Seller's inability to transfer the Assets to Buyer at Closing
or the material breach of Seller's representations and warranties, the portion
of the Purchase Price set forth in subsections (a) through (c) of this Section
2.3.1. shall not be changed or reduced after the Execution Date, except for
adjustments, if any, pursuant to Sections 2.6 and 13. The amount of the
Purchase Price as of the Closing Date shall be documented in an Addendum to
this Agreement and signed by all of the parties. Notwithstanding anything to
the contrary contained herein, this Agreement is a valid and binding agreement
of the parties as of the Execution Date, subject only to the conditions to
Closing set forth in this Agreement and determination of the Purchase Price on
the Closing Date.
2.3.2 Allocation. The Purchase Price shall be
allocated among the Assets as specified in the attached EXHIBIT 2.3.2, which
will be attached to the Addendum and incorporated herein. After the Closing,
the parties agree to make consistent use of the allocation, fair market value
and useful life specified in EXHIBIT 2.3.2 in any and all filings, declarations
and reports with the Internal Revenue Service in respect thereof, including
without limitation the reports required to be filed under Section 1060 of the
Internal Revenue Code of 1986, as amended, if applicable.
2.3.3 Seller's Work in Progress. The value of the
Seller's Work in Progress retained by Seller will be subtracted from the base
purchase price amount and will be determined at Closing, in accordance with the
following formula:
Installation, add-on and upgrade revenue minus sales
commission, labor and material costs (hook-up costs) = Net
Installation Revenue
Determine the QRR for the new installations and the increase
in QRR from the upgrades or add-ons multiplied by 28 = Gross
QRR Revenue
(Gross QRR Revenue plus Net Installation Revenue) multiplied
by two-thirds = Amount of the Base Purchase Price Reduction.
Seller's Work in Progress will be retained by Seller and will not be sold to
Buyer pursuant to this Agreement; however, upon completion of the Seller's Work
in Progress, those customer accounts will be sold to Buyer pursuant to the
Dealer Agreement described in Section 16 hereof.
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2.4 Payment of Purchase Price. The Purchase Price shall
be paid as follows:
2.4.1 Closing Date Payment. On the Closing Date,
Buyer shall pay to Seller ninety percent (90%) of the Purchase Price (the
"Closing Date Payment") as follows:
(a) On execution of the Letter of Intent
for this transaction, Buyer paid to Seller a deposit in the sum of $100,000.00
by check (the "Deposit"), which shall be credited against the Purchase Price.
(b) On the Closing Date, Buyer shall pay
to Seller the sum of $2,000,000.00 in common stock of Protection One, Inc. (the
"Pro One Stock") based upon the Closing Value for such stock, which Pro One
Stock shall be subject to an effective Registration Statement. Rather than
issue fractional shares of Pro One Stock, Buyer will pay to Seller in cash the
amount of any fractional shares to which Seller would be entitled.
(c) On the Closing Date, Buyer shall pay
to Seller the balance of the Closing Date Payment by wire transfer.
2.4.2 Deferred Payment. On the Closing Date, Buyer
shall pay to Xxxxxxx, Xxxx & Xxxxxx ("Escrow Agent"), in trust, the remaining
ten percent (10%) of the Purchase Price. Escrow Agent shall pay such amount
to Seller, subject to adjustments in accordance with Section 2.6 (the
"Deferred Payment") on or before the ninetieth (90th) day after the Closing
Date (the "Deferred Payment Date") in accordance with the terms and conditions
set forth herein and in the Escrow Agreement, which shall be mutually agreed to
by Seller, Buyer and Escrow Agent.
2.5 Registration of Pro One Stock. Prior to the Closing
Date, Buyer shall cause Protection One, Inc. ("Parent") to file a Registration
Statement on Form S-3 registering the offer and sale by Seller from time to
time of the Pro One Stock delivered to Seller under this Agreement. To
evidence the obligation of Parent to register the Pro One Stock, Parent and
Seller shall enter into a Registration Rights Agreement defining their
respective rights and responsibilities with respect to the Pro One Stock and
Seller shall execute and deliver to Buyer an Affidavit verifying the status of
Seller as an "accredited investor" within the meaning of Rule 501(a)(1) of
Regulation D promulgated by the Securities and Exchange Commission under the
Securities Act of 1933, as amended, a copy of the forms of which are attached
hereto as EXHIBIT 2.5 and by this reference incorporated herein.
2.6 Closing Date Adjustments. Within sixty (60) days
after the Closing, Buyer will deliver to Seller a schedule setting forth its
calculation of the Unearned Revenue ("Closing Unearned Revenue"), calculated as
of the Closing Date, and the basis for any set offs based on the
indemnification provisions set forth in Section 13 hereof, together with a
certificate signed by an officer of Buyer that the schedule has been prepared
in accordance with the terms and provisions of the Agreement. The parties
agree that any adjustments to the Unearned Revenue shall be based upon either
human or mathematical errors in the calculations made as of the Execution Date,
and not on any change in the formula for calculating Unearned Revenue. Seller
and Stockholder shall provide to Buyer, in Seller's office, any books and
records in their possession, which are reasonably requested by Buyer within
thirty (30) days after the Closing in order to prepare such schedule. Buyer
shall be entitled to an extension of time in which to deliver the schedule
required hereunder to Seller for each day after the forty-fifth (45th) day
after the Closing Date that Seller delays in providing information, books or
records requested by Buyer. The Purchase Price, Closing Date Payment and
Deferred Payment shall be adjusted upwards or
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downwards accordingly based upon any changes in the Closing Unearned Revenue
compared to the Unearned Revenue used to calculate the Purchase Price at
Closing and on any set offs under the indemnification provisions set forth in
Section 13 hereof. If Seller has any questions or raises any disputes
regarding any of the adjustments in the Purchase Price, Seller and Buyer shall
use their best efforts to resolve such questions or disputes, and Buyer shall,
at Seller's request, provide to Seller within 15 days its work papers and
supporting documents relating to any adjustments and make available to Seller
all material information and documents relied upon by Buyer in its calculations
as reasonably requested by Seller.
2.7 Instruments of Conveyance and Transfer. Seller shall
deliver to Buyer at the Closing such instruments of transfer, including bills
of sale and assignments in form and substance reasonably satisfactory to Buyer
as shall be effective to vest in Buyer all of the right, title and interest of
Seller in and to the Assets and letters of agency and supersedure forms for
transfer to Buyer of the Telephone Lines on which the Customer Accounts are
currently being monitored and on which the Business of Seller is carried on.
Seller will execute such other documents reasonably requested by Buyer and do
any further acts or things reasonably necessary to cause all of the Customer
Accounts to be connected to Buyer's central monitoring station within six (6)
months after the Closing and to put Buyer in possession and control of the
Assets.
2.8 Invoicing, Servicing, and Collection by Buyer. After
the Closing Date, Buyer is authorized to notify the Customer Accounts and
Buyer's Work in Progress customers to make all further payments for services to
be rendered or performed on and after the Closing Date directly to Buyer and
payable to the order of Buyer, except as to xxxxxxxx of Seller for Accounts
Receivable or other invoices which comprise the Unearned Revenue. If payments
due to Buyer are made payable to the order of Seller, Buyer is hereby
irrevocably appointed as Seller's attorney-in-fact to endorse any checks,
orders or other payment instruments in connection with each Customer Account or
Buyer's Work in Progress customer. If any payment or portion of a payment
received by Buyer is due to Seller for payment of any invoice for the Customer
Account issued by Seller prior to the Closing Date, then Buyer shall remit to
Seller the amount due to Seller within ten (10) days of receipt of the payment.
Seller shall remit to Buyer any payment or any portion of a payment due to
Buyer and made to Seller after the Closing Date within ten (10) days of receipt
of the payment. Buyer is also authorized to xxxx or invoice Customers for all
amounts due and to become due to Buyer under the Customer Accounts for services
to be rendered or performed after the Closing Date or due to Buyer under the
Buyer's Work in Progress agreements; except that Buyer shall not xxxx, invoice,
compromise, adjust or grant extensions as to any amounts due to Seller. Seller
is also authorized to xxxx or invoice Customers to collect all invoices issued
prior to the Closing Date and due to Seller under the Customer Accounts or
Buyer's Work in Progress agreements and to take reasonable collection action in
compliance with all material laws, statutes and regulations; provided however,
that in connection with its collection activities, Seller shall not threaten or
imply that a Customer Account can be canceled or terminated by Seller and
Seller agrees to consult with Buyer in connection with collecting Accounts
Receivable which are more than 120 days past due. Except as to any amounts due
to Seller, Seller shall not from and after the Closing Date have authority to,
and will not, without Buyer's prior written consent, accept, negotiate or
deposit payments or other amounts due in connection with the Customer Accounts.
3. Bulk Sales. Buyer hereby waives compliance by Seller with
respect to any applicable bulk sales or similar laws of any jurisdiction in
connection with the sale of the Assets to Buyer, and Seller agrees to indemnify
Buyer and to save and hold Buyer harmless from, for and against any liability,
damage, loss or deficiency (including reasonable attorney's fees) which Buyer
may suffer or sustain as a result of any claims made by creditors of Seller
against Buyer
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("Creditor's Claim"). In the event of a Creditor's Claim, Buyer shall so
notify Seller in writing and Seller shall have thirty (30) days in which to
satisfy or discharge the Creditor's Claim if it can be satisfied or discharged
within thirty (30) days. If the Seller disputes the Creditor's Claim, Seller
shall proceed to resolve such dispute with reasonable diligence, keeping Buyer
informed of Seller's progress. If the Creditor's Claim interferes with or
restricts Buyer's use of any of the Assets, and it is not resolved or
discharged within thirty (30) days by Seller, Buyer may resolve or discharge
such Creditor's Claim and shall be indemnified by Seller.
4. Representations, Warranties and Agreements of Seller. Except
as otherwise set forth or described on EXHIBIT 4 ("Seller's and Stockholder's
Disclosure Exhibit") or any other Schedule or Exhibit attached hereto,
Stockholder represents and warrants as to Sections 4.2, 4.15 and 4.27 and
Seller agrees, represents and warrants as follows:
4.1 Corporate Status of Seller and Status of Stockholder.
Seller is a corporation duly organized and validly existing under the laws of
the State of Oregon, does not have any subsidiaries and does not own any
securities of, or have any proprietary interest in, any other entity. Seller,
as a result of the character and location of the Assets and the nature of the
business conducted by it, will qualify to conduct business in Washington as a
foreign corporation within thirty (30) days after the Execution Date. Seller
has full corporate power and corporate authority to own, or hold under lease,
the Assets. Stockholder is a trust validly existing under the laws of the
State of Oregon. Xxxxxx Xxxxxxxxx and Xxxxxxx Xxxxxxxxx are the sole trustees
of the trust, which owns all of the issued and outstanding shares of stock of
Seller.
4.2 Authorization of Seller and Stockholder; No Adverse
Consequences. This Agreement has been duly executed and delivered by Seller
and Stockholder and constitutes a valid obligation legally binding on Seller
and Stockholder and is enforceable against Seller and Stockholder in accordance
with its terms, except as enforceability may be limited or affected by
applicable bankruptcy, insolvency, reorganization or other laws of general
application relating to or affecting the rights of creditors and except as
enforceability may be limited by rules of law governing specific performance,
injunctive relief or other equitable remedies. The execution, delivery and
performance of this Agreement by Seller and Stockholder and the consummation of
the transactions contemplated hereby by Seller and Stockholder do not and will
not conflict with, or result in a breach, default, violation or loss of a
material benefit under any agreement, mortgage, lease, license or other
instrument or obligation of Seller and Stockholder in connection with the
operation of the Business or any of the Assets; do not and will not require the
consent or permission of any person or governmental agency; and do not and will
not violate any law, rule or regulation of any agency or governmental body to
which Seller is, or Stockholder are, subject and that is individually or in the
aggregate material to the transactions contemplated hereby. No registration,
declaration or filing with any governmental or administrative authority is
required on the part of Seller and Stockholder in connection with the
execution, delivery and performance of this Agreement.
4.3 Title to Assets. Seller has good and valid title to
the Assets, free and clear of all liens, claims, charges or other encumbrances,
with full lawful right, power, capacity and authority to sell, assign, transfer
and deliver the Assets to Buyer pursuant to this Agreement and to consummate
the transactions contemplated hereby, and there are no agreements, arrangements
or understandings restricting or otherwise relating to the transfer of the
Assets. At the Closing, Buyer will receive good and valid title to the Assets,
free and clear of all liens, claims, charges or other encumbrances of any
nature whatsoever.
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4.4 Financial Statements. Seller has heretofore
delivered to Buyer a copy of Seller's balance sheet dated as of December 31,
1995 and an internally prepared income statement for the month of October, 1996
("Financial Statements"), copies of which are included in EXHIBIT 4. The
Financial Statements accurately present the financial position, results of the
operations and the changes in financial position of Seller for the periods
indicated; were accurately prepared from the books and records of Seller in
accordance with the accounting policies then in effect; and have been prepared
on a consistent basis with past periods, all subject to year-end adjustment,
which adjustment in the aggregate shall not materially affect the results
contained therein.
4.5 Changes in Business. Except as expressly allowed or
contemplated by this Agreement, since the date of the Financial Statements,
Seller has conducted its business in the ordinary course and there has not
occurred:
(i) Any change, effect or occurrence that has, or
is reasonably likely to have, individually or in the aggregate, a material
adverse impact on (i) the condition (financial or otherwise) or prospects of
Seller, its business or the Assets, or (ii) the operation of the business
before or after the Closing Date or the ownership or other use of the Assets by
Buyer and Seller thereafter.
(ii) Any acquisition, sale or disposition of
property or assets by or of Seller, except in the ordinary course of business;
(iii) Any entry into, amendment of, relinquishment,
termination or non-renewal by Seller of any Contracts, lease transaction,
commitment or other right or obligation other than in the ordinary course of
business; or
(iv) Any agreement or arrangement made by Seller
to take any action after the date hereof which, if taken prior to the date
hereof, would have made any representation or warranty set forth in this
Section 4.5 untrue or incorrect as of the date hereof.
4.6 Taxes. Seller has duly and timely filed all tax
reports and returns required to have been filed on or before the Closing Date,
and such returns as filed are true and correct in all material respects. All
federal, state, local and foreign income, receipts, profits, franchise, sales,
use, occupation, real and personal property, excise, employment or other taxes
(including interest and penalties of Seller) required to have been paid on or
before the Closing Date, whether or not assessed, have been or shall be fully
paid on or prior to the due date thereof. The accrual for taxes reflected in
the most recent balance sheet included in the Financial Statements shall be in
the aggregate adequate to cover any and all federal, state, local or foreign
tax liabilities (including interest and penalties), whether or not disputed,
for which Seller may be liable for the period ended as of the Closing Date and
all prior periods. Seller has never filed a consolidated, combined or unitary
tax return with any other person or entity. There is no unpaid interest,
penalty or addition to tax due or claimed to be due from, or any unpaid tax
deficiency, determination or assessment outstanding against Seller or any basis
therefor known to Seller. There are no tax liens on, pending against or, to
the best knowledge of Stockholder, threatened against Seller or its Assets.
Seller has not filed a consent under Section 341(f)(1) of the Internal Revenue
Code of 1986, as amended.
4.7 No UL Deficiencies. Seller's central station located
at 0000 X.X. Xxxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxx 00000, has been approved and
listed by Underwriters' Laboratory ("UL") and is not subject to any
deficiencies with respect thereto, including but not limited to any
deficiencies in any verbal or written report received by Seller in connection
with an inspection
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of such central station facility and UL certificated systems, if any, on or
about September 1, 1996. All required fire inspections with respect to each
fire alarm system installed at the premises of Seller's Customers have been
performed as required in accordance with the obligations and commitments of
Seller to UL and/or to any applicable insurance rating organization. All UL
certificates issued by Seller for alarm systems installed at the premises of
Seller's Customers have been properly issued and the systems for which such
certificates have been issued comply in all material respects with all of the
UL specifications and standards for such systems and Stockholder are not aware
of any outstanding deficiencies.
4.8 Employees. Seller does not have any collective
bargaining agreement with any labor union, and no labor union has requested or,
to the knowledge of Seller, has sought to represent any of the employees,
representatives or agents of Seller. Seller has provided Buyer with a complete
list of all of Seller's employees, including their base compensation and bonus
compensation.
4.9 Form Contracts. Included in EXHIBIT 4 is a true and
correct copy of each type of form contract Seller has in effect with each of
its Customers for alarm system sales, deferred purchases and alarm monitoring,
surveillance, access and other alarm services (the "Contract" or "Contracts").
Seller has not modified, except in a writing disclosed to Buyer, any of the
Contracts and has not undertaken any obligations or made any warranties,
agreements or guarantees to any Customers other than those set forth in the
Contracts. Seller has not entered into any other type of service or purchase
contract with its Customers nor is Seller obligated to render monitoring,
surveillance, access or extended maintenance services to any of its Customers
other than pursuant to a Contract, except time and materials service. Each
Contract which Seller has with its current Customers is fully executed, valid,
in full force and effect and enforceable in accordance with its terms and meet
all of the requirements for purchase set forth in the definition of QRR set
forth in Section 1.10 (less any applicable deductions required thereunder).
Seller is not in default or material violation of any Contracts with its
Customers. Except as disclosed in EXHIBIT 4 and except for the deferred
purchase agreements, Seller does not have any warranty obligations which exceed
in time or scope a one (1) year parts and labor warranty which commence from
the date of installation of each alarm system. On the Closing Date, Seller
shall have possession of all original monitoring and deferred purchase
contracts with Customers and such other documents and information which Buyer
will need and may reasonably require to perform monitoring, surveillance,
access, repair, servicing and other alarm services requested by Customers or
required to be provided pursuant to the Contracts.
4.10 Increase in Fees. Since September 1, 1996, Seller
has not increased recurring monitoring charges or service charges payable by
Seller's retail Customers, other than for additions or changes in services or
protection.
4.11 No Defaults. Seller is not in default, or alleged to
be in default under any material agreement, license or obligation relating to
the Assets. Except for delinquent payments by some of the Customers, no other
party to any such agreement, license or obligation is in default thereunder and
there exists no condition or event which, after notice or lapse of time or
both, would constitute a default by any party to any such agreement, license or
obligation.
4.12 License and Permits. Seller and its employees have
all material governmental licenses and permits (federal, state and local)
necessary for the conduct of the business as now carried on by the Seller, and
such licenses are in full force and effect. Copies of all of Seller's licenses
are included in EXHIBIT 4. No violations are or have been recorded and Seller
is not aware of any unrecorded violations in respect of any such licenses or
permits of
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11
Seller and no proceedings are pending or to Stockholder's knowledge threatened
concerning the revocation or limitation of any such license or permit of
Seller.
4.13 Compliance With Laws. Seller has complied with all
material laws, rules, regulations and orders applicable to the operation of the
business conducted by the Seller. Seller has not received notice nor taken any
action or failed to take any action which action or failure will or would, in
any way, preclude or prevent Buyer from using the Assets after the Closing in
the same manner as theretofore used by the Seller.
4.14 Litigation. There are no claims, litigation,
proceedings or investigations pending or threatened against Seller. Included
on EXHIBIT 4 is a list of all the incidents in the past two (2) years where a
Customer or third party alleged damages in excess of One Thousand Dollars
($1,000), which is alleged to result from a failure of an alarm system or
Seller's service, and whether Seller has reported such incident to its
insurance carrier. No insurance carrier, which has had any such incident
reported to it, has made a reservation of rights or denial of coverage with
respect to such incident.
4.15 Brokers. Seller and Stockholder have not employed
any broker, finder or agent or dealt with anyone purporting to act in such
capacity or agreed to pay any brokerage fee, finder's fee or commission in
connection with the transactions contemplated by this Agreement.
4.16 Insurance. Seller has in full force and effect the
policies of automobile liability insurance and commercial general liability
insurance including errors and omissions coverage ("Liability Insurance"), a
copy of which Liability Insurance policy is included in EXHIBIT 4. All of the
Contracts are covered by Seller's Liability Insurance for negligence claims.
Seller is not in default and no event has occurred (or failed to occur) that,
with the passing of time or the giving of notice or both would constitute a
default by Seller under any such policy of insurance, or would entitle the
insurer under such insurance to deny coverage of any claim against Seller.
Seller has had uninterrupted Liability Insurance coverage in full force and
effect for at least two years prior to the Closing Date.
4.17 Receivables. The Accounts Receivable arose in the
ordinary course of business and are valid receivables reflecting sums due for
the provision of goods and services by Seller pursuant to the Customer Accounts
or agreements for performing Buyer's Work in Progress or Seller's Work in
Progress.
4.18 Monitoring. All of the Customer Accounts that are
monitored are being monitored on the Telephone Lines which are owned and
controlled by Seller and no other alarm accounts owned by any third parties are
monitored on the Telephone Lines. Seller is currently performing the
monitoring for all of the Customer Accounts and none of the Customer Accounts
are being monitored by a third party, except (a) the Scan Alert Customer
Accounts which are being monitored by Alltec Security Systems on a
month-to-month oral contract; (b) less than 10 Customer Accounts are being
monitored by Alarm Central Station pursuant to an agreement which is terminable
upon giving 30 days notice; (c) less than 10 Customer Accounts which have
Module Alarm Systems equipment and are monitored by Seller; and (d) 2 radio
accounts which are monitored by Seller. Except for the Customer Accounts
described in subsections (a), (b), (c) and (d) of this Section 4.18, none of
the Customer Accounts need to be reprogrammed in order for Seller to transfer
the monitoring to Buyer's monitoring facility. Seller also has a few elevator
phone lines which Seller is monitoring.
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4.19 Equipment. All of the Equipment is in good working
order and condition, ordinary wear and tear excepted. All of the inventory
included in the Assets is new, and not used or refurbished.
4.20 Location of Alarm Account Customers. All of the
Alarm Account Customers are located in Idaho, Arizona, California, Nevada, New
Mexico, Oregon and Washington ("Buyer's Existing Market").
4.21 Consents and Approvals. Seller has obtained all
consents, authorizations or approvals of any third parties required in
connection with the execution, delivery or performance of this Agreement by
Seller and the consummation of the transactions contemplated hereby.
4.22 Alarm System Equipment. To the best of Seller's
knowledge, Seller has completed installation of the Alarm System equipment on
the premises of each Customer Account for which Seller was responsible for
completing the installation, and such equipment meets all specifications
required by the applicable Customer Account. To the best of Seller's
knowledge, the Alarm System equipment installed by Seller for the Customer
Accounts and for the Buyer's Work in Progress and Seller's Work in Progress has
been installed in substantial accordance with good and workmanlike practices
prevailing in the industry at the time of installation and in compliance in all
material respects with applicable laws, rules, regulations and codes at the
time of its installation.
4.23 Intangibles. Included in EXHIBIT 4 is a list of the
Intangibles presently owned or utilized by Seller and included in the Assets.
As used herein, the term "Intangibles" means fictitious business names,
trademarks, service marks, trade names, patents, copyrights, registrations,
software licenses or applications with respect thereto and licenses or rights
under the same. Seller has not granted any license or other permission to
anyone else with respect to any Intangible. No claim has been asserted against
the Seller alleging infringement of any Intangible, nor, to Seller's knowledge,
does there exist any basis on which such a claim for infringement could
reasonably be based.
4.24 Accredited Investor Status. Seller is an "accredited
investor" within the meaning of Rule 501(d)(1) of Regulation D promulgated by
the Securities and Exchange Commission under the Securities Act of 1933, as
amended.
4.25 Reliance. Seller recognizes and agrees that,
notwithstanding any investigation, Buyer is relying upon the representations
and warranties of Seller made herein.
4.26 Schedules Delivered at Execution. All of the
schedules described in this Agreement and prepared by Seller which are being
delivered to Buyer upon execution hereof (i) are true, accurate and complete,
as of the Closing Date; and (ii) have been prepared in conformity with the
provisions of this Agreement.
4.27 No Material Misstatements. No representation or
warranty by Seller or Stockholder contained in this Agreement, or in any
exhibit or schedule attached hereto, contains, or will contain, any untrue
statement of a material fact or omits, or will omit, to state a material fact
necessary to make the statements contained herein or therein not misleading.
5. Representations, Warranties and Agreements of Buyer. Except
as set forth on EXHIBIT 5 ("Buyer's Disclosure Exhibit"), Buyer agrees,
represents and warrants as follows:
Page 12 - ASSET PURCHASE AGREEMENT
13
5.1 Corporate Status of Buyer. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Buyer is qualified to conduct business in the States of
Oregon, Nevada, Idaho and Washington as a foreign corporation. Buyer has full
corporate power and corporate authority to purchase and acquire the Assets as
herein provided.
5.2 Authorization of Buyer. This Agreement has been duly
executed and delivered by Buyer and constitutes a valid obligation legally
binding on Buyer and is enforceable against Buyer in accordance with its terms;
except as enforceability may be limited or affected by applicable bankruptcy,
insolvency, reorganization or other laws of general application relating to or
affecting the rights of creditors and except as enforceability may be limited
by rules of law governing specific performance, injunctive relief or other
equitable remedies.
5.3 Litigation. There are no claims, litigation,
proceedings or investigations pending or, to the best knowledge of Buyer,
threatened against Buyer which would have a material adverse impact on Buyer's
ability to perform all of its duties and obligations under this Agreement.
5.4 Brokers. Buyer has not employed any broker, finder
or agent or dealt with anyone purporting to act in such capacity or agreed to
pay any brokerage fee, finder's fee or commission in connection with the
transactions contemplated by this Agreement.
5.5 No Material Misstatements. No representation or
warranty by Buyer contained in this Agreement, or in any exhibit or schedule
attached hereto, contains, or will contain, any untrue statement of a material
fact or omits, or will omit, to state a material fact necessary to make the
statements contained herein or therein not misleading.
5.6 Consents and Approvals. Buyer has obtained all
consents, authorizations or approvals of any third parties required in
connection with the execution, delivery or performance of this Agreement by
Buyer and the consummation of the transactions contemplated hereby.
6. Covenants of Seller.
6.1 Announcement Letter. Seller and Buyer have prepared
a mutually satisfactory announcement letter, the form of which is attached
hereto as EXHIBIT 6.1 and by this reference incorporated herein, with respect
to the sale of the Customer Accounts pursuant to this Agreement. Seller shall,
if its computer system is capable of doing so, deliver to Buyer at the Closing
address labels for all of the Customers and a sufficient amount of Seller's
envelopes and sheets of letterhead to enable Buyer to mail the announcement
letter to all of the Customers.
6.2 Corporate and Trade Names. The names "Xxxxxxxx
Electronics," "Xxxxxxxx Electronic Alarm Systems" and other assumed business
names and trade names of Seller are included in the Other Property sold to
Buyer hereunder. Within thirty (30) days after the Closing, Seller shall amend
its Articles of Incorporation in order to change its corporate name to a name
which is not similar to any of the corporate or trade names transferred to
Buyer.
6.3 Assignment of Nonsolicitation Agreements. Seller
hereby assigns to Buyer all of Seller's right, title and interest in and to any
nonsolicitation and noncompetition covenants and agreements, if any, with
respect to the Customer Accounts under which Seller's employees or other third
parties have agreed not to solicit the Customers or compete with Seller. Buyer
does
Page 13 - ASSET PURCHASE AGREEMENT
14
not assume any of Seller's duties or obligations under any of the
nonsolicitation and noncompetition covenants and agreements with respect to the
Customer Accounts. Seller has provided to Buyer true copies of all agreements
with respect to Seller's acquisition of any of the Customer Accounts from any
third party, including without limitation any acquisition by way of asset
purchase, stock purchase or merger.
6.4 Transfer to Buyer of Codes and Customer Information.
On or before the Closing Date, Seller shall deliver to Buyer all Customer
names, location of Alarm System equipment in the Customers' locations, Customer
contact lists, Alarm System zone information for each Customer location, and
any and all other information reasonably required by Buyer to provide
monitoring services from its central monitoring facility. On or before the
Closing Date, Seller shall also provide to Buyer the central station
identification number and installer codes for each Alarm System control panel,
all download programs and master codes necessary to connect the Alarm System to
Buyer's monitoring facility, and all other information reasonably required by
Buyer in order to remotely program the Alarm System equipment of the Customers
that is remotely programmable.
6.5 Conduct of Business from Execution Date Through
Closing Date. From the Execution Date through the Closing Date, Seller and
Stockholder shall operate Seller's business only in the ordinary course and
scope and in a manner consistent with its normal business practices and the
representations, warranties and agreements of Seller and Stockholder set forth
herein. From the Execution Date through the Closing Date, Seller and
Stockholder shall not, without the prior consent of Buyer, do any of the
following: (i) dispose of any of the Assets, other than inventory and supplies
consumed in the ordinary course of the Seller's business; or (ii) commit any
act that will have a materially adverse effect on the Assets or its lease of
its business premises.
7. Covenants of the Buyer.
7.1 Access to Books and Records. For a period of two (2)
years after the Closing Date, Buyer agrees that Seller and Stockholder and
their representatives shall have reasonable access to all books and records of
Seller to the extent that such access is lawful and may reasonably be required
by Seller and Stockholder in connection with matters relating to or affected by
the operations of Seller prior to the Closing Date, including without
limitation tax matters and pending litigation. Such access shall be afforded
by Buyer during normal business hours.
7.2 Consent to Interview and Hire Employees. At least
five (5) business days prior to the Closing Date, Buyer shall be given the
opportunity to interview Seller's employees and hire those employees who meet
the following criteria effective as of 12:01 a.m. on the day following the
Closing Date: a) the employee passes Buyer's drug screening test; b) a
satisfactory criminal background check; and c) the employee must possess or be
qualified to obtain any licenses or permits required by the State of Oregon for
the work which such employee performed for Seller. Subject to such employees
meeting the foregoing hiring criteria, Buyer agrees to employ Seller's
employees (excluding those employees hired by the Dealer described in Section
16 hereof) for a period of not less than six (6) months after the Closing Date,
beginning on 12:01 a.m. on the day after the Closing Date, to perform
reasonably similar job duties as they performed for Seller at the same salary
(not including any bonus or incentive compensation) paid by Seller. If the
drug screening test cannot be performed by the Closing Date as to any
employees, then such employees will be hired, subject to a later drug screening
test. Buyer agrees that it will pay wages, salaries and other compensation due
to the employees which it hires beginning on
Page 14 - ASSET PURCHASE AGREEMENT
15
January 1, 1997, and the amount of such payments from January 1, 1997 through
the Closing Date shall be a reduction against the Purchase Price; provided,
however, that such employees will not be deemed to be Buyer's employees until
hired by Buyer effective after the Closing Date. Seller will continue to
provide its existing health and medical plan coverage for its former employees
hired by Buyer for the month of January, 1997, the cost of which is
attributable to the period after the Closing Date shall be added to the
Purchase Price as a Prepaid Expense. Buyer agrees that it will pay thirty
(30) days' severance payments to any of Seller's former employees who were
hired by Buyer on or after the Closing Date and whose employment is terminated
for other than cause prior to or upon the expiration of the first six (6) month
period after the Closing Date; provided, however, that if such employee is
terminated for other than cause by Buyer prior to the expiration of the first
six (6) month period after the Closing Date, then in addition to the severance
payment required hereunder, Buyer shall also pay to the employee the remaining
salary and wages due for the balance of the first six (6) month period after
the Closing Date. If such employee voluntarily terminates his or her
employment with Buyer or is terminated for cause during the first six (6) month
period, or, if applicable, the second six (6) month period after the Closing
Date, then Buyer shall not be obligated to pay any severance payments to such
employee. After the end of the first six (6) month period following the
Closing Date, Buyer agrees to continue to employ the majority of Seller's
former employees who were employed by Buyer for the first six (6) month period
after the Closing Date (excluding those who are employed by the Dealer after
the Closing Date) for an additional six (6) month period. If Buyer terminates
the employment for other than cause of any of Seller's former employees during
the second six (6) month period after the Closing Date, then Buyer shall pay to
such employee the remaining salary and wages due for the balance of the second
six (6) month period after the Closing Date. During the second six (6) month
period following the Closing Date, Buyer may make any changes in the employee's
functions, job title and work place location it deems necessary or advisable in
exercise of its business judgment, but shall not change such employee's salary
during such time period. Notwithstanding anything to the contrary set forth in
this Agreement, the employees hired by Buyer after the Closing Date shall be
subject to Buyer's personnel policies and procedures and shall perform their
jobs in a reasonably satisfactory manner, and Buyer shall not assume any
obligations owed by Seller to such employees, including without limitation, any
salary, bonus payments, vacation, sick pay, pension or health benefits. Any of
Seller's former employees who continue to be employed by Buyer after the end of
the twelve (12) month period following the Closing Date shall be "at will"
employees and may be terminated at any time by Buyer without cause.
Subject to the other terms and conditions contained in this
Section 7.2, Buyer agrees that as to Xxxxxxxx Xxxxx and Xxxxxxxx Xxxx, who are
currently on medical leave, Buyer will hire these employees on a full-time
basis at such time as the employees are cleared by their respective doctors to
return to work full-time. When they are able to return to work and are hired
by Buyer, their employment with Buyer will continue for the remainder of the
first six (6) month period after the Closing Date, and they shall be eligible
for thirty (30) days' severance payments if their employment is terminated for
other than cause upon the expiration of the first six (6) month period after
the Closing Date. If these employees are not cleared by their doctors to
return to work full-time until after the end of the first six (6) month period
after the Closing Date, then Buyer may, but shall not be obligated to, hire
such employees in the second six (6) month period after the Closing Date, and
they shall become at-will employees after the end of the twelve (12) period
following the Closing Date.
Xxxxx XxXxxx, Xxxxx Xxxxxx and Xxx Xxxxx will be employed by
either Seller or Dealer, and Xx. XxXxxx will be reasonably available to assist
Buyer with the transition of the monitoring of the Customer Accounts to Buyer's
Central Station and Xx. Xxxxx will be reasonably
Page 15 - ASSET PURCHASE AGREEMENT
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available to assist Buyer in connection with handling parts and other service
inventory. Xxxxx XxXxxx'x salary shall be prorated between Buyer and either
Seller or Dealer, based upon the mutual agreement of the parties hereto or, if
the parties are unable to agree, based upon the amount of time which such
employee works for each of the parties during each pay period at an hourly rate
of $14.00 per hour. Buyer will pay all of Xxxxx Xxxxxx'x salary and Seller
will pay all of Xxx Xxxxx'x salary and there shall be no proration based on the
amount of services performed for Buyer, Seller or Dealer. The obligations of
Seller under this section may be assigned to the Dealer.
7.3 Addition of Call Processor to Business Line. Within
20 days after the Closing, Buyer shall arrange for AT&T to install a call
processor feature to be added to the Business Line, so that questions or
inquiries relating to new installations will be routed to the Dealer described
in Section 16 hereof and all other calls will be routed to Buyer. The
structure for the call processor feature and the script will be mutually agreed
to by Buyer and Chairman, or his assignee, in writing, and any future changes
in the structure for the call processor or script shall be mutually agreed to
by the parties in writing. If Buyer terminates the Dealer Agreement without
cause or if Buyer no longer wants to retain ownership or control over the
Business Line, then Dealer shall take ownership and control over the Business
Line and Buyer will execute such supersedure or letter of agency forms required
by the telephone company to transfer ownership and control of the Business Line
to the Dealer. If the Dealer Agreement is terminated for any reason other than
by Buyer without cause, then Buyer shall be immediately authorized to
unilaterally remove the call processor feature and exercise sole control over
the Business Line.
8. Nonsolicitation, Noncompetition and Nondisclosure of
Confidential Information
8.1 Nonsolicitation. For twenty (20) years following the
date of this Agreement, neither Seller, Chairman nor Stockholder will, directly
or indirectly, as a partner, limited partner, agent, representative,
stockholder, creditor or consultant or in any other capacity with any business,
in any manner, in or with respect to any Customer Accounts in the States of
Oregon, Washington, Idaho and Nevada, solicit, divert or accept orders for the
sale, deferred purchase, installation, maintenance or monitoring of alarm
systems or for providing surveillance, access, armed response or repair
services from any Customers whose Customer Accounts Buyer purchased from Seller
under this Agreement or who within one (1) year prior to such solicitation,
diversion or acceptance of orders, were or are customers of Buyer, including
Buyer's subsidiaries or affiliated corporations. For five (5) years following
the date of this Agreement, neither Seller, Chairman nor Stockholder will
directly or indirectly or as a partner, limited partner, agent, representative,
stockholder, creditor or consultant or in any other capacity with any business,
recruit, offer to employ or otherwise solicit the employment of any person who
was at any time within three (3) months prior to such action an employee of
Buyer; provided, however, that a general classified advertisement which Seller,
Chairman or Stockholder does not direct to Buyer's employees shall not violate
the restrictions set forth herein so long as Seller, Chairman or Stockholder
does not offer employment to any employee of Buyer or to a person who was an
employee of Buyer within the previous three (3) months.
8.2 Nondisclosure of Confidential Information. Seller,
Chairman and Stockholder agree to maintain as secret and confidential all
"Confidential Information," as defined herein, and agree not to use, disclose,
transfer, sell or make such information available to any successors or third
parties, except as authorized in advance and in writing by Buyer or in the
following circumstances (a) as required in order to comply with any subpoena,
court order or applicable law, provided that the disclosing party shall use its
best efforts to give Buyer prior written notice of such disclosure; (b) if such
information becomes publicly available not due to
Page 16 - ASSET PURCHASE AGREEMENT
17
the fault of Seller, Chairman or Stockholder; and (c) as such use of
Confidential Information is reasonably required for any reason set forth in
Section 7.1 hereof. From and after the Closing Date, Seller, Chairman and
Stockholder shall also use their best efforts to restrict their agents and
employees from having access to or using any Confidential Information. The
term "Confidential Information" means any trade secrets, proprietary or other
information reasonably known by Seller, Chairman or Stockholder to be
confidential or reasonably designated in writing to Seller, Chairman and
Stockholder as confidential by Buyer with respect to the Customer Accounts or
the Assets, including, without limitation, any of the following information:
any customer or Customer lists; any lists, notes or compilations which contain
the names, addresses, telephone numbers or any contract information for or with
respect to the Customers; and copies of contracts, agreements and related
documents between Seller and the Customers under the Customer Accounts.
8.3 Noncompetition. Except as otherwise provided in this
Section 8.3, Chairman agrees that, for five (5) years following the date of
this Agreement, Chairman will not, without the prior written consent of Buyer,
which may be given or withheld in its sole and absolute discretion, (a) compete
in the States of Oregon or Washington in any manner, whether individually or as
a director, officer, partner, limited partner, member, employee, agent,
representative, stockholder, creditor, consultant, or in any other capacity,
with the business of Buyer or any subsidiary or affiliate of Buyer, which
business consists of selling, leasing, installing, servicing, and monitoring
residential and commercial alarm systems and providing surveillance, access and
patrol and armed response services to residential and commercial customers; or
(b) in any manner, directly or indirectly, engage in selling, promoting the use
of, leasing, installing, maintaining, or monitoring of any product or service
which performs the same function or use as alarm systems and security services
to customers or potential customers in the States of Oregon and Washington.
The parties agree that notwithstanding anything contained herein to the
contrary, that Chairman shall be entitled to work for the Dealer (defined in
Section 16 hereof) of Buyer without violating this covenant, so long as the
company remains a Dealer of Buyer. Notwithstanding anything to the contrary
set forth herein, if Buyer terminates the Dealer Agreement (defined in Section
16 hereof) without cause, then this Section 8.3 shall be null and void from and
after such termination date. The parties have agreed that One Million Dollars
($1,000,000.00) of the Purchase Price is allocated to the noncompete of
Chairman and will be paid directly to Chairman. If the Dealer described in
Section 16 is terminated as a Dealer of Buyer for any reason, then the purchase
or installment buyout of Chairman's interest in such Dealer shall not violate
this Section 8.3.
8.4 Enforcement. Seller, Chairman and Stockholder
acknowledge and agree that the time, scope and other provisions of Sections
8.1, 8.2 and 8.3 have been specifically negotiated by sophisticated parties and
specifically hereby agree that such time, scope and other provisions are
reasonable under the circumstances. Seller, Chairman and Stockholder further
agree that if, at any time, despite the express agreement of the parties
hereto, a court of competent jurisdiction holds that any portion of Sections
8.1, 8.2 and 8.3 is unenforceable for any reason, the maximum restrictions of
time, scope or other provisions reasonable under the circumstances, as
determined by such court, will be substituted for any such restrictions held
unenforceable. Seller, Chairman and Stockholder agree that Buyer will suffer
irreparable harm if Seller, Chairman or Stockholder fails to comply with the
provisions of this Section 8 and that Buyer will be entitled to injunctive
relief to enforce the terms of this Section 8 in addition to any other remedies
available to Buyer.
Page 17 - ASSET PURCHASE AGREEMENT
18
9. Conditions Precedent to Obligations of Buyer. All obligations
of Buyer at the Closing are subject to the fulfillment prior to or at the
Closing by Seller, Chairman and Stockholder of each of the following:
9.1 Deliveries on the Execution Date. On or prior to the
Execution Date, Seller and Stockholder shall: (a) execute and deliver this
Agreement and the exhibits hereto; and (b) deliver a certified copy of the
resolution of the Board of Directors and stockholders of Seller authorizing the
execution, delivery and performance of this Agreement and all other actions to
be taken by Seller in connection therewith and an incumbency certificate with
respect to the officers of Seller. On or prior to the Execution Date, Chairman
shall also execute and deliver this Agreement. On or prior to the Execution
Date, Seller shall (c) execute and deliver the Affidavit and Agreement of
Prospective Investor; (d) execute and deliver the Registration Rights
Agreements; and (e) provide to Buyer a certificate of good standing from the
Secretary of State for the State of Oregon.
9.2 Deliveries on the Closing Date and Closing Date
Conditions. On or prior to the Closing Date, Seller shall: (a) execute, along
with Chairman and Stockholder, and deliver an Addendum to the Agreement and the
exhibits thereto; (b) execute and deliver an original xxxx of sale and
assignment agreement in the form attached as EXHIBIT 9.2 and other instruments
of transfer, in the form and substance reasonably satisfactory to counsel to
Buyer, necessary to transfer or convey all of the Assets to Buyer; and (c)
deliver to Buyer originals of all agreements and documents for the Customer
Accounts and all files and records relating to the Assets sold on the Closing
Date, including, without limitation, all computer records, data and information
stored on electronic media, and downloading codes. In addition, Buyer's
obligations at the Closing are subject to fulfillment of the following prior to
or at the Closing:
9.2.1 No Pending Litigation. There shall not be
pending or threatened any claim, proceeding, investigation or inquiry, by any
person, governmental body or authority, seeking to prevent or change the terms
of, or obtain damages in connection with, this Agreement or the transaction
contemplated hereby or which questions the validity or legality of the
consummation of the transaction contemplated hereby. No action or proceeding
relating to any item that is not disclosed in EXHIBIT 4 shall have been
instituted or threatened prior to the Closing Date that, if concluded adversely
to the Seller, would be materially adverse to Buyer's ownership of and
operation of the Assets.
9.2.2 Sublease. Seller shall have executed the
sublease agreement in the form attached hereto as EXHIBIT 2.2.1.
9.2.3 Seller's Certificate. At the Closing, Buyer
shall have received a Certificate, dated as of the Closing Date, signed by the
Seller, to the effect that all of the representations and warranties of Seller
and Stockholder set forth in Section 4 are true and correct as of the Closing
Date and that Seller has, in all material respects, complied with and performed
the terms, covenants, agreements and conditions required to be performed by
Seller as of the Closing Date under the Agreement.
9.2.4 Miscellaneous. Delivery to Buyer of all
consents and such additional instruments and documents as may reasonably be
required by this Agreement or to consummate the transactions contemplated
herein.
Page 18 - ASSET PURCHASE AGREEMENT
19
10. Conditions Precedent to Obligations of Seller, Chairman and
Stockholder. All obligations of Seller, Chairman and Stockholder at the
Closing are subject to the fulfillment prior to or at the Closing by Buyer of
each of the following:
10.1 Deliveries on Execution Date. On or prior to the
Execution Date, Buyer shall: (a) execute and deliver this Agreement and the
exhibits hereto; and (b) deliver a certified copy of the resolution of the
Board of Directors of Buyer authorizing the execution, delivery and performance
of this Agreement and all other actions to be taken by Buyer in connection
therewith. On or prior to the Execution Date, Parent shall execute and deliver
the Registration Rights Agreement.
10.2 Deliveries on Closing Date and Closing Date
Conditions. On or prior to the Closing Date, Buyer shall deliver to Seller,
Chairman and Stockholder an Addendum to the Agreement and the exhibits thereto.
In addition, Seller's, Chairman's and Stockholder's obligations at Closing are
subject to fulfillment of the following prior to or at the Closing:
10.2.1 No Pending Litigation. There shall not be
pending or threatened any claim, proceeding, investigation or inquiry, by any
person, governmental body or authority, seeking to prevent or change the terms
of, or obtain damages in connection with, this Agreement or the transaction
contemplated hereby or which questions the validity or legality of the
consummation of the transaction contemplated hereby. No action or proceeding
relating to any item that is not disclosed in EXHIBIT 5 shall have been
instituted or threatened prior to the Closing Date that, if concluded adversely
to the Buyer, would have a material adverse effect on Buyer's performance of
its obligations hereunder.
10.2.2 Payments. Payment to Seller of the Closing Date Payment due at Closing
pursuant to this Agreement.
10.2.3 Registration Statement. Parent shall have
filed the Registration Statement with the Securities and Exchange Commission
("SEC"), and the SEC shall have declared the Registration Statement for the Pro
One Stock to be effective.
10.2.4 Sublease. Buyer shall have executed and
delivered the sublease agreement in the form attached hereto as EXHIBIT 2.2.1.
10.2.5 Buyer's Certificate. At the Closing, Buyer
shall have delivered to Seller and Stockholder a Certificate, dated as of the
Closing Date, signed by the Buyer, to the effect that all of the
representations and warranties of Buyer set forth in Section 5 are true and
correct as of the Closing Date and that Buyer has, in all material respects,
complied with and performed the terms, covenants, agreements and conditions
required to be performed by Buyer as of the Closing Date under the Agreement.
10.2.6 Miscellaneous. Delivery to Seller and
Stockholder of all consents and such additional instruments and documents as
may reasonably be required by this Agreement or to consummate the transactions
contemplated herein.
11. Expenses. Buyer, Seller, Chairman and Stockholder shall each
pay all of their own respective expenses incurred by or on behalf of each of
them in connection with this Agreement and the transactions contemplated
hereunder, including, but not limited to, all due diligence, legal and
accounting expenses.
Page 19 - ASSET PURCHASE AGREEMENT
20
12. Nature of Statements and Survival of Representations,
Warranties And Agreements. All statements of fact and only those statements of
facts contained in any written statement, certificate, exhibit, schedule or
other document delivered by or on behalf of the parties pursuant hereto or in
connection with the consummation of the transactions contemplated hereby are
deemed representations and warranties made hereunder. All covenants,
representations, warranties and agreements made by the parties hereunder shall
survive the Closing Date, the delivery of the Assets, and the dissolution and
liquidation of any party hereto and remain effective regardless of any
investigation at any time (whether before or after the date of this Agreement)
made by or on behalf of any party or of any information any party may obtain or
have (whether before or after the date of this Agreement) in respect thereof
and regardless of any non-exercise by a party of any rights hereunder.
13. Indemnification By Seller, Chairman and Stockholder.
13.1 Indemnification. Notwithstanding any investigation
by Buyer, Seller, Chairman and Stockholder jointly and severally agree to
indemnify, hold harmless and defend Buyer, including Buyer's agents, employees,
officers, directors, and subsidiary and parent corporations (collectively, the
"Buyer Parties"), from and against, and to reimburse the Buyer Parties with
respect to, any and all losses, damages, liabilities, costs and expenses,
including interest, penalties and reasonable attorney's fees, incurred by the
Buyer Parties, or any of them, by reason of or arising out of or in connection
with: (i) any breach or inaccuracy of any representation or warranty of Seller
and Stockholder made in this Agreement or the schedules or exhibits hereto;
(ii) the nonfulfillment or inadequate performance of any covenant or agreement
on the part of Seller, Chairman and Stockholder under this Agreement; (iii) any
liabilities of Seller to third parties of any nature arising out of any act
performed or state of facts suffered to exist by Seller on or prior to the
Closing Date, other than the performance of the duties and obligations under
the Contracts after the Closing Date; and (iv) the failure by Seller or its
predecessors to comply with, prior to the Closing Date, any "three (3) day
right of rescission" law or similar right of rescission statute covering any of
the Customer Accounts. This indemnification extends to any losses suffered or
costs incurred by the Buyer Parties arising out of or relating to claims
pursuant to this Section 13.1, including, without limitation, reasonable
attorney's fees, whether or not a lawsuit is commenced by any third party. Any
claim for indemnification by any of the Buyer Parties pursuant to this Section
13.1 shall hereinafter be referred to as a "Buyer's Claim."
13.2 Survivability. In order for any Buyer Parties to be
entitled to indemnification for a Buyer's Claim as provided for in Section
13.1, a notice of Buyer's Claim must be submitted to Seller, Chairman and
Stockholder within the following applicable time limitations:
(a) Except as provided in Section 13.2(b) or in
cases of fraud or intentional misrepresentation, a Buyer's Claim pursuant to
Section 13.1(i) must be submitted on or before December 31, 1998;
(b) A Buyer's Claim pursuant to Section 13.1(i)
for a breach of Sections 4.1, 4.2, 4.3 and 4.6 must be submitted before the
expiration of the applicable statute of limitations with respect to such
Buyer's Claim; and
(c) All other Buyer's Claims must be submitted
before the expiration of the applicable statute of limitations with respect to
such Buyer's Claims.
Page 20 - ASSET PURCHASE AGREEMENT
21
13.3 Buyer's Claim Basket and Liability Limit. Seller's,
Chairman's and Stockholder's obligations with respect to indemnity pursuant to
this section shall be limited to the extent that the aggregate of such Buyer's
Claims must first exceed Fifty Thousand Dollars ($50,000) ("Buyer's Claim
Basket"). In no event shall the total liability of Seller, Chairman and
Stockholder for all Buyer's Claims exceed the Purchase Price ("Seller's
Liability Limit").
13.4 Notice; Tendering Defense to Seller and Stockholder.
Seller's, Chairman's and Stockholder's obligation to indemnify and reimburse
Buyer hereunder are subject to prior written thirty (30) day notice by Buyer of
a Buyer's Claim, unless the Buyer's Claim involves litigation, in which case
Buyer shall provide Seller, Chairman and Stockholder with notice of such
litigation within twenty (20) days after receipt of such complaint by Buyer;
provided, however, that Seller, Chairman and Stockholder shall have the right
to defend any Buyer's Claim made by a third party and Seller, Chairman and
Stockholder shall have the right to control the defense, settlement or
compromise of such Buyer's Claim and Buyer shall have the right to be kept
currently informed and to reasonably participate in all aspects of such
litigation to the extent deemed necessary to protect Buyer's interest, unless
the amount of damages demanded or alleged or prayed for in the complaint (or if
no damages are demanded, alleged or prayed for in the complaint, the damages
reasonably likely to result from such a Buyer's Claim) exceeds the Seller's
Liability Limit, as such term is defined in Section 13.3, in which case the
party with the greatest economic risk shall have the right to such control,
subject to the other party's right of information and participation.
Notwithstanding anything to the contrary contained in this Agreement, Buyer
shall control the defense, settlement or compromise of any Buyer's Claim where
the damages demanded or alleged or prayed for in the complaint (or if no
damages are demanded or alleged or prayed for in the complaint, the damages
reasonably likely to result from such a Buyer's Claim) do not exceed the
Buyer's Claim Basket; provided however, that Seller, Chairman or Stockholder
shall have the option to defend, at their cost and expense, any Buyer's Claim
which does not exceed the Claim Basket and to settle and compromise such
Buyer's Claim on terms approved in advance by Buyer and at Buyer's expense (if
within the Buyer's Claim Basket) or to settle and compromise such Buyer's Claim
at Seller's, Chairman's or Stockholder's expense. It is also agreed, however,
that if Buyer, in the reasonable exercise of its discretion, wishes to settle
or compromise the Buyer's Claim within the Buyer's Claim Basket, it may do so
at any time. After the Buyer's Claim Basket has been exceeded, Buyer shall
control the defense, settlement or compromise of any Buyer's Claim where the
damages demanded or alleged or prayed for in the complaint do not exceed the
sum of Two Thousand Five Hundred Dollars ($2,500), and Seller, Chairman and
Stockholder shall have no right to be kept informed or to participate in such
litigation. Seller, Chairman and Stockholder shall also indemnify and hold
harmless Buyer from, for and against any costs and expenses (including
attorney's fees at trial and in any appeal) which it may suffer or incur in
connection with enforcement of the indemnification obligation of the Seller,
Chairman and Stockholder hereunder.
13.5 Right of Setoff. In addition to the rights of Buyer
under Sections 13.1 through 13.4, Seller, Chairman and Stockholder agree that
Buyer shall have the right at any time following the Closing Date to setoff
against any amounts payable to Seller under this Agreement an amount equal to
any and all losses, damages, liabilities, costs and expenses incurred by Buyer,
including without limitation, reasonable attorney's fees, for which Buyer has a
right to indemnification under Sections 13.1 through 13.4.
14. Indemnification by Buyer.
14.1 Indemnification. Notwithstanding any investigation
by Stockholder, Buyer agrees to indemnify, hold harmless and defend Seller,
Chairman and Stockholder, including
Page 21 - ASSET PURCHASE AGREEMENT
22
Seller's, Chairman's and Stockholder's agents (collectively, the "Seller
Parties"), from and against, and to reimburse the Seller Parties with respect
to, any and all losses, damages, liabilities, costs and expenses, including
interest, penalties and reasonable attorney's fees, incurred by the Seller
Parties, or any of them, by reason of or arising out of or in connection with:
(i) any breach or inaccuracy of any representation or warranty of Buyer made in
this Agreement or the schedules or exhibits hereto, or (ii) the nonfulfillment
or inadequate performance of any covenant or agreement on the part of Buyer
under this Agreement. This indemnification extends to any losses suffered or
costs incurred by the Seller Parties arising out of or relating to claims
pursuant to this Section 14.1, including, without limitation, reasonable
attorney's fees, whether or not a lawsuit is commenced by any third party. Any
claim for indemnification by any of the Seller Parties pursuant to this Section
14.1 shall hereinafter be referred to as a "Seller's Claim."
14.2 Survivability. In order for any Seller Parties to be
entitled to indemnification for a Seller's Claim as provided for in Section
14.1, a notice of Seller's Claim must be submitted to Buyer within the
following applicable time limitations:
(a) Except in cases of fraud or intentional
misrepresentation, a Seller's Claim pursuant to Section 14.1(i) must be
submitted on or before December 31, 1998; and
(b) All other Seller's Claims must be submitted
before the expiration of the applicable statute of limitations with respect to
such Seller's Claims.
14.3 Seller's Claim Basket and Liability Limit. Buyer's
obligations with respect to indemnity pursuant to this section shall be limited
to the extent that the aggregate of such Seller's Claims must first exceed
Fifty Thousand Dollars ($50,000) ("Seller's Claim Basket"). In no event shall
the total liability of the Buyer for all Seller's Claims exceed the Purchase
Price ("Buyer's Liability Limit").
14.4 Notice; Tendering Defense to Buyer. Buyer's
obligation to indemnify and reimburse Seller, Chairman and Stockholder
hereunder is subject to prior written thirty (30) day notice by Seller,
Chairman or Stockholder of a Seller's Claim, unless the Seller's Claim involves
litigation, in which case Seller, Chairman or Stockholder shall provide Buyer
with notice of such litigation within twenty (20) days after receipt of such
complaint by Seller, Chairman or Stockholder; provided, however, that Buyer
shall have the right to defend any Seller's Claim made by a third party, and
Buyer shall have the right to control the defense, settlement or compromise of
such Seller's Claim and Seller, Chairman and Stockholder shall have the right
to be kept currently informed and to reasonably participate in all aspects of
such litigation to the extent deemed necessary to protect Seller's, Chairman's
and Stockholder's interests, unless the amount of damages demanded or alleged
or prayed for in the complaint (or if no damages are demanded, alleged or
prayed for in the complaint, the damages reasonably likely to result from such
a Seller's Claim) exceeds the Buyer's Liability Limit, in which case the party
with the greatest economic risk shall have the right to such control, subject
to the other party's right of information and participation. Notwithstanding
anything to the contrary contained in this Agreement, Seller, Chairman and
Stockholder shall control the defense, settlement or compromise of any Seller's
Claim where the damages demanded or alleged or prayed for in the complaint (or
if no damages are demanded or alleged or prayed for in the complaint, the
damages reasonably likely to result from such a Seller's Claim) do not exceed
the Seller's Claim Basket, and after the Seller's Claim Basket has been
exceeded, Seller, Chairman and Stockholder shall control the defense,
settlement or compromise of any Seller's Claim where the damages alleged or
prayed for in the complaint do not exceed the sum of Two Thousand Five Hundred
Dollars ($2,500), and Buyer shall have no right to be kept informed or to
participate in such litigation. Buyer shall also
Page 22 - ASSET PURCHASE AGREEMENT
23
indemnify and hold harmless Seller, Chairman and Stockholder from, for and
against any costs and expenses (including attorney's fees at trial and in any
appeal) which they may suffer or incur in connection with enforcement of the
indemnification obligation of the Buyer hereunder.
15. Transition Support. After the Closing Date and continuing for
a period of no less than ninety (90) days and no more than one hundred twenty
(120) days, Chairman, at no cost to Buyer, shall respond to Buyer's questions
as necessary to assist Buyer during such period with the transition of Assets,
business and operations to Buyer as a result of the sale contemplated hereby.
There will be no charge to Buyer for such transition assistance, other than
reimbursement for reasonable out-of-pocket expenses directly incurred in
connection with any travel or other expenses undertaken at the written request
of Buyer.
16. Dealer. It is anticipated that certain employees of Seller
and Chairman will form a limited liability company which will engage in the
alarm system sales, installation and service business as a dealer of Buyer on
or about the Closing Date (the "Dealer"). Buyer is willing to enter into a
mutually acceptable agreement for licensing the Seller's trade and corporate
names (the "License Agreement") and for the ongoing purchase of customer
accounts by Buyer ("Dealer Agreement") with such Dealer; provided however, that
if the parties are not able to execute a mutually satisfactory Dealer Agreement
within sixty (60) days after the Closing Date, Buyer may license the Other
Property and enter into a Dealer Agreement with any party it chooses.
17. Interest. In the event any party fails to pay any payment
when due hereunder, such party shall also pay interest to the other party at
the rate of nine percent (9%) per annum on the outstanding balance of the
past-due or delinquent payment from the date such payment is due, until paid.
Payment or accrual of interest does not excuse default or limit the exercise of
remedies hereunder.
18. Miscellaneous.
18.1 Notices. Any and all notices, demands or other
communications required or desired to be given hereunder by any party shall be
in writing and shall be validly given or made to another party if served either
personally or if deposited in the United States mail, certified or registered,
postage prepaid, return receipt requested. If such notice, demand or other
communication is served personally, or by facsimile (with verbal verification
of complete receipt), service shall be conclusively deemed made at the time of
such personal service or facsimile transmission. If such notice, demand or
other communication is given by mail, such notice shall be conclusively deemed
given seventy-two (72) hours after the deposit thereof in the United States
mail addressed to the party to whom such notice, demand or other communication
is to be given as hereinafter set forth:
If to Seller: Xxxxxxxx Electronics, Inc.
0000 X.X. Xxxxxxxx
Xxxxxxxx, Xxxxxx 00000
Attention: Xxxxxx X.
Xxxxxxxx, President
If to Stockholder Xxxxxx X. Xxxxxxxxx
or Chairman: 0000 Xxxxx Xxxx Xxxxx
Xxxxxxxxxxx, Xxxxxx 00000
Page 23 - ASSET PURCHASE AGREEMENT
24
With a copy to: Xxxxxx X. Xxxxx
Duffy, Kekel, Xxxxx & Xxxxxxx
0000 X.X. Xxxxx Xxx., Xxxxx 0000
Xxxxxxxx, Xxxxxx 00000
If to Buyer: Protection One Alarm
Monitoring, Inc.
0000 X.X. Xxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxx 00000
Attention: Xxxx X. Xxxxx
and
Protection One Alarm
Monitoring, Inc.
0000 Xxxxxxx Xxxxxxx
Xxxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxx, III
With a copy to: Xxxx X. Xxxx
Farleigh, Wada & Xxxx, P.C.
000 X.X. Xxxxxxxx Xxxxxx,
Xxxxx 000
Xxxxxxxx, Xxxxxx 00000
Any party hereto may change its address for the purpose of receiving notices,
demands and other communications as herein provided by a written notice given
in the manner provided hereby to the other party or parties hereto.
18.2 Modifications or Amendments. No amendment, change or
modification of this document shall be valid unless in writing and signed by
all parties hereto.
18.3 Waiver. No reliance upon or waiver of one or more
provisions of this Agreement shall constitute a waiver of any other provisions
hereof. All waivers must be in writing and signed by the party waiving
compliance.
18.4 Knowledge of Parties. Where any representation or
warranty contained in this Agreement is expressly qualified by a reference to
knowledge, information and/or belief of the party making such representation
and warranty, such party shall have made reasonable inquiry as to the matters
that are the subject of such representations and warranties.
18.5 Binding Effect. All of the terms and provisions
contained herein shall inure to the benefit of and shall be binding upon the
parties hereto and their respective heirs, personal representatives, successors
and, to the extent permitted by Section 16.6 assigns.
18.6 Assignment. Seller and Stockholder may not assign
any rights or delegate any duties under this Agreement without the prior
written consent of Buyer.
18.7 Separate Counterparts. This document may be executed
in one or more separate counterparts, each of which, when so executed, shall be
deemed to be an original. Such counterparts shall, together, constitute and
shall be one and the same instrument.
18.8 Further Assurances. Each of the parties hereto shall
execute and deliver any and all additional papers, documents and other
assurances, and shall do any and all acts and
Page 24 - ASSET PURCHASE AGREEMENT
25
things reasonably necessary in connection with the performance of their
obligations hereunder and to carry out the intent of the parties hereto.
18.9 Applicable Law; Severability; Attorney's Fees. This
Agreement shall, in all respects, be governed by the laws of the State of
Oregon applicable to agreements executed and to be wholly performed within the
State of Oregon. Nothing contained herein shall be construed so as to require
the commission of any act contrary to law, and wherever there is any conflict
between any provision contained herein and any present or future statute, law,
ordinance or regulation contrary to which the parties have no legal right to
contract, the latter shall prevail but the provision of this document which is
affected shall be curtailed and limited only to the extent necessary to bring
it within the requirements of the law. In the event any action or arbitration
is instituted by a party hereto to enforce or construe any term or to recover
damages resulting from the breach of any term of this Agreement, the prevailing
party in such action or arbitration shall be entitled to such reasonable fees,
costs and expenses (including the costs of the arbitrator) as may be fixed by
the court or arbitrator. The jurisdiction for any arbitration or judicial
proceedings brought by either party against the other party with respect to
this Agreement shall be Multnomah County, Oregon.
18.10 Arbitration. Either party may elect to require that
any controversy arising out of or relating to this Agreement be determined by
arbitration in accordance with the then effective commercial arbitration rules
of American Arbitration Association. All statutes of limitation which would
otherwise be applicable shall apply to the arbitration proceeding. Any
judgment upon the award rendered pursuant to arbitration may be entered in any
court having jurisdiction. In lieu of using the American Arbitration
Association, the parties may agree to select a single arbitrator who is
experienced in the alarm industry. If any legal action or other proceeding has
been brought by either party to construe, interpret or enforce this Agreement;
(i) the party who is the defendant or respondent in such proceeding shall be
deemed to have waived the option to arbitrate if a general appearance is made
in such proceeding prior to filing a claim in arbitration and (ii) the party
who is the plaintiff or petitioner in such proceeding shall be deemed to have
waived the option to arbitrate if a claim for arbitration is not filed within
sixty (60) days after a general appearance has been made by the adverse party
in such proceeding. If either party exercises the option to arbitrate,
arbitration shall be mandatory and any pending judicial proceeding shall be
stayed except to the extent permitted in this section.
18.11 Provisional Remedies. The following remedies may be
exercised by either party regardless of whether an arbitration proceeding is
then pending and without waiving any right to require arbitration: (i)
injunctive or other equitable relief to the extent such relief does not
conflict with any arbitration award; and/or (ii) setoff or recoupment.
18.12 Captions. Any captions to the sections of this
Agreement are solely for the convenience of the parties and are not a part of
this Agreement and shall not be used for the determination of the validity of
this Agreement or any provision therefor.
18.13 Entire Agreement; Waiver; Further Assurances. This
Agreement, together with any related documents referred to in this Agreement,
constitutes the entire understanding and agreement of the parties with respect
to the subject matter of this Agreement, and any and all prior agreements,
understandings or representations are hereby terminated and canceled in their
entirety. All of the terms and provisions contained herein shall inure to the
benefit of and shall be binding upon the parties hereto and their respective
heirs, personal representatives, successors and assigns. No reliance upon or
waiver of one or more provisions of this Agreement shall constitute a waiver of
any other provisions hereof. Each of the parties hereto shall execute
Page 25 - ASSET PURCHASE AGREEMENT
26
and deliver any and all additional papers, documents, and other assurances, and
shall do any and all acts and things reasonably necessary in connection with
the performance of their obligations hereunder and to carry out the intent of
the parties hereto.
18.14 No Third Party Beneficiaries. Nothing contained in
this Agreement shall be construed to give any person other than Buyer, Seller
and Stockholder any legal or equitable right, remedy or claim under or with
respect to this Agreement, except that the employees described in Section 7.2
shall, from and after the Closing of the transaction, be third party
beneficiaries under Section 7.2 only.
18.15 Time is of the Essence. Time is of the essence for
each and every provision of this Agreement.
18.16 Confidentiality. Each party shall hold in confidence
the fact of the existence of and all economic and other terms of this Agreement
and the transactions contemplated herein (collectively, "Confidential Terms").
The parties agree that disclosure of any Confidential Terms shall be limited
solely to management of and advisors to Buyer, Seller and Stockholder on a
"need to know" basis, and such management and advisors shall be advised of and
agree to be bound by the provisions of this Section 18.16. In furtherance and
not in limitation of the foregoing, no statements shall be issued regarding
this Agreement or the economic or other terms of the transactions contemplated
herein without the prior written consent of Buyer, Seller and Stockholder.
Notwithstanding anything to the contrary set forth in this Agreement or any
other documents executed by the parties, Buyer and Seller are authorized to
disclose the existence of and all economic and other terms of this Agreement in
connection with any state or federal securities filings, offering circulars,
registration statements, or loan agreements of Buyer, Seller or Parent.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first set forth above.
SELLER: XXXXXXXX ELECTRONICS, INC.
By: XXXXXX X. XXXXXXXXX
-------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
-----------------------------------
Its: Chairman
------------------------------------
STOCKHOLDER: XXXXXX X. XXXXXXXXX AND XXXXXXX X.
XXXXXXXXX, TRUSTEES OF THE XXXXXXXXX
LIVING TRUST DATED NOVEMBER 21, 1989
XXXXXX X. XXXXXXXX
----------------------------------------
Xxxxxx X. Xxxxxxxxx, Trustee
XXXXXXX X. XXXXXXXXX
----------------------------------------
Xxxxxxx X. Xxxxxxxxx, Trustee
Page 26 - ASSET PURCHASE AGREEMENT
27
CHAIRMAN: XXXXXX X. XXXXXXXXX
----------------------------------------
Xxxxxx X. Xxxxxxxxx,
aka Xxxxxx X. Xxxxxxxx
BUYER: PROTECTION ONE ALARM MONITORING, INC.
By: XXXX X. XXXX, III
----------------------------------------
Xxxx X. Xxxx, III, Executive Vice
President
Page 27 - ASSET PURCHASE AGREEMENT
28
EXHIBITS
TO
ASSET PURCHASE AGREEMENT
Each of the following exhibits has been omitted. The Registrant
hereby agrees to furnish supplementally a copy of any omitted exhibit to the
Commission upon request.
Exhibit Number
--------------
1.1 Aging of Accounts Receivable1
1.6A Customer Accounts Included in Calculating QRR
1.6B Unqualified Accounts
1.7 Equipment
1.11 Telephone Lines
1.12 Unearned Revenue
1.13 Disclosures re Buyer's Work in Progress1
1.14 Disclosures re Seller's Work in Progress1
1.15 Prepaid Expenses1
2.2.1 Form of Sublease Agreement
2.3.2 Allocation of Purchase Price1
2.5 Forms of Accredited Investor Affidavit and Registration Rights Agreement
4 Seller's and Stockholder's Disclosure Exhibit
5 Buyer's Disclosure Exhibit
6.1 Form of Announcement Letter
9.2 Form of Xxxx of Sale
___________
1 To be attached to the Asset Purchase Agreement
Addendum at Closing 18.16.0.0.0.0.0.1
Page 28 - ASSET PURCHASE AGREEMENT
