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Exhibit 10.71
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the 'Agreement') is made as of September 30,
1998, by and among MPA SYSTEMS, INC., a Texas corporation ('Purchaser'), XXXXXXX
COMPANY D/B/A MPA SYSTEMS, a Texas corporation (the 'Company'), and INTEGRATED
SECURITY SYSTEMS, INC., a Delaware corporation, the sole shareholder of the
Company (the 'Parent').
WHEREAS, the Company desires to sell to Purchaser, and Purchaser desires to
purchase from the Company, certain of the assets of the Company which it uses in
the business known as 'MPA Systems' (hereinafter referred to as the 'Business')
on the terms and conditions herein set forth;
NOW, THEREFORE, Purchaser, the Company and the Parent covenant and agree as
follows:
1. TRANSFER OF ASSETS
(a) On the terms and subject to the conditions stated in this
Agreement, the Company agrees to sell, convey, transfer, assign and deliver to
Purchaser at the Closing (as hereinafter defined), and Purchaser agrees to
purchase, good and marketable title to all of the assets used directly and
predominantly in the Company's Business, whether tangible or intangible, real,
personal or mixed, including, without limitation the following:
(i) the modular units more fully described in SCHEDULE 1(a)(i)
attached hereto;
(ii) the furniture and fixtures more fully described in
SCHEDULE 1(a)(ii) attached hereto;
(iii) the equipment as more fully described in SCHEDULE
1(a)(iii) attached hereto;
(iv) the contractual rights in all leases of modular units in
effect on the date of Closing (the 'Leases') as more fully described in SCHEDULE
1(a)(iv) attached hereto (but only to the extent such rights are assignable by
the Company);
(v) all other assets used predominantly in the Business
including any trademarks, patents, patent applications, trade secrets,
inventions, copyrights, service marks, trade names ('MPA Systems' and 'MPA' and
all others associated with the Business), associated goodwill, supplies,
customer and supplier lists, sales data, telephone numbers, contracts, service
contracts, warranties, computer hardware and software, promotional materials,
market studies, licenses and permits, copies of accounts and records, and all
goodwill, proprietary rights and interests and all intangible property of the
Business wherever located, as the same shall exist on the Closing Date (as
hereinafter defined);
(such assets are collectively hereinafter referred to as
the 'Transferred Assets'); provided, however, that the Transferred Assets shall
not include any accounts or notes receivable or any cash or cash equivalents on
hand on the Closing Date (as hereinafter defined), or deposits on the Leases,
all assets of the Company used predominantly in the Company's plastic inspection
business, the existing non-compete agreements between the Company and X. Xxxx
Xxxxxxx and affiliates, and insurance policies (all such assets are collectively
referred to as 'Excluded Assets').
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(b) Purchaser shall not assume or be responsible for any liabilities,
liens, claims, obligations or encumbrances, contingent or otherwise, except for
those specifically set forth on SCHEDULE 1(b) hereto (the 'Assumed
Liabilities'), and the Transferred Assets shall be sold and conveyed to
Purchaser free and clear of all liabilities, liens, claims, obligations and
encumbrances except for the liens created by this transaction. Without limiting
the generality of the foregoing, in no event shall Purchaser assume or be
responsible for:
(i) any federal, state or local income, sales, property,
franchise, use or other tax relating to the Transferred Assets and arising prior
to the Closing (as hereinafter defined) or resulting from the ownership or
operation of the Transferred Assets by the Company prior to the Closing Date (as
hereafter defined);
(ii) any liabilities, obligations or costs (including, without
limitation, attorneys' fees) resulting from any claim or lawsuit or other
proceeding relating to the Transferred Assets and (i) pending at the Closing
Date (as hereinafter defined) or (ii) based upon events, transactions or
circumstances occurring or existing prior to the Closing Date (as hereinafter
defined); or
(iii) except as contemplated by SECTIONS 7 or 11 of this
Agreement, any attorneys', accountants', brokers' or finders' fees or other
expenses of the Company or the Parent incurred in connection with this Agreement
or any transaction contemplated herein.
(c) In furtherance of the foregoing, the Company and the Parent
expressly release, and agree to cause any affiliate or related party or any
corporation, partnership or other entity controlled by them or any of their
affiliates or related parties to release any claims relating to any of the
foregoing liabilities, liens, claims, obligations or encumbrances that they or
such persons might have against Purchaser or the Transferred Assets, other than
pursuant to this Agreement or the transactions contemplated hereby.
(d) The Company and the Parent covenant and agree that, at the time of
the Closing, the Company will be current in all payments and other obligations
required to be made or performed by the Company under the contracts, purchase
orders and other agreements which are included in the Transferred Assets or the
Assumed Liabilities or which are otherwise transferred to and/or assumed by
Purchaser hereunder or pursuant hereto.
(e) Purchaser and the Company have agreed upon the allocation of the
consideration paid by Purchaser to the Company (including the assumption of the
Liabilities) among the Transferred Assets and have set forth the allocation of
such consideration and the tax basis of the Transferred Assets for federal
income tax purposes in writing, and such allocation is presented on SCHEDULES
1(a)(i)-(iv). Such allocation was made in accordance with the applicable rules
under SECTION 1060 of the Internal Revenue Code of 1986, as amended ('Code') and
is binding upon Purchaser and the Company for all purposes (including financial
accounting purposes, financial and regulatory reporting purposes and tax
purposes). Purchaser and the Company also each agree to file appropriate
documents with the IRS under Treasury Regulation SECTION 1.1060-1T(h)(3)
reflecting the foregoing.
2. PURCHASE PRICE
(a) The Total Purchase Price (herein so called) payable to the Company
for the Transferred Assets shall be $2,800,000.
(b) The Purchase Price shall be payable on the closing date as follows:
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(i) the delivery of an unsecured promissory note made by
Purchaser and payable to Company in the amount of $300,000 bearing interest on
the unpaid balance at the rate of 10% per annum (the '$300,000 Promissory Note')
with payment terms and form substantially similar to the form attached hereto as
EXHIBIT 2(b)(i).
(ii) the Purchaser's assumption of the Assumed Liabilities on
SCHEDULE 1(b).
(iii) the delivery of an unsecured promissory note made by
Purchaser and payable to Company in the amount of no more than $400,000, bearing
interest on the unpaid balance at the rate of 12.5% per annum (the '$400,000
Promissory Note') with payment terms and form substantially similar to the form
attached hereto as EXHIBIT 2(b)(ii).
(iv) cash, delivered by wire transfer, in an amount equal to
the Total Purchase Price less the amount of the Assumed Liabilities, less the
amount of the $300,000 Promissory Note and less 95% of the $400,000 Promissory
Note.
3. THE CLOSING
(a) The Closing of the transactions contemplated by this Agreement
shall be deemed effective as of 12:01 a.m., October 1, 1998. The closing shall
occur at the offices of Xxxxxx and Xxxxx, LLP, Attorneys at Law, Dallas, TX (the
'Closing') The term 'Closing Date' refers to September 30, 1998.
(b) At Closing, the Company and the Parent will deliver to Purchaser:
(i) the Xxxx of Sale, Assignment of Leases and Assignment of
Contracts (substantially in the forms attached hereto as EXHIBITS 3(b)(i)-l,
3(b)(i)-2 and 3(b)(i)-3, respectively) and such other good and sufficient
instruments of conveyance, assignment and transfer, in form and substance
satisfactory to Purchaser's counsel, as shall be effective to vest in Purchaser
good and marketable title to the Transferred Assets and take such actions as
shall be effective to put Purchaser in possession of such Transferred Assets;
(ii) evidence of any approvals of applications to public
authorities, and any approvals of any private persons the granting of which is
necessary for the consummation of the transactions contemplated hereby, or for
the preventing of any termination of any material right, privilege, license or
agreement of, or any material loss or disadvantage to, Purchaser upon
consummation of the transactions contemplated hereby;
(iii) evidence of the release of all liens and encumbrances
with respect to the Transferred Assets;
(iv) the records of the Company concerning the Business
(excluding Company financial statements and reports and corporate minute books
and stock records);
(v) a certificate of good standing from the Texas Comptroller
of Public Accounts;
(vi) certified resolutions of the Board of Directors and
Shareholders of the Company authorizing the transactions contemplated by this
Agreement;
(vii) such other documents, undertakings, agreements and
instruments, in form and substance acceptable to Purchaser's counsel, as may
otherwise be required by Purchaser to consummate the transactions contemplated
hereby.
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(c) At Closing, Purchaser will deliver, or cause to be delivered, to
the Company:
(i) the cash portion of the Total Purchase Price in
wire-transferred funds;
(ii) the $300,000 Promissory Note and the $400,000 Promissory
Note;
(iii) the Stock Option Agreement, an option agreement granted
by Purchaser to the Company for the purchase of 4,633 shares of the Company's
Common Stock at an exercise price equal to $7.78 per share, expiring on December
31, 2003;
(iv) certified resolutions of Purchaser's Board of Directors
authorizing the transactions contemplated by this Agreement;
(v) a release by Xxxxx X. Xxxxx; and
(vi) such other documents, undertakings, agreements and
instruments, in form and substance acceptable to the Company's counsel as may
otherwise be required by the Company and the Parent to consummate the
transactions contemplated hereby.
(d) At Closing, Purchaser and the Company shall execute a lease
agreement between them in a form substantially similar to Exhibit 3(d).
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Company and the Parent as follows:
(a) Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Texas.
(b) Purchaser has all requisite corporate power and authority to enter
into this Agreement and all other agreements and documents required to be
executed and delivered by Purchaser. The execution, delivery and performance of
this Agreement and all other agreements and documents required to be delivered
by Purchaser pursuant to this Agreement have been duly authorized by all
necessary action (corporate or otherwise) by Purchaser, and this Agreement and
the other agreements and documents required to be delivered by the Company
pursuant to this Agreement, have been duly executed and delivered and are legal,
valid and binding agreements of Purchaser, enforceable in accordance with their
respective terms.
(c) Neither the execution or delivery of this Agreement, nor the
consummation of any of the transactions contemplated hereby or thereby, will
result in the breach or violation of any term or provision, or constitute a
default under, any charter provision, bylaw, agreement, mortgage, deed of trust,
note, bond, license, lease, indenture, instrument, order, writ, injunction,
decree, statute, rule or regulation to which Purchaser is a party or which is
otherwise applicable to Purchaser.
(d) No court decision restrains or prohibits the consummation of the
transactions contemplated hereby, and no litigation is pending seeking to
restrain or prohibit or seeking damages with respect to the consummation of the
transactions contemplated hereby.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PARENT
The Company and the Parent, jointly and severally, represent and warrant to
Purchaser as follows:
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(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Texas. The Parent is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company and the Parent each has full corporate
power to own its properties and conduct its business. The Company is a
wholly-owned subsidiary of the Parent.
(b) The Company and the Parent each have all the requisite corporate
power and authority, and the legal right, to enter into this Agreement and all
other agreements and documents required to be executed and delivered by them.
The execution, delivery and performance of this Agreement, and all other
agreements and documents required to be delivered by the Company or the Parent
pursuant to this Agreement, have been duly authorized by all necessary action
(corporate or otherwise) by the Company and the Parent, and this Agreement and
the other agreements and documents required to be delivered by the Company and
the Parent pursuant to this Agreement, have been duly executed and delivered and
are legal, valid and binding agreements of the Company and the Parent,
enforceable in accordance with their respective terms.
(c) Upon execution and delivery, the Xxxx of Sale, Assignment of Leases
and the Assignment of Contracts (upon receipt of all applicable lessee and other
third party consents) will be sufficient to and will convey to Purchaser good
and marketable title to all of the Transferred Assets free and clear of all
liens, claims and encumbrances of any kind (including liens, claims and
encumbrances relating to income, franchise, use, sales, employee income tax
withholding, social security, unemployment and sales taxes), except as set forth
on SCHEDULE 5(c).
(d) Upon receipt of all applicable lessee and other third party
consents, neither the execution or delivery of this Agreement, the Xxxx of Sale
or the Assignment of Leases or other instruments or conveyance, assignment and
transfer, nor the consummation of any of the transactions contemplated hereby or
thereby, will result in the breach or violation of any term or provision of, or
constitute a default under, or result in any loss to, or the creation of a lien
on, any of the Transferred Assets, under any charter provision, bylaw,
agreement, mortgage, deed of trust, note, bond, license, statute, law, rule or
regulation, to which the Company or the Parent is a party or which is otherwise
applicable to either of them or any of the Transferred Assets.
(e) All financial statements concerning the Business previously
provided to Purchaser have been prepared from the books and records of the
Company, which accurately and fairly reflect the transactions and dispositions
of the assets and the incurrence of liabilities of the Company, are complete and
correct and reasonably present the financial position of the Business at the
respective dates indicated.
(f) Since the date of the last financial statements provided to
Purchaser, and except as set forth on SCHEDULE 5(f), the Company has operated
its businesses in the ordinary course, and there has not been:
(i) any material adverse change in the condition (financial or
otherwise), results of operations, business, prospects, assets or liabilities
(contingent or otherwise) of the Company;
(ii) any material theft, damage, or material operating or
other loss (whether or not covered by insurance) suffered by the Company;
(iii) any material change in the promotion, marketing,
standard terms in the Leases, sales or other policies relating to or affecting
the business of the Company or any changes in management, accounting or
operations;
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(iv) any sale of material assets used in the business which
have not been replaced with assets of substantially similar utility and
remaining life.
(g) As of the date hereof, proper and accurate reports to taxing
authorities have been timely filed by the Company (or extensions for filing
granted) with respect to the Transferred Assets and Business for all periods in
which such were due. Except as noted in paragraph 12(a), all taxes have been
paid or adequate provisions made therefor. Except as noted in paragraph 12(a),
there is not in force any extension of the date on which any tax return was or
is due to be filed by or with respect to the Transferred Assets or Business or
any waiver or agreement for the extension of time for the payment of any tax
which would result in the delay of payment of taxes due in the periods up to
Closing to periods after Closing. There are no tax liens upon any of the
Transferred Assets, other than for current taxes not yet due.
(h) Other than as set forth on SCHEDULE 5(h) hereto, neither the
Company nor the Parent beneficially owns, directly or indirectly, a controlling
interest in any corporation, partnership firm or association which is a
competitor, customer, supplier or lessor of the Business. For purposes of this
SECTION 5(h), the term 'control' shall mean the ownership of not less than five
percent of the voting stock, in the case of a corporation, or not less than five
percent of the voting interest, in the case of a partnership, firm or
association, or otherwise the power or authority to manage, direct, service or
administer the affairs of any person.
(i) Except as set forth in SCHEDULE 5(i) hereto, the Company has good
and marketable title to the Transferred Assets (including any patents, patent
rights, copyrights, trade names, trademarks, service marks and other names and
marks used in connection with the Company's operations), which assets are free
and clear of all liens, pledges, charges, claims, encumbrances, proscriptions,
restrictions, conditions, covenants and easements of any kind. Except as set
forth on SCHEDULE 5(i), no liens, mortgages or financing statements have been
filed under the Uniform Commercial Code or other similar statute on the
Transferred Assets, nor has the Company signed any security agreement or similar
agreement authorizing any secured party thereunder to file any such lien,
mortgage or financing statement regarding the Transferred Assets.
(j) Except as disclosed on SCHEDULE 5(j), substantially all modular
units subject to Leases or in the Company's inventory are merchantable for lease
in the ordinary course of the Company's business. The Transferred Assets include
all of the Company's modular units relating to the Company's business.
(k) Except as set forth on SCHEDULE 5(k):
(i) except with respect to the Xxxxxx Xxxx matter, there are
currently no pending, and neither the Company nor the Parent is aware of any
threatened lawsuits, mediations, arbitrations, or administrative proceedings
against the Company to which the Business or any of the Transferred Assets may
be or are subject;
(ii) except with respect to a threatened IRS audit, neither
the Company nor the Parent is aware of any investigation or review threatened by
any governmental entity with respect to the Business or relating to the
Transferred Assets;
(iii) the Company is in compliance in all material respects
with all laws and regulations with respect to, and is not subject to any
currently existing order, writ, injunction or decree relating to the operations
of the Business or the Transferred Assets; and
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(iv) no court decision restrains or prohibits the consummation
of the transactions contemplated hereby, and no litigation is pending seeking to
restrain or prohibit or seek damages with respect to the consummation of the
transactions contemplated hereby.
(l) SCHEDULE 5(l) hereto contains a true and correct list or brief
description of:
(i) all current or pending contracts, commitments and leases
(of real or personal property) written or otherwise, between the Company and any
party related to the Business, and all trade names, trademarks, assumed name
(fictitious name) filings and service marks used by the Company and related to
the Business;
(ii) all agreements related to the Business (other than those
relating to trade accounts payable or receivable) pursuant to which the Company
is obligated to pay or will receive in the future more than $5,000.00 annually;
and
(iii) all agreements or arrangements with competitors of the
Company or which restrict the Company's ability to compete in the Business.
The Company has delivered or made available to Purchaser, complete and current
copies of all written agreements, documents, arrangements, commitments and
Leases (together with all amendments thereto) referred to above or listed on
SCHEDULE 5(l), indicating by notation whether, to the Company's best knowledge
and belief, the consent of any person is required for the consummation of
transactions contemplated hereby, or for the preventing of the termination of
any material right, privilege, license or agreement of, or any loss to Purchaser
upon consummation of the transactions contemplated hereby. All such written
agreements, documents and Leases and, to the knowledge of the Company and the
Parent, all other arrangements and commitments are in full force and effect.
(m) The Company has in all material respects (except as set forth on
SCHEDULE 5(m)) performed all obligations to be performed by it under all
contracts, Leases, agreements and commitments to which it is a party, and, to
the best knowledge of the Company and Parent, there is not under any such
contract, Lease, agreement or commitment any existing default or event of
default or event which, with notice or lapse of time or both, would constitute a
default.
(n) Neither the Company nor the Parent makes any representation with
regard to the operating condition or repair of the Transferred Assets, and
understands that Purchaser is purchasing the Transferred Assets based upon
Purchaser's previous inspection of the Transferred Assets, and the Transferred
Assets are being sold to Purchaser 'as is.'
(o) To the best knowledge and belief of the Company and Parent, no
toxic chemicals, hazardous wastes, radioactive wastes, hazardous constituents,
non-hazardous industrial solid waste, or wastes classified by the Texas Natural
Resources Conservation Commission in 30 Tex. Admin. Code 335.505-335.507 as
Class 1, Class 2, or Class 3 wastes, have been deposited or disposed of in or on
the modular units. To the best knowledge and belief of the Company and Parent,
asbestos or similar materials which may create a potential health hazard have
not been used in the construction of, or in the manufacture of the modular
units.
(p) The Transferred Assets are all of the properties, assets and rights
(except for the Company's accounts receivable, cash and Excluded Assets) which
are currently being used by the Company in the conduct of the Business.
(q) The records of the Business for all periods, fairly set forth the
transactions to which the Company is a party or by which its properties are
bound, are accurate and complete and have been maintained consistent with good
business practices.
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(r) SCHEDULE 5(r) lists all licenses, franchises, permits and other
governmental authorizations which, to the best knowledge and belief of the
Company, are necessary or are legally required to conduct the Business as
conducted on the date hereof, the failure of which to obtain would have a
material adverse effect on the Company's business.
(s) SCHEDULE 5(s) sets forth a complete and correct list of each
patent, patent application, trademark (whether or not registered), trademark
application, trade name, service xxxx, copyright and proprietary intellectual
property (including without limitation, proprietary computer software, whether
in object or source form) (collectively, 'Intellectual Property') owned, used or
licensed by the Company which are used in the Business and a description of
whether such Intellectual Property is owned or licensed by the Company. The
Company is the owner of all right, title and interest in and to the Intellectual
Property, has the exclusive right to use such Intellectual Property and its
current use of such Intellectual Property does not infringe the rights of any
other person. Neither the Company nor the Parent is aware of any facts which
would render any of the patents, trademarks or trade names listed on SCHEDULE
5(s) invalid. To the best knowledge of the Company and the Parent, no person is
materially infringing the rights of the Company in any such Intellectual
Property.
(t) All of the schedules provided by the Company or the Parent pursuant
to this Agreement are true, correct and complete in all respects, and no
representation, warranty or statement made by the Company and/or the Parent in
or pursuant to this Agreement (including the schedules hereto) contains or will
contain any untrue statement of a material fact.
6. COVENANTS
The Company and the Parent, jointly and severally, covenant and agree, from and
after the Closing Date:
(a) to cooperate and work in good faith with Purchaser for the orderly
transfer of the Transferred Assets and the Business to Purchaser; and
(b) to change and, not at any time in the future, use the corporate
name 'MPA Systems, Inc. ' or any name similar thereto except in the orderly
transfer of the Business to Purchase.
7. INDEMNIFICATION
(a) Subject to the further terms and conditions of this SECTION 7, the
Company and the Parent agree, jointly and severally, to indemnify and hold
Purchaser, its directors, officers, employees, agents, affiliates, attorneys,
successors and assigns (each, a 'Purchaser Party') harmless from any and all
losses, damages, claims, costs (excluding incidental and consequential damages
and punitive damages, or expenses (including all court costs and reasonable
attorneys' fees) incurred by any Purchaser Party arising from or in connection
with:
(i) the material breach or inaccuracy of any representations,
warranties, covenants or agreements by the Company or the Parent set forth in
this Agreement or in any exhibit, schedule or document delivered pursuant
hereto;
(ii) any obligation or liability of the Company not expressly
assumed by the Purchaser pursuant to SECTION 1(b) hereof;
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(iii) any claims by employees of the Company (whether or not
employed by the Purchaser after Closing) for severance, sick leave, medical
benefits (including, without limitation, any claims arising out of or relating
to the Company's violation of or failure to comply with, the provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1985), or other employee
benefits arising out of or relating to any period prior to Closing;
(iv) any fact or occurrence causing any Purchaser Party to be
or become liable for any losses, damages, claims, costs or expenses, whether
fixed or contingent, matured or unmatured, known or unknown, other than the
Assumed Liabilities, arising out of or relating to the Company's ownership or
operation of the Transferred Assets or Business in the period prior to Closing;
or
(v) any claim for brokerage or finder's fees or commissions or
similar payments based upon any agreement or understanding alleged to have been
made by any person with Company or Parent (or any person acting on their behalf)
in connection with any of the transactions contemplated by this agreement.
(b) Subject to the further terms and conditions of this SECTION 7,
Purchaser agrees to indemnify and hold the Company and the Parent, their
directors, officers, employees, agents, affiliates, attorneys, successors and
assigns (each, a 'Company Party') harmless from any and all losses, damages,
claims, costs (excluding incidental and consequential damages and punitive
damages or expenses (including all court costs and reasonable attorneys' fees)
incurred by any Purchaser Party arising from or in connection with:
(i) the material breach or inaccuracy of any representations,
warranties, covenants or agreements by Purchaser set forth in this Agreement or
in any exhibit, schedule or document delivered pursuant hereto (subject to the
period of limitations provided in SECTION 7(e));
(ii) the Assumed Liabilities; or
(iii) any claim for brokerage or finder's fees or commissions
or similar payments based upon any agreement or understanding alleged to have
been made by any person with the Purchaser (or any person acting on Purchaser's
behalf) in connection with any of the transactions contemplated by this
agreement.
(c) In the event of any claim for which indemnification will be sought
pursuant to subsections (a) or (b) above, the party claiming the right to
indemnity (the 'Claimant') shall promptly notify (but in no case later than 30
days) the indemnifying party (the 'Indemnitor') in writing of such claim, which
notice shall set forth the basis of the claim for indemnity (including, without
limitation, reference to the specific representation, warranty, covenant or
obligation alleged to have been breached) and a reasonable estimate of the
amount thereof; provided that failure to give such notice shall not affect the
Indemnitor's obligations hereunder unless such failure materially prejudices the
rights of the Indemnitor with respect to any third party claim. The obligations
and liabilities of the parties with respect to such claims resulting from the
assertion of liability by third parties ('Claims'), shall be subject to
compliance by Claimant with each of the following terms and conditions:
(i) Claimant will give Indemnitor notice of any Claim asserted
against or imposed upon or incurred by Claimant, and Indemnitor will undertake
the defense thereof by attorneys of Indemnitor's own choosing reasonably
satisfactory to Claimant, and Claimant may elect to participate in such defense;
(ii) in the event that Indemnitor, within 10 days after notice
of any such Claim, fails to defend, Claimant will (upon further notice to
Indemnitor) have the right to undertake the defense, compromise or settlement of
such Claim for the account of Indemnitor; and
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(iii) anything in this subsection (c) notwithstanding,
Indemnitor shall not, without Claimant's prior written consent, settle or
compromise any Claim or consent to entry of any judgment with respect to any
Claim for anything other than money and damages paid by Indemnitor. Indemnitor
may, without Claimant's prior written consent, settle or compromise any Claim or
consent to entry of any judgment with respect to any Claim which requires solely
money damages paid by Indemnitor and which includes as an unconditional term
thereof the release of Claimant and all related parties and affiliates from all
liability in respect to such Claim.
(d) Indemnification pursuant to this SECTION 7 shall not be the sole
remedy of the Claimant, and the Claimant shall in such cases be entitled to any
and all remedies, whether at law or in equity, that it would otherwise have
under applicable law.
(e) After Closing, any claim for indemnification hereunder that is not
made in writing to the party against whom indemnification is sought within
twenty-four (24) months of the Closing Date shall be deemed waived, and no
person shall have any remedy under this SECTION 7 against any party for
indemnification; provided, however, that such actions by Purchaser against the
Company and the Parent for misrepresentations in SECTION 5(c) and 5(i) may be
commenced at any time that Purchaser or the Company or the Parent (as the case
may be) is subject to damages with respect thereto.
(f) In computing the amount of any damages to which a party shall be
entitled to indemnification hereunder, the Indemnitor shall be given the benefit
of any insurance proceeds which may become available to the Claimant (net of any
applicable costs in collecting such insurance and additional premiums resulting
from such loss).
(g) The Company and the Parent shall have no liability (for
indemnification or otherwise) with respect to the matters described in SECTION 7
until the total of all damages with respect to such matters exceeds $50,000 and
then only for the amount by which such damages exceed $30,000. The Company and
the Parent's total liability (for indemnification or otherwise) with respect to
the matters described in SECTION 7 shall not exceed $500,000. However, these
limitations on liability will not apply to any breach of SECTIONS 5(c) and (i),
and the Company and the Parent shall be liable for all damages with respect to
such breach.
8. SELLER'S COVENANT NOT TO COMPETE
(a) For a period of three (3) years following the Closing Date (the 'Effective
Time'), the Company and the Parent, jointly and severally, covenant and agree
that they, and each of their subsidiaries (each a 'Covenantor' and jointly, the
Covenantors in this SECTION 8):
(i) will not directly or indirectly, own, manage, operate,
join, advise, control or otherwise engage or participate in or be connected as
an officer, employee, shareholder, creditor, guarantor, partner, advisor,
consultant or otherwise, with any business of the type presently or historically
conducted by the Company with respect to the Business (specifically including,
without limitation, any activity concerning the leasing or selling of the
Transferred Assets;
(ii) will keep confidential all, and will not divulge to any
other party (except as required by law) any, of the private, secret or
confidential information of the Business or Purchaser, including, but not
limited to, private, secret and confidential information relating to such
matters as the Business' or Purchaser's finances, trade secrets, proprietary
rights, intellectual property, methods of operation and competition, marketing
plans and strategies, equipment and operational requirements and information
concerning personnel, customers and suppliers;
11
(iii) will not, either for any Covenantor's own account or for any person, firm
or company, solicit, interfere with or endeavor to cause any present or future
employee of Purchaser to leave his employment or induce or attempt to induce any
such employee to terminate or breach his employment agreement or terminate his
employment with the Purchaser; or
(iv) will not influence or attempt to influence any
franchisee, customer or potential customer of the Purchaser to engage in
activities similar to the Business.
The provisions of this SECTION 8(a) are intended to
benefit and be enforceable by Purchaser, its present and future affiliates and
any of their assignees.
(b) In the event any Covenantor violates the provisions of this SECTION
8, the running of the time period of such provisions so violated shall be
automatically suspended upon the date of such violation and shall resume on the
date any such Covenantor permanently ceases such violation.
(c) Notwithstanding anything set forth herein to the contrary, the
remedy at law for any breach of this SECTION 8 is and will be inadequate, and in
the event of a breach or threatened breach by any Covenantor of any of the
provisions of this SECTION 8, Purchaser shall be entitled to an injunction
restraining any such Covenantor from violating any of the provisions of this
SECTION 8. Nothing herein contained shall be construed as prohibiting Purchaser
from pursuing any other remedies (at law or in equity) available to it for any
such breach or threatened breach, including, without limitation, the recovery of
damages from any such Covenantor.
(d) The agreements described in this SECTION 8 shall be deemed to
consist of a series of separate covenants. Each Covenantor expressly agrees that
the character, duration and geographical scope of the agreements described in
this SECTION 8 are reasonable in light of the circumstances as they exist on the
date upon which this Agreement is executed. However, should a determination
nonetheless be made by a court of competent jurisdiction at a later date that
the character, duration or geographical scope of any of the agreements described
in this SECTION 8 is unreasonable in light of the circumstances as they then
exist, then it is the intention and the agreement of each Covenantor and
Purchaser that this Agreement shall be construed by the court in such a manner
as to impose only those restrictions on the conduct of each Covenantor which are
reasonable in light of the circumstances as they then exist and as are necessary
to assure Purchaser of the intended benefit of this SECTION 8. If, in any
judicial proceeding, a court shall refuse to enforce all of the separate
covenants deemed included herein because, taken together they are more extensive
than necessary to assure Purchaser of the intended benefit of this SECTION 8, it
is expressly understood and agreed among the parties that those of such
covenants which, if eliminated, would permit the remaining separate covenants to
be enforced in such proceeding shall, for the purpose of such proceeding, be
deemed eliminated from the provisions hereof.
(e) Purchaser's need for the protections afforded by the foregoing
provisions of this SECTION 8 outweighs the burdens and any potential hardship to
each Covenantor and outweighs any injury likely to the public, and such burdens
do not impose any undue hardship on any Covenantor.
9. PURCHASER'S COVENANT NOT TO COMPETE
(a) For a period of three (3) years following the Closing Date (the
'Effective Time'), the Purchaser covenants and agrees that it and each of its,
officers and directors, (whoever they may be during said three year period and
individually, each a 'Covenantor' and jointly, the 'Covenantors' in this SECTION
9):
12
(i) will not directly or indirectly, own, manage, operate,
join, advise, control or otherwise engage or participate in or be connected as
an officer, employee, shareholder, creditor, guarantor, partner, advisor,
consultant or otherwise, with any business (not including the Business subject
to this Agreement) of the type presently or historically conducted by the
Company specifically including, without limitation, any activity concerning the
production and sale of carriers for pneumatic transport systems or the
production and sale of injection molding tools (the 'Retained Business');
(ii) will keep confidential all, and will not divulge to any
other party (except as required by law) any, of the private, secret or
confidential information of the Company, including, but not limited to, private,
secret and confidential information relating to the Retained Business such as
the Retained Business' finances, trade secrets, proprietary rights, intellectual
property, methods of operation and competition, marketing plans and strategies,
equipment and operational requirements and information concerning personnel,
customers and suppliers;
(iii) will not, either for any Covenantor's own account or for
any person, firm or company, solicit, interfere with or endeavor to cause any
present or future employee of Company engaged in the Retained Business to leave
his employment or induce or attempt to induce any such employee to terminate or
breach his employment agreement or terminate his employment with the Company; or
(iv) will not influence or attempt to influence any
franchisee, customer or potential customer of the Company's Retained Business to
engage in activities similar to the Business.
The provisions of this SECTION 9(a) are intended to benefit and be enforceable
by Company, its present and future affiliates and any of their assignees.
(b) In the event any Covenantor violates the provisions of this SECTION
9, the running of the time period of such provisions so violated shall be
automatically suspended upon the date of such violation and shall resume on the
date any such Covenantor permanently ceases such violation.
(c) Notwithstanding anything set forth herein to the contrary, the
remedy at law for any breach of this SECTION 9 is and will be inadequate, and in
the event of a breach or threatened breach by any Covenantor of any of the
provisions of this SECTION 9, Company shall be entitled to an injunction
restraining any such Covenantor from violating any of the provisions of this
SECTION 9. Nothing herein contained shall be construed as prohibiting Company
from pursuing any other remedies (at law or in equity) available to it for any
such breach or threatened breach, including, without limitation, the recovery of
damages from any such Covenantor.
13
(d) The agreements described in this SECTION 9 shall be deemed to
consist of a series of separate covenants. Each Covenantor expressly agrees that
the character, duration and geographical scope of the agreements described in
this SECTION 9 are reasonable in light of the circumstances as they exist on the
date upon which this Agreement is executed. However, should a determination
nonetheless be made by a court of competent jurisdiction at a later date that
the character, duration or geographical scope of any of the agreements described
in this SECTION 9 is unreasonable in light of the circumstances as they then
exist, then it is the intention and the agreement of each Covenantor and Company
that this Agreement shall be construed by the court in such a manner as to
impose only those restrictions on the conduct of each Covenantor which are
reasonable in light of the circumstances as they then exist and as are necessary
to assure Company of the intended benefit of this SECTION 9. If, in any judicial
proceeding, a court shall refuse to enforce all of the separate covenants deemed
included herein because, taken together they are more extensive than necessary
to assure Company of the intended benefit of this SECTION 9, it is expressly
understood and agreed among the parties that those of such covenants which, if
eliminated, would permit the remaining separate covenants to be enforced in such
proceeding shall, for the purpose of such proceeding, be deemed eliminated from
the provisions hereof.
(e) Company's need for the protections afforded by the foregoing
provisions of this SECTION 9 outweighs the burdens and any potential hardship to
each Covenantor and outweighs any injury likely to the public, and such burdens
do not impose any undue hardship on any Covenantor.
10. OFFSET
In addition to any rights or remedies which Purchaser may have to assert, pursue
or enforce any claim against the Company or the Parent hereunder or with respect
to which the Purchaser shall be entitled to indemnification under SECTION 7
hereof or which Purchaser may otherwise possess by virtue of this Agreement or
at law or in equity, Purchaser shall have the absolute right, but not the
obligation, to offset any amount payable to the Company by an amount equal to
any and all of such claims; provided, however, that the Purchaser shall give the
Company and the Parent not less than ten (10) days written notice (the 'Offset
Notice') prior to effecting any offset contemplated hereby. The Company or
Parent shall notify the Purchaser in writing (the 'Dispute Notice') if the
Company or Seller disputes the amount or validity of such claim (such Dispute
Notice shall specify each disputed item, the amount thereof and the basis on
which such dispute is asserted by the Company or Parent) within 10 days after
receipt of the Offset Notice. If the Company or Parent fails to so timely
deliver the Dispute Notice, the Company or Parent shall be deemed to have agreed
to the offset or deduction of the amount claimed by the Purchaser as a Purchaser
claim and such amount may be offset and deducted by the Purchaser without being
in breach of or default under this Agreement. In the event the Company or Parent
timely and properly delivers the Dispute Notice, the Purchaser agrees to deposit
into the registry of a court having jurisdiction over the matter or with a
suitable escrow agent the amount offset that has been disputed by the Company or
Parent in such Dispute Notice until such matter has been resolved by the
agreement of the Parties.
14
11. MISCELLANEOUS
(a) The Company, Parent and Purchaser agree to cooperate with each of
the other parties to this Agreement after Closing as may be necessary to
determine if any party has received income or incurred expense which is
inconsistent with the goal of the Purchaser having the costs and benefits of
ownership of the Transferred Assets and Business after the Closing and the
Company having the costs and benefits of ownership up to and including the
Closing. Should any items be identified by any party which are inconsistent
therewith, the party receiving the benefit shall promptly reimburse the other
party. For purposes of determining into which time period an item of income or
expense properly belongs to achieve the purpose herein stated, generally
accepted accounting principles shall apply. Without limiting the number or types
of reimbursements which may occur under this paragraph, the Company acknowledges
that ad valorem taxes applicable to the Transferred Assets for the calendar year
1998 have partially accrued but have not yet been paid and are not due until
January 31, 1999. Company will reimburse Purchaser for a portion of such taxes
(prorated based on the number of days in 1998 prior to and after Closing) at the
time they are due.
(b) This Agreement and the related documents referenced as Exhibits or
SCHEDULES hereto or otherwise expressly contemplated hereby contain the entire
understanding of the parties relating to the sale of the Transferred Assets by
the Company to Purchaser and supersede all prior agreements and understandings,
written or oral, relating to the subject matter thereof. This Agreement cannot
be modified, amended except in writing signed by the party against whom
enforcement is sought.
(c) Each party agrees to keep confidential the specific terms hereof,
except as shall be mutually agreed on or required by law but nothing in this
paragraph shall prevent either party from communicating to all interested
parties that a purchase of the Business has occurred. Purchaser shall not make
any announcement to the public at large without the prior written consent of the
Company or the Parent.
(d) The Parent, the Company and Purchaser shall each bear the
attorneys', accountants', finders' or other fees, costs and expenses separately
incurred by the Parent and the Company on the one hand, and the Purchaser on the
other, in connection with the negotiation, execution and performance of this
Agreement or any of the transactions contemplated hereunder. Notwithstanding the
foregoing, the Purchaser shall bear the transfer fees, sales taxes and expenses
related to such fees and taxes incurred in connection with the consummation of
the transactions contemplated hereby.
(e) Each of the parties to this Agreement represents to the other party
that it has not incurred and will not incur any liability for brokerage or
finder's fees or agents' commissions in connection with this Agreement and any
of the transactions contemplated hereby, or if any party has incurred any such
liability, that the party incurring such liability shall be responsible for such
fees and commissions.
(f) In the event attorneys' fees or other costs are incurred to require
performance of any of the obligations herein provided for, or to establish
damages for the breach thereof, or to obtain any other appropriate relief,
whether by way of prosecution or defense, the prevailing party shall be entitled
to recover reasonable attorneys' fees and costs incurred therein.
(g) Each party hereto agrees to execute any and all documents, and to
perform such other acts, which may be necessary or expedient to further the
purposes of this Agreement or in order to more effectively convey and transfer
to Purchaser any of the Transferred Assets or for aiding and assisting Purchaser
in collecting and reducing to possession the Transferred Assets or exercising
rights with respect hereto.
15
(h) In the period after Closing, Company and Parent shall promptly
refer to the Purchaser any inquiries or requests for information from past or
potential customers of the Business of which they may become aware. Purchaser
shall promptly refer to the Company any inquiries or requests for information
from past or potential customers of the Company of which they may become aware.
(i) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TEXAS (WITHOUT GIVING EFFECT TO THE CHOICE OF LAW
PROVISIONS THEREOF). ANY SUIT, ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT, OR ANY JUDGMENT ENTERED BY ANY COURT IN RESPECT HEREOF MAY BE BROUGHT
IN THE COURTS OF THE STATE OF TEXAS, DALLAS COUNTY, OR IN THE UNITED STATES
COURTS LOCATED IN THE STATE OF TEXAS, AS THE PARTY BRINGING SUCH ACTION IN ITS
SOLE DISCRETION MAY ELECT AND THE PARTIES HERETO SUBMIT TO THE EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF TEXAS, COUNTY OF DALLAS, OR IN THE
UNITED STATES COURTS LOCATED IN THE STATE OF TEXAS, FOR THE PURPOSE OF ANY SUCH
SUIT, ACTION OR PROCEEDING. EACH PARTY WILL ADVISE THE OTHER PROMPTLY OF ANY
CHANGE OF ADDRESS. EACH PARTY HERETO HEREBY FURTHER IRREVOCABLY CONSENTS TO THE
SERVICE OF PROCESS IN ANY SUIT, ACTION OR PROCEEDING IN SAID COURTS BY THE
MAILING THEREOF BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID, TO
IT AT THE ADDRESSES SET FORTH ON THE SIGNATURE PAGE HERETO. EACH PARTY HERETO
HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO
THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT BROUGHT IN THE COURTS LOCATED IN THE STATE OF TEXAS, DALLAS
COUNTY, OR IN THE UNITED STATES COURTS LOCATED IN THE STATE OF TEXAS, AND HEREBY
FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(j) This Agreement shall be binding on, and inure to the benefit of the
parties hereto and on their respective heirs, legal representatives, successors
and assigns.
(k) In the event any provision contained herein shall be held to be
invalid, illegal or unenforceable, it shall not affect any other provision
hereof, and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein, unless to do so would
cause this Agreement to fail of its essential purpose.
(l) After the Closing Date, for a reasonable period of time, the
Company and the Parent shall furnish to Purchaser copies of any books, records
and other documents of the Company which may have been retained by the Company
or the Parent following the Closing which may reasonably be required by
Purchaser for tax purposes or other similar valid business purposes of Purchaser
and otherwise reasonably cooperate with Purchaser, to permit Purchaser to
interpret and evaluate the information so furnished. Without limiting the
foregoing, the Company and the Parent covenant and agree not to destroy or
otherwise dispose of any books or records of the Company, including records
relating to tax information and customer files, for a period of six years
following the Closing Date.
(m) All notices which are required or may be given pursuant to the
terms of this Agreement shall be in writing and shall be sufficient in all
respects if given in writing and delivered personally or sent by registered or
certified mail, postage prepaid, to the addresses set forth under the signatures
of the parties hereto on the last page of this Agreement, or to such other
address as any party shall request of the others in writing. All notices shall
be deemed to be effective upon delivery to an agent for personal delivery or
upon mailing.
(n) All exhibits and schedules attached hereto are incorporated herein
by reference.
(o) Time is of the essence.
16
(p) This Agreement may be executed in one or more counterparts for the
convenience of the parties hereto, all of which together shall constitute one
and the same instrument.
(q) The parties hereto will hold this Agreement and the transactions
contemplated hereby in strict confidence, and will not disclose this Agreement
or its contents without the prior written authorization of the other party,
subject to the requirements of applicable law.
All covenant and agreements in this Agreement which are intended by their terms
to continue after the Closing Date, shall survive the closing of this
transaction.
IN WITNESS WHEREOF the parties hereto have executed this Agreement on the date
first stated above.
Purchaser:
MPA SYSTEMS, INC.
By:
----------------------------
Xxxxx X. Xxxxx, President
X.X. Xxx 000
Xxxxxx, Xxxxx 00000
with a copy to:
Xxxxxxx, Xxxxxxx & Xxxxxxxxx, L.L.P.
0000 Xxxxxxx xx Xxxxx Xxx. X., Xxxxx 0-000
Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx
the Company:
XXXXXXX COMPANY D/B/A MPA SYSTEMS
By:
----------------------------
Xxxxxx X. Xxxxxxxx
c/o Integrated Security Systems, Inc.
0000 Xxxxxxxxxx Xxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
with a copy to:
Xxxxxx and Xxxxx, LLP
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Xxxxx X. Xxxx
Parent:
INTEGRATED SECURITY SYSTEMS, INC.
By:
-----------------------------
Xxxxxx X. Xxxxxxxx
c/o Integrated Security Systems, Inc.
0000 Xxxxxxxxxx Xxxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
