EXHIBIT 10.53
STOCK PURCHASE AGREEMENT
AMONG
INTELLISYS GROUP, INC.
as "Buyer,"
PRO LINE VIDEO, INC.
as the "Company"
AND
EACH OF
XXXXX X. XxXXXXXXX, III
XXXX X. XXXXXXXX
AND
XXXXXX X. XXXXXX
as "Sellers"
Entered Into On
March 17, 1999
But Effective as
of
January 1, 1999
TABLE OF CONTENTS
1. DEFINITIONS................................................... 1
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2. PURCHASE AND SALE OF COMPANY SHARES........................... 6
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(a) Basic Transaction.................................... 6
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(b) Purchase Price....................................... 6
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(c) Certain Provisions With Respect to the Buyer Notes... 6
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(d) Certain Provisions with Respect to the Parallel Notes 7
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(e) Employment Agreements................................ 7
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(f) Collateral Pledge Agreement.......................... 7
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(g) Right of Offset...................................... 7
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(h) Allocation of Amounts Due Sellers.................... 7
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(i) The Closing, Conditions Precedent.................... 7
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(j) Waive Compliance..................................... 8
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(k) Deliveries at the Closing............................ 8
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3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION..... 8
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(a) Representations and Warranties of the Sellers........ 8
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(b) Representations and Warranties of the Buyer.......... 9
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4. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY AND ITS
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SUBSIDIARIES.................................................. 10
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(a) Organization, Qualification, and Corporate Power..... 11
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(b) Capitalization....................................... 11
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(c) Noncontravention..................................... 11
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(d) Brokers' Fees........................................ 12
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(e) Title to Assets...................................... 12
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(f) Subsidiaries......................................... 12
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(g) Financial Statements................................. 12
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(h) Events Subsequent to Most Recent Fiscal Month End.... 12
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(i) Undisclosed Liabilities.............................. 14
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(j) Legal Compliance..................................... 15
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(k) Tax Matters.......................................... 15
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(l) Real Property........................................ 16
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(m) Intellectual Property................................ 17
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(n) Tangible Assets...................................... 20
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(o) Inventory............................................ 20
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(p) Contracts............................................ 20
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(q) Notes and Accounts Receivable........................ 21
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(r) Powers of Attorney................................... 22
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(s) Insurance............................................ 22
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(t) Litigation........................................... 22
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(u) Product Warranty..................................... 23
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(v) Product Liability.................................... 23
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(w) Employees........................................ 23
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(x) Employee Benefits................................ 23
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(y) Guaranties....................................... 25
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(z) Environment, Health, and Safety.................. 25
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(aa) Certain Business Relationships with the Company.. 26
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(bb) Disclosure....................................... 26
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5. POST-CLOSING COVENANTS..................................... 26
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(a) General.......................................... 26
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(b) Litigation Support............................... 27
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(c) Transition....................................... 27
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(d) Certain Guarantees............................... 27
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(e) Liabilities of the Company....................... 27
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(f) Employee Tenure.................................. 28
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6. REMEDIES FOR BREACHES OF THIS AGREEMENT.................... 28
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(a) Survival of Representations and Warranties....... 28
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(b) Indemnification Provisions for Benefit of the
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Buyer 28......................................... 28
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(c) Indemnification Provisions for Benefit of the
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Sellers.......................................... 29
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(d) Matters Involving Third Parties.................. 29
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(e) Limitations...................................... 30
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(f) Determination of Adverse Consequences............ 30
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(g) Other Indemnification Provisions................. 31
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7. TAX MATTERS................................................ 31
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(a) Tax Periods Ending on or Before the Effective Date 31
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(b) Tax Periods Beginning Before and Ending After the
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Closing Date...................................... 31
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(c) Cooperation on Tax Matters........................ 32
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(d) Tax Sharing Agreements; "S" Corporation Election.. 32
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(e) Certain Taxes..................................... 32
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8. MISCELLANEOUS............................................... 32
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(a) Arbitration....................................... 32
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(b) Waiver of Jury Trial.............................. 33
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(c) Nature of Certain Obligations..................... 33
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(d) Press Releases and Public Announcements........... 33
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(e) No Third-Party Beneficiaries...................... 33
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(f) Entire Agreement.................................. 33
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(g) Succession and Assignment......................... 33
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(h) Counterparts...................................... 34
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(i) Headings.......................................... 34
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(j) Notices........................................... 34
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(k) Governing Law..................................... 34
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(l) Amendments and Waivers............................ 34
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(m) Severability...................................... 35
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(n) Expenses......................................... 35
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(o) Construction..................................... 35
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(p) Incorporation of Exhibits, Annexes, and Schedules 35
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(q) Specific Performance............................. 35
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STOCK PURCHASE AGREEMENT
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This Stock Purchase Agreement (the "Agreement") is entered into as of
March 17, 1999 (the "Effective Date"), by and among INTELLISYS GROUP, INC., a
California corporation (the "Buyer"); PRO LINE VIDEO, INC., a Texas Corporation
(the "Company"); and each of XXXXX X. XxXXXXXXX, III ("XxXxxxxxx") XXXX X.
XXXXXXXX ("Xxxxxxxx") and XXXXXX X. XXXXXX ("Xxxxxx") (XxXxxxxxx, Xxxxxxxx and
Xxxxxx being hereinafter collectively referred to as the "Sellers" and
individually as a "Seller"). The Buyer, the Company and the Sellers are
sometimes referred to collectively herein as the "Parties" and individually as a
"Party."
RECITALS
A. The Sellers own 1131 shares of common stock of the Company which
constitutes all of the issued and outstanding capital stock of the Company (the
"Company Stock").
B. This Agreement contemplates a transaction in which the Buyer will
purchase from the Sellers, arid the Sellers will sell to the Buyer, all of the
Company Stock subject to the terms and conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
I. DEFINITIONS.
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"Accredited Investor" has the meaning set forth in Regulation D promulgated
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under the Securities Act.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
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investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and attorneys' fees and expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
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promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of Code
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(S)1504(a) or any similar group defined under a similar provision of state,
local or foreign law.
PAGE 1
"Applicable Rate" means the prime base rate of interest publicly announced
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from time to time by Xxxxx Fargo Bank (or its successor).
"Basis" means any past or present fact, situation, circumstance, status,
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condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence.
"Buyer" has the meaning set forth in the preface above.
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"Buyer Common Stock" has the meaning set forth in Section 2(c)(i).
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"Buyer Notes" has the meaning set forth in Section 2(b)(ii).
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"Buyer Parallel Notes" has the meaning set forth in Section 2(b)(iii).
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"Closing" has the meaning set forth in (S)2(i) below.
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"Closing Date" has the meaning set forth in (S)2(i) below.
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"Code" means the Internal Revenue Code of 1986, as amended.
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"Collateral Pledge Agreement" has the meaning set forth in Section 2(f).
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"Company" has the meaning set forth in the preface above.
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"Company Share" means any share of the Common Stock, par value $1.00 per
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share, of the Company.
"Confidential Information" means any information concerning the businesses
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and affairs of the Company that is not already generally available to the
public.
"Controlled Group of Corporations" has the meaning set forth in Code (S)
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1563.
"Deferred Intercompany Transaction" has the meaning set forth in Reg.
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(S)1.1502-13.
"Disclosure Schedule" has the meaning set forth in (S)4 below.
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"Effective Date" has the meaning set forth in the preface above.
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"Employee Benefit Plan" means any (a) nonqualified deferred compensation or
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retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
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Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA (S)3(2).
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"Employee Welfare Benefit Plan" has the meaning set forth in ERISA (S)3(l).
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"Environmental, Health, and Safety Laws" means the Comprehensive
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Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, the Occupational Safety and Health Act of
1970, the Federal Water Pollution Control Act, the Safe Drinking Water Act, the
Toxic Substances Control Act, the Clean Air Act, Title 2 of the Texas Water
Code, the Texas Solid Waste Disposal Act, and the Texas Clean Air Act, each as
amended, together with all other laws (including rules, regulations, codes,
plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder)
of federal, state, local, and foreign governments (and all agencies thereof)
concerning pollution or protection of the environment, public health and safety,
or employee health and safety, including laws relating to emissions, discharges,
releases, or threatened releases of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or wastes into ambient air, surface
water, ground water, or lands or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, or chemical, industrial, hazardous, or
toxic materials or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1864, as
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amended.
"Excess Loss Account" has the meaning set forth in Reg. (S) 1.1502-18.
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"Extremely Hazardous Substance" has the meaning set forth in (S)302 of the
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Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"Fiduciary" has the meaning set forth in ERISA (S)3(21).
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"Financial Statements" has the meaning set forth in (S)4(g) below.
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"GAAP" means United States generally accepted accounting principles as in
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effect from time to time.
"Indemnified Party" has the meaning set forth in (S)6(d) below.
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"Indemnifying Party" has the meaning set forth in (S)6(d) below.
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"Initial Public Offering" means the first public offering of the common
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stock (or securities convertible into common stock) of the Buyer pursuant to an
effective registration statement under the Securities Act.
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"Intellectual Property" means (a) all inventions (whether patentable or
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unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks', trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights, and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
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"Liability" means any liability (whether known or unknown, whether asserted
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or unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including
any liability for Taxes.
"Most Recent Balance Sheet" means the balance sheet contained within the
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Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in (S)4(g)
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below.
"Most Recent Fiscal Month End" has the meaning set forth in (S)4(g) below.
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"Most Recent Fiscal Year End" has the meaning set forth in (S)4(g) below.
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"Multi employer Plan" has the meaning set forth in ERISA (S)3(36).
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"Ordinary Course of Business" means the ordinary course of business
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consistent with past custom and practice (including with respect to quantity and
frequency).
"Part" has the meaning set forth in the preface above.
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"PBGC" means the Pension Benefit Guaranty Corporation.
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"Person" means an individual, a partnership, a corporation, an association,
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a joint stock company, a trust, a joint venture, an unincorporated organization,
or a governmental entity (or any department, agency, or political subdivision
thereof).
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"Prohibited Transaction" has the meaning set forth in ERISA (S)405 and Code
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(S)4865.
"Purchase Price" has the meaning set forth in (S)2(b) below.
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"Reportable Event" has the meaning set forth in ERISA (S)4043.
"Securities Act" means the Securities Act of 1933, as amended.
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"Securities Exchange Act" means the Securities Exchange Act of 1834, as
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amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
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or other security interest, other than (a) mechanic's, materialmen's, and
similar liens, (b) liens for Taxes not yet due and payable, (c) purchase money
liens and liens securing rental payments under capital lease arrangements, and
(d) other liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money.
"Seller" has the meaning set forth in the preface above.
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"Subsidiary" means any corporation with respect to which a specified Person
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(or a Subsidiary thereof) owns a majority of the common stock or has the power
to vote or direct the voting of sufficient securities to elect a majority of the
directors.
"Tax" means any federal, state, local, or foreign income, gross receipts,
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license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code (S) 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
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information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in (S)6(d) below.
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I. PURCHASE AND SALE OF COMPANY SHARES.
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(a) Basic Transaction. On and subject to the terms and conditions of
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this Agreement, the Buyer agrees to purchase from the Sellers, and the Sellers
agree to sell to the Buyer, all of the' ir Shares of Company Stock for the
consideration specified below in this Section 2.
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(b) Purchase Price. On and subject to the terms and conditions of this
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Agreement, as consideration for the sale of their Shares of Company Stock,
Sellers shall be entitled to receive, in the aggregate, the following:
(i) the payment by Buyer of SIXTY-NINE THOUSAND SIX HUNDRED AND
00/100 ($69,600.00) (the "Cash") by wire transfer or delivery of other
immediately available funds on the Closing Date; and
(ii) subordinated promissory notes from the Buyer (the "Buyer
Notes") in the aggregate principal amount of ONE HUNDRED NINETY-SEVEN
THOUSAND EIGHT HUNDRED FORTY AND 00/100 ($197,840.00) on the terms and
conditions set forth below and in the form of Exhibit A-1 attached hereto.
(iii) subordinated promissory notes from the Buyer (the "Buyer
Parallel Notes") in aggregate principal amount of TWO HUNDRED SIXTY-SEVEN
THOUSAND FIVE HUNDRED DOLLARS ($267,500.00) on terms and conditions set
forth below and in the form of Exhibit A-2 attached hereto.
(c) Certain Provisions With Respect to the Buyer Notes.
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(i) Subject to Sections 2(c)(g) and (h), the Buyer Notes shall
bear interest at the Applicable Rate as it exists on the Effective Date and
shall be payable as follows:
(A) $69,660.00 on the first day of the third calendar
month commencing after the Effective Date;
(B) $69,660.00 on the first day of the fourth calendar
month commencing after the Effective Date; and
(C) the remaining balance, together with all accrued and
unpaid interest on the first day of the fifth month commencing after
the Effective Date.
(ii) Notwithstanding the foregoing, the Buyer shall have the right
to prepay all or any part of the outstanding principal on any of the Buyer
Notes without penalty, from time to time.
(d) Certain Provisions with Respect to the Parallel Notes. The Buyer
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Parallel Notes shall bear interest at the Applicable Rate as of the Effective
Date and shall be due and payable on the first to occur of (A) July 1, 2000 or
(B) on the first day of the first calendar month commencing after the closing
and funding of the Initial Public Offering. Accrued interest shall be payable
with respect to the Parallel Notes in a single payment with outstanding
principal. Buyer shall not have a right of prepayment with respect to the
Parallel Notes.
PAGE 6
(e) Employment Agreements. XxXxxxxxx, Xxxxxxxx and Xxxxxx shall each
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enter into an employment agreement with the Buyer on terms and conditions
satisfactory to the Buyer and Sellers in substantially the form of Exhibits X-0,
X-0 and B-3, respectively, attached hereto.
(f) Collateral Pledge Agreement. The obligations of Buyer under the buyer
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Notes and the Buyer Parallel Notes shall be secured by the Company Stock
pursuant to the terms of a Collateral Pledge Agreement in the form of Exhibit C
attached hereto.
(g) Right of Offset. Subject to Section 6(e), the Buyer expressly
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reserves against the Sellers the right to offset against any and all sums
payable under the Buyer Notes an amount equal to all damages sustained by the
Buyer or the Company by reason of any default by the Sellers or the breach of
any representation, warranty or covenant of the Sellers under this Agreement;
provided, however, that Buyer shall not exercise any right of offset with
respect to damages until such time as Buyer shall have determined that a loss or
damage for which Sellers have indemnified Buyer or the Company hereunder has
been recognized or that a reserve, with respect thereto, should be established
for the purposes of GAAP.
(h) Allocation of Amounts Due Sellers. The Cash, Buyer Notes and the
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Buyer Parallel Notes shall be allocated among the Sellers in proportion to their
respective holdings of Company Stock as set forth in (S)4(b) of the Disclosure
Schedule.
(i) The Closing, Conditions Precedent.
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(i) the closing of the transactions contemplated in this Agreement
(the "Closing") shall take place at the offices of Xxxxxxx Xxxxxx L.L.P.,
000 Xxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000, commencing at 9:00
a.m. local time on the first business day following the satisfaction of the
conditions precedent set forth in the following sentence, or at such other
time, date and place as shall be mutually satisfactory to the parties, but
not later than March 17, 1999 (the "Closing Date"). Notwithstanding any
other provision of this Agreement to the contrary, the Closing shall be
subject to the satisfaction of the following conditions precedent:
(A) With respect to the Buyer on the one hand and Sellers
and the Company on the other, each of the representations and
warranties of the other parties hereto shall be true and complete as
of the Closing, and each of the parties hereto shall have performed
their respective covenants;
(B) each third party lender to the Company or Buyer having a
security interest in any of the property of the Company or Buyer, as
the case may be or whose indebtedness from the Company or Buyer would
be in default as a result of the consummation of any of the
transactions contemplated herein, shall have consented to the
consummation of the transactions contemplated herein and agreed (i) to
waive any defaults occurring as a result of such consummation for a
period of not less than
PAGE 7
thirty days or (ii) agree to amend its lending relationship with the
Company or Buyer, respectively in a manner satisfactory to the Buyer;
(C) the Sellers shall have acquired an aggregate of 4,458
shares of the Common Stock, (the "Buyer Common Stock") of Seller for
and in consideration of, at the election of the Sellers, either (i)
$60.00 per share in cash or (ii) promissory notes (the "Seller Notes")
allocated among the Sellers in proportion to their holdings of Company
Stock in principal amount equal to $60.00 per share acquired.
(j) Waive Compliance. With respect to the Buyer, the Sellers and the
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Company shall have waived compliance by any party thereto of the provisions of
the Shareholder's Agreement described in Section 3(a)(b) of Annex I with regard
to the transactions contemplated herein and with regard to any transaction
between Buyer and any third party.
(k) Deliveries at the Closing. At the Closing, (i) Sellers will deliver
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to the Buyer stock certificates representing all of their Company Stock,
endorsed in blank or accompanied by duly executed assignment documents and (ii)
the Buyer will deliver to the Seller the consideration specified in (S)2(b)
above, executed Collateral Pledge Agreements and all Company Stock certificates
as necessary to perfect Sellers' security interests.
3. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION.
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(a) Representations and Warranties of the Sellers. Each of the Sellers
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represents and warrants, jointly and severally, to the Buyer that the statements
contained in this (S)3(a) are correct and complete as of the Effective Date
except as set forth in Annex I attached hereto.
(i) Authorization of Transaction. The Seller has full power and
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authority to execute and deliver this Agreement and to perform his
obligations hereunder. This Agreement constitutes the valid and legally
binding obligation of the Seller, enforceable in accordance with its terms
and conditions. The Seller need not give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government
or governmental agency in order to consummate the transactions contemplated
by this Agreement.
(ii) Noncontravention. Neither the execution and the delivery of
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this Agreement, nor the consummation of the transactions contemplated
hereby, will (A) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which the Seller is
subject or (B) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to
which the Seller is a party or by which he or it is bound or to which any
of his or its assets is subject.
PAGE 8
(iii) Brokers' Fees. The Seller has no Liability or obligation to
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pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which the Buyer could
become liable or obligated.
(iv) Investment. The Seller (A) understands that the Buyer
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Notes, the Buyer Parallel Notes and the Buyer's Common Stock have not been,
and will not be, registered under the Securities Act, or under any state
securities laws, and are being offered and sold in reliance upon federal
and state exemptions for transactions not involving any public offering,
(B) is acquiring the Buyer Notes, the Parallel Notes and the potential for
Buyer common stock solely for his/its own account for investment purposes,
and not with a view to the distribution thereof, (C) is a sophisticated
investor with knowledge and experience in business and financial matters,
(D) has received certain information concerning the Buyer and has had the
opportunity to obtain any and all additional information as desired in
order to evaluate the merits and the risks inherent in holding the Buyer
Note, the Buyer Parallel Notes and Buyer Common Stock, (E) is able to bear
the economic risk and lack of liquidity inherent in holding the Buyer
Notes, the Buyer Parallel Notes or Buyer Common Stock, and (F) each of the
Sellers is an Accredited Investor for the reasons set forth on Annex 1.
(v) Company Shares. The Seller holds of record and owns
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beneficially the number of Shares of Company Stock set forth next to
his/its name in (S)4(b) of the Disclosure Schedule, free and clear of any
restrictions on transfer (other than any restrictions under the Securities
Act and state securities laws), Taxes, Security Interest, option, warrant,
purchase right, contract, commitment, claim or demand, and which constitute
all of the issued and outstanding capital stock of the Company. Except for
the Shareholder's Agreement described in Section 3(a)(v) of Annex I. The
Seller is not a party to any option, warrant, purchase right, or other
contract or commitment that could require the Seller to sell, transfer, or
otherwise dispose of any capital stock of the Company (other than this
Agreement). The Seller is not a party to any voting trust, proxy, or other
agreement or understanding with respect to the voting of any capital stock
of the Company.
(b) Representations and Warranties of the Buyer. The Buyer represents and
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warrants to the Sellers that the statements contained in this (S)3(b) are
correct and complete as of the Effective Date except as set forth in Annex II
attached hereto. No disclosure by Buyer of any exception to the representations
and warranties described in this Section 3(b) shall be deemed adequate to
relieve Buyer of liability with respect to such representation or warranty
unless such disclosure shall be in writing and identifies with particularity the
relevant facts in detail.
(i) Organization of the Buyer. The Buyer is a corporation duly
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organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation.
PAGE 9
(ii) Authorization of Transaction. The Buyer has full power and
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authority (including full corporate power and authority) to execute and
deliver this Agreement and to perform its obligations hereunder. This
Agreement constitutes the valid and legally binding obligation of the
Buyer, enforceable in accordance with its terms and conditions. The Buyer
need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental
agency in order to consummate the transactions contemplated by this
Agreement.
(iii) Noncontravention. Neither the execution and the delivery of
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this Agreement, nor the consummation of the transactions contemplated
hereby, will (A) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which the Buyer is
subject or any provision of its charter or bylaws or (B) conflict with,
result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract,
lease, license, instrument, or other arrangement to which the Buyer is a
party or by which it is bound or to which any of its assets is subject.
(iv) Brokers' Fees. The Buyer has no Liability or obligation to
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pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which any Seller could
become liable or obligated.
(v) Investment. The Buyer is not acquiring the Company Shares
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with a view to or for sale in connection with any distribution thereof
within the meaning of the Securities Act.
(vi) Buyer Common Stock. Xxxxxx Xxxxxx holds of record, and owns
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beneficially, the shares of Buyer Common Stock to be conveyed to the
Sellers at the closing, free and clear of any restrictions on transfer
(other than restrictions under the Securities Act and state securities
laws) taxes, Security Interest, option, warrant, purchase right, contract,
commitment, claim and demand.
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY AND ITS SUBSIDIARIES.
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The Sellers and the Company represent and warrant, jointly and severally, to
the Buyer that the statements contained in this (S)4 are correct and complete as
of the Effective Date except as set forth in the disclosure schedule delivered
by the Sellers to the Buyer and attached hereto as Annex III (the "Disclosure
----------
Schedule"). Nothing in the Disclosure Schedule shall be deemed adequate to
--------
disclose an exception to a representation or warranty made herein, however,
unless the Disclosure Schedule identifies the' exception with particularity and
describes the relevant facts in detail or specifically references such
information as provided elsewhere in the Disclosure Schedule. Without limiting
the generality of the foregoing, the mere listing of a document or other item
shall not be deemed adequate to disclose an exception to a representation or
warranty made herein (unless the relevant representation or warranty is
specifically identified and reference is made
PAGE 10
to an appropriate description of the document included elsewhere in the
Disclosure Schedule. The Disclosure Schedule will be arranged in paragraphs
corresponding to the lettered and numbered paragraphs contained in this (S)4.
(a) Organization, Qualification, and Corporate Power. The Company is a
------------------------------------------------
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. The Company is duly authorized
to conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required. The Company has full corporate power and
authority and all licenses, permits, and authorizations necessary to carry on
the businesses in which it is engaged and to own and use the properties owned
and used by it. (S)4(a) of the Disclosure Schedule lists the directors and
officers of the Company. The Sellers have delivered to the Buyer correct and
complete copies of the charter and bylaws of the Company (as amended to date).
The minute books (containing the records of meetings of the stockholders, the
board of directors, and any committees of the board of directors), the stock
certificate books, and the stock record books of the Company are correct and
complete. The Company is not in default under or in violation of any provision
of its charter or bylaws.
(b) Capitalization. The entire authorized capital stock of the Company
--------------
consists of 10,000 Company Shares, of which 1,131 Company Shares are issued
and outstanding and no Company Shares are held in treasury. All of the issued
and outstanding Company Shares have been duly authorized, are validly issued,
fully paid, and nonassessable, and are held of record by the respective Sellers
as set forth in (S)4(b) of the Disclosure Schedule. There are no outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments that could require
the Company to issue, sell, or otherwise cause to become outstanding any of its
capital stock. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or similar rights with respect to the
Company. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of the capital stock of the Company.
(c) Noncontravention. Neither the execution and the delivery of this
----------------
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Company is subject or any provision
of the charter or bylaws of the Company or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice or consent under any agreement, contract, lease, license, instrument, or
other arrangement to which the Company is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of any Security
Interest upon any of its assets). The Company does not need to give any notice
to, make any filing with, or obtain any authorization, consent, or approval of
any government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement.
PAGE 11
(d) Brokers' Fees. The Company does not have any Liability or obligation
-------------
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement.
(e) Title to Assets. The Company has good and marketable title to, or a
---------------
valid leasehold interest in, the properties and assets used by it, located on
its premises, or shown on the Most Recent Balance Sheet or acquired after the
date thereof, free and clear of all Security Interests, except for properties
and assets disposed of in the Ordinary Course of Business since the date of the
Most Recent Balance Sheet.
(f) Subsidiaries. The Company has no subsidiaries, either direct or
------------
indirect, whatsoever.
(g) Financial Statements. Attached hereto to (S)4(g) of the Disclosure
--------------------
Schedule are the following financial statements (collectively the "Financial
---------
Statements"): (i) balance sheets and statements of income and changes in
----------
stockholders' equity as of and for the fiscal years ended December 31, 1995,
1996, and 1997 (the "Most Recent Fiscal Year End") for the Company; and (ii)
---------------------------
balance sheets and statements of income (the "Most Recent Financial Statements")
--------------------------------
as of and for the 11 months ended November 30, 1998 (the "Most Recent Fiscal
------------------
Month End") for the Company. The Financial Statements (including the notes
---------
thereto) have been prepared on a consistent basis throughout the periods covered
thereby (although interim statements do not contain a report or year end
reconciliations, contain and reflect in all respects all necessary adjustments
and present fairly the financial condition of the Company as of such dates and
the results of operations of the Company for such periods, are correct and
complete, and are consistent with the books and records of the Company (which
books and records are correct and complete).
(h) Events Subsequent to Most Recent Fiscal Month End. Since the Most
-------------------------------------------------
Recent Fiscal Month End, there has not been any adverse change in the business,
financial condition, operations, results of operations, or future prospects of
the Company. Without limiting the generality of the foregoing, since that date:
(i) the Company has not sold, leased, transferred, or assigned
any of its assets, tangible or intangible, other than for a fair
consideration in the Ordinary Course of Business;
(ii) the Company has not entered into any agreement, contract,
lease, or license (or series of related agreements, contracts, leases, and
licenses) either involving more than $10,000 or outside the Ordinary Course
of Business;
(iii) no party (including the Company ) has accelerated,
terminated, modified, or canceled any agreement, contract, lease, or
license or series of related agreements, contracts, leases, and licenses)
involving more than $10,000 to which the Company is a party or by which
any of them is bound;
PAGE 12
(iv) the Company has not imposed any Security Interest upon any of
its assets, tangible or intangible;
(v) the Company has not made any capital expenditure (or series
of related capital expenditures) either involving more than $10,000 or
outside the Ordinary Course of Business;
(vi) the Company has not made any capital investment in, any loan
to, or any acquisition of the securities or assets of, any other Person (or
series of related capital investments, loans, and acquisitions) either
involving more than $10,000 or outside the Ordinary Course of Business;
(vii) the Company has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation either involving more than
$10,000 singly or $50,000 in the aggregate;
(viii) the Company has not failed to pay any of its obligations when
due or delayed or postponed the payment of accounts payable and other
Liabilities outside the Ordinary Course of Business;
(ix) the Company has not canceled, compromised, waived, or
released any right or claim (or series of related rights and claims) either
involving more than $ 10,000 or outside the Ordinary Course of Business;
(x) the Company has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property;
(xi) there has been no change made or authorized in the charter or
bylaws of the Company;
(xii) the Company has not issued, sold, or otherwise disposed of
any of its capital stock, or granted any options, warrants, or other
rights to purchase or obtain (including upon conversion, exchange, or
exercise) any of its capital stock;
(xiii) the Company has not declared, set aside, or paid any dividend
or made any distribution with respect to its capital stock (whether in cash
or in kind) or redeemed, purchased, or otherwise acquired any of its
capital stock;
(xiv) the Company has not experienced any damage, destruction, or
loss (whether or not covered by insurance) to its property, outside of
ordinary wear and tear, involving more than $21,000 in the aggregate as to
all such damages;
PAGE 13
(xv) the Company has not made any loan to, or entered into any
other transaction with, any of its directors, officers, and employees
outside the Ordinary Course of Business;
(xvi) other than hiring "at will" employees in the ordinary course,
the Company has not entered into any employment contract or collective
bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement;
(xvii) other than raises in the ordinary course of business granted
to employees at will, the Company has not granted any (a) increase in the
compensation or (b) bonuses, incentive compensation or other benefits,
contingent or otherwise, of or for the benefit of any of its directors,
officers, and employees outside the Ordinary Course of Business;
(xviii) the Company has not adopted, amended, modified, or terminated
any bonus, profit-sharing, incentive, severance, or other plan, contract,
or commitment for the benefit of any of its directors, officers, and
employees (or taken any such action with respect to any other Employee
Benefit Plan);
(xix) the Company has not made any other change in employment terms
for any of its directors, officers, and employees outside the Ordinary
Course of Business;
(xx) the Company has not made or pledged to make any charitable or
other capital contribution outside the Ordinary Course of Business;
(xxi) there has not been any other occurrence, event, incident,
action, failure to act, or transaction outside the Ordinary Course of
Business involving the Company; and
(xxii) the Company has not committed to any of the foregoing.
(i) Undisclosed Liabilities. The Company has no Liability (and there is
-----------------------
no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability), except for (i) Liabilities set forth on the face of the
Most Recent Balance Sheet (rather than in any notes thereto) and (ii)
Liabilities which have arisen after the Most Recent Fiscal Month End in the
Ordinary Course of Business (none of which results from, arises out of, relates
to, is in the nature of, or was caused by any breach of contract, breach of
warranty, tort, infringement, or violation of law).
(j) Legal Compliance. Each of the Company and its predecessors and
----------------
Affiliates has complied with all applicable laws (including rules, regulations,
codes, plans, injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, local, and foreign governments (and all agencies
thereof), and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against any of
them alleging any failure so to comply.
PAGE 14
(k) Tax Matters.
-----------
(i) The Company has filed all Tax Returns that it was required to
file. All such Tax Returns were correct and complete in all respects. All
Taxes owed by the Company (whether or not shown on any Tax Return) have
been paid. The Company is not currently the beneficiary of any extension of
time within which to file any Tax Return. No claim has ever been made by an
authority in a jurisdiction where the Company does not file Tax Returns
that it is or may be subject to taxation by that jurisdiction. There are no
Security Interests on any of the assets of the Company that arose in
connection with any failure (or alleged failure) to pay any Tax.
(ii) The Company has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third
party.
(iii) No Seller or director or officer (or employee responsible for
Tax matters) of the Company expects any authority to assess any additional
Tax for any period for which Tax Returns have been filed. There is no
dispute or claim concerning any Tax Liability of the Company either (A)
claimed or raised by any authority in waiting or (B) as to which any of the
Seller and the directors and officers (and employees responsible for Tax
matters) of the Company has Knowledge based upon personal contact with any
agent of such authority. (S)4(k) of the Disclosure Schedule lists all
federal, state, local, and foreign income Tax Returns filed with respect to
the Company for taxable periods ended on or after December 31, 1991
indicates those Tax Returns that have been audited, and indicates those Tax
Returns that currently are the subject of audit. The Seller have delivered
to the Buyer correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed against or
agreed to by the Company since December 31, 1991.
(iv) The Company has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(v) The Company has not filed a consent under Code (S)341(f)
concerning collapsible corporations. The Company has not made any payments,
is obligated to make any payments, or is a party to any agreement that
under certain circumstances could obligate it to make any payments that
will not be deductible under Code (S) 270G. The Company has not been a
United States real property holding corporation within the meaning of Code
(S)797(c)(2) during the applicable period specified in Code
(S)797(c)(1)(A)(ii). The Company has disclosed on its federal income Tax
Returns all positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Code (S)5552.
The Company is not a party to any Tax allocation or sharing agreement. The
Company (A) has not been a member of an Affiliated Group filing a
consolidated federal income Tax Return (other than a group the common
parent of which was the Company) or (B) has no Liability for the Taxes of
any Person (other than the Company) under Reg.
PAGE 15
(S)1.1502-5 (or any similar provision of state, local, or foreign law), as
a transferee or successor, by contract, or otherwise.
(vi) The Sellers will provide the following information before
Closing with respect to the Company as of the most recent practicable date
(as well as on an estimated pro forma basis as of the Closing giving effect
to the consummation of the transactions contemplated hereby): (A) the basis
of the Company or Subsidiary in its assets; (B) the amount of any net
operating loss, net capital loss, unused investment or other credit, unused
foreign tax, or excess charitable contribution allocable to the Company;
and (C) the amount of any deferred gain or loss allocable to the Company or
Subsidiary arising out of any Deferred Intercompany Transaction.
(vii) The unpaid Tax of the Company (A) did not, as of the Most
Recent Fiscal Month End, exceed the reserve for Tax Liability (rather than
any reserve for deferred Taxes established to reflect timing differences
between book and Tax income) set forth on the face of the Most Recent
Balance Sheet (rather than in any notes thereto) and (B) do not exceed that
reserve as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Company in filing its
Tax Returns.
(l) Real Property.
-------------
(i) Other than leasehold interests, the Company does not own any
real property whatsoever.
(ii) (S)4(l)(ii) of the Disclosure Schedule lists and describes
briefly all real property leased or subleased to the Company. The Sellers
have delivered to the Buyer correct and complete copies of the leases and
subleases listed in (S)4(l)(ii) of the Disclosure Schedule (as amended to
date). With respect to each lease and sublease listed in (S)4(l)(ii) of the
Disclosure Schedule:
(A) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(B) the lease or sublease will continue to be legal,
valid, binding, enforceable, and in full force and effect on identical
terms following the consummation of the transactions contemplated
hereby;
(C) no party to the lease or sublease is in breach or
default, and no event has occurred which, with notice or lapse of
time, would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(D) no party to the lease or sublease has repudiated any
provision thereof;
PAGE 16
(E) there are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease;
(F) with respect to each sublease, the representations and
warranties set forth in subsections (A) through (E) above are true and
correct with respect to the underlying lease;
(G) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the
leasehold or subleasehold;
(H) all facilities leased or subleased thereunder have
received all approvals of governmental authorities (including licenses
and permits) required in connection with the operation thereof and
have been operated and maintained in accordance with applicable laws,
rules, and regulations; and
(I) all facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the operation
of said facilities.
(m) Intellectual Property.
---------------------
(i) The Company owns or has the right to use pursuant to license,
sublicense, agreement, or permission all Intellectual Property necessary or
desirable for the operation of the businesses of the Company as presently
conducted and as presently proposed to be conducted. Each item of
Intellectual Property owned or used by the Company immediately prior to the
Closing hereunder will be owned or available for use by the Company on
identical terms and conditions immediately subsequent to the Closing
hereunder. The Company has taken all necessary and desirable action to
maintain and protect each item of Intellectual Property that it owns or
uses.
(ii) The Company has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and none of the Sellers and the directors
and officers (and employees with responsibility for Intellectual Property
matters) of the Company has ever received any charge, complaint, claim,
demand, or notice alleging any such interference, infringement,
misappropriation, or violation (including any claim that the Company must
license or refrain from using any Intellectual Property rights of any third
party). To the Knowledge of any of the Sellers and the directors and
officers (and employees with responsibility for Intellectual Property
matters) of the Company, no third party has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of the Company.
(iii) (S)4(m)(iii) of the Disclosure Schedule identifies each
patent or registration which has been issued to the Company with respect to
any of its Intellectual Property, identifies each pending patent
application or application for registration which the Company
PAGE 17
has made with respect to any of its Intellectual Property, and identifies
each license, agreement, or other permission which the Company has granted
to any third party with respect to any of its Intellectual Property
(together with any exceptions). The Sellers have delivered to the Buyer
correct and complete copies of all such patents, registrations,
applications, licenses, agreements, and permissions (as amended to date)
and have made available to the Buyer correct and complete copies of all
other written documentation evidencing ownership and prosecution (if
applicable) of each such item. (S)4(m)(iii) of the Disclosure Schedule also
identifies each trade name or unregistered trademark used by the Company in
connection with any of its businesses. With respect to each item of
Intellectual Property required to be identified in (S)4(m)(iii) of the
Disclosure Schedule:
(A) the Company possesses all right, title, and interest
in and to the item, free and clear of any Security Interest, license,
or other restriction;
(B) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(C) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or is threatened which
challenges the legality, validity, enforceability, use, or ownership
of the item; and
(D) the Company has never agreed to indemnify any Person
for or against any interference, infringement, misappropriation, or
other conflict with respect to the item.
(iv) (S)4(m)(iv) of the Disclosure Schedule identifies each item
of Intellectual Property that any third party owns and that the Company
uses pursuant to license, sublicense, agreement, or permission. The Sellers
have delivered to the Buyer correct and complete copies of all such
licenses, sublicenses, agreements, and permissions (as amended to date).
With respect to each item of Intellectual Property required to be
identified in (S)4(m)(iv) of the Disclosure Schedule:
(A) the license, sublicense, agreement, or permission
covering the item is legal, valid, binding, enforceable, and in full
force and effect;
(B) the license, sublicense, agreement, or permission will
continue to be legal, valid, binding, enforceable, and in full force
and effect on identical terms following the consummation of the
transactions contemplated hereby (including the assignments and
assumptions referred to in (S)2 above);
(C) no party to the license, sublicense, agreement, or
permission is in breach or default, and no event has occurred which
with notice or lapse of time
PAGE 18
would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(D) no party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
(E) with respect to each sublicense, the representations
and warranties set forth in subsections (A) through (D) above are true
and correct with respect to the underlying license;
(F) the underlying item of Intellectual Property is not
subject to any outstanding injunction, Judgment, order, decree,
ruling, or charge;
(G) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to the Knowledge of
any of the Seller and the directors and officers (and employees with
responsibility for Intellectual Property matters) of the Company, is
threatened which challenges the legality, validity, or enforceability
of the underlying item of Intellectual Property; and
(H) the Company has not granted any sublicense or similar
right with respect to the license, sublicense, agreement, or
permission.
(v) To the Knowledge of the Sellers and the directors and
officers (and employees with responsibility for Intellectual Property
matters) of the Company, the Company will not interfere with, infringe
upon, misappropriate, or otherwise come into conflict with, any
Intellectual Property rights of third parties as a result of the continued
operation of its businesses as presently conducted and as presently
proposed to be conducted.
(vi) None of the Sellers and the directors and officers (and
employees with responsibility for Intellectual Property matters) of the
Company had any Knowledge of any new products, inventions, procedures, or
methods of manufacturing or processing that any competitors or other third
parties have developed which reasonably could be expected to supersede or
make obsolete any product or process of the Company.
(n) Tangible Assets. The Company owns or leases all buildings,
---------------
machinery, equipment, and other tangible assets necessary for the conduct of
their businesses as presently conducted. To the best knowledge of Sellers, each
such tangible asset is free from defects (patent and latent), has been
maintained in accordance with normal industry practice, is in good operating
condition and repair (subject to normal wear and tear), is suitable for the
purposes for which it presently is used and presently is proposed to be used and
is in conformity in all material respects with all applicable laws, ordinances,
orders, regulations and other requirements (including applicable zoning,
environmental, motor vehicle safety or standards, occupational health and safety
laws and regulations) relating thereto currently in effect.
PAGE 19
(o) Inventory. The inventory of the Company consists of raw materials
---------
and supplies, manufactured and purchased parts, goods in process, and finished
goods, all of which is merchantable and fit for the purpose for which it was
procured or manufactured, and none of which is slow-moving, obsolete, damaged,
or defective, subject only to the reserve for inventory write down set forth on
the face of the Most Recent Balance Sheet (rather than in any notes thereto) as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of the Company or as adjusted in the inventory
evaluation conducted by DoveTech on or about January 8, 1999.
(p) Contracts. (S)4(p) of the Disclosure Schedule lists all contracts
---------
and other agreements to which the Company is a party including, but not limited
to, the following:
(i) any agreement (or group of related agreements) for the lease
of personal property to or from any Person providing for lease payments;
(ii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or
other personal property, or for the furnishing or receipt of services, the
performance of which will extend over a period of more than one year,
result in a loss to the Company, or involve consideration in excess of
$10,000;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which it
has created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation, or under which it has imposed a
Security Interest on any of its assets, tangible or intangible;
(v) any agreement concerning confidentiality or noncompetition;
(vi) any agreement with any of the Sellers and their Affiliates
(other than the Company);
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or
arrangement for the benefit of its current or former directors, officers,
and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a full-
time, part-time, consulting, or other basis providing any form of
compensation or providing severance benefits;
PAGE 20
(x) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xi) any agreement under which the consequences of a default or
termination could have an adverse effect on the business, financial
condition, operations, results of operations, or future prospects of the
Company; or
(xii) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $10,000.
The Sellers have delivered to the Buyer a correct and complete copy of each
written agreement listed in (S)4(p) of the Disclosure Schedule (as amended to
date) and a written summary setting forth the terms and conditions of each oral
agreement referred to in (S)4(p) of the Disclosure Schedule. With respect to
each such agreement: (A) the agreement is legal, valid, binding, enforceable,
and in full force and effect; (B) the agreement will continue to be legal,
valid, binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby; (C) no party
is in breach or default, and no event has occurred which with notice or lapse of
time would constitute a breach or default, or permit termination, modification,
or acceleration, under the agreement; and (D) no party has repudiated any
provision of the agreement.
(q) Notes and Accounts Receivable. All notes and accounts receivable of
-----------------------------
the Company are reflected properly on their books and records, are valid
receivable subject to no setoffs or counterclaims, are current and collectible,
and will be collected in accordance with their terms at their recorded amounts,
subject only to the reserve for bad debts set forth on the face of the Most
Recent Balance Sheet (rather than in any notes thereto) as adjusted for the
passage of time through the Closing Date in accordance with the past custom and
practice of the Company.
(r) Powers of Attorney. There are no outstanding powers of attorney
------------------
executed on behalf of the Company.
(s) Insurance. (S)4(s) of the Disclosure Schedule sets forth the
---------
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which the Company has been a party, a named
insured, or otherwise the beneficiary of coverage at any time within the past 5
years:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and
the name of each covered insured;
(iii) the policy number and the period of coverage;
PAGE 21
(iv) the scope (including an indication of whether the coverage
was on a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage; and
(v) a description of any retroactive premium adjustments or other
loss-sharing, arrangements.
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) the policy will continue
to be legal, valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions contemplated
hereby; (C) neither the Company nor any other party to the policy is in breach
or default (including with respect to the payment of premiums or the giving of
notices), and no event has occurred which, with notice or the lapse of time,
would constitute such a breach or default, or permit termination, modification,
or acceleration, under the policy; and (D) no party to the policy has repudiated
any provision thereof The Company has been covered during the past 5 years by
insurance in scope and amount customary and reasonable for the businesses in
which it has engaged during the aforementioned period. (S)4(s) of the Disclosure
Schedule describes any self-insurance arrangements affecting the Company.
(t) Litigation. (S)4(t) of the Disclosure Schedule sets forth each
----------
instance in which the Company (i) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge or ii is a party or is threatened to
be made a party to any action, suit, proceeding, hearing, or investigation of,
in, or before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator. None
of the actions, suits, proceedings, hearings, and investigations set forth in
(S)4(t) of the Disclosure Schedule could result in any adverse change in the
business, financial condition, operations, results of operations, or future
prospects of the Company. None of the Sellers and the directors and officers
(and employees with responsibility for litigation matters)of the Company has any
reason to believe that any such action, suit, proceeding, hearing, or
investigation may be brought or threatened against the Company.
(u) Product Warranty. To the knowledge of Sellers after diligent
----------------
investigation, each product manufactured, sold, leased, or delivered by the
Company has been in conformity with all applicable contractual commitments and
all express and implied warranties, and the Company has no Liability (and there
is no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability) for replacement or repair thereof or other damages in
connection therewith, subject only to the reserve for product warranty claims
set forth on the face of the Most Recent Balance Sheet (rather than in any notes
thereto) as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Company. No product
manufactured, sold, leased, or delivered by the Company is subject to any
guaranty, warranty, or other indemnity beyond the applicable standard terms and
conditions of sale or lease. (S)4 of the Disclosure Schedule includes copies of
the standard terms and conditions of sale or lease for the Company (containing
applicable guaranty, warranty, and indemnity provisions).
PAGE 22
(v) Product Liability. To the knowledge of Sellers after diligent
-----------------
investigation, the Company has no Liability (and there is no Basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against any of them giving rise to any Liability)
arising out of any injury to individuals or property as a result of the
ownership, possession, or use of any product manufactured, sold, leased, or
delivered by the Company.
(w) Employees. To the Knowledge of any of the Sellers, no executives
---------
key employee. or group of employees has any plans to terminate employment with
the Company. The Company is not a party to or bound by any collective
bargaining agreement, nor has any of them experienced any strikes, grievances,
claims of unfair labor practices, or other collective bargaining disputes. The
Company has not committed any unfair labor practice. None of the Sellers and
the directors and officers (and employees with responsibility for employment
matters) of the Company has any knowledge of any organizational effort presently
being made or threatened by or on behalf of any labor union with respect to
employees of the Company.
(x) Employee Benefits.
-----------------
(i) (S)4(x) of the Disclosure Schedule lists each Employee
Benefit Plan that the Company maintains or to which the Company
contributes.
(A) Each such Employee Benefit Plan (and each related
trust, insurance contract, or fund) complies in form and in operation
in all respects with the applicable requirements of ERISA, the Code,
and other applicable laws.
(B) All required reports and descriptions (including Form
5500 Annual Reports, Summary Annual Reports, PBGC-l's, and Summary
Plan Descriptions) have been filed or distributed appropriately with
respect to each such Employee Benefit Plan. The requirements of Part 5
of Subtitle B of Title I of ERISA and of Code (S) 4970B have been met
with respect to each such Employee Benefit Plan which is an Employee
Welfare Benefit Plan.
(C) All contributions (including all employer
contributions and employee salary reduction contributions) which are
due have been paid to each such Employee Benefit Plan which is an
Employee Pension Benefit Plan and all contributions for any period
ending on or before the Closing Date which are not yet due have been
paid to each such Employee Pension Benefit Plan or accrued in
accordance with the past custom and practice of the Company. All
premiums or other payments for all periods ending on or before the
Closing Date have been paid with respect to each such Employee Benefit
Plan which is an Employee Welfare Benefit Plan.
(D) Each such Employee Benefit Plan which is an Employee
Pension Benefit Plan meets the requirements of a "qualified plan"
under Code (S)401(a) and
PAGE 23
has received, within the last two years, a favorable determination
letter from the Internal Revenue Service.
(E) The market value of assets under each such Employee
Benefit Plan which is an Employee Pension Benefit Plan (other than any
Multiemployer Plan) equals or exceeds the present value of all vested
and non-vested Liabilities thereunder determined in accordance with
PBGC methods, factors, and assumptions applicable to an Employee
Pension Benefit Plan terminating on the date for determination.
(F) The Sellers have delivered to the Buyer correct and
complete copies of the plan documents and summary plan descriptions,
the most recent determination letter received from the Internal
Revenue Service, the most recent Form 5500 Annual Report, and all
related trust agreements, insurance contracts, and other funding
agreements which implement each such Employee Benefit Plan.
(ii) With respect to each Employee Benefit Plan that the Company
maintains or ever has maintained or to which it contributes, ever has
contributed, or ever has been required to contribute:
(A) No such Employee Benefit Plan which is an Employee
Pension Benefit Plan (other than any Multiemployer Plan) has been
completely or partially I terminated or been the subject of a
Reportable Event as to which notices would be required to be filed
with the PBGC. No proceeding by the PBGC to terminate any such
Employee Pension Benefit Plan (other than any Multiemployer Plan) has
been instituted or threatened.
(B) There have been no Prohibited Transactions with
respect to any such Employee Benefit Plan. No Fiduciary has any
Liability for breach of fiduciary duty or any other failure to act or
comply in connection with the administration or investment of the
assets of any such Employee Benefit Plan. No action, suit, proceeding,
hearing, or investigation with respect to the administration or the
investment of the assets of any such Employee Benefit Plan (other than
routine claims for benefits) is pending or threatened. None of the
Seller and the directors and officers (and employees with
responsibility for employee benefits matters) of the Company has any
Knowledge of any Basis for any such action, suit, proceeding, hearing,
or investigation.
(C) The Company has not incurred, and none of the Seller
and the directors and officers (and employees with responsibility for
employee benefits matters) of the Company has any reason to expect
that the Company will incur, any Liability to the PBGC (other than
PBGC premium payments) or otherwise under Title IV of ERISA (including
any withdrawal Liability) or under the Code with
PAGE 24
respect to any such Employee Benefit Plan which is an Employee Pension
Benefit Plan.
(iii) The Company does not contribute to, never has contributed to,
and never has been required to contribute to any Multiemployer Plan or has
any Liability (including withdrawal Liability) under any Multiemployer
Plan.
(iv) The Company does not maintain, never has maintained or
contributed and never has been required to contribute to any Employee
Welfare Benefit Plan providing medical, health, or life insurance or other
welfare-type benefits for current or future retired or terminated
employees, their spouses, or their dependents (other than in accordance
with Code (S) 4860B).
(y) Guaranties. Except as described in the Disclosure Schedule, the
----------
Company is not a guarantor or otherwise liable for any Liability or obligation
(including indebtedness) of any other Person.
(z) Environment, Health, and Safety.
-------------------------------
(i) To the knowledge of Sellers, the Company and its predecessors
and Affiliates have complied with all Environmental, Health, and Safety
Laws, and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced against any
of them alleging any failure so to comply. Without limiting the generality
of the preceding sentence, the Company and its predecessors and Affiliates
has obtained and been in compliance with all of the terms and conditions of
all permits, licenses, and other authorizations which are required under,
and has complied with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, and
timetables which are contained in, all Environmental, Health, and Safety
Laws.
(ii) To the knowledge of Sellers, the Company has no Liability
(and none of the Company and its predecessors and Affiliates have handled
or disposed of any substance, arranged for the disposal of any substance,
exposed any employee or other individual to any substance or condition, or
owned or operated any property or facility in any manner that could form
the Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against the Company
giving rise to any Liability) for damage to any site, location, or body of
water (surface or subsurface), for any illness of or personal injury to any
employee or other individual, or for any reason under any Environmental,
Health, and Safety Law.
(iii) To the knowledge of Sellers, all properties and equipment
used in the business of the Company and its predecessors and Affiliates
have been free of asbestos, PCB'S,
PAGE 25
methylene chloride, trichloroethylene, 1,2-trans-dichloroethylene, dioxins,
dibenzofurans, and Extremely Hazardous Substances.
(aa) Certain Business Relationships with the Company. None of the
-----------------------------------------------
Sellers and their Affiliates has been involved in any business arrangement or
relationship with the Company within the past 12 months, and none of the Sellers
and their Affiliates owns any asset, tangible or intangible, which is used in
the business of the Company.
(bb) Disclosure. The representations and warranties contained in this
----------
(S)4 do not contain any untrue statement of a fact or omit to state any fact
necessary in order to make the statements and information contained in this (S)4
not misleading.
5. POST-CLOSING COVENANTS. The Parties agree as follows with respect to the
----------------------
period following the Closing.
(a) General. In case at any time after the Effective Date any further
-------
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, all at the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor under (S)6
below). The Sellers acknowledge and agree that from and after the Effective
Date the Buyer will be entitled to possession of all documents, books, records
(including Tax records), agreements, and financial data of any sort relating to
the Company, subject only to Sellers' right upon notice to inspect and copy same
for any proper purpose.
(b) Litigation Support. In the event and for so long as any Party
------------------
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Effective Date involving the Company, each of the other Parties will
cooperate with him or it and his or its counsel in the contest or defense, make
available available their personnel, and provide such testimony and access to
their books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
therefor under (S)6 below).
(c) Transition. The Sellers will not take any action that is designed or
----------
intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of the Company from maintaining the same
business relationships with the Company after the Closing as it maintained with
the Company prior to the Closing. The Sellers will refer all customer inquiries
relating to the businesses of the Company to the Buyer from and after the
Closing.
PAGE 26
(d) Certain Guarantees. Not later than 10 days following the Closing,
------------------
Buyer will cause the Sellers to be released from each Guaranty or similar
arrangement pursuant to which Sellers have agreed to provide security or be
liable with respect to any loan or advance of money by any third party or
financial institution, equipment lessor, landlord or the like providing goods or
services or making available real property for the benefit of the Company;
provided, however, Buyer shall not be obligated pursuant to this Section 5(d)
with respect to any such guaranty which relates to any debt or any obligation of
any kind not reflected on or reserved for in the Most Recent Balance Sheet or
specifically described on Annex IV.
(e) Liabilities of the Company. The Buyer shall cause the Company to
--------------------------
perform its obligations reflected on the Most Recent Balance Sheet to the extent
of the Company's ability to do so and shall not, until the satisfaction of such
obligations or the third anniversary of the Closing accept any dividend or other
distribution of money or property (excluding dividends payable solely in the
equity or debt securities of the Company) in respect of its ownership of the
equity securities of the Company. Notwithstanding the foregoing sentence, Buyer
may accept dividends and distributions with respect to the equity securities of
the Company prior to the third anniversary of the Closing or the satisfaction of
the liabilities reflected on the Most Recent Balance Sheet if, at the time of
accepting such dividends or distribution, it covenants to make a contribution to
the capital of the Company in the amount of such dividend or distribution in the
event that prior to the third anniversary of the Closing or the satisfaction of
the last to be satisfied of the liabilities reflected on the Most Recent Balance
Sheet a claim is made by any third party against the Sellers with respect to the
liabilities reflected on the Most Recent Balance Sheet.
(f) Employee Tenure. For the purposes of vacation accruals and similar
---------------
non-cash benefits associated with employment, each employee of the Company shall
continue to be treated as having commenced employment with the Company (or the
Buyer if such person becomes employed by Buyer prior to any termination of
employment with the Company) on the date such person commenced employment with
the Company.
6. REMEDIES FOR BREACHES OF THIS AGREEMENT.
---------------------------------------
(a) Survival of Representations and Warranties. Except for the
------------------------------------------
representations and warranties set forth in Sections 3 and 4(i), (k), (x) and
(z) which shall survive indefinitely, all of the representations and warranties
of the Parties contained in this Agreement shall survive the Closing hereunder
without regard to any investigation made by any of the Parties (even if the
damaged Party knew or had reason to know of any misrepresentation or breach of
warranty or covenant at the time of Closing) and continue in full force and
effect until the passage of 18 months following the Closing Date.
(b) Indemnification Provisions for Benefit of the Buyer.
---------------------------------------------------
(i) Subject to the limitations set forth in (S) 6(e) below, in
the event the Sellers breach (or in the event any third party alleges, in
writing, facts that, if true, would mean the
PAGE 27
Sellers have breached) any of their representations, warranties, and
covenants contained herein (other than the covenants in (S)2(a) above and
the representations and warranties in (S)3(a) above), and, if there is an
applicable survival period pursuant to (S)6(a) above, provided that the
Buyer makes a written claim for indemnification against the Sellers
pursuant to (S)8(d) below within such survival period, then the Sellers
agree to indemnify the Buyer from and against the entirety of any Adverse
Consequences the Buyer may suffer through and after the date of the claim
for indemnification (including any Adverse Consequences the Buyer may
suffer after the end of any applicable survival period) resulting from,
arising out of, relating to, in the nature of, or caused by the breach (or
the alleged breach).
(ii) Subject to the limitations set forth in (S) 6(e) below, in
the event the Sellers breach (or in the event any third party alleges, in
writing, facts that, if true, would mean any of the Sellers has breached)
any of his or its covenants in (S)2(a) above or any of his or its
representations and warranties in (S)3(a) above, and, if there is an
applicable survival period pursuant to (S)6(a) above, provided that the
Buyer makes a written claim for indemnification against the Sellers
pursuant to (S)8(h) below within such survival period, then the Sellers
agree to indemnify the Buyer from and against the entirety of any Adverse
Consequences the Buyer may suffer through and after the date of the claim
for indemnification (including any Adverse Consequences the Buyer may
suffer after the end of any applicable survival period) resulting from,
arising out of, relating to, in the nature of, or caused by the breach (or
the alleged breach).
(iii) Subject to the limitations set forth in (S)6(e) below, the
Sellers agree to indemnify the Buyer from and against the entirety of any
Adverse Consequences the Buyer may suffer resulting from, arising out of,
relating to, in the nature of, or caused by any Liability of the Company
(x) for any Tax or portion thereof ending on or before the Closing.7 Date
(or for any Tax year beginning before and ending after the Closing Date to
the extent allocable (determined in a manner consistent with (S)8(c)) to
the portion of such period beginning before and ending on the Closing
Date), to the extent such Taxes are not reflected in the reserve for Tax
Liability (rather than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) shown on the face
of the Most Recent Balance Sheet (rather than in any notes thereto)[, as
such reserve is adjusted for the passage of time through the Closing Date
in accordance with the past custom and practice of the Company in filing
their Tax Returns, and (y) for the unpaid Taxes of any Person (other than
the Company ) under Reg. (S) 1. 1502-5 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract, or
otherwise.
(c) Indemnification Provisions for Benefit of the Sellers. Subject to
-----------------------------------------------------
the limitations set forth in (S) 6(e) below, in the event the Buyer breaches (or
in the event any third party alleges, in writing, facts that, if true, would
mean the Buyer has breached) any of its representations, warranties, and
covenants contained herein, including Buyer's obligations in Section 5(d) above,
and, if there is an applicable survival period pursuant to (S)6(a) above,
provided that the Sellers make a written claim for indemnification against the
Buyer pursuant to (S)8(h) below within such survival period,
PAGE 28
then the Buyer agrees to indemnify each of the Seller from and against the
entirety of any Adverse Consequences the Sellers may suffer through and after
the date of the claim for indemnification (including any Adverse Consequences
the Sellers may suffer after the end of any applicable survival period)
resulting from, arising out of, relating to, in the nature of, or caused by the
breach (or the alleged breach).
(d) Matters Involving Third Parties.
-------------------------------
(i) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim") which may give
rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this (S)6, then the Indemnified Party shall
promptly notify each Indemnifying Party thereof in writing (which notice
shall contain a copy of any written allegations giving rise to a claim for
indemnity); provided, however, that no delay on the part of the Indemnified
Party in notifying any Indemnifying Party shall relieve the Indemnifying
Party from any obligation hereunder unless (and then solely to the extent)
the Indemnifying Party thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (A) the
Indemnifying Party notifies the Indemnified Party in writing within 30 days
after the Indemnified Party has given notice of the Third Party Claim that
the Indemnifying Party will indemnify the Indemnified Party from and
against the entirety of any Adverse Consequences the Indemnified Party may
suffer resulting from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim, (B) the Indemnifying Party provides the
Indemnified Party with evidence reasonably acceptable to the Indemnified
Party that the Indemnifying Party will have the financial resources to
defend against the Third Party Claim and fulfill its indemnification
obligations hereunder, (C) the Third Party Claim involves only money
damages and does not seek an injunction or other equitable relief, (D)
settlement of, or an adverse judgment with respect to, the Third Party
Claim is not, in the good faith judgment of the Indemnified Party, likely
to establish a precedential custom or practice materially adverse to the
controlling business interests of the Indemnified Party, and (E) the
Indemnifying Party conducts the defense of the Third Party Claim actively
and diligently.
(iii) So long as the Indemnifying Party is conducting the defense
of the Third Party Claim in accordance with (S)6(d)(ii) above, (A) the
Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (B) the
Indemnified Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnifying Party (not to be withheld
unreasonably), and (C) the Indemnifying Party will not consent to the entry
of any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnified Party (not
to be withheld unreasonably).
PAGE 29
(iv) In the event any of the conditions in (S)6(d)(ii) above is or
becomes unsatisfied, however, (A) the Indemnified Party may defend against,
and consent to the entry of any judgment or enter into any settlement with
respect to, the Third Party Claim in any manner it reasonably may deem
appropriate (and the Indemnified Party need not consult with, or obtain any
consent from, any Indemnifying Party in connection therewith), (B) the
Indemnifying Parties will reimburse the Indemnified Party promptly and
periodically for the costs of defending against the Third Party Claim
(including reasonable attorneys' fees and expenses), and (C) the
Indemnifying Parties will remain responsible for any Adverse Consequences
the Indemnified Party may suffer resulting from, arising out of, relating
to, in the nature of, or caused by the Third Party Claim to the fullest
extent provided in this (S)6.
(e) Limitations. The provisions of this (S) 6 notwithstanding, neither
-----------
the Buyer nor the Sellers shall be liable to or required to indemnify the other
under (S)(S) 6(b) or (c) until the aggregate amount otherwise due the party to
be indemnified exceeds an accumulated total of Ten Thousand Dollars
($10,000.00).
(f) Determination of Adverse Consequences. The Parties shall take into
-------------------------------------
account the time cost of money (using the Applicable Rate as the discount rate)
in determining Adverse Consequences for purposes of this (S)6. All
indemnification payments under this (S)6 shall be deemed adjustments to the
Purchase Price.
(g) Other Indemnification Provisions. The foregoing indemnification
--------------------------------
provisions are in addition to, and not in derogation of, any statutory,
equitable, or common law remedy any Party may have for breach of representation,
warranty, or covenant. The Sellers hereby agree that they will not make any
claim for indemnification against the Company by reason of the fact that he or
it was a director, officer, employee, or agent of any such entity or was serving
at the request of any such entity as a partner, trustee, director, officer,
employee, or agent of another entity (whether such claim is for judgments,
damages, penalties, fines, costs, amounts paid in settlement, losses, expenses,
or otherwise and whether such claim is pursuant to any statute, charter
document, bylaw, agreement, or otherwise) with respect to any action, suit,
proceeding, complaint, claim, or demand brought by the Buyer against such Seller
(whether such action, suit, proceeding, complaint, claim, or demand is pursuant
to this Agreement, applicable law, or otherwise).
7. TAX MATTERS. The following provisions shall govern the allocation of
-----------
responsibility between Buyer and Sellers for certain tax matters following the
Closing Date:
(a) Tax Periods Ending on or Before the Effective Date. Sellers shall
--------------------------------------------------
prepare or cause to be prepared and file or cause to be filed all Tax Retums for
the Company for all periods ending on or prior to the Effective Date which are
filed after the Closing. Sellers shall permit Company to review and comment on
each such Tax Retum described in the preceding sentence prior to filing.
Sellers shall reimburse Buyer for Taxes of the Company with respect to such
periods within fifteen (15) days after payment by Buyer or the Company of such
Taxes to the extent such Taxes are not reflected in the reserve for Tax
Liability (rather than any reserve for deferred Taxes established to
PAGE 30
reflect timing differences between book and Tax income) shown on the face of the
Most Recent Balance Sheet or incurred in the ordinary course of business since
that date.
(b) Tax Periods Beginning Before and Ending After the Closing Date.
--------------------------------------------------------------
Buyer shall prepare or cause to be prepared and file or cause to be filed any
Tax Retums of the Company for all periods ending after the Effective Date.
Buyer shall be responsible for taxes incurred after the Effective Date.
(c) Cooperation on Tax Matters.
--------------------------
(i) Buyer, the Company and Sellers shall cooperate fully, as and
to the extent reasonably requested by the other party, in connection with
the filing of Tax Retums pursuant to this Section and any audit, litigation
or other proceeding with respect to Taxes. Such cooperation shall include
the retention and (upon the other party's request) the provision of records
and information which are reasonably relevant to any such audit, litigation
or other proceeding and making employees available on a mutually convenient
basis to provide additional information and explanation of any material
provided hereunder. The Company and Sellers agree (A) to retain all books
and records with respect to Tax matters pertinent to the Company relating
to any taxable period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent notified by
Buyer or Sellers, any extensions thereof) of the respective taxable
periods, and to abide by all record retention agreements entered into with
any taxing authority, and (B) to give the other party reasonable written
notice prior to transferring, destroying or discarding any such books and
records and, if the other party so requests, the Company or Sellers, as the
case may be, shall allow the other party to take possession of such books
and records.
(ii) Buyer and Sellers further agree, upon request, to use their
best efforts to obtain any certificate or other document from any
governmental authority or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including, but not
limited to, with respect to the transactions contemplated hereby).
(iii) Buyer and Sellers further agree, upon request, to provide the
other party with all information that either party may be required to
report pursuant to Section 6043 of the Code and all Treasury Department
Regulations promulgated thereunder.
(d) Tax Sharing Agreements; "S" Corporation Election. All tax sharing
------------------------------------------------
agreements or similar agreements with respect to or involving the Company shall
be tenninated as of the Closing Date and, after the Closing Date, the Company
shall not be bound thereby or have any liability thereunder. The Company shall
terminate its election under Subchapter S of the Code as of the Effective Date
and prior to the Closing.
(e) Certain Taxes. All transfer, documentary, sales, use, stamp,
-------------
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this
PAGE 31
Agreement (including any New York State Gains Tax, New York City Transfer Tax
and any similar tax imposed in other states or subdivisions), shall be paid by
Sellers when due, and Seller will, at their own expense, file all necessary Tax
Returns and other documentation with respect to all such transfer, documentary,
sales, use, stamp, registration and other Taxes and fees, and, if required by
applicable law, Buyer will, and will cause its affiliates to, join in the
execution of any such Tax Returns and other documentation.
8. MISCELLANEOUS.
-------------
(a) Arbitration. The Parties agree that all disputes among the Parties
-----------
after the Closing arising out of or relating to this Agreement, including
without limitation the indemnities provided above or the breach thereof, shall
be submitted to the American Arbitration Association ("AAA") for arbitration
before a single arbitrator for final and binding arbitration in accordance with
the rules of AAA then in effect or such other procedures as the Parties may
agree to as the sole and exclusive remedy for resolving such disputes. The
Parties agree that the decision of the arbitrator shall be final and binding
between the Parties thereto, and shall be enforceable by any court having
jurisdiction over the party against whom enforcement is sought. The Parties
agree that any such arbitration shall take place in Austin, Texas. The fees and
expenses of such arbitration (including reasonable attomeys' fees) or any action
to enforce an arbitration award shall be paid by the party that does not prevail
in such arbitration.
(b) Waiver of Jury Trial. THE PARTIES EACH ACKINOWLEDGE AND AGREE THAT
--------------------
BY SELECTING ARBITRATION AS THE SOLE AND EXCLUSIVE REMEDY FOR RESOLVING ALL
DISPUTES AMONG THEM (OTHER THAN THOSE SET FORTH IN SECTION 5(d)), THEY ARE
WAIVING THEIR RIGHT TO A JURY TRIAL TO WHICH THEY MAY OTHERWISE BE ENTITLED.
(c) Nature of Certain Obligations. The representations, warranties, and
-----------------------------
covenants in this Agreement are a material inducement to Buyer and Sellers in
entering into this Agreement. Thus, Buyer and Sellers will be responsible to
the extent provided in (S)6 above for the entirety of any Adverse Consequences
any other party may suffer as a result of any breach thereof.
(d) Press Releases and Public Announcements. No Party shall issue any
---------------------------------------
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of the
Buyer and the Company, provided, however, that any Party may make any public
disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities (in which
case the disclosing Party will use its reasonable best efforts to advise the
other Parties prior to making the disclosure).
(e) No Third-Party Beneficiaries. This Agreement shall not confer any
----------------------------
rights or remedies upon any Person other than the Parties and their respective
successors and pennitted assigns.
PAGE 32
(f) Entire Agreement. This Agreement (including the documents referred
----------------
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, negotiations or representations by or among
the Parties or their representatives, whether written or oral, to the extent
they related in any way to the subject matter hereof.
(g) Succession and Assignment. This Agreement shall be binding upon and
-------------------------
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of his
or its rights, Interests, or obligations hereunder without the prior written
approval of the Buyer and the Seller; provided, however, that the Buyer may (i)
-----------------
assign any or all of its rights and interests hereunder to one or more of its
Affiliates and (ii) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases the Buyer nonetheless shall
remain responsible for the performance of all of its obligations hereunder).
(h) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(i) Headings. The section headings contained in this Agreement are
--------
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(j) Notices. All notices, requests, demands, claims, and other
-------
communications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two business days after) it is sent by registered or certified mall, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth below:
If to the Sellers: Pro Line Video, Inc.
----------------- 0000 XxXxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attn: Xxxxx X. XxXxxxxxx, III
If to the Buyer: Intellisys Group, Inc.
--------------- 000 Xxxx Xxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Chairman of the Board
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Parties
notice in the manner herein set forth.
PAGE 33
(k) Governing Law. This Agreement shall be govemed by and construed in
-------------
accordance with the domestic laws of the State of Texas without giving effect to
any choice or conflict of law provision or rule (whether of the State of Texas
or any other jurisdiction) that would cause the application of the laws of any
other jurisdiction.
(l) Amendments and Waivers. No amendment of any provision of this
----------------------
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Sellers. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(m) Severability. Any term or provision of this Agreement that is
------------
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending tenn or provision in any other
situation or in any other jurisdiction.
(n) Expenses. Except that the Company shall pay up to $12,000.00 of the
--------
Sellers' legal fees associated with this Agreement, each of the Parties will
bear his or its own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby. The Sellers agree that the Company has not borne and will not bear any
of the Sellers'costs and expenses (including any of their legal fees and
expenses) in connection with this Agreement or any of the transactions
contemplated hereby in excess of $12,000.00.
(o) Construction. The Parties have participated jointly in the
------------
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local,
or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained here in any respect, the fact that there exists
another representation, warranty, or covenant relating to the same subject
matter (regardless of the relative levels of specificity) which the Party has
not breached shall not detract from or mitigate the fact that the Party is in
breach of the first representation, warranty, or covenant.
(p) Incorporation of Exhibits, Annexes, and Schedules. The Exhibits,
-------------------------------------------------
Annexes, and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
(q) Specific Performance. Each of the Parties acknowledges and agrees
--------------------
that the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not
PAGE 34
performed in accordance with their specific terms or otherwise are breached.
Accordingly, each of the Parties agrees that the other Parties shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any arbitration proceeding.
PAGE 35
IN WITNESS WHEREOF, the Parties hereto have executed this Ageement on as of
the date first above written.
INTELLISYS GROUP, INC.
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxx
-----------------------------
Title: Chairman of the Board
----------------------------
PRO LINE VIDEO, INC.
By: /s/ Xxxxxx Xxxxxx
-------------------------------
Name: Xxxxxx Xxxxxx
-----------------------------
Title: President
----------------------------
SELLERS
/s/ Xxxxx X. XxXxxxxxx, III
----------------------------------
Xxxxx X. XxXxxxxxx, III
/s/ Xxxx X. Xxxxxxxx
----------------------------------
Xxxx X. Xxxxxxxx
/s/ Xxxxxx X. Xxxxxx
----------------------------------
Xxxxxx X. Xxxxxx
PAGE 36
ANNEX I
-------
(S)3(a)(v): That one certain Stock Purchase and Transfer Restriction Agreement
dated November 29, 1996, by and between the shareholders of the Company
restricting the sale of all common stock owned by the shareholders, as more
particularly provided for therein, a true and correct copy of which is contained
in the Disclosure Documents provided pursuant to (S)4(a) at Tab A.
Page 1
ANNEX II
--------
[NONE]
Page 1
ANNEX III
---------
(S)4(a):
a. Directors of the Company consist of Xxxxx X. XxXxxxxxx, III, Xxxxxx X.
Xxxxxx, and Xxxx X. Xxxxxxx.
b. Officers of the Company consist of Xxxxxx Xxxxxx, President, Xxxxx X.
XxXxxxxxx, III, Vice President, and Xxxx X. Xxxxxxx, Secretary/Treasurer.
Copies of the Company charter, bylaws, minute book, stock certificate book
and stock record book are contained in the Disclosure Documents at Tab A.
(S)4(b): Shares of the Company are held as follows:
Xxxxx X. XxXxxxxxx, III - 820 shares
Xxxx X. Xxxxxxx - 191 shares
Xxxxxx X. Xxxxxx - 120 shares
Copies of the share certificates representing the number of shares
listed above are contained in the Disclosure Documents at Tab A.
(S)4(c):
a. The Company has entered into an agreement with Norwest Bank Texas,
N.A. which provides in principal that the default provision prohibiting the sale
of all stock of the Company will be waived for ten (10) days following the
Closing Date (as defined in the Stock Purchase Agreement), subject to the
payment in full of the two (2) promissory notes having a principal balance of
$546,000.00 and $111,374.00 respectively, all as more particularly provided for
in that one certain Waiver Agreement, a true and correct copy of which is
contained in the Disclosure Documents at Tab C.
b. The sale of stock contemplated by the Stock Purchase Agreement has not
been approved by the Lessor in the four (4) leases as more fully described in
(S)4(i) c. through f. herein below, copies of which are contained in the
Disclosure Documents at Tab I.
(S)4(g): True and correct copies of the Financial Statements listed in (S)4(g)
are contained in the Disclosure Documents at Tab G.
(S)4(h)(i): Purchase Orders exceeding $10,000 in total value described as
follows:
a. Dell Computers for $39,706.10 dated 1/21/99.
b. Dell computers for $21,980.16 dated 1/21/99.
c. International Communications for $12,525.00 dated 12/30/98.
d. Alamo Community College District for $125,810.00 dated 12/l/98.
e. Department of the Navy for $14,700.00 dated 12/3/98.
f. Trinity University for $16,402.00 dated 12/15/98.
g. UT San Antonio for $363,415.00 dated 10/15/98.
h. Department of the Air Force for $26,051.00 dated 1/14/97.
x. Xxxxx Entertainment Corporation (Sea World of Texas) for $21,139.00
dated 1/19/99.
j. Dell Computers for $38,612.78 dated 1/12/99.
k. UT Austin for $14,000.00 dated 12/18/98.
Page 1
1. Austin Commercial for $720,000.00 dated November 23, 1998.
m. Defense Industrial Supply Center for $18,606 dated January 22, 1999.
n. IXC Communications for $47,564.58 dated January 28, 1999.
True and correct copies of the purchase orders are contained in the
Disclosure Schedules at Tab X. Xxxxxxx believe that these transactions are all
within of the Ordinary Course of Business.
(S)4(h)(viii): Due to recent cash flow problems experienced by the Company, its
accounts payable are not being paid in the same manner as in previous accounting
periods. A true and correct copy of an aged accounts payable list is contained
in the Disclosure Documents at Tab H.
(S)4(i): The Company has certain liabilities that are not set forth on the face
of the Most Recent Balance Sheet as follows:
a. Lease Agreement by and between CPF Austin Industrial Associates
Limited Partnership and The Video Store, Inc., d/b/a Pro Line Video dated May
16, 1990, as amended, concerning the property located at 0000 XxXxxx Xxxxx,
Xxxxx 000, Xxxxxx, Xxxxx, a true and correct copy of which is contained in the
Disclosure Documents at Tab L.
b. Lease Agreement by and between Congress Investments V, Ltd. and The
Video Store, Inc. dated June 27, 1995, as amended, concerning the property
located at 00000 Xxxxxxxx Xxxx, Xxxxx 000, Xxx Xxxxxxx, Xxxxx 00000, a true and
correct copy of which is contained in the Disclosure Documents at Tab L.
c. Lease Agreement by and between Bank One Texas Leasing Corporation and
Pro Line Video, Inc. dated December 4, 1998, concerning the lease of a 1999 Ford
Explorer, a true and correct copy of which is contained in the Disclosure
Documents at Tab P.
d. Lease Agreement by and between Bank One Texas Leasing Corporation and
Pro Line Video, Inc. dated December 4, 1997, concerning the lease of a 1998
Dodge Caravan Van, a true and correct copy of which is contained in the
Disclosure Documents at Tab P.
e. Lease Agreement by and between Bank One Texas Leasing Corporation and
Pro Line Video, Inc. dated December 10, 1997, concerning the lease of a 1998
Dodge Durango, a true and correct copy of which is contained in the Disclosure
Documents at Tab P.
f. Equipment Lease by and between Office Pavillion Corporate Furnishings
and the Video Store, Inc. d/b/a Pro Line Video dated November 7, 1995 concerning
certain office equipment, a true and correct copy of which is contained in the
Disclosure Documents at Tab P.
(S)4(k): True and correct copies of Tax Returns filed with respect to the
Company for calendar year end 1990 through 1997 are contained in the Disclosure
Documents at Tab K. No Tax Returns have been audited or are the subject of
audit.
(S)4(l)(ii):
a. Lease Agreement by and between CPF Austin Industrial Associates
Limited Partnership and The Video Store, Inc., d/b/a Pro Line Video dated May
16, 1990, as amended, concerning the property located at 0000 XxXxxx Xxxxx,
Xxxxx 000, Xxxxxx, Xxxxx, a true and correct copy of which is contained in the
Disclosure Documents at Tab L.
b. Lease Agreement by and between Congress Investments V, Ltd. and The
Video Store, Inc. dated June 27, 1995, as amended, concerning the property
located at 00000 Xxxxxxxx Xxxx, Xxxxx 000, Xxx Xxxxxxx, Xxxxx 00000, a true and
correct copy of which is contained in the Disclosure Documents at Tab L.
(S)4(m)(iii): None.
(S)4(m)(iv): None.
(S)4(p)(i):
a. Lease Agreement by and between Bank One Texas Leasing Corporation and
Pro Line Video, Inc. dated December 4, 1998, concerning the lease of a 1999 Ford
Explorer, a true and correct copy of which is contained in the Disclosure
Documents at Tab P.
b. Lease Agreement by and between Bank One Texas Leasing Corporation and
Pro Line Video, Inc. dated December 4, 1997, concerning the lease of a 1998
Dodge Caravan Van, a true and correct copy of which is contained in the
Disclosure Documents at Tab P.
c. Lease Agreement by and between Bank One Texas Leasing Corporation and
Pro Line Video, Inc. dated December 10, 1997, concerning the lease of a 1998
Dodge Durango, a true and correct copy of which is contained in the Disclosure
Documents at Tab P.
d. Equipment Lease by and between Office Pavillion Corporate Furnishings
and the Video Store, Inc. d/b/a Pro Line Video dated November 7, 1995 concerning
certain office equipment, a true and correct copy of which is contained in the
Disclosure Documents at Tab P.
(S)4(p)(ii); See (S)4(h)(ii) to the extent that certain equipment with a value
is excess of $ 10,000.00 has been ordered to perform under the purchase orders
referenced therein, copies of which are contained in the Disclosure Documents at
Tab H.
(S)4(p)(iv):
a. Promissory Note #0133767-9001 at Norwest Bank Texas, N.A., dated
5/15/98 with a principal balance $546,000.00 as of February 1, 1999 and maturing
on 5/15/99; including related security documents covering the pledge of
substantially all of the Company's assets.
b. Promissory Note #0133767-9002 at Norwest Bank Texas, N.A., dated
5/23/97 with a principal balance $111,374.00 as of February 1, 1999 and maturing
on 5/23/01; including related security documents covering the pledge of
substantially all of the Company's assets.
c. Promissory Note #0133767-9003 at Norwest Bank Texas, N.A., dated
8/25/97 with a principal balance $12,023.26 as of February 1, 1999 and maturing
on 8/25/00; including related security documents covering the pledge of
substantially all of the Company's assets.
d. Promissory Note #0135271-9001 at Norwest Bank Texas, N.A., dated
7/26/96 with a principal balance $2,369.26 as of February 1, 1999 and maturing
on 7/16/99; including related security documents covering the pledge of
substantially all of the Company's assets.
e. UCC-1 financing statement filed by The Manifest Group, Marshall,
Minn., against 105700 Projector, D-XXX (DLA-Gl000U).
True and correct copies of all notes, security agreements, and UCC-1
financing statements are contained in the Disclosure Documents at Tab P.
Page 3
(S)4(p)(vii):
a. Profit Sharing Plan referenced in employee manual, originating in
October 1994, and have no specific formula. A true and correct copy of the
section of the manual referencing the plan is contained in the Disclosure
Documents at Tab P.
b. Sales Commission and Compensation Agreement dated September 27, 1997,
to be effective as of January 1, 1998, containing formulas for calculation of
commission and bonus income. A true and correct copy of this agreement is
contained in the Disclosure Documents at Tab P.
(S)4(p)(ix): True and correct copies of the following described employment
agreements are
contained in the Disclosure Documents at Tab P.
a. Employment agreement with Xxx XxXxxxxxx as Vice President -
Austin/Branch Manager, effective January 1, 1998 at a base salary of $6,000/mo.
plus benefits and a bonus plan based upon the performance if the Austin Branch
as provided therein (base reduced to $5,000/mo may 1998).
b. Employment agreement with Xxxxxx Xxxxxx as President, effective
January 1, 1998, at a base salary of $6,000/mo. plus benefits plus a bonus plan
based upon achieving certain sales and profit goals as provided therein (base
reduced to $5,000/mo may 1998).
c. Employment agreement with Skip Xxxxxxx as Vice President - San
Antonio, effective January 1, 1998, at base salary of $6,000/mo. plus benefits,
and a bonus plan based upon the performance of the San Xxxxxxx Xxxxxx as
provided therein (base reduced to $5,000/mo. May 1998).
d. At will employment agreement with Xxxx Xxxxx dated February 15, 1999
providing for minimum compensation of $2,400/mo. for 4 months and $1,200/mo. for
two months thereafter, and commission compensation only thereafter as provided
by formula contained in the agreement.
e. At will employment agreement with Xxxxxxx Xxxxx, dated December 8,
1998, as Installation Tech. Trainee compensated at $9.50/hr.
f. At will employment agreement with Xxxx Xxxxxxx, dated January 18,
1999, as Tech. III compensated at $14.00/hr.
g. Employment agreement with Xxxx X. Xxxxxxx, dated January 4, 1999, as
Administrative, Asst. II compensated at $9.50/hr.
h. Employment agreement with Xxxxx Xxxxxxx, dated February 12, 1996, as
Service Technician compensated at $1,900/mo. plus commission based upon gross
profits of the service department.
i. Employment agreement with Xxxx Xxxx, dated October 16, 1998, as a
Service Technician compensated at $2,775/mo. plus commission based upon profit
on invoiced repair work.
j. Employment agreement with Xxxx Xxxxxx, dated September 30, 1997, as a
Crew Chief compensated at $11.00/hr.
k. Employment agreement with Xxxxxxx Xxxxx, dated November 17, 1998, as a
Sales Engineer, commencing on January 4, 1999, at a base salary of $60,000 per
year plus 5% of gross profits on the sale of Visual Products in the South
Central Region, based upon sales as a direct result of participating in
engineering solutions for client.
l. Employment agreement with Xxxxx Xxxxxxx, dated June 12, 1995, as an
Outside Sales Associate with compensation as provided in the compensation
package contained therein.
Page 4
m. Employment agreement with Xxxxx Xxxxxxx, dated April 28, 1987,
compensated at $9.00/hr.
n. Employment agreement with Xxxxxxx XxXxxxxx, dated May 19, 1997, as a
Customer Service Rep. compensated at $2,000/mo. for 6 months probationary
period, after which the salary will be reduced and commission included based on
the income produced in each period by the account reps that this position
supports.
o. Employment agreement with Xxxxxxx Xxxxxxxx, dated May 27, 1997,
compensated at $2,200/mo. plus 10% commission based upon a formula contained in
the agreement.
p. Employment agreement with Xxxxx Xxxxxx, dated September 30, 1997, as a
Crew Chief compensated at $12.00/hr.
q. Employment agreement with Xxxx Xxxxx, dated September 30, 1997, as a
Crew Chief (no stated hourly rate).
r. Employment agreement with Xxxx Xxxxx, dated September 30, 1997, as
Project Manager at a base salary of $2,600/mo. plus a commission equal to 2% of
the prior month's profit on installation sales.
s. Bonus contract with Xxxx XxXxxxx, dated March 30, 1998, as described
therein.
t. Employment agreement with Xxxxx Xxxxxx, dated October 20, 1997, as a
Project Manager at a base salary of $2,900/mo. plus commission equal to 2% of
the prior month's profit on installation sales.
u. Employment agreement with Amber Silquero, dated December 15, 1997, as
a Rental Coordinator with a guaranteed minimum monthly salary of $1,500 until
April 8, 1998, with compensation thereafter as provided in the agreement.
v. Employment agreement with Xxxxxx Xxxxxx, dated January 15, 1998, as a
Rental Manager at a base salary of $3,100/mo. plus a bonus package as described
therein.
w. Employment agreement with Xxxxx Xxxxxxxx, dated January 30, 1998, as
Install Technician Trainee compensated at $9.50/hr.
x. Employment agreement with Xxxx X. Xxxxx, dated March 13, 1998, as a
Service Technician at a base salary of $2,300/mo. plus commission (after a 6
month evaluation) equal to 10% of profits on services rendered by employee.
y. Employment agreement with Xxxxxx "Bo" Xxxxx, dated March 17, 1998, as
an Installation Tech. compensated at $9.00/hr.
z. Bonus contract with Xxxxx Xxxxxxx, dated March 30, 1998, as described
therein.
aa. Employment agreement with Xxxxxx Xxxx, dated September 1, 1998, as an
Installation Tech. Trainee compensated at $8.50/hr.
bb. Employment agreement with Xxxxxxx Xxxx, dated October 22, 1996, as an
Administrative Assistant compensated at $7.25/hr.
cc. Employment agreement with Xxxxxxx X. Xxxxxxx, dated October 23, 1998,
as an Installation Tech. Trainee compensated at $8.50/hr.
dd. Employment agreement with Xxxxx X. Xxxxxxxx, dated November 1, 1998,
as an Admin. Asst. compensated at $8.50/hr.
ee. Employment agreement with Xxxxx Xxxxx, dated November 9, 1998, as an
Installation Tech. compensated at $11.00/hr.
Page 5
ff. Employment agreement with Xxxx Xxxxxx, dated November 12, 1998,
Inside Sales at a base salary of $2,000/mo. plus 15% commission on "direct"
sales profits, a 50/50 split commission in all "assertive" sales.
gg. Employment agreement with Xxxx Xxxxxxxxx, dated December 11, 1998, as
a Project Engineer compensated at $3,100/mo.
hh. Employment agreement with Xxxxx Xxxxxxx, dated December 11, 1998, as
a Project Technician compensated at $12.00/hr.
(S)4(q): Based upon information recently published in the Austin American
Statesman, the Xxxxxxxx Hotel is reported to be late in the payment of numerous
suppliers. The Company holds an account receivable from the Xxxxxxxx Hotel in
the approximate amount of $13,000.00 which has not been adjusted on the Most
Recent Balance Sheet. Collectability of this account is not known at this time.
(S)4(s):
a. A seven (7) page Summary of Insurance prepared by Company's agent,
Balcones-Southwest, Inc., is contained in the Disclosure Documents at Tab S and
summarizes current property, casualty, liability, workers' compensation,
business auto, equipment floater, installation and builders risk, liability
umbrella, and electronic data processing coverage provided to Company by
Republic Insurance Group.
b. True and correct copies of similar coverage for Company in prior years
are contained in the Disclosure Documents at Tab S and are summarized as
follows:
i. Policy period 1/28/96 to 1/28/97, issued through Valley Forge
Insurance Company.
ii. Policy period 1/28/95 to 1/28/96, issued through Valley Forge
Insurance Company.
c. True and correct copies of prior surety and/or performance bonds
issued through Universal Surety of America are contained in the Disclosure
Documents at Tab S.
(S)4(t): None.
(S)4(u): True and correct copies of standard warranties are contained in the
Disclosure Documents at Tab U.
Page 6
ANNEX IV
--------
(S)5(d): One or more of the Sellers have guaranteed the following obligations
of the Company which do not appear on the Most Recent Balance Sheet but are to
be included as obligations of Buyer pursuant to (S)5(d) of the Agreement;
a. Lease Agreement by and between CPF Austin Industrial Associates
Limited Partnership and The Video Store, Inc., d/b/a Pro Line Video dated May
16, 1990, as amended, concerning the property located at 0000 XxXxxx Xxxxx,
Xxxxx 000, Xxxxxx, Xxxxx, a true and correct copy of which is contained in the
Disclosure Documents provided pursuant to (S)4(l)(ii) at Tab L.
b. Lease Agreement by and between Congress Investments V, Ltd. and The
Video Store, Inc. dated June 27, 1995, as amended, concerning the property
located at 00000 Xxxxxxxx Xxxx, Xxxxx 000, Xxx Xxxxxxx, Xxxxx 00000, a true and
correct copy of which is contained in the Disclosure Documents provided pursuant
to (S)4(l)(ii) at Tab L.
c. Lease Agreement by and between Bank One Texas Leasing Corporation and
Pro Line Video, Inc. dated December 4, 1998, concerning the lease of a 1999 Ford
Explorer, a true and correct copy of which is contained in the Disclosure
Documents provided pursuant to (S)4(i) at Tab I.
d. Lease Agreement by and between Bank One Texas Leasing Corporation and
Pro Line Video, Inc. dated December 4, 1997, concerning the lease of a 1998
Dodge Caravan Van, a true and correct copy of which is contained in the
Disclosure Documents provided pursuant to (S)4(i) at Tab I.
e. Lease Agreement by and between Bank One Texas Leasing Corporation and
Pro Line Video, Inc. dated December 10, 1997, concerning the lease of a 1998
Dodge Durango, a true and correct copy of which is contained in the Disclosure
Documents provided pursuant to (S)4(i) at Tab I.
f. Equipment Lease by and between Office Pavillion Corporate Furnishings
and the Video Store, Inc. d/b/a Pro Line Video dated November 7, 1995
concerning certain office equipment, a true and correct copy of which is
contained in the Disclosure Documents provided pursuant to (S)4(i) at Tab I.
Page 1
EXHIBIT A1 TO STOCK PURCHASE AGREEMENT
SUBORDINATED PROMISSORY NOTE
----------------------------
U.S. $_______________ Mountain View, California
-------------------------
For Value Received, the undersigned INTELLYSIS GROUP, INC. ("INTELLYSIS")
promises to pay to the order of ___________________________________ ("Seller")
an individual resident of the State of Texas at ______________________________,
or at such other places as may be designated by Seller, the principal amount
of _________________________________________________________________________
($_____________________). This Subordinated Promissory Note (this "Note") is
issued pursuant to the terms of that certain Stock Purchase Agreement dated as
of January 1, 1999, (the "Stock Purchase Agreement") the terms and conditions of
which Stock Purchase Agreement are incorporated fully herein by this reference.
Unless otherwise defined herein, defined terms shall have the meanings as set
forth in the Stock Purchase Agreement. For the purposes of the Stock Purchase
Agreement, this Note is referred to as a Buyer Note, one of several Buyer Notes
in aggregate principal amount of $197,840.00.
The outstanding balance on this Note shall bear any interest at a rate
equal to the Applicable Rate.
All interest is calculated daily and shall be paid based upon a 360-day
year.
APPLICABLE RATE:
---------------
"Applicable Rate" shall mean, an amount equal to the rate of interest
publicly announced from by Xxxxx Fargo Bank ("Bank"), or its successor, in San
Francisco, California as its reference rate as of the Effective Date. It is a
rate set by Bank based upon various factors, including its costs and desired
return, general economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above or below
such announced rate.
FORM OF PAYMENT:
---------------
Any and all payments of any nature made or required to be made under this
Note shall be made in lawful money of the United States collectable on the date
of payment as provided in the Stock Purchase Agreement.
SUBORDINATION:
-------------
(a) The Seller agrees that the indebtedness evidenced by this Note
is subordinated in right of payment, to the extent and in the manner provided
herein, to the prior payment in full of all Senior Debt, and that the
subordination is for the benefit of the holders of Senior Debt.
(b) For the purposes of this Note, the following definitions shall
apply:
PAGE 1
(1) "Debt" of any person means any indebtedness, contingent
----
or otherwise, in respect of borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such person or
only to a portion thereof), or evidenced by bonds, notes, debentures
or similar instruments or letters of credit, or representing the
balance deferred and unpaid of the purchase price of any property or
interest therein, except any such balance that constitutes a trade
payable, if and to the extent such indebtedness would appear as a
liability upon a balance sheet of such person prepared on a
consolidated basis in accordance with generally accepted accounting
principles.
(2) "Senior Debt" means all Debt (present or future) created,
-----------
incurred, assumed or guaranteed by INTELLYSIS to any third party
financial institution, equipment lessor or any party having a security
interest in any of the property of Seller (and all renewals,
extensions or refundings thereof), unless the instrument under which
such Debt is created, incurred, assumed or guaranteed expressly
provides that such Debt is not senior or superior in right of payment
to the Seller.
(c) Upon any distribution to creditors of INTELLYSIS in a
liquidation or dissolution of INTELLYSIS or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to INTELLYSIS or its
property, holders of Senior Debt shall be entitled to receive payment in full in
cash of the principal of and interest (including interest accruing after the
commencement of any such proceeding) to the date of payment on the Senior Debt
before Seller shall be entitled to receive any payment of principal of or
interest on the Note.
(d) Upon the final maturity of any Senior Debt by lapse of time,
acceleration or otherwise, all such Senior Debt shall first be paid in full, or
such payment duly provided for in cash or in a manner satisfactory to the
holders of such Senior Debt, before any payment is made by INTELLYSIS or any
person acting on behalf of INTELLYSIS on account of the principal or interest of
the Note.
(e) INTELLYSIS may not pay principal of or interest on the Note if:
(1) a default on Senior Debt occurs and is continuing that
permits holders of such Senior Debt to accelerate its maturity, and
(2) the default is the subject of judicial proceedings or
INTELLYSIS receives a notice of the default from a person who holds
Senior Debt. If INTELLYSIS receives any such notice, a subsequent
notice received within nine months thereafter relating to the same
issue of Senior Debt shall not be effective for purposes of this
provision.
(f) INTELLYSIS shall resume payments on the Note and may acquire
the Note when:
PAGE 2
(1) the default is cured or waived, or
(2) 120 days pass after the notice is given if the default
is not the subject of judicial proceedings,
if this Note otherwise permits the payment or acquisition at that time.
(g) If payment of the Note is accelerated because of an Event of
Default, INTELLYSIS shall promptly notify holders of Senior Debt of the
acceleration. INTELLYSIS shall pay the Note when 120 days pass after the
acceleration occurs if the Note permits the payment at that time; provided,
however, that if no Senior Debt is outstanding at the time of such acceleration
INTELLYSIS shall pay the Note in accordance with the provisions of this Note.
(h) If a payment is made to the Seller that because of this
subordination provision should not have been made to them, the Seller shall hold
such payment in trust for holders of Senior Debt and pay it over to them as
their interests may appear.
(i) This subordination provision defines the relative rights of
Seller and holders of Senior Debt. Nothing in this provision shall:
(1) impair, as between INTELLYSIS and Seller, the obligation
of INTELLYSIS, which is absolute and unconditional, to pay principal
of and interest on the Note in accordance with its terms;
(2) affect the relative rights of Seller and creditors of
INTELLYSIS other than holders of Senior Debt; or
(3) prevent Seller from exercising their available remedies
upon a Default or Event of Default, subject to the rights of holders
of Senior Debt to receive payments otherwise payable to Seller.
(j) If INTELLYSIS fails because of this subordination provision to
pay principal of or interest on the Note on the due date, the failure is still a
Default or Event of Default.
(k) No right of any holder of Senior Debt to enforce the
subordination of the indebtedness evidenced by the Note shall be impaired by any
act or failure to act by INTELLYSIS or by its failure to comply with this
subordination provision.
PAGE 3
REQUIRED PAYMENTS AND LOAN MATURITY:
-----------------------------------
Principal and interest on this Note shall be due and payable as follows:
(a) $_________ on this first day of the third calendar month
commencing after the Effective Date;
(b) $_________ on the first day of the fourth calendar month
commencing after the Effective Date; and,
(c) All outstanding principal, together with all accrued and
unpaid interest thereon, under this Note, on the first day of
the fifth month commencing after the fifth month commencing
after the Effective Date. Interest under this Note shall accrue
only on unpaid principal.
If INTELLYSIS fails to make any payment when due, then Seller shall have
the option, to be exercised in its sole and absolute discretion, to accelerate
the payments due hereunder and declare the unpaid principal amount and all
accrued and unpaid interest immediately due and payable.
LATE CHARGE:
-----------
If any payment required hereunder is not received by holder when due, a
late charge of five percent (5.0%) of each overdue required payment shall be
charged for the purpose of defraying the expenses incident to handling said
delinquent payment(s).
APPLICATION OF PAYMENTS:
-----------------------
Payments shall be applied first to interest and the remainder to the
principal balance. Payments, if less than the amount required, shall be applied
in the sole discretion of holder and acceptance of such payments shall not be a
waiver of the rights of the holder hereof to require scheduled payments.
VOLUNTARY PREPAYMENT CLAUSE:
---------------------------
This Note may be prepaid at any time in whole or in part; provided, that
any such prepayment shall be applied to the last principal due hereunder and no
such prepayment shall affect or reduce the amount of any scheduled payments
hereunder.
PAGE 4
COLLATERAL PLEDGE AGREEMENT:
---------------------------
The obligations of INTELLYSIS hereunder are secured by a pledge of certain
collateral pursuant to the terms of that Collateral Pledge Agreement, of even
date herewith, between INTELLYSIS and the Seller.
RIGHT OF SET-OFF:
----------------
INTELLYSIS shall have the right to withhold and set-off against any amount
due hereunder the amount of any claim for indemnification or payment of damages
to which INTELLYSIS may be entitled as a result of Seller's breach of the
provisions in the Stock Purchase Agreement.
DEFAULT OF TERMS AND CONDITIONS:
-------------------------------
It is agreed that time is of the essence of this Note and that in the event
of default of payment of any installment, the holder of this Note may, at its
option, declare all the remainder of said debt due and payable, and any failure
to exercise said option shall not constitute a waiver of the right to exercise
the same at any other time, nor shall such failure to exercise the option be
construed as any form of acceptance of any said default. Notice of the exercise
of said option is hereby waived.
COSTS:
-----
Undersigned agrees to reimburse holder for all costs and expenses,
including, without limitation, all reasonable attorneys' fees incurred in the
enforcement or collection of this Note or any judgment obtained hereon.
LAWS:
----
This Note shall be governed by, and construed and enforced in accordance
with, the laws of the State of California applicable to contracts made and
performed in such state, without regard to the principles thereof regarding
conflicts of laws, and any applicable laws of the United States of America and
may not be amended except by a written document executed by the holder and
maker.
PARTIES IN INTEREST:
-------------------
This Note shall bind INTELLYSIS and its successor and assigns. This Note
shall not be assigned or transferred by Seller without the express prior written
consent of INTELLYSIS, except by will or, in default thereof, by operation of
law.
PAGE 5
MARGINAL CAPTIONS:
-----------------
The marginal captions appearing on this Note are for reference purposes
only and shall not in any way limit or otherwise affect the meaning, content or
interpretation of this Note.
INTELLYSIS GROUP, INC.
a California corporation
By:_________________________________
Xxxxxx X. Xxxxxx
Its:________________________________
PAGE 6
EXHIBIT A2 TO STOCK PURCHASE AGREEMENT
BUYER PARALLEL NOTE
-------------------
U.S. $_______________ Mountain View, California
-------------------------
For Value Received, the undersigned INTELLYSIS GROUP, INC. ("INTELLYSIS")
promises to pay to the order of ___________________________________ ("Seller")
an individual resident of the State of Texas, at _____________________________,
or at such other places as may be designated by Seller, the principal amount
of_______________________________________ ($_____________________ ). This
Buyer Parallel Note (this "Note") is issued pursuant to the terms of that
certain Stock Purchase Agreement dated as of February ___________________ 1999,
(the "Stock Purchase Agreement") the terms and conditions of which Stock
Purchase Agreement are incorporated fully herein by this reference. Unless
otherwise defined herein, defined terms shall have the meanings as set forth in
the Stock Purchase Agreement. For the purposes of the Stock Purchase Agreement,
this Note is referred to as a Buyer Parallel Note, one of several Buyer Parallel
Notes in aggregate principal amount of $267,500.00.
The outstanding balance on this Note shall bear any interest at a rate
equal to the Applicable Rate.
All interest is calculated daily and shall be paid based upon a 360-day
year.
APPLICABLE RATE:
---------------
"Applicable Rate" shall mean, an amount equal to the rate of interest
publicly announced from by Xxxxx Fargo Bank ("Bank"), or its successor, in San
Francisco, California as its reference rate as of the Effective Date. It is a
rate set by Bank based upon various factors, including its costs and desired
return, general economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above or below
such announced rate.
FORM OF PAYMENT:
---------------
Any and all payments of any nature made or required to be made under this
Note shall be made in lawful money of the United States collectable on the date
of payment as provided in the Stock Purchase Agreement.
SUBORDINATION:
-------------
(a) The Seller agrees that the indebtedness evidenced by this Note
is subordinated in right of payment, to the extent and in the manner provided
herein, to the prior payment in full of all Senior Debt, and that the
subordination is for the benefit of the holders of Senior Debt.
(b) For the purposes of this Note, the following definitions shall
apply:
PAGE 1
(1) "Debt" of any person means any indebtedness, contingent
----
or otherwise, in respect of borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such person or
only to a portion thereof), or evidenced by bonds, notes, debentures
or similar instruments or letters of credit, or representing the
balance deferred and unpaid of the purchase price of any property or
interest therein, except any such balance that constitutes a trade
payable, if and to the extent such indebtedness would appear as a
liability upon a balance sheet of such person prepared on a
consolidated basis in accordance with generally accepted accounting
principles.
(2) "Senior Debt" means all Debt (present or future)
-----------
created, incurred, assumed or guaranteed by INTELLYSIS to any third
party financial institution, equipment lessor or any party having a
security interest in any of the property of Seller (and all renewals,
extensions or refundings thereof), unless the instrument under which
such Debt is created, incurred, assumed or guaranteed expressly
provides that such Debt is not senior or superior in right of payment
to the Seller.
(c) Upon any distribution to creditors of INTELLYSIS in a
liquidation or dissolution of INTELLYSIS or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to INTELLYSIS or its
property, holders of Senior Debt shall be entitled to receive payment in full in
cash of the principal of and interest (including interest accruing after the
commencement of any such proceeding) to the date of payment on the Senior Debt
before Seller shall be entitled to receive any payment of principal of or
interest on the Note.
(d) Upon the final maturity of any Senior Debt by lapse of time,
acceleration or otherwise, all such Senior Debt shall first be paid in full, or
such payment duly provided for in cash or in a manner satisfactory to the
holders of such Senior Debt, before any payment is made by INTELLYSIS or any
person acting on behalf of INTELLYSIS on account of the principal or interest of
the Note.
(e) INTELLYSIS may not pay principal of or interest on the Note if:
(1) a default on Senior Debt occurs and is continuing that
permits holders of such Senior Debt to accelerate its maturity, and
(2) the default is the subject of judicial proceedings or
INTELLYSIS receives a notice of the default from a person who holds
Senior Debt. If INTELLYSIS receives any such notice, a subsequent
notice received within nine months thereafter relating to the same
issue of Senior Debt shall not be effective for purposes of this
provision.
(f) INTELLYSIS shall resume payments on the Note and may acquire
the Note when:
PAGE 2
(1) the default is cured or waived, or
(2) 120 days pass after the notice is given if the default
is not the subject of judicial proceedings,
if this Note otherwise permits the payment or acquisition at that time.
(g) If payment of the Note is accelerated because of an Event of
Default, INTELLYSIS shall promptly notify holders of Senior Debt of the
acceleration. INTELLYSIS shall pay the Note when 120 days pass after the
acceleration occurs if the Note permits the payment at that time; provided,
however, that if no Senior Debt is outstanding at the time of such acceleration
INTELLYSIS shall pay the Note in accordance with the provisions of this Note.
(h) If a payment is made to the Seller that because of this
subordination provision should not have been made to them, the Seller shall hold
such payment in trust for holders of Senior Debt and pay it over to them as
their interests may appear.
(i) This subordination provision defines the relative rights of
Seller and holders of Senior Debt. Nothing in this provision shall:
(1) impair, as between INTELLYSIS and Seller, the obligation
of INTELLYSIS, which is absolute and unconditional, to pay principal
of and interest on the Note in accordance with its terms;
(2) affect the relative rights of Seller and creditors of
INTELLYSIS other than holders of Senior Debt; or
(3) prevent Seller from exercising their available remedies
upon a Default or Event of Default, subject to the rights of holders
of Senior Debt to receive payments otherwise payable to Seller.
(j) If INTELLYSIS fails because of this subordination provision to
pay principal of or interest on the Note on the due date, the failure is still a
Default or Event of Default.
(k) No right of any holder of Senior Debt to enforce the
subordination of the indebtedness evidenced by the Note shall be impaired by any
act or failure to act by INTELLYSIS or by its failure to comply with this
subordination provision.
PAGE 3
REQUIRED PAYMENTS AND LOAN MATURITY:
-----------------------------------
Principal and accrued interest on this Note shall be due and payable on the
first to occur of:
(a) July 1, 2000; or,
(b) On the first business day of the first calendar month
commencing after the closing and funding of the first public
offering by INTELLYSIS of its equity securities pursuant to a
registration statement declared effective under the Securities
Act of 1933, as amended.
There shall be no right of prepayment with respect to this Note.
If INTELLYSIS fails to make any payment when due, then Seller shall have
the option, to be exercised in its sole and absolute discretion, to accelerate
the payments due hereunder and declare the unpaid principal amount and all
accrued and unpaid interest immediately due and payable.
LATE CHARGE:
-----------
If any payment required hereunder is not received by holder when due, a
late charge of five percent (5.0%) of each overdue required payment shall be
charged for the purpose of defraying the expenses incident to handling said
delinquent payment(s).
APPLICATION OF PAYMENTS:
-----------------------
Payments shall be applied first to interest and the remainder to the
principal balance. Payments, if less than the amount required, shall be applied
in the sole discretion of holder and acceptance of such payments shall not be a
waiver of the rights of the holder hereof to require scheduled payments.
COLLATERAL PLEDGE AGREEMENT:
---------------------------
The obligations of INTELLYSIS hereunder are secured by a pledge of certain
collateral pursuant to the terms of that Collateral Pledge Agreement, of even
date herewith, between INTELLYSIS and the Seller.
PARALLEL NOTES:
--------------
The parties hereto agree that simultaneously with the delivery of this
Note, Seller has executed and delivered to Xxxxxx X. Xxxxxx a promissory note,
in like principal amount, (the "Parallel Note"). It is the parties' intent that
amounts payable under this Note shall be utilized by
PAGE 4
Seller solely and exclusively to satisfy its obligations under the Parallel
Note. In furtherance thereof, Seller agrees that INTELLYSIS, at its own option,
shall be entitled to pay any amounts due hereunder directly to Xxxxxx X. Xxxxxx
and that such payment shall simultaneously, and fully, fulfill INTELLYSIS'
obligations hereunder and fulfill Seller's obligations under the Parallel Note.
DEFAULT OF TERMS AND CONDITIONS:
-------------------------------
It is agreed that time is of the essence of this Note and that in the event
of default of payment, the holder of this Note may, at its option, declare all
of said debt due and payable, and any failure to exercise said option shall not
constitute a waiver of the right to exercise the same at any other time, nor
shall such failure to exercise the option be construed as any form of acceptance
of any said default. Notice of the exercise of said option is hereby waived.
COSTS:
-----
Undersigned agrees to reimburse holder for all costs and expenses,
including, without limitation, all reasonable attorneys' fees incurred in the
enforcement or collection of this Note or any judgment obtained hereon.
LAWS:
----
This Note shall be governed by, and construed and enforced in accordance
with, the laws of the State of California applicable to contracts made and
performed in such state, without regard to the principles thereof regarding
conflicts of laws, and any applicable laws of the United States of America and
may not be amended except by a written document executed by the holder and
maker.
PARTIES IN INTEREST:
-------------------
This Note shall bind INTELLYSIS and its successor and assigns. This Note
shall not be assigned or transferred by Seller without the express prior written
consent of INTELLYSIS, except by will or, in default thereof, by operation of
law.
MARGINAL CAPTIONS:
-----------------
The marginal captions appearing on this Note are for reference purposes
only and shall not in any way limit or otherwise affect the meaning, content or
interpretation of this Note.
PAGE 5
INTELLYSIS GROUP, INC.
a California corporation
By:________________________________
Xxxxxx X. Xxxxxx
Its:_______________________________
PAGE 6
EXHIBIT B1 TO STOCK PURCHASE AGREEMENT
EMPLOYMENT AGREEMENT
--------------------
This EMPLOYMENT AGREEMENT (the "Agreement") is entered into by and between
PRO LINE VIDEO, a Texas corporation (the "Company"), INTELLYSIS GROUP, INC., a
Delaware corporation (the "Buyer") and XXXXX X. XXXXXXXXX, III (the "Employee")
and is effective as of March 17, 1999.
RECITALS
WHEREAS, the Employee is currently employed by the Company in the capacity
of President;
WHEREAS, concurrently with the execution of this Agreement, the Employee is
selling all of his interest in the Company to Buyer pursuant to the terms of a
Stock Purchase Agreement effective as of January 1, 1999, (the "Stock Purchase
Agreement");
WHEREAS, a condition to Buyer's acquisition of the Employee's ownership
interest in the Company is the Employee's entry into an employment agreement
with the Buyer;
WHEREAS, the Buyer desires to hire the Employee and avail itself of the
Employee's knowledge and expertise in the Company's business; and
WHEREAS, the Buyer and the Employee desire to set forth the terms and
conditions of the Employee's employment with the Buyer in writing.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and the mutual
promises and conditions contained below, the parties hereby agree as follows:
1. Title, Duties and Reporting Responsibility. During the Term of this
Agreement, the Employee shall be employed in such capacities and with such
title(s) as shall be designated by the Chairman of the Buyer's Board of
Directors (the "Chairman") or his designee. The Employee shall perform such
duties as may be assigned to the Employee from time-to-time by the President of
the Company or his designee. The Employee agrees that during his employment
with the Buyer
PAGE 1
he shall devote his full time, attention, efforts, energies, abilities and
interests to the business and affairs of the Buyer and the Company.
2. Base Salary. During the first twelve months of the Term of this
Agreement, the buyer shall pay the Employee an annual salary of $72,000 payable
in accordance with the Buyer's normal payroll practices. The Employee's annual
salary shall thereafter be reviewed and revised as determined by the Chairman
based on the Employee's performance.
3. Bonuses. Employee shall be entitled to a one-time bonus payable prior
to April 1, 2000, in an amount equal to $15,000 in the event, and only in the
event, that the Company's Austin, Texas operations shall, consistent with the
Company's reporting procedures with regard thereto, report a profit from
operations, before taxes, exceeding $170,000 for the twelve months ending
February 29, 2000.
4. Benefits. (a) So long as the Employee remains employed by the Buyer,
or the Company, the Buyer, or the Company, shall provide to the Employee those
benefits including vacation, holidays, etc. as are provided to other salaried
employees of the Buyer. The specific details of the coverage and applicability
of each of these benefits to the Employee shall be governed by the provisions of
the benefit plans themselves. In addition, the Company shall reimburse Employee
for, or shall pay on Employee's behalf at the Company's election, the cost of
family coverage under the Buyer's or Company's, as the case may be, medical
insurance; (b) During the Term of this Agreement, the Buyer shall make monthly
lease payments for Employee's lease of an automobile (the "Automobile") in an
amount not to exceed Four-Hundred and Sixty-Dollars ($460.00) and shall further
reimburse Employee for reasonable and customary maintenance and fuel costs
incurred in the operation of the Automobile in connection with the Company's
business.
5. Expenses. The Buyer shall reimburse the Employee for all reasonable
and necessary expenses incurred by the Employee in performing his duties and
responsibilities in connection with the services to be rendered by the Employee
to the Buyer hereunder provided that
PAGE 2
the Employee submit to the Buyer, when requested, an accounting and appropriate
verification of all such expenses.
6. Severability of Provisions. If any covenant set forth in this
Agreement is determined by any court to be unenforceable by reason of its
extending far too great a period of time or over too great a geographic area, or
by reason of its being too extensive in any other respect, such covenant shall
be interpreted to extend only for the longest period of time and over the
greatest geographic area, and to otherwise have the broadest application as
shall be enforceable. The invalidity or unenforceability of any particular
provision of this agreement shall not affect the other provisions hereof, which
shall continue in full force and effect. Without limiting the foregoing, the
convents contained herein shall be construed as separate covenants, covering
their respective subject matters, with respect to each of the separate cities,
counties and states of the United States, and each other country, and political
subdivision thereof, in which any of Seller or its successors now transacts any
business.
7. Term and Termination of Agreement.
(a) Subject to the provisions of this Section 7, this Agreement
shall be effective commencing on the Closing Date (as defined in the Stock
Purchase Agreement), and shall continue in effect only through the third
anniversary of the Closing (the "Term").
(b) Notwithstanding any other provisions hereof, the Company may
terminate this Agreement at any time following the first anniversary of the
Closing (i) upon 120 days notice, if notice is delivered prior to the second
anniversary of the Closing and (ii) upon 90 days notice if notice is delivered
after the second, and prior to third, anniversary of the Closing.
(c) Except as specifically set forth in this Agreement, the Company
may terminate this Agreement without any further obligation to the Employee on
the death or disability of the Employee. For the purposes of this section
"disability" shall mean the Employee's inability to perform his assigned duties
for the Buyer on a full-time basis for ninety (90) consecutive calendar days in
any Fiscal Year as a result of incapacity due to medically documented physical
or
PAGE 3
mental illness and which, in the opinion of a physician mutually agreed upon by
the Buyer and the Employee, makes it impossible for the Employee to perform his
duties and responsibilities under this Agreement.
(d) The Company may terminate this Agreement at any time without
any further obligation to the Employee for Cause as defined herein, except that
the Employee shall be entitled to his base salary through the date of
termination. For the purposes of this Agreement, "Cause" shall mean (i) the
Employee's conviction of a felony or a misdemeanor involving moral turpitude,
(ii) dishonest or illegal conduct by the Employee causing damage to the Buyer or
the Company, or (iii) the Employee's material breach or neglect of his duties
under this Agreement or (iv) the Employee's unsatisfactory performance as
reasonably determined by the Chairman; provided, however, that in the event of
-------- -------
(iii) or (iv) the Buyer shall first have given the Employee written notice of
the alleged breach or areas of neglect and a reasonable opportunity to cure and;
provided further that the Company shall not invoke the provisions of Section
7(d)(iv) prior to the first anniversary of this Agreement.
8. Unfair Competition.
(a) At all times during the Term of this Agreement, and thereafter,
the Employee shall hold in strictest confidence and not disclose to, or utilized
for the benefit of, directly or indirectly, any third person, firm or
corporation, without the express written prior authorization of the Chairman,
any trade secrets or any confidential business information, including but not
limited to, corporate planning, production, distribution or marketing processes;
manufacturing techniques; customer lists or customer leads; marketing
information or procedures; development or environmental work; work in process;
financial statements or notes, schedules or supporting financial data; or any
other secret or confidential matter relating to the products, sales or business
of the Buyer or the Company, including plans for expansion to new products,
areas and markets; new product development budgets and forecasts, together with
all written and graphic materials relating thereto.
PAGE 4
(b) If during the term of the Employee's employment, beginning with
the date hereof, the Employee conceives or makes any improvement, discovery or
invention relating to any article, machine, process, or composition of matter,
made, used, sold or under development by the Company, or pertaining to the
business of the Buyer or the Company, the Employee agrees to fully and promptly
disclose the same to the Chairman or his designee. Each such improvement,
discovery and invention shall be the exclusive property of the Buyer or the
Company, as applicable. The Employee further agrees that he will promptly make
full disclosure to the Buyer, and will hold in trust for the sole right and
benefit of the Buyer and the Company, any inventions, discoveries, developments,
improvements or trade secrets which the Employee solely or jointly conceives or
develops, or reduces to practice, or causes to be conceived, or developed, or
reduced to practice, during the period of the Employee's employment with the
Company beginning with the date hereof and for three (3) months thereafter,
which relate to or are connected with the Employee's employment, or the work,
processes, techniques, formulas, products, experiments, or developments or any
of the work or business of the Buyer or the Company. The Employee assigns to
the Buyer all of his right, title and interest in and to all such inventions,
discoveries, developments, improvements, and trade secrets and agrees that he
will, at the request of the Buyer, whether made by the Buyer during or after the
termination of the Employee's employment, and without expense to the Employee,
make, execute and deliver all applications, assignments or instruments, and
perform or cause to be performed, such other lawful acts as the Buyer may deem
necessary or desirable in making or prosecuting applications, domestic or
foreign, for patents, trademarks, or copyrights, or which may be procured with
respect to any of the foregoing.
(c) The parties agree that the provisions contained in this Section
8 shall not be construed as a waiver by the Buyer or the Company of their shop
rights and any other improvement, discovery or invention developed during the
working hours or times for which the Employee shall be compensated by the Buyer
or developed by the use of materials, facilities or information furnished by the
Buyer or the Company.
PAGE 5
(d) The Employee further agrees that within five (5) calendar days
after the termination of the Employee's employment, he will deliver to the Buyer
and will not keep in his possession, or deliver to anyone else, any and all
drawings, blueprints, notes, memoranda, specifications, financial statements,
customer lists, product surveys, data, documents, or other material contained or
disclosing any of the matters referred to herein together with all photocopies
of the above.
(e) The Employee shall not, either during the Term of this
Agreement or for a period of two (2) years following the termination of the
Employee's employment, solicit or attempt to solicit any employees, officers,
personnel or other representatives of the Buyer or the Company to work for,
render services or provide advice to any third person, firm or corporation.
(f) During the Term of this Agreement and for two (2) years
following any voluntary termination or any termination for Cause of Employee's
employment, or one (1) year following any involuntary termination for Cause,
other than a termination for cause, the Employee shall not own, manage, join,
operate or control or participate in the ownership, management, operation or
control of, or be connected as a director, officer, employee, partner,
consultant or otherwise with, or permit their names to be used by or in
connection with, any profit or non-profit business or organization which
produces, designs, conducts research on, provides, sells, distributes or markets
products, goods, equipment or services which, directly or indirectly compete
with the Company's and/or the Buyer's business in any metropolitan statistical
area (as defined by the Office of Management and Budget from time to time) in
the Company's South Central Region in which the Company or the Buyer (or their
respective parent and subsidiary corporations) conduct business or propose to
conduct business as of the termination of Employee's employment with Buyer and
the Company.
(g) During the Term of the Agreement and for two (2) years
thereafter, the Employee shall not call on or solicit or divert or take away
from the and/or the Buyer (including without limitation by divulging to any
competitor or potential competitor of the Company and/or
PAGE 6
the Buyer) any Person, firm or corporation or other entity who is, or during the
preceding two (2) years was, a customer of the Company and/or the Buyer or whose
identity is known to Employee as one whom the Company and/or the Buyer intends
to solicit.
(h) The Employee acknowledges that any breach of any of the
provisions of this Section 8 by him will cause irreparable damage to the Buyer
and the Company and their affiliates, for which the available remedies at law
will not be adequate. Accordingly, in the event of any such breach or threatened
breach of any of the provisions of this Section 8, in and addition to any other
remedy provided herein or by law or in equity, the Buyer and the Company shall
be entitled to appropriate injunctive relief, in any court of competent
jurisdiction, restraining the Employee or any of the Employee's associates or
affiliates from any threatened or actual violation of the provisions of this
Section 8. The Employee stipulates to the entry against the Employee of any such
temporary, preliminary or permanent injunction, and agrees not to resist the
Buyer's or the Company's application for such equitable relief, except on the
grounds that the acts or omissions alleged by the Company did not violate any of
the provisions of this Section 8. The Employee shall, in the event that any
injunctive relief or damages shall be granted to the Buyer or the Company, pay
all of the Buyer's and/or the Company's cost and expenses incurred in obtaining
such injunctive relief, including but not limited to, their reasonable
attorney's fees.
9. Arbitration.
(a) The parties agree that except with respect to any action for an
injunction pursuant to the provisions of Section 8 above, all other disputes
relating to, or arising out of this Agreement, including, but not limited to,
the termination of this Agreement, the Employee's employment with the Buyer, the
termination of the Employee's employment, or the payments due the Employee
hereunder shall be submitted to the American Arbitration Association ("AAA") for
arbitration before a single arbitrator in accordance with the rules of AAA then
in force and effect as the sole and exclusive remedy for resolving such
controversies. The parties agree that the decision of the arbitrator shall be
final and binding and that a judgment may be entered on such
PAGE 7
arbitration award in any court of competent jurisdiction. The parties agree that
no damages may be sought or awarded in any such arbitration other than those
specifically set forth in this Agreement. The parties agree that any such
arbitration shall take place in Austin, Texas.
a. THE PARTIES EACH ACKNOWLEDGE AND AGREE THAT BY SELECTING
ARBITRATION AS THE SOLE AND EXCLUSIVE REMEDY FOR RESOLVING ALL DISPUTES AMONG
THEM (OTHER THAN THOSE SET FORTH IN SECTION 7), THEY ARE WAIVING THEIR RIGHT TO
A JURY TRIAL TO WHICH THEY MAY OTHERWISE BE ENTITLED.
10. Attorneys' Fees and Costs.
If any party to this Agreement brings an arbitration to enforce or
determine his or its rights hereunder or brings any action under the terms of
Section 8 above, the prevailing party shall be entitled to recover his or its
costs and expenses, including reasonable attorneys' fees, incurred in connection
with such arbitration or action.
11. Miscellaneous.
a. The parties agree that the covenants and other terms contained
in this Agreement are reasonable in all respects.
b. The parties agree that each and every paragraph, sentence, Term
and provision of this Agreement shall be considered severable and that, in the
event a court or other tribunal finds any paragraph, sentence, Term or provision
to be invalid or unenforceable, the validity, enforceability, operation or
effect of the remaining paragraphs, sentences, terms or provisions shall not be
affected.
c. The failure of either party to insist in any one or more
instances upon performance of any of the provisions of the Agreement or to
pursue their rights hereunder, shall not be construed as a waiver of any such
provisions or the relinquishment of any rights.
d. This Agreement has been consummated in the State of Texas and
shall be construed and enforced in accordance with and governed by the laws of
that state.
PAGE 8
e. The parties agree that the language of this Agreement shall not
be construed for or against any particular party.
f. Any notices, requests or other communications required
hereunder shall be in writing and shall be personally delivered or, if mailed,
by first class mail
(1) if to the Buyer or the Company, to:
Intellysis Group, Inc.
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx
Chairman of the Board
and
(2) if to the Employee, to:
Xxxxx X. XxXxxxxxx, III
0000 XxXxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
g. This Agreement represents the sole and entire agreement among
the parties relating to the Employee's employment and supersedes all prior
promises, contracts and agreements of any kind, whether written or oral, express
or implied, as well as any negotiations and/or discussions between the parties
hereto. The Employee also agrees that no promises or commitments have been made
by the Buyer or the Company to the Employee regarding any other term or
condition of his employment, except as specifically provided herein and the
Employee understands that no representative of the Buyer or the Company other
than the Chairman is authorized to enter into any agreement or make any
commitment with Employee which is in any
PAGE 9
way inconsistent with the terms of this Agreement. Any amendment to this
Agreement must be in writing and signed by duly authorized representatives of
each of the parties hereto and must expressly state that it is the intention of
each of the parties hereto to amend this Agreement.
THE "EMPLOYEE"
By:____________________________
XXXXX X. XXXXXXXXX, III
THE "COMPANY"
By:____________________________
Name: Xxxxxx Xxxxxx
Its: President
THE "BUYER"
By:____________________________
Name: Xxxxxx X. Xxxxxx
Its: Chairman of the Board
PAGE 10
EXHIBIT B2 TO STOCK PURCHASE AGREEMENT
EMPLOYMENT AGREEMENT
--------------------
This EMPLOYMENT AGREEMENT (the "Agreement") is entered into by and
between PRO LINE VIDEO, a Texas corporation (the "Company"), INTELLYSIS GROUP,
INC., a Delaware corporation (the "Buyer") and XXXX X. XXXXXXXX (the "Employee")
and is effective as of March 17, 1999.
RECITALS
WHEREAS, the Employee is currently employed by the Company in the
capacity of President;
WHEREAS, concurrently with the execution of this Agreement, the
Employee is selling all of his interest in the Company to Buyer pursuant to the
terms of a Stock Purchase Agreement effective as of January 1, 1999, (the
"Stock Purchase Agreement");
WHEREAS, a condition to Buyer's acquisition of the Employee's
ownership interest in the Company is the Employee's entry into an employment
agreement with the Buyer;
WHEREAS, the Buyer desires to hire the Employee and avail itself of
the Employee's knowledge and expertise in the Company's business; and
WHEREAS, the Buyer and the Employee desire to set forth the terms and
conditions of the Employee's employment with the Buyer in writing.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and the mutual
promises and conditions contained below, the parties hereby agree as follows:
1. Title, Duties and Reporting Responsibility. During the term of this
Agreement, the Employee shall be employed in such capacities and with such
title(s) as shall be designated by the Chairman of the Buyer's Board of
Directors (the "Chairman") or his designee. The Employee shall perform such
duties as may be assigned to the Employee from time-to-time by the President of
the Company or his designee. The Employee agrees that during his employment
with the Buyer
PAGE 1
he shall devote his full time, attention, efforts, energies, abilities and
interests to the business and affairs of the Buyer and the Company.
2. Base Salary. During the first twelve months of the term of this
Agreement, the Buyer shall pay the Employee an annual salary of $72,000 payable
in accordance with the Buyer's normal payroll practices. The Employee's annual
salary shall thereafter be reviewed and revised as determined by the Chairman
based on the Employee's performance.
3. Bonuses. Employee shall be entitled to a one-time bonus payable prior
to April 1, 2000, in an amount equal to $15,000 in the event, and only in the
event, that the Company's San Antonio, Texas operations shall, consistent with
the Company's reporting procedures with regard thereto, report a profit from
operations, before taxes, exceeding $170,000 for the twelve months ending
February 29, 2000.
4. Benefits. (a) So long as the Employee remains employed by the Buyer
or the Company, the Buyer or the Company, shall provide to the Employee those
benefits including medical insurance, vacation, holidays, etc. as are provided
to other salaried employees of the Buyer. The specific details of the coverage
and applicability of each of these benefits to the Employee shall be governed by
the provisions of the benefit plans themselves; and, (b) During the Term of this
Agreement, the Buyer shall make monthly lease payments for Employee's lease of
an automobile (the "Automobile") in an amount not to exceed Four-Hundred and
Sixty-Dollars ($460.00) and shall further reimburse Employee for reasonable and
customary maintenance and fuel costs incurred in the operation of the Automobile
in connection with the Company's business.
5. Expenses. The Buyer shall reimburse the Employee for all reasonable
and necessary expenses incurred by the Employee in performing his duties and
responsibilities in connection with the services to be rendered by the Employee
to the Buyer hereunder provided that the Employee submit to the Buyer, when
requested, an accounting and appropriate verification of all such expenses.
PAGE 2
6. Severability of Provisions. If any covenant set forth in this
Agreement is determined by any court to be unenforceable by reason of its
extending far too great a period of time or over too great a geographic area, or
by reason of its being too extensive in any other respect, such covenant shall
be interpreted to extend only for the longest period of time and over the
greatest geographic area, and to otherwise have the broadest application as
shall be enforceable. The invalidity or unenforceability of any particular
provision of this agreement shall not affect the other provisions hereof, which
shall continue in full force and effect. Without limiting the foregoing, the
convents contained herein shall be construed as separate covenants, covering
their respective subject matters, with respect to each of the separate cities,
counties and states of the United States, and each other country, and political
subdivision thereof, in which any of Seller or its successors now transacts any
business.
7. Term and Termination of Agreement.
(a) Subject to the provisions of this Section 7, this Agreement
shall be effective commencing on the Closing Date (as defined in the Stock
Purchase Agreement), and shall continue in effect only through the third
anniversary of the Closing (the "Term").
(b) Notwithstanding any other provisions hereof, the Company may
terminate this Agreement at any time following the first anniversary of the
Closing (i) upon 120 days notice, if notice is delivered prior to the second
anniversary of the Closing and (ii) upon 90 days notice if notice is delivered
after the second, and prior to third, anniversary of the Closing.
(c) Except as specifically set forth in this Agreement, the Company
may terminate this Agreement without any further obligation to the Employee on
the death or disability of the Employee. For the purposes of this section
"disability" shall mean the Employee's inability to perform his assigned duties
for the Buyer on a full-time basis for ninety (90) consecutive calendar days in
any Fiscal Year as a result of incapacity due to medically documented physical
or mental illness and which, in the opinion of a physician mutually agreed upon
by the Buyer and the
PAGE 3
Employee, makes it impossible for the Employee to perform his duties and
responsibilities under this Agreement.
(d) The Company may terminate this Agreement at any time without
any further obligation to the Employee for Cause as defined herein, except that
the Employee shall be entitled to his base salary through the date of
termination. For the purposes of this Agreement, "Cause" shall mean (i) the
Employee's conviction of a felony or a misdemeanor involving moral turpitude,
(ii) dishonest or illegal conduct by the Employee causing damage to the Buyer or
the Company, or (iii) the Employee's material breach or neglect of his duties
under this Agreement or (iv) the Employee's unsatisfactory performance as
reasonably determined by the Chairman; provided, however, that in the event of
-------- -------
(iii) or (iv) the Buyer shall first have given the Employee written notice of
the alleged breach or areas of neglect and a reasonable opportunity to cure and;
provided further that the Company shall not invoke the provisions of Section
7(d)(iv) prior to the first anniversary of this Agreement.
8. Unfair Competition.
(a) At all times during the Term of this Agreement, and thereafter,
the Employee shall hold in strictest confidence and not disclose to, or utilized
for the benefit of, directly or indirectly, any third person, firm or
corporation, without the express written prior authorization of the Chairman,
any trade secrets or any confidential business information, including but not
limited to, corporate planning, production, distribution or marketing processes;
manufacturing techniques; customer lists or customer leads; marketing
information or procedures; development or environmental work; work in process;
financial statements or notes, schedules or supporting financial data; or any
other secret or confidential matter relating to the products, sales or business
of the Buyer or the Company, including plans for expansion to new products,
areas and markets; new product development budgets and forecasts, together with
all written and graphic materials relating thereto.
PAGE 4
(b) If during the term of the Employee's employment, beginning with
the date hereof, the Employee conceives or makes any improvement, discovery or
invention relating to any article, machine, process, or composition of matter,
made, used, sold or under development by the Company, or pertaining to the
business of the Buyer or the Company, the Employee agrees to fully and promptly
disclose the same to the Chairman or his designee. Each such improvement,
discovery and invention shall be the exclusive property of the Buyer or the
Company, as applicable. The Employee further agrees that he will promptly make
full disclosure to the Buyer, and will hold in trust for the sole right and
benefit of the Buyer and the Company, any inventions, discoveries, developments,
improvements or trade secrets which the Employee solely or jointly conceives or
develops, or reduces to practice, or causes to be conceived, or developed, or
reduced to practice, during the period of the Employee's employment with the
Company beginning with the date hereof and for three (3) months thereafter,
which relate to or are connected with the Employee's employment, or the work,
processes, techniques, formulas, products, experiments, or developments or any
of the work or business of the Buyer or the Company. The Employee assigns to
the Buyer all of his right, title and interest in and to all such inventions,
discoveries, developments, improvements, and trade secrets and agrees that he
will, at the request of the Buyer, whether made by the Buyer during or after the
termination of the Employee's employment, and without expense to the Employee,
make, execute and deliver all applications, assignments or instruments, and
perform or cause to be performed, such other lawful acts as the Buyer may deem
necessary or desirable in making or prosecuting applications, domestic or
foreign, for patents, trademarks, or copyrights, or which may be procured with
respect to any of the foregoing.
(c) The parties agree that the provisions contained in this Section
8 shall not be construed as a waiver by the Buyer or the Company of their shop
rights and any other improvement, discovery or invention developed during the
working hours or times for which the Employee shall be compensated by the Buyer
or developed by the use of materials, facilities or information furnished by the
Buyer or the Company.
PAGE 5
(d) The Employee further agrees that within five (5) calendar days
after the termination of the Employee's employment, he will deliver to the Buyer
and will not keep in his possession, or deliver to anyone else, any and all
drawings, blueprints, notes, memoranda, specifications, financial statements,
customer lists, product surveys, data, documents, or other material contained or
disclosing any of the matters referred to herein together with all photocopies
of the above.
(e) The Employee shall not, either during the Term of this
Agreement or for a period of two (2) years following the termination of the
Employee's employment, solicit or attempt to solicit any employees, officers,
personnel or other representatives of the Buyer or the Company to work for,
render services or provide advice to any third person, firm or corporation.
(f) During the Term of this Agreement and for two (2) years
following any voluntary termination or any termination for Cause of Employee's
employment or one (1) year following any involuntary termination, other than a
termination for Cause, the Employee shall not own, manage, join, operate or
control or participate in the ownership, management, operation or control of, or
be connected as a director, officer, employee, partner, consultant or otherwise
with, or permit their names to be used by or in connection with, any profit or
non-profit business or organization which produces, designs, conducts research
on, provides, sells, distributes or markets products, goods, equipment or
services which, directly or indirectly compete with the Company's and/or the
Buyer's business in any metropolitan statistical area (as defined by the Office
of Management and Budget from time to time) in the Company's South Central
Region in which the Company or the Buyer (or their respective parent and
subsidiary corporations) conduct business or propose to conduct business as of
the termination of Employee's employment with Buyer and the Company.
(g) During the Term of the Agreement and for two (2) years
thereafter, the Employee shall not call on or solicit or divert or take away
from the and/or the Buyer (including without limitation by divulging to any
competitor or potential competitor of the Company and/or
PAGE 6
the Buyer) any Person, firm or corporation or other entity who is, or during the
preceding two (2) years was, a customer of the Company and/or the Buyer or whose
identity is known to Employee as one whom the Company and/or the Buyer intends
to solicit.
(h) The Employee acknowledges that any breach of any of the
provisions of this Section 8 by him will cause irreparable damage to the Buyer
and the Company and their affiliates, for which the available remedies at law
will not be adequate. Accordingly, in the event of any such breach or threatened
breach of any of the provisions of this Section 8, in and addition to any other
remedy provided herein or by law or in equity, the Buyer and the Company shall
be entitled to appropriate injunctive relief, in any court of competent
jurisdiction, restraining the Employee or any of the Employee's associates or
affiliates from any threatened or actual violation of the provisions of this
Section 8. The Employee stipulates to the entry against the Employee of any such
temporary, preliminary or permanent injunction, and agrees not to resist the
Buyer's or the Company's application for such equitable relief, except on the
grounds that the acts or omissions alleged by the Company did not violate any of
the provisions of this Section 8. The Employee shall, in the event that any
injunctive relief or damages shall be granted to the Buyer or the Company, pay
all of the Buyer's and/or the Company's cost and expenses incurred in obtaining
such injunctive relief, including but not limited to, their reasonable
attorney's fees.
9. Arbitration.
(a) The parties agree that except with respect to any action for an
injunction pursuant to the provisions of Section 8 above, all other disputes
relating to, or arising out of this Agreement, including, but not limited to,
the termination of this Agreement, the Employee's employment with the Buyer, the
termination of the Employee's employment, or the payments due the Employee
hereunder shall be submitted to the American Arbitration Association ("AAA") for
arbitration before a single arbitrator in accordance with the rules of AAA then
in force and effect as the sole and exclusive remedy for resolving such
controversies. The parties agree that the decision of the arbitrator shall be
final and binding and that a judgment may be entered on such
PAGE 7
arbitration award in any court of competent jurisdiction. The parties agree that
no damages may be sought or awarded in any such arbitration other than those
specifically set forth in this Agreement. The parties agree that any such
arbitration shall take place in Austin, Texas.
a. THE PARTIES EACH ACKNOWLEDGE AND AGREE THAT BY SELECTING
ARBITRATION AS THE SOLE AND EXCLUSIVE REMEDY FOR RESOLVING ALL DISPUTES AMONG
THEM (OTHER THAN THOSE SET FORTH IN SECTION 7), THEY ARE WAIVING THEIR RIGHT TO
A JURY TRIAL TO WHICH THEY MAY OTHERWISE BE ENTITLED.
10. Attorneys' Fees and Costs.
If any party to this Agreement brings an arbitration to enforce or
determine his or its rights hereunder or brings any action under the terms of
Section 8 above, the prevailing party shall be entitled to recover his or its
costs and expenses, including reasonable attorneys' fees, incurred in connection
with such arbitration or action.
11. Miscellaneous.
a. The parties agree that the covenants and other terms contained
in this Agreement are reasonable in all respects.
b. The parties agree that each and every paragraph, sentence, Term
and provision of this Agreement shall be considered severable and that, in the
event a court or other tribunal finds any paragraph, sentence, Term or provision
to be invalid or unenforceable, the validity, enforceability, operation or
effect of the remaining paragraphs, sentences, terms or provisions shall not be
affected.
c. The failure of either party to insist in any one or more
instances upon performance of any of the provisions of the Agreement or to
pursue their rights hereunder, shall not be construed as a waiver of any such
provisions or the relinquishment of any rights.
d. This Agreement has been consummated in the State of Texas and
shall be construed and enforced in accordance with and governed by the laws of
that state.
PAGE 8
e. The parties agree that the language of this Agreement shall not
be construed for or against any particular party.
f. Any notices, requests or other communications required
hereunder shall be in writing and shall be personally delivered or, if mailed,
by first class mail
(1) if to the Buyer or the Company, to:
Intellysis Group, Inc.
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx
Chairman of the Board
and
(2) if to the Employee, to:
Xxxx X. Xxxxxxxx
0000 XxXxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
g. This Agreement represents the sole and entire agreement among
the parties relating to the Employee's employment and supersedes all prior
promises, contracts and agreements of any kind, whether written or oral, express
or implied, as well as any negotiations and/or discussions between the parties
hereto. The Employee also agrees that no promises or commitments have been made
by the Buyer or the Company to the Employee regarding any other term or
condition of his employment, except as specifically provided herein and the
Employee understands that no representative of the Buyer or the Company other
than the Chairman is authorized to enter into any agreement or make any
commitment with Employee which is in any
PAGE 9
way inconsistent with the terms of this Agreement. Any amendment to this
Agreement must be in writing and signed by duly authorized representatives of
each of the parties hereto and must expressly state that it is the intention of
each of the parties hereto to amend this Agreement.
THE "EMPLOYEE"
By: _________________________
XXXX X. XXXXXXXX
THE "COMPANY"
By: _________________________
Name:
Its:
THE "BUYER"
By: _________________________
Name:
Its:
PAGE 10
EXHIBIT B3 TO STOCK PURCHASE AGREEMENT
EMPLOYMENT AGREEMENT
--------------------
This EMPLOYMENT AGREEMENT (the "Agreement") is entered into by and
between PRO LINE VIDEO, a Texas corporation (the "Company"), INTELLYSIS GROUP,
INC., a Delaware corporation (the "Buyer") and XXXXXX XXXXXX (the "Employee")
and is effective as of March 17, 1999.
RECITALS
WHEREAS, the Employee is currently employed by the Company in the
capacity of President;
WHEREAS, concurrently with the execution of this Agreement, the
Employee is selling all of his interest in the Company to Buyer pursuant to the
terms of a Stock Purchase Agreement effective as of January 1, 1999, (the
"Stock Purchase Agreement");
WHEREAS, a condition to Buyer's acquisition of the Employee's
ownership interest in the Company is the Employee's entry into an employment
agreement with the Buyer;
WHEREAS, the Buyer desires to hire the Employee and avail itself of
the Employee's knowledge and expertise in the Company's business; and
WHEREAS, the Buyer and the Employee desire to set forth the terms and
conditions of the Employee's employment with the Buyer in writing.
AGREEMENT
NOW, THEREFORE, in consideration of the above recitals and the mutual
promises and conditions contained below, the parties hereby agree as follows:
1. Title, Duties and Reporting Responsibility. During the term of this
Agreement, the Employee shall be employed in such capacities and with such
title(s) as shall be designated by the Chairman of the Buyer's Board of
Directors (the "Chairman") or his designee. The Employee shall perform such
duties as may be assigned to the Employee from time-to-time by the President of
the Company or his designee. The Employee agrees that during his employment
with the Buyer
PAGE 1
he shall devote his full time, attention, efforts, energies, abilities and
interests to the business and affairs of the Buyer and the Company.
2. Base Salary. During the first twelve months of the Term of this
Agreement, the buyer shall pay the Employee an annual salary of $72,000 payable
in accordance with the Buyer's normal payroll practices. The Employee's annual
salary shall thereafter be reviewed and revised as determined by the Chairman
based on the Employee's performance.
3. Bonuses. Employee shall be entitled to a one-time bonus payable on or
before April 1, 2000, in an amount equal to the greater of (i) .1% of the
Company's gross revenues with respect to its Austin, Houston and San Antonio,
Texas operations when determined in accordance with Company's reporting
procedures with regard thereto for the twelve months ending February 29, 2000,
if such revenues exceed $10,000,000 and do not exceed $13,200,000 or (ii) .12%
of the Company's gross revenues with respect to its Austin, Houston and San
Antonio, Texas operations, if such revenues exceed $13,200,000; provided,
however, that no bonus shall be paid to Employee with respect to any revenues of
the Company exceeding $16,000,000.
4. Benefits. (a) So long as the Employee remains employed by the Buyer
or the Company, the Buyer or the Company, shall provide to the Employee those
benefits including medical insurance, vacation, holidays, etc. as are provided
to other salaried employees of the Buyer. The specific details of the coverage
and applicability of each of these benefits to the Employee shall be governed by
the provisions of the benefit plans themselves; and, (b) During the Term of this
Agreement, the Buyer shall make monthly lease payments for Employee's lease of
an automobile (the "Automobile") in an amount not to exceed Four-Hundred and
Sixty-Dollars ($460.00) and shall further reimburse Employee for reasonable and
customary maintenance and fuel costs incurred in the operation of the Automobile
in connection with the Company's business.
5. Expenses. The Buyer shall reimburse the Employee for all reasonable
and necessary expenses incurred by the Employee in performing his duties and
responsibilities in connection with the services to be rendered by the Employee
to the Buyer hereunder provided that
PAGE 2
the Employee submit to the Buyer, when requested, an accounting and appropriate
verification of all such expenses.
6. Severability of Provisions. If any covenant set forth in this
Agreement is determined by any court to be unenforceable by reason of its
extending far too great a period of time or over too great a geographic area, or
by reason of its being too extensive in any other respect, such covenant shall
be interpreted to extend only for the longest period of time and over the
greatest geographic area, and to otherwise have the broadest application as
shall be enforceable. The invalidity or unenforceability of any particular
provision of this agreement shall not affect the other provisions hereof, which
shall continue in full force and effect. Without limiting the foregoing, the
convents contained herein shall be construed as separate covenants, covering
their respective subject matters, with respect to each of the separate cities,
counties and states of the United States, and each other country, and political
subdivision thereof, in which any of Seller or its successors now transacts any
business.
7. Term and Termination of Agreement.
(a) Subject to the provisions of this Section 7, this Agreement
shall be effective commencing on the Closing Date (as defined in the Stock
Purchase Agreement), and shall continue in effect only through the third
anniversary of the Closing (the "Term").
(b) Notwithstanding any other provisions hereof, the Company may
terminate this Agreement at any time following the first anniversary of the
Closing (i) upon 120 days notice, if notice is delivered prior to the second
anniversary of the Closing and (ii) upon 90 days notice if notice is delivered
after the second, and prior to third, anniversary of the Closing.
(c) Except as specifically set forth in this Agreement, the Company
may terminate this Agreement without any further obligation to the Employee on
the death or disability of the Employee. For the purposes of this section
"disability" shall mean the Employee's inability to perform his assigned duties
for the Buyer on a full-time basis for ninety (90) consecutive calendar days in
any Fiscal Year as a result of incapacity due to medically documented physical
or
PAGE 3
mental illness and which, in the opinion of a physician mutually agreed upon by
the Buyer and the Employee, makes it impossible for the Employee to perform his
duties and responsibilities under this Agreement.
(d) The Company may terminate this Agreement at any time without
any further obligation to the Employee for Cause as defined herein, except that
the Employee shall be entitled to his base salary through the date of
termination. For the purposes of this Agreement, "Cause" shall mean (i) the
Employee's conviction of a felony or a misdemeanor involving moral turpitude,
(ii) dishonest or illegal conduct by the Employee causing damage to the Buyer or
the Company, or (iii) the Employee's material breach or neglect of his duties
under this Agreement or (iv) the Employee's unsatisfactory performance as
reasonably determined by the Chairman; provided, however, that in the event of
-------- -------
(iii) or (iv) the Buyer shall first have given the Employee written notice of
the alleged breach or areas of neglect and a reasonable opportunity to cure and;
provided further that the Company shall not invoke the provisions of Section
7(d)(iv) prior to the first anniversary of this Agreement.
8. Unfair Competition.
(a) At all times during the Term of this Agreement, and thereafter,
the Employee shall hold in strictest confidence and not disclose to, or utilized
for the benefit of, directly or indirectly, any third person, firm or
corporation, without the express written prior authorization of the Chairman,
any trade secrets or any confidential business information, including but not
limited to, corporate planning, production, distribution or marketing processes;
manufacturing techniques; customer lists or customer leads; marketing
information or procedures; development or environmental work; work in process;
financial statements or notes, schedules or supporting financial data; or any
other secret or confidential matter relating to the products, sales or business
of the Buyer or the Company, including plans for expansion to new products,
areas and markets; new product development budgets and forecasts, together with
all written and graphic materials relating thereto.
PAGE 4
(b) If during the term of the Employee's employment, beginning with
the date hereof, the Employee conceives or makes any improvement, discovery or
invention relating to any article, machine, process, or composition of matter,
made, used, sold or under development by the Company, or pertaining to the
business of the Buyer or the Company, the Employee agrees to fully and promptly
disclose the same to the Chairman or his designee. Each such improvement,
discovery and invention shall be the exclusive property of the Buyer or the
Company, as applicable. The Employee further agrees that he will promptly make
full disclosure to the Buyer, and will hold in trust for the sole right and
benefit of the Buyer and the Company, any inventions, discoveries, developments,
improvements or trade secrets which the Employee solely or jointly conceives or
develops, or reduces to practice, or causes to be conceived, or developed, or
reduced to practice, during the period of the Employee's employment with the
Company beginning with the date hereof and for three (3) months thereafter,
which relate to or are connected with the Employee's employment, or the work,
processes, techniques, formulas, products, experiments, or developments or any
of the work or business of the Buyer or the Company. The Employee assigns to
the Buyer all of his right, title and interest in and to all such inventions,
discoveries, developments, improvements, and trade secrets and agrees that he
will, at the request of the Buyer, whether made by the Buyer during or after the
termination of the Employee's employment, and without expense to the Employee,
make, execute and deliver all applications, assignments or instruments, and
perform or cause to be performed, such other lawful acts as the Buyer may deem
necessary or desirable in making or prosecuting applications, domestic or
foreign, for patents, trademarks, or copyrights, or which may be procured with
respect to any of the foregoing.
(c) The parties agree that the provisions contained in this Section
8 shall not be construed as a waiver by the Buyer or the Company of their shop
rights and any other improvement, discovery or invention developed during the
working hours or times for which the Employee shall be compensated by the Buyer
or developed by the use of materials, facilities or information furnished by the
Buyer or the Company.
PAGE 5
(d) The Employee further agrees that within five (5) calendar days
after the termination of the Employee's employment, he will deliver to the Buyer
and will not keep in his possession, or deliver to anyone else, any and all
drawings, blueprints, notes, memoranda, specifications, financial statements,
customer lists, product surveys, data, documents, or other material contained or
disclosing any of the matters referred to herein together with all photocopies
of the above.
(e) The Employee shall not, either during the Term of this
Agreement or for a period of two (2) years following the termination of the
Employee's employment, solicit or attempt to solicit any employees, officers,
personnel or other representatives of the Buyer or the Company to work for,
render services or provide advice to any third person, firm or corporation.
(f) During the Term of this Agreement and for two (2) years
following any voluntary termination or any termination for Cause of Employee's
employment or one (1) year following any involuntary termination, other than a
termination for Cause, the Employee shall not own, manage, join, operate or
control or participate in the ownership, management, operation or control of, or
be connected as a director, officer, employee, partner, consultant or otherwise
with, or permit their names to be used by or in connection with, any profit or
non-profit business or organization which produces, designs, conducts research
on, provides, sells, distributes or markets products, goods, equipment or
services which, directly or indirectly compete with the Company's and/or the
Buyer's business in any metropolitan statistical area (as defined by the Office
of Management and Budget from time to time) in the Company's South Central
Region in which the Company or the Buyer (or their respective parent and
subsidiary corporations) conduct business or propose to conduct business as of
the termination of Employee's employment with Buyer and the Company.
(g) During the Term of the Agreement and for two (2) years
thereafter, the Employee shall not call on or solicit or divert or take away
from the and/or the Buyer (including without limitation by divulging to any
competitor or potential competitor of the Company and/or
PAGE 6
the Buyer) any Person, firm or corporation or other entity who is, or during the
preceding two (2) years was, a customer of the Company and/or the Buyer or whose
identity is known to the Employee as one whom the Company and/or the Buyer
intends to solicit.
(h) The Employee acknowledges that any breach of any of the
provisions of this Section 8 by him will cause irreparable damage to the Buyer
and the Company and their affiliates, for which the available remedies at law
will not be adequate. Accordingly, in the event of any such breach or threatened
breach of any of the provisions of this Section 8, in and addition to any other
remedy provided herein or by law or in equity, the Buyer and the Company shall
be entitled to appropriate injunctive relief, in any court of competent
jurisdiction, restraining the Employee or any of the Employee's associates or
affiliates from any threatened or actual violation of the provisions of this
Section 8. The Employee stipulates to the entry against the Employee of any such
temporary, preliminary or permanent injunction, and agrees not to resist the
Buyer's or the Company's application for such equitable relief, except on the
grounds that the acts or omissions alleged by the Company did not violate any of
the provisions of this Section 8. The Employee shall, in the event that any
injunctive relief or damages shall be granted to the Buyer or the Company, pay
all of the Buyer's and/or the Company's cost and expenses incurred in obtaining
such injunctive relief, including but not limited to, their reasonable
attorney's fees.
9. Arbitration.
(a) The parties agree that except with respect to any action for an
injunction pursuant to the provisions of Section 8 above, all other disputes
relating to, or arising out of this Agreement, including, but not limited to,
the termination of this Agreement, the Employee's employment with the Buyer, the
termination of the Employee's employment, or the payments due the Employee
hereunder shall be submitted to the American Arbitration Association ("AAA") for
arbitration before a single arbitrator in accordance with the rules of AAA then
in force and effect as the sole and exclusive remedy for resolving such
controversies. The parties agree that the decision of the arbitrator shall be
final and binding and that a judgment may be entered on such
PAGE 7
arbitration award in any court of competent jurisdiction. The parties agree that
no damages may be sought or awarded in any such arbitration other than those
specifically set forth in this Agreement. The parties agree that any such
arbitration shall take place in Austin, Texas.
a. THE PARTIES EACH ACKNOWLEDGE AND AGREE THAT BY SELECTING
ARBITRATION AS THE SOLE AND EXCLUSIVE REMEDY FOR RESOLVING ALL DISPUTES AMONG
THEM (OTHER THAN THOSE SET FORTH IN SECTION 7), THEY ARE WAIVING THEIR RIGHT TO
A JURY TRIAL TO WHICH THEY MAY OTHERWISE BE ENTITLED.
10. Attorneys' Fees and Costs.
If any party to this Agreement brings an arbitration to enforce or
determine his or its rights hereunder or brings any action under the terms of
Section 8 above, the prevailing party shall be entitled to recover his or its
costs and expenses, including reasonable attorneys' fees, incurred in connection
with such arbitration or action.
11. Miscellaneous.
a. The parties agree that the covenants and other terms contained
in this Agreement are reasonable in all respects.
b. The parties agree that each and every paragraph, sentence, Term
and provision of this Agreement shall be considered severable and that, in the
event a court or other tribunal finds any paragraph, sentence, Term or provision
to be invalid or unenforceable, the validity, enforceability, operation or
effect of the remaining paragraphs, sentences, terms or provisions shall not be
affected.
c. The failure of either party to insist in any one or more
instances upon performance of any of the provisions of the Agreement or to
pursue their rights hereunder, shall not be construed as a waiver of any such
provisions or the relinquishment of any rights.
d. This Agreement has been consummated in the State of Texas and
shall be construed and enforced in accordance with and governed by the laws of
that state.
PAGE 8
e. The parties agree that the language of this Agreement shall not
be construed for or against any particular party.
f. Any notices, requests or other communications required
hereunder shall be in writing and shall be personally delivered or, if mailed,
by first class mail
(1) if to the Buyer or the Company, to:
Intellysis Group, Inc.
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx
Chairman of the Board
and
(2) if to the Employee, to:
Xxxxxx Xxxxxx
0000 XxXxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
g. This Agreement represents the sole and entire agreement among
the parties relating to the Employee's employment and supersedes all prior
promises, contracts and agreements of any kind, whether written or oral, express
or implied, as well as any negotiations and/or discussions between the parties
hereto. The Employee also agrees that no promises or commitments have been made
by the Buyer or the Company to the Employee regarding any other term or
condition of his employment, except as specifically provided herein and the
Employee understands that no representative of the Buyer or the Company other
than the Chairman is authorized to enter into any agreement or make any
commitment with Employee which is in any
PAGE 9
way inconsistent with the terms of this Agreement. Any amendment to this
Agreement must be in writing and signed by duly authorized representatives of
each of the parties hereto and must expressly state that it is the intention of
each of the parties hereto to amend this Agreement.
THE "EMPLOYEE"
By: _________________________
XXXXXX XXXXXX
THE "COMPANY"
By: _________________________
Name:
Its:
THE "BUYER"
By: _________________________
Name:
Its:
PAGE 10
EXHIBIT C TO STOCK PURCHASE AGREEMENT
ZZZ
FORM OF COLLATERAL PLEDGE AGREEMENT
-----------------------------------
This Collateral Pledge Agreement ("Agreement") is dated and effective March
17, 1999, by and between the INTELLISYS GROUP, INC., a California corporation,
whose address is 000 Xxxx Xxxx Xxxxxx, Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
("Pledgor"), and ("Secured Party"), whose address is 0000
XxXxxx Xxxxx, Xxxxx 000, Xxxxxx, Xxxxx 00000, and is as follows:
1. Pledgor has concurrently with the execution of this Agreement,
executed and delivered the following described promissory notes; a) that one
certain promissory note from Pledgor to Secured Party in the original principal
amount of $ , payable as provided therein, and finally maturing on May
1, 1999, and b) that one certain promissory note from Pledgor to Secured Party
in the original principal amount of $ , payable as provided therein,
and finally maturing on July 1, 2000 (herein after the "Notes"). Secured Party
has required, as a condition of the advance of funds under the Notes, and
Pledgor has agreed, that payment of the Notes be secured by the Collateral
herein described.
2. As security for payment of the Notes, Pledgor hereby pledges to
Secured Party all of Pledgor's present and future right, title and interest in,
to and under the following properties, in each case, whether now existing or
hereafter existing, whether now owned or hereafter acquired, and wherever
located (collectively the "Collateral"):
(a) ( ) shares of the common stock of
Pro Line Video, Inc., a Texas corporation, as certificated in
share certificates , dated November 15, 1995,
and June 26, 1998, respectively.
(b) All proceeds of, and revenues or other rights derived the share
certificates or other rights herein pledged.
3. Pledgor warrants and represents that it has not encumbered any of the
Collateral.
4. Until default, Pledgor may exercise all ownership rights associated
with the Collateral in any lawful manner not inconsistent with this Agreement,
but possession of the share certificates shall remain in the Secured Party at
all times.
5. At any time, and from time to time, the Secured Party may, at its
option, file in any jurisdiction, and at the expense of Pledgor, one or more
financing, continuation or similar statements, and amendments thereto, covering
all or any part of the Collateral. Pledgor shall join with Secured Party at its
request in executing any such statements or amendments and do such further acts
and things and execute and deliver all writings, contracts and security
agreements which in the Secured Party's opinion are necessary or appropriate to
preserve, validate, perfect or otherwise protect the lien and security interest
granted herein.
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6. This Agreement is a continuing agreement and shall remain in full
force and effect until the Notes have been satisfied in full.
7. Upon default, the Secured Party shall have all the rights and remedies
available to the secured party under the Texas Uniform Commercial Code, as in
effect at the time, and at the request of the Secured Party, at any time, and
from time to time, Pledgor will promptly:
(a) Deliver, transfer, assign or endorse to Secured Party, upon
receipt of the Collateral, and in the exact form as received,
all Collateral or proceeds of Collateral;
(b) Notify account debtors, obligors or other persons making
payments consisting of a part of the Collateral to make payment
directly to the Secured Party or into accounts designated by
the Secured Party;
(c) Deliver to Secured Party, as specified by Secured Party, all
Collateral in which possession by the Secured Party may perfect
a security interest, irrespective of whether Secured Party has
previously perfected its security interest otherwise;
(d) Pay or reimburse Secured Party for its expenses, including
attorney's fees and disbursements, incurred pursuant to this
Agreement or in connection with the administration, enforcement
or exercise of its rights under this Agreement.
8. The taking of the Collateral shall not impair, restrict or modify the
rights of Secured Party under the Notes to accelerate payment thereof upon the
occurrence of default.
9. Pledgor shall be in default under this Agreement upon the happening of
any of the following events or conditions:
(a) Default by Pledgor in the payment, when due (by demand,
acceleration or otherwise) of the principal of or interest on
the Notes, or other obligations of Pledgor to Secured Party;
(b) Default in the performance of any agreement or obligation of
the Pledgor to the holder of the Notes;
(c) Any warranty, representation or statement made in this
Agreement or made or furnished to Secured Party by or on behalf
of Pledgor to induce Secured Party to make any loan to Pledgor
proves to have been false in any material respect when made or
furnished, or any financial statement of Pledgor, which has
been or may hereafter be furnished to Secured Party on behalf
of Pledgor shall prove to be false in any materially
detrimental respect;
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(d) The levy of any attachment, execution or other process against
Pledgor, or any of the Collateral or other property of Pledgor;
(e) Death, dissolution, termination of existence, insolvency or
business failure of Pledgor, or the appointment of a receiver,
custodian or other legal representation for any part of the
property of, assignment for the benefit of creditors by, or
commencement of any proceedings under bankruptcy or insolvency
law by or against Pledgor.
10. The security interest granted herein is in addition to and cumulative
of, and without prejudice to such rights of set-off or other claims which
Secured Party may have against any of the Collateral.
11. No failure, delay or other inaction or omission on the part of Secured
Party in the exercise of any right or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of such right or remedy
preclude other or further exercise thereof or the exercise of any other right or
remedy. No notice to or demand upon Pledgor in any case shall entitle Pledgor
to any other or further notice or demand in similar or other circumstances.
None of the terms or provisions of this Agreement may be waived, modified or
amended except in writing duly signed by the Secured Party.
12. This Agreement shall be binding upon Pledgor and its successors,
transferees and assigns, and shall inure to the benefit of, and be enforceable
by the Secured Party and its successors, transferees and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
PLEDGOR:
INTELLISYS GROUP, INC.
BY:________________________________________
Xxxxxx X. Xxxxxx, Chairman of the Board
SECURED PARTY:
________________________________________
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