EXHIBIT 10.56
ASSET PURCHASE AGREEMENT
BETWEEN
INTELLISYS GROUP, INC.
as "Buyer,"
AND
AURORA VISUAL SYSTEMS
as the "Company"
AND
XXXX X. XXXXXX AND XXXX X. XXXXXX
as "Sellers"
Dated as of
November 4, 1998
TABLE OF CONTENTS
RECITALS......................................................................................... 1
AGREEMENT........................................................................................ 1
1. Definitions................................................................................ 1
Acquired Assets......................................................................... 1
Adverse Consequences.................................................................... 2
Affiliate............................................................................... 2
Affiliated Group........................................................................ 2
Applicable Rate......................................................................... 2
Assumed Liabilities..................................................................... 2
Basis................................................................................... 3
Buyer................................................................................... 3
Closing................................................................................. 3
Code.................................................................................... 3
Confidential Information................................................................ 3
Controlled Group of Corporations........................................................ 3
Deferred InterSeller Transaction........................................................ 3
Disclosure Schedule..................................................................... 3
Effective Date.......................................................................... 3
Employee Benefit Plan................................................................... 4
Employee Pension Benefit Plan........................................................... 4
Employee Welfare Benefit Plan........................................................... 4
Environmental, Health, and Safety Laws.................................................. 4
ERISA................................................................................... 4
Excess Loss Account..................................................................... 4
Extremely Hazardous Substance........................................................... 4
Fiduciary............................................................................... 4
Financial Statement..................................................................... 5
GAAP.................................................................................... 5
Intellectual Property................................................................... 5
Knowledge............................................................................... 5
Liability............................................................................... 5
Most Recent Balance Sheet............................................................... 5
Most Recent Financial Statements........................................................ 5
Most Recent Fiscal Month End............................................................ 5
Most Recent Fiscal Year End............................................................. 5
Multiemployer Plan...................................................................... 6
Ordinary Course of Business............................................................. 6
Party................................................................................... 6
PBGC.................................................................................... 6
Person.................................................................................. 6
Prohibited Transaction.................................................................. 6
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Purchase Price......................................................................... 6
Reportable Event....................................................................... 6
Securities Act......................................................................... 6
Securities Exchange Act................................................................ 6
Security Interest...................................................................... 6
Seller................................................................................. 7
Subsidiary............................................................................. 7
Tax.................................................................................... 7
Tax Return............................................................................. 7
2. Purchase and Sale of Seller Assets......................................................... 7
(a) Basic Transaction...................................................................... 7
(b) Purchase Price......................................................................... 7
(c) The Holdback Amount and Buyer's Right of Offset........................................ 8
(d) Allocation of Amounts Paid............................................................. 9
(e) Agreement with Seller Stockholders..................................................... 9
(f) The Closing............................................................................ 9
(g) Deliveries at the Closing.............................................................. 9
3. Representations and Warranties of the Buyer................................................ 9
(a) Organization of the Buyer.............................................................. 9
(b) Authorization of Transaction........................................................... 9
(c) Noncontravention....................................................................... 10
(d) Brokers' Fees.......................................................................... 10
4. Representations and Warranties Concerning the Seller and the Transaction................... 10
(a) Organization, Qualification, and Corporate Power....................................... 10
(b) Authorization of Transaction........................................................... 11
(c) Noncontravention....................................................................... 11
(d) Brokers' Fees.......................................................................... 11
(e) Title to Assets........................................................................ 11
(f) Subsidiaries........................................................................... 12
(g) Financial Statements................................................................... 12
(h) Events Subsequent to Most Recent Fiscal Year End....................................... 12
(i) Undisclosed Liabilities................................................................ 14
(j) Legal Compliance....................................................................... 15
(k) Tax Matters............................................................................ 15
(l) Real Property.......................................................................... 16
(m) Intellectual Property.................................................................. 18
(n) Tangible Assets........................................................................ 20
(o) Inventory.............................................................................. 21
(p) Contracts.............................................................................. 21
(q) Notes and Accounts Receivable.......................................................... 22
(r) Powers of Attorney..................................................................... 22
(s) Insurance.............................................................................. 22
(t) Litigation............................................................................. 23
(u) Product Warranty....................................................................... 23
(v) Product Liability...................................................................... 24
(w) Employees.............................................................................. 24
(x) Employee Benefits...................................................................... 24
ii
(y) Guaranties............................................................................ 26
(z) Environment, Health, and Safety....................................................... 26
(aa) Certain Business Relationships with the Seller........................................ 27
(bb) Disclosure............................................................................ 27
5. Post-Closing Covenants..................................................................... 27
(a) General............................................................................... 27
(b) Litigation Support.................................................................... 28
(c) Transition............................................................................ 28
(d) Tax Clearance Certificate............................................................. 28
(e) Confidentiality....................................................................... 28
(f) Covenant Not to Compete............................................................... 29
(g) Personal Guarantees................................................................... 30
6. Remedies for Breaches of this Agreement and the Asset Purchase Agreement................... 30
(a) Survival of Representations and Warranties............................................ 31
(b) Indemnification Provisions for Benefit of the Buyer................................... 31
(c) Indemnification Provisions for Benefit of the Seller.................................. 31
(d) Matters Involving Third Parties....................................................... 32
(e) Determination of Adverse Consequences................................................. 33
(f) Recoupment Under The Notes............................................................ 33
(g) Other Indemnification Provisions...................................................... 33
7. Miscellaneous.............................................................................. 34
(a) Survival of Representations and Warranties............................................ 34
(b) Press Releases and Public Announcements............................................... 34
(c) No Third-Party Beneficiaries.......................................................... 34
(e) Succession and Assignment............................................................. 34
(f) Counterparts.......................................................................... 34
(g) Headings.............................................................................. 35
(h) Notices............................................................................... 35
(i) Governing Law......................................................................... 36
(j) Amendments and Waivers................................................................ 36
(k) Severability.......................................................................... 36
(l) Expenses.............................................................................. 36
(m) Construction.......................................................................... 36
(n) Incorporation of Exhibits, Annexes, and Schedules..................................... 37
(o) Specific Performance.................................................................. 37
(p) Bulk Transfer Laws.................................................................... 37
8. Arbitration................................................................................ 37
(a) Exclusive Remedy...................................................................... 37
(b) Final and Binding..................................................................... 38
(c) Waiver of Right to Jury Trial......................................................... 38
(d) Attorneys'Fees and Costs.............................................................. 38
(e) Refusal to Arbitrate.................................................................. 38
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is entered into as of
November 4, 1998 (the "Effective Date"), by and among INTELLISYS GROUP, INC.,
a Delaware corporation (the "Buyer"), and AURORA VISUAL SYSTEMS, operating as a
Washington based general partnership (the "Company") and its owners, XXXX X.
XXXXXX and XXXX X. XXXXXX, each of whom is an individual residing in the State
of Washington (collectively the "Sellers"). The Buyer, the Company and the
Sellers are sometimes referred to collectively herein as the "Parties" and
individually as a "Party."
RECITALS
This Agreement contemplates a transaction in which the Buyer will purchase
from the Company and the Sellers and the Company and the Sellers will sell to
the Buyer, all of the Acquired Assets and Buyer will assume certain specified
Assumed Liabilities of the Sellers and the Company 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.
1. Definitions.
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"Acquired Assets" means all right, title, and interest in and to all of the
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assets of the Sellers in the Company as of the Effective Date, including all
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of the Company's (a) real property, leaseholds and subleaseholds therein,
improvements, fixtures, and fittings thereon, and easements, rights-of-way, and
other appurtenants thereto (such as appurtenant rights in and to public
streets), (b) tangible personal property (such as machinery, equipment,
inventories of raw materials and supplies, manufactured and purchased parts,
goods in process and finished goods, furniture, automobiles, trucks, tractors,
trailers, tools, jigs, and dies), (c) Intellectual Property, goodwill associated
therewith, licenses and sublicenses granted and obtained with respect thereto,
and rights thereunder, remedies against infringements thereof, and rights to
protection of interests therein under the laws of all jurisdictions, (d) leases,
subleases, and rights thereunder, (e) agreements, contracts, indentures,
mortgages, instruments, Security Interests, guaranties, other similar
arrangements, and rights thereunder, (f) accounts, notes, and other receivables,
(g) securities (such as the capital stock in any Subsidiaries), (h) claims,
deposits, prepayments, refunds, causes of action, choses in action, rights of
recovery, rights of set off, and rights of recoupment (including any such item
relating to the payment of Taxes), (i) franchises, approvals, permits, licenses,
orders, registrations, certificates, variances, and similar rights obtained from
governments and
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governmental agencies, (j) books, records, ledgers, files, documents,
correspondence, lists, plats, architectural plans, drawings, and specifications,
creative materials, advertising and promotional materials, studies, reports, and
other printed or written materials, and (k) Cash; provided, however, that the
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Acquired Assets shall not include (i) the corporate charter, qualifications to
conduct business as a foreign corporation, arrangements with registered agents
relating to foreign qualifications, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates, and other
documents relating to the organization, maintenance, and existence of the
Company as a business entity or (ii) any of the rights of the Company and the
Sellers under this Agreement (or under any side agreement between the Sellers
and the Company on the one hand and the Buyer on the other hand entered into on
or after the date of this Agreement).
"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
-----------
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.
"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).
"Assumed Liabilities" means and is limited to (a) all Liabilities of the
---------------------
Company set forth on the face of the Company's Most Recent Balance Sheet (rather
than in any notes thereto), (b) all Liabilities of the Company which have arisen
after the Most Recent Fiscal Month End in the Ordinary Course of the Company's
Business (other than any Liability resulting from, arising out of, relating to,
in the nature of, or caused by any breach of contract, tort, infringement, or
violation of law), and (c) all obligations of the Company under the agreements,
contracts, leases, licenses, and other arrangements referred to in the
definition of Acquired Assets either (i) to furnish goods, services, and other
non-Cash benefits to another party after the Closing or (ii) to pay for goods,
services, and other non-Cash benefits that another party will furnish to it
after the Closing; provided, however, that the Assumed Liabilities shall not
-----------------
include (i) any Liability of the Sellers or the Company for Taxes unless such
Taxes are accrued on the face of the Company's Most recent Balance Sheet, (ii)
any Liability of the Sellers or the Company for the unpaid Taxes of any Person
under Reg. (S)1.1502-6 (or any similar provision of state, local, or foreign
law), as a transferee or successor, by contract, or otherwise, (iii) any
obligation of the Sellers or the Company to indemnify any Person (including any
of the Sellers) by reason of the fact that such Person was
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a director, officer, employee, or agent of any of the Sellers or the Company or
was serving at the request of any such entity as a partner, trustee, director,
officer, employee, or agent of another entity (whether such indemnification is
for judgments, damages, penalties, fines, costs, amounts paid in settlement,
losses, expenses, or otherwise and whether such indemnification is pursuant to
any statute, charter document, bylaw, agreement, or otherwise), (iv) any
Liability of the Sellers or the Company for costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby, or (v)
any Liability or obligation of the Sellers or the Company under this Agreement
(or under any side agreement between the Sellers and the Company on the one hand
and the Buyer on the other hand entered into on or after the date of this
Agreement).
"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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"Closing" has the meaning set forth in (S)(S)2(f) and 2(g) below.
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"Code" means the Internal Revenue Code of 1986, as amended.
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"Confidential Information" means any information concerning the
--------------------------
businesses and affairs of the Sellers and the Company that is not already
generally available to the public.
"Controlled Group of Corporations" has the meaning set forth in Code
----------------------------------
(S)1563.
"Deferred InterSeller 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.
---------------------
"Effective Date" has the meaning set forth in the preface above.
----------------
"Employee Benefit Plan" means any (a) nonqualified deferred compensation or
-----------------------
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
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(1).
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"Environmental, Health, and Safety Laws" means the Comprehensive
----------------------------------------
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, 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 1974, as
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amended.
"Excess Loss Account" has the meaning set forth in Reg. (S)1.1502-19.
---------------------
"Extremely Hazardous Substance" has the meaning set forth in (S)302 of the
-------------------------------
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 Statement" has the meaning set forth in (S)4(g) below.
---------------------
"GAAP" means United States generally accepted accounting principles as in
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effect from time to time.
"Intellectual Property" means (a) all inventions (whether patentable or
-----------------------
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
4
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 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
---------------------------
Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in (S)4(g)
----------------------------------
below.
"Most Recent Fiscal Month End" has the meaning set forth in (S)4(g) below.
------------------------------
"Most Recent Fiscal Year End" has the meaning set forth in (S)4(g) below.
-----------------------------
"Multiemployer Plan" has the meaning set forth in ERISA (S)3(37).
--------------------
"Ordinary Course of Business" means the ordinary course of business
-----------------------------
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
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"PBGC" means the Pension Benefit Guaranty Corporation.
------
"Person" means an individual, a partnership, a corporation, an
--------
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Prohibited Transaction" has the meaning set forth in ERISA (S)405 and Code
------------------------
(S)4975.
"Purchase Price" has the meaning set forth in (S)2(b) below.
----------------
"Reportable Event" has the meaning set forth in ERISA (S)4043.
------------------
"Securities Act" means the Securities Act of 1933, as amended.
----------------
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
-------------------------
amended.
5
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
-------------------
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.
"Sellers" has the meaning set forth in the preface above.
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"Subsidiary" means any corporation with respect to which a specified Person
------------
(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,
-----
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
------------
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
2. Purchase and Sale of Assets.
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(a) Basic Transaction.
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(i) On and subject to the terms and conditions of this Agreement,
the Buyer agrees to purchase from the Company and the Sellers, and the
Company and the Sellers agree to sell, transfer, convey and deliver to the
Buyer, all of the Acquired Assets on the Effective Date for the
consideration specified in (S)2(b) below.
(ii) On and subject to the terms and conditions of this Agreement,
the Buyer agrees to assume and become responsible for all of the Assumed
Liabilities on the Effective Date. The Buyer will not assume or have any
responsibility, however, with respect to any other obligation or Liability
of the Sellers or the Company not included within the definition of Assumed
Liabilities.
(b) Purchase Price. On and subject to the terms and conditions of
---------------
this Agreement, as consideration for the sale of all of the Acquired Assets
the Buyer shall assume the Assumed Liabilities on the Effective Date and
shall pay to the Company the
6
total sum of ONE MILLION FOUR HUNDRED THOUSAND DOLLARS ($1,400,000.00) (the
"Purchase Price"), at the times and on the conditions set forth below:
(i) ONE MILLION THREE HUNDRED THOUSAND DOLLARS ($1,300,000.00)
shall be paid by wire transfer or delivery of other immediately
available funds on the Effective Date, and
(ii) the balance, being the "Holdback Amount" as defined below,
shall be paid in accordance with and subject to the provisions set
forth in section 2(c).
(c) The Holdback Amount and Buyer's Right of Offset.
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(i) The Buyer shall withhold from the Purchase Price the sum of ONE
HUNDRED THOUSAND DOLLARS ($100,000.00) (the "Holdback Amount") subject to
the provisions of this section 2(c). The Buyer shall have the right to
deduct from the Holdback Amount and reduce the Purchase Price by an amount
equal to any damages sustained by the Buyer by reason of any default by the
Sellers or the breach of any representations, warranties or covenants of
the Company or the Sellers (collectively a "Sellers' Default") under this
Agreement. Notwithstanding the foregoing, if the Buyer believes a Sellers'
Default has occurred, Buyer shall provide Sellers with a written "Notice of
Default" notifying Sellers of such belief and the amount to be deducted
from the Holdback Amount (the "Holdback Deduction") to compensate Buyer for
the default. Sellers' shall have thirty (30) days from the date of the
Notice of Default within which to deny the occurrence of a Sellers'
Default, cure the Sellers' Default and/or challenge the amount of the
proposed Holdback Deduction (the "Sellers' Response"). If a timely Seller's
Response is provided to Buyer, Buyer and Sellers shall attempt to resolve
their differences within ten (10) business days. If the Buyer and Sellers
are unable to resolve their differences, the dispute shall be submitted to
final and binding arbitration pursuant to the provisions of Section 8 of
this Agreement. If the Sellers' fail to submit a timely Sellers' Response,
the Buyer shall be entitled to retain the Holdback Deduction as if the
Purchase Price was reduced.
(ii) Buyer shall pay to the Company the Holdback Amount less any
Holdback Deduction which is the subject of a timely Notice of Default no
later than ninety (90) days after the Effective Date.
(iii) The Company and the Sellers each acknowledge and agree that the
Buyer's right of offset provided by this section 2(c) is in addition to,
and not in lieu of, any other right or remedy the Buyer may have against
the Company, the Sellers or any of them as a result of any Sellers' Default
under this Agreement, and the Buyer shall have
7
the right to pursue all available rights and remedies as the result of a
Sellers' Default even though Buyer may not have provided a timely Notice of
Default.
(d) Allocation of Amounts Paid. The Parties agree to allocate the Purchase
---------------------------
Price (and all other capitalizable costs) among the Acquired Assets for all
purposes (including financial accounting and tax purposes) based on the book
value of the Acquired Assets as of the Effective Date with the difference
between the book value of the Acquired Assets as of the Effective Date and the
aggregate of the consideration set forth in (S)2(b)(i)-(ii) and the value of the
Assumed Liabilities as of the Effective Date being characterized as "goodwill."
The parties shall agree on the book value of the Acquired Assets and the Assumed
Liabilities as of the Effective Date within thirty (30) days after the Effective
Date.
(e) Employment Agreement. As further consideration for and as a condition
---------------------
to the Buyer's payment of the Purchase Price, Xxxx X. Xxxxxx (one of the
Sellers) shall enter into an Employment Agreement with the Buyer in the form of
Exhibit A attached hereto.
(f) The Closing. The closing of the transactions contemplated by this
------------
Agreement (the "Closing") shall take place at the offices of Xxxxxx & Xxxxxxx,
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000 Xxxx Xxxxx Xxxxxx, Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000 on the
Effective Date.
(g) Deliveries at the Closing. At the Closing, (x) the Company and the
--------------------------
Sellers will deliver to the Buyer all of the various certificates, instruments,
documents and consents necessary to effect the transactions contemplated hereby;
(y) the Company and the Sellers will execute, acknowledge and deliver to the
Buyer the Shareholders Agreement, the Employment Agreement, assignments
(including, but not limited to, real property and Intellectual Property transfer
documents), the Xxxx of Sale attached hereto as Exhibit B and such other
instruments of sale, transfer and conveyance as the Buyer may request; and (z)
the Buyer will deliver to the Company and the Sellers the consideration
specified in (S)2(b) above.
3. Representations and Warranties of the Buyer. The Buyer represents and
--------------------------------------------
warrants to the Company and the Sellers that the statements contained in this
(S)3 are correct and complete as of the Effective Date.
(a) Organization of the Buyer. The Buyer is a corporation duly organized,
--------------------------
validly existing, and in good standing under the laws of the jurisdiction of its
incorporation.
(b) Authorization of Transaction. The Buyer has full power and 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
8
government or governmental agency in order to consummate the transactions
contemplated by this Agreement.
(c) Noncontravention. Neither the execution and the delivery of 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.
(d) Brokers' Fees. The Buyer has no Liability or obligation to pay any
--------------
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Company or any Seller
could become liable or obligated.
4. Representations and Warranties of the Company and the Sellers. The
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Company and each of the Sellers represents and warrants, 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 Company and the Sellers to the Buyer and initialed by the
Parties (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. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to disclose an exception to
a representation or warranty made herein (unless the representation or warranty
has to do with the existence of the document or other item itself). The
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
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general partnership duly organized, validly existing, and in good standing under
the laws of the State of Washington. 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 and the Sellers have full power and
authority and all licenses, permits, and authorizations necessary to carry on
the businesses in which the Company is engaged and to own and use the properties
owned and used by it. (S)4(a) of the Disclosure Schedule lists the owners of and
their respective ownership interests in the Company. The Company and the Sellers
have delivered to the Buyer correct and complete copies of the all
organizational documents of the Company (as amended to date). The Company's
books and records containing, among other things, the records of meetings of the
owners and records of ownership of the Company are correct and complete.
9
The Company is not in default under or in violation of any provision of its
organizational documents.
(b) Authorization of Transaction. The Company and the Sellers have full
-----------------------------
power and authority to execute and deliver this Agreement and to perform their
obligations hereunder. Without limiting the generality of the foregoing, the
board of directors (or owners) of the Company (as applicable) have duly
authorized the execution, delivery, and performance of this Agreement by the
Company and the Sellers. This Agreement constitutes the valid and legally
binding obligation of the Company and the Sellers, enforceable in accordance
with its terms and conditions. The Company and the Sellers 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.
(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 any of the Company or any Seller 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 or any
Seller is a party or by which the Company or the Sellers are bound or to which
any of the Company's assets is subject (or result in the imposition of any
Security Interest upon any of its assets).
(d) Brokers' Fees. The Company and the Sellers do 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 for which the
Buyer could become liable or obligated.
(e) Title to Assets. The Company and the Sellers have good and marketable
----------------
title to, or a valid leasehold interest in, the properties and assets used by
the Company, located on the Company's 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 cash flow as of
-----------
and for the fiscal year December 31, 1997 (the
10
"Most Recent Fiscal Year End") for the Company; and (ii) balance sheets and
---------------------------
statements of income, and cash flow (the "Most Recent Financial Statements") as
--------------------------------
of and for the nine (9) months ended September 30, 1998 (the "Most Recent Fiscal
------------------
Month End") for the Company. The Financial Statements (including the notes
---------
thereto) have been prepared in accordance with GAAP applied on a consistent
basis throughout the periods covered thereby, 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 Year End. Since the Most Recent
------------------------------------------------
Fiscal Year 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) neither the Company nor the Sellers has sold, leased,
transferred, or assigned any of the Company's assets, tangible or
intangible, other than for a fair consideration in the Ordinary Course of
Business;
(ii) neither the Company nor the Sellers has entered into any
agreement, contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) 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
$5,000 to which the Company is a party or by which any of them is bound;
(iv) neither the Company nor Sellers has imposed any Security
Interest upon any of the Company's assets, tangible or intangible;
(v) neither the Company nor the Sellers has made any capital
expenditure (or series of related capital expenditures) either involving
more than $5,000 or outside the Ordinary Course of Business.
(vi) neither the Company nor the Sellers has 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 $5,000 or outside the Ordinary
Course of Business;
(vii) neither the Company nor the Sellers has issued any note, bond,
or other debt security or created, incurred, assumed, or guaranteed any
indebtedness for
11
borrowed money or capitalized lease obligation involving more than $10,000
in the aggregate;
(viii) neither the Company nor the Sellers has failed to pay any of
the Company's obligations when due or delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course of
Business;
(ix) neither the Company nor the Sellers has canceled, compromised,
waived, or released any right or claim (or series of related rights and
claims) of the Company either involving more than $5,000 or outside the
Ordinary Course of Business;
(x) neither the Company nor the Sellers has granted any license or
sublicense of any rights under or with respect to any of the Company's
Intellectual Property;
(xi) there has been no change made or authorized in the charter or
bylaws of the Company;
(xii) neither the Company nor the Sellers has issued, sold, or
otherwise disposed of any ownership interest in the Company, or granted any
options, warrants, or other rights to purchase or obtain (including upon
conversion, exchange, or exercise) any ownership interest in the Company;
(xiii) neither the Company nor the Sellers has declared, set aside, or
paid any dividend or made any distribution with respect to the Sellers'
ownership interest in the Company (whether in cash or in kind) or redeemed,
purchased, or otherwise acquired any of their ownership interests;
(xiv) the Company has not experienced any damage, destruction, or
loss (whether or not covered by insurance) to its property;
(xv) neither the Company nor the Sellers has made any loan to, or
entered into any other transaction with, any of the Company's directors,
officers, and employees outside the Ordinary Course of Business;
(xvi) neither the Company nor the Sellers has entered into any
employment contract or collective bargaining agreement, written or oral, or
modified the terms of any existing such contract or agreement;
(xvii) neither the Company nor the Sellers has 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
the Company's directors, officers, and employees outside the Ordinary
Course of Business;
12
(xviii) neither the Company nor the Sellers has adopted, amended,
modified, or terminated any bonus, profit-sharing, incentive, severance, or
other plan, contract, or commitment for the benefit of any of the Company's
directors, officers, and employees (or taken any such action with respect
to any other Employee Benefit Plan);
(xix) neither the Company nor the Sellers has made any other change
in employment terms for any of the Company's directors, officers, and
employees outside the Ordinary Course of Business;
(xx) neither the Company nor the Sellers has made or pledged to
make any charitable or other capital contribution outside the Company's
Ordinary Course of Business;
(xxi) there has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary
Course of Business involving the Company; and
(xxii) neither the Company nor the Sellers has committed to any of
the foregoing.
(i) Undisclosed Liabilities. The Company and the Sellers have 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 Company's Most Recent Balance Sheet (rather than in any notes thereto)
and (ii) Liabilities which have arisen after the Company's 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, the Sellers and their respective
----------------
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.
(k) Tax Matters.
-----------
(i) The Company and the Sellers have filed all Tax Returns that
they were required to file. All such Tax Returns were correct and complete
in all respects. All Taxes owed by the Company or by the Sellers with
respect to the Company (whether
13
or not shown on any Tax Return) have been paid. Neither the Company nor the
Sellers currently is 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 and the Sellers have 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) None of the Company and the Sellers nor any director or officer
(or employee responsible for Tax matters) of them expects any authority to
assess any additional Taxes for any period for which Tax Returns have been
filed. There is no dispute or claim concerning any Tax Liability of the
Company or of the Sellers related to the Company either (A) claimed or
raised by any authority in writing or (B) as to which any of the Company or
the Sellers and their respective directors and officers (and employees
responsible for Tax matters) 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, 1994,
indicates those Tax Returns that have been audited, and indicates those Tax
Returns that currently are the subject of audit. The Company and the
Sellers 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, 1995.
(iv) Neither the Company nor any Seller has 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) Neither the Company nor the Sellers have filed a consent under
Code (S)341(f) concerning collapsible corporations. Neither the Company nor
the Sellers have 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)280G.
Neither the Company nor the Sellers have been a United States real property
holding corporation within the meaning of Code (S)897(c)(2) during the
applicable period specified in Code (S)897(c)(1)(A)(ii). The Company and
the Sellers have disclosed on their 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)6662.
Neither the Company nor the Sellers is a party to any Tax allocation or
sharing agreement. Neither the Company nor the Sellers (A) has been a
member of an Affiliated Group filing a consolidated federal income Tax
Return (other than a group
14
the common parent of which was the Seller) or (B) has any Liability for the
Taxes of any Person (other than the Company or the Seller ) under Reg.
(S)1.1502-6 (or any similar provision of state, local, or foreign law), as
a transferee or successor, by contract, or otherwise.
(vi) (S)4(k) of the Disclosure Schedule sets forth the following
information 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 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 arising
out of any Deferred InterSeller Transaction.
(vii) The unpaid Taxes 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 Company's 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) 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 or to the
Sellers for use by the Company and, with respect to each lease or sublease,
states the term, annual rent, renewal options and square footage. The
Company and 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;
15
(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;
(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) neither the Company nor the Sellers has 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;
(I) all facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the operation
of said facilities; and
(J) the owner of the facility leased or subleased has good
and marketable title to the parcel of real property, free and clear of
any Security Interest, easement, covenant, or other restriction,
except for installments of special easements not yet delinquent and
recorded easements, covenants, and other restrictions which do not
impair the current use, occupancy, or value, or the marketability of
title, of the property subject thereto.
(m) Intellectual Property.
---------------------
(i) The Company and the Sellers own or have 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 and the Sellers
immediately prior to the Closing hereunder will be owned or available for
use by the Buyer on identical terms and conditions immediately subsequent
to the Closing hereunder. The Company and the Sellers have
16
taken all necessary and desirable action to maintain and protect each item
of Intellectual Property that it owns or uses.
(ii) The Company and the Sellers have not interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of third parties, and none of the Company, the
Sellers and their 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 or the Sellers must license or refrain from using any Intellectual
Property rights of any third party). To the Knowledge of any of the
Company, 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 or the Sellers with
respect to any of the Company's Intellectual Property, identifies each
pending patent application or application for registration which the
Company or the Sellers has made with respect to any of the Company's
Intellectual Property, and identifies each license, agreement, or other
permission which the Company or the Sellers have granted to any third party
with respect to any of the Company's Intellectual Property (together with
any exceptions). The Company and 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
and the Sellers in connection with any of the Company's 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 and the Sellers possess 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;
17
(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) neither the Company nor the Sellers has ever 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 Company and
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 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 Sellers and the directors and officers (and employees with
responsibility for Intellectual Property matters) of the Seller, is
threatened which challenges the
18
legality, validity, or enforceability of the underlying item of
Intellectual Property; and
(H) neither the Company nor the Sellers has granted any
sublicense or similar right with respect to the license, sublicense,
agreement, or permission.
(v) To the Knowledge of the Company and the Sellers and the directors
and officers (and employees with responsibility for Intellectual Property
matters) of the Company, the Company and the Sellers 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 the Company's businesses as presently conducted and
as presently proposed to be conducted.
(vi) None of the Company, the Sellers or 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 and the Sellers own or lease all
---------------
buildings, machinery, equipment, and other tangible assets necessary for the
conduct of the Company's businesses as presently conducted and as presently
proposed to be conducted. Each such tangible asset is free from defects, 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.
(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 writedown 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 Effective Date in accordance with
the past custom and practice of the Company.
(p) Contracts. (S)4(p) of the Disclosure Schedule lists all contracts and
---------
other agreements to which the Company, or the Sellers on behalf of the Company,
is a party including, but not limited to, the following:
19
(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
$1,000;
(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 Company and its Affiliates;
(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;
(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 $1,000.
20
The Company and 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 its 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 or the Sellers with respect to 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;
(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.
21
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) none of the Company and the Sellers 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 or any of the Sellers (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 Company and 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. 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 and Sellers
have 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 Company's Most Recent Balance Sheet
(rather than in any notes thereto) as adjusted for the passage of time through
the Effective 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(u) 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).
(v) Product Liability. The Company and the Sellers have 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
22
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 Company, the Seller and the
----------
directors and officers (and employees with responsibility for employment
matters) of the Company, no executive, 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. Neither the Company nor the Sellers has
committed any unfair labor practice. None of the Company, the Sellers or 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-1's, and Summary Plan
Descriptions) have been filed or distributed appropriately with
respect to each such Employee Benefit Plan. The requirements of Part 6
of Subtitle B of Title I of ERISA and of Code (S)4980B 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)
23
and 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 nonvested 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 Company and 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 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 Sellers 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 and the Sellers have not incurred, and none of
the Company, the Sellers and the directors and officers (and employees
with responsibility for employee benefits matters) of the Company has
any reason to
24
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 respect to
any such Employee Benefit Plan which is an Employee Pension Benefit
Plan.
(iii) Neither the Company nor the Sellers contributes to, ever has
contributed to, and has ever been required to contribute to any
Multiemployer Plan or has any Liability (including withdrawal Liability)
under any Multiemployer Plan.
(iv) The Company and the Sellers do not maintain, never have
maintained or contributed and have never 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)4980B).
(y) Guaranties. Neither the Company nor the Sellers is a guarantor or
-----------
otherwise liable for any Liability or obligation (including indebtedness) of any
other Person.
(z) Environment, Health, and Safety.
--------------------------------
(i) 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) 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 or the Sellers 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.
25
(iii) All properties and equipment used in the business of the Company
and its predecessors and Affiliates have been free of asbestos, PCB's,
methylene chloride, trichloroethylene, 1,2-trans-dichloroethylene, dioxins,
dibenzofurans, and Extremely Hazardous Substances.
(aa) Certain Business Relationships with the Seller. None of the Company,
-----------------------------------------------
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
Company, 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. The Company and 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 regarding this transaction.
(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 counsel in the contest or defense, make 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 Company and 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. Each of the
26
Company and the Sellers will refer all customer inquiries relating to the
businesses of the Company to the Buyer from and after the Closing.
(d) Tax Clearance Certificate. No later than ninety (90) days after the
--------------------------
Effective Date, the Company and the Sellers shall provide Buyer with a tax
clearance certificate from the State of Washington stating that the Company
and/or the Sellers, as applicable, has paid all applicable sales and use taxes
as of the Effective Date.
(e) Confidentiality. The Company and the Sellers will treat and hold as
----------------
such all of the Confidential Information, refrain from using any of the
Confidential Information except in connection with this Agreement, and deliver
promptly to the Buyer or destroy, at the request and option of the Buyer, all
tangible embodiments (and all copies) of the Confidential Information which are
in his or its possession. In the event that any of the Company or the Sellers is
requested or required (by oral question or request for information or documents
in any legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information, the Party will notify
the Buyer promptly of the request or requirement so that the Buyer may seek an
appropriate protective order or waive compliance with the provisions of this
(S)5(e). If, in the absence of a protective order or the receipt of a waiver
hereunder, the Party is, on the advice of counsel, compelled to disclose any
Confidential Information to any tribunal or else stand liable for contempt, that
Party may disclose the Confidential Information to the tribunal; provided,
---------
however, that the disclosing Party shall use its best efforts to obtain, at the
-------
request of the Buyer, an order or other assurance that confidential treatment
will be accorded to such portion of the Confidential Information required to be
disclosed as the Buyer shall designate. The foregoing provisions shall not apply
to any Confidential Information which is generally available to the public
immediately prior to the time of disclosure.
(f) Covenant Not to Compete. The Company and the Sellers acknowledge and
------------------------
agree that they each have technical expertise associated with the Company's
business and are well known in the presentation/communication industry. In
addition, the Company and the Sellers have valuable business contacts with
clients and potential clients and with professionals in the
presentation/communication industry. The Company's reputation and good will is
an integral part of business success throughout the areas where it conducts its
business. If the Company or the Sellers deprive Buyer of any of its goodwill or
in any manner uses its reputation and goodwill in competition with the Buyer,
the Buyer will be deprived of the benefits it has bargained for pursuant to this
Agreement. Since the Company and the Sellers have the ability to compete with
the Buyer in the operation of the Buyer's business, Buyer, therefore, desires
that the Company and the Sellers enter into this covenant not to compete. But
for Company's and the Sellers' entry into this covenant not to compete, Buyer
would not enter into this Agreement. It is, therefore, understood and agreed
that by the sale of the Company's assets, the Company and the Seller have
transferred to Buyer all of their business goodwill as contemplated by, among
other laws, California Business and Professions Code Section 16601.
27
The Company and the Sellers, therefore, each agree that for a period of five (5)
years from the Effective Date (the "Term"), they shall not, without Buyer's
prior written consent (which may be given or withheld in Buyer's sole and
absolute discretion), directly or indirectly,
(i) 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 Buyer's business,
as conducted by the Company immediately prior to the Closing and as is
proposed to be conducted by the Buyer after the Closing, in the Counties
specified in Exhibit D attached hereto of the United States, or in any
other countries in which the Company's business is conducted;
(ii) call on or solicit or divert or take away from the Buyer
(including without limitation by divulging to any competitor or potential
competitor of the Buyer) any Person, firm or corporation or other entity
who is or which at the Closing was a customer of the Company or whose
identity is known to the Company or the Sellers at the Closing as one whom
the Company or the Sellers intended to solicit; or
(iii) hire or offer employment to or seek to hire or offer employment
to any employee of the Company whose employment is continued by the Buyer
after the Closing or any employee of any successor or affiliate of the
Buyer, unless Buyer first terminates the employment of such employee or
gives its written consent to such employment or offer of employment.
The Company and the Sellers acknowledge that the provisions of this (S)5(f) are
reasonable and necessary to protect legitimate interests of Buyer. The Company
and the Sellers further acknowledge that any breach of this (S) 5(f) by them
will cause irreparable injury to Buyer, for which the available remedies at law
will not be adequate. Accordingly, in the event of any such breach or
threatened breach of any provisions of this (S)5(f), in addition to any other
remedy provided by law or in equity, the Buyer shall be entitled to appropriate
injunctive relief and/or specific performance, in any court of competent
jurisdiction, restraining the Company and/or the Sellers from any such actual or
threatened breach of this section without posting bond or other security. The
Company and the Sellers stipulate to the entry against it of any temporary,
preliminary or permanent injunction and agree not to resist the Buyer's
application for such equitable relief, except on the grounds that the acts or
omissions alleged do not violate any of the provisions of this section. The
Company and the Sellers shall, in the event that any injunctive relief or
damages shall be granted to the Buyer, pay all of the Buyer's reasonable costs
and expenses, including attorneys' fees, incurred in obtaining such relief. If
the final judgment of a court of competent jurisdiction declares that any term
or provision of this (S)5(f)
28
is invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
(g) Personal Guarantees. The Buyer shall make a good faith reasonable
--------------------
effort to obtain the release of the Sellers from any personal guarantees they
have given for the indebtedness of the Company. The Sellers have set forth in
(S)4(y) of the Disclosure Schedule a complete list of all indebtedness for which
they have given a personal guaranty and have delivered to Buyer correct and
complete copies of all documents evidencing the indebtedness and their personal
guarantees. Buyer acknowledges its obligation to indemnify the Sellers, pursuant
to Section 6 below, for any liability arising out of such personal guarantees.
6. Remedies for Breaches of this Agreement.
----------------------------------------
(a) Survival of Representations and Warranties. All of the representations
-------------------------------------------
and warranties of the Buyer, the Company and the Sellers contained in this
Agreement shall survive the Closing (without regard to any investigation made by
any of the Parties and even if the damaged Party knew or had reason to know of
any misrepresentation or breach of warranty at the time of Closing) and continue
in full force and effect forever thereafter (subject to any applicable statutes
of limitations).
(b) Indemnification Provisions for Benefit of the Buyer.
----------------------------------------------------
(i) In the event the Company or the Sellers breach (or in the event
any third party alleges facts that, if true, would mean the Company or the
Sellers has breached) any of their representations, warranties, and
covenants contained in this Agreement, 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 Company and/or the Sellers
pursuant to (S)7(h) below within such survival period, then the Company
and/or the Sellers agree to indemnify the Buyer from and against 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) In addition to the foregoing, the Company and the Sellers agree
to indemnify the Buyer from and against any Adverse Consequences the Buyer
may suffer resulting from, arising out of, relating to, in the nature of,
or caused by:
29
(x) any Liability of the Company or the Sellers which is not an
Assumed Liability (including any Liability of the Company or the
Sellers that becomes a Liability of the Buyer under any bulk transfer
law of any jurisdiction, under any common law doctrine of de facto
merger or successor liability, or otherwise by operation of law);
(y) any Liability of any of the Company or the Sellers for any
unpaid Taxes with respect to any Tax year or portion thereof ending on
or before the Closing Date (except for those Tax liabilities expressly
assumed by the Buyer), or any Liability of any of the Company's
Subsidiaries for the unpaid Taxes of any Person under Reg. (S)1.1502-6
(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 Company and the Sellers.
----------------------------------------------------------------------
In the event the Buyer breaches (or in the event any third party alleges facts
that, if true, would mean the Buyer has breached) any of its representations,
warranties, and covenants contained in this Agreement, and, if there is an
applicable survival period pursuant to (S)6(a) above, provided that the Company
or the Sellers makes a written claim for indemnification against the Buyer
pursuant to (S)7(h) below within such survival period, then the Buyer agrees to
indemnify the Company and the Sellers from and against any Adverse Consequences
the Company and the Sellers may suffer through and after the date of the claim
for indemnification (including any Adverse Consequences the Seller 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).
The Buyer also agrees to indemnify the Company and the Sellers from and against
the entirety of any Adverse Consequences the Company and the Sellers may suffer
resulting from, arising out of, relating to, in the nature of, or caused by any
Assumed Liability.
(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; 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
30
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 continuing 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, 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). 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) 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.
(f) Recoupment From the Holdback Amount. As set forth in (S)2(c) above,
------------------------------------
the Buyer shall have the option of recouping all or any part of any Adverse
Consequences it may suffer
31
(in lieu of or in addition to seeking any indemnification to which it is
entitled under this (S)6) from the Holdback Amount.
(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 Company and the Sellers hereby agree that they will
not make any claim for indemnification against any of the Buyer and its
Subsidiaries by reason of the fact that it was an agent of the Company or the
Sellers or was serving at the request of any such entity or person 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 the Company or the Sellers (whether such action, suit, proceeding,
complaint, claim, or demand is pursuant to this Agreement, applicable law, or
otherwise).
7. Miscellaneous.
--------------
(a) Survival of Representations and Warranties. All of the representations
-------------------------------------------
and warranties of the Parties contained in this Agreement shall survive the
Closing hereunder as and to the extent provided in this Agreement.
(b) 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 Sellers; 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).
(c) 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 permitted assigns.
(d) 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.
(e) 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
rights, interests, or obligations hereunder without the prior written approval
of the Buyer and the Sellers; provided, however, that the
-----------------
32
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).
(f) 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.
(g) 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.
(h) 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 mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Company: Aurora Visual Systems
------------------
0000 Xxxxx Xxxxxx X.
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xx. Xxxx X. Xxxxxx
with a copy to:
Xxxxxx X. Xxxxxx, Esq.
X.X. Xxx 00000
Xxxxxxx, Xxxxxxxxxx 00000
If to the Sellers: Xxxx X. Xxxxxx
------------------
000 00xx Xxxxxx
Xxx Xxxxxx, Xxxxxxxxxx 00000
Xxxx X. Xxxxxx
00000 Xxxxx Xxxx Xxxx X.X.
Xxxxxxx, Xxxxxxxxxx 00000
If to the Buyer: Intellisys Group, Inc.
----------------
000 Xxxx Xxxx Xxxxxx
00
Xxxxxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Chairman of the Board
with a copy to:
Xxxxxx & Xxxxxxx
000 Xxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Xx.
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.
(i) Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the domestic laws of the State of California without giving
effect to any choice or conflict of law provision or rule (whether of the State
of California or any other jurisdiction) that would cause the application of the
laws of any other jurisdiction.
(j) 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 Seller. 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.
(k) 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 term or provision in any other
situation or in any other jurisdiction.
(l) Expenses. Each of the Parties will bear his own costs and expenses
---------
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby. The Company and the Sellers also agree
that they have not paid any amount to any third
34
party, and will not pay any amount to any third party until after the Closing,
with respect to any of the costs and expenses of the Company and the Sellers
(including any of their legal fees and expenses) in connection with this
Agreement or any of the transactions contemplated hereby.
(m) 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 herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
(n) 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.
(o) 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 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
instituted pursuant to Section 8 below, in addition to any other remedy to which
they may be entitled, at law or in equity.
(p) Bulk Transfer Laws. The Buyer acknowledges that the Company and the
-------------------
Sellers will not comply with the provisions of any bulk transfer laws of any
jurisdiction in connection with the transactions contemplated by this Agreement.
8. Arbitration.
-----------
(a) Exclusive Remedy. The Parties agree that except with respect to an
-----------------
action for an injunction pursuant to the provisions of section 5(f) above, all
other disputes relating to or arising out of this Agreement and each of the
agreements attached hereto as Exhibits, including, but not limited to, any
disputes relating to the Holdback Amount or Holdback Deduction, if any, shall be
submitted to the American Arbitration Association ("AAA") for arbitration before
a single arbitrator in accordance with the AAA Commercial Arbitration
35
Rules then in force and effect as the sole and exclusive remedy for resolving
such controversies. The Parties agree that any such arbitration shall take place
in the County of Santa Xxxxx, State of California.
(b) Final and Binding. The Parties agree that the decision of the
------------------
arbitrator shall be final and binding and that a judgment may be entered on such
arbitration award in any court of competent jurisdiction.
(c) Waiver of Right to Jury Trial. THE PARTIES 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 5(f)), THEY ARE
WAIVING THEIR RIGHT TO A TRIAL BY JURY TO WHICH THEY MAY BE OTHERWISE ENTITLED.
(d) Attorneys' Fees and Costs. The prevailing party in any such
--------------------------
arbitration shall be entitled to recover his or its costs and attorneys' fees
incurred in connection with the arbitration. The arbitrator shall determine who
is the prevailing party in any arbitration.
(e) Refusal to Arbitrate. If any Party refuse to arbitrate a dispute
---------------------
covered by this Section 8 and another Party brings a petition to compel
arbitration, the prevailing party in such action shall be entitled to recover
his or its costs and attorneys' fees incurred in connection with the to petition
to compel.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on [as
of] the date first above written.
INTELLISYS GROUP, INC. SELLERS
By: /s/ Xxxxxx X. Xxxxxx /s/ Xxxx X. Xxxxxx
----------------------------- ---------------------------
Xxxxxx X. Xxxxxx Xxxx X. Xxxxxx
Chairman of the Board
/s/ Xxxx Xxxxxx
AURORA VISUAL SYSTEMS ___________________________
Xxxx Xxxxxx
By: /s/ Xxxx X. Xxxxxx
-----------------------------
Xxxx X. Xxxxxx
President
36
