Exhibit 10.40
ASSET PURCHASE AGREEMENT
This is an Asset Purchase Agreement (this "Agreement") dated
as of July 10, 1997 (the "Effective Date"), by and among IL
ACQUISITION CORP. ("Purchaser"), a Kentucky corporation, VIDEO AND
COMMUNICATION SOLUTIONS, INC.("Seller"), a Delaware corporation
formerly incorporated as IMAGELINK, INC., VIDEOLAN TECHNOLOGIES,
INC. ("VideoLan Parent"), the sole shareholder of Purchaser, and
GCH ACQUISITION PARTNERS, LTD, and GROWTH CAPITAL HOLDINGS, INC.
(collectively, the "Shareholder"), shareholders of Seller.
RECITALS
WHEREAS, Seller is engaged in the business of is engaged in
the business of marketing and selling desktop Kodec video
conferencing systems;
WHEREAS, Seller wishes to sell, and Purchaser wishes to purchase,
upon the terms and conditions set forth in this Agreement, substantially
all of Seller's assets; and
WHEREAS, the Shareholder will benefit from the transactions
contemplated by this Agreement and is joining in this Agreement for
the purposes of making the representations, warranties and
covenants referred to in, or provided to be done and performed by
it under, this Agreement.
WHEREAS, VideoLan Parent, as the sole owner of Purchaser, will
benefit from the transaction contemplated in this Agreement.
NOW, THEREFORE, in consideration of the mutual benefits and
covenants contained herein, and subject to the terms and conditions
set forth herein, the parties agree as follows:
Section 1
Definitions
1.01 Definitions. As used in this Agreement, the following
terms shall have the following meanings:
(a) "Accounts Receivable" shall mean all of Seller's
accounts receivable that exist on the Effective Date.
(b) "Assets" shall mean all of Seller's assets (other
than the assets described on Schedule 1.01(b)), including, without
limitation, the Accounts Receivable, Contracts, Equipment,
Inventory and Permits.
(c) "Assignment of Contracts" shall mean the Assignment
of Contracts, substantially in the form attached hereto as Schedule
1.01(c), pursuant to which Seller shall assign the Contracts to
Purchaser.
(d) "Bill of Sale" shall mean the bill of sale, sub-
stantially in the form attached hereto as Schedule 1.01(d),
pursuant to which Seller shall transfer to Purchaser the Accounts
Receivable, Equipment, Inventory and Permits.
(e) "Contracts" shall mean the contracts, leases and
other commitments, which are listed on Schedule 1.01(e).
(f) "Equipment" shall mean all of Seller's furniture,
fixtures, machinery, equipment and other tangible personal prop-
erty, as described on Schedule 1.01(f), together with all manu-
facturers' warranties pertaining to the same, to the extent that
such warranties may exist and be assignable.
(g) "Goodwill" shall mean Seller's goodwill and name,
and the going concern value of Seller's business.
(h) "Intellectual Property" shall mean trade names,
trademarks or service marks, together with the Goodwill associated
therewith; copyrights; pending or issued registrations for any of
the foregoing; patents and patent applications; unpatented
inventions; trade secrets and other confidential or proprietary
information, computer programs, processes, formulas and methods;
and all other intangible property rights of any kind.
(i) "Inventory" shall mean the raw materials, manufac-
turing supplies, packaging materials, purchased products, finished
goods and all other goods, merchandise and materials owned by Sel-
ler, as more particularly described (including storage locations)
on Schedule 1.01(i).
(j) "Liabilities" (whether or not capitalized) shall
mean all accounts payable, notes payable, liabilities, commitments,
indebtedness or obligations of any kind whatsoever, whether
absolute, accrued, contingent, matured or unmatured, direct or
indirect, of Seller, or to which any of Seller's properties or
assets are subject, all of which are listed on Schedule 1.01(j)
hereto.
(k) "Other Agreements" shall mean the Assignment of
Contracts, Bill of Sale, and all other agreements, certificates,
opinions, instruments or documents contemplated by, required by or
referred to in, this Agreement for the consummation of the
transactions contemplated hereby.
(l) "Permits" shall mean all permits, licenses, fran-
chises, approvals, certificates or authorizations of any federal,
state or local governmental or regulatory body required in order to
permit Seller to carry on its business, as described on Schedule
1.01(l).
(m) "Person" shall mean any person, firm, trust, part-
nership, corporation, limited liability company or other business
entity.
Section 2
Purchase and Sale
2.01 Purchase of the Assets. Subject to the terms and con-
ditions of this Agreement, Seller hereby agrees to sell, transfer
and deliver to Purchaser, and Purchaser hereby agrees to purchase,
the Assets. Purchaser hereby agrees to pay certain outstanding and
accrued vacation funds to Seller's employees as designated by
Seller on Schedule 2.01.
2.02 Purchase Price. The purchase price (the "Purchase
Price") for the Assets shall be 4,000,000 shares (the "Shares") of
VideoLan Parent's common stock, $.001 par value (the "VideoLan
Parent Common Stock"), 3,000,000 of which shall be subject to
cancellation in accordance with Section 2.03.
2.03 Cancellation.
(a) Of the Shares (the "Noncontingent Shares"),
1,000,000 shall not be subject to cancellation.
(b) In accordance with the table below, up to 3,000,000
of the remaining Shares (the "Contingent Shares") shall be
automatically canceled without any action on the part of Seller,
Purchaser, VideoLan Parent, or Shareholder if VideoLan Parent's
aggregate revenues during the 12 months ending July 10, 1998 (as
reported in VideoLan Parent's reports filed with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of
1934) do not equal or exceed $12,000,000:
Aggregate Revenues Contingent Shares Canceled
$5,999,999 and below 3,000,000
$6,000,000-$7,999,999 2,000,000
$8,000,000-$11,999,999 1,000,000
$12,000,000 and above 0
2.04 Transfer Restrictions. On or prior to January 1, 2000,
the Shares may not be sold, conveyed, pledged, hypothecated or
otherwise transferred except as follows:
(a) Purchaser agrees to use its best efforts to promptly
register after the Closing up to 50,000 Noncontingent Shares under
the Securities Act of 1933, as amended.
(b) During each calendar month beginning on or after
January 1, 1998, up to 200,000 Noncontingent Shares, less any
Noncontingent Shares sold pursuant to paragraph (a) above, may be
sold in accordance with the manner of sale requirements set forth
in Rule 144(f) under the Securities Act of 1933 ("Ordinary
Brokerage Transactions").
(c) During each calendar month beginning on or after
July 1, 1998, the Noncontingent Shares may be sold in Ordinary
Brokerage Transactions in an amount not to exceed (i) 20% of the
noncanceled Contingent Shares less (ii) the number of Noncontingent
Shares sold during such month.
2.05 Exchange Rights.
(a) If on any day (the "Assessment Day") on or before
July 1, 1998, the Common Stock Price (as defined below) of VideoLan
Parent is worth less than $.25, then the Seller at its sole
discretion may exchange 4,000,000 shares of VideoLan Parent Common
Stock to VideoLan Parent in return for all of the common stock of
Purchaser, provided that the Seller has not sold any of its
VideoLan Common Stock pursuant to Section 2.04.
(b) For the purpose of this Section 2.05, the Common
Stock Price shall mean the average closing bid price of the
VideoLan Parent Common Stock on the Nasdaq market, or on any other
exchange on which the Shares are listed, as reported in the Wall
Street Journal for the five (5) trading days immediately preceding
the Assessment Day.
(c) In the event of a capital adjustment resulting from
a stock dividend, stock split, reverse stock split, reorganization,
merger, consolidation, combination or exchange of stock or other
change in corporate structure or capitalization affecting the
Shares, the number of Shares and the shares prices set forth in
Section 2.04 and this Section 2.05 shall be adjusted in a manner
consistent with such capital adjustment.
2.06 Allocation of Purchase Price. The Purchase Price shall
be allocated among the Assets as set forth on Schedule 2.06 hereto.
Purchaser and Seller shall report the transactions contemplated
herein for all tax purposes in accordance with such allocation and,
in any proceeding related to the determination of any tax, neither
Purchaser nor Seller shall contend or represent that such alloca-
tion is not a correct allocation.
2.07 Seller's Liabilities. Except as described on Schedule
2.07, Purchaser is not assuming, and the parties do not intend for
Purchaser to assume, pursuant to this Agreement or otherwise, any
of the Liabilities, and Seller agrees and confirms that it is, and
will remain, responsible for and will pay any and all of the
Liabilities that are not set forth on Schedule 2.07.
2.08 Employees of Seller.
(a) Pursuant to this Agreement or otherwise, Purchaser
will not purchase, recognize, assume or otherwise acquire any
rights, obligations, assets or liabilities under, arising from or
resulting from any employment agreement in existence between Seller
and any employee, or any person employed to consult with or perform
services for Seller, or otherwise. Seller agrees that VideoLan
Parent shall not be obligated to hire any of Seller's employees,
but that VideoLan Parent, in its sole discretion, may hire some or
all of such employees on such terms as VideoLan Parent and the
employees so hired may agree. Seller and the Shareholder agree to
cooperate with VideoLan Parent in VideoLan Parent's selection of
Seller's employees to be hired by VideoLan Parent.
(b) VideoLan Parent shall not be responsible to Seller
or to any current or former employee of Seller for any employee
benefits or deferred compensation plans (whether earned, accrued or
vested), due to Seller's employees with respect to their employment
prior to the date hereof. Seller agrees to immediately reimburse
VideoLan Parent for all amounts paid by VideoLan Parent to
discharge or satisfy employee benefit plan obligations (e.g.
vacation pay, sick leave pay, etc.) that are earned and vested as
of the date hereof under Seller's policies and plans applicable to
its employees; provided, however, that this provision shall not be
interpreted to create any obligation of VideoLan Parent to pay any
of Seller's employees such amounts due with respect to Seller's
employment of such employees prior to the date hereof.
(c) Seller shall provide all notices to its employees
and their dependents upon the termination of an employee's group
health care coverage required by the Consolidated Omnibus Reconcil-
iation Act of 1985 ("COBRA") as the result of the termination of
their employment, without regard to whether Purchaser rehires any
or all of such employees. Seller specifically undertakes to
provide any continuation coverage under COBRA elected by its
employees and their dependents whether or not VideoLan Parent
rehires any or all of such employees.
Section 3
Representations and Warranties
of Seller and the Shareholder
Seller and the Shareholder, jointly and severally, represent
and warrant to Purchaser as follows:
3.01 Organization. Seller is a corporation duly organized and
validly existing under the laws of the state of Delaware, and has
full corporate power and authority to own, lease and operate its
properties as such properties are now owned, leased and operated,
and to conduct its business as and where its business is now
conducted. Seller is qualified to do business and is in good
standing in all jurisdictions in which the character of the properties
owned or leased by it, or the nature of the activities conducted by
it, makes such qualification necessary. Schedule 3.01 lists the
jurisdictions in which Seller is qualified to do business.
3.02 Subsidiaries. Seller does not own or control, and never
has owned or controlled, directly or indirectly, any capital stock
of any other corporation or any interest in any other Person.
3.03 Authority.
(a) Seller and the Shareholder have full right, power,
authority, and capacity to execute and deliver this Agreement and
the Other Agreements as to which Seller or the Shareholder is a
party, and to perform their respective obligations under this
Agreement and such Other Agreements. This Agreement and the Other
Agreements as to which Seller or the Shareholder is a party
constitute valid and legally binding obligations of Seller and the
Shareholder, enforceable in accordance with their respective terms.
(b) The execution and delivery of this Agreement and the
Other Agreements as to which Seller or the Shareholder is a party,
the consummation of the transactions contemplated hereby and
thereby, and the performance and fulfillment of their respective
obligations and undertakings hereunder and thereunder by the Seller
and Shareholder will not, (i) violate any provision of, or result
in the breach of or accelerate or permit the acceleration of any
performance required by the terms of, the Articles of Incorporation
or Bylaws of Seller or Growth Capital Holdings or the Limited
Partnership Agreement of GCH Acquisition Partners, LTD; any
contract, agreement, arrangement or undertaking to which either
Seller or the Shareholder is a party or by which either of them may
be bound; any judgment, decree, writ, injunction, order or award of
any arbitration panel, court or governmental authority; or any
applicable law, ordinance, rule or regulation of any governmental
body; (ii) result in the creation of any claim, lien, charge or
encumbrance upon any of the properties or assets (whether real or
personal, tangible or intangible) of Seller; (iii) terminate or
cancel, or result in the termination or cancellation of, any agree-
ment or undertaking to which the Seller or the Shareholder is a
party; or (iv) in any way affect or violate the terms or conditions
of, or result in the cancellation, modification, revocation or
suspension of, any of the Permits.
3.04 Accredited Investor. The Seller is an "Accredited
Investor" as that term is defined in Section 501(a) of Regulation
D promulgated under the Securities Act of 1933.
3.05 Financial Statements. Seller has furnished to the
Purchaser true and complete copies of the unaudited financial
statements (including balance sheets, statements of income and
statements of changes in cash flows of Seller as of and for the
years ended December 31, 1995 and December 31, 1996 (collectively,
the "Financial Statements"). The Financial Statements fairly
present the financial position of Seller at the dates of, and the
results of the operations for Seller for the periods covered by,
such Financial Statements in accordance with generally accepted
accounting principles ("GAAP") consistently applied with prior
periods. Seller has furnished to the Purchaser true and complete
copies of the unaudited balance sheet of the Seller as of March 31,
1997 (the "Balance Sheet") and the related statements of income,
statements of changes in cash flows of Seller as of and for the
period then ended (collectively, the "Interim Financial Statements").
The Interim Financial Statements fairly present the financial position
of the Seller at the date thereof, and the results of the operations
and the changes in cash flows for Seller for the period then ended.
Such Interim Financial Statements have been prepared in accordance with
GAAP consistently applied with prior periods, except that the Interim
Financial Statements do not contain any or all of the footnotes required
by GAAP and are subject to year-end adjustments consistent with prior
practice.
3.06 Title to Assets. Seller has good and marketable title to
all of the Assets, free and clear of any claims, liens, charges,
mortgages, security interests or encumbrances whatsoever. The
execution and delivery of this Agreement, and the consummation of
the transactions contemplated by this Agreement, will not result in
the creation of any such encumbrance on the Assets.
3.07 Condition of Assets. The tangible real and personal
property owned or leased by Seller or used or employed by it in its
business, is (a) sufficient and adequate to carry on its business
as presently conducted; (b) in good condition and repair, ordinary
wear and tear excepted; and (c) in the state of maintenance, repair
and operating condition required for the proper operation and use
thereof in the ordinary course of business.
3.08 Inventory. The Inventory consists solely of good and
merchantable items which are usable or saleable at regular market
prices in the ordinary course of Seller's business.
3.09 Absence of Material Change. Except as set forth on
Schedule 3.09:
(a) Since June 30, 1997, the business and affairs of
Seller have been conducted only in the ordinary course.
(b) Since June 30, 1997, (i) there has been no change in
the condition (financial or otherwise), assets, liabilities,
earnings, business, operations, affairs or prospects of Seller,
other than minor changes in the ordinary course of business, none
of which either singly or in the aggregate has been materially
adverse; and (ii) there has been no damage, destruction, loss or
other occurrence or development (whether or not insured against),
that either singly or in the aggregate materially adversely affects
(and neither Seller nor the Shareholder knows, or has any reasonable
grounds to know, of any threatened occurrence or development that
could materially adversely affect) the assets, liabilities, earnings,
business, operations, affairs or prospects of Seller.
(c) Since December 31, 1996, Seller has not (i) created
or incurred any liability, commitment or obligation (absolute or
contingent), except unsecured current liabilities incurred for
other than money borrowed in the ordinary course of business; (ii)
mortgaged, pledged or subjected to any lien or otherwise encumbered
any of its assets, tangible or intangible; (iii) discharged or
satisfied any lien, security interest or encumbrance, or paid any
obligation or liability (absolute or contingent), other than
current liabilities due and payable in the ordinary course of
business; (iv) waived any rights of substantial value; canceled any
debts or claims; or terminated or amended, or suffered the
termination or amendment of, any contract, lease, agreement or
license to which Seller is or was a party; (v) made any capital
expenditures or any capital additions or betterments that in the
aggregate exceeded $5,000; (vi) sold or otherwise disposed of any
of its assets, tangible or intangible, except in the ordinary
course of business; (vii) declared or paid any dividends or made
any other distribution on or in respect of, or directly or
indirectly purchased, retired, redeemed, or otherwise acquired, any
shares of Seller's stock; (viii) paid or agreed to pay, conditionally or
otherwise, any bonus, extra compensation, pension or severance pay to
any of Seller's present or former stockholders, directors, officers,
agents or employees, whether under any existing pension or other plan or
otherwise, or increased the compensation (including salaries, fees,
commissions, bonuses, profit sharing, incentive, pension, retirement or
other similar payments) being paid as of December 31, 1996 to any of
Seller's stockholders, directors, officers, agents or employees; (ix)
renewed, amended, become bound by or entered into any contract,
commitment or transaction other than in the ordinary course of
business; or (x) changed any accounting practice followed or
employed in preparing the Financial Statements or the Interim
Financial Statements.
3.10 Tax Matters.
(a) With the exception of approximately $90,000 of
employment taxes, Seller has filed or caused to be filed all
federal income tax returns and all other federal, state, county,
local or city tax returns that have been required to be filed prior
to the date hereof; and Seller has paid or caused to be paid all
taxes shown on said returns or on any tax assessment received by it
to the extent that such taxes have become due, or has set aside on
its books reserves (segregated to the extent required by sound
accounting practice) deemed by it to be adequate with respect
thereto. To Seller's knowledge, and excluding the imposition of any
sales or use taxes, no events have occurred that could impose on
Purchaser any transferee liability for any taxes, penalties, or
interest due or to become due from Seller.
(b) There is no dispute or claim concerning any tax
liability of Seller either (i) claimed or raised by any authority
in writing, or (ii) as to which Seller or the Shareholder has
knowledge based upon personal contact with any agent of such
authority. Schedule 3.10 lists all federal, state, local, and
foreign income tax returns filed with respect to Seller for taxable
periods ended on or after December 31, 1992; indicates those tax
returns that have been audited; and indicates those tax returns
that currently are the subject of audit. Seller has delivered to
Purchaser correct and complete copies of all federal income tax
returns, examination reports, and statements of deficiencies
assessed against or agreed to by Seller since December 31, 1992.
3.11 Undisclosed Liabilities.
(a) Seller has no, and Seller's properties and assets
are not subject to any, liability, commitment, indebtedness or
obligation of any kind whatsoever, whether absolute, accrued,
contingent, known or unknown, matured or unmatured, that (i) is not
shown and adequately reserved against in the Financial Statements;
(ii) is not shown and adequately reserved against in the Interim
Financial Statements; or (iii) was incurred subsequent to the date
of the Interim Financial Statements other than in the ordinary
course of business and is disclosed on Schedule 1.01(j).
(b) Schedule 1.01(j) sets forth a true and complete list
of all Liabilities, including a description of (i) all of the terms
of such Liabilities; (ii) all of Seller's properties or assets that
are subject to a lien, mortgage or security interest related to
such Liabilities; and (iii) the terms of each such lien, mortgage
or security interest.
3.12 Contracts.
(a) Seller has performed all obligations required to be
performed by it to date under all contracts and commitments to
which it is a party, and neither Seller nor Shareholder knows, or
has any reasonable grounds to know, that any other party is in
default (or would be in default on the giving of notice or the
lapse of time or both) under any contract or commitment to which
Seller is a party.
(b) True and complete copies of all contracts and com-
mitments to which Seller is a party or which are otherwise referred
to in this Agreement, including any Schedule or Annex hereto, are
listed on Schedule 1.01(e) and have been delivered to Purchaser or
made available for Purchaser's inspection, and there are no
amendments to or modifications of, or significant agreements of the
parties relating to, any such contract, agreement or commitment
that has not been disclosed to Purchaser, and each such contract,
agreement or commitment is valid and binding on the parties thereto
in accordance with its respective terms. Schedule 1.01(e) includes
a true and complete description of the terms of any unwritten
contract or commitment to which Seller is a party or by which
Seller is bound.
3.13 Litigation and Pending Proceedings. Except as set forth
on Schedule 3.13, there are no claims of any kind or any actions,
suits, proceedings, arbitrations or investigations pending or
threatened in any court or before any governmental agency or
instrumentality or arbitration panel or otherwise against, by or
affecting Seller or the Shareholder, or Seller's business,
prospects or condition (financial or otherwise), or any of Seller's
properties or assets, or that would prevent the performance of this
Agreement or the Other Agreements or any of the transactions
contemplated hereby or thereby, or which declare the same unlawful
or cause the rescission thereof. Seller has complied with and is
not in default in any respect under (and has not been charged or
threatened with, and is not under an investigation with respect to,
any charge concerning any violation of any provision of) any
federal, state or local law, regulation, ordinance, rule or order
(whether executive, judicial, legislative or administrative), or
any order, writ, injunction or decree of any court, agency or
instrumentality.
3.14 Notes and Accounts Receivable. Seller has delivered to
the Purchaser a list of all Accounts Receivable as of the date
hereof attached hereto as Schedule 3.14, which list is true,
correct and complete in all material respects and sets forth the
aging of such Accounts Receivables.
3.15 Permits, Etc. Seller has all Permits that are necessary
for the conduct of its business, and all such Permits are listed on
Schedule 1.01(l). All such Permits are currently in full force and
effect, and no misrepresentations or willful or negligent omissions
were made of any material fact in obtaining any such Permits.
3.16 Intellectual Property. Schedule 3.16 sets forth a true
and complete identification and summary description of all Intel-
lectual Property either owned by Seller or utilized by Seller in
its business ("Seller's Intellectual Property"), including a
description of the nature of Seller's interest therein. Except as
set forth on Schedule 3.16, all of Seller's Intellectual Property
is owned by Seller and is free and clear of all liens, security
interests, charges, encumbrances, equities and other adverse
claims; Seller is not a party to any licenses, consents, settle-
ments or other agreements involving Seller's Intellectual Property;
there are, and have been, no claims, actions or judicial or adver-
sarial proceedings involving Seller's Intellectual Property, and no
such actions or proceedings are threatened or anticipated; Seller
has the right and authority to use Seller's Intellectual Property
in connection with the conduct of its business and such use has not
and will not infringe upon, constitute a misappropriation of, or
otherwise violate the rights of any other person in, any Intellec-
tual Property; and neither Seller nor the Shareholder know of any
past or present occurrences of any probable infringement or
misappropriation of, or violation of Seller's rights in, any of
Seller's Intellectual Property.
3.17 Proprietary Information. Prior to or in conjunction with
the execution of this Agreement, Seller and the Shareholder have
fully disclosed to Purchaser all customer lists, trade secrets,
processes, formulas, methods, know-how and other proprietary
information used or developed by Seller in connection with its
business. Neither Seller nor the Shareholder has disclosed or per-
mitted the disclosure of any such proprietary information to any
other Person, and the use by Seller of such proprietary information
does not violate any other Person's proprietary rights.
3.18 Customers, Etc. Listed on Schedule 3.18 are the names
and addresses of all of Seller's material customers with whom
Seller has done business since 1992, together with the amount of
such business in Seller's current fiscal year. Neither Seller nor
the Shareholder knows, or has any such reasonable grounds to know,
that any such customer has terminated or expects to terminate a
portion of its normal business with Seller or VideoLan Parent, as
a result of the transactions contemplated in this Agreement or
otherwise.
3.19 Employees of Seller. Schedule 3.19 sets forth the names
and job descriptions, and salaries of all of Seller's employees
whose total compensation from Seller for the fiscal year ending
December 31, 1997 will exceed $25,000, together with a statement of
the full amount paid or payable to each such person in respect of
such year.
3.20 Insurance. The tangible real and personal property and
assets, whether owned or leased, of Seller are insured against the
hazards and in the amounts stated in the policies of insurance
listed on Schedule 3.20. Seller carries insurance against personal
injury and property damage to third persons and in respect of its
services and operations and such other insurance as is stated in
the policies of insurance listed on Schedule 3.20. All such
insurance is in full force and effect, is carried with reputable
insurers and, in any event, the insurance carried by Seller in
respect of its physical properties is of an amount and character
such as to prevent Seller from being a co-insurer in respect of any
loss thereto.
3.21 Employment Matters. Except as set forth on Schedule 3.21,
Seller has no employees, employment agreements, collective
bargaining agreements, employee benefit plans or arrangements,
including pension or thrift plans, individual or supplemental
pension or accrued compensation arrangements, contributions to
hospitalization or other health or life insurance programs,
incentive plans, bonus arrangements and vacation, sick leave,
disability and termination arrangements or policies, including
workers' compensation policies.
3.22 Potential Competing Interests. Except as set forth on
Schedule 3.22, neither the Shareholder, nor any officer, director
or employee of Seller, has any direct or indirect interest in any
entity that competes with, is a supplier, customer or sales agent
of, or is engaged in any business of the kind being conducted by,
Seller, and neither the Shareholder, nor any officer, director or
employee of Seller, has any interest, direct or indirect, in any
contract or agreement with, commitment or obligation of or to, or
claim against, Seller. Except as set forth on Schedule 3.22, no
real or personal property in which the Shareholder or any officer,
director or employee of Seller has an interest is used by Seller in
the operation of its business, or located on or at any premises
used by Seller in its business, and no such property is significant
to the operation of Seller's business. On the Effective Date, all
indebtedness owed by, or to the Shareholder and any officer,
director or employee of Seller to, or by, Seller has been paid in
full. All such indebtedness is set forth on Schedule 3.22.
3.23 Health and Safety. Seller has duly complied with, and
its business, operations, assets, equipment, leaseholds and
facilities are in full compliance with, the provisions of all
federal, state and local environmental, health and safety laws,
codes and ordinances, and all rules and regulations promulgated
thereunder.
3.24 Completeness of Statements. No statement, Schedule,
Annex, certificate, information, representation or warranty of
Seller or the Shareholder contained in this Agreement or the Other
Agreements, or furnished by or on behalf of Seller or the Shareholder
to Purchaser or VideoLan Parent or any of their agents pursuant hereto
or thereto, or in connection with the transactions contemplated hereby
or thereby, contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact necessary in order
to make a statement contained herein or therein not misleading. All
representations and warranties of Seller and the Shareholder contained
in this Agreement and in the Other Agreements are true and complete as of
the date hereof.
Section 4
Representations and Warranties of Purchaser
Purchaser represents and warrants to Seller as follows:
4.01 Organization. Purchaser is a corporation duly organized
and validly existing under the laws of the State of Kentucky, and
has full corporate power and authority to own and lease its
properties as such properties are now owned and leased, and to
conduct its business as and where its business is now conducted.
4.02 Authority. Purchaser has full right, power, authority
and capacity to execute and deliver this Agreement and the Other
Agreements to which it is a party, and to perform its obligations
under this Agreement and the Other Agreements to which it is a
party. This Agreement and the Other Agreements to which it is a
party constitute valid and legally binding obligations of Purchaser
and VideoLan Parent, enforceable in accordance with their terms.
4.03 SEC Reports. Copies of the reports filed by VideoLan
Parent with the SEC prior to the execution of this Agreement are
listed on Schedule 4.03 and have been delivered to Seller. Such
documents did not on their effective dates or the date of filing in
the case of reports, contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statement therein, in light of the circumstances
which it was made, not misleading.
Section 5
Closing
5.01 Dates: Place. The closing of the sale and purchase of
the Assets (the "Closing") shall be deemed to take place as of
5:00, p.m. E.S.T., on July 10, 1997. The Closing shall take place
at the offices of Brown, Todd & Heyburn PLLC at 5:00 o'clock p.m.,
E.S.T., on July 10, 1997, or at such other location, time and date
as shall be agreed to in writing by Seller and Purchaser and, if
deemed to be appropriate, the time at which the Closing is deemed
to take place shall also be changed by such writing.
5.02 Delivery by the Seller of Instruments of Transfer.
(a) At the Closing, Seller shall deliver, or cause to be
delivered, to Purchaser declarations duly executed by each of
Seller's employee's stating that each employee has been paid in
full all amounts outstanding or owing such employee by Seller on
the date of the Closing.
(b) At the Closing, Seller shall deliver, or
cause to be delivered, to Purchaser duly executed Officer's Certificates.
(c) At the Closing, Seller shall deliver to Purchaser
the following duly executed instruments:
(i) A general assignment and Bill of Sale to
transfer to Purchaser good and marketable title to all of the
personal property of the Seller to be transferred to Purchaser
pursuant to this Agreement, free and clear of all mortgages,
security interests, liens, claims, pledges, assessments, covenants,
encroachments, title defects and other encumbrances of any kind or
nature whatsoever ("Liens") other than those Liens listed on
Schedule 5.01(c)(i).
(ii) Assignments to the Purchaser of all Contracts
identified on Schedule 1.01(e) that are to be assigned to the
Purchaser pursuant to this Agreement.
(iii) Assignments and Bill of Sale to transfer
to Purchaser goods and marketable title to all of the Inventory in
substantially the form attached as Schedule 1.01(i).
(iv) Any other assignments or appropriate instruments
of transfer in order to transfer all other assets, properties and rights
to be transferred pursuant to this Agreement which would not be
appropriately transferred by the other instruments of transfer referred
to herein.
5.03 Delivery by Purchaser of Certain Instrument.
(a) At the Closing, Purchaser shall deliver to Seller
duly executed stock certificates evidencing the Shares.
(b) At the Closing, Purchaser shall deliver to Seller
copies of the reports filed by VideoLan Parent with the SEC as
listed on Schedule 4.03.
Section 6
Survival of Representations and Warranties--Indemnification
6.01 Survival. Each of the parties' representations, war-
ranties, covenants and agreements (including undisclosed liabili-
ties) set forth in this Agreement shall survive the execution of
this Agreement.
6.02 Indemnity by Seller and the Shareholders. Seller and the
Shareholder shall, jointly and severally, indemnify and hold
Purchaser and VideoLan Parent harmless from and against, and shall
pay to Purchaser and VideoLan Parent the full amount of, any loss,
claim, damage, liability or expense (including reasonable attorneys'
fees) resulting to Purchaser and VideoLan Parent, respectively, either
directly or indirectly, from (a) any litigation pending at the date hereof,
by or affecting Seller, its business or the Assets; (b) any claims against
Purchaser and VideoLan Parent for products liability that are based upon
acts or deeds of Seller or its agents or employees before the date hereof;
(d) any inaccuracy in any representation or warranty, or any breach of any
covenant or agreement, by Seller or the Shareholder contained in this
Agreement or in any of the Other Agreements; and (e) any of the Liabilities,
except for those described on Schedule 2.06.
6.03 Remedies; Right of Offset. Upon the occurrence of any
event for which Purchaser is entitled to indemnification under this
Agreement, it shall have all the rights and remedies in law and in
equity available to it. Without limiting the foregoing, Seller and
the Shareholder hereby agree to pay promptly upon receipt of notice
from Purchaser the amounts that Seller and the Shareholder may owe
to Purchaser from time to time by reason of the provisions of this
Agreement or otherwise. Should Seller or the Shareholder fail or
refuse to pay any such amounts promptly after the request of
Purchaser, then Purchaser, at its election, may from time to time
cancel the number of Contingent Shares and/or Noncontingent Shares
having a fair market value equal to the amounts thus due and owing
to Purchaser.
Section 7
Miscellaneous
7.01 Notices. Any notices or other communications required or
permitted hereunder shall be deemed to have been duly given (a) if
delivered in person and a receipt is given; or (b) if sent by
registered or certified mail, return receipt requested, postage
prepaid, and addressed as follows:
(a) If to Seller or the Shareholder:
Video and Communication Solutions, Inc.
3100 Arapahoe Avenue., Suite 503
Boulder, CO 80303
Attn: Steve Muzzo
with a copy to:
_______________________________
_______________________________
_______________________________
Attn: _________________________
(b) If to Purchaser:
IL Acquisition Corp.
11403 Bluegrass Parkway, Suite 400
Louisville, KY 40299
Attn: Jack Shirman
with a copy to:
Brown, Todd & Heyburn PLLC
3200 Providian Center
Louisville, Kentucky 40202-3363
Attn: William G. Strench
(c) If to VideoLan Parent:
VideoLan Technologies, Inc.
11403 Bluegrass Parkway, Suite 400
Louisville, KY 40299
Attn: Jack Shirman
with a copy to:
Brown, Todd & Heyburn PLLC
3200 Providian Center
Louisville, Kentucky 40202-3363
Attn: William G. Strench
or if sent to such substituted address as any of the parties has
given to the others in writing in accordance with this Section
7.01.
7.02 Waivers. No waiver or failure to insist upon strict
compliance with any obligation, covenant, agreement or condition
of this Agreement shall operate as a waiver of, or an estoppel
with respect to, any subsequent or other failure.
7.03 Expenses. Each party shall assume its respective
expenses incurred in connection with the transactions contem-
plated by this Agreement.
7.04 Headings; Interpretation. The headings in this Agree-
ment have been included solely for ease of reference and shall
not be considered in the interpretation or construction of this
Agreement. All references herein to the masculine, neuter or
singular shall be construed to include the masculine, feminine,
neuter or plural, as appropriate.
7.05 Annexes and Schedules. The Annexes and Schedules to
this Agreement are incorporated herein by reference and expressly
made a part hereof.
7.06 Entire Agreement. All prior negotiations and agree-
ments by and among the parties hereto with respect to the subject
matter hereof are superseded by this Agreement, and there are no
representations, warranties, understandings or agreements with
respect to the subject matter hereof other than those expressly
set forth herein or on an Annex or Schedule delivered in connec-
tion herewith.
7.07 Representations and Warranties, Etc. The representa-
tions and warranties of each party contained herein shall not be
deemed to be waived or otherwise affected by any investigation
made by any other party hereto. As used in this Agreement, the
terms "Shareholder's knowledge" and "Seller's knowledge," and all
other references to matters that are known by or to the Share-
holders or Seller, shall refer to matters that are known, or
that with the exercise of reasonable care should have been known,
by the Shareholder or Seller after consultation with Seller's
current corporate officers, directors, and managers and after
their due investigation of corporate records (except that if the
Shareholder or Seller are required to make "due inquiry" with
respect to any matter, they shall make such additional inquiry as
a reasonable person would make under the circumstances).
7.08 Governing Law. This Agreement shall be governed by,
and construed and interpreted in accordance with, the laws of the
Commonwealth of Kentucky. Each party agrees that any action
brought in connection with this Agreement against another shall
be filed and heard in Jefferson County, Kentucky, and each party
hereby submits to the jurisdiction of the Circuit Court of
Jefferson County, Kentucky, and the U.S. District Court for the
Western District of Kentucky, Louisville Division.
7.09 Brokers. The parties covenant and agree with one
another that they have not dealt with any broker or finder in
connection with any of the transactions contemplated in this
Agreement and, insofar as they know, no broker or other Person is
entitled to a commission or finders' fee in connection with these
transactions. Each party shall indemnify and hold the other par-
ties harmless from and against any claim by any agent or broker
claiming by or through it for any fee or other compensation due
or allegedly due that broker or agent.
7.10 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but
all of which together shall constitute one and the same instrument.
7.11 Severability. If any provision of this Agreement or
its application will be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of all other
applications of that provision, and of all other provisions and
applications hereof, will not in any way be affected or impaired.
If any court shall determine that any provision of this Agreement
is in any way unenforceable, such provision shall be reduced to
whatever extent is necessary to make such provision enforceable.
7.12 Benefit and Binding Effect. This Agreement shall be
binding upon, and shall inure to the benefit of, Purchaser,
VideoLan Parent, Seller and the Shareholder and each of their
successors and assigns; provided, however, that no party to this
Agreement shall assign his or its rights or obligations hereunder
without the express written consent of the other parties, which
consent shall not be unreasonably withheld.
7.13 Further Assurances. From time to time at another
party's request and without further consideration, a party shall
execute and deliver such further instruments of conveyance,
assignment and transfer, and take such other actions as the
requesting party may reasonably request, in order to more effec-
tively convey and transfer any of the Assets. In addition, any
monies collected by a party that are due and payable to another
party will be promptly remitted to such party upon receipt
thereof.
7.14 Prorations and Adjustments. All income and operating
expenses pertaining to the conduct and operation of Seller's
business have been prorated as of the date hereof, so that, as
between Seller, Purchaser and VideoLan Parent, Seller shall
receive all revenues and be responsible for all expenses, costs
and liabilities (including, but not limited to, accrued employee
vacation expenses, salaries, ad valorem property taxes, lease
payments, etc.) allocable to the period prior to the date hereof,
and Purchaser and VideoLan Parent shall receive all revenues and
be responsible for all expenses, costs and liabilities allocable
to the date hereof and thereafter.
7.15 Sales and Transfer Taxes and Fees. All sales and
transfer taxes, and all recording, filing and other fees (including
any penalties or interest), incurred in connection with this
Agreement and the transactions contemplated hereby will be borne
by Seller. The parties will assist each other in the filing of
all necessary tax returns and other documentation with respect to
all such taxes and fees, and, if required by applicable law, will
join in the execution of any such tax returns or other documentation.
IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the date set forth in the preamble hereto.
IL ACQUISITION CORP.
By:________________________________
Title:_____________________________
VIDEO AND COMMUNICATION
SOLUTIONS, INC.
By:________________________________
Paul Cummings, President
VIDEOLAN TECHNOLOGIES, INC.
By:________________________________
Jack Shirman, Chief Executive
Officer
GCH ACQUISITION PARTNERS, LTD.
Growth Capital Holdings,
Inc., General Partner
By:________________________________
Steve Muzzo, President
GROWTH CAPITAL HOLDINGS, INC.
By:________________________________
Steve Muzzo, President