ASSET PURCHASE AGREEMENT
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This ASSET PURCHASE AGREEMENT (the "Agreement") is made and is entered into this
_____ day of ________________________, 2002, by, between and among ▇▇▇▇▇▇▇
SELECT INTEGRATION SOLUTIONS, INC. (Purchaser"), VERITY SOLUTIONS, LLC, an Ohio
limited liability company (Seller), and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ("▇. ▇▇▇▇▇▇▇▇▇")
(hereinafter referred to as the Member").
W I T N E S S E T H :
WHEREAS, Seller is a full service provider of a variety of information
technology consulting service and support solutions, involving enterprise
management, network infrastructure, network operating systems, and various
desktop technologies relating to custom development, applications training,
version upgrades, database management support and data warehousing and reporting
solutions to large and medium size commercial and other professional customers
throughout the Northern Ohio area; and
WHEREAS, Member is the owner of one hundred percent (100%) of the membership
interest of Seller; and-
WHEREAS, Purchaser is a single source provider of integrated desktop management
and network services including life cycle services, internetworking services,
and end user support services; and
WHEREAS, Purchaser is a wholly owned subsidiary of ▇▇▇▇▇▇▇ Computer Resources,
Inc. (PCR), which is in the business of marketing and selling a broad range of
microcomputers and related products, including equipment selection, procurement
and configuration; and
WHEREAS, Purchaser desires to purchase certain of the assets of Seller used in
its information technology consulting service and support solutions business
(the Business), and assume certain of the liabilities of the Seller in
connection with the Business, and Seller desires to sell certain of such assets,
subject to such liabilities, but only upon (i) the terms and subject to the
conditions set forth in this Agreement, (ii) the representations, warranties,
covenants, indemnifications, assurances and undertakings of the Seller, the
Member and of Purchaser contained in this Agreement, (iii) the agreement of the
Seller to refrain from competition with Purchaser for the term set forth in its
Non-Competition Agreement, (iv) the agreement of the Member to refrain from
competition for the term set forth in his Non-Competition Agreement.
NOW, THEREFORE, in consideration of the above premises and the mutual promises,
covenants, agreements, representations and warranties herein contained, the
parties hereto agree as follows:
1.
DEFINITIONS
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1.1 Affiliate. "Affiliate" shall have the meaning ascribed to such term in
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Rule 405 promulgated under the Securities Act of 1933, as amended.
1.2 Assumed Liabilities. The "Assumed Liabilities are the liabilities of
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Seller assumed or paid at Closing by Purchaser pursuant to Section 3.1
of this Agreement.
1.3 Balance Sheet. The "Balance Sheet" is the unaudited balance sheet of
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Seller as of July 31, 2002, included as part of the Financial
Statements.
1.4 Closing. The "Closing" shall be the consummation of the transactions
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contemplated under this Asset Purchase Agreement.
1.5 Closing Date. The "Closing Date" shall be as of 9:00 a.m., E.D.T.,
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August 30, 2002.
1.6 Code. The "Code" is the Internal Revenue Code of 1986, as amended, 26
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U.S.C. 1 et seq.
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1.7 Court. A "Court" is any federal, state, municipal, domestic, foreign
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or other governmental tribunal or an arbitrator or person with similar
power or authority.
1.8 Disclosure Schedule. The "Disclosure Schedule" is the Disclosure
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Schedule dated the date of this Agreement and delivered by Seller to
Purchaser.
1.9 Encumbrance. An "Encumbrance" is any security interest, lien, or
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encumbrance whether imposed by agreement, law or otherwise, on any of
the Purchased Assets (as defined herein).
1.10 Excluded Assets. An "Excluded Asset" is any asset set forth in Section
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2.3.
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1.11 Financial Statements. The "Financial Statements" are the unaudited
---------------------
financial statements of Seller for the years ending December 31, 2001,
including any and all notes thereto, and the unaudited financial
statements of the Seller for the period commencing January 1, 2002 and
ending July 31, 2002, including any and all notes thereto.
1.12 Funded Debt. "Interest Bearing Debt" of Seller related to the Business
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as reflected on the Pro Forma Balance Sheet.
1.13 Governmental Entity. A "Governmental Entity" is any Court or any
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federal, state, municipal, domestic, foreign or other administrative
agency, department, commission, board, bureau or other governmental
authority or instrumentality.
1.14 Knowledge of Seller and Member or Sellers Knowledge. "Knowledge of
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Seller and Member and/or Sellers Knowledge" shall mean actual
knowledge of the Member.
1.15 Net Asset Amount. "Net Asset Amount" shall have the meaning set forth
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in Section 5.1.
1.16 2002 EBIT. The earnings before interest and taxes of Seller for the
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period commencing January 1, 2002 and ending upon the Closing Date and
for Purchasers Verity Solutions Division for the period commencing on
the Closing Date and ending December 31, 2002, as set forth in Section
5.2. The determination of the 2002 EBIT shall be determined in
accordance with the provisions set forth in Section 5.2.
1.17 NPBT. The net profit before taxes of Purchasers Verity Solutions
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Division for the applicable period as set forth in Section 4.4. The
determination of NPBT shall be determined in accordance with the
provisions set forth in Section 4.5.
1.18 Person. Any natural person, firm, partnership, association,
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corporation, company, limited liability company, limited partnership,
trust, business trust, governmental authority or other entity.
1.19 Pro Forma Balance Sheet. The "Pro Forma Balance Sheet" is the balance
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sheet of Seller prepared as described in Section 5.1 and adjusted for
Excluded Assets of Seller and Excluded Liabilities relating to the
Business of Seller as of the Closing Date.
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1.20 Purchase Price. The "Purchase Price" is the total consideration paid
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by Purchaser to Seller for the Purchased Assets as set forth in
Sections 4.1 and 4.4.
1.21 Purchased Assets. The "Purchased Assets" are the assets of Seller used
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in the Business, acquired by Purchaser pursuant to the terms of this
Agreement.
1.22 Sellers Accountant. "Sellers Accountant" shall mean Zion, Smorag &
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Associates.
1.23 July 31 Pro-Forma Balance Sheet. The "July 31 Pro-Forma Balance Sheet"
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is the unaudited balance sheet of the Seller adjusted for Excluded
Assets and Excluded Liabilities of Seller relating to the Business as
of July 31, 2002.
1.24 Tax or Taxes. Any federal, state, provincial, local, foreign or other
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income, alternative, minimum, any taxes under Section 1374 of the
Code, any taxes under Section 1375 of the Code, accumulated earnings,
personal holding company, franchise, capital stock, net worth,
capital, profits, windfall profits, gross receipts, value added,
sales, use, goods and services, excise, customs duties, transfer,
conveyance, mortgage, registration, stamp, documentary, recording,
premium, severance, environmental, including taxes under Section 59A
of the Code), real property, personal property, ad valorem,
intangibles, rent, occupancy, license, occupational, employment,
unemployment insurance, social security, disability, workers'
compensation, payroll, health care, withholding, estimated or other
similar tax, duty or other governmental charge or assessment or
deficiencies thereof (including all interest and penalties thereon and
additions thereto whether disputed or not).
1.25 Tax Return. A "Tax Return" is a report, return or other information
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required to be supplied to a Governmental Entity in connection with
Taxes including, where permitted or required, combined or consolidated
returns for any group of entities that includes Seller.
2.
TERMS
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2.1 Agreement.
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Seller agrees to sell and convey to Purchaser the Purchased Assets as
hereinafter set forth in Section 2.2 owned by such entity. Purchaser
agrees to purchase the Purchased Assets. The agreements of
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Purchaser and Seller are expressly conditioned upon the terms,
conditions, covenants, representations and warranties as hereinafter
set forth.
2.2 Assets to be Sold by Seller and Purchased by Purchaser.
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At the Closing of this transaction, Purchaser shall purchase and
Seller shall sell the assets of Seller used in the Business, except
for the Excluded Assets relating to the Business. The Purchased Assets
shall include, but not be limited to:
(a) All tangible personal property and assets of Seller of every kind
and description, real, personal or mixed, wherever located, used
in the Business, including without limitation, all such assets as
reflected on the July 31, 2002 Pro Forma Balance Sheet (excepting
those assets disposed of, and including those assets acquired, in
the ordinary course of business since the date of the July 31,
2002 Pro Forma Balance Sheet);
(b) All intangible assets of Seller which are used in the Business of
the Seller, including without limitation, all purchase orders,
contract rights and agreements, work in process, customer lists,
supplier agreements, patents, trademarks and service marks
(including the goodwill associated with the marks), office
supplies, computer programs, claims of Seller, the right to use
of the limited liability company name and trade names of or used
by Seller, or any derivative thereof, as all or part of the
limited liability company or trade name;
(c) All investment securities, cash and cash equivalents and customer
notes receivable relating to the Business;
(d) All accounts receivable and vendor receivables relating to the
Business;
(e) Certain vehicles of Seller set forth on attached Exhibit A;
(f) All prepaid expenses applicable to the Business, including but
not limited to all prepaid software licenses;
(g) All of Sellers fixed rate contracts and time and material
contracts relating to the Business;
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(h) All vendor rebates, spiff money, retainage amounts under any
contracts and any customer deposits relating to the Business;
(i) All of Sellers service contracts relating to the Business;
(j) All of Sellers consulting contracts relating to the Business;
(k) All distribution contracts and authorizations of Seller relating
to the Business;
(l) All base artwork, photo materials, plates (if owned by Seller),
separations and other materials that are used by Seller for
printing brochures and promotional materials including all
intellectual property rights therein relating to the Business;
(m) The assignment of any telephone numbers, telefax numbers, e-mail
addresses and internet websites used in the Business of Seller;
(n) The entire right, title, benefit and interest of Seller now
existing or hereafter arising, in or to all indemnities,
guaranties, warranties, claims and CHOSES of action of Seller
against other parties with respect to the Purchased Assets,
including by way of example and not limitation, any rights under
insurance policies and any other rights thereunder, but only with
respect to the Purchased Assets;
(o) All of Sellers books, records, files, correspondence, manuals,
documents, agreements, lists and other writings used in or
relating to the Business, including paid accounts payable, paid
accounts receivable, purchase, sales, customer, representative,
marketing, advertising, distribution, operations, personnel,
research and development records, data, information and
materials;
(p) Sellers rights under the agreements set forth in Schedule 2.2(p)
with respect to the parties set forth therein, pursuant to which
such parties agreed not to disclose, use or communicate
information regarding such parties business (which is part of the
Business) and not to engage in certain activities competitive
with the Business; and
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(q) All other fees, assets, property, business and going concern
value, and rights of Seller (including the rights under covenants
or agreements not to disclose confidential information or not to
compete, if any) and rights under the respective asset purchase
agreements, stock purchase agreements or other documents set
forth on Disclosure Schedule 2.2(q) (and related documents)
pursuant to which Seller acquired certain of the assets of the
parties set forth in such Disclosure Schedule.
2.3 Excluded Assets.
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The Excluded Assets are set forth on Exhibit B hereto.
2.4 Lease Agreements.
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Seller is the lessee under certain lease agreements of real and
personal properties as listed on Schedule 2.4:
(the "Leases")
At the Closing, Seller and Purchaser shall execute necessary
documentation for the assignment of Leases and all of Seller's right
and interest thereunder to Purchaser, as agreed upon by the parties
and, at the Closing, Seller shall assign all its respective rights and
interest in said Leases to Purchaser. Seller and Purchaser shall use
best efforts to obtain terminations of any personal guarantees
relating to such Leases. Purchaser agrees to indemnify, defend and
hold Seller and the Member harmless from any loss, damage, claim,
liability or deficiency with respect to the obligations and
liabilities of Seller under the aforementioned leases arising or
accruing after the Closing Date which is assumed by Purchaser. To the
extent that the assignment of any Lease shall require the consent of
other parties thereto, this Agreement shall not constitute an
assignment thereof and Seller shall obtain any such necessary consents
or assignments by the Closing, or as reasonably possible after the
Closing.
2.5 Instruments of Transfer.
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Except as otherwise provided herein, at Closing, Seller will deliver
to Purchaser such bills of sale, endorsements, assignments and other
good and sufficient instruments of transfer and assignment as shall be
effective to vest in Purchaser good title and interest in and to the
Purchased Assets. At or
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after the Closing, and without further consideration, Seller will
execute and deliver to Purchaser such further instruments of
conveyance and transfer and take such other action as Purchaser may
reasonably request in order to more effectively convey and transfer to
Purchaser any of the Purchased Assets or for aiding and assisting and
collecting and reducing to possession and exercising rights with
respect thereto. Seller and Member agree to use their best efforts to
obtain and deliver to Purchaser such consents, approvals, assurances
and statements from third parties as Purchaser may reasonably require
in a form reasonably satisfactory to Purchaser. In addition to the
foregoing, Seller will deliver to Purchaser the originals or copies of
all of Seller's books, records and other data relating to the
Purchased Assets; and simultaneously with such delivery, Seller shall
take all such acts as may be necessary to put Purchaser in actual
possession and operating control of the Purchased Assets. Seller shall
cooperate with Purchaser to permit such parties, if possible, to enjoy
such Sellers ratings and benefits under workmen's compensation laws
and unemployment compensation laws to the extent permitted by such
laws.
2.6 Instruments Giving Certain Powers and Rights.
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At the Closing, Seller shall, by appropriate instrument, constitute
and appoint Purchaser, its successors and assigns, the true and lawful
attorney of Seller with full power of substitution, in the name of
Purchaser or the name of Seller, on behalf of and for the benefit of
Purchaser, to collect all accounts receivable and/or vendor
receivables and other items being transferred and assigned to
Purchaser as provided herein, to endorse, without recourse, any and
all checks in the name of Seller the proceeds of which Purchaser is
entitled to hereunder, to institute and prosecute, in the name of
Seller or otherwise, all proceedings which Purchaser may deem proper
in order to collect, assert or enforce any claim, right or title of
any kind in or to the Purchased Assets, to defend and compromise any
and all actions, suits and proceedings in respect of any of the
Purchased Assets, and to do all such acts and things in relation
thereto as such party may deem advisable. Purchaser shall provide
Seller with notice of any collection action(s) instituted by it under
this provision. Seller agrees that the foregoing powers are coupled
with an interest and shall be irrevocable by the Seller, directly or
indirectly, by the dissolution of Seller or in any manner or for any
reason. Seller further agrees that Purchaser shall retain for its own
respective account any amounts collected pursuant to the foregoing
powers, and Seller shall pay or transfer to Purchaser, if and when
received, any amounts which shall be received by Seller after the
Closing in respect of any such receivables or other assets,
properties, rights or business to be transferred and assigned to
Purchaser as provided herein. Seller further agrees that, at any time
or from time to time after the Closing, it will, upon the request of
Purchaser
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and at Seller's expense, do, execute, acknowledge and deliver, or will
cause to be done, executed, acknowledged or delivered, all such
further reasonable acts, assignments, transfers, powers of attorney or
assurances as may be required in order to further transfer, assign,
grant, assure and confirm to Purchaser, or to aid and assist in the
collection or granting of possession by Purchaser, of any of the
Purchased Assets, or to vest in Purchaser good and marketable title to
the Purchased Assets.
To the extent that any assignment does not result in a complete
transfer of the contracts to Purchaser because of a provision in any
contract against Seller's assignment of any its right thereunder,
Seller shall cooperate with Purchaser in any reasonable manner
proposed by Purchaser to complete the acquisition of the contracts and
Seller's rights, benefits and privileges thereunder in order to
fulfill and carry out Seller's obligations under this Agreement. Such
additional action may include, but is not limited to: (i) entering
into a subcontract between Seller and Purchaser which allows such
party to perform Seller's duties under such contracts and to enforce
Seller's rights thereunder; (ii) entering into a new multi-party
agreement with such customers which allows Purchaser to perform
Seller's obligations and enforce Seller's rights under the contracts.
3.
ASSIGNMENT OF LIABILITIES
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3.1 Liabilities to be Paid Off at Closing or Assumed by Purchaser.
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A. At the Closing, Purchaser shall assume and pay off or discharge
(or pay to Seller, who will discharge) when due (and secure the
release of Seller and Member from any and all personal liability
or guaranty with respect to such obligation), the following:
(i) Sellers obligation to FirstMerit Bank, N.A. under a credit
facility, the outstanding amount of which on July 31, 2002
is Two Hundred Thirty-Five Thousand Dollars ($235,000.00),
plus accrued interest, and as of the Closing Date is
$235,397.61, which is collateralized by a security interest
in Sellers assets;
(ii) All of the trade accounts payable of the Seller relating to
the Business incurred in the ordinary course of business
consistent with Sellers prior practices, the outstanding
amount of which is $4,670.75 on July 31, 2002, and as may be
incurred, increased
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or decreased since July 31, 2002 to the Pro Forma Balance
Sheet for operations in the ordinary course of business or
any other transaction provided by this Agreement, and
subject to the satisfaction of the Net Asset Amount
requirement set forth in Section 4.1(d) as of the Closing
Date.
(iii) All of the obligations and liabilities of Seller arising
after the Closing under the contracts described in Section
2.2 and the Leases described in Section 2.4.
The Assumed Liabilities to be paid off as set forth in Section
3.1 A. (i)-(ii), as may be incurred, increased or decreased since
the July 31, 2002 Pro Forma Balance Sheet to the Pro Forma
Balance Sheet for operations in the ordinary course of business
or any other transaction permitted by this Agreement, and subject
to the satisfaction of the Net Asset Amount requirement set forth
in Section 4.1(d) as of the Closing Date.
It is intent of the parties that Purchaser shall pay off at
Closing, or assume and pay off or discharge when due, all
obligations of Seller set forth in Section 3.1.A above for which
the Member has personal liability and Purchaser agrees to use its
best efforts to secure the release of such Member from such
liability after the Closing if such releases are not secured
prior to Closing.
B. Purchaser shall pay to Seller at Closing, the sum of Twenty-Four
Thousand Three Hundred Five Dollars and Fifty-Seven Cents
($24,305.57), which represents the amount of Seller's accrued
payroll and taxes and accrued travel and entertainment expenses
as of August 30, 2002. Seller, upon receipt, agrees to use such
funds to pay off such accrued expenses.
C Purchaser agrees to indemnify, defend and hold Seller and Member
harmless from any loss, damage, claim, liability or deficiency
with respect to Assumed Liabilities.
3.2 Excluded Liabilities.
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Notwithstanding anything in this Agreement to the contrary, Purchaser
shall not assume or become responsible for any claim, liability or
obligation of any nature whatsoever, whether known or unknown,
accrued, absolute, contingent or otherwise (a "Liability") of Seller
except the Assumed Liabilities that are specifically assumed by such
party. Without limiting the generality of the foregoing, the following
are included among the Liabilities of Seller which Purchaser shall not
assume or become responsible for (unless specifically included as
Assumed Liabilities):
(a) all Liabilities for any Taxes whether deferred or which have
accrued or may accrue or become
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due and payable by Seller either prior to, on or after the
Closing Date, including, without limitation, all Taxes and fees
of a similar nature arising from the sale and transfer of the
Purchased Assets to Purchaser;
(b) all Liabilities to any current or former members, directors,
officers, employees or agents of Seller, including, without
limitation, all Liabilities and obligations for wages, salary,
bonuses, commissions, vacation or severance pay, deferred
compensation, retirement pay, profit sharing or pension benefits,
and all Liabilities arising under any bonus, commission, salary
or compensation plans or arrangements, whether accruing prior to,
on or after the Closing Date;
(c) all Liabilities with respect to unemployment compensation claims
and workers compensation claims and claims for race, age and sex
discrimination or sexual harassment or for unfair labor practice
based on or arising from occurrences, circumstances or events, or
exposure to conditions, existing or occurring prior to the
Closing Date and for which any claim may be asserted by any of
Sellers employees, prior to, on or after the Closing Date;
(d) all Liabilities of Seller to third parties for personal injury or
damage to property based on or arising from occurrences,
circumstances or events, or exposure to conditions, existing or
occurring prior to the Closing Date and for which any claim may
be asserted by any third party prior to, on or after the Closing
Date;
(e) all Liabilities of Seller arising under or by virtue of federal
or state environmental laws based on or arising from occurrences,
circumstances or events, or exposure to conditions, existing or
occurring prior to the Closing Date and for which any claim may
be asserted prior to, on or after the Closing Date;
(f) all Liabilities of Seller including any costs of attorneys' fees
incurred in connection therewith, for litigation, claims, demands
or governmental proceedings arising from occurrences,
circumstances or events, or exposure to conditions occurring or
existing prior to the Closing Date, and which may be asserted or
commenced prior to, on or after the Closing Date;
(g) all Liabilities based on any theory of liability or product
warranty with respect to any product manufactured or sold prior
to the Closing Date and for which any claim may be asserted by
any third party, prior to, on or after the Closing Date;
(h) all attorneys' fees, accountants or auditors' fees, and other
costs and expenses incurred by Seller and/or the Member in
connection with the negotiation, preparation and performance of
this Agreement or any of the transactions contemplated hereby;
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(i) all Liabilities of Seller in connection with the Excluded Assets;
(j) all Liabilities of Seller with respect to any options, warrants,
agreements or convertible or other rights to acquire any
membership interest in Seller;
(k) all Liabilities of Seller incurred incident to any
indemnification for breach of any representations, warranties,
covenants, or other agreements made by Seller under any of the
asset purchase, stock, reorganization, or other legal
transaction(s) set forth in Disclosure Schedule 2.2(q);
(l) all Liabilities of Seller with respect to any loans or advances
made by the Member or any Affiliate to Seller;
(m) all other debts, Liabilities, obligations, contracts and
commitments (whether direct or indirect, known or unknown,
contingent or fixed, liquidated or unliquidated, and whether now
or hereinafter arising) arising out of or relating to the
ownership, operation or use of any of the Purchased Assets on or
prior to the Closing Date or the conduct of the Business of
Seller prior to the Closing Date, except only for the liabilities
and obligations to be assumed or paid, performed or discharged by
Purchaser constituting Assumed Liabilities; and
(n) all Liabilities of Seller with respect to any unpaid sales tax as
of the Closing Date related to accounts receivable as of such
date.
Seller shall pay all liabilities not being assumed hereunder by
Purchaser within the customary time for payment of such liabilities.
It is the intent of the parties that upon Closing, all employees of
Seller will be terminated by Seller and Purchaser will extend offers
of employment to such individuals.
4.
CONSIDERATION FOR THE PURCHASED ASSETS
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4.1 Purchase Price for the Purchased Assets.
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Subject to the other terms of this Agreement, the Purchase Price for
the Purchased Assets shall be the sum of:
(a) Five Hundred Twenty-Four Thousand Three Hundred Dollars
($524,300.00), less the amount of any Funded Debt of Seller in
excess of Two Hundred Thirty-Five Thousand Dollars ($235,000.00)
as of the Closing Date;
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(b) The liabilities assumed or paid off at Closing under Section 3.1;
and
(c) Any amount that may be paid pursuant to Section 4.4 that is
allocated to the Purchase Price.
The sum of the items contained in Sections 4.1(a), (b) and (c) above
shall be adjusted by the amounts determined under Sections 4.1(d)
and/or (e), as follows:
(d) If the deficit in the Net Asset Amount of the Seller as of the
Closing Date as shown on the Pro Forma Balance Sheet is greater
than negative Twenty-Five Thousand Dollars ($-25,000.00), the
Purchase Price shall be decreased on a dollar-for-dollar basis
equal to the difference between $-25,000.00 and such amount. In
the event the deficit in the Net Asset Amount of the Seller as of
the Closing Date is less than $-25,000.00, no increase to the
Purchase Price shall be made under this Section 4.1(d). The
determination of the Net Asset Amount shall be made in the manner
provided for in Section 5.1 hereof.
(e) If the 2002 EBIT is more than ten percent (10%) below the amount
of One Hundred Forty-Nine Thousand Eight Hundred Dollars
($149,800.00), or One Hundred Thirty-Four Thousand Eight Hundred
Twenty Dollars ($134,820.00), the Purchase Price shall be
decreased by any shortfall below such amount, multiplied by six
(6). In the event the 2002 EBIT was $130,000.00, the adjustment
hereunder would be $28,920.00 ($4,820.00 x 6). Any reduction to
the Purchase Price hereunder will be set off proportionately
against the promissory note described in Section 4.2(b) and the
cash paid at Closing as set forth in Section 4.2(a). If the 2002
EBIT is equal to or greater than One Hundred Thirty-Four Thousand
Eight Hundred Twenty Dollars ($134,820.00), but less than or
equal to One Hundred Forty-Nine Thousand Eight Hundred Dollars
($149,800.00), no adjustment to the Purchase Price shall be made
under this Section 4.1(e). In the event that the 2002 EBIT is
greater than One Hundred Forty-Nine Thousand Eight Hundred
Dollars ($149,800.00), no increase to the Purchase Price shall be
made under this Section 4.1(e). The determination of the 2002
EBIT shall be made in the manner provided for in Section 5.2
hereof.
4.2 Payment of the Purchase Price for the Purchased Assets.
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Subject to the conditions, covenants, representations and warranties
hereof, at Closing, Purchaser shall deliver:
(a) By certified or bank cashier's check or by wire transfer to
Seller, the amount of Three Hundred Forty Thousand Seven Hundred
Ninety-Five Dollars ($340,795.00), as may be adjusted by the
amount of Sellers Funded Debt assumed or paid off by Purchaser
under Section 3.1(a) in excess of Two Hundred Thirty-Five
Thousand Dollars ($235,000.00) as of the Closing Date;
(b) The remaining sum of One Hundred Eighty-Three Thousand Five
Hundred Five Dollars ($183,505.00) shall be payable to Seller
pursuant to the terms of Purchasers subordinated promissory note.
The note shall bear interest at the prime rate of Chase Manhattan
Bank as of the date of Closing. The principal of the note shall
be payable in full on the first annual
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anniversary of the Closing. Interest on the unpaid principal
balance of the note shall be paid quarterly with the first
interest payment being due and payable ninety (90) days from
Closing. Such note and all obligations of Purchaser thereunder
will be subordinated and made junior in right of payment to the
extent and in the manner provided in a Subordination Agreement to
be executed between Deutsche Financial Services Corporation, as
Administrative Agent for itself and other lenders, and Purchaser
and Seller. A copy of said note is attached hereto as Exhibit D.
Such note shall be subordinate to Purchasers lenders pursuant to
the terms of a Subordination Agreement in the form attached
hereto as Exhibit E. The obligation of Purchaser under said note
shall be guaranteed by PCR in the form attached hereto as Exhibit
F.
(c) The Assumed Liabilities assumed or paid off under Section 3.1.
4.3 Allocation of Purchase Price.
-------------------------------
The Purchase Price to be paid to the Seller hereunder, including the
liabilities assumed or paid by Purchaser pursuant to Section 3.1,
shall be allocated as set forth on Exhibit G attached hereto. Seller
and Purchaser and Member agree that each shall act in a manner
consistent with such allocation in (a) filing Internal Revenue Form
8594; and (b) in paying sales and other transfer taxes in connection
with the purchase and sale of assets pursuant to this Agreement.
4.4 Potential Adjustment to Purchase Price.
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If the Net Profits Before Taxes ("NPBT") of Purchaser's Verity
Solutions Division during any of fiscal years 2003, 2004 and 2005
exceed the applicable NPBT threshold for such year set forth below:
Fiscal Year 2003 $126,800
Fiscal Year 2004 - $176,800
Fiscal Year 2005 - $226,800
Purchaser shall pay Seller, by bank check or wiring, within ninety
(90) days following the end of the fiscal year, fifty percent (50%) of
the NPBT of Purchaser's Verity Solutions Division in excess of the
NPBT threshold for the applicable year, subject to a cumulative
limitation of One Million Dollars ($1,000,000.00) during such
aggregate period. Any NPBT shortfall in any year shall not be offset
against any excess NPBT in any subsequent year(s) hereunder, it being
the intent of the parties that the NPBT set forth herein shall apply
to each applicable year separately, subject, however, to the
cumulative limitation of $1,000,000.00 during such aggregate period.
Such cash payment by Purchaser shall be additional Purchase Price,
which will be added to the goodwill allocation of the Purchase Price.
14
4.5 Operation of and Accounting for Purchasers Verity Solutions Division
----------------------------------------------------------------------
and Procedure for Determination of NPBT.
--------------------------------------------
For purposes of this Agreement, "Purchasers Verity Solutions Division"
shall be defined as the Business acquired from Seller by Purchaser
pursuant to an Asset Purchase Agreement of even date., and any
additions, expansions, growth or enhancements thereof that may occur
after the date of this Agreement, Purchaser agrees that commencing
January 6, 2003, the term "Verity Solutions Division" shall include
Purchaser's existing Cleveland, Ohio branch.
For purposes of Section 4.4, the term NPBT" shall mean the net profit
before taxes of Purchasers Verity Solutions Division during the
applicable period. The NPBT shall be determined by the
internally-generated financial statements for Purchaser's Verity
Solutions Division determined in accordance with generally accepted
accounting principles, consistently applied (Verity Books of Account),
provided that (i) for the period commencing January 6, 2003 through
the end of Fiscal Year 2003, the Verity Books of Account will provide
for a 1.5% MAS royalty fee and a .3% Ad Fund royalty fee on the gross
sales by Purchasers Verity Solutions Division during such period. The
parties shall exercise good faith in effectuating the implementation
of said Astea Accounting System at Purchasers Verity Solutions
Division; (ii) for Fiscal Years 2004 and 2005, the MAS royalty fee and
Ad Fund royalty fee included in the Verity Books of Account, shall be
in amounts agreed to, in good faith, by the parties based on the level
of services and support being provided by Purchaser to its Verity
Solutions Division, provided, however, if the parties are unable to
come to an agreement for the amount of the MAS royalty fee and/or the
Ad Fund royalty fee for either such Fiscal Year, the MAS royalty fee
shall be 1.5% and the Ad Fund royalty fee shall be .3%, (iii) no
effect shall be given on the Verity Books of Account to any gain or
loss attributable to any sale of assets or services by Purchasers
Verity Solutions Division outside the ordinary course of business,
except as agreed to by the parties, (iv) no effect shall be given to
any increase in the amounts of depreciation, amortization or other
expense or deduction taken on tangible or intangible assets of
Purchaser if such increase is attributable to a revaluation of said
assets incident to their acquisition pursuant to the terms of this
Agreement, (v) no items of income or expense from any business of
Purchaser from its other branches that is relocated to Purchasers
Verity Solutions Division will be included in the Verity Books of
Account, unless it is mutually agreed upon by the parties to include
such income or expense in the Verity Books of Account, (vi) any
payment made to Seller pursuant to Section 4.4 shall not be charged
against NPBT for any year (vii) except as noted above with respect to
the MAS royalty fee and Ad Fund royalty fee, no indirect income or
expense allocations (such as overhead or other corporate allocation)
will be allocated to Purchasers Verity Solutions Division, unless such
items are reasonably calculated to contribute to the increase in
profits of Purchasers Verity Solutions Division and are agreed to by
the parties, it being the intent of the parties that Purchaser shall
exercise utmost
15
good faith with respect to allocations of income and expense to
Purchasers Verity Solutions Division, and (viii) any expense charged
to Purchaser's Verity Solutions Division for signing bonuses to be
paid to ▇▇▇▇▇ Wetherhill and ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ shall be amortized
over the term of their respective Employment Agreements with
Purchaser.
The determination of NPBT shall be subject to verification as set
forth in this Section 4.5. Within ninety (90) days after the end of
each fiscal year or period described herein in Section 4.4, Purchaser
will deliver to Seller a copy of the report of NPBT prepared by
Purchaser for the subject period, along with any documentation
reasonably requested by Seller. Within thirty (30) days following
delivery to Seller of such report, Seller shall have the right to
object in writing to the results contained in such determination. If
timely objection is not made by Seller to such determination, such
determination shall become final and binding for purposes of this
Agreement. If timely objection is made by Seller to Purchaser and
Seller and Purchaser are able to resolve their differences in writing
within thirty (30) days following the expiration of the thirty-day
(30-day) period, then such determination shall become final and
binding as it regards to this Agreement. If timely objection is made
by Seller to Purchaser and Seller and Purchaser are unable to resolve
their differences in writing within thirty (30) days following the
expiration of the thirty-day (30-day) period, then all disputed
accounting matters pertaining to the report shall be submitted to and
reviewed by an arbitrator (the Arbitrator) which shall be an
independent accounting firm selected by Purchaser and Seller. If
Purchaser and Seller are unable to agree promptly on an accounting
firm to serve as the Arbitrator, each shall select by no later than
the 30th day following the expiration of the sixty-day (60-day)
period, an accounting firm, and the two selected accounting firms
shall be instructed to select promptly another independent accounting
firm, such newly selected firm to serve as the Arbitrator. The
Arbitrator shall consider only the disputed accounting matters
pertaining to the determination and shall act promptly to resolve all
disputed accounting matters, and its decision with respect to all
disputed accounting matters shall be final and binding upon Seller and
Purchaser. If the determination of the Arbitrator results in
additional payments being due under Section 4.4, Purchaser shall pay
Seller such amount, by bank check or wiring, within three business
days following the determination by the Arbitrator. Expenses of the
Arbitration shall be borne one-half (1/2) by Purchaser and one-half
(1/2) by Seller. Each party shall be responsible for its own attorney
and accounting fees. The resolution of any disputed legal matters
pertaining to the report shall be subject to judicial review.
4.6 Certain Closing Expenses.
--------------------------
16
Except as set forth below, the Seller shall be responsible for and
shall pay all federal, state and local sales tax (if any), documentary
stamp tax and all other duties, or other like charges properly payable
upon and in connection with the conveyance and transfer of the
Purchased Assets by the Seller to Purchaser and the conveyance and
transfer of the Purchased Assets by the Seller to Purchaser.
5.
POST-CLOSING ADJUSTMENTS
------------------------
5.1 Within sixty (60) days after the Closing Date (the "Post Closing
Date"), Sellers Accountant will deliver to Purchaser a copy of the Pro
Forma Balance Sheet prepared by Sellers Accountant along with any
supporting documentation reasonably requested by Purchaser reflecting
the Net Asset Amount as of the Closing which shall be defined as the
total of the Purchased Assets less the amount of the Assumed
Liabilities relating to the Business, as reflected on the Pro Forma
Balance Sheet (the "Net Asset Report"). The Pro Forma Balance Sheet
shall be prepared using the same accounting methods, policies,
practices and procedures, with consistent classifications, judgments,
estimations and methodologies as used in the preparation of the July
31, 2002 Pro Forma Balance Sheet. For purposes of determining the Net
Asset Amount, within thirty (30) days following delivery to Purchaser
of the Net Asset Report, Purchaser shall have the right to object in
writing to the results contained therein. If timely objection is not
made by Purchaser to the Net Asset Report, the Net Asset Report shall
become final and binding for purposes of this Agreement. If timely
objection is made by Purchaser to the Net Asset Report, and the Seller
and Purchaser are able to resolve their differences in writing within
fifteen (15) days following the expiration of such thirty (30) day
period, then the Net Asset Report, as resolved, shall become final and
binding as it relates to this Agreement. If timely objection is made
by Purchaser to the Net Asset Report and Seller and Purchaser are
unable to resolve their differences in writing within such fifteen
(15) day period, then all disputed accounting matters pertaining to
the Net Asset Report shall be submitted to and reviewed by an
arbitrator (the Arbitrator) which shall be an independent accounting
firm selected by the Seller and the Purchaser. If Purchaser and Seller
are unable to agree promptly on the accounting firm to serve as the
Arbitrator, each shall select by not later than the seventh (7th) day
following the expiration of the Net Asset Report objection period, a
nationally recognized accounting firm, and each selected accounting
firm shall be instructed to jointly select promptly another nationally
recognized accounting firm, such third accounting firm shall serve as
the Arbitrator. The Arbitrator shall consider only the disputed
accounting matters pertaining to the determination and shall act
promptly and fairly to resolve all disputed accounting matters and its
decision with respect to all disputed accounting matters shall be
final and binding upon the Seller and Purchaser. The expenses of the
arbitration shall be borne one-half (1/2) by Purchaser and one-half
(1/2) by the Seller. Each party shall be responsible for its own
17
attorney and accounting fees. If the deficit in the Net Asset Amount
(as shown on the Net Asset Report) is greater than ($-25,000.00), the
Purchase Price shall be decreased on a dollar-for-dollar basis for
such difference by Seller first repaying to Purchaser by certified or
cashier's check or wire transfer, from the cash paid under Section
4.2(a). The resolutions of any disputed legal matters pertaining to
the report shall be subject to judicial review.
5.2 Within sixty (60) days after the close of the 2002 fiscal year
(December 31, 2002), Seller will deliver to Purchaser the
determination of the 2002 EBIT for the period commencing January 1,
2002 to Closing, prepared by Seller's Accountant, along with any
supporting documentation reasonably requested by Purchaser, and
Purchaser will deliver to Seller the determination of the 2002 EBIT
for the period commencing with the Closing and ending December 31,
2002, prepared by Purchasers internally generated accounting
statements, along with any supporting documentation reasonably
requested by Seller. The 2002 EBIT shall be prepared in accordance
with generally accepted accounting principles using the same
principles as set forth in the Financial Statements. Provided,
however, in determining the 2002 EBIT, any expense charged to
Purchaser's Verity Solutions Division for signing bonuses to be paid
to ▇▇▇▇▇ Wetherhill and ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ shall be amortized over
the term of their respective Employment Agreements with Purchaser.
Thirty (30) days following delivery of such reports, both parties
shall have the right to object in writing to the results contained in
such determinations. If timely objection is not made by either party
to such determination, such determination shall become final and
binding. If timely objection is made by any party and the parties are
able to resolve their differences in writing within fifteen (15) days
following the expiration of the 2002 EBIT objection period, then such
determination as resolved shall become final and binding as it relates
to this agreement. If timely objection is made by any party and Seller
and Purchaser are unable to resolve their differences in writing
within ten (10) days following the expiration of the 2002 EBIT
objection period, then all disputed accounting matters relating to the
report shall be submitted to and reviewed by an Arbitrator according
to the process and procedure set forth in Section 5.1 above. The
expenses of the arbitration shall be borne one-half (1/2) by Purchaser
and one-half (1/2) by Seller. Each party shall be responsible for its
own accounting and attorney fees. The resolution of any disputed legal
issues pertaining to those reports shall be subject to judicial
review. Any net reduction in the Purchase Price shall be made in the
manner set forth in Section 4.1(e). Purchaser's existing Cleveland
branch will not be included in the calculation to be made for the
period commencing with the Closing and ending December 31, 2002.
18
6.
EMPLOYMENT AGREEMENT
--------------------
6.1 Employment Agreement of Member.
---------------------------------
At Closing, Purchaser shall enter into an Employment Agreement with ▇.
▇▇▇▇▇▇▇▇▇. A copy of said Employment Agreement is attached hereto and
made a part hereof as Exhibit I.
7.
COVENANT NOT TO COMPETE AGREEMENTS
----------------------------------
7.1 Covenant Not to Compete Agreements of Seller and Member.
---------------------------------------------------------------
At Closing, Seller and Member shall enter into Covenant Not to Compete
Agreements with Purchaser. Copies of said Covenant Not to Compete
Agreements are attached hereto and made a part hereof as Exhibits J
and J-1.
8.
REPRESENTATIONS AND WARRANTIES OF SELLER AND MEMBER
---------------------------------------------------
Except as set forth in the Disclosure Schedule attached hereto, (i)
Seller and Member, jointly and severally, represent and warrant to
Purchaser that the following statements are true and correct as of the
date hereof.
8.1 Organization, Good Standing, Qualification and Power of Seller.
---------------------------------------------------------------------
(a) Seller is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Ohio
and has the power and authority to own, lease and operate the
Purchased Assets and to conduct the Business currently being
conducted by it. Seller is duly qualified and validly existing in
Ohio and in good standing in each of the other jurisdictions in
which it is required by the nature of its business or the
ownership of its properties to so qualify. Seller has no
subsidiaries. The Disclosure Schedule correctly lists, with
respect to Seller, each jurisdiction in which it is qualified to
do business as a foreign company.
19
8.2 Capitalization.
--------------
(a) The outstanding capitalization of Seller consists solely of
membership interests, of which 100% is currently owned by Member.
All outstanding membership units have been fully paid for and are
nonassessable and have not been issued in violation of the
preemptive rights of any person. Except as set forth in the
Disclosure Schedule, Seller is not obligated to issue or acquire
any membership interests, nor has it granted options or any
similar rights with respect to any membership interests.
8.3 Authority to Make Agreement.
------------------------------
The Seller and Member have the full legal power and authority to enter
into, execute, deliver and perform their respective obligations under
this Agreement and each of the other agreements, instruments and other
instruments to be delivered incident hereto ("Other Seller
Documents"). This Agreement and the Other Seller Documents have been
duly and validly executed and delivered by Seller and Member, and are
the legal and binding obligation of each of them, enforceable in
accordance with their respective terms, subject to principles of
equity, bankruptcy laws, and laws affecting creditors' rights
generally. The Seller has taken all necessary action (including action
of its sole Member incident to its Operating Agreement) to authorize
and approve the execution and delivery of this Agreement and the Other
Seller Documents, the performance of its obligations thereunder and
the consummation of the transactions contemplated thereby.
8.4 Existing Agreements, Governmental Approvals and Permits.
------------------------------------------------------------
(a) The execution, delivery and performance of this Agreement and the
Other Seller Documents by the Seller and Member, the sale,
transfer, conveyance, assignment and delivery of the Purchased
Assets to Purchaser as contemplated in this Agreement, and the
consummation of the other transactions contemplated thereby: (i)
do not violate any provisions of law, statute, ordinance or
regulation applicable to the Seller, the Member or the Purchased
Assets, (ii) (except for any of Sellers secured creditors set
forth in Section 3.1, whose consent shall be obtained prior to
Closing and except as set forth in the Disclosure Schedule), will
not conflict with, or result in the breach or termination of any
provision of, or constitute a default under (in each case whether
with or without the giving of notice or the lapse of time or
both) the Articles of Organization or Operating Agreement of
Seller, or any indenture, mortgage, lease, deed of trust, or
other instrument, contract or agreement or any license, permit,
approval, authority, or any order, judgment, arbitration award,
or decree to which Seller or Member is a party or by which Seller
or Member or any of their assets and properties are bound
(including, without limitation, the Purchased Assets), and (iii)
will not result in the creation of any encumbrance upon any of
the properties, assets, or the Business of Seller or of Member.
Neither the Seller, nor the Member, nor any of their assets or
properties (including, without limitation, the Purchased Assets)
is subject to any provision of any mortgage, lease, contract,
agreement, instrument, license, permit, approval, authority,
20
order, judgment, arbitration award or decree, or to any law,
rule, ordinance, or regulation, or any other restriction of any
kind or character, which would prevent Seller or Member from
entering into this Agreement or any of the Other Seller Documents
or from consummating the transactions contemplated thereby.
(b) Neither the Seller nor Member are a party to, subject to or bound
by any agreement, judgment, award, order, writ, injunction or
decree of any court, governmental body or arbitrator which would
prevent the use by Purchaser of the Purchased Assets in
accordance with present practices of Seller after the Closing
Date or which, by operation of law, or pursuant to its terms,
would be breached, terminate, lapse or be subject to termination
or default under (in each case whether with or without notice,
the passage of time or both) upon the consummation of the
transactions contemplated in this Agreement.
(c) No approval, authority or consent of, or filing by Seller with,
or notification to, any foreign, federal, state or local court,
authority or governmental or regulatory body or agency or any
person is necessary to authorize the execution and delivery of
this Agreement or the Other Seller Documents by Seller or Member,
the sale, transfer, conveyance, assignment and delivery of the
Purchased Assets to Purchaser, or the consummation of the other
transactions contemplated thereby, or to continue the use and
operation of the Purchased Assets by Purchaser after the Closing
Date.
8.5 Financial Statements.
---------------------
(a) Copies of the Financial Statements are attached to the Disclosure
Schedule. Each of the Financial Statements are true and complete
in all material respects and were prepared in accordance with
generally accepted accounting principles, applied on a consistent
basis throughout the periods indicated and fairly present in all
material respects the financial condition and operations of
Seller as of the respective dates thereof and the results of its
operations and changes in financial position for the respective
periods then ended.
(b) Except to the extent reflected, reserved against, or disclosed on
the Pro Forma Balance Sheet, or the Financial Statements, or the
Disclosure Schedule, Seller had, as of such date, no material
liabilities or obligations of any nature, whether accrued,
absolute, contingent, or otherwise, including without limitation,
unfunded pension or other retirement plan liabilities and tax
liabilities whether or not incurred in respect of or measured by
the Seller's income, for any period prior to the date of said
Financial Statements, or arising out of transactions entered into
or any set of facts existing prior thereto. Except to the extent
disclosed on the Disclosure Schedule, there exists no basis for
the assertion against Seller, as of the date of
21
the Financial Statements or of the Pro Forma Balance Sheet, of
any material liability of any nature or in any amount not fully
reflected, reserved against, or disclosed in the Financial
Statements or in the Pro Forma Balance Sheet.
8.6 Customers.
---------
The Disclosure Schedule includes a correct list of the twenty-five
(25) largest customers of Seller by sales in dollars for each of
fiscal year 2001, and January through July of 2002, and the amount of
business done by the Seller with each such customer for such periods.
Seller has no knowledge that any of the current customers of Seller
will or intend to (a) cease doing business with Seller; or (b) cancel
or materially modify any currently contracted projects; or (c) not do
business with the Purchaser after the Closing.
8.7 Intangible Property.
--------------------
The Disclosure Schedule includes an accurate list and summary
description of all patents, franchises, distributorships, registered
and unregistered trademarks, trade names and service marks, licenses,
brand names and company lists and all applications for the foregoing,
presently owned and/or held (as a licensee or otherwise) by the
Seller. The Seller is not a licensor in respect to any patents, trade
secrets, inventions, shop rights, know-how, trademarks, trade names,
copyrights, or applications therefor. The Disclosure Schedule contains
an accurate and complete description of such intangible property and
the items of all licenses and other agreements relating thereto. All
of the above-mentioned intangibles used in the Sellers Business are
the sole property of the Seller and do not require the consent of or
consent to any other person as a condition to their use or the
transaction provided for herein and do not infringe upon the rights of
others.
8.8 Significant Agreements.
-----------------------
The Disclosure Schedule contains an accurate and complete list of all
contracts, agreements, licenses, instruments and understandings
(whether or not in writing) to which Seller is a party or is bound and
that are material to the Business, assets, financial condition or
results of operations of the Seller. Without limiting the generality
of the foregoing, such list includes all such contracts, agreements,
licenses and instruments:
(a) Providing for payments of more than Five Thousand Dollars
($5,000.00) per year, other than purchase orders incurred in the
ordinary course of business;
(b) Providing for the extension of credit other than consistent with
normal credit terms described in the Disclosure Schedule;
22
(c) Limiting the ability of the Seller to conduct the Business or any
other business or to otherwise compete in its or any other
business, including as to manner or place;
(d) Providing for a guarantee or indemnity by Seller, including but
not limited to any indemnification provided under any asset
purchase agreement, stock purchase agreement, or other
transaction that Seller is a party to;
(e) With any Affiliate of Seller;
(f) With any labor union or employees' association connected with
Sellers Business;
(g) For the employment or retention of any director, manager,
officer, employee, agent, member, consultant, broker or advisor
of Seller or any other contract between Seller and any director,
manager, officer, employee, agent, member, consultant or advisor
which does not provide for termination at will by Seller without
further cost or other liability to Seller as of or at any time
after the Closing;
(h) In the nature of a profit sharing, pension, deferred
compensation, retirement, severance, hospitalization, insurance
or other plan or contract providing benefit to any person or
former director, manager, officer, employee, agent, member,
consultant, broker or advisor of Seller, or such person's
dependents, beneficiaries or heirs;
(i) In the nature of an indenture, mortgage, promissory note, loan or
credit agreement or other contract relating to the borrowing of
money or a line of credit by Seller or relating to the direct or
indirect guarantee or assumption by Seller of obligations of
others;
(j) Leases or subleases with respect to any property, real, personal
or mixed, in which Seller is involved, as lessor or lessee; and
(k) Distributorship Agreement(s) or License Agreement(s) with respect
to any property which Seller has entered into as licensor.
True and correct copies of all items so disclosed in the Disclosure
Schedule (if written) have been provided or made available to
Purchaser. Each of such items listed, or required to be listed, is a
valid and enforceable obligation of Seller and to Sellers Knowledge,
the other party(ies) thereto enforceable in accordance with its terms,
subject to principles of equity, bankruptcy laws, and laws affecting
creditors' rights generally, and there have been no material defaults
or claims of material default by Seller or the counterparty thereto
and there are no facts or conditions that have occurred or that are
anticipated to occur which, through the passage of time or the giving
of notice, or both, would
23
constitute a default by Seller, or would cause the acceleration of any
obligation of any party thereto or the creation of an Encumbrance upon
any asset of Seller. There are no material oral contracts, agreements
or understandings made by the Member, material to the Purchased
Assets, except such as have been disclosed in the Disclosure Schedule
and for which an accurate summary description has been provided.
8.9 Inventory.
---------
Seller represents that it does not own any inventory incident to the
operation of its Business.
8.10 Accounts Receivable and Vendor Receivables.
----------------------------------------------
All accounts receivable and vendor receivables of the Seller which
have arisen in connection with the Business or otherwise and which are
reflected on the Financial Statements and all receivables which have
arisen since July 31, 2002 through the Closing shall have arisen only
from bonafide transactions in the ordinary course of business and
represent valid, collectible and existing claims, net of any reserve
as reflected on the Pro Forma Balance Sheet. Subject to customer
credit, the payment of each account and vendor receivable will not be
subject to any known defense, counterclaim condition (other than
Sellers performance in the ordinary course of business) whatsoever.
The Disclosure Schedule hereto accurately lists, as of the Closing
Date, all receivables arising out of or relating to the Business, the
amount owing and aging of such accounts receivable, the name of the
party from whom such account receivable is owing, any security in
favor of any Seller for the repayment of such account receivable which
Seller purports to have. Seller has made available to Purchaser
complete and correct copies of all instruments, documents and
agreements evidencing such accounts receivable and of all instruments,
documents or agreements (if any) creating security therefor.
8.11 Taxes.
-----
Except as to Taxes not yet due and payable, and except for Taxes the
payment of which is being diligently contested in good faith and by
proper proceedings and for which adequate reserves have been
established in accordance with generally accepted accounting
principles, and except as set forth in the Disclosure Schedule, Seller
has filed all Tax Returns that are now required to be filed by it in
connection with any federal, state or local tax, duty or charge
levied, assessed or imposed upon them, or their property, including
unemployment, social security and similar taxes; and all of such Taxes
have been either paid or adequate reserves or other provision has been
made therefor. Seller and Member shall pay, without right of
reimbursement from Purchaser, all of Sellers and Member's income
Taxes, including any interest and penalties thereon, that relate to
the activities of Seller through the Closing including this
transaction, as due.
24
8.12 Title to Purchased Assets; Encumbrances.
-------------------------------------------
(a) With respect to the Purchased Assets sold, at the Closing Seller
shall have good title to the owned by it being acquired by
Purchaser, and except for matters expressly set forth in Section
3.1, which Encumbrances, if any, upon the Purchased Assets shall
be removed at Closing, free and clear of all Encumbrances
whatsoever; immediately after the transfer of the Purchased
Assets being acquired by Purchaser from Seller, and Purchaser
will own all of said Purchased Assets, free and clear of all
Encumbrances whatsoever, whether perfected or unperfected; and,
by way of illustration but not limitation, there are not any
unpaid taxes, assessments or charges due or payable by Seller to
any federal, state or local agency, or any obligations or
liabilities or any unsatisfied judgments against, or, to the best
of Seller's knowledge, any litigation or proceedings pending or
threatened against Seller by any of Seller's employees, clients,
customers, creditors, suppliers, or any other party (nor state of
facts for any such obligation, liability, litigation or
proceeding), that could become a claim, obligation, liability,
lien or other charge of or against Purchaser or the Purchased
Assets. To the best of knowledge of Seller, all of Seller's
tangible and other operating assets used in the Business which
are being sold hereunder to Purchaser are, in all material
respects, in good operating condition and repair, free of all
structural, material or mechanical defects and conform with all
applicable laws and regulations.
(b) Except as otherwise specifically set forth herein, Seller is not
a party to any contract, agreement, lease or commitment that
would result in any claim, obligation, liability, lien or other
charge against Purchaser or the Purchased Assets, and Purchaser
is not obligated to assume the obligations under any contract,
agreement, lease or commitment of Seller, except as specifically
set forth herein.
8.13 Pending Actions.
----------------
Seller has not been served with or received notice of any actions,
suits, arbitrations, OSHA, EPA or other governmental violations, or
any other proceedings or investigations, either administrative or
judicial, strikes, lockouts or NLRB charges or complaints ("Actions
and Disputes"). There are no Actions or Disputes pending or, to the
best of Sellers knowledge, threatened against or affecting (directly
or indirectly) Seller or its property or assets nor, to the best of
Sellers knowledge, are there any facts or conditions which exist which
would give rise to any such Actions or Disputes which, if determined
adversely to Seller, would have a material adverse effect upon the
Sellers Business.
25
8.14 Insurance.
---------
The Disclosure Schedule contains an accurate and complete listing
(showing type of insurance, amount, insurance company, annual premium
and special exclusions) of all policies of fire, liability, worker's
compensation and other forms of insurance owned or held by Seller. All
such policies are in full force and effect; are sufficient for
compliance with all requirements of law and of all agreements to which
Seller is a party; are valid, outstanding and enforceable policies;
provide adequate insurance coverage for the assets and operations of
Seller and will remain in full force and effect through the Closing.
There are no outstanding requirements or recommendations by any
insurance company that issued a policy with respect to any of the
properties and assets of Seller by any Board of Fire Underwriters or
other body exercising similar functions or by any Governmental Entity
requiring or recommending any repairs or other work to be done on or
with respect to any of the properties and assets of Seller or
requiring or recommending any equipment or facilities to be installed
on or in connection with any of the properties or assets of Seller.
8.15 Status of the Business.
-------------------------
(a) Since July 31, 2002, the Business of the Seller has been operated
only in the ordinary course, and, except as set forth in the
Disclosure Schedule, there has not been with respect to the
Business:
(i) Any material change in its condition (financial or other),
assets, liabilities, obligations, business or earnings,
except changes in the ordinary course of business, none of
which in the aggregate has been materially adverse;
(ii) Any material liability or obligation incurred or assumed, or
any material contract, agreement, arrangement, purchase
order, lease (as lessor or lessee), or other commitment
entered into or assumed, on behalf of the Business, whether
written or oral, except in the ordinary course of business;
(iii) Any purchase or sale of material assets in anticipation of
this Agreement, or any purchase, lease, sale, abandonment or
other disposition of material assets, except in the ordinary
course of business;
(iv) Any waiver or release of any material rights, except for
rights of nominal value;
26
(v) Any cancellation or compromise of any material debts owed to
Seller or material claims known by Seller against another
person or entity, except in the ordinary course of business;
(vi) Any damage or destruction to or loss of any physical assets
or property of Seller which materially adversely affects the
Business or any of the properties of Seller (whether or not
covered by insurance);
(vii) Any material changes in the accounting practices,
depreciation or amortization policy or rates theretofore
adopted by Seller, or any material revaluation or write-up
or write-down of any of their assets;
(viii) Any direct or indirect redemption, purchase or other
acquisition for value by Seller of its shares or any
agreement to do so;
(ix) Any material increase in the compensation levels or in the
method of determining the compensation of any of the Sellers
officers, managers, directors, agents, employees or members,
or any bonus payment or similar arrangement with or for the
benefit of any such person, any increase in benefits expense
to Seller, any payments made or declared into any
profit-sharing, pension, or other retirement plan for the
benefit of employees of Seller, except in the ordinary
course of business;
(x) Any loans or advances between Seller and any Member or any
family member or any associate or Affiliate of Seller or of
Member;
(xi) Any material contract canceled or the terms thereof amended
or any notice received with respect to any such contract
terminating or threatening termination or amendment of any
such contract;
(xii) Any transfer or grant of any material rights under any
leases, licenses, agreements, or with respect to any trade
secrets or know-how;
(xiii) Any labor trouble or employee controversy materially
adversely affecting the Business or assets;
(xiv) Any distribution on or in respect of membership interests
of Seller; or
27
(xv) The incurring of any Funded Debt except in the ordinary
course of business.
(b) To the best of Seller's Knowledge, the Seller is not:
(i) in violation of any outstanding judgment, order, injunction,
award or decree specifically relating to the Business, or
(ii) in violation of any federal, state or local law, ordinance
or regulation which is applicable to the Business, except
where such violation does not have a materially adverse
effect on the Business.
The Seller has all permits, licenses, orders, approvals,
authorizations, concessions and franchises of any federal, state
or local governmental or regulatory body that are material to or
necessary in the conduct of the Business, except where failure to
have such permit, license, order, approval, authorization,
concession or franchise does not have a materially adverse effect
on the Business. All such permits, licenses, orders, approvals,
concessions and franchises are set forth on the Disclosure
Schedule and are in full force and effect and there is no
proceeding pending or, to the knowledge of Seller, threatened to
revoke or limit any of them.
(c) No claim, litigation, action, investigation or proceeding is
pending or, to the knowledge of Seller, threatened, and no order,
injunction or decree is outstanding, against or relating to the
Business or its assets, and Seller does not know of any
information which could result in such a claim, litigation,
action, investigation or proceeding, which, if determined
adversely to Seller, would have a material adverse effect upon
Sellers Business.
(d) At the Closing, Seller shall have accrued or paid in full, to all
employees of the Business, all wages, salaries, commissions,
bonuses, vacations and other direct compensation for all services
performed by them. Seller is in compliance in all material
respects with all federal, state and local laws, ordinances and
regulations relating to employment and employment practices at
the Business, and all employee benefit plans and tax laws
relating to employment at the Business. There is no unfair labor
practice complaint against Seller relating to the Business
pending before the National Labor Relations Board or similar
agency or body and, to the best of Sellers Knowledge, no
condition exists that could give rise to any unfair labor
practice complaint. There is no labor strike, dispute, slowdown
or stoppage actually pending or, to the Knowledge of Seller,
threatened against or involving the Business.
28
Seller has no labor contracts or collective bargaining agreements
with respect to any of its employees.
8.16 Environmental Laws.
-------------------
(a) To the best of Seller's Knowledge, the real estate locations,
which are leased by Seller, ("Real Estate") have not been used or
operated in any fashion involving producing, handling and
disposing of chemicals, toxic substances, wastes and effluent
materials, x-rays or other materials or devices in material
violation of any laws, rules, regulations or orders, and to the
best of Sellers Knowledge, the Real Estate is in material
compliance with applicable laws, regulations, ordinances, decrees
and orders arising under or relating to health, safety, and
environmental laws and regulations, including without limitation
the Federal Occupation and Safety Health Act, 29 U.S.C. 651, et
seq.; Federal Resource Conservation and Recovery Act ("RCRA"), 42
U.S.C. 6901, et seq.; Federal Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C.
9601, et seq.; the Federal Clean Air Act, 42 U.S.C. 2401, et
seq.; the Federal Clean Water Act, 33 U.S.C. 1251, et seq.; and
all state and local laws that correspond therewith or supplement
such laws.
(b) To the best of Sellers Knowledge, the Real Estate has not been
operated, in violation of any laws, rules, regulations or orders,
so as to involve or create any surface impoundments,
incinerators, land fills, waste storage tanks, waste piles, or
deep well injection systems or for the purpose of storage,
treatment or disposal of a hazardous waste as defined by RCRA or
hazardous substance, pollutant or contaminate as defined by
CERCLA and, to the best of Sellers Knowledge, no acts have been
committed that would make the Real Estate or any part thereof
subject to remedial action under RCRA or CERCLA or corresponding
state or local laws.
(c) To the best of Seller's Knowledge, there have not been, are not
now and as of the Closing Date, there will be no solid waste,
hazardous waste, hazardous substance, toxic substance, toxic
chemicals, pollutants or contaminants, underground storage tanks,
purposeful dumps, or accidental spills in, on or about the Real
Estate or any of the assets of Seller, whether real or personal,
owned or leased, or stored on any real property owned or leased
by Seller or by Seller's lessees, licensees, invites, or
predecessors.
(d) Seller is not engaged in, and to the best of Sellers Knowledge
and belief, is not threatened with any litigation, or
governmental or other proceeding which may give rise to any claim
against the Real Estate. Specifically, there are no pending
suits, charges, actions,
29
governmental investigations, or other proceedings, involving,
directly or indirectly without limitation, the laws, statutes and
regulations set forth in subsection (a), above, whether initiated
by a third party or by Seller and there are none, to the best of
Sellers Knowledge, threatened against or relating to or involving
the Real Estate or the transactions contemplated by this
Agreement. Seller is not in default with respect to any order,
writ, injunction or decree of any federal, state, local or
foreign court, department, agency or instrumentality.
(e) To the best of Sellers Knowledge, Seller has obtained all
permits, and licenses and other authorizations required by all
environmental laws; and all of such permits, licenses and other
authorizations are in full force and effect as of the date
hereof. A true and correct list of all such permits, licenses and
other authorizations is set forth in the Disclosure Schedule.
8.17 Certain Employees
------------------
(a) Each of the following is included in the list of agreements set
forth in the Disclosure Schedule: all collective bargaining
agreements, employment and consulting agreements, bonus plans,
deferred compensation plans, employee pension plans or retirement
plans, employee profit-sharing plans, employee membership
interest purchase and membership interest option plans,
hospitalization insurance, and other plans and arrangements
providing for employee benefits of employees of the Seller.
(b) The Disclosures Schedule contains a true, complete and accurate
list of the following: the names, positions, and compensation of
the present employees of Seller, together with a statement of the
annual salary payable to salaried employees and a summary of the
bonuses and description of agreements for additional compensation
and other like benefits, if any, paid or payable to such persons
for the period set forth in the Disclosure Schedule. Except as
listed in the Disclosure Schedule, to the best of Seller's
Knowledge, all employees of the Seller are employees--at--will.
(c) Seller has no retired employees who are receiving or are entitled
to receive any payments, health or other benefits from Seller.
8.18 Payments to Employees.
-----------------------
All accrued obligations of Seller relating to employees and agents of
Seller, whether arising by operation of law, by contract, or by past
service, for payments to trusts or other funds or to any governmental
agency, or to any individual employee or agent (or his heirs,
legatees, or legal
30
representatives) with respect to unemployment compensation benefits,
deferred compensation, profit sharing or retirement benefits, or
social security benefits have been paid or accrued by such Seller. All
obligations of Seller as an employer or principal relating to
employees or agents, whether arising by operation of law, by contract,
or by past practice, for vacation and holiday pay, bonuses, and other
forms of compensation which are or may become payable to such
employees or agents, have been paid or will be paid or accrued by
Seller.
8.19 Change of Corporate Name.
---------------------------
At the Closing, the Seller, if requested by Purchaser, will adopt and
file with the Secretary of State of Ohio an Amendment to the Articles
of Organization of Seller, changing the name of Seller to a name
substantially dissimilar to VERITY SOLUTIONS, LLC, and the Seller
shall also execute a Consent for Use of Similar Name form, as set
forth in the Disclosure Schedule, granting to Purchaser consenting to
the use of the name VERITY SOLUTIONS, LLC.
8.20 Brokers and Finders.
---------------------
Except as set forth in the Disclosure Schedule, no broker, finder or
other person or entity acting in a similar capacity has participated
on behalf of Seller in bringing about the transaction herein
contemplated, or rendered any service with respect thereto or been in
any way involved therewith.
8.21 Preservation of Organization.
------------------------------
Except as set forth on the Disclosure Schedule, since July 31, 2002,
the Seller has kept intact the Business and organization of the
Seller; retained the services of all the Sellers material employees
and agents, retained the Sellers arrangements with the manufacturers
of the products distributed by Seller in the same manner as conducted
prior to such date, and engaged in no transaction other than in the
ordinary course of Sellers Business.
8.22 Absence of Certain Business Practices.
-----------------------------------------
Neither the Seller nor to the Sellers Knowledge, any officer, employee
or agent of the Seller, nor any other Person acting on its behalf,
has, directly or indirectly, within the past five years given or
agreed to give any gift, bribe, rebate or kickback or otherwise
provide any similar benefit to any customer, supplier, governmental
employee or any other Person who is or may be in a position to help or
hinder the Seller or the Business (or assist Seller in connection with
any actual or proposed transaction relating to the Business or any
other business previously operated by Seller) (i) which subjected or
31
might have subjected Seller to any damage or penalty in any civil,
criminal or governmental litigation or proceeding, (ii) which if not
given in the past, might have had a material adverse effect on the
Business, (iii) which if not continued in the future, might have a
material adverse effect on the Business or subject Seller to suit or
penalty in any private or governmental litigation or proceeding, (iv)
for any of the purposes described in Section 162(c) of the Code, or
(v) for the purpose of establishing or maintaining any concealed fund
or concealed bank account.
8.23 Suppliers.
---------
The Disclosure Statement sets forth the names of and description of
contractual arrangements (whether or not binding or in writing) with
the ten (10) largest suppliers of the Seller by sales or services in
dollars. Assuming that Purchaser continues to conduct the Business in
the ordinary course consistent with Sellers prior practices generally
and specifically with respect to Sellers current suppliers, Seller has
no direct knowledge that any of the current suppliers of the Seller
will, or intend to, (a) cease doing business with Seller; or (b)
materially alter the amount of business they are currently doing with
Seller; or (c) not do business with the Purchaser after the Closing.
8.24 Product Liability Claims.
--------------------------
To the best of Seller's Knowledge, there are no material product
liability claims against Seller, either potential or existing, which
are not fully covered by product liability insurance coverage with a
responsible company which, if determined adversely to Seller, would
have a material adverse effect upon the Sellers Business.
8.25 Employee Benefit Plans.
------------------------
For the purposes of this Section 8.25, "Seller" shall include all
persons who are members of a controlled group, a group of trades or
businesses under common control, or an affiliated service group
(within the meanings of Sections 414(b), (c) or (m) of the Code), of
which Seller is a member.
(a) The Employee Benefit Plans presently maintained by Seller or to
which Seller has contributed within the past six (6) years,
including any terminated or frozen plans which have not yet
distributed all plan assets, are fully set forth in the
Disclosure Schedule. For purposes of this provision, the term
"Employee Benefit Plan" shall mean:
(i) A Welfare Benefit Plan as defined in Section 3(1) of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA") established for the purpose of
32
providing for its participants or their beneficiaries,
through the purchase of insurance or otherwise, medical,
surgical, or hospital care or benefits, or benefits in the
event of sickness, accident, disability, death or
unemployment (including any plan or program of severance
pay), or vacation benefits, apprenticeship or other training
programs, or day care centers, scholarship funds, or prepaid
legal services, or any benefit described in Section 302(c)
of the Labor Management Relations Act of 1947;
(ii) An Employee Pension Benefit Plan as defined in Section 3(2)
of ERISA established or maintained by Seller for the purpose
of providing retirement income to employees or for the
purpose of providing deferral of income by employees for
periods extending to the termination of covered employment
or beyond; and
(iii) Any other plan or arrangement not covered by ERISA but
which provides benefits to employees or former employees and
results in an accrued liability on the part of Seller either
by contract or by operation of law.
(b) With respect to any such Employee Benefit Plans, the Seller
represents and warrants that, to the best of Sellers Knowledge;
(i) The Seller has not, with respect to any Employee Benefit
Plans, engaged in any prohibited transaction, as such term
is defined in Section 4975 of the Code or Section 406 of
ERISA.
(ii) The Seller has, with respect to any Employee Benefit Plans,
substantially complied with all reporting and disclosure
requirements required by Title I, Subtitle B, Part 1 of
ERISA.
(iii) There was no accumulated funding deficiency (as defined in
section 302 of ERISA and Section 412 of the Code) with
respect to any Employee Pension Benefit Plan which is a
defined benefit pension plan, whether or not waived, as of
the last day of the most recent fiscal year of the plans
ending prior to the date of this Agreement.
(iv) Except as described on the Disclosure Schedule, there are no
contributions due to any Employee Pension Benefit Plan for
the most recent fiscal year of the plans ending prior to the
date of this Agreement and the Seller's Financial Statements
reflect any liability of Seller to make contributions to the
Employee Pension Benefit Plans, and a pro rata portion of
the contributions (including matching contributions)
33
for the plan year on which the Closing Date occurs shall
have been made on or prior to the Closing Date for the
period ending on the Closing Date.
(v) No material liability to the Pension Benefit Guaranty
Corporation ("PBGC") has been asserted with respect to any
Employee Pension Benefit Plan which is a defined benefit
pension plan.
(vi) There has been no reportable event as described in Section
4043(b) of ERISA since the effective date of Section 4043 of
ERISA with respect to any Employee Pension Benefit Plan
which is a defined benefit plan.
(vii) Except for claims for benefits by participants and
beneficiaries in the normal course of events, to the best of
Seller's knowledge, there are no claims, pending or
threatened, by any individual or Governmental Entity, which,
if decided adversely, would have a material adverse effect
upon the financial condition of any Employee Benefit Plan,
the plan administrator of any Employee Benefit Plan, or
Seller.
(viii) The Seller has made available for inspection all annual
reports for Seller filed on Internal Revenue Service ("IRS")
Form 5500 or 5500C, all reports for Seller prepared by an
actuary for the last three plan years, the plan and trust
documents and the Summary Plan Description, as amended, for
each Employee Benefit Plan and the last filed PBGC1 Form (if
applicable) for each Employee Benefit Plan, with respect to
any Employee Benefit Plans other than multi-employer plans
(within the meaning of Section 3(37) of ERISA), and other
reports filed with the PBGC during the last three plan
years.
(ix) All Employee Pension Benefit Plans are intended to be
qualified retirement plans under the Code. The IRS has
issued, and Seller has made available for inspection, one or
more determination letters with respect to the qualification
of all Employee Pension Benefit Plans stating that the IRS
has made a favorable determination as to the qualification
of such Plan under Section 401(a) of the Code, and that
continued qualification of the Plan in its present form will
depend upon its effect in operation. The time for adoption
of any amendments required by changes in the Code since such
determination letters were issued, or changes required by
the IRS as a condition for continued qualification of such
plans has not expired, or did not expire without such
amendments being made. Such plans are now, and always have
been, established in writing and maintained and operated in
accordance with the plan
34
documents, ERISA, the Code, and all other applicable laws.
Except as described in the Disclosure Schedule, such Plans
are now and always have been, established in writing and
maintained and operated substantially in accordance with the
plan documents, ERISA, the Code and all other applicable
laws, in all material respects.
(x) There is no liability arising from the termination or
partial termination of any Employee Benefit Plan, except for
liabilities as to which adequate reserves are reflected on
the Financial Statements, and there exists no condition
presenting a material risk of such liability.
(xi) The Seller has timely made any contributions it is obligated
to make to any multi-employer plan within the meaning of
Section 3(37) of ERISA. The Seller has no liability arising
as a result of withdrawal from any multi-employer plan, no
such withdrawal liability has been asserted and no such
withdrawal liability will be asserted with regard to any
withdrawal or partial withdrawal on or before the date of
this Agreement.
8.26 Assets Necessary to the Business.
------------------------------------
The Seller owns, leases or holds under license all assets and
properties (tangible and intangible) necessary to carry on the
Business and operations as presently conducted and as shown on the
Financial Statements. Such assets and properties are all of the assets
and properties necessary to carry on the Seller's Business as
presently conducted and neither the Member (other than through his
ownership of a membership interest in Seller and/or as set forth on
the Disclosure Schedule) nor any member of his family own or lease or
has any interest in any assets or properties presently being used to
carry on the Business of Seller.
8.27 Transactions with Affiliates.
------------------------------
Except as disclosed on the Disclosure Schedule, there is no lease,
sublease, contract, agreement or other arrangement of any kind
whatsoever entered into by Seller and Member.
8.28 Territorial Restrictions.
-------------------------
Except as described in the Disclosure Schedule, Seller is not
restricted by any written agreement or understanding with any other
Person from carrying on the Business anywhere in the world. Neither
Purchaser nor any of its Affiliates will, as a result of its
acquisition of the Purchased Assets become restricted in carrying on
the Business anywhere in the world as a result of any contract or
other agreement to which Seller is a party or by which it is bound.
35
8.29 Immigration Compliance.
-----------------------
(a) Seller is in compliance with all applicable federal, state and
local laws, rules, directives and regulations relating to the
employment authorization of their respective employees
(including, without limitation, the Immigration Reform and
Control Act of 1986, as amended and supplemented, and Section
212(n) and 274A of the Immigration and Nationality Act, as
amended and supplemented, and all implementing regulations
relating thereto), and Seller has not employed nor is any such
entity currently employing any unauthorized aliens (as such term
is defined under 8 CFR 274a.1(a)).
(b) Seller has not received any notice from the Immigration and
Naturalization Service (the "INS") or the United States
Department of Labor (the "DOL") of the disapproval or denial of
any visa petition or entry permit pending before the INS or labor
certification pending before the DOL on behalf of any employee or
prospective employee of Seller.
(c) Since the approval of each of their respective visa petitions,
there has been no material change in the terms and conditions of
employment of any employees of Seller.
(d) Seller shall have delivered to Purchaser by the Closing Date
true, accurate and complete copies of all visa petitions, entry
permits and visa applications (and all supporting documents)
submitted to the INS for all foreign employees and prospective
foreign employees of Seller.
8.30 Full Disclosure.
----------------
None of the representations and warranties made by Seller named
herein, or made on its behalf, including any disclosures made in the
Disclosure Schedule, contains or will contain, to the best of Seller's
or Member's knowledge, any untrue statement of material fact or omits
or will omit any material fact.
9.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
Purchaser hereby represents and warrants to the Seller that the following
statements are true and correct as of the date hereof, and shall be true and
correct as of the Closing Date:
36
9.1 Organization, Good Standing and Power of Purchaser.
--------------------------------------------------------
(a) Purchaser is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware and
has full corporate power and lawful authority to execute, deliver
and perform this Agreement and conduct the Business of the Seller
currently conducted by the Seller in each of the jurisdictions in
which the Seller currently conducts the Business, which are the
only jurisdictions where the failure to be so qualified by
Purchaser will have a material adverse effect on the business
prospects or financial condition of Purchaser.
9.2 Status of Agreements.
----------------------
(a) All requisite corporate action (including action of its Board of
Directors) to approve, execute, deliver and perform this
Agreement and each of the other agreements, instruments and other
documents to be delivered by and on behalf of Purchaser ("Other
Purchaser Documents") in connection herewith has been taken by
Purchaser. This Agreement has been duly and validly executed and
delivered by Purchaser and constitutes the valid and binding
obligation of Purchaser enforceable in accordance with its terms.
All Other Purchaser Documents in connection herewith will, when
executed and delivered, constitute the valid and binding
obligation of Purchaser enforceable in accordance with their
respective terms.
(b) No authorization, approval, consent or order of, or registration,
declaration or filing with, any court, governmental body or
agency or other public or private body, entity or person is
required (except for providing Purchasers primary lenders,
Deutsche Financial Services Company, et al, with a certificate
prior to Closing certifying that this transaction is a permitted
acquisition as defined in the Credit Facilities Agreement between
the parties) in connection with the execution, delivery or
performance of this Agreement or any Other Purchaser Documents in
connection herewith.
(c) Neither the execution, delivery nor performance of this Agreement
or any of the Other Purchaser Documents in connection herewith
does or will:
(i) conflict with, violate or result in any breach of any
judgment, decree, order, statute, ordinance, rule or
regulation applicable to Purchaser;
37
(ii) conflict with, violate or result in any breach of any
agreement or instrument to which Purchaser is a party or by
which Purchaser or any of Purchaser's assets or properties
is bound, or constitute a default thereunder or give rise to
a right of acceleration of an obligation of Purchaser; or
(iii) conflict with or violate any provision of the Articles of
Incorporation or By-Laws of Purchaser.
9.3 Brokers and Finders.
---------------------
No broker, finder or other person or entity acting in a similar
capacity has participated on behalf of Purchaser in bringing about the
transaction herein contemplated, or rendered any service with respect
thereto or been in any way involved therewith.
9.4 Financial Matters.
------------------
Purchaser has provided Seller with its parent company, PCR, Form 10-Q
filing for the period ending July 5, 2002. Since July 5, 2002, there
have been no materially adverse changes in the results of operations
or financial condition of Purchaser and PCR, nor are there any
demands, commitments, events of uncertainty known to Purchaser which
could materially effect Purchaser or PCR of liquidity, capital
resources or results of operation as of the date hereof.
9.5 Full Disclosure.
----------------
None of the representations and warranties made by Purchaser herein
contains or will contain, to the best of Purchasers knowledge, any
untrue statement of material fact or omits or will omit any material
fact.
10.
SURVIVAL OF AND RELIANCE UPON REPRESENTATIONS,
WARRANTIES AND AGREEMENTS; INDEMNIFICATION
------------------------------------------
10.1 Survival of Representations and Warranties.
----------------------------------------------
The parties acknowledge and agree that all representat-ions,
warranties and agreements contained in this Agreement or in any
agreement, instrument, exhibit, certificate, schedule or other
document
38
delivered in connection herewith, shall survive the Closing and
continue to be binding upon the party giving such representation,
warranty or agreement and shall be fully enforceable to the extent
provided for in Sections 10.3 and 10.4 hereof, at law or in equity,
for the period beginning on the date of Closing and ending three (3)
years thereafter, except for the representations, warranties and
agreements designated and identified in Sections 8.3, 8.11, 8.12,
8.13, 8.16 and 9.2 which shall survive the Closing and shall terminate
in accordance with the statute of limitations governing written
contracts in the State of Ohio and Exhibit I and Exhibits J and J-1,
which shall terminate as provided therein.
10.2 Reliance Upon and Enforcement of Representations, Warranties and
----------------------------------------------------------------------
Agreements.
----------
(a) The Seller hereby agrees that, notwithstanding any right of
Purchaser to fully investigate the affairs of Seller, and
notwithstanding knowledge of facts determined or determinable by
Purchaser pursuant to such investigation or right of
investigation, Purchaser shall have the right to rely fully upon
the representations, warranties and agreements of Seller and the
Member contained in this Agreement and upon the accuracy of any
document, certificate or exhibit given or delivered to Purchaser
pursuant to the provisions of this Agreement.
(b) Purchaser hereby agrees that, notwithstanding any right of Seller
to fully investigate the affairs of Purchaser, and
notwithstanding knowledge of facts determined or determinable by
Seller pursuant to such investigation or right of investigation,
Seller have the right to rely fully upon the representations,
warranties and agreements of Purchaser contained in this
Agreement and upon the accuracy of any document, certificate or
exhibit given or delivered to Seller pursuant to the provisions
of this Agreement.
10.3 Indemnification by Seller and Member.
----------------------------------------
Provided Purchaser makes a written claim for indemnification against
Seller within any applicable survival period specified in Section
10.1, and subject to the limitations set forth in Section 10.7, the
Seller and Member (jointly and severally) shall indemnify Purchaser
against and hold it harmless from any and all loss, damage, liability
or deficiency (Loss) resulting from or arising out of:
(i) any breach of any representation, warranty, covenant, or
obligation made or incurred by Seller or the Member herein or in
any other agreement, instrument or document delivered by or on
behalf of Seller pursuant to the provisions of the Agreement;
39
(ii) any imposition (including by operation of law) or attempted
imposition by a third party upon Purchaser of any Excluded
Liability of Seller which Purchaser has not specifically agreed
to assume pursuant to Section 3.1 of this Agreement;
(iii) any liability of Seller arising out of Sellers operation of the
Business, its ownership or use of the Purchased Assets, or
occupancy and use of the Real Estate prior to the Closing (except
for any Assumed Liabilities described in Section 3.1) or other
obligation incurred by or imposed upon Purchaser resulting from
the failure of the parties to comply with the provisions of any
law relating to bulk transfers which may be applicable to the
transaction herein contemplated;
(iv) any and all costs and expenses (including reasonable legal and
accounting fees) related to any of the foregoing.
Except as otherwise provided in this Agreement, nothing in this
Section 10.3 shall be construed to limit the amount to which, by
reason of offset or otherwise, that Purchaser may recover from Seller
or Member pursuant to this Agreement resulting from Seller's breach or
violation of any representation, warranty, covenant or agreement
contained herein or from Member's breach or violation of any
representation made by such Member herein.
Any amounts to which Purchaser, its successors or assigns, is entitled
to indemnification pursuant to the provisions of this Section, shall
first be offset against the amount payable to Seller against the
subordinated promissory note, then against any payments due under
Section 4.4. Provided, however, the offset in any one year may not
exceed the aggregate amount payable of principal and interest due on
said applicable subordinated promissory note for said year, and any
amount, if any, payable under Section 4.4 for such year.
10.4 Indemnification by Purchaser.
------------------------------
Provided Member and/or Seller make a written claim for indemnification
against Purchaser within any applicable survival period specified in
Section 10 and subject to the limitation set forth in Section 10.8,
Purchaser shall indemnify Seller and Member against and hold them
harmless from any and all loss, damage, liability or deficiency
resulting from or arising out of: (i) any Assumed Liabilities of
Purchaser; (ii) any liability of Purchaser arising out of Purchasers
operations subsequent to the Closing (except to the extent such
liability is the result of a breach of a covenant or warranty of
Seller hereunder); (iii) any inaccuracy in or breach of any
representation, warranty, covenant or obligation made or incurred by
Purchaser herein or in any other agreement, instrument, or document
delivered by or on behalf of
40
Purchaser pursuant to the provisions of this Agreement; and (iv) any
and all related costs and expenses (including reasonable legal and
accounting fees). Except as otherwise provided herein, nothing in this
Section 10.4 shall be construed to limit the amount to which, or the
time by which, by reason of offset or otherwise, that Seller may
recover from Purchaser pursuant to this Agreement resulting from its
breach or violation of any representation, warranty, covenant or
agreement contained herein.
10.5 Notification of and Participation in Claims.
------------------------------------------------
(a) No claim for indemnification shall arise until notice thereof is
given to the party from whom indemnity is sought. Such notice
shall be sent within ten (10) days after the party to be
indemnified has received notification of such claim, but failure
to notify the indemnifying party shall in no event prejudice the
right of the party to be indemnified under this Agreement, unless
the indemnifying party shall be prejudiced by such failure and
then only to the extent of such prejudice. In the event that any
legal proceeding shall be instituted or any claim or demand is
asserted by any third party in respect of which Seller/Member on
the one hand, or Purchaser on the other hand, may have an
obligation to indemnify the other, the party asserting such right
to indemnity (the "Party to be Indemnified") shall give or cause
to be given to the party from whom indemnity is sought (the
"Indemnifying Party") written notice thereof and the Indemnifying
Party shall have the right, at its option and expense, to
participate in the defense of such proceeding, claim or demand,
but not to control the defense, negotiation or settlement
thereof, which control shall at all times rest with the Party to
be Indemnified, unless the Indemnifying Party irrevocably
acknowledges in writing full and complete responsibility for and
agrees to provide indemnification of the Party to be Indemnified,
in which case such Indemnifying Party may assume such control
through counsel of its choice and at its expense. In the event
the Indemnifying Party assumes control of the defense, the
Indemnifying Party shall not be responsible for the legal costs
and expenses of the Party to be Indemnified in the event the
Party to be Indemnified decides to join in such defense. The
parties hereto agree to cooperate fully with each other in
connection with the defense, negotiation or settlement of any
such third party legal proceeding, claim or demand.
(b) If the Party to be Indemnified is also the party controlling the
defense, negotiation or settlement of any matter, and if the
Party to be Indemnified determines to compromise the matter, the
Party to be Indemnified shall immediately advise the Indemnifying
Party of the terms and conditions of the proposed settlement. If
the Indemnifying Party agrees to accept such proposal, the Party
to be Indemnified shall proceed to conclude the settlement of the
41
matter, and the Indemnifying Party shall immediately indemnify
the Party to be Indemnified pursuant to the terms of Sections
10.3 and 10.4 hereunder. If the Indemnifying Party does not agree
within fourteen (14) days to accept the settlement (said 14-day
period to begin on the first business day following the date such
party receives a complete copy of the settlement proposal), the
Indemnifying Party shall immediately assume control of the
defense, negotia-tion or settlement thereof, at that Indemnifying
Party's expense. Thereafter, the Party to be Indemnified shall be
indemnified in the entirety for any liability arising out of the
ultimate defenses, negotiation or settlement of such matter.
(c) If the Indemnifying Party is the party controlling the defense,
negotiation or settlement of any matter, and the Indemnifying
Party determines to compromise the matter, the Indemnifying Party
shall immediately advise the Party to be Indemnified of the terms
and conditions of the proposed settlement. If the Party to be
Indemnified agrees to accept such proposal, the Indemnifying
Party shall proceed to conclude the settlement of the matter and
immediately indemnify the Party to be Indemnified pursuant to the
terms of Sections 10.3 or 10.4 hereunder. If the Party to be
Indemnified does not agree within fourteen (14) days to accept
the settlement (said 14-day period to begin on the first business
day following the date such party receives a complete copy of the
settlement proposal), the Party to be Indemnified shall
immediately assume control of the defense, negotiation or
settlement thereof, at the Party to be Indemnified's expense. If
the final amount paid to resolve the claim is less than the
amount of the original proposed settlement made by the
Indemnifying Party, then the Party to be Indemnified shall
receive such indemnification pursuant to Sections 10.3 or 10.4
hereof, including any and all expenses incurred by the Party to
be Indemnified incurred in connection with the defense,
negotiation or settlement of such matter up to the maximum of the
original proposed settlement. If the amount finally paid to
resolve the claim is equal to or greater than the amount of the
original proposed settlement proposed by the Indemnifying Party,
then the Indemnifying Party shall provide indemnification
pursuant to Sections 10.3 and 10.4 for the amount of the original
settlement proposal submitted by the Indemnifying Party, and the
Party to be Indemnified shall be responsible for all amounts in
excess of the original settlement proposal submitted by the
Indemnifying Party and all costs and expenses incurred by the
Party to be Indemnified in connection with such defense,
negotiation or settlement.
42
10.6 Excluded Liabilities.
---------------------
(a) Notwithstanding anything contained herein to the contrary, in the
event any Excluded Liability would attach to the Purchased Assets
under any successor liability statute or otherwise,
notwithstanding the fact that such liability was an Excluded
Liability, Seller and Member shall be jointly and severally
responsible for the payment of such Excluded Liability and the
lien on the Purchased Assets (which would represent a breach of
certain representations under the Agreement) related to such
liability.
10.7 Limitation on Seller and Member Liability.
----------------------------------------------
Seller's and Member's obligation to indemnify shall be subject to all
of the following limitations:
(a) All Losses shall be computed net of any insurance coverage
received by Purchaser with respect thereto that reduces the Loss
that would otherwise be sustained; and
(b) The maximum liability that Seller and Member may be required to
pay to Purchaser under this Section 10 shall not exceed an amount
equal to the total consideration paid to Seller hereunder by
Purchaser.
10.8 Limitation on Purchasers Liability.
-------------------------------------
The maximum amount that Purchaser may be required to pay to the Seller
under this Section 10 shall be limited to the total consideration paid
under this Agreement by Purchaser to the Seller.
11.
THE CLOSING
-----------
11.1 Date, Time and Place of Closing.
------------------------------------
Consummation of the transactions contemplated hereby (the "Closing")
shall take place on August 30, 2002 (the "Closing Date"), at 12:30
p.m. EDT at the offices of ▇▇▇▇▇▇▇▇▇ & Dreidame Co., LPA, ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, or on such other Closing
Date, or at such other time and/or place as the parties may mutually
agree upon.
43
11.2 Conditions Precedent to Purchasers Obligations.
--------------------------------------------------
The obligation of Purchaser to perform in accordance with this
Agreement and to consummate the transactions herein contemplated is
subject to the satisfaction of the following conditions at or before
the Closing:
(a) Seller shall have complied with and performed all of the
representations, warranties, agreements and covenants hereunder
required to be performed by it prior to or at the Closing;
(b) There shall be no pending or threatened legal action which, if
successful, would prohibit consummation or require substantial
rescission of the transactions contemplated by this Agreement;
(c) The business, aggregate properties and operations of the Seller
shall not have been materially adversely affected as a result of
any fire, accident or other casualty or any labor disturbance or
act of God or the public enemy, and there shall otherwise have
been no material adverse change to the business, aggregate
properties, or operations of the Seller since July 31, 2002;
(d) Seller shall have delivered to Purchaser at or before the
Closing, the following documents, all of which shall be in form
and substance reasonably acceptable to Purchaser and its counsel:
(i) The instruments of transfer required by Sections 2.5 and
2.6;
(ii) Releases (or copies thereof) of all liens, claims, charges,
encumbrances, security interests and restrictions on the
Purchased Assets necessary to provide Purchaser with good
title to the Purchased Assets at the Closing;
(iii) Certified copies of all actions taken by the Member of
Seller authorizing the execution, delivery and performance
of this Agreement;
(iv) Certificates of Existence for Seller from the Secretary of
State of Ohio dated no earlier than fifteen (15) days prior
to Closing;
(v) Opinion Letter of Lasko and ▇▇▇▇ Co., LPA, containing the
opinions set forth in Exhibit K;
44
(vi) The Seller and Member shall have entered into the
non-competition agreements as set forth in the respective
Exhibits;
(vii) ▇. ▇▇▇▇▇▇▇▇▇ shall have entered into the Employment
Agreement set forth in Exhibit I.
(f) Purchaser shall have received assurances in form and substance
satisfactory to it (that may include insurance certificates) that
Seller has made all provisions necessary under applicable law,
with regard to an employer's obligation to provide for a
continuation of health insurance and other benefits of any
employee, who is not employed by Seller following termination of
employment.
11.3 Conditions Precedent to Seller's Obligations.
------------------------------------------------
The obligation of Seller to perform in accordance with this Agreement
and to consummate the transactions herein contemplated is subject to
the satisfaction of the following conditions at or before the Closing:
(a) Performance by Purchaser of all of the representa-tions,
warranties, agreements and covenants to be performed by it at or
before the Closing;
(b) There shall be no pending or threatened legal action which, if
successful, would prohibit consummation or require substantial
rescission of the transactions contemplated by this Agreement;
(c) Purchasers representations and warranties shall be true and
correct as of the Closing Date;
(d) Purchaser shall deliver to the Seller at or before the Closing
the following documents, all of which shall be in form and
substance acceptable to the Seller and its counsel:
(i) A certified or bank cashier's check or wire transfer for the
aggregate amount to be paid to Seller at the Closing
pursuant to Section 4.2(a) hereof;
(ii) A Promissory Note as set forth in Section 4.2(b) hereof;
(iii) An assumption of liability agreement under which Purchaser
assumes the liabilities set forth in Section 3.1;
45
(iv) Certified copies of the corporate actions taken by Purchaser
authorizing the execution, delivery and performance of this
Agreement;
(v) Certificate of Good Standing for Purchaser from the
Secretary of State of Delaware dated no earlier than fifteen
(15) days prior to the date of Closing;
(vi) Opinion Letter of ▇▇▇▇▇▇▇▇▇ & Dreidame, counsel for
Purchaser, addressed to Seller and dated the Closing Date,
containing the opinions set forth in Exhibit L.
12.
GENERAL PROVISIONS
------------------
12.1 Publicity.
---------
All public announcements relating to this Agreement or the
transactions contemplated hereby will be made by Purchaser with the
consent of the Seller, which consent will not be unreasonably
withheld, except for any disclosure which may be required because of
Purchaser's parent company, PCR, being a publicly-traded corporation
on the over-the-counter market.
12.2 Expenses.
--------
Purchaser will bear and pay all of its expenses incident to the
transactions contemplated by this Agreement which are incurred by
Purchaser or its representatives, and Seller shall bear and pay all of
the expenses incident to the transactions contemplated by this
Agreement which are incurred by Seller or its representatives.
12.3 Notices.
-------
All notices and other communications required by this Agreement shall
be in writing and shall be deemed given if delivered by hand or mailed
by registered mail or certified mail, return receipt requested, to the
appropriate party at the following address (or at such other address
for a party as shall be specified by notice pursuant hereto):
46
(a) If to Purchaser to:
Pomeroy Select Integration Solutions, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
With a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇ III, Esq.
▇▇▇▇▇▇▇▇▇ & Dreidame
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
(b) If to Seller, to:
Verity Solutions, LLC
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
With a copy to:
▇▇▇ ▇▇▇▇▇, Esq.
Lasko and ▇▇▇▇ Co., LPA
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
(c) If to Member, to:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
47
12.4 Binding Effect.
---------------
Except as may be otherwise provided herein, this Agreement and all the
provisions hereof shall be binding upon and inure to the benefit of
the parties hereto and their respective heirs, legal representatives,
successors and assigns.
12.5 Headings.
--------
The headings in this Agreement are intended solely for convenience of
reference and shall be given no effect in the construction or
interpretation of this Agreement.
12.6 Exhibits.
--------
The Exhibit and Disclosure Schedule referred to in this Agreement
constitute an integral part of this Agreement as if fully rewritten
herein.
12.7 Counterparts.
------------
This Agreement may be executed in multiple counterparts, each of which
shall be deemed an original, but all of which constitute together one
and the same document.
12.8 Governing Law.
--------------
This Agreement shall be construed in accordance with and governed by
the laws of the State of Ohio, without regard to its laws regarding
conflict of laws.
12.9 Severability.
------------
If any provision of this Agreement shall be held unenforceable,
invalid, or void to any extent for any reason, such provision shall
remain in force and effect to the maximum extent allowable, if any,
and the enforceability or validity of the remaining provisions of this
Agreement shall not be affected thereby.
12.10 Waivers; Remedies Exclusive.
-----------------------------
No waiver of any right or option hereunder by any party shall operate
as a waiver of any other right or option, or the same right or option
with respect to any subsequent occasion for its exercise, or of any
right to damages. No waiver by any party of any breach of this
Agreement or of any representation or
48
warranty contained herein shall be held to constitute a waiver of any
other breach or a continuation of the same breach. No waiver of any of
the provisions of this Agreement shall be valid and enforceable unless
such waiver is in writing and signed by the party granting the same.
Except as otherwise provided in the Subordinated Promissory Note,
Employment Agreements, and the Covenant Not to Compete Agreements, the
indemnification provided for by Section 10 herein shall constitute the
exclusive remedy of any party with respect to (i) the matters for
which such indemnification is provided and (ii) any other matters
arising out of, relating to or connected with this Agreement or the
transactions contemplated hereby, and whether any claims or causes of
action asserted with respect to any such matters are brought in
contract, tort or other legal theory whatsoever. Such limitations set
forth in this Section 12.10 shall not impair the rights of any of the
parties: (a) to seek non-monetary equitable relief, including (without
limitation) specific performance or injunctive relief to address any
default or breach of this Agreement; or (b) to seek enforcement,
collection, damages or any non-monetary equitable relief to address
any subsequent default or breach of any transfer document, assumption,
consent or agreement to be delivered at Closing hereunder or to seek
declaratory relief or any related relief relating to certain issues
that may arise under Sections 4.5, 5.1 and 5.2. In connection with the
seeking of any non-monetary equitable relief, each of the parties
acknowledge and agree that the other parties hereto would be damaged
irrevocably 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 hereto agree that the other
parties hereto shall be entitled to an injunction or injunctions or
prevent breaches of the provisions of this Agreement and to enforce
specifically this Agreement and the terms and provisions hereof by any
competent court having jurisdiction over the parties. Accordingly,
each of the parties hereto agree that the other parties hereto shall
be entitled to an injunction or injunctions or prevent breaches of the
provisions of this Agreement and to enforce specifically this
Agreement and the terms and conditions hereof by any state court of
competent jurisdiction.
12.11 Assignments.
-----------
Except as otherwise provided in this Agreement, no party shall assign
its rights or obligations hereunder prior to Closing without the prior
written consent of the other party.
12.12 Entire Agreement.
-----------------
This Agreement and the agreements, instruments and other documents to
be delivered hereunder constitute the entire understanding and
agreement concerning the subject matter hereof. All negotiations
between the parties hereto are merged into this Agreement, and there
are no representations, warranties, covenants, understandings, or
agreements, oral or otherwise, in relation
49
thereto between the parties other than those incorporated herein and
to be delivered hereunder. Except as otherwise expressly contemplated
by this Agreement, nothing expressed or implied in this Agreement is
intended or shall be construed so as to grant or confer on any person,
firm or corporation other than the parties hereto any rights or
privilege hereunder. No supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by the parties
hereto.
12.13 Business Records.
-----------------
Seller and Member shall be permitted to retain copies of such books
and records relating to the Purchased Assets and relating to the
accounting and tax matters of the Business and to have access to all
original copies of records so delivered to Purchaser at reasonable
times, for any reasonable business purpose, for a period of six (6)
years after the Closing.
12.14 Dissolution of Seller.
-----------------------
Purchaser acknowledges that following the Closing, Seller may adopt a
plan of liquidation with the intent to dissolve the limited liability
company. Provided, however, Seller and Member agree that the plan of
liquidation will not be effectuated and implemented by Seller until
all the conditions set forth in Section 2 of this Agreement regarding
the transfer of all the respective Purchased Assets have been
effectuated by Seller. Seller acknowledges that Purchaser will suffer
irreparable harm in the event that Seller would liquidate prior to
satisfying all of its obligations under the terms of this Agreement
and the exhibits hereto.
12.15 Effective Date of Agreement.
-------------------------------
This Agreement shall be effective at the close of business on the
Closing Date.
13.
CONSENT TO GRANTING OF A
------------------------
SECURITY INTEREST IN ACQUISITION DOCUMENTS
------------------------------------------
13.1 Seller consents and agrees that upon the Closing of this transaction,
Purchaser shall have the right to grant to Deutsche Financial Services
Corporation, as Administrative Agent for the benefit of various
lenders under a Credit Facilities Agreement, and Purchaser and various
Affiliates of such parties, a first priority security interest and
lien on all of Purchasers rights, remedies, claims and interests under
all the acquisition documents for this transaction.
50
Seller agrees to execute at Closing an assignment of rights agreement,
a copy of which is attached hereto as Exhibit M.
The parties hereto have executed this Agreement as of the date first above
written.
WITNESSES: VERITY SOLUTIONS, LLC
___________________________ By:__________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
___________________________ Its: Managing Member
▇▇▇▇▇▇▇ SELECT INTEGRATION
SOLUTIONS, INC.
___________________________ By:____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
___________________________ Its: CEO
___________________________ MEMBER:
___________________________ ________________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
51