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EXHIBIT 2.1
MEMBERSHIP INTEREST PURCHASE AGREEMENT
by and between
MARIN CAPITAL CORPORATION
and
VERSO TECHNOLOGIES, INC.
dated as of
January 12, 2001
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Schedules
Schedule 2.4(b) Outstanding Checks
Schedule 5.1(a) - Foreign Qualifications-Company
Schedule 5.1(b) Foreign Qualifications-Squirrel (CAN)
Schedule 5.3 - Conflicts
Schedule 5.7(a) - November 30 Financial Statements
Schedule 5.7(b) - Liabilities not Disclosed on November 30 Balance Sheet
Schedule 5.8 - Changes Since Balance Sheet Date
Schedule 5.9 - Litigation
Schedule 5.10 - Proprietary Rights
Schedule 5.11 Squirrel Leases
Schedule 5.12 - Material Contracts
Schedule 5.13 - Leased Real Property
Schedule 5.14 - Tangible Personal Property
Schedule 5.15 - Governmental Permits and Licenses
Schedule 5.17 - Employment Agreements and Arrangements
Schedule 5.18 - Employee Benefit Plans
Schedule 5.19 - Insurance
Schedule 5.20 - Bank Accounts
Schedule 5.21 - Environmental Matters
Schedule 5.22 Terminated Employees
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MEMBERSHIP INTEREST PURCHASE AGREEMENT
This MEMBERSHIP INTEREST PURCHASE AGREEMENT (the "AGREEMENT"),
dated as of January 12, 2001 is entered into by and between Marin Capital
Corporation, a British Columbia company (the "PURCHASER"), and Verso
Technologies, Inc., a Minnesota corporation ("SELLER").
RECITALS
The Purchaser desires to purchase from the Seller, and the
Seller desire to sell to the Purchaser, for the consideration stated herein, all
of the outstanding membership interests of Squirrel Systems, LLC, a Georgia
limited liability company (the "COMPANY") and successor to Squirrel Systems,
Inc., a Georgia corporation ("PREDECESSOR"), on the terms and subject to the
conditions set forth herein.
COVENANTS
NOW, THEREFORE, in consideration of the foregoing and the
premises set forth herein, the parties hereto, intending to be legally bound,
hereby agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
1.1 Defined Terms. Certain capitalized terms used herein are defined
parenthetically in this Agreement. Capitalized terms used but not defined
parenthetically herein are defined in Article X hereto. The meanings assigned to
such terms shall be applicable to each use of such terms throughout this
Agreement.
1.2 Singular and Plural; Gender. Whenever appropriate in the context,
terms used in this Agreement in the singular also include the plural, and vice
versa, and each masculine, feminine or neuter pronoun shall also include the
other genders.
1.3 Meaning of "Including". As used herein, the word "including" shall
be deemed to mean "including, without limitation," unless otherwise expressly
provided in any instance.
1.4 Headings. The article, section and other headings in this Agreement
are for convenience of reference only and shall not be deemed to alter or affect
the meaning or interpretation of any provisions of this Agreement.
1.5 Drafting. The parties have participated jointly in the negotiation
and drafting of this Agreement, and they agree that any ambiguity or question of
intent or interpretation that may arise shall be construed as if drafted jointly
by the parties, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement.
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ARTICLE II
MEMBERSHIP INTEREST PURCHASE; CLOSING
2.1 Purchase and Sale of the Membership Interests. On the terms and
subject to the conditions set forth in this Agreement, the Seller agrees to sell
and deliver to the Purchaser, and the Purchaser agrees to purchase and accept
from the Seller (the "ACQUISITION"), in consideration of the Purchase Price set
forth in Section 2.2 below, all of issued and outstanding membership interests
of the Company (the "MEMBERSHIP INTERESTS").
2.2 Purchase Price and Payment. The consideration to be paid by the
Purchaser to the Seller in connection with the Acquisition (the "PURCHASE
PRICE") shall be (US) $8.5 million. The Purchase Price shall be payable in cash
delivered to the Seller at Closing.
2.3 Completion of Purchase and Sale. The closing of the Acquisition
(the "CLOSING") shall take place no later than five days after the satisfaction
or waiver of all the conditions to Closing set forth in Article VII hereof or
such other date that the Seller and the Purchaser shall mutually agree upon in
writing. The date on which the Closing actually occurs is referred to herein as
the "CLOSING DATE". In no event shall the Closing take place after January 12,
2001 (the "DROP-DEAD DATE").
2.4 Purchase Price Adjustment.
(a) Following Closing, an additional amount shall be transferred
between the Seller and Purchaser, to the extent that the
Intercompany Account Balance as of the Closing Date is
greater than or less than $8,196,174 (the "AGREED UPON
BALANCE"). For purposes of this Agreement, "INTERCOMPANY
ACCOUNT BALANCE" shall mean the account established between
Seller (and its affiliates) on the one hand, and the Company
and its subsidiary on the other hand, which records the net
obligations between such parties.
(b) Seller shall prepare and deliver to Purchaser, within 10
days following the Closing Date, a reconciliation of the
Intercompany Account Balance calculated as of the Closing
Date (the "CLOSING DATE BALANCE"). The Closing Date Balance
shall be prepared in a manner consistent with the
preparation of the Intercompany Account Balance for November
30, 2000 previously delivered to Purchaser (including
netting the aggregate amount of the outstanding checks set
forth on Schedule 2.4(b) against the Intercompany Account
Balance); provided, however, that if the Closing Date occurs
on or before January 12, 2001, the Closing Date Balance
shall exclude, for all periods following September 30, 2000,
any management fees payable by the Company and its
subsidiary to Seller.
(c) Purchaser may object to the Closing Date Balance by delivery
of a written statement of objections (stating the basis of
the objections with reasonable specificity) to Seller within
10 days following delivery of the Closing Date
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Balance. If Purchaser makes such objection, Seller and
Purchaser shall seek in good faith to resolve such
differences within 10 days following the delivery of such
objections. If Purchaser does not so object to the Closing
Date Balance within such 10 day period, the Closing Date
Balance shall be considered final and binding upon the
parties. If Purchaser and Seller are unable to mutually
resolve any disputes with respect to the Closing Date
Balance within the periods described above, the parties
shall, within 10 days following the expiration of such
periods, engage the Atlanta office of Ernst and Young (the
"MEDIATOR") to act as a Mediator and determine, in
accordance with the provisions of this Section 2.4, the
appropriate Closing Date Balance.
(d) If the Mediator is engaged pursuant to this Section 2.4,
then, within 10 days of the engagement, the Mediator shall
be furnished with a copy of this Agreement, a letter from
Purchaser describing Purchaser's position on the disputed
amount and a letter from Seller describing Seller's position
on the disputed amount. Neither party shall make any
additional submission except pursuant to the Mediator's
written request. The Mediator shall have 30 days to review
such documents and such other information as the Mediator
deems appropriate. Within such 30-day period, the Mediator
will furnish both parties with its written determination
with respect to each of the unresolved issues in dispute. In
arriving at its determination, the Mediator may select
either the Purchaser's or Seller's position, or make its own
determination. The determination of the Mediator with
respect to the Closing Date Balance will be final and
binding upon the parties and a judgment, based on the
Mediator's determination, may be entered into a court of
competent jurisdiction. The fee of the Mediator shall be
borne by Seller, if the mediator accepts Purchaser's
position, by Purchaser, if the Mediator accepts Seller's
position, and by Seller and Purchaser equally if the
Mediator accepts neither the Seller's nor the Purchaser's
position. In the process of preparing and reviewing the
Closing Date Balance and conducting of review by either
party or the Mediator, each party will grant the other party
all reasonable access to the records of the business and any
workpapers, including auditor's workpapers, prepared with
respect to the Closing Date Balance.
(e) On the Closing Date, but immediately prior to consummation
of the Transactions, the Closing Date Balance shall be
eliminated. Any intercompany account between the Company and
its subsidiary existing on the Closing Date shall also be
eliminated.
If the Closing Date Balance is less than the Agreed Upon Balance, Purchaser
shall remit such difference to Seller within three business days following final
determination of the Closing Date Balance. If the Closing Date Balance is
greater than the Agreed Upon Balance, Seller shall pay such difference to
Purchaser within three business days following final determination of the
Closing Date Balance.
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2.5 Earnout Amount.
(a) The Purchaser agrees to pay to or for the account of the
Seller the Earnout Amount (as defined below) in the event
Consolidated Net Earnings Before Taxes (as defined below)
for fiscal year 2001 exceeds (US) $1.7 million. The Earnout
Amount shall be paid within 10 days of the issuance of the
report of independent public accountants on the Company's
audited consolidated financial statements for fiscal year
2001. The Company shall complete the audit no later than
March 31, 2002.
(b) "EARNOUT AMOUNT" shall mean an amount (not to exceed (US)
$1.5 million) equal to the product of (i) two and (ii) the
amount of Consolidated Net Earnings Before Taxes in excess
of (US) $1.7 million. By way of example only, if
Consolidated Net Earnings Before Taxes for fiscal year 2001
is (US) $2.1 million, the Earnout Amount would be (US)
$800,000 ($400,000 x 2). "CONSOLIDATED NET EARNINGS BEFORE
TAXES" shall mean the Company's Consolidated Net Earnings
Before Taxes as reflected on the Company's audited
statements of income for the fiscal year ending December 31,
2001 and determined in accordance with Canadian GAAP,
excluding payments made by the Company to affiliates and
members of the Company in excess of $2,500 per month and all
amounts paid or accrued in respect of compensation not
consistent with past practice, but including payments of
interest to affiliates and members of the Company not to
exceed $350,000.
(c) Seller may object to the calculation of Consolidated Net
Earnings Before Taxes by delivery of a written statement of
objections (stating the basis of the objections with
reasonable specificity) to Purchaser within 10 days
following delivery of the audited financial statements. If
Seller makes such objection, Seller and Purchaser shall seek
in good faith to resolve such differences within 10 days
following the delivery of such objections. If Purchaser and
Seller are unable to mutually resolve any disputes with
respect to the calculation of Consolidated Net Earnings
Before Taxes within the periods described above, the parties
shall, within 10 days following the expiration of such
periods, engage the Vancouver, British Columbia office of
Ernst and Young ("E&Y") to review the Company's auditor's
workpapers and management's calculation of Consolidated Net
Earnings Before Taxes to determine, in accordance with
Canadian GAAP and the provisions of this Section 2.5, the
appropriate calculation of Consolidated Net Earnings Before
Taxes.
(d) If E&Y is engaged pursuant to this Section 2.5, then, within
10 days of the engagement, E&Y shall be furnished with a
copy of this Agreement, a letter from Seller describing
Seller's position on the disputed amount and a letter from
Purchaser describing Purchaser's position on the disputed
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amount. Neither party shall make any additional submission
except pursuant to E&Y's written request. E&Y shall have 30
days to review such documents and such other information as
E&Y deems appropriate. Within such 30-day period, E&Y will
furnish both parties with its written determination with
respect to each of the unresolved issues in dispute. In
arriving at its determination, E&Y may select either the
Purchaser's or Seller's position, or make its own
determination. The determination of E&Y with respect to the
calculation of Consolidated Net Earnings Before Taxes will
be final and binding upon the parties and a judgment, based
on E&Y's determination, may be entered into a court of
competent jurisdiction. The fee of E&Y shall be borne by
Seller, if E&Y accepts Purchaser's position, by Purchaser,
if E&Y accepts Seller's position, and by Seller and
Purchaser equally if E&Y accepts neither the Seller's nor
the Purchaser's position. In the process of preparing and
reviewing the calculation of Consolidated Net Earnings
Before Taxes and conducting of review by either party or
E&Y, each party will grant the other party all reasonable
access to the records of the business and any workpapers,
including auditor's workpapers, prepared with respect to the
calculation of Consolidated Net Earnings Before Taxes.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
In order to induce the Seller to enter into this Agreement
and each of the other Acquisition Documents to which it is or shall be a party,
and to consummate the transactions contemplated hereby and thereby, the
Purchaser hereby represents and warrants to the Seller on and as of the date
hereof and on and as of the Closing Date as follows:
3.1 Organization and Good Standing. The Purchaser is a British Columbia
company duly organized, validly existing and in good standing under the laws of
the Province of British Columbia, Canada with all requisite power and authority
to own, operate and lease its properties and to carry on its business as now
being conducted. The Purchaser is qualified to do business and is in good
standing in each jurisdiction in which such qualification is necessary except
where the failure to be qualified would not have a Material Adverse Effect on
the Purchaser.
3.2 Power and Authority. The Purchaser has the requisite power and
authority to execute, deliver and perform this Agreement and the other
Acquisition Documents to which it is or shall be a party and to consummate the
transactions contemplated hereby and thereby.
3.3 Due Authorization. The execution, delivery and performance by the
Purchaser of this Agreement and the other Acquisition Documents to which it is
or shall be a party and the consummation of the transactions contemplated hereby
and thereby by the Purchaser have been duly authorized by all necessary
proceedings.
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3.4 No Conflicts. Neither the execution and delivery by the Purchaser
of this Agreement or the other Acquisition Documents to which it is or shall be
a party nor the consummation by the Purchaser of the transactions contemplated
hereby or thereby:
(a) violates or conflicts with the Purchaser's Charter
Documents;
(b) violates, or conflicts with, or constitutes a default under,
or results in a breach of, any term or provision of, or
requires any consent, authorization or approval under, any
term or provision of any Lien, lease, license or other
agreement or instrument to which the Purchaser is a party or
by which it or its properties are bound, except to the
extent that such circumstance would not reasonably be
expected to have or result in a material adverse effect on
the ability of the Purchaser to consummate the Acquisition
and the transactions contemplated in the other Acquisition
Documents to which it is a party or to carry out its
obligations hereunder or thereunder; or
(c) (i) legally requires the Purchaser to obtain any Consent
from, or make any filing with, any governmental agency,
court, body or instrumentality (whether federal, state,
local or foreign) ("GOVERNMENTAL AUTHORITY") or other Person
or (ii) violates any provision of (x) any Applicable Law or
(y) any judicial, administrative or arbitration order,
award, judgment, writ, injunction or decree (collectively,
"JUDGMENT") to which the Purchaser is a party or to which it
or any of its properties are subject but expressly excluding
any filing pursuant to the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, 15 U.S.C. ss.18a, as amended ("HSR
ACT"), which the Seller has advised does not apply to this
transaction and upon which advice the Purchaser expressly
relies in completing this transaction
3.5 Enforceability. This Agreement is, and when executed and delivered,
each of the other Acquisition Documents to which the Purchaser is or shall be a
party shall be, a valid and binding agreement of the Purchaser, enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium or other laws affecting the enforcement of creditors
rights generally, and the application of equitable principles (whether
considered in a proceeding at law or in equity).
3.6 Financial Ability. The Purchaser has available to it, without any
conditions or contingencies, sufficient funds to perform all of its obligations
under this Agreement and the other Acquisition Documents, including the payment
of the Purchase Price.
3.7 Litigation. The Purchaser is not engaged in, and there is not, to
the knowledge of the Purchaser pending, nor has the Purchaser received any
written notice of, any Legal Action which would prevent or otherwise inhibit the
Purchaser from consummating the transactions contemplated hereby or carrying out
its obligations hereunder or under the other Acquisition Documents to which it
is or shall be a party.
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3.8 No Brokers. No broker has acted on behalf of the Purchaser in
connection with this Agreement, the other Acquisition Documents or the
transactions contemplated hereby or thereby, and there are no brokerage
commissions, finders' fees or similar fees or commissions payable in connection
therewith based on any agreement, arrangement or understanding with the
Purchaser or any action taken by the Purchaser.
3.9 Securities Law Compliance. The Purchaser understands and
acknowledges that the Membership Interests have not been registered under the
Securities Act or the state securities or blue sky laws of any jurisdiction, and
that the transactions contemplated by this Agreement have not been reviewed by,
passed on by or submitted to any federal or state agency or commission. The
Purchaser is acquiring the Membership Interests for its own account, for
investment, and not with a view to, or for resale in connection with, a
distribution thereof, and the Purchaser acknowledges that the Membership
Interests acquired hereunder cannot be transferred without being registered
under the Securities Act or pursuant to a valid exemption therefrom.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE
SELLER REGARDING THE
SELLER AND THE TRANSACTION
In order to induce the Purchaser to enter into this Agreement
and each of the other Acquisition Documents to which it is or shall be a party,
and to consummate the transactions contemplated hereby and thereby, the Seller
hereby represents and warrants to the Purchaser on and as of the date hereof and
on and as of the Closing Date as follows.
4.1 Organization and Good Standing. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of Minnesota.
4.2 Power and Authority. The Seller has the requisite corporate power
and authority to execute, deliver and perform this Agreement and the other
Acquisition Documents to which it is or shall be a party and to consummate the
transactions contemplated hereby and thereby.
4.3 Due Authorization. The execution, delivery and performance by the
Seller of this Agreement and the other Acquisition Documents to which it is or
shall be a party and the consummation of the transactions contemplated hereby
and thereby by the Seller have been duly authorized by all necessary corporate
proceedings.
4.4 No Conflicts. Neither the execution and delivery by the Seller of
this Agreement or the other Acquisition Documents to which it is or shall be a
party nor the consummation by the Seller of the transactions contemplated hereby
or thereby:
(a) violates or conflicts with the Seller's Charter Documents;
(b) violates, or conflicts with, or constitutes a default under,
or results in a breach of, any term or provision of, or
requires any consent, authorization or approval under, any
term or provision of any Lien, lease, license or
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other agreement or instrument to which the Seller is a party
or by which it or its properties are bound, except to the
extent that such circumstance would not reasonably be
expected to have or result in a Material Adverse Effect on
the Seller;
(c) (i) legally requires the Seller to obtain any Consent from,
or make any filing with, any Governmental Authority or other
Person or (ii) violates any provision of (x) any Applicable
Law or (y) any Judgment to which the Seller is a party or to
the Seller or any of its assets or properties is subject; or
(d) legally requires the Purchaser to make any filing pursuant
to the HSR Act, which the Seller has advised does not apply
to this transaction and upon which advice the Purchaser
expressly relies in completing this transaction
4.5 Enforceability. This Agreement is, and when executed and delivered,
each of the other Acquisition Documents to which the Seller is or shall be a
party shall be, a valid and binding agreement of the Seller, enforceable against
the Seller in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium or other laws affecting the enforcement of creditors
rights generally, and the application of equitable principles (whether
considered in a proceeding at law or in equity).
4.6 Title. The Seller has good and marketable title to the Membership
Interests, free and clear of any and all Liens. Upon delivery to the Purchaser
of the Company's Operating Agreement and amendment thereof to provide for
Purchaser as the sole member of the Company, the Purchaser will acquire good,
valid and marketable title to the Membership Interests, free and clear of any
and all Liens other than any Lien created by the Purchaser.
4.7 No Brokers. No broker has acted on behalf of the Seller in
connection with this Agreement, the other Acquisition Documents or the
transactions contemplated hereby or thereby, and there are no brokerage
commissions, finders' fees or similar fees or commissions payable in connection
therewith based on any agreement, arrangement or understanding with the Seller
or any action taken by the Seller.
4.8 Litigation. The Seller is not engaged in, and there is not, to the
Knowledge of the Seller, pending, nor has the Seller received any written notice
of, any Legal Action which would prevent or otherwise inhibit the Seller from
consummating the transactions contemplated hereby or carrying out its
obligations hereunder or under the other Acquisition Documents to which it is or
shall be a party.
4.9 Disclosure. The representations and warranties of the Seller and
the schedules attached to this Agreement are true and correct and may be relied
upon by the Purchaser in making the investment contemplated by this Agreement
independent of any searches, inquiries or investigations carried out or
performed by or on behalf of the Purchaser; provided that if the Purchaser or
any member of Purchaser's senior management, defined as ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇ or ▇▇▇▇▇▇▇ ▇▇▇▇▇, at the time of execution of this Agreement had actual
knowledge of a
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fact causing a representation or warranty of the Seller to be untrue, such
untrue representation or warranty cannot be the basis of an indemnity claim
insofar as attributable to such fact.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
THE SELLER REGARDING THE COMPANY AND SQUIRREL
In order to induce the Purchaser to enter into this Agreement
and each of the other Acquisition Documents to which it is or shall be a party,
and to consummate the transactions contemplated hereby and thereby, the Seller
hereby represents and warrants to the Purchaser on and as of the date hereof and
on and as of the Closing Date as follows. The disclosure items set forth in each
Schedule shall be deemed disclosed for purposes of all Schedules to which they
may otherwise be applicable, whether or not specifically referred to in such
Schedule.
5.1 Organization and Good Standing.
(a) The Company is a limited liability company duly organized,
validly existing and in good standing under the laws of the
State of Georgia. The Predecessor is qualified to do
business and is in good standing in each jurisdiction set
forth in Schedule 5.1(a) hereto, constituting the only
jurisdictions in which the nature of the Predecessor's
business or properties makes such qualification necessary,
except where the failure to be so qualified would not have a
Material Adverse Effect on the Predecessor.
(b) Squirrel Systems of Canada, Ltd., the Company's wholly-owned
subsidiary ("SQUIRREL"), is a corporation duly organized,
validly existing and in good standing under the laws of the
Province of British Columbia. Squirrel is qualified to do
business and is in good standing in each jurisdiction set
forth in Schedule 5.1(b) hereto, constituting the only
jurisdictions in which the nature of Squirrel's business or
properties makes such qualification necessary, except where
the failure to be so qualified would not have a Material
Adverse Effect on Squirrel.
5.2 Power and Authority. Each of the Company and Squirrel has all
requisite power and authority to own, operate and lease its properties and to
carry on its business as presently conducted and represented to the Purchaser.
5.3 No Conflicts. Except as set forth in Schedule 5.3 hereto, neither
the execution and delivery by the Seller of this Agreement or the Acquisition
Documents to which it is or shall be a party nor the consummation of the
transactions contemplated hereby or thereby:
(a) violates or conflicts with the Charter Documents of the
Company or Squirrel;
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(b) results in the creation of any Lien upon any of the
properties of the Company or Squirrel;
(c) violates or conflicts with, or constitutes a default under,
or results in a breach of, or gives rise to any right of
termination, cancellation or acceleration under (including
any circumstances that would result in any of the foregoing
with notice or lapse of time or both), or requires any
consent, authorization or approval under, any term or
provision of any Material Contract to which the Company or
Squirrel is a party or by which its assets or properties are
bound; or
(d) (i) legally requires the Company to obtain any Consent from,
or make any filing with, any Governmental Authority or other
Person or (ii) violates any provision of (x) any Applicable
Law or (y) any Judgment to which the Company or Squirrel is
a party of by which it or any of its properties is subject.
5.4 Ownership.
(a) The Seller is the legal, record and beneficial owner of all
issued and outstanding Membership Interests. There are no
outstanding Options with respect to the Company to which the
Seller or the Company is a party or by which either is
bound. There are no voting trusts or other agreements or
understandings to which the Company is a party with respect
to the voting of the Membership Interests.
(b) The authorized capital stock of Squirrel consists solely of
an unlimited number of common shares, of which 100 shares
are issued and outstanding. All issued and outstanding
common shares are duly and validly issued, and are fully
paid and non-assessable. The Company is the legal, record
and beneficial owner of all issued and outstanding shares of
capital stock of Squirrel. There are no outstanding Options
with respect to Squirrel to which the Company or Squirrel is
a party or by which either of them is bound. There are no
voting trusts or other agreements or understandings to which
the Company or Squirrel is a party with respect to the
voting of the capital stock of Squirrel.
(c) The Company is the legal and beneficial successor to the
Predecessor pursuant to Sections ▇▇-▇▇-▇▇▇ and 14-2-1109 of
the Official Code of Georgia, annotated, and is, either
directly or indirectly through Squirrel, the legal and
beneficial owner of, is seized of and holds and possesses
all right, title, and interest in and to all the assets,
undertaking, property (including both tangible and
intangible), rights, claims, benefits and causes of action
of whatsoever nature and kind, as a going concern of the
Predecessor, including without limitation the assets,
undertaking, property
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(including both tangible and intangible), rights, claims,
benefits and causes of action disclosed in the Schedules to
this Agreement.
5.5 Subsidiaries and Investments. Other than Squirrel, the Company does
not have any Subsidiaries, nor does it directly or indirectly own, of record or
beneficially, or own or have any Option with respect to, any capital stock of or
Investments in any Person. Squirrel has no Subsidiaries, nor does it directly or
indirectly own, of record or beneficially, or have any Option with respect to,
any capital stock of or Investments in any Person.
5.6 Compliance. Neither the Company nor Squirrel has taken any actions
in violation of any provision of its respective Charter Documents that would
have a Material Adverse Effect on the Company and Squirrel, taken as a whole.
Neither the Company nor Squirrel has received any written notice that the
Company is in violation or breach of, or in default under, any provision of any
Applicable Law or Judgment, or any license, permit, certificate, authorization
or other approval of any Governmental Authority applicable to it except as would
not have a Material Adverse Effect on the Company and Squirrel taken as a whole.
5.7 Financial Statements.
(a) Attached as Schedule 5.7(a) hereto is a true and complete
copy of the consolidated balance sheet of the Company as of
November 30, 2000 (the "BALANCE SHEET DATE"), and the
related consolidated statements of income and cash flows for
the 11 months then ended (the "FINANCIAL STATEMENTS"). The
Financial Statements have been prepared by management of the
Company, and have not been reviewed or audited by
independent public accountants. The Financial Statements
present fairly, in all material respects, the consolidated
financial position and the consolidated results of
operations and cash flows of the Company as of the dates and
for the periods indicated on the Financial Statements, in
each case in conformity with US GAAP, subject to normal
recurring year-end adjustments (which would not be material
in the aggregate) and the absence of statements of equity
and notes.
(b) Except as disclosed on Schedule 5.7(b) hereto, the Company
has no liability which is required by US GAAP to be
reflected or reserved on the Financial Statements other than
liabilities so reflected, or liabilities incurred in the
ordinary course of business since the Balance Sheet Date
(none of which would have a Material Adverse Effect on the
Company and Squirrel, taken as a whole).
5.8 Operations Since Balance Sheet Date. Since the Balance Sheet Date,
each of the Company, the Predecessor and Squirrel has conducted its business in
the ordinary course and in conformity with past practice, except for conversion
of the Company to a limited liability company and except as disclosed on
Schedule 5.8.
5.9 Litigation. Except as set forth in Schedule 5.9 hereto, neither the
Company nor Squirrel is engaged in, and there is not pending, nor to the
Knowledge of the Seller, threatened,
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nor has the Company or Squirrel received written notice of, any legal action,
suit, investigation, inquiry or proceeding by any Governmental Authority or
other Person ("LEGAL ACTION") against the Company or Squirrel which, if decided
adversely, would have a Material Adverse Effect on the Company and Squirrel,
taken as a whole.
5.10 Intellectual Property.
(a) Schedule 5.10 hereto sets forth all of the trademarks,
service marks and other marks or trade names of the Company
and Squirrel, and all other patents, copyrights, trademarks,
trade names, service marks and other marks used or licensed
by the Company in connection with its business
(collectively, "PROPRIETARY RIGHTS").
(b) Except for the lien of PNC Bank National Association ("PNC
BANK"), the Company and Squirrel are the exclusive owners of
all right, title and interest in and to the Proprietary
Rights listed in Schedule 5.10 free and clear of all Liens
other than Permitted Liens or as would not otherwise have a
Material Adverse Effect on the Company and Squirrel, taken
as a whole. None of the Proprietary Rights is registered
with the U.S. Patent and Trademark Office or the Canadian
equivalent thereof. To the Knowledge of the Seller, there
has been no infringement, misappropriation or misuse of any
of proprietary rights or other proprietary information of
any third party by the Company or Squirrel. The Seller is
not aware of any facts, matters or claims that would
indicate that any third party possesses intellectual
property rights that may prevent the Company or Squirrel
from conducting their business as currently conducted.
5.11 Squirrel Leases. A Subsidiary of Seller, Eltrax Group, Inc., and
its predecessor (together, "EGI"), is the lessor of several leases of equipment
manufactured by the Company and/or Squirrel, which have been assigned to HLC
Financial Inc. or HLC Capital (collectively, the "SQUIRREL LEASES"). Schedule
5.11 sets forth a true and complete list of the Squirrel Leases. EGI is also a
party to (a) a Private Label Vendor Agreement, dated December 31, 1992 with HLC
Financial Inc., as amended, a copy of which has been provided to the Purchaser,
and (b) an oral agreement with HLC Capital, described on Schedule 5.12
(together, the "HLC AGREEMENTS").
5.12 Material Contracts.
(a) Schedule 5.12 identifies all of the following to which the
Company or Squirrel is a party or by which the Company or
Squirrel is bound (collectively, "MATERIAL CONTRACTS"):
(i) all material purchase orders, agreements or commitments
obligating the Company or Squirrel to purchase any
products or services outside of the ordinary course of
business;
(ii) all material agreements relating to the borrowing of
money, or liability for the deferred purchase price of
property or services
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(excluding normal and customary trade payables
which are not overdue), or any material instrument
guaranteeing any indebtedness or other liability or
any material obligation to incur any indebtedness;
(iii) any joint venture, partnership, strategic alliance
or other similar arrangement;
(iv) any agreement pursuant to which any customer of the
Company or Squirrel has agreed to purchase a
minimum volume of the products or services of the
Company or Squirrel or pursuant to which the
Company or Squirrel has granted any customer a
volume discount outside of the ordinary course of
business;
(v) any agreement pursuant to which a rebate, discount,
bonus, commission or other payment with respect to
the sale of any product or service of the Company
or Squirrel will be payable or required after the
Closing Date in each case outside of the ordinary
course of business;
(vi) any guarantee of the obligations of the customers,
suppliers, officers, directors or employees of the
Company or Squirrel;
(vii) any agreement limiting, in any manner, the ability
of the Company or Squirrel to engage in any
business anywhere in the world (including, without
limitation, any agreements with manufacturers or
retailers which contain exclusive dealing or
similar provisions);
(viii) any employment, consulting, management, severance
or other similar agreement with any Person;
(ix) any union, collective bargaining, works council or
similar agreement; or
(x) any other material contract, agreement, commitment,
understanding or instrument providing for payments
to or from the Company or Squirrel.
(b) Each Material Contract is the valid and binding obligation
of the Company or Squirrel, as applicable, enforceable
against it in accordance with its respective terms, subject
to applicable bankruptcy, insolvency moratorium or other
laws affecting the enforcement of creditors' rights
generally, and the application of equitable principles
(whether considered in a proceeding at law or in equity). To
the Knowledge of Seller, neither the Company nor Squirrel is
in breach or default under (including any circumstances that
would result in a breach or default with notice or lapse of
time or both) any such Material Contract in any material
respect, nor waived any material provision of any such
Material Contract or agreed to do so. To
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the Knowledge of Seller, neither the Company nor Squirrel
has received any written notice of breach or default
(including any circumstances that would constitute a breach
or default with notice or lapse of time or both) or
termination under any Material Contract.
5.13 Real Property. Schedule 5.13 sets forth a list of all real
property leased, occupied or used by the Company and Squirrel. Neither the
Company nor Squirrel owns any real property. All leases and subleases pursuant
to which any of the real property is occupied or used are set forth on Schedule
5.13 and such leases and subleases are valid, subsisting, binding and
enforceable against the Company or Squirrel, as applicable, in accordance with
their respective terms, and to the Knowledge of the Seller there are no existing
breaches of a material provision thereof or defaults thereunder by the Company
or Squirrel, as applicable, or events that with notice or lapse of time or both
would constitute defaults thereunder by the Company or Squirrel, as applicable,
and no party under any such contract, lease or sublease has given or received a
written notice of termination thereunder.
5.14 Title to Property and Related Matters.
(a) Either the Company or Squirrel has good and marketable title
to and possession of all assets identified on the
Consolidated Balance Sheet, free and clear of all Liens,
except for (i) the liens of PNC Bank, (ii) Permitted Liens
and (iii) such imperfections in title that would not
reasonably be expected to have a Material Adverse Effect on
the Company and Squirrel, taken as a whole. Subject to
obtaining all Consents set forth in Schedule 5.3, at
Closing, the Purchaser will have good and marketable title
to and possession of all of the assets of the Company or
Squirrel, subject to Permitted Liens.
(b) Personal Property. Except as would otherwise not have a
Material Adverse Effect on the Company and Squirrel, taken
as a whole, all of the tangible personal property owned or
leased by the Company and Squirrel is in good operating
condition and repair (ordinary wear and tear excepted), is
free from significant defects of workmanship or material and
is usable and adequate for the operations of the business of
the Company and Squirrel, and requires no more repair,
replacement and rehabilitation than is normal in the
Company's industry. All leases and subleases pursuant to
which any such property is leased are valid, subsisting,
binding and enforceable against the Company or Squirrel, as
applicable, in accordance with their respective terms, and
to the Knowledge of the Seller, there are no existing
breaches of a material provision thereof or defaults
thereunder by the Company or Squirrel, as applicable, or
events that with notice or lapse of time or both would
constitute defaults thereunder by the Company or Squirrel,
and no party under any such contract, lease or sublease has
given or received a written notice of termination
thereunder.
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5.15 Governmental Permits. Schedule 5.15 hereto contains a list of all
material franchises, licenses, permits, certificates, authorizations, rights and
approvals of Governmental Authorities (collectively, "GOVERNMENTAL PERMITS")
held by the Company and Squirrel in connection with the operation of its
business. Each Governmental Permit held by the Company and Squirrel has been
duly and validly issued and is in full force and effect except for such failures
to be so validly issued as would not have a Material Adverse Effect on the
Company and Squirrel, taken as a whole, and neither the Company nor Squirrel has
received any written notice that any proceeding to revoke, cancel, encumber or
adversely affect in any manner any such Governmental Permit listed on Schedule
5.15 has been initiated or is threatened.
5.16 Taxes and Tax Returns.
(a) The Seller has timely filed all of its consolidated United
States, Federal and state tax returns required to be filed
by it as of the date hereof (or has timely filed for
extensions with the appropriate taxing authorities with
respect to such tax returns). Squirrel has timely filed all
material tax returns required to be filed by it as of the
date hereof (or has timely filed for extensions with the
appropriate taxing authorities with respect to such tax
returns). The Company and Squirrel have paid or made
provision for the payment of all taxes, including any
interest, penalty or addition thereto (whether or not such
taxes are required to be shown on such tax returns), except
where payment of any such taxes is being contested in good
faith by appropriate proceedings.
(b) Except for a sales and use tax audit in process for sales
and use taxes in the state of Illinois, there is no audit or
examination now pending, with respect to which the Seller,
the Company or Squirrel has been notified in writing,
regarding any material tax returns of the Seller or
Squirrel. Neither Seller nor Squirrel has waived any statute
of limitations in respect of any material taxes or agreed to
any extension of time with respect to any tax assessment or
deficiency.
(c) All taxes required to be deposited, withheld or collected
have been so deposited, withheld or collected, and such
deposit, withholding or collection has either been paid to
the respective governmental agencies or set aside in
accounts for such purpose or secured and reserved against
and entered on the Company's financial statements.
(d) There are no Liens for taxes on any properties or assets of
the Company or Squirrel (other than Liens for taxes which
are not yet due and for which adequate reserves have been
made on the Financial Statements).
(e) None of Seller, the Company or Squirrel is a party to or
bound by or obligated under any tax sharing, tax benefit or
similar agreement. The Predecessor has in the past applied
for, and the Company intends to apply for, Scientific
Research and Experimental Development Tax Credits.
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(f) Squirrel has paid the required employer health tax and
employer portions of employment insurance premiums and
Canada Pension Plan contributions to the appropriate taxing
authorities in the prescribed manner and within the
prescribed time periods; is registered for purpose of the
goods and services tax pursuant to Part IX of the Excise Tax
Act (Canada); and for the current tax year, has made all
installments relating to taxes in the prescribed manner and
within the prescribed time periods.
(g) The parties agree that for all tax and other reporting
purposes, the Purchase Price (other than the amount thereof
attributable to cash, cash equivalents, accounts receivable
and the assumed liabilities) shall be allocated among the
Company's assets as follows: (i) furniture, fixtures,
machinery, equipment, personal property and leasehold
improvements shall be allocated an amount of the Purchase
Price equal to the tax basis of such assets; and (ii) the
balance of the Purchase Price shall be allocated to
goodwill.
5.17 Employees.
(a) Except as described on Schedule 5.17, neither the Company
nor Squirrel is a party to any written or oral employment
contract, agreement, commitment or arrangement.
(b) Neither the Company nor Squirrel is a party to or subject to
(i) any labor union or collective bargaining agreement with
respect to any of its employees or any representative of any
such employees, (ii) any material labor or employment
dispute, and (iii) to the Knowledge of the Seller, no labor
union or bargaining agent or representative holds bargaining
rights with respect to any of the Company's or Squirrel's
employees or has applied or indicated an intention to apply
to be elected, recognized or certified as the bargaining
agent of any of their employees.
5.18 Employee Benefit Matters.
(a) Except as identified in Section 5.18, neither the Company
nor Squirrel maintains or contributes to or has any
obligation or liability to or with respect to any employee
benefit plans, programs, arrangements or practices,
including employee benefit plans within the meaning set
forth in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or other similar
material arrangements for the provision of benefits
(excluding any "Multi-employer Plan" within the meaning of
Section 3(37) of ERISA or a "Multiple Employer Plan" within
the meaning of Section 413(c) of the Code) (such plans,
programs, arrangements or practices of the Company and
Squirrel being referred to as the "EMPLOYEE PLANS").
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(b) Neither the Company nor Squirrel contributes, has any
obligation to contribute or has any liability with respect
to any (i) Multi-employer Plan, (ii) Multiple-employer Plan,
(iii) employee benefit plan that is subject to Title IV of
ERISA or to the minimum funding requirements of Section 412
of the Code or Section 302 of ERISA, or (iv) employee
benefit plan that provides health, life, or accident
insurance, or any other "welfare-type" benefits, to current
or future retirees, current or future former employees, or
current or future former independent contractors, their
spouses, dependents or other beneficiaries, other than in
accordance with Section 4980B of the Code, Part 6 of
Subtitle B of Title I of ERISA or applicable state
continuation coverage law.
(c) (i) There have been no prohibited transactions within the
meaning of Section 406 or 407 of ERISA or Section 4975 of
the Code with respect to the Employee Plans that could
reasonably be expected to result in the Company or Squirrel
incurring any penalties, taxes or liabilities; (ii) the
Employee Plans have been operated and administered in
material compliance with applicable laws during the period
of time covered by the applicable statute of limitations;
(iii) the Employee Plans which are intended to be
"qualified" within the meaning of Section 401(a) of the Code
have been determined by the Internal Revenue Service to be
so qualified and such determination has not been modified,
revoked or limited by failure to satisfy any condition
thereof or by a subsequent amendment thereto or a failure to
amend, except that it may be necessary to make additional
amendments retroactively to maintain the "qualified" status
of such Plan, and the period for making any such necessary
retroactive amendments has not expired; and (iv) no act,
omission or transaction (individually or in the aggregate)
has occurred with respect to the Employee Plans that has
resulted or could result in any material liability (direct
or indirect) to the Company and Squirrel, taken as a whole,
under Sections 409 or 502(c)(1) or (l) of ERISA or Chapter
43 of Subtitle (A) of the Code.
(d) Except as set forth in Section 5.18, none of the Employee
Plans obligates the Company or Squirrel to pay separation,
severance, termination or similar-type benefits solely as a
result of any transaction contemplated by this Agreement or
solely as a result of a "change in control," as contemplated
by Section 280G of the Code.
(e) No actions, suits, claims, complaints, charges, proceedings,
hearings, investigations, or demands with respect to the
Employee Plans (other than routine claims for benefits) are
pending or, to the Knowledge of the Seller, threatened, and,
to the Knowledge of the Seller, there are no facts which
could reasonably be expected to give rise to any actions,
suits, claims, complaints, charges, proceedings, hearings,
investigations, or demands.
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(f) With respect to each Employee Plan, the Seller has made
available to Purchaser, to the extent applicable, (i) a
summary of such Plan, (ii) the most recent annual report
(Form 5500 series), with attachments, and (iii) the most
recent Internal Revenue Service determination letter.
(g) Set forth in Schedule 5.18 is a complete list (as of October
31, 2000) of the names and positions of all employees and
consultants (other than those providing services which are
not material to the Company) of the Company and Squirrel who
are being compensated by the Company or Squirrel, together
with a statement of the starting dates and the current
annual salary or fee being paid to each such individual and,
to the Knowledge of the Seller, there have been no material
variations thereto since the date thereof.
5.19 Insurance. Schedule 5.19 hereto sets forth a list of all policies
or binders of insurance maintained, owned or held by the Seller covering the
Company and Squirrel which are in effect. Such policies and binders are in full
force and effect and all premiums required to be paid thereunder on or prior to
the date hereof have been paid and all such premiums required to be paid on or
prior to the Closing Date shall have been paid on or prior to such date. The
Seller has complied in all material respects with each of such insurance
policies and binders. The Seller has not received any written notice of
cancellation or nonrenewal of any such policy or binder.
5.20 Bank Accounts. Schedule 5.20 hereto sets forth the name of all
bank accounts, lock-boxes, safe deposit boxes, money market funds, certificates
of deposit, stocks, bonds, notes and other securities in the name of or owned or
controlled by the Company and Squirrel and the names of all persons authorized
to draw thereon or to have access thereto. Neither the Company nor Squirrel has
granted a power of attorney in favor of any Person.
5.21 Environmental Laws. Except as set forth in Schedule 5.21 or as
would not have a Material Adverse Effect on the Company and Squirrel, taken as a
whole, (i) neither the Company's nor Squirrel's operations are in violation of
or delinquent under any Environmental Laws, nor is there any consent decree,
consent order, fine or penalty, or similar document relating to any violations
of any Environmental Law to which the Company or Squirrel is a party relating to
any property or facility currently or previously owned, leased or operated by
the Company or Squirrel; (ii) to the Knowledge of the Seller, there are no
circumstances or conditions existing that would prevent or interfere with
carrying on the business of the Company or Squirrel as it is currently conducted
in compliance with Environmental Laws; (iii) the Company and Squirrel have
obtained all material Permits required to be obtained by them under all
Environmental Laws; and (iv) there is no Environmental Claim related to or
arising out of the Company's or Squirrel's past or present operations pending
or, to the Knowledge of the Seller, threatened against either the Company or
Squirrel, its assets, properties, facilities or its business and the Company has
not received a request for information under the Environmental Laws.
5.22 Miscellaneous.
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(a) The Seller is a resident of the United States pursuant to
the Code and is a non-resident of Canada pursuant to the
Income Tax Act (Canada).
(b) The representations and warranties of the Seller shall
survive after the Closing Date in accordance with Section
12.1 hereof.
(c) The Seller represents and warrants to the Purchaser (with
the intent and knowledge that the Purchaser will in reliance
thereon complete the transactions contemplated by this
Agreement) that the Purchaser is not required to make any
filing nor pay any filing fee pursuant to the HSR Act in
connection with this Agreement or the transactions
contemplated pursuant to this Agreement.
(d) Neither the Company nor Squirrel has guaranteed the
obligations of Seller to any third party except as may be
provided in any agreement with PNC, which guarantees to PNC
will be released at Closing.
(e) Set forth on Schedule 5.22 is a list of all employees of the
Company and Squirrel terminated since the Balance Sheet Date
or who will be terminated prior to the Closing Date.
(f) There are no obligations of the Company or Squirrel owing
to, and no claims are pending or, to the Knowledge of the
Seller, threatened against the Company or Squirrel by,
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ III or ▇▇▇▇▇▇▇ ▇'▇▇▇▇▇▇.
ARTICLE VI
COVENANTS
6.1 Access and Information. Subject to the confidentiality obligations
of the Purchaser under that certain letter dated December 22, 2000 (the "LETTER
AGREEMENT") and the provisions of this Section 6.1, from the date hereof until
the Closing Date, or if earlier, the date of termination of this Agreement
pursuant to Article IX, the Seller shall cause the Company and Squirrel to
afford to the Purchaser and to the Purchaser's officers, employees, accountants,
counsel, lenders and other authorized representatives reasonable access, upon
reasonable notice to the Company and Squirrel, to their facilities, properties,
books and records during normal business hours for the purpose of making such
investigations as the Purchaser shall reasonably desire in connection with the
completion of the transactions contemplated hereby.
6.2 Supplemental Information. From time to time prior to the Closing
Date, the Seller will promptly supplement or amend the Schedules which have been
delivered pursuant to this Agreement if any matter arises hereafter which, if
existing or occurring at the date of this
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Agreement, would have been required to be set forth or described in any such
Schedule, or if it becomes necessary to correct any information in any such
Schedule which has become inaccurate. Any representations by the Seller or
re-made by the Seller as at the Closing Date, shall be deemed for all purposes
to relate to any such schedules as supplemented or amended. In the event that
any of the Schedules provided by the Seller change prior to or on the Closing
Date which have a Material Adverse Effect on the Company and Squirrel, taken as
a whole, the Purchaser may terminate this Agreement.
6.3 Further Assurances. Consistent with the terms and conditions
hereof, each party hereto will execute and deliver such instruments and take
such other actions as the other parties hereto may reasonably require or request
in order to carry out this Agreement and the other Acquisition Documents and the
transactions contemplated hereby and thereby and use commercially reasonable
efforts to cause the conditions precedent to the Closing to occur and/or not
fail to occur. Post-Closing, the Seller will reasonably cooperate with Purchaser
in connection with the litigation described in Schedule 5.9.
6.4 Conduct of Business of Company Prior to the Closing Date. The
Seller agrees that from the date hereof and prior to the Closing Date, and
except (i) as set forth in Schedule 6.4 hereto, (ii) otherwise consented to or
approved by an authorized officer of the Purchaser (such consent or approval not
to be unreasonably withheld) or (iii) as required by this Agreement:
(a) the business of the Company and Squirrel shall be conducted
in the ordinary course;
(b) no material change shall be made in the Charter Documents of
the Company or Squirrel;
(c) neither the Company nor Squirrel shall enter into nor
terminate, amend, release or modify any Material Contract,
except in the ordinary course of business;
(d) neither the Company nor Squirrel will take, agree to take,
or do anything in the conduct of its business which would be
contrary to or in material breach of any of the terms or
provisions of this Agreement, or which would cause any of
the representations of the Seller contained herein to be or
become untrue in any material respect or which would result
in a Material Adverse Effect to the Company and Squirrel
taken as a whole; and
(e) except in the ordinary course of business, neither the
Company nor Squirrel shall incur any indebtedness for
borrowed money, prepay any outstanding indebtedness for
borrowed moneys on a "term loan" basis (except for scheduled
payments or required pre-payments of outstanding debt), or
adopt or agree to adopt any new employee benefit plan or
materially modify any existing Employee Plans except as
required by applicable law or terminate the employment or
contract of any employee
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or contractor or accrue any liability beyond the Closing
Date for severance, except as disclosed on Schedule 5.7(b)
to this Agreement.
6.5 Consents. Following the execution hereof, the Seller shall use
commercially reasonable efforts to obtain prior to the Closing Date all Consents
except such Consents, the failure to obtain which would not have a Material
Adverse Effect on the Company and Squirrel, taken as a whole. Notwithstanding
any provisions in this Agreement to the contrary, nothing in this Agreement will
be deemed to constitute a transfer or attempted transfer of any Governmental
Permit or contract which by its terms or under Applicable Law requires the
Consent of a third party (including, without limitation, a Governmental
Authority) unless such Consent shall have been obtained.
6.6 Public Announcements.
(a) Except for the issuance of a press release by Seller
announcing the execution of this Agreement, the Seller and
the Purchaser shall not, and shall each cause their
respective officers, employees and other authorized
representatives not to, prior to the Closing Date, issue any
press release or make any other public disclosure or
announcement or otherwise make any disclosure to any third
Person, concerning the transactions contemplated by this
Agreement or the terms and provisions hereof.
(b) Should any press release or other public disclosure be
required to be made, then the party required to make such
release or disclosure shall not make such release or
disclosure without first using its commercially reasonable
efforts to obtain the prior consent of the other parties
hereto as to both the timing and content of such press
release or public disclosure, which consent shall not be
unreasonably withheld.
6.7 Retention and Access to the Company's Records. Except as provided
in Section 6.9(c)(i), the Seller shall, for a period of five years from the
Closing Date, have access to, and the right to copy, at its expense, during
usual business hours upon reasonable prior notice to the Purchaser, all of the
books and records relating to the Company and Squirrel or their assets or
operations prior to the Closing Date. The Purchaser shall retain and preserve
all such books and records for such five year period. Subsequent to such five
year period, the Purchaser shall only destroy such books and records if there is
no ongoing litigation, governmental audit or other proceeding, and subsequent to
thirty days' written notice to the Seller of its right to remove and retain such
books and records or to copy such books and records prior to their destruction.
6.8 Tax Matters. The following provisions shall govern the allocation
of responsibility between the Purchaser and the Seller for certain tax matter
following the Closing Date:
(a) Seller will include the income of the Company on Seller's
consolidated federal income tax return and corresponding
state tax returns for all periods through the Closing Date
and pay any federal and state income taxes attributable to
such income. The Company will furnish tax information to
Seller for inclusion in Seller's federal consolidated income
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tax return for the period that includes the Closing Date in
accordance with the Company's past custom and practice.
Seller will take no position on such returns that would
adversely affect the Company after the Closing Date, unless
such position would be reasonable in the case of a person
that owned the Company both before and after the Closing
Date. The income of the Company will be apportioned to the
period up to and including the Closing Date and the period
after the Closing Date by closing the books of the Company
as of the end of the Closing Date. The costs of preparing
and filing all such returns shall be paid by the Seller.
(b) Purchaser agrees to indemnify Seller for any additional tax
owed by Seller (including tax owed by Seller due to this
indemnification payment) resulting from any transactions not
in the ordinary course of business occurring on the Closing
Date but after the Purchaser's purchase of the Company, but
excluding any additional tax arising from any action taken
by or at the direction of the Seller.
(c) At Seller's request and expense, the Purchaser will cause
the Company to make or join with Seller in making any
election if the making of such election does not have a
material adverse impact on the Purchaser (or the Company)
for any post-acquisition tax period. Seller will allow
Purchaser and its counsel to participate at its own expense
in any audits of Seller's consolidated federal income tax
returns to the extent that such returns relate to the
Company. Seller will not settle any such audit in a manner
which would adversely affect the Company or Squirrel after
the Closing Date or which would adversely affect the
financial condition of either of the Company or Squirrel as
of the Closing Date, in either case without the prior
written consent of the Purchaser, which consent shall not
unreasonably be withheld. Notwithstanding the foregoing,
Seller agrees to indemnify Purchaser, the Company and
Squirrel for any additional tax owed by any of them
resulting from the making of any election contemplated in
this Section 6.8(c).
(d) The income (loss) of Squirrel shall be apportioned to the
period up to and including the Closing Date by closing the
books of Squirrel as of the Closing Date. Employees of
Squirrel shall work with PricewaterhouseCoopers in Vancouver
to prepare and file all Canadian federal and provincial tax
returns on behalf of Squirrel for the period through the
Closing Date attributable to the operations of Squirrel
prior to Closing. Seller shall promptly reimburse Squirrel
the professional fees incurred solely in connection
therewith. Purchaser shall file all Canadian federal and
provincial tax returns of Squirrel reflecting operations
subsequent to Closing.
6.9 Agreement to Pay. The Purchaser acknowledges that the Seller has
guaranteed the Company's and Squirrel's obligations to pay the outstanding
balances on their employees' American Express credit cards. The Purchaser
covenants and agrees to cause the Company and
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Squirrel to make timely payments to American Express in respect of the
outstanding balances on such credit cards for charges incurred in the ordinary
course of business consistent with past practice prior to the Closing Date.
6.10 Squirrel Leases. At the Closing, Seller shall cause EGI to assign
to the Company all of its interest in and to the Squirrel Leases, and the
Company will have all of the rights and assume all of the obligations under the
Squirrel Leases, subject to the rights and obligations of the lessors on the
Squirrel Leases.
6.11 International Distribution Agreement. The parties acknowledge that
the Company is a party to that certain International Distribution agreement with
AremisSoft Corporation dated October 18, 2000 (the "DISTRIBUTION AGREEMENT").
Purchaser hereby acknowledges the Company's rights and obligations under the
Distribution Agreement, and hereby agrees to cause the Company to assume in full
the Company's obligations under the Distribution Agreement, including, without
limitation, the obligations contained in Section 4.3 thereof.
6.12 Assumption by Purchaser. Purchaser shall assume the defense of and
indemnify and hold Seller harmless from and against any and all actions, suits,
claims and administrative or other proceedings or every kind and nature
instituted or pending against Seller or any of its subsidiaries or affiliates at
any time before or after the Closing that relate to or arise out of the assets,
business, operations, conduct or employees of the Company or Squirrel, whether
relating to or accruing out of occurrences prior to or after the Closing Date.
Purchaser shall assume and conduct the defense of any such matters and Seller
shall cooperate in such defense to the extent reasonably requested by Purchaser.
Notwithstanding the foregoing, the assumption by Purchaser shall be limited as
follows: (i) in no event shall Seller be relieved of any of its obligations
under this Agreement, all of which shall continue in full force and effect in
accordance with the terms of this Agreement and may be enforced by Purchaser,
and (ii) in no event shall Seller be indemnified for willful or intentional
misconduct.
6.13 Directors' and Officers' Indemnification. The indemnification
provisions of the corporate charter and bylaws of each of the Company and
Squirrel as in effect at the date hereof shall not be amended, repealed or
otherwise modified for a period of six years from the Closing Date in any manner
that would adversely affect the rights thereunder of individuals who at the
Closing Date were directors, officers, employees or agents of either of the
Company or Squirrel.
6.14 Employment and Consulting Agreements and Arrangements. From and
after the Closing Date, Purchaser shall cause each of the Company and Squirrel
to honor in accordance with their terms, all employment, severance, and other
compensation contracts and arrangements between such entities and current or
former directors, officers or employees thereof, but only to the extent such
contracts and arrangements are disclosed to the Purchaser prior to the Closing
Date, including without limitation those disclosed in the Schedules hereto.
SUBJECT TO VOLUNTARY RESIGNATIONS, RETIREMENTS AND TERMINATIONS FOR CAUSE OR
OTHER TERMINATIONS (AFTER NOTICE TO AND WRITTEN CONSENT FROM THE PURCHASER)
FOLLOWING REASONABLE NOTICE TO THE EMPLOYEE OR PAYMENT IN LIEU THEREOF, the
Seller will use reasonable commercial efforts to retain all of the existing
employees, including management employees, of the Company and Squirrel through
the Closing Date.
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6.15 Resignations of Officers and Directors. At the Closing, the Seller
and Squirrel shall cause the resignations of all officers and directors of the
Company and Squirrel as requested by Purchaser to be delivered to the Purchaser.
At the Closing, Purchaser will be entitled to ownership and possession of all
the records of the Company and Squirrel, including in particular, but without
limitation, their minute books, corporate seals, if any, financial and tax
records, intellectual property records, employee information, leases, material
contracts and all records relating to litigation matters.
6.16 COBRA Reimbursement. In the event the Seller provides COBRA for
the employees of the Company and Squirrel, at the Purchaser's request, and the
Seller incurs any costs in connection with providing COBRA, the Purchaser shall
promptly reimburse Seller for all such costs.
ARTICLE VII
CLOSING CONDITIONS AND DELIVERIES
7.1 Conditions to the Purchaser's Consummation of the Acquisition. The
obligation of the Purchaser to consummate the Acquisition shall be subject to
the satisfaction, on or prior to the Closing Date, of each of the following
conditions, each of which may be waived by the Purchaser:
(a) Each of the representations and warranties of the Seller
contained in this Agreement shall be true and correct in all
material respects as of the Closing Date as though made on
the Closing Date, except for those representations and
warranties which address matters only as of a particular
date (which shall be correct in all material respects as of
such date).
(b) Each of the obligations of the Seller to be performed by it
on or before the Closing Date pursuant to the terms of this
Agreement, shall have been duly performed and complied with
in all material respects.
(c) All Consents shall have been obtained.
(d) No Judgment prohibiting the transactions contemplated by
this Agreement or the other Acquisition Documents shall have
been entered by a Governmental Authority with proper
jurisdiction which remains in effect, and no Legal Action
shall have been instituted by any Governmental Authority
challenging this Agreement or the Acquisition or the other
transactions contemplated by this Agreement or the other
Acquisition Documents.
(e) The Seller shall have tendered to the Purchaser all
documents which the Seller is required by Section 8.2(a) to
deliver to the Purchaser.
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(f) The Seller shall have delivered to Purchaser a release, in
form and substance reasonably satisfactory to the Purchaser,
executed by the Seller and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (the
"Releasors") in favor of the Company and Squirrel releasing
them from any and all manner of actions, causes of actions,
suits, proceedings, debts, dues, profits, expenses,
contracts, damages, claims, demands and liabilities
whatsoever, in law or in equity, which the Releasors ever
had, now have, or may in the future have against the Company
and/or Squirrel for or by reason of any matter, cause or
thing whatsoever done or omitted to be done by the Company
or Squirrel up to the Closing Date other than in respect of
obligations of the Company or Squirrel to the Releasors
arising in respect of:
(i) ongoing obligations to the Seller agreed to in writing
by the Purchaser pursuant to this Agreement or
otherwise;
(ii) liability to Seller arising under or pursuant to this
Agreement;
(iii) any obligations of the Company or Squirrel pursuant to
indemnities granted by them to officers and directors
of the Company or Squirrel who are or were also
officers or directors of Seller in connection with
their acts as directors or officers of the Company or
Squirrel, provided that such indemnities shall be
ineffective in respect of any act or omission which
would render any representation or warranty given
hereunder untrue or inaccurate.
7.2 Conditions to the Seller's Consummation of the Acquisition. The
obligation of the Seller to consummate the Acquisition shall be subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions, each of which may be waived by the Seller:
(a) Each of the representations and warranties of the Purchaser
contained in this Agreement shall be true and correct in all
material respects as of the Closing Date as though made on
the Closing Date.
(b) Each of the obligations of the Purchaser to be performed by
it on or before the Closing Date pursuant to the terms of
this Agreement, shall have been duly performed and complied
with in all material respects.
(c) All Consents shall have been obtained.
(d) No Judgment prohibiting the transactions contemplated hereby
shall have been entered by a Governmental Authority with
proper jurisdiction which remains in effect, and no Legal
Action shall have been instituted by any Governmental
Authority challenging this Agreement or the Acquisition or
the other transactions contemplated by this Agreement and
the other Acquisition Documents.
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(e) The Purchaser shall have tendered to the Seller all
documents and the payment which the Purchaser is required by
Section 8.2(b) to deliver to the Seller.
ARTICLE VIII
CLOSING
8.1 Closing. The Closing shall take place on the Closing Date as set
forth in Section 2.3. The Closing shall be held at the offices of the Seller, or
any other place the Seller and the Purchaser shall mutually agree. At the
Closing, each of the parties shall take all action and deliver all documents,
instruments, certificates, agreements and other items as required under this
Agreement in order to perform, fulfill and observe all covenants, conditions and
agreements on its part to be performed, fulfilled and observed at or prior to
the Closing Date (and not theretofore accomplished) and cause all conditions
precedent to the other party's obligations hereunder to be satisfied in full.
8.2 Closing Documents.
(a) At the Closing, the Seller shall deliver to the Purchaser
all of the following:
(i) the Membership Interests, together with duly executed
instruments of assignment and transfer;
(ii) a certificate from or on behalf of the Seller
certifying that the conditions set forth in Sections
7.1(a) and (b) have been satisfied by the Seller;
(iii) written resignations and releases (as contemplated in
Section 7.1(f)) from the members of the Company's and
Squirrel's Board of Directors that are requested by the
Purchaser;
(iv) written resignations and releases (as contemplated in
Section 7.1(f)) from the officers of the Company and
Squirrel that are requested by the Purchaser; and
(v) evidence of the termination of the management fee
charged to the Company and Squirrel by Seller.
(b) At the Closing, the Purchaser shall deliver to the Seller
the following:
(i) a certificate from the Purchaser certifying that the
conditions set forth in Sections 7.2(a) and (b) have
been satisfied by the Purchaser; and
(ii) the wire transfer of the Purchase Price pursuant to
instructions received from the Seller.
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ARTICLE IX
INDEMNIFICATION
9.1 Indemnification of Purchaser. The Seller hereby agrees to
indemnify, defend and hold harmless Purchaser, the Company and Squirrel and
their officers, directors, shareholders, managers, members, employees,
independent contractors, agents, successors and assigns (collectively, the
"PURCHASER PARTIES") from and against any and all liabilities, losses, costs or
expenses which any of the Purchaser Parties may suffer or for which any of the
Purchaser Parties may become liable and which are based on, the result of, arise
out of or are otherwise related to any of the following:
(a) any inaccuracy or misrepresentation in, or breach of any
representation or warranty of the Seller contained in this
Agreement, any of the Acquisition Documents or any
certificate, schedule, list or other instrument to be
furnished by the Seller to Purchaser pursuant to this
Agreement or any of the Acquisition Documents;
(b) any breach or failure of the Company or the Seller to
perform any covenant or agreement required to be performed
by the Company or the Seller pursuant to this Agreement or
any of the Acquisition Documents; and
(c) any and all actions, suits, proceedings, demands,
assessments, judgments, costs and expenses, including
reasonable attorneys' fees (collectively, "RELATED
EXPENSES"), incident to any of the foregoing (collectively,
"PURCHASER INDEMNIFIABLE CLAIMS");
provided, however, that within 60 days after learning of the assertion of any
third party claim against which Purchaser claims indemnification under this
Section 9.1, Purchaser shall notify Seller and afford it the opportunity to
assume the defense or settlement of such third party claims at its own expense
with counsel of its choosing, provided that Seller shall not settle any such
claim without the prior written consent of Purchaser, which consent shall not be
unreasonably withheld.
9.2 Indemnification of Seller. Purchaser hereby agrees to indemnify,
defend and hold harmless Seller and its officers, directors, shareholders,
employees, independent contractors, agents, successors and assigns
(collectively, the "SELLER PARTIES") from and against any and all liabilities,
losses, costs or expenses which any of the Seller Parties may suffer or for
which any of the Seller Parties may become liable and which are based on, the
result of, arise out of or are otherwise related to any of the following:
(a) any inaccuracy or misrepresentation in, or breach of any
representation or warranty of Purchaser contained in, this
Agreement, any of the Acquisition Documents or any
certificate, schedule, list or other instrument to be
furnished by Purchaser to Seller pursuant to this Agreement
or any of the Acquisition Documents;
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(b) any breach or failure of Purchaser to perform any covenant
or agreement required to be performed by Purchaser pursuant
to this Agreement or any of the Acquisition Documents;
(c) any liability arising under or with respect to the Squirrel
Leases and the HLC Agreements;
(d) any third party liability arising from the operations of the
Company or Squirrel conducted after the Closing; and
(e) any and all Related Expenses incident to any of the
foregoing (collectively, "SELLER INDEMNIFIABLE CLAIMS").
9.3 Minimization of Indemnities. Each Party shall use reasonable
efforts to minimize the indemnification obligations of the other Parties under
this Article IX by, among other reasonable things and without limiting the
generality of the foregoing, taking such reasonable remedial action as it
believes may minimize such obligation and seeking to the maximum extent possible
reimbursement from insurance carriers under applicable insurance policies
covering any such liability.
9.4 Limitation on Indemnities.
(a) Any provision of this Agreement to the contrary
notwithstanding, no claim for indemnification by an
indemnified party against an indemnifying party pursuant to
this Article IX shall be valid and capable of assertion
unless and until the aggregate amount of all claims against
the indemnifying party exceeds (US) $100,000 (the "BASKET
AMOUNT"), but then the indemnified party may seek
indemnification for the full amount of such claims.
(b) Any provision of this Agreement to the contrary
notwithstanding, the maximum amount for which an
indemnifying party may be liable to the indemnified party
hereunder shall not exceed, in the aggregate, the sum of (i)
(US) $4,250,000 and (ii) 50% of the Earnout Amount paid to
the Seller ("CAP AMOUNT").
(c) Notwithstanding anything to the contrary herein, no
indemnified party shall be subject to the Basket Amount or
the Cap Amount in seeking indemnification from an
indemnifying party involving fraud or willful or intentional
misrepresentations or a breach of the covenant in Sections
6.8(c), 6.9, 6.10, 6.11 and 6.12 hereof.
9.5 Sole Remedy. The indemnification provided for herein shall be the
sole and exclusive remedy for any Purchaser Indemnifiable Claims or Seller
Indemnifiable Claims, as applicable.
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ARTICLE X
TERMINATION
10.1 Termination Events. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned:
(a) At any time, by the mutual written agreement of the Seller
and the Purchaser;
(b) By either the Purchaser or the Seller, upon written notice
to the other, if the conditions to its obligations set forth
in Sections 7.1 and 7.2, respectively, shall not have been
satisfied or waived on or before the Drop-Dead Date for any
reason other than a breach or default by such terminating
party of its respective covenants, agreements or other
obligations hereunder, or any of its representations or
warranties herein not being true and accurate when made or
when otherwise required by this Agreement to be true and
accurate in all material respects;
(c) By the Seller by reason of a material breach or default by
the Purchaser under this Agreement and provided that the
Seller has not materially breached or defaulted hereunder
and has performed or stands ready, willing and able to
perform, its obligations under this Agreement in all
material respects; provided that, if the breach or default
by the Purchaser is capable of being cured, the Purchaser
shall have had 30 days following notice of such breach or
default to cure, and such breach or default shall not have
been cured; or
(d) By the Purchaser by reason of a material breach or default
by the Seller under this Agreement and provided that the
Purchaser has not materially breached or defaulted hereunder
and has performed or stands ready, willing and able to
perform, its obligations under this Agreement in all
material respects; provided that, if the breach or default
by the Seller is capable of being cured, the Seller shall
have had 30 days following notice of such breach or default
to cure, and such breach or default shall not have been
cured.
10.2 Manner of Exercise. In the event of the termination of this
Agreement by either the Purchaser of the Seller pursuant to this Article X,
notice thereof shall forthwith be given to the other party and this Agreement
shall terminate and the transactions contemplated hereunder shall be abandoned
without further action by the Purchaser or the Seller.
10.3 Effect of Termination. In the event of the termination and
abandonment of this Agreement, the obligations of the parties under Sections
10.3 and 12.2 shall survive any such termination. If this Agreement is
terminated pursuant to Section 10.1(a) or 10.1(b), no party shall have any
liability for any costs, expenses, loss of anticipated profits or any further
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obligation for breach of warranty or otherwise to any party to this Agreement.
Any termination of this Agreement pursuant to Section 10.1(c) or 10.1(d) shall
be without prejudice to any other rights or remedies of the respective parties.
ARTICLE XI
DEFINITIONS
As used in this Agreement, the following terms shall have the
meaning assigned thereto in this Article (or the meaning assigned thereto in the
referenced Section or Article of this Agreement):
"ACQUISITION" shall have the meaning assigned thereto in
Section 2.1 of this Agreement.
"ACQUISITION DOCUMENTS" shall mean this Agreement and all
documents executed in connection with this Agreement.
"AFFILIATE" shall mean, with respect to any Person, any other
Person or entity which shall be directly or indirectly controlling or controlled
by or under common control with such Person. For purposes of this Agreement, a
particular Person shall be deemed to control another entity if that Person or
possesses, directly or indirectly, the power to direct or cause the direction of
the management and policies of such entity, whether through ownership of voting
securities, by contract or otherwise.
"AGREED UPON BALANCE" shall have the meaning assigned thereto
in Section 2.4 of this Agreement.
"AGREEMENT" shall have the meaning assigned thereto in the
introduction to this Agreement and as the same may be amended from time to time
in accordance with its terms.
"APPLICABLE LAW" shall mean any Federal, state, local or
foreign code, law, ordinance, regulation, reporting or licensing requirement,
rule or statute applicable to a Person or its assets, properties, liabilities or
business, including those promulgated, interpreted or enforced by any
Governmental Authority.
"BALANCE SHEET DATE" shall have the meaning assigned thereto
in Section 5.7(a) of this Agreement.
"CANADIAN GAAP" shall mean generally accepted accounting
principles as in effect from time to time in Canada, consistently applied.
"CHARTER DOCUMENTS" shall mean, with respect to any
corporation, partnership, limited liability company, trust, association or other
entity, any articles or certificate of incorporation, formation, association or
organization, partnership agreement, operating
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agreement, trust agreement, bylaws and other documents, as applicable,
evidencing or governing the formation or governance of such entity.
"CLOSING" shall have the meaning assigned thereto in Section
2.3 of this Agreement.
"CLOSING DATE" shall have the meaning assigned thereto in
Section 2.3 of this Agreement.
"CLOSING DATE BALANCE" shall have the meaning assigned thereto
in Section 2.4 of this Agreement.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and any successor statute thereto and all final or
temporary rules and regulations promulgated thereunder, and all published and
generally applicable rulings entitled to precedential effect, in each case to
the extent such rules, regulations or rulings are effective and applicable.
"COMPANY" shall mean Squirrel Systems, LLC, a Georgia limited
liability company.
"CONSENTS" shall mean the consents, permits, approvals and
authorizations of Governmental Authorities and other Persons (including PNC)
necessary to sell the Membership Interests to the Purchaser or otherwise to
consummate the transactions contemplated by this Agreement.
"CONSOLIDATED NET EARNINGS BEFORE TAXES" shall have the
meaning assigned thereto in Section 2.5 of this Agreement.
"DROP-DEAD DATE" shall have the meaning assigned thereto in
Section 2.3 of this Agreement.
"E&Y" shall have the meaning assigned to it in Section 2.5 of
this Agreement.
"EARNOUT AMOUNT" shall have the meaning assigned thereto in
Section 2.5 of this Agreement.
"EMPLOYEE PLANS" shall have the meaning assigned thereto in
Section 5.18(a) of this Agreement.
"ENVIRONMENTAL CLAIM" means any claim, demand, complaint,
action, suit proceeding, investigation or notice by any Person alleging
potential liability arising out of, based on, or relating to Environmental Laws.
"ENVIRONMENTAL LAWS" means all federal, state, and local laws
(including, without limitation, common law), statutes, ordinances, judgments,
decrees, agreements with any
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Governmental Authority, licenses, permits, rules and regulations relating to
pollution or the environment or occupational or worker health and safety
including, without limitation, laws, statutes, ordinances, judgments, decrees,
agreements with any Governmental Authority, licenses, permits, rules and
regulations relating to the release of any Hazardous Material at any location or
otherwise relating to the use, treatment, storage, disposal, transport, or
handling of any Hazardous Material.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time.
"GOVERNMENTAL AUTHORITY" shall have the meaning assigned
thereto in Section 3.4(c) of this Agreement.
"GOVERNMENTAL PERMIT" shall have the meaning assigned thereto
in Section 5.15 of this Agreement.
"HAZARDOUS MATERIAL" means any material, substance or compound
regulated under Environmental Laws.
"HSR ACT" shall have the meaning assigned to thereto in
Section 3.4 of this Agreement.
"INTERCOMPANY ACCOUNT BALANCE" shall have the meaning assigned
thereto in Section 2.4 of this Agreement.
"INVESTMENTS" shall mean any (a) investment in shares of
capital stock, evidence of indebtedness or other securities issued by any other
Person, (b) loan, advance or extension of credit to, or contribution to the
capital of, any other Person, (c) purchase of the securities or business of any
other Person or commitment to make such purchase, and (d) other investment in
any other Person.
"JUDGMENT" shall have the meaning assigned thereto in Section
3.4(c) of this Agreement.
"KNOWLEDGE" shall mean, with respect to the Seller, the actual
knowledge of the Chief Financial Officer of Seller after she has reviewed all
records, documents and other information in her possession or under her control
which would be regarded as reasonably relevant to the matter and has made
appropriate inquiries of the senior officers of the Company and Squirrel who
would reasonably be expected to have responsibility for or knowledge of the
matters relevant to such representation, warranty, acknowledgement, covenant or
statement.
"LEGAL ACTION" shall have the meaning assigned thereto in
Section 5.9 of this Agreement.
"LIEN" shall mean (a) any encumbrance, mortgage, pledge, lien,
charge or other security interest of any kind upon any property or upon the
income or profits therefrom, (b) any
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right of redemption, put or call option or other right to sell or acquire any
property, or (c) any acquisition of or agreement to have an option to acquire
any property or assets upon conditional sale or other title retention agreement,
device or arrangement (including a capitalized lease).
"MATERIAL ADVERSE EFFECT" in respect of a Person shall mean
any material adverse effect on the business, assets, properties, condition
(financial or other) or results of operations of such Person, taken as a whole
together with any subsidiary, or on the ability of such Person to consummate the
Acquisition or to carry out the other transactions contemplated by this
Agreement and the other Acquisition Documents.
"MATERIAL CONTRACT" shall have the meaning assigned thereto in
Section 5.12(a) of this Agreement.
"MEDIATOR" shall have the meaning assigned thereto in Section
2.4 of this Agreement.
"MEMBERSHIP INTERESTS" shall mean the membership interests in
the Company.
"OPTIONS" shall mean, with respect to any Person, securities
or other rights or interests which are convertible into or exchangeable or
exercisable for shares of capital stock of such Person, or any other options,
warrants, rights, contracts, commitments, understandings or arrangements or
claims of any character pursuant to which such Person is or may become bound to
issue, transfer, sell, repurchase or otherwise acquire or retire any shares of
capital stock of such Person or any Membership Interests.
"PERMITTED LIEN" shall mean (a) liens for taxes and
assessments or governmental charges or levies not at the time due or the
validity of which is currently being contested in good faith by appropriate
proceedings, for which adequate reserves have been recorded on the books and
financial statements of the Company in accordance with GAAP, (b) liens incurred
in the ordinary course of business in respect of pledges or deposits under
workers' compensation laws or similar legislation, carriers', warehousemen's,
mechanics', laborers' and materialmen's and similar liens, if the obligations
secured by such liens are not then delinquent or are being contested in good
faith by appropriate proceedings, for which adequate reserves have been recorded
on the books and financial statements of the Company, (c) liens incidental to
the conduct of the business of the Company which were not incurred in connection
with the borrowing of money or the obtaining of advances or credit and which do
not, in the aggregate, materially detract from the value of the property of the
Company or materially impair the use thereof in the operation of the business of
the Company and (d) liens arising out of this Agreement or any other Acquisition
Document to which the Company is or shall be a party.
"PERSON" shall mean a natural person, a sole proprietorship, a
partnership, a joint venture, a corporation, a limited liability company, a
trust, an unincorporated organization, an institution, a government or any
department, division or agency thereof, and any other entity.
"PREDECESSOR" shall have the meaning assigned thereto in the
Recitals of this Agreement.
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"PROPRIETARY RIGHTS" shall have the meaning assigned thereto
in Section 5.10(a) of this Agreement.
"PURCHASE PRICE" shall have the meaning assigned thereto in
Section 2.2(a) of this Agreement.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SUBSIDIARY" shall mean, with respect to any Person, any
corporation, partnership, limited liability company or other entity, a majority
of the voting Capital Stock of which shall, at the time as of which any
determination is made, be owned by such Person either directly or through
Subsidiaries of such Person.
"US GAAP" shall mean generally accepted accounting principles
as in effect from time to time in the United States, consistently applied.
ARTICLE XII
MISCELLANEOUS
12.1 Survival. The representations and warranties of the Purchaser in
Article III and the Seller in Articles IV and V hereof shall survive for a
period of 12 months after the Closing Date, except that the representations and
warranties of the Seller in Sections 4.1, 4.2, 4.3, 4.5, 4.6, 5.1 and 5.2 shall
survive indefinitely and the representations and warranties of the Seller in
Section 5.16 shall survive for the applicable statute of limitations.
12.2 Expenses. Each of the parties hereto shall bear its own costs,
fees and expenses in connection with the negotiation, preparation, execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby, including, without limitation, fees,
commissions and expenses (including, without limitation, all filing, printing,
copying, mailing, telephone, transportation and delivery charges) payable to
brokers, finders, investment bankers, consultants, exchange, transfer or paying
agents, attorneys, accountants and other professionals, whether or not the
transactions contemplated by this Agreement are consummated.
12.3 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL SUBSTANTIVE LAWS OF THE STATE OF GEORGIA WITHOUT
CONSIDERATION OF PRINCIPLES OF CONFLICTS OR CHOICE OF LAWS.
12.4 Notices. All notices, requests, demands or other communications
made pursuant to this Agreement shall be in writing in the English language and
shall be deemed to have been duly given upon receipt when delivered personally,
by mail, by courier, by facsimile, telegram, telex or similar means of
communication (in all instances other than delivery by mail with
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confirmation by mail to be provided by the party giving notice) to the recipient
party, to the following addresses:
If to Purchaser:
Marin Capital Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ 185
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇▇ & Company, Barristers & Solicitors
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇, Esq.
and with a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP
1600 Atlanta Financial Center
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
If to the Seller:
Verso Technologies, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chief Financial Officer
with copy to:
Jaffe, Raitt, Heuer & ▇▇▇▇▇,
Professional Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇
Any party may change its address for purposes of this Section 12.5 by notice to
the others of such change in the manner specified above. Notices, requests,
demands or other communications shall be deemed given (i) if delivered
personally, upon delivery, (ii) if delivered
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by registered or certified mail (postage prepaid, return receipt requested),
upon the earlier of actual delivery or three business days after being mailed,
(iii) if delivered by overnight courier or similar service, upon delivery, or
(iv) if given by facsimile, upon receipt of confirmation of transmission by
facsimile; provided that if such notices or other communications would otherwise
be deemed given on a day which is not a business day, the delivery shall be
deemed the first business day following such day.
12.5 Assignment; Successors. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, but neither this Agreement
nor any of the rights, interests, or obligations hereunder shall be assigned by
any of the parties hereto, either in whole or in part, without the prior written
consent of the other parties hereto; provided, however, that the Seller may,
without the Purchaser's prior consent, assign its rights under this Agreement,
including the right to receive payment of the Earnout Amount, to PNC Bank,
National Association.
12.6 Annexes; Entire Agreement. The Schedules and Exhibits hereto
constitute an integral part of this Agreement. This Agreement, the other
Acquisition Documents and the Letter Agreement constitute the entire and sole
agreement and understanding between the parties hereto with respect to the
subject matter hereof and thereof and supersede any prior or contemporaneous
understanding, agreements, representations or warranties, whether oral or
written, with respect to the subject matter hereof and thereof.
12.7 Severability. Any provision of this Agreement which may be
determined by competent authority to be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement, and any such prohibition or unenforceability in
such jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction. Moreover, if any one or more provisions contained in
this Agreement shall for any reason be held by any court of competent
jurisdiction to be excessively broad as to time, duration, geographical scope,
activity or subject, it shall be construed, by limiting and reducing it, so as
to be enforceable to the extent compatible with the applicable law as it shall
then appear.
12.8 Time. Subject to any required notice and the lapse of any
applicable cure periods, time is of the essence of this Agreement with respect
to each and every provision of this Agreement in which time is specifically
expressed to be a factor.
12.9 Modification, Amendment, Waiver. No modification or amendment of
any provision of this Agreement shall be effective unless approved in writing by
the parties to the Agreement. No party shall be deemed to have waived compliance
by any other party with any provision of this Agreement unless such waiver is in
writing, and the failure of any party at any time to enforce any of the
provisions of this Agreement shall in no way be construed as a waiver of such
provisions and shall not affect the rights of any party thereafter to enforce
such provisions in accordance with their terms. No waiver of any provision of
this Agreement shall be deemed to be a waiver of any other provision of this
Agreement. No waiver of any breach of any provision of this Agreement shall be
deemed the waiver of any subsequent breach thereof or of any other provision of
this Agreement.
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12.10 Counterparts; Facsimile. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
with the same effect as if all parties had signed the same document. All such
counterparts will be deemed to be an original, shall be construed together and
shall constitute one and the same instrument. Photostatic or facsimile
reproductions of this Agreement may be made and relied upon to the same extent
as originals.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date first above written.
MARIN CAPITAL CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
VERSO TECHNOLOGIES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Executive Vice President and Chief
Financial Officer
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