Exhibit 10(i)(nn)(2)
ASSET PURCHASE AGREEMENT
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THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and is entered into this
_____ day of December, 2003, by, between and among POMEROY IT SOLUTIONS, INC.
formerly known as Pomeroy Computer Resources, Inc., a Delaware corporation
("Purchaser No. 1"), ▇▇▇▇▇▇▇ SELECT INTEGRATION SOLUTIONS, INC. (Purchaser No.
2"), eSERV SOLUTIONS GROUP, L.L.C., an Illinois limited liability company
(Seller), ▇▇▇ ▇▇▇▇▇▇▇ (▇. ▇▇▇▇▇▇▇) and ▇▇▇ ▇▇▇▇▇▇▇ (▇. ▇▇▇▇▇▇▇) (▇. ▇▇▇▇▇▇▇ and
▇. ▇▇▇▇▇▇▇ hereinafter referred to collectively as the Members and individually
as the Member).
W I T N E S S E T H :
WHEREAS, Seller is a single source provider of a variety of computer service and
support solutions, including providing the infrastructure for data management,
e-business and IT strategies to large and medium size commercial, governmental
and other professional customers throughout the Peoria, Quad-Cities and Central
Illinois areas in Illinois and central and eastern Iowa; and
WHEREAS, Members are the owners of one hundred percent (100%) of the membership
interests of Seller, in the following proportions: ▇. ▇▇▇▇▇▇▇ - 57.4%, ▇.
▇▇▇▇▇▇▇ - 42.6%; and
WHEREAS, Purchaser No. 1 is in the business of marketing and selling a broad
range of microcomputers and related products including equipment selection,
procurement and configuration; and
WHEREAS, Purchaser No. 2, a wholly-owned subsidiary of Purchaser No. 1, is a
single source provider of integrated desktop management and network services
including life cycle services, internetworking services, and end user support
services; and
WHEREAS, Purchaser No. 1 desires to purchase certain of the assets of the Seller
used in its business of marketing and selling a broad range of microcomputers
and related products including equipment selection, procurement and
configuration (Business No. 1") and assume certain of the liabilities of the
Seller in connection with Business No. 1 and Purchaser No. 2 desires to
purchase certain of the assets of the Seller used in its integrated desktop
management and network services business (Business No. 2") and assume certain of
the liabilities of the Seller in connection with Business No. 2; and Seller
desires to sell certain of such assets, subject to such liabilities, but only
upon (i) the terms and subject to the conditions set forth in this Agreement,
(ii) the representations, warranties, covenants, indemnifications, assurances
and undertakings of the Seller, each Member and of Purchaser No. 1 and Purchaser
No. 2 contained in this Agreement, (iii) the agreement of the Seller to refrain
from competition with Purchaser No. 1 and Purchaser No. 2 for the term set forth
in its Non-Competition Agreement, (iv) the agreement of each Member to refrain
from competition for the term set forth in his respective Non-Competition
Agreement.
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NOW, THEREFORE, in consideration of the above premises and the mutual promises,
covenants, agreements, representations and warranties herein contained, the
parties hereto agree as follows:
1.
DEFINITIONS
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1.1 Affiliate. "Affiliate" shall have the meaning ascribed to such term in
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Rule 405 promulgated under the Securities Act of 1933, as amended.
1.2 Assumed Liabilities No 1. The "Assumed Liabilities No. 1" are the
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liabilities of Seller assumed or paid at Closing by Purchaser No. 1
pursuant to Section 3.1 of this Agreement.
1.3 Assumed Liabilities No 2. The "Assumed Liabilities No. 2" are the
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liabilities of Seller assumed or paid at Closing by Purchaser No. 2
pursuant to Section 3.2 of this Agreement.
1.4 Balance Sheet. The "Balance Sheet" is the unaudited balance sheet of
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Seller as of November 14, 2003, included as part of the Financial
Statements.
1.5 Closing. The "Closing" shall be the consummation of the transactions
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contemplated under this Asset Purchase Agreement.
1.6 Closing Date. The "Closing Date" shall be as of 9:00 a.m., E.D.T.,
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December ____, 2003.
1.7 Code. The "Code" is the Internal Revenue Code of 1986, as amended, 26
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U.S.C. 1 et seq.
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1.8 Court. A "Court" is any federal, state, municipal, domestic, foreign
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or other governmental tribunal or an arbitrator or person with similar
power or authority.
1.9 Disclosure Schedule. The "Disclosure Schedule" is the Disclosure
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Schedule dated the date of this Agreement and delivered by Seller to
Purchaser No. 1 and Purchaser No. 2, respectively.
1.10 Encumbrance. An "Encumbrance" is any security interest, lien, or
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encumbrance whether imposed by agreement, understanding, law or
otherwise, on any of the Purchased Assets No. 1 and/or the Purchased
Assets No. 2 (as defined herein).
1.11 Excluded Assets. An "Excluded Asset" is any asset set forth in
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Section 2.4.
1.12 Financial Statements. The "Financial Statements" are the audited
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consolidated financial statements of Seller and J.T.S.H., L.L.C. and
eServ, L.L.C. for the years ending December 31, 2001 and December 31,
2002, including any and all notes thereto, and the unaudited
consolidated financial statements of the Seller and J.T.S.H., L.L.C.
and eServ, L.L.C. for the period commencing January 1, 2003 and ending
October 31, 2003, including any and all notes thereto and Seller's
separated unaudited balance sheet as of November 14, 2003.
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1.13 Governmental Entity. A "Governmental Entity" is any Court or any
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federal, state, municipal, domestic, foreign or other administrative
agency, department, commission, board, bureau or other governmental
authority or instrumentality.
1.14 Gross Sales. "Gross Sales" shall have the meaning set forth in Section
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4.8.
1.15 Knowledge of Seller and Members and/or Sellers Knowledge. Knowledge of
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Seller and Members and/or Sellers Knowledge shall mean actual
knowledge of any Member or Manager.
1.16 Net Asset Amount No. 1. Net Asset Amount No. 1 shall have the meaning
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set forth in Section 5.1.
1.17 Net Asset Amount No. 2. Net Asset Amount No. 2" shall have the meaning
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set forth in Section 5.1.
1.18 NPBT. The Net Profit Before Taxes of Purchaser No. 1's eServ Solutions
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Group Division and Purchaser No. 2's eServ Solutions Group Division
for the applicable period as set forth in Section 4.6. The
determination of NPBT shall be determined in accordance with the
provisions set forth in Section 4.8.
1.19 NPBT Margin. "NPBT Margin" shall have the meaning set forth in Section
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4.8.
1.20 NPBT Threshold. "NPBT Threshold" shall have the meaning set forth in
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Section 4.6.
1.21 2004 NPBT. The Net Profit Before Taxes of Purchaser No. 1's eServ
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Solutions Group Division and Purchaser No. 2's eServ Solutions Group
Division for the period commencing January 6, 2004 and ending January
5, 2005. The determination of the 2004 NPBT shall be determined in
accordance with the provisions set forth in Section 5.2.
1.22 Person. Any natural person, firm, partnership, association,
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corporation, company, limited liability company, limited partnership,
trust, business trust, governmental authority or other entity.
1.23 Pro Forma Balance Sheet No. 1. The "Pro Forma Balance Sheet No. 1" is
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the balance sheet of Seller prepared as described in Section 5.1 and
adjusted for Excluded Assets of Seller and Excluded Liabilities
relating to Business No. 1 of Seller as of the Closing Date.
1.24 Pro Forma Balance Sheet No. 2. The "Pro Forma Balance Sheet No. 2" is
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the balance sheet of Seller prepared as described in Section 5.1 and
adjusted for Excluded Assets of Seller and Excluded Liabilities
relating to Business No. 2 of Seller as of the Closing Date.
1.25 Purchase Price No. 1. The "Purchase Price No. 1" is the total
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consideration paid by Purchaser No. 1 to Seller for Purchased Assets
No. 1 as set forth in Sections 4.1, 4.6 and 4.7.
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1.26 Purchase Price No. 2. The "Purchase Price No. 2" is the total
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consideration paid by Purchaser No. 2 to Seller for Purchased Assets
No. 2 as set forth in Sections 4.2, 4.6 and 4.7.
1.27 Purchased Assets No. 1. The "Purchased Assets No. 1" are the assets of
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Seller, used in Business No. 1, acquired by Purchaser No. 1 pursuant
to the terms of this Agreement.
1.28 Purchased Assets No. 2. The Purchased Assets No. 2 are the assets of
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Seller, used in Business No. 2, acquired by Purchaser No. 2 pursuant
to the terms of this Agreement.
1.29 Sellers Accountant. Sellers Accountant shall mean Deloitte & Touche,
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▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇.
1.30 November 14th Pro-Forma Balance Sheet No. 1. The November 14th
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Pro-Forma Balance Sheet No. 1" is the unaudited balance sheet of the
Seller adjusted for Excluded Assets and Excluded Liabilities of Seller
relating to Business No. 1 as of November 14, 2003.
1.31 November 14th Pro-Forma Balance Sheet No. 2. The November 14th
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Pro-Forma Balance Sheet No. 2" is the unaudited balance sheet of
Seller adjusted for Excluded Assets and Excluded Liabilities of Seller
relating to Business No. 2 as of November 14, 2003.
1.32 Tax or Taxes. Any federal, state, provincial, local, foreign or other
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income, alternative, minimum, any taxes under Section 1374 of the
Code, any taxes under Section 1375 of the Code, accumulated earnings,
personal holding company, franchise, capital stock, net worth,
capital, profits, windfall profits, gross receipts, value added,
sales, use, goods and services, excise, customs duties, transfer,
conveyance, mortgage, registration, stamp, documentary, recording,
premium, severance, environmental, including taxes under Section 59A
of the Code), real property, personal property, ad valorem,
intangibles, rent, occupancy, license, occupational, employment,
unemployment insurance, social security, disability, workers'
compensation, payroll, health care, withholding, estimated or other
similar tax, duty or other governmental charge or assessment or
deficiencies thereof (including all interest and penalties thereon and
additions thereto whether disputed or not).
1.33 Tax Return. A "Tax Return" is a report, return or other information
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required to be supplied to a Governmental Entity in connection with
Taxes including, where permitted or required, combined or consolidated
returns for any group of entities that includes Seller.
2.
TERMS
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2.1 Agreement.
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Seller agrees to sell and convey to Purchaser No. 1 the Purchased
Assets No. 1 as hereinafter set forth in Section 2.2 owned by such
entity. Seller agrees to sell and convey to Purchaser No. 2
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the Purchased Assets No. 2 as hereinafter set forth in Section 2.3
owned by such entity. Purchaser No. 1 agrees to purchase the Purchased
Assets No. 1 and Purchaser No. 2 agrees to purchase the Purchased
Assets No. 2. The agreements of Purchaser No. 1 and Purchaser No. 2
and Seller are expressly conditioned upon the terms, conditions,
covenants, representations and warranties as hereinafter set forth.
2.2 Assets to be Sold by Seller and Purchased by Purchaser No. 1.
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At the Closing of this Agreement, Purchaser No. 1 shall purchase and
Seller shall sell all the assets of Seller used in Business No. 1,
except for the Excluded Assets relating to Business No. 1 and
excepting for all purposes all such assets being transferred pursuant
to Section 2.3 whether used or relating to Business No. 1. The
Purchased Assets No. 1 shall include, but not be limited to:
(a) All tangible personal property and assets of Seller of every kind
and description, real, personal or mixed, wherever located, used
in Business No. 1, including without limitation, all such assets
as reflected on the November 14, 2003 Pro Forma Balance Sheet No.
1 (excepting those assets disposed of, and including those assets
acquired, in the ordinary course of business since the date of
the November 14, 2003 Pro Forma Balance Sheet No. 1).
(b) All intangible assets of Seller which are used in Business No. 1
of Seller, including without limitation, all purchase orders,
contract rights and agreements, work in process, customer lists,
supplier agreements, patents, trademarks and service marks
(subject to Seller's obligation to rebrand such marks under the
terms of the Asset Transfer Agreement with eServe, L.L.C., dated
November 14, 2003) (including the goodwill associated with the
marks), office supplies, computer programs, claims of Seller, the
right to use of the limited liability company and trade names of
or used by Seller, or any derivative thereof (subject to Seller's
obligation under the terms of the Asset Transfer Agreement dated
Novmber 14, 2003), as all or part of a limited liability company
or trade name;
(c) All investment securities, cash and cash equivalents and customer
notes receivable relating to Business No. 1 generated commencing
December 1, 2003 until the Closing Date;
(d) All inventory of Business No. 1 which shall be valued consistent
with the Sellers historical practices;
(e) All accounts receivable and vendor receivables relating to
Business No. 1 generated commencing December 1, 2003 until the
Closing Date, except for certain accounts receivable and vendor
receivables that are designated as Excluded Assets;
(f) Certain vehicles of Seller set forth on attached Exhibit A;
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(g) All prepaid expenses applicable to Business No. 1, including but
not limited to all prepaid software licenses;
(h) All vendor rebates, spiff money, retainage amounts under any
contracts and any customer deposits relating to contracts for
Business No. 1, which contracts are being assumed by Purchaser
No. 1;
(i) All distribution contracts and authorizations of Seller relating
to Business No. 1;
(j) The assignment of any telephone numbers, telefax numbers, e-mail
addresses and internet websites used in Business No. 1 of Seller;
(k) The entire right, title, benefit and interest of Seller now
existing or hereafter arising, in or to all indemnities,
guaranties, warranties, claims and choses of action of Seller
against other parties with respect to Purchased Assets No. 1,
including by way of example and not limitation, any rights under
insurance policies and any other rights thereunder, but only with
respect to Purchased Assets No. 1;
(l) Copies of Sellers books, records, files, correspondence, manuals,
documents, agreements, lists and other writings used in or
relating to Business No. 1, including paid accounts payable, paid
accounts receivable, purchase, sales, customer, representative,
marketing, advertising, distribution, operations, personnel,
research and development records, data, information and
materials;
(m) Sellers rights under the agreements set forth in Schedule 2.2(n)
with respect to the parties set forth therein, pursuant to which
such parties agreed not to disclose, use or communicate
information regarding such parties business (which is part of
Business No. 1) and not to engage in certain activities
competitive with Business No. 1;
(n) All other fees, assets, property, business and going concern
value, and rights of Seller (including the rights under covenants
or agreements not to disclose confidential information or not to
compete, if any).
2.3 Assets to be Sold by Seller and Purchased by Purchaser No. 2.
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At the Closing of this Agreement, Purchaser No. 2 shall purchase and
Seller shall sell all the assets of Seller used in Business No. 2,
except for the Excluded Assets relating to Business No. 2 and
excepting for all purposes all such assets being transferred pursuant
to Section 2.2 whether used or relating to Business No. 2. The
Purchased Assets No. 2 shall include, but not be limited to:
(a) All tangible personal property and assets of Seller of every kind
and description, real, personal or mixed, wherever located, used
in Business No. 2, including without limitation,
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all such assets as reflected on the November 14, 2003 Pro Forma
Balance Sheet No. 2 (excepting those assets disposed of, and including
those assets acquired, in the ordinary course of business since the
date of the November 14, 2003 Pro Forma Balance Sheet No. 2).
(b) All intangible assets of Seller which are used in Business No. 2
of the Seller, including without limitation, all purchase orders,
contract rights and agreements, work in process, customer lists,
supplier agreements, patents, trademarks and service marks
(subject to Seller's obligation to rebrand such marks under the
terms of the Asset Transfer Agreement with eServe, L.L.C., dated
November 14, 2003) (including the goodwill associated with the
marks), office supplies, computer programs, claims of Seller, the
right to use of the limited liability company and trade names of
or used by Seller, or any derivative thereof (subject to Seller's
obligation under the terms of the Asset Transfer Agreement dated
Novmber 14, 2003), as all or part of a corporate or trade name;
(c) All investment securities, cash and cash equivalents and customer
notes receivable relating to Business No. 2 generated commencing
December 1, 2003 until the Closing Date;
(d) All inventory of Business No. 2 which shall be valued consistent
with the Sellers historical practices;
(e) All accounts receivable and vendor receivables relating to
Business No. 2 generated commencing December 1, 2003 until the
Closing Date, except for certain accounts receivable and vendor
receivables that are designated as Excluded Assets;
(f) Certain vehicles of Seller set forth on attached Exhibit A-1;
(g) All prepaid expenses applicable to Business No. 2, including but
not limited to all prepaid software licenses;
(h) All of Sellers fixed rate contracts and time and material
contracts relating to Business No. 2;
(i) All vendor rebates, spiff money, retainage amounts under any
contracts and any customer deposits relating to contracts for
Business No. 2, which contracts are being assumed by Purchaser
No. 2;
(j) All of Sellers service and consulting contracts relating to
Business No. 2;
(k) All distribution contracts and authorizations of Seller relating
to Business No. 2;
(l) The assignment of any telephone numbers, telefax numbers, e-mail
addresses and internet websites used in Business No. 2 of Seller;
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(m) The entire right, title, benefit and interest of Seller now
existing or hereafter arising, in or to all indemnities,
guaranties, warranties, claims and chooses of action of Seller
against other parties with respect to Purchased Assets No. 2,
including by way of example and not limitation, any rights under
insurance policies and any other rights thereunder, but only with
respect to Purchased Assets No. 2;
(n) Originals or copies of Sellers books, records, files,
correspondence, manuals, documents, agreements, lists and other
writings used in or relating to Business No. 2, including paid
accounts payable, paid accounts receivable, purchase, sales,
customer, representative, marketing, advertising, distribution,
operations, personnel, research and development records, data,
information and materials;
(o) Sellers rights under the agreements set forth in Schedule 2.3(p)
with respect to the parties set forth therein, pursuant to which
such parties agreed not to disclose, use or communicate
information regarding such parties business (which is part of
Business No. 2) and not to engage in certain activities
competitive with Business No. 2; and
(pq) All other fees, assets, property, business and going concern
value, and rights of Seller (including the rights under covenants
or agreements not to disclose confidential information or not to
compete, if any).
2.4 Excluded Assets.
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The Excluded Assets are set forth on Exhibit B hereto.
2.5 Lease Agreements.
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Seller is the lessee under certain lease and sublease agreements
covering the following real and personal properties as set forth on
Disclosure Schedule 2.5. At the Closing, Seller and Purchaser No. 1 or
Purchaser No. 2 shall execute necessary documentation for the
assignment of these leases and all of Seller's right and interest
thereunder to Purchaser No. 1 and/or Purchaser No. 2, as agreed upon
by the parties. Purchaser No. 1 and Purchaser No. 2 agree to indemnify
and hold Seller harmless from any liability with respect to the
aforementioned leases occurring after the Closing Date which is
assumed by such party. To the extent that the assignment of any lease
shall require the consent of other parties thereto, this Agreement
shall not constitute an assignment thereof and Seller shall obtain any
such necessary consents or assignments by the Closing, or as
reasonably possible after the Closing.
2.6 Instruments of Transfer.
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Except as otherwise provided herein, at Closing, Seller will deliver
to Purchaser No. 1
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and Purchaser No. 2, respectively, such bills of sale, endorsements,
assignments and other good and sufficient instruments of transfer and
assignment as shall be effective to vest in Purchaser No. 1 and
Purchaser No. 2, as applicable, good title and interest in and to
Purchased Assets No. 1 and Purchased Assets No. 2, respectively. At or
after the Closing, but without further consideration, Seller will
execute and deliver to Purchaser No. 1 and Purchaser No. 2, as
applicable, such further instruments of conveyance and transfer and
take such other action as Purchaser No. 1 and/or Purchaser No. 2 may
reasonably request in order to more effectively convey and transfer to
Purchaser No. 1 and/or Purchaser No. 2, as applicable, any of the
Purchased Assets No. 1 and/or Purchased Assets No. 2 or for aiding and
assisting and collecting and reducing to possession and exercising
rights with respect thereto. Seller and each Member agree to use
commercially reasonable efforts without additional cost to them to
obtain and deliver to Purchaser No. 1 and Purchaser No. 2, as
applicable, such consents, approvals, assurances and statements from
third parties as Purchaser No. 1 and Purchaser No. 2, as applicable,
may reasonably require in a form reasonably satisfactory to Purchaser
No. 1 and Purchaser No. 2. In addition to the foregoing, Seller will
deliver to Purchaser No. 1 and Purchase No. 2, as applicable, the
copies of all of Seller's books, records and other data relating to
Purchased Assets No. 1 and Purchased Assets No. 2, respectively; and
simultaneously with such delivery, Seller shall take all such acts as
may be reasonably necessary to put Purchaser No. 1 in actual
possession, and operating control of Purchased Assets No. 1 and put
Purchaser No. 2 in actual possession, and operating control of
Purchased Assets No. 2. Seller shall cooperate with Purchaser No. 1
and Purchaser No. 2 to permit such parties, if possible, to enjoy such
Sellers ratings and benefits under workmen's compensation laws and
unemployment compensation laws to the extent permitted by such laws.
2.7 Instruments Giving Certain Powers and Rights.
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At the Closing, Seller shall, by appropriate instrument, constitute
and appoint Purchaser No. 1 and Purchaser No. 2, their respective
successors and assigns, the true and lawful attorney of Seller with
full power of substitution, in the name of Purchaser No. 1 and/or
Purchaser No. 2, as applicable, or the name of Seller, on behalf of
and for the benefit of Purchaser No. 1 and Purchaser No. 2, as
applicable, to collect all accounts receivable and/or vendor
receivables and other items being transferred and assigned to
Purchaser No. 1 and/or Purchaser No. 2, as applicable, as provided
herein, to endorse, without recourse, any and all checks in the name
of Seller the proceeds of which Purchaser No. 1 and/or Purchaser No.
2, as applicable, is entitled to hereunder, to institute and
prosecute, in the name of Seller or otherwise, all proceedings which
Purchaser No. 1 and/or Purchaser No. 2, as applicable, may deem proper
in order to collect, assert or enforce any claim, right or title of
any kind in or to Purchased Assets No. 1 and/or Purchased Assets No.
2, as applicable, to defend and compromise any and all actions, suits
and proceedings in respect of any of Purchased Assets No. 1 and/or
Purchased Assets No. 2, as applicable, and to do all such acts and
things in relation thereto as such party may deem advisable. Purchaser
No. 1 and/or Purchaser No. 2, as applicable, shall provide Seller with
notice of any collection action(s) instituted by it under this
provision. Seller agrees that the foregoing powers are coupled with an
interest and shall be irrevocable by the Seller, directly or
indirectly, by the dissolution of Seller or in any manner or for any
reason. Seller further agrees that Purchaser No. 1 and/or Purchaser
No. 2, as applicable, shall retain for its own respective account any
amounts collected pursuant to the foregoing powers, and Seller shall
pay or transfer to
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Purchaser No.1 and/or Purchaser No. 2, as applicable, if and when
received, any amounts which shall be received by Seller after the
Closing in respect of any such receivables or other assets,
properties, rights or business to be transferred and assigned to
Purchaser No. 1 and/or Purchaser No. 2, as provided herein. Seller
further agrees that, at any time or from time to time after the
Closing, it will, upon the request of Purchaser No. 1 and/or Purchaser
No. 2 and without additional expense to Seller, do, execute,
acknowledge and deliver, or will cause to be done, executed,
acknowledged or delivered, all such further reasonable acts,
assignments, transfers, powers of attorney or assurances as may be
required in order to further transfer, assign, grant, assure and
confirm to Purchaser No. 1 and/or Purchaser No. 2, as applicable, or
to aid and assist in the collection or granting of possession by
Purchaser No. 1 and/or Purchaser No. 2, as applicable, of any of the
Purchased Assets No. 1 and/or the Purchased Assets No. 2, or to vest
in Purchaser No. 1 good and marketable title to Purchased Assets No. 1
and to vest in Purchaser No. 2 good and marketable title to Purchased
Assets No. 2.
To the extent that any assignment does not result in a complete
transfer of the contracts to Purchaser No. 1 and/or Purchaser No. 2,
as applicable, because of a provision in any contract against Seller's
assignment of any its right thereunder, Seller shall cooperate with
Purchaser No. 1 and Purchaser No. 2 in any reasonable manner proposed
by Purchaser No. 1 and/or Purchaser No. 2, as applicable, to complete
the acquisition of the contracts and Seller's rights, benefits and
privileges thereunder in order to fulfill and carry out Seller's
obligations under this Agreement. Such additional action may include,
but is not limited to: (i) entering into a subcontract between Seller
and Purchaser No. 1 and/or Purchaser No. 2, as applicable, which
allows such party to perform Seller's duties under such contracts and
to enforce Seller's rights thereunder; or (ii) entering into a new
multi-party agreement with such customers which allows Purchaser No. 1
and/or Purchaser No. 2, as applicable, to perform Seller's obligations
and enforce Seller's rights under the contracts.
3.
ASSIGNMENT OF LIABILITIES
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3.1 Liabilities to be Paid Off at Closing or Assumed by Purchaser No. 1.
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A. At the Closing, Purchaser No. 1 shall pay off or discharge when
due as to Sections 3.1.A(i) (ii) and (iii) (and secure the
release of Seller and Member from any and all personal liability
or guaranty with respect to such obligation), the following:
(i) A line of credit payable to American Bank and Trust Company
incurred in the ordinary course of business consistent with
Seller's prior practices, the outstanding amount of which
was zero ($0.00) on November 14, 2003, and as may be
incurred, increased or decreased since December 1, 2003 to
the date of the Pro Forma Balance Sheet No. 1 and Pro Forma
Balance Sheet No. 2 for operations in the ordinary course of
business.
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(ii) Seventy-Five Thousand Dollars ($75,000.00) of Sellers
obligation to eServ, LLC, an Illinois limited liability
company, under a Promissory Note dated November 14, 2003,
the outstanding amount which, on November 14, 2003 is One
Hundred Twenty-Five Thousand Dollars ($125,000.00)
(excluding $50,000.00 of such Promissory Note, which shall
be an Excluded Liability), plus accrued interest, and as of
the Closing Date shall be Seventy-Five Thousand Dollars
($75,000.00);___________________________________ Dollars
($_____________);
(iii) All of the trade accounts payable of the Seller relating to
Business No. 1 incurred in the ordinary course of business
consistent with Sellers prior practices, the outstanding
amount of which was zero (0) on November 14, 2003, and as
may be incurred, increased or decreased since December 1,
2003 to the date of the Pro Forma Balance Sheet No. 1 for
operations in the ordinary course of business.
The Assumed Liabilities to be paid off as set forth in Section 3.1 A.,
as may be incurred, increased or decreased since the November 14, 2003
Pro Forma Balance Sheet No. 1 to the Pro Forma Balance Sheet No. 1 for
operations in the ordinary course of business or any other transaction
permitted by this Agreement, and subject to the satisfaction of the
Net Asset Amount No. 1 requirement set forth in Section 4.1(d) as of
the Closing Date.
3.2 Liabilities to be Paid Off at Closing or Assumed by Purchaser No. 2.
----------------------------------------------------------------------
At the Closing, Purchaser No. 2 shall assume and pay off or discharge
when due (and secure the release of Seller and each Member from any
and all personal liability or guaranty with respect to such
obligation), the following:
A. All of the trade accounts payable of the Seller relating to
Business No. 2 incurred in the ordinary course of business
consistent with Sellers prior practices, the outstanding amount
of which is $0 on November 14, 2003, and as may be incurred,
increased or decreased since December 1, 2003 for operations in
the ordinary course of business or any other transaction provided
by this Agreement, and subject to the satisfaction of the Net
Asset Amount No. 2 requirement set forth in Section 4.1(d) as of
the Closing Date.
3.3 Executory Contracts to be Assumed by Purchaser No. 1.
------------------------------------------------------------
At the Closing, Purchaser No. 1 shall assume and pay, perform and
discharge when due the following:
(i) All of the obligations and liabilities of Seller arising after
the Closing under the contracts described in Section 2.2.
Page 11 of 61
(ii) All future liabilities for merchandise in transit FOB shipping
point relating to Business No. 1 which has not been received
and/or entered into inventory by Seller and for which no ▇▇▇▇ has
been posted by Seller as of the Closing.
3.4 Executory Contracts to be Assumed by Purchaser No. 2.
------------------------------------------------------------
At the Closing, Purchaser No. 2 shall assume and pay, perform and
discharge when due the following:
(i) All of the obligations and liabilities of Seller arising after
the Closing under the contracts described in Section 2.3.
(ii) All future liabilities for merchandise in transit FOB shipping
point relating to Business No. 2 which has not been received
and/or entered into inventory by Seller and for which no ▇▇▇▇ has
been posted by Seller as of the Closing.
3.5 Excluded Liabilities.
---------------------
Purchaser No. 1 and Purchaser No. 2 shall not assume or become
responsible for any claim, liability or obligation of any nature
whatsoever, whether known or unknown, accrued, absolute, contingent or
otherwise of Seller (a "Liability") of Seller except Assumed
Liabilities No. 1 and Assumed Liabilities No. 2 that are specifically
assumed by such party. Without limiting the generality of the
foregoing, the following are included among the Liabilities of Seller
which Purchaser No. 1 and Purchase No. 2 shall not assume or become
responsible for (unless specifically included as Assumed Liabilities
No. 1 or Assumed Liabilities No. 2):
(a) all Liabilities for any Taxes whether deferred or which have
accrued or may accrue or become due and payable by Seller either
prior to, on or after the Closing Date, including, without
limitation, all Taxes and fees of a similar nature arising from
the sale and transfer of Purchased Assets No. 1 and Purchased
Assets No. 2 to Purchaser No. 1 and Purchaser No. 2,
respectively;
(b) all Liabilities to any current or former Members, directors,
officers, employees or agents of Seller, including, without
limitation, all Liabilities of Seller for wages, salary, bonuses,
commissions, vacation or severance pay, deferred compensation,
retirement pay, profit sharing or pension benefits, and all
Liabilities arising under any bonus, commission, salary or
compensation plans or arrangements, whether accruing prior to, on
or after the Closing Date;
(c) all Liabilities of Seller with respect to unemployment
compensation claims and workmen's compensation claims and claims
for race, age and sex discrimination or sexual harassment or for
unfair labor practice based on or arising from occurrences,
circumstances or events, or exposure to conditions, existing or
occurring prior to the
Page 12 of 61
Closing Date and for which any claim may be asserted by any of
Sellers employees, prior to, on or after the Closing Date against
Seller;
(d) all Liabilities of Seller to third parties for personal injury or
damage to property based on or arising from occurrences,
circumstances or events, or exposure to conditions, existing or
occurring prior to the Closing Date and for which any claim may
be asserted by any third party prior to, on or after the Closing
Date;
(e) all Liabilities of Seller arising under or by virtue of federal
or state environmental laws based on or arising from occurrences,
circumstances or events, or exposure to conditions, existing or
occurring prior to the Closing Date and for which any claim may
be asserted prior to, on or after the Closing Date;
(f) all Liabilities of Seller including any costs of attorneys' fees
incurred in connection therewith, for litigation, claims, demands
or governmental proceedings arising from occurrences,
circumstances or events, or exposure to conditions occurring or
existing prior to the Closing Date, and which may be asserted or
commenced prior to, on or after the Closing Date;
(g) all Liabilities of Seller based on any theory of liability or
product warranty with respect to any product manufactured or sold
prior to the Closing Date and for which any claim may be asserted
by any third party, prior to, on or after the Closing Date;
(h) all attorneys' fees, accountants or auditors' fees, and other
costs and expenses incurred by Seller and/or the Members in
connection with the negotiation, preparation and performance of
this Agreement or any of the transactions contemplated hereby;
(i) all Liabilities of Seller in connection with the Excluded Assets;
(j) all Liabilities of Seller with respect to any options, warrants,
agreements or convertible or other rights to acquire its
membership interests of any class;
(k) all Liabilities of Seller incurred incident to any
indemnification for breach of any representations, warranties,
covenants, or other agreements made by Seller under any of the
asset purchase, stock, reorganization, or other legal
transaction(s) of Seller;
(l) all Liabilities of Seller with respect to any loans or advances
made by the Members or any Affiliate to Seller;
(m) all other debts, Liabilities, obligations, contracts and
commitments (whether direct or indirect, known or unknown,
contingent or fixed, liquidated or unliquidated, and whether now
or hereinafter arising) arising out of or relating to the
ownership, operation or use of any of Purchased Assets No. 1
and/or Purchased Assets No. 2 on or prior to the Closing Date or
the conduct of the Business No. 1 of Seller and/or Business No. 2
of Seller prior
Page 13 of 61
to the Closing Date, except only for the liabilities and
obligations to be assumed or paid, performed or discharged by
Purchaser No. 1 and/or Purchaser No. 2 constituting Assumed
Liabilities No. 1 or Assumed Liabilities No. 2;
(n) all Liabilities of Seller with respect to any unpaid sales tax as
of the Closing Date related to accounts receivable as of such
date;
(o) Seller's obligation to eServ, L.L.C. in the amount of Fifty
Thousand Dollars ($50,000.00) as evidenced by a Promissory Note
dated November 14, 2003;
(p) all Liabilities of Seller with respect to its obligations under
the J.T.S.H. Asset Distribution, Dissolution and Liquidation
Agreement dated November 14, 2003;
(q) except as set forth in Section 3.1(A)(ii), all Liabilities of
Seller under an Asset Transfer Agreement with eServ, L.L.C., an
Illinois limited liability company dated November 14, 2003; and
(r) all Liabilities of Seller relating to trade accounts payable
relating to Business No. 1 and Business No. 2 incurred between
November 14, 2003 and November 30, 2003.
Seller shall pay all liabilities not being assumed hereunder by
Purchaser No. 1 or Purchaser No. 2 within the customary time for
payment of such liabilities.
It is the intent of the parties that upon Closing, all employees of
Seller will be terminated by Seller and Purchaser No. 1 or Purchaser
No. 2 will extend offers of employment to all such individuals.
4.
CONSIDERATION FOR
-----------------
PURCHASED ASSETS NO. 1 AND PURCHASED ASSETS NO. 2
-------------------------------------------------
4.1 Purchase Price No. 1 for Purchased Assets No. 1.
-------------------------------------------------------
Subject to the other terms of this Agreement, Purchase Price No. 1 for
Purchased Assets No. 1 shall be the sum of:
(a) Seven Hundred Sixty Thousand Dollars ($760,000.00)
(b) The liabilities assumed or paid off at Closing under Section 3.1;
and
(c) Any amount that may be paid pursuant to Section 4.6 and/or
Section 4.7 that is allocated to Purchase Price No. 1.
Page 14 of 61
The amount set out in Section 4.1(a) above shall be adjusted by
the amounts determined under Sections 4.1(d) and/or (e), as
follows:
(d) If Net Asset Amount No. 1 and Net Asset Amount No. 2 of the
Seller in the aggregate, as of the Closing Date as shown on the
Pro Forma Balance Sheet No. 1 and the Pro Forma Balance Sheet No.
2 is less than zero ($0.00), the Purchase Price No. 1 and
Purchase Price No. 2 (to be allocated according to the respective
percentages determined by the parties) shall be decreased on a
dollar-for-dollar basis equal to the difference between zero
($0.00) and such negative amount. Any reduction in Purchase Price
No. 1 and/or Purchase Price No. 2 shall be repaid from the cash
paid at closing to Seller. In the event that Net Asset Amount No.
1 and Net Asset Amount No. 2 of the Seller, in the aggregate as
of the Closing Date, is greater than zero ($0.00), the Purchase
Price ▇▇. ▇ ▇▇▇/▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇. ▇ (▇▇ ▇▇ allocated
according to the respective percentages determined by the
parties) shall be increased on a dollar-for-dollar basis equal to
the difference of such amount and zero. Any increase in Purchase
Price No. 1 and Purchase Price No. 2 shall be paid in cash to
Seller according to the provisions of Sections 4.3(b) and 5.1
hereof. The determination of Net Asset Amount No. 1 and Net Asset
Amount No. 2 shall be made in the manner provided for in Section
5.1 hereof.
(e) If the 2004 NPBT is below the amount of Four Hundred Fifty
Thousand Dollars ($450,000.00), the Purchase Price No. 1 and/or
Purchase Price No. 2 shall be decreased by any shortfall below
such amount, multiplied by two (2). In the event the 2004 NPBT is
greater than Four Hundred Fifty Thousand Dollars ($450,000.00),
no adjustment to Purchase Price No. 1 and/or Purchase Price No. 2
shall be made under this Section 4.1(e). Any reduction to
Purchase Price No. 1 and/or Purchase Price No. 2 hereunder will
be set off against the Promissory Note described in Sections
4.3(b) and 4.4(b) and if said amounts are not sufficient then
against any amount earned under the earnout under Sections 4.6
and 4.7. The determination of the 2004 NPBT shall be made in the
manner provided for in Section 5.2 hereof.
4.2 Purchase Price No. 2 for Purchased Assets No. 2.
-------------------------------------------------------
Subject to the other terms of this Agreement, the Purchase Price for
Purchased Assets No. 2 shall be the sum of:
(a) One Hundred Ninety Thousand Dollars ($190,000.00)
(b) The liabilities assumed or paid off at Closing under Section 3.2;
and
(c) Any amount that may be paid pursuant to Section 4.6 and/or
Section 4.7 that is allocated to Purchase Price No. 2.
The amount set out in Section 4.2(a) above shall be adjusted by
the amounts determined under Section 4.2(d) as follows:
Page 15 of 61
(d) Purchase Price No. 2 shall be decreased by the portion of any
deficit in the Net Asset Amount No. 1 and Net Asset Amount No. 2
of Seller, if any, allocated to Purchase Price No. 2 under
Section 4.1(d) and/or by the portion of any deficit in the 2004
NPBT, if any, allocated to Purchase Price No. 2 under Section
4.1(e).
4.3 Payment of the Purchase Price for Purchased Assets No. 1.
-----------------------------------------------------------------
Subject to the conditions, covenants, representations and warranties
hereof, at Closing, Purchaser No. 1 shall deliver:
(a) By certified or bank cashier's check or by wire transfer to
Seller, the amount of Three Hundred Twenty Thousand Dollars
($320,000.00).
(b) By certified or bank cashier's check or by wire transfer to
▇▇▇▇▇▇▇▇▇ & Dreidame Co., LPA, the amount of One Hundred
Fifty-Four Thousand Eight Hundred Fifty-Six Dollars
($154,856.00), which is the sum of Forty Thousand Dollars
($40,000.00) (amount withheld from cash at Closing) and One
Hundred Fourteen Thousand Eight Hundred Fifty-Six Dollars
($114,856.00) , which amount is an advance payment by Purchaser
No. 1 to Seller of the amount projected in good faith by the
parties to be owed by Purchaser No. 1 to Seller pursuant to the
provisions of Section 4.1(d), which advance payment shall be
credited against the amount ultimately determined to be owed to
Seller by Purchaser No. 1 and Purchaser No. 2, to the extent
applicable, pursuant to provisions of Section 5.1 upon the
conclusion of the determination of the Net Asset Amount No. 1 and
the Net Asset Amount No. 2.
(c) The remaining sum of Four Hundred Thousand Dollars ($400,000.00)
shall be payable to Seller pursuant to the terms of Purchaser No.
1's Subordinated Promissory Note in the form attached hereto as
Exhibit C. The note shall bear interest at the prime rate of
Chase Manhattan Bank as of the date of Closing. The principal of
the note shall be payable in two (2) equal annual installments,
with the first principal payment being due and payable on the
first annual anniversary of the Closing, and the remaining
principal payment being due and payable on the second annual
anniversary date of the Closing. Interest on the unpaid principal
balance of the note shall be paid quarterly with the first
interest payment being due and payable ninety (90) days from
Closing. Such note and all obligations of Purchaser No. 1
thereunder will be subordinated and made junior in right of
payment to the extent and in the manner provided in a
Subordination Agreement to be executed between GE Commercial
Distribution Finance Corporation, formerly known as Deutsche
Financial Services Company, as Administrative Agent for itself
and other lenders, and Purchaser No. 1 and Seller in the form
attached hereto as Exhibit D.
(c) The Assumed Liabilities No. 1 assumed or paid off under Section
3.1.
Page 16 of 61
4.4 Payment of the Purchase Price for Purchased Assets No. 2.
----------------------------------------------------------------
Subject to the conditions, covenants, representations and warranties
hereof, at Closing, Purchaser No. 2 shall deliver:
(a) By certified or bank cashier's check or by wire transfer to
Seller, the amount of Eighty Thousand Dollars ($80,000.00)
(b) By certified or bank cashier's check or by wire transfer to
▇▇▇▇▇▇▇▇▇ & Dreidame Co., LPA, the amount of Thirty-Eight
Thousand Seven Hundred Fourteen Dollars ($38,714.00), which is
the sum of Ten Thousand Dollars ($10,000.00) (amount withheld
from cash at Closing) and Twenty-Eight Thousand Seven Hundred
Fourteen Dollars ($28,714.00), which amount is an advance payment
by Purchaser No. 2 to Seller of the amount projected in good
faith by the parties to be owed by Purchaser No. 2 to Seller
pursuant to the provisions of Section 4.1(d), which advance
payment shall be credited against the amount ultimately
determined to be owed to Seller by Purchaser No. 1 and Purchaser
No. 2, to the extent applicable, pursuant to provisions of
Section 5.1 upon the conclusion of the determination of the Net
Asset Amount No. 1 and the Net Asset Amount No. 2.
(c) The remaining sum of One Hundred Thousand Dollars ($100,000.00)
shall be payable to Seller pursuant to the terms of Purchaser No.
2's Subordinated Promissory Note in the form attached hereto as
Exhibit C-1. The note shall bear interest at the prime rate of
Chase Manhattan Bank as of the date of Closing. The principal of
the note shall be payable in two (2) equal annual installments,
with the first principal payment being due and payable on the
first annual anniversary of the Closing, and the remaining
principal payment being due and payable on the second annual
anniversary date of the Closing. Interest on the unpaid principal
balance of the note shall be paid quarterly with the first
interest payment being due and payable ninety (90) days from
Closing. Such note and all obligations of Purchaser No. 2
thereunder will be subordinated and made junior in right of
payment to the extent and in the manner provided in a
Subordination Agreement to be executed between GE Commercial
Distribution Finance Corporation, formerly known as Deutsche
Financial Services Company, as Administrative Agent for itself
and other lenders, and Purchaser No. 2 and Seller in the form
attached hereto as Exhibit D-1. Purchaser No. 2's obligation
under this Note and under the Agreement shall be guaranteed by
Purchaser No. 1.
(d) The Assumed Liabilities No. 2 assumed or paid off under Section
3.2.
4.5 Allocation of Purchase Price.
-------------------------------
Purchase Price No. 1 to be paid to the Seller hereunder, including the
liabilities assumed or paid by Purchaser No. 1 pursuant to Section
3.1, shall be allocated as set forth on Exhibit E attached hereto.
Purchase Price No. 2 to be paid to the Seller hereunder, including the
liabilities assumed or paid by Purchaser No. 2 pursuant to Section
3.2, shall be allocated as set forth on Exhibit E-1
Page 17 of 61
attached hereto. Seller, Purchaser ▇▇. ▇, ▇▇▇▇▇▇▇▇▇ ▇▇. ▇ and each
Member agree that each shall act in a manner consistent with such
allocation in (a) filing Internal Revenue Form 8594; and (b) in paying
sales and other transfer taxes in connection with the purchase and
sale of assets pursuant to this Agreement.
4.6 Potential Adjustment to Purchase Price.
------------------------------------------
Earn-Out No. 1
----------------
If the Net Profits Before Taxes ("NPBT") of Purchaser No. 1's and
Purchaser No. 2's eServ Solutions Group Divisions during any of fiscal
years 2004 (January 6, 2004 to January 5, 2005), 2005 and 2006 exceed
the applicable NPBT Threshold for such year set forth below:
Fiscal Year 2004 - $450,000.00
Fiscal Year 2005 - $450,000.00
Fiscal Year 2006 - $450,000.00
Purchaser No. 1 and Purchaser No. 2 (according to the percentages set
forth below) shall pay Seller, by bank check or wiring within ninety
(90) days following the end of the fiscal year, an amount equal to 50%
of the aggregate NPBT of Purchaser No. 1's and Purchaser No. 2's eServ
Solutions Group Division in excess of the NPBT Threshold for the
applicable year, subject to a cumulative limitation of Two Million
Dollars ($2,000,000.00) during such aggregate period. Any NPBT
shortfall in any year shall not be offset against any excess NPBT in
any subsequent year(s) hereunder, it being the intent of the parties
that the NPBT Threshold set forth herein shall apply to each
applicable year separately, subject, however, to the cumulative
limitation of Two Million Dollars ($2,000,000.00) during such
aggregate period. Such cash payment by Purchaser No. 1 and Purchaser
No. 2 shall be additional Purchase Price No. 1 and Purchase Price No.
2, in the proportions set forth below, which will be added to the good
will allocation of Purchase Price No. 1 and Purchase Price No. 2.
Purchaser No. 1 and Purchaser No. 2 shall pay their respective
percentage of any amounts due hereunder, which percentage shall be
predicated on the respective NPBT contribution made by each of their
eServ Solutions Group Divisions to the computation set forth above.
In the event that Seller would receive total consideration under
Section 4.6 of Two Million Dollars ($2,000,000.00) during the
applicable fiscal years set forth above, Purchaser No. 1 and Purchaser
No. 2 agree to discuss in good faith the extension of Earnout No. 1
for the fiscal years 2007, 2008, and 2009 for up to an additional Two
Million Dollars ($2,000,000.00) amount upon terms and conditions that
the parties shall mutually agree upon. Nothing contained herein shall
constitute an agreement to provide such additional earnout, but rather
it is the intent of the parties to discuss in good faith the possible
implementation and extension thereof based on all the facts and
circumstances that exist at such time.
Page 18 of 61
4.7 Potential Adjustment to Purchase Price.
------------------------------------------
Earnout No. 2.
---------------
If the Gross Sales of Purchaser No. 1's eServ Solutions Group and
Purchaser No.2's eServ Solutions Group Divisions in the aggregate
during any of the fiscal years 2004 (January 6, 2004 to January 5,
2005), and 2005 (and subject to the satisfaction of a minimum NPBT
Margin for such year as set forth below) exceed the applicable Gross
Sales threshold for such year set forth below:
Fiscal Year 2004:
-------------------
Gross Sales greater than or equal to $20,000,000.00 but less than or
equal to $25,000,000.00 = $200,000.00 cash; or
Gross Sales greater than $25,000,000.00 but less than or equal to
$30,000,000.00 = $400,000.00 cash; or
Gross Sales greater than $30,000,000.00 = $600,000.00 cash.
Fiscal Year 2005:
-------------------
Gross Sales greater than or equal to $25,000,000.00 but less than or
equal to $30,000,000.00 = $200,000.00 cash; or
Gross Sales greater than or equal to $30,000,000.00 but less than or
equal to $35,000,000.00 = $400,000.00 cash; or
Gross Sales greater than $35,000,000.00 = $600,000.00 cash.
Purchaser No. 1 and Purchaser No. 2 shall pay Seller, by bank check or
wiring within ninety (90) days following the end of the fiscal year,
the applicable amount, if any, that may have been earned above. Any
Gross Sales shortfall in any year shall not offset any excess Gross
Sales in any subsequent year hereunder, it being the intent of the
parties that the Gross Sales threshold set forth herein shall apply to
each applicable year separately. Notwithstanding anything contained
herein to the contrary for fiscal year 2005, in addition to satisfying
the applicable Gross Sales criteria, Purchaser No. 1 and Purchaser No.
2 eServ Solutions Group Divisions must also achieve a minimum of 2%
NPBT Margin for any payments to be made under this section. Such cash
payment by Purchaser ▇▇. ▇ ▇▇▇/▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇. ▇ ▇▇▇▇▇ ▇▇ additional
Purchase Price No. 1 and Purchase Price No. 2, which will be added to
the goodwill allocation of Purchase Price No. 1 and Purchase Price No.
2 as applicable. Purchaser No. 1 and Purchaser No. 2 shall pay their
respective percentage of any amounts due hereunder, which percentage
shall be predicated on the respective "Gross Sales" contribution made
by each of the eServ Solutions Group Divisions to the computation set
forth above.
Page 19 of 61
4.8 Operation of, and Accounting for, Purchaser No. 1's and Purchaser No.
----------------------------------------------------------------------
2's eServ Solutions Group Divisions and Procedure for Determination of
----------------------------------------------------------------------
NPBT, Gross Sales and NPBT Margin.
--------------------------------------
For purposes of this Agreement, the term "Purchaser No. 1's and
Purchaser No. 2's eServ Solutions Group Divisions" shall be defined as
Business No. 1 and Business No. 2 acquired from Seller by Purchaser
No. 1 and Purchaser No. 2, respectively and any additions, expansions,
growth or enhancements thereof that may occur after the date of this
Agreement. For purposes of Sections 4.6 and 4.7, NPBT shall mean the
Net Profits Before Taxes of Purchaser No. 1's and Purchaser No. 2's
eServ Solutions Group Divisions. The NPBT shall be determined by the
internally generated financial statements of Purchaser No. 1 and
Purchaser No. 2 determined in accordance with Generally Accepted
Accounting Principles, consistently applied. Provided, however, in
determining NPBT for the applicable period, the following adjustments
shall be made as follows:
(i) For the period commencing on the earlier of the installation
of the Astea (MAS and Accounting) System at Purchaser No.
1's and Purchaser No. 2's eServ Solutions Group Divisions,
or January 6, 2004, through the end of Fiscal Year 2004, a
2% infrastructure fee and a .3% MDF royalty fee on gross
sales by Purchaser No. 1's and Purchaser No. 2's eServ
Solutions Group Divisions shall be made. The Parties shall
exercise good faith and effectuate the implementation of
said Astea Accounting System at Purchaser No. 1's and
Purchaser No. 2's eServ Solutions Group Divisions.
(ii) For fiscal years 2005 and 2006, the infrastructure fee and
the MDF royalty fee included shall be in amounts agreed to,
in good faith, by the parties based on the level of service
and support being provided by Purchaser No. 1 and Purchaser
No. 2 to its eServ Solutions Group Divisions, provided,
however, that if the parties are unable to come to an
agreement for the amount of the infrastructure fee and/or
the MDF royalty fee for either of said fiscal years, the
infrastructure fee shall be 2% and the MDF royalty fee shall
be .3%.
(iii) No effect should be given to any gain or loss attributable
to any sale of assets or services by Purchaser No. 1's
and/or Purchaser No. 2's eServ Solutions Group Divisions not
in the ordinary course of business;
(iv) No effect shall be given to items of income and expense or
any purchase from any business of Purchaser from its other
branches that is relocated to Purchaser No. 1's and
Purchaser No. 2's eServ Solutions Group Divisions, unless it
is mutually agreed upon by the parties to include such
income and expense.
(v) No effect shall be given to the increase in the amounts of
depreciation, amortization or any other expense reduction
taken on tangible or intangible assets of Purchaser No. 1
and/or Purchaser No. 2 if such increase is attributable
Page 20 of 61
to reevaluation of such assets incident to their acquisition
pursuant to the terms of this Agreement.
(vi) Any payment made to Seller pursuant to Sections 4.6 or 4.7
shall not be charged against NPBT for any year.
(vii) Any period expense(s) resulting from and/or related to the
sales/operations of Purchaser NO. 1's and Purchaser NO. 2's
eServ Solutions Group Divisions that are identified or
discovered following the date upon which the internally
generated financial statements for the applicable period are
closed, but before the NPBT objection period is final in
accordance with the terms of this Section 4.8, which were
not reflected in the applicable fiscal period, for whatever
reason, yet should have been, shall be taken as an
adjustment to the NPBT determination.
(viii) Except as noted above with respect to the infrastructure
fee and MDF royalty fee, no indirect income or expense
allocations (such as overhead or other corporate
allocations) shall be allocated to Purchaser No. 1's and
Purchaser No. 2's eServ Solutions Group Divisions unless
such items are reasonably calculated to contribute to the
increase in profits of Purchaser No. 1's and Purchaser No.
2's eServ Solutions Group Divisions and are agreed to by the
parties, it being the intent of the parties that Purchaser
No. 1 and Purchaser No. 2 shall exercise utmost good faith
with respect to allocations of income and expense to
Purchaser No. 1's and/or Purchaser No. 2's eServ Solutions
Group Divisions.
(ix) It is anticipated that Seller's Des Moines, Iowa branch,
consisting of one (1) employee will be integrated into
Purchaser No. 1's and Purchaser No. 2's existing Seller's
Des Moines, Iowa respective branches. Effect shall be given
to any items of income and expense contributed by said
employee which amount shall be determined during each
applicable year by the good faith determination of the
parties with respect to any contribution made by said
individual employee or any future employees hired for the
purpose of serving Purchaser No. 1's and Purchaser No. 2's
eServe Solutions Group Divisions business in such area.
(x) No effect shall be given to items of income and expense
related to three (3) Purchase Orders that are to be taken
into account for the Net Asset Amount No. 1 and Net Asset
Amount No. 2 determinations to be made in Section 5.1.
Notwithstanding anything contained herein to the contrary, Seller
shall have the right to request MDF royalty fee relief for certain
predetermined investment/special bid transactions that Purchaser No.
1's and Purchaser No. 2's eServ Solutions Group Divisions may enter
into. Provided, however, any relief granted hereunder shall be in the
sole discretion of Purchaser No. 1 and Purchaser No. 2. In the event
Purchaser No. 1 and/or Purchaser No. 2 shall grant any MDF Royalty fee
relief for one transaction, such consent shall not be a guarantee that
Purchaser No. 1
Page 21 of 61
or Purchaser No. 2 shall be required to approve any MDF royalty fee
relief for any subsequent transaction.
For purposes of Section 4.7, the term "Gross Sales" shall mean the
Gross Sales of equipment, software and services by Purchaser No. 1's
and Purchaser No. 2's eServ Solutions Group Divisions during the
applicable period set forth above. In making said Gross Sales
determinations, all gains and losses realized on the sale or other
disposition of Purchaser No. 1's and Purchaser No. 2's eServ Solutions
Group Divisions assets not in the ordinary course shall be excluded.
All refunds, returns or rebates which are made during such period
shall be subtracted along with all accounts receivable derived from
such sales that are written off during such period in accordance with
Purchaser No. 1's and Purchaser No. 2's accounting system. For
purposes of Section 4.7, the term "NPBT Margin" shall mean the NPBT of
Purchaser No. 1's and Purchaser No. 2's eServ Solutions Group
Divisions divided by the Gross Sales of Purchaser No. 1's and
Purchaser No. 2's eServ Solutions Group Divisions for the applicable
period. In addition, the term "Gross Sales" and "NPBT Margin" shall
not include any of the three (3) Purchase Orders set forth in Section
5.1 to the extent those transactions are taken into account in
determining the Net Asset Amount No. 1 and Net Asset Amount No. 2
determinations as set forth in Section 5.1.
Within ninety (90) days after the end of each fiscal year or period
described herein, Purchaser No. 1 and Purchaser No. 2 will deliver to
Seller a copy of the report of NPBT, Gross Sales and NPBT Margin
prepared by Purchaser No. 1 and Purchaser No. 2 for the subject period
along with any supporting documentation reasonably requested by
Seller. Within thirty (30) days following delivery to Seller of such
report, Seller shall have the right to object in writing to the
results contained in such determination. If timely objection is not
made by Seller to such determination, such determination shall become
final and binding for purposes of this Agreement. If timely objection
is made by Seller to Purchaser No. 1 and Purchase No. 2 and Seller and
Purchaser No. 1 and Purchaser No. 2 are able to resolve their
differences in writing within thirty (30) days following the
expiration of the thirty-day (30-day) period, then such determination
shall become final and binding as it regards to this Agreement. If
timely objection is made by Seller to Purchaser No. 1 and Purchaser
No. 2 and Seller and Purchaser No. 1 and Purchaser No. 2 are unable to
resolve their differences in writing within thirty (30) days following
the expiration of the thirty-day (30-day) period, then all disputed
accounting matters pertaining to the report shall be submitted to and
reviewed by an arbitrator (the Arbitrator) which shall be an
independent accounting firm selected by Purchaser No. 1 and Purchaser
No. 2 and Seller. If Purchaser No. 1 and Purchaser No. 2 and Seller
are unable to agree promptly on an accounting firm to serve as the
Arbitrator, each shall select by no later than the 30th day following
the expiration of the sixty-day (60-day) period, an accounting firm,
and the two selected accounting firms shall be instructed to select
promptly another independent accounting firm, such newly selected firm
to serve as the Arbitrator. The Arbitrator shall consider only the
disputed accounting matters pertaining to the determination and shall
act promptly to resolve all disputed accounting matters, and its
decision with respect to all disputed accounting matters shall be
final and binding upon Seller and Purchaser. Expenses of the
Arbitration shall be borne one-half (1/2) by Purchaser No. 1 and
Purchaser No. 2 and one-half (1/2) by Seller. Each party shall be
responsible for its own attorney and accounting fees. The resolution
of any disputed legal matters pertaining to the report shall
Page 22 of 61
be subject to judicial review. If there is both a legal dispute and an
accounting dispute regarding any of the determinations to be made
hereunder and the legal dispute could impact the accounting dispute,
the legal dispute shall be determined first and the parties shall
adjust the timeline set forth herein for the resolution of the
accounting dispute incident thereto.
If Purchaser No. 1 and Purchaser No. 2 would sell substantially all of
the assets of their respective eServ Solutions Group Division,
Purchaser No. 1 and Purchaser No. 2 will require any acquirer to
expressly assume and agree to perform the remaining portion of the
earnout set forth in Sections 4.6 and 4.7 in the same manner and to
the same extent that Purchaser No. 1 and Purchaser No. 2 would have
been required to perform it if no such acquisition had taken place.
4.9 Certain Closing Expenses.
--------------------------
Except as set forth below, the Seller shall be responsible for and
shall pay all federal, state and local sales tax (if any), documentary
stamp tax and all other duties, or other like charges properly payable
upon and in connection with the conveyance and transfer of the
Purchased Assets No. 1 by the Seller to Purchaser No. 1 and the
conveyance and transfer of the Purchased Assets No. 2 by the Seller to
Purchaser No. 2.
5.
CLOSING AND POST-CLOSING ADJUSTMENTS
------------------------------------
5.1 Within sixty (60) days after the Closing Date (the Post Closing Date),
Sellers Accountant will deliver to Purchaser No.1 and to Purchaser No.
2 copies of Pro Forma Balance Sheet No. 1 and Pro Forma Balance Sheet
No. 2, respectively, prepared by Sellers Accountant along with any
supporting documentation reasonably requested by Purchaser No. 1 or
Purchaser No. 2 reflecting Net Asset Amount No. 1 and Net Asset Amount
No. 2 as of the Closing which shall be defined as the total of the
Purchased Assets No. 1 less the total of the Assumed Liabilities No. 1
relating to Business No. 1, as reflected on Pro Forma Balance Sheet
No. 1 (the Net Asset Report No. 1) and the total of the Purchased
Assets No. 2 less the total of the Assumed Liabilities No. 2 relating
to Business No. 2, as reflected on Pro Forma Balance Sheet No. 2 (the
Net Asset Report No. 2"). In addition, in making Net Asset Amount No.
1 and the Net Asset Amount No. 2 determinations, the Net Profit after
taxes with a gross up factor of twenty percent (20%) added back (after
taking into account all applicable expenses related thereto and tax
affecting the transactions) for the three (3) Purchase Orders
identified as McGraw Hill, Amerus, and NCS Pearson, shall be taken
into account in making said determination. The Pro Forma Balance Sheet
No. 1 and the Pro Forma Balance Sheet No. 2 shall be prepared using
the same accounting methods, policies, practices and procedures, with
consistent classifications, judgments, estimations and methodologies
as used in the preparation of the November 14, 2003 Pro Forma Balance
Sheet No. 1 and the November 14, 2003 Pro Forma Balance Sheet No. 2.
If the sum of the Net Asset Amount No. 1 and the Net Asset Amount No.
2 in the aggregate is less than zero, Purchase Price No. 1 and
Purchase Price No. 2 shall be decreased on a dollar-for-dollar basis
for any deficit. The amount of any deficit shall be paid to Purchaser
No. 1 and
Page 23 of 61
Purchaser No. 2 in the proportions to be determined by the parties by
certified or cashier's check. If the sum of the Net Asset Amount No. 1
and Net Asset Amount No. 2 in the aggregate is greater than zero (0),
Purchase Price No. 1 and Purchase Price No. 2 shall be increased on a
dollar-for-dollar basis for any increase. In the event such excess is
greater than the advance payments made by Purchaser No. 1 and
Purchaser No. 2 to Seller under Sections 4.3(b) and 4.4(b), any
additional amount owing shall be paid immediately by Purchaser No. 1
and Purchaser No. 2 to Seller by certified or cashier's check or wire
transfer on the date of the resolution of this determination. In the
event the increase in Purchase Price No. 1 and Purchase Price No. 2 is
less than the amount of the advance payments made under Sections
4.3(b) and 4.4(b) by Purchaser No. 1 and Purchaser No. 2 to Seller,
the difference between the amount of the advance payment paid to
Seller at Closing and the amount that Seller is entitled to pursuant
to this provision shall be repaid to Purchaser No. 1 and Purchaser No.
2 by Seller from the escrow funds by certified or cashier's check or
wire transfer on the date of the resolution of this determination.
Within thirty (30) days following delivery to Purchaser No. 1 of Net
Asset Report No. 1 and to Purchaser No. 2 of Net Asset Report ▇▇. ▇,
▇▇▇▇▇▇▇▇▇ ▇▇. ▇ and Purchaser No. 2 shall have the right to object in
writing to the results contained therein. If timely objection is not
made by Purchaser No. 1 and/or Purchaser No. 2 to Net Asset Report No.
1 and/or Net Asset Report No. 2, as applicable, Net Asset Report No. 1
and Net Asset Report No. 2 shall become final and binding for purposes
of this Agreement. If timely objection is made by Purchaser No. 1
and/or Purchaser No. 2 to Net Asset Report No. 1 and/or Net Asset
Report No. 2, and the Seller and Purchaser No. 1 and/or Purchaser No.
2, as applicable, are able to resolve their differences in writing
within fifteen (15) days following the expiration of such thirty (30)
day period, then Net Asset Report No. 1 and/or Net Asset Report No. 2,
as resolved, shall become final and binding as it relates to this
Agreement. If timely objection is made by Purchaser No. 1 and/or
Purchaser No. 2, as applicable, to Net Asset Report No. 1 and/or Net
Asset Report No. 2 and/or Seller and Purchaser No. 1 and/or Purchaser
No. 2, as applicable, are unable to resolve their differences in
writing within such fifteen (15) day period, then all disputed
accounting matters pertaining to Net Asset Report No. 1 and/or Net
Asset Report No. 2 shall be submitted to and reviewed by an arbitrator
(the Arbitrator) which shall be an independent accounting firm
selected by the Seller and Purchaser No. 1 and/or Purchaser No. 2, as
applicable. If Purchaser No. 1 and/or Purchaser No. 2, as applicable,
and the Seller are unable to agree promptly on the accounting firm to
serve as the Arbitrator, each shall select by not later than the
seventh (7th) day following the expiration of the Net Asset Report No.
1 and Net Asset Report No. 2 objection period, an accounting firm, and
each selected accounting firm shall be instructed to jointly select
promptly another independent accounting firm, such third accounting
firm shall serve as the Arbitrator. The Arbitrator shall consider only
the disputed accounting matters pertaining to the determination and
shall act promptly and fairly to resolve all disputed accounting
matters and its decision with respect to all disputed accounting
matters shall be final and binding upon the Seller, Purchaser No. 1
and Purchaser No. 2, as applicable. The expenses of the arbitration
shall be borne one-half (1/2) by Purchaser No. 1 and/or Purchaser No.
2, as applicable, and one-half (1/2) by the Seller. Each party shall
be responsible for its own attorney and accounting fees. The
resolution of any disputed legal matters pertaining to the Net Asset
Report No. 1 and/or Net Asset Report No. 2 shall be subject to
judicial review. If there is both a legal dispute and an accounting
dispute regarding the Net Asset Report No. 1 and/or the Net Asset
Report No. 2 and the legal dispute
Page 24 of 61
could impact the accounting dispute, the legal dispute shall be
determined first and the parties shall adjust the timeline set forth
herein for the resolution of the accounting dispute incident thereto.
5.2 Within ninety (90) days of the close of the 2004 fiscal year (January
6, 2004 - January 5, 2005), Purchaser No. 1 and Purchaser No. 2 will
deliver to Seller the determination of the 2004 NPBT, along with any
supporting documentation reasonably requested by Seller. The 2004 NPBT
shall be prepared in accordance with generally accepted accounting
principles consistently applied subject to the adjustments set forth
in Section 4.8 regarding the determination of NPBT for the fiscal year
2004 for earnout purposes. Thirty (30) days following delivery of such
report, both parties shall have the right to object in writing to the
results contained in such determinations. If timely objection is not
made by either party to such determination, such determination shall
become final and binding. If timely objection is made by any party and
the parties are able to resolve their differences in writing within
fifteen (15) days following the expiration of the 2004 NPBT objection
period, then such determination as resolved shall become final and
binding as it relates to this Agreement. If timely objection is made
by any party and Seller and Purchaser No. 1 and Purchaser No. 2 are
unable to resolve their differences in writing within ten (10) days of
the expiration of the 2004 NPBT objection period, then all disputed
accounting matters relating to the report shall be submitted to, and
reviewed by, an arbitrator according to the process and procedure set
forth in Section 5.1 above. The expenses of arbitration shall be borne
one-half by Purchaser No. 1 and Purchaser No. 2 and one-half by
Seller. Each party shall be responsible for its own accounting and
attorneys' fees. The resolution of any disputed legal issues
pertaining to this determination shall be subject to judicial review.
If there is both a legal dispute and an accounting dispute regarding
the 2004 NPBT determination and the legal dispute could impact the
accounting dispute, the legal dispute shall be determined first and
the parties shall adjust the timeline set forth herein for the
resolution of the accounting dispute incident thereto. Any net
reduction in Purchase Price No. 1 and Purchase Price No. 2 shall be
made in the manner set forth in Section 4.1(e). In making the 2004
NPBT determination, no effect shall be given to any of the three (3)
Purchase Orders that are to be taken into account in the Net Asset No.
1 and Net Asset No. 2 determination set forth in Section 5.1.
6.
EMPLOYMENT AGREEMENTS
---------------------
6.1 Employment Agreements of Shareholders.
----------------------------------------
At Closing, Purchaser No. 1 shall enter into respective Employment
Agreements with ▇. ▇▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇▇. Copies of said Employment
Agreements are attached hereto and made a part hereof as Exhibits F
and F-1.
Page 25 of 61
7.
COVENANT NOT TO COMPETE AGREEMENTS
----------------------------------
7.1 Covenant Not to Compete Agreements of Seller and Members.
----------------------------------------------------------------
At Closing, Seller and each Member shall enter into Non-Competition
Agreements with Purchaser No. 1 and Purchaser No. 2. Copies of said
Non-Competition Agreements are attached hereto and made a part hereof
as Exhibits G, G-1 and G-2.
8.
BULK SALES ACT
--------------
8.1 Compliance with Bulk Sales Act.
----------------------------------
Purchaser No. 1 and Purchaser No. 2 waive compliance with the
provisions of any applicable bulk sales law and the Seller agrees to
indemnify and hold harmless Purchaser No. 1 and Purchaser No. 2 from
any liability incurred as a result of the failure to so comply, except
to liabilities explicitly assumed hereunder by Purchaser No. 1 and/or
Purchaser No. 2.
9.
ASSIGNMENTS OF SUBLEASE AND LEASE AGREEMENT
-------------------------------------------
9.1 Assignment of Sublease Agreement.
-------------------
As a condition of the Closing of this Agreement, Seller shall assign
all its right, title and interest under a Sublease Agreement by and
between Seller and eServe, L.L.C. A copy of said Assignment of
Sublease is attached hereto as Exhibit H. The Consent of the
underlying Landlord of eServe, L.L.C. and of eServ, L.L.C., as
Sublessor shall be obtained as reasonably after Closing as possible.
9.2 Assignment of Lease Agreement.
---------------------------------
As a condition of the Closing of this Agreement, Seller shall assign
all its right, title and interest under a Lease to Purchaser relating
to its Des Moines, Iowa location. A copy of said Assignment of Lease
is attached hereto as Exhibit H-1. The Consent of the underlying
Landlord shall be obtained as reasonably soon after Closing as
possible.
Page 26 of 61
10.
REPRESENTATIONS AND WARRANTIES
------------------------------
OF SELLER AND EACH MEMBER
-------------------------
Except as set forth in the Disclosure Schedule attached hereto, Seller
and Members, jointly and severally, represent and warrant to Purchaser
No. 1 and Purchaser No. 2 that the following statements are true and
correct as of the date hereof.
10.1 Organization, Good Standing, Qualification and Power of Seller.
--------------------------------------------------------------------
(a) Seller is a domestic limited liability company duly organized,
validly existing and in good standing under the laws of the State
of Illinois and has the power and authority to own, lease and
operate the Purchased Assets No. 1 and Purchased Assets No. 2 and
to conduct Business No. 1 and Business No. 2 currently being
conducted by it. Seller is duly qualified and validly existing in
Illinois and in good standing in each of the other jurisdictions
in which it is required by the nature of its business or the
ownership of its properties to so qualify. Seller has no
subsidiaries. The Disclosure Schedule correctly lists, with
respect to Seller, each jurisdiction in which it is qualified to
do business as a foreign company.
10.2 Capitalization.
--------------
(a) The outstanding capitalization of Seller consists solely of
membership interests of which 100% is currently owned by the
Members, in the aggregate. All outstanding membership interests
of Seller have been fully paid for and are nonassessable and have
not been issued in violation of the preemptive rights of any
person. Except as set forth in the Disclosure Schedule, Seller is
not obligated to issue or acquire any membership interests, nor
has it granted options or any similar rights with respect to any
of its membership interests.
10.3 Authority to Make Agreement.
------------------------------
The Seller and each Member have the full legal power and authority to
enter into, execute, deliver and perform their respective obligations
under this Agreement and each of the other agreements, instruments and
other instruments to be delivered incident hereto ("Other Seller
Documents"). This Agreement and the Other Seller Documents have been
duly and validly executed and delivered by Seller and the Members, and
are the legal and binding obligation of each of them, enforceable in
accordance with their respective terms, subject to principles of
equity, bankruptcy laws, and laws affecting creditors' rights
generally. The Seller has taken all necessary action (including action
by the Members in their capacity as Members and Managers incident to
its Operating Agreement) to authorize and approve the execution and
delivery of this Agreement and the Other Seller Documents, the
performance of its obligations thereunder and the consummation of the
transactions contemplated thereby.
Page 27 of 61
10.4 Existing Agreements, Governmental Approvals and Permits.
------------------------------------------------------------
(a) The execution, delivery and performance of this Agreement and the
Other Seller Documents by the Seller and each Member, the sale,
transfer, conveyance, assignment and delivery of the Purchased
Assets No. 1 to Purchaser No. 1 and Purchased Assets No. 2 to
Purchaser No. 2 as contemplated in this Agreement, and the
consummation of the other transactions contemplated thereby: (i)
do not violate any provisions of law, statute, ordinance or
regulation applicable to the Seller, any Member or the Purchased
Assets ▇▇. ▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇. ▇, (▇▇) (except for any of
Sellers secured creditors, if any, whose consents shall be
obtained prior to Closing and except as set forth in the
Disclosure Schedule), will not conflict with, or result in the
breach or termination of any provision of, or constitute a
default under (in each case whether with or without the giving of
notice or the lapse of time or both) the Articles of Organization
or Operating Agreement of Seller, or any indenture, mortgage,
lease, deed of trust, or other instrument, contract or agreement
or any license, permit, approval, authority, or any order,
judgment, arbitration award, or decree to which Seller or any
Member is a party or by which Seller or any Member or any of
their assets and properties are bound (including, without
limitation, the Purchased Assets No. 1 and/or the Purchased
Assets No. 2, respectively), and (iii) will not result in the
creation of any encumbrance upon any of the properties, assets,
or the Business No. 1 or Business No. 2 of Seller or of any
Member. Neither the Seller, nor any Member, nor any of their
assets or properties (including, without limitation, the
Purchased Assets No. 1 and/or the Purchased Assets No. 2,
respectively) is subject to any provision of any mortgage, lease,
contract, agreement, instrument, license, permit, approval,
authority, order, judgment, arbitration award or decree, or to
any law, rule, ordinance, or regulation, or any other restriction
of any kind or character, which would prevent Seller or any
Member from entering into this Agreement or any of the Other
Seller Documents or from consummating the transactions
contemplated thereby.
(b) Neither the Seller nor any Member are a party to, subject to or
bound by any agreement, judgment, award, order, writ, injunction
or decree of any court, governmental body or arbitrator which
would prevent the use by Purchaser ▇▇. ▇ ▇▇▇/▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇. ▇
of the Purchased Assets No. 1 and/or the Purchased Assets No. 2,
respectively, in accordance with present practices of Seller
after the Closing Date or which, by operation of law, or pursuant
to its terms, would be breached, terminate, lapse or be subject
to termination or default under (in each case whether with or
without notice, the passage of time or both) upon the
consummation of the transactions contemplated in this Agreement.
(c) No approval, authority or consent of, or filing by Seller with,
or notification to, any foreign, federal, state or local court,
authority or governmental or regulatory body or agency or any
person is necessary to authorize the execution and delivery of
this Agreement or the Other Seller Documents by Seller or any
Member, the sale, transfer, conveyance, assignment and delivery
of the Purchased Assets No. 1 to Purchaser No. 1 and the
Purchased Assets No. 2 to Purchaser No. 2, respectively, or the
consummation of the
Page 28 of 61
other transactions contemplated thereby, or to continue the use and
operation of the Purchased Assets No. 1 by Purchaser No. 1 and the
Purchased Assets No. 2 by Purchaser No. 2, respectively by Purchaser
after the Closing Date.
10.5 Financial Statements.
---------------------
(a) Copies of the Financial Statements have been delivered to
Purchaser No. 1 and Purchaser No. 2. Each of the Financial
Statements are true and complete in all material respects and
were prepared in a manner consistent with the Companys historical
practices throughout the periods indicated and fairly present in
all material respects the financial condition and operations of
Seller as of the respective dates thereof and the results of its
operations and changes in financial position for the respective
periods then ended.
(b) Except to the extent reflected, reserved against, or disclosed on
Pro Forma Balance Sheet No. 1 and/or Pro Forma Balance Sheet No.
2, or the Financial Statements, or the Disclosure Schedule,
Seller had, as of such date, no material liabilities or
obligations of any nature, whether accrued, absolute, contingent,
or otherwise, including without limitation, unfunded pension or
other retirement plan liabilities and tax liabilities whether or
not incurred in respect of or measured by the Seller's income,
for any period prior to the date of said Financial Statements, or
arising out of transactions entered into or any set of facts
existing prior thereto. Except to the extent disclosed on the
Disclosure Schedule, there exists no basis for the assertion
against Seller, as of the date of the Financial Statements or of
Pro Forma Balance Sheet No. 1 and/or Pro Forma Balance Sheet No.
2, of any material liability of any nature or in any amount not
fully reflected, reserved against, or disclosed in the Financial
Statements or in Pro Forma Balance Sheet No. 1 and/or Pro Forma
Balance Sheet No. 2.
10.6 Customers.
---------
The Disclosure Schedule includes a correct list of the twenty (20)
largest customers of Seller by sales in dollars for each of fiscal
year 2002, and January through November of 2003, and the amount of
business done by the Seller with each such customer for such periods.
Except as disclosed on the Disclosure Schedule, to the Knowledge of
Seller and the Members, none of such current customers of Seller will
or intend to (a) cease doing business with Seller; or (b) materially
alter the level of business activity they are presently doing with
Seller (subject to any fluctuations due to any special rolloutsthat
may have occurred in fiscal year 2003); or (c) not do business with
the Purchaser No. 1 and/or Purchaser No. 2, as applicable, after the
Closing.
10.7 Intangible Property.
--------------------
The Disclosure Schedule includes an accurate list and summary
description of all patents, franchises, distributorships, registered
and unregistered trademarks, trade names and service
Page 29 of 61
marks, licenses, brand names and company lists and all applications
for the foregoing, presently owned and/or held (as a licensee or
otherwise) by the Seller. The Seller is not a licensor in respect to
any patents, trade secrets, inventions, shop rights, know-how,
trademarks, trade names, copyrights, or applications therefore. The
Disclosure Schedule contains an accurate and complete description of
such intangible property and the items of all licenses and other
agreements relating thereto. All of the above-mentioned intangibles
used in the Sellers Business No. 1 and/or Sellers Business No. 2 are
the sole property of the Seller and do not require the consent of or
consent to any other person as a condition to their use or the
transaction provided for herein and do not infringe upon the rights of
others.
10.8 Significant Agreements.
-----------------------
The Disclosure Schedule contains an accurate and complete list of all
contracts, agreements, licenses, instruments and understandings
(whether or not in writing) to which Seller is a party or is bound and
that are material to the assets, financial condition or results of
operations of the Seller. Without limiting the generality of the
foregoing, such list includes all such contracts, agreements, licenses
and instruments:
(a) Providing for payments of more than Five Thousand Dollars
($5,000.00) per year, other than purchase orders incurred in the
ordinary course of business;
(b) Providing for the extension of credit other than consistent with
normal credit terms described in the Disclosure Schedule;
(c) Limiting the ability of the Seller to conduct Business No. 1 or
Business No. 2 or any other business or to otherwise compete in
its or any other business, including as to manner or place;
(d) Providing for a guarantee or indemnity by Seller, including but
not limited to any indemnification provided under any asset
purchase agreement, stock purchase agreement, or other
transaction that Seller is a party to;
(e) With any Affiliate of Seller;
(f) With any labor union or employees' association connected with
Sellers Business No. 1 and/or Sellers Business No. 2;
(g) For the employment or retention of any director, officer,
employee, agent, member, consultant, broker or advisor of Seller
or any other contract between Seller and any director, officer,
employee, agent, shareholder, consultant or advisor which does
not provide for termination at will by Seller without further
cost or other liability to Seller as of or at any time after the
Closing;
Page 30 of 61
(h) In the nature of a profit sharing, bonus stock option, stock
purchase, pension, deferred compensation, retirement, severance,
hospitalization, insurance or other plan or contract providing
benefit to any person or former director, officer, employee,
agent, member, consultant, broker or advisor of Seller, or such
person's dependents, beneficiaries or heirs;
(i) In the nature of an indenture, mortgage, promissory note, loan or
credit agreement or other contract relating to the borrowing of
money or a line of credit by Seller or relating to the direct or
indirect guarantee or assumption by Seller of obligations of
others;
(j) Leases or subleases with respect to any property, real, personal
or mixed, in which Seller is involved, as lessor or lessee; and
(k) Distributorship Agreement(s) or License Agreement(s) with respect
to any property which Seller has entered into as licensor.
True and correct copies of all items so disclosed in the Disclosure
Schedule (if written) have been provided or made available to
Purchaser ▇▇. ▇ ▇▇▇/▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇. ▇. Each of such items listed, or
required to be listed, is a valid and binding obligation of the
parties thereto enforceable in accordance with its terms, subject to
principles of equity, bankruptcy laws, and laws affecting creditors'
rights generally, and there have been no material defaults or to
Seller Knowledge claims of material default by Seller and to Sellers
Knowledge, there are no facts or conditions that have occurred or that
are anticipated to occur which, through the passage of time or the
giving of notice, or both, would constitute a default by Seller, or
would cause the acceleration of any obligation of any party thereto or
the creation of an Encumbrance upon any asset of Seller. There are no
material oral contracts, agreements or understandings made by any
Member, material to Purchased Assets No. 1 or Purchased Assets No. 2,
except such as have been disclosed in the Disclosure Schedule and for
which an accurate summary description has been provided.
10.9 Inventory.
---------
Except as specifically described on the Disclosure Schedule, all
inventory is reflected on the November 14, 2003 Pro Forma Balance
Sheet, and at the Closing Date will consist of items of quality and
quantity which are usable or saleable in the ordinary course of
business of Seller in the conduct of Business No. 1 and/or Business
No. 2, and items of below standard quality and items not usable or
saleable in the ordinary course of Sellers business have been written
down in value in accordance with good business practices to estimated
net realizable market value or adequate reserves have been provided
therefor. The values at which the inventory is carried on the list
attached to the Disclosure Schedule reflect the normal valuation
policy of Seller. Except as set forth on the Disclosure Schedule,
since November 14, 2003, the inventory of Seller has been maintained
at normal and adequate levels for the continuation of the Business No.
1 and/or Business No. 2 in its normal course. No change has occurred
in such inventory which affects or will affect the usability or
salability thereof, no write-downs or write-offs of the value of such
Page 31 of 61
inventory has occurred and no additional amounts have been reserved
with respect to such inventories except in each case those adjustments
made in the ordinary course of business. The Disclosure Schedule lists
the location of all inventory together with a brief description of the
type and amount at each location.
10.10 Accounts Receivable and Vendor Receivables.
----------------------------------------------
All accounts receivable and vendor receivables of the Seller which
have arisen in connection with Business No. 1 and/or Business No. 2 or
otherwise and which are reflected on the Financial Statements and all
receivables which have arisen since November 14, 2003 through the
Closing shall have arisen only from bona fide transactions in the
ordinary course of business and represent valid, collectible and
existing claims, net of any reserve as reflected on the Pro Forma
Balance Sheet No. 1 and/or the Pro Forma Balance Sheet No. 2. Subject
to customer credit, the payment of each account and vendor receivable
will not be subject to any known defense, counterclaim condition
(other than Sellers performance in the ordinary course of business)
whatsoever. The Disclosure Schedule hereto accurately lists, as of the
Closing Date, all receivables arising out of or relating to Business
▇▇. ▇ ▇▇▇/▇▇ ▇▇▇▇▇▇▇▇ ▇▇. ▇, the amount owing and aging of such
accounts receivable, the name of the party from whom such account
receivable is owing, any security in favor of any Seller for the
repayment of such account receivable which Seller purports to have.
Seller has made available to Purchaser No. 1 and Purchaser No. 2
complete and correct copies of all instruments, documents and
agreements evidencing such accounts receivable and of all instruments,
documents or agreements (if any) creating security therefore.
10.11 Taxes.
-----
Except as to Taxes not yet due and payable, and except for Taxes the
payment of which is being diligently contested in good faith and by
proper proceedings and for which adequate reserves have been
established in accordance with generally accepted accounting
principles, and except as set forth in the Disclosure Schedule, Seller
has filed all Tax Returns that are now required to be filed by it in
connection with any federal, state or local tax, duty or charge
levied, assessed or imposed upon them, or their property, including
unemployment, social security and similar taxes; and all of such Taxes
have been either paid or adequate reserves or other provision has been
made therefor. Seller and each Member shall pay, without right of
reimbursement from Purchaser No. 1 and/or Purchaser No. 2, all of
Sellers and any Members income Taxes, including any interest and
penalties thereon, that relate to the activities of Seller through the
Closing including this transaction, as due.
10.12 Title to Purchased Assets; Encumbrances.
-------------------------------------------
(a) With respect to Purchased Assets No. 1 and Purchased Assets No. 2
sold, at the Closing Seller shall have good title to Purchased
Assets No. 1 and/or Purchased Assets No. 2 owned by it being
acquired by Purchaser No. 1 and/or Purchaser No. 2, respectively,
and except for matters expressly set forth in Sections 3.1 or
Section 3.2, which
Page 32 of 61
Encumbrances, if any, upon Purchased Assets No. 1 and/or
Purchased Assets No. 2 shall be removed at Closing, free and
clear of all Encumbrances whatsoever; immediately after the
transfer of Purchased Assets No. 1 being acquired by Purchaser
No. 1 from Seller and Purchased Assets No. 2 being acquired by
Purchaser No. 2 from Seller, Purchaser No. 1 will own all of said
Purchased Assets No. 1 and Purchaser No. 2 will own all of said
Purchased Assets No. 2, free and clear of all Encumbrances
whatsoever, whether perfected or unperfected; and, by way of
illustration but not limitation, there are not any unpaid taxes,
assessments or charges due or payable by Seller to any federal,
state or local agency, or any obligations or liabilities or any
unsatisfied judgments against, or, to Seller's Knowledge, any
litigation or proceedings pending or threatened against Seller by
any of Seller's employees, clients, customers, creditors,
suppliers, or any other party (nor state of facts for any such
obligation, liability, litigation or proceeding), that could
become a claim, obligation, liability, lien or other charge of or
against Purchaser ▇▇. ▇, ▇▇▇▇▇▇▇▇▇ ▇▇. ▇, or Purchased Assets No.
1 or Purchased Assets No. 2. To Sellers Knowledge, all of
Seller's tangible and other operating assets used in Business No.
1 and/or Business No. 2 which are being sold hereunder to
Purchaser No. 1 and/or Purchaser No. 2, respectively, are, in all
material respects, in good operating condition and repair, free
of all structural, material or mechanical defects and conform
with all applicable laws and regulations.
(b) Except as otherwise specifically set forth herein, Seller is not
a party to any contract, agreement, lease or commitment that
would result in any claim, obligation, liability, lien or other
charge against Purchaser No. 1 and/or Purchaser No. 2 or
Purchased Assets No. 1 or Purchased Assets ▇▇. ▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇. ▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇. ▇ are not obligated to assume the
obligations under any contract, agreement, lease or commitment of
Seller, except as specifically set forth herein.
10.13 Pending Actions.
----------------
Seller has not been served with or received notice of any actions,
suits, arbitrations, OSHA, EPA or other governmental violations, or
any other proceedings or investigations, either administrative or
judicial, strikes, lockouts or NLRB charges or complaints ("Actions
and Disputes"). Except as shown on the Disclosure Schedules, there are
no Actions or Disputes pending or, to the best of Sellers knowledge,
threatened against or affecting (directly or indirectly) Seller or its
property or assets nor, to Sellers Knowledge, are there any facts or
conditions which exist which would give rise to any such Actions or
Disputes which, if determined adversely to Seller, would have a
material adverse effect upon Sellers Business ▇▇. ▇ ▇▇▇/▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇. ▇.
10.14 Insurance.
---------
The Disclosure Schedule contains an accurate and complete listing
(showing type of insurance, amount, insurance company, annual premium
and special exclusions) of all policies of fire, liability, worker's
compensation and other forms of insurance owned or held by Seller. All
such policies are in full force and effect; are sufficient for
compliance with all requirements of law and
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of all agreements to which Seller is a party; are valid, outstanding
and enforceable policies; provide adequate insurance coverage for the
assets and operations of Seller and will remain in full force and
effect through the Closing. There are no outstanding requirements or
recommendations by any insurance company that issued a policy with
respect to any of the properties and assets of Seller by any Board of
Fire Underwriters or other body exercising similar functions or by any
Governmental Entity requiring or recommending any repairs or other
work to be done on or with respect to any of the properties and assets
of Seller or requiring or recommending any equipment or facilities to
be installed on or in connection with any of the properties or assets
of Seller.
10.15 Status of Business.
--------------------
(a) Since November 15, 2003, Business No. 1 and Business No. 2 of the
Seller have been operated only in the ordinary course, and,
except as set forth in the Disclosure Schedule, there has not
been with respect to Business ▇▇. ▇ ▇▇▇/▇▇ ▇▇▇▇▇▇▇▇ ▇▇. ▇:
(i) Any material change in its condition (financial or other),
assets, liabilities, obligations, business or earnings,
except changes in the ordinary course of business, none of
which individually or in the aggregate has been materially
adverse;
(ii) Any material liability or obligation incurred or assumed, or
any material contract, agreement, arrangement, purchase
order, lease (as lessor or lessee), or other commitment
entered into or assumed, on behalf of Business No. 1 and/or
Business No. 2, whether written or oral, except in the
ordinary course of business;
(iii) Any purchase or sale of material assets in anticipation of
this Agreement, or any purchase, lease, sale, abandonment or
other disposition of material assets, except in the ordinary
course of business;
(iv) Any waiver or release of any material rights, except for
rights of nominal value;
(v) Any cancellation or compromise of any material debts owed to
Seller or material claims known by Seller against another
person or entity, except in the ordinary course of business;
(vi) Any damage or destruction to or loss of any physical assets
or property of Seller which materially adversely affects
Business No. 1 and/or Business No. 2 or any of the
properties of Seller (whether or not covered by insurance);
(vii) Any material changes in the accounting practices,
depreciation or amortization policy or rates theretofore
adopted by Seller, or any material revaluation or write-up
or write-down of any of their assets;
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(viii) Any direct or indirect redemption, purchase or other
acquisition for value by Seller of its shares or any
agreement to do so;
(ix) Any material increase in the compensation levels or in the
method of determining the compensation of any of the Sellers
officers, directors, agents, employees or members, or any
bonus payment or similar arrangement with or for the benefit
of any such person, any increase in benefits expense to
Seller, any payments made or declared into any
profit-sharing, pension, or other retirement plan for the
benefit of employees of Seller, except in the ordinary
course of business;
(x) Any loans or advances between Seller and any Member or any
family member or any associate or Affiliate of Seller or of
any Shareholder;
(xi) Any material contract canceled or the terms thereof amended
or any notice received with respect to any such contract
terminating or threatening termination or amendment of any
such contract;
(xii) Any transfer or grant of any material rights under any
leases, licenses, agreements, or with respect to any trade
secrets or know-how;
(xiii) Any labor trouble or employee controversy materially
adversely affecting Business No. 1 and/or Business No. 2 or
assets;
(xiv) Any distribution on or in respect of Sellers membership
interests; or
(xv) The incurring of any funded indebtedness except in the
ordinary course of business.
(b) The Seller is not:
(i) in violation of any outstanding judgment, order, injunction,
award or decree specifically relating to Business ▇▇. ▇
▇▇▇/▇▇ ▇▇▇▇▇▇▇▇ ▇▇. ▇, ▇▇
(▇▇) in violation of any federal, state or local law, ordinance
or regulation which is applicable to Business No. 1 and/or
Business No. 2, except where such violation does not have a
materially adverse effect on Business ▇▇. ▇ ▇▇▇/▇▇ ▇▇▇▇▇▇▇▇
▇▇. ▇.
The Seller has all permits, licenses, orders, approvals,
authorizations, concessions and franchises of any federal, state
or local governmental or regulatory body that are material to or
necessary in the conduct of Business No. 1 and/or Business No. 2,
except where failure to have such permit, license, order,
approval, authorization, concession or franchise does not have a
materially adverse effect on Business ▇▇. ▇ ▇▇▇/▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇ ▇▇ ▇▇
▇▇. ▇. All such permits, licenses, orders, approvals, concessions
and franchises are set forth on the Disclosure Schedule and are
in full force and effect and there is no proceeding pending or,
to the knowledge of Seller, threatened to revoke or limit any of
them.
(c) At the Closing, Seller shall have paid in full, to all employees
of Business No. 1 and/or Business No. 2, all wages, salaries,
commissions, bonuses, vacations and other direct compensation for
all services performed by them. To Sellers Knowledge, Seller is
in compliance in all material respects with all federal, state
and local laws, ordinances and regulations relating to employment
and employment practices at Business No. 1 and/or Business No. 2,
and all employee benefit plans and tax laws relating to
employment at Business No. 1 and/or Business No. 2. There is no
unfair labor practice complaint against Seller relating to
Business No. 1 and/or Business No. 2 pending before the National
Labor Relations Board or similar agency or body and, to Sellers
Knowledge, no condition exists that could give rise to any unfair
labor practice complaint. There is no labor strike, dispute,
slowdown or stoppage actually pending or, to Sellers Knowledge,
threatened against or involving Business No. 1 and/or Business
No. 2. Seller has no labor contracts or collective bargaining
agreements with respect to any of its employees.
(d) No claim, litigation, action, investigation or proceeding is
pending or, to the Knowledge of Seller, threatened, and no order,
injunction or decree is outstanding, against or relating to
Business No. 1 or Business No. 2 or their respective assets, and
Seller does not know of any information which could result in
such a claim, litigation, action, investigation or proceeding,
which, if determined adversely to Seller, would have a material
effect upon Seller's Business No. 1 or Business No. 2.
10.16 Environmental Laws.
-------------------
(a) To Sellers Knowledge, the real estate location(s) which are
leased by Seller, (Real Estate) have not been used or operated in
any fashion involving producing, handling and disposing of
chemicals, toxic substances, wastes and effluent materials,
x-rays or other materials or devices in material violation of any
laws, rules, regulations or orders, and to the best of Sellers
Knowledge, the Real Estate is in material compliance with
applicable laws, regulations, ordinances, decrees and orders
arising under or relating to health, safety, and environmental
laws and regulations, including without limitation the Federal
Occupation and Safety Health Act, 29 U.S.C. 651, et seq.; Federal
Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. 6901,
et seq.; Federal Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 U.S.C. 9601, et
seq.; the Federal Clean Air Act, 42 U.S.C. 2401, et seq.; the
Federal Clean Water Act, 33 U.S.C. 1251, et seq.; and all state
and local laws that correspond therewith or supplement such laws.
(b) To Sellers Knowledge, the Real Estate has not been operated, in
violation of any laws, rules, regulations or orders, so as to
involve or create any surface impoundments,
Page 36 of 61
incinerators, land fills, waste storage tanks, waste piles, or
deep well injection systems or for the purpose of storage,
treatment or disposal of a hazardous waste as defined by RCRA or
hazardous substance, pollutant or contaminate as defined by
CERCLA and, to Sellers Knowledge, no acts have been committed
that would make the Real Estate or any part thereof subject to
remedial action under RCRA or CERCLA or corresponding state or
local laws.
(c) To the best of Sellers Knowledge, there have not been, are not
now and as of the Closing Date, there will be no solid waste,
hazardous waste, hazardous substance, toxic substance, toxic
chemicals, pollutants or contaminants, underground storage tanks,
purposeful dumps, or accidental spills in, on or about the Real
Estate or any of the assets of Seller, whether real or personal,
owned or leased, or stored on any real property owned or leased
by Seller or by Seller's lessees, licensees, invites, or
predecessors in amounts sufficient to require any reporting
obligations under any applicable environmental laws, rules or
regulations.
(d) Seller is not engaged in, and to Sellers Knowledge is not
threatened with any litigation, or governmental or other
proceeding which may give rise to any claim against the Real
Estate. Specifically, there are no pending suits, charges,
actions, governmental investigations, or other proceedings,
involving, directly or indirectly without limitation, the laws,
statutes and regulations set forth in subsection (a), above,
whether initiated by a third party or by Seller and there are
none, to Sellers Knowledge, threatened against or relating to or
involving the Real Estate or the transactions contemplated by
this Agreement. To Sellers Knowledge, Seller is not in default
with respect to any order, writ, injunction or decree of any
federal, state, local or foreign court, department, agency or
instrumentality.
(e) The Disclosure Schedule will list all waste disposal sites, dump
sites and other areas either on the Real Estate or offsite at
which hazardous or toxic waste generated by Seller has been
disposed (in each case identifying such waste) and it will
specifically identify each such site or area which is or has been
included in any published federal, state or local (domestic or
foreign) superfund or other list of hazardous or toxic waste
sites or areas.
(f) To Sellers Knowledge, Seller has obtained all permits, and
licenses and other authorizations required by all environmental
laws; and all of such permits, licenses and other authorizations
are in full force and effect as of the date hereof. A true and
correct list of all such permits, licenses and other
authorizations is set forth in the Disclosure Schedule.
10.17 Certain Employees
------------------
(a) Each of the following is included in the list of agreements set
forth in the Disclosure Schedule: all collective bargaining
agreements,
Page 37 of 61
employment and consulting agreements, bonus plans, deferred
compensation plans, employee pension plans or retirement plans,
employee profit-sharing plans, employee stock purchase and stock
option plans, hospitalization insurance, and other plans and
arrangements providing for employee benefits of employees of the
Seller.
(b) The Disclosures Schedule contains a true, complete and accurate
list of the following: the names, positions, and compensation of
the present employees of Seller, together with a statement of the
annual salary payable to salaried employees and a summary of the
bonuses and description of agreements for additional compensation
and other like benefits, if any, paid or payable to such persons
for the period set forth in the Disclosure Schedule. Except as
listed in the Disclosure Schedule, to Sellers Knowledge, all
employees of the Seller are employees-at-will.
(c) To Sellers Knowledge, Seller has no retired employees who are
receiving or are entitled to receive any payments, health or
other benefits from Seller.
10.18 Payments to Employees.
-----------------------
To Sellers Knowledge, accrued obligations of Seller relating to
employees and agents of Seller, whether arising by operation of law,
by contract, or by past service, for payments to trusts or other funds
or to any governmental agency, or to any individual employee or agent
(or his heirs, legatees, or legal representatives) with respect to
unemployment compensation benefits, deferred compensation, profit
sharing or retirement benefits, or social security benefits have been
paid or accrued by Seller. To Sellers Knowledge, all obligations of
Seller as an employer or principal relating to employees or agents,
whether arising by operation of law, by contract, or by past practice,
for vacation and holiday pay, bonuses, and other forms of compensation
which are or may become payable to such employees or agents, have been
paid or will be paid or accrued by Seller.
10.19 Change of Legal Liability Name.
----------------------------------
At the Closing, the Seller, if requested by either Purchaser No. 1
and/or Purchaser No. 2, will adopt and file with the Secretary of
State of Illinois an Amendment to the Articles of Organization of
Seller changing the name of Seller to a name substantially dissimilar
to eServe Solutions Group, L.L.C. and the Seller shall also execute a
Consent for Use of Similar Name, as set forth in the Disclosure
Schedule, granting to Purchaser consenting the use of the name of
eServe Solutions Group.
10.20 Brokers and Finders.
---------------------
Except as set forth in the Disclosure Schedule, no broker, finder or
other person or entity acting in a similar capacity has participated
on behalf of Seller in bringing about the transaction herein
contemplated, or rendered any service with respect thereto or been in
any way involved therewith.
Page 38 of 61
10.21 Preservation of Organization.
------------------------------
Except as set forth on the Disclosure Schedule, since November 14,
2003, the Seller has kept intact Business No. 1 and/or Business No. 2
and organization of the Seller; retained the services of all the
Sellers material employees and agents, retained the Sellers
arrangements with the manufacturers of the products distributed by
Seller in the same manner as conducted prior to such date, and other
than as contemplated by this Agreement, engaged in no transaction
other than in the ordinary course of Sellers Business ▇▇. ▇ ▇▇▇/▇▇
▇▇▇▇▇▇▇▇ ▇▇. ▇.
10.22 Absence of Certain Business Practices.
-----------------------------------------
Neither the Seller nor to the Sellers Knowledge, any officer, employee
or agent of the Seller, nor any other Person acting on its behalf,
has, directly or indirectly, within the past five years given or
agreed to give any gift, bribe, rebate or kickback or otherwise
provide any similar benefit to any customer, supplier, governmental
employee or any other Person who is or may be in a position to help or
hinder the Seller or Business No. 1 and/or Business No. 2 (or assist
Seller in connection with any actual or proposed transaction relating
to Business No. 1 and/or Business No. 2 or any other business
previously operated by Seller) (i) which subjected or might have
subjected Seller to any damage or penalty in any civil, criminal or
governmental litigation or proceeding, (ii) which if not given in the
past, might have had a material adverse effect on Business ▇▇. ▇
▇▇▇/▇▇ ▇▇▇▇▇▇▇▇ ▇▇. ▇, (▇▇▇) which if not continued in the future,
might have a material adverse effect on Business No. 1 and/or Business
No. 2 or subject Seller to suit or penalty in any private or
governmental litigation or proceeding, (iv) for any of the purposes
described in Section 162(c) of the Code or (v) for the purpose of
establishing or maintaining any concealed fund or concealed bank
account.
10.23 Suppliers.
---------
The Disclosure Statement sets forth the names of and description of
contractual arrangements (whether or not binding or in writing) with
the ten (10) largest suppliers of the Seller by sales or services in
dollars. Except as disclosed on the Disclosure Statement and assuming
that Purchaser No.1 and/or Purchaser No. 2, as applicable, continues
to conduct Business No. 1 and/or Business No. 2 in the ordinary course
consistent with Sellers prior practices generally and specifically
with respect to Sellers current suppliers, Seller has no direct
knowledge that any of the current suppliers of the Seller will, or
intend to, (a) cease doing business with Seller; or (b) materially
alter the amount of business they are currently doing with Seller; or
(c) not do business with Purchaser ▇▇. ▇ ▇▇▇/▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇. ▇ after
the Closing.
10.24 Product Liability Claims.
--------------------------
To Sellers Knowledge, there are no material product liability claims
against Seller, either potential or existing, which are not fully
covered by product liability insurance coverage with a responsible
Page 39 of 61
company which, if determined adversely to Seller, would have a
material adverse effect upon Sellers Business ▇▇. ▇ ▇▇▇/▇▇ ▇▇▇▇▇▇▇▇
▇▇. ▇.
10.25 Employee Benefit Plans.
------------------------
For the purposes of this Section 10.25, "Seller" shall include all
persons who are members of a controlled group, a group of trades or
businesses under common control, or an affiliated service group
(within the meanings of Sections 414(b), (c) or (m) of the Code), of
which Seller is a member.
(a) The Employee Benefit Plans presently maintained by Seller or to
which Seller has contributed within the past six (6) years,
including any terminated or frozen plans which have not yet
distributed all plan assets, are fully set forth in the
Disclosure Schedule. For purposes of this provision, the term
"Employee Benefit Plan" shall mean:
(i) A Welfare Benefit Plan as defined in Section 3(1) of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA") established for the purpose of providing for its
participants or their beneficiaries, through the purchase of
insurance or otherwise, medical, surgical, or hospital care
or benefits, or benefits in the event of sickness, accident,
disability, death or unemployment (including any plan or
program of severance pay), or vacation benefits,
apprenticeship or other training programs, or day care
centers, scholarship funds, or prepaid legal services, or
any benefit described in Section 302(c) of the Labor
Management Relations Act of 1947;
(ii) An Employee Pension Benefit Plan as defined in Section 3(2)
of ERISA established or maintained by Seller for the purpose
of providing retirement income to employees or for the
purpose of providing deferral of income by employees for
periods extending to the termination of covered employment
or beyond; and
(iii) Any other plan or arrangement not covered by ERISA but
which provides benefits to employees or former employees and
results in an accrued liability on the part of Seller either
by contract or by operation of law.
(b) With respect to any such Employee Benefit Plans, the Seller
represents and warrants that, to the best of Sellers Knowledge;
(i) The Seller has not, with respect to any Employee Benefit
Plans, engaged in any prohibited transaction, as such term
is defined in Section 4975 of the Code or Section 406 of
ERISA.
Page 40 of 61
(ii) The Seller has, with respect to any Employee Benefit Plans,
substantially complied with all reporting and disclosure
requirements required by Title I, Subtitle B, Part 1 of
ERISA.
(iii) There was no accumulated funding deficiency (as defined in
section 302 of ERISA and Section 412 of the Code) with
respect to any Employee Pension Benefit Plan which is a
defined benefit pension plan, whether or not waived, as of
the last day of the most recent fiscal year of the plans
ending prior to the date of this Agreement.
(iv) Except as described on the Disclosure Schedule, there are no
contributions due to any Employee Pension Benefit Plan for
the most recent fiscal year of the plans ending prior to the
date of this Agreement and the Sellers Financial Statements
reflect any liability of Seller to make contributions to the
Employee Pension Benefit Plans, and a pro rata portion of
the contributions (including matching contributions) for the
plan year on which the Closing Date occurs shall have been
made on or prior to the Closing Date for the period ending
on the Closing Date.
(v) No material liability to the Pension Benefit Guaranty
Corporation ("PBGC") has been asserted with respect to any
Employee Pension Benefit Plan which is a defined benefit
pension plan.
(vi) There has been no reportable event as described in Section
4043(b) of ERISA since the effective date of Section 4043 of
ERISA with respect to any Employee Pension Benefit Plan
which is a defined benefit plan.
(vii) Except for claims for benefits by participants and
beneficiaries in the normal course of events, to the best of
Sellers knowledge, there are no claims, pending or
threatened, by any individual or Governmental Entity, which,
if decided adversely, would have a material adverse effect
upon the financial condition of any Employee Benefit Plan,
the plan administrator of any Employee Benefit Plan, or
Seller.
(viii) The Seller has made available for inspection all annual
reports for Seller filed on Internal Revenue Service ("IRS")
Form 5500 or 5500C, all reports for Seller prepared by an
actuary for the last three plan years, the plan and trust
documents and the Summary Plan Description, as amended, for
each Employee Benefit Plan and the last filed PBGC1 Form (if
applicable) for each Employee Benefit Plan, with respect to
any Employee Benefit Plans other than multi-employer plans
(within the meaning of Section 3(37) of ERISA), and other
reports filed with the PBGC during the last three plan
years.
(ix) Except as set forth on the Disclosure Schedule, all Employee
Pension Benefit Plans are intended to be qualified
retirement plans under the Code. The IRS has
Page 41 of 61
issued, and Seller has made available for inspection, one or
more determination letters with respect to the qualification
of all such Employee Pension Benefit Plans stating that the
IRS has made a favorable determination as to the
qualification of such Plan under Section 401(a) of the Code,
and that continued qualification of the Plan in its present
form will depend upon its effect in operation. The time for
adoption of any amendments required by changes in the Code
since such determination letters were issued, or changes
required by the IRS as a condition for continued
qualification of such plans has not expired, or did not
expire without such amendments being made. Such plans are
now, and always have been, established in writing and
maintained and operated in accordance with the plan
documents, ERISA, the Code, and all other applicable laws.
Except as described in the Disclosure Schedule, such Plans
are now and always have been, established in writing and
maintained and operated substantially in accordance with the
plan documents, ERISA, the Code and all other applicable
laws, in all material respects.
(x) There is no liability arising from the termination or
partial termination of any Employee Benefit Plan, except for
liabilities as to which adequate reserves are reflected on
the Financial Statements, and there exists no condition
presenting a material risk of such liability.
(xi) The Seller has timely made any contributions it is obligated
to make to any multi-employer plan within the meaning of
Section 3(37) of ERISA. The Seller has no liability arising
as a result of withdrawal from any multi-employer plan, no
such withdrawal liability has been asserted and no such
withdrawal liability will be asserted with regard to any
withdrawal or partial withdrawal on or before the date of
this Agreement.
10.26 Assets Necessary to the Business.
------------------------------------
The Seller owns, leases or holds under license all assets and
properties (tangible and intangible) necessary to carry on Business
No. 1 and Business No. 2 and operations as presently conducted and as
shown on the Financial Statements. Such assets and properties are all
of the assets and properties necessary to carry on Sellers Business
No. 1 and Business No. 2 as presently conducted and Members (other
than through their ownership of membership interests in Seller and/or
as set forth on the Disclosure Schedule) nor any member of his family
owns or leases or has any interest in any assets or properties
presently being used to carry on Business No. 1 or Business No. 2 of
Seller.
10.27 Transactions with Affiliates.
------------------------------
Except as disclosed on the Disclosure Schedule, there is no lease,
sublease, contract, agreement or other arrangement of any kind
whatsoever entered into by Seller and its Shareholders.
Page 42 of 61
10.28 Territorial Restrictions.
-------------------------
Except as described in the Disclosure Schedule, Seller is not
restricted by any written agreement or understanding with any other
Person from carrying on the Business No. 1 and/or Business No. 2
anywhere in the world. Neither Purchaser nor any of its Affiliates
will, as a result of its acquisition of Purchased Assets No. 1 and/or
Purchased Assets No. 2 become restricted in carrying on Business No. 1
and/or Business No. 2 anywhere in the world as a result of any
contract or other agreement to which Seller is a party or by which it
is bound.
10.29 Immigration Compliance.
-----------------------
(a) Seller is in compliance with all applicable federal, state and
local laws, rules, directives and regulations relating to the
employment authorization of their respective employees
(including, without limitation, the Immigration Reform and
Control Act of 1986, as amended and supplemented, and Section
212(n) and 274A of the Immigration and Nationality Act, as
amended and supplemented, and all implementing regulations
relating thereto), and Seller has not employed nor is any such
entity currently employing any unauthorized aliens (as such term
is defined under 8 CFR 274a.1(a)).
(b) Seller has not received any notice from the Immigration and
Naturalization Service (the "INS") or the United States
Department of Labor (the "DOL") of the disapproval or denial of
any visa petition or entry permit pending before the INS or labor
certification pending before the DOL on behalf of any employee or
prospective employee of Seller.
(c) Since the approval of each of their respective visa petitions,
there has been no material change in the terms and conditions of
employment of any employees of Seller.
(d) Seller shall have delivered to Purchaser No. 1 and Purchaser No.
2 by the Closing Date true, accurate and complete copies of all
visa petitions, entry permits and visa applications (and all
supporting documents) submitted to the INS for all foreign
employees and prospective foreign employees of Seller.
10.30 J.T.S.H., L.L.C. Asset Distribution, Dissolution and Liquidation
----------------------------------------------------------------------
Agreement and Asset Transfer Agreement Between eServ, L.L.C.
-------------------------------------------------------------------
(engineering) and eServ Solutions Group, L.L.C.
----------------------------------------------------
Any distribution and/or transfer of any and all membership interests
of Seller and/or any transfer of assets between eServ, L.L.C. and
Seller and/or J.T.S.H., L.L.C. were made pursuant to proper legal and
limited liability authority and that the Members so redeemed and/or
the membership interest so acquired and the assets so transferred
and/or acquired will result in no claims, demands, causes of action,
damages or any other rights whatsoever against Seller arising out of
Page 43 of 61
or resulting from, directly or indirectly, any such transactions,
other than as expressly set forth in this Agreement.
10.31 Disclosures.
-----------
None of the representations and warranties made by Seller and Members
herein, or made in any certificate furnished or to be furnished by it,
pursuant to the requirements of this Agreement, including any
disclosures made in the Disclosure Schedule, contains or will contain
any untrue statement of material fact or omits or will omit any
material fact, an omission of which could, in light of the
circumstances in which it was made, be misleading. Seller has no
knowledge of any factors materially adversely affecting the future
prospects of Seller's Business No. 1 and/or Business No. 2 which have
not been disclosed in this Agreement and the Disclosure Schedule.
11.
REPRESENTATIONS AND WARRANTIES
------------------------------
OF PURCHASER ▇▇. ▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇. ▇
--------------------------------------
Purchaser No. 1 hereby represents and warrants to the Seller that the following
statements are true and correct as of the date hereof, and shall be true and
correct as of the Closing Date:
11.1 Organization, Good Standing and Power of Purchaser No. 1.
--------------------------------------------------------
(a) Purchaser No. 1 is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Delaware and has full corporate power and lawful authority to
execute, deliver and perform this Agreement and conduct Business
No. 1 of the Seller currently conducted by the Seller in each of
the jurisdictions in which the Seller currently conducts Business
No. 1, which are the only jurisdictions where the failure to be
so qualified by Purchaser No. 1 will have a material adverse
effect on the business prospects or financial condition of
Purchaser No. 1.
11.2 Status of Agreements.
----------------------
(a) All requisite corporate action (including action of its Board of
Directors) to approve, execute, deliver and perform this
Agreement and each of the other agreements, instruments and other
documents to be delivered by and on behalf of Purchaser No. 1
("Other Purchaser No. 1 Documents") in connection herewith has
been taken by Purchaser No. 1. This Agreement has been duly and
validly executed and delivered by Purchaser No. 1 and constitutes
the valid and binding obligation of Purchaser No. 1 enforceable
in accordance with its terms. All Other Purchaser No. 1 Documents
in connection herewith will, when executed and delivered,
constitute the valid and binding obligation of Purchaser No. 1
enforceable in accordance with their respective terms.
Page 44 of 61
(b) No authorization, approval, consent or order of, or registration,
declaration or filing with, any court, governmental body or
agency or other public or private body, entity or person is
required (except for providing Purchaser No. 1's primary lenders,
GE Commercial Distribution Finance Corporation, formerly known as
Deutsche Financial Services Company, et al, with a certificate
prior to Closing certifying that this transaction is a permitted
acquisition as defined in the Credit Facilities Agreement between
the parties) in connection with the execution, delivery or
performance of this Agreement or any Other Purchaser No. 1
Documents in connection herewith.
(c) Neither the execution, delivery nor performance of this Agreement
or any of the Other Purchaser No. 1 Documents in connection
herewith does or will:
(i) conflict with, violate or result in any breach of any
judgment, decree, order, statute, ordinance, rule or
regulation applicable to Purchaser No. 1;
(ii) conflict with, violate or result in any breach of any
agreement or instrument to which Purchaser is a party or by
which Purchaser No. 1 or any of Purchaser's assets or
properties is bound, or constitute a default thereunder or
give rise to a right of acceleration of an obligation of
Purchaser No. 1; or
(iii) conflict with or violate any provision of the Articles of
Incorporation or By-Laws of Purchaser No. 1.
11.3 Brokers and Finders.
---------------------
No broker, finder or other person or entity acting in a similar
capacity has participated on behalf of Purchaser No. 1 in bringing
about the transaction herein contemplated, or rendered any service
with respect thereto or been in any way involved therewith.
Purchaser No. 2 hereby represents and warrants to the Seller that the following
statements are true and correct as of the date hereof.
11.4 Organization, Good Standing and Power of Purchaser No. 2.
----------------------------------------------------------------
(a) Purchaser No. 2 is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Delaware and has full corporate power and lawful authority to
execute, deliver and perform this Agreement and conduct Business
No. 2 of the Seller currently conducted by the Seller in each of
the jurisdictions in which the Seller currently conducts Business
No. 2, which are the only jurisdictions where the failure to be
so qualified by Purchaser No. 2 will have a material adverse
effect on the business prospects or financial condition of
Purchaser No. 2.
Page 45 of 61
11.5 Status of Agreements.
----------------------
(a) All requisite corporate action (including action of its Board of
Directors) to approve, execute, deliver and perform this
Agreement and each of the other agreements, instruments and other
documents to be delivered by and on behalf of Purchaser No. 2
("Other Purchaser No. 2 Documents") in connection herewith has
been taken by Purchaser No. 2. This Agreement has been duly and
validly executed and delivered by Purchaser No. 2and constitutes
the valid and binding obligation of Purchaser No. 2 enforceable
in accordance with its terms. All Other Purchaser No. 2 Documents
in connection herewith will, when executed and delivered,
constitute the valid and binding obligation of Purchaser No. 2
enforceable in accordance with their respective terms.
(b) No authorization, approval, consent or order of, or registration,
declaration or filing with, any court, governmental body or
agency or other public or private body, entity or person is
required (except for providing Purchaser No. 2's primary lenders,
GE Commercial Distribution Finance Corporation, formerly known as
Deutsche Financial Services Company, et al, with a certificate
prior to closing certifying that the transaction is a permitted
acquisition as defined in the Credit Facilities Agreement between
the parties) in connection with the execution, delivery or
performance of this Agreement or any Other Purchaser No. 2
Documents in connection herewith.
(c) Neither the execution, delivery nor performance of this Agreement
or any of the Other Purchaser No. 2 Documents in connection
herewith does or will:
(i) conflict with, violate or result in any breach of any
judgment, decree, order, statute, ordinance, rule or
regulation applicable to Purchaser No. 2;
(ii) conflict with, violate or result in any breach of any
agreement or instrument to which Purchaser No. 2 is a party
or by which Purchaser No. 2 or any of Purchaser's assets or
properties is bound, or constitute a default thereunder or
give rise to a right of acceleration of an obligation of
Purchaser No. 2; or
(iii) conflict with or violate any provision of the Articles of
Incorporation or By-Laws of Purchaser No. 2.
11.6 Brokers and Finders.
---------------------
No broker, finder or other person or entity acting in a similar
capacity has participated on behalf of Purchaser No. 2 in bringing
about the transaction herein contemplated, or rendered any service
with respect thereto or been in any way involved therewith.
Page 46 of 61
11.7 Full Disclosure.
----------------
None of the representations and warranties made by Purchaser No. 1
herein contains or will contain, to the best of Purchaser No. 1's
knowledge, any untrue statement of material fact or omits or will omit
any material fact. None of the representations and warranties made by
Purchaser No. 2 herein contains or will contain, to the best of
Purchaser No. 2's knowledge, any untrue statement of material fact or
omits or will omit any material fact.
12.
SURVIVAL OF AND RELIANCE UPON REPRESENTATIONS,
WARRANTIES AND AGREEMENTS; INDEMNIFICATION
------------------------------------------
12.1 Survival of Representations and Warranties.
----------------------------------------------
The parties acknowledge and agree that all representations, warranties
and agreements contained in this Agreement or in any agreement,
instrument, exhibit, certificate, schedule or other document delivered
in connection herewith, shall survive the Closing and continue to be
binding upon the party giving such representation, warranty or
agreement and shall be fully enforceable to the extent provided for in
Sections 12.3 and 12.4 hereof, at law or in equity, for the period
beginning on the date of Closing and ending three (3) years
thereafter, except for the representations, warranties and agreements
designated and identified in Sections 3.1, 3.2, 3.3, 3.4, 4.1, 4.2,
4.6, 4.7, 10.3, 10.11, 10.12, 10.13, 10.16, 11.2 and 11.5 which shall
survive the Closing and shall terminate in accordance with the statute
of limitations governing written contracts in the State of Illinois
and Exhibits F and F-1, and Exhibits G, G-1, G-2 and Exhibits H and
H-1, which shall terminate as provided therein.
12.2 Reliance Upon and Enforcement of Representations, Warranties and
----------------------------------------------------------------------
Agreements.
-----------
(a) The Seller hereby agrees that, notwithstanding any right of
Purchaser No. 1 and/or Purchaser No. 2 to fully investigate the
affairs of Seller, and notwithstanding knowledge of facts
determined or determinable by Purchaser No. 1 and/or Purchaser
No. 2 pursuant to such investigation or right of investigation,
Purchaser No. and/or Purchaser No. 2 have the right to rely fully
upon the representations, warranties and agreements of Seller and
the Members contained in this Agreement and upon the accuracy of
any document, certificate or exhibit given or delivered to
Purchaser No. 1 and/or Purchaser No. 2 pursuant to the provisions
of this Agreement.
(b) Purchaser No. 1 and/or Purchaser No. 2 hereby agree that,
notwithstanding any right of Seller to fully investigate the
affairs of Purchaser No. 1 and/or Purchaser No. 2, and
notwithstanding knowledge of facts determined or determinable by
Seller pursuant to such investigation or right of investigation,
Seller have the right to rely fully upon the representations,
warranties and agreements of Purchaser No. 1 and/or Purchaser No.
2 contained in this Agreement and upon the accuracy of any
document, certificate or exhibit given or delivered to Seller
pursuant to the provisions of this Agreement.
Page 47 of 61
12.3 Indemnification by Seller and Members.
-----------------------------------------
Provided Purchaser ▇▇. ▇ ▇▇▇/▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇. ▇ make a written claim
for indemnification against Seller and/or Members within any
applicable survival period specified in Section 12.1, and subject to
the limitations set forth in Section 12.7, the Seller and Members
(jointly and severally), shall indemnify Purchaser ▇▇. ▇ ▇▇▇/▇▇
▇▇▇▇▇▇▇▇▇ ▇▇. ▇ against and hold them harmless from any and all loss,
damage, liability or deficiency resulting from or arising out of:
(i) any inaccuracy in or breach of any representation, warranty,
covenant, or obligation made or incurred by Seller or the Members
herein or in any other agreement, (including exhibits and
schedules) or legal instrument delivered by or on behalf of
Seller pursuant to the provisions of the Agreement;
(ii) any imposition (including by operation of law) or attempted
imposition by a third party upon Purchaser ▇▇. ▇ ▇▇▇/▇▇ ▇▇▇▇▇▇▇▇▇
▇▇. ▇ of any Excluded Liability of Seller which Purchaser No. 1
has not specifically agreed to assume pursuant to Section 3.1 of
this Agreement and/or which Purchaser No. 2 has not specifically
agreed to assume pursuant to Section 3.2 of this Agreement;
(iii) any liability of Seller arising out of Sellers operation of
Business No. 1 and/or Business No. 2, its ownership or use of the
Purchased Assets No. 1 and/or Purchased Assets No. 2, or
occupancy and use of the Real Estate prior to the Closing (except
for any Assumed Liabilities No. 1 or Assumed Liabilities No. 2
described in Sections 3.1 and 3.2, respectively) or other
obligation incurred by or imposed upon Purchaser ▇▇. ▇ ▇▇▇/▇▇
▇▇▇▇▇▇▇▇▇ ▇▇. ▇ resulting from the failure of the parties to
comply with the provisions of any law relating to bulk transfers
which may be applicable to the transaction herein contemplated;
(iv) any and all costs and expenses (including reasonable legal and
accounting fees) related to any of the foregoing.
Except as otherwise provided in this Agreement, nothing in this
Section 12.3 shall be construed to limit the amount to which, or the
time by which, by reason of offset or otherwise, that Purchaser No. 1
and/or Purchaser No. 2 may recover from Seller or any Member pursuant
to this Agreement resulting from Seller's or any Members breach or
violation of any representation, warranty, covenant or agreement
contained herein.
Any amounts to which Purchaser No. 1 and/or Purchaser No. 2, their
successors or assigns, is entitled to indemnification pursuant to the
provisions of this Section, shall first be offset against the amount
payable to Seller against the subordinated promissory notes, then
against any payments due under Section 4.6 and/or 4.7. Provided,
however, the offset in any one year may not exceed the aggregate
amount payable of principal and interest due on said applicable
Page 48 of 61
subordinated promissory notes for said year, and any amount, if any,
payable under Section 4.6 or 4.7 for such year.
12.4 Indemnification by Purchaser ▇▇. ▇ ▇▇▇/▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇. ▇.
-----------------------------------------------------------------
Provided Members and/or Seller make a written claim for
indemnification against Purchaser No. 1 and/or Purchaser No. 2, as
applicable, within any applicable survival period specified in Section
12 and subject to the limitation set forth in ▇▇▇▇▇▇▇ ▇▇.▇, ▇▇▇▇▇▇▇▇▇
▇▇. ▇ and/or Purchaser No. 2, jointly and severally, shall indemnify
Seller and each Member against and hold them harmless from any and all
loss, damage, liability or deficiency resulting from or arising out
of: (i) any Assumed Liabilities of Purchaser No. 1 or any Assumed
Liabilities of Purchaser No. 2 , as applicable; (ii) any liability of
Purchaser No. 1 and/or Purchaser No. 2 arising out of Purchaser No.
1's and/or Purchaser No. 2's operations subsequent to the Closing
(except to the extent such liability is the result of a breach of a
covenant or warranty of Seller hereunder); (iii) any inaccuracy in or
breach of any representation, warranty, covenant or obligation made or
incurred by Purchaser No. 1 and/or Purchaser No. 2, as applicable
herein or in any other agreement, instrument, or document delivered by
or on behalf of Purchaser No. 1 and/or Purchaser No. 2 pursuant to the
provisions of this Agreement; and (iv) any and all related costs and
expenses (including reasonable legal and accounting fees). Except as
otherwise provided herein, nothing in this Section 11.4 shall be
construed to limit the amount to which, or the time by which, by
reason of offset or otherwise, that Seller may recover from Purchaser
No. 1 and/or Purchaser No. 2 pursuant to this Agreement resulting from
its breach or violation of any representation, warranty, covenant or
agreement contained herein.
12.5 Notification of and Participation in Claims.
------------------------------------------------
(a) No claim for indemnification shall arise until notice thereof is
given to the party from whom indemnity is sought. Such notice
shall be sent within ten (10) days after the party to be
indemnified has received notification of such claim, but failure
to notify the indemnifying party shall in no event prejudice the
right of the party to be indemnified under this Agreement, unless
the indemnifying party shall be prejudiced by such failure and
then only to the extent of such prejudice. In the event that any
legal proceeding shall be instituted or any claim or demand is
asserted by any third party in respect of which Seller/Members on
the one hand, or Purchaser ▇▇. ▇ ▇▇▇/▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇. ▇, as
applicable, on the other hand, may have an obligation to
indemnify the other, the party asserting such right to indemnity
(the "Party to be Indemnified") shall give or cause to be given
to the party from whom indemnity is sought (the "Indemnifying
Party") written notice thereof and the Indemnifying Party shall
have the right, at its option and expense, to participate in the
defense of such proceeding, claim or demand, but not to control
the defense, negotiation or settlement thereof, which control
shall at all times rest with the Party to be Indemnified, unless
the Indemnifying Party irrevocably acknowledges in writing full
and complete responsibility for and agrees to provide
indemnification of the Party to be Indemnified, in which case
such Indemnifying Party may assume such control through counsel
of its choice and at its expense. In the event the Indemnifying
Party
Page 49 of 61
assumes control of the defense, the Indemnifying Party shall not
be responsible for the legal costs and expenses of the Party to
be Indemnified in the event the Party to be Indemnified decides
to join in such defense. The parties hereto agree to cooperate
fully with each other in connection with the defense, negotiation
or settlement of any such third party legal proceeding, claim or
demand.
(b) If the Party to be Indemnified is also the party controlling the
defense, negotiation or settlement of any matter, and if the
Party to be Indemnified determines to compromise the matter, the
Party to be Indemnified shall immediately advise the Indemnifying
Party of the terms and conditions of the proposed settlement. If
the Indemnifying Party agrees to accept such proposal, the Party
to be Indemnified shall proceed to conclude the settlement of the
matter, and the Indemnifying Party shall immediately indemnify
the Party to be Indemnified pursuant to the terms of Sections
12.3 and 12.4 hereunder. If the Indemnifying Party does not agree
within fourteen (14) days to accept the settlement (said 14-day
period to begin on the first business day following the date such
party receives a complete copy of the settlement proposal), the
Indemnifying Party shall immediately assume control of the
defense, negotiation or settlement thereof, at that Indemnifying
Party's expense. Thereafter, the Party to be Indemnified shall be
indemnified in the entirety for any liability arising out of the
ultimate defenses, negotiation or settlement of such matter.
(c) If the Indemnifying Party is the party controlling the defense,
negotiation or settlement of any matter, and the Indemnifying
Party determines to compromise the matter, the Indemnifying Party
shall immediately advise the Party to be Indemnified of the terms
and conditions of the proposed settlement. If the Party to be
Indemnified agrees to accept such proposal, the Indemnifying
Party shall proceed to conclude the settlement of the matter and
immediately indemnify the Party to be Indemnified pursuant to the
terms of Sections 12.3 or 12.4 hereunder. If the Party to be
Indemnified does not agree within fourteen (14) days to accept
the settlement (said 14-day period to begin on the first business
day following the date such party receives a complete copy of the
settlement proposal), the Party to be Indemnified shall
immediately assume control of the defense, negotiation or
settlement thereof, at the Party to be Indemnified's expense. If
the final amount paid to resolve the claim is less than the
amount of the original proposed settlement made by the
Indemnifying Party, then the Party to be Indemnified shall
receive such indemnification pursuant to Sections 12.3 or 12.4
hereof, including any and all expenses incurred by the Party to
be Indemnified incurred in connection with the defense,
negotiation or settlement of such matter up to the maximum of the
original proposed settlement. If the amount finally paid to
resolve the claim is equal to or greater than the amount of the
original proposed settlement proposed by the Indemnifying Party,
then the Indemnifying Party shall provide indemnification
pursuant to Sections 12.3 and 12.4 for the amount of the original
settlement proposal submitted by the Indemnifying Party, and the
Party to be Indemnified shall be responsible for all amounts in
excess of the original settlement proposal submitted by the
Indemnifying Party and all costs and
Page 50 of 61
expenses incurred by the Party to be Indemnified in connection
with such defense, negotiation or settlement.
12.6 Excluded Liabilities.
---------------------
(a) Notwithstanding anything contained herein to the contrary, in the
event any Excluded Liability would attach to Purchased Assets No.
1 and/or Purchased Assets No. 2 under any successor liability
statute or otherwise, notwithstanding the fact that such
liability was an Excluded Liability, Seller and Members shall be
jointly and severally responsible for the payment of such
Excluded Liability and the lien on Purchased Assets No. 1 and/or
Purchased Assets No. 2 (which would represent a breach of certain
representations under the Agreement) related to such liability.
12.7 Limitation on Liability.
-------------------------
Notwithstanding the provisions of the Section 12, Seller and Members
shall not have any indemnification obligation under this Agreement
unless and until the aggregate amount of the claimed liability exceeds
Five Thousand Dollars ($5,000.00) and Seller and Members shall be
liable for indemnification of the Indemnified Party only to the extent
that actual losses exceed Five Thousand Dollars ($5,000.00) as further
modified by Section 12. The maximum liability that Seller and the
Members may be required to pay to Purchaser No. 1 and Purchaser No. 2
under this Section 12 shall not exceed an amount equal to the total
consideration paid to Seller for the Purchased Assets No. 1 and the
Purchased Assets No. 2 and the maximum liability that any Member may
be individually required to pay to Purchaser No. 1 and Purchaser No. 2
under this Section 12 shall not exceed an amount equal to the total
consideration paid to Seller hereunder for the Purchased Assets No. 1
and the Purchased Assets No. 2 by Purchaser No. 1 and Purchaser No. 2
hereunder multiplied by the following respective percentages:
▇. ▇▇▇▇▇▇▇ . . . . . 57.4%
▇. ▇▇▇▇▇▇▇ . . . . . 42.6%
12.8 Limitation on Liability.
-------------------------
Notwithstanding anything contained in this Agreement to the contrary,
the maximum amount that Purchaser No. 1 and/or Purchaser No. 2, as
applicable, payable to the Seller under this Section 12 as a result of
any and all breaches shall be limited to the total consideration paid
under this Agreement by Purchaser No. 1 and Purchaser No. 2, as
applicable, to the Seller for the Purchased Assets No. 1 and the
Purchased Assets No. 2.
12.9 Miscellaneous.
-------------
The amount payable by an indemnifying party under Sections 12.7 or
12.8 with respect to a loss shall be reduced by the amount of any
insurance proceeds received by the indemnified party with respect to
the loss and each party agrees to use its best efforts to collect any
and all insurance
Page 51 of 61
proceeds to which it may be entitled in respect of any loss. The
amount payable by an indemnifying party shall also be net of any
federal, state or local tax benefit (calculated at a 40% rate) derived
by the indemnified party by reason of the loss.
13.
THE CLOSING
-----------
13.1 Date, Time and Place of Closing.
------------------------------------
Consummation of the transactions contemplated hereby (the "Closing")
shall take place simultaneously with the execution of this Agreement
at the offices of ▇▇▇▇▇▇▇▇▇ & Dreidame Co., LPA, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, or at such other place as the
parties may mutually agree upon.
13.2 Conditions Precedent to Purchaser No. 1's and Purchaser No. 2's
-----------------------------------------------------------------------
Obligations.
-----------
The obligation of Purchaser No. 1 and/or Purchaser No. 2 to perform in
accordance with this Agreement and to consummate the transactions
herein contemplated is subject to the satisfaction of the following
conditions at or before the Closing:
(a) Seller shall have complied with and performed all of the
representations, warranties, agreements and covenants hereunder
required to be performed by it prior to or at the Closing;
(b) There shall be no pending or threatened legal action which, if
successful, would prohibit consummation or require substantial
rescission of the transactions contemplated by this Agreement;
(c) The business, aggregate properties and operations of the Seller
shall not have been materially adversely affected as a result of
any fire, accident or other casualty or any labor disturbance or
act of God or the public enemy, and there shall otherwise have
been no material adverse change to the business, aggregate
properties, or operations of the Seller since November 14, 2003;
(d) Seller shall have delivered to Purchaser No. 1 and/or Purchaser
No. 2, as applicable, at or before the Closing, the following
documents, all of which shall be in form and substance reasonably
acceptable to Purchaser No. 1 and Purchaser No. 2 and its
counsel:
(i) The instruments of transfer required by Sections 2.6 and
2.7;
(ii) Releases (or copies thereof) of all liens, claims, charges,
encumbrances, security interests and restrictions on
Purchased Assets No. 1 and Purchased Assets No.
Page 52 of 61
2 necessary to provide Purchaser No. 1 with good title to
each of the Purchased Assets No. 1 at the Closing and to
provide Purchaser No. 2 with good title to each of the
Purchased Assets no. 2 at the Closing;
(iii) Certified copies of a limited liability company action
taken by the Members and Managers of Seller authorizing the
execution, delivery and performance of this Agreement;
(iv) Certificates of Existence for Seller from the Secretary of
State of Illinois dated no earlier than fifteen (15) days
prior to Closing;
(v) The Seller and each Member shall have entered into the
non-competition agreements as set forth in the respective
Exhibits;
(vii) ▇. ▇▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇▇ shall have entered into his
respective Employment Agreement as set forth in the
respective Exhibits.
(viii) Seller shall have entered into the Assignment of Sublease
and Assignment of Lease with Purchaser No. 1 as set forth in
Exhibits H and H-1.
(ix) The Opinion Letter of Vonachen, Lawless, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, as
set forth on Exhibit I.
(x) Seller shall enter into the Escrow Agreement with Purchaser
No. 1 and Purchaser No. 2 as set forth in Exhibit J.
(e) Seller will adopt and file with the Secretary of State of
Illinois an Amendment to the Articles of Organization of Seller
changing the name of Seller to a name substantially dissimilar to
eServe Solutions Group, L.L.C.
(f) Purchaser No. 1 and Purchaser No. 2 shall have received
assurances in form and substance satisfactory to it that Seller
is currently not providing any COBRA benefits to any former
employee, and Purchaser No. 1 and Purchaser No. 2 shall have
received assurances in form and substance satisfactory to them
that Seller has made all provisions necessary under applicable
law, with regard to an employer's obligation to provide for a
continuation of health insurance and other benefits of any
employee, who is not employed by Seller following termination of
employment.
13.3 Conditions Precedent to Seller's Obligations.
------------------------------------------------
The obligation of Seller to perform in accordance with this Agreement
and to consummate the transactions herein contemplated is subject to
the satisfaction of the following conditions at or before the Closing:
Page 53 of 61
(a) Performance by Purchaser No. 1 and Purchaser No. 2 of all of the
representations, warranties, agreements and covenants to be
performed by it at or before the Closing;
(b) There shall be no pending or threatened legal action which, if
successful, would prohibit consummation or require substantial
rescission of the transactions contemplated by this Agreement;
(c) Purchaser No. 1 shall deliver to the Seller at or before the
Closing the following documents, all of which shall be in form
and substance acceptable to the Seller and its counsel:
(i) A certified or bank cashier's check or wire transfer for the
aggregate amount to be paid to Seller at the Closing
pursuant to Section 4.3(a) hereof;
(ii) A certified or bank cashier's check or wire transfer for the
aggregate amount to be paid to the Escrow Agent at the
Closing pursuant to Section 4.3(b) hereof;
(iii) A Promissory Note as set forth in Section 4.3(c) hereof;
(iv) An assumption of liability agreement under which Purchaser
No. 1 assumes the liabilities set forth in Section 3.1;
(v) Certified copies of the corporate actions taken by Purchaser
No. 1 authorizing the execution, delivery and performance of
this Agreement;
(vi) Certificate of Good Standing for Purchaser No. 1 from the
Secretary of State of Delaware dated no earlier than fifteen
(15) days prior to the date of Closing.
(vii) Opinion Letter of ▇▇▇▇▇▇▇▇▇ & Dreidame Co., LPA, counsel
for Purchaser No. 1 containing the opinion set forth in
Exhibit K.
(d) Purchaser No. 2 shall deliver to the Seller at or before the
Closing the following documents, all of which shall be in form
and substance acceptable to Seller and its counsel:
(i) A certified or bank cashier's check or wire transfer for the
aggregate amount to be paid to Seller at the Closing
pursuant to Section 4.4(a) hereof;
(ii) A certified or bank cashier's check or wire transfer for the
aggregate amount to be paid to the Escrow Agent at the
Closing pursuant to Section 4.4(b) hereof;
(iii) A Promissory Note as set forth in Section 4.4(c);
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(iv) An assumption of liability agreement under which Purchaser
No. 2 assumes the liabilities set forth in Section 3.2;
(v) Certified copies of the corporate actions taken by Purchaser
No. 2 authorizing the execution, delivery and performance of
this Agreement;
(vi) Certificate of Good Standing for Purchaser No. 2 from the
Secretary of State of Delaware dated no earlier than fifteen
(15) days prior to the date of Closing.
(vii) Opinion Letter of ▇▇▇▇▇▇▇▇▇ & Dreidame Co., LPA, counsel
for Purchaser No. 2 containing the opinion set forth in
Exhibit L.
(e) Purchaser No. 1 shall have entered into the Employment Agreements
with ▇. ▇▇▇▇▇▇▇ and ▇. ▇▇▇▇▇▇▇ as set forth in Exhibits G and
G-1, respectively;
(f) Purchaser No. 1 shall have entered into the Assignment of
Sublease and Assignment of Lease with Seller as set forth in
Exhibit H and H-1.
(g) Purchaser No. 1 and Purchaser No. 2 shall have entered into the
Escrow Agreement as set forth in Exhibit J.
(h) Purchaser No. 1 shall have entered into the Guaranty.
14.
GENERAL PROVISIONS
------------------
14.1 Publicity.
---------
All public announcements relating to this Agreement or the
transactions contemplated hereby will be made by Purchaser No. 1 and
Purchaser No. 2 with the consent of the Seller, which consent will not
be unreasonably withheld, except for any disclosure which may be
required because of Purchaser No. 1's being a publicly-traded
corporation on the over-the-counter market.
14.2 Expenses.
--------
Purchaser No. 1 will bear and pay all of its expenses incident to the
transactions contemplated by this Agreement which are incurred by
Purchaser No. 1 or its representatives, Purchaser No. 2 will bear and
pay all of its expenses incident to the transactions contemplated by
this Agreement which are incurred by Purchaser No. 2 or its
representatives, and Seller shall bear and pay all of the expenses
incident to the transactions contemplated by this Agreement which are
incurred by Seller or its representatives.
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14.3 Notices.
-------
All notices and other communications required by this Agreement shall
be in writing and shall be deemed given if delivered by hand or mailed
by registered mail or certified mail, return receipt requested, to the
appropriate party at the following address (or at such other address
for a party as shall be specified by notice pursuant hereto):
(a) If to Purchaser No. 1, to:
Pomeroy IT Solutions, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
With a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇ III, Esq.
▇▇▇▇▇▇▇▇▇ & Dreidame
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
(b) If to Purchaser No. 2, to
Pomeroy Select Integration Solutions, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
With a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇ III, Esq.
▇▇▇▇▇▇▇▇▇ & Dreidame
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
(c) If to Seller, to:
eServ Solutions Group, L.L.C.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Page 56 of 61
With a copy to:
Vonachen, Lawless, ▇▇▇▇▇▇ & ▇▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇
_________________________456 ▇▇▇▇▇▇ Street, Suite 425
_________________________Peoria, IL 61602
(d) If to Members, to:
▇▇▇ ▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
_________________________▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
14.4 Binding Effect.
---------------
Except as may be otherwise provided herein, this Agreement and all the
provisions hereof shall be binding upon and inure to the benefit of
the parties hereto and their respective heirs, legal representatives,
successors and assigns.
14.5 Headings.
--------
The headings in this Agreement are intended solely for convenience of
reference and shall be given no effect in the construction or
interpretation of this Agreement.
14.6 Exhibits.
--------
The Exhibit and Disclosure Schedule referred to in this Agreement
constitute an integral part of this Agreement as if fully rewritten
herein.
14.7 Counterparts.
------------
This Agreement may be executed in multiple counterparts, each of which
shall be deemed an original, but all of which constitute together one
and the same document.
14.8 Governing Law.
--------------
This Agreement shall be construed in accordance with and governed by
the laws of the State of Illinois, without regard to its laws
regarding conflict of laws.
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14.9 Severability.
------------
If any provision of this Agreement shall be held unenforceable,
invalid, or void to any extent for any reason, such provision shall
remain in force and effect to the maximum extent allowable, if any,
and the enforceability or validity of the remaining provisions of this
Agreement shall not be affected thereby.
14.10 Waivers; Remedies Exclusive.
-----------------------------
No waiver of any right or option hereunder by any party shall operate
as a waiver of any other right or option, or the same right or option
with respect to any subsequent occasion for its exercise, or of any
right to damages. No waiver by any party of any breach of this
Agreement or of any representation or warranty contained herein shall
be held to constitute a waiver of any other breach or a continuation
of the same breach. No waiver of any of the provisions of this
Agreement shall be valid and enforceable unless such waiver is in
writing and signed by the party granting the same. Except as otherwise
provided in the Subordinated Promissory Notes, the Employment
Agreements and the Covenant Not to Compete Agreements, the Sublease,
the indemnification provided for by Section 12 herein shall constitute
the exclusive remedy of any party with respect to (i) the matters for
which such indemnification is provided and (ii) any other matters
arising out of, relating to or connected with this Agreement or the
transactions contemplated hereby, and whether any claims or causes of
action asserted with respect to any such matters are brought in
contract, tort or other legal theory whatsoever. Such limitations set
forth in this Section 14.10 shall not impair the rights of any of the
parties: (a) to seek non-monetary equitable relief, including (without
limitation) specific performance or injunctive relief to address any
default or breach of this Agreement; or (b) to seek enforcement,
collection, damages or any non-monetary equitable relief to address
any subsequent default or breach of any transfer document, assumption,
consent or agreement to be delivered at Closing hereunder or to seek
declaratory relief or any related relief relating to certain issues
that may arise under Sections 4.6, 4.7, 5.1 and 5.2. In connection
with the seeking of any non-monetary equitable relief, each of the
parties acknowledge and agree that the other parties hereto would be
damaged irrevocably in the event any of the provisions of this
Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the parties hereto agree
that the other parties hereto shall be entitled to an injunction or
injunctions or prevent breaches of the provisions of this Agreement
and to enforce specifically this Agreement and the terms and
conditions hereof by any state court of competent jurisdiction.
14.11 Assignments.
-----------
Except as otherwise provided in this Agreement, no party shall assign
its rights or obligations hereunder prior to Closing without the prior
written consent of the other party.
Page 58 of 61
14.12 Entire Agreement.
-----------------
This Agreement and the agreements, instruments and other documents to
be delivered hereunder constitute the entire understanding and
agreement concerning the subject matter hereof. All negotiations
between the parties hereto are merged into this Agreement, and there
are no representations, warranties, covenants, understandings, or
agreements, oral or otherwise, in relation thereto between the parties
other than those incorporated herein and to be delivered hereunder.
Except as otherwise expressly contemplated by this Agreement, nothing
expressed or implied in this Agreement is intended or shall be
construed so as to grant or confer on any person, firm or corporation
other than the parties hereto any rights or privilege hereunder. No
supplement, modification or amendment of this Agreement shall be
binding unless executed in writing by the parties hereto.
14.13 Business Records.
-----------------
Seller and each Member shall be permitted to retain originals or
copies of such books and records relating to Purchased Assets No. 1
and/or Purchased Assets No. 2 and relating to the accounting and tax
matters of Business No. 1 and/or Business No. 2 and the party
receiving copies shall have access to all original copies of records
at reasonable times, for any reasonable business purpose, for a period
of six (6) years after the Closing.
14.14 Dissolution of Seller.
-----------------------
Purchaser No. 1 and Purchaser No. 2 acknowledge that following the
Closing, Seller may adopt a plan of liquidation with the intent to
dissolve the limited liability company. Provided, however, Seller and
each Member agree that the plan of liquidation will not be effectuated
and implemented by Seller until all the conditions set forth in
Section 2 of this Agreement regarding the transfer of all the
respective purchased assets have been effectuated by Seller. Seller
acknowledges that Purchaser No. 1 and Purchaser No. 2 will suffer
irreparable harm in the event that Seller would liquidate prior to
satisfying all of its obligations under the terms of this Agreement
and the exhibits hereto.
14.15 Effective Date of Agreement.
------------------------------
This Agreement shall be effective at the close of business on the
Closing Date.
14.16 Written Notice of Default.
----------------------------
During the earnout period set forth in Sections 4.6 and 4.7, in the
event that Purchaser No. 1 and/or Purchaser No. 2 shall give written
notice of such party being in default under the terms of the Credit
Facilities Agreement referenced in ▇▇▇▇▇▇▇ ▇▇.▇, ▇▇▇▇▇▇▇▇▇ ▇▇. ▇
and/or Purchaser No. 2 agree to provide written notice to Seller of
such event.
Page 59 of 61
15.
CONSENT TO GRANTING OF A
------------------------
SECURITY INTEREST IN ACQUISITION DOCUMENTS
------------------------------------------
15.1 Seller consents and agrees that upon the Closing of this transaction,
Purchaser No. 1 and Purchaser No. 2 shall have the right to grant to
GE Commercial Distribution Finance Corporation, formerly known as
Deutsche Financial Services Company, as Administrative Agent for the
benefit of various lenders under a Credit Facilities Agreement among
Deutsche Financial Services Corporation, as Administrative Agent and
certain other lenders, and Purchaser No. 1 and Purchaser No. 2 and
various Affiliates of such parties, a first priority security interest
and lien on all of Purchaser No. 1's and Purchaser No. 2's rights,
remedies, claims and interests under all the acquisition documents for
this transaction.
Seller agrees to execute at Closing an assignment of rights agreement,
a copy of which is attached hereto as Exhibit M.
The parties hereto have executed this Agreement as of the date first
above written.
WITNESSES: eSERV SOLUTIONS GROUP, LLC
_____________________________________ By: ___________________________________
_____________________________________ Its: ___________________________________
WITNESSES: MEMBERS:
_____________________________________ ___________________________________
▇▇▇ ▇▇▇▇▇▇▇
_____________________________________
_____________________________________ ___________________________________
▇▇▇ ▇▇▇▇▇▇▇
_____________________________________
Page 60 of 61
▇▇▇▇▇▇▇ IT SOLUTIONS, INC.
_____________________________________ By: ___________________________________
_____________________________________ Its: ___________________________________
▇▇▇▇▇▇▇ SELECT INTEGRATION
SOLUTIONS, INC.
_____________________________________ By: ___________________________________
_____________________________________ Its: ___________________________________
Page 61 of 61