EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
AMONG
▇▇▇▇ MICROPRODUCTS INC.,
NEW PROSYS CORP.,
PROSYS INFORMATION SYSTEMS, INC.,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
AND
▇▇▇▇▇ ▇▇▇▇▇▇
DATED OCTOBER 2, 2006
TABLE OF CONTENTS
Page
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Exhibits
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Exhibit 2.1(a) Description of Real Property
Exhibit 2.1(b) Description of Tangible Personal Property
Exhibit 2.1(e) Assumed Contracts
Exhibit 2.1(f) Governmental Authorizations
Exhibit 2.1(g) Records
Exhibit 2.1(h) Intellectual Property
Exhibit 2.1(j) Assigned Claims
Exhibit 2.1(k) Pre-paid Expenses
Exhibit 2.2 Excluded Assets
Exhibit 2.2(c) Retained Contracts
Exhibit 2.7(a)(i) Form of ▇▇▇▇ of Sale
Exhibit 2.7(a)(ii) Form of Assignment and Assumption Agreement
Exhibit 2.7(a)(iii) Form of Assignment and Assumption of Lease
Exhibit 2.7(a)(iv) Form of Owners' Release
Exhibit 2.7(a)(v) Form of Employment Agreement
Exhibit 2.7(a)(vi) Form of Escrow Agreement
Exhibit 2.7(a)(vii) Form of Registration Rights Agreement
Exhibit 2.7(a)(xii) Form of Opinion of Company's and Owners' Counsel
Exhibit 2.7(a)(xiii) Form of Waiver and Termination of Shareholders' Agreement
Exhibit 2.7(b)(viii) Form of Opinion of Buyer's Counsel
Exhibit 2.8(e) Form of Lease
Exhibit 2.8(f) Personal Guarantees not Released at Closing
Exhibit 2.10(a) Contingent Payment Schedule
Exhibit 2.11 Excluded Employees
Schedules
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Schedule 2.1 Sample Tax True-Up Calculation
Schedule 4.2 Conflicts and Consents Required on Behalf of Buyer
ASSET PURCHASE AGREEMENT
This
Asset Purchase Agreement (the "AGREEMENT") is entered into and
made effective as of October 2, 2006, by and between New ProSys Corp., a Georgia
corporation ("BUYER"), ▇▇▇▇ Microproducts Inc., a
California corporation
("PARENT"), ProSys Information Systems, Inc., a Georgia corporation (the
"COMPANY"), ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, an individual resident in Georgia ("CLERY"), and
▇▇▇▇▇ ▇▇▇▇▇▇, an individual resident in Georgia ("▇▇▇▇▇▇" and, collectively with
Clery, "OWNERS").
RECITALS
1. The Owners own all of the issued and outstanding capital stock of
the Company.
2. The Company desires to sell to Buyer and Buyer desires to
purchase from the Company, all of the Company's Assets other than
the Excluded Assets, on the terms and conditions set forth
herein.
3. Immediately following to the Closing, the Owners shall cause the
Company to distribute cash bonuses, and the Owners shall
establish a trust for the payment of additional bonuses, to the
current employees of the Company, in an aggregate amount equal to
$5,000,000.
4. Immediately following the Closing, the Owners shall cause the
Company to distribute the net proceeds of the Asset sale to the
Owners as a dividend.
5. Immediately following the distribution of the dividend to the
Owners, Buyer shall purchase all of the outstanding capital stock
of the Company owned by ▇▇▇▇▇▇ pursuant to that Stock Purchase
Agreement of even date herewith between Buyer and ▇▇▇▇▇▇, so that
upon the consummation of said transaction Buyer shall own 48% and
Clery shall own 52% of the Company.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1. DEFINITIONS; USAGE.
1.1 DEFINITIONS. For purposes of this Agreement, the following
terms have the meanings specified or referred to in this Section 1:
"ACCOUNTANTS" -- as defined in Section 2.9(b).
"ACCOUNTS RECEIVABLE" -- means (a) all trade accounts receivable and
other rights to payment from customers of the Company and the full benefit of
all security for such accounts or rights to payment, including all trade
accounts receivable representing amounts receivable in respect of goods shipped
or products sold or services rendered to customers of the Company, less any
reserve for bad debt, (b) all other accounts or notes receivable of the Company
and the full benefit of all security for such accounts or notes and (c) any
claim, remedy or other right related to any of the foregoing.
"ACTUAL NET ASSETS" -- means the total assets of the Company less the
total liabilities of the Company, determined in accordance with GAAP, as of the
Closing Date; provided, however, that the
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determination of Actual Net Assets shall exclude the accrual for Employee
Bonuses to be paid by the Company pursuant to Section 2.8.
"ACTUAL WORKING CAPITAL" shall mean the current assets of the Company
minus the current liabilities of the Company, determined in accordance with
GAAP, as of the Closing Date; provided, however, that the determination of
Actual Working Capital shall exclude the accrual for Employee Bonuses to be paid
by the Company pursuant to Section 2.8.
"ADVISORY COMMITTEE" -- as defined in Section 12.6.
"ADJUSTMENT AMOUNT" -- as defined in Section 2.5.
"ANNUALIZED CONTRIBUTION" -- means the average monthly Contribution for
all months of the Contingent Payment Period in question prior to a Change of
Control Transaction, as applicable, multiplied by 12.
"APPURTENANCE" -- means all privileges, rights, easements,
hereditaments, and appurtenances belonging to or for the benefit of the Land,
including all easements appurtenant to and for the benefit of any Land (a
"Dominant Parcel") for, and as the primary means of access between the Dominant
Parcel and a public way, or for any other use upon which lawful use of the
Dominant Parcel for the purposes for which it is presently being used is
dependent, and all rights existing in and to any streets, alleys, passages and
other rights-of-way included thereon or adjacent thereto (before or after
vacation thereof) and vaults beneath any such streets.
"ASSETS" -- as defined in Section 2.1.
"ASSUMED LIABILITIES" -- as defined in Section 2.4(a).
"BALANCE SHEET" -- balance sheet of the Company as of December 31,
2005.
"BEST EFFORTS" -- the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such result
is achieved as expeditiously as possible.
"BREACH" -- a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument delivered
pursuant to this Agreement will be deemed to have occurred if there is or has
been (a) any inaccuracy in or breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation, or other provision of
this Agreement or any instrument delivered pursuant to this Agreement, or (b)
any occurrence or other circumstance that is or was inconsistent with such
representation, warranty, covenant, obligation, or other provision, and the term
"Breach" means any such inaccuracy, breach, failure, claim, occurrence, or
circumstance.
"BUSINESS" - means the customized IT solutions business owned and
operated by the Company.
"BUYER" -- as defined in preamble to this Agreement.
"BUYER CHANGE OF CONTROL TRANSACTION" -- (A) any merger or
consolidation of Buyer into or with another entity (other than one in which the
holders of Buyer capital stock immediately prior to such merger or consolidation
continue to hold at least a majority of the voting power of the capital stock
(or other securities) of the entity surviving such transaction or of an entity
controlling the entity surviving such transaction), (B) any sale of all or
substantially all of Buyer's assets (other than a sale of assets of Buyer to an
entity controlled by Buyer), and (C) any other transaction pursuant to or as a
result of which a
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person (or group of affiliated persons) other than Parent or one or more Parent
affiliates acquires or holds capital stock (or other securities entitled to
voting rights) of Buyer representing a majority of the outstanding voting power
of Buyer.
"BUYER'S CLOSING DOCUMENTS" -- as defined in Section 4.2.
"BUYER INDEMNIFIED PERSONS" -- as defined in Section 10.3
"CHANGE OF CONTROL PROCEEDS" -- as defined in Section 2.10(f).
"CHANGE OF CONTROL TRANSACTION" -- any one or more of the following: a
Parent Change of Control Transaction, a Buyer Change of Control Transaction or a
Company Change of Control Transaction, as applicable.
"CLOSING" -- as defined in Section 2.6.
"CLOSING DATE" -- the date and time as of which the Closing actually
takes place.
"CLOSING FINANCIAL STATEMENTS" -- as defined in Section 2.8(b).
"CLOSING REQUIRED CONSENTS" -- are those Consents that are required to
be delivered by the Company and the Owners at Closing as identified in Part 3.2
of the Disclosure Letter.
"COMPANY" -- as defined in the introductory paragraph of this
Agreement.
"COMPANY CHANGE OF CONTROL TRANSACTION" -- (A) any merger or
consolidation of the Company into or with another entity (other than one in
which the holders of Company capital stock immediately prior to such merger or
consolidation continue to hold at least a majority of the voting power of the
capital stock (or other securities) of the entity surviving such transaction or
of an entity controlling the entity surviving such transaction), (B) any sale of
all or substantially all of the Company's assets (other than a sale of assets of
Parent to an entity controlled by Parent), and (C) any other transaction
pursuant to or as a result of which a person (or group of affiliated persons)
other than Parent or one or more Parent affiliates acquires or holds capital
stock (or other securities entitled to voting rights) of the Company
representing a majority of the outstanding voting power of the Company.
"COMPANY CONTRACTS" -- any Contract (a) under which the Company has or
may acquire any rights, (b) under which the Company has or may become subject to
any obligation or liability, or (c) by which the Company or any of the assets
owned or used by it is or may become bound, including the Material Contracts.
"COMPANY FINANCIAL STATEMENTS" -- as defined in Section 3.4.
"COMPETING BUSINESS" -- as defined in Section 3.25.
"CONSENT" -- any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS" -- all of the transactions contemplated by
this Agreement, including:
(a) the sale of the Assets by the Company to the Buyer;
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(b) the execution, delivery, and performance of the Employment
Agreements, Owners' Releases, the Registration Rights Agreement and the
Escrow Agreement;
(c) the performance by Buyer and Owners of their respective
covenants and obligations under this Agreement; and
(d) Buyer's acquisition and ownership of the Assets and
exercise of control over the Assets.
"CONTINGENT CONSIDERATION FINANCIAL STATEMENTS" -- as defined in
Section 2.10(b).
"CONTINGENT CONSIDERATION PERIOD" -- means a 12-month fiscal period
beginning on October 1, with the first such Contingent Consideration Period
beginning on October 1, 2006.
"CONTINGENT PAYMENTS" -- as defined in Section 2.10(a).
"CONTINGENT PAYMENT DISPUTE" -- as defined in Section 2.10(b).
"CONTINGENT PAYMENT NOTICE" -- as defined in Section 2.10(b).
"CONTRACT" -- any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"CONTRIBUTION" shall mean the gross profit generated by Buyer and the
Company minus all direct operating expenses of Buyer and the Company, excluding
any interest expense incurred by Buyer related to acquisition financing and (for
the avoidance of doubt) any Contingent Payments. Direct operating expenses shall
include, among other things, all employment compensation paid to Owners and all
other compensation expense, all depreciation expense, amortization (other than
amortization of intangible Assets transferred pursuant to the Agreement), bad
debt charges, asset write-downs and reserves, working capital interest and all
other operating expenses incurred in the Ordinary Course of Business.
"DAMAGES" -- as defined in Section 10.2.
"DISCLOSURE LETTER" -- the disclosure letter delivered by the Company
and the Owners to Buyer concurrently with the execution and delivery of this
Agreement.
"DISPUTE NOTICE" -- as defined in Section 2.10(b).
"DUE DATE" -- as defined in Section 2.10(b).
"EMPLOYEE BENEFIT PLAN" -- as defined in Section 3.13.
"EMPLOYEE BONUSES" -- as defined in Section 2.8(a).
"EMPLOYMENT AGREEMENTS" -- as defined in Section 2.7(a)(v).
"ENCUMBRANCE" -- any charge, Proceeding, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership.
"ENVIRONMENT" -- soil, land surface or subsurface strata, surface
waters (including navigable waters, ocean waters, streams, ponds, drainage
basins, and wetlands), groundwaters, drinking water
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supply, stream sediments, ambient air (including indoor air), plant and animal
life, and any other environmental medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES" -- any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
any Environmental Law or any Occupational Safety and Health Law.
"ENVIRONMENTAL LAW" -- any Legal Requirement that requires or relates
to:
(a) advising appropriate authorities, employees, and the
public of intended or actual releases of pollutants or hazardous
substances or materials, violations of discharge limits, or other
prohibitions and of the commencements of activities, such as resource
extraction or construction, that could have significant impact on the
Environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or
minimizing the hazardous characteristics of wastes that are generated;
(d) protecting resources, species, or ecological amenities;
(e) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or other
potentially harmful substances;
(f) cleaning up pollutants that have been released, preventing
the threat of release, or paying the costs of such clean up or
prevention; or
(g) making responsible parties pay private parties, or groups
of them, for damages done to the Environment.
"ERISA" -- the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"ESCROW AGENT" -- means US Bank National Association.
"ESCROW AGREEMENT" -- as defined in Section 2.7(a)(vi).
"ESCROWED SHARES" -- as defined in Section 2.3(b)(ii).
"EXCLUDED ASSETS" means those assets of the Company listed on Exhibit
2.2 not being transferred to the Buyer pursuant to this Agreement.
"EXCLUDED EMPLOYEES" -- as defined in Section 2.11.
"FACILITIES" -- any real property, leaseholds, or other interests
currently or formerly owned or operated by the Company and any buildings,
plants, structures, or equipment (including motor vehicles, tank cars, and
rolling stock) currently or formerly owned or operated by the Company.
"GAAP" -- generally accepted United States accounting principles,
applied on a consistent basis.
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"GOVERNMENTAL AUTHORIZATION" -- any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY" -- any:
(a) nation, state, county, city, town, village, district, or
other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or
entity and any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police, regulatory,
or taxing authority or power of any nature.
"HAZARDOUS ACTIVITY" -- the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment, or use (including any
withdrawal or other use of groundwater) of Hazardous Materials in, on, under,
about, or from the Facilities or any part thereof into the Environment, and any
other act, business, operation, or thing that increases the danger, or risk of
danger, or poses an unreasonable risk of harm to persons or property on or off
the Facilities, or that may affect the value of the Facilities or the Company.
"HAZARDOUS MATERIALS" -- any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, including any admixture or solution thereof, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
"IMPROVEMENTS" -- means all buildings, structures, fixtures and
improvements located on the Land or included in the Assets, including those
under construction.
"INDEMNIFICATION CAP" -- as defined in Section 10.4
"INTELLECTUAL PROPERTY" -- as defined in Section 3.22.
"INTERIM BALANCE SHEET" -- as defined in Section 3.4.
"INTERIM BALANCE SHEET DATE" shall mean June 30, 2006.
"INVENTORY" -- means all inventories of the Company, wherever located,
including all finished goods, work in process, raw materials, spare parts and
all other materials and supplies to be used or consumed by the Company in the
production of finished goods or the provision of services.
"IRC" -- the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS" -- the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
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"KEY EMPLOYEE" -- means ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, all officers
appointed by the Board of Directors of the Company, and any other Company
employee with projected 2006 compensation (base salary plus commissions) greater
than $200,000.
"KNOWLEDGE" -- means the actual knowledge of any Person. The Knowledge
of a Person who is an individual shall be without investigation and shall not
encompass constructive, imputed or similar concepts of knowledge. A Person
(other than an individual) will be deemed to have "KNOWLEDGE" of a particular
fact or other matter if any individual who is serving as a director, officer,
partner, executor, or trustee of such Person (or in any similar capacity) has,
or at any time had, Knowledge of such fact or other matter.
"LAND" -- means all parcels and tracts of land in which the Company has
an ownership interest.
"LEASE" -- means any agreement related to the operation of the Business
to use or occupy real property for a specified period.
"LEGAL REQUIREMENT" -- any constitution, statute, ordinance, principle
of common law, regulation, rule, administrative order, safe harbor or treaty
administered, promulgated, monitored, or enforced by any Governmental Body.
"LIABILITY" -- with respect to any Person, any liability or obligation
of such Person of any kind, character or description, whether known or unknown,
absolute or contingent, accrued or unaccrued, disputed or undisputed, liquidated
or unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined, determinable or otherwise, and
whether or not the same is required to be accrued on the financial statements of
such Person.
"MATERIAL ADVERSE CHANGE" - means an effect that is materially adverse
to the financial condition, assets, properties, business, prospects or results
of operations of the Company or the Buyer, as the case may be, taken as a whole,
but shall exclude any effect resulting from or arising out of (a) any acts of
terrorism, war, or national or international disasters, (b) the taking of any
action required by, or the failure to take any action prohibited by, this
Agreement, (c) the announcement or pendency of this Agreement or the
Contemplated Transactions, or (d) changes generally adversely affecting the
United States economy (so long as the Company or the Buyer is not
disproportionately affected thereby).
"MATERIAL CONTRACTS" -- as defined in Section 3.17.
"MINIMUM NET ASSETS" -- means $10,000,000.
"MINIMUM WORKING CAPITAL" shall mean $8,000,000.
"OCCUPATIONAL SAFETY AND HEALTH LAW" -- any Legal Requirement designed
to provide safe and healthful working conditions and to reduce occupational
safety and health hazards.
"ORDER" -- any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" -- an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if:
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(a) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal day-to-day
operations of such Person;
(b) such action is not required to be authorized by the board
of directors of such Person (or by any Person or group of Persons
exercising similar authority) and is not required to be specifically
authorized by the parent company (if any) of such Person; and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors
(or by any Person or group of Persons exercising similar authority), in
the ordinary course of the normal day-to-day operations of other
Persons that are in the same line of business as such Person.
"ORGANIZATIONAL DOCUMENTS" -- (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person; and (e) any amendment
to any of the foregoing.
"OWNERS" -- as defined in the preamble.
"OWNERS' CLOSING DOCUMENTS" -- as defined in Section 3.2(a).
"OWNER INDEMNIFIED PERSONS" -- as defined in Section 10.2.
"OWNERS' RELEASES" -- as defined in Section 2.7(a).
"PARENT" -- as defined in the preamble to this Agreement.
"PARENT CHANGE OF CONTROL TRANSACTION -- (A) any merger or
consolidation of Parent into or with another entity (other than one in which the
holders of Parent capital stock immediately prior to such merger or
consolidation continue to hold at least a majority of the voting power of the
capital stock (or other securities) of the entity surviving such transaction or
of an entity controlling the entity surviving such transaction), (B) any sale of
all or substantially all of Parent's assets (other than a sale of assets of
Parent to an entity controlled by Parent), and (C) any other transaction
pursuant to or as a result of which a person (or group of affiliated persons)
acquires or holds capital stock (or other securities entitled to voting rights)
of Parent representing a majority of the outstanding voting power of Parent.
"PARENT COMMON STOCK" -- the common stock of ▇▇▇▇ Microproducts Inc.,
par value $0.01 per share.
"PARENT SEC DOCUMENTS" -- as defined in Section 4.5.
"PARENT TIER-1 SUBSIDIARY" -- means TotalTec Systems, Inc or any other
subsidiary of Parent (other than Company or Buyer) currently in existence or
organized subsequent to the Closing Date that markets and distributes products
and services directly to an end user.
"PERMITTED ENCUMBRANCE" -- means those Encumbrances listed on Part 3.6
of the Disclosure Letter.
"PER SHARE VALUE" - the per share value of Parent Common Stock shall be
equal to the average of the closing sale price of Parent Common Stock for the 30
trading days immediately preceding the date
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of determination as listed on the Nasdaq Global Market, or such other national
public market or exchange on which the Parent Common Stock is then registered
and sold.
"PERSON" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"PRIME RATE" -- as defined in Section 2.9(c).
"PROCEEDING" -- any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"PURCHASE PRICE" -- as defined in Section 2.3.
"REAL PROPERTY" -- any Land owned by the Company and any Improvements
and all Appurtenances thereto, and any Leases and Company's leasehold interest
in any real property described therein.
"RECORD" -- information that is inscribed on a tangible medium or that
is stored in an electronic form or other medium and is retrievable in
perceivable form.
"RELATED PERSON" -- with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by
such individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material
Interest; and
(d) any Person with respect to which such individual or one or
more members of such individual's Family serves as a director, officer,
partner, executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly or indirectly
under common control with such specified Person;
(b) any Person that holds a Material Interest in such
specified Person;
(c) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar
capacity);
(d) any Person in which such specified Person holds a Material
Interest;
(e) any Person with respect to which such specified Person
serves as a general partner or a trustee (or in a similar capacity);
and
(f) any Related Person of any individual described in clause
(b) or (c).
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For purposes of this definition, (a) the "FAMILY" of an individual includes (i)
the individual, (ii) the individual's spouse, (iii) any other natural person who
is related to the individual or the individual's spouse within the second
degree, and (iv) any other natural person who resides with such individual, and
(b) "MATERIAL INTEREST" means direct or indirect beneficial ownership (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934) of voting
securities or other voting interests representing at least 10% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 10% of the outstanding equity securities or
equity interests in a Person.
"RELEASE" -- any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing of any Hazardous Materials into
the Environment, whether intentional or unintentional.
"REPRESENTATIVE" -- with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"RESPONSE PERIOD" -- as defined in Section 2.10(b).
"RETAINED LIABILITIES" -- as defined in Section 2.4(b).
"RETAINED CONTRACTS" --as defined in Section 2.2(c).
"SEC" -- as defined in Section 4.5.
"SECURITIES ACT" -- the Securities Act of 1933 or any successor law,
and regulations and rules issued pursuant to that Act or any successor law.
"SECURITIES EXCHANGE ACT" -- the Securities Exchange Act of 1934 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"SHARES" -- as defined in Section 3.3.
"SUBSIDIARY" -- with respect to any Person that is not an individual
(an "ENTITY"), any corporation or other Person of which securities or other
interests having the power to elect a majority of that corporation's or other
Person's board of directors or similar governing body, or otherwise having the
power to direct the business and policies of that corporation or other Person
(other than securities or other interests having such power only upon the
happening of a contingency that has not occurred) are held by the Entity or one
or more of its Subsidiaries; when used without reference to a particular Person,
"Subsidiary" means a Subsidiary of the Company.
"TANGIBLE PERSONAL PROPERTY" -- all machinery, equipment, tools,
furniture, office equipment, computer hardware, supplies, materials, vehicles
and other items of tangible personal property (other than Inventories) of every
kind owned or leased by the Company (wherever located and whether or not carried
on the Company's books), together with any express or implied warranty by the
manufacturer or sellers or lessors of any item of component part thereof and all
maintenance records and other documents relating thereto.
"TAX" -- any tax (including any income tax, capital gains tax,
value-added tax, sales tax, property tax, gift tax, or estate tax), levy,
assessment, tariff, duty (including any customs duty), deficiency, or other fee,
and any related charge or amount (including any fine, penalty, interest, or
addition to tax), imposed, assessed, or collected by or under the authority of
any Governmental Body or payable pursuant to any
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tax-sharing agreement or any other Contract relating to the sharing or payment
of any such tax, levy, assessment, tariff, duty, deficiency, or fee.
"TAX RETURN" -- any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"THREAT OF RELEASE" -- a substantial likelihood of a Release that may
require action in order to prevent or mitigate damage to the Environment that
may result from such Release.
"THREATENED" -- a Proceeding, dispute, action, or other matter will be
deemed to have been "Threatened" if any demand or statement has been made
(orally or in writing) or any notice has been given (orally or in writing).
"TRANSFERRED EMPLOYEE" -- as defined in Section 2.11.
1.2 USAGE.
(a) Interpretation. In this Agreement, unless a clear contrary
intention appears:
(i) the singular number includes the plural
number and vice versa;
(ii) reference to any gender includes each other
gender;
(iii) reference to any agreement, document or
instrument means such agreement, document or
instrument as amended or modified and in
effect from time to time in accordance with
the terms thereof;
(iv) reference to any Legal Requirement means
such Legal Requirement as amended, modified
codified, replaced or reenacted, in whole or
in part, and in effect from time to time,
including rules and regulations promulgated
thereunder, and reference to any section or
other provision of any Legal Requirements
means that provision of such Legal
Requirement from time to time in effect and
constituting the substantive amendment,
modification, codification, replacement or
reenactment of such section or other
provision;
(v) "including" (and with correlative means
"include") means "including but not limited
to" and shall not limit the generality of
any description preceding such term; and
(vi) "or" is used in the inclusive sense of
"and/or".
2. SALE AND TRANSFER OF ASSETS; CLOSING.
2.1 ASSETS TO BE SOLD. Subject to the terms and conditions of this
Agreement, the Company will sell, convey, assign, transfer and deliver to Buyer,
and Buyer shall purchase and acquire from the Company, free and clear of any
Encumbrances other than Permitted Encumbrances, all of the Company's right,
title and interest in and to all of the Company's property and assets, real,
personal or mixed, tangible and intangible, of every kind and description,
wherever located, including, but not necessarily limited to, the following (but
excluding the Excluded Assets):
(a) all Real Property, including the Real Property described
in Exhibit 2.1(a), but excluding any Real Property rights
under any of the Retained Contracts;
11
(b) all Tangible Personal Property, including those items
described in Exhibit 2.1(b);
(c) all Inventory;
(d) all Accounts Receivable;
(e) all Company Contracts, including those listed on Exhibit
2.1(e), and all outstanding offers or solicitations made by or
to the Company, but excluding the Retained Contracts listed on
Exhibit 2.2(c);
(f) all Governmental Authorizations, including those listed on
Exhibit 2.1(f), and all pending applications therefore or
renewals thereof, in each case to the extent transferable to
Buyer;
(g) all data and Records related to the operations of the
Company, including client and customer lists and Records,
referral sources, research and development reports and
Records, production reports and Records, service and warranty
Records, equipment logs, operating guides and manuals,
financial and accounting Records, creative materials,
advertising and promotional materials, studies, reports,
correspondence and other similar documents and Records and,
subject to Legal Requirements, copies of all personnel Records
described on Exhibit 2.2(g);
(h) all of the intangible rights and property of the Company,
including all Intellectual Property, going concern value,
goodwill, telephone, telecopy, e-mail addresses and listings,
and all domain names, including those described on Exhibit
2.1(h);
(i) all insurance benefits, including rights and proceeds,
arising from or relating to the Assets or the Assumed
Liabilities prior to the Closing Date;
(j) all claims of the Company against third parties relating
to the Assets, whether ▇▇▇▇▇▇ or inchoate, known or unknown,
contingent or non-contingent, including all such claims listed
on Exhibit 2.1(j);
(k) all rights of the Company relating to deposits and prepaid
expenses, claims for refunds and rights to offset in respect
thereof, including all such rights described on Exhibit
2.1(k);
(l) all computer software, including Biz-X-Change and all
other information technology systems or assets owned by the
Company; and
(m) all other properties and assets of every kind, character
and description, tangible or intangible, owned by the Company
and used or held for use in connection with the Business,
whether or not similar to the items specifically set forth
above.
All of the property and assets to be transferred to Buyer hereunder are
herein referred to collectively as the "ASSETS". At Closing, the Owners and the
Company shall deliver to Buyer the Assets, except the vendor and customer
contracts and the ▇▇▇▇▇▇▇ Tennessee, Franklin Tennessee and Boca Raton Florida
lease agreements (the "LEASES") included as part of the Company Contracts. The
Owners and the Company shall use their Best Efforts to deliver to the Buyer on
or prior to December 31, 2006, all such vendor, customer contracts and Leases
and related Consents required to operate the business of the Company as it is
being conducted immediately prior to the Closing Date (other than the business
related
12
to the Retained Contracts); provided, however, that the Buyer shall have the
right to demand assignment and delivery of such vendor and customer contracts
and Leases and related consents at any time and the Owners and the Company shall
execute such instruments as are reasonably requested by Buyer to effect such
assignment and delivery. Notwithstanding the foregoing or anything to the
contrary herein, the transfer of the Assets pursuant to this Agreement shall not
include the assumption of any Liability related to the Assets unless the Buyer
assumes that Liability pursuant to Section 2.4.
2.2 EXCLUDED ASSETS.
Notwithstanding anything to the contrary contained in Section 2.1 or
elsewhere in this Agreement, the assets of the Company listed on Exhibit 2.2
(collectively, the "EXCLUDED ASSETS") are not part of the sale and purchase
contemplated hereunder, are excluded from the Assets to be transferred from the
Company to the Buyer and shall remain the property of the Company after the
Closing. The Excluded Assets shall include the following:
(a) all minute books, stock Records and corporate seals of the
Company;
(b) the shares of Company capital stock held in treasury, if
any;
(c) all of the Company's Contracts listed on Exhibit 2.2(c)
(the "RETAINED Contracts");
(d) all diversity-based certifications issued to Company by
any Governmental Authority or other entity;
(e) all personnel Records and other Records that the Company
is required by law to retain in its possession; and
(f) all rights of the Company under this Agreement, the ▇▇▇▇
of Sale, the Assignment and Assumption Agreement, and the
Escrow Agreement.
2.3 PURCHASE PRICE.
(a) Subject to Section 2.5, the aggregate consideration
payable or issuable in connection with Buyer's purchase of the Assets
and the rights and benefits conferred herein, including the covenants
of the Company and the Owners in Sections 5 and 11 herein (the
"Purchase Price") shall consist of: (i) $31,370,192 in cash payable at
Closing as provided in Section 2.3(b)(i); (ii) shares of Parent Common
Stock, par value $0.01 issuable as provided in Section 2.3(b)(ii); and
(iii) the Contingent Payments contemplated in Section 2.10. Payment of
the Purchase Price is subject to the terms of this Agreement, and is
subject to set-off as provided in Section 2.9 and Section 10, and all
references to the Purchase Price shall be deemed to include and refer
to such Purchase Price as and if so reduced.
(b) The Purchase Price payable to the Company at the
Closing shall be as follows:
(i) The Company shall be entitled to receive
$31,370,192 in cash, consisting of immediately
available funds, payable by the Buyer, net of any
expenses to be paid by the Company pursuant to
Section 12.1 hereof.
(ii) Subject to Section 2.3(c), the Company shall
additionally be entitled to receive, that number of
shares of Parent Common Stock equal to $8,173,077
divided by the Per Share Value determined as of the
Closing Date; provided, however, that, as set forth
in the Escrow Agreement, $4,807,692 of such amount of
Parent Common Stock (the "ESCROWED SHARES") shall be
deposited into an escrow account and paid or
distributed therefrom in accordance with the Escrow
Agreement.
13
(c) No certificate or scrip representing fractional shares of
Parent Common Stock shall be issued, and such fractional share
interests will not entitle the owner thereof to vote or to any rights
of a stockholder of Buyer. Notwithstanding any other provision of this
Agreement, if the Company would otherwise have been entitled to receive
a fraction of a share of Parent Common Stock, the Company shall
receive, in lieu thereof, cash (without interest) in an amount equal to
such fractional part of a share of Parent Common Stock multiplied by
the Per Share Value determined as of the Closing Date.
2.4 LIABILITIES.
(a) ASSUMED LIABILITIES. On the Closing Date, and effective as
of the Closing Date, Buyer shall assume and agree to discharge all of
the Liabilities of the Company other than the Retained Liabilities (the
"ASSUMED LIABILITIES").
(b) RETAINED LIABILITIES. The Retained Liabilities shall
remain the sole responsibility of and shall be retained, paid,
performed and discharged, in accordance with the terms of this
Agreement, solely by the Company and the Owners. "RETAINED LIABILITIES"
shall mean the following:
(i) any Liability under any Company Contract not
assumed by Buyer hereunder;
(ii) any Liability related to the Employee Bonuses
and the investment banking fees and professional
services fees described in Section 12.1 hereof;
(iii) any Liability of the Company under this
Agreement or any other document executed in
connection with the Contemplated Transactions; and
(iv) any Liability related to the Sarcom settlement
agreement referenced in Part 3.15 of the Disclosure
Letter.
(c) SUBSEQUENT TRANSFER OF COMPANY CONTRACTS. With regard to
each Company Contract that is to be assigned to Buyer after the
Closing, as described in Section 2.1, any Liability thereunder shall be
deemed to be a Retained Liability until such time as said Company
Contract is assigned to Buyer. Upon the assignment of such Company
Contract any Liability thereunder shall be deemed to be an Assumed
Liability of Buyer.
2.5 ALLOCATION. The Purchase Price allocation shall be determined after
the Closing by mutual agreement of Buyer, Parent, the Company and each Owner,
which agreement shall not be unreasonably withheld. If such agreement cannot be
reached, the parties shall use the dispute resolution mechanism set forth in
Section 2.9(b). Once the allocation has been determined, in any Proceeding
related to the determination of any Tax, neither Buyer, Parent, the Company, nor
either Owner shall contest or represent that such allocation is not a correct
allocation.
2.6 CLOSING. The purchase and sale provided for in this Agreement (the
"CLOSING") will take place at 11:00 a.m. (Eastern) on October 2, 2006 or at such
other time and place as the parties may agree. Subject to the provisions of
Section 9, failure to consummate the purchase and sale provided for in this
Agreement on the date and time and at the place determined pursuant to this
Section 2.6 will not result in the termination of this Agreement and will not
relieve any party of any obligation under this Agreement.
2.7 CLOSING OBLIGATIONS. In addition to any other documents to be
delivered under other provisions of this Agreement, at the Closing:
14
(a) The Company and the Owners, as the case may be, will
deliver to Buyer the following, subject to the caveat that the
transfer, assignment and delivery of certain Company Contracts and
other Assets shall be delayed pending receipt of Consents, as more
particularly described in Section 2.1:
(i) a ▇▇▇▇ of sale for all of the Assets that are
Tangible Personal Property in the form of Exhibit 2.7(a)(i)
(the "▇▇▇▇ OF SALE") executed by the Company;
(ii) an assignment of all of the Assets that are
intangible personal property in the form of Exhibit
2.7(a)(ii), which assignment shall also contain Buyer's
undertaking and assumption of the Assumed Liabilities (the
"ASSIGNMENT AND ASSUMPTION AGREEMENT") executed by the
Company;
(iii) for each interest in Real Property identified
on Exhibit 2.1(a), a recordable warranty deed, an Assignment
and Assumption of Lease in the form of Exhibit 2.7(a)(iii) or
such other appropriate document or instrument of transfer, as
the case may require, each in form and substance satisfactory
to Buyer and its counsel and executed by the Company;
(iv) releases in the form of Exhibit 2.7(a)(iv)
executed by each Owner (collectively, "OWNERS' RELEASES");
(v) employment agreements for ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ in the form of Exhibit
2.7(a)(v), executed by the Company (as applicable) and each
such Key Employee (collectively, "EMPLOYMENT AGREEMENTS");
(vi) the escrow agreement in the form of Exhibit
2.7(a)(vi) executed by the Company and the Owners (the "ESCROW
AGREEMENT");
(vii) the registration rights agreement in the form
of Exhibit 2.7(a)(vii) executed by Owners (the "REGISTRATION
RIGHTS AGREEMENT");
(viii) a certificate executed by the Company and the
Owners, signed by each Owner in their individual capacities
and by the chief executive officer of the Company,
representing and warranting to Buyer that each of Owners' and
the Company's representations and warranties in this Agreement
was accurate in all respects as of the date of this Agreement
and is accurate in all respects as of the Closing Date as if
made on the Closing Date (giving full effect to any
supplements to the Disclosure Letter that were delivered by
Owners to Buyer prior to the Closing Date in accordance with
Section 5.5), and that all obligations and conditions required
by this Agreement have been fulfilled;
(ix) certified copies of minutes or unanimous written
consents of the Board of Directors of the Company authorizing
and approving the execution, delivery and performance of this
Agreement, and the consummation of the transactions
contemplated hereby;
(x) a copy of the By-laws of the Company certified by
the secretary of Company and a copy of the Articles of
Incorporation of the Company certified by the Secretary of
State of Georgia as of the most recent practicable date;
(xi) certificates of existence or good standing for
the Company from the State
15
of Georgia and each state where the Company is required to be
qualified to transact business as a foreign corporation dated
no earlier than five (5) business days prior to the Closing
Date;
(xii) an opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ PLLC, dated the
Closing Date, in the form of Exhibit 2.7(a)(xii);
(xiii) a termination and waiver of rights, dated the
Closing Date, with respect to the Shareholder Agreement, dated
of March 12, 1998, between the Company, Clery and ▇▇▇▇▇▇, such
termination and waiver of rights to be in the form of Exhibit
2.7(a)(xiii);
(xiv) the Closing Required Consents listed on Part
3.2 of the Disclosure Letter;
(xv) such other documents as the Company or its
counsel may reasonably request to carry out the purposes of
this Agreement; and
(xvi) the terminations of the leases for the premises
located at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
and ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
(b) Parent and Buyer will deliver to the Company (or, in the
case of Section 2.7(b)(iii), the Escrow Agent):
(i) a cash payment by wire transfer in accordance
with Section 2.3(b)(i);
(ii) one or more certificates representing that
number of shares of Parent Common Stock the Company is
entitled to receive calculated in accordance with Section
2.3(b)(ii);
(iii) one or more certificates representing the
Parent Common Stock to be delivered to the Escrow Agent in
accordance with Section 2.3(b)(ii);
(iv) the Employment Agreements, executed by Buyer (as
applicable).
(v) the Escrow Agreement, executed by Parent, Buyer
and the Escrow Agent.
(vi) the Registration Rights Agreement, executed by
Parent;
(vii) the Owner Releases, executed by Buyer and any
third parties identified as parties to the agreements therein;
(vii) a certificate executed by Parent and Buyer to
the effect that, except as otherwise stated in such
certificate, each of Parent's and Buyer's representations and
warranties in this Agreement was accurate in all material
respects as of the date of this Agreement and is accurate in
all material respects as of the Closing Date as if made on the
Closing Date.
(viii) an opinion of ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.A., dated
the Closing Date, in the form of Exhibit 2.7(b)(viii);
16
2.8 POST-CLOSING OBLIGATIONS. In addition to any other obligations to
be performed after the Closing, the parties covenant and agree as follows:
(a) Immediately following the Closing, the Owners shall cause
the Company to distribute accrued cash bonuses to the current employees
of the Company, in an aggregate amount of $2,669,979, including
employee withholding taxes (collectively the "EMPLOYEE Bonuses"). The
parties acknowledge and the Owners agree to establish a trust for the
payment of additional bonuses to current Company employees in the
amount of $2,330,021.
(b) Immediately following the Closing, the Owners shall cause
the Company to distribute the proceeds received by the Company in
payment of the Purchase Price, net of the amount allocated for the
Employee Bonuses and any investment banking and professional services
fees in excess of $300,000 and any other transaction related costs, to
the Owners as a dividend. Said distribution shall include cash, Parent
Common Stock (including the assignment of Company's right to receive
shares out Escrow pursuant to Section 2.9 hereof), and the assignment
of Company's right to receive any Contingent Payments pursuant to
Section 2.10 hereof.
(c) As soon as practicable following the Closing, but after
the completion of the actions described in Sections 2.8(a) and (b)
above, ▇▇▇▇▇▇ and the Buyer shall consummate the transactions
contemplated by that certain Stock Purchase Agreement between ▇▇▇▇▇▇
and the Buyer, pursuant to which all of the capital stock of the
Company owned by ▇▇▇▇▇▇ shall be conveyed to the Buyer.
(d) The Owners and the Company shall use their Best Efforts to
deliver to the Buyer on or prior to December 31, 2006, all vendor and
customer contracts and the Leases, which are included as part of the
Company Contracts but excluding the Retained Contracts, and the related
Consents, required to operate the business of the Company as it is
being conducted immediately prior to the Closing Date (other than the
business related to the Retained Contracts); provided, however, that
the Buyer shall have the right to demand assignment and delivery of
such vendor and customer contracts and Leases and related consents at
any time and the Owners and the Company shall execute such instruments
as are reasonably requested by Buyer to effect such assignment and
delivery.
(e) Immediately following the Closing, Buyer shall enter into
new Leases with each of Laurelwood Holdings, LLC and Laurelwood
Holdings II, LLC, in substantially the form of Exhibit 2.8(e) attached
hereto, which Leases shall replace the Company's existing Leases for
the Avalon Ridge Parkway and Saturn Court facilities; and written
non-disturbance agreements in a form reasonably acceptable to the Buyer
and Parent from any existing mortgage holders or evidence of
mortgage(s) payoff.
(f) Buyer shall use its Best Efforts to obtain, prior to
December 31, 2006, the release of Owners under the personal guarantees
listed in Exhibit 2.8(f), and Buyer agrees that it shall not enter into
any additional Liabilities under any Company Contract identified
therein unless and until such releases have been obtained.
(g) Immediately following the Closing, Buyer and Company and
Clery, as applicable, shall execute the Services Agreement and
Shareholders' Agreement of even date herewith.
17
2.9 ADJUSTMENT AMOUNT; ADJUSTMENT PROCEDURE.
(a) The Adjustment Amount will be equal to the sum of (i) the
difference between the Minimum Net Assets and the Actual Net Assets of
the Company as of the Closing Date plus (ii) the difference between the
Minimum Working Capital and the Actual Working Capital as of the
Closing Date; provided that the Adjustment Amount is greater than zero.
There shall be no addition to the Adjustment Amount for a difference
between the Minimum Net Assets and the Actual Net Assets unless the
difference is greater than $150,000 and then only to the extent of the
difference in excess of $150,000. The Adjustment Amount, if any, shall
be paid by Owners to Buyer pursuant to the terms of this Section 2.9.
In the event the Actual Net Assets are greater than the Minimum Net
Assets or the Actual Working Capital is greater than the Minimum
Working Capital, neither the Company nor the Owners be entitled to the
payment of an Adjustment Amount by the Buyer and the absolute value
assigned to such difference for purposes of the calculation of the
Adjustment Amount described above shall be zero.
(b) The Company will prepare and will cause ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇▇, LLP, the Company's certified public accountants, to
prepare audited consolidated financial statements of the Company as of
the Closing Date and for the period from the date of the Balance Sheet
through the Closing Date ("CLOSING FINANCIAL STATEMENTS). The Company
will deliver the Closing Financial Statements to Buyer within sixty
(60) days following the Closing Date. If within thirty (30) days
following delivery of the Closing Financial Statements, Buyer has not
given Owners notice of its objection to the Closing Financial
Statements, then the Closing Financial Statements will be used in
Buyer's computation of the Adjustment Amount. If Buyer gives such
notice of objection or if Owners object to Buyer's computation of the
Adjustment Amount, then the issues in dispute will be submitted to
certified public accountants mutually agreed upon by Buyer and the
Owners (the "Accountants"), for resolution. If issues in dispute are
submitted to the Accountants for resolution, (i) each party will
furnish to the Accountants such workpapers and other documents and
information relating to the disputed issues as the Accountants may
request and are available to that party or its Subsidiaries (or its
independent public accountants), and will be afforded the opportunity
to present to the Accountants any material relating to the
determination and to discuss the determination with the Accountants;
(ii) the determination by the Accountants, as set forth in a notice
delivered to both parties by the Accountants, will be binding and
conclusive on the parties; and (iii) the fees of the Accountants for
any determination made pursuant to this Section 2.9(b) shall be borne
by the party raising the dispute; provided, however, that the Company
shall pay any fees incurred relating to the preparation of the Closing
Financial Statements out of the closing proceeds.
(c) On the tenth business day following the final
determination of the Adjustment Amount, the Adjustment Amount shall be
paid by the Owners to Buyer pursuant to the terms of the Escrow
Agreement and this Agreement. The payment will be subject to interest
at a rate equal to the "prime rate," as published in the "Money Rates"
table of The Wall Street Journal (Western Edition) (the "PRIME RATE"),
in effect on the date of payment of the Adjustment Amount compounded
daily beginning on the Closing Date and ending on the date of payment.
The Adjustment Amount shall be paid first out of the Escrowed Shares.
In determining the number of Escrowed Shares to be returned to Buyer,
the Per Share Value shall be determined as of the date of determination
of the Adjustment Amount. In the event that the value of the Escrowed
Shares, as determined in accordance with the preceding sentence, does
not satisfy the Adjustment Amount owed to Buyer from the Company, the
Owners shall, within ten business days following the final
determination of the Adjustment Amount, make cash payments to Buyer, in
proportion to their percentage ownership of the Company immediately
prior to the Closing, in an aggregate amount equal to (i) the
Adjustment Amount minus (ii) the value of the Escrowed
18
Shares previously delivered to Buyer pursuant to the provisions of this
Section. The obligation of Owners to make cash payments to Buyer
pursuant to this Section 2.9(c) shall not be subject to the limitations
of Section 10.5 of this Agreement. Cash payments to Buyer, if any, must
be made by wire transfer to such bank account or accounts specified by
Buyer. If Owners fail to pay Buyer the Adjustment Amount due Buyer, if
any, when due, and such unpaid amount remains outstanding on the date
Buyer is obligated to pay Owners any Contingent Payments, Buyer may, in
addition to any other available remedies, off-set such unpaid amount
against any and all such Contingent Payments. Once the Adjustment
Amount (if any) has been paid to Buyer, the remaining Escrowed Shares
(if any) shall be promptly distributed to Company or its assigns.
2.10 CONTINGENT CONSIDERATION.
(a) For three consecutive Contingent Consideration Periods,
additional annual payments shall be made to Company or its assigns on
the conditions described herein and as a result of calculations
described on Exhibit 2.10(a) attached hereto and incorporated herein
(the "CONTINGENT PAYMENTS"). The Contingent Payments shall be made in
cash, Parent Common Stock or a combination thereof, at Buyer's sole
discretion; provided that for purposes of determining the number of
shares of Parent Common Stock, if any, to be issued to Company or its
assigns as part of the Contingent Payment, the per share value of
Parent Common Stock shall be equal to the Per Share Value determined as
of the Due Date following the Contingent Consideration Period for which
any such Contingent Payment is due, without giving effect to any
extension of any such Due Date; provided further that Buyer must make
its election to use Parent Common Stock by giving written notice to
Owners on or before the Due Date, and provided further that the
aggregate value of Parent Common Stock issued in connection with
Contingent Payments shall not exceed thirty percent (30%) of the
aggregate value of all Contingent Payments, through and including the
current Contingent Payment; and provided further that Buyer shall not
be entitled to use Parent Common Stock as part of a Contingent Payment
if, on the date of issuance, (i) the Parent Common Stock is not
registered under Section 12 of the Securities Exchange Act, or (ii)
Parent is not current in its reporting obligations under the Securities
Exchange Act. The parties agree that 1/26th of the Contingent Payment
shall be paid to ▇▇▇▇▇▇ pursuant to the Stock Purchase Agreement with
him.
(b) Within forty (45) days following the last day of a
Contingent Consideration Period, Buyer shall provide to Owners
financial statements for the Buyer and the Company for such Contingent
Consideration Period (the "CONTINGENT CONSIDERATION FINANCIAL
STATEMENTS"). Together with the Contingent Consideration Financial
Statements, Buyer shall deliver to each Owner a written notice (a
"CONTINGENT PAYMENT NOTICE") setting forth the amount of the Contingent
Payment to be paid and reasonably specific details as to the manner in
which the calculation of the amount due was made. If an Owner disagrees
with the calculation provided by Buyer in the Contingent Payment Notice
(a "CONTINGENT PAYMENT DISPUTE"), such Owner shall notify Buyer of the
Contingent Payment Dispute in writing (the "DISPUTE NOTICE"),
specifying the nature and amount of the Contingent Payment Dispute,
within 45 calendar days of the date of the Contingent Payment Notice
(the "Response Period"). During the Response Period, Buyer shall
provide Owners and their Representatives with reasonable access to
books and records of Buyer and, if possible, to the work papers of
Accountants reasonably requested by Owners and their Representatives
necessary to verify the determination of the amount of such Contingent
Payment and the compliance by Buyer with the provisions of Exhibit
2.10(a). If Company or an assignee fails to deliver to Buyer a Dispute
Notice within the Response Period, the calculation by Buyer shall be
final and binding as to Company or that assignee, as applicable. Each
annual Contingent Payment, if any, shall be due and payable by Buyer to
Company or its assigns no later than 15 days after the expiration of
the applicable Response Period (the "Due Date"), provided, however,
19
that in the event of a Contingent Payment Dispute, only the undisputed
amount shall be due and payable by Buyer no later than 15 days after
the expiration of the applicable Response Period, and the Due Date for
any disputed amount shall automatically be extended without further
action of any of the parties hereto until 15 days following the date
upon which such Contingent Payment Dispute is resolved pursuant to
Section 2.10(c). Buyer shall distribute any Contingent Payment to
Company or its assigns. In the event of a Contingent Payment Dispute,
payments under this Section 10 will be subject to interest at a rate
equal to the Prime Rate, in effect on the Due Date of the Contingent
Payment compounded annually beginning on Due Date and ending on the
date of payment.
(c) If Company or an assignee timely delivers a Dispute Notice
to Buyer, Buyer and Company or such assignee shall use the dispute
resolution procedures of Section 12.6 of this Agreement to attempt to
settle the dispute.
(d) The parties agree any and all decisions regarding the
conduct of Buyer's and the Company's operations from and after the
Closing Date, including any matters directly or indirectly affecting
the financial performance or prospects of Buyer or the Company
(including those financial measures set forth on Exhibit 2.10(a)),
shall be made in the sole and absolute discretion of the Board of
Directors of Buyer or Company, as the case may be, without any express
or implied obligation or liability to the parties or any other Person,
except that Buyer and Company covenant and agree to manage their
respective businesses and affairs in a manner the Board of Directors of
each company believes in good faith to be in the best interests of the
company and its shareholders, with the care an ordinarily prudent
person in a like position would exercise under similar circumstances.
(e) Buyer agrees that, in the event of any Parent Change of
Control Transaction that occurs following the Closing Date and prior to
the expiration of the final Contingent Consideration Period, Buyer
shall use Best Efforts to cause the terms of this Section 2.10 to be
fully and equitably assumed by one or more parties to the Parent Change
of Control Transaction. In the event such assumption is not obtained
and Company or its assigns would reasonably be projected to earn a
Contingent Payment pursuant to the terms of this Section 2.10 and
Exhibit 2.10(a) based on the Annualized Contribution for the Contingent
Payment Period in which such Parent Change of Control Transaction
occurs, Company or its assigns shall be entitled (subject to and
consistent with the other provisions of this Section 2.10 that do not
conflict with this Section 2.10(d)) to a Contingent Payment in an
amount equal to fifty percent (50%) of the product of the Annualized
Contribution for the Contingent Consideration Period in question
multiplied by a fraction, the numerator of which is the number of
completed months of the Contingent Consideration Period in question as
of the closing of the Parent Change of Control Transaction and the
denominator of which is 12. For example, if the Annualized Contribution
for the Contingent Consideration Period in question were $10,000,000
and the closing of the Parent Change of Control Transaction occurred
during the seventh month of the Contingent Consideration Period in
question, Company or its assigns would be entitled to an aggregate
Contingent Payment of $2,500,000, which is fifty percent of $10,000,000
multiplied by 6/12, or 1/2. Said Contingent Payment shall be payable by
Parent or Buyer to Company or its assigns within fifteen (15) business
days of the closing of such Parent Change of Control Transaction.
Thereafter, Buyer's obligations under this Section 2.10 shall be deemed
fully performed and discharged. In the event of a Parent Change of
Control Transaction, the provisions and obligations of Section 2.10(f)
of this Agreement shall be inoperative and of no force or effect with
respect to any subsequent Buyer Change of Control Transaction or
Company Change of Control Transaction.
20
(f) The provisions of this Section 2.10(f) shall only apply
with respect to any Buyer Change of Control Transaction or Company
Change of Control Transaction that occurs after the Closing Date, but
before the expiration of the final Contingent Consideration Period and
before a Parent Change of Control Transaction.
(i) Buyer agrees that, in the event of any Buyer
Change of Control Transaction that does not also constitute a Parent
Change of Control Transaction, Buyer shall use Best Efforts to cause
the terms of this Section 2.10 to be fully and equitably assumed by one
or more parties to such Buyer Change of Control Transaction.
(ii) In the event of any Buyer Change of Control
Transaction in which the assumption of the provisions of this Section
2.10 is not obtained and the proceeds received by Buyer (and/or any
Related Persons) from such Buyer Change of Control Transaction (the
"CHANGE OF CONTROL PROCEEDS") exceed $41,000,000 plus any Contingent
Payment already paid or owed to Company or its assigns for any prior
Contingent Consideration Period, Company or its assigns shall be
entitled (subject to and consistent with the other provisions of this
Section 2.10 that do not conflict with this Section 2.10(f)) to payment
of the following: (i) a Contingent Payment in an amount equal to fifty
percent (50%) of the product of the Annualized Contribution for the
Contingent Consideration Period in which such Buyer Change of Control
Transaction occurs, multiplied by a fraction, the numerator of which is
the number of completed months of the Contingent Consideration Period
in question as of the closing date of such Buyer Change of Control
Transaction and the denominator of which is 12; and (ii) an additional
amount equal to fifty percent (50%) of any such Change of Control
Proceeds in excess of the sum of (A) $41,000,000, plus (B) any
Contingent Payment already paid or owed to Company or its assigns for
any prior Contingent Consideration Period, plus (C) any Contingent
Payment owed to Company or its assigns as described in clause (i)
above, until the aggregate amount of such Contingent Payments and such
Change of Control Proceeds paid to Company or its assigns equals
$13,000,000. The Company or its assigns shall only be entitled to any
such Change of Control Proceeds if at the time of such Buyer Change of
Control Transaction the Company or its assigns would reasonably be
projected to earn a Contingent Payment pursuant to the terms of this
Section 2.10 and Exhibit 2.10(a) based on the Annualized Contribution
for the Contingent Payment Period in which such Buyer Change of Control
Transaction occurs. For the purpose of the foregoing calculation, any
proceeds received by Buyer (and/or any Related Persons) from any
Company Change of Control Transaction occurring prior to or within
ninety (90) days of the Buyer Change of Control Transaction shall be
included in the Change of Control Proceeds.
(iii) In the event of a Buyer Change of Control
Transaction or a Company Change of Control Transaction (but not both in
the same transaction or both in separate transactions occurring within
ninety (90) days of each other) that does not also constitute a Parent
Change of Control Transaction, where such assumption of the provisions
of this Section 2.10 is not obtained and the proceeds received by Buyer
(and/or any Related Persons) from such Change of Control Transaction
are less than $41,000,000 plus any Contingent Payment already paid to
Company or its assigns, then Parent shall pay to Company or its assigns
an amount equal to $13,000,000 less any Contingent Payments already
paid to Company or its assigns. Such amount shall be paid in equal
annual installments as if each such payment were a Year-One Contingent
Payment, Year-Two Contingent Payment or Year-Three Contingent Payment,
as appropriate, and as such terms are defined in Exhibit 2.10(a).
(iv) In the event of a Buyer Change of Control
Transaction and a Company Change of Control Transaction occurring as
part of the same transaction or in different transactions occurring
within ninety (90) days of each other, upon payment of the amounts set
forth in this Section 2.10(f), Buyer's obligations under this Section
2.10 shall be deemed fully performed and discharged, and the provisions
and obligations of Section 2.10(f) of this
21
Agreement shall be inoperative and of no force or effect with respect
to any subsequent Change of Control Transaction.
(g) Buyer shall give Owners written notice of any Change of
Control Transaction described herein. Such notice shall be given as
soon as practicable and in any event no later than the effective date
of such Change of Control Transaction. Buyer's notice shall state the
total consideration paid or to be paid to the Buyer and/or any Related
Persons, shall describe any non-cash consideration included in the
Change of Control Proceeds, and shall state Buyer's determination of
the fair market value thereof, which valuation shall be conclusive and
binding on Buyer, Company and Owners in the absence of a timely
challenge made in accordance with this Section 2.10(f). Company or any
assignee may, within ten (10) days after delivery of Buyer's notice, by
written notice to Buyer, challenge Buyer's determination of the Change
of Control Proceeds (including the valuation of any non-cash
consideration), in which event the value of the Change of Control
Proceeds shall be determined via the dispute resolution mechanisms of
Section 12.6 of this Agreement. The Change of Control Proceeds shall be
payable to Company or its assigns within fifteen (15) business days of
the closing of such Change of Control Transaction or the date the value
of the Change of Control Proceeds has been conclusively determined,
whichever is later.
2.11 TRANSFERRED EMPLOYEES. From and after the Closing, the Buyer shall
offer employment to each of the Company's employees other than those listed on
Exhibit 2.11 (the "EXCLUDED Employees"). Each such employee that accepts
employment with the Buyer (each a "TRANSFERRED EMPLOYEE") shall be given full
credit for all vacation time, personal days and sick leave, if any, accrued by
such employee as of the Closing in the Ordinary Course of Business in amounts
and on terms consistent with past practices (and in compliance with this
Agreement). To the extent properly accrued at the Closing, Buyer shall pay any
accrued but unpaid compensation payable to each Transferred Employee. Buyer
agrees to form plans with features substantially similar to the Employee Benefit
Plans currently operated by the Company, and to take reasonable action to permit
each Transferred Employee to participate in such plans to the same extent each
respective Transferred Employee has elected to participate in the Company's
Employee Benefit Plans at Closing. Notwithstanding the foregoing, nothing in
this Section 2.11 shall obligate Parent or the Buyer to make contributions on
behalf of or for credit to the accounts of any Transferred Employees with
respect to any profit sharing or savings plans or to take any action that
violates any applicable Legal Requirement (defined below).
2.12 TAX TRUE-UP. Within forty-five (45) days following the Closing
Date, Owners shall deliver to Buyer a statement (the "TAX TRUE-UP STATEMENT")
demonstrating and stating (i) the tax effect on each Owner of the Contemplated
Transactions (the "ASSET TAX IMPACT") and (ii) the tax effect on each Owner of
the Contemplated Transactions had such Contemplated Transactions been structured
as the purchase by Parent or Buyer of all of the capital stock of the Company
(the "STOCK TAX IMPACT"). (See Schedule 2.1 for an example of this calculation.)
Buyer shall have thirty (30) days (the "TAX TRUE-UP DISPUTE PERIOD") to dispute
any information contained in the Tax True-Up Statement, including the Asset Tax
Impact or the Stock Tax Impact. If Buyer has not delivered to each Owner a
notice describing in detail the nature of its dispute with respect to the Tax
True-Up Statement (a "TAX TRUE-UP DISPUTE NOTICE"), then the Tax True-Up
Statement shall be deemed binding on the parties and Buyer shall pay to Company
or its assigns an amount in cash equal to the difference between the Asset Tax
Impact and the Stock Tax Impact (the "TAX TRUE-UP AMOUNT"). Such Tax True-Up
Amount may be offset against any Adjustment Amount owed to Buyer from Owners
pursuant to Section 2.9 of this Agreement. In the event that Buyer delivers a
Tax True-Up Dispute Notice within the Tax True-Up Dispute Period, the parties
shall use the dispute resolution procedures of Section 12.6 of this Agreement to
attempt to settle the dispute.
22
2.13 TAX BENEFIT SHARING. In the event that the aggregate cumulative
Contribution by the Company for the three one-year Contingent Consideration
Periods described in Section 2.10 and Exhibit 2.10(a) to this Agreement exceeds
$31,500,000 and Parent has recognized a tax benefit from the Contemplated
Transaction associated with the depreciation of the acquired Assets resulting
from a step-up in basis and the amortization of goodwill related to the
Business, then Parent shall pay to Company or its assigns an amount equal to
thirty-three and one-third percent (33 1/3%) of any such tax benefit up to an
aggregate maximum of $750,000 (the "PARENT TAX BENEFIT PAYMENT"). Upon either
Owner's request, Parent shall provide supporting documentation from time to time
as is reasonable and necessary to demonstrate the Parent tax benefit (or lack of
such benefit) from the Contemplated Transaction. In the event the parties
dispute the amount or existence of the tax benefit, the parties shall use the
dispute resolution procedures of Section 12.6 of this Agreement to attempt to
settle the dispute.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE OWNERS.
The Company, and each Owner, severally and not jointly, make the
representations and warranties contained in this Section 3 to the Buyer. Each
representation or warranty that refers collectively to Owners or addresses any
facts or circumstances regarding either of them shall be construed to mean that
each of them is making such representation or warranty about himself or herself
or facts or circumstances regarding himself or herself. Each representation or
warranty that refers collectively to the Owners and/or the Company or addresses
a fact or circumstance regarding any or all of them shall be construed to mean
that each of the Owners is making such representation or warranty about himself
or herself and about the Company or facts or circumstances regarding himself or
herself and the Company. The representations and warranties contained in
Sections 3.1, 3.2, 3.5, 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13, 3.14, 3.15,
3.17, 3.18, 3.19, 3.20, 3.21, 3.23 that are made with respect to the Company or
its financial condition, assets, properties, business, prospects or results of
operations, and any other representations and warranties that are expressly so
qualified, are made by Owners to their Knowledge.
3.1 ORGANIZATION AND GOOD STANDING.
(a) Part 3.1 of the Disclosure Letter contains a complete and
accurate list of the Company's jurisdiction of incorporation, all other
jurisdictions in which it is authorized to do business, and its
capitalization (including the identity of each shareholder and the
number of shares held by each). The Company is a corporation duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation, with full corporate power and authority
to conduct its business as it is now being conducted, to own or use the
properties and assets that it purports to own or use, and to perform
all its obligations under Company Contracts. Except as disclosed in
Part 3.1 of the Disclosure Letter, the Company is duly qualified to do
business as a foreign corporation and is in good standing under the
laws of each state or other jurisdiction in which either the ownership
or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification.
(b) The Company has delivered to Buyer copies of the
Organizational Documents of the Company, as currently in effect.
23
3.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of the Company and Owners, enforceable against the Company
and Owners in accordance with its terms. Upon the execution and
delivery of the Escrow Agreement, the Registration Rights Agreement,
the Employment Agreements, and the Owners' Releases (collectively, the
"OWNERS' CLOSING DOCUMENTS") by the parties thereto, Owners' Closing
Documents will constitute the legal, valid, and binding obligations of
Owners, enforceable against Owners in accordance with their respective
terms. Owners have the absolute and unrestricted right, power,
authority, and capacity to execute and deliver this Agreement and
Owners' Closing Documents and to perform their obligations under this
Agreement and Owners' Closing Documents.
(b) Except as set forth in Part 3.2 of the Disclosure Letter,
neither the execution and delivery of this Agreement and Owners'
Closing Documents nor the consummation or performance of any of the
Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time):
(i) contravene, conflict with, or result in a
violation of (A) any provision of the Organizational Documents
of the Company, or (B) any resolution adopted by the board of
directors or the stockholders of the Company;
(ii) contravene, conflict with, or result in a
violation of, or give any Governmental Body or other Person
the right to challenge any of the Contemplated Transactions or
to exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which either Owner, or, to either
Owner's Knowledge, the Company or any of the assets owned or
used by the Company, may be subject;
(iii) to Owners' Knowledge, contravene, conflict
with, or result in a violation of any of the terms or
requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any
Governmental Authorization that is held by the Company or that
otherwise relates to the business of, or any of the assets
owned or used by, the Company;
(iv) to Owners' Knowledge, contravene, conflict with,
or result in a violation or breach of any provision of, or
give any Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of,
or to cancel, terminate, or modify, any Material Contract; or
(v) result in the imposition or creation of any
Encumbrance upon or with respect to any of the assets owned or
used by the Company.
Except as set forth in Part 3.2 of the Disclosure Letter, and except
for Consents with respect to Company Contracts that are not Material Contracts,
neither of the Owners nor, to Owners' Knowledge, the Company is or will be
required to give any notice to or obtain any Consent from any Person in
connection with the execution and delivery of this Agreement or the consummation
or performance of any of the Contemplated Transactions.
3.3 CAPITALIZATION. The authorized equity securities of the Company
consist of 1,000,000 shares of common stock, no par value, of which 800,000
shares are issued and outstanding. Owners are and will be on the Closing Date
the only record and beneficial owners and holders of capital stock of the
Company, free and clear of all Encumbrances, except those identified in Part 3.3
of the Disclosure Letter.
24
Clery owns 416,000 shares of common stock of the Company and ▇▇▇▇▇▇ owns 384,000
shares of common stock of the Company (collectively, Clery's and ▇▇▇▇▇▇'▇ shares
of common stock of the Company are referred to herein as the "SHARES"). Except
as identified in Part 3.3 of the Disclosure Letter, no legend or other reference
to any purported Encumbrance appears upon any certificate representing equity
securities of the Company. All of the outstanding equity securities of the
Company have been duly authorized and validly issued and are fully paid and
nonassessable. There are no Contracts relating to the issuance, sale, or
transfer of any equity securities or other securities of the Company. None of
the outstanding equity securities or other securities of the Company was issued
in violation of the Securities Act or any other Legal Requirement. The Company
does not own, or have any Contract to acquire, any equity securities or other
securities of any Person or any direct or indirect equity or ownership interest
in any other business.
3.4 FINANCIAL STATEMENTS. The Company has delivered to Buyer: (a)
consolidated balance sheets of the Company as of December 31 in each of the
years 2003, 2004 and 2005 (including the notes thereto) (the balance sheet as of
December 31, 2005, referred to as the "BALANCE SHEET"), and the related
consolidated statements of income, changes in shareholders' equity, and cash
flow for the fiscal year then ended, together with the report thereon of ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP, Buyer's certified public accountants (collectively,
with the Balance Sheet, the "COMPANY FINANCIAL STATEMENTS"), and (b) an
unaudited consolidated balance sheet of the Company as of June 30, 2006,
(including the notes thereto) (the "INTERIM BALANCE SHEET"), and the related
unaudited consolidated statements of income, changes in stockholders' equity,
and cash flow for the six-months then ended (collectively, with the Interim
Balance Sheet, the "INTERIM FINANCIAL STATEMENTS"). The Balance Sheet and
Company Financial Statements have been prepared in accordance with GAAP, and
fairly present the financial condition and the results of operations, changes in
stockholders' equity, and cash flow of the Company as at the respective dates of
and for the periods referred to in such financial statements. All financial
statements referred to in this Section 3.4 reflect the consistent application of
such accounting principles throughout the periods involved. No financial
statements of any Person are required by GAAP to be included in the consolidated
financial statements of the Company. The Company has accrued for the payment of
Employee Bonuses as referenced in Section 2.8(a).
3.5 BOOKS AND RECORDS. Except as identified in Part 3.5 of the
Disclosure Letter, the books of account, minute books, stock record books, and
other records of the Company, all of which have been made available to Buyer,
are complete and correct and have been maintained in accordance with sound
business practices. The minute books of the Company contain accurate and
complete records of all meetings held of, and corporate action taken by, the
stockholders, the Boards of Directors, and committees of the Board of Directors
of the Company, and no meeting of any such shareholders, Board of Directors, or
committee has been held for which minutes have not been prepared and are not
contained in such minute books. At the Closing, all of those books and records
will be in the possession of the Company.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES. Part 3.6 of the Disclosure
Letter contains a complete and accurate list of all real property, leaseholds,
or other real property interests therein owned by the Company. To the Company's
and the Owners' Knowledge, the Company owns and has good and marketable title to
all of its assets and properties free and clear of all liens, charges, claims,
pledges and encumbrances whatsoever, except as disclosed in Part 3.6 the
Disclosure Letter. The Assets are sufficient to enable the Business to be
conducted immediately after the Closing in the same manner as presently
conducted by the Company. All material items of tangible personal property owned
or leased by the Company are in good operating order and repair, free from known
defects in construction or design, and are suitable for the purposes for which
they are presently being used.
25
3.7 CONDITION AND SUFFICIENCY OF ASSETS. Except as identified in Part
3.7 of the Disclosure Letter, the buildings, plants, structures, and equipment
of the Company are structurally sound, are in good operating condition and
repair, and are adequate for the uses to which they are being put, and none of
such buildings, plants, structures, or equipment is in need of maintenance or
repairs except for ordinary, routine maintenance and repairs that are not
material in nature or cost. The building, plants, structures, and equipment of
the Company are sufficient for the continued conduct of the Company's businesses
after the Closing in substantially the same manner as conducted prior to the
Closing.
3.8 ACCOUNTS RECEIVABLE. All accounts receivable of the Company that
are reflected on the Balance Sheet or the Interim Balance Sheet or on the
accounting records of the Company as of the Closing Date (collectively, the
"ACCOUNTS RECEIVABLE") represent or will represent valid obligations arising
from sales actually made or services actually performed or to be performed in
the Ordinary Course of Business. Except as disclosed in Part 3.8 of the
Disclosure Letter, unless paid prior to the Closing Date, the Accounts
Receivable are or will be as of the Closing Date current and collectible net of
the respective reserves shown on the Balance Sheet or the Interim Balance Sheet
or on the accounting records of the Company as of the Closing Date (which
reserves are adequate and calculated consistent with past practice). Subject to
such reserves, each of the Accounts Receivable either has been collected or is
collectible in full, without any set-off. Within ninety days after the day on
which each Accounts Receivable first becomes due and payable, ninety percent
(90%) of the Accounts Receivable are collectible. Except as disclosed in Part
3.8 of the Disclosure Letter, to the Knowledge of the Company and the Owners,
there is no contest, claim, or right of set-off, other than returns in the
Ordinary Course of Business, under any Contract with any obligor of an Accounts
Receivable relating to the amount or validity of such Accounts Receivable.
Company has delivered a list of all Accounts Receivable as of the date of the
Interim Balance Sheet, which list sets forth the aging of such Accounts
Receivable. To the Knowledge of the Company and the Owners, said list was
complete and accurate as of such date.
3.9 INVENTORY. All inventory of the Company reflected on the Balance
Sheet or the Interim Balance Sheet, consists of a quality and quantity usable
and salable in the Ordinary Course of Business, except for obsolete items and
items of below-standard quality, all of which have been written off or written
down to net realizable value in the Balance Sheet or the Interim Balance Sheet
or on the accounting records of the Company as of the Closing Date, as the case
may be. All inventories not written off have been priced at the lower of average
cost or market. The quantities of each item of inventory (whether raw materials,
work-in-process, or finished goods) are not excessive and are consistent with
past practices of the Company.
3.10 NO UNDISCLOSED LIABILITIES. Except as set forth in Part 3.10 of
the Disclosure Letter, to the Knowledge of the Company or the Owners, the
Company has no material liabilities of any nature (whether absolute, accrued,
contingent, or otherwise) except for liabilities reflected or reserved against
in the Balance Sheet or the Interim Balance Sheet and current liabilities
incurred in the Ordinary Course of Business since the respective dates thereof.
3.11 TAXES.
(a) The Company has filed or caused to be filed (on a timely
basis since December 31, 2002) all Tax Returns that are or were
required to be filed by or with respect to any of them, either
separately or as a member of a group of corporations, pursuant to
applicable Legal Requirements. The Company has delivered or made
available to Buyer copies of, and Part 3.11 of the Disclosure Letter
contains a complete and accurate list of, all such Tax Returns relating
to income or franchise taxes filed since December 31, 2002. Except as
disclosed in Part 3.11 of the Disclosure Letter, the Company has paid,
or made provision for the payment of, all Taxes that have or may have
become due pursuant to those Tax Returns or otherwise, or pursuant to
any
26
assessment received by Owners or the Company, except such Taxes, if
any, as are listed in Part 3.11 of the Disclosure Letter and are being
contested in good faith and as to which adequate reserves (determined
in accordance with GAAP) have been provided in the Balance Sheet and
the Interim Balance Sheet.
(b) The United States federal and state income Tax Returns of
the Company have never been audited by the IRS or relevant state tax
authorities. Part 3.11 of the Disclosure Letter describes all
adjustments to the United States federal income Tax Returns filed by
the Company or any group of corporations including the Company for all
taxable years since December 31, 2002, and the resulting deficiencies
proposed by the IRS. Except as described in Part 3.11 of the Disclosure
Letter, neither of the Owners nor the Company has given or, to the
Knowledge of the Company or the Owners, been requested to give waivers
or extensions (or is or would be subject to a waiver or extension given
by any other Person) of any statute of limitations relating to the
payment of Taxes of the Company or for which the Company may be liable.
(c) Except as disclosed in Part 3.11 of the Disclosure Letter,
the charges, accruals, and reserves with respect to Taxes on the
respective books of the Company are adequate and are at least equal to
the Company's liability for Taxes. There exists no proposed tax
assessment against the Company except as disclosed in the Balance Sheet
or in Part 3.11 of the Disclosure Letter. No consent to the application
of Section 341(f)(2) of the IRC has been filed with respect to any
property or assets held, acquired, or to be acquired by the Company.
All Taxes that the Company is or was required by Legal Requirements to
withhold or collect have been duly withheld or collected and, to the
extent required, have been paid to the proper Governmental Body or
other Person.
(d) All Tax Returns filed by the Company are true, correct,
and complete. There is no tax sharing agreement that will require any
payment by the Company after the date of this Agreement. The Company
has in effect valid and continuing elections to be taxed under
Subchapter S of the IRC, and have been duly qualified as a Subchapter S
corporation for all tax periods commencing on or after January 1, 1997.
The Company and Owners have taken all action necessary to preserve
Subchapter S status. During the consistency period (as defined in
Section 338(h)(4) of the IRC with respect to the sale of the Shares to
Buyer), the Company or any target affiliate (as defined in Section
338(h)(6) of the IRC with respect to the sale of the Shares to Buyer)
has not sold nor will sell any property or assets to Buyer or to any
member of the affiliated group (as defined in Section 338(h)(5) of the
IRC) that includes Buyer. Part 3.11 of the Disclosure Letter lists all
such target affiliates.
3.12 NO MATERIAL ADVERSE CHANGE. Since the date of the Balance Sheet,
there has not been any Material Adverse Change in the business, operations,
properties, prospects, assets, or condition of the Company, and no event has
occurred or circumstance exists that may result in such a Material Adverse
Change.
3.13 ERISA. Except as set forth on Part 3.13 of the Disclosure Letter,
neither the Company nor any entity that would be deemed a "single employer" with
the Company under Section 414(b), (c), (m), or (o) of the IRC or Section 4001 of
ERISA (an "ERISA AFFILIATE") is a party to, obligated under, or otherwise
maintains, contributes or sponsors, any pension, annuity, retirement,
equity-based, stock purchase, savings, profit sharing, severance, health,
welfare, or deferred compensation plan or agreement, or any retainer,
employment, consultant, bonus, group insurance or other compensation, incentive
or benefit contract, plan or arrangement with regard to any current of former
employee, consultant, independent contractor or director (or any dependent or
spouse thereof) of the Company (each, an "EMPLOYEE BENEFIT PLAN"), and no such
individual is entitled to any benefits except pursuant to an
27
Employee Benefit Plan. Each Employee Benefit Plan complies and has been
maintained and operated in all material respects in compliance with its terms
and applicable law, including, without limitation, ERISA, the IRC, and all laws
and regulations of any foreign jurisdiction applicable to it. Each Employee
Benefit Plan intended to qualify under Section 401(a) of the IRC (all of which
are set forth on Part 3.13 of the Disclosure Letter) is qualified and has
received a determination letter from the IRS to the effect that it is qualified
under Section 401 of the IRC, and any trust maintained pursuant thereto is
exempt from federal income taxation under Section 501 of the IRC and nothing has
occurred or is expected to occur that caused or could cause the loss of such
qualification or exemption or the imposition of any penalty or tax liability.
All payments required by any Employee Benefit Plan, any collective bargaining
agreement or other agreement, or by any United States federal or state law or
the law of any foreign jurisdiction, with respect to all periods through the
date of this agreement have been made. No claim, lawsuit, arbitration or other
action (whether brought by a governmental authority or otherwise) has been
Threatened, asserted, instituted, or is anticipated against any of the Employee
Benefit Plans (other than non-material routine claims for benefits, and appeals
of such claims) and no "prohibited transaction" within the meaning of Section
4975 of the IRC and Section 406 of ERISA has occurred or is expected to occur
with respect to any Employee Benefit Plan. Neither the Company nor any ERISA
Affiliate, or any of their respective predecessors, has ever, directly or
indirectly, contributed to or been in any way liable with respect to any plan
subject to Section 412 of the IRC, Section 302 of ERISA or Title IV of ERISA.
Neither the Company nor any ERISA Affiliate provides for any health, disability,
or life insurance benefits of any kind whatsoever (other than under Section
4980B of the IRC, the U.S. Social Security Act, a plan qualified under Section
401(a) of the IRC or as otherwise required by applicable law) to any current or
future retiree or terminated employee.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS.
(a) Since or as of January 1, 2003, except as set forth in
Part 3.14 of the Disclosure Letter:
(i) the Company is, and at all times has been, in
full compliance with each Legal Requirement that is or was
applicable to it or to the conduct or operation of its
business or the ownership or use of any of its assets;
(ii) no event has occurred or circumstance exists
that (with or without notice or lapse of time) (A) may
constitute or result in a violation by the Company of, or a
failure on the part of the Company to comply with, any Legal
Requirement, or (B) may give rise to any obligation on the
part of the Company to bear, or undertake to bear, all or any
portion of the cost of any remedial action of any nature in
connection with any Legal Requirement; and
(iii) the Company has not received any notice or
other communication (whether oral or written) from any
Governmental Body or any other Person regarding (A) any
actual, alleged, possible, or potential violation of, or
failure to comply with, any Legal Requirement, or (B) any
actual, alleged, possible, or potential obligation on the part
of the Company to undertake, or to bear all or any portion of
the cost of, any remedial action of any nature.
(b) Part 3.14 of the Disclosure Letter contains a complete and
accurate list of each Governmental Authorization that is held by the
Company or that otherwise relates to the business of, or to any of the
assets owned or used by, the Company. Each Governmental Authorization
listed or required to be listed in Part 3.14 of the Disclosure Letter
is valid and in full force and effect. Except as set forth in Part 3.14
of the Disclosure Letter:
28
(i) the Company is, and at all times since January 1,
2003 has been, in full compliance with all of the terms and
requirements of each Governmental Authorization identified or
required to be identified in Part 3.14 of the Disclosure
Letter;
(ii) no event has occurred or circumstance exists
that may (with or without notice or lapse of time) (A)
constitute or result directly or indirectly in a violation of
or a failure to comply with any term or requirement of any
Governmental Authorization listed or required to be listed in
Part 3.14 of the Disclosure Letter, or (B) result directly or
indirectly in the revocation, withdrawal, suspension,
cancellation, or termination of, or any modification to, any
Governmental Authorization listed or required to be listed in
Part 3.14 of the Disclosure Letter;
(iii) the Company has not received, at any time since
January 1, 2003, any notice or other communication (whether
oral or written) from any Governmental Body or any other
Person regarding (A) any actual, alleged, possible, or
potential violation of or failure to comply with any term or
requirement of any Governmental Authorization, or (B) any
actual, proposed, possible, or potential revocation,
withdrawal, suspension, cancellation, termination of, or
modification to any Governmental Authorization; and
(iv) all applications required to have been filed for
the renewal of the Governmental Authorizations listed or
required to be listed in Part 3.14 of the Disclosure Letter
have been duly filed on a timely basis with the appropriate
Governmental Bodies, and all other filings required to have
been made with respect to such Governmental Authorizations
have been duly made on a timely basis with the appropriate
Governmental Bodies.
The Governmental Authorizations listed in Part 3.14 of the Disclosure
Letter collectively constitute all of the Governmental Authorizations
necessary to permit the Company to lawfully conduct and operate its
businesses in the manner it currently conducts and operates such
business and to permit the Company to own and use its assets in the
manner in which it currently owns and uses such assets
3.15 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in Part 3.15 of the Disclosure Letter,
there is no pending Proceeding:
(i) that has been commenced by or against the Company
or that otherwise relates to or may affect the business of, or
any of the assets owned or used by, the Company; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering
with, any of the Contemplated Transactions.
To the Knowledge of Owners and the Company, except as set forth in Part
3.15 of the Disclosure Letter (1) no such Proceeding has been
Threatened, and (2) no event has occurred or circumstance exists that
may give rise to or serve as a basis for the commencement of any such
Proceeding. Owners have delivered to Buyer copies of all pleadings,
correspondence, and other documents relating to each Proceeding listed
in Part 3.15 of the Disclosure Letter. The Proceedings listed in Part
3.15 of the Disclosure Letter will not have a material adverse effect
on the business, operations, assets, condition, or prospects of the
Company.
29
(b) Except as set forth in Part 3.15 of the Disclosure Letter:
(i) there is no Order to which the Company, or any of
the assets owned or used by the Company, is subject;
(ii) neither Owner is subject to any Order that
relates to the business of, or any of the assets owned or used
by, the Company; and
(iii) to the Knowledge of Owners and the Company, no
officer, director, agent, or employee of the Company is
subject to any Order that prohibits such officer, director,
agent, or employee from engaging in or continuing any conduct,
activity, or practice relating to the business of the Company.
(c) Except as set forth in Part 3.15 of the Disclosure Letter:
(i) the Company is, and at all times since January 1,
2003 has been, in full compliance with all of the terms and
requirements of each Order to which it, or any of the assets
owned or used by it, is or has been subject;
(ii) no event has occurred or circumstance exists
that may constitute or result in (with or without notice or
lapse of time) a violation of or failure to comply with any
term or requirement of any Order to which the Company, or any
of the assets owned or used by the Company, is subject; and
(iii) the Company has not received, at any time since
January 1, 2003, any notice or other communication (whether
oral or written) from any Governmental Body or any other
Person regarding any actual, alleged, possible, or potential
violation of, or failure to comply with, any term or
requirement of any Order to which the Company, or any of the
assets owned or used by the Company, is or has been subject.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set
forth in Part 3.16 of the Disclosure Letter, since the date of the
Interim Balance Sheet, the Company has conducted its business only in
the Ordinary Course of Business and there has not been any:
(a) change in the Company's authorized or issued
capital stock; grant of any stock option or right to purchase
shares of capital stock of the Company; issuance of any
security convertible into such capital stock; grant of any
registration rights; purchase, redemption, retirement, or
other acquisition by the Company of any shares of any such
capital stock; or declaration or payment of any dividend or
other distribution or payment in respect of shares of capital
stock, except that the Company may make distributions to the
Owners in sufficient amount to pay federal, state and local
income taxes, at the highest marginal tax rates applicable to
either Owner, on the net distributive share of the Company's
income, losses deductions and credits that have been
separately stated and passed through to the Owners under
Section 1366 of the IRC, which amount shall be determined
before taking into account the effect of the payment of the
bonuses referenced in clause (c) below;
(b) amendment to the Organizational Documents of the
Company;
(c) payment or increase by the Company of any
bonuses, salaries, or other compensation to any stockholder,
director, officer, or (except in the Ordinary Course of
30
Business) employee or entry into any employment, severance, or
similar Contract with any director, officer, or employee;
(d) adoption of, or increase in the payments to or
benefits under, any profit sharing, bonus, deferred
compensation, savings, insurance, pension, retirement, or
other employee benefit plan for or with any employees of the
Company, except as contemplated in clause (c) above;
(e) damage to or destruction or loss of any asset or
property of the Company, whether or not covered by insurance,
materially and adversely affecting the properties, assets,
business, financial condition, or prospects of the Company,
taken as a whole;
(f) entry into, early termination of, or receipt of
notice of termination of (i) any license, distributorship,
dealer, sales representative, joint venture, credit, or
similar agreement, or (ii) any Contract or transaction
involving a total remaining commitment by or to the Company of
at least $500,000;
(g) sale (other than sales of inventory in the
Ordinary Course of Business), lease, or other disposition of
any asset or property of the Company or mortgage, pledge, or
imposition of any lien or other encumbrance on any material
asset or property of the Company, including the sale, lease,
or other disposition of any of the Intellectual Property;
(h) cancellation or waiver of any claims or rights
with a value to the Company in excess of $250,000;
(i) material change or amendment to any credit
facility, loan agreement or other financings agreement to
which the Company is a party;
(j) any commitment, agreement or other arrangement
calling for the Company to make capital expenditures in excess
of $25,000 or entry into any lease obligation;
(k) material change or amendment to or termination of
or notice of termination of any agreement or other arrangement
with any vendor or customer;
(l) loss of any Key Employee or notice given by any
Key Employee that he or she intends to termination his or her
employment relationship with the Company;
(m) material change in the accounting methods used by
the Company; or
(n) agreement, whether oral or written, by the
Company to do any of the foregoing.
3.17 CONTRACTS; NO DEFAULTS.
(a) Part 3.17(a) of the Disclosure Letter contains a complete
and accurate list, and the Company has delivered to Buyer true and
complete copies, of the following (the "MATERIAL CONTRACTS"):
31
(i) each Company Contract that involves performance
of services or delivery of goods or materials by the Company
of an amount or value in excess of $1,000,000 within the
course of a year;
(ii) each Company Contract that involves performance
of services or delivery of goods or materials to the Company
of an amount or value in excess of $1,000,000 within the
course of a year;
(iii) each Company Contract that was not entered into
in the Ordinary Course of Business and that involves
expenditures or receipts of the Company in excess of $50,000;
(iv) each lease, rental or occupancy agreement,
license, installment and conditional sale agreement, and other
Company Contract affecting the ownership of, leasing of, title
to, use of, or any leasehold or other interest in, any real or
personal property (except personal property leases and
installment and conditional sales agreements having a value
per item or aggregate payments of less than $100,000 and with
terms of less than one year);
(v) each agreement (or standard form of agreement)
with current or former employees, consultants, or contractors
regarding the appropriation or the non-disclosure of any of
the Intellectual Property;
(vi) each collective bargaining agreement and other
Company Contract to or with any labor union or other employee
representative of a group of employees;
(vii) each joint venture, partnership, and other
Company Contract (however named) involving a sharing of
profits, losses, costs, or liabilities by the Company with any
other Person;
(viii) each Company Contract containing covenants
that in any way purport to restrict the business activity of
the Company or any affiliate of the Company or limit the
freedom of the Company or any affiliate of the Company to
engage in any line of business or to compete with any Person;
(ix) each Company Contract providing for payments to
or by any Person based on sales, purchases, or profits, other
than direct payments for goods;
(x) each power of attorney that is currently
effective and outstanding;
(xi) each Company Contract entered into other than in
the Ordinary Course of Business that contains or provides for
an express undertaking by the Company to be responsible for
consequential damages;
(xii) each Company Contract for capital expenditures
in excess of $100,000;
(xiii) each written warranty, guaranty, and other
similar undertaking with respect to contractual performance
executed by the Company other than in the Ordinary Course of
Business; and
32
(xiv) each amendment, supplement, and modification
(whether oral or written) in respect of any of the foregoing.
Part 3.17(a) of the Disclosure Letter sets forth the following details
concerning such Contracts: the parties to the Contracts, the date and
term of the Contracts, and the Company's office where details relating
to the Contracts are located.
(b) Except as set forth in Part 3.17(b) of the Disclosure
Letter:
(i) neither Owner (and no Related Person of either
Owner) has or may acquire any rights under, and neither Owner
has or may become subject to any obligation or liability
under, any Contract that relates to the business of, or any of
the assets owned or used by, the Company; and
(ii) to the Knowledge of Owners and the Company, no
officer, director, agent, employee, consultant, or contractor
of the Company is bound by any Contract that purports to limit
the ability of such officer, director, agent, employee,
consultant, or contractor to (A) engage in or continue any
conduct, activity, or practice relating to the business of the
Company, or (B) assign to the Company or to any other Person
any rights to any invention, improvement, or discovery.
(c) Except as set forth in Part 3.17(c) of the Disclosure
Letter, each Contract identified or required to be identified in Part
3.17(a) of the Disclosure Letter is in full force and effect and is
valid and enforceable in accordance with its terms.
(d) Except as set forth in Part 3.17(d) of the Disclosure
Letter:
(i) the Company is, and at all times since January 1,
2003 has been, in material compliance with all applicable
terms and requirements of each Contract under which it has or
had any obligation or liability or by which the Company or any
of the assets owned or used by the Company is or was bound;
(ii) each other Person that has or had any obligation
or liability under any Contract under which the Company has or
had any rights is, and at all times since January 1, 2003 has
been, in material compliance with all applicable terms and
requirements of such Contract;
(iii) no event has occurred or circumstance exists
that (with or without notice or lapse of time) may contravene,
conflict with, or result in a violation or breach of, or give
the Company or other Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any
Company Contract; and
(iv) the Company has not given to or received from
any other Person, at any time since January 1, 2003 any notice
or other communication (whether oral or written) regarding any
actual, alleged, possible, or potential violation or breach
of, or default under, any Contract.
(e) There are no renegotiations of, attempts to renegotiate,
or outstanding rights to renegotiate any material amounts paid or
payable to the Company under current or completed Contracts with any
Person and, to the Knowledge of Owners and the Company, no such Person
33
has made written demand for such renegotiation.
(f) The Contracts relating to the sale, design, manufacture,
or provision of products or services by the Company have been entered
into in the Ordinary Course of Business and have been entered into
without the commission of any act alone or in concert with any other
Person, or any consideration having been paid or promised, that is or
would be in violation of any Legal Requirement.
3.18 INSURANCE.
(a) The Company has delivered to Buyer:
(i) true and complete copies of all policies of
insurance to which the Company is a party or under which the
Company, or any director of the Company, is or has been
covered at any time within the three years preceding the date
of this Agreement;
(ii) true and complete copies of all pending
applications for policies of insurance; and
(iii) any statement by the auditor of the Company's
financial statements with regard to the adequacy of such
entity's coverage or of the reserves for claims.
(b) Part 3.18(b) of the Disclosure Letter describes:
(i) any self-insurance arrangement by or affecting
the Company, including any reserves established thereunder;
(ii) any contract or arrangement for the transfer or
sharing of any risk by the Company other than (A) a policy of
insurance, (B) those customer and vendor contracts incurred in
the Ordinary Course of Business involving potential
liabilities that are less than $1,000,000 over the course of a
year and (C) Company Contracts other than customer and vendor
contracts incurred in the Ordinary Course of Business
involving potential liabilities that are less than $100,000
over the course of a year; and
(iii) all obligations of the Company to third parties
with respect to insurance (including such obligations under
leases and service agreements) and identifies the policy under
which such coverage is provided, and involving potential
liabilities that are immaterial in amount.
(c) Part 3.18(c) of the Disclosure Letter sets forth, by year,
for the current policy year and each of the three preceding policy
years for each policy to which the Company is a party or under which
the Company, or any director of the Company, is or has been covered at
any time within the three years preceding the date of this Agreement
(excluding any applicable group health insurance policies) :
(i) a summary of the loss experience under each
policy;
(ii) a statement describing each claim under an
insurance policy for an amount in excess of $5,000 which sets
forth:
(A) the name of the claimant;
34
(B) a description of the policy by insurer,
type of insurance, and period of coverage; and
(C) the amount and a brief description of
the claim; and
(D) a statement describing the loss
experience for all claims that were self-insured,
including the number and aggregate cost of such
claims.
(d) Except as set forth on Part 3.18(d) of the Disclosure
Letter:
(i) All policies to which the Company is a party or
that provide coverage to either Owner, the Company, or any
director or officer of the Company:
(A) are valid, outstanding, and enforceable;
(B) to the knowledge of the Company and the
Owners, taken together, provide adequate insurance
coverage for the assets and the operations of the
Company;
(C) are sufficient for compliance with all
Legal Requirements and Contracts to which the Company
is a party or by which any of them is bound;
(D) will continue in full force and effect
following the consummation of the Contemplated
Transactions; and
(E) do not provide for any retrospective
premium adjustment or other experienced-based
liability on the part of the Company.
(ii) Neither of the Owners nor the Company has
received (A) any refusal of coverage or any notice that a
defense will be afforded with reservation of rights, or (B)
any notice of cancellation or any other indication that any
insurance policy is no longer in full force or effect or will
not be renewed or that the issuer of any policy is not willing
or able to perform its obligations thereunder.
(iii) The Company has paid all premiums due, and have
otherwise performed all of their respective obligations, under
each policy to which the Company is a party or that provides
coverage to the Company or director thereof.
(iv) The Company has given notice to the insurer of
all claims that may be insured thereby.
3.19 ENVIRONMENTAL MATTERS. Except as set forth in Part 3.19 of
the Disclosure Letter:
(a) The Company is, and at all times has been, in material
compliance with, and has not been and is not in violation of or liable
under, in any material respect, any Environmental Law.
(b) There are no pending or, to the Knowledge of Owners and
the Company, Threatened claims, Encumbrances, or other restrictions of
any nature, resulting from any Environmental, Health, and Safety
Liabilities or arising under or pursuant to any Environmental Law, with
respect to or affecting any of the Facilities or any other properties
and assets (whether
35
real, personal, or mixed) in which the Company has or had an interest.
(c) There are no Hazardous Materials present on or in the
Environment at the Facilities, including any Hazardous Materials
contained in barrels, above or underground storage tanks, landfills,
land deposits, dumps, equipment (whether moveable or fixed) or other
containers, either temporary or permanent, and deposited or located in
land, water, sumps, or any other part of the Facilities or such
adjoining property, or incorporated into any structure therein or
thereon, other than commercially reasonable quantities insecticides,
pesticides, cleaning supplies and other Hazardous Materials kept at the
Facilities in material compliance with applicable Environmental Laws
for use in the Ordinary Course of Business.
(d) There has been no Release or, to the Knowledge of Owners
and the Company, Threat of Release, of any Hazardous Materials at or
from the Facilities.
(f) The Company has delivered to Buyer true and complete
copies and results of any reports, studies, analyses, tests, or
monitoring possessed or initiated by Owners or the Company pertaining
to Hazardous Materials or Hazardous Activities in, on, or under the
Facilities, or concerning compliance by Owners, the Company, or any
other Person for whose conduct they are or may be held responsible,
with Environmental Laws.
3.20 EMPLOYEES.
(a) Part 3.20 of the Disclosure Letter contains a complete and
accurate list of the following information:
(i) the names, job titles and current salaries of all
officers and other salaried employees and sales
representatives of the Company;
(ii) the wage rates for non-salaried and
non-executive salaried employees of the Company, by
classification;
(iii) accrued vacation and service credited for
purposes of vesting and eligibility under all Employee Benefit Plans
through October 1, 2006; and
(b) Except as disclosed on Part 3.20 of the Disclosure Letter,
no employee or director of the Company is a party to, or is otherwise bound by,
any agreement or arrangement, including any confidentiality, noncompetition, or
proprietary rights agreement, between such employee or director and any other
Person ("PROPRIETARY RIGHTS AGREEMENT") that in any way adversely affects or
will affect (i) the performance of his duties as an employee or director of the
Company, or (ii) the ability of the Company to conduct its business, including
any Proprietary Rights Agreement with Owners or the Company by any such employee
or director. To Owners' Knowledge, no Key Employee of the Company intends to
terminate his employment with the Company.
(c) Except as disclosed on Part 3.20(c) of the Disclosure
Letter, each current and former employee of the Company has executed a
proprietary rights and inventions assignment agreement.
3.21 LABOR RELATIONS; COMPLIANCE. Since January 1, 2003, the Company
has not been a party to any collective bargaining or other labor Contract. Since
January 1, 2003, there has not been, there is not presently pending or existing,
and to Owners' Knowledge there is not Threatened, (a) any strike, slowdown,
picketing, work stoppage, or employee grievance process, (b) any Proceeding
against or affecting the Company relating to the alleged violation of any Legal
Requirement pertaining to labor relations or employment matters, including any
charge or complaint filed by an employee or union with
36
the National Labor Relations Board, the Equal Employment Opportunity Commission,
or any comparable Governmental Body, organizational activity, or other labor or
employment dispute against or affecting the Company or its premises, or (c) any
application for certification of a collective bargaining agent. To either
Owner's Knowledge, no event has occurred or circumstance exists that could
provide the basis for any work stoppage or other labor dispute. There is no
lockout of any employees by the Company, and no such action is contemplated by
the Company. The Company has complied in all respects with all Legal
Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and
health, and plant closing. The Company is not liable for the payment of any
compensation, damages, taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.
3.22 INTELLECTUAL PROPERTY.
(a) To the Knowledge of the Company and the Owners, the
Company has ownership or license or legal right to use all patent,
copyright, trade secret, trademark, customer lists, designs,
manufacturing or other processes, computer software, systems, data
compilation, research results or other proprietary rights used in the
business of the Company and material to the Company (collectively,
"INTELLECTUAL PROPERTY"), other than Intellectual Property generally
available on commercial terms from other sources. Except as set forth
in Part 3.22 of the Disclosure Letter, all of such patents, registered
trademarks and registered copyrights as to which the Company claims
ownership have been duly registered in, filed in or issued by the
United States Patent and Trademark Office, the United States Register
of Copyrights or the corresponding offices of other jurisdictions and
have been maintained and renewed in accordance with all applicable
provisions of law and administrative regulations in the United States
and all such jurisdictions.
(b) All material licenses or other material agreements under
which (i) the Company is granted rights in Intellectual Property, other
than Intellectual Property generally available on commercial terms from
other sources, and (ii) the Company has granted rights to others in
Intellectual Property owned or licensed by the Company, are in full
force and effect and, to the knowledge of the Company and the Owners,
there is no material default by the Company thereunder.
(c) Except as set forth in Part 3.22 of the Disclosure Letter,
the Company and the Owners believe they have taken all steps required
in accordance with sound business practice and business judgment to
establish and preserve the Company's ownership of all material
copyright, trade secret and other proprietary rights with respect to
its products and technology.
(d) To Owners' Knowledge, the present business, activities and
products of the Company do not infringe any intellectual property of
any other person, except where such infringement would not have a
material adverse effect on the Company. To Owners' Knowledge, no
proceeding charging the Company with infringement of any adversely held
Intellectual Property has been filed. To the Company's and the Owner's
Knowledge, there exists no unexpired patent or patent application held
by any other person which includes claims that would be infringed by or
otherwise have a material adverse effect on the Company. To Owners'
Knowledge, the Company is not making unauthorized use of any
confidential information or trade secrets of any person. Except as set
forth on Part 3.22(d) of the Disclosure Letter, neither the Company
nor, to the knowledge of the Company and the Owners, any of its
employees, have any agreements or arrangements with any persons other
than the Company related to confidential information or trade secrets
of such persons, other than agreements between the Company and its
customers and vendors entered into in the Ordinary Course of Business,
or any agreements restricting any such employee's engagement in
business activities of any nature.
37
(e) No proceedings have been instituted or are pending, or, to
Company's or Owners' Knowledge, have been threatened, which challenge
in a material manner the rights of the Company to the use of the
Intellectual Property. To the Knowledge of the Company and the Owners,
the Company has the right to use, free and clear of material claims or
rights of other persons, all of its customer lists, designs, computer
software, systems, data compilations, and other information that are
required for its products or its business as presently conducted.
3.23 CERTAIN PAYMENTS. Neither the Company nor any director,
officer, agent, or employee of the Company, or to Owners' Knowledge any other
Person associated with or acting for or on behalf of the Company, has directly
or indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any Person, private or public, regardless
of form, whether in money, property, or services in violation of any Legal
Requirement, (b) established or maintained any fund or asset that has not been
recorded in the books and records of the Company.
3.24 DISCLOSURE.
(a) No representation or warranty of Owners in this Agreement
and no statement in the Disclosure Letter omits to state a material
fact necessary to make the statements herein or therein, in light of
the circumstances in which they were made, not misleading.
(b) No notice given pursuant to Section 5.5 will contain any
untrue statement or omit to state a material fact necessary to make the
statements therein or in this Agreement, in light of the circumstances
in which they were made, not misleading.
(c) There is no fact known to either Owner that has specific
application to either Owner or the Company (other than general economic
or industry conditions) and that materially adversely affects the
assets, business, prospects, financial condition, or results of
operations of the Company that has not been set forth in this Agreement
or the Disclosure Letter.
3.25 RELATIONSHIPS WITH RELATED PERSONS. Except as set forth in Part
3.25 of the Disclosure Letter, neither of the Owners nor any Related Person of
Owners or of the Company has any interest in any property (whether real,
personal, or mixed and whether tangible or intangible), used in or pertaining to
the Company's businesses. No Owner or any Related Person of an Owner or of the
Company owns (of record or as a beneficial owner) an equity interest or any
other financial or profit interest in, a Person that has (i) had business
dealings or a material financial interest in any transaction with the Company
other than business dealings or transactions conducted in the Ordinary Course of
Business with the Company at substantially prevailing market prices and on
substantially prevailing market terms, or (ii) engaged in competition with the
Company with respect to any line of the products or services of the Company (a
"COMPETING BUSINESS") in any market presently served by the Company except for
less than one percent of the outstanding capital stock of any Competing Business
that is publicly traded on any recognized exchange or in the over-the-counter
market. Part 3.25 of the Disclosure Letter sets forth all material business
interests of each of the Owners, including equity ownership and directorships,
in any way relating to the Company or its business. Except as set forth in Part
3.25 of the Disclosure Letter, no Owner or any Related Person of Owners or of
the Company is a party to any Contract with, or has any claim or right against,
the Company.
3.26 BROKERS OR FINDERS. Except as set forth in Part 3.26 of the
Disclosure Letter, Owners and their agents have incurred no obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement.
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4. REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER.
Parent and Buyer represent and warrant to the Company as follows:
4.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Georgia. Parent is a corporation duly organized, validly existing, and in good
standing under the laws of the State of
California.
4.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer and Parent, enforceable against Buyer and Parent in
accordance with its terms. Upon the execution and delivery by Buyer of
the Escrow Agreement, the Employment Agreements, and the Registration
Rights Agreement (collectively, the "BUYER'S CLOSING DOCUMENTS"), the
Buyer's Closing Documents will constitute the legal, valid, and binding
obligations of Buyer, enforceable against Buyer in accordance with
their respective terms. Buyer has the absolute and unrestricted right,
power, and authority to execute and deliver this Agreement and the
Buyer's Closing Documents and to perform its obligations under this
Agreement and the Buyer's Closing Documents.
(b) Except as set forth in Schedule 4.2, neither the execution
and delivery of this Agreement by Buyer and Parent nor the consummation
or performance of any of the Contemplated Transactions will give any
Person the right to prevent, delay, or otherwise interfere with any of
the Contemplated Transactions pursuant to:
(i) any provision of Buyer's or Parent's
Organizational Documents;
(ii) any resolution adopted by the board of directors
or the stockholders of Buyer or Parent;
(iii) any Legal Requirement or Order to which Buyer
or Parent may be subject; or
(iv) any Contract to which Buyer or Parent is a party
or by which Buyer or Parent may be bound.
Except for the consent of Wachovia Bank, National Association and as set forth
in Schedule 4.2, neither Buyer nor Parent will be required to obtain any Consent
from any Person in connection with the execution and delivery of this Agreement
or the consummation or performance of any of the Contemplated Transactions.
4.3 CERTAIN PROCEEDINGS. There is no pending Proceeding that has
been commenced against Buyer or Parent that challenges, or may have the effect
of preventing, delaying, making illegal, or otherwise interfering with, any of
the Contemplated Transactions. To Buyer's and Parent's Knowledge, no such
Proceeding has been Threatened.
4.4 BROKERS OR FINDERS. Neither Buyer nor Parent, nor their
respective officers and agents have incurred any obligation or liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement and Buyer and Parent
will indemnify and hold Owners harmless from any such payment alleged to be due
by or through Buyer or Parent as a result of the action of Buyer, Parent or
their respective officers or agents.
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4.5 SEC FILINGS. Parent has made available to the Owners or the
Owners have had access through the ▇▇▇▇▇ filing system to accurate and complete
copies (excluding copies of exhibits) of each report, registration statement (on
a form other than Form S-3 or S-8) and definitive proxy statement filed by
Parent with the Securities and Exchange Commission (the "SEC") between January
1, 2003 and the date of this Agreement (the "PARENT SEC DOCUMENTS"). As of the
time it was filed with the SEC (or, if amended or superseded by a filing prior
to the date of this Agreement, then on the date of such filing): (i) each of the
Parent SEC Documents complied in all material respects with the applicable
requirements of the Securities Act or the Exchange Act, as the case may be; and
(ii) none of the Parent SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances Parent SEC Documents: (i) complied as to form in all material
respects with the published rules and regulations of the SEC applicable thereto;
(ii) were prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods covered, except as may be
indicated in the notes to such financial statements and (in the case of
unaudited statements) as permitted by Form 10-Q of the SEC, and except that
unaudited financial statements may not contain footnotes and are subject to
year-end audit adjustments; and (iii) fairly present the consolidated financial
position of the Parent and its subsidiaries as of the respective dates thereof
and the consolidated results of operations of the Parent and its subsidiaries
for the periods covered thereby.
4.6 VALID ISSUANCE. The Parent Common Stock to be issued in the
Contemplated Transactions, including the Parent Common Stock to be issued as
Contingent Payments, has been duly authorized and will, when issued in
accordance with the provisions of this Agreement, be validly issued, fully paid
and nonassessable and will not be subject to any restriction on resale under the
Securities Act, other than restrictions imposed by Rules 144 and 145 under the
Securities Act and restrictions imposed in the Registration Rights Agreement.
5. COVENANTS OF THE COMPANY AND THE OWNERS .
5.1 ACCESS AND INVESTIGATION. Between the date of this Agreement
and the Closing Date, Owners will, and will cause the Company and its
Representatives to, (a) afford Buyer and its Representatives and prospective
lenders and their Representatives (collectively, "BUYER'S ADVISORS") reasonable
access to the Company's personnel, properties, contracts, books and records, and
other documents and data (collectively, the "COMPANY INFORMATION"), (b) furnish
Buyer and Buyer's Advisors with copies of all such contracts, books and records,
and other existing documents and data as Buyer may reasonably request, and (c)
furnish Buyer and Buyer's Advisors with such additional financial, operating,
and other data and information as Buyer may reasonably request; provided,
however, that Buyer shall inform Owners prior to contacting any Company
employees. Buyer shall use Best Efforts to ensure that Buyer's Advisors maintain
the confidentiality of any Company Information.
5.2 OPERATION OF THE BUSINESS OF THE COMPANIES. Between the date
of this Agreement and the Closing Date, Owners will, and will cause the Company
to:
(a) conduct the business of the Company only in the Ordinary
Course of Business;
(b) use their Best Efforts to preserve intact the current
business organization of the Company, keep available the services of
the current officers, employees, and agents of the Company, and
maintain the relations and good will with suppliers, customers,
landlords, creditors, employees, agents, and others having business
relationships with the Company;
(c) confer with Buyer concerning operational matters of a
material nature and entry into any material agreements;
40
(d) not materially increase the compensation of any employee
of the Company or enter into any agreement with any such employee
except relating to the Employee Bonuses referenced in Section 2.8(a);
and
(e) otherwise report periodically to Buyer concerning the
status of the business, operations, and finances of the Company.
5.3 NEGATIVE COVENANT. Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, Owners will
not, and will cause the Company not to, without the prior written consent of
Buyer, take any affirmative action, or fail to take any reasonable action within
their or its control, as a result of which any of the changes or events listed
in Section 3.16 is likely to occur.
5.4 REQUIRED APPROVALS. As promptly as practicable after the date of
this Agreement, Owners will, and will cause the Company to, make all filings
required by Legal Requirements to be made by them in order to consummate the
Contemplated Transactions. Between the date of this Agreement and the Closing
Date, Owners will, and will cause the Company to, (a) cooperate with Buyer with
respect to all filings that Buyer elects to make or is required by Legal
Requirements to make in connection with the Contemplated Transactions, and (b)
cooperate with Buyer in obtaining all Consents identified in Schedule 4.2.
5.5 NOTIFICATION. Between the date of this Agreement and the Closing
Date, each Owner will promptly notify Buyer in writing if such Owner or the
Company becomes aware of any fact or condition that causes or constitutes a
material Breach of any of Owners' or the Company's representations and
warranties as of the date of this Agreement. Owners will deliver to Buyer an
updated Disclosure Letter within two (2) business days prior to the Closing
Date.
5.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS. Except as expressly
provided in this Agreement, Owners will cause all indebtedness owed to the
Company by either Owner or any Related Person of either Owner to be paid in full
prior to Closing.
5.7 NO NEGOTIATION. Until such time, if any, as this Agreement is
terminated pursuant to Section 9, Owners will not, and will cause the Company
and each of their Representatives not to, directly or indirectly solicit,
initiate, or encourage any inquiries or proposals from, discuss or negotiate
with, provide any non-public information to, or consider the merits of any
unsolicited inquiries or proposals from, any Person (other than Buyer) relating
to any transaction involving the sale of the business or assets (other than in
the Ordinary Course of Business) of the Company, or any of the capital stock of
the Company, or any merger, consolidation, business combination, or similar
transaction involving the Company.
5.8 BEST EFFORTS. Between the date of this Agreement and the Closing
Date, Owners will use their Best Efforts to cause the conditions in Sections 7
and 8 to be satisfied.
5.9 SALE OF ▇▇▇▇▇▇ STOCK TO BUYER. As soon as practicable following the
Closing, ▇▇▇▇▇▇ shall execute that certain Stock Purchase Agreement between
▇▇▇▇▇▇ and the Buyer (the "▇▇▇▇▇▇ Stock Purchase Agreement"), pursuant to which
all of the capital stock of the Company owned by ▇▇▇▇▇▇ shall be conveyed to the
Buyer.
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE.
6.1 APPROVALS OF GOVERNMENTAL BODIES. As promptly as practicable after
the date of this Agreement, Buyer will, and will cause each of its Related
Persons to, make all filings required by Legal
41
Requirements to be made by them to consummate the Contemplated Transactions.
Between the date of this Agreement and the Closing Date, Buyer will, and will
cause each Related Person to, cooperate with Owners with respect to all filings
that Owners are required by Legal Requirements to make in connection with the
Contemplated Transactions, and (ii) cooperate with Owners in obtaining all
Consents identified in Part 3.2 of the Disclosure Letter; provided that this
Agreement will not require Buyer to dispose of or make any change in any portion
of its business or to incur any other burden to obtain a Governmental
Authorization.
6.2 BEST EFFORTS. Except as set forth in the proviso to Section
6.1, between the date of this Agreement and the Closing Date, Buyer will use its
Best Efforts to cause the conditions in Sections 7 and 8 to be satisfied.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE.
Buyer's obligation to purchase the Assets and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Buyer, in whole or in part):
7.1 ACCURACY Of REPRESENTATIONS.
(a) All of the Company's and Owners' representations and
warranties in this Agreement (considered collectively), and each of
these representations and warranties (considered individually), must
have been accurate in all material respects as of the date of this
Agreement, and must be accurate in all material respects as of the
Closing Date as if made on the Closing Date, without giving effect to
any supplement to the Disclosure Letter.
(b) Each of the Company's and Owners' representations and
warranties in Sections 3.3, 3.4, 3.12, and 3.24 must have been accurate
in all respects as of the date of this Agreement, and must be accurate
in all respects as of the Closing Date as if made on the Closing Date,
without giving effect to any supplement to the Disclosure Letter.
7.2 OWNERS' PERFORMANCE.
(a) All of the covenants and obligations that Owners are
required to perform or to comply with pursuant to this Agreement at or
prior to the Closing (considered collectively), and each of these
covenants and obligations (considered individually), must have been
duly performed and complied with in all material respects.
(b) Each document required to be delivered pursuant to Section
2.7 must have been delivered, and each of the other covenants and
obligations in Sections 5.4 and 5.8 must have been performed and
complied with in all respects.
7.3 CONSENTS. Each Closing Required Consent identified in Part 3.2
of the Disclosure Letter shall have been obtained prior to the Closing. Each
Consent identified in Schedule 4.2 must have been obtained and must be in full
force and effect.
7.4 ADDITIONAL DOCUMENTS. Owners shall have delivered to Buyer such
other documents as Buyer may reasonably request for the purpose of (i)
evidencing the accuracy of any of Owners' representations and warranties, (ii)
evidencing the performance by either Owner of, or the compliance by either Owner
with, any covenant or obligation required to be performed or complied with by
such Owner, (iii) evidencing the satisfaction of any condition referred to in
this Section 7, or (iv) otherwise facilitating the consummation or performance
of any of the Contemplated Transactions.
42
7.5 NO PROCEEDINGS. Since the date of this Agreement, there must not
have been commenced or Threatened against Buyer, or against any Person
affiliated with Buyer, any Proceeding (a) involving any challenge to, or seeking
damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with any of the Contemplated Transactions.
7.6 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS. There must not
have been made or Threatened by any Person any claim asserting that such Person
(a) is the holder or the beneficial owner of, or has the right to acquire or to
obtain beneficial ownership of, any stock of, or any other voting, equity, or
ownership interest in, the Company, or (b) is entitled to all or any portion of
the Purchase Price payable for the Shares.
7.7 NO PROHIBITION. Neither the consummation nor the performance of any
of the Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time), materially contravene, or conflict with, or result in
a material violation of, or cause Buyer or any Person affiliated with Buyer to
suffer any material adverse consequence under, (a) any applicable Legal
Requirement or Order, or (b) any Legal Requirement or Order that has been
published, introduced, or otherwise formally proposed by or before any
Governmental Body.
7.8 MATERIAL ADVERSE CHANGE. Since the date of this Agreement, there
shall not have been any Material Adverse Change with respect to the Company.
8. CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATION TO CLOSE.
The Company's obligation to sell the Assets and to take the other
actions required to be taken by Company at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Owners, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS. All of Buyer's representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), must have been
accurate in all material respects as of the date of this Agreement and must be
accurate in all material respects as of the Closing Date as if made on the
Closing Date.
8.2 BUYER'S PERFORMANCE.
(a) All of the covenants and obligations that Buyer is
required to perform or to comply with pursuant to this Agreement at or
prior to the Closing (considered collectively), and each of these
covenants and obligations (considered individually), must have been
performed and complied with in all material respects.
(b) Buyer must have delivered each of the documents required
to be delivered by Buyer pursuant to Section 2.7 and must have made the
cash payments required to be made by Buyer pursuant to Sections
2.3(b)(i) and 2.3(b)(ii).
8.3 CONSENTS. Each Closing Required Consent identified in Part 3.2 of
the Disclosure Letter shall have been obtained prior to Closing. Each Consent
identified in Schedule 4.2 must have been obtained and must be in full force and
effect.
8.4 NO INJUNCTION. There must not be in effect any Legal Requirement or
any injunction or other Order that (a) prohibits the sale of the Shares by
Owners to Buyer, and (b) has been adopted or issued, or has otherwise become
effective, since the date of this Agreement.
43
8.5 LISTING OF SHARES. Parent shall continue to qualify for listing on
the NASDAQ Global Market for a period of one year
8.6 MATERIAL ADVERSE CHANGE. Since the date of this Agreement, there
shall not have been any Material Adverse Change with respect to the Buyer.
8.7. PARENT CHANGE OF CONTROL. Since the date of this Agreement, there
shall not have been a Parent Change of Control Transaction (or any agreement to
effect the same) or any material change in Parent's Board of Directors or senior
management.
9. TERMINATION.
9.1 TERMINATION EVENTS. This Agreement may, by notice given prior to or
at the Closing, be terminated:
(a) by either Buyer or the Company if a material Breach of any
provision of this Agreement has been committed by the other party and
such Breach has not been waived;
(b) (i) by Buyer if any of the conditions in Section 7 has not
been satisfied as of the Closing Date or if satisfaction of such a
condition is or becomes impossible (other than through the failure of
Buyer to comply with its obligations under this Agreement) and Buyer
has not waived such condition on or before the Closing Date; or (ii) by
Owners, if any of the conditions in Section 8 has not been satisfied as
of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Owners to comply
with their obligations under this Agreement) and Owners have not waived
such condition on or before the Closing Date;
(c) by mutual consent of Buyer and the Company; or
(d) by either Buyer or the Company if the Closing has not
occurred (other than through the failure of any party seeking to
terminate this Agreement to comply fully with its obligations under
this Agreement) on or before October 31, 2006 or such later date as the
parties may agree upon.
9.2 EFFECT OF TERMINATION. Each party's right of termination under
Section 9.1 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated pursuant to Section 9.1, all
further obligations of the parties under this Agreement will terminate, except
that the obligations in Sections 11.1 and 11.3 will survive; provided, however,
that if this Agreement is terminated by a party because of the Breach of the
Agreement by the other party or because one or more of the conditions to the
terminating party's obligations under this Agreement is not satisfied as a
result of the other party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies will
survive such termination unimpaired.
10. INDEMNIFICATION; REMEDIES.
10.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE. Each
Owner's representations, warranties, covenants, and obligations in this
Agreement, the Disclosure Letter, the supplements to the Disclosure Letter, the
certificate delivered pursuant to Section 2.7(a)(viii), and any other
certificate or document delivered pursuant to this Agreement will survive the
Closing. The right to indemnification, payment of Damages or other remedy based
on such representations, warranties, covenants, and obligations will not be
affected by any investigation conducted with respect to, or any
44
Knowledge acquired (or capable of being acquired) at any time, whether before or
after the execution and delivery of this Agreement or the Closing Date, with
respect to the accuracy or inaccuracy of or compliance with, any such
representation, warranty, covenant, or obligation. The waiver of any condition
based on the accuracy of any representation or warranty, or on the performance
of or compliance with any covenant or obligation, will not affect the right to
indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY OWNERS. Each Owner, in
his or her capacity as former or current equity owner of the Company, will
indemnify and hold harmless Buyer, the Company, and their respective
Representatives, shareholders, controlling persons, and affiliates
(collectively, the "OWNER INDEMNIFIED PERSONS") for, and will pay to the Owner
Indemnified Persons the amount of, any loss, liability, claim, damage (including
incidental and consequential damages), expense (including costs of investigation
and defense and reasonable attorneys' fees) or diminution of value, whether or
not involving a third-party claim (collectively, "DAMAGES"), arising, directly
or indirectly, from or in connection with:
(a) any Breach of any representation or warranty made by such
Owner in this Agreement, the Disclosure Letter, the supplements to the
Disclosure Letter, the Owners' Closing Documents, the ▇▇▇▇▇▇ Stock
Purchase Agreement or any other certificate or document delivered by
Owners pursuant to this Agreement;
(b) any Breach by such Owner of any covenant or obligation of
such Owner in this Agreement;
(c) any Breach by such Owner of such Owner's obligations under
Section 11 of this Agreement; or
(d) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with either
Owner or the Company (or any Person acting on their behalf) in
connection with any of the Contemplated Transactions.
Notwithstanding anything contained in this Agreement to the contrary, absent
fraud or an intentional Breach by either of the Owners, after the Closing, the
indemnification pursuant to the provisions of this Section 10 shall be the
exclusive remedy for the parties hereto for any Breach of any representation or
warranty, covenant or other provision contained in this Agreement or certificate
delivered pursuant hereto, for any Damages or other amounts (including, without
limitation, any Damages relating to Environment, Health and Safety Liabilities
or any Tax matters) arising under the indemnification obligations set forth
herein or otherwise in respect of the Contemplated Transactions. The Owners
hereby waive any rights they may have to any contribution or indemnification
from the Company for any Damages.
10.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Buyer will
indemnify and hold harmless each of the Owners (collectively, the "BUYER
INDEMNIFIED PERSONS") for, and will pay to the Buyer Indemnified Persons the
amount of any Damages, arising, directly or indirectly, from or in connection
with:
(a) any Breach of any representation or warranty by Buyer in
this Agreement or Buyer's Closing Documents, or any other certificate
or document delivered by Buyer pursuant to this Agreement;
45
(b) any Breach by Buyer of any covenant or obligation of Buyer
in this Agreement;
(c) any claim by any Person for brokerage or finder's fees or
commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with Buyer
(or any Person acting on Buyer's behalf) in connection with any of the
Contemplated Transactions; or
(d) any Assumed Liability.
10.4 TIME LIMITATIONS. If the Closing occurs, neither of the Owners
will have liability (for indemnification or otherwise) with respect to any
representation or warranty, or covenant or obligation to be performed and
complied with prior to the Closing Date, unless on or before October 2, 2008,
Buyer notifies Owners of a claim specifying the factual basis of that claim in
reasonable detail to the extent then known by Buyer; provided, however, that a
claim with respect to fraud or intentional Breach, may be made at any time prior
to the expiration of any applicable statute of limitations. If the Closing
occurs, Buyer will have no liability (for indemnification or otherwise) with
respect to any representation or warranty, or covenant or obligation to be
performed and complied with prior to the Closing Date, unless on or before
October 2, 2008, Owners notify Buyer of a claim specifying the factual basis of
that claim in reasonable detail to the extent then known by Owners.
10.5 LIMITATIONS ON AMOUNT. Neither Buyer, Parent, nor either of
the Owners will have liability (for indemnification or otherwise) with respect
to the matters described in Section 10.2, as applied to the Owners, or with
respect to the matters described in Section 10.3, as applied to the Buyer or
Parent, until the total of all Damages with respect to such matters exceeds
$150,000, and then only for such Damages in excess of $150,000. However, the
limitations of this Section 10.5 will not apply to any fraud or intentional
misrepresentation or any intentional Breach by either Owner of any covenant or
obligation. With respect to any Breach for which both Owners are liable, the
Owners will be severally but not jointly liable for their pro rata share of
Damages with respect to such Breach in accordance with each Owner's
proportionate ownership of the Company as of the Closing Date. Owners'
individual liability for Damages under this Section 10 of the Agreement, other
than Damages resulting from fraud or intentional misrepresentation, shall not
exceed in the aggregate $4,000,000 per Owner, and neither Buyer, Parent nor any
Indemnified Person shall be entitled to indemnification hereunder in excess of
an aggregate amount of $8,000,000 (the "INDEMNIFICATION CAP"). Buyer's or
Parent's liability for Damages under Section 10 of the Agreement, other than
Damages resulting from fraud or intentional misrepresentation, shall not exceed
in the aggregate the Indemnification Cap and, other than for Damages resulting
from fraud or intentional misrepresentation neither Owners nor any Indemnified
Person shall be entitled to indemnification hereunder in excess of the
Indemnification Cap. Any amounts set off by Buyer pursuant to Section 10.6 shall
count toward the Indemnification Cap.
10.6 BUYER RIGHT OF SET-OFF. Buyer shall first set off any amount
to which it may be entitled under this Section 10 against any amounts otherwise
earned and payable to Owners pursuant to Section 2.10, if any. The exercise of
such right of set-off by Buyer in good faith, whether or not ultimately
determined to be justified, will not constitute an event of default under this
Agreement or any related agreements. Neither the exercise of nor the failure to
exercise such right of set-off will constitute an election of remedies or limit
Buyer in any manner in the enforcement of any other remedies that may be
available to it. In the event that amounts earned and payable to Owners pursuant
to Section 2.10 are insufficient to satisfy the full amount of Damages to which
Buyer is entitled under this Section 10, Owners shall remain jointly and
severally liable to Buyer for such Damages to the extent of the Indemnification
Cap.
10.7 PROCEDURE FOR INDEMNIFICATION -- THIRD PARTY CLAIMS.
46
(a) Promptly after receipt by an indemnified party of notice
of the commencement of any Proceeding against it, such indemnified
party will, if a claim is to be made against an indemnifying party
under such Section, give notice to the indemnifying party of the
commencement of such claim, but the failure to notify the indemnifying
party will not relieve the indemnifying party of any liability that it
may have to any indemnified party, except to the extent that the
indemnifying party demonstrates that the defense of such action is
prejudiced by the indemnified party's failure to give such notice.
(b) If any Proceeding referred to in Section 10.6(a) is
brought against an indemnified party and it gives notice to the
indemnifying party of the commencement of such Proceeding, the
indemnifying party will, unless the claim involves Taxes, be entitled
to participate in such Proceeding and, to the extent that it wishes
(unless (i) the indemnifying party is also a party to such Proceeding
and the indemnified party determines in good faith that joint
representation would be inappropriate, or (ii) the indemnifying party
fails to provide reasonable assurance to the indemnified party of its
financial capacity to defend such Proceeding and provide
indemnification with respect to such Proceeding), to assume the defense
of such Proceeding with counsel satisfactory to the indemnified party
and, after notice from the indemnifying party to the indemnified party
of its election to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently conducts such
defense, be liable to the indemnified party under this Section 10 for
any fees of other counsel or any other expenses with respect to the
defense of such Proceeding, in each case subsequently incurred by the
indemnified party in connection with the defense of such Proceeding,
other than reasonable costs of investigation. If the indemnifying party
assumes the defense of a Proceeding, (i) it will be conclusively
established for purposes of this Agreement that the claims made in that
Proceeding are within the scope of and subject to indemnification; (ii)
no compromise or settlement of such claims may be effected by the
indemnifying party without the indemnified party's consent unless (A)
there is no finding or admission of any violation of Legal Requirements
or any violation of the rights of any Person and no effect on any other
claims that may be made against the indemnified party, and (B) the sole
relief provided is monetary damages that are paid in full by the
indemnifying party; and (iii) the indemnifying party will have no
liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying
party of the commencement of any Proceeding and the indemnifying party
does not, within ten days after the indemnified party's notice is
given, give notice to the indemnified party of its election to assume
the defense of such Proceeding, the indemnifying party will be bound by
any determination made in such Proceeding or any compromise or
settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a
result of monetary damages for which it would be entitled to
indemnification under this Agreement, the indemnified party may, by
notice to the indemnifying party, assume the exclusive right to defend,
compromise, or settle such Proceeding, but the indemnifying party will
not be bound by any determination of a Proceeding so defended or any
compromise or settlement effected without its consent (which may not be
unreasonably withheld).
(d) Owners hereby consent to the non-exclusive jurisdiction of
any court in which a Proceeding is brought against any Indemnified
Person for purposes of any claim that an Indemnified Person may have
under this Agreement with respect to such Proceeding or the matters
alleged therein, and agree that process may be served on Owners with
respect to such a claim anywhere in the world.
10.8 PROCEDURE FOR INDEMNIFICATION -- OTHER CLAIMS. A claim for
indemnification for any
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matter not involving a third-party claim may be asserted by notice to the party
from whom indemnification is sought.
11. NON-COMPETITION AND NON-SOLICITATION.
11.1 COVENANT NOT TO COMPETE. For five (5) years following the
Closing Date, or thirty-six (36) months following an Owner's termination of
employment from the Company, whether voluntary or involuntary, whichever is
longer (the "NON-COMPETITION TERM"), each Owner promises and agrees that such
Owner will not enter into any position in which such Owner has direct or
indirect responsibility for selling and/or marketing IT products and services
for any company or business organization located in the United States, that is
engaged in the same or similar business as that conducted by Parent or any of
its affiliates while such Owner was an employee of the Parent or any of its
affiliates and which competes with Parent or any of its affiliates. Each Owner
acknowledges that he or she has been responsible for selling and marketing IT
products and services for the Company throughout the United States and that he
or she will be responsible for selling and marketing IT products and services
throughout the United States for the Parent or an affiliate of the Parent.
11.2 NON-SOLICITATION OF EMPLOYEES. During the Non-competition
Term, neither Owner shall directly or indirectly encourage or solicit any
employee, consultant, or independent contractor with whom such Owner had contact
while employed with the Parent, Buyer or an affiliate of either Parent or Buyer,
to leave the employment or service of the Parent, Buyer, or any of their
affiliates for any reason or interfere in any manner with such relationships
between the Parent, Buyer, or any of their affiliates and employees, consultants
and independent contractors.
11.3 NON-SOLICITATION OF CUSTOMERS. During the Non-competition
Term, neither Owner shall directly or indirectly solicit any customer, vendor,
supplier, licensor, licensee or other business affiliate of the Parent, Buyer or
any of their affiliates on behalf of such Owner or any other third party. This
provision shall only apply to customers, vendors, suppliers, licensors,
licensees, or business affiliates with whom an Owner had material contact while
employed by ProSys, Parent, Buyer or one of their affiliates and shall only
restrict an Owner from soliciting products or services to said entities
competitive with those offered by the Parent, Buyer or one of their affiliates
during such Owner's employment with ProSys or the Parent, Buyer or one of their
affiliates.
11.4 TERMINATION OF COVENANTS. The provisions of this Section 11 shall
automatically terminate with respect to Clery:
(i) as of the effective date of any Parent Change of Control
Transaction;
(ii) as of the effective date of any Buyer Change of Control
Transaction and/or Company Change of Control Transaction which has the
effect of prematurely terminating or discharging Buyer's obligation to
pay Contingent Payments (excluding any such transaction in which (A)
said obligation is assumed by one or more of the parties to said
transaction, or (B) Clery is paid her pro rata portion of the
Annualized Contribution or Change of Control Proceeds); provided,
however that for the remainder of the Non-competition Term Clery shall
not enter into any employment relationship (whether as a principal,
agent, executive, consultant or board member) with any company or
business organization that is engaged in the same or similar business
as that conducted by any Parent Tier-1 Subsidiary; or
(iii) as of the effective date of termination of Clery's
employment due to any of the circumstances described in Section 9 or
10(b) of her Employment Agreement.
11.5 SURVIVAL OF COVENANTS. Unless terminated pursuant to the terms
of Section 11.4,
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the provisions of this Section 11 and the obligations of Owners hereunder shall
survive the Closing.
12. GENERAL PROVISIONS.
12.1 EXPENSES. Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, counsel, and accountants. Company will accrue prior to
the Closing and pay all amounts payable to The Breckenridge Group, Inc. or any
other finder or investment banker retained or engaged by Company or the Owners
and all fees and expenses of agents, representatives, counsel, and accountants
retained by Company or the Owners in connection with this Agreement and the
Contemplated Transactions. The amount of the dividend payable to the Owners
post-Closing shall be reduced by the amount all such investment banking and
professional fees and expenses exceed $300,000. In the event of termination of
this Agreement, the obligation of each party to pay its own expenses will be
subject to any rights of such party arising from a breach of this Agreement by
another party.
12.2 PUBLIC ANNOUNCEMENTS. Any public announcement or similar
publicity with respect to this Agreement or the Contemplated Transactions will
be issued, if at all, at such time and in such manner as Buyer determines.
Unless consented to by Buyer in advance or required by Legal Requirements, prior
to the Closing Owners shall, and shall cause the Company to, keep this Agreement
strictly confidential and may not make any disclosure of this Agreement to any
Person. Owners and Buyer will consult with each other concerning the means by
which the Company's employees, customers, and suppliers and others having
dealings with the Company will be informed of the Contemplated Transactions, and
Buyer will have the right to be present for any such communication.
12.3 CONFIDENTIALITY. Between the date of this Agreement and the
Closing Date, Buyer and Owners will maintain in confidence, and will cause the
directors, officers, employees, agents, and advisors of Buyer and the Company to
maintain in confidence, and not use to the detriment of another party or the
Company any written, oral, or other information obtained in confidence from
written information stamped "confidential" when originally furnished by another
party or the Company in connection with this Agreement or the Contemplated
Transactions, unless (a) such information is already known to such party or to
others not bound by a duty of confidentiality or such information becomes
publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the Contemplated
Transactions, or (c) the furnishing or use of such information is required by or
necessary or appropriate in connection with legal proceedings. If the
Contemplated Transactions are not consummated, each party will return or destroy
as much of such written information as the other party may reasonably request.
12.4 NOTICES. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by telecopier (with written confirmation of receipt),
provided that a copy is mailed by registered mail, return receipt requested, (c)
when received by the addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), in each case to the appropriate addresses
and telecopier numbers set forth below (or to such other addresses and
telecopier numbers as a party may designate by notice to the other parties) or
(d) when a read receipt of an email sent to the appropriate email addresses
below is received by the sender of any such email:
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Company:
ProSys Information Systems, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: _________________
Attn: President
Owners:
▇▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Email:
▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇
355 ▇▇▇▇▇ ▇▇▇▇ Pt.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Email:
With a copy to:
Mr. ▇▇▇▇▇ ▇▇▇▇, Esq.
▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ PLLC
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇@▇▇▇▇▇▇.▇▇▇
Buyer:
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Operating Officer, Chief Financial Officer and
President Americas
▇▇▇▇ Microproducts, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇.▇▇▇
With a copy to:
▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.A.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇
12.5 JURISDICTION; SERVICE OF PROCESS. Any Proceeding seeking to
enforce any provision of, or based on any right arising out of, this Agreement
may be brought against any of the parties in the courts
50
of the State of
California, County of Santa ▇▇▇▇▇ or, if it has or can acquire
jurisdiction, in the United States District Court for the Northern District of
California, San ▇▇▇▇ Division and each of the parties consents to the
jurisdiction of such courts (and of the appropriate appellate courts) in any
such Proceeding and waives any objection to venue laid therein. Process in any
Proceeding referred to in the preceding sentence may be served on any party
anywhere in the world.
12.6 DISPUTE RESOLUTION.
(a) Advisory Committee. In order to attempt to resolve any
disputes that may arise under this Agreement, the parties hereto will
form an advisory committee (the "ADVISORY Committee") consisting of one
(1) representative designated by Buyer and one (1) representative
designated by Owners. The Advisory Committee will meet as needed to
monitor compliance by each side with the provisions of this Agreement,
including any Dispute, defined in Section 12.6(b).
(b) Initial Settlement. With respect to any controversy,
dispute or claim arising out of or relating to this Agreement,
including, but not limited to, those arising under Sections 2.5, 2.10,
Section 10, Section 11 and the Employment Agreements, any of which are
referred to herein as a "DISPUTE"), the Advisory Committee shall first
attempt to settle the matter through good faith negotiation within
fifteen (15) days after written notice is given by one party to the
other of the controversy or claim. The parties thereafter, if unable to
settle the Dispute, shall submit the Dispute to mediation before a
single mediator selected by the parties. If the parties cannot agree on
a mediator, then upon the request of either party, the Center for
Public Resources ("CPR") shall appoint a mediator from the CPR Panel of
Neutrals. The recommendation of the mediator shall not be binding on
the parties and the cost of the mediation, exclusive of a party's own
attorneys' fees, but including the fee of the mediator, shall be
divided equally between Owners and Buyer.
12.7 FURTHER ASSURANCES. The parties agree (a) to furnish upon request
to each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
12.8 WAIVER. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by any
party in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such
notice or demand to take further action without notice or demand as provided in
this Agreement or the documents referred to in this Agreement.
12.9 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter
(including the Letter of Intent between Buyer and Owners dated May 2, 2006) and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement executed by the party to be charged with the amendment.
12.10 DISCLOSURE LETTER.
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(a) The disclosures in the Disclosure Letter, and those in any
Supplement thereto, must relate only to the representations and
warranties in the Section of the Agreement to which they expressly
relate and not to any other representation or warranty in this
Agreement, unless explicitly cross-referenced in the disclosure
relating to such other representation or warranty.
(b) In the event of any inconsistency between the statements
in the body of this Agreement and those in the Disclosure Letter (other
than an exception expressly set forth as such in the Disclosure Letter
with respect to a specifically identified representation or warranty),
the statements in the body of this Agreement will control.
12.11 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. Neither party
may assign any of its rights under this Agreement without the prior consent of
the other parties, which will not be unreasonably withheld, except that Buyer
may assign any of its rights under this Agreement to any Subsidiary of Buyer,
and the Company may assign its rights to payment of any portion of the Purchase
Price to Owners or any current employees of the Company. Subject to the
preceding sentence, this Agreement will apply to, be binding in all respects
upon, and inure to the benefit of the successors and permitted assigns of the
parties. Nothing expressed or referred to in this Agreement will be construed to
give any Person other than the parties to this Agreement any legal or equitable
right, remedy, or claim under or with respect to this Agreement or any provision
of this Agreement. This Agreement and all of its provisions and conditions are
for the sole and exclusive benefit of the parties to this Agreement and their
successors and assigns.
12.12 SEVERABILITY. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
12.13 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "SECTION" or "SECTIONS" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
12.14 TIME OF ESSENCE. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
12.15 GOVERNING LAW. This Agreement will be governed by the laws of the
State of
California without regard to conflicts of laws principles.
12.16 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
BUYER: OWNERS:
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Its: Chief Financial Officer
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
PARENT: COMPANY:
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Its: Chief Financial Officer Its: President
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