ASSET PURCHASE AGREEMENT
by and between
FACTUAL DATA CORP.
and
OXBOW ENTERPRISES, INC.
Dated as of January 4, 1999
ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
Page
RECITALS..........................................................1
ARTICLE I
DEFINITIONS....................................................1
ARTICLE II
ACQUISITION OF THE ASSETS......................................3
2.1 Delivery Of Assets.....................................3
2.2 Purchase Price for Assets..............................4
2.3 Assumed Liabilities....................................4
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDERS......5
3.1 Organization and Qualification Of Seller...............5
3.2 Authorized Capitalization..............................5
3.3 Authorization..........................................5
3.4 Product Rights.........................................6
3.5 Bulk Sale Law..........................................6
3.6 No Conflicting Agreements..............................6
3.7 Compliance with Applicable Law.........................6
3.8 Material Misstatements or Omissions....................6
3.9 No Known Adverse Effects...............................6
3.10 Consents and Approvals.................................6
3.11 Subsidiaries...........................................7
3.12 Litigation.............................................7
3.13 Brokers................................................7
3.14 Taxes..................................................7
3.15 Ownership..............................................7
3.16 Accounts...............................................7
3.17 License Agreements.....................................8
3.18 Intellectual Property..................................8
3.19 Customers..............................................8
3.20 Contracts..............................................8
3.21 Financial Statements...................................8
3.22 Absence of Undisclosed or Contingent Liabilities.......9
3.23 No Material Adverse Changes............................9
3.24 Absence of Developments................................9
3.25 Title to Properties....................................9
3.26 Tax Matters...........................................10
3.27 Tax Notices...........................................10
3.28 Employees.............................................11
3.29 Employee Benefit Plans................................11
3.30 Gifts.................................................12
3.31 Employee Health and Safety............................12
3.32 Representations as to Knowledge.......................12
3.33 Representations Concerning Solvency...................12
3.34 Y2K...................................................12
ARTICLE IV
PRE-CLOSING COVENANTS OF SELLER...............................12
4.1 Inspection of Properties and Books....................13
4.2 Other Contracts.......................................13
4.3 Ongoing Operation.....................................13
4.4 Indebtedness..........................................13
4.5 Records...............................................13
4.6 Articles of Incorporation; Bylaws.....................13
4.7 Distributions or Dividends............................14
4.8 Notice of Breach......................................14
4.9 Nondisclosure.........................................14
4.10 Employment Matters....................................14
4.11 Insurance.............................................14
4.12 Preservation of Business..............................15
4.13 Regulatory Filings....................................15
4.14 No Negotiations.......................................15
4.15 Assignment of Contracts, Leases and Other Agreements..16
4.16 Best Efforts..........................................16
4.17 Additional Disclosure.................................16
ARTICLE V
POST-CLOSING COVENANTS........................................16
5.1 Further Assurances....................................16
5.2 Litigation Support....................................16
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER...................17
6.1 Organization and Qualification of Purchaser...........17
6.2 Authorization.........................................17
6.3 No Conflicting Agreements.............................17
6.4 Compliance with Applicable Law........................17
6.5 Litigation............................................17
6.6 Material Misstatements or Omissions...................17
6.7 Consents and Approvals................................18
6.8 Brokers...............................................18
6.9 Representations as to Knowledge.......................18
ARTICLE VII
COVENANTS OF PURCHASER........................................18
7.1 Other Contracts.......................................18
7.2 Additional Disclosure.................................18
7.3 Notice of Breach......................................18
7.4 Nondisclosure.........................................18
7.5 Best Efforts..........................................19
7.6 Regulatory Filings....................................19
7.7 Non-Compete and Confidentiality Agreements............19
7.8 Employment Agreements.................................19
ARTICLE VIII
CONDITIONS PRECEDENT TO CLOSING...............................19
8.1 Conditions Precedent to Obligations of Seller.........19
8.2 Conditions Precedent to Obligations of
Purchaser............................................21
ARTICLE IX
SURVIVAL OF REPRESENTATIONS AND WARRANTIES....................24
ARTICLE X
INDEMNIFICATION...............................................25
10.1 Indemnification.......................................25
10.2 Limitation of Liability...............................25
10.3 Method of Asserting Claims............................25
10.4 Payment of Claim......................................27
10.5 Other Rights and Remedies Not Affected................27
10.6 Post-Closing Adjustments and Right of Offset..........27
ARTICLE XI
AMENDMENT, TERMINATION AND BREACH.............................28
11.1 Amendment and Modification............................28
11.2 Termination and Abandonment...........................28
ARTICLE XII
CLOSING.......................................................28
12.1 Closing...............................................28
12.2 Allocations...........................................28
12.3 Seller's Deliveries at Closing........................29
12.4 Purchaser's Deliveries at Closing.....................30
12.5 Forwarding of Receivables.............................30
12.6 Removal of Personal Effects Following Closing.........31
12.7 Cooperation; Premises.................................31
ARTICLE XIII
MISCELLANEOUS.................................................31
13.1 Notice................................................31
13.2 Entire and Sole Agreement.............................32
13.3 Successors and Assigns................................32
13.4 Expenses..............................................32
13.5 Severability..........................................32
13.6 Governing Law.........................................32
13.7 Counterparts..........................................32
13.8 Amendments............................................32
13.9 No Third Party Beneficiary............................32
13.10Headings..............................................32
13.11Disputes..............................................33
13.12Delivery of Exhibits..................................33
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into this 4th day of January, 1999, by and
between Factual Data Corp., a Colorado corporation ("Purchaser"), and Oxbow
Enterprises, Inc. ("Seller"). For accounting purposes, this Agreement shall be
deemed to be effective at 12:01 a.m. January 1, 1999.
RECITALS
WHEREAS, on or about November 2, 1998, Purchaser issued a term sheet to Seller
("Term Sheet") pursuant to which Purchaser indicated its desire to proceed with
the acquisition of certain assets of Seller; and
WHEREAS, the Term Sheet contemplated the parties would enter into a definitive
Asset Purchase Agreement which definitive agreement is as set forth below (the
"Agreement") and which shall supersede the Term Sheet in its entirety; and
WHEREAS, Purchaser desires to purchase, and Seller desires to sell, the assets
of Seller as described on Exhibit 2.1 hereto (the "Assets") and Purchaser
desires to assume the liabilities of Seller described on Exhibit 2.3 hereto
("Assumed Liabilities");
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and in reliance upon the representations and warranties
contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
The following terms used in this Agreement shall, unless the context requires
otherwise, have the meanings designated below:
Assets means the assets set forth on Exhibit 2.1 hereto.
Assumed Liabilities means the liabilities set forth on Exhibit 2.3 hereto which
may include but are not necessarily limited to, equipment or facility leases.
Claim Notice has the meaning given to it in Section 10.3(a).
Closing has the meaning given to it in Section 12.1.
Closing Date has the meaning given to it in Section 12.1.
Code means the Internal Revenue Code of 1986, as amended.
Communication means collectively any publicity release, security filing, private
placement memorandum or any other communication.
Damages means any and all damages, claims, deficiencies, losses and expenses, as
further defined in Section 10.1.
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ERISA means the Employee Retirement Income Security Act of 1974, as amended, and
any regulations, rules or orders promulgated thereunder.
Evaluation Material means Seller's documents, financial statements, information
and materials which shall be used in connection with a due diligence review.
Excluded Assets means cash on hand, notes receivable, billed accounts receivable
and a 1993 Ford Explorer as set forth on Exhibit 2.1.
Financial Statements has the meaning given to it in Section 3.21.
Indemnified Party means the party claiming indemnification under Article X.
Indemnifying Party means the party against whom indemnification claims are
asserted under Article X.
Intellectual Property means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto
and all patents, patent applications and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions and
reexaminations thereof, (b) all trademarks, services marks, trade dress, logos,
trade names and corporate names, together with all translations, adaptations,
derivations and combinations thereof and including all goodwill associated
therewith, and all applications, registrations and renewals in connections
therewith, (c) all copyrightable works, all copyrights and all applications,
registrations and renewals in connection therewith, (d) all mask works and all
applications, registration and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas, compositions, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information, and business and
marketing plans and proposals), (f) all computer software (including data and
related documentation), (g) all other proprietary rights and (h) all copies and
tangible embodiments thereof (in whatever form or medium).
Loss means Damages for which any claim may be asserted under Article X.
Other Company Agreements means the Non-Compete and Confidentiality
Agreements.
Note shall have the meaning given it in Section 2.2
Notice means the thirty day period which the indemnifying party shall have from
the personal delivery or mailing of the Claim Notice.
OSHA means the Occupational Safety and Health Act of 1970, as amended, and any
regulations, rules or orders promulgated thereunder.
Purchase Price has the meaning given it in Section 2.2.
Purchaser means Factual Data Corp., a Colorado corporation, or its assigns.
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Seller means Oxbow Enterprises, Inc., a Wisconsin corporation.
Shareholders means all owners of capital stock of Seller at the date hereof and
as of Closing to wit: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (51%) and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (49%).
Tax or Taxes means any federal, state, local or foreign income, gross receipt,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Section 59A), custom
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimating or other tax of any kind whatsoever, including any interest, penalty
or addition thereto, whether disputed or not.
Tax Return means any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
Uniform Commercial Code means the Uniform Commercial Code applicable in the
state of organization of the Seller.
ARTICLE II
ACQUISITION OF THE ASSETS
Subject to the terms and conditions set forth in this Agreement:
2.1 Delivery Of Assets At the Closing, Seller shall endorse and deliver such
instruments, documents, certificates or instructions as may be necessary
to vest title to the Assets, not including the Excluded Assets, set forth
on Exhibit 2.1 hereto in Purchaser. Upon receipt of such documents,
instruments, certificates or instructions, and upon the Closing, Purchaser
shall become the beneficial and record holder of the Assets and entitled
to all of the rights, benefits and privileges with respect thereto. The
Assets shall be delivered by Seller to Purchaser at the Closing and will
be free of all encumbrances, liens, security interests or other claims. At
the Closing, the Assets which will be transferred to Purchaser, and their
value, shall be as follows:
Asset Category Valuation(1)
Fixed and operating assets $ 16,900
Contract rights, customer agreements and customer lists 431,310
Intellectual property, software and licenses _________
Personnel files _________
Books and records _________
Non-Compete and Confidentiality Agreement 20,000
Deposits 1,790
Prepaid assets _________
Goodwill _________
-------------------------
(1) The parties acknowledge and agree that the valuation of the Assets if not
determined at the date of execution of this Agreement, shall be made by
the parties not later than twenty (20) days prior to Closing.
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Each of Seller and Purchaser covenant that it will not take a position on any
income tax return or before any governmental agency or in any judicial
proceeding that is inconsistent in any way with this allocation.
2.2 Purchase Price for Assets The aggregate purchase price for the Assets
shall consist of $300,000 cash and a promissory note in the aggregate
amount of $170,000 which shall be delivered to Seller at the Closing
subject to and upon the terms and conditions hereof and the
representations and warranties contained herein, in the following manner:
(a) At the Closing, Purchaser shall pay an aggregate cash consideration of
$300,000 to the Seller, which shall be paid in the form of bank
cleared funds or a wire transfer to a financial institution designated
by the Seller.
(b) Purchaser shall deliver to Seller a non-negotiable promissory note in
the aggregate principal amount of $170,000 (the "Note"). The Note
shall be issued by Purchaser on the following terms and conditions:
(i) The Note shall bear interest at the rate of 8% per annum and
shall be due and payable in 20 quarterly installments of
principal and interest in accordance with the amortization
schedule attached to the Note commencing March 31, 1999.
(ii) The Note, a copy of which is attached hereto as Exhibit
2.2(b)(i), shall be secured by a perfected lien on all of the
Assets sold pursuant to this Agreement. A security agreement and
UCC-1 setting forth the security interest in the form attached as
Exhibit 2.2(b)(ii) shall be executed at the Closing by Purchaser
and filed by Seller with the Wisconsin Secretary of State or
other required regulatory agencies or governmental entities in
each state and entity in which a UCC filing may be required.
(c) The parties contemplate that, subsequent to the Closing, an audit of
the financial records of Seller may be performed in accordance with
generally accepted accounting principles by independent certified
public accountants designated by the Purchaser, and at Purchaser's
sole cost and expense.
2.3 Assumed Liabilities As part of the consideration for the Assets, the
Purchaser shall assume and pay, perform and discharge the Assumed
Liabilities described on Exhibit 2.3 hereto. The Purchaser will pay,
perform and discharge the Assumed Liabilities as they become due provided
the Purchaser shall not be obligated to pay, perform or discharge any
obligation except to the extent that such obligation or liability
constitutes a valid and legally enforceable claim against Seller.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDERS
Seller and Shareholders represent and warrant to Purchaser that the statements
contained in this Article III are true, correct and complete as of the date of
this Agreement and will, except as otherwise expressly provided in this
Agreement be true, correct and complete on the Closing Date (as though made then
and as though the Closing Date were substituted for the date of this Agreement)
as follows:
3.1 Organization and Qualification Of Seller The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
state of incorporation, and is duly qualified and authorized to do
business as a foreign corporation and is in good standing in each
jurisdiction, if any, in which the nature of the business conducted by it
or the properties owned, leased or operated by it makes such qualification
necessary or, if not, then such lack of authorization will not have
materially adversely affected the Purchaser's use of the Assets. The
Seller has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being
conducted. The copies of the Articles of Incorporation (certified by the
Secretary of the State of the state of incorporation) and the Bylaws of
the Seller, both as amended to date, which have been delivered to
Purchaser and attached hereto as Exhibits 3.1(a) and 3.1(b), respectively,
are complete and correct, and the Seller is not in default under or in
violation of any provision of its Articles of Incorporation or Bylaws. The
minute books (containing the records of meeting of the shareholders, the
board of directors and any committees of the board of directors), the
stock certificate books and the stock record books of the Seller, as
delivered to Purchaser, are correct and complete.
3.2 Authorized Capitalization The authorized capital stock of the Seller
consists of 600 shares of common stock, of which 100 shares are issued and
outstanding as of the date of this Agreement. All shares issued and
outstanding as of the date of this Agreement have been duly authorized and
validly issued and are fully paid and nonassessable. No shares of the
Seller's capital stock are held in treasury. The Seller has no authorized
or outstanding stock or securities convertible into or exchangeable for,
or any authorized or outstanding option, warrant or other right to
subscribe for or to purchase, or convert any obligation into, any unissued
shares. There are no authorized or outstanding stock appreciation, phantom
stock, profit participation or similar rights with respect to the Seller.
There are no voting trusts, voting agreements, proxies or other agreements
or understandings with respect to the voting of the capital stock of the
Seller.
3.3 Authorization This Agreement has been duly and validly executed and
delivered by Seller and the Shareholders and the agreements,
representations and warranties contained herein constitute valid and
binding obligations, representations and warranties of Seller and the
Shareholders enforceable in accordance with their terms. Attached hereto
as Exhibit 3.3(a) is a Certificate which shall evidence the approval and
authorization of the Shareholder of Seller and which shall be attested to
by the President of Seller. This Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly and
unanimously approved by the board of directors of Seller. Attached hereto
as Exhibit 3.3(b) is a certified copy of the Directors' Consent or a
resolution passed pursuant to a duly and validly called meeting of the
Board of Directors. This Agreement constitutes, and all other agreements
contemplated hereby to be executed and delivered by the Seller will when
executed and delivered constitute, the legal, valid and binding
obligations of, and be enforceable in accordance with their respective
terms against, the Seller.
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3.4 Product Rights As of the Closing, subject to those limitations set forth
in this Agreement, Seller has no rights with respect to any trademarks and
trade names.
3.5 Bulk Sale Law Seller has advised Purchaser that Seller is not required to
comply with the bulk sale provisions of the Wisconsin Uniform Commercial
Code.
3.6 No Conflicting Agreements The execution and delivery of this Agreement by
Seller does not, and consummation by Seller of the transactions
contemplated hereby will not, (a) violate any existing term or provision
of any law, regulation, order, writ, judgment, injunction or decree
applicable to Seller or the Assets, (b) conflict with or result in a
breach of any of the terms, conditions or provisions of the Articles of
Incorporation or Bylaws of Seller or of any agreement or instrument to
which Seller is a party, or (c) result in the creation or imposition of
any lien, charge, security interest, encumbrance, restriction or claim
upon the Assets.
3.7 Compliance with Applicable Law Except as set forth in Exhibit 3.7, Seller
has not received any notice or information of any violation, probable
violation or default by Seller under any applicable law, regulation or
order of any governmental department, commission, board or agency or
instrumentality, domestic or foreign, having jurisdiction over Seller's
operations which could materially adversely affect the business,
operations, financial condition, properties or assets of Seller, or the
ability to consummate the transaction contemplated hereby. To the best of
Seller's and the Shareholders' knowledge after diligent inquiry, Seller
has operated its business, and will continue to operate its business, in
compliance with the Fair Credit Reporting Act, the Real Estate Settlement
Procedures Act, the Fair Debt Collection Act and applicable state law.
Additionally, Seller has given notice of the sale of Assets to all
government entities that require such notice.
3.8 Material Misstatements or Omissions Neither this Agreement nor any other
document, certificate or statement furnished to Purchaser by or on behalf
of Seller in connection with this Agreement contains any untrue statement
of a material fact, or omits any material fact necessary to make the
statements contained herein or therein not misleading in light of the
context in which they were made.
3.9 No Known Adverse Effects There is no fact known to Seller, its officers,
directors or employees or the Shareholders which materially adversely
affects or will materially adversely affect the Assets which has not been
set forth in writing in this Agreement or disclosed in the other
documents, certificates or written statements furnished to Purchaser by or
on behalf of Seller in connection herewith.
3.10 Consents and Approvals The execution and delivery by Seller of this
Agreement, and the performance by Seller of its obligations hereunder,
does not require Seller to obtain any consent, approval, agreement, or
action of, or make any filing with or give any notice to, any corporation,
person, entity, or firm or any public, governmental or judicial authority
except (i) such as have been duly obtained or made, as the case may be,
and or will be duly obtained and made and in full force and effect as of
the Closing, (ii) those as to which the failure to obtain would have no
material adverse effect on the Assets or the transactions contemplated
hereby, and (iii) approval of the Seller's Shareholders, which shall be
obtained prior to the execution hereof.
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3.11 Subsidiaries Seller does not own, have an ownership interest in, or
control any corporation, partnership, proprietorship or other entity.
3.12 Litigation Except as described in Exhibit 3.12, there are no actions,
proceedings or investigations pending or threatened against Seller or the
Assets before any court or administrative agency which could result in any
material adverse change in the operations or financial condition of Seller
other than as identified therein.
3.13 Brokers All negotiations relative to this Agreement and the transactions
contemplated hereby have been carried out by Seller directly with
representatives of Purchaser, without the intervention of any person in
such manner as to give rise to any valid claim by any person against
Purchaser for a finder's fee, brokerage commission, or similar payment.
All rights of indemnity under Article X hereof shall apply to any claim
relating to a Loss (hereinafter defined) arising out of this Agreement for
any fee, commission or similar payment.
3.14 Taxes Seller shall pay all Taxes arising out of the transfer of the Assets
and shall be responsible for all personal property taxes for the business
of Seller through the date of the Closing. Purchaser shall not be
responsible for any business, occupation, withholding or similar Tax, or
any Taxes of any kind related to the Assets or the business of Seller for
any period prior to the Closing.
3.15 Ownership Seller is the owner, beneficially and of record, of all of the
Assets as identified on Exhibit 2.1 hereto, free and clear of all liens,
encumbrances, security agreements, equities, options, claims, charges and
restrictions, except as otherwise described on Exhibit 3.15 hereto.
3.16 Accounts The list of customers attached hereto as Exhibit 3.16(a)
represents the customers with which Seller now does business, principally
in the area of mortgage credit reporting. The customers with which Seller
maintains a contract or agreement are identified on Exhibit 3.16(b)
hereto. Except as described on Exhibit 3.16(c), all such contracts or
agreements are valid and enforceable contracts or agreements and are not
currently, and will not be at Closing, in default, invalid or
unenforceable in any manner, or where termination is threatened or
imminent to the actual knowledge of Seller. Seller has performed all of
its material obligations and material responsibilities as described under
each such contract or agreement, none of such contracts or agreements are
subject to any counterclaim or set-off and such contracts are in full
force and effect and will continue in full force and effect following the
Closing (assuming continuing performance by Purchaser following the
Closing, which is not warranted or represented by Seller). Except as
described on Exhibit 3.16(d), Seller has no reason to believe that amounts
payable under such contracts or agreements, assuming due performance by
Purchaser in the future (which is not warranted or represented by Seller),
will not be paid in accordance with the terms of such contracts or
agreements. Seller has not received any notices of default, claims, or any
other type of notice with respect to each such contract or agreement or,
if such notice has been received, a copy of any such notice has been
provided in writing to Purchaser.
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3.17 License Agreements Attached as Exhibit 3.17 is a complete and accurate
list of any license agreements to which Seller is a party as of the date
hereof. Also stated on Exhibit 3.17 is the expiration date of each such
license agreement. Except as described on Exhibit 3.17, all such license
agreements are valid and enforceable contracts or agreements and are not
currently, and will not be at Closing, in material default, invalid or
unenforceable in any manner. To the extent the transfer of any license
agreement hereunder requires the consent of any third party, Seller and
Shareholders shall use their best efforts to obtain such consents. Seller
has not received any written notices of default, claims or any other type
of written notice with respect to any license agreement or, if such
written notice has been received, a copy of such notice has been provided
in writing to Purchaser.
3.18 Intellectual Property Attached as Exhibit 3.18 to this Agreement is a
schedule of all trade names, trademarks, service marks, copyrights,
computer software, source code and their registrations, owned by Seller or
in which Seller has any right, license, or for which Seller has made
application, together with a brief description of each (hereinafter
collectively the "Intellectual Property"). To the best of Seller's
knowledge, Seller has not infringed, and by its use of its Intellectual
Property, is not now infringing on any United States or state trade name,
trademark, service ▇▇▇▇ or copyright belonging to any other person, firm
or corporation and, to the best of Seller's knowledge, the use of the
Intellectual Property by Purchaser will not conflict with, infringe on or
otherwise violate the rights of others.
3.19 Customers Exhibit 3.19 to this Agreement sets forth a correct and current
list of all customers of Seller together with summaries of the revenues
from each customer during the most recent 12 months ending 30 days prior
to the date hereof.
3.20 Contracts Except as set forth in Exhibit 3.20, Seller is not a party to,
nor is the property of Seller bound by, any contract, distributorship
agreement, license agreement, agency agreement or output or requirements
agreement, or any other agreement, indenture, mortgage, deed of trust,
lease, security agreement, loan agreement or instrument which Purchaser
would succeed to by its purchase of the Assets, nor will the purchase of
the Assets by Purchaser create any default by Seller as to any of such
agreements which will materially adversely affect the Purchaser's use of
the Assets.
3.21 Financial Statements Seller has delivered to Purchaser copies of Seller's
balance sheet as of the end of the most recent fiscal year and the
statements of income and retained earnings for the years ended for the two
most recent fiscal years and for the interim period commencing January 1,
1998 and ending October 31, 1998 (collectively, the "Financial
Statements"). The Financial Statements are based upon the information
contained in the books and records of Seller and fairly and accurately
present the financial condition of Seller as of the dates thereof and
results of operations for the periods referred to therein. The monthly
financial statements generated by Seller from and after the interim period
delivered to Purchaser will be prepared on a basis consistent with the
methods and procedures used to prepare the Financial Statements. If
requested by Purchaser, Seller will deliver such monthly financial
statements from and after the interim period to Purchaser within 30 days
of the end of each month from the date hereof to Closing.
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3.22 Absence of Undisclosed or Contingent Liabilities Seller has no liabilities
(whether accrued, absolute, contingent, unliquidated or otherwise, whether
due or to become due, whether known or unknown, and regardless of when
asserted) except as otherwise set forth in the Financial Statements, the
monthly financial statements and Exhibit 3.22 hereto.
3.23 No Material Adverse Changes Since the date of the most recent Financial
Statements, there has been no change materially adverse to Seller in its
Assets, financial condition, gross profit, operating results, customer,
employee or supplier relations, business condition or prospects, except as
otherwise disclosed on Exhibit 3.23 hereto.
3.24 Absence of Developments Since the date of the Term Sheet by and between
Seller and Purchaser, Seller has, and will until Closing:
(a) Conducted its business and operations only in the regular and ordinary
course; maintained reasonable business insurance; committed no waste
of the Assets; disposed or otherwise changed the nature of any Asset
such that cash or accounts receivable are increased (other than in the
ordinary course of business), nor created or suffered to exist any
material lien, charge or encumbrance on any Asset or incurred any
indebtedness for borrowed money (other than in the ordinary course)
which is secured by one or more of the Assets; and has used its best
efforts to maintain and preserve its business organization intact and
maintain its relationships with suppliers, employees, customers and
others;
(b) Refrained from making capital expenditures or commitments for
additions to the property, plant or equipment or entered into
transactions which could materially alter or affect operations, except
as otherwise have been approved in writing by Purchaser;
(c) Except from the assets to be retained by Seller, refrained from paying
the officers or directors or their affiliates, whether in the
capacities of shareholders, directors, officers or employees, any
dividends or any bonuses or any other forms of compensation except for
non-bonus compensation in accordance with current practice; and
(d) Maintained title to, and refrained from making or permitting, any
transfer, sale, pledge, encumbrance on, lien or other disposition of
the Assets of Seller except in the ordinary course of business.
3.25 Title to Properties Seller does not own any real property. The lease to
which Seller is a party, a true and complete copy of which is attached
hereto as Exhibit 3.25, is in full force and effect, and Seller holds a
valid and existing leasehold interest in such lease for the term set forth
in such lease. Seller shall utilize its best efforts to obtain an
assignment of the property lease if requested to do so by Purchaser.
Seller shall have delivered complete and accurate copies of such lease to
Purchaser, and such lease shall not have been modified in any material
respect except to the extent that such modifications are disclosed in
writing delivered to Purchaser. Seller is not in default, and no
circumstances exist which, if unremedied would, either with or without
notice or the passage of time or both, result in a default under such
lease, nor is Seller in default under the lease. The fixed assets
necessary for the conduct of Seller's businesses are in good condition and
repair, ordinary wear and tear excepted, and are usable in the ordinary
course of business. There are no defects in such fixed assets or other
conditions relating thereto which, in the aggregate, materially adversely
affect the operation or value of such fixed assets. Seller owns, or leases
under valid leases, all equipment and other tangible assets necessary for
the conduct of its business.
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3.26 Tax Matters
(a) The Seller has filed all Tax Returns that it was required to file. All
such Tax Returns were correct and complete in all respects. All Taxes
owed by the Seller (whether or not shown on any Tax Return) have been
paid. The Seller is not currently the beneficiary of any extension of
time within which to file any Tax Return. No claim has ever been made
by an authority in a jurisdiction where the Seller does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction.
There are no encumbrances on any of the Assets of the Seller that
arose in connection with any failure (or alleged failure) to pay any
Taxes.
(b) The Seller has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, shareholder or other third
party.
(c) There is no basis for any authority to assess any additional Taxes for
any period for which Tax Returns have been filed. There is no dispute
or claim concerning any liability for Taxes of the Seller (i) claimed
or raised by any authority in writing or orally with any directors,
officers or employees of the Seller, or (ii) as to which any such
person has knowledge based upon personal contact with any agent of
such authority. Exhibit 3.26 lists all federal, state, local and
foreign income Tax Returns filed with respect to the Seller for
taxable periods ended on or after December 31, 1995, indicates those
Tax Returns that have been audited and indicates those Tax Returns
that currently are the subject of audit. The Seller has delivered to
the Purchaser correct and complete copies of all federal income Tax
Returns, examination reports, and statements of deficiencies filed,
assessed against or agreed to by the Seller since December 31, 1995.
3.26 Tax Notices Except as set forth on Exhibit 3.27 hereto, no deficiency for
any Taxes has been proposed, asserted or assessed against Seller that has
not been resolved and paid in full. No waiver, extension or comparable
consent given by Seller regarding the application of the statute of
limitations with respect to any Taxes outstanding, nor is any request for
any such waiver or consent pending. Except as described in Exhibit 3.27
hereto, there has been no tax audit or other administrative proceeding or
court proceeding with respect to any Taxes, nor is any such Tax audit or
other proceeding pending, nor has there been any notice to Seller by any
taxing authority regarding any such Tax, audit or other proceeding or, to
the best knowledge of Seller, is any such Tax audit or other proceeding
threatened with regard to any Taxes. Seller does not expect the assessment
of any additional Taxes and is not aware of any unresolved questions,
claims or disputes concerning the liability for Taxes which would exceed
the estimated reserves established on its books and records. For the
purposes hereof, the term "Taxes" means all taxes, charges, fees, levies
or other assessments, including without limitation, all net income, gross
income, gross receipts, sales, use, ad valorem, transfer, franchise,
profits, license, withholding, payroll, employment, workmen's
compensation, social security, unemployment, excise, estimated, severance,
stamp, occupation, property or other taxes, customs, duties, fees,
assessments or charges of any kind whatsoever including, without
limitation, all interest and penalties thereon, and additions to tax or
additional amounts imposed by any taxing authority, domestic or foreign,
upon Seller.
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3.27 Employees Except as described on Exhibit 3.28, (a) Seller has no actual or
constructive notice that any executive employee of Seller or any group of
Seller's employees has any plan or intention to terminate his, her or its
employment following the Closing; (b) Seller has complied with all laws
relating to the employment of labor, including provisions thereof relating
to wages, hours, equal opportunity, collective bargaining and the payment
of social security and other taxes; (c) to the best of Seller's knowledge,
Seller has no material labor relations problem pending and its labor
relations are satisfactory; (d) there are no workmen's compensation,
sexual harassment, discrimination or claims pending against Seller nor is
Seller aware of any facts that would give rise to such claims; (e) to the
best of Seller's knowledge, no employee of Seller is subject to any
secrecy or non-competition agreement or any other agreement or restriction
of any kind that would impede in any way the ability of such employee to
carry out fully all activities of such employee in furtherance of the
business of Seller; and (f) to the best of Seller's knowledge, no employee
or former employee of Seller has any claim with respect to any
intellectual property rights of Seller.
3.29 Employee Benefit Plans
(a) Except as provided in writing to Purchaser and as listed on Exhibit
3.29, with respect to all employees and former employees of Seller and
all dependents and beneficiaries of such employees and former
employees, (i) Seller does not maintain or contribute to any
non-qualified deferred compensation or retirement plans, contracts or
arrangements, (ii) Seller does not maintain or contribute to any
qualified defined contribution plans as defined in Section 3(34) of
ERISA or Section 414(i) of the Code, (iii) Seller does not maintain or
contribute to any qualified defined benefit plans as defined in
Section 3(35) of ERISA or Section 414(j) of the Code, and (iv) Seller
does not maintain or contribute to any employee welfare benefit plans
as defined in Section 3(1) of ERISA.
(b) To the best of Seller's knowledge, to the extent required (either as a
matter of law or to obtain the intended tax treatment and tax
benefits), all employee benefit plans as defined in Section 3(3) of
ERISA which Seller does maintain or to which it does contribute
(collectively, the "Plans") comply in all material respects with the
requirements of ERISA and the Code. With respect to the Plans, (i) all
required contributions which are due have been made and a proper
accrual has been made for all contributions due in the current fiscal
year, (ii) there are no actions, suits or claims pending, other than
routine uncontested claims for benefits, and (iii) there have been no
prohibited transactions as defined in Section 406 of ERISA or Section
4975 of the Code.
(c) Seller does not contribute (and has not ever contributed) to any
multi-employer plan, as defined in Section 3(37) of ERISA. Seller has
no actual or potential liabilities under Section 4201 of ERISA for any
complete or partial withdrawal from a multi-employer plan. Seller has
no actual or potential liability for death or medical benefits after
separation from employment, other than (i) death benefits under the
employee benefit plans or programs (whether or not subject to ERISA)
that will be set forth in writing to Purchaser, and (ii) health care
continuation benefits described in Section 4980B of the Code.
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3.30 Gifts Neither Seller nor any of its officers, directors or shareholders
has made or agreed to make gifts of money, other property or similar
benefits (other than incidental gifts of articles of nominal value) to any
actual or potential customer, supplier, governmental employee, political
party, candidate for office, governmental agency or instrumentality or any
other person in a position to assist or hinder Seller in connection with
any actual or proposed business transaction.
3.31 Employee Health and Safety Seller has not violated and has no liability,
and has not received a notice or charge asserting any violation of or
liability under, OSHA or any other federal or state acts (including rules
and regulations thereunder) and, to the best of Seller's knowledge,
regulating or otherwise affecting employee health and safety.
3.32 Representations as to Knowledge The representations and warranties
contained in Article III hereof shall in each and every event whereby an
exercise of discretion or a statement to the "best knowledge", "best of
knowledge" or "knowledge" is required on behalf of any party to this
Agreement be deemed to require that such exercise of discretion or
statement be in good faith, with due diligence, to the best efforts of
each such party and be exercised always in a reasonable manner and within
reasonable times.
3.33 Representations Concerning Solvency The Seller has not incurred, and does
not intend to incur, and has no reasonable basis to believe that it will
incur, any debts beyond its ability to pay such debts as they become due.
Seller has, and will continue to have, assets greater than Seller's debts,
based upon a fair valuation and has paid, and will pay, its debts as they
become due. Purchaser may rely on such representations in asserting that
Purchaser has no reasonable cause to believe that Seller is or will become
insolvent as a result of the transactions contemplated hereby. Seller has
undertaken the transactions described herein in good faith, considering
its obligations to any person or entity to whom Seller owes a right to
payment, whether or not the right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured and has undertaken the transaction
described herein without any intent to hinder, delay or defraud its
creditors. Seller will not, and has not, concealed this transaction or the
proceeds of such transaction from any of its creditors. Seller has not
removed or concealed any assets from its creditors and will not incur debt
in connection with the assets or business that is significantly greater
than the normal and customary debts of Seller in the ordinary course.
Seller does not contemplate and has no reason to contemplate it will seek
protection under the bankruptcy laws and believes in good faith that it
will receive consideration reasonably equivalent to the value of the
Assets being purchased by the Purchaser.
3.34 Y2K Neither the Seller nor the Shareholders make any representations or
warranties concerning the Seller's computer systems (defined to include
both hardware and software) compliance with the Year 2000 date change.
ARTICLE IV
PRE-CLOSING COVENANTS OF SELLER
Seller hereby covenants and agrees that, between the date hereof and the
Closing, it will comply with the provisions of this Article IV, except to the
extent Purchaser may otherwise consent in writing.
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4.1 Inspection of Properties and Books Seller shall assist any individual or
individuals designated by Purchaser with reasonable prior notice to visit
or inspect any property of Seller, at reasonable times acceptable to both
parties, including books of accounts and records of Seller, to make
extracts or copies of such books and records and to discuss the affairs,
finances and accounts of Seller with its officers, and shall use its best
efforts to obtain access for Purchaser to Seller's accountants' work
papers. As a condition to the Closing, the parties acknowledge and agree
that Seller shall furnish to Purchaser Evaluation Material which shall be
used in connection with a due diligence review. The parties agree that
Purchaser shall treat the Evaluation Material confidentially, and shall
not disclose to any party, except as otherwise set forth herein, the
Evaluation Material or any information set forth therein; provided,
however, that Purchaser is authorized to disclose the Evaluation Material
to its investment banker, counsel and accountants for their review.
Purchaser shall instruct its officers, directors, employees, agents or
representatives of the confidential nature of the Evaluation Material and
shall be responsible for ensuring that the Evaluation Material is kept
confidential by such persons. In the event the Closing is not consummated,
all Evaluation Material shall be returned to Seller, within ten days of a
request therefor, with the understanding that Purchaser shall retain no
copies of the Evaluation Material and shall not disclose to any other
party the Evaluation Material or information contained therein, with the
exception of (i) information which becomes generally available to the
public other than as a result of disclosure by Purchaser, or (ii)
information included in the Evaluation Material which is first disclosed
by a third party not bound by a confidentiality agreement with Seller and
(iii) information required to be disclosed in any registration statement
or periodic report under the disclosure requirements of applicable federal
and state securities laws.
4.2 Other Contracts Except in the ordinary course of business, Seller shall
not enter into or become subject, and shall not cause Seller to enter into
or become subject, to any agreement, transaction, or commitment which
would restrict or in any way impair the obligation or ability of Seller to
comply with all of the terms of this Agreement.
4.3 Ongoing Operation Seller shall carry on its business diligently and
substantially in the same manner as heretofore conducted. The business of
Seller shall be conducted only in the ordinary course and neither the
shareholders of Seller nor Seller shall take any action except in the
ordinary course of Seller's business, on an arm-length basis and in
accordance in all material respects with all applicable laws, rules and
regulations and Seller's past custom and industry practice.
4.4 Indebtedness Seller will not create, incur, assume, guarantee or otherwise
become liable with respect to any indebtedness related or connected with,
or secured by, the Assets, except in the ordinary course of its business
and subject to prior written notice to Purchaser. Except in the ordinary
course of its business, and subject to prior written notice to Purchaser,
Seller will not sell, pledge, encumber or otherwise subject the Assets to
any claim or indebtedness.
4.5 Records Seller shall maintain its books, accounts and records in the
usual, regular and ordinary manner.
4.6 Articles of Incorporation; Bylaws Seller will not amend its Articles of
Incorporation or Bylaws or otherwise alter its corporate existence or
powers.
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4.7 Distributions or Dividends Seller will not declare or pay any dividend,
make any distribution on shares of its capital stock or repurchase any
shares of its capital stock.
4.8 Notice of Breach In the event of and promptly after becoming aware of the
occurrence or threatened occurrence of any event which would cause or
constitute a breach of any warranty, representation, covenant or agreement
of Seller contained herein, Seller shall give notice in writing of such
event or threatened event to Purchaser and use all reasonable efforts to
prevent or promptly remedy such breach or threatened breach.
4.9 Nondisclosure The parties agree that any publicity release, security
filing, memorandum or any other communication, whether written or oral,
identifying this proposed transaction shall not identify Seller at any
time prior to Closing unless required by applicable securities laws or
regulations. Seller shall timely review and approve any public
communication prepared by Purchaser before its dissemination and release.
4.10 Employment Matters Seller shall not, directly or indirectly, except in the
ordinary course of business and with prior notice to Purchaser, (i) enter
into or modify any employment, severance or similar agreements or
arrangements with, or grant any bonuses, salary increases, severance or
termination paid to, any officers or directors or consultants, or (ii)
take any action with respect to the grant of any bonuses, salary
increases, severance or termination pay or with respect to any increase of
benefits payable in effect on the date hereof. Seller shall not adopt or
amend any bonus, profit sharing, compensation, stock option, pension,
retirement, deferred compensation, employment or other employee benefit
plan, trust, fund or group arrangement for the benefit or welfare of any
employees or any bonus, profit sharing, compensation, stock option,
pension, retirement, deferred compensation, employment or other employee
benefit plan, agreement, trust, fund or arrangements for the benefit or
welfare of any director.
4.11 Insurance Without providing Purchaser 30 days' prior written notice,
Seller shall not cancel or terminate its current insurance policies or
cause any of the coverage thereunder to lapse, unless simultaneously with
such termination, cancellation or lapse, replacement policies providing
coverage equal to or greater than the coverage under the cancelled,
terminated or lapsed policies for substantially similar premiums are in
full force and effect. To the extent Seller has paid premiums for
insurance coverage that will continue in effect on a post-Closing basis,
the Purchaser will reimburse Seller within 15 days of Closing the prorated
portion of post-Closing insurance coverage based upon the time period
covered by such insurance both prior to, and subsequent to, Closing.
Seller shall purchase tail coverage covering Seller and its officers and
directors for any error and omission policy maintained by Seller prior to
Closing.
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4.12 Preservation of Business Seller and the Shareholders shall (i) use their
best efforts to preserve intact Seller's business organization and
goodwill, keep available the services of Seller's officers and employees
as a group and maintain satisfactory relationships with suppliers,
distributors, customers and others having business relationships with
Seller, (ii) confer on a regular and weekly basis with representatives of
Purchaser to report operational matters and the general status of ongoing
operations, (iii) not intentionally take any action which would render, or
which reasonably may be expected to render, any representation or warranty
made by Seller in the Agreement untrue at the Closing, (iv) notify
Purchaser of any emergency or other change in the normal course of
Seller's business or in the operation of Seller's properties and of any
governmental or third party complaints, investigations or hearings (or
communications indicating that the same may be contemplated) if such
emergency, change, complaint, investigation or hearing would be material,
individually or in the aggregate, to the business, operations or financial
condition of Seller or the ability of Seller to consummate the
transactions contemplated by this Agreement, and (v) promptly notify
Purchaser in writing if Seller or its representatives shall discover that
any representation or warranty made by Seller in this Agreement was when
made, or has subsequently become, untrue in any respect.
4.13 Regulatory Filings Seller is not required, and shall not be required prior
to or following Closing, to make any filings or submissions under any laws
or regulations applicable to Seller for the consummation of the
transactions contemplated herein. Seller shall make all filings necessary
such that, at the Closing, Purchaser may file for and obtain use of
Seller's corporate name identified on page one of this Agreement.
Purchaser has advised Seller that the execution of this Agreement and
closing of the transaction contemplated hereby may require the Purchaser
to provide certain disclosure concerning the business and the financial
statements of Seller to the United States Securities and Exchange
Commission. Seller hereby consents to the inclusion of disclosure
concerning Seller, the financial statements of Seller and the
representations and warranties made by Seller in the course of this
transaction, in a periodic report or any amendment thereto, in order to
allow Purchaser to discharge its disclosure obligations under the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder.
4.13 No Negotiations None of Seller, its officers, directors or the
Shareholders shall cause Seller to, directly or indirectly, through any
officer, director, agent or otherwise, solicit, initiate or encourage
submission of any proposal or offer from any person or entity (including
any of its or their officers or employees) relating to any liquidation,
dissolution, recapitalization, merger, consolidation or acquisition or the
purchase of all or a material portion of the assets of, or any equity
interest in, Seller, or any similar transaction or business combination
involving Seller, or participate in any negotiations regarding, or furnish
to any other person, any information with respect to, or otherwise
cooperate in any way with, or assist or participate in, facilitate or
encourage, any effort or attempt by any other person or entity to do or
seek any of the foregoing. Seller shall within five business days notify
Purchaser of any such proposal or offer, or any inquiry from or contact
with any person with respect thereto, and shall promptly provide Purchaser
with such information regarding such proposal, offer, inquiry or contact
as Purchaser may request.
- 15 -
4.14 Assignment of Contracts, Leases and Other Agreements Seller agrees that,
prior to the Closing, it will secure the approval of all parties with
which Seller has customer, supplier or other agreements as to which
consent is expressly required and assignment is contemplated to Purchaser
and, should Purchaser desire to assume any other contract, lease,
agreement or right, Seller shall use its best efforts to secure the
approval of the remaining party to the contract, lease, agreement or right
such that Purchaser may succeed to rights and obligations of Seller under
such contracts, leases, agreements or rights.
4.15 Best Efforts Seller agrees to use its best efforts in good faith to
satisfy the various conditions to Closing and to consummate the
transactions provided for herein as expeditiously as possible. Seller will
not take or knowingly permit to be taken any action that would be in
breach of the terms or provisions of this Agreement or that would cause
any of its representations and warranties contained herein to be or become
untrue.
4.16 Additional Disclosure From the date of this Agreement to and including the
Closing Date, Seller promptly upon the occurrence thereof, will advise
Purchaser of each event subsequent to the date hereof which would have had
to be disclosed on any exhibit to this Agreement had it occurred prior to
the date hereof.
ARTICLE V
POST-CLOSING COVENANTS
The parties agree as follows with respect to the period following the Closing.
5.1 Further Assurances In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this
Agreement, each of the parties will take such further action (including
the execution and delivery of such further instruments and documents) as
any other party reasonably may request, all at the sole cost and expense
of the requesting party (unless the requesting party is entitled to
indemnification therefor under Article X).
5.2 Litigation Support In the event and for so long as any party actively is
contesting or defending against any action, suit, proceedings, hearing,
investigation, charge, complaint, claim or demand in connection with (a)
any transaction contemplated by this Agreement, or (b) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act or transaction on or
prior to the Closing Date involving the Seller, each of the other parties
will cooperate with each other and counsel in the contest or defense, make
available their personnel, and provide such testimony and access to their
books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending
party (unless the contesting or defending party is entitled to
indemnification therefor under Article X).
- 16 -
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller that the statements contained in
this Article VI are true, correct and complete as of the date of this Agreement
and will, except as otherwise expressly provided in this Agreement be true,
correct and complete on the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement) as follows:
6.1 Organization and Qualification of Purchaser Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of
the State of Colorado and has the full corporate power and authority to
own and operate its properties and to carry on its business.
6.2 Authorization This Agreement has been duly and validly executed by
Purchaser, as certified in Exhibit 6.2 hereto, and the agreements,
representations, and warranties contained herein constitute valid and
binding obligations, representations, and warranties of Purchaser
enforceable in accordance with their terms.
6.3 No Conflicting Agreements The execution and delivery of this Agreement by
Purchaser does not, and consummation by Purchaser of the transactions
contemplated hereby will not, (a) violate any existing term or provision
of any law, regulation, order, writ, judgment, injunction or decree
applicable to Purchaser, (b) conflict with or result in a breach of any of
the terms, conditions or provisions of the Articles of Incorporation or
Bylaws of Purchaser or of any agreement or instrument to which Purchaser
is a party, or (c) result in the creation or imposition of any lien,
charge, security interest, encumbrance, restriction or claim upon
Purchaser or any of its assets.
6.4 Compliance with Applicable Law Purchaser has not received any notice or
information of any violation, probable violation or default by Purchaser
under any applicable law, regulation or order of any governmental
department, commission, board or agency or instrumentality, domestic or
foreign, having jurisdiction over Purchaser's operations which could
materially adversely affect the business, operations, financial condition,
properties or assets of Purchaser or the ability to consummate the
transaction contemplated hereby.
6.5 Litigation There are no material actions, proceedings or investigations
pending, or to the knowledge of Purchaser, threatened against Purchaser or
its officers or directors, before any court or administrative agency or
administrative officer.
6.6 Material Misstatements or Omissions Neither this Agreement nor any other
document, certificate or statement furnished to Seller by or on behalf of
Purchaser in connection with this Agreement contains any untrue statement
of a material fact, or omits any material fact necessary to make the
statements contained herein and therein not misleading in light of the
context in which they were made.
- 17 -
6.7 Consents and Approvals The execution and delivery by Purchaser of this
Agreement, and the performance by Purchaser of Purchaser's obligations
hereunder, do not require Purchaser to obtain any consent, approval or
action of, or make any filing with or give any notice to, any corporation,
person or firm or any public, governmental or judicial authority except
(i) such as have been duly obtained or made, as the case may be, and are
in full force and effect on the date hereof and will continue to be in
full force and effect on the Closing Date, and (ii) those which the
failure to obtain would have no material adverse effect on the
transactions contemplated hereby.
6.8 Brokers All negotiations relative to this Agreement and the transactions
contemplated hereby have been carried out by representatives of Purchaser
directly with Seller, without the intervention of any person on behalf of
Purchaser in such manner as to give rise to any valid claim by any person
against Seller for a finder's fee, brokerage commission or similar
payment. All rights of indemnity under Article X hereof shall apply to any
claim relating to a Loss (hereinafter defined) arising out of this
Agreement for any fee, commission or similar payment.
6.9 Representations as to Knowledge The representations and warranties
contained in Article VI hereof shall in each and every event whereby and
exercise of discretion or a statement to the "best knowledge", "best of
knowledge" or "knowledge" is required on behalf of any party to this
Agreement be deemed to require that such exercise of discretion or
statement be in good faith, with due diligence, to the best efforts of
each such party and be exercised always in a reasonable manner and within
reasonable times.
ARTICLE VII
COVENANTS OF PURCHASER
Purchaser covenants and agrees as follows:
7.1 Other Contracts From and after the date of this Agreement, Purchaser will
not enter into or become subject to any agreement or commitment which
would restrict or in any way impair the obligation of Purchaser to comply
with all of the terms of this Agreement.
7.2 Additional Disclosure From the date of this Agreement to and including the
Closing, Purchaser will, promptly upon the occurrence thereof, advise
Seller of each event subsequent to the date hereof which would have had to
be disclosed by Purchaser on any exhibit to this Agreement had it occurred
prior to the date hereof.
7.3 Notice of Breach In the event of and promptly after becoming aware of the
occurrence or threatened occurrence of any event which would cause or
constitute a breach of any warranty, representation, covenant or agreement
of Purchaser contained herein, Purchaser shall give notice in writing of
such event or threatened event to Seller and use all reasonable efforts to
prevent or promptly remedy such breach or threatened breach.
7.4 Nondisclosure The Purchaser agrees that any publicity release, security
filing, or any other communication, whether written or oral, identifying
this proposed transaction shall not identify Seller any time prior to
Closing unless required by applicable securities laws or regulations.
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7.5 Best Efforts Purchaser agrees to use its best efforts in good faith to
satisfy the various conditions to Closing and to consummate the
transactions provided for herein as expeditiously as possible. Purchaser
will not take or knowingly permit to be taken any action that would be
contrary to or in breach of the terms or provisions of this Agreement or
that would cause any of the representations and warranties of Purchaser
contained herein to be or become untrue.
7.6 Regulatory Filings Purchaser has advised Seller that the transaction
contemplated hereby will require Purchaser to file disclosure, in the form
of a periodic report or amendments thereto, with the United States
Securities and Exchange Commission, which report may include disclosure
concerning, and the financial statements of, Seller. Seller hereby
consents to the inclusion of disclosure concerning Seller, the financial
statements of Seller and the representations and warranties made by Seller
in the course of this transaction, in such periodic report or amendment,
in order to allow Purchaser to discharge its disclosure obligations under
the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder. Purchaser agrees to provide Seller upon request a
copy of such periodic report or any amendment thereto at least three
business days prior to filing. Purchaser will make all required filings
with the Securities and Exchange Commission that relate to this
transaction.
7.7 Non-Compete and Confidentiality Agreements At or prior to Closing, ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ shall enter into non-compete and
confidentiality agreements with Purchaser substantially in the form of
Exhibit 7.7 hereto.
7.8 Employment Agreements At or prior to Closing, Seller shall have terminated
all employment agreements to which it is a party.
ARTICLE VIII
CONDITIONS PRECEDENT TO CLOSING
8.1 Conditions Precedent to Obligations of Seller The obligations of Seller to
consummate and effect this Agreement are subject to the satisfaction in
all material respects, on or before the Closing Date, of the following
conditions (unless waived by Seller in writing in the manner provided in
Section 8.1(d) hereof):
(a) Representations and Warranties of Purchaser; Performance by Purchaser.
(i) The representations and warranties of Purchaser set forth in
Article VI hereof shall (except where stated to be as of an earlier
date) be accurate in all material respects on and as of the Closing as
though made on and as of the Closing, except for any changes resulting
from activities or transactions which may have taken place after the
date hereof which are expressly permitted by this Agreement or which
have been entered into in the ordinary course of business and are not
expressly prohibited by this Agreement; (ii) Purchaser shall have
performed all obligations and complied with all covenants required to
be performed or to be complied with by Purchaser under this Agreement
prior to or at the Closing Date including the delivery of all
documents required at the Closing; and (iii) Seller shall have
received a certificate dated the Closing and signed by the President
of Purchaser to the effect that the representations and warranties
made by Purchaser in this Agreement are true and accurate in all
material respects as of the Closing (or, where applicable, as of the
earlier specified date), which certificate shall be in the form of
Exhibit 8.1.
- 19 -
(b) Action. All action necessary to authorize the execution, delivery and
performance of this Agreement by Purchaser and the consummation of the
transactions contemplated hereby shall have been duly and validly
taken by Purchaser. Purchaser shall have furnished Seller with copies
of all consents or resolutions adopted or executed by Purchaser in
connection with such actions, certified by the Secretary of Purchaser.
(c) No Action or Proceeding. As of the Closing, no action or proceeding by
any public authority or person shall be pending before any court or
administrative body or overtly threatened to restrain, enjoin or
otherwise prevent the consummation of this Agreement or the
transactions contemplated herein. There shall not be threatened,
instituted or pending any action or proceeding, before any court or
governmental authority or agency, domestic or foreign, (i) challenging
or seeking to make illegal, or to delay or otherwise directly or
indirectly restrain or prohibit, the consummation of the transactions
contemplated hereby or seeking to obtain material damages in
connection with such transactions, (ii) seeking to prohibit direct or
indirect ownership or operation by Purchaser of all or a material
portion of the business or Assets of Seller, or to compel Seller or
Purchaser to dispose of or to hold separately all or a material
portion of the business or assets of Seller, as a result of the
transactions contemplated hereby, (iii) seeking to require direct or
indirect transfer or sale by Purchaser of any of the Assets, (iv)
seeking to invalidate or render unenforceable any material provision
of this Agreement or any of the other agreements attached hereto as
Exhibits, or otherwise contemplated hereby, (v) seeking relief against
Purchaser under any federal or state law or regulation relating to
bankruptcy, insolvency, reorganization or moratorium or creditors'
rights generally, (vi) otherwise relating to and materially adversely
affecting the transactions contemplated hereby, or (vii) which could
result in any material adverse change in the business, operations,
financial condition or properties of Purchaser.
(d) Waiver of Conditions Precedent. Seller may waive any or all of the
conditions precedent set forth in this Article VIII, either
prospectively or retroactively, by giving written notice of such
waiver to Purchaser. No waiver of any condition precedent pursuant to
this paragraph 8.1(d) shall, unless otherwise expressly stated in such
written notice of waiver, extend to any covenant or agreement
contained herein or to any other condition precedent.
(e) Discovery of Facts or Circumstances. Seller shall not have discovered
any fact or circumstance existing as of the date of this Agreement
which has not been disclosed to Seller as of the date of this
Agreement regarding the business, assets, liabilities, properties,
condition (financial or otherwise), results of operations or prospects
of Purchaser which is, individually or in the aggregate with other
such facts and circumstances, materially adverse to Purchaser.
(f) Opinion of Counsel. Seller shall have received from ▇▇▇▇▇ & ▇▇▇▇▇▇,
P.C., counsel to Purchaser, an opinion dated the Closing, to the
following effect:
(i) Purchaser is a corporation duly organized, validly existing in a
good standing under the laws of the State of Colorado.
- 20 -
(ii) Execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly
authorized by all necessary action, corporate and otherwise, by
Purchaser; this Agreement is a valid and binding obligation of
Purchaser, enforceable against Purchaser in accordance with its
terms except as enforcement can be limited by general equitable
principles or bankruptcy, insolvency or similar laws affecting
creditor's rights generally.
(iii)The execution and delivery of the Agreement will not violate or
conflict with the Articles of Incorporation or Bylaws of
Purchaser or any agreement known to such counsel to which
Purchaser is a party or by which Purchaser or its assets are
bound.
(iv) No consent, approval, authorization or order of, and no notice to
or filing with, any governmental agency or body or any court is
required to be obtained or made by Purchaser pursuant to this
Agreement except such as has been obtained or made.
(v) Except as disclosed in this Agreement or the Exhibits hereto,
such counsel is not aware of any material pending or threatened
action, suit, proceeding or investigation before any court or any
public, regulatory or governmental agency, authority or body,
involving Purchaser or any of its officers or directors, and such
counsel does not know of any legal matter or government
proceedings regarding Purchaser.
(g) Miscellaneous. No party shall have initiated action seeking monetary
damages or claims in connection with, or seeking to prohibit or enjoin
the transactions described in this Agreement.
8.2 Conditions Precedent to Obligations of Purchaser The obligation of
Purchaser to consummate and effect this Agreement are subject to the
satisfaction in all material respects, on or before the Closing Date, of
the following conditions (unless waived by Purchaser in writing in the
manner provided in Section 8.2(f) hereof):
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(a) Representations and Warranties of Seller and Shareholders; Performance
by Seller. (i) The representations and warranties of Seller and its
Shareholders set forth in Article III hereof shall (except where
stated to be as of an earlier date) be accurate in all material
respects on and as of the Closing as though made on and as of the
Closing, except for any changes resulting from activities or
transactions which may have taken place after the date hereof which
are expressly permitted by this Agreement or which have been entered
into in the ordinary course of business and are not expressly
prohibited by this Agreement; (ii) Seller shall have performed all
obligations and complied with all covenants required to be performed
or to be complied with by it under this Agreement prior to the
Closing; (iii) Purchaser shall have received a certificate dated as of
the Closing and signed by the President of Seller to the effect that
the representations and warranties made by Seller in this Agreement
are true and accurate in all material respects as of the Closing (or,
where applicable, as of the earlier specified date) in the form
attached as Exhibit 8.2; (iv) Purchaser shall have entered into
non-compete and confidentiality agreements with ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ in the form attached as Exhibit 7.7, which shall
commence by their terms on Closing of the purchase of the Assets; and
(v) Seller shall have terminated all employment agreements to which it
is a party.
(b) Action. All action necessary to authorize the execution, delivery and
performance of this Agreement by Seller and the consummation of the
transactions contemplated hereby shall have been duly and validly
taken by Seller. Seller shall have furnished Purchaser with copies of
all consents or resolutions adopted or executed by Seller in
connection with such actions, certified by the Secretary of Seller.
(c) No Action or Proceeding. As of the Closing, no action or proceeding by
any public authority or person shall be pending before any court or
administrative body or overtly threatened to restrain, enjoin or
otherwise prevent the consummation of this Agreement or the
transactions contemplated herein. Further, except as described on
Exhibit 3.7, there shall not be threatened, instituted or pending any
action or proceeding, before any court or governmental authority or
agency, domestic or foreign, (i) challenging or seeking to make
illegal, or to delay or otherwise directly or indirectly restrain or
prohibit, the consummation of the transactions contemplated hereby or
seeking to obtain material damages in connection with such
transactions, (ii) seeking to prohibit direct or indirect ownership or
operation by Purchaser of all or a material portion of the business or
assets of Seller, or to compel Purchaser or Seller to dispose of or to
hold separately all or a material portion of the business or assets of
Seller, as a result of the transactions contemplated hereby, (iii)
seeking to require direct or indirect transfer or sale by Purchaser of
any of the Assets, (iv) seeking to invalidate or render unenforceable
any material provision of this Agreement or any of the other
agreements attached hereto as Exhibits, or otherwise contemplated
hereby, (v) seeking relief against Seller under any federal or state
law or regulation relating to bankruptcy, insolvency, reorganization
or moratorium or creditors' rights generally, (vi) otherwise relating
to and materially adversely affecting the transactions contemplated
hereby, or (vii) which could result in any material adverse change in
the business, operations, financial condition or properties of Seller
or the Assets.
- 22 -
(d) No Adverse Changes. There shall have been no event or change occurring
between the execution of this Agreement and the Closing which in the
aggregate may be deemed to have a material adverse effect on the
business, operations, financial condition or properties of Seller or
the Assets.
(e) Litigation. Except as described on Exhibit 3.12, there shall be no
actions, proceedings or investigations pending, threatened against
Seller or its officers or directors before any court, any
administrative agency or administrative officer or executive, which
could result in any material adverse change in the business,
operations, financial condition or properties of Seller or the Assets.
(f) Waiver of Conditions Precedent. Purchaser may waive any or all of the
conditions precedent set forth in this Section 8.2, either
prospectively or retroactively, by giving written notice of such
waiver to Seller. No waiver of any condition precedent pursuant to
this Section 8.2(f) shall, unless otherwise expressly stated in such
written notice of waiver, extend to any other covenant or agreement
contained herein or to any other condition precedent.
(g) Breach or Violation. Seller shall have obtained, or caused to be
obtained, each consent and approval necessary in order that the
transactions contemplated herein not constitute a breach or violation
of, or result in a right of termination or acceleration of, or
creation of any encumbrance on any of the Assets, pursuant to the
provisions of any agreement, arrangement or undertaking of or
affecting Seller or any license, franchise or permit of or affecting
Seller.
(h) Governmental Filings. All material governmental filings,
authorizations and approvals that are required for the consummation of
the transactions contemplated hereby shall have been duly made and
obtained by Seller (except filings required by Purchaser pursuant to
applicable securities laws).
(i) Discovery of Facts or Circumstances. Purchaser shall not have
discovered any fact or circumstance existing as of the date of this
Agreement which has not been disclosed to Purchaser as of the date of
this Agreement regarding the business, assets, liabilities,
properties, condition (financial or otherwise), results of operations
or prospects of Seller which is, individually or in the aggregate with
other such facts and circumstances, materially adverse to Seller or
the value of the Assets.
(j) Damage. There shall have been no damage, destruction or loss of or to
any property or properties owned or used by Seller, or to the Assets,
whether or not covered by insurance which, in the aggregate, has or
would be reasonably likely to have, a material adverse effect on
Seller.
(k) Opinion of Counsel. Purchaser shall have received from counsel to
Seller, an opinion dated the Closing, to the following effect:
(h) Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Wisconsin. - 23 -
(iii)Upon the consummation of the transactions described herein,
Purchaser will own the Assets free and clear of all adverse
claims and charges, encumbrances, claims, liens or other
encumbrances whatsoever, except as otherwise disclosed herein.
(iv) Execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly and validly
authorized by all necessary action, corporate or otherwise, by
Seller, and by its Shareholders; this Agreement is a valid and
binding obligation of Seller, enforceable against Seller in
accordance with its terms except as enforcement can be limited by
general equitable principles or bankruptcy, insolvency or similar
laws affecting creditor's rights generally.
(v) The execution and delivery of this Agreement and the sale of the
Assets by Seller will not violate or conflict with the Articles
of Incorporation or Bylaws of Seller or any agreement or
instrument to which Seller is a party or by which Seller or its
Assets are bound.
(vi) No consent, approval, authorization or order of, and no notice to
or filing with, any governmental agency or body or any court is
required to be obtained or made by Seller for the sale of the
Assets pursuant to this Agreement, except such as have been
obtained or made.
(vii)Except as disclosed in this Agreement or the Exhibits hereto,
such counsel is not aware, after reasonable investigation, of any
pending or threatened action, suit, proceeding or investigation
before any court or any public, regulatory or governmental
agency, authority or body, involving Seller or any of its
officers or directors, and such counsel does not know of any
legal matter or government proceedings regarding Seller.
ARTICLE IX
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
Except as otherwise stated below, the representations, warranties, covenants and
agreements made by the respective parties in this Agreement or in a certificate
executed and delivered in connection with the transactions contemplated hereby
shall survive the Closing for a period of three (3) years. The foregoing shall
be subject to the exception that any claims relating to tax matters covered in
Sections 3.26 and 3.27 hereof shall survive for the period of the applicable
statute of limitations pertaining to tax claims. All covenants, agreements,
representations and warranties made herein or pursuant hereto shall be deemed to
be material and to have been relied upon by the parties hereto, notwithstanding
any investigation heretofore or hereinafter made by or on behalf of the parties
prior to the Closing, provided, however, that no legal remedy, at law or in
equity, shall be available with respect to any loss, liability, or breach of
agreement or warranty or misrepresentation if the party alleging such loss,
liability, breach, or misrepresentation had actual knowledge of the existence,
nature and extent thereof on the Closing and, despite such knowledge, proceeded
with the Closing without objection.
- 24 -
ARTICLE X
INDEMNIFICATION
10.1 Indemnification Subject to the provisions of Article IX and this Article
X, Seller and Shareholders agree to indemnify in respect of, and hold
Purchaser harmless against, any and all damages, claims, deficiencies,
losses, and expenses (collectively "Damages") resulting from (i) any
misrepresentation, breach of warranty, or nonfulfillment or failure to
perform any covenant or agreement on the part of Seller or the
Shareholders made as a part of or contained in this Agreement or in any
certificate executed and delivered pursuant to this Agreement or in
connection with the transactions contemplated hereby, except for Damages
resulting from any such misrepresentations, breach of warranty or
nonfulfillment or failure to perform any such covenant or agreement known
to Purchaser and waived in writing by Purchaser as of the Closing and (ii)
Seller's operation of its business through the date of Closing. Subject to
the provisions of Article IX and this Article X, Purchaser agrees to
indemnify in respect of, and hold Seller harmless against, any and all
Damages resulting from (i) any misrepresentation, breach of warranty, or
nonfulfillment or failure to perform any covenant or agreement on the part
of Purchaser made as a part of or contained in this Agreement or in any
certificate executed and delivered pursuant to this Agreement or in
connection with the transactions contemplated hereby except for Damages
resulting from any such misrepresentations, breach of warranty or
nonfulfillment or failure to perform any such covenant or agreement known
to Seller and waived in writing by Seller as of the Closing and (ii)
Purchaser's operation of the purchased business after the date of Closing.
The party claiming indemnification hereunder is hereinafter referred to as
the "Indemnified Party" and the party against whom such claims are
asserted hereunder is hereinafter referred to as the "Indemnifying Party".
Damages for which a claim or action may be asserted hereunder are
hereinafter referred to as a "Loss".
10.2 Limitation of Liability Neither party shall be liable to the other party
to this Agreement except to the extent that the aggregate amount of Losses
for which they would otherwise (but for this provision) be liable under
this Article X exceeds in the aggregate the sum of $10,000 and then only
to the extent of such excess. Claims for indemnification by either party
shall be limited to the greater of (i) the amount of the Purchase Price,
or (ii) the amount of any damages, claims, deficiencies, losses and
expenses paid by the Indemnified Party to a third party.
10.3 Method of Asserting Claims All claims for indemnification by any
Indemnified Party under this Article X shall be asserted and resolved as
follows:
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(a) In the event that any claim or demand for which an Indemnifying Party
would be liable to an Indemnified Party hereunder is asserted against
or sought to be collected from such Indemnified Party by a third
party, said Indemnified Party shall, within twenty (20) days of such
claim or demand being made, notify the Indemnifying Party of such
claim or demand, specifying the nature of and specific basis for such
claim or demand and the amount or the estimated amount thereof to the
extent then feasible (the "Claim Notice"). The estimate of Loss
contained in the Claim Notice shall not limit the amount of the
Indemnifying Party's ultimate liability under the claim. The
Indemnifying Party shall not be obligated to indemnify the Indemnified
Party with respect to any such claim or demand if the Indemnified
Party fails to notify the Indemnifying Party thereof in accordance
with the provisions of this Agreement within said twenty (20) day
period. The Indemnifying Party shall have 30 days from the personal
delivery or mailing of the Claim Notice (the "Notice Period") to
notify the Indemnified Party (i) whether or not the liability of the
Indemnifying Party to the Indemnified Party hereunder with respect to
such claim or demand is disputed, and (ii) whether or not the
Indemnifying Party desires, at the sole cost and expense of the
Indemnifying Party, to defend the Indemnified Party against such claim
or demand; provided, however, that any Indemnified Party is hereby
authorized prior to and during the Notice Period to file any motion,
answer or other pleading which it shall deem necessary or appropriate
to protect its interest or those of the Indemnifying Party and not
unreasonably prejudicial to the Indemnifying Party. In the event that
the Indemnifying Party notifies the Indemnified Party within the
Notice Period that it desires to defend the Indemnified Party against
such claim or demand, then, except as hereinafter provided, the
Indemnifying Party shall have the right to defend by all appropriate
proceedings, which proceedings shall be promptly settled or prosecuted
by it to a final conclusion. If the Indemnified Party desires to
participate in, but not control, any such defense or settlement it may
do so at its sole cost and expense. If requested by the Indemnifying
Party, the Indemnified Party agrees to cooperate with the Indemnifying
Party and its counsel in contesting any claim or demand which the
Indemnifying Party elects to contest, or, if appropriate and related
to the claim in question, in making any counterclaim against the
person asserting the third party claim or demand, or any cross
complaint against any person but in any such case at the sole cost and
expense of the Indemnifying Party. No claim may be settled without the
consent of the Indemnifying Party, unless such settlement includes the
complete release of the Indemnifying Party.
(b) In the event any Indemnified Party should have a claim against any
Indemnifying Party hereunder which does not involve a claim or demand
being asserted against or sought to be collected from it by a third
party, the Indemnified Party shall send a Claim Notice with respect to
such claim to the Indemnifying Party. If the Indemnifying Party does
not notify the Indemnified Party within the Notice Period that it
disputes such claim, the amount of such claim shall be conclusively
deemed a liability of the Indemnifying Party hereunder. If the
Indemnifying Party has disputed such claim, as provided above, such
dispute shall be resolved by arbitration as provided in Section 13.11.
- 26 -
10.4 Payment of Claim Upon the determination of the liability of Seller or
Purchaser under Section 10.1, 10.2 and 10.3, as the case may be, after
payment by the Indemnified Party of, or upon entry of final judgment or
reaching of a settlement in respect of, an Indemnifiable Claim, or
determination of a Loss to the Indemnified Party occasioned by the breach
of a representation and warranty by the Indemnifying Party, and notice
thereof to the Indemnifying Party, the Indemnifying Party shall within
thirty (30) days after receipt of such notice pay to the Indemnified Party
the amount of the payment, judgment, settlement or Loss, as the case may
be.
10.5 Other Rights and Remedies Not Affected The indemnification rights of the
parties under this Article X are independent of and in addition to such
rights and remedies as the parties may have at law or in equity or
otherwise for any misrepresentation, breach of warranty or failure to
fulfill any agreement or covenant hereunder on the part of any party
hereto including without limitation the right to seek specific
performance, rescission or restitution, none of which rights or remedies
shall be affected or diminished hereby.
10.6 Post-Closing Adjustments and Right of Offset As promptly as practicable,
but in no event later than 120 days following the Closing, the Purchaser
may audit and calculate the actual results of operations from January 1,
1998 through the Closing (as well as the prior fiscal year), taking into
account the transaction expenses paid by the Seller through the date of
Closing. In the event of a material variation in gross revenues between
the results of such audit and the representation provided by Seller to
Purchaser in Exhibit 10.6 hereto (such material variation in gross
revenues to be defined as a variation of more than the lesser of (i) 2% of
revenues or (ii) $10,000), then the Purchaser shall have the right to
offset 55% of such material variation in excess of either the
above-described amounts against the promissory note payment due in the
quarter immediately following the determination of such material
variation. The Note shall also contain provisions which shall permit the
Purchaser to offset indemnification claims under Article X against
payments due under the Note. The right of offset regarding tax matters
will survive the Closing until expiration of the applicable statute of
limitations.
If Seller disagrees with the results of such audit and wishes to contest the
results of such audit, the Seller shall so notify Purchaser within ten days of
written notice from the Purchaser of the intention to exercise the right to
offset, or any other rights of Purchaser. Within 20 days of a notice of
intention to contest the audited results from Seller to Purchaser, Seller and
Purchaser shall each have the right to select a firm of certificate public
accountants (which may be the certified public accountants that prepared the
financial statements on behalf of Purchaser or Seller). Upon the expiration of
such 20-day period, the two certified public accountants shall jointly select,
within ten days, a third firm of certified public accountants who shall be
responsible for determining the proper accounting of revenues. Such independent
firm of certified public accountants shall, within 30 days of their selection or
within a time period mutually acceptable to Purchaser and Seller, evaluate the
respective claims of the parties and tender a decision to the parties concerning
the proper determination of revenues. If no further disagreement exists between
the parties following the determination by the independent firm of certified
public accountants, then in such event the cost and fees payable to such
independent firm shall be assumed by Purchaser in the event a material variation
in revenues of less than $10,000 is determined to exist or, in the alternative,
if a material variation in revenues of $10,000 or more is determined to exist,
then the fees and costs of such independent certified public accounting firm
shall be paid by Seller. Should either of the parties then disagree with the
determination by the independent certified public accounting firm, any further
dispute shall be subject to the provisions of Article 13.11 hereof. The right of
offset shall survive the Closing for a period of three years, provided that the
right of offset regarding tax matters will survive the Closing until expiration
of the applicable statute of limitations.
- 27 -
ARTICLE XI
AMENDMENT, TERMINATION AND BREACH
11.1 Amendment and Modification This Agreement may be amended, modified or
supplemented only by an instrument in writing, executed after the date
hereof, making specific reference to this Article and to each Article and
paragraph hereof to which such amendment, modification or supplement
applies, which document shall be signed by an authorized officer of
Purchaser and by Seller.
11.2 Termination and Abandonment This Agreement may be terminated and the
transaction provided for by this Agreement may be abandoned without
liability on the part of any party to any other party:
(a) At any time before the Closing Date, by mutual consent of Purchaser
and Seller;
(b) Commencing five days prior to Closing and until the Closing, by
Purchaser, if any of the conditions provided for in Section 8.2 of
this Agreement have not been met and have not been waived by Purchaser
in writing;
(c) Commencing five days prior to Closing and until the Closing, by
Seller, if any of the conditions of Section 8.1 of this Agreement have
not been met and have not been waived by Seller in writing; and
(d) Automatically if the Closing has not occurred by January 31, 1999.
In the event of the termination and abandonment of this Agreement by any party
as above provided in this Article XI, written notice shall forthwith be given to
the other party, and each party shall be solely responsible to pay its own
expenses incident to preparation for the consummation of this Agreement and the
transactions contemplated hereunder (except as otherwise provided herein).
ARTICLE XII
CLOSING
12.1 Closing The closing of this Agreement (the "Closing") shall be January 4,
1999 or as soon thereafter as practicable but not later than January 31,
1999 ("Closing Date"); unless a later date is mutually agreed upon by the
parties, provided for accounting and allocation purposes, this Agreement
shall be deemed to be effective at 12:01 a.m. on the first day of the
month in which Closing occurs.
12.2 Allocations At the Closing (i) the Seller will pay Purchaser for all
vacation pay accrued for employees as of the Closing Date; (ii) Seller
will pay Purchaser the amount of all accounts receivable credit balances
existing on the Closing Date; (iii) Purchaser will pay Seller for any
uncredited ▇▇▇▇▇▇▇ Mac activity due and owing as of the Closing Date; and
(iv) the parties shall allocate or prorate all the portion attributable to
Seller of the water, sewer, electric, other utilities and rent through the
Date of Closing. For purposes of income and expense all income and
expenses incurred on or before the Date of Closing shall be billed and
collected by, and paid for, respectively, by Seller.
- 28 -
12.3 Seller's Deliveries at Closing At the Closing Seller and Shareholder will
deliver the following documents to the Purchaser all of which shall be
reasonably satisfactory in form and substance to the Purchaser and its
counsel:
(a) ▇▇▇▇ of Sale. ▇▇▇▇ of Sale for the Assets in the form described in
Exhibit 12.3 hereto, together with such deeds, instruments,
conveyances, certificates of title, assignments, assurances and other
documents as may be required to sell, convey and transfer title to the
Assets from Seller to the Purchaser free and clear of any and all
liens, claims, charges, taxes, encumbrances, pledges, security
interests, options or other restrictions of any kind.
(b) Assignment of Intellectual Property. Assignment of Intellectual
Property described in Exhibit 3.18 together with assurances and other
documents as may be required to transfer all of Seller's right, title
and interest in the Intellectual Property.
(c) Assignment of Contracts, Leases and Other Agreements. Assignment of
contracts, leases and other agreements, described in Exhibit 3.20
together with assurances and other documents as may be required to
transfer all of Seller's right, title and interest in the contracts,
leases and other agreements.
(d) Opinion of Counsel. An opinion from ▇▇▇▇▇▇▇▇▇ & Haensel, S.C., counsel
to Seller, dated the Closing Date, in the form described in Section
8.2 of this Agreement.
(e) Consents and Approvals. All consents, approvals and authorizations,
all notices and all registrations and filings required to be obtained,
given or made under any law, statute, rule, regulation, judgment,
order, injunction, contract, agreement or other instrument to which
Seller is subject, bound or a party, or by which Seller or any of its
properties is bound or subject, in each case which is required to
permit the consummation of the transactions contemplated by the
Agreement without contravention, violation or breach by the Seller of
any of the terms thereof.
(f) Certificates. Certificate of good standing for Seller from the
Secretary of State of the state of incorporation of Seller dated as of
a date reasonably prior to the Closing Date.
(g) Resolutions. Certified copy of resolutions of the Board of Directors
and the Shareholders of Seller authorizing, inter alia, the execution
and delivery of this Agreement, the sale of the Assets and the other
transactions contemplated under this Agreement.
(h) Non-Compete and Confidentiality Agreements. The non-compete agreements
of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ in the form annexed as
Exhibit 7.7 hereto.
(i) Delivery of Corporate and Business Records. Such other corporate and
business records related to the Assets as may be reasonably requested
by the Purchaser including without limitation employee and personnel
folders and applications, payroll, tax related records and financial
data.
(j) Officer's Certificate in the form described in Section 8.2 of this
Agreement.
- 29 -
(k) Other documents. Such other documents, instruments, certificates and
agreements including assignment of space lease to Purchaser, as
Purchaser and its counsel may reasonably request.
(l) License Agreement. The license agreement by and between the Seller and
the Purchaser shall be delivered to Purchaser and, upon such delivery,
Seller shall be released from any and all further obligation and
liability under such license agreement.
12.4 Purchaser's Deliveries at Closing At the Closing, Purchaser shall deliver
the following documents to Seller all of which shall be in a form
reasonably acceptable to Seller and their counsel:
(a) Purchase Price. The purchase price for the Assets referred to in
Section 2.2 including the cash portion and the Note.
(b) Consents and Approval. All consents, approvals and authorizations, all
notices and all registrations and filings required to be obtained,
given or made under any law, statute, rule, regulation, judgment,
order, injunction, contract, agreement or other instrument to which
the Purchaser is a party, or by which it or any of its properties is
bound or subject, in each case which is required to permit the
consummation of the transactions contemplated by this Agreement
without contravention, violation or breach by the Purchaser of any of
the terms thereof.
(c) Opinion of Counsel. An opinion from counsel to the Purchaser, dated
the Closing Date, in the form described in Section 8.1 of this
Agreement.
(d) Resolutions. Certified copy of resolutions of the Board of Directors
of the Purchaser authorizing, inter alia, the execution and delivery
of this Agreement and the Note, the purchase of the Assets, and the
other transactions contemplated hereby.
(e) Officer's Certificate in the form described in Section 8.1 of this
Agreement.
(f) Other Documents. Such other documents, instruments, certificates and
agreements including without limitation, if assumed, the assumption of
the lease, as Seller and its counsel may reasonably request.
12.5 Forwarding of Receivables Following the Closing, in the event the
Purchaser receives payment of receivables which were billed by Seller, and
are the property of Seller, the Purchaser shall take prompt action
(defined to mean not less than every seven calendar days), to forward to
Seller such checks or other remittances as Purchaser shall have received
and which are the property of Seller. Likewise, in the event payments are
received by Seller which are the property of Purchaser and which relate to
receivables created after the purchase of the Assets, the Seller shall
promptly forward (not later than seven calendar days after receipt
thereof) such checks or other remittances to the Purchaser representing
payments on receivables which are the property of Purchaser.
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12.6 Removal of Personal Effects Following Closing In the event the Seller
maintains assets which are the personal property of Seller on the premises
and Seller desires to remove such personal property, the Seller shall have
a period of sixty days following the Closing to remove such personal
property. As to any such personal property removed, the Seller shall
provide the Purchaser with a schedule of such property prior to the
removal of the same from the premises.
12.7 Cooperation; Premises For a period of 90 days following the Date of
Closing, Seller, at Seller's expense, agrees to assist Purchaser in the
retention of Seller's customers and employees, if necessary, and perform
any other duties that Purchaser may reasonably request. Purchaser will
reimburse Seller for any reasonable travel expenses if such travel is
specifically requested by Purchaser. Further, Seller will attempt to
secure a 120 day notice of termination from the lessor of its office space
and will further assist the Purchaser in terminating, renewing or
negotiating with the lessor of such office space.
ARTICLE XIII
MISCELLANEOUS
13.1 Notice All notices and communications required or permitted to be given
hereunder shall be in writing, signed by the sender, and delivered by
personal delivery overnight courier service or by registered or certified
mail to:
If to Purchaser: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
Factual Data Corp.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
With a copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
If to Seller: Oxbow Enterprises, Inc.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, S.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
or such other address as shall have been furnished in writing. Receipt by, or
filing with, the respective parties of any communications shall be deemed to
have occurred for the purpose of this Agreement, when personally delivered, or
next business day if sent by overnight courier, or two days after deposit
thereof, postage prepaid, properly addressed, in the United States mail.
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13.2 Entire and Sole Agreement This Agreement, including all Exhibits hereto
(which by this reference shall incorporate herein all such Exhibits as if
more fully set forth herein), constitutes the entire agreement between the
parties and as of Closing supersedes all agreements, representations,
warranties, statements, promises and understandings, whether oral or
written, with respect to the subject matter hereof. After Closing neither
party shall be bound by or charged with any oral or written agreements,
representations, warranties, statements, promises or understandings not
specifically set forth in this Agreement or in the certificates or
documents delivered in connection herewith.
13.3 Successors and Assigns Except as otherwise provided in this Agreement, all
covenants and agreements of the parties contained in this Agreement shall
be binding upon and inure to the benefit of the respective successors and
permitted assigns of the parties hereto and the heirs, personal
representatives, executors and assigns of the Shareholders. This Agreement
may not be assigned by any party hereto without the prior express written
consent of the other parties hereto.
13.4 Expenses Whether or not the transactions contemplated hereby shall be
consummated, each party shall be solely responsible for payment of all
expenses incurred by it in connection with the consummation of this
Agreement and the transactions contemplated hereunder except as otherwise
provided herein.
13.5 Severability Should any one or more of the provisions of this Agreement be
determined to be illegal or unenforceable, all other provisions of this
Agreement shall be given effect separately from the provision or
provisions determined to be illegal or unenforceable and shall not be
affected thereby.
13.6 Governing Law This Agreement shall be construed and enforced in accordance
with and governed by the laws of the State of Colorado without regard to
conflicts of laws principles.
13.7 Counterparts This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be an original, but all of which
together shall constitute one and the same Agreement.
13.8 Amendments Neither this Agreement nor any term hereof may be changed,
waived, discharged or terminated orally, but only by an instrument in
writing in accordance with Section 11.1 hereof.
13.9 No Third Party Beneficiary The terms and provisions of this Agreement are
intended solely for the benefit of the parties hereto, including ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other person or
entity.
13.10 Headings The headings in this Agreement are for purposes of convenience
and easy reference only and shall not limit or otherwise affect the
meaning hereof.
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13.11 Disputes In the event of any dispute which arises between the parties and
which relates to the subject matter of this Agreement, the parties
acknowledge and agree that any such dispute shall be submitted for binding
arbitration in Denver, Colorado in accordance with the Arbitration
Commercial Rules procedures established by the American Arbitration
Association or, if such association is not then in existence, an
independent association of arbitrators which may be designated by
agreement of the parties. In the event the parties are unable to agree on
an independent association of arbitrators from which arbitrators may be
drawn, either party may apply to a court of competent jurisdiction for
appointment of arbitrators, however, such application will only be made in
the event the American Arbitration Association is not then in existence.
The arbitrator(s) shall make detailed written findings to support their
award. The arbitrator(s) shall also determine which party(ies) is (are)
the prevailing party(ies) in any arbitration proceeding. The prevailing
party in any such arbitration proceeding shall be awarded such costs and
expenses (including reasonable attorney's and expert witness' fees) as
were incurred by the prevailing party as a result of the institution and
prosecution of the arbitration proceeding including all costs and expenses
(including reasonable attorney's and expert witness fees) to enter
judgment upon or enforce any such award including all appellate
proceedings.
13.11 Delivery of Exhibits All Exhibits to be delivered by either of the parties
hereto upon execution of this Agreement which are not so delivered shall
be delivered to the other party not later than 20 days from the date of
the execution of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
PURCHASER:
FACTUAL DATA CORP.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
SELLER:
OXBOW ENTERPRISES, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
SHAREHOLDERS, but only with respect
to Articles III and X
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
TABLE OF ATTACHMENTS
Exhibit Description
2.1 List of Acquired Assets
2.2(b)(i) Form of Promissory Note and Amortization
Schedule
2.2(b)(ii) Form of Security Agreement
2.3 List of Assumed Liabilities
3.1(a) Articles of Incorporation of Seller
3.1(b) Bylaws of Seller
3.3(a) Certificate of Seller re: Shareholder Approval
3.3(b) Directors' Consent of Seller
3.7 Governmental Notices
3.12 Litigation
3.15 Exceptions to Title of Assets
3.16(a) Customer Accounts
3.16(b) Customer Contracts or Agreements
3.16(c) Impaired Customer Contracts
3.16(d) Delinquent Contracts or Agreements
3.17 License Agreements
3.18 Intellectual Property
3.19 Seller's Customers--Revenues
3.20 Contracts
3.22 Liabilities not on Financial Statements
3.23 No Material Adverse Changes
3.25 Leases
3.26 Tax Returns
3.27 Tax Notices
3.28 Employment Matters
3.29 Employee Benefit Plans
6.2 Directors' Consent of Purchaser
7.7(a) Non-Compete and Confidentiality
Agreement--▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
7.7(b) Non-Compete and Confidentiality
Agreement--▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
7.8 Employment Agreements
8.1 Form of Certificate of Purchaser
8.1(f) Opinion of ▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
8.2 Form of Certificate of Seller
8.2(k) Opinion of ▇▇▇▇▇▇▇▇▇ & Haensel, S.C.
10.6 Seller's Gross Revenue Representation
12.3 ▇▇▇▇ of Sale and Assignment