EXHIBIT 10.1
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EXECUTION COPY
STOCK PURCHASE AGREEMENT
BY AND AMONG
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.,
AS PURCHASER,
AND
XXXX X. XXXXX
XXXXX X. XXXX
XXXXXXXX XXXXXXX
XXXXX XXXXXXXX
XXXX XXXXX
XXXXXXX XXXXXXXXX
XXXX XXXXXXXXX
AND
XXXXX XXXXX
AS THE SHAREHOLDERS OF QUESTAR EDUCATIONAL SYSTEMS, INC.
AND
QUESTAR EDUCATIONAL SYSTEMS, INC.
DATED AS OF MAY 31, 2006
STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
AND
LIST OF EXHIBITS AND SCHEDULES
Page
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1. DEFINITIONS 1
2. COVENANTS AND UNDERTAKINGS 1
2.1 Purchase and Sale of Shares 1
2.2 Purchase Price 1
2.3 Working Capital of QES 3
2.4 Discharge of Debt and Other Obligations 5
2.5 Cooperation 5
2.6 Consents and Approvals 6
2.7 Non-competition Agreements and Employee
Proprietary Rights Agreements of Selling
Shareholders 6
2.8 Resignations and Employment 6
2.9 Tax Matters 6
2.10 Employee Plans and Compensation Arrangements 9
2.11 Affirmative Covenants 12
2.12 Brokers 12
2.13 Publicity 12
2.14 Access to Books and Records 12
2.15 Non-Competition by QDS 14
2.16 Certain Post-Closing Environmental Procedures 14
2.17 Banking and Lockbox Arrangements 15
3. REPRESENTATIONS AND WARRANTIES OF SELLING SHAREHOLDERS 15
3.1 Organization, Standing and Foreign Qualification 15
3.2 Authority and Status; No Violation 16
3.3 Capitalization 17
3.4 Absence of Equity Investments 18
3.5 Liabilities and Obligations of QES 18
3.6 Tax Matters 18
3.7 Title to Assets 19
3.8 Bank Accounts 20
3.9 Undisclosed Liabilities 20
3.10 Absence of Changes 20
3.11 Legal Proceedings 22
3.12 Licenses and Permits; Compliance with Law 22
3.13 Real Property 23
3.14 Environmental Matters 24
3.15 Transactions with Certain Persons 25
3.16 Intellectual Property 25
3.17 Labor Matters and Employee Relations 28
3.18 Benefit Plans 29
3.19 Non-Competition by QDS 32
3.20 Accounts Receivable 32
3.21 Insurance 32
3.22 Guarantees 33
3.23 Contracts 33
3.24 Post-closing Cooperation 34
3.25 Full Disclosure 34
3.26 Restricted Stock 34
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER 35
4.1 Purchaser's Organization and Authority 35
4.2 Authorization of Agreement 35
4.3 Consents of Third Parties 35
4.4 Financial Capacity and Debt Restrictions 36
4.5 Capitalization 36
4.6 SEC Reports 36
4.7 Absence of Undisclosed Liabilities 37
4.8 Absence of Material Adverse Changes 37
4.9 Legal Proceedings 38
5. FURTHER AGREEMENTS OF THE PARTIES 38
5.1 Expenses 38
5.2 Sales Taxes 38
5.3 Further Assurances 39
5.4 Bulk Transfer Law 39
5.5 Final Financial Statements 39
5.6 Name Protection 39
6. CONDITIONS TO CLOSING 39
6.1 Conditions to Obligations of Purchaser 39
6.2 Conditions Precedent to Obligation of the Selling
Parties 40
7. DOCUMENTS TO BE DELIVERED AT CLOSING 41
7.1 Documents to be Delivered by the Selling Parties 41
7.2 Documents to be Delivered by Purchaser 42
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 43
8.1 Survival of Representations and Warranties of
Selling Parties 43
8.2 Survival of Representations and Warranties of
Purchaser 43
8.3 Assertion of Indemnification Claims 44
8.4 Certain Limitations On Obligation to Indemnify 46
8.5 Setoff 46
9. MISCELLANEOUS 47
9.1 Entire Agreement; Amendment 47
9.2 Governing Law 47
9.3 Headings 47
9.4 Notices 47
9.5 Separability 48
9.6 Waiver 49
9.7 Publicity 49
9.8 No Third Party Beneficiaries 49
9.9 Jurisdiction 49
9.10 Assignment 49
9.11 Counterparts 49
9.12 Pronouns and Number 50
9.13 Schedules and Exhibits Incorporated 50
9.14 Waiver of Jury Trial 50
EXHIBITS:
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Exhibit A Shareholders of QES
Exhibit B Definitions
Exhibit C Subordinated Note
Exhibit D TASA Preferred Stock Statement of Rights and
Preferences
Exhibit E Escrow Agreement
Exhibit F Omitted
Exhibit G Noncompetition Agreement
Exhibit H Employee Proprietary Rights Agreement
Exhibit I Employment Agreement
Exhibit J Services Agreement with NBS
Exhibit K Opinion of Counsel for QES, QDS and Selling
Shareholders
Exhibit L Opinion of Counsel for Purchaser
Exhibit M Lease [current building]
Exhibit N Lease [new building]
Exhibit O Intellectual Property Assignment and Usage Agreement
Exhibit P Transitional Services Agreement
SCHEDULES:
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2.4.1 Discharge of Debts and Other Obligations
2.4.2 Approved Intercompany Obligations
2.6 Consents and Waivers
2.8 Resignations and Employment
3.1 Organization, Standing and Foreign Qualification
3.3.1 Capitalization
3.6.2 Tax Matters
3.7 Encumbrances on Assets
3.8 Bank Accounts
3.9 Undisclosed Liabilities
3.10 Absence of Changes
3.11 Legal Proceedings
3.12.1 Licenses & Permits; Compliance with Law
3.13 Real Property
3.15 Transactions with Certain Persons
3.16 Intellectual Property
3.16.7 Third Party Software Used in QES Business
3.16.9 Trademarks and Intellectual Property Registrations
3.17 Labor Matters and Employee Relations
3.18 Benefit Plans
3.21 Insurance
3.23 Contracts
3.23.3 Contracts with Projected Revenue Through 2010
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") made as of the
31st day of May, 2006, by and among TOUCHSTONE APPLIED SCIENCE
ASSOCIATES, INC., a Delaware corporation with a principal place
of business at 0 Xxxxxxxxxxxx Xxxxxxx, Xxxxxxxx, Xxx Xxxx 00000
("Purchaser" or "TASA"), the parties listed on the Schedule of
Stockholders attached to this Agreement as Exhibit A
(individually, a "Selling Shareholder", and collectively,
"Selling Shareholders"), and QUESTAR EDUCATIONAL SYSTEMS, INC.,
a Minnesota corporation, with its principal place of business at
0000 Xxxxx 000xx Xxxxxx Xxxx, Xxxxx Xxxxxx, Xxxxxxxxx 00000
("QES" with Selling Shareholders, each a "Selling Party" and
collectively, the "Selling Parties").
WHEREAS, Selling Shareholders are the owners of 50,000
shares of the common stock, $0.01 par value per share, of QES
constituting one hundred percent (100%) of the issued and
outstanding capital stock of QES (the "Shares");
WHEREAS, the parties hereto desire to enter into this
Agreement pursuant to which Purchaser will purchase the Shares
from Selling Shareholders upon the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the
mutual promises, representations, warranties and covenants
hereinafter set forth, the parties hereto agree as follows:
1. DEFINITIONS.
Unless otherwise stated in this Agreement, certain terms
used herein shall have the meanings set forth in Exhibit B
attached hereto.
2. COVENANTS AND UNDERTAKINGS.
2.1 PURCHASE AND SALE OF SHARES.
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Subject to the terms and conditions hereinafter set
forth, Selling Shareholders hereby, sell, assign, transfer,
convey and deliver to Purchaser the Shares, free and clear of
all Encumbrances. Such sale, assignment, transfer, conveyance
and delivery shall be evidenced by share certificates duly
endorsed in blank or by instruments of transfer satisfactory in
form and substance to Purchaser and its counsel.
2.2 PURCHASE PRICE.
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2.2.1 In consideration of the sale, assignment,
transfer, conveyance and delivery of the Shares and in reliance
upon the representations and warranties made herein by Selling
Parties, Purchaser, in full payment for the Shares and the Non-
Competition Agreements, shall pay to Selling Shareholders
(i) the aggregate amount of Twenty Million Dollars ($20,000,000)
(the "Initial Purchase Price") plus (ii) an additional aggregate
sum in an amount calculated as set forth in Section 2.2.2 (the
"Earnout Payment"); (iii) as adjusted by the payment by or to
the Selling Shareholders of the Working Capital Adjustment
Amount as defined in Section 2.3.2.3 below, (the Working Capital
Adjustment Amount together with the Earnout Payment and the
Initial Purchase Price, the "Purchase Price"). The Initial
Purchase Price shall be payable by:
2.2.1.1 wire transfer at Closing, as Selling
Shareholders direct, the aggregate amount of FIFTEEN MILLION and
00/100 DOLLARS ($15,000,000) (the "Cash Portion" of the Purchase
Price); and
2.2.1.2 delivery to Selling Shareholders of a
subordinated promissory note of the Purchaser in the principal
amount of FOUR MILLION and 00/100 DOLLARS ($4,000,000) in the
form of Exhibit C annexed hereto and made a part hereof (the
"Subordinated Note"); and
2.2.1.3 issuance to Selling Shareholders, in
proportion to their ownership of the Shares, TASA Preferred
Stock in such number of shares as will aggregate the amount of
One Million Dollars ($1,000,000) priced at $4.50 per share. Each
Selling Shareholder shall be issued the maximum number of whole
shares of TASA Preferred Stock that does not exceed his or her
proportionate interest in the aggregate number of shares issued
thereunder, and any fractional shares shall be paid in cash.
The TASA Preferred Stock to be issued pursuant to Section
2.2.1.3 shall have such rights as are set forth in that certain
statement of rights and preferences to be filed with the
Secretary of State of the State of Delaware in substantially the
form of Exhibit D annexed hereto and made a part hereof (the
"TASA Preferred Stock Statement of Rights and Preferences").
2.2.2 Purchaser shall pay to Selling Shareholders in
accordance with Section 2.2.3.5 below, the Earnout Payment as
hereinafter set forth. On or before January 31, 2010,
Cumulative Earnout Revenue shall be calculated and:
2.2.2.1 if Cumulative Earnout Revenue equals at
least Sixty-Three Million Dollars ($63,000,000) but less than
Sixty-Six Million Dollars ($66,000,000), Purchaser shall pay to
Selling Shareholders an aggregate Earnout Payment of one-sixth
of Ten Million Dollars ($10,000,000), or
2.2.2.2 if Cumulative Earnout Revenue equals at
least Sixty-Six Million Dollars ($66,000,000) but less than
Sixty-Nine Million Dollars ($69,000,000), Purchaser shall pay to
Selling Shareholders an aggregate Earnout Payment of one-third
of Ten Million Dollars ($10,000,000), or
2.2.2.3 if Cumulative Earnout Revenue equals at
least Sixty-Nine Million Dollars ($69,000,000), Purchaser shall
pay to Selling Shareholders an aggregate Earnout Payment of Ten
Million Dollars ($10,000,000), and
2.2.2.4 if Cumulative Earnout Revenue equals at
least Eighty Million Dollars ($80,000,000), Purchaser shall pay
to Selling Shareholders an additional aggregate Earnout Payment
of Two Million Five Hundred Thousand Dollars, ($2,500,000).
2.2.2.5 Payments by Purchaser to Selling
Shareholders pursuant to Section 2.2.3.1, 2.2.3.2 and 2.2.3.3,
if any, shall be paid fifty percent (50%) in cash and fifty
percent (50%) in TASA Preferred Stock. At the Closing, the
Selling Shareholders and TASA shall enter into an escrow
agreement in the form of Exhibit E hereto, pursuant to which
TASA shall deliver to the Escrow Agent One Million One Hundred
Eleven Thousand One Hundred and Eleven shares of TASA Preferred
Stock priced at $4.50 per share, representing fifty percent
(50%) of the potential Ten Million Dollar aggregate Earnout
Payment under sections 2.2.3.1, 2.2.3.2 and 2.2.3.3 (the "Escrow
Agreement"). Fractional shares shall be paid in cash. Payments
by Purchaser to Selling Shareholders pursuant to Section
2.2.3.4, if any, shall be paid in such combination of cash and
TASA Preferred Stock as Purchaser shall determine. The number
of shares of TASA Preferred Stock issued in accordance with
Section 2.2.3.4 shall be based upon Fair Market Value Per Share
as of December 31, 2009. If the TASA Preferred Stock becomes
subject to mandatory conversion prior to distribution to Selling
Shareholders pursuant to the Escrow Agreement, or if any Selling
Shareholder shall elect to convert the TASA Preferred Stock upon
distribution pursuant to the Escrow Agreement, the TASA Common
Stock into which the TASA Preferred Stock is converted shall be
substituted for the TASA Preferred Stock held under or
distributed pursuant to the Escrow Agreement.
2.2.3 If an Earnout Payment is made in accordance
with Section 2.2.3.3, there shall be no additional Earnout
Payment made in accordance with either Section 2.2.3.1 or
2.2.3.2. If an Earnout Payment is made in accordance with
section 2.2.3.2, there shall be no additional Earnout Payment
made in accordance with Section 2.2.3.1.
2.2.4 All cash payments to be made under this Section
2.2 shall be made by wire transfer of immediately available
funds to such account as Selling Shareholders shall direct.
2.3 WORKING CAPITAL OF QES.
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2.3.1 Selling Parties agree that the amount of the
Working Capital of QES on the Closing Date (after giving effect
to Section 2.4) (the "Closing Date Working Capital") shall be
One Million Five Hundred Thousand Dollars ($1,500,000) (the
"Base Working Capital"), and shall include cash on hand of at
least One Million Five Hundred Thousand Dollars ($1,500,000),
less any amount owed to QES by Purchaser for certain costs and
expenses as provided in Section 5.1 (the "Base Cash Balance").
2.3.1.1 If the amount of cash on hand as of the
Closing Date is less than the Base Cash Balance, then Selling
Parties shall on such Closing Date pay to QES the amount of such
difference, or shall reduce the amount of any distribution from
QES by the amount of such difference, and such amount shall be
repaid to Selling Shareholders by QES upon collection of
accounts receivable included in the Closing Date Working
Capital.
2.3.2 Not later than July 15, 2006, TASA shall cause
QES to prepare and shall deliver to Selling Shareholders and
Purchaser a balance sheet of QES as of the Closing Date (the
"Closing Date Balance Sheet") which Closing Date Balance Sheet
shall be accompanied by a reasonably detailed calculation by
McGladrey of the amount of the Closing Date Working Capital.
The Closing Date Balance Sheet shall be prepared in accordance
with GAAP and on a basis consistent with the preparation of the
October 31, 2005 QES Fiscal Year Statements. Following the
Closing Date, QES and Purchaser shall provide to McGladrey full
access to the books and records of QES to the extent reasonably
related to the preparation of the Closing Date Balance Sheet.
2.3.2.1 If the Closing Date Working Capital
exceeds Base Working Capital, then on August 1, 2006 (if neither
party provides a notice of disagreement pursuant to section
2.3.3 on or before such date) or within five (5) days after the
Determination Date (if a notice of disagreement is timely given
by either party), the Purchaser shall pay to the Selling
Shareholders the amount of such excess in cash by wire transfer
to an account designated by Selling Shareholders.
2.3.2.2 If the Closing Date Working Capital is
less than Base Working Capital, then on August 1, 2006 (if
neither party provides a notice of disagreement pursuant to
section 2.3.3 on or before such date) or within five (5) days
after the Determination Date (if a notice of disagreement is
timely given by either party), the Selling Shareholders shall
pay to the Purchaser the amount of such difference in cash by
wire transfer to an account designated by Purchaser.
2.3.2.3 The "Working Capital Adjustment Amount"
shall mean, as applicable (i) the amount payable by the
Purchaser to the Selling Shareholders pursuant to Section
2.3.2.1, or (ii) the amount payable by the Selling Shareholders
to the Purchaser pursuant to Section 2.3.2.2.
2.3.3 DISPUTES. At the time of delivery of the
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Closing Date Balance Sheet, Selling Shareholders shall deliver
to Purchaser a schedule that reflects the activity in the
intercompany, or similar due to/due from accounts of Questar
Data Systems, Inc. ("QDS") and QES and any other Affiliate of
either and all cash receipts and disbursements of QES in each
case for the period from January 31, 2006 to the Closing Date.
If either Purchaser or Selling Shareholders shall disagree with
the calculation of the Closing Date Working Capital or any
element of the Closing Date Balance Sheet relevant thereto, such
party shall notify the other party of such disagreement in
writing on or before August 1, 2006, which notice shall set
forth in detail the particulars of such disagreement. In the
event that neither Purchaser nor Selling Shareholders provide
such a notice of disagreement on or before such date, each shall
be deemed to have accepted the Closing Date Balance Sheet and
the calculation of the Closing Date Working Capital, which shall
be final, binding and conclusive for all purposes hereunder. In
the event any such notice of disagreement is timely provided by
either Purchaser or Selling Shareholders, the Purchaser and the
Selling Shareholders shall use their commercially reasonable
efforts for a period of fifteen (15) days (or such longer period
as they may mutually agree) to resolve any disagreements with
respect to the calculation of the Closing Date Working Capital.
If, at the end of such period, they are unable to resolve such
disagreements, then such independent accounting firm of
recognized national or regional standing as may be mutually
selected by the Purchaser and the Selling Shareholders (the
"Accounting Arbitrator") shall resolve any remaining
disagreements. The Accounting Arbitrator shall determine as
promptly as practicable, but in any event within thirty (30)
days of the date on which such dispute is referred to the
Accounting Arbitrator, based solely on written submissions
forwarded by the Purchaser and the Selling Shareholders to the
Accounting Arbitrator within ten (10) days following the
Accounting Arbitrator's selection, whether or not the
calculation of the Closing Date Working Capital was prepared in
accordance with the standards set forth in Section 2.3.2 and
(only with respect to the remaining disagreements submitted to
the Accounting Arbitrator) whether and to what extent (if any)
either determination requires adjustment. The Accounting
Arbitrator shall allocate its costs and expenses between the
Purchaser and the Selling Shareholders based upon the percentage
which the portion of the contested amount not awarded to each
party bears to the amount actually contested by such party. In
acting hereunder, the Accounting Arbitrator shall be entitled to
the privileges and immunities of arbitrators. The determination
of the Accounting Arbitrator shall be final, conclusive and
binding on the parties. The date on which the Closing Date
Working Capital is finally determined in accordance with this
Section 2.3.3 is referred to as the "Determination Date."
2.4 DISCHARGE OF DEBT AND OTHER OBLIGATIONS.
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On or before the Closing Date, Selling Parties shall:
2.4.1 cause to be paid, discharged in full or
otherwise satisfied and released, and shall deliver satisfactory
releases, and terminations of any security interest held in
respect of, or other evidence thereof reasonably satisfactory to
Purchaser all Indebtedness of QES. All documents evidencing
obligations under this subsection are listed on Schedule 2.4.1
attached hereto;
2.4.2 cause each Affiliate of any Selling Party to
cause to be paid, discharged in full, contributed or otherwise
satisfied and released, and shall deliver evidence thereof
reasonably satisfactory to Purchaser, all inter-company debt or
liabilities owed by any of such Affiliates to QES or by QES to
any of such Affiliates other than Approved Intercompany
Obligations set forth on Schedule 2.4.2 hereto;
2.4.3 cause each Related Party to cause to be paid,
discharged in full, contributed or otherwise satisfied and
released, and shall deliver evidence thereof reasonably
satisfactory to Purchaser, all debt or liabilities owed by any
such Related Party to QES or by QES to any such Related Party
other than Approved Intercompany Obligations set forth on
Schedule 2.4.2; and
2.4.4 cause QES to make any distributions to Selling
Shareholders with respect to periods ending on or before the
Closing Date, including but not limited to distributions of
Working Capital in excess of the Base Working Capital amount,
distributions relating to Taxes payable by Selling Shareholders
with respect to the Transaction or the operations of QES through
the Closing Date, and any other distributions not inconsistent
with this Agreement.
2.5 COOPERATION.
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Purchaser and Selling Parties shall cooperate fully
with each other and their respective counsel and accountants in
connection with any actions required to be taken as a part of
their respective obligations under this Agreement, and Purchaser
and Selling Parties shall execute such other documents as may be
necessary and desirable to the implementation and consummation
of this Agreement and otherwise use their commercially
reasonable efforts to consummate the transactions contemplated
hereby and to fulfill their obligations hereunder.
2.6 CONSENTS AND APPROVALS.
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2.6.1 Subject to the next to last sentence of this
Section 2.6.1, Selling Parties agree to use good faith,
commercially reasonable efforts and to take any and all actions
reasonably necessary to obtain the written waiver, consent and
approval of all Persons whose waiver, consent or approval is
required (i) in order to consummate the transactions
contemplated by this Agreement, or (ii) by any agreement, lease,
instrument, arrangement, judgment, writ, decree, order or
license to which QES, or any Related Party, Affiliate or Selling
Shareholder, is a party or subject on the Closing Date and which
would prohibit, or require the waiver, consent or approval of
any Person to such transactions or under which, without such
waiver, consent or approval, the consummation of such
transactions would constitute an occurrence of default under the
provisions thereof, result in the acceleration of any obligation
thereunder or result in the creation or imposition of any
Encumbrance upon the Shares or Business or any property or asset
of QES or give rise to a right of any party thereto to terminate
its obligations thereunder. Notwithstanding anything to the
contrary contained in this Agreement, Purchaser shall not be
required to accept or honor (nor shall QES be permitted to
accept or honor except with Purchaser's prior written consent)
any conditions, changes, modifications or additions to, or in
connection with, any contracts, agreements, licenses, permits or
other authorizations of QES that may be imposed or required by
the party from whom consent or approval is sought under this
Agreement or in connection with the transactions contemplated
hereby, other than those of an immaterial or ministerial nature.
Schedule 2.6 contains a list of all consents and waivers to be
obtained by any Selling Party under this Section 2.6.
2.7 NON-COMPETITION AGREEMENTS AND EMPLOYEE PROPRIETARY
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RIGHTS AGREEMENTS OF SELLING SHAREHOLDERS.
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Each Selling Shareholder, individually, shall enter
into a Non-Competition Agreement at Closing substantially in the
form of Exhibit G. Each of Xxxx X. Xxxxx, Xxxxx Xxxxxxxx, Xxxx
Xxxxx, XxXxxxx Xxxxxxxxx, Xxxx Xxxxxxxxx and Xxxxx Xxxxx shall
enter into an Employee Proprietary Rights Agreement in the form
of Exhibit H.
2.8 RESIGNATIONS AND EMPLOYMENT.
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Schedule 2.8 is a list of all current and former
officers and directors of QES. At Closing, Selling Shareholders
shall cause to be delivered to Purchaser the resignation of
(i) each of the then serving directors of QES and (ii) each of
the then serving officers of QES whose resignation is requested
by Purchaser, which resignations shall be effective immediately
subsequent to Closing. At Closing, each of Xxxx X. Xxxxx, Xxxxx
Xxxxxxxx, Xxxx Xxxxx, XxXxxxx Xxxxxxxxx, Xxxx Xxxxxxxxx and
Xxxxx Xxxxx shall enter into an Employee Employment Agreement
substantially in the form of Exhibit I (collectively, the
"Employment Agreements").
2.9 TAX MATTERS.
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2.9.1 Taxes of QES with respect to the period ending
on (and including) the Closing Date shall be the responsibility
of Selling Shareholders. Taxes of QES with respect to the
period after the Closing Date shall be the responsibility of
Purchaser.
2.9.1.1 Selling Shareholders agree to pay and,
notwithstanding any disclosure of potential tax liabilities made
by Selling Shareholders or QES, to indemnify, reimburse and hold
harmless Purchaser and QES and their respective successors, and
their respective officers, directors, employees, agents and
representatives, from and against any and all Taxes of QES
payable with respect to, and any and all claims, liabilities,
losses, damages, costs and expenses (including, without
limitation, court costs and reasonable professional fees
incurred in the investigation, defense or settlement of any
claims covered by this indemnity) (herein referred to as
"Indemnifiable Tax Damages"), arising out of or in any manner
incident, relating or attributable to Taxes of QES payable with
respect to, or Tax Returns required to be filed by QES under
Section 2.9 with respect to, (i) any taxable year (or other
applicable reporting period) (a "Reporting Period") of QES
ending on or before the Closing Date, (ii) any Reporting Period
of QES that begins before the Closing Date and that ends after
the Closing Date (a "Straddle Period"), but only for that
portion of such period ending on or before the Closing Date and
(iii) the Transaction regardless as to whether the imposition of
such Taxes occurs before on or after the Closing Date, provided,
however, that Taxes payable by QES with respect to the
Transaction and Indemnifiable Tax Damages with respect to the
Transaction shall only include Taxes based upon gross or net
income (including capital gains and recapture of depreciation or
amortization). Selling Shareholders shall be entitled to any
credits or refunds of Taxes of QES payable in accordance with
the preceding sentence. Purchaser shall cause the amount of any
credits or refunds of Taxes to which Selling Shareholders are
entitled under this Section 2.9, but which are received by or
credited to QES after the Closing Date, to be paid to Selling
Shareholders within ten (10) business days following such
receipt or crediting; provided that Selling Shareholders shall
reimburse QES and Purchaser shall have a right of setoff against
any obligation to Selling Shareholders to the extent of any
required subsequent repayment of, or reduction in, the amount of
such credits or refunds of Taxes so received or credited.
2.9.1.2 Purchaser agrees to pay and to
indemnify, reimburse and hold harmless Selling Shareholders and
their heirs, successors, and representatives, from and against
any and all Taxes of QES payable with respect to, and any and
all Indemnifiable Tax Damages, arising out of or in any manner
incident, relating or attributable to Taxes of QES payable with
respect to, or Tax Returns required to be filed by QES with
respect to, (A) any Reporting Period of QES beginning after the
Closing Date and (B) any Straddle Period, but only for that
portion of such period commencing the day after the Closing Date
except for Taxes relating to or arising out of the Transaction
that are based upon gross or net income (including capital gains
and recapture of depreciation or amortization), regardless as to
whether the imposition of such Taxes occurs before, on or after
the Closing Date, whether such Taxes are imposed directly on QES
or as a result of including QES in consolidated returns.
2.9.2 Any tax sharing practice or other similar
arrangement between QES and QDS, or QES and Selling Shareholders
shall be terminated as of the Closing Date.
2.9.3 The Tax liabilities for each Straddle Period
for QES shall be determined by closing the books and records of
QES as of the Closing Date, by treating each such Straddle
Period as if it were a separate Reporting Period and by
employing accounting methods which are consistent with those
employed in preparing the Tax Returns for QES in prior Reporting
Periods and which do not have the effect of distorting income or
expenses (taking into account the transactions contemplated by
this Agreement, specifically including, but not limited to
Section 2.9.5), except that Taxes based on items other than
income or sales shall be computed for the Reporting Period
beginning on the first day of the applicable Straddle Period and
prorated on a time basis between the Straddle Period and the
period beginning on the first day after the Closing Date and
ending on the last day of the Reporting Period which includes
the Closing Date; provided that with respect to any Tax which is
not in effect during the entire Straddle Period, the proration
of such Tax shall be based on the period during the Straddle
Period that such Tax was in effect.
2.9.4 Selling Shareholders shall be responsible for
preparing and filing on behalf of QES all Tax Returns for
Reporting Periods of QES ending on or before the Closing Date,
including Tax Returns of QES for such periods which are due
after the Closing Date, and Selling Shareholders shall be
responsible for the contents of such returns; provided, however,
that Selling Shareholders shall furnish Purchaser and QES with
copies of such returns of QES, not less than ten (10) days prior
to the due date thereof for approval thereof by Purchaser and
QES prior to filing. Purchaser shall be responsible for
preparing and filing on behalf of QES all Tax Returns for
Reporting Periods of QES ending after the Closing Date
(including for Reporting Periods beginning before and ending
after the Closing Date).
2.9.5 SECTION 338(H)(10) ELECTION.
---------------------------
2.9.5.1 QES shall make timely and irrevocable
elections under Section 338(h)(10) of the Code and, if
permissible, similar elections under any applicable state or
local income tax laws with respect to QES (the "Section
338(h)(10) Elections"), and Selling Shareholders shall join with
Purchaser in making Section 338(h)(10) Elections. Selling
Shareholders and Purchaser shall report the transactions
contemplated by this Agreement consistent with such Section
338(h)(10) Elections and shall take no position contrary
thereto, unless otherwise required by a determination within the
meaning of Section 1313 of the Code (or similar provision of
state or local law). Selling Shareholders shall pay to the
applicable taxing authority any Tax attributable to the Section
338(h)(10) Elections, whether imposed before, on or after the
Closing Date, to the extent such Taxes are based upon gross or
net income (including capital gains and recapture of
depreciation or amortization).
2.9.5.2 Selling Shareholders and Purchaser
agree to allocate the modified "Aggregate Deemed Sale Price" (as
defined under applicable laws, rules and regulations of the
United States Treasury) among the assets of QES in accordance
with the agreement of Selling Shareholders and Purchaser reached
within 100 days following the Closing (the "Agreement Period").
Neither Selling Shareholders nor Purchaser shall take a position
before any Taxing Authority or otherwise (including in any Tax
Return) inconsistent with such allocation or the appraisal of
any QES assets used in connection with financing this
transaction, unless otherwise required by a determination within
the meaning of Section 1313 of the Code (or similar provision of
state or local law).
2.9.6 COOPERATION ON TAX MATTERS.
--------------------------
2.9.6.1 Selling Shareholders and Purchaser
shall cooperate fully, as and to the extent reasonably requested
by the other party, in connection with the filing of Tax Returns
pursuant to this Section 2.9, termination of the S status of QES
with each Governmental Authority as of the Closing Date, and any
audit, litigation or other proceeding with respect to Taxes.
Such cooperation shall include the retention and (upon the other
party's request) the provision of records and information which
are reasonably relevant to any such Tax Return, audit,
litigation or other proceeding and making employees available on
a mutually convenient basis to provide additional information
and explanation of any material provided hereunder. Selling
Shareholders and Purchaser agree (i) to retain all books and
records with respect to Tax matters pertinent to QES relating to
any taxable period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent
notified by Selling Shareholders or Purchaser, any extensions
thereof) of the respective taxable periods, and to abide by all
record retention agreements entered into with any taxing
authority, and (ii) to give the other party reasonable written
notice prior to transferring, destroying or discarding any such
books and records and, if the other party so requests, Selling
Shareholders or Purchaser, as the case may be, shall allow the
other party to take possession of such books and records to the
extent they would otherwise be destroyed or discarded.
2.9.6.2 Selling Shareholders and Purchaser
further agree, upon request, to use commercially reasonable
efforts to obtain any certificate or other document from any
Governmental Authority or any other Person as may be necessary
to mitigate, reduce or eliminate any Tax that could be imposed
(including Taxes with respect to the transactions contemplated
hereby).
2.9.6.3 Each of Purchaser and Selling
Shareholders shall promptly deliver to the other any notice from
any Taxing Authority received by it relating to Taxes for which
the other is or may be liable pursuant to this Agreement.
2.10 EMPLOYEE PLANS AND COMPENSATION ARRANGEMENTS.
--------------------------------------------
2.10.1 With respect to all of its group health plans,
and compliance with the continuation coverage requirements with
respect to all qualifying events as described in the
Consolidated Omnibus Budget Reconciliation Act ("COBRA") health
benefit provisions of 1986, affecting any current or former
employees of QES and any qualifying beneficiary of such
employees or former employees that occurred on or prior to the
Closing Date, Selling Shareholders shall hold Purchaser and any
entity required to be combined with Purchaser (within the
meaning of Sections 414(b), (c), (m) or (o) of the Code)
harmless from and fully indemnify them against any costs,
expenses, losses, damages and liabilities incurred or suffered
by them directly or indirectly, including, but not limited to,
reasonable attorneys' fees and expenses, which relate to
continuation coverage and arise as a result of any action or
omission by any Selling Party, Affiliate or Related Party.
2.10.2 Except as described on Schedule 3.18, prior to
the Closing Date, Selling Shareholders shall cause QES and its
Affiliates to terminate QES' participation in any Employee Plans
described on Schedule 3.18 that provide medical or death benefit
coverage to employees or former employees of QES (the "Retiree
Medical Plans"), except to the extent required by Section 4980B
of the Code, in a manner that precludes the imposition of any
future liability on QES under such Retiree Medical Plans.
Selling Shareholders shall hold Purchaser and any entity
required to be combined with Purchaser (within the meaning of
Sections 414(b), (c), (m) or (o) of the Code), including QES,
harmless from and fully indemnify them against any costs,
expenses, losses, damages and liabilities incurred or suffered
by them directly or indirectly, including, but not limited to,
reasonable attorneys' fees and expenses, which relate to the
Retiree Medical Plans. Notwithstanding the foregoing, Selling
Shareholders shall assume the liability for benefits under the
Retiree Medical Plans with respect to employees of QES through
and including the Closing Date. On or prior to the Closing Date,
QES shall establish a medical benefits plan approved by
Purchaser with reasonably comparable benefits and at reasonably
comparable cost as has been paid by QES in the ordinary course
of business to provide health insurance to employees of QES from
and after the Closing Date.
2.10.3 With respect to any Employee Plan and
compliance with laws, rules and regulations applicable to each
Employee Plan, Selling Shareholders agree to pay, and
notwithstanding any disclosure of potential liabilities made by
Selling Shareholders or QES, shall hold Purchaser and any entity
required to be combined with Purchaser (within the meaning of
Sections 414(b), (c), (m) or (o) of the Code), including QES,
harmless, from and fully indemnify them against any and all
liabilities of QES payable with respect to, and any and all
claims, liabilities, losses, damages, costs and expenses
(including, without limitation, court costs and reasonable
professional fees incurred in the investigation, defense or
settlement of any claims covered by this indemnity) (herein
referred to as "Indemnifiable Plan Damages"), arising out of or
in any manner incident, relating or attributable to liabilities
of QES payable with respect to, each Employee Plan (including,
but not limited to self-funded Employee Plans), or filings and
returns required to be filed by QES with respect to, (i) any
plan year (or other applicable reporting period) (a "Plan
Reporting Period") of QES ending on or before the Closing Date,
and (ii) any Reporting Period of QES that begins before the
Closing Date and that ends after the Closing Date (a "Plan
Straddle Period"), but only for that portion of such period
ending on or before the Closing Date (the "Plan Liabilities").
The Plan Liabilities for each Plan Straddle Period for QES shall
be determined by treating each such Plan Straddle Period as if
it were a separate Plan Reporting Period and by employing
accounting methods which are consistent with those employed in
preparing the Employee Plan filings for QES. Selling
Shareholders shall be responsible for preparing and filing on
behalf of QES, or for causing an Affiliate of QES to prepare and
file, all Employee Plan filings for Plan Reporting Periods of
QES ending on or before the Closing Date, including Employee
Plan filings of QES for such periods which are due after the
Closing Date, and Selling Shareholders shall be responsible for
the contents of such returns; provided, however, that Selling
Shareholders shall furnish Purchaser and QES with copies of such
returns of QES not less than fifteen days prior to filing and
such returns shall be subject to approval of Purchaser (which
approval shall not be unreasonably withheld or delayed) and
copies of same shall be delivered to Purchaser within 30 days
following the filing date. Purchaser shall be responsible for
preparing and filing on behalf of QES all Employee Plan Returns
for Plan Reporting Periods of QES ending after the Closing Date
(including for Reporting Periods beginning before and ending
after the Closing Date). Any claims for Indemnifiable Plan
Damages shall be subject to the provisions and process of
Paragraph 8 hereof.
2.10.4 Prior to the Closing Date, Selling Shareholders
shall cause QES to terminate effective concurrently with the
Closing, any existing bonus and other incentive plans or
programs, including deferred bonus plans or bonus programs, that
provide similar benefits to employees or former employees of
QES. Selling Shareholders shall hold Purchaser and any entity
required to be combined with Purchaser (within the meaning of
Sections 414(b), (c), (m) or (o) of the Code), including QES,
harmless from and fully indemnify them against any costs,
expenses, losses, damages and liabilities incurred or suffered
by them directly or indirectly, including, but not limited to,
reasonable attorneys' fees and expenses, which relate to such
Employee Plans.
2.10.5 Selling Shareholders shall cause QDS and NBS to
take such action, and pay such fees and costs (including but not
limited to reasonable attorneys fees and expenses,
contributions, penalties and voluntary compliance program fees)
as shall be required: (i) prior to the Closing Date, for QES to
spin off from the current plan with QDS and NBS and set up and
maintain the current QES 401(K) Plan as a separate, stand alone
plan in compliance with applicable laws, rules and regulations
(the "QES Spin-Off Plan"); and (ii) within thirty (30) days of
the Closing Date, for QES and QDS/NBS to prepare and file in a
joint submission with the Internal Revenue Service such
documents and instruments as may be reasonably requested by
Purchaser with respect to the QES 401(K) Plan and applicable
laws, rules and regulations. The documents and instruments
necessary to set up and maintain the QES Spin-Off Plan and
documents provided at the request of Purchaser thereafter, shall
be subject to review and approval by Purchaser. Selling
Shareholders agree to pay, and notwithstanding any disclosure of
potential liabilities made by Selling Shareholders or QES, shall
hold Purchaser and any entity required to be combined with
Purchaser (within the meaning of Sections 414(b), (c), (m) or
(o) of the Code), including QES, harmless, from and fully
indemnify them against any and all Indemnifiable Plan Damages
arising out of or in any manner incident, relating or
attributable to liabilities of QES, QDS or NBS or any
beneficiaries of the 401(K) Plan with respect to such 401(K)
Plan arising out of or in any manner incident, relating or
attributable to any Plan Reporting Period of QES ending on or
before the Closing Date, and (ii) the Plan Straddle Period but
only for Plan Liabilities.
2.10.6 Selling Shareholders shall cause QDS and NBS to
take such action, and pay such fees and costs (including but not
limited to reasonable attorneys fees and expenses,
contributions, fees and penalties) as shall be required: (i) as
of the Closing Date, for QES to QES to spin off from the current
Section 125 Flexible Benefits Plan in which it participates as a
participating employer with QDS and NBS and set up and maintain
a QES Section 125 Flexible Benefits Plan as a separate, stand
alone mirror plan in compliance with applicable laws, rules and
regulations (the "QES 125 Plan). The documents and instruments
necessary to set up and maintain the QES 125 Plan, including the
transfers of all employee deposits shall be subject to review
and approval by Purchaser. Selling Shareholders agree to pay,
and notwithstanding any disclosure of potential liabilities made
by Selling Shareholders or QES, shall hold Purchaser and any
entity required to be combined with Purchaser (within the
meaning of Sections 414(b), (c), (m) or (o) of the Code),
including QES, harmless, from and fully indemnify them against
any and all Indemnifiable Plan Damages arising out of or in any
manner incident, relating or attributable to liabilities of QES,
QDS or NBS or any beneficiaries of the Section 125 Plan with
respect to such Section 125 Plan arising out of or in any manner
incident, relating or attributable to any Plan Reporting Period
of QES ending on or before the Closing Date, and (ii) the Plan
Straddle Period but only for Plan Liabilities. QDS and NBS
shall be responsible for providing COBRA continuation coverage
(for the applicable period of time as required by law) to QES
employees and their eligible dependents who become eligible for
such coverage on or prior to the Closing Date. After the
Closing Date, QES shall be responsible for providing COBRA. QDS
and NBS shall also remain responsible for all benefit claims
arising for periods through and including the Closing Date
(including but not limited to processing of such claims and
payment therefore under the terms of the 125 Plan) except and
only to the extent that an individual employee deposit to his or
her flexible spending account for same is transferred to the QES
125 Plan.
2.10.7 Except as otherwise specifically provided in
this Section 2.10, Purchaser, at its option, shall cause QES to
provide benefit coverage under the Employee Plans and
Compensation Arrangements listed in Schedule 3.18 for such
period of time as Purchaser shall determine, or may terminate
such Employee Plans and Compensation Arrangements in lieu of the
current benefit plans and compensation arrangements offered to
other employees of Purchaser except to the extent such coverage
violates applicable laws, rules or regulations.
2.11 AFFIRMATIVE COVENANTS.
---------------------
At Closing Selling Shareholders shall deliver to
Purchaser the NBS Services Agreement, executed and delivered by
NBS in substantially the form of Exhibit J annexed hereto and
made a part hereof.
2.12 BROKERS.
-------
Purchaser shall pay Signal Hill Capital Group LLC and
agrees to indemnify and hold harmless QES and Selling
Shareholders against any fee, loss or expense arising out of any
claim by any other broker or finder employed or alleged to have
been employed by Purchaser, and Selling Shareholders shall pay
Xxxxxxx Xxxxx & Co., LLC and agree to indemnify and hold
harmless Purchaser against any fee, loss or expense arising out
of any claim by any other broker or finder employed or alleged
to have been employed by Selling Shareholders or QES or any of
its Affiliates.
2.13 PUBLICITY.
---------
Except as otherwise required by law, rule or
regulation and specifically including but not limited to
regulations pursuant to the Securities and Exchange Commission
and required disclosures thereunder, none of the parties hereto
shall issue any press release or make any other public
statement, in each case relating to or connected with or arising
out of this Agreement or the matters contained herein, without
obtaining the prior written approval of Purchaser and Selling
Shareholders to the contents and the manner of presentation and
publication thereof. The parties agree to cooperate with
respect to any disclosures required by law. In the case of
disclosures required by law, rule or regulation, Purchaser shall
use commercially reasonable efforts to provide Selling
Shareholders Party with a draft of such disclosure for review at
least one (1) business day in advance of making such disclosure,
and shall consider the feedback of Selling Shareholders with
respect to such disclosure.
2.14 ACCESS TO BOOKS AND RECORDS.
---------------------------
2.14.1 After the Closing Date, Purchaser shall, upon
request of any of the Selling Shareholders, and with reasonable
notice to Purchaser, in connection with the preparation by
Selling Shareholders of financial statements and tax returns and
for such other purposes as Selling Shareholders shall reasonably
request (but only with respect to operations of QES prior to
Closing and the calculation of Cumulative Earnout Revenue) (i)
provide to Selling Shareholders reasonable access, during normal
business hours, to files, books, records, documents and other
information of QES (and, at Selling Shareholders' expense,
copies thereof), (ii) cause its officers and personnel and QES
to furnish to Selling Shareholders any and all financial and
operating data and other information pertaining to QES, and
(iii) make available, for consultation with Selling
Shareholders, personnel of Purchaser and of QES having access to
such information and documents. In exercising its rights under
this Section 2.14, Selling Shareholders and their
representatives shall not interfere with QES' normal operations.
Purchaser shall retain the files, books, records and documents
of QES, and comply with the aforesaid provisions, for at least
three years after the Closing Date. Selling Shareholders
acknowledge and agree that any and all information to which each
is granted access pursuant hereto shall be the subject of the
confidentiality provisions set forth and contained in the Non-
Competition Agreements or applicable Employment Agreements with
respect to Selling Shareholders who have executed and delivered
such Employment Agreements and the Employee Proprietary Rights
Agreements with such same employees.
2.14.2 After the Closing Date, Selling Shareholders
shall cause QDS or NBS, as the case may be, upon request of
Purchaser, and with reasonable notice to Selling Shareholders,
in connection with the preparation by Purchaser of financial
statements and tax returns and for such other purposes as
Purchaser shall reasonably request (but only with respect to
operations of QES prior to Closing and during the term of the
Transitional Services Agreement), (i) provide to Purchaser
reasonable access during normal business hours to (and, at
Purchaser's expense, copies of) files, books, records, documents
and other information of QES that are commingled with QDS or NBS
records and, thus, retained by QDS or NBS on the Closing Date
("Commingled Records"), (ii) cause QDS or NBS and their
respective officers and personnel to furnish to Purchaser any
and all financial and operating data and other information
pertaining to QES in the manner described in the Transitional
Services Agreement, and (iii) make available, for consultation
with Purchaser, personnel of QDS or NBS having access to such
information and documents. In exercising its rights under this
Section 2.14, Purchaser and its representatives shall not
interfere with QDS' nor NBS' normal operations. QDS shall retain
copies of all Commingled Records and comply with the aforesaid
provisions for at least seven years after the Closing Date.
2.15 NON-COMPETITION BY QDS.
----------------------
Selling Shareholders shall cause QDS to operate its
business so that QDS will not and it will not permit its
officers or directors to, for a period beginning on the date
hereof and continuing until October 31, 2009, without the prior
written consent of TASA or QES, anywhere in the United States
directly or indirectly own, manage, control, operate,
participate in, consult with, render services to (as an officer,
director, employee, partner, consultant or in any similar role)
or have any other interest as a stockholder, lender or other
financial or beneficial interest in any Competitor; provided,
however, that ownership of not more than two percent (2 %) of
any class of securities traded actively, over-the-counter or
through a stock exchange shall not violate this Section 2.15.
2.16 CERTAIN POST-CLOSING ENVIRONMENTAL PROCEDURES.
---------------------------------------------
2.16.1 From and after Closing, with respect to
environmental liabilities or breaches of representations set
forth in Section 3.14, Purchaser shall provide written notice to
Selling Shareholders, specifying the nature of and basis for
such environmental liability or breach, and Selling Shareholders
shall have the option to control the resolution of any remedial
action relating thereto, including, without limitation, the
performance of any tests, reports, investigations or any other
activities relating to such remedial action and contacting
Governmental Authorities, making any reports to such
Governmental Authorities, submitting any remedial action plans
to such Governmental Authorities and negotiating with such
Governmental Authorities; provided that, in addition to the
provisions set forth in Section 2.16.3 below, Selling
Shareholders agree (i) to provide Purchaser, in advance, with a
reasonably detailed description of any such proposed remedial
action and a reasonable period of time, given the specific
circumstances, to permit Purchaser to comment on proposed
activity, and Selling Shareholders agree to consider in good
faith any such comments, (ii) to perform any such remedial
action in a reasonably prudent manner to avoid any harm to the
environment or to human health and safety, to comply with all
laws, including Environmental Laws, to obtain and maintain all
necessary permits, financial assurances and insurance and to
obtain their own EPA Identification Number (if practicable),
arrange for disposal and be identified on manifests as the
"generator" (if practicable), of all Hazardous Materials
generated from or otherwise arising out of any such remedial
action, (iii) to perform all actions reasonably necessary to
remove or remediate the Hazardous Materials, contamination or
environmental degradation arising out of or relating to the
indemnification claim and to bring the facility or property into
compliance with all Environmental Laws with respect to such
Hazardous Materials, contamination or degradation and agree to
obtain written governmental approval confirming that no further
actions are required with respect to such Hazardous Materials,
contamination or degradation, and (iv) not to perform any
remedial action in a manner which is reasonably likely to reduce
the value of or materially alter the use of the Real Property.
Purchaser and Selling Shareholders agree that the use of the
Real Property as of the Closing Date shall be the appropriate
property classification to be used in determining which actions
are reasonably necessary pursuant to clause (iii) above with
respect to such Real Property. Notwithstanding the foregoing,
Selling Shareholders must provide Purchaser with written notice
within ten days of their receipt of Purchaser's notice pursuant
to this Section 2.16.1 whether or not they desire to control the
resolution of such remedial action, and, if no such written
notice is received by Purchaser within such ten-day period,
Purchaser shall have the option to control the resolution of
such remedial action.
2.16.2 Purchaser and Selling Shareholders each agree
to maintain in strict confidence all information concerning any
environmental matters of QES. If any Environmental Law requires
Selling Shareholders to disclose any such information, Selling
Shareholders agree to promptly notify Purchaser of such
requirement and to give Purchaser the opportunity to review and
comment in advance upon the content and timing of any
disclosures that Selling Shareholders propose to make.
2.16.3 Purchaser and Selling Shareholders agree that
each shall, in connection with any activities they each
undertake in connection with this Section 2.16 or otherwise, (i)
provide the other parties with reasonable access to all Related
Parties with relevant facts about such activities, (ii) provide
copies of any material documents to the other parties and a
reasonable opportunity to comment on such documents, (iii) keep
the other parties reasonably informed relating to the progress
of such activities, (iv) where applicable, select counsel,
contractors and consultants of recognized standing and
competence after consultation with the other parties, (v) take
all steps necessary in the defense of any claims which are the
subject of such activities, (vi) at all times diligently and
promptly pursue the resolution of any claims which are the
subject of such activities, (vii) allow the other parties to
participate in any communications or proceedings involving any
Governmental Authority or any other Person and consult with the
other parties hereto as to the manner of managing or resolving
such communications or proceedings, in each case, except to the
extent necessary to protect attorney-client privilege or
attorney work product and (viii) use reasonable efforts to avoid
unreasonable interference with the other parties' normal
business operations.
2.17 BANKING AND LOCKBOX ARRANGEMENTS.
--------------------------------
As of Closing, Selling Shareholders shall cause QES
and QDS to take such steps and deliver such documents and
instruments as shall be required or reasonably required by
Purchaser to (i) cease all sweeps of the cash account maintained
for deposit of funds of QES; (ii) transfer and deposit to such
bank account of Purchaser as Purchaser shall direct, all monies
and funds of QES held directly or indirectly, or through a cash
management account, by QDS or any Affiliate; and (iii) to the
extent any such funds are received by QDS or any Affiliate
thereafter, to cause such funds to be held by QDS or such
Affiliate, in trust, and immediately transferred and deposited
to such account of Purchaser, in each cash Purchaser shall
receive copies of any transmittals received with such funds.
3. REPRESENTATIONS AND WARRANTIES OF SELLING SHAREHOLDERS.
Each Selling Shareholder, jointly and severally, represents
and warrants to Purchaser, as of the date hereof, as follows:
3.1 ORGANIZATION, STANDING AND FOREIGN QUALIFICATION.
------------------------------------------------
QES is a corporation duly organized, validly existing
and in good standing under the laws of the State of Minnesota.
QES has no Subsidiaries. QES has all corporate power and
authority to carry on its business as now conducted. QES has
the full power and authority to own and lease its assets, and is
qualified to transact business and in good standing in each
jurisdiction in which the nature of its business or the location
of its properties requires such qualification or licensing,
except where the failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse
Effect. Schedule 3.1 sets forth a listing of each jurisdiction
in which QES is qualified to do business. Complete and correct
copies of QES' certified articles of incorporation and bylaws,
and certified qualifications as a foreign corporation in each
jurisdiction listed on Schedule 3.1, and other applicable
governing instruments, all as amended to date, and of the stock
ledger of QES have been delivered to Purchaser.
3.2 AUTHORITY AND STATUS; NO VIOLATION.
----------------------------------
3.2.1 SELLING SHAREHOLDERS AUTHORITY. Each of the
------------------------------
Selling Shareholders has the full power and authority to execute
and deliver this Agreement and all other agreements, instruments
and certificates contemplated hereby and thereby (the "Selling
Shareholders Related Agreements", and together with the QES
Related Agreements, the "Related Agreements") to be executed and
delivered by them, to carry out and perform their obligations
under the terms of this Agreement and the Related Agreements to
be executed and delivered by them and to consummate the
transactions contemplated hereby and thereby, without the
necessity of any act, approval or consent of any other Person
whomsoever. This Agreement and the Related Agreements to be
executed and delivered by Selling Shareholders constitute or
will, when executed and delivered by Selling Shareholders,
constitute the valid and legally binding obligations of Selling
Shareholders, enforceable against Selling Shareholders in
accordance with their respective terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws from time to time in effect
affecting the enforcement of creditors' rights generally and
except as enforcement of remedies may be limited by general
equitable principles.
3.2.2 QES AUTHORITY. QES has the full corporate
-------------
power and authority to execute and deliver this Agreement and
all other agreements, instruments and certificates contemplated
hereby and thereby (the "QES Related Agreements") to be executed
and delivered by QES, to carry out and perform their obligations
under the terms of this Agreement and the Related Agreements to
be executed and delivered by QES and to consummate the
transactions contemplated hereby and thereby, without the
necessity of any act, approval or consent of any other Person
whomsoever. All corporate action on the part of QES and its
directors and shareholders necessary for the authorization,
execution, delivery and performance by QES of this Agreement and
the Related Agreements to be executed and delivered by QES has
been taken. This Agreement and the Related Agreements to be
executed and delivered by QES constitute or will, when executed
and delivered by QES, constitute the valid and legally binding
obligations of QES, enforceable against QES in accordance with
their respective terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium and other
similar laws from time to time in effect affecting the
enforcement of creditors' rights generally and except as
enforcement of remedies may be limited by general equitable
principles.
3.2.3 VIOLATIONS; CONSENTS OF THIRD PARTIES. The
-------------------------------------
execution, delivery and performance of this Agreement and each
of the Related Agreements by the Selling Parties (i) will not
conflict with the articles of incorporation or by-laws of any of
the Selling Parties, (ii) will not conflict with, or result in a
breach or termination of, or constitute a default or cause or
permit the acceleration under, any agreement, commitment,
obligation, instrument, or any order, judgment or decree, to
which any Selling Party is a party or by which it is bound;
(iii) will not constitute a violation by any Selling Party of
any law, rule or regulation applicable to it; or (iv) will not
result in the creation of any Encumbrance upon any of the Shares
or assets or properties of QES, except in each case for such
conflicts, breaches, terminations, defaults or violations which
would not, individually or in the aggregate, have a Material
Adverse Effect. Except as listed on Schedule 2.6, no consent,
approval or authorization of, or designation, declaration,
registration or filing with, any Governmental Authority or any
other person or entity (each a "Consent") is required in
connection with the execution, delivery and performance of this
Agreement by each Selling Party.
3.3 CAPITALIZATION.
--------------
3.3.1 Schedule 3.3.1 sets forth the authorized,
issued and outstanding capital stock of QES, and no shares are
held in the treasury of QES. All of the issued and outstanding
shares of capital stock of QES are owned beneficially and of
record by Selling Shareholders, free and clear of all
Encumbrances and preemptive or other rights or options of any
nature whatsoever, and the authorization of no other Person is
required in order to consummate the transactions contemplated by
this Agreement by virtue of any such Person having an equitable
or beneficial interest in QES. All of the Shares comprise one
hundred percent (100%) of the issued and outstanding capital
stock of QES, and are duly authorized, validly issued, fully
paid and nonassessable. Except for this Agreement or as
contemplated by this Agreement, there are no outstanding
subscriptions, options, warrants, calls, demands, commitments,
plans or agreements to issue any additional shares of QES
capital stock or to pay any dividends on such shares, or to
purchase, redeem or retire any outstanding shares of its capital
stock, or outstanding securities or obligations which are
convertible into or exchangeable for any shares of capital stock
of QES. All Affiliates of QES, Xxxxx X. Xxxx, and Xxxxxxxx
Xxxxxxx, as well as any Affiliate of Any Selling Shareholder
(other than Xxxxx X. Xxxx, and Xxxxxxxx Xxxxxxx) which is now or
at any time in the past was a party to any material transaction
with QES are set forth on Schedule 3.3.1. The payment or
performance of any such material transaction shall not
constitute a breach or a threatened breach of any obligation of
any Selling Shareholder under the terms and conditions of such
Selling Shareholder's Noncompetition Agreement executed and
delivered in connection with this Agreement.
3.3.2 All issuances, transfers or purchases of the
capital stock of QES have been effected in compliance with all
applicable agreements and all applicable laws, including federal
and state securities laws, and all Taxes thereon, if any, have
been paid. No former or present holder of any of the Shares or
any other capital stock of QES has any legally cognizable claim
against Selling Shareholders or QES based on any issuance, sale,
purchase, redemption or involvement in any transfer of any
Shares or any such other capital stock by QES.
3.3.3 Upon consummation of the transactions
contemplated hereby, Purchaser will own all of the issued and
outstanding capital stock of QES free and clear of all
Encumbrances. Selling Shareholders have full and unrestricted
power to sell, assign, transfer and deliver the Shares to
Purchaser upon the terms and subject to the conditions of this
Agreement free and clear of Encumbrances. There are no shares
of capital stock of QES issued or outstanding other than the
Shares. There is no outstanding contract or other agreement of
any Selling Party to purchase, redeem or otherwise acquire any
outstanding shares of capital stock or any other equity security
of QES.
3.4 ABSENCE OF EQUITY INVESTMENTS.
-----------------------------
QES does not own or have the right or obligation to
acquire voting securities or other ownership interests in any
other Person.
3.5 LIABILITIES AND OBLIGATIONS OF QES.
----------------------------------
3.5.1 Selling Shareholders have previously delivered
to Purchaser true and correct copies of audited financial
statements for QES as of and for the years ended December 31,
2002, 2003 and 2004 (the "QES Calendar Year Financial
Statements") and for the years ended October 31, 2004 and 2005
(the "QES Fiscal Year Financial Statements"), and interim
unaudited financial statements for QES as of and for the
quarterly period ended January 31, 2006 and if Closing occurs
after April 30, 2006, Selling Shareholders shall deliver such
interim unaudited financial statements as of and for the
quarterly period ended April 30, 2006 (the "Interim Financial
Statements"). Each of the balance sheets included in the QES
Fiscal Year Financial Statements fairly presents in all material
respects the financial position of QES as of its date and each
of the statements of operations and cash flow statements
included in the QES Fiscal Year Financial Statements fairly
presents in all material respects the results of operations and
cash flows of QES for the period therein set forth, in each case
in accordance with GAAP applied on a consistent basis (except as
may be disclosed in the notes thereto). The Interim Financial
Statements were prepared in a manner consistent with that
employed in the QES Fiscal Year Financial Statements. The
Interim Financial Statements do not contain footnote disclosures
and are subject to normal recurring year-end adjustments, but
otherwise fairly present in all material respects the financial
position and results of operations of QES for the periods and as
of the dates therein set forth.
3.5.2 The books of account and other financial
records of QES: (i) reflect all material items of income and
expense and all material assets and liabilities required to be
reflected therein in accordance with business, accounting and
actuarial practices, as applicable reasonable and customary for
a business of the type conducted by QES; (ii) are in all
material respects complete and correct, and (iii) have been
maintained in accordance with business, accounting and actuarial
practices, as applicable, reasonable and customary for a
business of the type conducted by QES. Since October 31, 2005,
QES has not changed the manner or timing of the payment of
accounts payable or other liabilities outside the ordinary
course of business or changed the manner or timing of collection
of accounts receivable outside the ordinary course of business
or changed any other material aspect of its cash management
process.
3.5.3 QES is not in default in any material respect
with respect to any liabilities or obligations which are related
to the properties, assets, Business or operations of QES.
3.6 TAX MATTERS.
-----------
3.6.1 QES has filed or has caused to be filed in a
timely manner all required Tax Returns with the appropriate
Governmental Authorities in all jurisdictions in which such Tax
Returns are required to be filed by QES (except Tax Returns for
which the filing date has not expired or has been extended and
such extension period has not expired), and all Taxes shown on
such Tax Returns have been properly accrued or paid to the
extent such Taxes have become due and payable.
3.6.2 Schedule 3.6.2 lists all jurisdictions where
Tax Returns are required to be filed with respect to QES.
3.6.3 The QES Fiscal Year Financial Statements
reflect an adequate reserve in accordance with GAAP (without
regard to any amounts reserved for deferred taxes) for all
unpaid Taxes payable by QES for all Tax periods and portions
thereof through the date of such QES Fiscal Year Financial
Statements. Selling Shareholders have not, and QES has not,
executed any waiver or extension of any statute of limitations
on the assessment or collection of any Tax or with respect to
any liability arising therefrom. None of the federal, state or
local income Tax Returns filed by or on behalf of QES are
currently being audited by any taxing authority, and there are
no other examinations, requests for information or other
administrative or judicial proceedings pending with respect to
Taxes of QES. Neither the Internal Revenue Service nor any
other taxing authority has asserted any deficiency or claim for
additional Taxes against, or any adjustment of Taxes relating
to, QES and there are no proposed reassessments of any property
owned by QES that would affect the Taxes of QES. There are no
Tax liens on any assets of QES, other than liens for current
Taxes not yet due and payable without penalty.
3.6.4 QES 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,
stockholder or other Person.
3.6.5 No power of attorney has been granted by or
with respect to QES with respect to any matter relating to
Taxes.
3.6.6 QES has not been at any time a member of any
partnership, joint venture or other arrangement or contract
which is treated as a partnership for federal, state, local or
foreign tax purposes or the holder of a beneficial interest in
any trust for any period for which the statute of limitations
for any Tax has not expired.
3.6.7 As of the Closing, there will be no tax sharing
agreements or similar arrangements with respect to or involving
QES.
3.7 TITLE TO ASSETS.
---------------
QES has good and marketable title to, or valid and
subsisting leasehold interests in (and no Affiliate of QES has
any right, title or interest therein), all real and personal
property and other assets on its books and reflected on its
balance sheet at October 31, 2005 and January 31, 2006 included
as part of the QES Fiscal Year Financial Statements and the
Interim Financial Statements, respectively, or acquired in the
ordinary course of business consistent with past practice since
October 31, 2005 or January 31, 2006, as appropriate, which
would have been required to be reflected on such balance sheet
if acquired on or prior to such date, other than assets which
have been disposed of in the ordinary course of business and
those assets the failure of which to have good title to, or
valid and subsisting leasehold interest in, would not,
individually or in the aggregate, have a Material Adverse
Effect. QES owns all tangible personal property located and
used within the Leased Real Property. None of such property and
other assets is subject to any Encumbrance, except for
Encumbrances set forth on Schedule 3.7 or reflected in the QES
Fiscal Year Financial Statements as of October 31, 2005. QES
has the right to quiet enjoyment of all property leased by it
for the full term of each such lease or sublease or similar
agreement (or any renewal option) relating thereto and such
leased property is not subject to any failure to have the right
to quiet enjoyment. Except pursuant to this Agreement, neither
Selling Shareholders nor QES is a party to any contract or
obligation whereby there has been granted to anyone an absolute
or contingent right to purchase, obtain or acquire any rights in
any of the assets, properties, Business or operations of QES.
3.8 BANK ACCOUNTS.
-------------
Set forth and described on Schedule 3.8 hereto is a
complete list of all bank accounts and safe deposit boxes of
QES, all powers of attorney in connection with such accounts and
the names of all persons authorized to draw thereon or to have
access thereto.
3.9 UNDISCLOSED LIABILITIES.
-----------------------
QES has no actual or potential liability or obligation
related to its assets, Business, operations or financial
condition (whether accrued, absolute, contingent or otherwise)
which is of a nature required to be reflected in financial
statements prepared in accordance with GAAP, consistently
applied, including, without limitation, any liability that might
result from an audit of its Tax Returns by any appropriate
Governmental Authority, except for (i) the liabilities and
obligations of QES which are disclosed or reserved against in
the QES January 31, 2006 Interim Financial Statements or
disclosed in the Compliance Certificate, to the extent and in
the amounts so disclosed or reserved against, and (ii)
liabilities incurred or accrued in the ordinary course of
business since the date of the most recent QES Fiscal Year
Financial Statement, and which do not, either individually or in
the aggregate, have (and would not reasonably be expected to
have) a Material Adverse Effect, except as disclosed in the
Compliance Certificate. With respect to any employee medical
plans providing coverage for QES employees, the only liability
of QES with respect to such plans and the benefits and coverage
thereunder is a payment at a fixed monthly rate per participant
made to QDS by QES which payment rate has not changed since the
QES Fiscal Year Financial Statements as of October 31, 2005.
QDS is obligated for all liabilities in excess of those monthly
payments under all such employee medical plans.
3.10 ABSENCE OF CHANGES.
------------------
Except as reflected on the QES Fiscal Year Financial
Statements and the January 31, 2006 Interim Financial Statements
or as set forth in the Compliance Certificate hereto, since
October 31, 2005, QES has conducted its business in the ordinary
course of business consistent with past practice and has not:
3.10.1 made any change in its fiscal year, reserving,
financial or accounting practices or policies, except as
required by law, GAAP or statutory accounting practices of its
state of incorporation or as would not, individually or in the
aggregate, have a Material Adverse Effect;
3.10.2 issued, sold, pledged, encumbered or disposed
of, any of its capital stock, notes, bonds or other securities,
or any option, warrant or other right to acquire the same;
3.10.3 split, combined or reclassified any shares of
capital stock or redeemed, repurchased or otherwise acquired any
of its capital stock or declared, made or paid any dividends or
distributions (whether in cash, securities or other property) to
the holders of its capital stock;
3.10.4 merged with, entered into a consolidation with
or acquired an interest of 5% or more in any Person or acquired,
in one transaction or a series of transactions, a substantial
portion of the assets or business of any Person or any division
or line of business thereof, or otherwise acquired any assets or
securities with an aggregate value in excess of $50,000 other
than in the ordinary course of QES' business consistent with
past practice;
3.10.5 made any capital expenditure or commitment for
any capital expenditure including, without limitation, capital
lease obligations, in excess of $50,000 in the aggregate;
3.10.6 incurred indebtedness for money borrowed in
excess of $50,000 in the aggregate;
3.10.7 made any loan to, guaranteed any indebtedness
for money borrowed of, or otherwise incurred such indebtedness
on behalf of, any Person in excess of $50,000 in the aggregate
other than investments made in the ordinary course of business;
3.10.8 (i) granted any increase, or announced any
increase, in the wages, salaries, compensation, bonuses,
incentives, pension or other benefits payable to any of
employee, or any director, including without limitation, any
increase or change pursuant to any Employee Plan or Compensation
Agreement or (ii) established or promised to establish any plan
or benefit program or increased or promised to increase any
benefits under any Employee Plan or Compensation Agreement
(including any severance arrangement or employee retention
arrangement);
3.10.9 amended or restated its articles of
incorporation or bylaws (or other organizational documents);
3.10.10 paid, discharged, settled or satisfied any
claim, liability or obligation (absolute, accrued, asserted or
unasserted, contingent or otherwise) other than (i) for an
amount of $50,000 or less, (ii) an insurance claim in the
ordinary course of business consistent with past practice, or
(iii) ordinary course repayment of indebtedness or payment of
contractual obligations when due;
3.10.11 transferred, assigned, conveyed or liquidated
any of the assets of QES or entered into any transaction or
incurred any liability or obligation that individually or in the
aggregate could have a Material Adverse Effect on the Business,
operations or financial condition of QES other than in the
ordinary course of its business;
3.10.12 became aware of any event or state of facts
that may reasonably be expected to result, individually or in
the aggregate, in a Material Adverse Effect;
3.10.13 suffered any physical destruction, damage or
loss which, individually or in the aggregate, could result in a
Material Adverse Effect, whether or not covered by insurance;
3.10.14 incurred the imposition of any Encumbrance or
claim upon any of the material assets of QES, except for any
current year lien with respect to personal or real property
Taxes not yet due and payable;
3.10.15 committed or permitted any default in any
liability or obligation which has had or could have,
individually or in the aggregate, a Material Adverse Effect;
3.10.16 declared, promised or made any distribution or
other payment from the assets of QES to Selling Shareholders or
issued any additional shares or rights, options or calls with
respect to any of QES' capital stock, or redeemed, purchased or
otherwise acquired any of QES' capital stock, or made any change
whatsoever in QES' capital structure;
3.10.17 except in the ordinary course of business and
consistent with past practices, paid, agreed to pay or incurred
any obligation for any payment for, any contribution or other
amount to, or with respect to, any Employee Plan or Compensation
Arrangement, or made any increase in the pension, retirement or
other benefits of its directors, officers, agents or other
employees; or
3.10.18 incurred any other material liability or
obligation or entered into any transaction, in each case other
than in the ordinary course of business.
3.11 LEGAL PROCEEDINGS.
-----------------
Except as set forth on Schedule 3.11 hereto, neither
QES nor any Selling Shareholder is a party to any, and there are
no pending or, to the Knowledge of any Selling Party,
threatened, Actions against or otherwise affecting QES or any
Selling Shareholder, or any of their respective properties or
assets, or challenging the validity or propriety of the
transactions contemplated by this Agreement or the Related
Agreements which, if adversely determined, would have,
individually or in the aggregate, a Material Adverse Effect, and
there is no injunction, order, judgment, decree or regulatory
restriction imposed upon QES or any Selling Shareholder, or any
of their respective properties, Business, operations or assets
which has had or could have, individually or in the aggregate, a
Material Adverse Effect.
3.12 LICENSES AND PERMITS; COMPLIANCE WITH LAW.
-----------------------------------------
3.12.1 QES holds in full force and effect all
licenses, franchises, permits and authorizations, other than
Environmental Permits (which are addressed solely in Section
3.14) ("Permits"), necessary for the lawful ownership and use of
its properties and assets and the conduct of its businesses
under and pursuant to Applicable Laws relating to QES, and there
has been no violation of any Permit nor has any Selling Party
received written notice asserting any such violation. All
Permits are listed on Schedule 3.12.1. Neither the execution
nor delivery of this Agreement, nor the consummation of the
transactions contemplated hereby will result in the termination,
revocation or suspension of any Permit.
3.12.2 QES is in compliance with each Applicable Law
relating to its Business and any of its assets, properties or
operations, except where noncompliance with any such Applicable
Law would not, individually or in the aggregate, have a Material
Adverse Effect.
3.13 REAL PROPERTY.
-------------
3.13.1 Schedule 3.13 lists all Real Property owned or
leased by any of QES and used or held for use in the Business,
indicating in each case whether the property is owned or leased.
Other than the Leased Real Property, there are no other leases
to which QES is a party for any Real Property. The Real
Property disclosed on Schedule 3.13 includes all real property
or interests therein necessary to conduct lawfully the Business
as presently conducted. All of the Real Property (including
the improvements thereon) has full legal and practical access to
public roads or streets and is supplied in all material respects
with all utilities and other services, including gas,
electricity, water, telephone, sanitary sewer and storm sewer,
necessary for the conduct and operation of the business of QES
as now conducted, all of which services are adequate in
accordance in all material respects with all applicable laws,
ordinances, rules and regulations and are provided via public
roads or via permanent, irrevocable, appurtenant easements
benefiting the Real Property. All improvements, installations,
equipment and facilities made by or constructed for QES or
utilized in connection with QES' Business were constructed and
are maintained, placed and located in compliance in all material
respects with all applicable federal, state or other statutes,
laws, ordinances, regulations, rules, codes, orders, deeds,
easements, restrictions, leases, licenses, permits or other
arrangements or requirements (including, but not limited to, any
building, zoning or Environmental Laws or codes) affecting such
premises and are located entirely on the Real Property, and none
of the Real Property is located within any flood plain.
3.13.2 With respect to each leasehold interest
included in the Real Property, neither QES, nor to the Knowledge
of the Selling Shareholders the landlord, is in default under
any agreement relating thereto (nor, to the Knowledge of Selling
Shareholders, is any other party thereto). Each such leasehold
interest (i) is valid, subsisting and in full force and effect;
(ii) is free and clear of all Encumbrances of any nature
whatsoever, and without reservation or exclusion of any mineral,
timber or other rights or interests, except for (a) liens for
real estate Taxes not yet due and payable, (b) easements,
rights-of-way and restrictions of record, all of which are
described in Schedule 3.13, (c) statutory liens in favor of
landlords with respect to rent not yet due and payable, (d) any
other claims or Encumbrances which are described in Schedule
3.13 and annotated to indicate whether such claims or
Encumbrances will be removed prior to or at Closing, and (e)
those non-monetary Encumbrances which do not, individually or in
the aggregate, materially interfere with the use of such Real
Property or materially detract from its value; and (iii) will at
Closing include enforceable rights to nondisturbance with
respect to all prior Encumbrances and peaceful and quiet
enjoyment, so long as QES fulfills its obligations under the
lease and/or mortgage therefor.
3.13.3 All Real Property (including the improvements
thereon) (i) is in good condition and repair in accordance with
normal and customary industry practices (excepting ordinary wear
and tear), (ii) is available for immediate use in the conduct of
the Business or operations of QES and (iii) complies in all
material respects with all applicable building, safety and
zoning codes and the regulations of any Governmental Authority
having jurisdiction including, but not limited to, the Americans
with Disabilities Act. None of the Real Property or buildings or
improvements thereon are subject to "permitted non-conforming
use" or "permitted non-conforming structure" classifications. To
the Knowledge of Selling Shareholders, there are no condemnation
proceedings or eminent domain proceedings, lawsuits or legal
proceedings of any kind pending or, to the Knowledge of Selling
Shareholders, threatened in connection with any of the Real
Property. The Real Property and the present use and condition
thereof do not violate in any material respect any applicable
deed restrictions or other covenants, restrictions, agreements,
existing site plan approvals, or in any material respect, any
zoning or subdivision regulations or urban redevelopment plans
applicable to the Real Property as modified by any duly issued
variances, and no permits, licenses or certificates pertaining
to the ownership or operation of the Real Property, other than
those which are transferable with the Real Property, are
required by any Governmental Authority having jurisdiction over
the Real Property or their operation. QES, and to the Knowledge
of Selling Shareholders each landlord of the Real Property, has
paid, or shall have paid or caused to be paid prior to Closing,
all amounts owing by QES or each such landlord to any architect,
contractor, subcontractor or materialman for labor or materials
performed, rendered or supplied to or in connection with any of
the Real Property. Schedule 3.13 sets forth a true and complete
list of all construction, architect, engineering and other
agreements, if any, relating to uncompleted construction
projects entered into by QES or by landlord in connection with
any of the Real Property. The rental set forth in each lease
of the Real Property is the actual rental being paid, and there
are no separate agreements or understandings with respect to the
same.
3.14 ENVIRONMENTAL MATTERS.
---------------------
3.14.1 To the Knowledge of the Selling Parties: (i)
QES and each landlord of the Leased Real Property has been and
is in compliance with all applicable Environmental Laws, and has
possessed, posseses, has been and is in compliance with all
Environmental Permits required under such laws for the conduct
of its business operations and ownership of its Real property,
(ii) there are no past, present or future events (including,
without limitation, the sale of any Real Property), conditions
or legal requirements that would prevent, or substantially
increase the cost to QES of complying with Environmental Laws or
of its or each landlord of the Leased Real Property obtaining,
renewing or complying with all Environmental Permits required
under such laws for the conduct of its business and operations
and ownership of its Real Property or that would give rise to
any liability arising under any Environmental law, and (iii)
there are no liabilities or obligations of QES of any kind
whatsoever, whether accrued, contingent, absolute, direct or
indirect, determined, determinable or otherwise, arising under
or relating to any Environmental Law, (iv) there are and have
been no conditions relating to the release or threatened release
of Hazardous Materials at any property owned by landlord and
operated or otherwise used by QES now or in the past that would
give rise to liability of QES under any Environmental Law and
(v) no written notice, notification, demand, request for
information, citation, summons, complaint, order, or notice of
investigation has been received by or from QES or any landlord
of its Leased Real Property, and no action, claim, suit,
proceeding or review is pending or threatened by, any
Governmental Authority or Person against QES or any such
landlord with respect to any Environmental Law.
3.14.2 None of the operations of QES on the Real
Property involves the generation, transportation, treatment,
storage or disposal of Hazardous Materials of "Reportable
Quantity" (as defined by CERCLA); and except in accordance in
all material respects with all legal requirements, QES has not
disposed of any Hazardous Material of Reportable Quantity in, on
or about the Real Property and, to the Knowledge of Selling
Shareholders, neither has any lessee, prior owner or other
Person.
3.14.3 To the Knowledge of Selling Parties, there are
no surface impoundments or above ground or underground storage
tanks located in, on or about the Real Property.
3.15 TRANSACTIONS WITH CERTAIN PERSONS.
---------------------------------
Except as set forth on Schedule 3.15 hereto, neither
any officer, director or employee of any Selling Shareholder,
QES or QDS, nor any member of any such Person's immediate
family, nor any Affiliate of any such Person, is now a party to
any material transaction with QES, including any contract or
other binding arrangement (i) providing for the furnishing of
services by such Person (except in such Person's capacity as an
officer, director, or employee of QES), (ii) providing for the
rental of real or personal property from such Person, or (iii)
otherwise requiring payments (whether pursuant to indebtedness
or otherwise) to such Person (other than for services as an
officer, director or employee of QES).
3.16 INTELLECTUAL PROPERTY.
---------------------
3.16.1 For purposes of this Section 3.16 the term
"Intellectual Property" shall have the following meaning: QES
created, developed or owned: (i) patents and patent
applications; (ii) copyrights, and registrations thereof; (iii)
mask works and registrations and applications for registration
thereof; (iv) computer software, including source and object
code, data, processes and documentation; (v) trade secrets and
confidential business information, whether patentable or
unpatentable and whether or not reduced to practice, know-how,
manufacturing and production processes and techniques, research
and development information, copyrightable works, financial,
marketing and business data, pricing and cost information,
business and marketing plans and customer and supplier lists and
information; (vi) trademarks, service marks, trade names, brand
names, domain names, URLs and applications and registrations
therefor; and (vii) other proprietary rights relating to any of
the foregoing or used in the conduct of the business of QES.
Schedule 3.16 hereto sets forth a complete and correct list of
all (i) patents and patent applications; (ii) registered
copyrights, copyright applications and other copyrights material
to the business of QES; (iii) mask works and registrations and
applications for registration thereof; (iv) computer software
programs including those test taking methodologies and processes
developed or owned by QES and embodied therein; (v)
identification of material customers and suppliers; (vi)
trademarks, service marks, trade names, brand names, domain
names, URLs and applications and registrations therefor; (vii)
other proprietary rights relating to any of the foregoing or
used in the conduct of the Business of QES and its properties
and assets; and (viii) licenses granted by or to QES with
respect to any of the above. Selling Shareholders warrant that
all documents, computer records, disks and other materials of
any nature or kind containing the Intellectual Property or any
portion thereof have been turned over to the Purchaser and that
the Selling Shareholders and QDS will not retain the
Intellectual Property or any portion thereof, in any form
whatsoever after the Closing except as specifically permitted
hereunder or under the Transitional Services Agreement to be
entered into at Closing by and among Purchaser, QES and QDS.
For the purposes of this Section 3.16, the term "documents"
includes all information fixed in any tangible medium of
expression in whatever form or format, and copies thereof.
3.16.2 Except as otherwise provided on Schedule 3.16,
QES is the sole owner of all right, title and interest in the
Intellectual Property free of any Encumbrance. Except as
otherwise provided on Schedule 3.16, QES has the sole right to
assign the Intellectual Property and it has not assigned it or
any part of it to any Person, nor are there any agreements,
transactions or arrangements of any kind that would restrict the
assignment of the Intellectual Property. The Intellectual
Property is reasonably fit and suitable to conduct the Business
of QES and its assets and properties as each is now being
conducted. Except as otherwise provided on Schedule 3.16: (i)
the Intellectual Property arises out of, and was developed
through the sole, exclusive and original work of, the employees
and contractors of QES; (ii) the Intellectual Property is not in
the public domain; (iii) the Intellectual Property is not the
derivative work of a third party under United States Copyright
Law, except as utilized pursuant to license as disclosed on the
schedules hereto; and (iv) QES' right, title and interest in and
to the Intellectual Property is valid and enforceable and
uncontested and will be owned or available for continued use by
QES after the Closing.
3.16.3 Except as set forth on Schedules 3.11 and 3.16,
no claims, notices, oppositions or demands have been asserted by
any third party with respect to any of the Intellectual Property
or any of the items listed in Schedule 3.16, and to the
Knowledge of the Selling Parties no Person has interfered with,
infringed upon, misappropriated, acted adversely to or otherwise
come into conflict with the Intellectual Property that QES or
any of its Affiliates owns or has an exclusive license to use.
To the Knowledge of the Selling Parties, QES has not interfered
with, infringed upon, misappropriated, acted adversely to or
otherwise come into conflict with any trademarks, trade names,
copyrights, patents, patent applications, know-how, methods or
processes owned by any other Person or Persons. There is no
claim or action pending or, to the Knowledge of any Selling
Party, threatened with respect thereto.
3.16.4 Each employee of QES or any of its Affiliates
who created any of QES' Intellectual Property and each
independent contractor engaged by or on behalf of QES who
created any of QES' Intellectual Property has assigned to QES,
by written agreement, all of such employee's or contractor's
right, title and interest in such Intellectual Property. No
current or former employee or independent contractor of QES or
QDS, has any rights to any of the Intellectual Property owned,
developed or contributed to by QES or its Affiliates.
3.16.5 Except as set forth on Schedule 3.16, there are
no agreements with any Person pursuant to which QES obtains
rights to Intellectual Property material to the Business,
properties and assets of QES (other than software that is
generally commercially available) that is owned by a party other
than QES. Other than license fees for software that is
generally commercially available, QES is not obligated to pay
any royalties or other compensation to any third party in
respect of its ownership, use or license of any of its
Intellectual Property, except as set forth on Schedule 3.16.
3.16.6 QES has taken reasonable and customary
precautions (i) to protect its rights in its Intellectual
Property; (ii) to maintain the confidentiality of its
Intellectual Property, and there have been no acts or omissions
by the officers, directors, employees and agents of QES, the
result of which would be to materially compromise the value of
the Intellectual Property or the rights of QES to apply for or
enforce appropriate legal protection of QES' or its Affiliates'
Intellectual Property; and (iii) to ensure that all existing
registrations and applications to Government Entities with
respect to the Intellectual Property are in full force and
effect and that all necessary fees required to maintain or
continue those registrations and applications, as of the date of
the Closing, have been paid.
3.16.7 QES has all necessary licenses to use all
material third-party software used in QES' Business and in
connection with its Intellectual Property. QES' use of third-
party software does not exceed the scope of those licenses and
QES is not in breach of any of the underlying agreements related
to those licenses. Schedule 3.16.7 is a list of all third-party
software used in QES' Business, other than commonly used and
available third-party software which is subject to commercially
standard "shrink-wrap" licenses and which can be readily
obtained by Purchaser without significant cost or expense.
3.16.8 QES has not and to the Knowledge of the Selling
Shareholders, no Selling Party has, engaged in any infringement
of the Intellectual Property or intellectual property rights of
others with respect to any Intellectual Property that, if such
infringement is determined to be unlawful, is reasonably likely
to have, individually or in the aggregate, a Material Adverse
Effect. The execution and delivery of this Agreement and the
Related Agreements by Selling Parties, and the consummation of
the transactions contemplated hereby and thereby, will neither
cause QES to be in violation or default under any licenses,
sublicenses or other agreements to which QES is a party and
pursuant to which QES is authorized to use any Intellectual
Property, nor entitle any other party to any such license,
sublicense or agreement to terminate such license, sublicense or
agreement, except where any such violation, default, termination
or modification would not, individually or in the aggregate,
have a Material Adverse Effect. The use of Intellectual
Property in the Business as currently conducted by QES does not
breach, violate or infringe any intellectual property rights of
any third party or (except for the payment of computer software
or other licensing fees) does not require any payment for the
use of any patent, trade name, service xxxx, trade secret,
trademark, copyright or other intellectual property right or
technology owned by any third party except where such breaches,
violations, infringements or payments would not, individually or
in the aggregate, have a Material Adverse Effect.
3.16.9 Schedule 3.16.9 sets forth a complete and
correct list, as of the date hereof, of the trademarks that are
used in the business as currently conducted by QES and all
registrations and applications for registration of any
Intellectual Property rights. No Selling Party has any
Knowledge of any infringement by any Person of the Intellectual
Property.
3.17 LABOR MATTERS AND EMPLOYEE RELATIONS.
------------------------------------
Schedule 3.17 is a list of all employees of QES (other
than seasonal readers), including their titles as of May 26,
2006. Purchaser has been provided with a complete and accurate
list of annual wages, salary and bonus information for the
employees identified on Schedule 3.17. Except as otherwise set
forth on Schedule 3.17 hereto:
3.17.1 No Selling Party has received notice (or has
Knowledge) that any present or former employee, or union or
other collective bargaining agents claiming to represent any
employee, of QES has advanced a claim in writing or orally
against QES (whether under any foreign, federal, state or common
law, through any Governmental Authority, under an employment
agreement, collective bargaining agreement, personal service or
independent contractor agreement or otherwise) that is currently
pending or threatened, including without limitation, any claim
for (i) overtime pay, other than overtime pay for the current
period; (ii) wages, salaries or profit sharing (excluding wages,
salaries or profit sharing for the current payroll period);
(iii) vacations, time off (including, without limitation,
potential sick leave) or pay in lieu of vacation or time off,
other than vacation or time off (or pay in lieu thereof) earned
in respect of QES' current fiscal year; (iv) any violation of
any statute, ordinance or regulation relating to minimum wages
or maximum hours of work; (v) discrimination against employees
on any basis; (vi) unlawful employment or termination practices;
(vii) unfair labor practices or alleged violations of collective
bargaining agreements; (viii) any violation of occupational
safety and/or health standards; (ix) benefits under any Employee
Plan or Compensation Agreement; (x) breach of any employment,
personal service or independent contractor agreement; or (xi)
the misclassification of employees as independent contractors.
3.17.2 Since its incorporation, QES has not been the
subject of any union organizing activity or labor dispute, nor
has there been any strike, slowdown, picketing or work stoppage
of any kind called, or, to the Knowledge of Selling
Shareholders, threatened to be called, against QES. QES has not
violated in any material respect any applicable federal or state
law or regulation relating to labor or labor practices,
including, without limitation, those related to wages, hours,
collective bargaining, occupational safety, discrimination and
the payment of social security and other payroll-related Taxes.
Except as set forth in Schedule 3.17, QES is not a party to any
collective bargaining agreement, no such agreement determines
the terms and conditions of employment of any employee of QES,
no union or other collective bargaining agent has been
recognized or certified, or claims to be, or has requested
recognition as, a representative of any of the employees of QES
and, to the Knowledge of Selling Shareholders, no representation
campaign or election is now in progress or threatened with
respect to any of the employees of QES.
3.17.3 There is not pending or threatened by written
notice to any Selling Party any charge or complaint against QES
by or before the National Labor Relations Board, any
representative thereof or any comparable foreign or state agency
or authority.
3.17.4 Except as set forth on Schedule 3.17, neither
Selling Shareholders nor QES has any written or oral contracts
of employment with any current employee of QES, except for oral
employment contracts terminable at will without penalty.
3.18 BENEFIT PLANS.
-------------
3.18.1 All of the Employee Plans and Compensation
Arrangements (as defined in Section 3.18.15) that provide
benefit coverage to employees or former employees of QES are
listed and described in Schedule 3.18, and complete and accurate
copies of any such written Employee Plans and Compensation
Arrangements (including any amendments, related trust
agreements, IRS favorable determination letters and rulings, and
related insurance policies) have been furnished to Purchaser,
along with copies of any employee handbooks, summary plan
descriptions or similar documents describing such Employee Plans
and Compensation Arrangements. Any unwritten Employee Plans or
Compensation Arrangements and prior Employee Plans or
Compensation Arrangements also are listed in Schedule 3.18, and,
except as set forth on Schedule 3.18, complete descriptions and
copies have been furnished to Purchaser. "Prior" Employee Plans
or Compensation Arrangements include, but are not limited to,
all prior plans and arrangements that were terminated; all prior
plans and arrangements that were merged or spun off from any
existing plan or arrangement and all prior versions of all
existing and prior plans and arrangements. Except as disclosed
in Schedule 3.18, neither Selling Shareholders nor any of QES or
QDS is a party to and/or has in effect or to become effective
after the date of this Agreement any plan arrangement or other
scheme which will become an Employee Plan or Compensation
Arrangement (including, but not limited to, any bonus, cash or
deferred compensation, severance, medical, pension, profit
sharing or thrift, stock option, employee stock ownership, life
or group insurance, death benefit, vacation, sick leave,
disability or trust agreement or arrangement) or any amendment
to an Employee Plan or Compensation Arrangement. Schedule 3.18
contains a separate list of all Employee Plans or Compensation
Arrangements in which seasonal readers participate. No seasonal
reader has accrued or is entitled to accrue any PTO under any
Employee Plan.
3.18.2 Except as set forth on Schedule 3.18, Selling
Shareholders have caused QES to furnish to Purchaser all the
Forms 5500, 5329, 5330, 945, 1096, 1099-R, 990-T and PBGC-1
filed for at least each of the last six Plan Years (or such
shorter period that the applicable Employee Plan has been in
effect), for each of the existing and prior Employee Plans
listed in Schedule 3.18 (including all attachments and
schedules) and all actuarial reports, summaries of material
modifications, summary annual reports and any other employer
notices (including governmental filings and descriptions of
material changes to Employee Plans) relating to such Employee
Plans. Except as set forth in Schedule 3.18, all forms and
notices required to be filed with the Internal Revenue Service,
Department of Labor, Employee Benefit Security Administration or
Pension Benefit Guaranty Corporation and all notices and
disclosures required to be made to Plan participants and
beneficiaries have been filed and/or made on a timely basis.
3.18.3 Each Employee Plan and Compensation Arrangement
has been administered in compliance with its own terms and in
material compliance with the provisions of ERISA, the Code, the
Age Discrimination in Employment Act and any other applicable
federal or state laws.
3.18.4 Neither QES, nor any ERISA Affiliate (or former
ERISA Affiliate) thereof, is contributing to, is required to
contribute to, or has contributed within the last six years to,
any Multiemployer Plan, and none of QES nor any ERISA Affiliate
(or former ERISA Affiliate) thereof has incurred within the last
six years, or reasonably expects to incur, any "Withdrawal
Liability," as defined under Section 4201 ET SEQ. of ERISA.
Also, except as set forth in Schedule 3.18 neither QES nor any
ERISA Affiliate (or former ERISA Affiliate) thereof, is required
to contribute to, or has contributed within the last six years
to, any defined benefit pension plan with respect to which QES
is potentially jointly and severally liable under Section
412(c)(11)(B) of the Code.
3.18.5 Except as set forth on Schedule 3.18, at all
times on or prior to the Closing, each Employee Plan, to the
extent such Employee Plan is intended to be tax-qualified,
satisfies all minimum coverage, minimum participation,
nondiscrimination and other qualification requirements, if any,
imposed on such Employee Plan by the applicable terms of the
Code and ERISA. Except as set forth on Schedule 3.18, no
Selling Party is aware of the existence of any facts or
circumstances that could adversely affect the qualified status
of any Employee Plan or the tax-exempt status of any related
Plan Trust, or that is noncompliant with any law or regulation
that could subject QES or the Plan to any income tax, excise
tax, penalty or civil liability.
3.18.6 No Selling Party has Knowledge of the existence
of any governmental inspection, investigation, audit or
examination of any Employee Plan or Compensation Arrangement or
of any facts which would lead them to believe that any such
governmental inspection, investigation, audit or examination is
pending or threatened. There exists no action, suit or claim
(other than routine claims for benefits) with respect to any
Employee Plan or Compensation Arrangement pending or, to the
Knowledge of any Selling Party, threatened against any of such
plans or arrangements, and no Selling Party possesses any
Knowledge of any facts which could give rise to any such action,
suit or claim.
3.18.7 Except as described in Schedule 3.18, no
Selling Party or any ERISA Affiliate thereof sponsors, maintains
or contributes to any Employee Plan or Compensation Arrangement
that provides medical or death benefit coverage to former
employees of QES, except to the extent required by Section 4980B
of the Code. Schedule 3.18 lists all active and former employees
of QES eligible for a benefit, if any, described in the
preceding sentence.
3.18.8 Except as described in Schedule 3.18, with
respect to each Employee Plan and, to the extent applicable,
each Compensation Arrangement: (i) each Employee Plan that is
intended to be tax-qualified, and each amendment thereto, is the
subject of a favorable determination letter, and no plan
amendment that is not the subject of a favorable determination
letter would adversely affect the qualified status of an
Employee Plan or the tax-exempt status of any related Plan
Trust; (ii) no condition or event exists or is expected to occur
that could subject, directly or indirectly, Selling Shareholders
or any ERISA Affiliate thereof or any Employee Plan to any
material liability, contingent or otherwise, or the imposition
of any lien on the assets of QES or any ERISA Affiliate thereof
or any Employee Plan under the Code or Title IV of ERISA whether
to the Pension Benefit Guaranty Corporation, the Internal
Revenue Service or any other Person; (iii) no Employee Plan ever
has incurred an "accumulated funding deficiency," as such term
is defined in Section 302(a)(2) of ERISA and Section 412(a) of
the Code, whether or not waived, and otherwise always has fully
met the funding standards required under Title I of ERISA and
Section 412 of the Code; (iv) no "reportable event," as that
term is defined in Section 4043(b)(1) through (8) of ERISA and,
to the Knowledge of Selling Shareholders and QES, Section
4043(b)(9) of ERISA, ever has occurred with respect to any
Employee Plan and no reportable event requires prior notice; (v)
there are no unfunded liabilities with respect to any Employee
Plan, i.e., the actuarial present value of all "benefit
liabilities" (determined within the meaning of Section 401(a)(2)
of the Code) under such Employee Plan, whether or not vested,
does not exceed the current value of the assets of such Employee
Plan; (vi) no prohibited transaction, within the definition of
Section 4975 of the Code or Title 1, Part 4 of ERISA, has
occurred which would subject Selling Shareholders or any ERISA
Affiliate thereof to any liability; (vii) all contributions,
premiums or payments accrued, in whole or in part, under each
Employee Plan or Compensation Arrangement or with respect
thereto as of the Closing will be paid by Selling Shareholders,
on or prior to Closing or, if later, within the time period
required by ERISA and the Code; (viii) all contributions were
timely deposited into the Plan so as to not subject QES to any
late deposit excise tax or penalty or to negatively affect any
contribution deduction QES may have taken for the taxable year
in which it was taken; and (ix) all income taxes each Employee
Plan was required to withhold from each distribution made to any
participant or beneficiary was properly withheld and timely
deposited.
3.18.9 With respect to QES, Schedule 3.18 contains a
complete and accurate list of all qualified beneficiaries, as
defined under Section 4980B(g)(1) of the Code, as of the
effective date of this Agreement (including qualified
beneficiaries who are in the election period for continuation
coverage but who have not yet elected continuation coverage),
the date of the applicable qualifying event and the nature of
the qualifying event relating to the duration of such coverage.
There have been no failures to provide continuation coverage as
required by Section 4980B(f) of the Code. Selling Shareholders
agree to provide to Purchaser at Closing an updated list of such
qualified beneficiaries, as described above, effective as of the
Closing Date.
3.18.10 Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated
hereby will (i) result in any material payment (including,
without limitation, severance or unemployment compensation)
becoming due to any director or employee of QES; (ii) result in
the acceleration of vesting under any Employee Plan or
Compensation Arrangement; or (iii) materially increase any
benefits otherwise payable under any Employee Plan; and any such
payment or increase in benefits is fully deductible under the
Code, including, but not limited to, Sections 162, 280G and 404.
3.18.11 Except as set forth on Schedule 3.18, all
Employee Plans that provide health and welfare benefits coverage
to current and/or former employees, directors or independent
contractors of QES are fully insured.
3.18.12 The assets in the Employee Plan out of which
the benefits accrued under the Employee Plan are paid consist of
an amount sufficient to provide for lump sum payments to those
employees and/or former employees of QES entitled to benefits
under the Employee Plan either upon termination of the Employee
Plan or in the event of a "change of control," as such term is
defined in the Employee Plan.
3.18.13 No current or former employee of QES is
entitled to make a claim for long-term disability benefit
coverage under any Employee Plan, except for those employees or
former employees of QES set forth in Schedule 3.18 who currently
are receiving long-term disability benefit coverage under a
long-term disability program previously sponsored by QES that is
fully insured. QES retains no liability of any nature,
including, but not limited to, the payment of insurance
premiums, with respect to the provision of long-term disability
coverage to the employees or former employees set forth in
Schedule 3.18.
3.18.14 With respect to any actions of QES, QDS or any
of their Affiliates, or agents, directors, officers or employees
of such entities, where such entities or parties have acted or
could be deemed to have acted as an ERISA fiduciary (within the
meaning of Section 3(21)(A) or ERISA) or have performed services
as a result of which any such person was a party in interest
(within the meaning of Section 3914) or ERISA) or a disqualified
person (within the meaning of Section 4975 (e) (2) of the Code),
such actions have been in compliance with ERISA's and the Code's
fiduciary and prohibited transaction requirements (to the extent
applicable), except for such violations as would not
individually or in the aggregate, have a Material Adverse
Effect.
3.18.15 For purposes of this Agreement, the following
terms shall have the meanings indicated: (i) "Employee Plan"
shall mean any retirement or welfare plan or arrangement or any
other employee benefit plan as defined in Section 3(3) of ERISA
to which QES or any ERISA Affiliate thereof contribute or to
which QES or any ERISA Affiliate thereof sponsor, maintain or
otherwise are bound; (ii) "Compensation Arrangement" shall mean
any plan or compensation arrangement other than an Employee
Plan, whether written or unwritten, which provides to employees,
former employees, officers, directors and shareholders of QES or
any ERISA Affiliate thereof any compensation or other benefits,
whether deferred or not, in excess of base salary or wages,
including, but not limited to, any bonus or incentive plan,
stock rights plan, deferred compensation arrangement, life
insurance, stock purchase plan, severance pay plan, and any
other employee fringe benefit plan; (iii) "ERISA" shall mean the
Employee Retirement Income Security Act of 1974, as amended, any
successor thereto and any regulations promulgated thereunder;
(iv) "Multiemployer Plan" means a plan, as defined in ERISA
Section 3(37), to which QES or any ERISA Affiliate thereof has
contributed, is contributing or is required to contribute; and
(v) "ERISA Affiliate" shall mean any trade or business related
to QES (or formerly related to QES within the past six years)
under the terms of Sections 414(b), (c), (m) or (o) of the Code.
3.19 NON-COMPETITION BY QDS.
----------------------
Immediately following the Closing, QDS will lack the
capabilities and personnel skills to engage in a Competitive
Business.
3.20 ACCOUNTS RECEIVABLE.
-------------------
All of the accounts receivable of QES reflect actual
transactions which arose in the ordinary course of business and
are not subject to offset or deduction and are collectible in
the ordinary course.
3.21 INSURANCE.
---------
Schedule 3.21 contains a true and correct list, as of
the date hereof, of all policies of insurance maintained
relating to the assets, properties, Business, operations,
employees, officers or directors of QES. Complete and accurate
copies of all such policies have been provided to Purchaser.
Since the formation of QES, there has been no lapse or coverage
with respect to any such policy. QES maintains or causes to be
maintained, insurance relating to such assets, properties,
Business, operations, employees, officers and directors which is
reasonable for a company of its size engaged in the Business.
3.22 GUARANTEES.
----------
QES is not, directly or indirectly, (i) liable, by
guaranty or otherwise, upon or with respect to, (ii) obligated
by discount or repurchase agreement or in any other way to
provide funds in respect of or (iii) obligated to guarantee or
assume any debt, dividend or other obligation of any Person,
except endorsements made in the ordinary course of business in
connection with the deposit of items for collection.
3.23 CONTRACTS.
---------
3.23.1 Schedule 3.23 hereto contains a true, complete
and accurate list and description, as of the date hereof, of the
following:
(a) all commitments and agreements for the purchase of
materials or supplies or the receipt of services that involve an
expenditure by QES of more than $25,000 for any one commitment
or two or more related commitments; (b) all consulting, sales
agency, distribution, commission, sales representation and other
agreements with independent contractors that provide for
compensation in excess of $25,000 a year; (c) all agreements for
the sale, lease, license or rental by or to QES of any
Intellectual Property rights that require, individually or in
the aggregate, the payment by or to QES or any Affiliate in
excess of $25,000; (d) all agreements requiring the payment by
or to QES of any royalty or similar payment; (e) all other
agreements, commitments and understandings (written or oral)
that individually or in the aggregate require payment by or to
QES of more than $25,000, or which are outside the ordinary
course of business consistent with past practices; (f) all
guarantees, loan agreements, mortgages, pledges, conditional
sale or title retention agreements, security agreements or lease
purchase agreements as to items of property; (g) all leases for
Real Property, (h) all other agreements, commitments and
understandings (written or oral) that are, individually or in
the aggregate, otherwise material to any of the business,
properties or assets of QES; (i) all items of machinery,
equipment, vehicles, and other tangible personal property owned,
leased or used by or for any of QES, or in connection with the
Business, properties or assets of QES, except for items having a
value of less than $10,000 which do not, in the aggregate, have
a total value of more than $50,000, setting forth with respect
to all such listed items all leases relating thereto; (j) all
trademarks, trademark registrations, and applications therefor,
service marks, service names, trade names, patents and patent
applications, copyrights, copyright registrations, and
applications therefor, domain names, names of websites owned,
used or managed by or for QES, wholly or partially owned, held
or used by QES for or in connection with any of the business,
properties or assets of QES; (k) as of a date not more than
thirty (30) days prior to date hereof, a listing of all
Inventory, segregated by type, quantity and location; (l) as of
a date not more than ten (10) days prior to the date hereof, a
listing of all outstanding accounts receivable, and accounts
payable and accrued expenses, including the aging thereof, and
segregated by customer or vendor, as the case may be; and (m)
all contracts and agreements that limit or purport to limit QES
to compete in any line of business or with any Person or in any
geographic area ("a" through "m" and all amendments thereto,
collectively, the "Contracts"). The unwritten contracts listed
as Items (c), (d), (e) and (f) therein shall be terminated
without liability to QES as of Closing, and simultaneously
therewith, QES shall enter into the NBS Services Agreement and
the Transitional Services Agreement.
3.23.2 No Selling Party has received notice or has
Knowledge of a cancellation of or an intent to cancel any
Contract the cancellation of which would have, individually or
in the aggregate, a Material Adverse Effect. Except as set
forth on Schedule 3.23, no Selling Party has received notice or
has Knowledge that any Contract would not be extended or renewed
or notice of an intent not to extend or renew any Contract, the
failure to extend or renew of which would have, individually or
in the aggregate, a Material Adverse Effect.
3.23.3 Schedule 3.23.3 is a true, complete and
accurate list and description of all Contracts with individual
states or Persons pursuant to which QES currently has projected
revenue through 2010 including the revenue projected for each
such Contract as set forth in such Contract.
3.23.4 Each Contract is valid, binding and enforceable
against QES and, to the Knowledge of Selling Shareholders, is
valid, binding and enforceable against the other parties
thereto.
3.23.5 QES is not in breach of, or default under, any
Contract and, to the Knowledge of each Selling Party, no other
party to any Contract is in breach thereof or default
thereunder.
3.24 POST-CLOSING COOPERATION.
------------------------
Each Selling Party agrees to use good faith, best
efforts and to take any and all actions reasonably necessary to
maintain and retain the current relationships of QES with each
of the parties to its Contracts, including, but not limited to
those contracts currently or anticipated to produce revenue for
QES (i) in which a Selling Shareholder is listed by name as
performing services thereunder, or (ii) derived from personal
relationships of a Selling Shareholder with those persons within
the various state agencies and departments with whom such
Selling Shareholder has been involved in the negotiation and
proposal made to such states resulting in such contracts.
3.25 FULL DISCLOSURE.
---------------
To the Knowledge of each Selling Party, no statement
contained herein or in any certificate, Schedule, Exhibit, list
or other instrument furnished to Purchaser pursuant to the
provisions hereof contains, or will contain, any untrue
statement of any material fact or omits, or will omit, to state
a material fact necessary in order to make the statements
contained herein or therein, in the light of the circumstances
under which they were made, not misleading.
3.26 RESTRICTED STOCK.
----------------
3.26.1 Each of the Selling Shareholders has been
advised and understands that (a) the TASA Preferred Stock and
the TASA Common Stock have not been registered under the
Securities Act of 1933, as amended, or under applicable state
securities laws, and accordingly, such shares are restricted
securities and may not be transferred except pursuant to an
effective registration under the Securities Act and applicable
state securities laws, or an exemption therefrom; (b) each
Selling Shareholder is acquiring the TASA Preferred Stock and
the TASA Common Stock for his or her own account and not with a
view to the distribution thereof, and (c) the certificates
evidencing the TASA Preferred Stock and the TASA Common Stock
will bear a legend restricting the transfer thereof accordingly.
3.26.2 Each Selling Shareholder has received
information regarding the Purchaser and its Subsidiaries to
enable it to make a meaningful investment decision with respect
to the acquisition of the TASA Common Stock and the TASA
Preferred Stock.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
-------------------------------------------
Purchaser represents and warrants to the Selling
Shareholders as follows:
4.1 PURCHASER'S ORGANIZATION AND AUTHORITY.
--------------------------------------
Purchaser is a corporation duly organized and validly
existing under the law of the state of Delaware and has the full
power and authority to enter into and perform this Agreement in
accordance with its terms.
4.2 AUTHORIZATION OF AGREEMENT.
--------------------------
The execution, delivery and performance of this
Agreement and each other agreement, document and instrument to
be executed or delivered by Purchaser in connection with this
Agreement (the "Purchaser Related Agreements") have been duly
authorized by all requisite actions and proceedings of
Purchaser. This Agreement and each other Purchaser Document to
which Purchaser is or shall be a party thereto has been duly
executed and delivered by Purchaser, constitutes a legal, valid
and binding obligation of Purchaser, and is enforceable against
it in accordance with its terms, except as may be limited by
bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights in general and subject to
general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at
law).
4.3 CONSENTS OF THIRD PARTIES.
-------------------------
The execution, delivery and performance of this
Agreement and each of the Purchaser Related Agreements by
Purchaser will not (a) conflict with Purchaser's organizational
documents and, except for the consent of Purchaser's lenders
obtained in connection with the Closing will not conflict with
or result in the breach or termination of, or constitute a
default or cause or permit the acceleration under, any
agreement, commitment, obligation, instrument, or any order,
judgment or decree to which Purchaser is a party or by which
Purchaser is bound, or (b) constitute a violation by Purchaser
of any law, rule or regulation applicable to it. No consent,
approval or authorization of, or designation, declaration or
filing with, any governmental authority or any other person or
entity is required on the part of Purchaser in connection with
the execution, delivery and performance of this Agreement.
4.4 FINANCIAL CAPACITY AND DEBT RESTRICTIONS.
----------------------------------------
4.4.1 Purchaser has at the date of this Agreement,
and will have at each subsequent date at which payments are to
be made to Selling Shareholders, the financial capacity to
perform its financial obligations under this Agreement.
Purchaser covenants and agrees with Selling Shareholders that it
shall not prepay the TASA Debt during the three year Earnout
Period, other than in the ordinary course of business in
accordance with the loan documentation related thereto, unless
and until any and all Earnout Payments due to Selling
Shareholders have been made or otherwise provided for.
4.4.2 Purchaser further covenants and agrees with
Selling Shareholders that the term debt included in TASA Debt to
which the Subordinated Note is subordinated shall not, except as
otherwise provided in this Section 4.4.2, at Closing exceed the
aggregate amount of $11,000,000. The parties agree that as such
term debt portion of the TASA Debt is amortized, Purchaser shall
be permitted to reborrow term debt and even increase the term
debt portion of the TASA Debt up to and including an aggregate
of $12,500,000; provided, however, that as such term debt is
reborrowed or increased from $11,000,000 to the $12,500,000
limit, for each dollar of term debt reborrowed or increased, the
outstanding principal balance of the Subordinated Note shall be
repaid 33 1/3 cents for each dollar reborrowed or increased up
to the $12,500,000 limit. For all term debt borrowings by
Purchaser which exceed the $12,500,000 limit, the outstanding
principal balance of the Subordinated Note shall be paid down
dollar for dollar to the extent such term debt reborrowings or
increases exceed the $12,500,000 limit. To the extent Purchaser
reasonably determines an increase in the revolving line of
credit is needed to finance the growth of the business,
Purchaser shall be permitted to increase the limit of such
revolving debt; provided, however that Purchaser covenants and
agrees with Selling Shareholders that Purchaser shall not,
without the prior written consent of a majority in interest of
the Selling Shareholders, utilize borrowings under the revolving
loan portion of the TASA Debt to acquire the business, stock or
assets of another Person.
4.5 CAPITALIZATION.
--------------
As of March 15, 2006, the authorized capital stock of
Purchaser consisted of (a) 15,000,000 shares of TASA Common
Stock with a par value of $.0001, of which there were 2,909,738
shares issued and outstanding and no shares held in Purchaser's
treasury, and (b) 5,000,000 shares of TASA Preferred Stock with
a par value of $.0001 per share, of which there were no shares
issued and outstanding. The shares of TASA Preferred Stock
and/or TASA Common Stock to be issued and delivered to Selling
Shareholders pursuant to this Agreement shall be, at the time of
issuance and delivery, validly issued, fully paid, non-
assessable, and free of preemptive rights
4.6 SEC REPORTS.
-----------
4.6.1 Purchaser has filed all forms, reports, and
other documents required to be filed by it with the Securities
and Exchange Commission ("SEC") since November 1, 2004 (such
forms, reports and other documents, together with any amendments
thereto, are referred to as the "Purchaser SEC Filings"). As of
their respective dates, the Purchaser SEC Filings (i) complied
as to form in all material respects with the applicable
requirements of the Securities Exchange Act of 1934, as amended,
and (ii) did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of
the circumstances under which they were made, not misleading.
4.6.2 The audited financial statements included in
the Purchaser SEC Filings, including but not limited to
Purchaser's audited financial statements at and for the year
ended October 31, 2005 (the "Purchaser October 31, 2005
Financials"), and the unaudited interim financial statements at
and for periods commencing on or after November 1, 2005 included
in the forms, reports, registration statements and other
documents filed by Purchaser with the SEC (i) were prepared in
accordance with GAAP (except, in the case of unaudited
statements, as permitted by Form 10-Q filed with the SEC)
applied on a consistent basis during the periods involved
(except as may be indicated therein or in the notes thereto)
subject, in the case of unaudited interim financial statements,
to the absence of notes and to year-end adjustments, (ii)
complied as of their respective dates in all material respects
with applicable accounting requirements and the published rules
and regulations of the SEC with respect thereto, and (iii)
fairly present in all material respects the consolidated
financial position of Purchaser and its consolidated
subsidiaries as of the dates thereof and the consolidated
income, cash flows, and changes in stockholders' equity of
Purchaser and its consolidated subsidiaries for the periods
involved, except as otherwise noted therein and subject, in the
case of unaudited statements, to normal year-end audit
adjustments. The statements of operations included in the
audited or unaudited interim financial statements in the
Purchaser SEC Filings do not contain any items of special or
nonrecurring income or any other income not earned in the
ordinary course of business required to be disclosed separately
in accordance with GAAP, except as expressly specified in the
applicable statement of operations or notes thereto.
4.7 ABSENCE OF UNDISCLOSED LIABILITIES.
----------------------------------
To the best of Purchaser's Knowledge, neither
Purchaser nor any of its Subsidiaries has any liabilities or
obligations of any nature (whether absolute, accrued, contingent
or otherwise) of the type required to be reflected on or
reserved against in, or disclosed in the notes to, a balance
sheet prepared in accordance with GAAP except: (a) liabilities
or obligations that are accrued or reserved against in the
audited consolidated balance of Purchaser as of October 31, 2005
contained in the Purchaser SEC Filings or in the unaudited
consolidated balance sheet of Purchaser as of January 31, 2006
contained in Purchaser's Quarterly Report on Form 10-QSB for the
fiscal quarter ended January 31, 2006 or referred to in the
notes thereto, (b) liabilities incurred in the ordinary course
of business since January 31, 2006, (c) liabilities or
obligations that would not reasonably be expected to have a
Material Adverse Effect on Purchaser; and (d) liabilities
incurred in connection with this transaction and the financing
related thereto.
4.8 ABSENCE OF MATERIAL ADVERSE CHANGES.
-----------------------------------
Between October 31, 2005 and the date of this
Agreement:
4.8.1 other than the Closing of this transaction and
the obligations of Purchaser assumed in connection herewith and
in connection with the financing associated herewith, there has
been no event, effect or change (including the incurrence of any
liabilities or obligations of any nature whether or not accrued,
contingent or otherwise) having a Material Adverse Effect on
Purchaser;
4.8.2 there has been no damage, destruction or loss,
not covered by insurance, that would reasonably be expected to
have a Material Adverse Effect on Purchaser;
4.8.3 there has been no material change by Purchaser
or any of its subsidiaries in accounting methods or principles
used for financial reporting purposes, except as required by a
change in applicable law or GAAP and concurred with by
Purchaser's independent public accountants; and
4.8.4 there has been no agreement, whether in writing
or otherwise, to take any action described or referenced in this
Section 4.8.
4.9 LEGAL PROCEEDINGS.
-----------------
Purchaser is not a party to any, and there are no
pending or, to the Knowledge of Purchaser, threatened, Actions
against or otherwise affecting Purchaser, or any of its
properties or assets, or challenging the validity or propriety
of the transactions contemplated by this Agreement or the
Related Agreements which, if adversely determined, would have,
individually or in the aggregate, a Material Adverse Effect on
Purchaser, and there is no injunction, order, judgment, decree
or regulatory restriction imposed upon Purchaser, or any of its
properties or assets which has had or could have, individually
or in the aggregate, a Material Adverse Effect on Purchaser.
5. FURTHER AGREEMENTS OF THE PARTIES.
---------------------------------
5.1 EXPENSES.
--------
Except as otherwise specifically provided in this
Agreement, each of Purchaser and the Selling Parties shall bear
their own expenses incurred in connection with this Agreement
and in connection with all obligations required to be performed
by it under this Agreement. Purchaser shall reimburse QES for
certain costs and expenses incurred by QES in connection with
its retention of McGladrey as evidenced by a letter agreement
between Selling Shareholders and Purchaser dated the date hereof
and executed and delivered at Closing (the "Questar Letter
Agreement").
5.2 SALES TAXES.
-----------
Each party obligated by Applicable Law shall pay, in
accordance with such Applicable Law, such state or local sales
or transfer taxes payable in connection with the transaction
contemplated by this Agreement. Purchaser and each Selling
Party will cooperate to prepare and file with the proper public
officials, as and to the extent reasonably necessary, all
appropriate sales tax exemption certificates or similar
instruments as may be necessary to avoid the imposition of
sales, transfer and similar taxes on the transaction
contemplated by this Agreement.
5.3 FURTHER ASSURANCES.
------------------
At any time and from time to time after the Closing
Date each party shall, without further consideration, execute
and deliver to the other such other instruments of transfer and
assumption and shall take such other action as the other may
reasonably request to carry out the purposes and intents of this
Agreement.
5.4 BULK TRANSFER LAW.
-----------------
Each Selling Shareholder and QES represents that no
bulk transfer or fraudulent conveyance statutes are applicable
to the transactions contemplated by this Agreement, and
accordingly Purchaser waives compliance by the Selling Party
with the requirements of such statutes, and Selling Parties,
jointly and severally agree to indemnify and hold harmless
Purchaser from and against any and all claims that may be made
against Purchaser by any creditor(s) of or claimant(s) against
any Selling Party as a result of a failure to comply with any of
such statutes.
5.5 FINAL FINANCIAL STATEMENTS.
--------------------------
The Selling Parties shall cause to be prepared and
shall deliver copies thereof to Purchaser, the QES Fiscal Year
Financial Statements for QES, and quarterly review-quality
financial statements prepared in accordance with GAAP for QES
for the periods ending January 31, 2005, April 30, 2005, July
31, 2005, January 31, 2006 and April 30, 2006 (the "Quarterly
Interim Financial Statements", together with the QES Fiscal Year
Financial Statements, the "Final Financial Statements").
5.6 NAME PROTECTION.
---------------
At the Closing, QES shall cause QDS to execute and
deliver to Purchaser (i) an assignment of trademark for the
trademark "Questar Educational Systems", Registration Number
2908243, registered with the United States Patent and Trademark
Office December 7, 2004, sufficient to transfer ownership of
such trademark and all rights thereto to QES; (ii) such other
documents and instruments as will be necessary to transfer all
domain names, URL's, web sites and other intellectual property
related to the Business, properties and assets of QES, in each
case in form and substance acceptable to counsel for Purchaser;
and (iii) the Intellectual Property Assignment and Usage
Agreement in the form of Exhibit P annexed hereto and made a
part hereof.
6. CONDITIONS TO CLOSING.
---------------------
6.1 CONDITIONS TO OBLIGATIONS OF PURCHASER.
--------------------------------------
Purchaser's obligation to consummate the purchase
under this Agreement is subject to the fulfillment, prior to or
at the Closing, of each of the following conditions (any or all
of which may be waived in writing by Purchaser):
(a) each of the representations and warranties
of the Selling Parties to Purchaser shall be true and correct in
all material respects as of the date hereof;
(b) the Selling Parties shall have performed and
complied in all material respects with all obligations and
covenants required by this Agreement to be performed or complied
with by the Selling Parties prior to or at the Closing;
(c) the Selling Parties shall have received,
without any material conditions adverse to Purchaser or QES or
the business, properties and assets of QES, all consents and
approvals listed on Schedule 2.6 hereto;
(d) There shall not be in effect or have been
threatened any action, suit, proceeding or investigation,
injunction or restraining order before or issued by any court or
governmental body or agency against, or seeking damages in
connection with, the consummation of the transactions
contemplated by this Agreement;
(e) Each of the following individuals shall have
accepted employment with Purchaser on terms acceptable to
Purchaser and shall have executed and delivered an Employment
Agreement, and the Employee Proprietary Rights Agreement.
(i) Xxxx X. Xxxxx;
(ii) Xxxxx Xxxxxxxx;
(iii) Xxxx Xxxxx;
(iv) XxXxxxx Xxxxxxxxx;
(v) Xxxx Xxxxxxxxx; and
(vi) Xxxxx Xxxxx.
(f) Purchaser shall have been furnished with a
certificate of an officer of QES, dated the Closing Date, in
form and substance reasonably satisfactory to Purchaser,
certifying to the fulfillment of the conditions specified in
sections 6.1(a) and 6.1(b); and
(g) Purchaser shall have been furnished with an
opinion of counsel to QES and each Selling Shareholder, in the
form of Exhibit K.
6.2 CONDITIONS PRECEDENT TO OBLIGATION OF THE SELLING
-------------------------------------------------
PARTIES.
-------
The Selling Parties' obligations to consummate the
sale under this Agreement are subject to the fulfillment, prior
to or at the closing, of each of the following conditions (any
or all of which may be waived by the Selling Parties):
(a) each of the representations and warranties
of Purchaser shall be true and correct in all material respects
when made and shall be true and correct in all material respects
as of the time of the Closing;
(b) Purchaser shall have performed and complied
in all material respects with all obligations and covenants
required by this Agreement to be performed or complied with by
it prior to or at the Closing;
(c) There shall not be in effect, or have been
threatened, any action, suit, proceeding or investigation,
injunction or restraining order before or issued by any court or
governmental body or agency against, or seeking damages in
connection with, the consummation of the transactions
contemplated by this Agreement;
(d) The Selling Parties shall have been
furnished with a certificate of an officer of Purchaser dated
the Closing Date, in form and substance reasonably satisfactory
to the Selling Parties, certifying to the fulfillment of the
conditions specified in Sections 6.2(a) and 6.2(b); and
(e) The Selling Parties shall have been
furnished with an opinion of Rider, Weiner & Xxxxxxx, P.C.,
counsel to Purchaser, in the form of Exhibit L.
7. DOCUMENTS TO BE DELIVERED AT CLOSING
------------------------------------
7.1 DOCUMENTS TO BE DELIVERED BY THE SELLING PARTIES.
------------------------------------------------
At the Closing, the Selling Parties shall deliver to
Purchaser the following:
(a) Base Working Capital;
(b) Non-Competition Agreements;
(c) Employment Agreements;
(d) Stock certificates or stock powers
transferring the Shares to Purchaser in form acceptable to
counsel for Purchaser;
(e) copies of resolutions of the Selling
Parties' board of directors and stockholders authorizing the
execution, delivery and performance of this Agreement by each of
them, and a certificate of its secretary or assistant secretary
of each Selling Party, dated the Closing Date, that such
resolutions were duly adopted and are in full force and effect;
(f) the certificate referred to in Section
6.1(f);
(g) the opinion(s) referred to in Section
6.1(g);
(h) the originals or true copies of all
Contracts;
(i) certificate of good standing of QES, issued
as of a recent date by the Minnesota Secretary of State and the
Secretary of State of each jurisdiction where QES is required to
be qualified as set forth on Schedule 3.1 hereto;
(j) minute book, corporate seal, stock ledger
for QES, including certified copies of the articles of
incorporation, filing receipt and bylaws, and all amendments
thereto;
(k) leases for the premises located at 0000
Xxxxx 000xx Xxxxxx Xxxx, Xxxxx Xxxxxx, Xxxxxxxxx and 00000
Xxxxxx Xxx, Xxxxx Xxxxxx, Xxxxxxxxx, in the forms of Exhibit M
and Exhibit N;
(l) NBS Services Agreement;
(m) Escrow Agreement;
(n) Proprietary Rights Agreements;
(o) Intellectual Property Assignment and Usage
Agreement substantially in the form of Exhibit O;
(p) Transitional Services Agreement
substantially in the form of Exhibit P;
(q) Original Trademark Assignment referred to in
the Intellectual Property Assignment and usage Agreement for
filing with the Patent and Trademark Office or evidence of
filing;
(r) the Compliance Certificate referred to in
Sections 3.9 and 3.10 of this Agreement; and
(s) all other documents required by the terms of
this Agreement in such form as counsel for Purchaser shall
accept.
7.2 DOCUMENTS TO BE DELIVERED BY PURCHASER.
--------------------------------------
At the Closing, Purchaser shall deliver to the Selling
Parties the following:
(a) the wire transfer of funds referred to in
Section 2.2.1.1;
(b) a copy of resolutions of Purchaser
authorizing the execution, delivery and performance of this
Agreement by it, and a certificate of its secretary or assistant
secretary of Purchaser, dated the Closing Date, that such
resolutions were duly adopted and are in full force and effect;
(c) the certificate referred to in Section
6.2(d);
(d) a certificate of good standing of Purchaser
from the Secretary of State of the State of Delaware;
(e) the opinion referred to in Section 6.2(e);
(f) Escrow Agreement;
(g) Subordinated Note;
(h) Transitional Services Agreement; and
(i) all other documents required by the terms of
this Agreement in such form as counsel for Selling Shareholders
shall accept.
8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
-----------------------------------------------------------
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF SELLING
-----------------------------------------------------
PARTIES.
-------
All representations, warranties, agreements, covenants
and obligations made or undertaken by Selling Parties in this
Agreement or in any Related Agreements are material, have been
relied upon by Purchaser and shall survive the Closing
hereunder, subject to the limitations set forth in Section 8.4
to the extent applicable, and shall not merge in the performance
of any obligation by any party hereto. Subject to the
limitations set forth in this Article 8, each Selling
Shareholder agrees from and after Closing to jointly and
severally, indemnify and hold Purchaser or any of Purchaser's
Affiliates, including QES, and their respective officers,
directors, employees, agents, successors and assigns
(collectively, with Purchaser, "Purchaser Indemnitees"),
harmless from and against all liability, loss, damages or injury
and all reasonable costs and expenses (including reasonable
counsel fees and costs of any Action related thereto)
(collectively, "Damages") suffered or incurred by any Purchaser
Indemnitee arising from, resulting from or relating to:
8.1.1 any misrepresentation by, or breach of any
covenant, agreement or warranty, of such Selling Party contained
in this Agreement or the Related Agreements or any certificate,
schedule, document or instrument furnished by such Selling Party
pursuant thereto; or
8.1.2 (i) the Business, assets, properties or
operations of QES on or prior to the Closing Date whether or not
disclosed on the Schedules hereto; or (ii) liabilities or
obligations of QES attributable to acts or omissions, or the
Business, assets, properties or operations, of any Selling Party
(other than QES), QDS and NBS; and in the case of either clause
(i) or (ii) irrespective of when any claim, suit, action,
proceeding or investigation in respect of such matters is
asserted or made. It is understood and agreed by Selling
Shareholders that since QES will be owned by Purchaser following
the Closing, any recovery by Purchaser hereunder after Closing
will be against Selling Shareholders, jointly and severally, who
will have no right of reimbursement or contribution against QES.
Any examination, inspection or audit of the assets or Business
of QES conducted pursuant to this Agreement shall in no way
limit, affect or impair the ability of Purchaser, its successors
or assigns to rely upon the representations, warranties,
covenants and obligations of Selling Parties set forth herein.
8.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF
---------------------------------------------
PURCHASER.
---------
All representations, warranties, agreements, covenants
and obligations made or undertaken by Purchaser in this
Agreement or in any Related Agreement or document or instrument
executed and delivered pursuant hereto are material, have been
relied upon by Selling Shareholders and shall survive the
Closing hereunder and shall not merge in the performance of any
obligation by any party hereto. Subject to the limitations set
forth in this Article 8, Purchaser agrees from and after Closing
to indemnify and hold each Selling Shareholder harmless from and
against all Damages, suffered or incurred by such Selling
Shareholder, his or her heirs and legal representatives,
successors or assigns (collectively, with Selling Shareholders,
the "Selling Shareholder Indemnitees") arising from, resulting
from or relating to:
8.2.1 any misrepresentation by, or breach of any
covenant or warranty of, Purchaser contained in this Agreement,
the Related Agreements or any certificate, document or
instrument furnished by Purchaser pursuant thereto; or
8.2.2 the Business or operations of QES after the
Closing Date.
8.3 ASSERTION OF INDEMNIFICATION CLAIMS.
-----------------------------------
All claims for indemnification under Section 8.1 or
8.2 shall be asserted and resolved as follows:
8.3.1 DEFENSE OF CLAIMS. (a) If any action or
-----------------
proceeding is commenced by a third party against a party
entitled to indemnification under Sections 8.1 or 8.2 (an
"Indemnitee") in respect of which the Indemnitee proposes to
hold any party or parties obligated to provide such
indemnification with respect thereto (the "Indemnitor(s)")
liable under the provisions of Section 8.1 (a "Covered
Proceeding"), the Indemnitee shall give the Indemnitor(s) prompt
written notice of such Covered Proceeding and copies of all
pleadings filed relating thereto within twenty (20) days after
the Indemnitee's receipt thereof.
8.3.2 If the Indemnitor(s) shall, at its (their)
option, elect by prompt written notice to each Indemnitee to
contest or defend any such Covered Proceeding, the Indemnitor(s)
shall, subject to the provisions of this Section 8.3, be
entitled, at its or their sole cost and expense, to contest or
defend the same with counsel of its or their own choosing, but
reasonably satisfactory to the Indemnitee, and in such event the
Indemnitee shall not settle, compromise, pay or discharge the
same without the prior written consent of the Indemnitor(s)
(which consent shall, however, not be unreasonably withheld or
delayed), so long as the Indemnitor(s) is (are) actively
contesting and defending the same in good faith.
8.3.3 Notwithstanding the foregoing provisions of
this Section 8.3, if the Covered Proceeding does not seek only
monetary damages, but seeks any injunction or other equitable
relief or specific performance against any Indemnitee, then the
Indemnitee shall be entitled to elect not to contest, and shall
be entitled to settle and discharge, any claim to the extent
that such claim seeks such injunctive or other equitable relief
or specific performance.
8.3.4 Notwithstanding anything to the contrary
contained in this Section 8.3:
8.3.4.1 If the Indemnitee fails to give the
Indemnitor(s) timely notice of a Covered Proceeding or otherwise
defaults in its obligations under this Section 8.3, included
among but not in limitation of, the remedies of Indemnitor(s)
for such default shall be the right to set off against the
indemnification liability otherwise payable by the Indemnitor(s)
to the Indemnitee the Damages of the Indemnitor(s) as a result
of such default, or in the event the Subordinated Note has not
been paid in full or the Earnout Payment has not been made, to
recover such Damages by setoff of the Damages against the
payments due under the Subordinated Note or Earnout Payment.
8.3.4.2 In the event the Indemnitor(s) elect(s)
(and is (are) entitled as provided herein) to defend a Covered
Proceeding, the Indemnitee shall be entitled to participate in
the defense thereof with its own separate counsel and receive
copies of all pleadings and other papers in connection
therewith. In such event, the fees and expenses of such
Indemnitee's counsel shall, except as otherwise provided in this
Section 8.3, be borne by the Indemnitee, unless the Indemnitee
on advice of counsel reasonably determines that it may have one
or more defenses available to it which are different from or in
additional to those available to the Indemnitor or the Covered
Proceeding also involves or could reasonably be expected to have
an adverse effect upon material matters beyond the scope of the
indemnification obligations set forth in this Agreement. In
such event, the Indemnitor shall not have the right to direct
the defense thereof, but may still participate in such defense
with its own separate counsel and receive copies of all
pleadings and other papers in connection therewith.
8.3.4.3 If the Indemnitor(s) do(es) not (or is
(are) not entitled to) elect to contest or defend a Covered
Proceeding, or after so electing do(es) not actively contest and
defend the same in good faith, and in conformity with the
requirements of this Section 8.3, the Indemnitee shall be
entitled to contest, defend and/or settle such Covered
Proceeding on such terms and with such counsel as the Indemnitee
reasonably deems appropriate, and at the sole cost and expense
of the Indemnitor(s).
8.3.4.4 If the Indemnitor(s) is (are) otherwise
entitled to control the settlement of a Covered Proceeding
(subject to the requirements and limitations of this Section
8.3), the Indemnitor(s) will be entitled to control such
settlement only if (A) the terms of such settlement require no
more than the payment of money (i.e., such settlement does not
require the Indemnitee to admit any wrongdoing or take or
refrain from taking any action), (B) the full amount of such
monetary settlement is paid by the Indemnitor(s), and (C) the
Indemnitee receives as part of such settlement a legally binding
and enforceable unconditional satisfaction and/or release, in
form and substance reasonably satisfactory to the Indemnitee,
providing that the Covered Proceeding and any claimed liability
or obligation of the Indemnitee with respect thereto is being
fully satisfied by reason of such settlement and that the
Indemnitee is being released from any and all obligations or
liabilities it may have with respect thereto.
8.3.4.5 No Indemnitor shall have any right to
defend any Covered Proceeding (except with respect to any
Covered Proceeding in which such Indemnitor is a named party and
then, only as to such Indemnitor's individual defense) unless
each Indemnitor unconditionally acknowledges in writing, within
a reasonable period of time after any Indemnitee gives notice of
such Covered Proceeding, that each Indemnitor is obligated to
indemnify each Indemnitee in full with respect to such Covered
Proceeding as provided in Section 8.1, Section 8.2 and and this
Section 8.3.
8.4 CERTAIN LIMITATIONS ON OBLIGATION TO INDEMNIFY.
----------------------------------------------
Notwithstanding anything contained in this Article 8
to the contrary, no party shall have any obligation to indemnify
any other party or hold it harmless pursuant to this Article 8:
8.4.1 with regard to any claim for breach or alleged
breach of any representation or warranty of such party, unless
such claim is asserted by notice to Selling Shareholders or
Purchaser, as the case may be, on or prior to December 31, 2007;
provided, however that (i) any claim for violation of the
representations and warranties regarding title to the Shares and
the assets of QES contained in this Agreement or in any Related
Agreements delivered pursuant hereto shall survive indefinitely,
(ii) any claim for violation of the covenants, representations
or warranties set forth in Sections 2.4, 2.9, 2.10, 2.15, 2.16,
3.2, 3.3, 3.6, 3.9, 3.11, 3.14, 3.16, 3.17, 3.18, 3.19 or
3.26.1, shall survive until the expiration of the applicable
statute of limitations applicable to any claim or right of
action related thereto, and (iii) the covenants and agreements
contained in this Agreement to be performed at Closing or during
the period following Closing will survive until fully performed
in accordance with their terms;
8.4.2 until the aggregate amount of such other
party's Damages exceeds One Hundred Thousand Dollars ($100,000)
(the "Threshold Amount"), in which case Selling Shareholders or
Purchaser, as the case may be, shall then be liable for such
Threshold Amount and any amounts in excess of the Threshold
Amount; provided, however, that the limitations on Selling
Shareholders' indemnification obligations set forth in this
Section 8.4.2 (i.e. the Threshold Amount) shall not apply to (i)
any claim under Section 2.4, 2.9, 2.10, 2.15, 2.16, 3.2, 3.3,
3.6, 3.9, 3.11, 3.14, 3.16, 3.17, 3.18, 3.19 or 3.26.1 (the
"Carved Out Covenants and Representations") (ii) any claim for a
violation of the representations and warranties regarding title
to the Shares and the assets of QES contained in this Agreement
or in any Related Agreement; and
8.4.3 The maximum amount of the Selling Shareholders'
indemnification obligations set forth in this Article 8 with
respect to indemnification obligations other than those relating
to the Carved Out Covenants and Representations (for which the
Selling Shareholders' indemnification obligations shall be
unlimited) shall not exceed 25% of the Purchase Price.
8.5 SETOFF.
------
Purchaser shall have the right to set off against any
obligations to any Selling Shareholder, including but not
limited to obligations to make payments under the Subordinated
Note and the Earnout Payment, the amount of any Damages for
which Purchaser is entitled to indemnification by any such
Selling Shareholder under Article 8 hereof, but only after a
final determination of Damages has been made. In the event a
claim for indemnification under Section 8.1 has been made, but
not yet determined as of the date the Earnout Payment or
principal payment under the Subordinated Note is due, Purchaser
shall have the right to place in escrow such Earnout Payment or
principal payment, or portion thereof as reasonably represents
the claim for Damages, until final determination of Damages is
made and the right of setoff shall continue to apply to such
escrowed funds until such determination is made and such amount
of Damages is released from escrow and paid to Purchaser.
9. MISCELLANEOUS.
-------------
9.1 ENTIRE AGREEMENT; AMENDMENT.
---------------------------
This Agreement, and the Schedules, Exhibits and
Related Agreements constitutes the entire agreement among the
parties hereto and, except as specifically set forth in this
Agreement, supersedes and cancels any prior agreements,
representations, warranties or communications, whether oral or
written, among the parties hereto relating to the transactions
contemplated hereby or the subject matter herein. Neither this
Agreement nor any provision hereof may be modified, changed,
waived, discharged or terminated orally, other than by an
agreement in writing signed by the party against whom or which
the enforcement of such modification, change, waiver, discharge
or termination is sought.
9.2 GOVERNING LAW.
-------------
This Agreement shall be governed by and construed in
accordance with the law of the State of New York applicable to
agreements made and to be performed in New York, without giving
effect to any choice or conflict of law provision or rule.
9.3 HEADINGS.
--------
The section headings of this Agreement are for
reference purposes only and are not to be given any effect in
the construction or interpretation of this Agreement.
9.4 NOTICES.
-------
All notices and other communications under this
Agreement shall be in writing and shall be deemed given when
delivered personally, or if mailed by registered mail, return
receipt requested, three (3) business days after such mailing,
to the parties at the following addresses (or to such other
address as a party may have specified by notice given to the
other party pursuant to this provision):
If to QES or Xxxxxxxx Xxxxxxx:
Questar Data System, Inc.
0000 Xxxx Xxxxxxx Xxxx
Xxxxx, XX 00000
Attn: Xxxxxxxx Xxxxxxx
and if to other Selling Shareholders:
Xxxxx X. Xxxx
000 Xxxxxxx Xxx.
Xxxxxx, XX 00000
Xxxx X. Xxxxx
00000 Xxxxxx Xxxx
Xxxxxxxxx, XX 00000
Xxxxx Xxxxxxxx
0000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Xxxx Xxxxx
00000 00xx Xxx X
Xxxxx Xxxxx, XX 00000
XxXxxxx Xxxxxxxxx
0000 000xx Xxxxxx X
Xxxxxx, XX 00000
Xxxxxxx Xxxxxxxxx
0000 Xxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Xxxxx Xxxxx
0000 Xxxxxx Xxx X.
Xxxxxxxxxxx, XX 00000
with a copy to: Robins, Kaplan, Xxxxxx & Xxxxxx L.L.P.
0000 XxXxxxx Xxxxx
000 XxXxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxx, Esq.
If to Purchaser: Touchstone Applied Science Associates, Inc.
X.X. Xxx 000
0 Xxxxxxxxxxxx Xxxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxx, President
with a copy to: Rider, Weiner & Xxxxxxx, P.C.
000 Xxxxxx Xxxxxxx Xxxx
Xxx Xxxxxxx, Xxx Xxxx 00000
Attn: Xxxxxxx Crush, Esq.
9.5 SEPARABILITY.
------------
In the event that any provision of this Agreement or
any word, phrase, clause, sentence or other portion thereof
should be held to be unenforceable or invalid for any reason,
such provision or portion thereof shall be modified or deleted
in such a manner so as to make this Agreement, as modified,
legal and enforceable to the fullest extent permitted under
applicable laws.
9.6 WAIVER.
------
Any party may waive compliance by another with any of
the provisions of this Agreement. No waiver of any provision
shall be construed as a waiver of any other provision. Any
waiver must be in writing.
9.7 PUBLICITY.
---------
Except as required by applicable law, rule or
regulation neither party shall issue any press release or other
public statement regarding the transactions contemplated by this
Agreement without the prior written consent of the other party.
9.8 NO THIRD PARTY BENEFICIARIES.
----------------------------
This Agreement does not create, and shall not be
construed as creating, any rights in favor of any person not a
party to this Agreement.
9.9 JURISDICTION.
------------
The courts of the State of New York in Westchester
County and the United States District Court for the Southern
District of New York shall have jurisdiction over the parties
with respect to any dispute or controversy between them arising
under or in connection with this Agreement and, by execution and
delivery of this Agreement, each of the parties to this
Agreement submits to the jurisdiction of those courts,
including, but not limited to, the in personam and subject
matter jurisdiction of those courts, waives any objection to
such jurisdiction on the grounds of venue or forum non
conveniens, the absence of in personam or subject matter
jurisdiction and any similar grounds, consents to service of
process by mail (in accordance with Section 9.4) or any other
manner permitted by law, and irrevocably agrees to be bound by
any judgment rendered thereby in connection with this Agreement.
These consents to jurisdiction shall not be deemed to confer
rights on any person other than the parties to this Agreement.
9.10 ASSIGNMENT.
----------
Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of
the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other parties, and any
attempt to make any such assignment without such consent shall
be null and void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective permitted
successors and assigns.
9.11 COUNTERPARTS.
------------
This Agreement may be executed in multiple counterpart
copies, each of which will be considered an original and all of
which constitute one and the same instrument, binding on all
parties hereto, even though all the parties are not signatory to
the same counterpart. Any counterpart of this Agreement which
has attached to it separate signature pages, which taken
together contain the signature of all parties hereto, shall for
all purposes be deemed a fully executed original and a facsimile
transmission shall be deemed to be an original signature.
9.12 PRONOUNS AND NUMBER.
-------------------
All pronouns used herein shall be deemed to refer to
the masculine, feminine or neuter gender as the context
requires.
9.13 SCHEDULES AND EXHIBITS INCORPORATED.
-----------------------------------
All Schedules and Exhibits attached hereto are
incorporated herein by reference, and all blanks in such
Schedules and Exhibits, if any, will be filled in as required in
order to consummate the transactions contemplated herein and in
accordance with this Agreement.
9.14 WAIVER OF JURY TRIAL.
--------------------
Each of the parties hereto hereby irrevocably waives
any and all right to trial by jury in any suit, action,
proceeding, counterclaim or crossclaim seeking to enforce any
provision of, or based on any matter arising out of or related
to, this Agreement or the transactions contemplated hereby.
[Balance of Page Intentionally Blank]
IN WITNESS WHEREOF, the undersigned parties by their duly
authorized agents have executed and delivered this Agreement as
of the date first above written.
QUESTAR EDUCATIONAL SYSTEMS, INC.
By: /s/ XXXXXXXX XXXXXXX
------------------------------
Name: Xxxxxxxx Xxxxxxx
Title: Chief Executive Officer
SELLING SHAREHOLDERS:
/s/ XXXXXXXX XXXXXXX
------------------------------
Xxxxxxxx Xxxxxxx
/s/ XXXXX X. XXXX
------------------------------
Xxxxx X. Xxxx
/s/ XXXX X. XXXXX
------------------------------
Xxxx X. Xxxxx, Ph.D.
/s/ XXXXX XXXXXXXX
------------------------------
Xxxxx Xxxxxxxx
/s/ XXXX XXXXX
------------------------------
Xxxx Xxxxx
/s/ XXXXXXX XXXXXXXXX
-----------------------------
XxXxxxx Xxxxxxxxx
/s/ XXXX XXXXXXXXX
------------------------------
Xxxx Xxxxxxxxx
/s/ XXXXX XXXXX
------------------------------
Xxxxx Xxxxx
XXXXXXXXXX APPLIED SCIENCE
ASSOCIATES, INC.
By: /s/ XXXXXX X. XXXXX
------------------------------
Name: Xxxxxx X. Xxxxx
Title: President
SELLING PARTIES' DISCLOSURE SCHEDULE
TO
STOCK PURCHASE AGREEMENT
BY AND AMONG
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.,
AS PURCHASER,
AND
XXXX X. XXXXX
XXXXX X. XXXX
XXXXXXXX XXXXXXX
XXXXX XXXXXXXX
XXXX XXXXX
XXXXXXX XXXXXXXXX
XXXX XXXXXXXXX
AND
XXXXX XXXXX
AS THE SHAREHOLDERS OF
QUESTAR EDUCATIONAL SYSTEMS, INC.
AND
QUESTAR EDUCATIONAL SYSTEMS, INC.
AND
DATED AS OF MAY 31, 2006
Disclosure Schedule
This Disclosure Schedule modifies, supplements and forms a
part of the covenants, representations and warranties of the
Selling Parties contained in Sections 2 and 3 of the Stock
Purchase Agreement (the "Agreement") dated as of June 1, 2006.
All capitalized terms used and not otherwise defined herein
shall have the meanings given them in the Agreement. The
section numbers below correspond to the section numbers in the
Agreement; provided, however, that any information presented
herein under any section number or in any section to the
Agreement shall be deemed disclosed and incorporated into any
other sections of the Agreement where such disclosure would be
appropriate, whether or not repeated in such other section.
Notwithstanding any Materiality qualifications in any of the
Selling Parties' representations or warranties in the Agreement,
for administrative ease, certain items have been included herein
that are not considered by the Selling Parties to be Material.
The inclusion of any item hereunder shall not be deemed to be an
admission by the Selling Parties that such item is Material, or
an admission of any obligation or liability to any third party.
LIST OF SCHEDULES
-----------------
Schedule 2.4.1 Discharge of Debts and Other Obligations
Schedule 2.4.2 Discharge of Debts and Other Obligations
Schedule 2.6 Consents and Approvals
Schedule 2.8 Resignations and Employment
Schedule 3.1 Organization, Standing and Foreign Qualification
Schedule 3.3.1 Capitalization
Schedule 3.6.2 Tax Matters
Schedule 3.7 Encumbrances
Schedule 3.8 Bank Accounts
Schedule 3.11 Legal Proceedings
Schedule 3.12.1 Licenses & Permits; Compliance with Law
Schedule 3.13 Real Property
Schedule 3.15 Transactions with Certain Persons
Schedule 3.16 Intellectual Property
Schedule 3.16.7 Intellectual Property
Schedule 3.16.9 Intellectual Property
Schedule 3.17 Labor Matters and Employee Relations
Schedule 3.18 Benefit Plans
Schedule 3.21 Insurance
Schedule 3.23 Contracts
Schedule 3.23.3 Contracts
SCHEDULE 2.4.1
--------------
DISCHARGE OF DEBT AND OTHER OBLIGATIONS
None.
SCHEDULE 2.4.2
--------------
DISCHARGE OF DEBT AND OTHER OBLIGATIONS
None.
SCHEDULE 2.6
------------
CONSENTS AND APPROVALS
The transactions contemplated by the Agreement require the
following consents, approvals or waivers:
Consents of "Shareholders" pursuant to that certain Stock
Purchase and Redemption Agreement made effective January 2,
2003 by and between QES and Xxxxx Xxxx, Xxxxxxxx Xxxxxxx,
Xxxx Xxxxx, XxXxxxx Xxxxxxxxx, Xxxxx Xxxxx, Xxxxxxx
Xxxxxxxxx, and Xxxxx Xxxxxxxx, and Xxxx Xxxxx.
SCHEDULE 2.8
------------
RESIGNATIONS AND EMPLOYMENT
Directors:
---------
Xxxxx X. Xxxx
Xxxxxxxx Xxxxxxx
Xxxx Xxxxx
Officers:
--------
Xxxxxxxx Xxxxxxx Chief Executive Officer
Xxxx Xxxxx President
XxXxxxx Xxxxxxxxx Executive Vice President
Xxxxx Xxxxx Vice President
Xxx Xxxx Secretary
Xxx Small Chief Financial Officer
SCHEDULE 3.1
------------
ORGANIZATION, STANDING AND FOREIGN QUALIFICATION
QES is qualified to do business in each of the following
jurisdictions:
a. Minnesota (state of incorporation)
b. Arkansas
c. California
d. Connecticut
e. Xxxxxxx
x. Illinois
g. Louisiana
h. Ohio
i. Virginia
SCHEDULE 3.3.1
--------------
CAPITALIZATION
QES is authorized to issue 100,000 shares of common stock, par
value $0.01 per share. At the date of the Agreement, 50,000
shares of common stock are issued and outstanding, and no shares
are held in the treasury of QES.
The following entities are Affiliates of QES, Xxx Xxxxxxx and/or
Xxxx Xxxx:
Beaver Dam Property, LLC
Countryside Ford Mercury, Inc.
Countryside Pontiac GMC Olds, Inc.
El Monte Development Company
Columbus Holdings, LLC
NBS Limited Partnership I
National Business Systems, Inc.
Questar Data Systems, Inc.
Apple Valley Development, LLC
Midwest Farm Supply, Inc.
Dock Cafe, Inc.
Stillwater Project LLC
Midwest Rental, LLC
Milaca Data Services, Inc.
SCHEDULE 3.6.2
--------------
TAX MATTERS
Tax Returns are required to be filed in the following
jurisdictions with respect to QES:
a. Minnesota
b. Louisiana
c. Florida
d. Wisconsin
SCHEDULE 3.7
------------
None.
SCHEDULE 3.8
------------
BANK ACCOUNTS
Bank Account Number Signers
---- -------------- -------
Associated Bank - xxxxxxxxxx Xxxxx Xxxx, Xxxxxxxx Xxxxxxx
Operating Account
Associated Bank - xxxxxxxxxx Xxxxx Xxxx, Xxxxxxxx
Committee Account Xxxxxxx, Xxx Small,
Xxxxx Xxxxx, Xxxxx
Xxxxxxxx
SCHEDULE 3.11
-------------
LEGAL PROCEEDINGS
QES has filed a letter protesting the award of the Arkansas
Augmented NRT to Harcourt; reference is made to Schedule 3.10(e).
SCHEDULE 3.12.1
---------------
LICENSES AND PERMITS; COMPLIANCE WITH LAW
a. Illinois Department of Human Rights Public Contracts #
123008-00 (expires 9/9/2010)
b. Sales tax permit in Minnesota
SCHEDULE 3.13
-------------
REAL PROPERTY
a. QES does not own any real property.
b. QES leases the real property located at :
0000 Xxxxx 000xx Xxxxxx Xxxx
Xxxxx Xxxxxx, XX 00000
c. QES leases the real property located at:
00000 Xxxxxx Xxx
Xxxxx Xxxxxx, XX 00000
d. Mortgage on 0000 Xxxxx 000xx Xxxxxx Xxxx in Apple Valley in
favor of Associated Bank; will not be removed prior to Closing.
e. Mortgage to be placed on 00000 Xxxxxx Xxx, Xxxxx Xxxxxx, XX 00000.
f. See attached surveys, indicating easements, rights-of-way,
and restrictions of record, for the properties at 0000
Xxxxx 000xx Xxxxxx Xxxx, Xxxxx Xxxxxx, XX 00000 and 00000
Xxxxxx Xxx, Xxxxx Xxxxxx, XX 00000.
g. Agreement between Apple Valley Development, LLC and X.X.
Xxxx Construction, Inc. for the construction of a building
at 00000 Xxxxxx Xxx, Xxxxx Xxxxxx, XX 00000.
SCHEDULE 3.15
-------------
TRANSACTIONS WITH CERTAIN PERSONS
Transactions pursuant to agreements with QDS, NBS, and Apple
Valley Development LLC identified and described in Schedules
3.23.
Additional reference is made to Schedules 3.18 and 3.21.
SCHEDULE 3.16
-------------
INTELLECTUAL PROPERTY
a. Registered copyrights:
Title: "QUESTAR'S COMMITMENT TO QUALITY"
Copyright No.: Txu1-268-420
b. Computer software:
Test Path
Score Point
Service Point
c. Customers / suppliers:
CUSTOMERS
---------
Arkansas
Georgia
Illinois
Louisiana
Measurement Inc.
Pacific Metrics
Riverside Publishing
Virginia
SUPPLIERS
---------
Measurement Inc.
UPS
Pro Staff
Xxx Xxxxxxxx Graphics, Inc.
Paragon Forms, Inc.
Insight
Apple Valley Development Co.
Infinity Direct
NCS Pearson
Scenario LLC
National Business Systems, Inc.
Questar Data Systems, Inc.
d. Trademark (assigned to QES by QDS):
"QUESTAR EDUCATIONAL SYSTEMS"
U.S. Trademark Reg. No. 2,908,243.
Registration Date: December 7, 2004.
e. Common law trademarks in "Questar," "Test Path," "Score
Point," and "Service Point"
f. Patent License Agreement with NCS Pearson
SCHEDULE 3.16.7
---------------
INTELLECTUAL PROPERTY
Identification of the following software does not represent an
admission that any such software is not "commonly used and
available third-party software which is subject to commercially
standard 'shrink-wrap' licenses and which can be readily
obtained by Purchaser without significant cost or expense," as
referenced in Section 3.16.7 of the Agreement:
Acrobat (Full Product)
Adobe Illustrator
Adobe InDesign CS
Adobe PageMaker
Adobe PageMaker Plug In Pack
Adobe Photoshop
Adobe Photoshop
Altris
ArcServe Backup
ArcServe Backup Agent for Open Files
ArcServe Client Agent
ArcServe InoculateIT Virus Software
ArcServe SAN Agent
ArcServe Tape Libraray
AuditWizad
AuthorIT
Cisco VPN Client
Crystal Reports
Data Dynamics Active Reports
EditPad Pro
Embarcadero ER Studio
EnFocus PitStop Pro
GoToMyPC
HP SecurePath
HP Virtual Replicator
IPSwitch What's Up Gold
IPSwitch WS_FTP Pro
ITC Avant Garde Font
LeadTools Raster Imaging Pro
Log Explorer
MathType Font
Microsoft FrontPage
Microsoft SQL Server Standard (2000, 2005)
MileStone
MSDN
Norton Ghost
Office 2000
Office Pro 2003
Office XP Pro
OmniPage Pro
PaintShop Pro
Parscale
PReS
Project 2002
Project 2003
Rational
RequisitePro
Rational RUP
Rational TestManager (TUP)
RedGate Compare
RoboHelp Office Pro
Roxio Toast
SAS
ScanTools
Scitor
Shavlik
SPSS
SQL 2000 Developers Edition
SurfControl
TestTrack
UltraEdit32
UPS Online WorldShip
Visio
VSS
Xxxxx Font
Windows 2000
Windows 2003 Enterprise (Server OS)
Windows XP Pro
WinSteps and Facets
WinZip
SCHEDULE 3.16.9
---------------
INTELLECTUAL PROPERTY
Reference is made to Schedule 3.16.
SCHEDULE 3.17
-------------
LABOR MATTERS AND EMPLOYEE RELATIONS
Xxxxxxx, Xxxx X. Project Lead IT
Xxxxx, Xxxx X. President
Xxxxxx, Xxxxxxxx X. Proofreader/Editor
Xxxxxxxx, Xxxxx X. Director Performance Assessment
Asp, Xxxxxx X. Project Lead IT
Xxxxx, Xxxx X Publications Assistant
Xxxxxxx, Xxxxx X Business Analyst
Xxxxxxxxxx, Xxxxx L General Production
Xxxxxxxxx, Xxxxxx X. Xx. Project Manager
Xxxxx, Xxxx X. Director Operations
Xxxxxxx, Xxxxxx X Xx. Project Manager
Xxxxx, Xxxxxx X. Xx. SQA Analyst
Xxxxxxxx, Xxxxxxx A Associate Program Manager
Xxxxxxxx, Xxxxx X SQA Analyst
Xxxxxxx, Xxxxx X. Xx. SQA Analyst
Xxxxxxxxxxx, Xxxxxx X. Event/Meeting Planner
Xxxxxx, Xxxxx X. General Production
Xxxxxxxx, Xxxxxx X. Administrative Assistant
Deutsch, Adria Project Assistant
Xxxxxx, Xxxxx X Xx. Database Analyst
Xxxxx, Xxxxxxx O Facility Coordinator
Xxxxx, Xxxxxx K General Production
Xxxxxxxx, Xxxx B Project Director
Xxxx, Xxxxxx M Project Coordinator
Xxxxxxxxxx, Xxxxxx J SQA Manager
Xxxxxxx, Xxxxxxx X Programmer Analyst
Xxxx, Xxxxxxxxxxx X. Senior Program Analyst
Xxxxxxxxxxx, Xxxxxxxxxx R SQA Analyst
Xxxxxxxxx, Xxxxxxx L Executive Vice President
Harris Jr., Xxxxxx X. Production Supervisor
Xxxxxxxxx, Xxxxxx X. Administrative Assistant
Xxxxxx, Xxxxxxx J SQA Analyst
Xxxxxx, Xxxxx R Senior Program Analyst
Xxxxxxx, Xxxxxxxx X General Production
Xxxxxxx, Xxxxx R Network Administrator
Xxxxxxxxx, Xxxxxxx A Project Manager
Xxxxx, Xxxxxx X. Project Director
Xxxxxxxxxxx, Xxxxxxx Database Analyst
Xxxxxx, Xxxxxx E Administrative Assistant
Xxxxx, Xxxx X Xx. Systems Analyst
Xxxxxxxxx, Xxxxxxx X. Director Information Systems
Link, Xxxxxxx B Director Research & Development
Xxxxxx, Xxxxx X Clerk
Xxxx, Xxxx M PC Support
Xxxxxxxxx, Xxxx M Clerk
Xxxxxxx, Xxxxx K Clerk
XxXxxx, Xxxxx Business Analyst
XxXxxx, Xxxxx L Project Assistant
XxXxxx, Xxxxx N Project Manager
Xxxxx, Xxxxxxx L SQA Analyst
Xxxxxx, Xxxxx A Publications Assistant
Xxxxxxx, Xxxx B Project Manager
Xxxxxx, Xxxxxxx L Research Analyst
Xxxxx, Xxxxxx G Project Lead
Xxxxx, Xxxx X. Quality Assurance
Xxxxxxxx, Xxxxxx Programmer Analyst
Xxxxxxxxxx, Xxxxx J Manager, IS Applications
Xxxxxxxxx, Xxxxxxx X. General Production
Xxxxx, Xxxxx X. Senior SQA Analyst
Xxxxxxxxx, Xxxxx R Project Assistant
Xxxxxxx, Xxxxxxx M Clerk
Xxxxxxxxx, Xxxxxx L General Production
Xxxxxx, Xxxxxx M Project Coordinator
Xxxxx, Xxxxxxx X. Associate Program Manager
Xxxxx, Xxxxxx X Xx. Systems Analyst
Xxxxx, Xxxxxxxx X. Associate Program Manager
Xxxxxx, Xxxxxxxxx X. Clerk
Xxxxxxxx, Xxxxxxx X. General Production
Xxxxxxx, Xxxxx X. Programmer Analyst
Xxxxxxx, Xxxxx X Associate Program Manager
Xxxxxx, Xxxxxxx General Production
Xxxxx, Xxxxx D VP Performance Assessment
Xxxxxx, Xxxxx X. Xx. Database Architect
Xxxxxxx, Xxxxx X SQA Analyst
Employment Agreements with the following employees:
Xxxxxx Asp
Xxxxxx Xxxxx
Xxxxx Xxxxxxxx
Xxxxx Xxxxxx
Xxxxxx Xxxxxxxxxx
Xxxxxxx Xxxxxxx
Xxxxx Xxxx
Xxxx Xxxxx
Xxxxxx Xxxxx
Xxxxx (Xxxx) Xxxxxxxxxx
Xxxx Xxxxx
Employment Agreement with Xxxxxxx Xxxxxxxxxxx.
SCHEDULE 3.18
-------------
BENEFIT PLANS
3.18.1
Medical Plan*
Dental Plan*
Flex Plan*
Group Term Life and AD&D Insurance**
Long Term Disability**
Short Term Disability**
Voluntary Supplemental Life**
401(k)*
Personal Time Off (PTO)
Funeral Leave
Leaves of Absence
Jury Duty
Volunteer Day
Holidays (in general - 9 holidays and 1 floating holiday;
in 2006, 8 holidays and 2 floating)
Educational Reimbursement
Direct Deposit
* Offered by QES through QDS' plan. New plan, as
discussed between Purchaser and QES, will be in place
effective June 1, 2006.
** Offered by QES through NBS' plan. New plan, as
discussed between Purchaser and QES, will be in place
effective June 1, 2006.
Copies of the materials identified in Section 3.18.1 of the
Agreement with respect to "prior" Employee Plans or
Compensation Agreements have not been furnished to
Purchaser, other than with respect to the 401(k) plan
identified above.
Seasonal readers receive an attendance bonus, paid through
their weekly paycheck, as part of their regular
compensation package (rather than being accrued and paid at
year- end); they do not participate in any of the above
plans.
3.18.2
Selling Shareholders have not caused QES to furnish to
Purchaser the forms identified in Section 3.18.2 of the
Agreement. Selling Shareholders will cause such forms to
be provided within a reasonable time following a request
for such forms by Purchaser.
3.18.5
Reference is made to certain liabilities related to the
tax-qualification of QES's 401(k) plan (previously offered
through QDS); see also Schedule 3.10(g).
3.18.7
Xxxxx Xxxxxx, a former Company employee, is currently
offered health coverage by QDS through COBRA.
3.18.9
Xxxxx Xxxxxx, a former Company employee, and Xx. Xxxxxx'x
husband Xxxxx are currently offered health coverage by QDS
through COBRA as a result of the termination of Xx.
Xxxxxx'x employment with QES on February 7, 2005.
3.18.11
During the time in which QES's medical plan was offered
through QDS, such plan was self-insured rather than fully
insured.
SCHEDULE 3.21
-------------
INSURANCE
QES, together with NBS and QDS holds, the following business
insurance policies through The St. Xxxx Companies:
Property
Crime
General Liability
Automobile
Workers Compensation
Umbrella
Errors and Omissions Liability
QES employees may receive the benefit of business travel
accident insurance offered by QDS through Cigna; any such
insurance coverage will cease as of the Closing.
Reference is made to Schedule 3.18.
SCHEDULE 3.23
CONTRACTS
a. Agreement with Vericenter (originally Agiliti) for internet
services
b. Agreement with Xxxx XxXxxxx for governmental relations
services
c. Unwritten agreement with QDS for HR/accounting services
d. Unwritten agreement with QDS for management services
e. Unwritten agreement with NBS for printing services
f. Unwritten agreement with NBS for management services
g. Agreements with Apple Valley Development LLC for the lease
of 0000 Xxxxx 000xx Xxxxxx Xxxx xx Xxxxx Xxxxxx, XX and
00000 Xxxxxx Xxx xx Xxxxx Xxxxxx, XX.
h. Product Acquisition, Maintenance and Support Services
Agreement with Pearson NCS (Company has been unable to
locate a copy of this agreement in its files; invoices
provided to Purchaser represent the current course of
dealing under this agreement; Selling Parties acknowledge
that Purchaser is relying on its review of such invoices
for its understanding of this agreement.)
i. Services Agreement with Frontier
j. Company purchases shipping services from United Parcel
Service
k. Company purchases temporary services from ProStaff
l. Confidentiality Agreements with all employees
m. Agreements with states:
* Arkansas Benchmark
* Arkansas End of Course
* Georgia Alternate Assessment
* Illinois IMAGE
* Louisiana TAAP
* Virginia Alternate Assessment
Agreements with Measurement, Inc. as prime contractor:
* Connecticut CAPT
* Ohio OGT/NGT
Agreement with Riverside Publishing as prime contractor:
* Arkansas NRT
Agreement with Pacific Metrics, Inc. as prime contractor:
* Louisiana PASS
n. Contracts contemplated pursuant to the Agreement.
o. Reference is made to Schedules 3.16, 3.17, 3.18 and 3.21.
SCHEDULE 3.23.3
---------------
XXXXXXXXX
(xx xxxxxxxx)
Xxxxxxxx 0000-0000 2006-2007 2007-2008 2008-2009 2009-2010
-------------------------------------------------------------
Arkansas Benchmark (bid) 11.43 11.40
Arkansas End of Course (bid) 5.14 5.10 5.10 5.10 5.10
Arkansas NRT (bid) 0.53 0.53
Georgia 0.64 1.10 1.20 1.24
Illinois 0.80 1.20 1.90
Connecticut 0.64 2.00 2.00 2.00 0.20
LA
PASS 0.28 0.30 0.30
LA
TAAP 0.06 0.06
VAAP 2.00
Ohio 7.96 8.50
-------------------------------------------------------------
Estimated billing booked 29.48 30.19 10.50 8.34 5.30
=============================================================
Exhibit A
---------
SHAREHOLDERS OF QES
Name of Shareholder No. of Shares Percent
------------------- ------------- -------
Xxxxx X. Xxxx 24,465 48.93%
Xxxxxxxx Xxxxxxx 9,785 19.57%
Xxxx X. Xxxxx 5,000 10.00%
XxXxxxx Xxxxxxxxx 4,000 8.00%
Xxxxx Xxxxxxxx 2,000 4.00%
Xxxx Xxxxxxxxx 2,000 4.00%
Xxxxx Xxxxx 2,000 4.00%
Xxxx Xxxxx 750 1.50%
--------- -------
TOTAL 50,000 100.00%
========= =======
Exhibit B
---------
DEFINITIONS
DEFINITIONS. As used in this Agreement, capitalized terms are
-----------
defined as follows:
"Accounting Arbitrator" shall have the meaning set forth in
Section 2.3.3.
"Action" means any legal, administrative, arbitration or other
similar proceeding, claim, action or governmental or regulatory
investigation of any nature.
"Affiliate" shall mean, with respect to any Person, any other
person that directly or indirectly controls, is controlled by,
or is under common control with such Person. A Person shall be
deemed to control another Person if the controlling Person owns,
directly or indirectly, more than fifty percent (50%) of the
voting power of the controlled Person or possesses, directly or
indirectly the power to direct or cause the direction of the
management and policies of the controlled Person, whether
through ownership of stock, by contract or otherwise.
"Aggregate Deemed Sales Price" shall have the meaning set forth
in Section 2.9.5.2.
"Agreement" shall mean this Stock Purchase Agreement as set
forth in the recitals.
"Agreement Period" shall have the meaning set forth in Section
2.9.5.2.
"Applicable Law" means any federal, state, local or foreign law
(including common law), statute, ordinance, rule, regulation,
permit, regulatory agreement with a Governmental Authority,
order, writ, injunction, judgment or decree applicable to a
Person or any such Person's subsidiaries, properties, assets,
officers, directors, employees or agents.
"Approved Intercompany Obligations" shall have the meaning set
forth in Section 2.4.2.
"Base Cash Balance" shall have the meaning set forth in Section
2.3.1.
"Base Working Capital" shall have the meaning set forth in
Section 2.3.1.
"Business" shall mean the operation of a scanning and scoring
business and assessment company and any related businesses,
including, without limitation, internet, software and other
technology efforts conducted by QES or otherwise conducted
ancillary to the Business, as such operations are currently
conducted by QES.
"Capitalized Lease Obligations" means (without duplication) that
portion of any obligation of QES as lessee under a lease which
at the time would be required to be capitalized on the balance
sheet of such lessee in accordance with GAAP.
"Carved Out Covenants and Representations" shall have the
meaning set forth in Section 8.4.2.
"Cash Portion" shall have the meaning set forth in Section
2.2.1.1.
"Closing" shall mean the purchase of the Shares in connection
with this Agreement.
"Closing Date" shall mean the date of the execution and delivery
of this Agreement by all of the parties hereto.
"Closing Date Balance Sheet" shall have the meaning set forth in
Section 2.3.2.
"Closing Date Working Capital" shall mean the Working Capital of
QES as of the Closing Date.
"Closing Escrow Agreement" shall have the meaning set forth in
the definition of Compliance Certificate.
"COBRA" shall have the meaning set forth in Section 2.10.1.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
and the regulations thereunder, or any subsequent legislative
enactment thereof, as in effect from time to time.
"Commingled Records" shall have the meaning set forth in Section
2.14.2.
"Compensation Arrangement" shall have the meaning set forth in
Section 3.18.15.
"Competitive Business" means a business that provides any of the
following services, for any of school grades K through 12 or in
the post-secondary educational market: (i) research,
psychometric and test development services; (ii) development and
publication of assessment materials; (iii) assembling, packaging
and distributing assessment materials; (iv) assessment scanning
and data processing; (v) developing, producing and utilizing
databases for analysis and reporting of assessments; (vi)
scoring services for standard and alternative assessments; (vii)
performance assessment services; or (viii) consultation services
for clients on providing project management and professional
development services related to the delivery, scanning or
scoring of assessments. Competitive Business shall also be
deemed to include the licensing, marketing, or distribution of
any Competitive Business. The assessments, referred to herein
and any documents or materials to be provided through the
services performed by any Competitive Business may be in print,
film, tape, electronic, internet or other media or forms,
anywhere in the world, in any language, whether now known or
hereafter developed.
"Competitor" means any person or entity that owns, manages,
controls or engages in any Competitive Business; provided,
however, that, any person or entity which owns, manages,
controls or engages in multiple lines of business shall be
deemed a "Competitor" only with respect to any such line of
business which is a Competitive Business and not with respect to
any such line of business which is not a Competitive Business.
"Compliance Certificate" means that certain written compliance
certificate executed and delivered at Closing by Questar and
certified by an officer of Questar, representing and warranting
that except as set forth in such certificate, the
representations and warranties to which it refers are true and
correct in all material respects as of the Closing Date. The
certificate shall be subject to the prior review by Purchaser
and to the extent that Purchaser and Questar mutually agree,
Questar may pay to Escrow Agent, to be held in trust pursuant to
the terms of a Closing Escrow Agreement in a form mutually
agreed by Purchaser and Questar (the "Closing Escrow
Agreement"), such agreed obligations listed in connection with
such Compliance Certificate which are earned, but not yet due
and payable by Questar through the Closing Date.
"Contracts" means all contracts, agreements, options, leases,
commitments, undertakings, written and oral, and other similar
rights and interests of QES relating to the conduct of the
business and operations of QES, plus such contracts entered into
between the date hereof and the Closing Date (including
amendments or other modifications of existing contracts).
"Covered Proceeding" shall have the meaning set forth in Section
8.3.1.
"Cumulative Earnout Revenue" shall mean QES' fiscal year end
October 31, 2007, 2008 and 2009 GAAP Based Revenue, as
calculated by McGladrey which shall be engaged by Purchaser to
calculate Cumulative Earnout Revenue. The calculation performed
by McGladrey shall include the allocable incremental revenue of
QES earned in connection with its services provided on projects
of TASA and TASA Affiliates. On or before December 31, 2007,
2008 and 2009, McGladrey shall provide to Selling Shareholders
such portions of its annual workpapers relating to and
evidencing its calculation of earn-out revenue for the
immediately preceding QES fiscal year.
"Damages" shall have the meaning set forth in Section 8.1.
"Determination Date" shall have the meaning set forth in Section
2.3.3.
"Earnout Payment" shall have the meaning set forth in Section
2.2.1.
"Employee Plan" shall have the meaning set forth in Section
3.18.15.
"Employee Plan Returns" shall have the meaning set forth in
Section 2.10.3.
"Employee Proprietary Rights Agreement" shall have the meaning
set forth in Section 2.7.
"Employment Agreements" shall have the meaning set forth in
Section 2.8.
"Encumbrance" means any lien, pledge, security interest, claim,
easement, limitation, restriction or encumbrance of any kind or
nature whatsoever, or any agreement to give any of the
foregoing; provided, however, that this definition of
"Encumbrance" shall not include: (a) with respect to all
property other than the Shares liens for current Taxes and
assessments not yet due and payable, including, without
limitation, liens for nondelinquent ad valorem Taxes; (b) with
respect to the Shares only, (i) any such lien, pledge, security
interest, claim, easement, limitation, restriction or
encumbrance arising solely as a result of any action taken by
Purchaser or any of its Affiliates, and (ii) any limitation or
restriction imposed upon the transfer of the Shares by any
registration provision of the Securities Act of 1933, as
amended, or any applicable state securities law regulating the
disposition of the Shares.
"Environmental Law" means any Applicable Law pertaining to land
use, air, soil, surface water, groundwater (including
protection, cleanup, removal, remediation or damage thereof),
public or employee health or safety or any other environmental
matter, including, without limitation, the following laws as the
same may be amended from time to time: (i) Clean Air Act (42
U.S.C. ss. 7401, ET SEQ.), (ii) Clean Water Act (33 U.S.C. ss.
1251 et SEQ.), (iii) Resource Conservation and Recovery Act (42
U.S.C. ss. 6901, ET SEQ.) ("RCRA"), (iv) Comprehensive
Environmental Response Compensation Liability Act, as amended
(42 U.S.C. ss. 9601, ET SEQ.) ("CERCLA"), (v) Safe Drinking
Water Act (42 U.S.C. ss. 300f ET SEQ.), (vi) Toxic Substance
Control Act (15 U.S.C. ss. 2601, ET SEQ.), (vii) Rivers and
Harbors Act (33 U.S.C. ss. 401, ET SEQ.), (viii) Endangered
Species Act (16 U.S.C. ss. 1531, ET SEQ.), and (ix) Occupational
Safety and Health Act (29 U.S.C. ss. 651, ET seq.), together
with any other applicable federal, state or local laws relating
to emissions, discharges, releases or threatened releases of any
Hazardous Substance into ambient air, land, surface water,
ground water, personal property or structures, or otherwise.
"Environmental Permits" means all permits, approvals,
identification numbers, licenses and other authorizations
required under any Environmental Law.
"ERISA" shall have the meaning set forth in Section 3.18.15.
"ERISA Affiliate" shall have the meaning set forth in Section
3.18.15.
"Escrow Agent" means Rider, Weiner & Xxxxxxx, P.C., a
professional corporation existing under the laws of the State of
New York, having its principal place of business at 000 Xxxxxx
Xxxxxxx Xxxx, Xxx Xxxxxxx, Xxx Xxxx 00000.
"Escrow Agreement" shall have the meaning set forth in Section
2.2.3.5.
"Fair Market Value Per Share" shall mean the average of the
closing prices of TASA Common Stock in the over-the-counter
market, as reported by the National Association of Securities
Dealers Electronic Bulletin Board or otherwise, in either case
for the ten trading days immediately preceding the date of
calculation of the Fair Market Value Per Share; provided that if
no transactions in the TASA Common Stock are reported for a day
during that period, the average of the high and low sale prices
or the closing prices, as appropriate, as so reported for the
remaining days during such period on which transactions in the
TASA Common Stock were effected.
"Final Financial Statements" shall have the meaning set forth in
Section 5.5.
"GAAP" means generally accepted accounting principles as used in
the United States of America as in effect at the time any
applicable financial statements were prepared or any act
requiring the application of GAAP was performed.
"Governmental Authority" means (i) the United States of America,
(ii) any state, commonwealth, territory or possession of the
United States of America and any political subdivision thereof
(including counties, municipalities and the like) or (iii) any
agency, authority or instrumentality of any of the foregoing,
including any court, tribunal, department, bureau, commission or
board.
"Hazardous Materials" shall mean (i) hazardous materials,
contaminants, constituents, hazardous wastes and hazardous
substances as those terms are defined in the following statutes
and their implementing regulations, as amended: the Hazardous
Materials Transportation Act, 49 U.S.C. ss. 0000 XX XXX., XXXX,
00 X.X.X. ss. 6901 ET SEQ., CERCLA, as amended by the Superfund
Amendments and Reauthorization Act, 42 U.S.C. ss. 9601 ET SEQ.,
the Clean Water Act, 33 U.S.C. ss. 1251 ET SEQ., and the Toxic
Substance Control Act, 15 U.S.C. ss. 2601 ET SEQ., (ii)
petroleum, including crude oil and any fractions thereof, (iii)
natural gas, synthetic gas and any mixtures thereof, (iv)
asbestos and/or asbestos-containing materials, (v)
polychlorinated biphenyls (PCBs), or PCB-containing materials or
fluids, (vi) any other substances with respect to which any
federal, state or local agency or other Governmental Authority
may require either an environmental investigation or
environmental remediation, and (vii) any other hazardous or
noxious substance, material, pollutant or solid or liquid waste
that is regulated by any Environmental Laws.
"Indebtedness" means, at any particular time, with respect to
QES, (i) all indebtedness of QES for borrowed money or on
account of advances to QES or obligations under acquisition
agreements, in respect of which QES is liable or evidenced by
any bond, debenture, note or similar instrument issued by QES,
including all principal, accrued and unpaid interest, prepayment
premiums, penalties and other fees or charges related thereto;
(ii) any Capitalized Lease Obligations, swaps, collars, caps,
xxxxxx or other agreements relating to the fixing of interest
rates of indebtedness; (iii) all trade accounts payable, except
to the extent incurred in the ordinary course of business and
not accrued for more than forty-five (45) days; (iv) all
obligations under agreements, personal property leases,
commitments and orders that are in effect as of the Closing,
except as they accrue after the Closing Date; (v) unpaid
consulting, management or non-competition fees or additional
payments due in connection with any acquisitions or other
similar obligations of QES, if any; (vi) any long-term
obligations (including any guaranties or similar obligations) of
QES whether or not directly related to the operations of QES
other than obligations under the Contracts or agreements,
leases, contracts or other instruments which have been disclosed
under this Agreement or which otherwise are not required to be
disclosed hereunder; and (vii) all expenses of Closing
(including, but not limited to costs of legal representation,
accounting and finders fees, if any).
"Indemnifiable Plan Damages" shall have the meaning set forth in
Section 2.10.3.
"Indemnifiable Tax Damages" shall have the meaning set forth in
Section 2.9.1.1.
"Indemnitee" shall have the meaning set forth in Section 8.3.1.
"Indemnitor(s)" shall have the meaning set forth in Section
8.3.1.
"Initial Purchase Price" shall have the meaning set forth in
Section 2.2.1.
"Intellectual Property" shall have the meaning set forth in
Section 3.16.1.
"Intellectual Property Assignment and Usage Agreement" shall
have the meaning set forth in Section 5.6 hereof and as
presented in the form of Exhibit P hereto.
"Interim Financial Statements" has the meaning set forth in
Section 3.5.1.
"Inventory" shall mean all inventories, including but not
limited to work-in-process, including those on consignment, in
transit or in warehouses, which are used of held for use in
connection with, or which are intended for sale in, the
Business.
"Knowledge" shall mean actual knowledge, after diligent inquiry
and reasonable investigation and when used in connection with a
representation and warranty shall be deemed to include a
representation and warranty that such diligent inquiry and
reasonable investigation has been made.
"Knowledge of QES" shall mean Knowledge of any Selling
Shareholder.
"Knowledge of Selling Shareholders" shall mean Knowledge of any
Selling Shareholder.
"Knowledge of Selling Parties" shall mean Knowledge of each
Selling Shareholder and QES.
"Leased Real Property" means the real property leased by QES, as
tenant, together with, to the extent leased by QES, all
buildings and other structures, facilities or improvements
currently located thereon under and pursuant to the leases
attached hereto as Exhibit M and Exhibit N.
"MAE Clause" shall have the meaning set forth in Material
Adverse Effect.
"Material Adverse Effect" shall mean a material adverse effect
on the financial condition, business, assets, liabilities or
results of operations of QES or the Business. Where any
representation, warranty, covenant or condition contained in or
pursuant to the Agreement refers to one or more events,
circumstances, transactions or occurrences involving a Material
Adverse Effect (each an "MAE Clause"), the determination of what
constitutes a Material Adverse Effect shall be determined by
considering together the effect of all events, circumstances,
transactions and occurrences with respect to such
representation, warranty, covenant or condition, whether or not
of a like or related nature or covered by different MAE Clauses.
"McGladrey" shall mean McGladrey & Xxxxxx, LLP, certified public
accountants or in the event they are no longer able to be
engaged by Purchaser to complete such computation, such
successor certified public accountants with similar national
standing not to the exclusion of the certified public
accountants then engaged to audit TASA financial statements.
"Multiemployer Plan" shall have the meaning set forth in Section
3.18.15.
"NBS" shall mean National Business Systems, which is an
Affiliate of QES, QDS, Xxxxx X. Xxxx and Xxxxxxxx Xxxxxxx
providing printing services to QES.
"NBS Services Agreement" shall mean that agreement executed and
delivered on or before the Closing substantially in the form of
Exhibit J to this Agreement.
"Non-Competition Agreement" shall have the meaning set forth in
Section 2.7.
"Permits" shall have the meaning set forth in Section 3.12.1.
"Person" means an individual, corporation, partnership, limited
liability company, trust or unincorporated organization, or a
government or any agency or political subdivision thereof.
"Plan Liabilities" shall have the meaning set forth in Section
2.10.3.
"Plan Reporting Period" shall have the meaning set forth in
Section 2.10.3.
"Plan Straddle Period" shall have the meaning set forth in
Section 2.10.3.
"Plan Year" shall mean a fiscal year for which QES is required
to file Form 5500, 5329, 5330, 945, 1096, 1099-R, 990-T or PBGC-
1 with respect to any Employee Plan.
"Prior Employee Plans" shall have the meaning set forth in
Section 3.18.1.
"Purchase Price" shall have the meaning set forth in Section
2.2.1.
"Purchaser" shall have the meaning set forth in the recitals.
"Purchaser Related Agreements" shall have the meaning set forth
in Section 4.2.
"Purchaser Indemnitee" or "Purchaser Indemnitees" shall have the
meaning set forth in Section 8.1.
"Purchaser's Quarterly Report" shall mean the quarterly report
filed from time to time with the Securities Exchange Commission.
"Purchaser's SEC Filings" shall have the meaning set forth in
Section 4.6.1.
"QDS" shall mean Questar Data Systems, Inc., a Minnesota
corporation, which is an Affiliate of QES, Xxxxx X. Xxxx and
Xxxxxxxx Xxxxxxx.
"QES" shall have the meaning set forth in the recitals.
"QES 125 Plan" shall have the meaning set forth in Section
2.10.6.
"QES Calendar Year Financial Statements" shall have the meaning
set forth in Section 3.5.1.
"QES Fiscal Year Financial Statements" shall have the meaning
set forth in Section 3.5.1.
"QES Related Agreements" shall have the meaning set forth in
Section 3.2.2.
"QES Spin-Off Plan" shall have the meaning set forth in Section
2.10.5.
"Quarterly Interim Financial Statements" shall have the meaning
set forth in Section 5.5.
"Questar Letter Agreement" shall have the meaning set forth in
Section 5.1.
"Real Property" means all of the fee estates and buildings and
other improvements thereon, leasehold interests, easements,
licenses, rights to access, rights-of-way, and other real
property interest which are used by QES, or owned by QES, as of
the date hereof, in the business or operations of QES, plus such
additions thereto and deletions therefrom arising in the
ordinary course of business and permitted by this Agreement
between the date hereof and the Closing Date.
"Related Agreements" shall have the meaning set forth in Section
3.2.1.
"Related Party" shall mean each current or former shareholder,
director and officer of QES or of any Affiliate of QES and each
of NBS, Apple Valley and QDS to the extent they are not
Affiliates of QES.
"Reporting Period" shall have the meaning set forth in Section
2.9.1.1.
"Reportable Quantity" shall have the meaning set forth in
Section 3.14.2.
"Retiree Medical Plans" shall have the meaning set forth in
Section 2.10.2.
"SEC" shall have the meaning set forth in Section 4.6.1.
"Section 338(h)(10) Elections" shall have the meaning set forth
in Section 2.9.5.1.
"Selling Parties" shall have the meaning set forth in the
recitals.
"Selling Party" shall have the meaning set forth in the
recitals.
"Selling Shareholder(s)" shall have the meaning set forth in the
recitals.
"Selling Shareholder Indemnitee" or "Selling Shareholder
Indemnitees" shall have the meaning set forth in Section 8.2.
"Selling Shareholder Related Agreements" shall have the meaning
set forth in Section 3.2.1.
"Shares" shall have the meaning set forth in the recitals.
"Straddle Period" shall have the meaning set forth in Section
2.9.1.1.
"Subordinated Note" shall have the meaning set forth in Section
2.2.1.2.
"Subsidiary" shall mean, as to any Person any other Person
which, directly or indirectly is controlled by such Person. For
purposes of the preceding sentence, "control" shall mean the
power to vote or direct the voting of more than 50% of the
voting shares, general partnership interests or other voting
equity interests of a Person.
"TASA" shall have the meaning set forth in the recitals.
"TASA Common Stock" shall mean the common stock, $.0001 par
value of TASA.
"TASA Debt" shall mean that certain debt undertaken with T.D.
Banknorth, NA in connection with the purchase by TASA of the
Shares and other secured indebtedness not exceeding $15,000,000
in the aggregate.
"TASA Preferred Stock" shall mean the Series A-2 convertible
preferred stock of TASA.
"TASA Preferred Stock Statement of Rights and Preferences" shall
have the meaning set forth in Section 2.2.2.
"Tax" or "Taxes" shall mean all taxes, charges, fees and levies
based upon gross or net income, gross receipts, franchises,
premiums, profits, sales, use, value added, transfer, employment
or payroll, including, without limitation, any ad valorem,
environmental, excise, license, occupation, property, severance,
stamp, withholding, or windfall profit tax, any custom duty or
other tax, together with any interest credit or charge, penalty,
addition to tax or additional amount imposed by or payable to
any Taxing Authority.
"Tax Returns" means all federal, state, local and foreign income
and franchise Tax returns and Tax reports (including any
attached Schedules) and other Tax statements and other similar
filings required to be filed, including any information return
(including, without limitation, any information return required
to be filed under Section 60501 of the Code), claim for refund,
amended return or declaration of estimated Tax.
"Taxing Authority" shall mean any governmental body or authority
authorized to assess Taxes.
"Threshold Amount" shall have the meaning set forth in Section
8.4.2.
"Transaction" shall mean the sale of Shares as described in this
Agreement.
"Transitional Services Agreement" shall have the meaning set
forth in Section 7.1.
"Working Capital" shall mean the excess of current assets over
current liabilities as such terms are defined by GAAP.
"Withdrawal Liability" shall have the meaning set forth in
Section 3.18.4.
"Working Capital Adjustment Amount" shall have the meaning set
forth in Section 2.3.2.3.
Exhibit C
---------
THE PAYMENT OF THIS NOTE AND THE RIGHTS OF THE HOLDER OF THIS
NOTE ARE SUBORDINATED TO THE PAYMENT OF SENIOR INDEBTEDNESS AND
THE RIGHTS OF THE HOLDERS OF SENIOR INDEBTEDNESS UPON THE TERMS
OF SUBORDINATION SET FORTH IN THAT CERTAIN SUBORDINATION
AGREEMENT DATED MAY 31, 2006 BY AND AMONG THE ISSUER OF THIS
NOTE AND TD BANKNORTH, N.A., AS AMENDED, MODIFIED AND
SUPPLEMENTED FROM TIME TO TIME.
U.S. $4,000,000.00 May 31, 2006
FOR VALUE RECEIVED, the undersigned, Touchstone Applied
Science Associates, Inc. a Delaware corporation (the
"Borrower"), hereby promises to pay to the order of Questar Data
Systems, Inc., as paying agent (the "Agent") for the Selling
Shareholders (as defined in the Stock Purchase Agreement
referenced below), having an address at 0000 Xxxx Xxxxxxx Xxxx,
Xxxxx, XX 00000, the principal sum of FOUR MILLION AND 00/100
DOLLARS ($4,000,000.00), which principal sum shall bear interest
from the date hereof at the rate of six percent (6.0%) per annum
on the unpaid principal balance, calculated on the basis of a
360 day year consisting of twelve 30 day months.
Interest on the unpaid principal balance of this Note shall
be paid commencing July 1, 2006, and continuing on the 1st day
of each succeeding January 1 and July 1 thereafter (each such
date being hereinafter referred to as an "Interest Payment
Date"), to and including January 1, 2011. Subject to the
provisions for prepayment described below, the interest payment
to be made on July 1, 2006 shall be equal to TWENTY THOUSAND SIX
HUNDRED SIXTY-SIX and 67/100 DOLLARS ($20,666,67), and each
subsequent interest payment through and including the January 1,
2011 payment shall be equal to ONE HUNDRED TWENTY THOUSAND AND
00/100 DOLLARS ($120,000.00). The entire outstanding principal
balance and accrued interest thereon shall in any event be due
and payable in full on May 30, 2011 (the "Maturity Date").
If any principal or accrued interest is not paid when due
(whether at the Maturity Date, by acceleration or otherwise),
the Borrower hereby promises to pay, on demand, interest on such
overdue amount from and including the due date to, but excluding
the date such amount is paid in full, at a fluctuating rate
equal to six percent (6.0%) per annum in excess of LIBOR (the
"Default Interest Rate"). The interest rate applicable to any
such overdue amounts shall change on the first day of each
calendar month based upon LIBOR as published in the Wall Street
Journal on the last Business Day of such month. "LIBOR" means
the rate published each business day in the Wall Street Journal
for notes maturing one (1) month after issuance under the
caption "Money Rates, London Interbank Offered Rates (Libor)".
In the event that no LIBOR shall be published, the Agent may
substitute another rate approximating the LIBOR (which
substitute rate may be reasonably adjusted by Agent) to the
effect that such substitute rate will provide for an interest
rate equivalent to the Default Interest Rate which would have
been effective if the LIBOR were quoted, as determined by the
Agent.
This Note is being delivered pursuant to that certain Stock
Purchase Agreement, dated May 31, 2006 among the Borrower, the
Selling Shareholders and Questar Educational Systems, Inc., a
Minnesota corporation (the "Stock Purchase Agreement"). All
capitalized terms used but not otherwise defined herein shall
have the meaning ascribed to such terms in the Stock Purchase
Agreement.
1. Subordination.
The Agent's right to payment pursuant to the terms of this
Note shall be subordinated to the extent and on the terms and
conditions set forth in the Subordination Agreement, dated May
31, 2006, by and among the Borrower, TD BankNorth, N.A. (the
"Senior Lender"), Agent and the Selling Shareholders (the
"Subordination Agreement"), and the terms and provisions of the
Subordination Agreement are incorporated herein by reference.
2. Payment.
Payment of the Principal Sum on the Maturity Date and
Interest on each Interest Payment Date shall be made by wire
transfer to the Agent in accordance with the instructions set
forth in Section 6 hereof (or in such other manner or at such
other place as the Agent hereof shall notify the Borrower in
writing) in lawful money of the United States of America. The
Borrower may prepay this Note at any time, without premium or
penalty, in whole or in part, with accrued interest to the date
of such payment on the amount prepaid. If the Maturity Date or
any Interest Payment Date occurs on a date that is not a
Business Day then the Principal Sum or Interest then due shall
be paid on the next succeeding Business Day. "Business Day"
shall mean any day other than Saturday, Sunday or any day upon
which banks in the city of New York, New York are authorized or
required to be closed.
3. Default and Remedies.
(a) If any of the following events or conditions (each an
"Event of Default") shall occur and be continuing:
(i) the Borrower shall fail to pay an installment
of principal or interest within 10 days of when and as the same
shall become due and payable, whether at the Maturity Date, by
acceleration or otherwise;
(ii) the Borrower shall fail to comply with the
provisions of Section 4.4.2 of the Stock Purchase Agreement;
(ii) an involuntary proceeding shall be commenced
or an involuntary petition shall be filed in a court of
competent jurisdiction seeking (A) relief in respect of the
Borrower, or of a substantial part of the property or assets of
the Borrower, under Title 11 of the United States Code, as now
constituted or hereafter amended, or any successor to or
replacement of such statute, or any other Federal or state
bankruptcy, insolvency, receivership or similar law, (B) the
appointment of a receiver, trustee, custodian, conservator or
similar official for the Borrower or for a substantial part of
the properties or assets of the Borrower or (C) the winding-up,
liquidation or dissolution of the Borrower; and such proceeding
or petition shall continue un-dismissed for 90 days or an order
or decree approving or ordering any of the foregoing shall be
entered;
(iii) the Borrower (A) voluntarily commences
any proceeding or files any petition seeking relief under Title 11
of the United States Code, as now constituted or hereafter
amended, or any successor to or replacement of such statute, or
any other Federal or state bankruptcy, insolvency, receivership
or similar law, (B) consents to, or fails to contest in a timely
and appropriate manner, the commencement against of any
proceeding or the filing of any petition described in clause (v)
above, (C) applies for or consents to the appointment of a
receiver, trustee, custodian, conservator or similar official
for the Borrower or for a substantial part of the properties or
assets of the Borrower, (D) files an answer admitting the
material allegations of a petition filed against it in any such
proceeding, (E) makes a general assignment for the benefit of
creditors, (F) becomes unable, admits in writing its inability
or fails generally to pay its debts as they become due or (G)
takes any action for the purpose of effecting any of the
foregoing; or
(iv) The occurrence of any uncured default or
event of default under any agreement with the Senior Lender or
under any other agreement, note, debenture, deed of trust,
mortgage or other instrument to which Borrower is a party or by
which it is bound relating to the borrowing of money;
then, in the case of an Event of Default, the Agent may, at any
time during the continuance of such Event of Default, by written
notice to the Borrower, declare the entire outstanding principal
sum, together with all accrued and unpaid interest, to be
immediately due and payable.
(b) In the case of an Event of Default, the Borrower will
pay to the Agent such further amount as shall be sufficient to
cover the costs and expenses of collection, including, without
limitation, reasonable attorneys' fees, expenses and
disbursements.
(c) The Borrower shall promptly furnish the Agent notice
of any Event of Default or event which, with notice, lapse of
time or both, would become an Event of Default under this
Section 3.
4. Notices.
All notices, instructions and other communications given
hereunder or in connection herewith shall be in writing. Any
such notice, instruction or communication shall be sent either
(i) by certified mail, return receipt requested, postage prepaid
or (ii) via a reputable nationwide overnight courier, in each
case to the address set forth below. Any such notice,
instruction or communication shall be deemed to have been
delivered upon receipt of confirmation of delivery after it is
sent by certified mail, return receipt requested, postage
prepaid, or one (1) Business Day after it is sent via a
reputable nationwide overnight courier service.
If to the Borrower to: Touchstone Applied Science
Associates, Inc.
4 Hardscrabble Heights
X.X. Xxx 000
Xxxxxxxx, XX 00000
Att: President
With a copy to: Rider, Weiner & Xxxxxxx, P.C.
000 Xxxxxx Xxxxxxx Xxxx
Xxx Xxxxxxx, XX 00000
Att: Xxxxxxx Crush, Esq.
If to the Agent to: Questar Data Systems, Inc.
0000 Xxxx Xxxxxxx Xxxx,
Xxxxx, XX 00000
Att: Xxxxxxxx Xxxxxxx
With a copy to: Robins, Kaplan, Xxxxxx & Xxxxxx L.L.P.
0000 XxXxxxx Xxxxx
000 XxXxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000-0000
Att: Xxxx X. Xxxxxx, Esq.
Wire transfer instructions
for payments: Bank: Associated Bank
ABA Number: xxxxxxxxx
Account Name: Transaction Account
Account Number: xxxxxxxxxx
Either party may give any notice, instruction or communication
in connection with this Note using any other means (including
personal delivery or ordinary mail), but no such notice,
instruction or communication shall be deemed to have been
delivered unless and until it is received by the party to whom
it was sent. Either party may change the address to which
notices, instructions or communications are to be delivered by
giving the other party to this Note notice thereof in the manner
set forth in this Section 4.
5. Miscellaneous.
(a) This Note shall be governed, construed and enforced in
accordance with the laws of the State of New York, without
regard to its conflicts of laws rules. The Borrower waives
presentment, demand, notice, protest and all other demands and
notices in connection with the delivery, acceptance,
performance, default and enforcement of this Note. The Borrower
hereby irrevocably and unconditionally submits, for itself and
its property, to the exclusive jurisdiction of the courts of the
State of New York of the United States District Court for the
Southern District of New York, and any appellate court of such
courts, in any action or proceeding arising out of or relating
to this Note, or for recognition or enforcement of any judgment,
and the Borrower hereby irrevocably and unconditionally agrees
that all claims in respect of any such action or proceeding may
be heard and determined in such New York court (or, to the
extent permitted by law, in such federal court). The Borrower
agrees that a final, non-appealable judgment in any such action
or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Note shall affect any right
that the Agent may otherwise have to bring any action or
proceeding relating to this Note against the Borrower or its
properties in the courts of any jurisdiction.
(b) THE AGENT AND THE BORROWER AGREE THAT NEITHER OF THEM
NOR ANY ASSIGNEE OR SUCCESSOR SHALL (A) SEEK A JURY TRIAL IN ANY
LAWSUIT, PROCEEDING, COUNTERCLAIM OR ANY OTHER ACTION BASED
UPON, OR ARISING OUT OF, THIS NOTE, ANY RELATED INSTRUMENTS, ANY
COLLATERAL OR THE DEALINGS OR THE RELATIONSHIP BETWEEN OR AMONG
ANY OF THEM, OR (B) SEEK TO CONSOLIDATE ANY SUCH ACTION WITH ANY
OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN
WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY
DISCUSSED BY THE AGENT AND THE BORROWER, AND THESE PROVISIONS
SHALL BE SUBJECT TO NO EXCEPTIONS. NEITHER THE AGENT NOR THE
BORROWER HAS AGREED WITH OR REPRESENTED TO THE OTHER THAT THE
PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL
INSTANCES.
(c) If any provision of this Note shall be held invalid or
unenforceable by any court of competent jurisdiction, that
holding shall not invalidate or render unenforceable any other
provision hereof.
(d) This Note may not be changed, amended or modified
except by agreement in writing signed by the Borrower and the
Agent.
(e) The Agent has provided as Attachment "A" hereto the
employer identification numbers(s) to be used by Borrower when
issuing any Forms 1099 in connection with interest payments made
pursuant hereto.
IN WITNESS WHEREOF, the Borrower has caused this Note to be
signed on its behalf, in its corporate name, by its duly
authorized officer, as of the day and year first above written.
TOUCHSTONE APPLIED SCIENCE
ASSOCIATES, INC.
By:_____________________________
Name: Xxxxxx X. Xxxxx
Title: President
ATTACHMENT A
to
Subordinated Promissory Note
Dated
May 31, 2006
Employer Identification Number(s):
Xxxx X. Xxxxx xxx-xx-xxxx
XxXxxxx Xxxxxxxxx xxx-xx-xxxx
Xxxxx Xxxxxxxx xxx-xx-xxxx
Xxxxx Xxxxx xxx-xx-xxxx
Xxxx Xxxxxxxxx xxx-xx-xxxx
Xxxx Xxxxx xxx-xx-xxxx
Xxxxx X. Xxxx xxx-xx-xxxx
Xxxxxxxx Xxxxxxx xxx-xx-xxxx
Exhibit D
---------
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
AMENDED CERTIFICATE OF DESIGNATIONS
OF
SERIES A CONVERTIBLE PREFERRED STOCK
_________________________________
Pursuant to Section 151(g) of the
Delaware General Corporation Law
_________________________________
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC., a corporation
organized and existing under the General Corporation Law of the
State of Delaware (the "Corporation"), DOES HEREBY CERTIFY that
the following resolution was duly adopted by the Board of
Directors of the Corporation at a meeting duly called and held
on May 25, 2006, at which a quorum was present and acting
throughout:
RESOLVED, that the Corporation had heretofore authorized
and issued 1,500 shares of Series A Preferred Stock with a non-
cumulative dividend of $.01 per share and a liquidation
preference of $0.01 per share and the holders thereof have
surrendered such shares to the Corporation for cancellation and
no authorized shares are outstanding and none will be issued
with respect to the Certificate of Designations filed March 24,
1995; and further
RESOLVED, that, pursuant to authority conferred upon the
Board of Directors of the Corporation pursuant to Article Fourth
of the Certificate of Incorporation of the Corporation, a series
of Preferred Stock of the Corporation to be designated
collectively as Series A Convertible Preferred Stock, par value
$.0001 per share, be, and it hereby is, created, to consist of
5,000,000 shares of Preferred Stock which the Corporation has
authority to issue, and that the designations, powers,
preferences and relative, participating, optional and other
special rights and relative qualifications, limitations or
restrictions of the shares of such series hereby are fixed as
follows:
1. DESIGNATION. The number of shares of Series A
-----------
Convertible Preferred Stock (the "Series A Preferred Stock")
which the Corporation has authority to issue is 5,000,000
shares. The Series A Preferred Stock may be issued in sub-
series, designated as "Series A-1 Convertible Preferred Stock"
and "Series A-2 Convertible Preferred Stock". The Series A
Preferred Stock shall consist of the Series A-1 Convertible
Preferred Stock and the Series A-2 Convertible Preferred Stock,
collectively. Except as specifically set forth in this
Certificate of Designations or in an agreement between the
Corporation and the Holder(s) of the respective sub-series, the
Series A-1 Convertible Preferred Stock (hereinafter, "Series A-1
Preferred") and the Series A-2 Convertible Preferred Stock
(hereinafter, "Series A-2 Preferred") shall have identical
rights and benefits as set forth in this Certificate of
Designations. The Board of Directors shall, by resolution duly
adopted, designate the number of shares of Series A Preferred
Stock comprising Series A-1 Preferred and the number of shares
of Series A Preferred Stock comprising Series A-2 Preferred, to
be issued as the Board of Directors shall approve. The holders
of the shares of the Series A Preferred Stock (and all
securities or other rights issued with respect to, upon
conversion of or in exchange for such shares) are referred to in
this Certificate of Designations as the "Holders".
2. RANK. The Series A Preferred Stock shall be senior in
----
right to any other equity securities of the Corporation with
respect to dividend payments and the distribution of assets upon
Liquidation (as defined in paragraph 3 hereof).
3. LIQUIDATION RIGHTS.
------------------
(a) LIQUIDATION. In the event of the voluntary or
-----------
involuntary liquidation, dissolution or winding up
("Liquidation") of the Corporation, the Holders of the Series A
Preferred Stock shall be entitled to have paid to them out of
the assets of the Corporation, before any distribution is made
to or set apart for the holders of any other series of preferred
stock or any other class or series of stock ranking junior to
the Series A Preferred Stock in respect of distribution of
assets upon Liquidation, an amount per share in cash equal to
the Liquidation Value (as defined below) for each share of
Series A Preferred Stock held (including any shares of Preferred
Stock accrued but not yet issued as dividends pursuant to
Paragraph 4(a) hereof up to and including the date of final
distribution to the Holders of the Series A Preferred Stock
pursuant to this Paragraph 3 (the "Liquidation Date")).
For the purposes of this Certificate, the "Liquidation
Value" of each share of Series A Preferred Stock means the
greater of (a) $4.50 per share of Series A Preferred Stock plus
accrued but unpaid dividends with respect to such share, or (b)
the amount per share of Common Stock the Holder would have been
entitled to receive had such Holder converted such share of
Series A Preferred Stock immediately prior to the Liquidation.
For purposes of this Paragraph 3, each of the following shall be
considered a "Liquidation": (i) the adoption by Corporation of
any plan of liquidation providing for the distribution of all or
substantially all of its assets; (ii) the sale or disposition of
all or substantially all of the assets or business of the
Corporation pursuant to a merger, consolidation or other
transaction (unless the stockholders of the Corporation
immediately prior to such merger, consolidation or other
transaction beneficially own, directly or indirectly, 80% or
more of the combined voting power of the entity or entities, if
any, that succeed to the business of the Corporation, in
substantially the same proportion as they owned the combined
voting power of the Corporation); (iii) the combination of the
Corporation with another company pursuant to which the
Corporation is the surviving corporation if, immediately after
the combination, the stockholders of the Corporation immediately
prior to the combination hold, directly or indirectly, less than
50% of the combined voting power of the combined company; or
(iv) any person (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), other than any person who was a beneficial
owner of more than 15% of the then outstanding Common Stock of
the Corporation, par value $.0001 per share (the "Common
Stock"), on a fully-diluted basis, on or before the date hereof
becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act) of securities of the Corporation representing
more than 50% of the combined voting power of the Corporation.
(b) INSUFFICIENT LIQUIDATION PROCEEDS. If, upon any
---------------------------------
Liquidation of the Corporation, the assets of the Corporation or
proceeds thereof distributable among the Holders shall be
insufficient to pay in full the preferential amounts payable to
such Holders, then such assets or the proceeds thereof shall be
distributed among such Holders ratably in accordance with the
respective amounts that would be payable on such shares if all
amounts payable thereon were not paid in full.
4. DIVIDENDS.
---------
(a) SERIES A DIVIDENDS. For a period of three (3) years
------------------
following the date of issuance of the shares of Series A
Preferred Stock, the Holders of outstanding shares of Series A
Preferred Stock shall not be entitled to receive any dividends,
and no dividends shall accrue with respect to shares of Series A
Preferred Stock, during such period. Commencing on the first
day of the fourth (4th) year following the date of issuance of
the shares of Series A Preferred Stock, the Holders of the
outstanding shares of Series A Preferred Stock shall be entitled
to receive dividends at the rate of eight percent (8.0%) per
annum of the Face Value (as defined below). Such dividends
shall be cumulative and shall accrue on a quarterly basis,
whether or not declared, from and including the most recent date
to which dividends have been paid, or if no dividends have been
paid, from the date of original issue thereof. The right to
dividends shall accrue regardless of whether there are profits,
surplus or other funds legally available for payment of
dividends. Whether the dividends on the Preferred Stock are to
be paid in cash or in-kind shall be at the sole election of the
Corporation at the end of each fiscal quarter of the
Corporation, but such election shall be applicable to all
Holders at the time of such election. If the Corporation elects
to pay the dividends in-kind by issuing additional shares of
Preferred Stock, it shall so notify the Holders in writing, and
such additional shares shall be issued or deemed issued only
immediately prior to (i) the occurrence of a Liquidation, (ii)
the redemption of the Series A Preferred Stock, or (iii) the
conversion of a Holder's shares of Series A Preferred Stock into
shares of Common Stock of the Corporation, par value $.0001 per
share (the "Common Stock") pursuant to Paragraph 5. Shares of
Series A Preferred Stock accrued as dividends pursuant to this
Paragraph 4(a) shall not be deemed outstanding for the purposes
of this Paragraph 4 or Paragraph 6, and no dividends shall
accrue with respect thereto, provided that such shares of Series
A Preferred Stock accrued as dividends pursuant to this
Paragraph 4(a) shall be deemed outstanding for the purposes of
Paragraph 5. In the event that a dividend payment is made
partly in cash and partly in-kind, each Holder will be entitled
to receive the same relative proportions of cash and in-kind
stock. Each dividend will be payable to Holders of record at
the close of business on the date (a "Record Date") which is the
last day of the fiscal quarter of the Corporation. To the
extent that the Corporation elects to pay a dividend in cash,
such cash payment will be made to the Holders no later than
fifteen (15) days following the Record Date for such dividend.
"Face Value" shall mean $4.50 per share of Series A Preferred
Stock, subject to proportionate adjustment upon the occurrence
of any of the events specified in Section 5(d)(iv) or (v) of
this Certificate.
(b) OTHER DIVIDENDS. So long as any shares of Series A
---------------
Preferred Stock are outstanding, no dividend, other than a
dividend payable in Junior Stock (as defined below), shall be
declared or set aside for payment or other distribution declared
or made upon Junior Stock, nor shall the Junior Stock be
redeemed, purchased or otherwise acquired for any consideration
by the Corporation (except by conversion into or exchange for
stock of the Corporation ranking junior to the Series A
Preferred Stock as to dividends or upon Liquidation) unless, in
each case, the full cumulative dividends on all outstanding
shares of Series A Preferred Stock shall have been paid or
declared and set apart. For the purposes of this Paragraph
4(b), "Junior Stock" means the Common Stock and any other class
or series of stock of the Corporation hereinafter authorized
which shall rank under the Series A Preferred Stock as to all
dividend payments or the distribution of assets upon
Liquidation.
5. CONVERSION. The Holders of the Series A Preferred
----------
Stock shall have conversion rights as follows (the "Conversion
Rights"):
(a) RIGHT TO CONVERT. Each Holder of any share or shares
----------------
of Series A Preferred Stock shall have the right, at its option
at any time, to convert any such shares of Series A Preferred
Stock into such number of fully paid and non-assessable whole
shares of Common Stock as is obtained by dividing (i) the
product of the number of shares of Series A Preferred Stock to
be converted multiplied by the Face Value, by (ii) the
Conversion Price (as hereinafter defined) per share. For
purposes of this Certificate of Designations, the "Conversion
Price" shall equal the Face Value, as adjusted pursuant to
Paragraph 5(d).
(b) MECHANICS OF CONVERSION. Each Holder desiring to
-----------------------
convert its shares shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the
Corporation, and shall give written notice to the Corporation at
such office specifying the number of shares of Series A
Preferred Stock to be converted. Whether or not specified in
such notice, the notice of conversion shall be deemed to include
the shares of Series A Preferred Stock issued as in-kind
dividends pursuant to Paragraph 4 hereof with respect to
Holder's shares of Series A Preferred Stock being converted. No
later than the fifth business day (in New York, New York)
following the Corporation's receipt of such notice of conversion
accompanied by the certificate(s) evidencing the shares to be
converted, the Corporation shall deliver to the Holder the
following:
(i) a certificate or certificates for the number of
shares of Common Stock to which such Holder is entitled
upon such conversion;
(ii) a cash payment in lieu of any fraction of a share
based upon the Liquidation Value of a whole share of Series
A Preferred Stock; and
(iii) a certificate or certificates evidencing the
number of shares of Series A Preferred Stock which had been
evidenced by the original certificate delivered to the
Corporation but have not been converted.
Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such
surrender of the certificate or certificates representing the
shares of Series A Preferred Stock to be converted, and the
Holder entitled to receive the shares of Common Stock issuable
upon such conversion shall be treated for all purposes as the
record holder of such shares of Common Stock on such date.
(c) AUTOMATIC CONVERSION. At any time after the
--------------------
occurrence of a Qualifying Event, the Corporation shall have the
right to cause each share of Series A Preferred Stock (and all
accrued in-kind dividends with respect thereto) to be converted
into shares of Common Stock as provided in Paragraph 5(a). In
order to effectuate such conversion, the Corporation shall be
required to provide written notice to each Holder of Series A
Preferred Stock being converted at least five (5) business days
prior to such conversion. For purposes of this Certificate of
Designations, a "Qualifying Event" shall have occurred if (i)
the rolling twenty (20)-trading day volume-weighted average
trading price of shares of the Corporation's Common Stock
exceeds 150% of the then applicable Series A Conversion Price,
(ii) the average trading volume of the shares of the
Corporation's Common Stock for the prior 45 calendar days
exceeds 30,000 shares per day, and (iii) there shall be an
effective registration statement under the Securities Act of
1933, as amended (the "Act") covering all of the shares of the
Corporation's Common Stock which would be issuable upon
conversion of all of the outstanding shares of Series A
Preferred Stock (including shares of Series A Preferred Stock
deemed issued as payment-in-kind of accrued dividends).
(d) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF COMMON
------------------------------------------------------
STOCK. Except as provided in Paragraph 5(e) hereof, if and
-----
whenever the Corporation shall issue or sell (or is deemed to
have issued or sold, in accordance with clauses (i) through
(viii) below) any shares of its Common Stock without
consideration or for a consideration per share less than the
Conversion Price in effect immediately prior to the time of such
issuance or sale (any such issuance or sale herein referred to
as a "Dilutive Issuance"), then, forthwith upon such Dilutive
Issuance the Conversion Price shall be reduced as follows: the
Conversion Price shall be reduced to the price determined by
dividing:
(A) an amount equal to the sum of (1) the total number
of shares of Common Stock outstanding immediately prior to
such issuance or sale (including as outstanding all shares
of Common Stock issuable upon conversion of outstanding
Series A Preferred Stock and shares of Series A Preferred
Stock accrued as in-kind dividends) multiplied by the
existing Conversion Price in effect immediately prior to
such issuance or sale; plus (2) the consideration, if any,
received by the Corporation upon such issuance or sale of
additional securities, by
(B) the total number of shares of Common Stock
outstanding immediately after such issuance or sale
(including as outstanding all shares of Common Stock
issuable upon conversion of outstanding Series A Preferred
Stock and shares of Series A Preferred Stock deemed issued
as in-kind dividends).
No adjustment of the Conversion Price however, shall be
made in an amount less than $.01 per share, and any such lesser
adjustment shall be carried forward and shall be made at the
time and together with the next subsequent adjustment which
together with any adjustments so carried forward shall amount to
$.01 per share or more.
For purposes of this subparagraph (d), the following
clauses (i) through (vii) shall also be applicable, subject to
subparagraph (e):
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Corporation
-----------------------------
shall in any manner grant (whether directly, by assumption
in a merger or otherwise) any options or rights to
subscribe for or to purchase Common Stock or any stock or
securities convertible into or exchangeable for Common
Stock (such rights or options being herein called "Options"
and such convertible or exchangeable stock or securities
being herein called "Convertible Securities"), whether or
not such Options or the right to convert or exchange any
such Convertible Securities are immediately exercisable,
and the price per share for which Common Stock is issuable
upon the exercise of such Options or upon conversion or
exchange of such Convertible Securities (determined by
dividing (i) the total amount, if any, received or
receivable by the Corporation as consideration for the
issuance of such Options, plus the minimum aggregate amount
of additional consideration payable to the Corporation upon
the exercise of all such Options, plus, in the case of such
Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any,
payable upon the issuance or sale of such Convertible
Securities and upon the conversion or exchange thereof, by
(ii) the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon the
conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options) shall be less
than the Conversion Price in effect immediately prior to
the time of the granting of such Options, then the total
maximum number of shares of Common Stock issuable upon the
exercise of such Options or upon conversion or exchange of
the total maximum amount of such Convertible Securities
issuable upon the exercise of such Options shall be deemed
to have been issued for such price per share as of the date
of granting of such Options and thereafter shall be deemed
to be outstanding. Except as otherwise provided in clause
(iii) below, no adjustment of such Conversion Price shall
be made upon the actual issuance of such Common Stock or of
such Convertible Securities upon exercise of such Options
or upon the actual issuance of such Common Stock upon
conversion or exchange of such Convertible Securities.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the
----------------------------------
Corporation shall in any manner issue (whether directly or
by assumption in a merger or otherwise) or sell any
Convertible Securities, whether or not the rights to
exchange or convert the same are immediately exercisable,
and the price per share for which Common Stock is issuable
upon such conversion or exchange (determined by dividing
(i) the total amount received or receivable by the
Corporation as consideration for the issuance or sale of
such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, payable to the
Corporation upon the conversion or exchange thereof, by
(ii) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such
Convertible Securities) shall be less than the Conversion
Price in effect immediately prior to the time of such
issuance or sale, then the total maximum number of shares
of Common Stock issuable upon conversion or exchange of all
such Convertible Securities shall be deemed to have been
issued for such price per share as of the date of the
issuance or sale of such Convertible Securities and
thereafter shall be deemed to be outstanding. Except as
otherwise provided in clause (iii) below, no adjustment of
such Conversion Price shall be made upon the actual
issuance of Common Stock upon conversion or exchange of
such Convertible Securities. If any such issuance or sale
of such Convertible Securities is made upon exercise of any
Option to purchase any such Convertible Securities for
which adjustments of such Conversion Price have been or are
to be made pursuant to other provisions of this paragraph
(d), no further adjustment of such Conversion Price shall
be made by reason of such issuance or sale.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE.
-----------------------------------------
If (1) the purchase price provided for in any Option
referred to in clause (i) above; (2) the additional
consideration, if any, payable upon the conversion or
exchange of any Convertible Securities referred to in
clauses (i) or (ii) above; or (3) the rate at which any
Convertible Securities referred to in clauses (i) or (ii)
above are convertible into or exchangeable for Common
Stock, shall change at any time (in each case other than
under or by reason of provisions designed to protect
against dilution), the Conversion Price in effect at the
time of such event shall forthwith be readjusted to the
Conversion Price which would have been in effect at such
time had such Options or Convertible Securities provided
for such changed purchase price, additional consideration
or conversion rate, as the case may be, at the time
initially granted, issued or sold. On the expiration of
any such Option or the termination of any such right to
convert or exchange such Convertible Securities, the
Conversion Price then in effect hereunder shall forthwith
be increased to the Conversion Price which would have been
in effect at the time of such expiration or termination had
such Option or Convertible Securities never been issued,
and the Common Stock issuable thereunder shall no longer be
deemed to be outstanding. If the purchase price provided
for in any such Option referred to in clause (i) or the
rate at which any Convertible Securities referred to in
clauses (i) or (ii) are convertible into or exchangeable
for Common Stock shall be reduced at any time under or by
reason of provisions with respect thereto designed to
protect against dilution, then, in case of the delivery of
Common Stock upon the exercise of any such Option or upon
conversion or exchange of any such Convertible Securities,
the Conversion Price then in effect hereunder shall
forthwith be adjusted to such respective amount as would
have been obtained had such Option or Convertible
Securities never been issued as to such Common Stock and
had adjustments been made upon the issuance of the shares
of Common Stock delivered as aforesaid, but only if as a
result of such adjustment such Conversion Price then in
effect hereunder is thereby reduced.
(iv) STOCK DIVIDENDS. If the Corporation shall declare
---------------
a dividend or make any other distribution upon any stock of
the Corporation payable in Common Stock, Options or
Convertible Securities, any Common Stock, Options or
Convertible Securities, as the case may be, issuable in
payment of such dividend or distribution shall be deemed to
have been issued or sold without consideration (except that
in the case of a distribution in respect of the
Corporation's Common Stock that is payable in Common Stock,
the Conversion Price shall be reduced, concurrently with
the effectiveness of such event, as if the Corporation had
subdivided its outstanding shares of Common Stock into a
greater number of shares, as provided in clause (v)
hereof); provided, however, that in the case of a dividend
payable in shares of Common Stock, no such adjustment shall
be made if the Holders of the Series A Preferred Stock
simultaneously receive a dividend or other distribution of
shares of Common Stock (or shares of Series A Preferred
Stock that are convertible, on the date of such event, into
shares of Common Stock) in a number equal to the number of
shares of Common Stock as they would have received if all
outstanding shares of Series A Preferred Stock had been
converted into Common Stock on the date of such event.
(v) SUBDIVISION OR COMBINATION OF STOCK. If the
-----------------------------------
Corporation shall split or subdivide its outstanding shares
of Common Stock into a greater number of shares, the
Conversion Price in effect immediately prior to such
subdivision shall, concurrently with the effectiveness of
such event, be proportionately reduced, and conversely, if
the outstanding shares of Common Stock of the Corporation
shall be combined into a smaller number of shares, the
Conversion Price in effect immediately prior to such
combination shall be proportionately increased.
(vi) CONSIDERATION FOR STOCK. In case any shares of
-----------------------
Common Stock, Options or Convertible Securities shall be
issued or sold for cash, the consideration received
therefor shall be deemed to be the amount received by the
Corporation therefor, without deduction therefrom of any
expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in
connection therewith. In case any shares of Common Stock,
Options or Convertible Securities shall be issued or sold
for a consideration other than cash, the amount of the
consideration other than cash received by the Corporation
shall be deemed to be the fair value of such consideration
as determined in good faith by the Board of Directors of
the Corporation, without deduction of any expenses incurred
or any underwriting commissions or concessions paid or
allowed by the Corporation in connection therewith. In
case any Options shall be issued in connection with the
issuance and sale of other securities of the Corporation,
together comprising one integral transaction in which no
specific consideration is allocated to such Options by the
parties thereto, such Options shall be deemed to have been
issued without consideration.
(vii) OTHER TRANSACTIONS. If any event shall
------------------
occur as to which the other provisions of this subparagraph
(d) are not strictly applicable but as to which the failure
to make any adjustment would not fairly protect the
conversion rights of the Series A Preferred Stock in
accordance with the essential intent and principles hereof
then, in each such case, the Holders of the Series A
Preferred Stock may appoint a firm of independent public
accountants of recognized national standing reasonably
acceptable to the Corporation, which shall give their
opinion as to the adjustment, if any, on a basis consistent
with the essential intent and principles established
herein, necessary to preserve the conversion rights
represented herein. Upon receipt of such opinion, the
Corporation will promptly mail a copy thereof to all
registered Holders of the Series A Preferred Stock and
shall make the adjustments described therein. The fees and
expenses of such independent public accountants shall be
borne by the Corporation.
(e) EXCEPTIONS. Notwithstanding any other provision
----------
hereof, no adjustment to the Conversion Price will be made:
(i) upon the issuance of any share of Series A-2
Preferred in connection with the Corporation's acquisition
of Questar Educational Systems, Inc.; or
(ii) upon the issuance of any shares of Series A
Preferred Stock as in-kind dividends pursuant to Paragraph
4 of this Certificate of Designations; or
(iii) in the event of any subdivision,
combination, stock split, stock dividend, recapitalization,
reorganization or other analogous event; or
(iv) upon the issuance of Common Stock, Options or
Convertible Securities with the consent of the Holders of a
majority of the outstanding shares of the Series A
Preferred Stock; or
(v) upon the conversion of any shares of Series A
Preferred Stock; or
(vi) upon the issuance or exercise of options or
rights issued to employees, directors or consultants of the
Corporation, as approved by the Board of Directors, or a
committee thereof, of the Corporation; or
(vii) upon the exercise of options, warrants or
other rights outstanding on the date of issuance of the
Series A Preferred Stock; or
(viii) upon the issuance of any shares of Common
Stock pursuant to a firm underwritten public offering.
(f) FRACTIONAL SHARES. No fractional shares or scrip
-----------------
representing fractional shares of Common Stock shall be issued
upon conversion of shares of Series A Preferred Stock. In lieu
of any fractional share or scrip to which the Holder would
otherwise be entitled, the Corporation shall (after aggregation
of all holdings) pay a cash adjustment in respect of such
fractional interest in an amount equal to fair value thereof on
the conversion date, as determined in good faith by the Board of
Directors.
(g) RESERVATION OF COMMON STOCK ISSUABLE UPON CONVERSION.
----------------------------------------------------
The Corporation shall at all times reserve and keep available
out of its authorized but unissued shares of Common Stock,
solely for the purpose of effecting the conversion of the shares
of the Series A Preferred Stock, such number of its shares of
Common Stock as shall from time to time be sufficient to effect
the conversion of all outstanding shares of Series A Preferred
Stock (including shares of Series A Preferred Stock which have
been issued or deemed issued as dividends upon outstanding
shares of Series A Preferred Stock). The Corporation shall use
its best efforts from time to time, in accordance with the laws
of the State of Delaware, to increase the authorized number of
shares of Common Stock if at any time the number of such
reserved shares shall not be sufficient to permit the conversion
of all the then outstanding shares of Series A Preferred Stock.
(h) PAYMENT OF TAXES. The Corporation shall pay all taxes
----------------
(other than taxes based upon income or transfer) and other
governmental charges that may be imposed with respect to the
issuance or delivery of shares of Common Stock upon conversion
of any shares of Series A Preferred Stock.
(i) CLOSING OF BOOKS. The Corporation shall at no time
----------------
close its transfer books against the transfer of any Series A
Preferred Stock or of any shares of Common Stock issued or
issuable upon the conversion of any shares of Series A Preferred
Stock in any manner which could reasonably interfere with the
timely conversion of such Series A Preferred Stock.
6. VOTING. Each Holder shall be entitled to one vote for
------
each share of Common Stock into which such Holder's shares of
Series A Preferred Stock may be converted, voting together as
one class with the Common Stock; provided, however, that shares
of Series A-2 Preferred held in escrow shall not be entitled to
any voting rights until such shares are released from escrow.
Neither the Certificate of Incorporation nor this Certificate
may be amended to alter or change the powers, preferences or
special rights of the Series A Preferred Stock without the
consent of the Holders of at least a majority of the number of
outstanding shares of the Series A Preferred Stock outstanding
at the time, given by such Holders together as one class, and
given by vote in person, by proxy at a meeting or by consent as
permitted under law.
7. IDENTICAL RIGHTS. Each share of the Series A
----------------
Preferred Stock, whether issued as Series A-1 Preferred or
Series A-2 Preferred, shall have the same relative rights and
preferences as set forth in this Certificate of Designations,
and shall be identical in all respects with, all respects with,
and all other shares of the Series A Preferred Stock, except as
otherwise set forth in this Certificate of Designations or as
may otherwise be agreed between a Holder and the Corporation.
8. CERTIFICATES. So long as any shares of the Series A
------------
Preferred Stock are outstanding, there shall be set forth on the
face or back of each stock certificate issued by the Corporation
a statement that the Corporation shall furnish without charge to
each stockholder who so requests, the powers, preferences and
rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences
or such rights.
9. MISCELLANEOUS.
-------------
(a) COMMUNICATIONS. All notices and other communications
--------------
required or permitted to be given to Holders pursuant to this
Certificate shall be in writing and shall be deemed to have been
duly given (i) when delivered by hand or by recognized overnight
courier to, (ii) upon receipt, if sent by facsimile confirmed
promptly in writing sent by United States mail, postage prepaid,
or (iii) otherwise, upon receipt or upon the Holder's having
actual knowledge of the contents thereof, addressed to the
persons shown on the books of the Corporation as the Holders of
the shares at the addresses as they appear in the books of the
Corporation, as of a record date or a date determined in
accordance with the Corporation's Certificate of Incorporation
or By-laws, this Certificate and applicable law.
(b) DESIGNATIONS AND PREFERENCES. Except as may otherwise
----------------------------
be required by law, shares of Series A Preferred Stock will not
have any designations, preferences, limitations or relative
rights other than those specifically set forth in this
Certificate or in the Corporation's Certificate of
Incorporation.
(c) HEADINGS. Headings used in this Certificate are for
--------
convenience only and shall not be used in the interpretation of
this Certificate. References to paragraphs are to the
paragraphs of this certificate.
(d) WAIVER; AMENDMENT. The preferences, special rights or
-----------------
powers of the Series A Preferred Stock may be waived, and any of
the provisions of the Series A Preferred Stock may be amended,
by the affirmative vote at a meeting or the written consent of
Holders of record of at least a majority of the outstanding
shares of Series A Preferred Stock.
IN WITNESS WHEREOF, the Corporation has caused this
Certificate to be signed and its corporate seal hereunto affixed
by Xxxxxx X. Xxxxx, its President, and to be attested by Xxxxx
X. Xxxxxxx, its Secretary on this 25th day of May, 2006.
TOUCHSTONE APPLIED SCIENCE
ASSOCIATES, INC.
By _____________________________
Xxxxxx X. Xxxxx
President
Attest:
_____________________________
Xxxxx X. Xxxxxxx
Secretary
Exhibit E
---------
ESCROW AGREEMENT
This ESCROW AGREEMENT ("Agreement") is entered into as of the
31st day of May, 2006, by and among TOUCHSTONE APPLIED SCIENCE
ASSOCIATES, INC., a Delaware corporation, (the "Company"), with
its principal place of business located at 0 Xxxxxxxxxxxx
Xxxxxxx, Xxxxxxxx, XX 00000, and XXXX X. XXXXX, XXXXX X. XXXX,
XXXXXXXX XXXXXXX, XXXXX XXXXXXXX, XXXX XXXXX, XXXXXXX XXXXXXXXX,
XXXX XXXXXXXXX, and XXXXX XXXXX (each a "Selling Shareholder"
and collectively, the "Selling Shareholders"), and RIDER, WEINER
& XXXXXXX, P.C., a New York professional services corporation,
with its principal place of business at 000 Xxxxxx Xxxxxxx Xxxx,
Xxx Xxxxxxx, Xxx Xxxx 00000 (the "Escrow Agent"). For purposes
of this Agreement, the Company, each of the Selling Shareholders
and Escrow Agent is referred to, severally, as a "Party" and,
collectively, as the "Parties." Capitalized terms used herein
and not otherwise defined herein shall have the meanings set
forth in that certain Stock Purchase Agreement dated as of the
date hereof, by and among the Company, Selling Shareholders and
Questar Educational Systems, Inc., a Minnesota corporation
("QES") (the "Stock Purchase Agreement").
This Agreement is based on the following facts and
conditions:
A. The Company has a contingent obligation to pay Selling
Shareholders the stock portion of the Earnout Payment based upon
the computation of Cumulative Earnout Revenue on or before
January 31, 2010, under the terms and conditions of Section
2.2.2 of the Stock Purchase Agreement;
B. The Company has, in connection with the Closing,
registered in the name of the Escrow Agent One Million One
Hundred Eleven Thousand One Hundred Eleven (1,111,111) Shares of
TASA Preferred Stock, representing the Stock Portion of the
Earnout Payment (the "Escrowed Preferred Stock") which
represents the number of shares necessary to fully pay the stock
portion of the Earnout Amount (other than any Earnout Amount
that may be payable pursuant to Section 2.2.2.4 of the Stock
Purchase Agreement) if it is earned;
C. Each Selling Shareholder is the contingent beneficial
owner of a portion of the Escrowed Preferred Stock, in such
number of shares as is listed opposite his or her name on
Exhibit A to this Agreement;
D. As a condition to Closing on the transaction described
in the Stock Purchase Agreement, the Selling Shareholders and
the Company have agreed to deposit the Escrowed Preferred Stock
with the Escrow Agent to be held in escrow in accordance with
the terms and conditions of this Agreement;
E. The Escrow Agent has agreed to hold the Escrowed
Preferred Stock, in escrow, in accordance with such same terms
and conditions; and
F. The Parties have agreed to be bound by the terms of
this Agreement.
NOW THEREFORE, in consideration of the premises and other
good and valuable consideration, the Parties agree as follows:
1. DEPOSIT OF PREFERRED STOCK. Shares representing the
Escrowed Preferred Stock have been registered in the name of
Rider, Weiner & Xxxxxxx, P.C., as Escrow Agent, (collectively,
the "Escrow Documents") and have been deposited into an escrow
account ("Escrow") with the Escrow Agent, and the Escrow Agent
acknowledges receipt of the Escrow Documents as of the date of
this Agreement.
2. EXERCISE OR CONVERSION OF PREFERRED STOCK INTO COMMON
STOCK.
(a) If the Escrowed Preferred Stock has exercise rights or
conversion rights allowing it to be converted into TASA Common
Stock of the Company, the Escrow Agent will, upon receipt of a
written notice of conversion jointly executed by a Selling
Shareholder exercising his or her conversion right and the
Company, provide the certificates and documents that evidence
and/or which are necessary to execute the exercise rights or
conversion rights. The converted Common Stock (the "Escrowed
Common Stock" and, together with the Escrowed Preferred Stock,
the "Escrowed Stock") will remain in Escrow subject to the terms
of this Agreement.
(b) If the Escrowed Preferred Stock becomes subject to
mandatory conversion prior to distribution to Selling
Shareholders pursuant to this Agreement (a "Conversion"), the
TASA Common Stock into which the Escrowed Preferred Stock is
converted shall be substituted for the Escrowed Preferred Stock
held under or distributed pursuant to the Escrow Agreement. The
Escrow Agent will provide the documents and instruments that
evidence or are necessary to convert such stock. Any and all
certificates representing stock dividends and shares resulting
from a Conversion that are granted to or received by Selling
Shareholders while their Escrowed Preferred Stock is held in
Escrow shall be deposited with and held by the Escrow Agent
subject to the terms of this Agreement.
3. DIVIDENDS. Selling Shareholders shall be entitled to
any dividends that are declared with respect to the Escrowed
Stock after the date on which Selling Shareholders are
determined to be entitled to receive an Earnout Payment (the
"Vesting Date"). Selling Shareholders shall not be entitled to
any dividends declared prior to the Vesting Date. Any dividends
declared after the Vesting Date shall be promptly deposited with
and held by the Escrow Agent subject to the terms of this
Agreement, in the event that the Escrowed Stock is held in
escrow. If such dividends are in the form of cash, the Escrow
Agent will deposit any such dividends in an interest-bearing
account bearing the taxpayer identification number(s) provided
by the Selling Shareholders (the "Escrowed Cash"). Such cash
dividends and any interest earned on the cash dividends will be
disbursed by the Escrow Agent in accordance with paragraph 5
hereof in proportion to the number of shares released from the
Escrow as provided in Exhibit A hereto.
4. TERM. This Agreement and the Escrow begin on the date
this Agreement was entered into as indicated above. The Escrow
Agent will hold the Escrowed Stock until the release conditions
of paragraph 5 below are satisfied.
5. RELEASE OF ESCROWED STOCK. Subject to the
documentation requirements in paragraph 6, the Escrow Agent will
release to the Selling Shareholders the vested portion of the
Escrowed Stock and Escrowed Cash, if any, when it receives a
Release Instruction on or after January 1, 2010. Escrow Agent
shall take all necessary steps and cooperate with the Company to
effectuate the transfer and retitling in the names of the
Selling Shareholders such Escrowed Stock and Escrowed Cash.
6. DOCUMENTATION REGARDING THE RELEASE OF TASA PREFERRED
STOCK.
(a) Following the computation of Cumulative Earnout
Revenue and the Earnout Payment, a written instruction directing
the release of the Escrowed Stock (the "Release Instruction"),
in the form of Exhibit B and executed by each of the Selling
Shareholders and the Company, shall be forwarded to the Escrow
Agent, accompanied by a written certificate of the Company's
then-current auditors as to the computation of Cumulative Earned
Revenue and the Earnout Payment.
(b) Within three (3) business days of its receipt of the
Release Instruction described in subparagraph 6(a), the Escrow
Agent will release some or all of the Escrowed Stock from Escrow
as described in the Release Instruction, at which time this
Agreement will terminate.
(c) Any of the Escrowed Stock or Escrowed Cash that is not
released pursuant to the Release Instruction is forfeited by the
Selling Shareholders and shall be returned by the Escrow Agent
to the Company within three (3) business days of the Escrow
Agent's receipt of the Release Instruction.
(d) The Escrow Agent will maintain all records relating to
the Agreement for a period of three (3) years following the
termination of the Agreement. The Escrow Agent will forward
copies of all records retained by it to any Party promptly upon
written request.
7. RESTRICTIONS ON THE TRANSFER, SALE OR DISPOSAL OF
ESCROWED STOCK. While this Agreement is in effect, no Escrowed
Stock, any interest therein or any right or title thereto, may
be sold, transferred, hypothecated, pledged or otherwise
disposed of ("transfer" or "transferred"), and the Escrow Agent
will not recognize any transfer that violates the terms of this
Agreement; provided, however, that transfers by operation of law
occasioned by the death or incapacity of a Selling Shareholder
shall be recorded upon presentation to the Company by the
personal representative or guardian of a deceased or
incapacitated Selling Shareholder of appropriate documents
regarding the necessity for transfer and of which transfer the
Company has notified the Escrow Agent and the representative of
such Selling Shareholder (the "Representative").
During the Escrow Period all Selling Shareholders and
owners of the Escrowed Stock, certificates for which have been
deposited to the Escrow Account, shall remain subject to the
restrictions imposed hereby, including those persons, if any,
who become holders, by any means provided herein, of the
Escrowed Stock during the Escrow Period.
8. VOTING RIGHTS. On and after the Vesting Date, the
Selling Shareholders will have the same voting rights as holders
of non-escrowed TASA Stock. Prior to the Vesting Date, the
Escrowed Preferred Stock shall not be entitled to any voting
rights. In the event that the Escrow Agent is in possession of
TASA Common Stock prior to the Vesting Date as a result of a
mandatory conversion described in paragraph 3(a) hereof, the
Escrow Agent shall vote such shares as directed by the Company.
9. ESCROW AGENT PROVISIONS.
(a) Escrow Agent acts hereunder as depositary only and is
not a party to or bound by any agreement or undertaking which
may be evidenced by or arise out of any Escrow Documents
deposited with it hereunder, is not responsible or liable in any
manner for the sufficiency, correctness, genuineness, or
validity of any of the Escrow Documents and undertakes no
responsibility or liability for the form of execution of the
Escrow Documents or the identity, authority, title or rights of
any person executing or depositing any of the Escrow Documents.
(b) The Parties hereto acknowledge that Escrow Agent is
acting solely as a stakeholder at their request and for their
convenience, and that Escrow Agent shall not be liable to the
Parties hereto for any act or omission on its part unless taken
or suffered in bad faith, in willful disregard of this
Agreement, or involving its gross negligence.
(c) Escrow Agent shall not be liable for any error of
judgment or for any act done or omitted by it in good faith nor
for any negligence other than its gross negligence, or for
anything which it may in good faith do or refrain from doing in
connection herewith. Escrow Agent shall have no duty,
responsibility or obligation to interpret or enforce the terms
of any agreement other than the Escrow Agent's obligations
hereunder, it being agreed that the sole duties and
responsibilities of the Escrow Agent shall be to accept and hold
the Escrow Documents. No liability will be incurred by Escrow
Agent if, in the event of any dispute or question as to the
release of the Escrow Documents, it acts in accordance with the
opinion of its legal counsel. Escrow Agent shall have the right
to rely upon the genuineness of all certificates and documents
delivered to it pursuant hereto, and all the signatures thereto
or to any other writing received by Escrow Agent purporting to
be signed by the Parties and upon the truth of the contents
thereof. Before making delivery in accordance with the
provisions hereof or otherwise of any Escrow Documents, Escrow
Agent shall have the right but not the obligation to require
delivery to it of an executed and acknowledged receipt for the
subject matter of the delivery to be made by it.
(d) In the event of any disagreement or the presentation
of adverse claims or demands in connection with the Escrow
Documents, Escrow Agent shall at its option be entitled to
refuse to comply with any such claims or demands during the
continuance of such disagreement and may refrain from delivering
any Escrow Documents affected hereby until such conflict is
resolved to its satisfaction and in so doing Escrow Agent shall
not become liable to the Parties, or to any other person, due to
its failure to comply with any such adverse claim or demand.
Escrow Agent shall be entitled to continue, without liability,
to refrain and refuse to act:
(i) Until all the rights of the adverse claimants
have been finally adjudicated by a court having
jurisdiction of the Parties and the Escrow Documents
affected hereby, after which time Escrow Agent shall be
entitled to act in conformity with such adjudication; or
(ii) Until all differences have been adjusted by
agreement and Escrow Agent shall have been notified thereof
and shall have been directed in a writing signed jointly or
in counterpart by the Parties and by all persons making
adverse claims or demands, at which time Escrow Agent shall
be protected in acting in compliance therewith; or
In the event Escrow Agent files a suit in interpleader, it shall
thereupon be fully released and discharged from all further
obligations to perform any and all duties or obligations imposed
upon it by this Agreement.
(e) The Parties jointly and severally agree to pay all
costs, damages, judgments and expenses, including reasonable
attorneys' fees and disbursements to Escrow Agent and its
counsel, suffered or incurred by Escrow Agent in connection with
or arising out of this Agreement, including, but without
limiting the generality of the foregoing, a suit in interpleader
brought by Escrow Agent and the costs and expenses of defending
against any claim or liability arising out of or related to this
Agreement. Escrow Agent shall have a first lien on all Escrow
Documents held by it herewith for its compensation and for any
costs, liability, expenses or fees it may incur.
(f) Escrow Agent has acknowledged acceptance of these
provisions by signing in the place indicated on the signature
page of this Agreement.
10. ESCROW AGENT'S INDEMNIFICATION. The Company and the
Selling Shareholders agree to hold the Escrow Agent harmless
from, and shall indemnify the Escrow Agent jointly and severally
for, any cost or liability regarding any administrative
proceeding, investigation, litigation, interpretation,
implementation or interpleading relating to this Agreement,
including the release of Escrowed Stock and the disbursement of
dividends, interest or proceeds, unless the cost or liability
arises from the Escrow Agent's act or omission solely as
described in paragraph 9(b).
11. ESCROW AGENT REPRESENTATION. The Selling Shareholders
acknowledge that Escrow Agent has acted as counsel for the
Company in connection with the transactions contemplated by the
Stock Purchase Agreement and that, in the event of a dispute
between the Parties, Escrow Agent shall not be prevented from
representing the Company in such dispute by reason of having
acted as escrow agent hereunder, provided that Escrow Agent
shall at such time deposit the Escrow Documents with a court of
competent jurisdiction or as otherwise directed by the Parties.
12. SCOPE. This Agreement will be binding upon the
Selling Shareholders, their heirs and assigns, and upon the
Company, Escrow Agent, and their successors and assigns.
13. SUBSTITUTE ESCROW AGENT. The Escrow Agent may, upon
not less than sixty (60) days prior written notice to the
Company and the Selling Shareholders, resign as the Escrow
Agent. The Company and the Selling Shareholders will, before
the effective date of the Escrow Agent's resignation, enter into
a new identical Escrow Agreement with a substitute Escrow Agent.
If the Company and the Selling Shareholders fail to enter into a
new Escrow Agreement and appoint a successor Escrow Agent within
sixty (60) days after the Escrow Agent has given notice of its
resignation, the Escrow Agent then serving under this Agreement
will retain the Escrowed Stock in escrow for a reasonable time
until either (i) a new, identical Escrow Agreement has been
executed and a successor Escrow Agent has been appointed, or
(ii) the proper disposition of those shares has been determined.
14. TERMINATION. Except for the provisions of paragraph
6(c) (which shall survive for three (3) years following
termination hereof) and paragraphs 9, 10 and 16 (which shall
survive indefinitely), this Agreement will terminate in its
entirety when all of the Escrowed Stock has been released, or
the Company's capital stock, including the Escrowed Stock,
and/or assets has been distributed as provided by paragraph 5.
15. NOTICES. All notices, instructions, requests or other
communications required to be given or which may be given
hereunder shall be in writing and shall be deemed to have been
duly given when sent by hand delivery, by facsimile (when
confirmed by return facsimile) followed by first-class mail, by
United States registered or certified mail, return receipt
requested, postage prepaid, or by nationally recognized
overnight courier service with written receipt of delivery, to
the addresses set forth below.
If to Selling Shareholders:
Xxxx X. Xxxxx
00000 Xxxxxx Xxxx
Xxxxxxxxx, XX 00000
Xxxxx X. Xxxx
000 Xxxxxxx Xxx.
Xxxxxx, XX 00000
Xxxxxxxx Xxxxxxx
0000 Xxxx Xxxxxxx Xxxx
Xxxxx, XX 00000
Xxxxx Xxxxxxxx
0000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Xxxx Xxxxx
00000 00xx Xxx X
Xxxxx Xxxxx, XX 00000
XxXxxxx Xxxxxxxxx
0000 000xx Xxxxxx X
Xxxxxx, XX 00000
Xxxxxxx Xxxxxxxxx
0000 Xxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Xxxxx Xxxxx
0000 Xxxxxx Xxx X.
Xxxxxxxxxxx, XX 00000
With a copy to:
Robins, Kaplan, Xxxxxx & Xxxxxx L.L.P.
0000 XxXxxxx Xxxxx
000 XxXxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxx, Esq.
If to Company:
Touchstone Applied Science Associates, Inc.
X.X. Xxx 000
0 Xxxxxxxxxxxx Xxxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxx, President
With a copy to:
Rider, Weiner & Xxxxxxx, P.C.
000 Xxxxxx Xxxxxxx Xxxx
Xxx Xxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Crush, Esq.
If to Escrow Agent:
Rider, Weiner & Xxxxxxx, P.C.
000 Xxxxxx Xxxxxxx Xxxx
Xxx Xxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Crush, Esq.
16. GENERAL.
(a) This Agreement sets forth the entire agreement and
understanding of the Parties in respect to the matters contained
herein and supersedes all prior agreements, arrangements and
understandings relating thereto.
(b) All of the terms and conditions of this Agreement
shall be binding upon, and inure to the benefit of and be
enforceable by, the Parties hereto.
(c) This Agreement may be amended, superseded or canceled,
and any of the terms or conditions hereof may be waived, only by
a written instrument executed by each Party hereto or, in the
case of a waiver, by the Party waiving compliance. The failure
of any Party at any time or times to require performance of any
provision hereof shall in no manner affect its right at a later
time to enforce the same. No waiver of any Party of any
condition, or of the breach of any term contained in this
Agreement, whether by conduct or otherwise, in any one or more
instances shall be deemed to be or construed as a further or
continuing waiver of any such condition or breach or a waiver of
any other condition or of the breach of any other term of this
Agreement. No Party may assign any rights, duties or
obligations hereunder unless all other Parties have given their
prior written consent.
(d) If any provision included in this Agreement shall be
determined by a court of competent jurisdiction to be invalid or
unenforceable, it shall not affect the validity of the remaining
provisions.
(e) This Agreement shall be construed in accordance with
and governed by the laws of the State of New York and shall be
binding on Escrow Agent and the Parties and their respective
successors and assigns; provided, however, that any assignment
or transfer by either of the Parties of their respective rights
and/or obligations under this Agreement shall be void as against
Escrow Agent unless (a) a written notice thereof shall be given
to Escrow Agent, (b) the assignee or transferee shall agree in
writing to be bound by the provisions of this Agreement and (c)
Escrow Agent and the Parties shall have consented, in writing,
to such assignment or transfer.
(f) The Parties have entered into this Agreement, which
may be written in multiple counterparts and each of which will
be considered an original, and have signed this Agreement in the
capacities and on the dates indicated below.
[Balance of Page Intentionally Blank]
IN WITNESS WHEREOF, the undersigned parties by their duly
authorized agents have executed and delivered this Escrow
Agreement as of the date first above written.
SELLING SHAREHOLDERS:
_________________________
Xxxx X. Xxxxx
_____________________________
Xxxxx X. Xxxx
_________________________
Xxxxxxxx Xxxxxxx
_________________________
Xxxxx Xxxxxxxx
_________________________
Xxxx Xxxxx
_________________________
XxXxxxx Xxxxxxxxx
_________________________
Xxxx Xxxxxxxxx
_________________________
Xxxxx Xxxxx
XXXXXXXXXX APPLIED SCIENCE
ASSOCIATES, INC.
By:____________________________
Name: Xxxxxx X. Xxxxx
Title: President
ESCROW AGENT:
RIDER, WEINER & XXXXXXX, P.C.
By: ________________________________
Name: _____________________________
Title: ______________________________
EXHIBIT A
Selling Shareholders
Selling Shareholder Number of Shares Percentage
------------------- ---------------- ----------
XXXX X. XXXXX 111,111 10.00%
XXXXX X. XXXX 543,667 48.93%
XXXXXXXX XXXXXXX 217,445 19.57%
XXXXX XXXXXXXX 44,444 4.00%
XXXX XXXXX 16,667 1.50%
XXXXXXX XXXXXXXXX 88,889 8.00%
XXXX XXXXXXXXX 44,444 4.00%
XXXXX XXXXX 44,444 4.00%
--------- ------
1,111,111 100.00%
========= ======
Exhibit G
---------
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT ("Agreement") is made as of
this 31st day of May, 2006 (the "Effective Date") by and between
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC., a Delaware
corporation ("Purchaser"), QUESTAR EDUCATIONAL SYSTEMS, INC.
(the "Corporation") and _________________, an individual
residing at _________ ___________________________ (the "Selling
Shareholder").
RECITALS
WHEREAS, Purchaser, the Selling Shareholder, other
individual selling shareholders of the Corporation and the
Corporation are parties to that certain Stock Purchase Agreement
dated as of May 31, 2006 (the "Stock Purchase Agreement").
Capitalized terms used herein but not otherwise defined herein
shall have the meanings ascribed thereto in the Stock Purchase
Agreement. The execution and delivery of this Agreement is an
express condition to the fulfillment by the Selling Shareholder
of the Selling Shareholder's obligations under the Stock
Purchase Agreement; and
WHEREAS, pursuant to the Stock Purchase Agreement, the
Purchase Price to be paid thereunder shall be partially paid
with Earnout Payments through October 31, 2009, which term
coincides with the term of this Agreement; and
WHEREAS, Purchaser and the Corporation would suffer
substantial damage and Purchaser's investment in developing the
strategy underlying the purchase of the Shares of the
Corporation would be negatively impacted, if the undersigned
Selling Shareholder engaged in activities prohibited by this
Agreement.
NOW THEREFORE, in consideration of the foregoing and the
covenants of Selling Shareholder hereinafter contained, Selling
Shareholder agrees with the Corporation and Purchaser as
follows:
1. RESTRICTIVE COVENANT. In consideration of the sums
--------------------
paid to the Selling Shareholder pursuant to the Stock Purchase
Agreement, the Selling Shareholder agrees that he will not, for
a period beginning on the Effective Date and continuing until
October 31, 2009, without the prior written consent of Purchaser
or Corporation, anywhere in the United States directly or
indirectly:
(a) own, manage, control, operate, participate in,
consult with, render services to (as an officer, director,
employee, partner, consultant or in any similar role) or
have any other interest as a stockholder, lender or other
financial or beneficial interest in any Competitor;
provided, however, that ownership of not more than two
percent (2%) of any class of securities traded actively,
over-the-counter or through a stock exchange shall not
violate this subparagraph (a);
(b) solicit, induce or persuade any employee or
contractor of Purchaser, Corporation or an Affiliate to
leave employment with that entity for any reason;
(c) hire or retain or assist others in hiring or
retaining any individuals who are employees or contractors
of Purchaser, Corporation or an Affiliate who were
employees or contractors at any time during the twelve (12)
month period prior to the Effective Date of this Agreement;
(d) solicit, call on or take away any Customers of
Purchaser, Corporation or an Affiliate ("Customer" means
any person or entity to whom Purchaser, Corporation or an
Affiliate has provided goods or services, or to whom
Purchaser, Corporation or an Affiliate has submitted a
proposal to provide goods or services and who Selling
Shareholder has been introduced to by or through
Corporation or has become acquainted with by working for
Corporation);
(e) perform or supply any services or products (as an
employee, contractor or otherwise) to such Customers;
(f) induce or persuade or assist others in inducing
or persuading any such Customer to reduce or discontinue
doing business with Purchaser, Corporation or an Affiliate
or to purchase from another person or entity goods or
services supplied or which could be supplied by Purchaser,
Corporation or an Affiliate to that Customer; or
(g) interfere with any business relationship between
Purchaser, Corporation or an Affiliate and any other person
or entity.
2. DEFINITIONS. For purposes of this Agreement, the
-----------
following terms shall have the following definitions:
(a) "Affiliate" means a company (i) 50% or more of
the voting securities of which are owned, directly or
indirectly, by any of Purchaser, the Corporation or the
Selling Shareholder; (ii) which owns, directly or
indirectly, 50% or more of the voting securities of any of
Purchaser, the Corporation or the Selling Shareholder; or
(iii) any person or entity, directly or indirectly,
controlling, controlled by or under common control with the
Purchaser, the Corporation or the Selling Shareholder.
(b) "Competitive Business" means a business that
provides any of the following services, for any of school
grades K through 12 or in the post-secondary educational
market: (i) research, psychometric and test development
services; (ii) development and publication of assessment
materials; (iii) assembling, packaging and distributing
assessment materials; (iv) assessment scanning and
processing of assessment data; (v) developing, producing
and utilizing databases for analysis and reporting of
assessments; (vi) scoring services for standard and
alternative assessments; (vii) performance assessment
services; or (viii) consultation services for clients on
providing project management and professional development
services related to the delivery, scanning or scoring of
assessments. Competitive Business shall also be deemed to
include the licensing, marketing, or distribution of any
Competitive Business. The assessments, referred to herein
and any documents or materials to be provided through the
services performed by any Competitive Business may be in
print, film, tape, electronic, internet or other media or
forms, anywhere in the world, in any language, whether now
known or hereafter developed.
(c) "Competitor" means any person or entity that
owns, manages, controls or engages in any Competitive
Business; provided, however, that, any person or entity
which owns, manages, controls or engages in multiple lines
of business shall be deemed a "Competitor" only with
respect to any such line of business which is a Competitive
Business and not with respect to any such line of business
which is not a Competitive Business.
3. CONSIDERATION. This Agreement, and the restrictive
-------------
covenant contained herein, is made as material enticement for
Purchaser and Corporation to enter into the above mentioned
Stock Purchase Agreement and is incident thereto.
4. CONFIDENTIAL INFORMATION AND NON-DISCLOSURE. Selling
-------------------------------------------
Shareholder understands and acknowledges that as a result of
Selling Shareholder's involvement with Corporation, Selling
Shareholder may have had access to confidential information of
Corporation including, without limitation, Corporation's trade
secrets and proprietary information regarding its inventions,
patentable technologies, technical information, ideas, computer
code, source codes, mask works, software development tools,
specifications, schematics, processes, techniques, designs,
know-how, marketing plans, business strategy, pricing
information, financial data, customer lists, referral and vendor
sources and scanning, scoring, reporting and testing methods and
materials (collectively "Confidential Information"). Selling
Shareholder understands and acknowledges that such Confidential
Information, even though it may have been or may be developed or
otherwise acquired by Selling Shareholder, is the exclusive
property of Corporation and Selling Shareholder shall not at
any time, from this date forward, reveal, report, publish,
transfer or otherwise disclose to any person, corporation or
other entity, or use or exploit, any of Corporation's
Confidential Information, without the written consent of
Purchaser or Corporation, except for such information which
legally and legitimately is or becomes of general public
knowledge from authorized sources other than Selling
Shareholder.
5. SURRENDER OF CORPORATION'S CONFIDENTIAL INFORMATION.
---------------------------------------------------
In connection with the execution of this Agreement, Selling
Shareholder shall deliver to Purchaser (a) all Confidential
Information and (b) all documents, computer discs, electronic
files, computer code, materials, equipment, documents, drawings
and other information both in hard copy and in machine readable
form that in any way relate to the Confidential Information.
Selling Shareholder shall not make or retain any hard or
electronic copies of any such information or materials, make or
retain any summaries or descriptions of any such information or
materials, and/or erase any hard drives or otherwise delete any
such information or materials from any laptop or desktop
computers, computer networks or other electronic devices or
services of Corporation.
6. OWNERSHIP OF CORPORATION'S PROPERTY AND RIGHTS.
----------------------------------------------
(a) INVENTIONS. Selling Shareholder understands and
----------
acknowledges that as a result of Selling Shareholder's
involvement with Corporation, Selling Shareholder may have
conceived, developed or produced ideas, inventions,
documentation, computer code, tools, procedures,
techniques, know-how, improvements and/or other materials,
whether or not they were reduced to practice or made or
conceived by Selling Shareholder solely or jointly with
others that relate to the Corporation's business
(collectively "Inventions"). Selling Shareholder
acknowledges and understands that Corporation shall be
deemed the sole creator and owner of the Inventions.
(b) INTELLECTUAL PROPERTY RIGHTS. Corporation shall
----------------------------
solely own and have exclusive worldwide right, title and
interest in and to the Confidential Information and
Inventions, and to all modifications, enhancements and
derivative works thereof, in all United States and
worldwide trademarks, service marks, trade dress,
copyrights, patents, trade secrets and all other
intellectual property rights related thereto and to the
Corporation's business (including all renewals and
extensions thereof) (collectively "Intellectual Property
Rights"). Selling Shareholder understands and acknowledges
that no license or other interest of any kind in the
Confidential Information, Inventions or Intellectual
Property Rights has been directly or indirectly granted to
Selling Shareholder. Selling Shareholder represents and
warrants that Selling Shareholder will not, from this date
forward, challenge or otherwise impair Purchaser or
Corporation's rights to the Confidential Information,
Inventions or the validity or enforceability of the
Intellectual Property Rights.
(c) ASSIGNMENT OF RIGHTS. From the moment of
--------------------
creation, Selling Shareholder irrevocably assigns and
transfers to Corporation all right, title and interest
worldwide in and to all of the Inventions, to all
modifications, enhancements and derivative works thereof,
and to all worldwide Intellectual Property Rights related
thereto. The above assignment includes without limitation
the exclusive right for Corporation to exploit the
Inventions by and through all media, platforms, processes,
and other means now known or hereafter devised. Selling
Shareholder further irrevocably waives all rights to assert
any moral rights in any way regarding the Inventions and/or
the Intellectual Property Rights related thereto.
(d) NOTICE REQUIRED BY MINNESOTA LAW: Pursuant to
--------------------------------
Minnesota Statute Section 181.78(3), Selling Shareholder is
hereby notified that Paragraph 5(c) regarding assignment of
Inventions does not apply to any invention for which no
equipment, supplies, facility or trade secret information
of Corporation was used and which was developed entirely on
Selling Shareholder's own time, and (1) which does not
relate (i) directly to the business of Corporation or (ii)
to Corporation's actual or demonstrably anticipated
research or development; or (2) which does not result from
any work performed by Selling Shareholder for Corporation.
7. EQUITABLE RELIEF FOR BREACH. Because the breach or
---------------------------
anticipated breach of the restrictions set forth in this
Agreement shall result in the immediate and irrevocable harm and
injury to Purchaser and/or Corporation, for which Purchaser
and/or Corporation will not have an adequate remedy at law,
Selling Shareholder agrees that the Purchaser and/or Corporation
shall be entitled to relief in equity to enjoin temporarily
and/or permanently such breach or anticipated breach and to seek
any and all other legal and equitable remedies to which each may
be entitled. If the Purchaser, and/or Corporation prevails in
any action at equity or at law brought to enforce this
Agreement, Selling Shareholder agrees to pay all costs of
litigation including the reasonable attorneys' fees and expenses
of the Purchaser and Corporation. In the event the restrictions
set forth in this Agreement are considered by a court of
competent jurisdiction to be excessive in their duration of
scope, they shall be considered modified and valid for such
duration and for such business and area as such court may
determine to the maximum extent permitted by applicable law.
8. GOVERNING LAW. This Agreement shall, with respect to
-------------
any and all matters, including, but not limited to, validity,
construction or performance, be governed by the laws of the
State of Minnesota.
9. SEVERABILITY. All provisions of this Agreement are
------------
intended to be severable. Each provision of this Agreement
constitutes a separate and distinct covenant. In the event any
term, provision, or restriction in this Agreement is held to be
illegal, invalid, or unenforceable in any respect, such findings
shall in no way affect the legality, viability, or
enforceability of all other provisions of this Agreement.
Selling Shareholder, Purchaser and Corporation agree that any
such unenforceable term, provision or restriction shall be
deemed modified to the extent necessary to permit its
enforcement to the maximum extent permitted by applicable law.
10. NO WAIVER. Neither any failure or delay on the part
---------
of any party in exercising its rights shall operate as a waiver,
nor shall a single or partial exercise preclude any further
exercise in any right, power, or privilege by any party.
11. SUCCESSORS AND ASSIGNS. This Agreement shall be
----------------------
binding upon and inure to the benefit of the Purchaser,
Corporation and Selling Shareholder and their respective
successors and assigns and legal representatives.
12. ENTIRE AGREEMENT. This Agreement sets forth the
----------------
parties' final and entire Agreement with respect to its subject
matter and supersedes any and all prior understandings and
agreements. No waiver, alteration or modification of any
provision of this Agreement will be valid unless made in writing
and signed by all of the parties hereto.
13. COUNTERPARTS. This Agreement may be executed in one
------------
or more counterparts, each of which shall be deemed an original
and all of which together shall constitute one and the same
instrument.
14. DEFINED TERMS. Capitalized terms used and not
-------------
otherwise defined herein shall have the meaning ascribed to them
in the Stock Purchase Agreement.
In Witness Whereof, the parties have executed this
Agreement as of the day and year first above written.
Purchaser:
---------
Touchstone Applied Science
Associates, Inc.
By:__________________________
Name:
Title:
Selling Shareholder:
-------------------
_____________________________
Corporation:
-----------
By:
_____________________________
Name:
Title:
Exhibit H
---------
EMPLOYEE PROPRIETARY RIGHTS AGREEMENT
As a condition of my employment by QUESTAR EDUCATIONAL
SYSTEMS, INC., a Minnesota corporation, (the "Company") and
wholly-owned subsidiary of Touchstone Applied Science
Associates, Inc., a Delaware corporation ("TASA") in connection
with the acquisition of the Company by TASA, and in
consideration of my promise of employment, compensation and
enhanced benefits, I, ________________________, agree as
follows:
1. NOT AN EMPLOYMENT AGREEMENT. This Proprietary
---------------------------
Information Agreement shall not be deemed to be an employment
agreement. I understand that nothing in this Proprietary
Information Agreement changes, or is intended to change, the
basic premise that my employment with the Company is governed by
that certain Employment Agreement to which this Agreement is a
part thereof. No representative of the Company has the
authority to enter into an agreement contrary to this. The
Company may in its sole discretion modify, enlarge or eliminate
any of the privileges or benefits of my employment at the
Company without notice consistent with applicable law.
2. CONFIDENTIAL INFORMATION AND INVENTIONS. I
---------------------------------------
acknowledge that I have had and will continue to have access to
the Company, TASA and its affiliates' (each a "TASA Entity" and
collectively, the "TASA Entities") trade secrets and proprietary
information regarding certain test materials, scoring and
reporting processes and other technologies. The TASA Entities=
trade secrets and proprietary information shall include without
limitation ideas, computer code, source codes, mask works,
software development tools, specifications, schematics,
processes, techniques, designs, know-how, marketing plans,
financial data, customer lists, referral and vendor sources, and
scanning, scoring, reporting and testing methods (collectively
"Confidential Information").
I may also have access to proprietary information or
materials belonging to other parties which the Company is
required to keep confidential (collectively "Third Party
Information"). During my employment, I may also conceive,
develop or produce ideas, inventions, documentation, computer
code, tools, procedures, techniques, know-how, improvements
and/or other materials, whether or not they are reduced to
practice or made or conceived by me solely or jointly with
others that relate to the business of any TASA Entity
(collectively "Inventions").
3. CONFIDENTIALITY. During and after my employment, I
---------------
will not disclose or otherwise distribute the Confidential
Information, Inventions or Third Party Information to any third
party. I will use the Confidential Information, Inventions and
Third Party Information only to perform my duties as an employee
of the Company, and for no other purpose. I further agree that
after I leave the Company, I will not incorporate, use or
exploit any of the Confidential Information, Inventions or Third
Party Information (disclosed separately or embodied in the
products, procedures or operations of any TASA Entity), or
assist any others in doing so.
4. PROPERTY RIGHTS. The TASA Entities shall solely own
---------------
and have exclusive worldwide right, title and interest in and to
the Confidential Information and Inventions, and to all
modifications, enhancements and derivative works thereof, in all
United States and worldwide trademarks, service marks, trade
dress, copyrights, patents, trade secrets and all other
intellectual property rights related thereto (including all
renewals and extensions thereof) (collectively "Intellectual
Property Rights"). No license or other interest of any kind in
the Confidential Information, Inventions or Third Party
Information is directly or indirectly granted to me. During and
after my employment with the Company, I will not challenge or
otherwise impair any TASA Entity's rights to the Confidential
Information, Inventions, its products, and/or the validity or
enforceability of its Intellectual Property Rights.
5. ASSIGNMENT. I agree that the Inventions are made
----------
within the scope of my employment with the Company, are
commissioned at the specific request and control of the Company,
and shall be deemed "works made for hire" under the United
States copyright laws, and the Company shall be the sole creator
and owner of the Inventions. From the moment of creation, I
irrevocably assign and transfer to the Company all right, title
and interest worldwide in and to all of the Inventions, to all
modifications, enhancements and derivative works thereof, and to
all worldwide Intellectual Property Rights related thereto. The
above assignment includes without limitation the exclusive right
for the Company to exploit the Inventions by and through all
media, platforms, processes, and other means now known or
hereafter devised. I further irrevocably waive all rights to
assert any moral rights in any way regarding the Inventions
and/or the Intellectual Property Rights related thereto.
NOTICE REQUIRED BY MINNESOTA LAW: Pursuant to Minnesota
Statute Section 181.78(3), I am hereby notified that this
Paragraph 5 regarding assignment of Inventions does not apply to
any invention for which no equipment, supplies, facility or
trade secret information of a TASA Entity was used and which was
developed entirely on my own time, and (1) which does not relate
(a) directly to the business of any TASA Entity; or (b) to any
TASA Entity's actual or demonstrably anticipated research or
development, or (2) which does not result from any work
performed by me for the Company.
6. REPRESENTATIONS. I warrant that in performing my job
---------------
at the Company, I have not and will not violate any legal or
equitable duties owed to any of my current or previous
employers, customers or other business or consulting
relationships (collectively "Relationships"), including without
limitation duties relating to protecting confidential
information or refraining from competitive activities. I
further warrant that (a) I have not and will not disclose to
anyone at any TASA Entity any confidential or proprietary
information or material of a current or previous Relationship
(other than my Relationship with the Company); (b) I will not in
any way use, incorporate or refer to any confidential or
proprietary information or material of a current or previous
Relationship (other than my Relationship with the Company) in
performing my work at the Company; and (c) my Inventions shall
be new and original, and shall not use or incorporate any
materials or intellectual properties of third parties, except
for such materials as specifically authorized in advance by the
Company for which the Company has or obtains a license to use.
7. PRIOR INVENTIONS. I understand that all inventions,
----------------
if any, which I made prior to my employment with the Company are
excluded from this Agreement. I warrant that Exhibit "A"
represents a complete and accurate list of all of my prior
inventions, including numbers of all patent, trademark and
copyright applications or registrations and brief descriptions
of all unpatented, un-trademarked or un-copyrighted inventions
which are not the property of a current or previous
Relationship. I agree to notify the Company in writing before I
make any disclosure or perform any work on behalf of any TASA
Entity which appears to threaten or conflict with my rights in a
prior invention. In the event I fail to give such notice, I
agree that I will have no right to make any claim at any time
against any TASA Entity regarding the prior invention. To the
extent that I incorporate any of my prior inventions into the
Company's products or services, I hereby grant to the Company a
non-exclusive, irrevocable, royalty free, perpetual and
worldwide license, with the right to sublicense, to make, have
made, modify, copy, perform, display, make derivative works,
distribute, use and/or sell such prior inventions as part of or
in connection with such product or service.
8. TERMINATION. In the event my employment is terminated
-----------
for any reason, I resign or otherwise leave the Company 's
employ or at any other time upon the Company 's request, I will
immediately deliver to the Company (a) all Confidential
Information, Third Party Information and Inventions, and (b) all
documents, computer discs, electronic files, computer code,
materials, equipment, documents, drawings and other information
both in hard copy and in machine readable form that in any way
relate to the Confidential Information, Third Party Information,
Inventions or my employment or other work at the Company. I
will not make or retain any hard or electronic copies of any
such information or materials, make or retain any summaries or
descriptions of any such information or materials, and/or erase
any hard drives or otherwise delete any such information or
materials from any laptop or desktop computers, computer
networks or other electronic devices or services of the Company.
Immediately upon my termination or other departure, I agree to
sign and deliver to the Company the "Termination Certificate" in
Exhibit "B." During my employment with the Company and at all
times thereafter, I agree that I will not disparage any TASA
Entity to third parties.
9. ENFORCEMENT. I agree that the Company will be
-----------
irreparably harmed and money damages will be inadequate
compensation to the Company in the event I breach any provision
of this Agreement. Accordingly, I agree that all the provisions
of this Agreement shall be specifically enforceable, and the
Company shall be entitled to injunctive relief against me in
addition to other available remedies, for my breach of any
provision of this Agreement. I further agree that all of the
provisions of this Agreement are reasonable and necessary to
protect Confidential Information of the TASA Entities,
contractual obligations regarding Third Party Information,
Inventions, goodwill of its business and its competitive
position in the marketplace, and that such provisions are fair
and will not prevent me from earning a sufficient livelihood. I
also agree that any claim I may have against any TASA Entity
shall not constitute a defense to the Company 's enforcement of
this Agreement.
10. GOVERNING LAW AND VENUE. This Agreement shall be
-----------------------
interpreted and enforced according to the substantive laws of
the State of Minnesota, without application of its conflicts or
choice of law rules. I irrevocably submit to the jurisdiction
and venue of the state and/or federal courts located in
Minnesota for any action or proceeding regarding this Agreement.
11. ASSIGNMENT. I agree that I have no right to assign or
----------
otherwise transfer any of my rights or obligations under this
Agreement, in whole or in part. This Agreement shall be binding
upon and inure to the benefit of each TASA Entity and each of
their successors, assigns and legal representatives.
12. WAIVER. I agree that any TASA Entity's failure to
------
enforce any provision of this Agreement shall not be deemed a
waiver unless such waiver is in writing and signed by the
Company.
13. VALIDITY. If any provision of this Agreement is held
--------
by a court of competent jurisdiction to be invalid, void or
unenforceable, the remaining provisions shall remain in full
force and effect.
14. ENTIRE AGREEMENT. This Agreement constitutes the
----------------
entire agreement regarding the subject matter hereof, and
supersedes all prior or contemporaneous understandings, whether
oral or written. This Agreement cannot be modified or amended,
except by a writing signed by both The Company and me. Exhibits
"A" and "B" are fully incorporated herein.
15. SURVIVAL. I agree that all of the provisions of this
--------
Agreement shall survive the termination of this Agreement or my
employment with the Company except for Paragraph 7.
Dated as of _______________
____________________
(Name of Employee)
EXHIBIT "A"
LIST OF PRIOR INVENTIONS
______ No prior inventions
______ See below
Title Date of Creation Identifying Number and Brief
----- ---------------- ----------------------------
Description
-----------
______________ _________________ ____________________________
______________ _________________ ____________________________
______________ _________________ ____________________________
______________ _________________ ____________________________
EXHIBIT "B"
TERMINATION CERTIFICATE
I hereby certify that:
(a) I have delivered and returned to the Company (i) all
Confidential Information, Third Party Information and
Inventions, and (ii) all notes, records, computer discs,
electronic files, computer code, materials, equipment, drawings,
documents and other information in any way related to my
employment or other work for the Company or any other TASA
Entity (collectively "Materials");
(b) I have not made or retained any hard or electronic
copies of any of the Materials, and to not have in my
possession, at home or otherwise, any of the Materials or copies
thereof; and
(c) I have fully complied with and will continue to fully
comply with all the provisions of the Employee Proprietary
Information Agreement previously signed by me, including without
limitation reporting Inventions and keeping confidential all of
the Confidential Information, Third Party Information and
Inventions.
DATED: ______________________ _______________________________
(Name of Employee)
Exhibit I
---------
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement") is made and
entered into effective as of May 31, 2006, by and between
QUESTAR EDUCATIONAL SYSTEMS, INC., a Minnesota corporation, with
its principal place of business at 0000 Xxxxx 000xx Xxxxxx Xxxx,
Xxxxx Xxxxxx, Xxxxxxxxx 00000, (the "Company"), TOUCHSTONE
APPLIED SCIENCE ASSOCIATES, INC., a Delaware corporation and
parent entity of the Company, with its principal place of
business at 0 Xxxxxxxxxxxx Xxxxxxx, Xxxxxxxx, Xxx Xxxx 00000
("TASA"), and _____________________, an individual residing at
______________________________ _______________________
("Executive"). The Company and Executive are hereinafter
collectively referred to as the "Parties," and individually
referred to as a "Party."
RECITALS
A. Executive has been employed by the Company as an at-
will employee in the position of ______________________; and
B. The Company is being acquired by TASA, and the Company
and TASA desire assurance of the association and services of
Executive in order to retain the experience, skills, abilities,
background and knowledge of Executive and the Company is willing
to engage the services of Executive on the terms and conditions
set forth in this Agreement.
C. Executive desires to enter into this Agreement to
obtain contractual rights to employment and the enhanced
benefits offered by the Company and by TASA for employees of the
Company, and Executive is willing to continue such employment on
the terms and conditions set forth in this Agreement.
AGREEMENT
In consideration of the foregoing Recitals and the mutual
promises and covenants herein contained, and for other good and
valuable consideration, the Parties, and TASA, where applicable,
intending to be legally bound, agree as follows:
1. EMPLOYMENT.
----------
1.1 TERM. The Company hereby employs
----
Executive, and Executive hereby accepts employment by the
Company, upon the terms and conditions set forth in this
Agreement for the period commencing May 31, 2006, and ending May
31, 2008. Notwithstanding anything herein to the contrary,
Executive's employment under this Agreement may be terminated,
subject to the terms and conditions of Section 6 herein.
1.2 TITLE. Executive shall have the title
-----
of _______________________ of the Company and shall serve in such
other executive capacity or capacities as the Company may from
time to time prescribe.
1.3 DUTIES. Executive shall do and perform
------
all services, acts or things necessary or advisable to manage and
conduct the business of the Company and which are normally
associated with the position of ______________________,
consistent with the Bylaws of the Company and as required by the
Company. Further, Executive shall have the following duties:
[Description of Duties]. Executive shall report directly to Xxxx
Xxxxx, President of the Company, or his successor.
1.4 LOCATION. Unless the Parties otherwise
--------
agree in writing, during the term of this Agreement, Executive
shall perform the services he is required to perform pursuant to
this Agreement in offices located in Minneapolis, Minnesota, or
at any other place at which TASA or the Company maintains an
office within fifty (50) miles of Minneapolis, Minnesota;
provided, however, that the Company may from time to time require
Executive to travel temporarily to other locations in connection
with the Company's or TASA's business.
2. PROPRIETARY RIGHTS AGREEMENT.
----------------------------
Concurrent with the execution of this Agreement,
Executive shall enter into an Employee Proprietary Rights
Agreement, the form of which is attached hereto as Exhibit A and
made a part hereof.
3. LOYAL AND CONSCIENTIOUS PERFORMANCE
-----------------------------------
3.1 EXECUTIVE'S DUTIES TO COMPANY. During his
-----------------------------
employment by the Company, Executive shall devote his full time,
best efforts to the performance of his duties under this
Agreement. Executive acknowledges and agrees that Executive
owes a fiduciary duty of loyalty, obedience and care to act at
all times in the best interests of the Company and to do no act
which would injure the business, interests, or reputation of the
Company or any of its affiliates.
3.2 CONFLICTS OF INTEREST. It is agreed that any
---------------------
direct or indirect interest in, connection with, or benefit from
any outside activities, particularly commercial activities,
which interest might in any way adversely affect the Company or
any of its or TASA's affiliates, involves a possible conflict of
interest. In keeping with Executive's fiduciary duties to the
Company, Executive agrees that Executive shall not knowingly
become involved in a conflict of interest with the Company or
any of its or TASA's affiliates, or upon discovery thereof,
shall disclose to the Company's Board of Directors any facts
which might involve such a conflict of interest that has not
been approved by the Company's Board of Directors. Executive
agrees that the Company's determination as to whether a conflict
of interest exists shall be conclusive. The Company reserves
the right to take such action, as in its judgment, will end the
conflict.
4. NON-COMPETITION.
---------------
4.1 NO COMPETITION DURING EMPLOYMENT.
--------------------------------
Except with the prior written consent of the Company's Board of
Directors, Executive will not, during his employment by the
Company, engage in competition with the Company, either directly
or indirectly, in any manner or capacity, as adviser, principal,
agent, partner, officer, director, employee, member of any
association or otherwise, with any business, entity or individual
who develops, publishes, manages, operates, licenses, markets,
distributes or provides scanning and scoring services relating to
instructional materials, testing, test development, test
preparation and/or assessment in the K through 12 and post-
secondary assessment market, in each case whether in print, film,
tape, electronic, internet or other media or other forms, whether
now know or hereinafter invented. Executive acknowledges that in
consideration of the purchase by TASA of his capital stock in the
Company, Executive has entered into a Non-competition Agreement
with TASA which extends beyond the employment term stated herein.
4.2 NO INVESTMENTS. Except as permitted
--------------
herein, Executive agrees not to acquire, assume or participate
in, directly or indirectly, any position, investment or interest
known by him to be adverse or antagonistic to the Company, its
business or prospects, financial or otherwise. Ownership by
Executive, as a passive investment, of less than one percent (1%)
of the outstanding shares of capital stock of any corporation
with one or more classes of its capital stock listed on a
national securities exchange or publicly traded in the over-the-
counter market shall not constitute a breach of this Section.
5. COMPENSATION OF EXECUTIVE.
-------------------------
5.1 BASE SALARY. The Company shall pay
-----------
Executive an annual base salary of _________________________
($____________) Dollars (the "Base Salary"), payable in equal
installments in accordance with TASA's standard policy regarding
payment of compensation to executives. Such salary shall be
prorated for any partial year of employment on the basis of a 365
day fiscal year.
5.2 ADJUSTMENTS. Executive's base salary
-----------
shall be subject to adjustment from time to time pursuant to the
employee compensation policies of TASA in effect for executive
employees of the Company from time to time. Executive's adjusted
base salary shall be Executive's base salary for purposes of this
Agreement until the effective date of any subsequent change.
5.3 BONUS. In addition to Base Salary, for
-----
fiscal year ended October 31, 2006, and in connection with each
twelve month period thereafter during the Employment Term
(November 1 - October 31), Employee shall be eligible to
participate in such Senior Level Bonus Program as is established
for executive level employees of TASA and approved by the
Compensation Committee of TASA.
5.4 BENEFITS. In addition to Base Salary,
--------
Executive shall be eligible to participate in or benefit from,
such medical insurance, life insurance, disability insurance,
pension, profit-sharing, stock purchase and any other fringe
benefit plans, practices, programs or policies as provided by the
Company, or TASA on behalf of the Company employees, in
accordance with the terms of such plans, practices, programs and
policies, as amended from time to time.
5.5 KEY MAN INSURANCE. Executive agrees that,
-----------------
subject to approval of the Chief Executive Officer of TASA, the
Company or TASA may obtain key man life insurance with respect to
Executive, and in connection therewith, Executive agrees to
submit to all reasonable and customary examinations requested by
the provider of such life insurance.
5.6 EXPENSES. Executive shall be entitled
--------
to reimbursement for all normal and reasonable travel,
entertainment and other expenses necessarily incurred by him in
the performance of his duties hereunder in accordance with the
policies, practices and procedures of TASA as amended from time
to time.
5.7 DISABILITY. Except as hereinafter
----------
provided, the Company shall pay Executive for a period, during
the Employment Term in which he is unable fully to perform his
duties because of physical or mental disability or incapacity, an
amount and for the period of time required under the TASA
Personnel Handbook, as it may be amended by TASA from time to
time.
5.8 TAXES. All of Executive's compensation
-----
shall be subject to customary withholding taxes and any other
employment taxes as are required to be collected or withheld by
the Company.
5.9 BENEFITS: SIMILAR TREATMENT. Nothing
---------------------------
in this Agreement is to be construed or interpreted to provide
greater rights, participation, coverage, or benefits under such
benefit plans or programs than provided to similarly situated
employees pursuant to the terms and conditions of such benefit
plans and programs. The Company shall not by reason of Sections
5.1 through and including 5.7, be obligated to institute,
maintain, or refrain from changing, amending, or discontinuing,
any of such benefit plans or programs, so long as such actions
are applicable to similarly situated employees generally. Unless
specifically provided for in a written plan document adopted by
the Board of Directors, or TASA if provided on behalf of Company
employees, none of the benefits or arrangements described in this
Article shall be secured or funded in any way, and each shall
instead constitute an unfunded and unsecured promise to pay money
in the future exclusively from the general assets of the Company.
5.10 STOCK INCENTIVE PLAN. As part of the
--------------------
consideration to be paid to Executive for his services hereunder,
Executive shall be eligible to participate in any stock incentive
plan adopted by TASA or the Company (the "Plan") for which an
executive level employee may participate.
5.11 REGISTRATION STATEMENT. The Company hereby
----------------------
agrees that it shall cause to be filed with the Securities and
Exchange Commission a registration statement on Form S-8 (or
equivalent form as may be in effect at such time) with respect to
all options granted to Executive under the Plan. The Company
covenants that it will keep such registration statement current
until Executive is no longer employed by the Company. The
Company hereby agrees that, for so long as either the Company
does not have an effective registration statement on Form S-8 or
the Company has an effective registration statement on Form S-8
but Executive is restricted in his ability to resell shares
acquired pursuant to the exercise of options because of the
provisions of General Instruction C.2(b) to Form S-8, Executive
shall have "piggyback" registration rights with respect to the
options granted to Executive under the Plan and the shares
underlying such options.
5.12 TERMINATION OF EMPLOYMENT. In the event that
-------------------------
Executive's employment is terminated pursuant to Section 6
hereof, other than those obligations accrued or earned and vested
(if applicable) by Executive through the date of termination,
Executive's employment hereunder shall terminate without further
obligations to Executive.
6. TERMINATION.
-----------
6.1 DEATH OR DISABILITY. In the event of
-------------------
the Executive's "Disability" (as defined below), Executive's
employment with the Company shall terminate effective not less
than 30 days after the date of such event. "Disability" means the
earlier of (i) a mental or physical condition that renders
Executive incapable of performing his duties and obligations
under this Agreement for a period of three (3) consecutive
months, or more than ninety (90) days in any eight (8) month
period, in the written opinion of a competent physician
specializing in such condition selected by the Company who has
personally examined and evaluated Executive's condition; (ii)
determination of Disability under any disability income or
disability buyout policy on Executive; (iii) determination of
Disability under TASA's Personnel Handbook as in effect from time
to time. Executive agrees to submit to appropriate medical
examination by such physician at the Company's expense and that
such physician's determination shall be final. Executive's
employment with the Company shall terminate immediately upon the
death of Executive.
6.2 TERMINATION FOR CAUSE. The Company may
---------------------
terminate Executive's employment at any time for "Cause," as
defined below. "Cause" shall mean termination by action of the
President of the Company or Chief Executive Officer of TASA due
to (i) any act or acts of personal dishonesty engaged in by
Executive, (ii) failure by Executive to perform Executive's
obligations under Section 1 of this Agreement which are not
remedied within thirty (30) days after receipt of written notice
from the Corporation; (iii) conviction of Executive of a felony
or any act of embezzlement or misappropriation of funds, (iv)
material breach of any representation or warranty of Executive in
this Agreement, or (v) material breach of the provisions of
Section 2, 3 or 4 hereof; (vi) engaging in conduct that Executive
knows or should know may be materially injurious to the Company,
TASA, or any of its affiliates, (vii) involvement in a conflict
of interest as referenced in Section 1.6 for which the Company
makes a determination to terminate the employment of Executive
and which remains uncorrected for thirty (30) days following
written notice to Executive by the Company of such conflict and
determination, (viii) breach of any material provision of this
Agreement or corporate code or policy which remains uncorrected
for thirty (30) days following written notice to Executive by the
Company of such breach, or (ix) acts involving moral turpitude.
6.3 EFFECT OF TERMINATION. If this
---------------------
Agreement is terminated by the Company under this Section 6, the
Company shall pay Executive or his estate within the next regular
payroll period after such termination any unpaid salary and bonus
payments, if any, which are payable as of such effective date.
If Executive is terminated under Section 6.2, all then non-
exercisable options shall immediately and automatically
terminate, and any registration rights theretofore granted which
have not been invoked with respect to shares of common stock of
TASA either acquired by Executive pursuant to the exercise of
stock options or underlying vested options shall immediately and
automatically terminate.
6.4 EXPIRATION OF AGREEMENT: SEVERANCE. If (i)
----------------------------------
Executive is still employed under this Agreement on the
expiration date of the Agreement; and (ii) on or before the
expiration of this Agreement, (x) Executive is not offered a new
employment agreement for continued employment with the Company,
TASA or an affiliate (a "New Agreement"), and (y) the decision
not to offer a New Agreement is other than for Cause, subject to
the execution and delivery by Executive of the Release as defined
in Section 6.5 below, the Company shall pay to Executive at the
option of the Company, either in a lump sum within sixty (60)
days after the expiration of this Agreement, or over such normal
payroll periods of the Company as are necessary to pay out the
full amount to Executive of the Severance Payment as defined in
the next sentence (the "Severance Payment"). The Severance
Payment shall be the aggregate of the following amounts: (i) any
unpaid salary and bonus payments, if any, payable as of such
expiration date; and (ii) an amount equal to six (6) months of
the Executive's Base Salary (on an annualized basis) for the year
which includes the expiration date. If Executive is still
employed under this Agreement on the expiration date of the
Agreement and Executive is offered a New Agreement which
Executive does not execute and deliver on or before the
expiration of the Term hereof (or such date as the Parties
mutually agree in writing), for any reason or for no reason,
Executive shall not be entitled to the Severance Payment and the
terms of Section 6.3 shall apply to the termination of
Executive's employment.
Executive agrees that prior to payment of the Severance
Payment pursuant to this Section 6.4, Executive shall, as a
condition thereto, execute a release, based on the Company's
standard form (including mutual confidentiality and non-
disparagement provisions), of any and all claims he may have
against the Company and TASA and each of their respective
officers, directors, employees and affiliates, except for his
right to enforce any post-employment obligations to him,
including but not limited to obligations of the Company under
this Agreement and stock option agreements under the Plan (the
"Release").
7. ASSIGNMENT AND BINDING EFFECT. This Agreement shall be
-----------------------------
binding upon and inure to the benefit of Executive and
Executive's heirs, executors, personal representatives, assigns,
administrators and legal representatives. Because of the unique
and personal nature of Executive's duties under this Agreement,
neither this Agreement nor any rights or obligations under this
Agreement shall be assignable by Executive. This Agreement
shall be binding upon and inure to the benefit of the Company
and TASA and each of their successors, assigns and legal
representatives.
8. NOTICES. All notices or demands of any kind required or
-------
permitted to be given by the Company or Executive under this
Agreement shall be given in writing and shall be personally
delivered (and receipted for) or mailed by certified mail,
return receipt requested, postage prepaid, addressed as follows:
8.1 NOTICE TO COMPANY. If to the Company:
-----------------
Questar Educational Systems, Inc., c/o Touchstone Applied Science
Associates, Inc., 0 Xxxxxxxxxxxx Xxxxxxx, Xxxxxxxx, XX 00000,
Att: Xx. Xxxxxx X. Xxxxx.
8.2 NOTICE TO EXECUTIVE. If to Executive:
-------------------
_____________________________ ____________________________.
8.3 RECEIPT OF NOTICE. Any such written notice
-----------------
shall be deemed received when personally delivered or three (3)
days after its deposit in the United States mail as specified
above.
8.4 CHANGE OF ADDRESS. Either Party may change
-----------------
its address for notices by giving notice to the other Party in
the manner specified in this section.
9. INTEGRATION. This Agreement and the Exhibit hereto
-----------
contains the complete, final and exclusive agreement of the
Parties relating to the terms and conditions of Executive's
employment. This Agreement supersedes and terminates all prior
oral and written employment agreements or arrangements between
the Parties.
10. AMENDMENT. This Agreement cannot be amended or
---------
modified except by a written agreement signed by Executive, the
Company and TASA
11. WAIVER. No term, covenant or condition of this
------
Agreement or any breach thereof shall be deemed waived, except
with the written consent of the Party against whom the waiver is
claimed, and any waiver or any such term, covenant, condition or
breach shall not be deemed to be a waiver of any preceding or
succeeding breach of the same or any other term, covenant,
condition or breach.
12. SEVERABILITY. The finding by a court of competent
------------
jurisdiction of the unenforceability, invalidity or illegality
of any provision of this Agreement shall not render any other
provision of this Agreement unenforceable, invalid or illegal.
Such court shall have the authority to modify or replace the
invalid or unenforceable term or provision with a valid and
enforceable term or provision which most accurately represents
the parties' intention with respect to the invalid or
unenforceable term or provision.
13. INTERPRETATION; CONSTRUCTION. The headings set forth
----------------------------
in this Agreement are for convenience of reference only and
shall not be used in interpreting this Agreement. This Agreement
has been drafted by legal counsel representing the Company, but
Executive has been encouraged, and has consulted with, his own
independent counsel and tax advisors with respect to the terms
of this Agreement. The Parties and TASA acknowledge that each
party and its counsel has reviewed and revised, or had an
opportunity to review and revise, this Agreement, and the normal
rule of construction to the effect that any ambiguities are to
be resolved against the drafting party shall not be employed in
the interpretation of this Agreement.
14. REPRESENTATIONS AND WARRANTIES. Executive represents
------------------------------
and warrants that he is not restricted or prohibited,
contractually or otherwise, from entering into and performing
each of the terms and covenants contained in this Agreement, and
that his execution and performance of this Agreement will not
violate or breach any other agreements between Executive and any
other person or entity.
15. LITIGATION COSTS. Should any litigation, arbitration,
----------------
or administrative action be commenced between the Parties, TASA,
or any of their personal representatives concerning any
provision of this Agreement or the rights and duties of any
person in relation to this agreement, the Party or Parties, or
TASA if prevailing in such action shall be entitled, in addition
to such other relief as may be granted, to a reasonable sum as
and for that person or entity's attorney's fees in such
litigation which shall be determined by the court, arbitrator,
or administrative agency, in such action or in a separate action
brought for that purpose.
16. COUNTERPARTS. This Agreement may be executed in two
------------
counterparts, each of which shall be deemed an original, all of
which together shall contribute one and the same instrument.
17. GOVERNING LAW. This Agreement shall be governed by
-------------
and construed under the laws of the State of Minnesota, without
regard to the choice of law provisions of this or any other
jurisdictions. The courts of the State of Minnesota shall have
exclusive jurisdiction over all matters arising out of or in
connection with this Agreement.
18. INJUNCTIVE RELIEF. Executive is obligated under this
-----------------
Agreement to render services and comply with covenants of a
special, unique, unusual and extraordinary character, thereby
giving this Agreement peculiar value, so that the loss of such
service or violation by Executive of this Agreement, including,
but not limited to, the Proprietary Rights Agreement, could not
reasonably or adequately be compensated in damages in an action
at law. Therefore, in addition to any other remedies or
sanctions provided by law, whether criminal or civil, and
without limiting the right of the Company and successors or
assigns to pursue all other legal and equitable rights available
to them, the Company and TASA, individually, shall have the
right during Executive's employment hereunder (or thereafter
with respect to obligations continuing after the termination of
this Agreement) to compel specific performance hereof by
Executive or to obtain temporary and permanent injunctive relief
against violations hereof by Executive, including, but not
limited to, violations of the Proprietary Rights Agreement, and,
in furtherance thereof, to apply to any court with jurisdiction
over the Parties to enforce the provisions hereof.
19. ADVERTISING WAIVER. Executive agrees to permit the
------------------
Company, TASA and its affiliates, and persons or other
organizations authorized by the Company, TASA or its affiliates,
to use, publish and distribute advertising or sales promotional
literature concerning the products, or the machinery and
equipment used in the production thereof, in which Executive's
name and/or pictures of Executive taken in the course of
Executive's provision of services hereunder appear. Executive
hereby waives and releases any claim or right Executive may
otherwise have arising out of such use, publication or
distribution.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date
first above written.
COMPANY EXECUTIVE
Questar Educational
Systems, Inc., a Minnesota
corporation
By:___________________________
Title:________________________
Exhibit A
Proprietary Rights Agreement
EMPLOYEE PROPRIETARY RIGHTS AGREEMENT
-------------------------------------
As a condition of my employment by QUESTAR EDUCATIONAL
SYSTEMS, INC., a Minnesota corporation, (the "Company") and
wholly-owned subsidiary of Touchstone Applied Science
Associates, Inc., a Delaware corporation ("TASA") in connection
with the acquisition of the Company by TASA, and in
consideration of my promise of employment, compensation and
enhanced benefits, I, _________________, agree as follows:
1. NOT AN EMPLOYMENT AGREEMENT. This Proprietary
---------------------------
Information Agreement shall not be deemed to be an employment
agreement. I understand that nothing in this Proprietary
Information Agreement changes, or is intended to change, the
basic premise that my employment with the Company is governed by
that certain Employment Agreement to which this Agreement is a
part thereof. No representative of the Company has the
authority to enter into an agreement contrary to this. The
Company may in its sole discretion modify, enlarge or eliminate
any of the privileges or benefits of my employment at the
Company without notice consistent with applicable law.
2. CONFIDENTIAL INFORMATION AND INVENTIONS. I
---------------------------------------
acknowledge that I have had and will continue to have access to
the Company, TASA and its affiliates' (each a "TASA Entity" and
collectively, the "TASA Entities") trade secrets and proprietary
information regarding certain test materials, scoring and
reporting processes and other technologies. The TASA Entities=
trade secrets and proprietary information shall include without
limitation ideas, computer code, source codes, mask works,
software development tools, specifications, schematics,
processes, techniques, designs, know-how, marketing plans,
financial data, customer lists, referral and vendor sources, and
scanning, scoring, reporting and testing methods (collectively
"Confidential Information").
I may also have access to proprietary information or
materials belonging to other parties which the Company is
required to keep confidential (collectively "Third Party
Information"). During my employment, I may also conceive,
develop or produce ideas, inventions, documentation, computer
code, tools, procedures, techniques, know-how, improvements
and/or other materials, whether or not they are reduced to
practice or made or conceived by me solely or jointly with
others that relate to the business of any TASA Entity
(collectively "Inventions").
3. CONFIDENTIALITY. During and after my employment, I
---------------
will not disclose or otherwise distribute the Confidential
Information, Inventions or Third Party Information to any third
party. I will use the Confidential Information, Inventions and
Third Party Information only to perform my duties as an employee
of the Company, and for no other purpose. I further agree that
after I leave the Company, I will not incorporate, use or
exploit any of the Confidential Information, Inventions or Third
Party Information (disclosed separately or embodied in the
products, procedures or operations of any TASA Entity), or
assist any others in doing so.
4. PROPERTY RIGHTS. The TASA Entities shall solely own
---------------
and have exclusive worldwide right, title and interest in and to
the Confidential Information and Inventions, and to all
modifications, enhancements and derivative works thereof, in all
United States and worldwide trademarks, service marks, trade
dress, copyrights, patents, trade secrets and all other
intellectual property rights related thereto (including all
renewals and extensions thereof) (collectively "Intellectual
Property Rights"). No license or other interest of any kind in
the Confidential Information, Inventions or Third Party
Information is directly or indirectly granted to me. During and
after my employment with the Company, I will not challenge or
otherwise impair any TASA Entity's rights to the Confidential
Information, Inventions, its products, and/or the validity or
enforceability of its Intellectual Property Rights.
5. ASSIGNMENT. I agree that the Inventions are made
----------
within the scope of my employment with the Company, are
commissioned at the specific request and control of the Company,
and shall be deemed "works made for hire" under the United
States copyright laws, and the Company shall be the sole creator
and owner of the Inventions. From the moment of creation, I
irrevocably assign and transfer to the Company all right, title
and interest worldwide in and to all of the Inventions, to all
modifications, enhancements and derivative works thereof, and to
all worldwide Intellectual Property Rights related thereto. The
above assignment includes without limitation the exclusive right
for the Company to exploit the Inventions by and through all
media, platforms, processes, and other means now known or
hereafter devised. I further irrevocably waive all rights to
assert any moral rights in any way regarding the Inventions
and/or the Intellectual Property Rights related thereto.
NOTICE REQUIRED BY MINNESOTA LAW: Pursuant to Minnesota
Statute Section 181.78(3), I am hereby notified that this
Paragraph 5 regarding assignment of Inventions does not apply to
any invention for which no equipment, supplies, facility or
trade secret information of a TASA Entity was used and which was
developed entirely on my own time, and (1) which does not relate
(a) directly to the business of any TASA Entity; or (b) to any
TASA Entity's actual or demonstrably anticipated research or
development, or (2) which does not result from any work
performed by me for the Company.
6. REPRESENTATIONS. I warrant that in performing my job
---------------
at the Company, I have not and will not violate any legal or
equitable duties owed to any of my current or previous
employers, customers or other business or consulting
relationships (collectively "Relationships"), including without
limitation duties relating to protecting confidential
information or refraining from competitive activities. I
further warrant that (a) I have not and will not disclose to
anyone at any TASA Entity any confidential or proprietary
information or material of a current or previous Relationship
(other than my Relationship with the Company); (b) I will not in
any way use, incorporate or refer to any confidential or
proprietary information or material of a current or previous
Relationship (other than my Relationship with the Company) in
performing my work at the Company; and (c) my Inventions shall
be new and original, and shall not use or incorporate any
materials or intellectual properties of third parties, except
for such materials as specifically authorized in advance by the
Company for which the Company has or obtains a license to use.
7. PRIOR INVENTIONS. I understand that all inventions,
----------------
if any, which I made prior to my employment with the Company are
excluded from this Agreement. I warrant that Exhibit "A"
represents a complete and accurate list of all of my prior
inventions, including numbers of all patent, trademark and
copyright applications or registrations and brief descriptions
of all unpatented, un-trademarked or un-copyrighted inventions
which are not the property of a current or previous
Relationship. I agree to notify the Company in writing before I
make any disclosure or perform any work on behalf of any TASA
Entity which appears to threaten or conflict with my rights in a
prior invention. In the event I fail to give such notice, I
agree that I will have no right to make any claim at any time
against any TASA Entity regarding the prior invention. To the
extent that I incorporate any of my prior inventions into the
Company's products or services, I hereby grant to the Company a
non-exclusive, irrevocable, royalty free, perpetual and
worldwide license, with the right to sublicense, to make, have
made, modify, copy, perform, display, make derivative works,
distribute, use and/or sell such prior inventions as part of or
in connection with such product or service.
8. TERMINATION. In the event my employment is terminated
-----------
for any reason, I resign or otherwise leave the Company's employ
or at any other time upon the Company's request, I will
immediately deliver to the Company (a) all Confidential
Information, Third Party Information and Inventions, and (b) all
documents, computer discs, electronic files, computer code,
materials, equipment, documents, drawings and other information
both in hard copy and in machine readable form that in any way
relate to the Confidential Information, Third Party Information,
Inventions or my employment or other work at the Company. I
will not make or retain any hard or electronic copies of any
such information or materials, make or retain any summaries or
descriptions of any such information or materials, and/or erase
any hard drives or otherwise delete any such information or
materials from any laptop or desktop computers, computer
networks or other electronic devices or services of the Company.
Immediately upon my termination or other departure, I agree to
sign and deliver to the Company the "Termination Certificate" in
Exhibit "B." During my employment with the Company and at all
times thereafter, I agree that I will not disparage any TASA
Entity to third parties.
9. ENFORCEMENT. I agree that the Company will be
-----------
irreparably harmed and money damages will be inadequate
compensation to the Company in the event I breach any provision
of this Agreement. Accordingly, I agree that all the provisions
of this Agreement shall be specifically enforceable, and the
Company shall be entitled to injunctive relief against me in
addition to other available remedies, for my breach of any
provision of this Agreement. I further agree that all of the
provisions of this Agreement are reasonable and necessary to
protect Confidential Information of the TASA Entities,
contractual obligations regarding Third Party Information,
Inventions, goodwill of its business and its competitive
position in the marketplace, and that such provisions are fair
and will not prevent me from earning a sufficient livelihood. I
also agree that any claim I may have against any TASA Entity
shall not constitute a defense to the Company 's enforcement of
this Agreement.
10. GOVERNING LAW AND VENUE. This Agreement shall be
-----------------------
interpreted and enforced according to the substantive laws of
the State of Minnesota, without application of its conflicts or
choice of law rules. I irrevocably submit to the jurisdiction
and venue of the state and/or federal courts located in
Minnesota for any action or proceeding regarding this Agreement.
11. ASSIGNMENT. I agree that I have no right to assign or
----------
otherwise transfer any of my rights or obligations under this
Agreement, in whole or in part. This Agreement shall be binding
upon and inure to the benefit of each TASA Entity and each of
their successors, assigns and legal representatives.
12 WAIVER. I agree that any TASA Entity's failure to
------
enforce any provision of this Agreement shall not be deemed a
waiver unless such waiver is in writing and signed by the
Company.
13. VALIDITY. If any provision of this Agreement is held
--------
by a court of competent jurisdiction to be invalid, void or
unenforceable, the remaining provisions shall remain in full
force and effect.
14. ENTIRE AGREEMENT. This Agreement constitutes the
----------------
entire agreement regarding the subject matter hereof, and
supersedes all prior or contemporaneous understandings, whether
oral or written. This Agreement cannot be modified or amended,
except by a writing signed by both the Company and me. Exhibits
"A" and "B" are fully incorporated herein.
15. SURVIVAL. I agree that all of the provisions of this
--------
Agreement shall survive the termination of this Agreement or my
employment with the Company except for Paragraph 7.
Dated as of May 31, 2006
________________________
[Employee]
EXHIBIT "A"
LIST OF PRIOR INVENTIONS
______ No prior inventions
______ See below
Title Date of Creation Identifying Number and Brief
----- ---------------- ----------------------------
Description
-----------
______________ _________________ ____________________________
______________ _________________ ____________________________
______________ _________________ ____________________________
______________ _________________ ____________________________
EXHIBIT "B"
TERMINATION CERTIFICATE
I hereby certify that:
(a) I have delivered and returned to the Company (i) all
Confidential Information, Third Party Information and
Inventions, and (ii) all notes, records, computer discs,
electronic files, computer code, materials, equipment, drawings,
documents and other information in any way related to my
employment or other work for the Company or any other TASA
Entity (collectively "Materials");
(b) I have not made or retained any hard or electronic
copies of any of the Materials, and to not have in my
possession, at home or otherwise, any of the Materials or copies
thereof; and
(c) I have fully complied with and will continue to fully
comply with all the provisions of the Employee Proprietary
Information Agreement previously signed by me, including without
limitation reporting Inventions and keeping confidential all of
the Confidential Information, Third Party Information and
Inventions.
DATED: ______________________________ __________________________
[Employee]
Exhibit J
---------
SUPPLY AGREEMENT
----------------
THIS SUPPLY AGREEMENT (this "Agreement"), is made and
entered into as of the 31st day of May, 2006, by and between
QUESTAR EDUCATIONAL SYSTEMS, INC., a Minnesota corporation with
offices at 0000 Xxxxx 000xx Xxxxxx Xxxx, Xxxxx Xxxxxx, XX 00000
("Purchaser") and NATIONAL BUSINESS SYSTEMS, INC., a Minnesota
corporation with offices at 0000 Xxxx Xxxxxxx Xxxx, Xxxxx, XX
00000 ("Supplier").
WHEREAS, it is the intention of the parties that Supplier
provide to Purchaser, and Purchaser purchase from Supplier, high
speed document printing services (the "Services"); and
WHEREAS, Supplier has the capability to provide such
Services; and
WHEREAS, Purchaser desires to enter into a supply agreement
with the Supplier for the Services and is willing to purchase
such Services, all as set forth herein below.
W I T N E S S E T H:
--------------------
1. SERVICES: Supplier hereby agrees to provide to Purchaser,
--------
and Purchaser, hereby agrees to purchase and accept from
Supplier, subject to the provisions of this Agreement,
during the term of this Agreement, the Services. The
Services to be provided hereunder from time to time shall
be initiated by a purchase order submitted to Supplier by
Purchaser, which purchase order shall specify in sufficient
detail the Services, the price(s) and any completion
deadline required by Purchaser on the order (the "Deadline").
2. PRICING:
-------
2.1 The prices for all Services to be provided under this
Agreement shall be set forth in the purchase orders or
order acknowledgements relating to the Services.
2.2 If Supplier performs work substantially similar to the
Services for any other customer on pricing terms (at
comparable volumes) more favorable than those charged
to Purchaser, then Purchaser shall be afforded the
same advantageous terms and conditions either via a
refund issued by Supplier, if Purchaser already has
paid for an order, or via a reduction in the purchase
price charged to Purchaser.
2.3 Supplier hereby represents and warrants that the
prices that shall be charged to Purchaser for the
Services shall be fair market value prices for the
Services based upon prices charged for similar
services (at comparable volumes) provided to third
parties by Supplier and, to the best of Supplier's
knowledge, Supplier's competitors. In the event that
it is determined that the prices charged to Purchaser
hereunder exceed the fair market value for the
Services, Purchaser retains the right to terminate
this Agreement 10 days' following its provision of
written notice to Supplier of such intention to
terminate, during which 10-day period Supplier shall
have an opportunity to cure the overcharge.
Notwithstanding the foregoing, Purchaser's right to
termination in the preceding sentence shall not be its
exclusive remedy, and Purchaser shall retain its
rights to seek any remedy to which it may be entitled
under applicable law.
2.4 Purchaser shall have the right to audit Supplier's
business records in order to validate that Supplier
has adhered to the requirements of Sections 2.2 and
2.3.
3. TERM: The initial term of this Agreement shall commence on
----
the date hereof and shall end on May 31, 2009.
4. TERMINATION. In the event that one party becomes subject
-----------
to an Event of Default (as defined below), the Agreement
may be terminated by the non-defaulting party upon thirty
(30) days prior written notice.
4.1 For purposes of this Agreement, an Event of Default in
relation to a party means the occurrence of one or
more of the following circumstances:
(a) failure to perform or fulfill any obligation or
condition of this Agreement to be performed or
fulfilled by such party, and such failure
continues for thirty (30) business days (or such
longer period of time as is agreed by the parties
to be reasonably necessary to allow such party to
show or perform or observe such obligation) after
written notice thereof is given by the other
party; or
(b) failure to make any payment when due hereunder,
if such failure continues for thirty (30) days
after such payment was due, unless such payment
is being actively contested in good faith by the
party; or
(c) the making of any general assignment or
arrangement for the benefit of creditors, the
filing of voluntary or involuntary petition in
bankruptcy by or against such party under any
bankruptcy law or similar proceeding, the
appointment of a trustee or receiver or the
commencement of a similar proceeding to take
possession of, or the attachment or other
judicial seizure of, substantially all of such
party's assets, or the taking by such party of
any action in furtherance of the foregoing; or
(d) an order is made or a resolution is passed or a
petition is filed by such party for the
liquidation, dissolution or winding-up of such
party (other than a corporate reorganization,
recapitalization, realignment or restructuring
pursuant to Section 368 of the Internal Revenue
Code of 1986, as amended); or
(e) a final, non-appealable, decision of any
judicial, administrative, governmental authority
or other authority or arbitrator is made which
enjoins or restrains, or renders illegal or
unenforceable, the performance or observance by
such party of this Agreement.
4.2 No later than two (2) business days following
termination hereof and regardless as to whether the
parties are in dispute with regard to any payment,
Supplier shall surrender to Purchaser all of
Purchaser's records, data and materials, whether in
hard copy or electronically.
5. PAYMENT: Payment in U.S. dollars is due within 30 days of
-------
Purchaser's receipt of Supplier's invoice for Services
provided hereunder.
6. WARRANTY: Supplier warrants that it shall deliver Services
--------
on a timely basis and in accordance with any Deadline
contained in a purchase order.
7. FORCE MAJEURE: Neither party shall be liable for its
-------------
failure to perform hereunder, and the obligation of such
party to perform hereunder shall be suspended, to the
extent that its performance is made impracticable, delayed
or prevented, in whole or in part, due to any contingency
beyond its reasonable control, including, without
limitation, acts of God, fires, floods, war, sabotage,
governmental laws, ordinances, or regulations and any other
similar contingency. If the obligations of a party are
suspended pursuant to the preceding sentence, such party
shall give written notice to that effect to the other party
within three (3) days after suspension shall have
commenced, together with a statement setting forth
reasonably detailed particulars concerning the cause of the
suspension, and shall use all possible diligence to remedy
the cause of the suspension as quickly as possible.
8. If the obligations of a party are suspended pursuant to the
preceding sentence, such party shall give written notice to
that effect to the other party within ten (10) days after
suspension shall have commenced together with a statement
setting forth reasonably full particulars concerning the
cause of the suspension and shall use all possible
diligence to remedy the cause of the suspension as quickly
as possible.
9. ASSIGNMENT: This Agreement shall be binding upon, and
----------
inure to the benefit of, the parties and their respective
successors and permitted assigns. Nothing contained herein
shall be deemed to create any third party beneficiary
rights in any person or entity not a party to this
Agreement, other than subsidiaries and affiliates of the
parties as expressly provided herein. No assignment or
transfer of this Agreement, or of any rights or obligations
hereunder, may be made by either party without the prior
written consent of the other party; provided, however, that
either party may assign its rights and obligations under
this Agreement to any parent company or controlled
subsidiary of any parent company upon written notice to the
other party. For purposes of this Section 9, "control"
shall be defined to mean ownership in excess of fifty
percent (50%). Any attempted assignment without the
required consent, if any, shall be void.
10. GOVERNING LAW: THE VALIDITY, INTERPRETATION AND
-------------
PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ALL RESPECTS IN ACCORDANCE WITH THE LAW OF NEW
YORK, WITHOUT REFERENCE TO ITS CONFLICTS OF LAWS RULES OR
PRINCIPLES.
11. DISPUTE RESOLUTION AND ARBITRATION:
----------------------------------
11.1 If at any time there is a dispute, controversy or
claim (a "Dispute") between the parties hereto with
respect to any matter arising out of or relating to
this Agreement, then the party that wishes to initiate
resolution of the Dispute must give written notice
(the "Dispute Notice") to the other party, requiring
that such Dispute be resolved pursuant to this Section 11.
11.2 If the Dispute is not resolved between the parties
within thirty (30) days after the date of the Dispute
Notice, any controversy or claim arising out of this
Agreement shall be settled by arbitration in
accordance with the rules of the American Arbitration
Association. Judgment upon the award rendered by the
arbitrator(s) shall be supported by written opinion,
shall be incorporated into and made a part of this
Agreement and may, at the option of either party, be
enforced in law or in equity by a court having
competent jurisdiction. All costs of such arbitration
shall be borne in the manner determined by the
arbitrator. Any proceeding under this Section shall
be held in Hennepin County, Minnesota, unless the
parties agree in writing to an alternate location.
12. NOTICES: All notices permitted or required to be given
-------
hereunder shall be given by personal delivery, telex,
telecopy, reputable overnight carrier, or registered or
certified mail, return receipt requested, postage prepaid,
addressed to the receiving party at its address set forth
hereinabove. Any party may change its address for such
purpose by giving written notice to the other party of such
change. Any notice so delivered, telecopied or telexed
shall be deemed to have been duly given upon receipt and
any notice so mailed shall be deemed to have been duly
given four (4) business days after so mailed.
13. NO WAIVER. The failure of either party at any time to
---------
enforce or require performance of any provision contained
in this Agreement shall in no way operate as a waiver or
affect the right of such party at a later time to enforce
such provision. No waiver by any party of any breach of
any term or covenant contained in this Agreement, whether
by conduct or otherwise, in any one or more instance, shall
be deemed to be or construed as a further or continuing
waiver of any such breach, or waiver of any other breach of
any other term or covenant contained in this Agreement.
14. ENTIRE AGREEMENT; CONFLICT; AMENDMENT. This Agreement and
-------------------------------------
all the Schedules and Exhibits attached hereto constitute
the entire understanding of the parties concerning the
subject matter hereof and cancels and supersedes all
previous agreements and understandings, oral or written,
between the parties with respect to the subject matter
hereof. No modification of this Agreement or waiver of any
terms or rights hereunder will be binding upon any party
unless signed in writing by an authorized representative of
such party.
15. SEVERABILITY. The provisions of this Agreement will be
------------
enforceable to the fullest extent permissible under
applicable law, and the unenforceability (or modification
to conform to law) of any provision will not render
unenforceable or impair the remainder of this Agreement.
If any provision will be found invalid or unenforceable, in
whole or in part, this Agreement will be considered amended
to delete or modify, as necessary, the offending provision
or provisions and to alter its bounds to render it valid
and enforceable.
16. SECTION HEADINGS. The headings contained in this Agreement
----------------
are inserted for the convenience of reference only and
shall not otherwise affect the meaning or interpretation or
be deemed to be a substantive part of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto
duly authorized as of the day and year first above written.
QUESTAR EDUCATIONAL SYSTEMS, INC.
By:_______________________________
Title:____________________________
NATIONAL BUSINESS SYSTEMS, INC.
By:_______________________________
Title:____________________________
Exhibit K
---------
May 31, 2006
Touchstone Applied Science Associates, Inc.
0 Xxxxxxxxxxxx Xxxxxxx
Xxxxxxxx, XX 00000
Re: Stock Purchase Agreement dated as of May 31, 2006.
Ladies and Gentlemen:
We have acted as counsel to Questar Educational Systems,
Inc., a Minnesota corporation (the "Company") and Xxxx X. Xxxxx,
Xxxxx X. Xxxx, Xxxxxxxx Xxxxxxx, Xxxxx Xxxxxxxx, Xxxx Xxxxx,
XxXxxxx Xxxxxxxxx, Xxxx Xxxxxxxxx and Xxxxx Xxxxx (collectively,
the "Selling Shareholders"), in connection with the execution
and delivery of the Stock Purchase Agreement (the "Stock
Purchase Agreement") dated as of May 31, 2006, among Touchstone
Applied Science Associates, Inc., a Delaware corporation
("TASA"), the Selling Shareholders and the Company. Capitalized
terms used herein have the same meanings as are ascribed to them
in the Stock Purchase Agreement unless otherwise defined herein.
In such capacity, we have examined the documents listed
below and such other documents, records and matters of law as we
have deemed necessary for purposes of this opinion letter:
9.14.1 the Stock Purchase Agreement together with any
schedules and exhibits;
9.14.2 the documents, instruments, and agreements ancillary
or supplementary to the Stock Purchase Agreement
(collectively, the "Transaction Documents");
9.14.3 the Articles of Incorporation and Bylaws of the
Company;
9.14.4 a Secretary's Certificate relating to resolutions
adopted by the board of directors of the Company, at a
meeting of the board of directors or by written
consent in lieu thereof, in connection with the Stock
Purchase Agreement; and
9.14.5 a Certificate of Good Standing with respect to the
Company issued by the Minnesota Secretary of State as
of May 22, 2006.
Based upon our examination described above, but subject to
the assumptions, limitations, and qualifications set forth
herein, we are of the opinion that:
1. The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the
State of Minnesota.
2. The Company has all necessary corporate power and
corporate authority to enter into, and to perform its
obligations under, each of the Transaction Documents to which it
is a party.
3. The Company has authorized, by all necessary corporate
action, the execution and delivery of, and performance of its
obligations under, each of the Transaction Documents to which it
is a party, and the Company has executed and delivered each of
such Transaction Documents.
4. Each of the Transaction Documents to which the Company
is a party constitutes the legal, valid and binding obligation
of the Company enforceable against the Company in accordance
with its respective terms.
5. To our knowledge, there are no actions or proceedings
against the Company pending before any court, government agency
or arbitrator, or overtly threatened in writing, that are
material to the Company or which challenge the ability of the
Company to execute, deliver or perform its obligations under the
Transaction Documents to which it is a party.
6. The execution and delivery by the Company of, and the
performance of its obligations under, each of the Transaction
Documents to which it is a party do not (a) violate the
Company's Articles of Incorporation or Bylaws or (b) breach, or
result in a default under, any existing obligation of the
Company under its material Contracts.
7. To our knowledge, the execution and delivery by the
Company of, and the performance by the Company of its
obligations under, each of the Transaction Documents to which it
is a party are not prohibited by, nor do they subject the
Company to the imposition of a fine, penalty or other similar
sanction, or a violation under, the provisions of statutory laws
or regulations.
8. No approval, authorization or other action by, or
filing with, any governmental authority is required in
connection with the execution and delivery by the Company of the
Transaction Documents to which it is a party and the
consummation of the transactions contemplated thereby.
9. The Company's authorized capital stock consists of
100,000 shares of common stock, par value $0.01 per share, of
which 50,000 shares are issued and outstanding. The Shares have
been duly authorized, validly issued, and are fully paid and
nonassessable. The delivery of the Shares to Purchaser by each
of the Selling Shareholders along with duly executed stock
powers and assignments separate from certificate will transfer
to Purchaser title thereto free and clear of all liens, pledges,
encumbrances, security interests or claims.
10. Each Transaction Document executed and delivered by a
Selling Shareholder constitutes the legal, valid and binding
obligation of each such Selling Shareholder, enforceable against
each such Selling Shareholder in accordance with its terms.
Our opinions herein are rendered upon the assumptions and
are subject to the limitations and qualifications set forth
below:
(a) As to factual matters relating to our opinions
herein, we have relied upon statements, certificates, and
other assurances of public officials and of officers and
other representatives of the Company, upon such other
certificates as we deemed appropriate and upon the
representations, warranties, and covenants of the Company
set forth in the Stock Purchase Agreement, which factual
matters have not been independently established or verified
by us.
(b) We have assumed (a) the genuineness of all
signatures (other than those of the Company and the Selling
Shareholders) on all documents submitted to us for
examination, (b) the truthfulness of all facts stated in
such documents, (c) the legal capacity of all natural
persons (other than the Selling Shareholders), (d) the
authenticity of all documents submitted to us as originals,
(e) the conformity to original documents of all documents
submitted to us as copies and the authenticity of the
originals of such copied documents, and (f) that all
certificates issued by public officials have been properly
issued.
(c) We have assumed that all consideration agreed to
be paid for the issuance of the Shares has been received by
the Company from the shareholders of the Company.
(d) We have assumed, without independent check or
verification, that TASA has all requisite power and
authority to execute, deliver, and perform its obligations
under the Stock Purchase Agreement, and that the Stock
Purchase Agreement has been duly authorized by all
necessary action on the part of TASA, has been duly
executed and delivered by TASA and constitutes the legal,
valid, and binding obligation of TASA, enforceable against
TASA in accordance with its terms.
(e) Our opinions herein are subject to the effect of
(a) laws relating to bankruptcy, reorganization,
insolvency, receivership, moratorium, fraudulent
conveyance, or other similar laws now or hereafter in
effect relating to or limiting creditors' rights generally,
(b) the application of general principles of equity
(regardless of whether such enforceability is considered in
a proceeding in equity or at law), and (c) the exercise of
judicial discretion. The use of the term "enforceable" in
this opinion letter does not imply any opinion as to the
availability of equitable remedies.
(f) In basing the opinions and other matters set
forth herein on "our knowledge", the words "our knowledge"
signify that, in the course of our representation of the
Company in matters with respect to which we have been
engaged by the Company as counsel, no information has come
to our attention that would give us actual existing
knowledge or actual existing notice that any such opinions
or other matters are not accurate or that any of the
documents, certificates, reports, and information on which
we have relied are not accurate and complete. Whenever our
opinion with respect to the existence or absence of facts
is indicated to be based on our knowledge, we are referring
solely to the actual knowledge of the particular attorneys
of the firm who have represented the Company and the
Selling Shareholders in connection with the transactions
contemplated by the Stock Purchase Agreement and we do not
necessarily refer to such knowledge as might be acquired by
a review of all of our files with respect to matters
involving the Company or the Selling Shareholders or by
interviews with all present and former members and
associates of our firm. We have not undertaken any
independent investigation to determine the existence or
absence of such facts, and no inference should be drawn
from the fact that no such investigation has been
undertaken by us.
(g) We express no opinion with respect to the
applicability or effect of any federal or state antitrust
or unfair competition laws or regulations.
(h) We express no opinion with respect to the
applicability or effect of any federal or state securities
or "blue sky" laws or regulations.
(i) We render no opinion as to matters involving the
laws of any jurisdiction other than the laws of the State
of Minnesota, the Business Corporation Act of the State of
Minnesota, and the federal laws of the United States of
America. Although the lawyers of this firm responsible for
the preparation and review of this opinion letter, as well
as other lawyers of this firm, are admitted to practice in
other jurisdictions, we have neither examined nor
considered the laws of any other jurisdiction in connection
with this opinion letter.
(j) The opinions expressed in this opinion letter are
limited to the matters set forth in this opinion letter as
of the date hereof, and no other opinions should be
inferred beyond the matters expressly stated. We assume no
obligation to supplement this opinion letter if any
applicable laws change after the date hereof or if we
become aware of any facts that might change the opinions
expressed herein after the date hereof.
Our opinions expressed herein are rendered solely for the
use of the addressee and Rider, Weiner & Xxxxxxx, P.C. and
Vedder, Price, Xxxxxxx and Kammholz, P.C., as counsel to TASA,
and these opinions may not be relied on by any other persons
without our prior written approval.
Very truly yours,
ROBINS, KAPLAN, XXXXXX & XXXXXX L.L.P.
Xxxx X. Xxxxxx
EOM/klg
Exhibit L
---------
May 31, 2006
TO THE SELLERS OF COMMON STOCK
OF QUESTAR EDUCATIONAL SYSTEMS, INC. NAMED
ON EXHIBIT A HERETO
Re: Acquisition of Stock of Questar Educational Systems, Inc.
By Touchstone Applied Science Associates, Inc.
Our File No. 1571.59
Ladies and Gentlemen:
We have acted as counsel for Touchstone Applied Science
Associates, Inc., a Delaware corporation ("Purchaser"), in
connection with the execution and delivery of the Stock Purchase
Agreement (the "Stock Purchase Agreement") dated as of May 31,
2006, among Purchaser, Xxxx X. Xxxxx, Xxxxx X. Xxxx, Xxxxxxxx
Xxxxxxx, Xxxxx Xxxxxxxx, Xxxx Xxxxx, XxXxxxx Xxxxxxxxx, Xxxx
Xxxxxxxxx and Xxxxx Xxxxx (collectively, the "Selling
Shareholders") and Questar Educational Systems, Inc., a Minnesota
corporation ("QES"). Except as otherwise defined herein,
capitalized terms used but not defined herein have the respective
meanings given to them in the certain Stock Purchase Agreement.
In such capacity, we have made an examination in respect of (a)
the organization, existence, qualification and good standing of
the Purchaser, and (b) the authorization, execution and delivery
of the various documents to be executed and delivered by Purchaser
in connection with the transactions. In particular we have
examined copies of the following documents (collectively, the
"Transaction Documents");
(a) Stock Purchase Agreement;
(b) Employment Agreement by and among QES, Purchaser
and each of Xxxxx, Appleman, Budde, Hallstrom,
Lindstrom, and Trent;
(c) Non-Competition Agreement by and among Purchaser,
QES and each of Adams, Appleman, Budde, Hallstrom,
Ihle, Lindstrom, Xxxxxxx and Xxxxx;
(d) Questar Investor Rights Agreement between Purchaser
and Selling Shareholders;
(e) Escrow Agreement by and among Xxxx X. Xxxxx, Xxxxx
X. Xxxx, Xxxxxxxx Xxxxxxx, Xxxxx Xxxxxxxx, Xxxx
Xxxxx, Xxxxxxx Xxxxxxxxx, Xxxx Xxxxxxxxx, Xxxxx
Xxxxx, Purchaser and Rider, Weiner & Xxxxxxx, P.C.,
as Escrow Agent;
(f) Intellectual Property Assignment and Usage
Agreement by and among Questar Data Systems, Inc.,
QES and Purchaser;
(g) Transitional Services Agreement by and among QES,
Purchaser and Questar Data Systems, Inc.
(h) Proprietary Rights Agreement by and among QES,
Purchaser and Xxx Small
(i) Subordinated Note issued by Purchaser in favor of
Questar Data Systems, Inc. on behalf of Selling
Shareholders.
We have also examined such other instruments and documents as
we have deemed necessary or appropriate as the basis for the
opinion hereinafter expressed, the certificate of incorporation,
good standing certificate, and corporate resolutions of the
Purchaser and have conducted such other investigations of law as
we have considered necessary or appropriate in the circumstances
to render the following opinion.
In stating our opinion, we have assumed the genuineness of
all signatures of, and the authority of persons signing on behalf
of parties thereto, the authenticity of all documents submitted to
us as originals and conformity to authentic original documents of
all documents submitted to us as certified, conformed or
photostatic copies.
As to issues of fact material to the opinions expressed
below, we have relied upon oral and written certifications and
representations and warranties of the Purchaser, without making
independent investigations or verification thereof.
Whenever our opinion with respect to the existence or
absence of facts is indicated to be based on our knowledge, we
are referring solely to the actual knowledge of the particular
attorneys of the firm who have represented the Purchaser in
connection with the transactions contemplated by the Stock
Purchase Agreement and we do not necessarily refer to such
knowledge as might be acquired by a review of all of our files
with respect to matters involving the Purchaser or by interviews
with all present and former members and associates of our firm.
We have not undertaken any independent investigation to
determine the existence or absence of such facts, and no
inference should be drawn from the fact that no such
investigation has been undertaken by us.
In reaching the opinions set forth below, we have assumed, and
to our knowledge there are no facts inconsistent with, the
following:
1. Each party to the Transaction Documents (other than
Purchaser and any person executing any of the Transaction
Documents on behalf of Purchaser) has duly and validly executed
and delivered the Transaction Documents, and such party's
obligations under the Transaction Documents are its legal, valid
and binding obligations, enforceable in accordance with their
respective terms.
2. Each person (other than Purchaser and any person
executing any of the Transaction Documents on behalf of
Purchaser, whether individually or on behalf of an entity), is
authorized to execute the Transaction Documents.
Based upon the foregoing, and subject to the limitations,
qualifications and exceptions herein contained, we are of the
opinion that:
1. Purchaser is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Delaware.
2. Purchaser has all necessary corporate power and
authority to enter into, and to perform its obligations under
each of the Transaction Documents to which it is a party.
3. The Purchaser has authorized, by all necessary
corporate action, the execution and delivery of, and performance
of its obligations under, each of the Transaction Documents to
which it is a party, and the Purchaser has executed and
delivered each of such Transaction Documents.
4. Each of the Transaction Documents to which Purchaser
is a party constitutes the legal, valid and binding obligation
of the Purchaser enforceable against the Purchaser in accordance
with its respective terms.
5. To our knowledge, there are no actions or proceedings
against the Purchaser pending before any court, government
agency or arbitrator, or overtly threatened in writing which are
material to the Purchaser or which challenge the ability of the
Purchaser to execute, deliver or perform its obligations under
the Transaction Documents.
6. To our knowledge, the execution, delivery and
performance by Purchaser of the Transaction Documents executed by
it do not, and will not (a) conflict with or violate any provision
of the Certificate of Incorporation and Bylaws of Purchaser or (b)
breach, or result in a default under, any existing obligation of
the Purchaser under any of the Purchaser's material contracts or
licenses of which we have knowledge.
7. To our knowledge, the execution and delivery by the
Purchaser of, and the performance by the Purchaser of its
obligations under, each of the Transaction Documents are not
prohibited by, nor do they subject the Purchaser to the
imposition of a fine, penalty or other similar sanction for a
violation under, the provisions of statutory laws or
regulations.
8. In basing the opinions and other matters set forth
herein on "our knowledge", the words "our knowledge" signify
that, in the course of our representation of the Company in
matters with respect to which we have been engaged by the
Company as counsel, no information has come to our attention
that would give us actual existing knowledge or actual existing
notice that any such opinions or other matters are not accurate
or that any of the documents, certificates, reports, and
information on which we have relied are not accurate and
complete.
9. Except for filings required pursuant to any state
securities or "blue sky" laws or the federal securities laws, no
approval, authorization or other action by, or filing with, any
governmental authority is required in connection with the
execution and delivery by the Purchaser of the Transaction
Documents and the consummation of the transactions contemplated
thereby.
10. All necessary corporate action on the part of the
Purchaser has been taken to authorize the issuance of the TASA
Preferred Stock and, when issued pursuant to the terms of the
Stock Purchase Agreement, the TASA Preferred Stock will be
validly issued, fully paid and nonassessable.
The enforceability of certain remedies contained in the
Transaction Documents may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to
or affecting the rights of creditors generally. The use of the
term "enforceable" in this opinion letter does not imply any
opinion as to the availability of equitable remedies.
This opinion is not to be used, circulated, quoted or
referred to in connection with any transaction other than as
contemplated by the Transaction Documents. Although certain
lawyers of this firm are admitted to practice in jurisdictions
other than New York, we do not express any opinion as to the laws
of states or jurisdictions other than New York, except that the
foregoing opinions are additionally based upon and limited to
our review of the General Corporation Law of the State of
Delaware. We are not members of the bar of the State of
Delaware and do not hold ourselves out as experts on the laws of
the State of Delaware and accordingly, we have reviewed only the
General Corporation Law of the State of Delaware as in effect as
of the date of this letter in connection with the foregoing
opinions. Certain of the Transaction Documents are governed by
the laws of the State of Minnesota and we have assumed that
insofar as the laws of the State of Minnesota are applicable to
the opinions expressed herein, such laws are identical to and
will be interpreted in the same manner as the laws of the State
of New York.
This opinion is solely for the benefit of the addressees and
Robins, Kaplan, Xxxxxx & Xxxxxx, L.L.P. and Selling Shareholders
of Common Stock of Questar Educational Systems, Inc. may not be
relied upon by any other person or entity.
Very truly yours,
RIDER, WEINER & XXXXXXX, P.C.
By:________________________
Xxxxxxx Crush
Vice President
SCHEDULE "A"
Xx. Xxxx X. Xxxxx
Xx. Xxxxx X. Xxxx
Xx. Xxxxxxxx Xxxxxxx
Xx. Xxxxx Xxxxxxxx
Xx. Xxxx Xxxxx
Xx. XxXxxxx Xxxxxxxxx
Xx. Xxxx Xxxxxxxxx
Xx. Xxxxx Xxxxx
Exhibit M
---------
LEASE
THIS INDENTURE OF LEASE, made and entered into effective
the 31st day of May, 2006, by and between Apple Valley
Development LLC, a limited liability company having an address
at 0000 Xxxx Xxxxxxx Xxxx, Xxxxx, XX 00000 (hereinafter
referred to as "Lessor"), and Questar Educational Systems, Inc.
a Minnesota corporation, having an address at 0000 Xxxxx 000xx
Xxxxxx Xxxx, Xxxxx Xxxxxx, XX 00000 (hereinafter referred to as
"Tenant").
WITNESSETH:
That Lessor, for and in consideration of the covenants and
agreements hereinafter set forth to be kept and performed by
Tenant, does hereby demise and lease into the Tenant the
following premises situated in Dakota County, Minnesota:
Xxx 0, Xxxxx 0, Xxxxxx Xxxxxxxx Xxxx 0xx Addition, commonly
known as 0000 Xxxxx 000xx Xxxxxx Xxxx, Xxxxx Xxxxxx, Xxxxxxxxx
00000 and the building and improvements thereon constituting
approximately forty-eight thousand seven hundred thirty-three
(48,733) square feet of space as delineated on Schedule "A"
annexed hereto and made a part hereof in the building
(collectively the "Leased Premises").
1. PRIOR LEASE. This Lease replaces in its entirety the Lease
-----------
made and entered into effective as of April , 2003, and any
amendments or modifications thereof, and any consents or
approvals made by Lessor with respect thereto (the "Prior
Lease"), between Lessor and Tenant from and after the
Commencement Date of this Lease, whereupon, after such date, all
of the rights and obligations of Lessor and Tenant with respect
to the Leased Premises shall be governed and controlled by the
provisions of this Lease, except that nothing herein contained
shall be deemed to constitute a release or discharge of Tenant
with respect to any obligation or liability accrued or incurred
under the Prior Lease, and outstanding and unsatisfied on the
date of execution and delivery of this Lease.
2. TERM. The initial term of this Lease shall be for a period
----
of approximately five (5) years ("Lease Term"), beginning May
31, 2006 (the "Commencement Date"), and continuing up to and
including May 31, 2011 (the "Expiration Date").
3. RENTALS. Tenant agrees to pay to Lessor or to such party
-------
as Lessor may designate in writing as rent for said premises,
during the Lease Term, the sum of Thirty-Six Thousand and 00/100
Dollars ($36,000.00) per month (the "Fixed Rent"), payable in
advance, with the first month's rental payable on May 31, 2006
and thereafter each month's rental shall be payable on the first
day of each month. The first month's rent shall be adjusted by
multiplying the Fixed Rent for such month by a fraction, the
numerator of which shall be the number of calendar days in the
period from the Commencement Date to the last day of the month
in which such Commencement Date shall occur, both dates
inclusive, and the denominator of which shall be the number of
calendar days in such month. In the event that any rent
payment, or any other sum owed by the Tenant to the Lessor is
not received by the Lessor within fifteen (15) days of its due
date, the Tenant shall incur, and be obligated to pay the Lessor
a late payment fee in the amount of five percent (5%) of the
amount of such delinquent payment; provided, however, that in
the event of a second delinquency in rent payment and
thereafter, the five percent (5%) penalty shall be imposed in
the event that any payment owed by the Tenant to the Lessor is
not received by the Lessor within five (5) days of its due date.
4. OPTION TO RENEW. Provided Tenant is not then in material
---------------
default of any term of this lease, the Lease Term may be
extended for one (1) additional period of FIVE (5) years ( the
"Option Period" ), the Option Period running from the
Expiration Date to April 30, 2016, unless sooner terminated as
herein provided. Such option to extend shall be exercised by
the Tenant by giving written notice to the Lessor not later than
one-hundred twenty (120) days prior to the Expiration Date of
the Lease Term. Such Option Period shall be on the same terms,
covenants and conditions as provided in this lease for the Lease
Term and payment of all additional rent and other charges
required to be made by the Tenant as provided in this Lease for
the Lease Term shall continue to be made during the Option
Period or as otherwise provided in this lease, except that the
fixed annual rental payable as provided in Article "3" herein
shall be increased or decreased as follows:
Fixed Rent during the Option Period shall be set at the
Fixed Rent as set forth in Article "3" above, together with the
product obtained by multiplying such Fixed Rent by of the
percentage increase in the Consumer Price Index - Midwest Urban,
All Consumers published by the United States Department of
Labor, Bureau of Labor Statistics (hereinafter the "C.P.I")
between that published for April, 2006 and that published for
March, 2011, provided that in no event shall (i) an increase in
Fixed Rent as a result of the rent adjustment to occur on the
Expiration Date exceed fifteen percent (15%) of the Fixed Rent
nor (ii) a decrease in Fixed Rent as a result of the rent
adjustment to occur on the Expiration Date result in Fixed Rent
below the amount set forth in Article "3". In the event the
C.P.I. is discontinued, comparable statistics on the purchasing
power of the consumer dollar, published by the Bureau of Labor
and Statistics of the United States Department of Labor shall be
used for making the computation in this subsection. In the
event the Bureau of Labor Statistics shall no longer maintain
statistics on the purchasing power of the consumer dollar,
comparable statistics published by a reasonable financial
periodical or recognized authority selected by Lessor shall be
used for making the computation in this subsection. If such
index is changed so that a year other than 1984 shall equal 100,
then such index shall be converted in accordance with the
conversion factor published by the United States Bureau of Labor
Statistics. In the event that a dispute arises regarding the
amount or computation of the increase to the fixed annual rental
payable during the Option Period, such a dispute shall be
arbitrated in Hennepin County, Minnesota, in accordance with the
rules of the American Arbitration Association, as in effect at
the time of the dispute, except that each party shall be
entitled to choose one arbitrator, who jointly shall select a
third arbitrator, who shall determine the matter. Any award of
such arbitration shall be enforceable against the parties to the
same extent as a judgment of a court of law having jurisdiction
over same, provided however, that the arbitrator shall have no
authority to alter or re-determine the terms of this Agreement
and the arbitration shall be limited to the amount or
computation of the increase to the fixed annual rental payable
during the Option Period under this Article "4".
5. TENANT'S COVENANTS. Tenant expressly covenants and agrees:
------------------
a. To pay any and all charges made by any public or
utility company for services furnished to Tenant or the Leased
Premises during the term of this Lease. b. To use the
Leased Premises for office, warehouse and for any other purpose
consistent with and pertinent to its business, and to comply
with all laws, ordinances, rules and regulations of legally
constituted authorities relating to the use of such premises.
c. To keep the roof free of damaging ice and snow
accumulation and to keep the parking, driveway and lawn areas in
a neat and clean condition and in good repair, all at its own
cost and expense.
d. Not to use the Leased Premises nor permit the same to
be used for any unlawful business or purpose whatsoever or for
any purpose which is classed by insurance companies as extra-
hazardous.
e. To heat and cool the premises at its own cost and
expense, including heating, plumbing and electrical utilities.
f. To carry property, casualty and extended coverage
insurance and personal property insurance at its own cost and
expense in an amount of at least the fair market value of the
Leased Premises and personal property, with the Lessor to be
named as an insured and loss payee, and to keep such insurance
policies and premium receipts thereon on deposit with Lessor at
all times. In the event that the Lessor elects to carry itself,
the required property, casualty and extended insurance coverage,
it shall have the right to do so, with the Tenant being
responsible for reimbursing the Lessor for all insurance
premiums incurred as a result thereof.
g. To carry public liability insurance at its own cost
and expense in the amount of at least One Million and 00/100
Dollars ($1,000,000.00) or such additional amounts as Lessor may
reasonably require from time to time, with Lessor to be named as
an additional insured, and to provide Lessor with insurance
certificates evidencing such coverage and renewals at all times.
h. To pay all real estate taxes and special assessments
which become due and payable on the Leased Premises during the
term of this Lease before penalty attaches thereto, including
those becoming due and payable in the calendar year of 2006 on
or after the Commencement Date. Said taxes and special
assessments shall be pro-rated for that portion of the first
year of the Lease, and such taxes and special assessments for
the last year of the Lease shall be prorated, based upon the
prior year's tax and assessment. If Tenant in good faith shall
desire to contest the validity or amount of any real estate tax
or special assessment which it has hereby agreed to pay on said
Leased Premises, Tenant shall notify Lessor of its intention to
do so and Lessor agrees to render to Tenant all assistance
reasonably possible, without expense to Lessor in asserting such
contest, including the joining in and signing of any protest or
pleading which Tenant may deem advisable to file. Any rebate or
refund on such tax or special assessment paid by Tenant shall
belong to and be paid to Tenant. In no event shall Tenant
permit such taxes to become delinquent or penalties to accrue
thereon. In the event that Tenant is delinquent in its payment
of real estate taxes relating to the Leased Premises, Lessor
reserves the right to collect from Tenant monthly installments
for such real estate taxes.
i. To quit and surrender the Leased Premises to the
Lessor at the expiration of this Lease in as good condition as
when received, ordinary wear and tear resulting from permitted
use by Tenant and damage by fire and the elements for which
there is insurance coverage excepted.
j. To the extent allowed by their respective insurance
carriers, both the Lessor and Tenant shall have waiver of
subrogation clauses contained n their insurance policies.
k. All insurance policies carried by the Tenant shall
contain a provision that the Lessor must be provided written
notice at least thirty (30) days in advance of any cancellation
or non-renewal.
6. LESSOR'S COVENANTS. Lessor expressly covenants and agrees:
------------------
a. That the Lessor is lawfully seized of the premises
hereby demised and has good right and lawful authority to enter
into this Lease for the full term aforesaid.
b. That the Tenant shall have actual possession of the
premises hereby demised at the beginning of the term hereof, and
the Tenant shall have the peaceable and uninterrupted use and
occupancy of said premises during the said Lease term and
extension thereof, provided the Tenant pays the said rent and
performs the covenants herein agreed by it to be performed.
7. TENANT AND LESSOR COVENANTS AS TO REPAIRS. The Tenant and
-----------------------------------------
Lessor covenant and agree:
a. After the Tenant has been tendered possession of the
Leased Premises and the term of this Lease has begun, Tenant,
during the term hereof, at its own expense, shall keep the
Leased Premises and the equipment, drains, fixtures, appliances
and machinery in, upon, serving or appurtenant to said premises,
in good order and repair and it shall maintain reasonable
preventative maintenance on all such items. Tenant shall
replace, at its own expense any and all glass broken in or about
said premises, including plate glass, if any, with glass of the
same quality, and shall keep the roof of the building free from
an accumulation of ice and snow which would endanger the roof
and put undue strain on the roof's supports. Lessor shall, to
the extent it receives or has received any assignable warranties
from its contractors, subcontractors or manufacturers, for work,
materials or equipment performed or installed in connection with
the Leased Premises which Tenant is obligated to repair
pursuant to this Lease, assign such warranties to the Tenant.
In the event this Lease should terminate prior to the expiration
of such warranties for any reason, Tenant shall reassign such
warranties to Lessor.
b. Unless caused by the negligent or intentional acts of
omissions of the Tenant, the Lessor shall conduct and pay for
all repairs and maintenance to the exterior walls, the roof,
foundation and supporting columns of the Leased Premises or any
part thereof, and shall replace and pay for building equipment,
such as heating, plumbing, air conditioning, electrical wiring
and service facilities of like nature which must be replaced due
to general wearing out.
8. TENANT'S FIXTURES. Tenant shall have the right to use all
-----------------
furniture, fixtures and equipment now located on the Leased
Premises which are necessary for and used in the conduct of the
business of Tenant on the Leased Premises.
9. ASSIGNMENT OR SUBLETTING. Lessor shall have the right to
------------------------
assign the Lease in its absolute discretion. Tenant shall not
assign this Lease or sublet all or any part of the Leased
Premises without first obtaining the written consent of Lessor,
which consent shall not be unreasonably withheld or delayed by
the Lessor. Notwithstanding the foregoing, Tenant shall have
the right without Lessor's consent, to assign or sublease this
Lease to a corporation with which Tenant may merge or
consolidate, to any subsidiary of Tenant, to any corporation
under common control with Tenant, or to a purchaser of
substantially all of Tenant's assets.
10. FIRE, ETC., DAMAGE. If through no fault of the Tenant, the
------------------
Leased Premises or any part thereof or any appurtenance thereto
is so materially damaged by fire, casualty or structural defects
that a reasonable business person would determine that the same
cannot be restored within one hundred twenty (120) days, then
Tenant shall have the right within ninety (90) days following
damage to elect by notice to Lessor to terminate this Lease as
of the date of such damage. In the event of minor damage to any
part of the Leased Premises, and if such damage does not render
the Leased Premises materially unusable for Tenant's purposes,
or Tenant elects not to terminate this Lease, Lessor shall
promptly repair such damage at the cost of the Lessor. In making
the repairs called for in this paragraph, Lessor shall not be
liable for any delays resulting from strikes, governmental
restrictions, inability to obtain necessary materials or labor
or other matters which are beyond the reasonable control of
Lessor. Tenant shall be relieved from paying rent and other
charges during any portion of the Lease term that the Leased
Premises are inoperable or unfit for occupancy or use, in whole
or in part, for Tenant's purposes. Rentals and other charges
paid in advance for any such periods shall be credited on the
next ensuing payments, if any, but if no further payments are to
be made, any such advance payments shall be refunded to Tenant.
The provisions of this paragraph extend not only to the matters
aforesaid, but also to any occurrence which is beyond Tenant's
reasonable control and which renders the Leased Premises, or any
appurtenance thereto, inoperable or materially unfit for
occupancy or use, in whole or in part, for Tenant's purposes.
11. ALTERATIONS AND WORKMANLIKE REPAIRS. Lessor agrees that
-----------------------------------
Tenant, at its own cost and expense, may make such alterations
in and to the Leased Premises as it finds necessary or
convenient for its purposes, except that no structural change
shall be made without the express written consent of Lessor,
which consent shall not be unreasonably withheld or delayed.
All such alterations shall immediately become part of the
building and shall belong to the Lessor except that Lessor may,
at its option, at the termination of the term of this Lease,
require Tenant to remove such alterations and restore the
premises to substantially the condition in which they were
before such alterations, all at the cost and expense of Tenant.
All work done in connection with any repairs, changes or
alterations, whether by Lessor or Tenant, shall be done promptly
and in a good and workmanlike manner and in compliance with the
requirements of the public and insurance authorities and all
governmental laws and regulations applicable thereto. The cost
of such repairs shall be paid so that the Leased Premises shall
at all times be free of liens for labor and materials, supplied
or claimed to have been supplied to the Leased Premises. In the
event Tenant, for any reason, decides to dispute and delay
payment of the cost of such repairs, it may do so by notifying
Lessor in writing of such dispute and delay, and shall post
security with Lessor, at its request, to save Lessor harmless
therefrom, and delay, and shall post security with Lessor, at
its request, to save Lessor harmless therefrom, and at Lessor's
request, will provide a bond to prevent a lien foreclosure sale.
12. SUBORDINATE LEASE TO MORTGAGE. The Lessor shall have the
-----------------------------
right to subject and subordinate this Lease at all times to the
lien of any mortgage or mortgages now or hereafter placed on the
Lessor's interest in the Leased Premises, if requested by any
such mortgage holder. Tenant agrees to execute and deliver upon
demand of the Lessor, its successors and assigns, such further
instruments subordinating this Lease to the lien of any such
mortgage or mortgages, provided, however, such mortgagee or
mortgagees shall, in writing:
a. Recognize the validity and continuance of this Lease
in the event of a foreclosure of the Lessor's interest as long
as the Tenant shall not be in default under the terms hereof;
and
b. Agree to notify Tenant within a reasonable time prior
to the commencement of any mortgage foreclosure proceedings of
the nature and extent of all defaults under such mortgage.
13. NON-DISTURBANCE AGREEMENTS. Lessor hereby agrees to use
--------------------------
reasonable efforts to obtain for Tenant a subordination, non-
disturbance and attornment agreement (a "SNDA") from all
existing Mortgagees and Lessors, in the standard form
customarily employed by such Mortgagee and/or Lessor in respect
of the Leased Premises. The fact that the Lessor is unable to
obtain such a SNDA shall not affect the Tenant's obligations
hereunder.
14. PERFORMANCE OF OTHER PARTY'S OBLIGATIONS. The Tenant
----------------------------------------
covenants and agrees that if it shall at any time fail to make
any payment or perform any other act on its part to be made or
performed as in this Lease provided, then the Lessor, may, after
thirty (30) days, written notice thereof to Tenant, but without
obligation so to do and without waiving or releasing the Tenant
from any obligations of the Tenant in this Lease contained, make
any payment or perform any other act on the part of the Tenant
to be made and performed as in this Lease provided, in such
manner and to such extent as the Lessor may deem desirable. All
sums so paid by the Lessor and all necessary and incidental
costs and expenses in connection with the performance of any
such act by the Lessor, together with interest thereon at the
rate of eight percent (8%) per annum from the date of making
such expenditure by the Lessor, shall be deemed additional rent
hereunder and shall be payable to the Lessor on demand, and the
Lessor shall have, in addition to any other right or remedy of
the Lessor, the same rights and remedies in event of the
nonpayment thereof by the Tenant as in the case of default by
the Tenant in the payment of rent.
If there is an undisputed default with respect to any of
Lessor's covenants, warranties or representations under this
Lease, and if the default continues more than thirty (30) days
after notice in writing from Tenant to Lessor specifying the
default, Tenant may, at its option and without affecting any
other remedy hereunder, cure such default and deduct the cost
thereof from the next accruing installment or installments of
rent payable hereunder until Tenant shall have been fully
reimbursed for such expenditure.
15. REASONABLE ACCESS BY LESSOR. The Lessor shall have
---------------------------
reasonable access during business hours to the premises hereby
demised for the purpose of examining and exhibiting the same to
prospective purchasers or mortgagees or to make any needed
repairs as above permitted, provided Lessor does not unnecessary
interfere with Tenant's business. Lessor shall further have
reasonable access during business hours to the premises during
the last six (6) months of the term hereof to exhibit the same
to prospective tenants.
16. COMPLIANCE WITH ENVIRONMENTAL LAWS. Tenant, at all times
----------------------------------
during the term of this Lease, agrees to conduct its business
operations from the Leased Premises in compliance with all
applicable environmental laws and regulations, and will
indemnify and save harmless Lessor from any and all claims,
damages, fines, judgments, penalties, costs, liabilities or
losses (including, without limitation, reasonable attorneys'
fees and expenses of litigation) arising during or after the
term of this Lease as a result of any violation by Tenant of
applicable environmental laws or regulations. Lessor agrees to
indemnify and save harmless Tenant from any and all claims,
damages, fines, judgments, penalties, costs, liabilities or
losses (including, without limitation, reasonable attorneys'
fees and expenses of litigation) resulting from any violation of
applicable environmental laws or regulations with respect to the
Leased Premises, which existed as of the commencement date of
this Lease, or which results from a violation of such laws or
regulations by Lessor during the term of this Lease. Lessor
acknowledges that, to the best of its knowledge, there have been
no violations of such laws or regulations with respect to the
Leased Premises prior to the Commencement Date. The respective
rights and obligations of Lessor and Tenant under this Article
"16" shall survive the expiration or earlier termination of this
Lease.
17. CONDEMNATION. If the entire Leased Premises shall be
------------
taken for any street or other public use by the action of the
public authorities, or substantial portions of said Leased
Premises are taken as, in the reasonable judgment of the Tenant,
would make it uneconomic to continue to operate its business
thereon, then this Lease and the term demised shall thereupon
terminate as of the date when physical possession of said
premises, or such part thereof, shall be taken by such
municipality or other public corporation, and all further
obligations of the parties under this Lease shall end, provided,
however, that for any lesser taking the Lease shall continue
upon a proper adjustment of rentals in view of the lesser
premises available for use by Tenant. Upon any termination of
this Lease pursuant to the provisions of this Article "17", rent
shall be apportioned as of, and shall be paid or refunded up to
and including, the date of such termination.
18. INDEMNIFICATION BY TENANT. Tenant shall defend, indemnify
-------------------------
and hold the Lessor harmless from any and all liability, damage,
expense, cause of action, suits, claims or judgments resulting
from injury to persons or property on the demised property (not
caused by the sole negligence of Lessor, its employees or
agents) which arise out of Tenant's use or occupancy of the
premises, its act, failure to act, or negligence of Tenant, its
agents, employees or business visitors or any other parties.
Lessor agrees that in case any claim is asserted or any action
brought to recover any such damage, Lessor will give immediate
notice thereof in writing to Tenant and will cooperate in every
way in the investigation and defense of any such claim or
action, and that the handling and settlement of any such action
shall be performed and concluded by Tenant.
19. RISK OF LOSS, DAMAGE OR DESTRUCTION. Tenant assumes all
-----------------------------------
risk of loss, damage or destruction of the contents of said
building and of or to other property brought upon the Leased
Premises by the Tenant or by any other persons with the
knowledge or consent of the Tenant and of or to property in
proximity to the Leased Premises when connected with or
incidental to the occupation thereof.
20. LESSOR'S REMEDY FOR DEFAULTS. If Tenant shall default in
----------------------------
the payment of rent when due to Lessor as herein provided, and
if said default shall continue for fifteen (15) days after
written notice thereof shall have been given to Tenant by
Lessor, or if default shall be made in any of the other
covenants or conditions to be kept, observed and performed by
Tenant, and such default shall continue for thirty (30) days
after notice thereof in writing to Tenant by Lessor without
correction thereof then having been commenced and thereafter
diligently prosecuted, then it shall be optional for Lessor to
declare this Lease forfeited and the said term ended, and to re-
enter said Leased Premises with or without process of law, using
such force as may be necessary to remove all persons or chattels
therefrom, and Lessor shall not be liable for damages by reason
of such re-entry or forfeiture. Tenant hereby expressly waives
any and all rights of redemption granted by or under any present
or future laws in the event of Tenant being evicted or
dispossessed for any cause, or in the event of Lessor obtaining
possession of the Lease Premises by reason of the violation by
Tenant of any of the covenants or conditions of this Lease, or
otherwise; but notwithstanding such declaration and re-entry by
Lessor, the liability of Tenant for the rent provided for herein
shall not be relinquished or extinguished for the balance of the
term of this Lease. If default be made by Tenant and if Lessor
exercises its option to terminate as herein provided or as
provided by law, Lessor shall use reasonable efforts to
mitigate its damages and to re-rent the Leased Premises for the
unexpired portion of this Lease, and if the amount of rental
received by Lessor upon said re-letting is less than an amount
equal to the rental herein agreed to be paid by Tenant, and all
other payments required under this Lease plus all costs and
expense, including reasonable legal fees, incurred by Lessor due
to said default and re-letting, Tenant shall thereupon pay said
difference to Lessor in cash, as Tenant's liquidated damages for
such breach. Tenant shall pay, in addition to the rentals and
other sums agreed to be paid hereunder, such additional sums as
the court may adjudicate as reasonable as attorneys' fees and
costs and expenses incurred in any suit or action instituted by
Lessor to enforce the provisions of this Lease or to collect the
rental due Lessor hereunder. No payment by Tenant or receipt by
Lessor of a lesser amount than the monthly rent and other
payments herein stipulated shall be deemed to be other than a
partial payment, nor shall any endorsement or statement on any
check or any letter accompanying any check or payment be deemed
an accord and satisfaction, and Lessor may accept such check or
payment without prejudice to Lessor's rights to recover the
balance of such rent or other sums due hereunder or pursuant to
any other remedy in this Lease. In the event of a default by
the Tenant, all remedies available to the Lessor shall be
cumulative.
21. SIGNS. Upon Lessor's consent not to be unreasonably
-----
withheld or delayed, Tenant shall have the right to place on the
Leased Premises, at locations selected by Tenant, any signs
which are permitted by applicable zoning ordinances and private
restrictions. Lessor shall assist and cooperate with Tenant in
obtaining any necessary permission from governmental authorities
or adjoining owners and occupants for Tenant to place or
construct the foregoing signs. Tenant shall repair all damage to
the Leased Premises resulting from the removal of signs
installed by Tenant
22. NOTICES. Wherever in this Lease it shall be required or
-------
permitted that notice or demand be given or served by either
party to this Lease to or on the other, such notice or demand
shall be given or served and shall not be deemed to have been
given or served, unless in writing and forwarded by certified
mail addressed as follows:
To the Lessor at: Apple Valley Development, LLC
Attn: Xxx Xxxxxxx
0000 Xxxx Xxxxxxx Xxxx
Xxxxx, XX 00000
To the Tenant at: Questar Educational Systems, Inc.
0000 Xxxxx 000xx Xxxxxx Xxxx
Xxxxx Xxxxxx, XX 00000
With copies to: Touchstone Applied Science Associates, Inc.
Att: President
4 Hardscrabble Heights
X.X. Xxx 000
Xxxxxxxx, XX 00000
And to: Rider, Weiner & Xxxxxxx, P.C.
Attn: Xxxxxxx Crush, Esq.
X.X. Xxx 0000
Xxxxxxxx, Xxx Xxxx 00000
Such addresses may be changed from time to time by either party
by serving notice as above provided.
23. BINDING ON SUCCESSSORS, ETC. This indenture shall be
---------------------------
binding upon and inure to the benefit of the successors, heirs,
executors, administrators and assigns of the parties hereto.
24. HOLDING OVER, ETC. If, upon the expiration of the term
-----------------
hereof, the Tenant shall hold over the Leased Premises without
any written agreement as to the new term, the holding over shall
be a tenancy from month to month only, at a Fixed Rent of 110%
as previously established, any rule of law to the contrary
notwithstanding.
25. CAPTIONS. The captions used in this Lease are for
--------
convenience only and are not a part of this Lease.
26. MEMORANDUM OF LEASE. The parties hereto contemplate that
-------------------
this Lease should not be filed for record, but in lieu thereof,
at the request of either party, Lessor and Tenant shall execute
a Memorandum of Lease to be recorded for the purpose of giving
record notice of the appropriate provisions of this Lease.
27. SURVIVAL. If any clause or provision of this lease is
--------
illegal, invalid or unenforceable under present or future laws
effective during the term of this lease, then and in that event,
it is the intention of the parties hereto that the remainder of
this lease shall not be affected thereby, and it is also the
intention of the parties to this lease that in lieu of each
clause or provision of this lease that is illegal, invalid or
unenforceable, there be added as a part of this lease contract a
clause or provision as similar in terms to such illegal, invalid
or unenforceable clause or provision as may be possible and be
legal, valid and enforceable.
28. MINNESOTA LAW. This Lease shall be governed by the laws of
-------------
the State of Minnesota. The parties agree that the State
(Dakota County) and Federal Courts of Minnesota shall have
exclusive jurisdiction over any legal proceeding regarding this
Lease.
29. ALL AGREEMENTS INCLUDED; MODIFICATIONS. This instrument
--------------------------------------
embodies all the agreements between the parties hereto
respecting the premises hereby demised and expressly supercedes
all prior agreements of the parties hereto, whether written or
oral, with respect to the Leased Premises. All subsequent
changes and modifications to be valid shall be embodied within a
written instrument duly executed by the parties hereto.
30. NO WAIVER. The receipt by the Lessor of rent or other sums
---------
with knowledge of the breach of any covenant in this Lease by
the Tenant shall not be deemed as a waiver of such breach and no
provision of this Lease shall be deemed to have been waived by
the Lessor unless such waiver is in writing and signed by the
Lessor.
31. TRIPLE NET LEASE. The parties recognize and acknowledge
----------------
that this Lease is intended to be on a triple net basis.
32. BROKER. The parties agree no broker negotiated or brought
------
about this transaction.
IN TESTIMONY WHEREOF, the Lessor and the Tenant have caused
these presents to be executed the day and year first above
written.
LESSOR:
APPLE VALLEY DEVELOMENT, LLC
By:_________________________________
Xxxxxxxx Xxxxxxx
Its Member
TENANT:
QUESTAR EDUCATIONAL SYSTEMS, INC.
By:___________________________________
Its Chief Executive Officer
SCHEDULE A
Exhibit N
---------
LEASE
-----
THIS INDENTURE OF LEASE, made and entered into effective
the 31st day of May, 2006, by and between Apple Valley
Development LLC, a limited liability company having an address
at 0000 Xxxx Xxxxxxx Xxxx, Xxxxx, XX 00000 (hereinafter
referred to as "Lessor"), and Questar Educational Systems, Inc.
a Minnesota corporation, having an address at 0000 Xxxxx 000xx
Xxxxxx Xxxx, Xxxxx Xxxxxx, XX 00000 (hereinafter referred to as
"Tenant").
WITNESSETH:
That Lessor, for and in consideration of the covenants and
agreements hereinafter set forth to be kept and performed by
Tenant, does hereby demise and lease into the Tenant the
following premises situated in Dakota County, Minnesota:
approximately forty-four thousand seven hundred ninety five
(44,795) square feet of space as delineated on Schedule "A"
annexed hereto and made a part hereof in the building (the
"Building") constructed on Xxx 0, Xxxxx 0, Xxxxxx Xxxxxxxx Xxxx
0xx Addition, commonly known as 00000 Xxxxxx Xxx, Xxxxx Xxxxxx,
Xxxxxxxxx 00000 ( the "Leased Premises") The as-built space
will be measured in accordance with the Building Owners and
Managers Association ("BOMA") Standard Method for Measuring
Floor Area in Office Buildings and agreed to between Lessor and
Tenant prior to Commencement Date, as hereinafter defined.
Tenant, its agents, employees and invitees shall have the
nonexclusive right in common with other tenants of the Building,
if any, to the use for intended and normal purposes of common
entrances, lobbies, stairways, hallways, elevators, public rest
rooms, sidewalks, driveways and parking areas (hereinafter
collectively referred to as the "Common Areas"), subject to the
terms and conditions of this Agreement (the Premises, building,
Common Areas and the land on which they are located are
hereinafter collectively referred to as the "Property").
1. TERM. The initial term of this Lease shall be for a period
----
of approximately five (5) years ("Lease Term"), beginning May
31, 2006 (the "Commencement Date"), and continuing up to and
including May 31, 23011 (the "Expiration Date").
2. RENTALS. Tenant agrees to pay to Lessor or to such party
-------
as Lessor may designate in writing as rent for said premises,
during the Lease Term, the sum of Twenty Nine Thousand and
00/100 Dollars ($29,000.00) per month (the "Fixed Rent"),
payable in advance, with the first month's rental payable on May
31, 2006 and thereafter each month's rental shall be payable on
the first day of each month. The first month's rent shall be
adjusted by multiplying the Fixed Rent for such month by a
fraction, the numerator of which shall be the number of calendar
days in the period from the Commencement Date to the last day of
the month in which such Commencement Date shall occur, both
dates inclusive, and the denominator of which shall be the
number of calendar days in such month. In the event that any
rent payment, or any other sum owed by the Tenant to the Lessor
is not received by the Lessor within fifteen (15) days of its
due date, the Tenant shall incur, and be obligated to pay the
Lessor a late payment fee in the amount of five percent (5%) of
the amount of such delinquent payment; provided, however, that
in the event of a second delinquency in rent payment and
thereafter, the five percent (5%) penalty shall be imposed in
the event that any payment owed by the Tenant to the Lessor is
not received by the Lessor within five (5) days of its due date.
3. OPTION TO RENEW. Provided Tenant is not then in material
---------------
default of any term of this lease, the Lease Term may be
extended for one (1) additional period of FIVE (5) years ( the
"Option Period" ), the Option Period running from the
Expiration Date to April 30, 2016, unless sooner terminated as
herein provided. Such option to extend shall be exercised by
the Tenant by giving written notice to the Lessor not later than
one-hundred twenty (120) days prior to the Expiration Date of
the Lease Term . Such Option Period shall be on the same terms,
covenants and conditions as provided in this lease for the Lease
Term and payment of all additional rent and other charges
required to be made by the Tenant as provided in this Lease for
the Lease Term shall continue to be made during the Option
Period or as otherwise provided in this lease, except that the
fixed annual rental payable as provided in Article "2" herein
shall be increased or decreased as follows:
Fixed Rent during the Option Period shall be set at the
Fixed Rent as set forth in Article "2" above, together with the
product obtained by multiplying such Fixed Rent by of the
percentage increase in the Consumer Price Index - Midwest Urban,
All Consumers published by the United States Department of
Labor, Bureau of Labor Statistics (hereinafter the "C.P.I")
between that published for April, 2006 and that published for
March, 2011, provided that in no event shall (i) an increase in
Fixed Rent as a result of the rent adjustment to occur on the
Expiration Date exceed fifteen percent (15%) of the Fixed Rent
nor (ii) a decrease in Fixed Rent as a result of the rent
adjustment to occur on the Expiration Date result in Fixed Rent
below the amount set forth in Article "2". In the event the
C.P.I. is discontinued, comparable statistics on the purchasing
power of the consumer dollar, published by the Bureau of Labor
and Statistics of the United States Department of Labor shall be
used for making the computation in this subsection. In the
event the Bureau of Labor Statistics shall no longer maintain
statistics on the purchasing power of the consumer dollar,
comparable statistics published by a reasonable financial
periodical or recognized authority selected by Lessor shall be
used for making the computation in this subsection. If such
index is changed so that a year other than 1984 shall equal 100,
then such index shall be converted in accordance with the
conversion factor published by the United States Bureau of Labor
Statistics. In the event that a dispute arises regarding the
amount or computation of the increase to the fixed annual rental
payable during the Option Period, such a dispute shall be
arbitrated in Hennepin County, Minnesota, in accordance with the
rules of the American Arbitration Association, as in effect at
the time of the dispute, except that each party shall be
entitled to choose one arbitrator, who jointly shall select a
third arbitrator, who shall determine the matter. Any award of
such arbitration shall be enforceable against the parties to the
same extent as a judgment of a court of law having jurisdiction
over same, provided however, that the arbitrator shall have no
authority to alter or re-determine the terms of this Agreement
and the arbitration shall be limited to the amount or
computation of the increase to the fixed annual rental payable
during the Option Period under this Article "3".
4. OPTION TO RENT ADDITIONAL SPACE IN BUILDING.
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a. In consideration of valuable consideration receipt of
which is hereby acknowledged, Lessor hereby grants to Tenant an
option to lease (the "Additional Space Option") an additional
Eleven Thousand Five Hundred Twenty Five (11,525) square feet of
space in the Building as more particularly shown on Schedule "B"
annexed hereto and made a part hereof (the "Additional Space").
The Option shall be for an initial term of twelve (12) months,
commencing on the Commencement Date (as defined above) (the
"Additional Space Option Period") at no charge to the Tenant.
The Additional Space Option Period may be extended by Tenant for
an additional twelve (12) months upon thirty (30) days written
notice to Lessor and payment of the sum of Twenty Thousand and
00/100 dollars ($20,000.00) ("Additional Space Option Period
Extension Fee"). The Tenant must give the Lessor written notice
at least thirty (30) days prior to the expiration of the Initial
Option should it elect to exercise such Additional Space Option.
(b) In the event Tenant exercises the Additional Space
Option, then Lessor hereby leases the Additional Space to Tenant
for a term commencing on the first day of the month following
the later of the date notice of Tenant's election to lease the
Additional Space is delivered to Lessor or build out of the
Additional Space is completed and the space can be legally
occupied for use (the "Additional Space Commencement Date") and
extending until the Expiration Date (the "Additional Space
Term"). Tenant's rights to use common entrances, lobbies,
stairways, hallways, elevators, public rest rooms, sidewalks,
driveways and parking areas on the Property will thereupon
become exclusive, as there will be no other tenants in the
Building. Tenant shall use the Additional Space for the same
uses as set forth in Section 5 (B) below for the Leased
Premises.
(c) Tenant agrees to pay to Lessor or to such party as
Lessor may designate in writing as rent for said Additional
Space, during the Additional Space Term, the sum of Seven
Thousand Nine Hundred Twenty Three and 00/100 Dollars
($7,923.00) per month or Eight and 25/100 Dollars ($8.25) per
square foot per annum (the "Additional Space Fixed Rent"),
payable in advance on the first day of each month. Tenant shall
additionally pay such additional sums as are required to be paid
for the Leased Premises, including but not limited to real
estate taxes and special assessments and utilities.
(d) Tenant shall have the option to renew the rental of
the Additional Space (the "Additional Space Option Renewal") at
the same time, for the same period and upon the same terms and
conditions as for the Option Period for the Leased Premises,
with the Additional Space Fixed Rent to be adjusted using the
same methodology as set forth in Article 4 above for the Fixed
Rent for the Leased Premises.
(e) In the event Tenant exercises the Additional Space
Option, the Additional Space shall be built-out, prepared and
completed for Tenant's occupancy in accordance with
architectural and interior design plans and specifications which
Lessor shall cause to be prepared (collectively such plans and
specifications are hereinafter referred to as the "Build-Out
Plans") and submit to Tenant for approval, which approval shall
not be unreasonably withheld or delayed. Lessor shall have the
right to charge Tenant for any costs the Lessor incurs in
revising the Build-Out Plans due to material changes requested
by Tenant and Tenant shall be solely responsible for the costs
of upgrades in materials from those contained in the initial
Build-Out Plans, said costs to be paid within fifteen (15) days
of delivery of a statement therefore by Lessor to Tenant. All
installations, materials and work in building out and renovating
the Additional Space provided for in the plans and
specifications shall be accomplished by Lessor (such
installations, materials and work are hereinafter collectively
referred to as the "Build-Out Work"), who shall retain one or
more construction managers and/or contractors to manage and
perform the Build-Out Work. The selection of such construction
manager(s) and contractor(s) shall be approved by Tenant, which
approval shall not be unreasonably withheld or delayed. Lessor
shall cause a budget to be prepared for the Build-Out Work (the
"Build-Out Budget") and shall submit the Build-Out Budget to the
Tenant for its approval, such approval not be unreasonably
withheld or delayed, prior to authorizing the contractors to
proceed with the Build-Out Work. Upon Tenant's approval of the
Build-Out Budget, Lessor shall promptly cause the
construction manager and/or prime contractor to apply for a
building permit or permits for the Build-Out Work. Upon the
issuance of a building permit for the Build Out Work, Lessor
shall cause the contractor(s) to perform the Build-Out Work with
due diligence and dispatch. The Build-Out Work shall be
performed in a good and workmanlike manner and subject to and in
accordance with all applicable laws, rules and regulations. In
all cases, the Lessor shall have the right to substitute like
kind materials provided that the functionality and performance
of such are equivalent to those in the Build-Out Plans and that
the Tenant has been informed of such changes and has consented
to such changes in writing, which consent shall not be
unreasonably withheld or delayed. Lessor shall deliver to
Tenant copies of all contracts and invoices for the Build-Out
Work within a reasonable time following Lessor's receipt and
shall notify promptly Tenant of any material variance from the
Build-Out Budget and the reasons therefore.
Lessor represents and warrants that the Additional Space
shall be equipped with adequate HVAC and sprinkler service at
Lessor's expense. Lessor shall not be required to contribute
toward the cost and expense of the design, permits, construction
management fees and the Build-Out Work (other than as specified
in the preceding sentence) for the Additional Space (the "Build-
Out Costs"). Tenant shall pay the Build-Out Costs. Upon
issuance of a certificate of occupancy for the Additional Space,
Lessor shall deliver to Tenant, a copy of the certificate of
occupancy and a statement for the difference between the Build
Out Costs and the Tenant's Allowance (the "Tenant's Build -Out
Cost Payment"). The Lessor shall attach copies of all invoices
and vouchers for the Build-Out Work to the statement. Upon
receipt of such notice and statement and prior to its occupancy
of the Additional Space, Tenant shall deliver the Tenant's
Build-Out Cost Payment to Lessor by certified or bank check.
In the event there are punch list items which remain to be
completed but do not adversely affect Tenant's use and occupancy
of the Additional Space, those items shall be specifically noted
and Lessor shall cause such items to be completed as soon as
reasonably possible, but in no event more than 30 days following
occupancy unless otherwise agreed to in writing. Upon
completion of the punch list items, Lessor shall render a
statement to Tenant for the costs of the items to which shall
be attached all invoices Lessor has received for such items and
Tenant shall forward full payment upon such invoice within
fifteen (15) days of receipt of the statement.
To the extent reasonably possible, and provided it does not
interfere with the Lessor's completion of the Additional Space
Standard Work and Additional Space Extra Work, Tenant shall be
provided access to the Premises for purposes of making its
preparation for the commencement of its operations prior to the
Additional Space Commencement Date. In connection with such
access, Tenant covenants: (a) to cease promptly upon request by
Lessor activity or work (i) during any period which shall
interfere or delay completion of any Additional Space Standard
Work or Additional Space Extra Work or (ii) which shall be in
violation of any governmental rules, regulations or laws; (b) to
comply promptly with all reasonable procedures and regulations
prescribed by Lessor from time to time for coordinating such
access; (c) prior to such access, to deliver to Lessor the
policies of insurance required by this Lease; and (d) to comply
with all the provisions of this Lease, except there shall be no
obligations by Tenant solely because of such access to pay any
Rent or Additional Rent or to operate its business for any
period prior to the Commencement Date.
(f) Notwithstanding anything to the contrary contained in
this Lease, in the event Tenant does not exercise the Additional
Space Option and Lessor rents the Additional Space to a third
party or uses the Additional Space for its own uses, then
Tenant's obligations and responsibilities for payment of real
estate taxes and special assessments, public utilities, heating
and cooling, real property insurance premiums, and repairs and
maintenance of the Building and facilities on the Property
outside the Leased Premises shall be pro-rated on the basis of
ratio of square footage of the Leased Premises to the total
square footage of leasable space in the Building (unless the
Additional Space is separately metered or submetered for
utilities in which case Tenant's pro-rata share shall be based
on metered usage). Lessor shall put in place appropriate
billing arrangements wherein Lessor timely forwards bills to
Tenant for Tenant's proportionate share of bills, with original
bills attached. Tenant's obligation to carry liability
insurance and to indemnify Lessor shall additionally be confined
to the Leased Premises. Lessor shall maintain in good repair,
reasonable wear and tear and any casualty covered by the
provisions of Paragraph excepted, all parts of the Building,
other than tenants' premises, making all necessary repairs and
replacements, whether ordinary or extraordinary, structural or
nonstructural, including roof, foundation, walls, downspouts,
gutters, sprinkler system; regularly mow any grass, remove weeds
and perform general landscape maintenance; and maintain and
repair the parking lot and driveway areas. Tenant shall
immediately give Lessor written notice of any defect or need for
repairs after which Lessor shall have a reasonable opportunity
to repair the same or cure such defect.
5. TENANT'S COVENANTS. Tenant expressly covenants and agrees:
------------------
a. To pay any and all charges made by any public or
utility company for services furnished to Tenant or the Building
during the term of this Lease.
b. To use the Leased Premises for office, warehouse and
for any other purpose consistent with and pertinent to its
business, and to comply with all laws, ordinances, rules and
regulations of legally constituted authorities relating to the
use of such premises.
c. To keep the roof free of damaging ice and snow
accumulation and to keep the parking, driveway and lawn areas in
a neat and clean condition and in good repair, all at its own
cost and expense.
d. Not to use the Leased Premises nor permit the same to
be used for any unlawful business or purpose whatsoever or for
any purpose which is classed by insurance companies as extra-
hazardous.
e. To heat and cool the Building at its own cost and
expense, including heating, plumbing and electrical utilities.
f. To carry property, casualty and extended coverage
insurance and personal property insurance at its own cost and
expense in an amount of at least the fair market value of the
Leased Premises and personal property, with the Lessor to be
named as an insured and loss payee, and to keep such insurance
policies and premium receipts thereon on deposit with Lessor at
all times. In the event that the Lessor elects to carry itself,
the required property, casualty, and extended insurance
coverage, it shall have the right to do so, with the Tenant
being responsible for reimbursing the Lessor for all insurance
premiums incurred as a result thereof.
g. To carry public liability insurance at its own cost
and expense in the amount of at least One Million and 00/100
Dollars ($1,000,000.00) or such additional amounts as Lessor may
reasonably require from time to time, with Lessor to be named as
an additional insured, and to provide Lessor with insurance
certificates evidencing such coverage and renewals at all times.
h. To pay all real estate taxes and special assessments,
as corresponds to the portion of the Building leased by Tenant,
which become due and payable on the Leased Premises during the
term of this Lease before penalty attaches thereto, including
those becoming due and payable in the calendar year of 2006 on
or after the Commencement Date, and to furnish written evidence
of such payment to Lessor within thirty (30) days after payment.
Said taxes and special assessments shall be pro-rated for that
portion of the first year of the Lease, and such taxes and
special assessments for the last year of the Lease shall be
prorated, based upon the prior year's tax and assessment. If
Tenant in good faith shall desire to contest the validity or
amount of any real estate tax or special assessment which it has
hereby agreed to pay on said Leased Premises, Tenant shall
notify Lessor of its intention to do so and Lessor agrees to
render to Tenant all assistance reasonably possible, without
expense to Lessor in asserting such contest, including the
joining in and signing of any protest or pleading which Tenant
may deem advisable to file. Any rebate or refund on such tax or
special assessment paid by Tenant shall belong to and be paid to
Tenant. In no event shall Tenant permit such taxes to become
delinquent or penalties to accrue thereon. In the event that
Tenant is delinquent in its payment of real estate taxes
relating to the Leased Premises, Lessor reserves the right to
collect from Tenant monthly installments for such real estate
taxes.
i. To quit and surrender the Leased Premises to the
Lessor at the expiration of this Lease in as good condition as
when received, ordinary wear and tear resulting from permitted
use by Tenant and damage by fire and the elements for which
there is insurance coverage excepted.
j. To the extent allowed by their respective insurance
carriers, both the Lessor and Tenant shall have waiver of
subrogation clauses contained n their insurance policies.
k. All insurance policies carried by the Tenant shall
contain a provision that the Lessor must be provided written
notice at least thirty (30) days in advance of any cancellation
or non-renewal.
6. LESSOR'S COVENANTS. Lessor expressly covenants and agrees:
------------------
a. That the Lessor is lawfully seized of the premises
hereby demised and has good right and lawful authority to enter
into this Lease for the full term aforesaid.
b. That the Tenant shall have actual possession of the
premises hereby demised at the beginning of the term hereof, and
the Tenant shall have the peaceable and uninterrupted use and
occupancy of said premises during the said Lease term and
extension thereof, provided the Tenant pays the said rent and
performs the covenants herein agreed by it to be performed.
7. TENANT AND LESSOR COVENANTS AS TO REPAIRS. The Tenant and
-----------------------------------------
Lessor covenant and agree:
a. After the Tenant has been tendered possession of the
Leased Premises and the term of this Lease has begun, Tenant,
during the term hereof, at its own expense, shall keep the
Leased Premises and the equipment, drains, fixtures, appliances
and machinery in, upon, serving or appurtenant to said premises,
in good order and repair and it shall maintain reasonable
preventative maintenance on all such items. Tenant shall
replace, at its own expense any and all glass broken in or about
said premises, including plate glass, if any, with glass of the
same quality, and shall keep the roof of the building free from
an accumulation of ice and snow which would endanger the roof
and put undue strain on the roof's supports. Lessor, shall to
the extent it receives or has received any assignable warranties
from its contractors, subcontractors or manufacturers, for work,
materials or equipment performed or installed in connection with
the Leased Premises which Tenant is obligated to repair
pursuant to this Lease, assign such warranties to the Tenant.
In the event this Lease should terminate prior to the expiration
of such warranties for any reason, Tenant shall reassign such
warranties to Lessor.
b. Unless caused by the negligent or intentional acts or
omissions of the Tenant, the Lessor shall conduct and pay for
all repairs and maintenance to the exterior walls, the roof,
foundation and supporting columns of the Leased Premises or any
part thereof, and shall replace and pay for building equipment,
such as heating, plumbing, air conditioning, electrical wiring
and service facilities of like nature which must be replaced due
to general wearing out.
8. TENANT'S FIXTURES. Tenant shall have the right to use all
-----------------
furniture, fixtures and equipment now located on the Leased
Premises which are necessary for and used in the conduct of the
business of Tenant on the Leased Premises.
9. ASSIGNMENT OR SUBLETTING. Lessor shall have the right to
------------------------
assign this Lease in its absolute discretion. Tenant shall not
assign this Lease or sublet all or any part of the Leased
Premises without first obtaining the written consent of Lessor,
which consent shall not be unreasonably withheld or delayed by
the Lessor. Notwithstanding the foregoing, Tenant shall have
the right without Lessor's consent, to assign or sublease this
Lease to a corporation with which Tenant may merge or
consolidate, to any subsidiary of Tenant, to any corporation
under common control with Tenant, or to a purchaser of
substantially all of Tenant's assets.
10. FIRE, ETC., DAMAGE. If through no fault of the Tenant, the
------------------
Leased Premises or any part thereof or any appurtenance thereto
is so materially damaged by fire, casualty or structural defects
that a reasonable business person would determine that the same
cannot be restored within one hundred twenty (120) days, then
Tenant shall have the right within ninety (90) days following
damage to elect by notice to Lessor to terminate this Lease as
of the date of such damage. In the event of minor damage to any
part of the Leased Premises, and if such damage does not render
the Leased Premises materially unusable for Tenant's purposes,
or Tenant elects not to terminate this Lease, Lessor shall
promptly repair such damage at the cost of the Lessor. In making
the repairs called for in this paragraph, Lessor shall not be
liable for any delays resulting from strikes, governmental
restrictions, inability to obtain necessary materials or labor
or other matters which are beyond the reasonable control of
Lessor. Tenant shall be relieved from paying rent and other
charges during any portion of the Lease term that the Leased
Premises are inoperable or unfit for occupancy or use, in whole
or in part, for Tenant's purposes. Rentals and other charges
paid in advance for any such periods shall be credited on the
next ensuing payments, if any, but if no further payments are to
be made, any such advance payments shall be refunded to Tenant.
The provisions of this paragraph extend not only to the matters
aforesaid, but also to any occurrence which is beyond Tenant's
reasonable control and which renders the Leased Premises, or any
appurtenance thereto, inoperable or materially unfit for
occupancy or use, in whole or in part, for Tenant's purposes.
11. ALTERATIONS AND WORKMANLIKE REPAIRS. Lessor agrees that
-----------------------------------
Tenant, at its own cost and expense, may make such alterations
in and to the Leased Premises as it finds necessary or
convenient for its purposes, except that no structural change
shall be made without the express written consent of Lessor,
which consent shall not be unreasonably withheld or delayed.
All such alterations shall immediately become part of the
building and shall belong to the Lessor except that Lessor may,
at its option, at the termination of the term of this Lease,
require Tenant to remove such alterations and restore the
premises to substantially the condition in which they were
before such alterations, all at the cost and expense of Tenant.
All work done in connection with any repairs, changes or
alterations, whether by Lessor or Tenant, shall be done promptly
and in a good and workmanlike manner and in compliance with the
requirements of the public and insurance authorities and all
governmental laws and regulations applicable thereto. The cost
of such repairs shall be paid so that the Leased Premises shall
at all times be free of liens for labor and materials, supplied
or claimed to have been supplied to the Leased Premises. In the
event Tenant, for any reason, decides to dispute and delay
payment of the cost of such repairs, it may do so by notifying
Lessor in writing of such dispute and delay, and shall post
security with Lessor, at its request, to save Lessor harmless
thereform, and delay, and shall post security with Lessor, at
its request, to save Lessor harmless therefrom, and at Lessor's
request, will provide a bond to prevent a lien foreclosure sale.
12. SUBORDINATE LEASE TO MORTGAGE. The Lessor shall have the
-----------------------------
right to subject and subordinate this Lease at all times to the
lien of any mortgage or mortgages now or hereafter placed on the
Lessor's interest in the Leased Premises, if requested by any
such mortgage holder. Tenant agrees to execute and deliver upon
demand of the Lessor, its successors and assigns, such further
instruments subordinating this Lease to the lien of any such
mortgage or mortgages, provided, however, such mortgagee or
mortgagees shall, in writing:
a. Recognize the validity and continuance of this Lease
in the event of a foreclosure of the Lessor's interest as long
as the Tenant shall not be in default under the terms hereof;
and
b. Agree to notify Tenant within a reasonable time prior
to the commencement of any mortgage foreclosure proceedings of
the nature and extent of all defaults under such mortgage.
13. NON-DISTURBANCE AGREEMENTS. Lessor hereby agrees to use
--------------------------
reasonable efforts to obtain for Tenant a subordination, non-
disturbance and attornment agreement (a "SNDA") from all
existing Mortgagees and Lessors, in the standard form
customarily employed by such Mortgagee and/or Lessor in respect
of the Leased Premises. The fact that the Lessor is unable to
obtain such an SNDA shall not affect the Tenant's obligations
hereunder.
14. PERFORMANCE OF OTHER PARTY'S OBLIGATIONS. The Tenant
----------------------------------------
covenants and agrees that if it shall at any time fail to make
any payment or perform any other act on its part to be made or
performed as in this Lease provided, then the Lessor, may, after
thirty (30) days, written notice thereof to Tenant, but without
obligation so to do and without waiving or releasing the Tenant
from any obligations of the Tenant in this Lease contained, make
any payment or perform any other act on the part of the Tenant
to be made and performed as in this Lease provided, in such
manner and to such extent as the Lessor may deem desirable. All
sums so paid by the Lessor and all necessary and incidental
costs and expenses in connection with the performance of any
such act by the Lessor, together with interest thereon at the
rate of eight percent (8%) per annum from the date of making
such expenditure by the Lessor, shall be deemed additional rent
hereunder and shall be payable to the Lessor on demand, and the
Lessor shall have, in addition to any other right or remedy of
the Lessor, the same rights and remedies in event of the
nonpayment thereof by the Tenant as in the case of default by
the Tenant in the payment of rent.
If there is an undisputed default with respect to any of
Lessor's covenants, warranties or representations under this
Lease, and if the default continues more than thirty (30) days
after notice in writing from Tenant to Lessor specifying the
default, Tenant may, at its option and without affecting any
other remedy hereunder, cure such default and deduct the cost
thereof from the next accruing installment or installments of
rent payable hereunder until Tenant shall have been fully
reimbursed for such expenditure.
15. REASONABLE ACCESS BY LESSOR. The Lessor shall have
---------------------------
reasonable access during business hours to the premises hereby
demised for the purpose of examining and exhibiting the same to
prospective purchasers or mortgagees or to make any needed
repairs as above permitted, provided Lessor does not unnecessary
interfere with Tenant's business. Lessor shall further have
reasonable access during business hours to the premises during
the last six (6) months of the term hereof to exhibit the same
to prospective tenants.
16. COMPLIANCE WITH ENVIRONMENTAL LAWS. Tenant, at all times
----------------------------------
during the term of this Lease, agrees to conduct its business
operations from the Leased Premises in compliance with all
applicable environmental laws and regulations, and will
indemnify and save harmless Lessor from any and all claims,
damages, fines, judgments, penalties, costs, liabilities or
losses (including, without limitation, reasonable attorneys'
fees and expenses of litigation) arising during or after the
term of this Lease as a result of any violation by Tenant of
applicable environmental laws or regulations. Lessor agrees to
indemnify and save harmless Tenant from any and all claims,
damages, fines, judgments, penalties, costs, liabilities or
losses (including, without limitation, reasonable attorneys'
fees and expenses of litigation) resulting from any violation of
applicable environmental laws or regulations with respect to the
Leased Premises, which existed as of the commencement date of
this Lease, or which results from a violation of such laws or
regulations by Lessor during the term of this Lease. Lessor
acknowledges that, to the best of its knowledge, there have been
no violations of such laws or regulations with respect to the
Leased Premises prior to the Commencement Date. The respective
rights and obligations of Lessor and Tenant under this Article
"16" shall survive the expiration or earlier termination of this
Lease.
17. CONDEMNATION. If the entire Leased Premises shall be taken
------------
for any street or other public use by the action of the public
authorities, or such material parts of said Leased Premises are
taken as, in the reasonable judgment of the Tenant, would make
it uneconomic to continue to operate its business thereon, then
this Lease and the term demised shall thereupon terminate as of
the date when physical possession of said premises, or such part
thereof, shall be taken by such municipality or other public
corporation, and all further obligations of the parties under
this Lease shall end, provided, however, that for any lesser
taking the Lease shall continue upon a proper adjustment of
rentals in view of the lesser premises available for use by
Tenant. Upon any termination of this Lease pursuant to the
provisions of this Article "17", rent shall be apportioned as
of, and shall be paid or refunded up to and including, the date
of such termination.
18. INDEMNIFICATION BY TENANT. Tenant shall defend, indemnify
-------------------------
and hold the Lessor harmless from any and all liability, damage,
expense, cause of action, suits, claims or judgments resulting
from injury to persons or property on the demised property (not
caused by the sole negligence of Lessor, its employees or
agents) which arise out of Tenant's use or occupancy of the
premises, its act, failure to act, or negligence of Tenant, its
agents, employees or business visitors or any other parties.
Lessor agrees that in case any claim is asserted or any action
brought to recover any such damage, Lessor will give immediate
notice thereof in writing to Tenant and will cooperate in every
way in the investigation and defense of any such claim or
action, and that the handling and settlement of any such action
shall be performed and concluded by Tenant.
19. RISK OF LOSS, DAMAGE OR DESTRUCTION. Tenant assumes all
-----------------------------------
risk of loss, damage or destruction of the contents of said
building and of or to other property brought upon the Leased
Premises by the Tenant or by any other persons with the
knowledge or consent of the Tenant and of or to property in
proximity to thee Leased Premises when connected with or
incidental to the occupation thereof.
20. LESSOR'S REMEDY FOR DEFAULTS. If Tenant shall default in
----------------------------
the payment of rent when due to Lessor as herein provided, and
if said default shall continue for fifteen (15) days after
written notice thereof shall have been given to Tenant by
Lessor, or if default shall be made in any of the other
covenants or conditions to be kept, observed and performed by
Tenant, and such default shall continue for thirty (30) days
after notice thereof in writing to Tenant by Lessor without
correction thereof then having been commenced and thereafter
diligently prosecuted, then it shall be optional for Lessor to
declare this Lease forfeited and the said term ended, and to re-
enter said Leased Premises with or without process of law, using
such force as may be necessary to remove all persons or chattels
thereform, and Lessor shall not be liable for damages by reason
of such re-entry or forfeiture. Tenant hereby expressly waives
any and all rights of redemption granted by or under any present
or future laws in the event of Tenant being evicted or
dispossessed for any cause, or in the event of Lessor obtaining
possession of the Lease Premises by reason of the violation by
Tenant of any of the covenants or conditions of this Lease, or
otherwise; but notwithstanding such declaration and re-entry by
Lessor, the liability of Tenant for the rent provided for herein
shall not be relinquished or extinguished for the balance of the
term of this Lease. If default be made by Tenant and if Lessor
exercises its option to terminate as herein provided or as
provided by law, Lessor shall use reasonable efforts to mitigate
its damages and to re-rent the Leased Premises for the unexpired
portion of this Lease, and if the amount of rental to be
received by Lessor upon said re-letting is less than an amount
equal to the rental herein agreed to be paid by Tenant, and all
other payments required under this Lease plus all costs and
expense, including reasonable legal fees, incurred by Lessor due
to said default and re-letting, Tenant shall thereupon pay said
difference to Lessor in cash, as Tenant's liquidated damages for
such breach. Tenant shall pay, in addition to the rentals and
other sums agreed to be paid hereunder, such additional sums as
the court may adjudicate as reasonable as attorneys' fees and
costs and expenses incurred in any suit or action instituted by
Lessor to enforce the provisions of this Lease or to collect the
rental due Lessor hereunder. No payment by Tenant or receipt by
Lessor of a lesser amount than the monthly rent and other
payments herein stipulated shall be deemed to be other than a
partial payment, nor shall any endorsement or statement on any
check or any letter accompanying any check or payment be deemed
an accord and satisfaction, and Lessor may accept such check or
payment without prejudice to Lessor's rights to recover the
balance of such rent or other sums due hereunder or pursuant to
any other remedy in this Lease. In the event of a default by
Tenant, all remedies available to the Lessor shall be
cumulative.
21. SIGNS. Upon Lessor's consent not to be unreasonably
-----
withheld or delayed, Tenant shall have the right to place on the
Leased Premises, at locations selected by Tenant, any signs
which are permitted by applicable zoning ordinances and private
restrictions. Lessor shall assist and cooperate with Tenant in
obtaining any necessary permission from governmental authorities
or adjoining owners and occupants for Tenant to place or
construct the foregoing signs. Tenant shall repair all damage to
the Leased Premises resulting from the removal of signs
installed by Tenant
22. NOTICES. Wherever in this Lease it shall be required or
-------
permitted that notice or demand be given or served by either
party to this Lease to or on the other, such notice or demand
shall be given or served and shall not be deemed to have been
given or served, unless in writing and forwarded by certified
mail addressed as follows:
To the Lessor at: Apple Valley Development, LLC
Attn: Xxx Xxxxxxx
0000 Xxxx Xxxxxxx Xxxx
Xxxxx, XX 00000
To the Tenant at: Questar Educational Systems, Inc.
0000 Xxxxx 000xx Xxxxxx Xxxx
Xxxxx Xxxxxx, XX 00000
With copies to: Touchstone Applied Science Associates, Inc.
Attn: President
4 Hardscrabble Heights
X.X. Xxx 000
Xxxxxxxx, XX 00000
And to: Rider, Weiner & Xxxxxxx, P.C.
Attn: Xxxxxxx Crush, Esq.
X.X. Xxx 0000
Xxxxxxxx, Xxx Xxxx 00000
Such addresses may be changed from time to time by either party
by serving notice as above provided.
23. BINDING ON SUCCESSORS, ETC. This indenture shall be
--------------------------
binding upon and inure to the benefit of the successors, heirs,
executors, administrators and assigns of the parties hereto.
24. HOLDING OVER, ETC. If, upon the expiration of the term
-----------------
hereof, the Tenant shall hold over the Leased Premises without
any written agreement as to the new term, the holding over shall
be a tenancy from month to month only at a Fixed Rate of 110% as
previously established, any rule of law to the contrary
notwithstanding.
25. CAPTIONS. The captions used in this Lease are for
--------
convenience only and are not a part of this Lease.
26. SURVIVAL. If any clause or provision of this lease is
--------
illegal, invalid or unenforceable under present or future laws
effective during the term of this lease, then and in that event,
it is the intention of the parties hereto that the remainder of
this lease shall not be affected thereby, and it is also the
intention of the parties to this lease that in lieu of each
clause or provision of this lease that is illegal, invalid or
unenforceable, there be added as a part of this lease contract a
clause or provision as similar in terms to such illegal, invalid
or unenforceable clause or provision as may be possible and be
legal, valid and enforceable.
27. MEMORANDUM OF LEASE. The parties hereto contemplate that
-------------------
this Lease should not be filed for record, but in lieu thereof,
at the request of either party, Lessor and Tenant shall execute
a Memorandum of Lease to be recorded for the purpose of giving
record notice of the appropriate provisions of this Lease
28. MINNESOTA LAW. This Lease shall be governed by the laws of
-------------
the State of Minnesota. The parties agree that the State
(Dakota County) and Federal Courts of Minnesota shall have
exclusive jurisdiction over any legal proceeding regarding this
Lease.
29. ALL AGREEMENTS INCLUDED; MODIFICATIONS. This instrument
--------------------------------------
embodies all the agreements between the parties hereto
respecting the premises hereby demised and expressly supercedes
all prior agreements of the parties hereto, whether written or
oral, with respect to the Leased Premises. All subsequent
changes and modifications to be valid shall be embodied within a
written instrument duly executed by the parties hereto.
30. NO WAIVER. The receipt by the Lessor of rent or other sums
---------
with knowledge of the breach of any covenant in this lease by
the Tenant shall not be deemed as a waiver of such breach and no
provision of this lease shall be deemed to have been waived by
the Lessor unless such waiver is in writing and signed by the
Lessor.
31. TRIPLE NET LEASE. The parties recognize and acknowledge
----------------
that this Lease is intended to be on a triple net basis.
32. LESSOR'S STORAGE. During the period(s) of time that Tenant
----------------
has the Option to Lease the Additional Space, but has not
exercised said Option, and taken possession thereof, the Lessee
shall have the right to occupy and store non-hazardous, non-
noxious materials in the Option Space without any consideration
due the Tenant, and without any reduction or allocation of the
Tenant's financial obligations hereunder.
33. BROKER. The parties agree no broker negotiated or brought
------
about this transaction.
IN TESTIMONY WHEREOF, the Lessor and the Tenant have caused
these presents to be executed the day and year first above
written.
LESSOR:
APPLE VALLEY DEVELOPMENT, LLC
By:_________________________________
Xxxxxxxx Xxxxxxx
Its Member
TENANT:
QUESTAR EDUCATIONAL SYSTEMS, INC.
By:___________________________________
Its Chief Executive Officer
SCHEDULE A
SCHEDULE B
Exhibit O
---------
INTELLECTUAL PROPERTY ASSIGNMENT AND USAGE AGREEMENT
Intellectual Property Assignment and Usage Agreement dated
as of May 31, 2006 (the "Agreement") by and between QUESTAR DATA
SYSTEMS, INC. a Minnesota corporation, with its principal place
of business at 0000 Xxxx Xxxxxxx Xxxx, Xxxxx, Xxxxxxxxx 00000
("QDS"); QUESTAR EDUCATIONAL SYSTEMS, INC., a Minnesota
corporation, with its principal place of business at 0000 Xxxxx
000xx Xxxxxx Xxxx, Xxxxx Xxxxxx, Xxxxxxxxx 00000 ("QES"); and
TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC., a Delaware
corporation with a principal place of business at 0 Xxxxxxxxxxxx
Xxxxxxx, Xxxxxxxx, Xxx Xxxx 00000 ("TASA")
WHEREAS, QDS owned all right, title and interest in the
stylized/design trademark "Questar Educational Systems",
Registration No. 2,908,243 with the United States Patent &
Trademark Office ("USPTO"), a copy of such registration is
attached hereto as Exhibit "A" (the "QES Registered Trademark")
and had access to other intellectual property of QES, including
the common law trademarks of Test Path, Score Point and Service
Point (these common law trademarks along with the QES Registered
Trademark shall be referred to herein as the "QES Trademarks");
WHEREAS, on April 18, 2006, QDS executed an assignment of
the QES Registered Trademark to QES, which assignment is
attached hereto and incorporated herein as Exhibit "B" (the
"Assignment Agreement").
WHEREAS, QDS owns other registered trademarks and
copyrights which utilize the name "Questar" and operates its
business using the name "Questar".
WHEREAS, TASA, pursuant to that certain Stock Purchase
Agreement dated May 31, 2006 (the "Stock Purchase Agreement"),
shall purchase all of the issued and outstanding shares of
capital stock of QES upon the terms and subject to the
conditions set forth therein and the parties desire to enter
into this agreement to ensure that all of the intellectual
property of QES is assigned and transferred to QES and TASA and
to ensure that the parties can continue to utilize the name
"Questar" for their businesses.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants contained in this Agreement, the receipt and
sufficiency of which the parties hereby acknowledge, the parties
agree as follows:
1. ASSIGNMENT. QDS does hereby sell, assign, grant,
----------
transfer, convey and deliver unto QES, its successors and
assigns, on a royalty-free and non-cancelable basis, all right,
title and interest to each of the QES Trademarks together with
any and all renewals of any of the foregoing; provided that, QDS
and QES agree that the assignment of rights with respect to the
QES Registered Trademark made pursuant to the Assignment
Agreement encompasses all right, title and interest to the QES
Registered Trademark. Notwithstanding the foregoing, the sales,
assignments, grants, transfers, conveyances, and deliveries made
and memoralized herein include the following:
(a) all rights to utilize the QES Trademarks in the
operation of any business enterprise conducted by QES, including
the right to use the QES Trademarks and any similar or
derivative trademarks or service marks, except as otherwise
provided herein;
(b) all rights to claims for past infringement of the
QES Trademarks; and
(c) the right to initiate suit and obtain damages and
other forms of relief, both legal and equitable, arising from
infringement, misappropriation or other violation whether prior
to or subsequent to the date hereof, of the QES Trademarks, or
of any proprietary or other rights in the QES Trademarks.
As of the date of this Agreement, QDS shall cease the use of the
QES Trademarks without the prior, written consent of QES or
TASA. QDS grants permission to QES to secure new and additional
trademark and service xxxx protection for any of the QES
Trademarks throughout the world and to use the QES Trademarks in
all media now existing or hereinafter created, in perpetuity.
2. WARRANTIES FOR THE QES TRADEMARKS. QDS represents and
---------------------------------
warrants the following:
(a) it has the full right and power to make this
Agreement;
(b) it has no knowledge of any adverse claim to or in
any of the QES Trademarks;
(c) it has not sought trademark protection for any
other QES trademark except for the registration
attached on Exhibit "A" hereto;
(d) the QES Trademarks do not violate the copyright
or trademark of another individual or entity and
do not infringe on the personal or property
rights of any person or entity, including QDS's
other trademarks;
(e) it has not licensed, assigned or otherwise
conveyed any rights in the QES Trademarks to a
third-party;
(f) it understands that in the event that QES
discontinues use of any of the QES Trademarks,
any rights in the QES Trademarks will not revert
back or be transferred to QDS; and
(h) it is not retaining any intellectual property or
other rights in the QES Trademarks, other
than as provided herein.
3. MODIFICATIONS TO QES TRADEMARKS. Subject to the
-------------------------------
conditions of Paragraph 6(b) below, QES may make or have made,
at its own expense, any modifications, adjustments, additions or
format changes to the QES Trademarks, including using the QES
Trademarks for any and all media now existing or hereinafter
developed as QES or TASA may deem desirable.
4. INFRINGEMENT. Any legal action brought by QES or TASA
------------
against any alleged infringer of any of the QES Trademarks shall
be initiated and prosecuted at QES or TASA's sole expense and
any recovery made as a result therefore shall be the sole
property of QES.
5. NON-INTERFERENCE AND NON-COMPETITION.
------------------------------------
(a) Use by QDS. QES and TASA each acknowledge that QDS
----------
utilizes the name "Questar" in its corporate name and its
business and has certain registered trademarks under the name
"Questar" (the "QDS Trademarks"). So long as QDS is in
compliance with the terms of this Agreement, QES and TASA each
agree that:
(i) QDS exclusively may utilize the QDS Trademarks and
the name "Questar" as it is currently used and for all
other purposes in the survey research and data collection
market and QES and TASA shall not use or register any name,
trademark or service xxxx in that market or on any services
or goods that directly compete with services or goods
currently provided or offered by QDS;
(ii) QDS exclusively is permitted to use the name
"Questar" as part of the QDS Trademarks, including
applications, registration and protection thereof, and for
registration of any additional trademarks or service marks
in USPTO Class 35 Advertising and Business or other
analogous class utilized by USPTO or in international
trademark registration and QES and TASA shall not use or
register any name, trademark or service xxxx in Class 35 or
the analogous class;
(iii) QES and TASA shall not contest the validity of
or challenge the QES Trademarks, through infringement
proceedings, opposition to USPTO registrations or
otherwise, or take any other action inconsistent with or in
derogation of QDS' rights in the QDS Trademarks or other
uses of the name "Questar" by QDS that are in compliance
with the terms and conditions of this Agreement; and
(iv) QDS may alter or modify the QDS Trademarks or
develop, use or register a new trademark or service xxxx
using the name "Questar", so long as the design of the xxxx
is not confusingly similar to any design xxxx previously
used or registered by QES or TASA. If QDS seeks to utilize
or register a trademark or service xxxx other than as
provided herein, QDS shall obtain the prior written consent
of QES and TASA.
(b) Use by QES and TASA. QDS acknowledges that QES
-------------------
utilizes the name "Questar" in its corporate name and its
business and in the QES Registered Trademark. So long as TASA
and QES are in compliance with the terms of this Agreement, QDS
agrees that:
(i) QES and TASA exclusively may utilize the each of
the QES Trademarks and the name "Questar" as it is
currently used by QES and for all other purposes in the
educational testing and assessment market and QDS shall not
use or register any name, trademark or service xxxx in that
market or on any services or goods that directly compete
with services or goods currently provided or offered by QES;
(ii) QES exclusively is permitted to use the name
"Questar" as part of the QES Registered Trademark,
including applications, registration and protection
thereof, and for registration of any additional trademarks
or service marks in USPTO Class 41 Education and
Entertainment or other analogous class utilized by USPTO or
in international trademark registration and QDS shall not
use or register any name, trademark or service xxxx in
Class 41 or the analogous class;
(iii) QDS shall not contest the validity of or
challenge any of the QES Trademarks, through infringement
proceedings, opposition to USPTO registrations or
otherwise, or take any other action inconsistent with or in
derogation of TASA or QES' rights in the QES Trademarks or
other uses of the name "Questar" by TASA or QES that are in
compliance with the terms and conditions of this Agreement;
and
(iv) QES or TASA may alter or modify any of the QES
Trademarks or develop, use or register a new trademark or
service xxxx using the name "Questar", so long as the
design of the xxxx is not confusingly similar to any design
xxxx previously used or registered by QDS. If QES or TASA
seeks to utilize or register a trademark or service xxxx
other than as provided herein, QES or TASA shall obtain the
prior written consent of QDS.
6. MUTUAL USE. Except for the exclusive use provisions
----------
set forth in Paragraph 6 above, each of the parties have the
right to use the name "Questar" in any other markets and may
register trademarks or service marks containing that name
"Questar" in any other USPTO Class of Goods and Services or
analogous international class.
7. AUTHORIZATION TO UTILIZE DOMAIN NAME AND URL RIGHTS.
---------------------------------------------------
QDS does hereby authorize QES, its successors and assigns the
sole and exclusive right to utilize the universal locator
xxx.xxxxxxxxx.xxx; and use of such domain name/url or other
similar domain name/url shall not be deemed to be infringement
on any of the trademark or other intellectual property rights of
QDS. QES does hereby authorize QDS, its successors and assigns
the sole and exclusive right to utilize the universal locator
xxx.xxxxxxxxxx.xxx; and use of such domain name/url or other
similar domain name/url shall not be deemed to be infringement
on any of the trademark or other intellectual property rights of
QES.
8. NO ADDITIONAL COMPENSATION. Unless otherwise stated
--------------------------
herein, the parties hereby agree and acknowledge that the mutual
promises contained herein are full and adequate consideration
for this Agreement. No additional compensation, in the form of
royalties or otherwise, shall be owing to QDS, QES or TASA for
the right to utilize the QES Trademarks or QDS Trademarks.
9. OWNERSHIP OF QES'S PROPERTY AND RIGHTS.
--------------------------------------
(a) INVENTIONS. QDS understands and acknowledges that in
----------
the course of and as a direct result of QDS providing services
to QES, whether before or after the date hereof, (including but
not limited to the "Services" (as such term is defined in that
certain Transitional Services Agreement between the parties of
even date herewith)), QDS, its officers, directors, employees
and independent contractors, may have conceived, developed or
produced ideas, inventions, documentation, computer code, tools,
procedures, techniques, know-how, improvements and/or other
materials, whether or not they were reduced to practice or made
or conceived by QDS, its officers, directors, employees or
independent contractors, solely or jointly with others
(collectively "Inventions"). For the avoidance of doubt, the
term "Inventions" includes the code, design, development,
production and use of certain proprietary software such as Test
Path, Score Point and Service Point. QDS acknowledges and
understands that QES shall be deemed the sole creator and owner
of the Inventions.
(b) INTELLECTUAL PROPERTY RIGHTS. QES shall solely own
----------------------------
and have exclusive worldwide right, title and interest in and to
the Confidential Information and Inventions, and to all
modifications, enhancements and derivative works thereof, in all
United States and worldwide trademarks, service marks, trade
dress, copyrights, patents, trade secrets and all other
intellectual property rights related thereto and to QES's
business (including all renewals and extensions thereof)
(collectively "Intellectual Property Rights"). QDS understands
and acknowledges that no license or other interest of any kind
in the Confidential Information, Inventions or Intellectual
Property Rights has been directly or indirectly granted to QDS,
its officers, directors, employees or independent contractors.
QDS represents and warrants that QDS will not, from this date
forward, challenge or otherwise impair TASA or QES's rights to
the Confidential Information, Inventions or the validity or
enforceability of the Intellectual Property Rights.
(c) ASSIGNMENT OF RIGHTS. From the moment of creation,
--------------------
QDS for itself and on behalf of its officers, directors,
employees and independent contractors, irrevocably assigns and
transfers to QES all right, title and interest worldwide in and
to all of the Inventions, to all modifications, enhancements and
derivative works thereof, and to all worldwide Intellectual
Property Rights related thereto. The above assignment includes
without limitation the exclusive right for QES to exploit the
Inventions by and through all media, platforms, processes, and
other means now known or hereafter devised. QDS for itself and
on behalf of its officers, directors, employees and independent
contractors further irrevocably waives all rights to assert any
moral rights in any way regarding the Inventions and/or the
Intellectual Property Rights related thereto.
(d) NOTICE REQUIRED BY MINNESOTA LAW: Pursuant to
--------------------------------
Minnesota Statute Section 181.78(3), QDS and its officers,
directors, employees and independent contractors are hereby
notified that Paragraph 10(c) regarding assignment of Inventions
does not apply to any invention for which no equipment,
supplies, facility or trade secret information of QES was used
and which was developed entirely on QDS' officers, directors,
employees and independent contractors' own time, and (1) which
does not relate (i) directly to the business of QES or (ii) to
QES's actual or demonstrably anticipated research or
development; or (2) which does not result from any work
performed by QDS' officers, directors, employees and independent
contractors for QES.
10. NON-INTERFERENCE AND KEY EMPLOYEE AGREEMENT.
-------------------------------------------
(a) In consideration of the Services Fees provided to
QDS pursuant to the Transitional Services Agreement between the
parties of even date herewith, QDS agrees that it will not, and
it will not permit its officers or directors to, for a period
beginning on the date hereof and continuing until October 31,
2009 (the "Non-Interference Term"), without the prior written
consent of TASA or QES, directly or indirectly:
(i) solicit, induce or persuade any employee or
contractor of TASA, QES or an Affiliate to leave employment
with that entity for any reason;
(ii) hire or retain or assist others in hiring or
retaining any individuals who are employees or contractors
of TASA, QES or an Affiliate who were employees or
contractors at any time during the twelve (12) month period
prior to the Effective Date of this Agreement;
(iii) solicit, call on or take away any QES
Customer ("QES Customer" means any person or entity (A) to
whom TASA, QES or an Affiliate has provided goods or
services, or to whom TASA, QES or an Affiliate has
submitted a proposal to provide goods or services and (B)
who QDS or its officers or directors, have been introduced
to by or through QES or has become acquainted with by
working with QES during the twelve (12) month period prior
to the Effective Date of this Agreement or during the Non-
Interference Term);
(iv) perform or supply any services or products
(as an employee, contractor or otherwise) to QES Customers;
(v) induce or persuade or assist others in
inducing or persuading any QES Customer to reduce or
discontinue doing business with TASA, QES or an Affiliate
or to purchase from another person or entity goods or
services supplied or which could be supplied by TASA, QES
or an Affiliate to that QES Customer; or
(vi) interfere with any business relationship
between TASA, QES or an Affiliate and any other person or
entity.
(b) Each of QES and TASA agrees that it will not, and
it will not permit its officers or directors to, for a period
beginning on the date hereof and continuing until October 31,
2009, without the prior written consent of QDS, directly or
indirectly:
(i) solicit, induce or persuade any employee or
contractor of QDS or an Affiliate to leave employment with
that entity for any reason; provided, however, that the
parties agree that Xxx Small ("Small"), a current, key
employee of QDS, shall be specifically exempted from the
restrictions of this Section 10(b)(i) and Section 10(b)(ii)
below such that TASA or QES may solicit, hire, retain or
otherwise have dealings with Small during the Non-
Interference Term, which actions shall not be deemed a
violation of this Agreement;
(ii) hire or retain or assist others in hiring or
retaining any individuals who are employees or contractors
of QDS or an Affiliate who were employees or contractors at
any time during the twelve (12) month period prior to
the Effective Date of this Agreement;
(iii) solicit, call on or take away any QDS
Customer ("QDS Customer" means any person or entity (A) to
whom QDS or an Affiliate has provided goods or services, or
to whom QDS or an Affiliate has submitted a proposal to
provide goods or services and (B) who QES, or its officers
or directors, have been introduced to by or through QDS or
has become acquainted with by working with QDS during the
twelve (12) month period prior to the Effective Date of
this Agreement or during the Non-Interference Term);
(iv) perform or supply any services or products
(as an employee, contractor or otherwise) to QDS Customers;
(v) induce or persuade or assist others in
inducing or persuading any QDS Customer to reduce or
discontinue doing business with QDS or an Affiliate or to
purchase from another person or entity goods or services
supplied or which could be supplied by QDS or an Affiliate
to that Customer; or
(vi) interfere with any business relationship
between QDS or an Affiliate and any other person or entity.
(c) QES and TASA's obligations under this Agreement
are subject to the requirement that, prior to the date of this
Agreement that Small shall have executed and delivered a
Proprietary Rights Agreement to QES and TASA, which agreement
shall be substantially in the form attached hereto as Exhibit
"C" to this Agreement.
11. DEFINITIONS. Capitalized terms used but not defined
-----------
herein having the meanings ascribed thereto in the Stock
Purchase Agreement. For purposes of this Agreement, the term
"Affiliate" means a company (i) 50% or more of the voting
securities of which are owned, directly or indirectly, by any of
TASA, QES or QDS; (ii) which owns, directly or indirectly, 50%
or more of the voting securities of any of TASA, QES or QDS; or
(iii) any person or entity, directly or indirectly, controlling,
controlled by or under common control with TASA, QES or QDS.
12. INDEMNIFICATION. Each of QDS and QES shall indemnify,
---------------
save and hold harmless the other party and its officers,
directors, legal representatives, successors, licensees and
assigns from and against all claims, demands, actions,
proceedings, liabilities, costs and expenses, including
attorneys' fees, which may be asserted against or incurred by
any of them, arising out of or connected with any claim by a
third party which is inconsistent with any of the
representations and warranties made by that party in this
Agreement or by reason of the exercise of any of the rights
granted or purported to be granted in this Agreement.
13. FURTHER ASSURANCES. At any time and from time to time
------------------
after the Effective Date each party shall, without further
consideration, execute and deliver to the other such other
instruments of transfer and assumption and shall take such other
action as the other may reasonably request to carry out the
transfer of any of the QES Trademarks to QES as contemplated by
this Agreement.
14. ENTIRE AGREEMENT. This Agreement and any Exhibits
----------------
hereto constitute the entire agreement and understanding of the
parties with respect to the subject matter hereof and supersede
all prior agreements and understandings, whether oral or
written. No modification or claimed waiver of any of the
provisions hereof shall be valid unless in writing and signed by
the party against whom such modification or waiver is sought to
be enforced.
15. CHOICE OF LAW. This Agreement will be governed by the
-------------
laws of the State of New York that apply to intellectual
property and to contracts made and performed within New York,
and will be binding on the parties' heirs, legal
representatives, successors and assigns.
16. INJUNCTIVE RELIEF. The parties hereto acknowledge and
-----------------
agree that the restrictions contained in this paragraph are
reasonable and necessary protection of the immediate interests
of the parties, and any violation of these restrictions would
cause substantial injury to the parties and that the parties
would not have entered into this Agreement without receiving the
additional consideration offered by these restrictions. In the
event of a breach or a threatened breach of these restrictions,
the non-breaching party shall be entitled to apply to any court
of competent jurisdiction for temporary, preliminary and
permanent injunctive relief, of both a prohibitory and mandatory
nature, restraining such party from such breach or threatened
breach; provided, however, that the right to apply for
injunctive relief shall not be construed as prohibiting the non-
breaching party from pursuing any other available remedies for
such breach or threatened breach.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first above written.
Questar Data Systems, Inc.
________________________
Name:
Title:
Questar Educational Systems, Inc.
________________________
Name:
Title:
Touchstone Applied Science Associates,
Inc.
________________________
Name:
Title:
EXHIBIT "A"
USPTO Registration of QES Registered Trademark
EXHIBIT "B"
Assignment Agreement for QES Registered Trademark
EXHIBIT "C"
Xxx Small Proprietary Rights Agreement
THIS PROPRIETARY RIGHTS AGREEMENT ("Agreement") is made as
of this 31st day of May, 2006 (the "Effective Date") by and
between TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC., a Delaware
corporation ("Purchaser"), QUESTAR EDUCATIONAL SYSTEMS, INC.
(the "Corporation") and Xxx Small, an individual residing at
0000 Xxxxxxxx Xxxx, Xxxxx, Xxxxxxxxx, 00000 ("Small").
RECITALS
WHEREAS, Purchaser, the individual selling shareholders of
the Corporation and the Corporation are parties to that certain
Stock Purchase Agreement dated as of June 1, 2006 (the "Stock
Purchase Agreement"); and
WHEREAS, Questar Data Systems, Inc. ("QDS"), the Purchaser
and the Corporation are parties to a certain Intellectual
Property Assignment and Usage Agreement (the "IP Agreement") and
to a Transitional Services Agreement each dated as of June 1,
2006, which are being entered into pursuant to the sale of the
Corporation to Purchaser; and
WHEREAS, Small is a key employee of QDS and has worked on
certain matters involving the business of the Corporation and
had access, and pursuant to the Transitional Services Agreement
may continue to have access, to certain confidential and
proprietary information of the Corporation; and
WHEREAS, the execution and delivery of this Agreement is an
express condition to the fulfillment by QDS of its obligations
under the Transitional Services Agreement and the IP Agreement;
and
WHEREAS, Purchaser and the Corporation would suffer
substantial damage and Purchaser's investment in developing the
strategy underlying the purchase of the Shares of the
Corporation and the effectiveness of the IP Agreement and the
Transitional Services Agreement would be negatively impacted, if
Small engaged in activities prohibited by this Agreement.
NOW THEREFORE, in consideration of the foregoing and the
covenants of Small hereinafter contained, Small agrees with the
Corporation and Purchaser as follows:
15. CONFIDENTIAL INFORMATION AND NON-DISCLOSURE. Small
-------------------------------------------
understands and acknowledges that as a result of Small's
involvement with Corporation, Small may have had access to
confidential information of Corporation including, without
limitation, Corporation's trade secrets and proprietary
information regarding its inventions, patentable technologies,
technical information, ideas, computer code, source codes, mask
works, software development tools, specifications, schematics,
processes, techniques, designs, know-how, marketing plans,
business strategy, pricing information, financial data, customer
lists, referral and vendor sources and scanning, scoring,
reporting and testing methods and materials (collectively
"Confidential Information"). Small understands and acknowledges
that such Confidential Information, even though it may have been
or may be developed or otherwise acquired by Small, is the
exclusive property of Corporation and Small shall not at any
time, from this date forward, reveal, report, publish, transfer
or otherwise disclose to any person, corporation or other
entity, or use or exploit, any of Corporation's Confidential
Information, without the written consent of Purchaser or
Corporation, except for such information which legally and
legitimately is or becomes of general public knowledge from
authorized sources other than Small.
16. SURRENDER OF CORPORATION'S CONFIDENTIAL INFORMATION.
---------------------------------------------------
Except as otherwise provided in the Transitional Services
Agreement, in connection with the execution of this Agreement,
Small shall deliver to Purchaser (a) all Confidential
Information and (b) all documents, computer discs, electronic
files, computer code, materials, equipment, documents, drawings
and other information both in hard copy and in machine readable
form that in any way relate to the Confidential Information.
Small shall not make or retain any hard or electronic copies of
any such information or materials, make or retain any summaries
or descriptions of any such information or materials, and/or
erase any hard drives or otherwise delete any such information
or materials from any laptop or desktop computers, computer
networks or other electronic devices or services of Corporation.
17. OWNERSHIP OF CORPORATION'S PROPERTY AND RIGHTS.
----------------------------------------------
(a) INVENTIONS. Small understands and acknowledges
----------
that as a result of Small's involvement with Corporation,
Small may have conceived, developed or produced ideas,
inventions, documentation, computer code, tools,
procedures, techniques, know-how, improvements and/or other
materials, whether or not they were reduced to practice or
made or conceived by Small solely or jointly with others
that relate to the Corporation's business (collectively
"Inventions"). Small acknowledges and understands that
Corporation shall be deemed the sole creator and owner of
the Inventions.
(b) INTELLECTUAL PROPERTY RIGHTS. Corporation shall
----------------------------
solely own and have exclusive worldwide right, title and
interest in and to the Confidential Information and
Inventions, and to all modifications, enhancements and
derivative works thereof, in all United States and
worldwide trademarks, service marks, trade dress,
copyrights, patents, trade secrets and all other
intellectual property rights related thereto and to the
Corporation's business (including all renewals and
extensions thereof) (collectively "Intellectual Property
Rights"). Small understands and acknowledges that no
license or other interest of any kind in the Confidential
Information, Inventions or Intellectual Property Rights has
been directly or indirectly granted to Small. Small
represents and warrants that she will not, from this date
forward, challenge or otherwise impair Purchaser or
Corporation's rights to the Confidential Information,
Inventions or the validity or enforceability of the
Intellectual Property Rights.
(c) ASSIGNMENT OF RIGHTS. From the moment of
--------------------
creation, Small irrevocably assigns and transfers to
Corporation all right, title and interest worldwide in and
to all of the Inventions, to all modifications,
enhancements and derivative works thereof, and to all
worldwide Intellectual Property Rights related thereto.
The above assignment includes without limitation the
exclusive right for Corporation to exploit the Inventions
by and through all media, platforms, processes, and other
means now known or hereafter devised. Small further
irrevocably waives all rights to assert any moral rights in
any way regarding the Inventions and/or the Intellectual
Property Rights related thereto.
(d) NOTICE REQUIRED BY MINNESOTA LAW: Pursuant to
--------------------------------
Minnesota Statute Section 181.78(3), Small is hereby
notified that Paragraph 5(c) regarding assignment of
Inventions does not apply to any invention for which no
equipment, supplies, facility or trade secret information
of Corporation was used and which was developed entirely on
Small's own time, and (1) which does not relate (i)
directly to the business of Corporation or (ii) to
Corporation's actual or demonstrably anticipated research
or development; or (2) which does not result from any work
performed by Small for Corporation.
18. EQUITABLE RELIEF FOR BREACH. Because the breach or
---------------------------
anticipated breach of the restrictions set forth in this
Agreement shall result in the immediate and irrevocable harm and
injury to Purchaser and/or Corporation, for which Purchaser
and/or Corporation will not have an adequate remedy at law,
Small agrees that the Purchaser and/or Corporation shall be
entitled to relief in equity to enjoin temporarily and/or
permanently such breach or anticipated breach and to seek any
and all other legal and equitable remedies to which each may be
entitled. If the Purchaser, and/or Corporation prevails in any
action at equity or at law brought to enforce this Agreement,
Small agrees to pay all costs of litigation including the
reasonable attorneys' fees and expenses of the Purchaser and
Corporation. In the event the restrictions set forth in this
Agreement are considered by a court of competent jurisdiction to
be excessive in their duration of scope, they shall be
considered modified and valid for such duration and for such
business and area as such court may determine to the maximum
extent permitted by applicable law.
19. GOVERNING LAW. This Agreement shall, with respect to
-------------
any and all matters, including, but not limited to, validity,
construction or performance, be governed by the laws of the
State of Minnesota.
20. SEVERABILITY. All provisions of this Agreement are
------------
intended to be severable. Each provision of this Agreement
constitutes a separate and distinct covenant. In the event any
term, provision, or restriction in this Agreement is held to be
illegal, invalid, or unenforceable in any respect, such findings
shall in no way affect the legality, viability, or
enforceability of all other provisions of this Agreement.
Small, Purchaser and Corporation agree that any such
unenforceable term, provision or restriction shall be deemed
modified to the extent necessary to permit its enforcement to
the maximum extent permitted by applicable law.
21. NO WAIVER. Neither any failure or delay on the part
---------
of any party in exercising its rights shall operate as a waiver,
nor shall a single or partial exercise preclude any further
exercise in any right, power, or privilege by any party.
22. SUCCESSORS AND ASSIGNS. This Agreement shall be
----------------------
binding upon and inure to the benefit of the Purchaser,
Corporation and Small and their respective successors and
assigns and legal representatives.
23. ENTIRE AGREEMENT. This Agreement sets forth the
----------------
parties' final and entire Agreement with respect to its subject
matter and supersedes any and all prior understandings and
agreements. No waiver, alteration or modification of any
provision of this Agreement will be valid unless made in writing
and signed by all of the parties hereto.
24. COUNTERPARTS. This Agreement may be executed in one
------------
or more counterparts, each of which shall be deemed an original
and all of which together shall constitute one and the same
instrument.
25. DEFINED TERMS. Capitalized terms used and not
-------------
otherwise defined herein shall have the meaning ascribed to them
in the Stock Purchase Agreement.
In Witness Whereof, the parties have executed this
Agreement as of the day and year first above written.
Purchaser:
---------
Touchstone Applied Science
Associates, Inc.
By:__________________________
Name:
Title:
Corporation:
-----------
By:
_____________________________
Name:
Title:
______________________________
Xxx Small
Exhibit P
---------
TRANSITIONAL SERVICES AGREEMENT
This Agreement, dated as of May 31, 2006, by and between
Questar Educational Systems, Inc., a Minnesota corporation
("QES"), Questar Data Systems, Inc., a Minnesota corporation
("QDS"), and Touchstone Applied Science Associates, Inc., a
Delaware corporation ("Purchaser").
WHEREAS, pursuant to a Stock Purchase Agreement, dated as
of May 31, 2006, between the shareholders of QES and Purchaser
(the "SPA"), the shareholders of QES have sold, assigned,
transferred, and delivered the Shares (as defined in the SPA) to
Purchaser (the "Sale Transaction"); and
WHEREAS, prior to the Closing Date (as defined in the SPA),
QDS, an Affiliate of QES, provided certain administrative and
other services to QES; and
WHEREAS, the parties hereto desire to arrange for the
provision by QDS of certain transitional services to QES and
Purchaser from and after the date hereof, as more particularly
described herein.
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto hereby agree as
follows (capitalized terms used but not defined herein having
the meanings ascribed thereto in the SPA):
1. TERM. The term of this Agreement shall commence
----
as of the Closing Date and shall continue until November 30,
2006, or such shorter period as Purchaser may specify by ten
(10) days' written notice to the Selling Parties (the "Term").
All Services Fees (as hereinafter defined) due to QDS under this
Agreement shall begin to accrue as of the Closing Date.
2. THE SERVICES. During the Term, QDS shall, on
------------
behalf of and under the direction and control of the Purchaser,
perform the services set forth in this Agreement (collectively,
the "Services") as previously performed by any of QDS or its
Affiliates prior to the date hereof, and QDS shall make best
efforts to perform each specific herein-designated service in a
manner which is substantially similar in nature, quality and
timeliness to those provided to or for the Business prior to the
date hereof. Without limiting the foregoing, QDS shall:
(a) CASH MANAGEMENT SERVICES.
------------------------
(i) QDS shall provide administrative services
for the Business, which shall include, but shall not be limited
to, billing and remittance of cash to accounts designated by
Purchaser.
(ii) Purchaser shall establish, and QDS agrees
to follow, reasonable procedures for the collection, remittance,
delivery and/or deposit of amounts belonging to Purchaser or QES
and received by QES thereof in respect of the Business
("Amounts") and forwarding of invoices payable by the Business.
In addition to any reports previously prepared by or under the
direction of QDS and used by QES that may be requested by
Purchaser in connection with the services to be performed
pursuant to Paragraph 2(a)(i) hereof, QDS shall, at Purchaser's
request, submit to Purchaser (or its designee) a report, which
in form and substance is consistent with past practice, of the
Amounts and the sources of all Amounts.
(b) ACCOUNTING AND REPORTING SERVICES. During the
---------------------------------
Term, QDS shall provide the following accounting and reporting
services in a manner which, unless otherwise specifically
described, is substantially similar in nature, quality and
timeliness to those provided to or for the Business prior to the
Closing Date:
(i) General ledger accounting;
(ii) Accounts payable accounting and payments;
(iii) Billing;
(iv) Accounts receivable accounting and
collections;
(v) Periodic reporting, with monthly financial
statements produced no later than 20 days
following the end of each month and
quarterly financial statements produced no
later than 20 days following the end of
each quarter, provided that an accounts
receivables aging shall be produced no
later than five (5) days following the end
of each month;
(vi) Storage of financial and accounting data;
(vii) Payroll processing and accounting
(including, but not limited to, remittance
of payroll tax and other withholdings);
and
(viii) Job cost accounting in a level of
detail sufficient to support Purchaser's
percentage of completion method of
accounting.
During the Term, QES shall ensure that the appropriate
QDS personnel involved in providing the services described in
Paragraphs 2(b)(ii) and (vi) have access to QES bank accounts as
necessary for purposes of directing such payments.
(c) HUMAN RESOURCES SERVICES. During the Term, QDS
------------------------
shall provide the following human resources services in a manner
which is substantially similar in nature, quality and timeliness
to those provided to or for the Business prior to the Closing
Date:
(i) Maintenance of employee records and
employee benefits records relating to
dates prior to the Closing Date as
required by applicable law, whether
benefits have been administered by QDS or
an Affiliate; and
(ii) Communications with QES employees on
routine inquiries relating to benefits
provided to such employees prior to the
Closing Date; provided that all inquiries
relating to employee benefits arising out
of changes in benefits resulting from the
Sale Transaction shall be directed to
Purchaser.
3. SEPARATION OF DATA. During the Term, Purchaser
------------------
and QDS will work together to achieve timely separation of data
so as to enable the Business to be conducted independently of
QDS following the date hereof, except as set forth herein.
4. TRANSITION ASSISTANCE. QDS shall assist
---------------------
Purchaser and cooperate in all respects reasonably requested by
Purchaser in the transition of all aspects of the operations of
the Business as previously conducted by QDS to QES and
Purchaser.
5. SERVICES FEES. In consideration of the Services
-------------
to be performed by QDS hereunder, Purchaser shall pay QDS a fee
(the "Services Fee") of $15,500 for each 30 day-period of the
Term, or such lesser amount pro-rated for the number of expired
days of the Term in the event that this Agreement is terminated
by Purchaser prior to [November 30, 2006]. The Services Fees
shall be payable on or before the 1st day of each of July,
August, September, October, November and December for each
previous month along with any other and additional fees and
expenses which QDS shall incur under the terms of this
Agreement. QDS shall not be entitled to any additional
compensation except as provided under this Agreement.
6. LIMITATION OF LIABILITY; INDEMNIFICATION.
----------------------------------------
(a) LIMITATION OF LIABILITY. QES recognizes that QDS
-----------------------
is not in the business of providing the Services and is
providing the Services at QES' request in connection with the
SPA. QDS shall perform the Services with reasonable diligence
but in no case shall be held to the same standard of performance
as a business that regularly provides equivalent services to
third parties. Except as may be provided in subparagraph 6(b),
each party hereto (as well as its officers, directors and
employees) shall not be liable to any other party hereto (as
well as such other party's officers, directors and employees),
in each case for any liabilities, claims, damages, losses or
expenses, including, but not limited to, any special, indirect,
incidental, consequential or punitive damages arising in
connection with this Agreement and the Services provided
hereunder. Notwithstanding the foregoing, QDS shall use its
best efforts to perform the Services in a manner consistent with
past practice. QDS' total liability with respect to any breach
of Paragraph 2 shall not exceed the fees paid to QDS by QES
pursuant to this Agreement.
(b) INDEMNIFICATION. QDS shall indemnify, defend and
---------------
hold harmless QES and QES' officers, directors and employees
from and against all liabilities, claims, damages, losses and
expenses (including, but not limited to, court costs and
reasonable attorneys' fees) (collectively referred to as
"Damages") of any kind or nature (but excluding any special,
indirect, incidental, consequential or punitive damages) of
third parties unrelated to QES caused by or arising out of the
gross negligence or willful misconduct of any employee of QDS in
connection with the performance of the Services, except to the
extent that Damages were caused by acts or omissions of any of
QES, Purchaser or the officers, directors or employees of QES or
Purchaser.
7. COOPERATION WITH AUDIT. In consideration of the
----------------------
Services Fees provided to QDS hereunder, QDS and its employees
involved in the provision of the Services shall cooperate with
Purchaser's and QES's auditors in their audit of Purchaser's and
QES's financial statements to the extent that such cooperation
is not unreasonably burdensome and regardless as to whether such
cooperation is requested during the Term or subsequent to
termination of this Agreement; provided , however, that QDS'
responsibility under this Agreement for any such audit shall be
limited to such cooperation.
8. EXPENSES OF THE BUSINESS. Purchaser shall be
------------------------
responsible for all direct costs of the Business incurred by and
paid to third party service providers by QDS in connection with
the Services provided pursuant to Paragraphs 2, but only to the
extent that any such costs are incurred during the Term and in
accordance with this Agreement. No other expense shall be
incurred by QDS in connection herewith without the prior
approval of Purchaser's Chief Financial Officer. In no event
shall Purchaser be responsible for any other cost or expense
incurred by QDS, including, without limitation compensation or
labor expenses of any employees of any of QDS. For the
avoidance of doubt, QDS shall not be responsible for any cost or
expense incurred directly by QES or Purchaser, including (but
not limited to) costs associated with third-party service
providers.
9. PERSONNEL. During the Term, QDS shall make
---------
persons reasonably acceptable to Purchaser available to QES and
Purchaser to provide and perform the Services. Work performed
for QES and Purchaser hereunder shall constitute no more than
fifty percent (50%) of the staff time of such persons in the
aggregate. Each such person and any other person performing any
Services shall at all times remain and be considered an employee
of QDS for all purposes; provided, however, that Purchaser shall
have the right to extend an offer of employment and hire Xxx
Small as an employee of Purchaser. QDS is and shall remain
responsible for all liabilities, obligations, claims, costs and
expenses relating to any employee of any of QDS, whether based
on or arising from any services provided by any such employee
under this Agreement or otherwise, and including, without
limitation, any and all severance, retention and other payments
to which an employee may be entitled or claims to be entitled.
10. NON-SOLICITATION. QDS shall not solicit for
----------------
hire, hire or retain or assist others in soliciting for hire,
hiring or retaining any individual who is an employee or
contractor of QES or Purchaser during the Term or for six (6)
months following the conclusion of the Term. Except as provided
in Paragraph 9, neither QES nor Purchaser shall solicit for
hire, hire or retain any individual who is an employee or
contractor of QDS during the Term or for six (6) months
following the conclusion of the Term.
11. INDEPENDENT CONTRACTOR. Nothing herein shall be
----------------------
construed to create a joint venture or partnership between the
parties hereto or an employee/employer relationship between any
person and Purchaser. Each of QDS and its officers, directors,
employees and agents or its Affiliates shall be independent
contractors with respect to the services described herein.
12. CONFIDENTIAL INFORMATION AND NON-DISCLOSURE. QDS
-------------------------------------------
understands and acknowledges that as a result of QDS'
involvement with QES, QDS, its officers, directors and
employees, may have had access to confidential information of
QES and Purchaser, including, without limitation, pricing
information, financial data, customer lists and referral and
vendor sources (collectively "QES Confidential Information").
QDS understands and acknowledges that QES Confidential
Information, even though it may have been or may be developed or
otherwise acquired by QDS, is the exclusive property of QES and
QDS shall not at any time, from this date forward, reveal,
report, publish, transfer or otherwise disclose to any person or
entity, or use or exploit, any of QES Confidential Information,
or permit its officers, directors or employees to do any of
these acts, without the written consent of Purchaser or QES.
Notwithstanding the foregoing, the term "QES Confidential
Information" shall not include information which (i) legally and
legitimately is or becomes of general public knowledge from
authorized sources other than QDS; (ii) is received without
restriction from an individual or entity other than QDS lawfully
in possession of and permitted to disclose such information; or
(iii) independently developed by QDS or its employees or agents
after the date hereof without access to QES Confidential
Information.
13. SURRENDER OF QES CONFIDENTIAL INFORMATION.
-----------------------------------------
(a) SURRENDER OF QES CONFIDENTIAL INFORMATION. It is
-----------------------------------------
expected that, over the course of the Term, but in any case no
later than ten (10) days following the conclusion of the Term,
QDS shall deliver to Purchaser (i) all QES Confidential
Information (ii) all documents, computer discs, electronic
files, computer code, materials, equipment, documents, drawings
and other information both in hard copy and in machine readable
form that embody the QES Confidential Information and (iii) all
other books and records of QES in the possession of QDS,
including copies of all mutually-owned records of QES and QDS.
QDS, its officers, directors and employees shall not make or
retain any hard or electronic copies of any such information or
materials (other than mutually-owned records), make or retain
any summaries or descriptions of any such information or
materials, and/or erase any hard drives or otherwise delete any
such information or materials from any laptop or desktop
computers, computer networks or other electronic devices or
services of QES.
(b) PRESERVATION OF CONFIDENTIAL INFORMATION.
----------------------------------------
Subject to the provisions of subparagraph 13(a), QDS shall
preserve all documents and books and records related to its
transactions with QES including, but not limited to, any
Employee Plan or Benefit, for the greater of (i) the statute of
limitations applicable to any claim by any of QES, QDS or any
Governmental Authority or beneficiary or participant in any such
Employee Plan or Benefit and (ii) the sixth anniversary after
the Closing Date, and shall not thereafter destroy or dispose of
any such materials unless it shall have notified Purchaser at
least two (2) months before such disposition and given Purchaser
the opportunity to remove and retain any such materials provided
they relate to QES and its business, properties or assets
acquired by Purchaser.
14. EQUITABLE RELIEF FOR BREACH. Because the breach
---------------------------
or anticipated breach of the restrictions set forth in this
Agreement shall result in the immediate and irrevocable harm and
injury to Purchaser and/or QES, for which Purchaser and/or QES
will not have an adequate remedy at law, QDS agrees that the
Purchaser and/or QES shall be entitled to relief in equity to
enjoin temporarily and/or permanently such breach or anticipated
breach and to seek any and all other legal and equitable
remedies to which each may be entitled. If the Purchaser,
and/or QES prevails in any action at equity or at law brought to
enforce this Agreement, QDS agrees to pay all costs of
litigation including the reasonable attorneys' fees and expenses
of the Purchaser and QES. In the event the foregoing
restrictions are considered by a court of competent jurisdiction
to be excessive in its duration of scope, it shall be considered
modified and valid for such duration and for such business and
area as such court may determine to the maximum extent permitted
by applicable law.
(a) NOTICES. All notices and other communications
-------
under this Agreement shall be in writing and shall be deemed
given when delivered personally, or if mailed by registered
mail, return receipt requested, three (3) business days after
such mailing, to the parties at the following addresses (or to
such other address as a party may have specified by notice given
to the other party pursuant to this provision):
If to QDS:
Questar Data Systems, Inc.
0000 Xxxx Xxxxxxx Xxxx
Xxxxx, XX 00000
Attn: Xxxxxxxx Xxxxxxx
with a copy to:
Robins, Kaplan, Xxxxxx & Xxxxxx L.L.P.
0000 XxXxxxx Xxxxx
000 XxXxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxx, Esq.
If to Purchaser or QES:
Touchstone Applied Science Associates, Inc.
X.X. Xxx 000
0 Xxxxxxxxxxxx Xxxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. Xxxxx, President
with a copy to:
Rider, Weiner & Xxxxxxx, P.C.
000 Xxxxxx Xxxxxxx Xxxx
Xxx Xxxxxxx, Xxx Xxxx 00000
Attn: Xxxxxxx Crush, Esq.
15. RETURN OF RECORDS. The provision of Services
-----------------
hereunder by QDS shall not entitle QDS to retain any records of
QES. At the end of the Term, QDS shall surrender possession of
all QES records to QES in compliance with the SPA, including but
not limited to employee, employee benefits and financial
records.
16. ALL AGREEMENTS INCLUDED; MODIFICATIONS. This
--------------------------------------
Agreement embodies all the agreements between the parties hereto
respecting the provision of services by QDS to QES and expressly
supercedes all prior agreements of the parties hereto, whether
written or oral. All subsequent changes and modifications to be
valid shall be embodied within a written agreement duly executed
by the parties hereto.
17. COUNTERPARTS. This Agreement may be executed in
------------
any number of counterparts, each of which shall be deemed an
original but all of which shall constitute one and the same
agreement.
18. AMENDMENT. This Agreement may not be modified,
---------
amended or terminated except by a written agreement specifically
referring to this Agreement signed by the parties hereto.
IN WITNESS WHEREOF, the parties have duly executed this
Transitional Services Agreement as of the date first above
written.
TOUCHSTONE APPLIED SCIENCE
ASSOCIATES, INC.
By:_________________________
Name: Xxxxxx X. Xxxxx
Title: President
QUESTAR EDUCATIONAL SYSTEMS, INC.
By:__________________________
Name:
Title:
QUESTAR DATA SYSTEMS, INC.
By:___________________________
Name:
Title:
