Exhibit 2.1
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
THE SHAREHOLDERS OF
TACTIX, INC.
AND
INCENTRA SOLUTIONS, INC.
DATED AS OF SEPTEMBER 1, 2006
TABLE OF CONTENTS
PAGE
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RECITALS 8
ARTICLE I
PURCHASE AND SALE OF SHARES 8
SECTION 1.1. PURCHASE AND SALE OF SHARES 8
SECTION 1.2. CONSIDERATION 8
SECTION 1.3 CLOSING 10
ARTICLE II
REPRESENTATIONS AND WARANTIES OF THE COMPANY 11
SECTION 2.1 ORGANIZATION, STANDING AND CORPORATE POWER 11
SECTION 2.2 SUBSIDIARIES 11
SECTION 2.3 CAPITAL STRUCTURE 11
SECTION 2.4 AUTHORITY; NONCONTRAVENTION 12
SECTION 2.5 FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES 13
SECTION 2.6 MATERIAL CONTRACTS 15
SECTION 2.7 PERMITS; COMPLIANCE WITH APPLICABLE LAWS 16
SECTION 2.8 ABSENCE OF LITIGATION 17
SECTION 2.9 TAX MATTERS 17
SECTION 2.10 EMPLOYEE BENEFIT PLANS 19
SECTION 2.11 LABOR MATTERS 22
SECTION 2.12 ENVIRONMENTAL MATTERS 23
SECTION 2.13 INTELLECTUAL PROPERTY 24
SECTION 2.14 INSURANCE MATTERS 26
SECTION 2.15 TRANSACTIONS WITH AFFILIATES 27
SECTION 2.16 VOTING REQUIREMENTS 27
SECTION 2.17 BROKERS 27
SECTION 2.18 REAL PROPERTY 27
SECTION 2.19 TANGIBLE PERSONAL PROPERTY 28
SECTION 2.20 INVESTMENT COMPANY 28
SECTION 2.21 BOARD APPROVAL 28
SECTION 2.22 BOOKS AND RECORDS 28
SECTION 2.23 STATUS OF SHARES BEING TRANSFERRED 28
SECTION 2.24 CONTRACTS 29
SECTION 2.25 GUARANTIES 30
SECTION 2.26 DISCLOSURE 30
SECTION 2.27 FORMER SHAREHOLDER UCC TERMINATION 30
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER 30
SECTION 3.1 ORGANIZATION; STANDING AND CORPORATE POWER 30
SECTION 3.2 AUTHORITY; NONCONTRAVENTION 31
SECTION 3.3 VOTING REQUIREMENTS 31
SECTION 3.4 BROKERS 31
SECTION 3.5 BOARD AND OTHER APPROVALS 31
SECTION 3.6 ADDITIONAL REPRESENTATIONS 31
SECTION 3.7 LITIGATION 32
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS 32
SECTION 4.1 CONDUCT OF BUSINESS BY THE COMPANY 32
SECTION 4.2 NOTICES OF CHANGES 34
SECTION 4.3 NO SOLICITATION BY THE COMPANY 34
SECTION 4.4 CONDUCT OF BUSINESS BY PURCHASER 35
SECTION 4.5 TRANSITION 35
ARTICLE V
ADDITIONAL AGREEMENTS 35
SECTION 5.1 ACCESS TO INFORMATION; CONFIDENTIALITY 35
SECTION 5.2 COMMERCIALLY REASONABLE EFFORTS 36
SECTION 5.3 FEES AND EXPENSES 36
SECTION 5.4 PUBLIC ANNOUNCEMENTS 36
SECTION 5.5 SHAREHOLDERS COVENANT NOT TO COMPETE 36
SECTION 5.6 SHAREHOLDER REPRESENTATIVE 37
SECTION 5.7 NO TAX ELECTION 37
SECTION 5.8 CANCELLATION OF XXXXX OPTION 37
ARTICLE VI
CONDITIONS PRECEDENT 37
SECTION 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO
EFFECT THE PURCHASE 38
SECTION 6.2 CONDITIONS TO OBLIGATIONS OF PURCHASER 38
SECTION 6.3 CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDERS 40
SECTION 6.4 FRUSTRATION OF CLOSING CONDITIONS 41
ARTICLE VII
INDEMNIFICATION; ARBITRATION 41
SECTION 7.1 INDEMNIFICATION 41
SECTION 7.2 CLAIMS AND PROCEDURE 43
SECTION 7.3 ARBITRATION 45
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ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER 45
SECTION 8.1 TERMINATION 45
SECTION 8.2 EFFECT OF TERMINATION 46
SECTION 8.3 AMENDMENT 47
SECTION 8.4 EXTENSION; WAIVER 47
ARTICLE IX
GENERAL PROVISIONS 47
SECTION 9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS 47
SECTION 9.2 NOTICES 47
SECTION 9.3 DEFINITIONS 48
SECTION 9.4 INTERPRETATION 49
SECTION 9.5 COUNTERPARTS 49
SECTION 9.6 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES 50
SECTION 9.7 GOVERNING LAW 50
SECTION 9.8 ASSIGNMENT 50
SECTION 9.9 HEADINGS 50
SECTION 9.10 SEVERABILITY 50
SECTION 9.11 ENFORCEMENT 50
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EXHIBITS
Exhibit A - Form of Employment Agreements
Exhibit B - Form of Legal Opinion of Counsel to the Company and Shareholders
SCHEDULES
Schedule 1.2(c)
Company Disclosure Schedule
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INDEX OF DEFINED TERMS
DEFINED TERMS SECTION DEFINED
------------- ---------------
affiliate Section 9.3(a)
Agreement Preamble
Closing Section 1.4
Closing Date Section 1.4
Code Section 2.9(e)
Company Preamble
Company Acquisition Proposal Section 4.3(a)
Company Certificate of Incorporation Section 2.3(b)
Company Common Stock Section 2.3(a)
Company Disclosure Schedule Article II
Company Financial Statements Section 2.5(a)
Company IP Agreements Section 2.13(g)
Company Material Contracts Section 2.6(b)
Company Permitted Lien Section 2.19
Competing Business Section 5.6
Dispute Section 7.3
Employee Plans Section 2.10(a)
Employment Agreements Section 6.2(e)
encumbrance Section 9.3(b)
Environmental Laws Section 2.12(d)(i)
Environmental Permits Section 2.12(d)(ii)
ERISA Section 2.10(a)
ERISA Affiliate Section 2.10(a)
Fiduciary Section 2.10(e)
GAAP Section 1.4
Government Entities Section 2.4(c)
Governmental Entity Section 2.4(c)
Hazardous Substances Section 2.12(d)(iii)
indemnified party Section 7.2(a)
indemnifying party Section 7.2(a)
Intellectual Property Section 2.13(a)
IRS Section 2.10(g)
knowledge Section 9.3(c)
Liens Section 2.4(d)
material adverse change Section 9.3(d)
material adverse effect Section 9.3(d)
Multi-Employer Plans Section 2.10(d)
Net Working Capital Section 1.4
Other Company Documents Section 2.7(c)
Permits Section 2.7(a)
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person Section 9.3(e)
Purchaser Preamble
Purchaser Common Stock Section 3.2(a)
Purchaser Employee Stock Options Section 3.2(a)
Purchaser Indemnified Parties Section 7.1(a)
Purchaser Losses Section 7.1(a)
Purchaser SEC Documents Section 3.4(a)
Purchaser Preferred Stock Section 3.2(a)
Purchaser Stock Plans Section 3.2(a)
Release Section 2.12(d)(iv)
Requisite Regulatory Approvals Section 6.1(b)
Restraints Section 6.1(c)
Sarbanes Oxley Act Section 3.9
SEC Section 3.4(a)
Securities Act Section 2.24(a)
Seller Indemnified Parties Section 7.1(b)
Seller Losses Section 7.1(b)
Shareholders Preamble
Shares Recitals
Software Section 2.13(a)
subsidiary Section 9.3(f)
Tangible Personal Property Section 2.19
Tax Section 2.9(i)(i)
Taxes Section 2.9(i)(i)
Tax Return Section 2.9(i)(ii)
Third Party Rights Section 2.13(d)
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement") dated as of September 1, 2006,
by and between INCENTRA SOLUTIONS, INC., a Nevada corporation ("Purchaser"), and
the persons whose names and signatures appear at the end of this Agreement, all
of whom are shareholders of TACTIX, INC., an Oregon corporation (the "Company"),
referred to collectively as "Shareholders" and individually as "Shareholder."
RECITALS
WHEREAS, Shareholders own all of the outstanding shares of capital stock
(the "Shares") of the Company;
WHEREAS, Shareholders intend to sell and Purchaser intends to purchase the
Shares;
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto intending to be legally bound do hereby agree
as follows:
ARTICLE I
PURCHASE AND SALE OF THE SHARES
SECTION 1.1. PURCHASE AND SALE OF THE SHARES. Upon the terms and subject to
the conditions of this Agreement, Shareholders agree to sell, convey, assign and
transfer, and Purchaser agrees to purchase, the Shares, free and clear of all
Encumbrances (as defined in Section 9.3(b) hereof) for the purchase price of
Three Million Six Hundred Thousand Dollars ($3,600,000) (the "Purchase Price"),
payable in cash. At the Closing (as defined in Section 1.3) each Shareholder
will transfer to Purchaser the Shares owned by each Shareholder as listed after
his or her name in Section 2.3(a) of the Company Disclosure Schedule, which
together will constitute all of the issued and outstanding Shares of the
Company.
SECTION 1.2. CONSIDERATION. Upon the terms and subject to the conditions of
this Agreement, in consideration of the sale, conveyance, assignment and
transfer of the Shares to Purchaser at the Closing, Purchaser agrees to:
(a) Pay to Silicon Valley Bank the sum of Four Hundred Fifty One Thousand
Six Hundred Seven and 41/100 Dollars ($451,607.41);
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(b) Pay to each Shareholder his or her pro rata share, as defined below, by
wire transfer to the Xxxxxx Xxxx LLP Lawyer Trust Account, of Two Million Seven
Hundred Eighty Eight Thousand Three Hundred Ninety Two and 59/100 Dollars
($2,788,392.59) at the Closing; and
(c) Purchaser shall withhold the remaining Three Hundred Sixty Thousand
($360,000) of the Purchase Price (the "Withheld Purchase Price"), which shall be
payable as follows:
(i) As promptly as practicable, but no later than thirty (30) days
after the Closing Date, Purchaser shall cause to be prepared and delivered
to the Shareholders Representative (as defined under Section 5.6 below) a
closing statement (the "Closing Statement") presenting the Net Working
Capital (defined in accordance with generally accepted accounting
principles ("GAAP") as current assets minus current liabilities) as of the
end of business on the Closing Date ("Closing Net Working Capital"). The
Net Working Capital will be computed in a manner consistent with the net
working capital computation prepared by the Company at July 31, 2006 and
attached hereto as Schedule 1.2(c). Accounts receivable included within Net
Working Capital for this purpose shall be valued at face value if the
maturity is ninety (90) days or less and at zero (0) if the maturity is
ninety (90) days or more. Shareholders Representative shall have fifteen
(15) days from receipt of the Closing Statement to dispute the calculation
of Net Working Capital by Purchaser. In the event Shareholders and
Purchaser are not able to agree within thirty (30) days of receipt of the
statement by the Shareholders Representative on such calculation, it shall
be submitted to a mutually agreed upon independent public accounting firm
for final resolution in accordance with the guidelines as provided herein.
(ii) The independent accounting firm selected by Purchaser and
Shareholders Representative will be a firm with offices in more than one
location. Each party may present financial information to the accounting
firm for review within ten (10) days of selection of the firm provided that
all such information is simultaneously provided to the other party. No such
firm will be engaged that does not undertake to provide its final
determination within thirty (30) days of submission of all materials to be
reviewed. The decision of the selected accounting firm will be presented in
a written report to include the basis for all adjustments made to the
Closing Statement. The fees of the accounting firm will be paid one-half by
the Purchaser and one-half by the Shareholders.
(iii) In the event Closing Net Working Capital is negative, such
negative amount shall be referred to herein as the "NWC Deficit". If such
NWC Deficit is greater than Two Hundred Thousand Dollars ($200,000), then
the Purchase Price shall be reduced by the amount such NWC Deficit
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exceeds Two Hundred Thousand Dollars ($200,000) (the "Excess NWC Deficit").
In the event the NWC Deficit is less than Two Hundred Thousand Dollars
($200,000), the Purchase Price shall be increased by the difference in the
NWC Deficit and Two Hundred Thousand Dollars ($200,000) (the "Purchase
Price Increase Amount"). The Withheld Purchase Price shall be adjusted by
subtracting from Three Hundred Sixty Thousand Dollars ($360,000) any Excess
NWC Deficit or by adding to Three Hundred Sixty Thousand Dollars ($360,000)
any Purchase Price Increase Amount, as applicable (the "Adjusted Withheld
Purchase Price").
(iv) Forty-five (45) days after the Closing Date, Purchaser shall pay
to each Shareholder his or her pro rata share of One Hundred Eighty
Thousand Dollars ($180,000) plus the full amount of any Purchase Price
Increase Amount if the Withheld Purchase Price has increased, or one-half
of the Adjusted Withheld Purchase Price if there is an Excess NWC Deficit.
(v) Ninety (90) days after the Closing Date, the Adjusted Withheld
Purchase Price shall be increased by the amount of (1) accounts receivable
which were over ninety (90) days as of the Closing Date collected between
the Closing Date and the date ninety (90) days after the Closing Date (the
"Over 90 Collections") and (2) the amount of credits to customers and
vendors outstanding as of the Closing Date that were removed from such
customer and vendor accounts between the Closing Date and the date ninety
(90) days after the Closing Date (the "Removed Credits"). Purchaser shall
then pay to each Shareholder, from the newly calculated Adjusted Withheld
Purchase Price, his or her pro rata share of an amount equal to the sum of
the Over 90 Collections and the Removed Credits; provided, however, the
total of the payments made pursuant to Section 1.2(c)(iv) above and this
Section 1.2(c)(v) shall not exceed one-half of the newly calculated
Adjusted Withheld Purchase Price.
(vi) Six (6) months after the Closing Date, Purchaser shall pay to
each Shareholder his or her pro rata share of the remaining Adjusted
Withheld Purchase Price less any amounts claimed by Purchaser as
indemnification for Purchaser Losses as provided for in Article VII hereof.
(vii) Any amounts payable under this subsection (c) will bear interest
at ten percent (10%) per annum from the due date, when determined, until
paid if not paid within ten (10) days of the date payable.
(d) For purposes of this Agreement, a Shareholder's pro rata share shall be
such Shareholder's percentage interest in the total number of the Shares as set
forth on Section 2.3(a) of the Disclosure Schedule.
SECTION 1.3. CLOSING. Subject to the satisfaction or, to the extent
permitted by applicable law, waiver of the conditions to consummation of the
Purchase contained in
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Article VI hereof, the closing of the Purchase (the "Closing") shall take place
at 10:00 a.m., Denver time, on a date specified by the parties (the "Closing
Date"), which date shall not be later than the third business day following
satisfaction or, to the extent permitted by applicable law, waiver of the
conditions to consummation of the Purchase contained in Article VI (other than
those conditions that by their nature are to be satisfied at the Closing, but
subject to the fulfillment or, to the extent permitted by applicable law, waiver
of those conditions), unless another time or date is agreed to by the parties
hereto; provided that in all events, the Closing Date shall not be later than
September 15, 2006. The Closing will be held at the offices of Purchaser,
located at 0000 Xxxxx Xxxxxx, Xxxxxxx, XX 00000 or at such other location as is
agreed to by the parties hereto.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Disclosure Schedule delivered by the Company to
Purchaser prior to the execution of this Agreement which hereby is incorporated
by reference in and constitutes an integral part of this Agreement (the "Company
Disclosure Schedule"), the Shareholders hereby represent and warrant to
Purchaser as follows:
SECTION 2.1 ORGANIZATION, STANDING AND CORPORATE POWER.
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the state of its incorporation or organization
and has the requisite corporate power and authority to carry on its business as
presently being conducted. The Company is duly qualified or licensed to conduct
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership, leasing or operation of its properties makes such
qualification or licensing necessary, except for those jurisdictions where the
failure to be so qualified or licensed or to be in good standing individually or
in the aggregate would not reasonably be expected to have a material adverse
effect on the Company.
(b) The Company has delivered or made available to Purchaser prior to the
execution of this Agreement complete and correct copies of the certificate of
incorporation and by-laws of the Company each as in effect at the date of this
Agreement.
SECTION 2.2 SUBSIDIARIES. The Company has no subsidiaries whether
consolidated or unconsolidated. Except as set forth in Section 2.2 of the
Company Disclosure Schedule, the Company does not own, directly or indirectly,
any capital stock of or other equity or voting interests in any person.
SECTION 2.3. CAPITAL STRUCTURE. As of the date hereof:
(a) (i) The only class of capital stock authorized by the Company is common
stock ("Company Common Stock"); (ii) Ten Thousand (10,000) shares of
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Company Common Stock are authorized and 680.3403 shares of Company Common Stock
are issued and outstanding, all held by Shareholders in the amounts set forth
next to their respective names in Section 2.3(a) of the Company Disclosure
Schedule; and (iii) no shares of Company Common Stock are held by the Company in
its treasury and no shares of Company Common Stock are held by subsidiaries of
the Company
(b) Except as set forth in Section 2.3(b) of the Company Disclosure
Schedule, all outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and nonassessable and are not
subject to preemptive rights created by statute, the Company's Articles of
Incorporation (the "Company Certificate of Incorporation") or any agreement to
which the Company is a party or by which the Company may be bound.
(c) Except as set forth in Section 2.3(c) of the Company Disclosure
Schedule, there are outstanding (i) no shares of capital stock or other voting
securities of the Company, (ii) no securities of the Company convertible into or
exchangeable for shares of capital stock or voting securities of the Company,
and (iii) no options or other rights to acquire from the Company, and no
obligation of the Company to issue, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock of the Company.
SECTION 2.4. AUTHORITY; NONCONTRAVENTION.
(a) Shareholders have the power, authority and legal capacity to execute,
deliver and perform this Agreement and the other agreements to be executed and
delivered by Shareholders in connection herewith and to consummate the
transactions contemplated hereby and thereby. All acts and proceedings required
to be taken by or on the part of Shareholders to authorize Shareholders to
execute, deliver and perform this Agreement and the other agreements to be
executed and delivered by Shareholders in connection herewith and to consummate
the transactions contemplated hereby and thereby have been duly and validly
taken. This Agreement constitutes a valid and binding agreement, and the other
agreements to be executed and delivered by Shareholders in connection herewith
when so executed and delivered will constitute valid and binding agreements, of
Shareholders.
(b) The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not, conflict with or
result in a violation of, or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any material obligation under (i) any provision of the Company
Certificate of Incorporation or by-laws, (ii) any material loan or credit
agreement, note, mortgage, indenture, lease or other material agreement or (iii)
material instrument, permit, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or its properties or
assets.
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(c) The execution, delivery and performance by the Shareholders of this
Agreement and the consummation of the purchase and sale of the Shares by the
Shareholders require no consent, approval, order or authorization of, action by
or in respect of, or registration or filing with, any governmental body, court,
agency, official or authority (each, a "Governmental Entity", collectively
"Government Entities").
(d) The execution and delivery of this Agreement and the consummation of
the purchase and sale of the Shares will not result in the creation of any
pledges, claims, liens, charges, encumbrances, adverse claims, mortgages and
security interests of any kind or nature whatsoever (collectively, "Liens") upon
any asset of the Company.
(e) Except as set forth in Section 2.4(e) of the Company Disclosure
Schedule, no consent, approval, waiver or other action by any person (other than
the Governmental Entities referred to in (d) above) under any Company Material
Contract is required or necessary for, or made necessary by reason of, the
execution, delivery and performance of this Agreement by the Shareholders or the
consummation of the purchase and sale of the Shares.
SECTION 2.5. FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES.
(a) The Company has furnished to the Purchaser true, correct and complete
copies of a balance sheet, income statement, statement of cash flows and
statement of stockholders' equity for each of the fiscal years ended December
31, 2004 and December 31, 2005 reviewed by the Company's independent
accountants, and a Company balance sheet and income statement for the six
(6)months ended June 30, 2006 (collectively, the "Company Financial
Statements"). Except as set forth in Section 2.5(a) of the Company Disclosure
Schedule, the Company Financial Statements fairly present in all material
respects the financial condition of the Company and its subsidiaries as at the
respective dates thereof.
(b) Except for liabilities (i) set forth in Section 2.5(b) of the Company
Disclosure Schedule, (ii) reflected in the Company Financial Statements or
described in any notes thereto (or for which neither accrual nor footnote
disclosure is required pursuant to GAAP), (iii) incurred in the ordinary course
of business, consistent with past practice or in connection with this Agreement
or the transactions contemplated hereby, or (iv) pursuant to any Company
obligations under any of the agreements listed in Section 2.24 of the Disclosure
Schedule neither the Company nor any of its subsidiaries has any material
liabilities or obligations of any nature. The Company is not in default in
respect of any terms or conditions of any indebtedness.
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(c) Other than changes in the usual and ordinary conduct of business since
December 31, 2005, there have been, and at the Closing Date there will be, no
material, adverse changes in the financial condition of the Company.
Specifically, but, not by way of limitation, since its balance sheet of December
31, 2005 the Company has not, and prior to the Closing Date will not have:
(i) Issued or sold any stock (except as reflected in Section 2.3(a) of
the Disclosure Schedule), bond, options to purchase Company stock or other
Company securities;
(ii) Except for current liabilities incurred and obligations under
contracts entered into in the ordinary course of business and except as set
forth in Section 2.5(c)(ii) of the Company Disclosure Schedule, incurred
any obligation or liability, whether absolute or contingent (in excess of
$25,000 individually or in the aggregate);
(iii) Except for current liabilities shown on the balance sheet as of
December 31, 2005 and current liabilities incurred since that date in the
ordinary course of business and except as set forth in Section 2.5(c)(iii)
of the Company Disclosure Schedule, discharged or satisfied any lien or
encumbrance, or paid any obligation or liability, absolute or contingent;
(iv) Mortgaged, pledged or subjected to lien or any other encumbrance,
any of its assets, tangible or intangible;
(v) Sold, leased, transferred, or assigned any of its assets, tangible
or intangible, other than for a fair consideration in the Ordinary Course
of Business;
(vi) Canceled any debts or claims except as listed in Section
2.5(c)(vi) of the Company Disclosure Schedule;
(vii) Sold, assigned, or transferred any patents, formulas,
trademarks, trade names, copyrights, licenses, or other intangible assets;
(viii) Suffered any extraordinary losses, been subjected to any
strikes or other labor disturbances, or waived any rights of any
substantial value;
(ix) Except for transactions contemplated by this Agreement, entered
into any transaction other than in the ordinary course of business;
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(x) Declared, set aside, or paid any dividend or made any distribution
with respect to its capital stock (whether in cash or in kind) or redeemed,
purchased, or otherwise acquired any of its capital stock; or
(xi) Made any loan to, or entered into any other transaction with, any
of its directors, officers, and employees outside the Ordinary Course of
Business.
(d) Subject to any changes that may have occurred in the ordinary and usual
course of business, the assets of the Company at the Closing Date will be
substantially those owned by it and shown on the Company Financial Statements.
(e) Except to the extent that a reasonable allowance for uncollectible
accounts has been established on its books and is reflected in the Company
Financial Statements, all accounts receivable and notes receivable of the
Company are current and collectible. Such accounts receivable of the Company
have arisen in the ordinary course of business in arms-length transactions for
goods actually sold and services actually performed or to be performed.
(f) Except as set forth in Schedule 2.5(f) of the Company Disclosure
Schedule, all inventory to be transferred to Purchaser pursuant to this
Agreement is in good repair and saleable.
(g) Prior to the Closing Date, the Company shall assign and transfer to
Shareholders all of the Company's right, title and interest in and to the assets
described in Section 2.5(g) of the Company Disclosure Schedule (collectively,
the "Excluded Assets"). Purchaser acknowledges and agrees that none of the
Excluded Assets, nor the rights, title or interests of the Company therein,
shall be deemed to constitute a part of the Company or its assets, and that such
assets will not be owned or retained by the Company at the Closing. Purchaser
acknowledges and agrees that the Company may transfer or distribute the Excluded
Assets at any time and from time to time prior to the Closing, and no such
transfer or distribution shall be deemed to violate or breach any provision
under this Agreement or any other Transaction Document. The Shareholder
Representative shall have access to and may contact Xxxxxxx Xxxxxxx, who will
include Xxxx Xxxxx in discussions, following the Closing with respect to the
collection and remittance of the receivables included in the Excluded Assets.
SECTION 2.6. MATERIAL CONTRACTS.
(a) Each Company Material Contract is valid and binding on and enforceable
against the Company (or, to the extent a subsidiary is a party, such subsidiary)
and each other party thereto and is in full force and effect. Except as set
forth in Section 2.6 of the Company Disclosure Schedule, neither the Company nor
any of its
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subsidiaries is in breach or default under any Company Material Contract. Except
as set forth in Section 2.6 of the Company Disclosure Schedule, neither the
Company nor any of its subsidiaries knows of, and has not received notice of,
any violation or default under (nor, to the knowledge of the Shareholders, does
there exist any condition which with the passage of time or the giving of notice
or both would result in such a violation or default under) any Company Material
Contract by any other party thereto. Prior to the date hereof, the Company has
made available to Purchaser true and complete copies of all Company Material
Contracts.
(b) As used in this Agreement, "COMPANY MATERIAL CONTRACTS" shall mean any
contract, license agreement, commitment, lease, or restriction of any kind to
which the Company is a party or by which the Company or any of its subsidiaries
is bound or to which any of the Company's or any of its subsidiaries' assets are
subject which involve payments to or from the Company of at least Twenty-Five
Thousand Dollars ($25,000).
SECTION 2.7. PERMITS; COMPLIANCE WITH APPLICABLE LAWS.
(a) The Company owns and/or possesses all material permits, licenses,
variances, authorizations, exemptions, orders, registrations and approvals of
all Governmental Entities which are required for the operation of the business
of the Company (the "Permits") as presently conducted. The Company is in
compliance in all material respects with the terms of the Permits. All the
Permits are in full force and effect and no suspension, modification or
revocation of any of them is pending or threatened nor do grounds exist for any
such action.
(b) Except as set forth in Section 2.7(b) of the Company Disclosure
Schedule, the Company is in compliance in all material respects with all
applicable statutes, laws, regulations, ordinances, Permits, rules, writs,
judgments, orders, decrees and arbitration awards of each Governmental Entity
applicable to the Company.
(c) Except for filings with respect to Taxes, which are the subject of
Section 2.9 and not covered by this Section 2.7(c) and except as set forth in
Section 2.7(c) of the Company Disclosure Schedule, the Company and each of its
subsidiaries has timely filed all regulatory reports, schedules, forms,
registrations and other documents, together with any amendments required to be
made with respect thereto, that they were required to file with each
Governmental Entity (the "Other Company Documents"), and have timely paid all
fees and assessments, if any, due and payable in connection therewith, except
where the failure to make such payments and filings individually or in the
aggregate would not have a material adverse effect on the Company.
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SECTION 2.8. ABSENCE OF LITIGATION. Section 2.8 of the Company Disclosure
Schedule contains a true and current summary description of each pending and, to
the Shareholders' knowledge, threatened litigation, action, suit, case,
proceeding, investigation or arbitration. Except as set forth in Section 2.8 of
the Company Disclosure Schedule, no action, inquiry, demand, charge, requirement
or investigation by any Governmental Entity and no litigation, action, suit,
case, proceeding, investigation or arbitration by any person or Governmental
Entity, in each case with respect to the Company or any of its subsidiaries or
any of their respective properties or Permits, is pending or, to the knowledge
of the Shareholders, threatened.
SECTION 2.9. TAX MATTERS.
(a) Except as set forth in Section 2.9(a) of the Company Disclosure
Schedule, the Company (i) filed with the appropriate Governmental Entities all
United States federal and state income and other material Tax Returns required
to be filed by it (giving effect to all extensions) and such Tax Returns are
true, correct and complete in all material respects; (ii) paid in full all
United States federal income and other material Taxes required to have been paid
by it; and (iii) made adequate provision for all accrued Taxes not yet due. The
accruals and provisions for Taxes reflected in the Company Financial Statements
are adequate for all Taxes accrued or accruable through the date of such
statements.
(b) Except as set forth in Section 2.9(b) of the Company Disclosure
Schedule, as of the date of this Agreement, no Federal, state, local or foreign
audits or other administrative proceedings or court proceedings are presently
pending with regard to any Taxes or Tax Returns of the Company and the Company
has not received a written notice of any material pending or proposed claims,
audits or proceedings with respect to Taxes.
(c) Except as set forth in Section 2.9(c) of the Company Disclosure
Schedule, no deficiency or proposed adjustment which has not been settled or
otherwise resolved for any amount of Tax has been proposed, asserted, or
assessed in writing by any Governmental Entity against, or with respect to, the
Company. There is no action, suit or audit now in progress, pending or, to the
knowledge of the Company, threatened against or with respect to the Company with
respect to any material Tax.
(d) The Company has not been included in any "consolidated," "unitary" or
"combined" Tax Return (other than Tax Returns which include only the Company)
provided for under the laws of the United States, any foreign jurisdiction or
any state or locality with respect to Taxes for any taxable year.
17
(e) No election under Section 341(f) of the Internal Revenue Code as from
time to time amended (the "Code") has been made by the Company.
(f) No claim has been made in writing by any Governmental Entities in a
jurisdiction where the Company does not file Tax Returns that the Company is, or
may be, subject to taxation by that jurisdiction.
(g) Except as set forth in Section 2.9(g) of the Company Disclosure
Schedule, the Company has made available to Purchaser correct and complete
copies of (i) all of its material Tax Returns filed within the past three (3)
years, (ii) all audit reports, letter rulings, technical advice memoranda and
similar documents issued by a Governmental Entity within the past three (3)
years relating to the Federal, state, local or foreign Taxes due from or with
respect to the Company, and (iii) any closing letters or agreements entered into
by the Company with any Governmental Entities within the past three (3) years
with respect to Taxes.
(h) Except as set forth in Section 2.9(h) of the Company Disclosure
Schedule, the Company has not received any notice of deficiency or assessment
from any Governmental Entity for any amount of Tax that has not been fully
settled or satisfied, and to the knowledge of the Company, no such deficiency or
assessment is proposed.
(i) For purposes of this Agreement:
(i) "TAX" or "TAXES" shall mean all federal, state, county, local,
foreign and other taxes of any kind whatsoever (including, without
limitation, income, profits, premium, excise, sales, use, occupancy, gross
receipts, franchise, ad valorem, severance, capital levy, production,
transfer, license, stamp, environmental, withholding, employment,
unemployment compensation, payroll related and property taxes, import
duties and other governmental charges and assessments), whether or not
measured in whole or in part by net income, and including deficiencies,
interest, additions to tax or interest, and penalties with respect thereto,
and including expenses associated with contesting any proposed adjustment
related to any of the foregoing.
(ii) "Tax Return" shall mean any return, information report or filing
with respect to Taxes, including any schedules attached thereto and
including any amendments thereof.
18
SECTION 2.10. EMPLOYEE BENEFIT PLANS.
(a) Section 2.10(a) of the Company Disclosure Schedule contains a true and
complete list of all pension, stock option, stock purchase, benefit, welfare,
profit-sharing, retirement, disability, vacation, severance, hospitalization,
insurance, incentive, deferred compensation and other similar fringe or employee
benefit plans, funds, programs or arrangements, whether written or oral, in each
of the foregoing cases which (i) covers, is maintained for the benefit of, or
relates to any or all current or former employees of the Company and any other
entity ("ERISA Affiliate") related to the Company under Section 414(b), (c), (m)
and (o) of the Code and (ii) is not a "multiemployer plan" as defined in Section
3(37) or Section 4001(a)(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") or Section 414 of the Code (the "EMPLOYEE PLANS").
Section 2.10 of the Company Disclosure Schedule identifies and includes but is
not limited to each of the Employee Plans that is subject to Section 302 or
Title IV of ERISA or Section 412 of the Code. Neither the Company nor any ERISA
Affiliate of the Company has any commitment or formal plan, whether or not
legally binding, to create any additional employee benefit plan or modify or
change any existing Employee Plan other than as may be required by the express
terms of such Employee Plan or applicable law.
(b) With respect to each Employee Plan that has been qualified or is
intended to be qualified under the Code or that is an "Employee Benefit Plan"
within the meaning of Section 3.3 of ERISA, such Employee Plan has been duly
approved and adopted by all necessary and appropriate action of the Board of
Directors of the Company (or a duly constituted committee thereof).
(c) Except as set forth in Section 2.10(c) of the Company Disclosure
Schedule, with respect to the Employee Plans, all required contributions for all
periods ending before the Closing Date have been or will be paid in full by the
Closing Date. Subject only to normal retrospective adjustments in the ordinary
course, all required insurance premiums have been or will be paid in full with
regard to such Employee Plans for policy years or other applicable policy
periods ending on or before the Closing Date by the Closing Date. As of the date
hereof, none of the Employee Plans has unfunded benefit liabilities, as defined
in Section 4001(a)(16) of ERISA.
(d) The Company has no "multi-employer plans," as defined in Section 3(37)
or Section 4001(a)(3) of ERISA or Section 414 ("Multi-Employer Plans"), and
never has had any such plans.
(e) With respect to each Employee Plan (i) no prohibited transactions as
defined in Section 406 of ERISA or Section 4975 of the Code have occurred or are
expected to occur as a result of the Purchase or the transactions contemplated
by this Agreement, and (ii) no action, suit, grievance, arbitration or other
type of litigation, or
19
claim with respect to the assets of any Employee Plan (other than routine claims
for benefits made in the ordinary course of plan administration for which plan
administrative review procedures have not been exhausted) is pending or, to the
knowledge of the Company, threatened or imminent against the Company, any ERISA
Affiliate or any fiduciary, as such term is defined in Section 3(21) of ERISA
("Fiduciary"), including, but not limited to, any action, suit, grievance,
arbitration or other type of litigation, or claim regarding conduct that
allegedly interferes with the attainment of rights under any Employee Plan. To
the knowledge of the Company, neither the Company, nor its directors, officers,
employees nor any Fiduciary has any liability for failure to comply with ERISA
or the Code for any action or failure to act in connection with the
administration or investment of such plan. None of the Employee Plans is subject
to any pending investigations or to the knowledge of the Company threatened
investigations from any Governmental Agencies who enforce applicable laws under
ERISA and the Code.
(f) Except as set forth in Section 2.10(f) of the Company Disclosure
Schedule, each of the Employee Plans is, and has been, operated in accordance
with its terms and each of the Employee Plans, and administration thereof, is,
and has been, in all material respects in compliance with the requirements of
any and all applicable statutes, orders or governmental rules or regulations
currently in effect, including, but not limited to, ERISA and the Code. Except
as set forth in Section 2.10(f) of the Company Disclosure Schedule, all required
reports and descriptions of the Employee Plans (including but not limited to
Form 5500 Annual Reports, Form 1024 Application for Recognition of Exemption
Under Section 501(a), Summary Annual Reports and Summary Plan Descriptions) have
been timely filed and distributed as required by ERISA and the Code. Any notices
required by ERISA or the Code or any other state or federal law or any ruling or
regulation of any state or federal administrative agency with respect to the
Employee Plans, including but not limited to any notices required by Section
4980B of the Code, have been appropriately given.
(g) The Internal Revenue Service (the "IRS") has issued a favorable
determination letter or opinion letter with respect to each Employee Plan
intended to be "qualified" within the meaning of Section 401(a) of the Code that
has not been revoked and, to the knowledge of the Shareholders, no circumstances
exist that could adversely affect the qualified status of any such plan and the
exemption under Section 501(a) of the Code of the trust maintained thereunder.
Each Employee Plan intended to satisfy the requirements of Section 125,
501(c)(9) or 501(c)(17) of the Code has satisfied such requirements in all
material respects.
(h) With respect to each Employee Plan to which the Company or any ERISA
Affiliate made, or was required to make, contributions on behalf of any employee
during the five (5)-year period ending on the last day of the most recent plan
year end prior to the Closing Date, (i) no liability under Title IV or Section
302 of ERISA has been incurred by the Company or any ERISA Affiliate that has
not been satisfied in full, and (ii) to the knowledge of the Shareholders, no
condition exists that presents a material risk
20
to the Company or any ERISA Affiliate of incurring any such liability and (iii)
the present value of accrued benefits under such plan, based upon the actuarial
assumptions used for funding purposes in the most recent actuarial report
prepared by such plan's actuary with respect to such plan did not exceed, as of
its latest valuation date, the then current value of the assets of such plan
allocable to such accrued benefits. No Employee Plan or any trust established
thereunder has incurred any "accumulated funding deficiency" (as defined in
Section 302 of ERISA and Section 412 of the Code), whether or not waived, as of
the last day of the most recently ended fiscal year.
(i) Except as set forth in Section 2.10(i) of the Company Disclosure
Schedule, no Employee Plan provides medical, surgical, hospitalization, death or
similar benefits (whether or not insured) for employees for periods extending
beyond their retirement or other termination of service, other than (i) coverage
mandated by Section 4980B of the Code, Section 601 of ERISA or other applicable
law, (ii) death benefits under any "pension plan," (iii) benefits the full cost
of which is borne by the employee (or his beneficiary) or (iv) Employee Plans
that can be amended or terminated by the Company without consent. The Company
does not have any current or projected liability with respect to post-employment
or post-retirement welfare benefits for retired, former, or current employees of
the Company.
(j) No material amounts payable under the Employee Plans will fail to be
deductible for Federal income tax purposes by virtue of Section 162(m) of the
Code.
(k) To the extent that the Company is deemed to be a fiduciary with respect
to any Plan that is subject to ERISA, the Company (i) during the past five (5)
years has complied with the requirements of ERISA and the Code in the
performance of its duties and responsibilities with respect to such employee
benefit plan and (ii) has not knowingly caused any of the trusts for which it
serves as an investment manager, as defined in Section 3(38) of ERISA, to enter
into any transaction that would constitute a "prohibited transaction" under
Section 406 of ERISA or Section 4975 of the Code, with respect to any such
trusts, except for transactions that are the subject of a statutory or
administrative exemption.
(l) No person will be entitled to a "gross up" or other similar payment in
respect of excise taxes under Section 4999 of the Code with respect to the
transactions contemplated by this Agreement.
(m) None of the Employee Plans have been completely or partially terminated
and none has been the subject of a "reportable event" as that term is defined in
Section 4043 of ERISA. No amendment has been adopted which would require the
Company or any ERISA Affiliate to provide security pursuant to Section 307 of
ERISA or Section 401(a)(29) of the Code.
21
SECTION 2.11. LABOR MATTERS.
(a) With respect to employees of the Company: (i) to the knowledge of the
Shareholders, no senior executive or key employee has any plans to terminate
employment with the Company or any of its subsidiaries; (ii) there is no unfair
labor practice charge or complaint against the Company pending or, to the
knowledge of the Shareholders, threatened before the National Labor Relations
Board or any other comparable Governmental Entity; (iii) there is no demand for
recognition made by any labor organization or petition for election filed with
the National Labor Relations Board or any other comparable Governmental Entity;
(iv) no grievance or any arbitration proceeding arising out of or under
collective bargaining agreements is pending and, to the knowledge of
Shareholders, no claims therefor have been threatened other than grievances or
arbitrations incurred in the ordinary course of business; (v) the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby and thereby will not give rise to termination of any existing collective
bargaining agreement or permit any labor organization to commence or initiate
any negotiations in respect of wages, hours, benefits, severance or working
conditions under any such existing collective bargaining agreements; and (vi)
there is no litigation, arbitration proceeding, governmental investigation,
administrative charge, citation or action of any kind pending or, to the
knowledge of the Shareholders, proposed or threatened against the Company
relating to employment, employment practices, terms and conditions of employment
or wages, benefits, severance and hours.
(b) Section 2.11(b) of the Company Disclosure Schedule lists the name,
title, date of employment and current annual salary of each current salaried
employee whose annual salary exceeds $100,000. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby and
thereby will not (i) result in any payment (including severance, unemployment
compensation, tax gross-up, bonus or otherwise) becoming due to any current or
former director, employee or independent contractor of the Company or any of its
subsidiaries, from the Company or any of its subsidiaries under any Employee
Plan or other agreement, (ii) materially increase any benefits otherwise payable
under any Employee Plan or other agreement, or (iii) result in the acceleration
of the time of payment, exercise or vesting of any such benefits.
(c) Section 2.11(c) of the Company Disclosure Schedule sets forth all
contracts, agreements, plans or arrangements covering any employee of the
Company or its subsidiaries containing "change of control," "stay-put,"
transition, retention, severance or similar provisions, and sets forth the names
and titles of all such employees, the amounts payable under such provisions,
whether such provisions would become payable as a result of the Purchase and the
transactions contemplated by this Agreement, and when such amounts would be
payable to such employees, all of which are in writing, have heretofore been
duly approved by the Company's Shareholders, and true and complete copies of all
of which have heretofore been delivered to Purchaser. There is no contract,
22
agreement, plan or arrangement (oral or written) covering any employee of the
Company that individually or collectively could give rise to the payment of any
amount that would not be deductible pursuant to the terms of Section 280G of the
Code.
SECTION 2.12 ENVIRONMENTAL MATTERS. Except for such matters which would
not, individually or in the aggregate, reasonably be expected to result in a
material adverse effect on the Company or are listed in Section 2.12 of the
Company Disclosure Schedule:
(a) COMPLIANCE. (i) The Company is in compliance in all material respects
with all applicable Environmental Laws; (ii) the Company has not received any
written communication from any person or governmental entity that alleges that
the Company is not in compliance with applicable Environmental Laws; and (iii)
there have not been any Releases of Hazardous Substances by the Company or by
any other party at any property currently or formerly owned or operated by the
Company that occurred during the period of the Company's ownership or operation
of such property.
(b) ENVIRONMENTAL PERMITS. The Company has all Environmental Permits
necessary for the conduct and operation of its business, and all such permits
are in good standing or, where applicable, a renewal application has been timely
filed and is pending agency approval, and the Company is in compliance with all
terms and conditions of all such Environmental Permits and is not required to
make any expenditure in order to obtain or renew any Environmental Permits.
(c) ENVIRONMENTAL CLAIMS. There are no Environmental Claims pending or, to
the Company's knowledge, threatened, against the Company, or against any real or
personal property or operation that the Company owns, leases or manages.
(d) As used in this Agreement:
(i) "Environmental Laws" shall mean any and all binding and applicable
local, municipal, state, federal or international law, statute, treaty,
directive, decision, judgment, award, regulation, decree, rule, code of
practice, guidance, order, direction, consent, authorization, permit or
similar requirement, approval or standard concerning (A) occupational,
consumer and/or public health and safety, and/or (B) environmental matters
(including clean-up standards and practices), with respect to buildings,
equipment, soil, sub-surface strata, air, surface water, or ground water,
whether set forth in applicable law or applied in practice, whether to
facilities such as those of the Company Properties in the jurisdictions in
which the Company Properties are located or to
23
facilities such as those used for the transportation, storage or disposal
of Hazardous Substances generated by the Company or otherwise.
(ii) "Environmental Permits" shall mean Permits required by
Environmental Laws.
(iii) "Hazardous Substances" shall mean any and all dangerous
substances, hazardous substances, toxic substances, radioactive substances,
hazardous wastes, special wastes, controlled wastes, oils, petroleum and
petroleum products, computer component parts, hazardous chemicals and any
other materials which are regulated by the Environmental Laws or otherwise
found or determined to be potentially harmful to human health or the
environment.
(iv) "Release" shall mean any spilling, leaking, pumping, emitting,
emptying, discharging, injecting, escaping, leaching, migrating, dumping or
disposing of Hazardous Substances (including the abandonment or discarding
of barrels, containers or other closed receptacles containing Hazardous
Substances) into the environment.
SECTION 2.13 INTELLECTUAL PROPERTY.
(a) Section 2.13(a) of the Company Disclosure Schedule sets forth, for the
Intellectual Property (as defined below) owned or purported to be owned by the
Company a complete and accurate list of all U.S. and foreign (i) patents and
patent applications, (ii) trademarks and service marks which are registered or
the subject of an application for registration and material unregistered
trademarks or service marks , (iii) copyrights which are registered or the
subject of an application for registration, and (iv) Internet domain names. The
Company owns or has the valid right to use all patents and patent applications,
patent rights, trademarks, service marks, trademark or service xxxx
registrations and applications, trade names, logos, designs, Internet domain
names, slogans and general intangibles of like nature, together with all
goodwill related to the foregoing, copyrights, copyright registrations, renewals
and applications, Software (as defined below), technology, inventions,
discoveries, trade secrets and other confidential information, know-how,
proprietary processes, designs, processes, techniques, formulae, algorithms,
models and methodologies, licenses, and all other proprietary rights
(collectively, the "Intellectual Property") that it owns or purports to own or
is licensed to Company in a manner sufficient for the conduct of the business of
the Company as it currently is conducted. "Software" means any and all (i)
computer programs, including any and all software implementations of algorithms,
models and methodologies, whether in source code or object code, (ii) databases
and compilations, including any and all data and collections of data, whether
machine readable or otherwise, (iii) descriptions, flow-charts and other work
product used to design, plan, organize and develop any of the
24
foregoing, (iv) the technology supporting and content contained on any owned or
operated Internet site(s), and (v) all documentation, including user manuals and
training materials, relating to any of the foregoing.
(b) Except as set forth in Section 2.13(b) of the Company Disclosure
Schedule, all of the Intellectual Property owned or purported to be owned by the
Company or any of its subsidiaries is free and clear of all Liens. The Company
is listed in the records of the appropriate United States, state or foreign
agency as, the sole owner of record for each patent and patent application and
trademark, service xxxx and copyright which is registered or the subject of an
application for registration that is listed in Section 2.13(a) of the Company
Disclosure Schedule.
(c) The patents, patent applications, trademarks, service marks and
copyrights owned or purported to be owned by the Company which have been issued
by, or registered or the subject of an application filed with, as applicable,
the U.S. Patent and Trademark Office, the U.S. Copyright Office or in any
similar office or agency anywhere in the world, if any, listed in Section
2.13(a) of the Company Disclosure Schedule are subsisting, enforceable, in full
force and effect, and have not been cancelled, expired, abandoned or otherwise
terminated and all renewal fees in respect thereof have been duly paid and are
currently in compliance with all formal legal requirements (including the timely
post-registration filing of affidavits of use and incontestability and renewal
applications) and are valid. There is no pending or threatened opposition,
interference, invalidation or cancellation proceeding before any court or
registration authority in any jurisdiction against any of the items listed in
Section 2.13(a) of the Company Disclosure Schedule or against any other
Intellectual Property used by the Company.
(d) The conduct of the Company's business as currently conducted does not
unlawfully infringe upon (either directly or indirectly such as through
contributory infringement or inducement to infringe), dilute, misappropriate or
otherwise violate (i) any Intellectual Property owned or controlled by any third
party ("Third Party Rights"), or (ii) the rights of any third party under any
patent. The Company has not received any communication alleging or suggesting
that the Company has been or may be engaged in, liable for or contributing to
any infringement of any Third Party Rights, nor does the Company or the
Shareholders have any reason to expect that any such communication will be
forthcoming. There are no pending or threatened claims against the Company
alleging that the operation of the business as currently conducted, infringes on
or conflicts with any Third Party Rights.
(e) To the Shareholders' knowledge, no third party is misappropriating,
infringing, diluting, or violating any Intellectual Property owned or purported
to be owned by or licensed to or by the Company and no such claims have been
made against a third party by the Company.
25
(f) Each material item of Software which is used by the Company in
connection with the operation of its business as currently conducted, is either
(i) owned by the Company, (ii) currently in the public domain or otherwise
available to the Company without the need of a license, lease or consent of any
third party, or (iii) used under rights granted to the Company pursuant to a
written agreement, license or lease from a third party.
(g) Section 2.13(g) of the Company Disclosure Schedule sets forth a
complete list of all agreements under which the Company is granted rights to
acquire or use the Intellectual Property of a third party (other than
shrink-wrap or click on-downloadable general purpose software) (the "Company IP
Agreements"). Except as set forth in Section 2.13(g) of the Company Disclosure
Schedule, the Company is not under any obligation to pay royalties or other
payments in connection with any Company IP Agreement, nor restricted from
assigning its rights respecting Intellectual Property nor will the Company
otherwise be, as a result of the execution and delivery of this Agreement or the
performance of its obligations under this Agreement, in breach of any Company IP
Agreement. Each Company IP Agreement is in full force and effect and has not
been amended. Neither the Company nor any other party thereto is in default or
breach under any such Company IP Agreement. No event has occurred which, with
the passage of time or the giving of notice or both, would cause a breach of or
default by the Company under any of the Company IP Agreements and there is no
breach or anticipated breach by any other party to any Company IP Agreement.
(h) The Company does not sell any products that intentionally contain any
"viruses," "time-bombs," "key-locks," or any other devices intentionally created
that could disrupt or interfere with the operation of the products or the
integrity of the data, information or signals they produce in a manner adverse
to the Company or any licensee or recipient.
(i) The Company has not embedded any open source, copyleft or community
source code in any of its Products which are generally available or in
development, including but not limited to any libraries or code licensed under
the GNU General Public License, GNU Lesser General Public License or similar
license arrangement.
SECTION 2.14 INSURANCE MATTERS. All policies providing insurance coverage
as set forth in Section 2.14 of the Company Disclosure Schedule are in full
force and effect, all premiums due and payable thereon have been paid and no
written or oral notice of cancellation or termination has been received and is
outstanding.
26
SECTION 2.15 TRANSACTIONS WITH AFFILIATES. Except as set forth on Section
2.15 of the Company Disclosure Schedule, there are no outstanding amounts
payable to or receivable from, loans, leases or other existing agreements
between the Company, on the one hand, and any shareholder, member, officer,
manager, employee or affiliate of the Company or any of the Shareholder
affiliated companies, or any family member or affiliate of such member, officer,
manager, employee or affiliate on the other hand.
SECTION 2.16 VOTING REQUIREMENTS. The execution of this Agreement by
Shareholders is the only action of the holders of any class or series of the
Company's Shares required by applicable law and the Company's organizational
instruments to duly effect such adoption.
SECTION 2.17 BROKERS. Except for Veber Partners, no broker, investment
banker, financial advisor, finder, consultant or other person is entitled to any
broker's, finder's, financial advisor's or other similar fee, compensation or
commission, however and whenever payable, in connection with the Purchase and
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Company or Shareholders. Shareholders shall be solely
responsible for any fees charged by Veber Partners.
SECTION 2.18 REAL PROPERTY.
(a) The Company does not own any real properties and holds valid leaseholds
in all real estate leased by it. Section 2.18(a) of the Company Disclosure
Schedule sets forth a complete list of all real property leased, subleased, or
otherwise occupied or used by the Company or any of its subsidiaries as lessee.
With respect to each parcel of real property leased, subleased, or otherwise
occupied or used by the Company or any of its subsidiaries as lessee, the
Company or the applicable subsidiary has a valid leasehold interest or other
right of use and occupancy, free and clear of any Liens on such leasehold
interest or other rights of use and occupancy, or any covenants, easements or
title defects known to or created by the Company or the applicable subsidiary,
except as do not materially affect the occupancy or uses of such property. The
Company's agreement with respect to real property leased, subleased, or
otherwise occupied or used by the Company as lessee is in full force and effect
and has not been amended. Neither the Company nor any other party thereto is in
material default or material breach under any such agreement. No event has
occurred which, with the passage of time or the giving of notice or both, would
cause a breach of or default by the Company under any of such agreement and, to
the knowledge of the Company, there is no breach or anticipated breach by any
other party to such agreements.
(b) As used in this Agreement, Company Permitted Liens shall mean: (i) Any
Lien reflected in Section 2.18(b)(i) of the Company Disclosure Schedule, (ii)
Liens for Taxes not yet due or delinquent or as to which there is a good faith
dispute and for which there are adequate provisions on the books and records of
the Company,
27
(iii) with respect to real property, any Lien, encumbrance or other title defect
which is not in a liquidated amount (whether material or immaterial) and which
does not, individually or in the aggregate, interfere materially with the
current use or materially detract from the value or marketability of such
property (assuming its continued use in the manner in which it is currently
used) and (iv) inchoate materialmen's, mechanics', carriers', workmen's and
repairmen's liens arising in the ordinary course and not past due and payable or
the payment of which is being contested in good faith by appropriate
proceedings.
SECTION 2.19 TANGIBLE PERSONAL PROPERTY. Except as would not materially
impair the Company and its operations, the machinery, equipment, furniture,
fixtures and other tangible personal property (the "Tangible Personal Property")
owned, leased or used by the Company or any of its subsidiaries is in the
aggregate sufficient and adequate to carry on business in all material respects
as presently conducted and is, in the aggregate and in all material respects, in
operating condition and repair, normal wear and tear excepted. The Company is in
possession of and has good title to, or valid leasehold interests in or valid
rights under contract to use, the Tangible Personal Property material to the
Company, taken as a whole, free and clear of all Liens, other than the Company
Permitted Liens as set forth in Section 2.18(b) of the Company Disclosure
Schedule.
SECTION 2.20 INVESTMENT COMPANY. The Company is not an investment company
required to be registered as an investment company pursuant to the Investment
Company Act.
SECTION 2.21 BOARD APPROVAL. Pursuant to meetings duly noticed and convened
in accordance with all applicable laws and at each of which a quorum was
present, or by written consent as permitted by applicable law and governing
documents, the Board of Directors of the Company, after full and deliberate
consideration, unanimously (other than for directors who abstain) has (i) duly
approved this Agreement and resolved that the transactions contemplated hereby
are fair to, advisable and in the best interests of the Company's shareholders,
(ii) resolved to unanimously recommend that the Company's shareholders approve
the transactions contemplated hereby and (iii) directed that this Agreement be
submitted for consideration by the holders of the Shares.
SECTION 2.22 BOOKS AND RECORDS. The Company maintains and has in all
material respects, maintained accurate books and records reflecting its assets
and liabilities and accounts, notes and other receivables and inventory are
recorded accurately, and proper and adequate procedures are implemented to
effect the collection thereof on a current and timely basis.
SECTION 2.23 STATUS OF SHARES BEING TRANSFERRED. Subject to Section 2.23 of
the Company Disclosure Schedule, the Shareholders own all of the issued and
outstanding shares of capital stock of the Company. The Shareholders have full
28
power to convey good and marketable title to their Shares, free of any liens,
charges, or encumbrances of any nature.
SECTION 2.24 CONTRACTS. Section 2.24 of the Company Disclosure Schedule
lists the following contracts and other agreements to which Company is a party:
(a) any agreement (or group of related agreements) for the lease of
personal property to or from any Person providing for lease payments in excess
of $25,000 per annum;
(b) any agreement (or group of related agreements) for the purchase or sale
of supplies, products, or other personal property, or for the furnishing or
receipt of services, the performance of which will extend over a period of more
than one year, result in a material loss to Company, or involve consideration in
excess of $25,000;
(c) any agreement concerning a partnership or joint venture;
(d) any agreement (or group of related agreements) under which it has
created, incurred, assumed, or guaranteed any indebtedness, or under which it
has imposed a lien on any of its assets, tangible or intangible;
(e) any agreement concerning confidentiality or noncompetition;
(f) any agreement involving any of Company's Affiliates;
(g) any profit sharing, stock option, stock purchase, stock appreciation,
deferred compensation, severance, or other plan or arrangement for the benefit
of its current or former directors, officers, and employees;
(h) any collective bargaining agreement;
(i) any agreement for the employment of any individual on a full-time,
part-time, consulting, or other basis;
(j) any agreement under which it has advanced or loaned any amount to any
of its directors, officers, and employees outside the Ordinary Course of
Business;
(k) any agreement under which the consequences of a default or termination
could have a material adverse effect; or
(l) any other agreement (or group of related agreements) the performance of
which involves consideration in excess of $50,000.
Company has delivered to Purchaser a correct and complete copy of each
written agreement listed in Section 2.24 of the Company Disclosure Schedule (as
amended to date) and a written summary setting forth the terms and conditions of
each
29
oral agreement referred to in Section 2.24 of the Company Disclosure Schedule.
With respect to each such agreement, except as set forth in Section 2.24 of the
Company Disclosure Schedule: (A) the agreement is legal, valid, binding,
enforceable, and in full force and effect; (B) the agreement will continue to be
legal, valid, binding, enforceable, and in full force and effect on identical
terms following the consummation of the transactions contemplated hereby; (C) no
party is in breach or default, and no event has occurred which with notice or
lapse of time would constitute a breach or default, or permit termination,
modification, or acceleration, under the agreement; and (D) no party has
repudiated any provision of the agreement.
SECTION 2.25 GUARANTIES. Except as set forth in Section 2.25 of the Company
Disclosure Schedule, Company is not a guarantor nor otherwise liable for any
liability or obligation (including indebtedness) of any other person.
SECTION 2.26 DISCLOSURE. None of the representations and warranties made by
Shareholders in this Agreement and contained in any certificate or other
instrument furnished or to be furnished to Purchaser pursuant to this Agreement
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary in order to make the statements
contained in this Agreement not misleading. Shareholders have not now and will
not have, as of the Closing Date, intentionally withheld knowledge of any
events, conditions, or facts known to the Shareholders, that will materially
adversely affect the future business of the Company.
SECTION 2.27 FORMER SHAREHOLDER SECURITY INTEREST. All amounts to be paid,
whether fixed or contingent in nature, pursuant to either (a) that certain Stock
Purchase Agreement dated November 29, 2002, among Xxxxx X. Xxxxxx, Xxxxx X.
Xxxxxx, Xxxxx Xxxxxxxx, Xxxx Xxx Yuan, Tactix ReEngineering, Inc. and Tactix
Acquisition Group, LLC, (b) that certain Option Exercise and Stock Purchase and
Redemption Agreement dated as of November 29, 2002 among Xxxxx X. Xxxxxx, Xxxx
Xxxxxxx, Xxxxxxx Xxxxx, Xxxxx Xxxxx, Tactix ReEngineering, Inc. and Tactix
Acquisition Group, LLC, and (c) that Non-Negotiable Promissory Note dated as of
November 29, 2002 by Tactix ReEngineering, Inc. to Xxxxx X. Xxxxxx, Xxxxx X.
Xxxxxx, Xxxx Xxx Yuan, Xxxxx Xxxxxxxx, Xxxx Xxxxxxx, Xxxxxxx Xxxxx and Xxxxx
Xxxxx have been paid in full and no further amounts are due thereunder. That UCC
Financing Statement filed pursuant to the Security and Subordination Agreement
dated as of November 29, 2002 among the above named parties to secure the
obligations of the above referenced agreements will be terminated not later than
thirty (30) days after the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Shareholders as follows:
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SECTION 3.1 ORGANIZATION, STANDING AND CORPORATE POWER.
(a) Purchaser is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is organized and has the
requisite corporate power and requisite authority to carry on its business as
presently being conducted. Purchaser is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership, leasing or operation of its properties makes such
qualification or licensing necessary, except for those jurisdictions where the
failure to be so qualified or licensed or to be in good standing individually or
in the aggregate would not reasonably be expected to have a material adverse
effect on Purchaser.
(b) Purchaser has delivered or made available to the Company prior to the
execution of this Agreement complete and correct copies of the certificate of
incorporation and by-laws or other organizational documents of Purchaser and its
subsidiaries, each as in effect at the date of this Agreement.
SECTION 3.2 AUTHORITY; NONCONTRAVENTION. Purchaser has the corporate power
and authority to execute, deliver and perform this Agreement and the other
agreements to be executed and delivered by Purchaser in connection herewith and
to consummate the transactions contemplated hereby and thereby. All corporate
acts and proceedings required to be taken by or on the part of Purchaser to
authorize Purchaser to execute, deliver and perform this Agreement and the other
agreements to be executed and delivered by Purchaser in connection herewith and
to consummate the transactions contemplated hereby and thereby have been duly
and validly taken. This Agreement constitutes a valid and binding agreement, and
the other agreements to be executed and delivered by Purchaser in connection
herewith when so executed and delivered will constitute valid and binding
agreements, of Purchaser.
SECTION 3.3 VOTING REQUIREMENTS. No consent or approval of the holders of
the outstanding shares of Purchaser Common Stock or any other class of Purchaser
capital stock is required to approve the Purchase and the transactions
contemplated by this Agreement under applicable law or the Purchaser's
organizational instruments.
SECTION 3.4 BROKERS. Except for Pagemill Partners, LLC, no broker,
investment banker, financial advisor, finder, consultant or other person is
entitled to any broker's, finder's, financial advisor's or other similar fee,
compensation or commission, however and whenever payable, in connection with the
Purchase and the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Purchaser. Purchaser shall be solely
responsible for any fees charged by Pagemill Partners, LLC.
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SECTION 3.5 BOARD AND OTHER APPROVALS. Pursuant to meetings duly noticed
and convened in accordance with all applicable laws and at each of which a
quorum was present, or by written consent as permitted by applicable law and
governing documents, the Board of Directors of Purchaser, after full and
deliberate consideration, unanimously (other than for directors who abstain) has
duly adopted this Agreement and resolved that the Purchase and the transactions
contemplated hereby are fair to, advisable and in the best interests of
Purchaser's Shareholders. The Board of Directors of Purchaser unanimously has
duly approved this Agreement and has determined that the Purchase is advisable.
Purchaser has obtained all other approvals or consents required in connection
with the execution and delivery of this Agreement or the consummation or
performance of any of the transactions contemplated herein.
SECTION 3.6 ADDITIONAL REPRESENTATIONS.
Neither the execution nor delivery of this Agreement nor the consummation
or performance of any of the transactions contemplated herein will, directly or
indirectly (with or without notice or lapse of time):
(i) Breach (a) any provision of any of the governing documents of
Purchaser or (b) any resolution adopted by the Board of Directors or the
shareholders;
(ii) Breach or give any Governmental Entity or other Person the right
to challenge any of the transactions contemplated herein, or to exercise
any remedy or obtain any relief under any rule, ordinance, contract, order,
decree, or agreement under any legally binding arrangement to which
Purchaser is subject;
(iii) Contravene, conflict with or result in a violation or breach of
any of the terms or requirements of, or give any Governmental Entity the
right to revoke, withdraw, suspend, cancel, terminate or modify, any Permit
or governmental authorization that is held by Purchaser or that otherwise
relates to the business of Purchaser;
(iv) Cause Shareholder or Company to become subject to, or to become
liable for the payment of, any Tax, penalty or fine resulting from the
contemplated transaction subsequent to the Closing Date; or
(v) result in a violation or Breach of, or constitute a default under,
any of the terms, conditions or provisions of any agreement or other
instrument or obligation to which Purchaser is a party or by which
Purchaser or any of its properties or assets may be bound.
SECTION 3.7 LITIGATION. There is no suit, claim, action, proceeding or
investigation pending or to the knowledge of Purchaser threatened against
Purchaser or its Affiliates that is reasonably likely to or would prevent
Purchaser from consummating the transactions contemplated herein. Purchaser is
not subject to any outstanding order, writ, injunction or decree which in so far
as can be reasonably foreseen, individually or in
32
the aggregate, which now or in the future, would prevent Purchaser from
consummating the transactions contemplated herein.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 CONDUCT OF BUSINESS BY THE COMPANY. Except as required by
applicable law or regulation and except as otherwise contemplated by this
Agreement, until the earlier of the termination of this Agreement or the Closing
Date, the Company shall conduct its business in the ordinary course and
consistent with past practices. Except as set forth in Section 4.1 of the
Company Disclosure Schedule, as required by applicable law or regulation and
except as otherwise contemplated by this Agreement or except as previously
consented to by Purchaser, in writing, after the date hereof and until the
earlier of the termination of this Agreement or the Closing Date, the Company
shall not:
(a) amend or otherwise change its Certificate of Incorporation or bylaws;
(b) issue, sell, pledge, dispose of, encumber, or authorize the issuance,
sale, pledge, disposition, grant or encumbrance of (i) any shares of any class,
or options, warrants, convertible securities or other rights of any kind to
acquire shares, or any other ownership interest, thereof, or (ii) any of its
assets, tangible or intangible;
(c) declare, set aside, make or pay any dividend or other distribution,
payable in cash, property or otherwise, with respect to its shares;
(d) reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any of its shares;
(e) (i) acquire (including, without limitation, for cash or shares of
stock, by Purchase, consolidation, or acquisition of stock or assets) any
interest in any corporation, partnership or other business organization or
division thereof, or make any investment either by purchase of stock or
securities, contributions of capital or property transfer, or, except in the
ordinary course of business, consistent with past practice, purchase any
property or assets of any other person, (ii) except in the ordinary course of
business, incur any indebtedness for borrowed money or issue any debt securities
or assume, guarantee or endorse or otherwise as an accommodation become
responsible for, the obligations of any person, or make any loans or advances,
or (iii) enter into any Company Material Contract;
33
(f) make any capital expenditure in excess of $25,000 or enter into any
contract or commitment therefore;
(g) amend, terminate or extend any Company Material Contract;
(h) delay or accelerate payment of any account payable or other liability
of the Company beyond or in advance of its due date or the date when such
liability would have been paid in the ordinary course of business consistent
with past practice; or
(i) agree, in writing or otherwise, to take or authorize any of the
foregoing actions or any action which would make any representation or warranty
contained in Article III untrue or incorrect.
SECTION 4.2 NOTICE OF CHANGES. Each of the Shareholders and the Company
shall promptly advise the Purchaser orally and in writing to the extent it has
knowledge of (i) any representation or warranty made by them contained in this
Agreement that is qualified as to materiality becoming untrue or inaccurate in
any respect or any such representation or warranty that is not so qualified
becoming untrue or inaccurate in any material respect, (ii) the failure by any
of them to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by them under this Agreement; (iii) any suspension,
termination, limitation, modification, change or other alteration of any
material agreement, arrangement, business or other relationship, in any material
respect, with any of the Company's customers, suppliers or sales or design
personnel; or (iv) any change or event having, or which, insofar as reasonably
can be foreseen, could have a material adverse effect on the Company or on the
accuracy and completeness of its representations and warranties or the ability
of the Shareholders or the Company to satisfy the conditions set forth in
Article VII; PROVIDED, HOWEVER, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties (or remedies
with respect thereto) or the conditions to the obligations of the parties under
this Agreement; and PROVIDED FURTHER that a failure to comply with this Section
4.2 shall not constitute a failure to be satisfied of any condition set forth in
Article VII unless the underlying untruth, inaccuracy, failure to comply or
satisfy, or change or event would independently result in a failure of a
condition set forth in Article VII to be satisfied.
SECTION 4.3 NO SOLICITATION BY THE COMPANY.
(a) The Company will promptly notify Purchaser after receipt of any offer
or indication that any person is considering making an offer with respect to a
Company Acquisition Proposal or any request for nonpublic information relating
to the Company or for access to the properties, books or records of the Company
by any person
34
that may be considering making, or has made, an offer with respect to a Company
Acquisition Proposal and will keep Purchaser fully informed of the status and
details of any such offer, indication or request. "Company Acquisition Proposal"
means any proposal for a Purchase or other business combination involving the
Company or the acquisition of any equity interest in, or a substantial portion
of the assets of, the Company, other than the transactions contemplated by this
Agreement.
(b) From the date hereof until the termination hereof pursuant to Section
8.1, the Company and the officers of the Company will not and the Company will
use its best efforts to cause its directors, employees and agents not to,
directly or indirectly, (i) take any action to solicit, initiate or encourage
any offer or indication of interest from any person or entity with respect to
any Company Acquisition Proposal, (ii) engage in negotiations with, or disclose
any nonpublic information relating to the Company or (iii) afford access to the
properties, books or records of the Company to, any person or entity that may be
considering making, or has made, an offer with respect to a Company Acquisition
Proposal.
SECTION 4.4 CONDUCT OF BUSINESS BY PURCHASER. Purchaser will conduct its
business in substantially the same manner as before.
SECTION 4.5 TRANSITION. To the extent permitted by applicable law,
Purchaser and the Company shall, and shall cause their respective subsidiaries,
affiliates, officers and employees to, use their commercially reasonable efforts
to facilitate the integration of the Company and its subsidiaries with the
businesses of Purchaser and its subsidiaries to be effective as of the Closing
Date.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) The Company and Shareholders shall afford to Purchaser and to the
officers, current employees, accountants, counsel, financial advisors, agents,
lenders and other representatives of Purchaser, reasonable access during normal
business hours during the period prior to the Closing Date to all the Company's
properties, books, contracts, commitments, personnel and records and, during
such period, shall furnish promptly to Purchaser (i) a copy of each material
report, schedule, registration statement and other document filed by it with any
Governmental Entity, and (ii) all other information concerning its business,
properties and personnel as Purchaser may reasonably request.
35
(b) The parties will hold, and will use their best efforts to cause their
officers, directors, employees, consultants, advisors and agents to hold, in
confidence, unless compelled to disclose by judicial or administrative process
or by other requirements of law, all confidential documents and information
concerning the other party and its subsidiaries furnished to it in connection
with the transactions contemplated hereby, except to the extent that such
information can be shown to have been (i) previously known on a nonconfidential
basis by the receiving party, (ii) in the public domain through no fault of the
receiving party, or (iii) later lawfully acquired by the receiving party from
other sources; PROVIDED that each party may disclose such information to its
officers, directors, employees, consultants, advisors and agents in connection
with the Purchase so long as such persons are informed of the confidential
nature of such information and are directed to treat such information
confidentially. Each parties' obligation to hold such information in confidence
shall be satisfied if it exercises the same care with respect to such
information as it would exercise to preserve the confidentiality of its own
similar information. Notwithstanding any other provision of this Agreement, if
this Agreement is terminated, such confidentiality shall be maintained and all
confidential materials shall be destroyed or delivered to their owner, upon
request. Notwithstanding any provisions of this Agreement to the contrary, this
Agreement shall not be deemed to supersede, cancel or otherwise alter the
Confidentiality Agreement until the Closing, at which time such Confidentiality
Agreement shall be deemed superseded by the provisions herein.
SECTION 5.2 COMMERCIALLY REASONABLE EFFORTS. Except where otherwise
provided in this Agreement, each party will use its commercially reasonable
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate the Purchase as soon as practicable after the
satisfaction of the conditions set forth in Article VI hereof, PROVIDED that the
foregoing shall not require the Company or Purchaser to take any action or agree
to any condition that might, in the reasonable judgment of the Company or
Purchaser, as the case may be, have a material adverse effect on the Company or
Purchaser, respectively; and FURTHER PROVIDED, that any action and the cost
thereof shall be borne by the party hereto on which the burden of compliance is
placed in order to permit consummation of the transaction. By way of example and
not limitation, if a Governmental Entity must grant a Requisite Regulatory
Approval to a party hereto to permit said party to consummate this transaction,
then said party must bear the cost and expense including but not limited to
attorney fees, to attempt to obtain such Requisite Regulatory Approval, and the
other party shall not have to participate in, contribute or otherwise pay any
costs in obtaining such Requisite Regulatory Approval.
SECTION 5.3 FEES AND EXPENSES. All costs, fees and expenses incurred in
connection with the Purchase, this Agreement (including all instruments and
agreements prepared and delivered in connection herewith), and the transactions
contemplated by this Agreement shall be paid by the party incurring such fees or
expenses.
36
SECTION 5.4 PUBLIC ANNOUNCEMENTS. Purchaser, Shareholders and the Company
shall consult with each other before issuing, and shall provide each other the
opportunity to review, comment upon and concur with, and shall use reasonable
efforts to agree on, any press release or other public statements or
announcements (including pursuant to Rule 165 under the Securities Act and Rule
14a-12 under the Exchange Act) and any broadly distributed internal
communications with respect to the Purchase, this Agreement and the transactions
contemplated by this Agreement, and shall not issue any such press release or
make any such public statement or announcement prior to such consultation,
except as either party may determine is required by applicable law or court
process (provided prior notice is given to the other party with a copy of any
such disclosure). The parties agree that the initial press releases (or joint
press release if the parties so determine) to be issued with respect to the
Purchase, this Agreement and the transactions contemplated by this Agreement
shall be in the form heretofore agreed to by the parties.
SECTION 5.5 SHAREHOLDERS COVENANT NOT TO COMPETE. Without the prior written
consent of the Purchaser's Chief Executive Officer, for a period of three (3)
years after the Closing Date, each of the Shareholders listed on Schedule 5.5
(i) will not, directly or indirectly, whether as owner, partner, shareholder,
consultant, agent, employee, co-venturer or otherwise, engage, participate,
assist or invest in any Competing Business (as hereinafter defined); (ii) will
refrain from directly or indirectly employing, attempting to employ, recruiting
or otherwise soliciting, inducing or influencing any person to leave employment
with the Company or Purchaser; and (iii) will refrain from soliciting or
encouraging any customer or supplier to terminate or otherwise modify adversely
its business relationship with the Company or Purchaser. Each such Shareholder
understands that the restrictions set forth in this Section 5.5 are intended to
protect the Purchaser's and Company's interests in their respective Confidential
Information and established employee, customer and supplier relationships and
goodwill, and agrees that such restrictions are reasonable and appropriate for
this purpose. For purposes of this Agreement, the term "Competing Business"
shall mean any business that provides the same or similar types of services or
products as those currently provided by the Company in any geographic area now
served or targeted by the Company which products or services compete with
products or services then being offered by the Purchaser or the Company.
Notwithstanding the foregoing, each of Shareholders may own up to two percent
(2%) of the outstanding stock of a publicly held corporation that is engaged in
a Competing Business.
SECTION 5.6 SHAREHOLDER REPRESENTATIVE. The Shareholders hereby appoint
Xxxx X. Xxxxxxx as their Shareholder Representative pursuant to the terms of the
Shareholder Representative Agreement attached hereto as Schedule 5.6. Purchaser
shall be entitled to send notices and other communications after the Closing and
in connection with any matter hereunder to the Shareholders by sending such
communication to the Shareholder Representative, and the Shareholder
Representative is expressly authorized to settle or compromise on behalf of all
the Shareholders any dispute with or claims by the Purchaser hereunder.
37
SECTION 5.7 NO TAX ELECTION. The Purchaser shall not make any election with
respect to the Company under Section 338(h)(10) of the Internal Revenue Code
without first providing for certain make whole payments to the Shareholders as
approved in writing by the Shareholder Representative.
SECTION 5.8 CANCELLATION OF XXXXX OPTION. Prior to the Closing, the Company
and Xxxxx Xxxxx shall cancel that certain option to purchase shares of Company
stock held by Xxxxx Xxxxx (the "Xxxxx Option"). Reference is made to Disclosure
Schedule Section 4.1.
SECTION 5.9 LANDLORD CONSENT. Following the Closing, the Shareholders shall
obtain the consent of the landlord at 0000 XX Xxxxxxxxxx Xxxxxx Xxxx, Xxxxx 000
to the change of control effected by the transaction and will indemnify the
Purchaser against damages suffered if such consent is not obtained.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE PURCHASE.
The respective obligation of each party to affect the Purchase is subject to the
satisfaction or, to the extent permitted by applicable law, waiver by each of
Purchaser and the Company on or prior to the Closing Date of the following
conditions:
(a) BOARD AND SHAREHOLDER APPROVALS. Each of the Company and Purchaser
shall have obtained the consent of its Board of Directors and Shareholders to
the Purchase, this Agreement and the transactions contemplated hereby as in each
case required.
(b) GOVERNMENTAL AND REGULATORY APPROVALS. All consents, approvals and
actions of, filings with and notices to any Governmental Entity required by the
Company, Purchaser or any of their subsidiaries under applicable law or
regulation to consummate the Purchase and the transactions contemplated by this
Agreement, the failure of which to be obtained or made would result in a
material adverse effect on Purchaser's ability to conduct the business of the
Company in substantially the same manner as presently conducted, shall have been
obtained or made (all such approvals and the expiration of all such waiting
periods, the "Requisite Regulatory Approvals"), provided that, the party which
is required to procure such Requisite Regulatory Approvals shall bear the cost
of such procurement.
(c) NO INJUNCTIONS OR RESTRAINTS. No judgment, order, restraining order
and/or injunction (temporary or otherwise), decree, statute, law, ordinance,
rule or regulation, entered, enacted, promulgated, enforced or issued by any
court or other
38
Governmental Entity or other legal restraint or prohibition (collectively,
"Restraints") shall be in effect preventing or materially delaying the
consummation of the Purchase; PROVIDED, HOWEVER, that each of the parties shall
have used its commercially reasonable efforts to have such Restraint lifted,
vacated or rescinded, and; provided, further, that such efforts shall be all at
the sole cost and expense of the party hereto which is the subject of the
Restraint.
SECTION 6.2 CONDITIONS TO OBLIGATIONS OF PURCHASER . The obligation of
Purchaser to affect the Purchase is further subject to satisfaction or waiver as
part of Closing or on or prior to the Closing Date of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The representations and
warranties of the Shareholders set forth herein and in the Company Disclosure
Schedule shall be true and correct in all material respects at and as of the
Closing Date, as if made at and as of such time (except to the extent expressly
made as of an earlier date, in which case such representations and warranties
shall be true and correct as of such date). Purchaser shall have received a
certificate from the Chief Executive Officer of the Company to the foregoing
effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company and the
Shareholders shall have performed in all material respects all obligations
required to be performed by them at or prior to the Closing Date under this
Agreement. Purchaser shall have received a certificate from the Chief Executive
Officer of the Company to the foregoing effect.
(c) REGULATORY CONDITION. No condition or requirement shall have been
imposed by one or more Governmental Entities in connection with any required
approval by them of the Purchase that requires the Company or any of its
subsidiaries to be operated in a manner that would have a material adverse
effect on the Company.
(d) NO COMPANY MATERIAL ADVERSE EFFECT. There shall not be or exist any
change, effect, event, circumstance, occurrence or state of facts that has had,
has or which reasonably could be expected to have, a material adverse effect on
the Company.
(e) EMPLOYMENT AGREEMENTS. Those persons listed on Schedule 6.2(e) shall
have executed employment agreements, all in substantially the form attached
hereto as Exhibit A.
(f) SATISFACTORY COMPLETION OF DUE DILIGENCE. Purchaser shall have
completed to its satisfaction legal, accounting and business due diligence as to
the Company.
39
(g) RESIGNATION OF DIRECTORS AND OFFICERS. There shall have been delivered
to Purchaser the written resignations of the directors and officers of the
Company.
(h) CERTIFICATE OF GOOD STANDING. Purchaser shall have received prior to or
at the Closing a certificate of good standing regarding the Company from the
Secretary of State of the State of Oregon dated not more than fifteen (15) days
prior to Closing.
(i) The Company shall have delivered to Purchaser a certificate of the
secretary or an assistant secretary of the Company, dated the Closing Date, in
form and substance reasonably satisfactory to Purchaser, as to (i) no amendments
to the Certificate of Incorporation (or other formation) of the Company as
furnished to Purchaser (ii) the bylaws (or other organizational documents) of
the Company; (iii) the resolutions of the board of directors (or other
authorizing body) (or a duly authorized committee thereof) and shareholders, if
applicable, of the Company authorizing the execution, delivery, and performance
of this Agreement and the transactions contemplated hereby; and (iv) incumbency
and signatures of the officers of the Company executing this Agreement or any
other agreement contemplated by this Agreement.
(j) LEGAL OPINION. Purchaser shall have received an opinion of Xxxxxx Xxxx
LLP, counsel to the Company and Shareholders, in substantially the form attached
hereto as Exhibit B.
(k) XXXXX OPTION. The Xxxxx Option shall have been cancelled.
(l) THIRD PARTY CONSENTS. The Company shall have procured all of the third
party consents specified in SECTION 2.4(E) OF THE COMPANY DISCLOSURE SCHEDULE.
SECTION 6.3 CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDERS. The obligation
of the Shareholders to affect the Purchase is further subject to satisfaction or
waiver on or prior to the Closing Date of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Purchaser set forth herein shall be true and correct in all material respects at
and as of the Closing Date, as if made at and as of such time (except to the
extent expressly made as of an earlier date, in which case such representations
and warranties shall be true and correct as of such date). The Company shall
have received a certificate from Purchaser to the foregoing effect.
40
(b) PERFORMANCE OF OBLIGATIONS OF PURCHASER. Purchaser shall have performed
in all material respects all obligations required to be performed by it at or
prior to the Closing Date under this Agreement. The Company shall have received
a certificate from Purchaser to the foregoing effect.
(c) REGULATORY CONDITION. No condition or requirement shall have been
imposed by one or more Governmental Entities in connection with any required
approval by them of the Purchase that requires Purchaser or any of its
subsidiaries to be operated in a manner that would have a material adverse
effect on Purchaser.
(d) NO PURCHASER MATERIAL ADVERSE EFFECT. There shall not be or exist any
change, effect, event, circumstance, occurrence or state of facts that has had,
has or which reasonably could be expected to have, a material adverse effect on
Purchaser.
(e) EMPLOYMENT AGREEMENTS. The Company shall have executed the employment
agreements for those persons listed on Schedule 6.2(e), all in substantially the
form attached hereto as Exhibit A.
(f) CERTIFICATE OF GOOD STANDING. Shareholder shall have received prior to
or at the Closing a certificate of good standing regarding the Purchaser from
the Secretary of State of the State of Nevada dated not more than fifteen (15)
days prior to Closing.
SECTION 6.4 FRUSTRATION OF CLOSING CONDITIONS. Neither Purchaser,
Shareholders nor the Company may rely on the failure of any condition set forth
in Section 6.1, 6.2 or 6.3, as the case may be, to be satisfied if such failure
was caused by such party's failure to use its own commercially reasonable
efforts to consummate the Purchase and the other transactions contemplated by
this Agreement, as required by and subject to Section 5.2.
ARTICLE VII
INDEMNIFICATION; ARBITRATION
SECTION 7.1. INDEMNIFICATION.
(a) Subject to the limitations and compliance with the procedure set forth
herein and in Section 7.2 below, Purchaser and its officers, directors and
Affiliates (the "Purchaser Indemnified Parties") shall be indemnified and held
harmless by the Shareholders, and each of them, jointly and severally (subject
to the limitation set forth in subsection (e) below, against all claims, losses,
liabilities, damages, deficiencies, costs and expenses, including reasonable
attorneys' fees and expenses of investigation (hereinafter individually a
"Purchaser Loss" and collectively "Purchaser Losses")
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incurred by the Purchaser Indemnified Parties directly or indirectly as a result
of: (i) any inaccuracy of a representation or warranty of Company and/or
Shareholders contained in this Agreement or (ii) any failure by Company and/or
Shareholders to perform or comply with any covenant contained in this Agreement;
PROVIDED that, except as specifically provided above or below, no Purchaser
Indemnified Party shall be entitled to receive indemnification payments under
clauses (i) and (ii) above with respect to any Purchaser Loss unless and until
the aggregate deductible amount of the Purchaser Losses exceeds One Hundred
Thousand Dollars ( $100,000) and then only to the extent of the Purchaser Losses
in excess of such aggregate amount; and PROVIDED FURTHER that in determining the
amount of any Purchaser Losses suffered by any Purchaser Indemnified Party which
give rise to liability of Shareholders hereunder, there shall have been taken
into account (x) the amount of any tax benefits actually realized by such
Purchaser Indemnified Party attributable to such Purchaser Losses or derived
therefrom in any period to and including the end of the taxable year following
the year in which the Purchaser Losses were incurred; and (y) the amount of any
insurance benefits actually realized by such Purchaser Indemnified Party
attributable to such Purchaser Losses or derived therefrom. It is expressly
agreed that the One Hundred Thousand Dollar ($100,000) threshold amount referred
to above shall not apply to losses related to any breach by the Company of its
lending agreement with Silicon Valley Bank and that any such losses shall be
indemnified in their entirety.
(b) Shareholders (the "Seller Indemnified Parties") shall be indemnified
and held harmless by Purchaser against all claims, losses, liabilities, damages,
deficiencies, costs and expenses, including reasonable attorneys' fees and
expenses of investigation (hereinafter individually a "Seller Loss" and
collectively "Seller Losses") incurred by the Seller Indemnified Parties
directly or indirectly as a result of: (i) any inaccuracy of a representation or
warranty of Purchaser contained in this Agreement or (ii) any failure by
Purchaser to perform or comply with any covenant contained in this Agreement;
provided, that the Seller Indemnified Parties shall not be entitled to receive
indemnification payments with respect to any Seller Loss under (i) or (ii) above
unless and until the aggregate deductible amount of the Seller Losses exceeds
One Hundred Thousand Dollars ($100,000) and then only to the extent of such
Seller Losses in excess of such aggregate amount. In determining the amount of
any Seller Losses suffered by any Seller Indemnified Party which give rise to
liability of Purchaser hereunder, there shall have been taken into account (x)
the amount of any tax benefits actually realized by such Seller Indemnified
Party attributable to such Seller Losses or derived therefrom in any period to
and including the end of the taxable year following the year in which the Seller
Losses were incurred; and (y) the amount of any insurance benefits actually
realized by such Seller Indemnified Party attributable to such Seller Losses or
derived therefrom.
(c) Notwithstanding anything to the contrary herein, Shareholders'
representations and warranties made herein, Shareholders' indemnification
obligations for Purchaser Losses incurred by the Purchaser Indemnified Parties
directly or indirectly as a result of any inaccuracy of a representation or
warranty of Shareholders contained in this Agreement, or any failure by
Shareholders to perform or comply with any covenant contained in this Agreement,
shall all terminate on August 31, 2008. Notwithstanding
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anything to the contrary herein, Purchaser's representations and warranties made
herein, Purchaser's indemnification obligations for Seller Losses incurred by
the Seller Indemnified Parties directly or indirectly as a result of any
inaccuracy of a representation or warranty of Purchaser contained in this
Agreement, or any failure by Purchaser to perform or comply with any covenant
contained in this Agreement, shall all terminate on August 31, 2008.
(d) Anything herein to the contrary notwithstanding, and in all events, any
claim for indemnification under this Agreement, whether as a Purchaser Loss,
Purchaser Losses, Seller Loss or Seller Losses, shall be strictly limited to
direct, actual damages, out-of-pocket costs, out-of-pocket expenses and
out-of-pocket deficiencies arising out of, based upon or otherwise in respect of
such breach or claim and shall in no event include special, consequential or
punitive damages of any kind or nature arising out of or in connection with this
Agreement, including but not limited to, loss of data or loss of business
opportunities, even if one party hereto has been advised by the other party of
same or is aware of the possibility of such damages.
(e) In no event shall any Shareholder be liable hereunder for any amount in
excess of amounts paid to the Shareholder under Section 1.2 above as the
Shareholder's proportionate share of the total purchase price paid by Purchaser.
(f) Notwithstanding anything to the contrary herein, the existence of this
Article VII and of the rights and restrictions set forth herein do not limit any
legal remedy for claims based on common law fraud.
(g) Any claim for the recovery of Seller Losses or Purchaser Losses shall
be made by giving notice thereof in accordance with Section 7.2 below and, such
notice shall be given prior to August 31, 2008.
(h) Anything in this Agreement to the contrary notwithstanding, and in all
events, prior to asserting any claim pursuant to the preceding provisions, the
party seeking indemnification shall file, or cause to be filed, a claim with
respect to the liabilities in question under any applicable insurance policies
maintained by such party.
SECTION 7.2 CLAIMS AND PROCEDURE
(a) CLAIMS. Whenever any claim shall arise for indemnification, the party
seeking indemnification hereunder (the "indemnified party") shall notify the
party or parties from whom indemnification is sought (collectively, the
"indemnifying party") of the claim pursuant to Section 7.2 (c) hereunder and,
when known, the facts constituting the basis for such claim and the amount or
estimate of the amount of the liability arising from such claim. The indemnified
party shall not settle or compromise any claim by a third party for which the
indemnified party is entitled to indemnification hereunder without the prior
written consent of the indemnifying party unless (i) suit shall have been
instituted against the indemnified party and (ii) the indemnifying party shall
not have taken control of such suit as provided in Section 7.2 (b) within 25
days after notification thereof.
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(b) DEFENSE BY INDEMNIFYING PARTY. In connection with any claim giving rise
to indemnity hereunder resulting from or arising out of any claim or legal
proceeding by a third party, the indemnifying party, at its sole cost and
expense, may, upon written notice to the indemnified party, assume the defense
of any such claim or legal proceeding. If the indemnifying party assumes the
defense of any such claim or legal proceeding, the indemnifying party shall
select counsel reasonably acceptable to the indemnified party to conduct the
defense of such claims or legal proceedings and at the indemnifying party's sole
cost and expense shall take all reasonable steps necessary in the defense or
settlement thereof. The indemnifying party shall not consent to a settlement of,
or the entry of any judgment arising from, any such claim or legal proceeding,
without the prior written consent of the indemnified party, which consent shall
not be unreasonably withheld, conditioned or delayed, if (a) the indemnifying
party admits in writing its liability to hold the indemnified party harmless
from and against any losses, damages, expenses and liabilities arising out of
such settlement, (b) concurrently with such settlement the indemnifying party
pays into court the full amount of all losses, damages, expenses and liabilities
to be paid by the indemnifying party in connection with such settlement and
obtains a full release of any liability of the indemnified party which is not
conditioned upon any further payment and (c) such settlement would not otherwise
have a material adverse effect on the indemnified party. The indemnified party
shall be entitled to participate in (but not control) the defense of any such
action, with its own counsel and at its own expense. If the indemnifying party
does not assume the defense of any such claim or litigation resulting therefrom
in accordance with the terms hereof, the indemnified party may defend against
such claim or litigation in such manner as it may deem appropriate including,
but not limited to, settling such claim or litigation, after giving notice of
the same to the indemnifying party, on such terms as the indemnified party may
deem appropriate. The indemnifying party shall be required to participate in the
defense of any action by providing information necessary to permit the
indemnified party to defend such action as indicated in (d) below and shall be
advised of its status. In any action by the indemnified party seeking
indemnification from the indemnifying party in accordance with the provisions of
this Section, if the indemnifying party did not assume the defense of any such
claim or litigation, the indemnifying party shall not be entitled to question
the manner in which the indemnified party defended such claim or litigation or
the amount or nature of any such settlement.
(c) NOTICE. In the event of any occurrence which may give rise to a claim
by an indemnified party against an indemnifying party hereunder, the indemnified
party will give notice thereof to the indemnifying party within twenty (20) days
of the indemnified party becoming aware of events giving rise to the possibility
of a right to indemnification and the first opportunity to reduce, remedy or
incur the damages or potential damages caused by such occurrence; PROVIDED,
HOWEVER, that failure of the indemnified party to timely give the notice
provided in this Section 7.2 (c) shall not be a defense to the liability of an
indemnifying party for such claim, but such indemnifying party may recover from
the indemnified party any actual damages arising from the indemnified party's
failure to give such timely notice; provided, further that Purchaser may take
preemptive legal action of a pressing nature, with respect to a third party
Claim, only after providing notice to the Shareholders in the manner provided
for in Section 9.2 hereof.
44
(d) ACCESS TO INFORMATION. Regardless of which party shall assume the
defense of a claim, each party shall provide to the other parties, upon written
request, all information and documentation in the possession or control of such
party and reasonably necessary to support and verify any Purchaser or Seller
Losses which give rise to such claim for indemnification and shall provide
reasonable access to all books, records and personnel in such party's possession
or control which would have a bearing on such claim.
(e) TAX AUDITS. Notwithstanding any provision to the contrary contained
herein, in all events Shareholder shall be permitted to retain legal counsel,
accountants, and any and all professional assistance Shareholder desires, (all
at Shareholder's sole cost and expense) to defend against any audits involving
taxes relating to the time during which Shareholder owned the Company. Purchaser
agrees to give Seller notice in the event Purchaser has received notice of any
such tax audit.
SECTION 7.3 ARBITRATION. Any dispute, controversy or claim arising out of
or relating to this Agreement (a "Dispute"), shall be settled by binding
arbitration. Any such arbitration proceeding shall be conducted by one
arbitrator mutually agreeable to Shareholders and Purchaser. In the event that
within forty-five (45) days after submission of any Dispute to arbitration,
Shareholders and Purchaser cannot mutually agree on one arbitrator, Shareholders
and Purchaser shall each select one arbitrator, and the two arbitrators so
selected shall select a third arbitrator who will arbitrate the case on his own.
The agreed upon arbitrator or the third arbitrator, as the case may be, shall
set a limited time period and establish procedures designed to reduce the cost
and time for discovery while allowing the parties an opportunity, adequate in
the sole judgment of the arbitrator or third arbitrator, as the case may be, to
discover relevant information from the opposing parties about the subject matter
of the Dispute. The arbitrator or the third arbitrator, as the case may be,
shall rule upon motions to compel or limit discovery and shall have the
authority to impose sanctions, including attorneys' fees and costs, to the same
extent as a competent court of law or equity, should the arbitrator or third
arbitrator, as the case may be, determine that discovery was sought without
substantial justification or that discovery was refused or objected to without
substantial justification. The decision of the arbitrator shall be binding and
conclusive upon the parties to this Agreement. Such decision shall be written
and shall be supported by written findings of fact and conclusions which shall
set forth the award, judgment, decree or order awarded by the arbitrator(s).
Judgment upon any award rendered by the arbitrator(s) may be entered in any
court having jurisdiction. Any such arbitration shall be held in Denver,
Colorado if initiated by the Shareholders and in Portland, Oregon if initiated
by the Purchaser, under the rules then in effect of Judicial Arbitration and
Mediation Services. The substantially non-prevailing party shall pay all
expenses relating to the arbitration, including without limitation, the
respective expenses of each party, the fees of each arbitrator and applicable
administrative fees.
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ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 TERMINATION. This Agreement may be terminated at any time prior
to the Closing:
(a) by mutual written consent of Purchaser and the Shareholders;
(b) by either Purchaser or the Shareholders;
(i) if the Purchase shall not have been consummated at or prior to
5:00 p.m., Denver, CO, time, on September 15, 2006, PROVIDED, HOWEVER, that
the right to terminate this Agreement pursuant to this Section 8.1(b)(i)
shall not be available to any party whose failure to perform any of its
obligations under this Agreement results in the failure of the Purchase to
be consummated by such time and date; provided further that either party
may extend the Closing Date by notice to the other to a date not later than
September 30, 2006.
(ii) if any Restraint having any of the effects set forth in Section
6.1(c) shall be in effect and shall have become final and nonappealable;
PROVIDED, HOWEVER, that the party seeking to terminate this Agreement
pursuant to this Section 8.1(b) (ii) shall have used its commercially
reasonable efforts to prevent the entry of such Restraint and to have such
Restraint vacated or removed;
(iii) if any Governmental Entity that must grant a Requisite
Regulatory Approval shall have denied the applicable Requisite Regulatory
Approval and such denial shall have become final and nonappealable; or
(c) by Purchaser, if the Shareholders or the Company shall have breached
any of their respective representations, warranties, covenants or other
agreements contained in this Agreement, which breach (i) would give rise to the
failure of a condition set forth in Section 6.2(a) or (b), and (ii) is either
incapable of being cured by the Company or the Shareholders, or if curable, is
not cured within 15 days of receipt from Purchaser of written notice thereof; or
(d) by the Shareholders, if Purchaser shall have breached any of its
representations, warranties, covenants or other agreements contained in this
Agreement, which breach (i) would give rise to the failure of a condition set
forth in Section 6.3(a) or (b), and (ii) is either incapable of being cured by
Purchaser or, if curable, is not cured within 15 days of receipt from the
Company of written notice thereof.
The party desiring to terminate this Agreement pursuant to this Section 8.1
shall provide written notice of such termination to the other party in
accordance with
46
Section 8.2, specifying in reasonable detail the provision hereof pursuant to
which such termination is effected.
SECTION 8.2 EFFECT OF TERMINATION.
(a) If this Agreement is terminated as provided in Section 8.1, this
Agreement forthwith shall become void and have no effect, without any liability
or obligation on the part of Purchaser or the Shareholders; PROVIDED, HOWEVER,
that nothing herein shall relieve any party from any liability (in contract,
tort or otherwise, and whether pursuant to an action at law or in equity) for
any knowing or willful breach by such party of any of its representations,
warranties, covenants or agreements set forth in this Agreement or in respect of
fraud by any party. Notwithstanding the foregoing, the provisions of this
Article VIII, Section 5.1(b), Section 5.3, Section 5.4, Section 9.8 and Section
9.11 shall survive any termination of this Agreement.
(b) Anything in this Agreement to the contrary notwithstanding, if any of
the conditions specified in Article VI hereof for its benefit have not been
satisfied, Purchaser, Shareholder or the Company (as applicable) shall have the
right to waive the satisfaction thereof and to proceed with the transactions
contemplated hereby.
SECTION 8.3 AMENDMENT. This Agreement may be amended by the parties at any
time. This Agreement may not be amended except by an instrument in writing
signed on behalf of all of the parties to be bound thereby.
SECTION 8.4 EXTENSION; WAIVER. At any time prior to the Closing, a party
may (a) extend the time for the performance of any of the obligations or other
acts of the other party, (b) waive any inaccuracies in the representations and
warranties of the other party contained in this Agreement or in any document
delivered pursuant to this Agreement or (c) subject to the provisions of Section
8.3, waive compliance by the other party with any of the agreements or
conditions contained in this Agreement. Any agreement on the part of a party to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Closing Date for a period of two
(2) years. This Section 9.1 shall not limit any covenant or agreement of the
parties which by its terms contemplates performance after the Closing Date.
47
SECTION 9.2 NOTICES. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
If to Purchaser, to:
Incentra Solutions, Inc.
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Fax No.: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx III
with a copy (which shall not constitute notice pursuant to
this Section 9.2) to:
Law Offices of Xxxx Xxxx Guest
Attn: Xxxx Guest, Esq.
00 Xxxxxxxxx Xxxx
Xxxxxx, XX 00000
Fax No.: (000) 000-0000.
(b) if to the Shareholders, to:
Xxxx X. Xxxxxxx
0000 XX Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxx, XX 00000
with a copy (which shall not constitute notice pursuant to
this Section 9.2) to:
Xxxxxx X. Xxxxxxxx
Xxxxxx Xxxx LLP
1600 Pioneer Tower
000 XX Xxxxx Xxxxxx
Xxxxxxxx, XX 00000-0000
Fax: (000) 000-0000
SECTION 9.3 DEFINITIONS. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person, where "control" means the
possession, directly
48
or indirectly, of the power to direct or cause the direction of the management
policies of a person, whether through the ownership of voting securities, by
contract, as trustee or executor, or otherwise.
(b) "encumbrances" shall mean Liens, security interests, deeds of trust,
encroachments, reservations, orders of Governmental Entities, decrees,
judgments, contract rights, claims or equity of any kind.
(c) "knowledge" means, (i) with respect to the Shareholders, the actual
knowledge, of any of the Shareholders or of the Company's executive officers and
(ii) with respect to Purchaser, the actual knowledge, of any of Purchaser's
executive officers.
(d) "material adverse change" or "material adverse effect" means, when used
in reference to the Company or Purchaser, any change, effect, event,
circumstance, occurrence or state of facts that is, or which reasonably could be
expected to be, materially adverse to the business, assets, liabilities,
condition (financial or otherwise), cash flows or results of operations of such
party and its subsidiaries, considered as an entirety.
(e) "person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity.
(f) a "subsidiary" of any person means another person, an amount of the
voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect not less than a majority of its Board of Directors
or other governing body (or, if there are no such voting interests, fifty
percent (50%) or more of the equity interests of which) is owned directly or
indirectly by such first person.
SECTION 9.4 INTERPRETATION. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation." The words "hereof," "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. The
parties have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the parties
and no presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of the authorship of any of the provisions of this Agreement.
SECTION 9.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
49
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties. A facsimile copy of a signature
page shall be deemed to be an original signature page.
SECTION 9.6 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement
(including the documents and instruments referred to herein, but excluding the
Confidentiality Agreement to the extent stated herein) (a) constitutes the
entire agreement, and supersedes all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter of this
Agreement, and; (b) except for the provisions of Section 6.4 which shall inure
to the benefit of and be enforceable by the persons referred to therein, are not
intended to confer upon any person other than the parties any rights or
remedies; and (c) all Exhibits and Schedules to this Agreement are incorporated
into this Agreement by reference.
SECTION 9.7 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the internal substantive and procedural laws of
the State of Colorado, regardless of the laws that might otherwise govern under
applicable principles of conflicts of law of such state.
SECTION 9.8 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties hereto without the
prior written consent of the other parties. Subject to the preceding sentence,
this Agreement will be binding upon, inure to the benefit of, and be enforceable
by, the parties and their respective successors and assigns.
SECTION 9.9 HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 9.10 SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable law in a reasonably acceptable manner to the end that
the transactions contemplated hereby are fulfilled to the extent possible.
SECTION 9.11 ENFORCEMENT. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement, this being in addition to any other
remedy to which they are entitled at law or in equity. If any litigation or
arbitration shall be commenced to enforce, or
50
relating to, any provision of this Agreement, the prevailing party shall be
entitled to an award of reasonable attorneys fees and reimbursement of such
other costs as it incurs in prosecuting or defending such litigation. For
purposes of this section, "prevailing party" shall include a party awarded
injunctive relief or a party prevailing based upon final, unappealable order.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, Shareholders, and Purchaser have caused this Agreement
to be signed by their respective officers thereunto duly authorized, all as of
the date first written above.
INCENTRA SOLUTIONS, INC.
By /s/ XXXXXX X. XXXXXXX III
-------------------------
Name: Xxxxxx X. Xxxxxxx III
Title: Chief Executive Officer
SHAREHOLDERS:
/s/ XXXX X. XXXXXXX
--------------------
Xxxx X. Xxxxxxx
/s/ XXXXX XXXX
--------------------
Xxxxx Xxxx
/s/XXXXX X. XXXXX
--------------------
Xxxxx X. Xxxxx
/s/ XXXXXXXX XXXXXXX
--------------------
Xxxxxxxx Xxxxxxx
/s/ XXXXX XXXXXX
--------------------
Xxxxxx Xxxxxx
52
