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EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
BY AND AMONG
ACTIVE IQ TECHNOLOGIES, INC.,
A MINNESOTA CORPORATION
AND
RED WING BUSINESS SYSTEM, INC.,
A MINNESOTA CORPORATION
AND
THE SHAREHOLDERS IDENTIFIED HEREIN.
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JUNE 6, 2001
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT") is made and entered
into this 6th day of June, 2001, by and between ACTIVE IQ TECHNOLOGIES, INC., a
Minnesota corporation ("PURCHASER"), RED WING BUSINESS SYSTEMS, INC., a
Minnesota corporation (the "COMPANY"), and the persons identified on SCHEDULE I
attached hereto (each a "SHAREHOLDER" and collectively, the "SHAREHOLDERS").
WHEREAS, the Shareholders own all of the issued and outstanding capital
stock (collectively, the "SHARES") of the Company; and
WHEREAS, Purchaser desires to purchase, and the Shareholders desire to
sell to Purchaser, all of the Shares on the terms and conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
1.1 Purchase of Shares from Shareholders. On the terms and subject to
the conditions set forth herein, at the Closing (as defined herein), the
Shareholders shall sell, transfer, convey, assign and deliver to Purchaser, and
Purchaser shall purchase, acquire and accept from the Shareholders, the Shares
on the terms and subject to the conditions set forth in this Agreement. At the
Closing, the Shareholders shall deliver to Purchaser certificates evidencing the
Shares duly endorsed for transfer, and all such other documentation as is
necessary and helpful as determined by Purchaser to transfer the Shares to
Purchaser.
1.2 Consideration for Shares. The aggregate consideration to be paid by
Purchaser for the Shares shall be 400,000 shares of Purchaser common stock (the
"COMMON STOCK") and cash in the amount of $1,600,000 (the "CASH CONSIDERATION,"
and together with the Common Stock, the "CONSIDERATION"). The Common Stock and
$400,000 of the Cash Consideration (the "CLOSING PAYMENT") shall be delivered by
Purchaser at Closing. Purchaser shall thereafter deliver the remaining Cash
Consideration as follows: (a) $400,000 shall be delivered six (6) months from
the Closing Date (the "6-MONTH PAYMENT"), (b) $400,000 shall be delivered twelve
(12) months from the Closing Date (the "12-MONTH PAYMENT"), and (c) $400,000
shall be delivered eighteen (18) months from the Closing Date (the "18-MONTH
PAYMENT"). The Consideration shall be distributed pro rata to each of the
Shareholders in accordance with their respective Share holdings as set forth on
SCHEDULE I.
1.3 Adjustment to Purchase Price. The 6-Month Payment shall be reduced
by the fees and expenses incurred by Purchaser in connection with the audit of
the Company's financial statements by Virchow Xxxxxx & Co. LLP, or such other
certified public accountants as the Purchaser shall retain. Following the
Closing, Purchaser shall deliver to the Company and the Shareholders a statement
identifying such audit fees and expenses.
1.4 Closing. The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall take place at the offices of Xxxxxx Xxxxxxx
Xxxxxx & Brand, LLP, at 10:00 a.m., Minneapolis time, on June 5, 2001 (the
"CLOSING DATE"), unless the parties hereto agree upon a different time, date or
place, provided all of the conditions to the Closing contained herein have been
satisfied or waived in writing on or prior to the Closing Date.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Company and the Shareholders
that:
2.1 Organization and Corporate Authority. Purchaser is organized,
validly existing and in good standing under the laws of the State of Minnesota
and has all requisite corporate power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby. This Agreement and all
other agreements herein contemplated to be executed in connection herewith by
Purchaser have been (or upon execution will have been) duly executed and
delivered by Purchaser, have been effectively authorized by all necessary
action, corporate or otherwise, and constitute (or upon execution will
constitute) legal, valid and binding obligations of Purchaser enforceable in
accordance with their respective terms, except as the same may be subject to
general principles of equity or limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance or similar laws.
2.2 Agreement Not in Breach of Other Instruments. Except as set forth
on SCHEDULE 2.2 attached hereto, the execution, delivery and performance of this
Agreement and all other agreements contemplated herein to be executed by
Purchaser and the consummation of the transactions contemplated hereby and
thereby, and the fulfillment of the terms hereof and thereof, will not result in
a breach of any of the terms or provisions of, or constitute a default under, or
conflict with, (a) any material agreement, contract, commitment, permit,
indenture or other instrument to which Purchaser is a party or by which its
assets are bound or (b) the Articles of Incorporation or Bylaws of Purchaser.
2.3 Investment Representation. Purchaser is purchasing the Shares for
its own account with the present intention of holding the Shares for investment
purposes and not with a view to or for sale in connection with any distribution
of the Shares in violation of any applicable securities law.
2.4 No Legal Bar. Purchaser is not prohibited by any order, writ,
injunction or decree of any body of competent jurisdiction from consummating the
transactions contemplated by this Agreement, and no such action or proceeding is
pending against Purchaser which questions the validity of this Agreement, any of
the transactions contemplated hereby or any action which has been taken by any
of the parties in connection herewith or in connection with any of the
transactions contemplated hereby.
2.5 Brokers. No broker or finder has acted for Purchaser or any
Affiliate of Purchaser in connection with this Agreement or the transactions
contemplated hereby, and no broker or finder is entitled to any brokerage or
finder's fees or other commissions in respect of such transactions based in any
way on agreements, arrangements or understandings made by or on behalf of
Purchaser or any Affiliate of Purchaser.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE
SHAREHOLDERS REGARDING THE SHAREHOLDERS AND THE SHARES
Each of the Shareholders, jointly and severally, represents and
warrants to Purchaser that the following representations and warranties are, as
of the date hereof, and will be, as of the Closing Date, true and correct:
3.1 Organization and Authority. Each Shareholder has executed and
delivered this Agreement, all other agreements set forth herein or contemplated
hereby and any other document or instrument delivered by the Shareholders or
entered into as part of the transactions contemplated herein or hereby (the
"OTHER
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AGREEMENTS") and has full and adequate authority to perform such Shareholder's
obligations hereunder and thereunder. Each Shareholder is of legal capacity and
has full power and authority to execute and deliver this Agreement and the Other
Agreements, and to perform his or her obligations hereunder. This Agreement
constitutes the valid and legally binding obligation of each Shareholder,
enforceable in accordance with its terms and conditions. None of the
Shareholders is required to give notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order to consummate the transactions contemplated by this Agreement.
3.2 Title to Shares. Except as set forth in SCHEDULE 3.2, the
Shareholders have good title to the Shares free and clear of any and all
covenants, conditions, demands, subscriptions, commitments, warrants, proxies,
restrictions, shareholder agreements, voting trust arrangements, liens, charges,
encumbrances, community property or quasi-community property interests, options,
adverse claims or rights whatsoever. Upon consummation of the purchase
contemplated hereby, Purchaser will acquire from the Shareholders good title to
the Shares, free and clear of all covenants, liabilities, obligations,
conditions, demands, subscriptions, commitments, warrants, proxies,
restrictions, shareholder agreements, voting trust arrangements, liens, charges,
encumbrances, community property or quasi-community property interests, options,
adverse claims or rights whatsoever. No person other than the Shareholders has
any beneficial or legal ownership to the Shares.
3.3 Brokerage Fees. No broker or finder has acted for any Shareholder
in connection with this Agreement or the Other Agreements, and no broker or
finder is entitled to any broker or finder's fees or other commissions in
respect of such transactions based in any way on agreements, arrangements or
understandings made by or on behalf of such Shareholder.
3.4 Agreement Not in Breach of Other Instruments. Except as set forth
on SCHEDULE 3.4, the execution and delivery of this Agreement and the Other
Agreements, the consummation of the transactions contemplated hereby and
thereby, and the fulfillment of the terms hereof and thereof will not result in
a breach of any of the terms or provisions of, or constitute a default under, or
conflict with, (a) any agreement, contract, commitment, permit, indenture or
other instrument to which any Shareholder is a party or by which any Shareholder
or his, her or its assets or any of the Shares are bound, including but not
limited to any trust agreement or any agreement or instrument related thereto,
or (b) any law, statute or regulation or any judgment, decree, order or award of
any court, governmental body or arbitrator to which any Shareholder or any of
such Shareholder's Shares or assets are subject.
3.5 No Legal Bar. None of the Shareholders is prohibited by any order,
writ, injunction or decree of any body of competent jurisdiction from
consummating the transactions contemplated by this Agreement, and no such action
or proceeding is pending against any Shareholder which questions the validity of
this Agreement or the Other Agreements.
3.6 Regulatory Approvals. All consents, approvals, authorizations and
other requirements prescribed by any law, rule or regulation which must be
obtained or satisfied by any or all of the Shareholders from any governmental
authority in order to permit the consummation of the transactions contemplated
by this Agreement or the Other Agreements have been obtained and satisfied, or
will have been obtained and satisfied as of the Closing Date.
3.7 Due Execution; Enforceability. This Agreement and the Other
Agreements have been (or upon execution will have been) duly executed and
delivered by each of the Shareholders and has been effectively authorized by all
necessary action, corporate or otherwise, and, constitute (or upon execution
will constitute) legal, valid and binding obligations of each of the
Shareholders enforceable in accordance with their respective terms, except as
the same may be subject to general principles of equity or limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance or similar laws.
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3.8 No Other Agreements to Sell the Assets or Capital Stock of the
Company or its Subsidiaries. Except as set forth on SCHEDULE 3.8 attached
hereto, none of Shareholders, the Company or its Subsidiaries has any legal
obligation, absolute or contingent, to any other person or entity to sell or
effect a sale of the assets of the Company or its Subsidiaries, to sell or
effect a sale of any of the capital stock of the Company or its Subsidiaries or
to effect any merger, consolidation or other reorganization of the Company or
its Subsidiaries or to enter into any agreement or cause the entering into of an
agreement with respect thereto.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE
SHAREHOLDERS REGARDING THE COMPANY AND ITS SUBSIDIARIES
Each of the Shareholders, jointly and severally, represents and
warrants to Purchaser that, the following representations and warranties are
true and correct as of the date hereof and will be, as of the Closing Date, true
and correct:
4.1 Organization, Authority and Purpose. The Company is duly organized,
validly existing and in good standing under the laws of the State of Minnesota
and has all requisite corporate power and authority to carry on its business as
it is now, and has since its formation has been, conducted and is duly
authorized to own the properties and assets it now owns. Each Subsidiary of the
Company is duly organized, validly existing and in good standing under the laws
of the state of its incorporation and each has the requisite corporate power and
authority to carry on its business as it is now, and has since formation been,
conducted and is duly authorized to own the properties and assets it now owns.
The Company and each Subsidiary are duly qualified to do business as a foreign
corporation and are in good standing in each jurisdiction in which such
qualification is necessary under the applicable law as a result of the conduct
of their businesses or the ownership of their properties except where the
failure to be so qualified and in good standing would not have a Material
Adverse Effect. For purposes of this Agreement, "MATERIAL ADVERSE EFFECT" shall
mean any matter which, either individually or in the aggregate, could or does
have a material adverse effect on the Shares or the assets, business, financial
condition, results of operations or prospects of the Company or its
Subsidiaries. Each jurisdiction in which each of the Company and its
Subsidiaries are qualified to do business as a foreign corporation is listed in
SCHEDULE 4.1. Except as set forth in SCHEDULE 4.1, neither the Company nor its
Subsidiaries owns, of record or beneficially, or control, directly or
indirectly, any equity interest in any entity. The Company and its Subsidiaries
each have full power and authority to perform its obligations under this
Agreement and the Other Agreements and no other authority, whether by directors,
shareholders or otherwise, is necessary to execute, deliver or consummate this
Agreement or the Other Agreements. SCHEDULE 4.1 lists and describes each and
every predecessor (whether direct or indirect) corporation or entity to the
Company or its Subsidiaries and describes each and every assumed name or trade
name such predecessors, the Company or its Subsidiaries have used or had rights
to during the past ten (10) years. For purposes of this Agreement, the term
"SUBSIDIARY" or "SUBSIDIARIES" shall mean any entity or entities, respectively,
with respect to which the Company beneficially owns more than 50 percent of the
outstanding equity of such entity.
4.2 Financial Statements. SCHEDULE 4.2 contains the unaudited
consolidated balance sheets of the Company and its Subsidiaries as of March 31,
2001, and the related statements of earnings, equity and cash flows for the
fiscal years then ended and the notes related thereto (the "FINANCIAL
STATEMENTS"). The Financial Statements, subject to the exceptions hereinafter
set forth in this SECTION 4.2, (i) were prepared in accordance with the books
and records of the Company and its Subsidiaries, respectively; (ii) were
prepared in accordance with accounting principles consistently applied,
consistent with past practices; (iii) fairly present the Company's and its
Subsidiaries' respective financial condition and the results of their operations
as at the relevant dates thereof and for the periods covered thereby; and (iv)
are true and
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accurate. For purposes of this Agreement, "BALANCE SHEET" means the balance
sheets of each of the Company and its Subsidiaries as of March 31, 2001 (the
"BALANCE SHEET DATE").
4.3 Absence of Certain Changes. Except as set forth on SCHEDULE 4.3,
since the Balance Sheet Date, each of the Company and its Subsidiaries has
conducted its business in the ordinary course of business substantially
consistent with past practice and there has not been (i) any declaration or
payment of distributions or dividends by the Company or its Subsidiaries or any
intercompany transfer of assets of any kind whatsoever by the Company or its
Subsidiaries; (ii) any transaction not in the ordinary course of business (for
purposes of this Agreement, "ordinary course of business" means the ordinary
course of business consistent with past custom and practice (including with
respect to quantity and frequency)); (iii) any change in the business, results
of operations, condition (financial or otherwise), assets, liabilities (whether
absolute, accrued, contingent or otherwise) or business of the Company or its
Subsidiaries that has had or is reasonably likely to have, with the passage of
time or otherwise, a Material Adverse Effect; (iv) any damage, destruction or
loss, whether or not covered by insurance, which has had or is reasonably likely
to have, with the passage of time or otherwise, a Material Adverse Effect; (v)
any sale or transfer of any of their assets or any cancellation of any debts,
rights or claims, except sales in the ordinary course of business of inventory
or immaterial amounts (not in excess of $5,000 in the aggregate) of other
tangible personal property not required in their respective businesses; (vi) any
mortgage, pledge or subjection to lien, charge or encumbrance of any kind,
except liens for taxes not due, of any of their properties or assets; (vii) any
material amendment, modification or termination of any material contract or
agreement to which the Company or its Subsidiaries is a party; (viii) any
increase in, or commitment to increase, the compensation payable or to become
payable to any employee or agent of the Company or its Subsidiaries or any bonus
payment or similar arrangement made to or with any of such employees or agents,
except with the prior written consent of Purchaser other than those undertaken
in the ordinary course of business in connection with annual salary reviews
consistent with past practices which, in the aggregate, have not increased
annual payroll by more than $25,000 and, individually, with respect to any
employee, has not increased annual compensation by $10,000; (ix) any incurrence
of, assumption of, or taking of any property subject to, any liability, except
for liabilities incurred or assumed or property taken subsequent to the Balance
Sheet Date in the ordinary course of business and consistent with past practice;
(x) any alteration in the manner of keeping the books, accounts or records of
the Company or its Subsidiaries, or in the accounting practices therein
reflected; (xi) any issuance or sale of any interests, including but not limited
to equity and debt, in or of the Company or its Subsidiaries, or any issuance or
sale of securities convertible into, or options with respect to, or warrants to
purchase or rights to subscribe to, any interests in or of the Company or its
Subsidiaries, or any agreements entered into obligating the Company or its
Subsidiaries to issue, sell, redeem, repurchase or acquire any such interests;
(xii) any labor dispute or any activity or proceeding by a labor union or
representative thereof to organize any employees of the Company or its
Subsidiaries or any lockouts, strikes, slowdowns, work stoppages, or threats
thereof by or with respect to such employees; (xiii) any notice from any
customer or customers or supplier or suppliers, as to such customer or
supplier's intention not to conduct business with the Company or its
Subsidiaries, the results of which loss or losses of business or supplies,
individually or in the aggregate, has had, or may reasonably be expected to
have, with the passage of time or otherwise, a Material Adverse Effect; (xiv)
any adoption of, amendment to or termination of any Employee Plans (as defined
herein); or (xv) any other event or condition of any character which has had or
may reasonably be expected to have, with the passage of time or otherwise, a
Material Adverse Effect.
4.4 Charter Documents. Attached as SCHEDULE 4.4 are true and correct
copies of the Articles of Incorporation, all amendments thereto, and the Bylaws
of the Company and its Subsidiaries, in each case as in effect on the date
hereof. The Shareholders or the Company have provided Purchaser with all the
corporate minutes of the Company and its Subsidiaries. All such documents have
been maintained in accordance with good business and record keeping practices
and in compliance with all applicable laws, regulations and procedures.
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4.5 Real Property. Neither the Company nor its Subsidiaries has sold,
transferred, assigned, gifted or otherwise disposed of any interest in any real
property to any person or entity in the ten year period preceding the date of
this Agreement. Neither the Company nor its Subsidiaries owns or has any
interest, contingent or otherwise in or to any real property, other than the
Lease (as hereinafter defined).
4.6 Leaseholds. Other than the lease (the "LEASE") described on
SCHEDULE 4.6 relating to the real property described therein (the "LEASED
PROPERTY"), neither the Company nor its Subsidiaries leases or subleases any
real property from any person or entity. With respect to the Lease:
(a) The Company, through the Lease, has, to the best of the
Company's and each Shareholder's knowledge, a valid written leasehold
interest in all of the Leased Property;
(b) The Lease is, to the best of the Company's and each
Shareholder's knowledge, legal, valid, binding, enforceable, and in
full force and effect;
(c) The Lease 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;
(d) Except as set forth on SCHEDULE 4.6(d), no action of any
kind is necessary or required by the Company or its Subsidiaries (or
any other person, entity or government body), including but not limited
to obtaining consent, with respect to such Leased Property or the
Lease, in connection with the transactions contemplated by this
Agreement;
(e) The Company is not in breach or default, and, to the best
of the Company's and each Shareholder's knowledge, no event has
occurred which, with notice or lapse of time, would constitute a breach
or default or permit termination, modification, or acceleration
thereunder;
(f) To the best of the Company's and each Shareholder's
knowledge, no party to the Lease has repudiated any provision thereof;
(g) There are no disputes, oral agreements, or forbearance
programs in effect as to the Lease;
(h) The Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the Lease;
(i) All facilities leased under the Lease are supplied with
utilities and other services necessary for the operation of said
facilities;
(j) (i) there are no pending or, to the knowledge of the
Company and each Shareholder, threatened or contemplated condemnation
proceedings, lawsuits, administrative actions, or proceedings relating
to the Leased Property or otherwise affecting adversely the current
use, occupancy, or value thereof; and (ii) neither the Company nor any
Shareholder has received notice of or has knowledge of (without
independent investigation) any proposed or pending public improvements
project(s), the cost of which a governmental agency may assess against
the Leased Property;
(k) To the best of the Company's and each Shareholder's
knowledge, no violation of any law (including but not limited to
Environmental Laws), regulation, ordinance, permit, license,
certificate or other governmental requirement (including without
limitation, laws, regulations or ordinances relating to zoning or city
planning) relating to the Leased Property presently exists
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other than for violations, which have not had and will not have with
the passage of time or otherwise, individually or in the aggregate, a
Material Adverse Effect;
(l) To the best of the Company's and each Shareholder's
knowledge, all facilities have received all approvals of governmental
authorities (including licenses and permits) required in connection
with the ownership and operation thereof and have been operated and
maintained in accordance with applicable laws (including but not
limited to Environmental Laws), rules, and regulations, except for
noncompliance which has not had, and will not have with the passage of
time or otherwise, individually or in the aggregate, a Material Adverse
Effect;
(m) Other than the Lease, there are no leases, subleases,
licenses, concessions, or other agreements, written or oral, granting
to any party or parties the right of use or occupancy of any portion of
any parcel of Leased Property;
(n) There are no parties (other than the Company or any of its
Subsidiaries) in possession of the Leased Property;
(o) To the best of the Company's and each Shareholder's
knowledge, there has been no labor or materials furnished to the Leased
Property for which payment has not been paid;
(p) There are no xxxxx located on the Leased Property;
(q) The Leased Property is sufficient for the conduct of the
business as is currently being carried out by the Company and its
Subsidiaries and is consistent with past practices;
(r) The Company and its Subsidiaries have maintained the
improvements on the Leased Property in a manner consistent with the
ongoing requirements of their respective businesses and have not
altered such maintenance practices in anticipation of the transactions
contemplated hereby; and
(s) All facilities located on the Leased Property are supplied
with utilities and other services necessary for the operation of such
facilities, including (if necessary) gas, electricity, water,
telephone, sanitary sewer, and storm sewer, all of which services are,
to the best of the Company's and each Shareholder's knowledge, adequate
in accordance with all applicable laws, ordinances, rules, and
regulations.
4.7 Tangible Personal Property. Except as set forth in SCHEDULE 4.7:
(a) The Company and its Subsidiaries have good title to each
item of tangible personal property owned by them free and clear of any
and all Security Interests, leases, encumbrances, claims under bailment
and storage agreements, equities, conditional sales contracts, charges
and restrictions of any kind ("LIENS");
(b) Each item of tangible personal property not owned by the
Company or its Subsidiaries is in such condition that upon the return
of such property to its owner in its present condition at the end of
the relevant lease term or as otherwise contemplated by the applicable
agreement between the Company and the owner or lessor thereof, the
obligations of the Company to such owner or lessor will be discharged;
(c) The tangible personal property owned or used by each of
the Company and its Subsidiaries is sufficient for the proper conduct
of its business as heretofore conducted;
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(d) The Company and its Subsidiaries have maintained the
tangible personal property owned or leased by them and material to
their respective businesses in a manner consistent with the ongoing
requirements of their respective businesses and have not altered such
maintenance practices in anticipation of the transactions contemplated
hereby;
(e) The Company and its Subsidiaries own or otherwise have the
right to use all of the tangible personal property currently in the
operation of its business; and
(f) Neither the Company nor its Subsidiaries has any material
contract, letter of intent or proposal relating to the acquisition or
divestiture of tangible personal property.
4.8 Capitalization. The Company is authorized to issue 1,000,000 shares
of Common Stock, no par value, and no other capital stock or other equity or
debt interests. Of its authorized capital stock, 65,634 shares of Common Stock
are issued and outstanding, all of which are owned, of record and beneficially,
by the Shareholders in such amounts as set forth in SCHEDULE 4.8. All of the
Shares have been duly authorized and are validly issued, fully paid and
nonassessable. There are not, and on the Closing Date there will not be,
outstanding (i) any options, warrants or, other rights to purchase from the
Company or any other person or entity any capital stock of the Company or its
Subsidiaries, (ii) any securities convertible into or exchangeable for shares of
such stock or (iii) any other commitments of any kind for the issuance of
additional shares of capital stock or options, warrants or other securities of
the Company. There are no outstanding obligations of the Company or its
Subsidiaries to repurchase, redeem or otherwise acquire any capital stock of the
Company or securities convertible into such capital stock.
4.9 Subsidiaries. SCHEDULE 4.9 sets forth for each Subsidiary: (i) its
name and jurisdiction of incorporation, (ii) the number of shares of authorized
capital stock of each class of its capital stock, (iii) the number of issued and
outstanding shares of each class of its capital stock, the names of the holders
thereof, and the number of shares held by each such holder, and (iv) the number
of shares of its capital stock held in treasury. All of the issued and
outstanding shares of capital stock of each Subsidiary have been duly authorized
and are validly issued, fully paid, and nonassessable. The Company or its
Subsidiaries holds of record and owns beneficially all of the outstanding shares
of each subsidiary, free and clear of any restrictions on transfer (other than
restrictions under the Securities Act and state securities laws), Taxes,
Security Interests, options, warrants, purchase rights, contracts, commitments,
equities, claims, and demands. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other contracts or commitments that could require the Company or its
Subsidiaries to sell, transfer, or otherwise dispose of any capital stock of any
of its subsidiaries that could require any Subsidiary to issue, sell, or
otherwise cause to become outstanding any of its own capital stock. There are no
outstanding stock appreciation, phantom stock, profit participation, or similar
rights with respect to any Subsidiary. There are no voting trusts, proxies, or
other agreements or understandings with respect to the voting of any capital
stock of any Subsidiary. Neither the Company nor its Subsidiaries controls
directly or indirectly or has any direct or indirect equity participation in any
corporation, limited liability company, limited liability partnership,
partnership, trust, or other business association which is not a Subsidiary.
4.10 Agreement Not in Breach of Other Instruments. Except as set forth
in SCHEDULE 4.10, neither the execution and delivery of this Agreement or the
Other Agreements, nor the consummation of the transactions contemplated hereby
or thereby, nor the fulfillment of the terms hereof or thereof, will (a)
violate, or result in a breach of, any of the terms and provisions of, or
constitute a default under, or conflict with (i) any agreement, contract,
commitment, permit, indenture or other instrument to which any of the Company or
its Subsidiaries is a party or by which any of the Company or its Subsidiaries
or any of their assets, are bound, or give rise to any right of termination,
cancellation or acceleration under any such agreement, contract, commitment,
permit, indenture or other instrument by any party thereto, (ii) the
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bylaws, articles/certificate of incorporation or shareholder agreements of any
of the Company or its Subsidiaries or (iii) any law, statute or regulation, or
any judgment, decree, order or award of any court, governmental body or
arbitrator applicable to any of the Company or its Subsidiaries; or (b) result
in the creation or imposition of any lien, charge, pledge, Security Interest or
encumbrance of any kind on any asset of any of the Company or its Subsidiaries.
4.11 Insurance. SCHEDULE 4.11 sets forth a true and correct list of all
insurance policies of any nature whatsoever, including self-insurance plans,
currently maintained by the Company or its Subsidiaries or maintained by a
Shareholder and covering the Company or its Subsidiaries or the Company's or its
Subsidiaries' assets, and the annual or other premiums payable from time to time
thereunder. All such policies of the Company and its Subsidiaries (i) are issued
by insurance companies reasonably believed by the Shareholders to be financially
sound and reputable and are in full force and effect; (ii) are sufficient (in
form, amount and otherwise) for compliance with all requirements of law and of
all applicable agreements; (iii) are valid, outstanding and enforceable
policies; and (iv) in the reasonable judgment of each of the Company, its
Subsidiaries and the Shareholders provide reasonable insurance coverage for the
assets and operations of the Company and its Subsidiaries for all risks normally
insured against by persons carrying on the same business as the Company and its
Subsidiaries. SCHEDULE 4.11 also contains a description of all contingent
liability that the Company or its Subsidiaries may be subject as a result of
retrospective insurance premium obligations, and describes the extent of any
self-insurance reserves which are actuarially determinable but not accrued as
liabilities on the Financial Statements. There are no outstanding claims by the
Company or its Subsidiaries under the insurance coverages listed in SCHEDULE
4.11, as to which full and complete coverage (subject to deductibles) for losses
has been questioned, disputed or denied. None of the Company and its
Subsidiaries has failed to give any notice or present any outstanding claim
under any insurance policy in a timely and complete manner. No claims are being
handled by an insurer of the Company or its Subsidiaries under a reservation of
rights letter. To the best of the Company's and each Shareholder's knowledge,
there are no outstanding requirements or recommendations by any insurance
company that issued any policy listed in SCHEDULE 4.11 or by any Board of Fire
Underwriters or other similar body exercising similar functions or by any
governmental authority exercising similar functions which requires or recommends
any changes in the conduct of the business of, or any repairs or other work to
be done on or with respect to any of the properties or assets of the Company or
its Subsidiaries. None of the Company and its Subsidiaries has received any
notice or other communication from any such insurance company within the three
years preceding the date hereof canceling or materially amending or materially
increasing the annual or other premiums payable under any of said insurance
policies, and no such cancellation, amendment or increase of premiums is
threatened.
4.12 Employee Benefit Matters.
(a) SCHEDULE 4.12(a) lists and generally describes:
(i) each employee welfare benefit plan and each
employee pension benefit plan within the meaning of Section 3
of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), that is maintained or contributed to by the
Company, its Subsidiaries or any Shareholder for the benefit
of the Company's or its Subsidiaries' employees (collectively,
the "ERISA PLANS"); and each trust fund maintained by the
Company, its Subsidiaries or any Shareholder in connection
with any of such ERISA Plans; and
(ii) all other plans providing compensation (other
than salaries or wages), benefits or perquisites to any class
of employees of the Company or its Subsidiaries, including
without limitation any incentive, bonus, stock option,
restricted stock, vacation pay, sick pay and severance plans
("COMPENSATION PLANS"); and any cafeteria plan" ("125
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PLAN") governed by Section 125 of the Internal Revenue Code of
1986, as amended, including all regulations and rules adopted
in connection therewith or pursuant thereto (the "CODE"). the
ERISA Plans, the Compensation Plans and any 125 Plan may be
collectively referred to as the "EMPLOYEE PLANS."
(b) The Company or the Shareholders have furnished to
Purchaser a true, correct and complete copy of each of the ERISA Plans
and any related trust agreements or other funding vehicles; true,
correct and complete copies of the Compensation Plans and 125 Plan (or
summaries of any unwritten Compensation Plans or 125 Plan) and true,
correct and complete copies of any employment policy manuals
distributed to any class of employees of the Company or its
Subsidiaries. With respect to each of the ERISA Plans and any 125 Plan,
the Shareholders have also furnished to Purchaser the most recent
summary plan description and the last three most recently filed annual
reports required to be made on Form 5500. As to each of the ERISA Plans
that is funded, the Company and its Subsidiaries have delivered or made
available to Purchaser a true, correct and complete copy of the most
recent annual financial report (including any auditor's report) with
respect to such plan, and any subsequent interim report. Each such
financial report and interim report is an accurate description of the
financial status of the subject employee benefit plan, and to the
knowledge of the Company, its Subsidiaries and each of the
Shareholders, there have been no adverse changes in the financial
status of any such funded ERISA Plans since the date of the most recent
report provided with respect thereto.
(c) SCHEDULE 4.12(c) specifically identifies each of the ERISA
Plans that is represented to be a qualified plan under Code Section
401(a) ("QUALIFIED PLAN"). With respect to each Qualified Plan, the
following are true: (a) the plan, in form and operation, currently
satisfies, and for all years subsequent to the establishment of such
plan, has satisfied, the qualification requirements of Section 401(a)
of the Code; and (b) the Internal Revenue Service (the "IRS") has
issued a favorable letter of determination with respect to the plan
(including without limitation the provisions of the Tax Reform Act of
1986 and related regulations), and all amendments required by the Code
as a condition of retention of such qualified status as of the date
hereof have been adopted within time limits required to maintain such
status or such time limits have not expired. Each of the Qualified
Plans is and has been operating in compliance with all amendments
required by the Tax Reform Act of 1986 and subsequent legislation and
regulations. the Company or its Subsidiaries have furnished to
Purchaser a true, correct and complete copy of the most recent letter
of determination issued with respect to each such Qualified Plan.
(d) None of the Company and its Subsidiaries maintains or
contributes to any Qualified Plan that is subject to Title IV of ERISA,
nor has the Company or its Subsidiaries terminated or withdrawn from
participation in any such plan. Except as set forth in SCHEDULE
4.12(d), none of the Qualified Plans is a Multiemployer Plan, as
defined in ERISA Section 4001(a)(3). All contributions payable by the
Company or its Subsidiaries to any of the ERISA Plans for any plan year
ending prior to the date hereof have been paid in full on a timely
basis and no accumulated funding deficiency (as defined in Section
302(a)(2) of ERISA) has been incurred with respect to any Qualified
Plan subject to Code Section 412. Except as set forth in SCHEDULE
4.12(d), (i) neither the Company nor its Subsidiaries has maintained,
contributed to or been required to contribute to a Multiemployer Plan,
(ii) no amount is due by the Company or its Subsidiaries to any
Multiemployer Plan on account of any withdrawal therefrom, (iii) no
withdrawal events triggering liability have occurred with respect to
any Multiemployer Plan (and no material risk of such event exists),
(iv) no contingent liability exists with respect to any Multiemployer
Plan in respect of an asset sale by the Company or any ERISA Affiliate
made in the prior five (5) years, and (v) SCHEDULE 4.12(d), lists and
described the current liability of the Company and its Subsidiaries
under each Multiemployer Plan if a withdrawal liability occurred on the
date of this Agreement.
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(e) Neither the Company nor its Subsidiaries have engaged in,
nor entered into any arrangement pursuant to which the Company or a
Subsidiary is contractually bound to enter into, any transaction which
could result in imposition upon the Company or its Subsidiaries,
Purchaser or Purchaser's subsidiaries, of any excise tax under Sections
4971 through 4980B, inclusive, and Section 5000 of the Code or civil
liability under Section 502(i) or 502(l) of ERISA or otherwise incurred
a liability for any excise tax with respect to any of the Employee
Plans, other than excise taxes that have heretofore been paid or have
been accrued, and, in either case are fully reflected in the Balance
Sheet.
(f) The Company or its Subsidiaries has (a) filed or caused to
be filed on a timely basis each and every return, report, statement,
notice, declaration and other document required to be filed with any
governmental agency, federal, state and local (including, without
limitation, the IRS, the Department of Labor, the Pension Benefit
Guaranty Corporation and the SEC) with respect to each of the Employee
Plans; and the Company or its Subsidiaries have maintained on their
premises (or have caused to be maintained by a service provider) all
records with respect to such plans as are required for their proper
administration and proper continued reporting and disclosure; (b)
timely complied with all applicable participant disclosure requirements
of ERISA; and (c) maintained in full force and effect any bond required
under ERISA in connection with the ERISA Plans.
(g) Neither the Company nor any Subsidiary (during the period
it is a Subsidiary) is or ever has been a member of a controlled group
of corporations, an unincorporated trade or business under common
control, or a member of an affiliated service group (as such terms are
defined in Sections 414(b), 414(c) and 414(m) of the Code), that
includes any entity other than the Company and its Subsidiaries.
(h) The Company and its Subsidiaries have not utilized to any
material extent, the services of "leased employees" (as defined in
Section 414(n) of the Code) within the four (4) year period ending on
the Closing Date, nor are there any persons now working for the Company
or its Subsidiaries who are anticipated to become such leased employees
with the passage of time, except to the extent such status would not
have a Material Adverse Effect on any of the Employee Plans.
(i) Except as described in SCHEDULE 4.12(I), neither the
Company nor its Subsidiaries maintain any group life insurance or
health benefit coverage for former employees or directors of the
Company or its Subsidiaries, other than group life insurance or health
benefit coverage mandated by applicable law. the Company and its
Subsidiaries have timely complied with all of their respective "COBRA"
obligations under ERISA Section 602, Code Section 4980B and applicable
state insurance laws, with respect to group life insurance or health
benefit continuation coverage to be provided by those of its Employee
Plans that provide such benefits.
(j) With respect to the Employee Plans, there are no claims,
actions, suits or proceedings pending or, to the knowledge of the
Company, its Subsidiaries and each Shareholder, threatened against the
Company, its Subsidiaries or any other fiduciaries thereof, respecting
their duties or obligations to any such plan, its assets, any trust
thereunder or any participant or beneficiary thereof, except claims
made in the ordinary course for benefits or compensation provided by
such plans.
(k) Neither the Company, its Subsidiaries, nor any of their
respective directors, officers, employees or other "fiduciaries," as
that term is defined in Section 3(21) of ERISA, has committed any
breach of fiduciary responsibility imposed by ERISA or any other
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applicable law with respect to the ERISA Plans, that would subject the
Company or its Subsidiaries, Purchaser, Purchaser's subsidiaries or any
of their respective directors, officers or employees to any liability
under ERISA or any other applicable law and that is reasonably expected
to have a Material Adverse Effect.
4.13 Tax Matters.
(a) The following terms shall have the meanings indicated
below:
(i) "TAXES" (or "TAX" or "TAXABLE" or "TAXING" where
the context requires) shall mean (a) all federal, state,
county, local, foreign and other taxes (including, without
limitation, net income, gross income, profits, premium,
estimated, excise, sales, use, value-added, occupancy,
occupation, gross receipts, franchise, license, ad valorem,
severance, capital levy, production, transfer, withholding,
employment and payroll related, and property taxes, custom and
import duties and other governmental fees, charges and
assessments), whether attributable to statutory or
nonstatutory rules and whether or not measured in whole or in
part by net income, whether or not consolidated, combined,
unitary or separate; (B) any interest, additions to tax or
interest and penalties with respect thereto; and (C) any
liability for the payment of any of such amounts as a result
of being a member of an affiliated or combined group.
(ii) "TAX AGREEMENT" shall mean any tax sharing or
indemnity arrangement among or between the Company, its
Subsidiaries, a Shareholder or any Shareholder's Affiliates,
or any predecessor thereof and described in SCHEDULE 4.13(a).
(iii) "TAX RETURNS" (or "TAX RETURN" where the
context requires) shall mean all returns, declarations,
reports and information returns of whatsoever kind in respect
of Taxes.
(iv) "PRE-CLOSING TAX PERIOD" shall mean all Tax
Periods ending on or before the Closing Date and that portion
to and including the Closing Date of any Taxable period that
includes (but does not end on) the Closing Date.
(b) Each of the Company and its Subsidiaries: (i) has timely
filed all Tax Returns required to be filed through the date hereof, has
timely paid any Tax due through the date hereof with respect to the
time periods covered by such Tax Returns and shall timely pay any such
Taxes required to be paid by it after the date hereof and on or prior
to the Closing Date with respect to such Tax Returns; and (ii) shall
prepare and timely file all such Tax Returns required to be filed after
the date hereof and through the Closing Date and timely pay all Taxes
required to be paid by them on or prior to the Closing Date with
respect to the periods covered by such Tax Returns; and (iii) all such
Tax Returns filed pursuant to clause (i) after the date hereof shall,
in each case, be prepared and filed in a manner consistent in all
material respects (including elections and accounting methods and
conventions) with such Tax Return most recently filed in the relevant
jurisdiction prior to the date hereof, except as otherwise required by
law or regulation or agreed to in writing by Purchaser.
(c) All consolidated or combined Tax Returns (except those
described in subparagraph (b) above) required to be filed by any person
through the date hereof that are required or permitted to include the
income, or reflect the activities, business, operations, assets or
transactions, of the Company and its Subsidiaries for any taxable
period have been timely filed, and the income, business, activities,
operations, property and transactions of each of the Company and its
Subsidiaries have been properly included and reflected thereon. The
Shareholders
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shall prepare and timely file, or cause to be prepare and timely filed,
all such consolidated or combined Tax Returns that are required or
permitted to include the income, or reflect the activities, business,
operations, assets or transactions, of each of the Company and its
Subsidiaries, with respect to any taxable year or operation thereof
ending on or prior to the Closing Date.
(d) There has been adequately disclosed in the federal income
Tax Returns filed by the Company and its Subsidiaries or will be
disclosed in any such Tax Returns to be filed on or before the Closing
Date, all positions taken therein that otherwise could give rise to a
substantial understatement of federal taxes within the meaning of Code
Section 6662.
(e) As of the time of filing, each of such Tax Returns:
(i) correctly reflected (and, as to any Tax Returns
not filed as of the date hereof, will correctly reflect) the
facts regarding income, activities, business, operations,
assets, transactions and status of the Company and its
Subsidiaries and any other information required to be shown
therein;
(ii) constitute (and, as to any Tax Returns not filed
as of the date hereof, will constitute) complete and accurate
representations of the Tax liabilities for the periods
covered; and
(iii) accurately set forth all items (to the extent
required to be included or reflected in the Tax Returns)
relevant to future Tax liabilities, including the Tax bases of
properties and assets.
(f) All amounts required to be withheld as of the Closing Date
by the Company and its Subsidiaries for Taxes or otherwise shall by
then have been withheld and paid when due to the appropriate agency or
authority.
(g) There is no agreement, waiver or consent providing for an
extension of time with respect to the assessment of any Taxes
attributable to the Company, its Subsidiaries or any of their assets or
operations that is currently in effect. No power of attorney granted by
the Company or its Subsidiaries with respect to any Tax matter is
currently in force.
(h) Neither the Company nor its Subsidiaries is delinquent in
the payment of any Taxes with respect to the Company or its
Subsidiaries; or has requested any extension of time within which to
file or send any Tax Return required to be filed by the Company or its
Subsidiaries, which Tax Return has not since been filed or sent.
(i) SCHEDULE 4.13(i) (i)sets forth Taxable years of the
Company and its Subsidiaries for which the statute of limitations has
not expired for federal or state income Tax purposes; and (ii) with
respect to such open years, specifies whether an examination by the IRS
or state taxing authority has been initiated or completed.
(j) Except as set forth in SCHEDULE 4.13(j), there is no
action, suit, proceeding, audit, claim, demand, deficiency or
additional assessment outstanding, in progress, pending, or to the
knowledge of the Company, its Subsidiaries and each Shareholder,
threatened, against or with respect to any Tax attributable to the
Company or its Subsidiaries, any of their assets or operations, or
pursuant to which the Company or its Subsidiaries could be held liable
for any Tax attributable to the Company or its Subsidiaries; nor, to
the knowledge of the Company, its
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Subsidiaries and each Shareholder, is any investigation pending or
threatened regarding any of the foregoing.
(k) There are no Tax rulings, requests for Tax rulings, or Tax
closing agreements relating to the Company or its Subsidiaries, in
which any of the Shareholder, the Company or its Subsidiaries is named
that could affect the liability of Purchaser, the Company or its
Subsidiaries for any taxable period ending after the Closing.
(l) Except as set forth on SCHEDULE 4.13(l), the Company has
not agreed, and is not required, to make any adjustment under Code
Section 481(a) that could affect a Tax Period ending after the Closing
Date.
(m) No property of the Company or its Subsidiaries is either
"tax-exempt use property" within the meaning of Section 168(h) of the
Code, or property that Purchaser and/or the Company or its Subsidiaries
will be required to treat as being owned by another person pursuant to
Section 168(f)(8) of the Internal Revenue Code of 1954, as amended and
in effect immediately prior to the enactment of the Tax Reform Act of
1986.
(n) Neither the Company nor its Subsidiaries has participated
in an international boycott within the meaning of Section 999 of the
Code.
(o) Neither the Company nor its Subsidiaries has ever filed a
consent under Code Section 341(f) or made an election to be taxed as an
S corporation under Section 1362(a) of the Code.
(p) No Tax is required to be withheld pursuant to Section 1445
of the Code as a result of the transactions contemplated in this
Agreement.
(q) Neither the Company nor its Subsidiaries is a party to,
bound by, or has any obligation under (A) any Tax Agreement, (B) any
agreement relating to a foreign sales corporation within the meaning of
Section 922(a) of the Code, or (C) any cost sharing agreement with
respect to the sharing of the costs and risks of developing intangible
property within the meaning of Treas. Reg. 1.482-7(d).
(r) There have been made available to Purchaser true and
complete copies of Tax Returns for the last three (3) fiscal years and
any other Tax Returns requested by Purchaser that may be relevant to
the Company or its Subsidiaries or their respective business, assets or
operations for any and all periods up through the period ending on
December 31, 2000; and for any other Tax years that remain subject to
audit or investigation by any Taxing authority or entity.
(s) To the best of the Company's and each Shareholder's
knowledge, there is no contract, agreement, plan or arrangement,
including but not limited to the provisions of this Agreement, covering
any employee or former employee of the Company or its Subsidiaries
that, individually or collectively, could give rise to the payment of
any amount that would not be deductible pursuant to Section 280G or 162
of the Code.
(t) Neither the Company nor its Subsidiaries is or has been
subject to any liability under Treas. Reg. 1.1502-6 with respect to any
affiliated group, except for the group including only them.
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(u) Neither the Company nor any of its Subsidiaries is or has
been liable for any accumulated earnings Tax under Code Section 531 for
any Taxable period, except (i) to the extent that such Tax has been
paid or (ii) for any Taxable periods for which the statute of
limitations (including any extensions thereof) for assessment and
collection of such Tax has expired.
4.14 Litigation. Except as set forth in SCHEDULE 4.14, there is no
charge, complaint, action, order, writ, injunction, judgment or decree
outstanding or claim, suit, litigation, proceeding, labor dispute, arbitral
action or, to the knowledge of the Company, its Subsidiaries and Shareholder,
threatened or anticipated against, relating to or affecting, or an investigation
pending concerning (collectively, "ACTIONS"): (i) the Company or its
Subsidiaries or their assets or operations as currently operated, (ii) any
Employee Plan or any trust or other funding instrument, fiduciary or
administrator thereof, (iii) the transactions contemplated by this Agreement or
the Other Agreements, or (iv) the Shares. Each of the Company and its
Subsidiaries is not in default with respect to any judgment, order, writ,
injunction or decree of any court or governmental agency, and there are no
unsatisfied judgments against the Company or its Subsidiaries or the business of
the Company or its Subsidiaries. To the knowledge of the Company, its
Subsidiaries and Shareholder, there is not a reasonable likelihood of an adverse
determination of any pending Actions that would, individually or in the
aggregate, have a Material Adverse Effect.
4.15 Suppliers. There has been no adverse change in the business
relationship with any supplier material to the businesses of the Company and, to
the knowledge of the Company, its Subsidiaries, and Shareholder, no threat or
indication that any such change is reasonably foreseeable which is reasonably
likely to have a Material Adverse Effect.
4.16 Banking Facilities. SCHEDULE 4.16 contains a true and complete
list of: (i) each bank, savings and loan, trust company or similar or other
financial institution in which the Company or its Subsidiaries has an account or
safety deposit box and the numbers of such accounts or safety deposit boxes;
(ii) the names of all persons authorized to draw on each such account or to have
access to any such safety deposit box facility, together with a description of
the authority (and conditions thereof, if any) of each such person with respect
thereto; and (iii) each letter of credit issued by either the Company or its
Subsidiaries.
4.17 Indebtedness to and from Officers, Directors and Stockholders;
Insider Transactions. Except as set forth in SCHEDULE 4.17, neither the Company
nor its Subsidiaries is indebted, directly or indirectly, to any person who is
an officer, director or shareholder of the Company or its Subsidiaries in any
amount whatsoever, other than for salaries for services rendered or reimbursable
business expenses incurred in the ordinary course of business, nor is any such
officer, director, shareholder or Affiliate indebted to the Company or its
Subsidiaries except for advances made to employees of the Company or its
Subsidiaries in the ordinary course of business consistent with past practice to
meet reimbursable business expenses anticipated to be incurred by such obligor.
Except as set forth in SCHEDULE 4.17, none of the directors, officers or
shareholders of the Company or its Subsidiaries has any transaction pending or
agreement (oral or written) outstanding with the Company or its Subsidiaries.
4.18 Personnel. SCHEDULE 4.18 contains a true and complete list of the
names and current salaries of all the directors and officers of the Company and
its Subsidiaries and all employees (collectively, the "EMPLOYEES") of the
Company and its Subsidiaries. There is listed on SCHEDULE 4.18 the annual
salary, vacation, other compensation due and benefits entitled to for each such
Employee.
4.19 Powers of Attorney and Suretyships. Except as set forth on
SCHEDULE 4.19, neither the Company nor its Subsidiaries has any general or
special powers of attorney outstanding (whether as grantor or grantee thereof)
or any obligation or liability (whether actual, accrued, accruing, contingent or
otherwise) as guarantor, surety, co-signer, endorser, co-maker, indemnitor or
otherwise in respect of the obligation of any person, corporation, partnership,
joint venture, association, organization or other entity,
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except as endorser or maker of checks or letters of credit, made in the ordinary
course of business.
4.20 Contracts.
(a) Except as disclosed in SCHEDULE 4.20, neither the Company nor its
Subsidiaries is a party or subject to any of the following written or oral
contracts and agreements: (i) any union or collective bargaining agreements and
any employment contracts; (ii) any contracts with agents, consultants, advisors,
salespersons, sales representatives, distributors or dealers; (iii) any
contracts or commitments for capital expenditures or the acquisition of fixed
assets providing for payments of $10,000 in the aggregate; (iv) any contracts
relating to the rental or use of equipment, other personal property or fixtures
involving payment of fixed or contingent annual rentals or sums in excess of
$10,000; (v) any contracts relating in any way to indebtedness for borrowed
money or evidenced by a bond, debenture, note or other evidence of indebtedness
(whether secured or unsecured) including but not limited to, indebtedness by way
of lease or installment purchase arrangement, guarantee, undertaking on which
others rely in extending credit, or otherwise, and any conditional sales
contracts, chattel and purchase money mortgages and other security arrangements
with respect to any equipment, other personal property or fixtures; (vi) any
contracts limiting the freedom of the Company or its Subsidiaries to engage in
or to compete in any line of business or with any person or in any area or to
use or disclose any information in its possession; (vii) any license or
franchise agreements, either as licensor or licensee or as franchisee or
franchisor; (viii) any contracts or commitments not made in the ordinary course
of business; (ix) any joint venture or partnership contracts; (x) any contracts
or agreements for the purchase of any materials or supplies or services in the
ordinary course of business and involving more than $10,000 in consideration in
each such case; (xi) any contracts or agreements under which either the Company
or its Subsidiaries has agreed to indemnify any person or entity with respect
to, or to share, any liability of any person or entity; and (xii) any other
contract or commitment which is material to the Company or its Subsidiaries or
that, if terminated, could reasonably be expected to have, with the passage of
time or otherwise, a Material Adverse Effect. The contracts and agreements which
are required to be identified in SCHEDULE 4.20 are each hereinafter referred to
individually as a "CONTRACT" and collectively as the "CONTRACTS."
(b) Except as set forth on SCHEDULE 4.20:
(i) Each of the Contracts is a valid and binding agreement of the Company or
its Subsidiaries, respectively, and, to the knowledge of the Company, its
Subsidiaries, and each Shareholder, all other parties thereto (subject to
general principles of equity and bankruptcy, insolvency, reorganization or
other similar laws);
(ii) The Company and its Subsidiaries have, respectively, fulfilled all
obligations required pursuant to each of the Contracts to have been
performed by it prior to the date hereof and none of the Company, its
Subsidiaries nor any Shareholder, has reason to believe that the Company or
its Subsidiaries will not be able to fulfill, when due, all of their
respective obligations under the Contracts which remain to be performed
after the date hereof;
(iii) There has not occurred a default under any of the Contracts on the
part of the Company or its Subsidiaries, or to the knowledge of the Company,
its Subsidiaries, and each Shareholder, on the part of any other party
thereto nor has any event occurred which with the giving of notice or the
lapse of time, or both, would constitute a default on the part of the
Company or its Subsidiaries under any of the Contracts nor, to the knowledge
of the Company, its Subsidiaries and each Shareholder, has any event
occurred which with the giving of notice or the lapse of time, or both,
would constitute any default on the part of any other party to any of the
Contracts; and
(iv) No consent of any party to any of the Contracts is required by
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the execution, delivery or performance of this Agreement, the
Other Agreements or the consummation of the transactions
contemplated hereby.
4.21 Accounts Receivable; Accounts Payable; Inventory.
(a) The accounts and notes receivable of the Company and its
Subsidiaries on the Balance Sheet and arising after the date thereof
(i) arose from the bona fide sale of inventory, assets or services, in
each case, in the ordinary course of business, (ii) constitute only
valid and undisputed claims, (iii) are not subject to counterclaims or
setoffs, and (iv) to the best knowledge of the Company and the
Shareholders, are collectible in full, net of the applicable reserve
for doubtful accounts, in the ordinary course of business. The reserves
for accounts and notes receivable of the Company and its Subsidiaries,
as reflected on their respective books and records, are adequate to
reserve for all such outstanding receivables that are or become
uncollectible in the ordinary course of business within such 90 day
period and such reserves were calculated in a manner consistent with
past practices.
(b) The accounts payable of the Company and its Subsidiaries
on the Balance Sheet and arising after the date thereof are the result
of bona fide transactions in the ordinary course of business and were
paid, will be paid, or are not yet due and payable.
(c) Each of the products produced or sold or services provided
by the Company and its Subsidiaries: (i) is and at all times has been,
in compliance in all respects with all applicable federal, state, local
and foreign laws, rules, and regulations and (ii) is, and at all
relevant times has been, fit for the ordinary purposes for which such
product or service is intended to be used and conforms in all respects
to any warranties or promises or affirmations of fact, oral or written,
including but not limited to those made on the container or label for
such products or in connection with its sale. There is no design defect
with respect to any of the products or services.
4.22 Compliance with Laws; Permits. Except as set forth on SCHEDULE
4.22, the Company and its Subsidiaries, and the conduct of their respective
businesses, are in compliance with all applicable laws, statutes, ordinances,
rules and regulations promulgated, or judgments, decisions or orders entered, by
any federal, state, local, or foreign court or governmental agency, department,
authority or instrumentality relating to the assets or the business of the
Company or its Subsidiaries. Except as set forth on SCHEDULE 4.22, neither the
Company, its Subsidiaries, nor any Shareholder has received during the past five
years any written notice to the effect that, or to the knowledge of the Company,
its Subsidiaries and each Shareholder, otherwise been advised by a governmental
authority, that, the Company or its Subsidiaries is not in compliance with any
of such statutes, regulations, orders, ordinances or other laws, and neither the
Company, its Subsidiaries, their directors or officers, nor any Shareholder has
any reason to anticipate that any currently existing circumstances are likely to
result in violations of any such regulations which could, in any one case or in
the aggregate, have a Material Adverse Effect. The Company and its Subsidiaries
have all Permits (as herein defined), authorizations and approvals, each of
which is currently valid and in full force and effect, material to the conduct
of the business of each of the Company and its Subsidiaries, which licenses,
Permits, authorizations and approvals are set forth in SCHEDULE 4.22. Without
limiting the generality of the preceding representation and warranty, neither
the Company nor its Subsidiaries has (i) made or agreed to make any
contribution, payment or gift to any government official, employee, or agent
where either the contribution, payment or gift or the purpose thereof was
illegal under the laws of any federal, state, local or foreign jurisdiction,
(ii) established or maintained any unrecorded fund or asset for any purpose or
made any false entries on the books and records of the Company or its
Subsidiaries for any reason, or (iii) made or agreed to make any contribution,
or reimbursed any political gift or contribution made by any other person, to
any candidate for, federal, state, local or foreign public office. In addition,
each of the Company and its Subsidiaries (a) has complied with all applicable
laws relating to employee and civil rights and relating to employment
opportunities, (b) filed in a timely
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manner all reports and documents it was required to file (and the information
contained therein was correct and complete in all respects) under all applicable
laws, (c) has possession of all records and documents it was required to retain
under all applicable law, and (d) has not violated in any respect or received a
notice or charge asserting any material violation of and there are no current,
nor have there been any in the past five (5) years, government investigations,
including but not limited to any civil investigative demand or similar request,
related to the Xxxxxxx Act, the Xxxxxxx Act, the Xxxxxxxx-Xxxxxx Act, the
Federal Trade Commission Act, the Securities Act of 1933 or the Securities
Exchange Act of 1934, each as amended, except where such violation would not
have a Material Adverse Effect. "PERMITS" shall mean all licenses, permits and
other governmental authorizations necessary to carry on the business of the
Company and its Subsidiaries as presently conducted and as proposed to be
conducted.
4.23 No Undisclosed Liabilities. Neither the Company nor its
Subsidiaries has liabilities or obligations of any nature or kind whatsoever,
liquidated or unliquidated, absolute, accrued, contingent or otherwise, and
whether due or to become due (including, without limitation, any liability for
Taxes and interest, penalties and other charges payable with respect to any such
liability or obligation) (the "COMPANY LIABILITIES"), other than (i) liabilities
or obligations reflected or reserved against in the Interim Financial
Statements; and (ii) liabilities or obligations incurred in the ordinary course
of business consistent with past practice since the Balance Sheet Date, which
individually or in the aggregate will not have a Material Adverse Effect or is
otherwise specifically disclosed in detail in a written Schedule attached hereto
referencing a specific Section of this Agreement but only with respect to and to
the extent of the specifically detailed exception to the representation or
warranty being referenced by such Schedule. There is no existing condition,
situation or set of circumstances which could reasonably be expected to result
in the Company Liabilities other than the matters set forth in Subsections
4.23(i) and (ii) and liabilities or obligations covered by any insurance policy
disclosed in SCHEDULE 4.11 to this Agreement.
4.24 Environmental Matters. Except as set forth in SCHEDULE 4.24:
(a) Each of the Company and its Subsidiaries is conducting and
has conducted its business and operations in compliance with all
applicable Environmental Laws and pursuant to all necessary government
permits, including but not limited to in connection with any clean-up
or remedial work necessitated by such compliance failure, any damages
to personal property arising from such compliance failure, any damages
for personal injury or nuisance claims arising from such compliance
failure or any fines, penalties or natural resource damages arising
from such compliance failure. Neither the Company nor its Subsidiaries
is violating and has not violated any Environmental Laws, including but
not limited to in connection with any clean-up or remedial work in
respect of such violation, any damages to personal property arising
from such violation, any damages for personal injury or nuisance claims
arising from such violation or any fines, penalties or natural resource
damages arising from such violation. There is no Environmental Claim
(as herein defined) pending, or to the knowledge of the Company, its
Subsidiaries and each Shareholder, threatened, against the Company or
its Subsidiaries or with respect to any properties or assets now or
previously owned, leased or used by any of them, including but not
limited to in connection with any clean-up or remedial work in respect
of such Environmental Claim, any damages to personal property arising
from such Environmental Claim, any damages for personal injury or
nuisance claims arising from such Environmental Claim or any fines,
penalties or natural resource damages arising from such Environmental
Claim.
(b) To the best knowledge of the Company and the Shareholders,
there has been no release, emission, discharge, storage, generation,
treatment or disposal of any Hazardous Substance (as herein defined) by
the Company or its Subsidiaries, their respective agents or
contractors, that could form the basis of any Environmental Claim
against the Company or its Subsidiaries or with respect to any of their
properties or assets. No property or facility now owned, used or
leased, or to the knowledge of the Company, its Subsidiaries and
Xxxxxxxxxxx,
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previously owned, used or leased by the Company or its Subsidiaries is
listed or, to the knowledge of the Company, its Subsidiaries and each
Shareholder, proposed for listing under CERCLA or any similar
Environmental Law, as sites requiring investigation or clean up.
(c) Neither the Company nor its Subsidiaries has transported
or arranged for the transportation (directly or indirectly) of any
Hazardous Substance to any location which is listed or, to the
knowledge of the Company, its Subsidiaries, and each Shareholder,
proposed for listing under CERCLA or any other similar Environmental
Law, or which is the subject of federal, state, local or foreign
enforcement actions or other investigation which may be reasonably
anticipated to lead to claims against the Company or its Subsidiaries
for clean-up costs, remedial work, damages to natural resources,
personal injury or nuisance claims.
(d) There have been no environmental investigations,
administrative orders, consent orders, studies, audits, tests, reviews
or other analyses conducted by or which are in the possession of the
Company or its Subsidiaries in relation to any property or facility now
or previously owned, used or leased by the Company or its Subsidiaries
which have not been delivered to Purchaser prior to the date hereof and
which deal with or relate to facts that would form the basis of an
Environmental Claim against the Company or its Subsidiaries or with
respect to any of their properties and assets.
(e) To the best knowledge of the Company and the Shareholders,
no Hazardous Substance has been generated, treated, stored, released,
disposed or otherwise placed or located on or deposited in the Leased
Property or the Leased Property or any real property previously owned
or leased by the Company or its Subsidiaries, or their agents or
contractors in such form or substance as to create any liability for
the Company or its Subsidiaries.
(f) To the best knowledge of the Company and the Shareholders,
there are not now, nor have there ever been in the past, any
underground or above ground storage tanks or other contaminant
facilities of any kind on the Leased Property or the Leased Property or
any real property previously owned or leased by the Company or its
Subsidiaries which contain or ever did contain any Hazardous Substance
(including but not limited to fuel oil or diesel fuel).
(g) Throughout this Agreement, the following terms shall have
the meanings set forth below:
(i) "AFFILIATE," as applied to any other Person,
shall mean any other Person directly or indirectly
controlling, controlled by or under common control with that
Person.
(ii) "ENVIRONMENTAL CLAIM" shall mean any claim or
demand, or notice thereof, alleging potential liability
(including, without limitation, liability for investigatory
costs, clean-up costs, monitoring costs, governmental response
costs, natural resources damages, property damages, liability
for nuisance or damage to property values, personal injuries
or penalties) arising out of, based on or resulting from: (a)
noncompliance with Environmental Laws by the Company, its
Subsidiaries, or by any of their respective Affiliates,
employees or agents, (B) the condition of any real or personal
property now or previously owned, used or leased by the
Company or its Subsidiaries; (C) the release into the
environment of any Hazardous Substance by the Company, its
Subsidiaries or any of their respective Affiliates, employees
or agents.
(iii) "ENVIRONMENTAL LAWS" shall mean all present and
future Federal, state, local, foreign or other statutes, laws,
regulations, ordinances, rules, orders, consent decrees,
consent judgments, judicial or administrative decisions,
agreements or directives,
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issued or enacted relating to: (A) pollution or protection of
the environment, including natural resources; (B) exposure of
any individual, including employees of the Company and its
Subsidiaries, to any Hazardous Substance; (C) protection of
human health or welfare from the effects of manufacture, use
or introduction into commerce of Hazardous Substances,
including, without limitation, use of or rights with respect
to their manufacture, formulation, packaging, labeling,
distribution, transportation, handling, storage and disposal;
and (E) regulation generally of the use of the environment,
including, without limitation, ambient air, surface water,
ground water, and surface or subsurface strata, in each case,
as amended and as now or hereafter in effect. For purposes of
this definition, the term "Environmental Laws" shall include,
without limitation, the following statutes: (1) the Clean Air
Act, as amended, 42 U.S.C. Sections 7401 et seq.; (2) the
Federal Water Pollution Control Act, as amended, 33 U.S.C.
Sections 1251 et seq.; (3) the Resource Conservation and
Recovery Act of 1976, as amended, 42 U.S.C. Sections 6901 et
seq. ("RCRA"); (4) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C.
Sections 9601 et seq., as amended by the Superfund Amendments
and Reauthorization Act of 1986 ("CERCLA"); (5) the Toxic
Substances Control Act, as amended, 15 U.S.C. Sections 2601 et
seq.; (6) the Occupational Safety and Health Act, as amended,
29 U.S.C. Section 651; (7) the Emergency Planning and
Community Right-to-Know Act of 1986, 42 U.S.C. Sections 801 et
seq.; (8) the Mine Safety and Health Act of 1977, as amended,
30 U.S.C. Sections 801 et seq.; (9) the Safe Drinking Water
Act, 42 U.S.C. Sections 3008 et seq.; and (10) all comparable
United States, state, local and foreign laws, statutes, rules
regulations, judgments, orders decrees, stipulations or
charges.
(iv) "HAZARDOUS SUBSTANCE" shall mean: (A) any
"hazardous substance" as defined in CERCLA, 42 U.S.C. Section
9601(14); (B) any "pollutant or contaminant" as defined in
CERCLA, 42 U.S.C. Section 9601(33); (C) any "hazardous waste"
as defined in RCRA, 42 U.S.C. Section 6903(5); (D) any
asbestos, dioxins, polychlorinated biphenyls that exceed
regulated levels, uranium, radioactive isotopes and other
nuclear by-products, toxic substances or petroleum products,
by-products or derivatives; (E) any substance, whether liquid,
solid or gas that presents a significant risk of an adverse or
harmful effect upon human health, upon animals or upon air,
water, land, natural resources or any other aspects of the
environment; and (F) any other substance, material or waste
classified as hazardous, toxic, harmful or dangerous or
otherwise regulated under any Environmental Law.
(v) "PERSON" shall mean any individual, corporation,
limited liability company, limited liability partnership,
partnership, firm, joint venture, association, joint stock
company, trust, unincorporated organization, governmental or
regulatory body, or other entity.
4.25 Approvals. Except as set forth in SCHEDULE 4.25, no consent,
approval, authorization or order of or registration, declaration or filing with
any entity is required in connection with (a) the execution, performance and
delivery of this Agreement and the Other Agreements, or (b) the consummation of
the transactions contemplated hereby and thereby.
4.26 Intellectual Property. SCHEDULE 4.26 (i) lists (including where
applicable the federal, state, local or foreign registration, application or
patent number and the date of registration, application or patent and the name
in which such registration, application or patent was applied for and, if
different, issued), to the extent material to the business of the Company or its
Subsidiaries, (x) all of the Company's and its Subsidiaries' registrations of
trademarks, service marks, assumed names and trade names, and all pending
applications for any of the foregoing, (y) all of the Company's or its
Subsidiaries' patents and copyrights and all pending applications therefor, and
(z) all computer software owned and/or used by the Company or its Subsidiaries
in the conduct of their respective businesses ("COMPUTER SOFTWARE") (all of
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the items referred to in this clause (i) being "INTELLECTUAL PROPERTY RIGHTS"),
and (ii) identifies any Intellectual Property Rights that any third party owns
and that the Company or its Subsidiaries uses (specifically excluding normal
commercial software routinely available for purchase), and specifies whether
such use is pursuant to license, sublicense, agreement or permission. The
Company or its Subsidiaries owns (or, as set forth on SCHEDULE 4.26, possesses
adequate and enforceable licenses or other rights to use) all Intellectual
Property Rights now used in its business and has taken all reasonably necessary
or appropriate action to protect the Intellectual Property Rights. Except as set
forth on SCHEDULE 4.26, no person has a right to receive a royalty or similar
payment in respect of any Intellectual Property Rights by the Company or its
Subsidiaries pursuant to any contractual arrangements entered into by the
Company, its Subsidiaries or otherwise. Except as set forth on SCHEDULE 4.26,
neither the Company nor its Subsidiaries has licenses granted by or to it and no
other agreements exist to which it is a party, relating in whole or in part to
any of the Intellectual Property Rights. Neither the Company nor its
Subsidiaries has received notice that, the Company's or its Subsidiaries' use of
the Intellectual Property Rights is (and to the knowledge or the Company, its
Subsidiaries and each Shareholder, such use is not) interfering with, infringing
upon or otherwise violating the rights of any third party in or to such
Intellectual Property Rights, and no proceedings have been instituted against or
notices received by the Company or its Subsidiaries alleging that the Company's
or its Subsidiaries' use of any Intellectual Property Rights infringes upon or
otherwise violates any rights of a third party in or to such Intellectual
Property Rights.
4.27 Labor and Employment Agreements. Except as set forth in SCHEDULE
4.27:
(a) Each of the Company and its Subsidiaries has paid in full,
or fully accrued for in the Financial Statements, the Interim Financial
Statements and the Closing Balance Sheet, all wages, overtime wages,
salaries, commissions, bonuses, stay-pay benefits, severance payments,
vacation payments, pay in lieu of compensatory time and other
compensation or remuneration due or to become due to all current and
former employees of the Company and its Subsidiaries for all services
performed through the Closing Date by any of them;
(b) Upon the Closing Date and/or the date of termination of
the employment of any of said employees, neither the Company, its
Subsidiaries nor Purchaser will be liable to any of said current or
former employees for "severance pay" or similar form of termination pay
or incentive pay;
(c) Each of the Company and its Subsidiaries is in compliance
in all material respects with all applicable federal, state, local and
foreign laws, rules and regulations relating to the employment of
labor, including without limitation, laws, rules and regulations
relating to payment of wages, employment and employment practices,
terms and conditions of employment, hours, immigration, discrimination,
child labor, occupational health and safety, collective bargaining, and
other aspects of labor management relations and the payment and
withholding of Taxes and other sums required by governmental
authorities;
(d) There is no unfair labor practice charge pending or
threatened against the Company or its Subsidiaries before the National
Labor Relations Board or any other federal, state or local agency or
department;
(e) There have not been in the past three years and currently
are no labor strikes, disputes, slowdowns, sympathy strikes, wildcat
strikes, lockouts or other form of work stoppages pending nor, to the
knowledge of the Company, its Subsidiaries and each Shareholder
threatened against or involving the Company or its Subsidiaries, and
there has not been in the past three years and there currently is no
recognitional picketing at any of the Company's or its Subsidiaries'
locations;
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(f) No grievance or any arbitration proceeding arising out of
or under collective bargaining agreements is pending against the
Company or its Subsidiaries and no claim therefor has been asserted;
(g) No collective bargaining agreement is currently in place
or being negotiated by the Company or its Subsidiaries;
(h) To the knowledge of the Company, its Subsidiaries and each
Shareholder, there have been no attempts to organize any employees of
the Company or its Subsidiaries to join a labor organization;
(i) No key employee of the Company or its Subsidiaries or
group of such employees has stated an intent to terminate his, her or
their employment;
(j) No civil action, administrative charge, or any other type
of employment claim whatsoever is pending against the Company or its
Subsidiaries in any court, governmental agency, or elsewhere;
(k) the Company has no affirmative action plans with any
governmental agency except as set forth on any SCHEDULE 4.12; and
(l) There are no employment contracts for a definite term
between the Company and current employees, and all employees work for
the Company on an at will basis.
4.28 Entire Business. All of the assets, properties, intellectual
properties and operations of the Company and its Subsidiaries are comprised
within and owned by the Company or its Subsidiaries. Following the consummation
of the transactions contemplated by this Agreement and the Other Agreements, the
Company and its Subsidiaries will own all of the assets and rights necessary to
conduct the businesses of the Company and its Subsidiaries in the same manner as
conducted during the periods covered by the Financial Statements, and no
Shareholder, directly or indirectly, will own or have any interest in any real
or personal property, tangible or intangible, used in or useful for such
businesses.
4.29 Warranties. To the knowledge of the Company, its Subsidiaries and
each Shareholder, and except as set forth on SCHEDULE 4.29, all products
manufactured or sold, and all services provided by the Company and its
Subsidiaries during the longer of the three (3) year period prior to the date
hereof or the period prior to the date hereof for which any applicable statute
of limitations would apply with respect to any claims related thereto, have
complied, and are in compliance with all contractual requirements, warranties or
covenants, express or implied, applicable thereto, and complied with all
applicable governmental or regulatory specifications therefor or applicable
thereto at the time of manufacture or sale.
4.30 Predecessor Entities. No facts or circumstances exist whereby any
of the Company, its Subsidiaries or Purchaser has or will incur any liability,
costs or damages, or which could result in a Material Adverse Effect, related
to, connected with or resulting from any (i) entity that is a direct or indirect
predecessor (whether through stock or assets) to the Company or its
Subsidiaries, or (ii) an entity that is currently owned or was previously owned,
directly or indirectly, by any of Shareholder, or their predecessors
(collectively, a "PREDECESSOR").
4.31 Other Information. No representations or warranties by any of the
Shareholders, whether made on behalf of the Shareholders, the Company or its
Subsidiaries, in this Agreement, the Other Agreements, any document, exhibit,
statement, certificate or schedule furnished or to be furnished to Purchaser
pursuant hereto, contains or will contain any untrue statement of a material
fact, or omits or
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will omit to state any material fact necessary to make the statements or facts
contained therein not misleading. There is no material fact that has not been
disclosed in writing to Purchaser which has a Material Adverse Effect or could
reasonably be anticipated to have a Material Adverse Effect.
ARTICLE V
CERTAIN COVENANTS, UNDERSTANDINGS AND AGREEMENTS
5.1 Tax Covenants.
(a) Preparation of Tax Returns. For Tax Returns required to be
filed on or before the Closing Date, the Shareholders shall cause the
Company and its Subsidiaries to prepare and timely file such Tax
Returns so as to not reflect any new elections or the adoption of any
new accounting methods or conventions or other similar items, except to
the extent such particular reflection or adoption is required to comply
with any law or regulation, without the prior written approval of
Purchaser. For Tax Returns required to be filed after the Closing Date,
Purchaser agrees to cause the Company and its Subsidiaries to prepare
and timely file such Tax Returns, to the extent they relate to a
Pre-Closing Tax period, in a manner consistent with all material
respects with such Tax Returns previously filed in the relevant
jurisdiction, unless the relevant Taxing authority will not accept such
a return filed on that basis.
(b) Payment of Taxes. The Company and its Subsidiaries shall
timely pay any Taxes due on or before the Closing Date, as required by
SECTION 4.13(b) of this Agreement. Purchaser agrees to cause the
Company and its Subsidiaries to pay Taxes due after the Closing Date,
to the extent they relate to Pre-Closing Tax Periods, in a timely
manner. Nothing contained in this SECTION 6.08(b) shall be deemed to
modify the indemnities contained in ARTICLE VIII. For Tax Returns
required to be filed after the Closing Date for Tax Periods ending on
or prior to the Closing Date, Purchaser shall cause the Company to
engage its regular accountants to prepare such returns, and the fees
and expenses of such firm shall be equally shared between Shareholder
and the Purchaser.
(c) After the Closing, Purchaser and the Company shall (except
as provided in SECTION 10.3(e)) have the exclusive right to exercise,
at their own expense, control at any time over the handling,
disposition and/or settlement of any issue raised in any official
inquiry, examination or proceeding regarding any Tax Return for Taxes
affecting the Company or its Subsidiaries (including the right to
settle or otherwise terminate any contest with respect thereto).
(d) Subsequent to the date hereof (including the time after
the Closing), the parties hereto shall provide each other, and
Purchaser or Shareholder (as applicable) shall cause the Company to
provide Shareholder, with such cooperation and information relating to
the Company as a party reasonably may request in (i) filing any Tax
Return, amended Tax Return, claim for Tax refund, election or consent,
(ii) determining any liability for Taxes or a right to refund of Taxes,
(iii) conducting or defending any audit or other proceedings in respect
of Taxes or (iv) conducting due diligence with respect to the
transaction contemplated by this Agreement. Such mutual cooperation and
information shall include providing copies of all relevant Tax Returns,
together with accompanying schedules and related work papers, documents
relating to rulings or other determinations by Tax authorities and
records concerning the ownership and Tax basis of property which any
party, the Company, or its Subsidiaries or predecessors may possess.
Shareholder or Purchaser (as applicable) shall make, and shall cause
the Company to make its employees, accountants and other advisors
available on a mutually convenient basis to provide explanations of any
documents or information required to be provided hereunder. In response
to requests made after the Closing, such persons or required documents
and information, as the case
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may be, shall be made available or delivered, as applicable, to the
requesting party within thirty (30) days after a party's receipt of any
written request therefor. the requesting party shall pay or reimburse
the direct out-of-pocket expenses of the other party (excluding
compensation for services of a party or an Affiliate or their
employees) reasonably incurred in providing assistance in response to
such request.
5.2 Conditions. The Shareholders shall take all commercially reasonable
actions necessary or desirable to cause the conditions set forth in ARTICLE VI
to be satisfied.
5.3 Waiver and Release by Shareholders. Effective as of the Closing,
each Shareholder, for themselves and for each of their respective Subsidiaries,
Affiliates, successors, assigns, beneficiaries insurers, indemnitors, trustees,
agents, and representatives (collectively, the "RELEASING PARTIES"), hereby
releases and forever discharges the Company and each of its Subsidiaries, and
each of their respective officers, directors, shareholders, Affiliates existing
prior to Closing, predecessors, successors, assigns, insurers, indemnitors,
attorneys, employees, agents and representatives (collectively, the "RELEASED
PARTIES"), of and from any and all past, present and future claims, demands,
liabilities, judgments, and causes of action, at law or in equity, known or
unknown, asserted or unasserted, liquidated or unliquidated, absolute or
contingent, accrued or not accrued, which any of the Releasing Parties (either
individually or jointly) ever had, presently has, might have in the future,
claim to have, or claim to have had against any of the Released Parties arising
out of, touching upon, relating to, or in any manner connected with (i) the
Shares, or (ii) the Company or its Subsidiaries or the operation and conduct of
the business of the Company and its Subsidiaries prior to and including the
Closing Date.
5.4 Covenant to Register the Common Stock. As soon as practicable
following the Closing, Purchaser shall undertake to prepare and file a
registration statement with the Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "SECURITIES ACT"), covering
the resale of the Common Stock issued to the Shareholders hereunder (the
"REGISTRATION STATEMENT"). Purchaser shall bear all expenses and fees incurred
in connection with the preparation, filing, and amendment of the Registration
Statement with the SEC, except that each Shareholder shall pay all fees,
disbursements, commissions and expenses of any counsel, broker or expert
retained by such Shareholder relating to the sale or transfer of the Common
Stock included in the Registration Statement or other taxes relating to the
Common Stock. Each Shareholder agrees to cooperate with Purchaser in the
preparation and filing of any Registration Statement, and in the furnishing of
information concerning such shareholder for inclusion therein, or in any efforts
by Purchaser to establish that the proposed sale is exempt under the Securities
Act as to any proposed distribution.
5.5 Lockup Agreements. Each Shareholder shall enter into a lockup
agreement (in substantially the form of EXHIBIT A attached hereto) pursuant to
which the transfer of 75 percent of the Common Stock issued to such Shareholder
shall be restricted; provided, however, that every three (3) months following
the effective date of the Registration Statement filed pursuant to SECTION 5.4
hereof, 12.5 percent of the Common Stock shall no longer be subject to such
transfer restrictions.
5.6 Due Diligence, Access to Information; Confidentiality.
(a) Between the date hereof and the Closing Date, Purchaser and the
Company (including its Subsidiaries) shall afford to the other party and their
authorized representatives the opportunity to conduct and complete a due
diligence investigation of the other party as described herein. In light of the
foregoing, each party shall permit the other party full access on reasonable
notice and at reasonable hours to its properties and shall disclose and make
available (together with the right to copy) to the other party and its officers,
employees, attorneys, accountants and other representatives, all books, papers
and records relating to the assets, stock, properties, operations, obligations
and liabilities of such party and its subsidiaries, including, without
limitation, all books of account (including, without limitation, the general
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ledger), tax records, minute books of directors' and stockholders' meetings,
organizational documents, bylaws, contracts and agreements, filings with any
regulatory authority, accountants' work papers, litigation files (including,
without limitation, legal research memoranda), attorney's audit response
letters, documents relating to assets and title thereto (including, without
limitation, abstracts, title insurance policies, surveys, environmental reports,
opinions of title and other information relating to the real and personal
property), plans affecting employees, securities transfer records and
stockholder lists, and any books, papers and records relating to other assets or
business activities in which such party may have a reasonable interest, and
otherwise provide such assistance as is reasonably requested in order that each
party may have a full opportunity to make such investigation and evaluation as
it shall reasonably desire to make of the business and affairs of the other
party; provided, however, that the foregoing rights granted to each party shall,
whether or not and regardless of the extent to which the same are exercised, in
no way affect the nature or scope of the representations, warranties and
covenants of the respective party set forth herein. In addition, each party and
its officers and directors shall cooperate fully (including providing
introductions, where necessary) with such other party to enable the party to
contact third parties, including customers, prospective customers, specified
agencies or others as the party deems reasonably necessary to complete its due
diligence; provided that such party agrees not to initiate such contacts without
the prior approval of the other party, which approval will not be unreasonably
withheld.
(b) The Company, Seller or the Shareholders may, in their respective
sole discretion, elect not to proceed with the transactions contemplated herein
based upon its due diligence investigation performed pursuant to SECTION 5.6(a)
above, if the results of such due diligence investigation, in such party's
reasonable judgment, (i) causes the Purchaser's or Company's value to be
materially less than it would have been in the absence of such information or
(ii) reveals any event, condition or occurrence (not previously disclosed in
this Agreement or the schedules attached hereto) that materially adversely
affects the financial condition, assets, operating results, business condition
or prospects of the other party, by providing such other party with written
notice thereof on or before the Closing Date.
(c) Prior to Closing and if, for any reason, the transactions
contemplated by this Agreement are not consummated, neither the Purchaser, the
Company or the Shareholders nor any of their respective officers, employees,
attorneys, accountants and other representatives, shall disclose to third
parties or otherwise use any confidential information received from the other
party in the course of investigating, negotiating, and performing the
transactions contemplated by this Agreement; provided, however, that nothing
shall be deemed to be confidential information which:
(i) is known to the party receiving the information at the
time of disclosure;
(ii) becomes publicly known or available without the
disclosure thereof by the party receiving the information in violation
of this Agreement; or
(iii) is rightfully received by the party receiving the
information from a third party.
This provision shall not prohibit the disclosure of information
required to be made under federal or state securities laws. If any disclosure is
so required, the party making such disclosure shall consult with the other party
prior to making such disclosure, and the parties shall use all reasonable
efforts, acting in good faith, to agree upon a text for such disclosure which is
satisfactory to both parties.
5.7 No Solicitation. Unless and until this Agreement shall have been
terminated pursuant to ARTICLE IX, neither the Shareholders, the Company nor
their respective officers, directors or agents shall, directly or indirectly,
encourage, solicit or initiate discussions or negotiations with, or engage in
negotiations or discussions with, or provide non-public information to, any
corporation, partnership, person or other entity or groups concerning any
merger, sale of capital stock, sale of substantial assets or other business
combination.
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5.8 Pledge of Shares. Immediately following the Closing, Purchaser
shall pledge to the Shareholders the Shares purchased hereby solely to secure
Purchaser's obligation to deliver the 6-Month and 12-Month Payments, as
described in SECTION 1.2 hereof, pursuant to the terms and conditions of the
pledge agreement attached hereto as EXHIBIT B (the "PLEDGE AGREEMENT").
Purchaser further covenants and agrees that until such time as it has satisfied
its obligations to deliver the 6-Month and 12-Month Payments it shall not
transfer or assign to any third parties (a) the Company's intellectual property
rights to software it has developed (except for such transfers or assignments
made in the ordinary course of the Company's business, including without
limitation, licensing software to customers of the Company), (b) the Company's
customer lists or (c) the name "Red Wing Business Systems, Inc." (or any
derivative thereof).
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser to effect the transactions contemplated
hereby shall be, at the option of Purchaser, subject to the fulfillment, at or
prior to the Closing Date, of the following additional conditions:
6.1 Representations and Warranties. The representations and warranties
of the Shareholders contained in this Agreement, the Other Agreements, the
Schedules hereto and any other agreement contemplated herein or hereby shall be
true and correct on the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date with the same force and effect as though made on the Closing Date, except
for: (i) changes specifically contemplated by this Agreement and (ii)
inaccuracies which, individually or in the aggregate, have not had and are not
reasonably likely to have a Material Adverse Effect (without regard to any
materiality limitations contained in any such representation or warranty), or a
Material Adverse Effect upon the consummation of the transactions contemplated
hereby.
6.2 Performance of the Shareholders and the Company. Each of the
obligations of the Shareholders and the Company to be performed by any of them
on or before the Closing Date pursuant to the terms of this Agreement, including
but not limited to those set forth in ARTICLE V, shall have been duly performed
on or before the Closing Date.
6.3 Opinions of Shareholder's Counsel. Purchaser shall have been
furnished at the Closing with an opinion of Holst, Vogel, Xxxxxxx & Xxxxx,
counsel to the Company, dated the Closing Date, addressed to Purchaser in the
form of EXHIBIT C attached hereto.
6.4 No Adverse Change. There shall not have occurred between the date
hereof and the Closing Date any material adverse changes in the consolidated
results of operations, condition (financial or otherwise), assets, liabilities
(whether absolute, accrued, contingent or otherwise) or business of the Company
or its Subsidiaries or the Shares.
6.5 Consents. The Company or the Shareholders shall have obtained or,
to the satisfaction of Purchaser obviated the need to obtain, all consents,
approvals or waivers from governmental bodies or agencies, regulatory
authorities and third parties necessary for the execution, delivery and
performance of this Agreement, the Other Agreements and the transactions
contemplated hereby. Purchaser shall have obtained all consents, approvals or
waivers from governmental bodies or agencies, regulatory authorities and third
parties necessary for the execution, delivery and performance of this Agreement,
the Other Agreements and the transactions contemplated hereby.
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6.6 [Intentionally omitted.]
6.7 Legal Actions or Proceedings. No legal action or proceeding shall
have been instituted or threatened by, any entity or person seeking to (i)
restrain, prohibit, invalidate, or otherwise affect the consummation of the
transactions contemplated hereby; (ii) impose any material limitation upon the
ability of Purchaser to own, hold or vote the interest or operate, manage or
conduct the business of the Company or its Subsidiaries or the business of
Purchaser or its Affiliates; or (iii) cause the divestiture, or the holding
separate, of any material portion of the business, of the Company or its
Subsidiaries from Purchaser or any of its Affiliates.
6.8 No Injunction. No preliminary or permanent injunction issued by any
court to restrain or prohibit consummation of this Agreement shall be in effect.
6.9 Loss. There shall have been no damage, destruction or loss of or to
any property or properties owned or used by the Company or its Subsidiaries,
whether or not covered by insurance, which, in the aggregate, has, or would be
reasonably likely to have, a Material Adverse Effect.
6.10 Deliveries. On the Closing Date, the Company or Shareholders, as
appropriate, shall have delivered to Purchaser all of the following:
copies of the third party and governmental consents and
approvals referred to in SECTION 6.5 above;
the stock certificates issued to each of the Shareholders
representing the Shares, duly endorsed for transfer or accompanied by a
duly executed stock power, with requisite stock transfer stamps, if
any, attached;
the Company's and its Subsidiaries' minute books, stock
transfer records, corporate seal and other materials related to the
Company's and its Subsidiaries' corporate administration;
resignations (effective as of the Closing Date) from such of
the Company's and its Subsidiaries' officers and members of the
Company's and its Subsidiaries' Board of Directors as Purchaser shall
have requested prior to the Closing Date;
Certificates of Good Standing dated as of a recent date from
the Secretary(ies) of State of the State(s) of incorporation of the
Company and its Subsidiaries evidencing the good standing of the
Company and its Subsidiaries in each such jurisdiction, as well as
Certificates of Good Standing or Certificates of Authority from each
jurisdiction in which the Company or its Subsidiaries is authorized to
do business as a foreign corporation;
A certificate in form reasonably acceptable to Purchaser from
the Chief Financial Officer of the Company certifying that the
Financial Statements are in compliance with SECTION 4.2;
The lockup agreements and letters of investment intent in
substantially the form of the attached EXHIBITS A AND D, respectively,
completed and signed by each of the Shareholders; and
such other certificates, documents and instruments as
Purchaser reasonably requests related to the transactions contemplated
hereby.
6.11 Searches. Purchaser shall have received, as of a date no more than
five (5) days prior to the Closing Date, Uniform Commercial Code Searches
against the Company and its Subsidiaries from the Secretary of State of
Minnesota and from such other states, countries and/or counties as Purchaser
shall
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reasonably request, together with tax lien and judgment lien searches, in each
case certified by a reporting service reasonably satisfactory to Purchaser, and
disclosing no liens or security interests against the assets of the Company or
its Subsidiaries or the Shares.
6.12 Shareholder Employment Agreements. Purchaser shall have received
signed copies of Employment Agreements between Purchaser and each of the
Employees of the Company set forth in SCHEDULE 6.12 in substantially the form of
EXHIBIT E attached hereto.
6.13 Due Diligence. Purchaser shall not have discovered on or prior to
the Closing Date, any fact or condition in the performance of its due diligence
which Purchaser believes, in its sole discretion, effects the amount,
composition, quality or prospects of the Purchase Price Shares or the business
of the Company.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDERS
The obligations of each of the Shareholders to effect the transactions
contemplated hereby shall be, at the option of the Shareholders, subject to the
fulfillment, at or prior to the Closing Date, of the following additional
conditions, any one or more of which may be waived by the Shareholders:
7.1 Representations and Warranties. The representations and warranties
of Purchaser contained in this Agreement and the Schedules hereto shall be true
and correct on the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date with the same force and effect as though made on the Closing Date, except
for (i) changes specifically contemplated by this Agreement and (ii)
inaccuracies which, individually or in the aggregate, have not had and are not
reasonably likely to have a material adverse effect on Purchaser or upon the
consummation of the transactions contemplated hereby.
7.2 Performance of Covenants. Each of the obligations of Purchaser to
be performed by it on or before the Closing Date pursuant to the terms of this
Agreement shall have been duly performed on or before the Closing Date.
7.3 No Injunction. No preliminary or permanent injunction issued by any
court to restrain or prohibit consummation of this Agreement shall be in effect.
7.4 Legal Action or Proceedings. No legal action or proceeding shall
have been instituted or threatened by any entity or person (other than
Shareholder, the Company, its Subsidiaries or an entity Affiliated with any of
them) seeking to restrain, prohibit, invalidate, or otherwise affect the
consummation of the transactions contemplated hereby.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by Shareholders.
(a) Generally. The Shareholders, jointly and severally, shall
indemnify, defend and hold harmless Purchaser and its directors,
officers, employees, agents, consultants, representatives, successors,
transferees and assigns (individually a "Purchaser Indemnified Party";
and collectively the "Purchaser's Indemnified Parties"), promptly upon
demand, at any time and from time to time, from, against, and in
respect of any and all demands, claims, losses, damages,
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judgments, liabilities, assessments, suits, actions, proceedings,
interest, penalties, and expenses (including, without limitation,
settlement costs and any out-of-pocket legal, accounting and other
expenses for investigating or defending any actions or threatened
actions or for enforcing such rights of indemnity and defense) incurred
or suffered by the Purchaser's Indemnified Parties, in connection with,
arising out of or as a result of each and all of the following:
(i) any material breach of any representation or
warranty made by the Company or any Shareholder in this
Agreement or in any other document or instrument delivered by
the Company or the Shareholders to Purchaser or entered into
as part of the transactions contemplated by this Agreement;
and
(ii) the material breach of any covenant, agreement or obligation of
the Company or any Shareholder contained in this Agreement or any other document
or instrument delivered by the Company or any Shareholder to Purchaser or
entered into as part of the transactions contemplated by this Agreement.
(b) Deductible. No claim for indemnification under this
Section 8.1 shall be made by a Purchaser Indemnified Party unless and
until the aggregate amount of such claims (including attorney's fees
and costs) by all the Purchaser's Indemnified Parties shall exceed
Twenty Five Thousand Dollars ($25,000) (the "Threshold Amount"), and in
such event, the Purchaser's Indemnified Parties shall each be entitled
to all amounts including but not limited to the Threshold Amount.
(c) Limitation on Indemnification. The right to
indemnification under this Section 8.1 to the extent based on any
breach of any representation or warranty shall terminate on the second
(2nd) anniversary of the Closing Date, except (i) for any claim based
on the untruth or inaccuracy of any representation or warranty made
herein or in any statement, certificate or schedule furnished hereunder
with an intent to deceive or defraud or with reckless disregard for the
truth or accuracy thereof, (ii) for any pending claim for indemnity
hereunder which shall have been made prior to such termination dates,
and (iii) any claim relating to Section 5.1 hereof, the right to
indemnity shall have no limit as to time and such claim shall not
terminate until the final determination and satisfaction of such claim.
In addition, no such loss, cost or expense indemnified under this
Section 8.1 shall be deemed to have been sustained by the Purchaser
Indemnified Parties to the extent of any proceeds received by the
Purchaser Indemnified Parties from any insurance policy with respect
thereto. Furthermore, the maximum liability under this SECTION 8.1 for
Seller shall be an amount equal to the Purchase Price, except that
there shall be no maximum liability for any claims under clause (i) of
this SECTION 8.1(c).
(d) Third Party Procedures. In the event any demands or claims
are asserted against a Purchaser Indemnified Party or any actions,
suits or proceedings are commenced against a Purchaser Indemnified
Party for which Seller is obligated to indemnify a Purchaser
Indemnified Party under this SECTION 8.1, then Purchaser Indemnified
Party shall give prompt notice thereof to the Shareholders in order to
permit the Shareholders the necessary time to evaluate the merits of
such demand, claim, action, suit or proceeding and defend, settle or
compromise the same so that the Shareholders' interests are not
materially prejudiced. The Shareholders shall assume the defense
thereof with counsel chosen by the Shareholders and reasonably
acceptable to the Purchaser Indemnified Party. The Shareholders shall
not be liable for any costs or expenses incurred by a Purchaser
Indemnified Party in connection with any demand, claim, action, suit or
proceeding for which the Shareholders are obligated to indemnify
Purchaser Indemnified Party under this SECTION 8.1, provided that the
Shareholders shall have assumed the defense thereof in accordance with
this SECTION 8.1. Purchaser Indemnified Parties shall be entitled to
participate in (but not control) the defense of any such action, with
its counsel and at its own expense. If
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the Shareholders do not assume the defense of any such claim or
litigation resulting therefrom, (a) a Purchaser Indemnified Party may
defend against such claim or litigation, in such manner as it may deem
appropriate, at the Shareholders' expense, including, but not limited
to, settling such claim or litigation, after giving notice of the same
to the Shareholders on such terms as such Purchaser Indemnified Party
may deem appropriate, and (b) the Shareholders shall be entitled to
participate in (but not control) the defense of such action, with their
own counsel and at its own expense.
(e) Other Procedures. In the event any Purchaser Indemnified
Party should have a claim against the Shareholders that does not
involve a third party claim as contemplated by SECTION 8.1(d), the
Purchaser Indemnified Party shall deliver a notice of such claim with
reasonable promptness to the Shareholders. If the Shareholders notify
the Purchaser Indemnified Party that it does not dispute the claim
described in such notice or fails to notify the Purchaser Indemnified
Party within 30 days after delivery of such notice by the Purchaser
Indemnified Party whether the Shareholders dispute the claim described
in such notice, the amount specified in the Purchaser Indemnified
Party's notice will be conclusively deemed a joint and several
liability of the Shareholders and the Shareholders shall pay the amount
to the Purchaser Indemnified Party on demand.
(f) Settlement and Compromise. The Shareholders shall not
settle or compromise any demands, claims, actions, suits or proceedings
for which a Purchaser Indemnified Party has sought indemnification from
the Shareholders unless it shall have given Purchaser Indemnified Party
not less than fifteen (15) days prior written notice of the proposed
settlement or compromise and afforded Purchaser Indemnified Party an
opportunity to consult with the Shareholders regarding the proposed
settlement or compromise.
(g) Manner of Indemnification. All indemnification by the
Shareholders shall be effected by the payment of cash or delivery of a
certified or official bank check within thirty (30) days of the
resolution of any such claim. Any and all indemnification payments
shall be deemed an adjustment to the Purchase Price.
(h) Non-Waiver, Non-Exclusive Remedy. Failure of Purchaser
Indemnified Parties to give reasonably prompt notice of any claim or
claims shall not release, waive or otherwise affect the Shareholders'
obligations with respect thereto, except to the extent that the
Shareholders can demonstrate actual loss or prejudice as a result of
such failure. The indemnification provisions contained in this SECTION
8.1 are in addition to, and not in derogation of, any statutory, common
law or equitable rights or remedies any party may have for breach of
any representation, warranty, covenant or agreement.
8.2 Indemnification by Purchaser.
(a) Generally. Purchaser shall indemnify, defend and hold
harmless the Shareholders and their respective directors, officers,
employers, agents, consultants, representatives, successors,
transferees and assigns (individually a "Shareholder Indemnified
Party;" and collectively the "Shareholder Indemnified Parties"),
promptly upon demand, at any time and from time to time, from, against,
and in respect of any and all demands, claims, losses, damages,
judgments, liabilities, assessments, suits, actions, proceedings,
interest, penalties, and expenses (including, without limitation,
settlement costs and any legal, accounting and other expenses for
investigating or defending any actions or threatened actions or for
enforcing such rights of indemnity and defense) incurred or suffered by
the Shareholder Indemnified Parties, in connection with, arising out of
or as a result of each and all of the following:
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(i) any material breach of any representation or
warranty made by Purchaser in this Agreement or any other
document or instrument delivered by Purchaser to the
Shareholders or entered into as part of the transactions
contemplated by this Agreement; and
(ii) the material breach of any covenant, agreement
or obligation of Purchaser contained in this Agreement or any
other document or instrument delivered by Purchaser to the
Shareholders or entered into as part of the transactions
contemplated by this Agreement.
(b) Deductible. No claim for indemnification under this
SECTION 8.2 shall be made by a Shareholder Indemnified Party unless and
until the aggregate amount of such claims by all Shareholder
Indemnified Parties shall exceed Twenty Five Thousand Dollars ($25,000)
(the "Threshold Amount"), and in such event, the Shareholder
Indemnified Parties shall each be entitled to all amounts including but
not limited to the Threshold Amount.
(c) Limitation on Indemnification.. The right to
indemnification under this SECTION 8.2 to the extent based on any
breach of any representation or warranty shall terminate on the second
anniversary hereof, except that (a) for any claim based on the untruth
or inaccuracy of any representation or warranty made herein or in any
statement, certificate or schedule furnished hereunder with an intent
to deceive or defraud or with reckless disregard for the truth or
accuracy thereof, (b) for any pending claim for indemnity hereunder
which shall have been made prior to such termination date, and (c) any
claim arising under SECTION 5.1, the right to indemnity shall have no
limit as to time and such claim shall not terminate until the final
determination and satisfaction of such claim. In addition, no such
loss, cost or expense indemnified under this SECTION 8.2 shall be
deemed to have been sustained by the Seller Indemnified Parties to the
extent of any proceeds received by the Shareholder Indemnified Parties
from any insurance policy with respect thereto. Furthermore, the
maximum liability under this SECTION 8.2 for Purchaser shall be an
amount equal to the Purchase Price, except that there shall be no
maximum liability for any claims under clause (i) of this SECTION
8.2(c).
(d) Third Party Procedures. In the event any demands or claims
are asserted against the Shareholder Indemnified Parties or any
actions, suits or proceedings are commenced against any Shareholder
Indemnified Party for which Purchaser is obligated to indemnify a
Seller Indemnified Party under this SECTION 8.2, then the Shareholder
Indemnified Party shall give notice thereof to Purchaser in order to
permit Purchaser the necessary time to evaluate the merits of such
demand, claim, action, suit or proceeding and defend, settle or
compromise the same so that Purchaser's interest is not materially
prejudiced. Within 10 business days after such notice, Purchaser shall
assume the defense thereof with counsel chosen by Purchaser or its
insurer and reasonably acceptable to the Shareholder Indemnified Party.
Purchaser shall not be liable for any costs or expenses incurred by the
Shareholder Indemnified Party in connection with any demand, claim,
action, suit or proceeding for which Purchaser is obligated to
indemnify the Seller Indemnified Party under this SECTION 8.2, provided
that Purchaser shall have assumed the defense hereof in accordance with
this SECTION 8.2. The Shareholder Indemnified Parties shall be entitled
to participate in (but not control) the defense of any such action,
with its counsel and at its own expense. If Purchaser does not assume
the defense of any such claim or litigation resulting therefrom, (a)
the Shareholder 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 Purchaser on such terms as the Shareholder Indemnified
Party may deem appropriate, and (b) Purchaser shall be entitled to
participate in (but not control) the defense of such action, with their
own counsel and at its own expense.
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(e) Other Procedures. In the event any Shareholder Indemnified
Party should have a claim against Purchaser that does not involve a
third party claim as contemplated by SECTION 8.2(D), the Shareholder
Indemnified Party shall deliver a notice of such claim with reasonable
promptness to Purchaser. If Purchaser notifies the Shareholder
Indemnified Party that it does not dispute the claim described in such
notice or fails to notify Purchaser within 30 days after delivery of
such notice by the Shareholder Indemnified Party whether Purchaser
disputes the claim described in such notice, the amount specified in
the Shareholder Indemnified Party's notice will be conclusively deemed
a liability of Purchaser and Purchaser shall pay the amount to the
Shareholder Indemnified Party on demand.
(f) Settlement and Compromise. Purchaser shall not settle or
compromise any demands, claims, actions, suits or proceedings for which
the Shareholder Indemnified Parties have sought indemnification from
Purchaser unless it shall have given the Shareholder Indemnified
Parties not less than fifteen (15) days prior written notice of the
proposed settlement or compromise and afforded the Shareholder
Indemnified Parties an opportunity to consult with Purchaser regarding
the proposed settlement or compromise.
(g) Manner of Indemnification. All indemnification by
Purchaser shall be effected by the payment of cash or delivery of a
certified or official bank check within thirty (30) days of the
resolution of any such claim. Any and all indemnification payments
shall be deemed an adjustment to the Purchase Price.
(h) Non-Waiver, Non-Exclusive Remedy. Failure of the
Shareholder Indemnified Parties to give reasonably prompt notice of any
claim or claims shall not release, waive or otherwise affect any of
Purchaser's obligations with respect thereto except to the extent that
Purchaser can demonstrate actual loss and prejudice as a result of such
failure. The indemnification provisions contained in this SECTION 8.2
are in addition to, and not in derogation of, any statutory, common law
or equitable rights or remedies any party may have for breach of any
representation, warranty, covenant or agreement.
ARTICLE IX
TERMINATION OF AGREEMENT
In addition to certain provisions contained in this Agreement, this
Agreement may be terminated at any time prior to the Closing Date:
9.1 Mutual Consent. By mutual consent of Purchaser and the
Shareholders.
9.2 Termination Date. By either party if the transactions contemplated
herein are not consummated by June 30, 2001.
9.3 Breach of Agreement. By Purchaser giving written notice to the
Shareholders if any Shareholder is in breach, or by the Shareholders giving
written notice to Purchaser if Purchaser is in breach, in any material respect
of any material representation, warranty or covenant contained in this
Agreement; provided that any such notice shall be followed by a period of ten
(10) days in which the breaching party shall have the opportunity to cure such
breach(es).
9.4 Government Action. By Purchaser or Seller if any court of competent
jurisdiction in the United States or other governmental body shall have issued
an order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated by this
Agreement and such order, decree, ruling or other action shall have become final
and
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non-appealable.
ARTICLE X
MISCELLANEOUS
10.1 Notices. Any notice or other communication required or which may
be given hereunder shall be in writing and shall be delivered personally, or
sent by facsimile transmission with telephone confirmation, or sent by
certified, registered, or express mail, postage prepaid, and shall be deemed
given when so delivered personally, or sent by facsimile transmission, or if
mailed, three days after the date of mailing, as follows:
If to Purchaser: Active IQ Technologies, Inc.
000 Xxxxxxx Xxxxxxx, Xxxxx 0000
Xxxxxxxxxx, XX 00000
Attention: Chief Executive Officer
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
With a copy to: Xxxxxx Xxxxxxx Xxxxxx & Brand, LLP
3300 Xxxxx Fargo Center
00 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
Attention: Xxxxxxx Xxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
If to the Shareholders: The addresses specified across from each
Shareholder's name on SCHEDULE I
With a copy to: Holst, Vogel, Xxxxxxx & Xxxxx
X.X. Xxx 00
Xxx Xxxx, XX 00000
Attn: Xxxx X. Xxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
10.2 Knowledge. Whenever any statement herein or in any schedule,
exhibit, certificate or other document delivered to any party pursuant to this
Agreement is made "to the Company's, the Shareholders' or Purchaser's knowledge"
or "to the best of the Company's, the Shareholders' or Purchaser's knowledge" or
words of similar intent or effect of any party or its representative, such
statement shall be deemed to be made to the best knowledge of the party and, to
the extent applicable, its senior management.
10.3 Assignability and Parties in Interest. This Agreement shall not be
assignable by any of the parties hereto, provided that Purchaser shall have the
right to assign to one or more of its Affiliates any and all of its rights under
this Agreement. This Agreement (a) shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns
and (b) is not intended to confer upon any other persons any rights or remedies
hereunder.
10.4 Survivability of Representations and Warranties. The
representations and warranties of the Purchaser contained in Article II hereof,
and of the Company and the Shareholders contained in
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Articles III and IV of this Agreement shall survive the Closing and continue in
full force for a period of two (2) years.
10.5 Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the internal laws, and not the laws pertaining
to choice or conflicts of laws, of the State of Minnesota.
10.6 Counterparts. This Agreement may be executed simultaneously in one
or more counterparts, each of which shall be deemed an original, but all of
which shall constitute but one and the same instrument.
10.7 Publicity. Except as otherwise required by law or rules of any
applicable stock exchange, the Company, the Shareholders and Purchaser agree
that prior to issuing any press releases and other announcements, whether
written or oral, to be made by any of them with respect to the transactions
contemplated hereby, such releasing party shall provide written notice to and
consult with the other parties hereto (either the Company, the Shareholders or
the Purchaser, as the case may be) prior to such release.
10.8 Complete Agreement. This Agreement, the Other Agreements, the
exhibits hereto, the Schedules hereto delivered pursuant to this Agreement, and
all Other Agreements contemplated herein or hereby contain the entire agreement
between the parties hereto with respect to the transactions contemplated herein
and, except as provided herein, supersede all previous oral and written and all
contemporaneous oral negotiations, commitments, writings and understandings,
including but not limited to the letter of intent between certain of the
parties.
10.9 Modifications, Amendments and Waivers. At any time prior to the
Closing Date or termination of this Agreement, the parties hereto may, by mutual
written agreement:
(a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto;
waive any inaccuracies in the representations and warranties
made by the other parties contained in this Agreement or in the
Schedules hereto or any other document delivered pursuant to this
Agreement;
waive compliance with any of the covenants or agreements of
the other parties contained in this Agreement; and
modify any term hereof.
10.10 Severability. If any provision or portion thereof of this
Agreement is held to be illegal, invalid or unenforceable under any present or
future law in any jurisdiction, (a) such provision or portion thereof will be
fully severable in such jurisdiction, (b) this Agreement will be construed and
enforced as if such illegal, invalid or unenforceable provision or portion
thereof had never comprised a part hereof, (c) the remaining provisions of this
Agreement will remain in full force and effect and will not be affected by the
illegal, invalid or unenforceable provision or portion thereof or by its
severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision or portion thereof, there will be added automatically as a part of
this Agreement a legal, valid and enforceable provision as similar in terms to
such illegal, invalid or unenforceable provision as may be possible to the
maximum extent allowable by law.
10.11 Setoff. If any of the Shareholders or the Company fails to pay
any amounts it or they
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owe Purchaser or any entity related to Purchaser in any manner ("Setoff Party")
pursuant to this Agreement, the Other Agreements, or any other agreement (oral
or written) between any of such parties, Purchaser shall have the right to
offset such amounts which have not been paid against all amounts which are owed
by Purchaser or a Setoff Party to any of the Shareholders or the Company
pursuant to any and all obligations. If Purchaser fails to pay any amount it
owes to the Shareholders pursuant to this Agreement, the Other Agreements, or
any other agreement between Purchaser and the Shareholders, the Shareholders
shall have the right to offset such amounts which have not been paid against all
amounts which are owed by the Shareholders to Purchaser pursuant to any and all
obligations.
10.12 Payment of Expenses. Except as specifically provided for herein,
each of the parties hereto will pay all fees and expenses (including, without
limitation, brokerage, investment banking, environmental consulting and
accounting fees, as well as legal fees and expenses) incurred by them in
connection with the transactions contemplated hereunder. All sales or transfer
taxes arising out of the conveyance of the Shares shall be borne by the
Shareholders.
10.13 Further Assurances. If, at any time after the Closing Date, any
party shall consider or be advised that any further assignments, conveyances,
certificates, filings, instruments or documents or any other things are
necessary or desirable to vest, perfect or confirm in Purchaser title to the
Shares, or to consummate any of the transactions contemplated by this Agreement,
the appropriate other party(ies) shall, upon request, promptly execute and
deliver all such proper deeds, assignments, certificates, filings, instruments
and documents and do all things reasonably necessary and proper to vest, perfect
or confirm title to the Shares in Purchaser and to otherwise carry out the
purpose of this Agreement.
10.14 Facsimile Execution. This Agreement may be executed by one or
more of the parties by facsimile transmitted signature and all parties agree
that the reproduction of signatures by way of telecopying device will be treated
as though such reproductions were executed originals.
10.15 Interpretation. All references herein to Articles and Sections
refer to Articles and Sections of this Agreement. All Article and Section
headings are for reference purposes only and shall not affect the interpretation
of this Agreement. Within this Agreement, the singular shall include the plural
and the plural shall include the singular, and any gender shall include all
other genders, all as the meaning and the context of this Agreement shall
require. The parties acknowledge that this Agreement and the other agreements
contemplated hereby were mutually drafted by both parties and that the
interpretation thereof will not prejudice any one party due to control of the
Agreement.
10.16 Negotiations. Until all parties have fully executed this
Agreement, this Agreement constitutes nonbinding negotiations between the
parties hereto and no rights shall arise hereunder.
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK.
INDIVIDUAL SIGNATURE PAGES FOR THE PURCHASER, THE COMPANY AND EACH
SHAREHOLDER IDENTIFIED ON SCHEDULE I FOLLOW.
35
37
RED WING BUSINESS SYSTEMS, INC.
STOCK PURCHASE AGREEMENT
SIGNATURE PAGE
IN WITNESS WHEREOF, the undersigned has duly executed this Stock
Purchase Agreement as of the date first above written.
PURCHASER: COMPANY:
ACTIVE IQ TECHNOLOGIES, INC. RED WING BUSINESS SYSTEMS, INC.
By: /s/ Xxxxxxx X. Xxxxxxx By: /s/ Xxx Xxxxxxxx
--------------------------------- ------------------------------------
Xxxxxxx X. Xxxxxxx Xxx Xxxxxxxx
Chief Executive Officer Chief Executive Officer
SHAREHOLDERS:
/s/ Xxx Xxxxxxxx /s/ Xxxxxxx Xxxxxx
--------------------------------- ------------------------------------
Xxx Xxxxxxxx Xxxxxxx Xxxxxx
/s/ Xxxxx Xxxxxxxxxx /s/ Xxxxxx Xxxxx
--------------------------------- ------------------------------------
Xxxxx Xxxxxxxxxx Xxxxxx Xxxxx
/s/ Xxxxxx Xxxxxx /s/ Xxxxx X'Xxxxx
--------------------------------- ------------------------------------
Xxxxxx Xxxxxx Xxxxx X'Xxxxx
/s/ Xxxxx Xxxxxxxx /s/ Xxxx Xxxxxx
--------------------------------- ------------------------------------
Xxxxx Xxxxxxxx Xxxx Xxxxxx
/s/ Xxxxx Xxxxxxxxxx /s/ Xxxxxx Xxxxx
--------------------------------- ------------------------------------
Xxxxx Xxxxxxxxxx Xxxxxx Xxxxx
/s/ Xxx Xxxx /s/ Xxxxxx Xxxxx
--------------------------------- ------------------------------------
Xxx Xxxx Xxxxxx Xxxxx
/s/ Xxxx Xxxx /s/ Xxxxxx Cant
--------------------------------- ------------------------------------
Xxxx Xxxx Xxxxxx Cant
/s/ Xxxxxx Xxxxxxxxxx Xxxxx /s/ Xxxxxx Xxxx
--------------------------------- ------------------------------------
Xxxxxx Xxxxxxxxxx Xxxxx Xxxxxx Xxxx
/s/ Xxxxx Xxxxx /s/ XxXxx Xxxxxx
--------------------------------- ------------------------------------
Xxxxx Xxxxx XxXxx Xxxxxx
/s/ Xxx Xxxxxxx /s/ Xxxx Xxxxxxxxx
--------------------------------- ------------------------------------
Xxx Xxxxxxx Xxxx Xxxxxxxxx
36
38
/s/ Xxxx Xxxxxxxxx /s/ Xxx Xxxxxxxx
--------------------------------- ------------------------------------
Xxxx Xxxxxxxxx Xxx Xxxxxxxx
/s/ Xxxxxx Xxxxxxxxxx /s/ Xxxx Xxxxxxxxxx
--------------------------------- ------------------------------------
Xxxxxx Xxxxxxxxxx Xxxx Xxxxxxxxxx
/s/ Xxxxxx Xxxxx /s/ Xxxx Xxxxxxxx
--------------------------------- ------------------------------------
Xxxxxx Xxxxx Xxxx Xxxxxxxx
[Schedules and Exhibits have been intentionally omitted.]
37
