STOCK PURCHASE AGREEMENT by and among SMLB LTD., THE STOCKHOLDERS OF SMLB LTD. and FORTRESS INTERNATIONAL GROUP INC. Dated as of January 2, 2008
by
and among
SMLB
LTD.,
THE
STOCKHOLDERS OF SMLB LTD.
and
FORTRESS
INTERNATIONAL GROUP INC.
Dated
as of January 2, 2008
TABLE
OF CONTENTS
Page
|
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ARTICLE
I
|
DEFINITIONS
|
1
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1.1.
|
Definitions
|
1
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|
ARTICLE
II
|
PURCHASE
AND SALE OF THE SHARES; ADJUSTMENT
|
5
|
|
2.1.
|
Purchase
and Sale of the Shares.
|
5
|
|
2.2.
|
Closing
|
6
|
|
2.3.
|
Deliveries
and Payments at the Closing.
|
6
|
|
2.4.
|
Purchase
Price Adjustment.
|
7
|
|
2.5.
|
EBITDA
Earn-Out
|
9
|
|
2.6.
|
Project
Earn-Out
|
10
|
|
2.7.
|
Payment
of Earn-Out
|
10
|
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2.8
|
Right
of Set-Off.
|
10
|
|
ARTICLE
III
|
REPRESENTATIONS
AND WARRANTIES RELATING TO THE COMPANIES
|
10
|
|
3.1.
|
Organization
and Standing
|
10
|
|
3.2.
|
Authorization
|
11
|
|
3.3.
|
Noncontravention
|
11
|
|
3.4.
|
Consents
and Filings
|
11
|
|
3.5.
|
Capital
Stock
|
11
|
|
3.6.
|
Financial
Statements
|
12
|
|
3.7.
|
Absence
of Undisclosed Liabilities
|
12
|
|
3.8.
|
Absence
of Certain Changes
|
12
|
|
3.9.
|
Litigation
|
13
|
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3.10.
|
Compliance
with Laws.
|
13
|
|
3.11.
|
Material
Contracts.
|
13
|
|
3.12.
|
Intellectual
Property.
|
14
|
|
3.13.
|
Benefit
Plans.
|
15
|
|
3.14.
|
Labor;
Employees.
|
15
|
|
3.15.
|
Taxes
|
16
|
|
3.16.
|
Environmental
Matters
|
16
|
|
3.17.
|
Real
Property
|
16
|
|
3.18.
|
Personal
Property
|
17
|
|
3.19.
|
Sufficiency
of Assets
|
17
|
|
3.20.
|
Insurance
|
17
|
|
3.21.
|
Suppliers
and Customers
|
17
|
|
3.22.
|
Bank
Accounts; Authorized Signatories
|
17
|
|
3.23.
|
Brokers
|
17
|
|
3.24.
|
Affiliate
Transactions
|
17
|
|
3.25.
|
Books
and Records
|
17
|
(i)
3.26.
|
Restrictions
on Business Activities
|
18
|
|
3.27.
|
Certain
Business Practices
|
18
|
|
3.28.
|
Takeover
Statutes
|
18
|
|
3.29.
|
Disclosure
|
18
|
|
ARTICLE
IV
|
REPRESENTATIONS
AND WARRANTIES RELATING TO THE SELLERS
|
18
|
|
4.1.
|
Authorization
|
18
|
|
4.2.
|
The
Shares
|
19
|
|
4.3.
|
Consents
and Filings
|
19
|
|
4.4.
|
Noncontravention
|
19
|
|
4.5.
|
No
Legal Proceedings
|
19
|
|
4.6.
|
Receipt
of Buyer Common Stock for Seller’s Own Account
|
19
|
|
4.7.
|
Accredited
Investor
|
19
|
|
4.8.
|
Disclosure
of Information
|
19
|
|
4.9.
|
Restricted
Securities
|
20
|
|
4.10.
|
Legends
|
20
|
|
ARTICLE
V
|
REPRESENTATIONS
AND WARRANTIES OF BUYER
|
20
|
|
5.1.
|
Organization
and Existence
|
20
|
|
5.2.
|
Authorization
|
20
|
|
5.3.
|
Consents
and Filings
|
20
|
|
5.4.
|
Noncontravention
|
20
|
|
5.5.
|
No
Legal Proceedings
|
21
|
|
5.6.
|
Valid
Issuance of Buyer Common Stock
|
21
|
|
5.7.
|
Brokers
|
21
|
|
ARTICLE
VI
|
COVENANTS
|
21
|
|
6.1.
|
Conduct
of the Business
|
21
|
|
6.2.
|
Access
|
21
|
|
6.3.
|
Government
Filings
|
22
|
|
6.4.
|
Further
Actions
|
22
|
|
6.5.
|
Tax
Returns
|
22
|
|
6.6.
|
No
Solicitation of Other Proposals.
|
22
|
|
ARTICLE
VII
|
CONDITIONS
TO CLOSING
|
23
|
|
7.1.
|
Conditions
Precedent to Buyer’s Obligations
|
23
|
|
7.2.
|
Conditions
Precedent to the Company’s and Seller’s Obligations
|
25
|
|
ARTICLE
VIII
|
INDEMNIFICATION
OBLIGATIONS
|
25
|
|
8.1.
|
Survival
|
25
|
|
8.2.
|
Sellers’
Indemnification Obligations
|
26
|
|
8.3.
|
Notice
of Claim
|
26
|
|
8.4.
|
Direct
Claims
|
26
|
|
8.5.
|
Third
Party Claims
|
26
|
|
8.6.
|
Disputes
|
27
|
(ii)
ARTICLE
IX
|
TERMINATION,
AMENDMENT AND WAIVER
|
27
|
|
9.1.
|
Termination
|
27
|
|
9.2.
|
Effect
of Termination
|
28
|
|
ARTICLE
X
|
MISCELLANEOUS
|
28
|
|
10.1.
|
Expenses;
Transfer Taxes
|
28
|
|
10.2.
|
Notices
|
28
|
|
10.3.
|
Severability
|
29
|
|
10.4.
|
Amendments
and Waivers
|
30
|
|
10.5.
|
Counterparts
|
30
|
|
10.6.
|
Entire
Agreement
|
30
|
|
10.7.
|
No
Third Party Beneficiaries
|
30
|
|
10.8.
|
Governing
Law
|
30
|
|
10.9.
|
Consent
to Jurisdiction; Waiver of Jury Trial
|
30
|
|
10.10.
|
Publicity
|
31
|
|
10.11.
|
Assignment
|
31
|
|
10.12.
|
Construction
|
32
|
(iii)
This
STOCK PURCHASE AGREEMENT (this “Agreement”)
is
made and entered into as of January 2, 2008 by and among FORTRESS INTERNATIONAL
GROUP, INC., a Delaware corporation (“Buyer”),
SMLB
LTD., an Illinois corporation (the “Company”),
and
the undersigned holders of the outstanding shares of capital stock of the
Company (each, a “Seller”
and,
collectively, the “Sellers”).
RECITALS
A. The
Sellers own all of the issued and outstanding shares of capital stock of the
Company (the “Shares”),
with
each Seller owning the number of Shares set forth on such Seller’s signature
page hereto.
B. Buyer
desires to purchase the Shares from the Sellers, and the Sellers desire to
sell
the Shares to Buyer, in each case on the terms and subject to the conditions
contained in this Agreement.
NOW,
THEREFORE, in consideration of the mutual promises, covenants and agreements
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as
follows:
ARTICLE
I
DEFINITIONS
1.1. Definitions.
As used
in this Agreement, the following terms have the following
meanings:
“AAA”
has
the
meaning the set forth in Section 8.6.
“Accounting
Firm”
has
the
meaning set forth in Section 2.4(b)(iii).
“Affiliate”
of
any
Person means any other Person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with,
such first Person.
“Agreement”
has
the
meaning set forth in the preamble to this Agreement.
“Acquisition
Proposal”
has
the
meaning set forth in Section 6.6(a).
“Business
Day”
means
any day other than a Saturday or Sunday or any day banks in the State of New
York are authorized or required to be closed.
“Buyer”
has
the
meaning set forth in the preamble to this Agreement.
“Buyer
Common Stock”
has
the
meaning set forth in Section 2.1(b)(iii).
“Buyer
Indemnified Parties”
has
the
meaning set forth in Section 8.2.
“Cash
Consideration”
has
the
meaning set forth in Section 2.1(b)(i).
“Closing”
has
the
meaning set forth in Section 2.2.
“Closing
Date”
has
the
meaning set forth in Section 2.2.
“Closing
Funnel Report”
has
the
meaning set forth in Section 2.6.
“Closing
Working Capital”
has
the
meaning set forth in Section 2.4(a).
“Code”
means
the Internal Revenue Code of 1986, as amended from time to time, and the rules
and regulations promulgated thereunder.
“Company”
has
the
meaning set forth in the preamble to this Agreement.
“Company
Plan”
has
the
meaning set forth in Section 3.13(a).
“Company
Representatives”
has
the
meaning set forth in Section 6.6(a).
“Consent”
has
the
meaning set forth in Section 3.4.
“Current
Assets”
has
the
meaning set forth in Section 2.4(d).
“Current
Liabilities”
has
the
meaning set forth in Section 2.4(d).
“Damages”
means
any and all claims, lawsuits, liabilities, losses, damages, costs and expenses,
including the reasonable fees and disbursements of counsel (including fees
of
attorneys and paralegals, whether at the pre-trial, trial, or appellate level,
or in arbitration) and all amounts reasonably paid in investigation, defense,
or
settlement of any of the foregoing.
“Direct
Claim”
has
the
meaning set forth in Section 8.3.
“Direct
Claim Counter Notice”
has
the
meaning set forth in Section 8.4.
“Earn-Out
Payments”
has
the
meaning set forth in Section 2.6.
“EBITDA”
has
the
meaning set forth in Section 2.5(a).
“EBITDA
Earn-Out Payment”
has
the
meaning set forth in Section 2.1(b)(iv)).
“EBITDA
Earn-Out Period”
has
the
meaning set forth in Section 2.5(c).
“EBITDA
Earn-Out Worksheet”
has
the
meaning set forth in Section 2.5(a).
“Employment
Agreement”
has
the
meaning set forth in Section 2.3(b)(ii).
2
“Encumbrance”
means
any charge, claim, lien, pledge, security interest, voting agreement, option,
right of first refusal, easement, servitude, right of way, or other encumbrance
or similar restriction.
“ERISA”
has
the
meaning set forth in Section 3.13(a).
“Escrow
Agent”
has
the
meaning ascribed thereto in the Escrow Agreement.
“Escrow
Agreement”
has
the
meaning set forth in Section 2.3(a)(iii).
“Filing”
has
the
meaning set forth in Section 3.4.
“Financial
Statements”
has
the
meaning set forth in Section 3.66.
“GAAP”
has
the
meaning set forth in Section 2.4(a).
“Governmental
Entity”
means
any U.S. or foreign federal, state, provincial or local governmental authority,
court, government or self-regulatory organization, commission, tribunal or
organization or any regulatory, administrative or other agency, or any political
or other subdivision, department or branch of any of the foregoing.
“Inbound
Licenses”
has
the
meaning set forth in Section 3.12(c).
“Indemnifying
Party”
has
the
meaning set forth in Section 8.3.
“Intellectual
Property”
means
all U.S. and foreign intellectual property rights, including patents,
inventions, technology, discoveries, processes, know-how, trademarks, service
marks, trade names, brand names, domain names, corporate names, logos,
copyrights, and copyrightable works (including software and related items),
and
trade secrets, and all registrations, applications, continuations,
continuations-in-part, divisions, provisionals, reissues, re-examinations and
similar protections relating thereto.
“Knowledge”
means
the actual knowledge, after reasonable inquiry, of the Sellers, after reasonable
investigation by such persons.
“Law”
means
any domestic or foreign, federal, state, provincial or local statute, law,
ordinance, rule, administrative interpretation, regulation, order, writ,
injunction, directive, judgment, decree or other requirement of any Governmental
Entity.
“Lease”
has
the
meaning set forth in Section 3.17.
“Legal
Proceeding”
means
any action, claim, lawsuit, arbitration, proceeding or
investigation.
“Material
Adverse Effect”
means
a
material adverse effect on the business, assets, financial condition, results
of
operations or prospects of the Company, taken as a whole, other than events
or
changes generally occurring in the businesses in which the Company operates
or
in the economy in general.
3
“Material
Contract”
means
any contract or agreement required to be set forth on Schedule
3.11(a).
“NASDAQ
CM”
has
the
meaning set forth in Section 2.1(b)(iii).
“Note”
has
the
meaning set forth in Section 2.1(b)(ii).
“Notice
of Claim”
has
the
meaning set forth in Section 8.3.
“Notice
of Disagreement”
has
the
meaning set forth Section 2.4(b).
“Outbound
Licenses”
has
the
meaning set forth in Section 3.12(c).
“Parties”
means
the parties to this Agreement, and “Party”
means
any of the Parties.
“Permit”
means
any permit, licenses, registrations or other authorization.
“Permitted
Encumbrances”
means
(a) liens for taxes, assessments and other governmental charges not yet due
and
payable or, if due, (i) not delinquent or (ii) being contested in good faith
by
appropriate proceedings; (b) mechanics’, workmen’s, repairmen’s, warehousemen’s,
carriers’ or other liens arising or incurred in the ordinary course of business;
(c) liens or title retention arrangements arising under original purchase price
conditional sales contracts and equipment leases with third parties entered
into
in the ordinary course of business; (d) with respect to real property, (i)
easements, licenses, covenants, rights-of-way and other similar restrictions,
including, without limitation, any other agreements or restrictions which would
be shown by an investigation of title to the extent and nature which a prudent
buyer of property in the relevant jurisdiction would carry out, (ii) any
conditions that may be shown by survey, title report or physical inspection
(whether or not made) and (iii) zoning, building and other similar restrictions,
so long as none of (i) or (ii) or (iii) prevent the use of such real property
substantially as currently used by the Company or materially affect the value
of
any such property.
“Person”
means
any individual, corporation, limited liability company, limited partnership,
general partnership, joint venture, trust, association, Governmental Entity
or
other organization or entity.
“Project
Earn-Out Payment”
has
the
meaning set forth in Section 2.6.
“Purchase
Price”
has
the
meaning set forth in Section 2.1(b).
“Section
2.5(b) Accountants”
has
the
meaning set forth in Section 2.5(b).
“Section
2.5(b) Notice”
has
the
meaning set forth in Section 2.5(b).
“Securities
Act”
has
the
meaning set forth in Section 4.7.
“Seller”
and
“Sellers”
have
the meanings set forth in the preamble to this Agreement.
4
“Seller’s
Cash Consideration”
with
respect to any Seller means the dollar amount of Cash Consideration equal to
the
product of (x) the aggregate Cash Consideration payable pursuant to Section
2.1(b)(i) multiplied by (y) such Seller’s Proportionate Interest.
“Seller’s
Proportionate Interest”
with
respect to any Seller means the percentage set forth on Schedule A attached
hereto.
“Sellers’
Representative”
has
the
meaning set forth in Section 2.5(a).
“Seller’s
Stock Consideration”
with
respect to any Seller means the number of shares of Buyer Common Stock equal
to
the product of (x) the aggregate number of shares of Buyer Common Stock issuable
pursuant to Section 2.1(b)(iii) multiplied by (y) such Seller’s Proportionate
Interest.
“Shares”
has
the
meaning set forth in the Recital A to this Agreement.
“SMLB
Common Stock”
means
the common stock of the Company.
“Statement”
has
the
meaning set forth in Section 2.4(a).
“Tax”
or
“Taxes”
means
all United States federal, state, local and foreign income, profits, franchise,
gross receipts, payroll, sales, employment, use, property, real estate, excise,
value added, estimated, stamp, alternative or add-on minimum, environmental,
withholding and any other taxes, duties or assessments, together with all
interest, penalties and additions imposed with respect to such amounts.
“Tax
Authority”
means
any domestic, foreign, federal, national, state, county or municipal or other
local government, any subdivision, agency, commission or authority thereof,
or
any quasi-governmental body exercising any taxing authority or any other
authority exercising Tax regulatory authority.
“Tax
Return”
means
any return, report, information return or other document (including any related
or supporting information) required to be filed with any taxing authority with
respect to Taxes, including information returns, claims for refunds of Taxes
and
any amendments or supplements to any of the foregoing.
“Third
Party Claim”
has
the
meaning set forth in Section 8.3.
“Working
Capital”
has
the
meaning set forth in Section 2.4(d).
ARTICLE
II
PURCHASE
AND SALE OF THE SHARES; ADJUSTMENT
2.1. Purchase
and Sale of the Shares.
(a) Subject
to the terms and conditions hereof, at the Closing, each Seller shall sell,
transfer, assign and deliver to Buyer, and Buyer shall purchase from each
Seller, legal and beneficial ownership of the Shares held by such Seller, free
and clear of Encumbrances of any kind.
5
(b) Subject
to Section 2.4 hereof, the aggregate purchase price for the Shares (the
“Purchase
Price”)
shall
consist of the following:
(i) $2,000,000
in cash in immediately available funds, subject to adjustment as provided herein
(the “Cash
Consideration”);
(ii) unsecured
promissory note in the aggregate original principal amount of $500,000,
substantially in the form attached hereto as Exhibit
A
(the
“Note”);
(iii) that
number of fully paid, nonassessble shares of common stock of Buyer, par value
$0.0001 per share (the “Buyer
Common Stock”)
as
shall be equal to $500,000, calculated based on the average of the last reported
sale prices per share of Buyer Common Stock on the NASD Capital Market (the
“NASDAQ
CM”)
over
the 20 consecutive
trading days ending on the trading day that is two trading days prior to the
Closing Date; and
(iv) subject
to the limitation set forth in Section 2.7 the earn-out amounts, if any,
determined in accordance with the provisions of Sections 2.5 and
2.6.
2.2. Closing.
The
closing of the purchase and sale of the Shares (the “Closing”)
will
take place on the second Business Day following the satisfaction or waiver
of
the conditions set forth in Article
VII,
or at
such other date as may be agreed to by the Parties (the date on which the
Closing actually occurs being referred to as the “Closing
Date”).
2.3. Deliveries
and Payments at the Closing.
(a) At
the
Closing, Buyer shall deliver or cause to be delivered:
(i) to
the
applicable Seller, such Seller’s Cash Consideration by wire transfer of
immediately available funds to such account or accounts as may be designated
by
such Seller in writing no later than two Business Days prior to the Closing,
in
each case against delivery by such Seller of the certificates evidencing the
Shares being sold by such Seller, duly endorsed or accompanied by duly executed
stock powers;
(ii) the
Note
referred to in Section 2.1(b)(ii);
(iii) to
XxXxx,
Xxxxxxx & Associates Ltd. as escrow agent (the “Escrow
Agent”),
under
an escrow agreement to be entered into at Closing, substantially in the form
of
Exhibit
B attached
hereto (the “Escrow
Agreement”),
duly
executed stock certificates for the shares of Buyer Common Stock representing
each Seller’s Stock Consideration in the amounts set forth on Schedule A, to be
held by the Escrow Agent in accordance with the terms and conditions of the
Escrow Agreement;
(iv) to
the
Company, the officer’s certificate referred to in Section 7.2(c) hereof;
and
6
(v) such
other documents as Sellers may reasonably request to demonstrate satisfaction
of
the conditions and compliance with the covenants set forth in this
Agreement.
(b) At
Closing, Sellers shall deliver or cause to be delivered to Buyer:
(i) a
receipt
for the payment of the Sellers’ Cash Consideration;
(ii) Employment
Agreements, dated as of the Closing Date, executed by each of Xxxxx Xxxxxxxx
and
Xxxxx Xxxxxxx, each substantially in the form of Exhibit
C
attached
hereto (each, an “Employment
Agreement”);
(iii) any
closing certificates referred to in Section 7.1(c) hereof; and
(iv) such
other documents as Buyer may reasonably request to demonstrate satisfaction
of
the conditions and compliance with the covenants set forth in this
Agreement.
2.4. Purchase
Price Adjustment.
(a) Within
60
days after the Closing Date, Buyer shall prepare and deliver to the Sellers
a
balance sheet of the Company prepared in accordance with United States generally
accepted accounting principles (“GAAP”),
and a
statement attached thereto (the “Statement”),
certified by an officer of Buyer, setting forth Working Capital (as defined
in
Section 2.4(d)) as of the close of business on the Closing Date (the
“Closing
Working Capital”).
(b) During
the 30-day period following each Seller’s receipt of the Statement, the Sellers
and their accountants shall be permitted to review the working papers of Buyer
relating to the Statement. The Statement shall become final and binding upon
the
parties on the 30th day following delivery thereof, unless the Sellers’
Representative gives written notice of the Sellers’ disagreement with the
Statement (a “Notice
of Disagreement”)
to
Buyer prior to such date. Any Notice of Disagreement shall:
(i) specify
in reasonable detail the nature of any disagreement so asserted;
(ii) only
include disagreements based on mathematical errors or based on Closing Working
Capital not being calculated in accordance with this Section 2.4; and
(iii) be
accompanied by a certificate of the Seller’s accountants stating that they
concur with each of the positions taken by Sellers in the Notice of
Disagreement.
If
a
Notice of Disagreement is received by Buyer in a timely manner, then the
Statement (as revised in accordance with Clause A or B below) shall
become final and binding upon the Sellers and Buyer on the earlier of
(A) the date the Sellers’ Representative (as defined below) and Buyer
resolve in writing any differences they have with respect to the matters
specified in the Notice of Disagreement or (B) the date any disputed
matters are finally resolved in writing by the Accounting Firm (as defined
below). During the 30-day period following the delivery of a Notice of
Disagreement, the Sellers’ Representative and Buyer shall seek in good faith to
resolve in writing any differences that they may have with respect to the
matters specified in the Notice of Disagreement. During such period Buyer and
its accountants shall have access to the working papers of the Seller’s
accountants prepared in connection with their certification of the Notice of
Disagreement. At the end of such 30-day period, the Sellers and Buyer shall
submit to an independent accounting firm that has not had a previous
relationship with the Sellers or Buyer (the “Accounting
Firm”)
for
arbitration any and all matters that remain in dispute and that were properly
included in the Notice of Disagreement, in the form of a written brief. The
Accounting Firm shall be Deloitte or, if such firm is unable or unwilling to
act, such other nationally recognized independent public accounting firm as
shall be agreed upon by the parties hereto in writing. The Sellers and Buyer
agree that judgment may be entered upon the determination of the Accounting
Firm
in any court having jurisdiction over the Party against which such determination
is to be enforced. The parties shall instruct the Accounting Firm to render
its
decision as promptly as practicable but in no event later than 60 days after
its
selection. The cost of any arbitration (including the fees and expenses of
the
Accounting Firm and reasonable attorney fees and expenses of the parties)
pursuant to this Section
2.4
shall be
borne by Buyer and the Sellers in equal proportion as they may prevail on
matters resolved by the Accounting Firm, which proportionate allocations shall
also be determined by the Accounting Firm at the time the determination of
the
Accounting Firm is rendered on the merits of the matters submitted. The fees
and
disbursements of the Sellers’ accountants incurred in connection with their
review of the Statement and certification of any Notice of Disagreement shall
be
borne by the Sellers, and the fees and disbursements of the accountants of
Buyer
incurred in connection with their certification of the Statement and review
of
any Notice of Disagreement shall be borne by Buyer.
7
(c) The
Purchase Price shall be decreased by the amount by which Closing Working Capital
is less than $300,000, which amount shall be payable by Sellers by reduction
of
such amount from the Note or, by Buyer
having
the right to set-off payment to Sellers with respect to any Earn-Out Payment
that remains payable, at Buyer’s election upon notice to Sellers. For the
avoidance of doubt, provided that Sellers deliver the certificate required
to be
delivered by Sellers to Buyer as provided in Section 7.1(p) and subject to
the
provisions of this Section 2.4, prior to Closing, Sellers may transfer to
accounts designated by Sellers any cash of the Company in excess of the $300,000
Working Capital requirement. In
the
event that Sellers choose not to exercise their right to the distribution of
the
Closing Working Capital in excess of $300,000 prior to the Closing Date
and defer distribution of said funds until after the delivery and
acceptance by both parties of a balance sheet and the Statement referred to
in
Section 2.4(a) of this Agreement, Buyer agrees to disburse said funds within
then (10) days of the final acceptance of the Sellers or their designated agent.
This working capital disbursement to the Sellers shall have no effect on
the EBITDA Earn-Out Payments stipulated in Section 2.5(c), (i), (ii), and (iii),
or the Project Earn-Out Payments referred to in Section 2.7 of the
Agreement.
(d) The
term
“Working
Capital”
means
Current Assets (as defined below) minus Current Liabilities (as defined below).
The terms “Current
Assets”
and
“Current
Liabilities”
mean
the consolidated current assets and consolidated current liabilities,
respectively, of the Company calculated in accordance with GAAP applied
consistently throughout the periods involved. Without limiting the generality
of
the foregoing, Current Liabilities will include all accrued tax liabilities
through the Closing Date.
8
2.5. EBITDA
Earn-Out.
(a) Delivery
of Financial Information.
Within
90 days after the last Business Day of each EBITDA Earn-Out Period (as defined
below), Buyer shall deliver to each Seller a work sheet (the “EBITDA
Earn-Out Worksheet”)
prepared by Buyer’s independent public accountants or Buyer’s Chief Financial
Officer (or his designee), setting forth Buyer’s determination of earnings with
respect to the business of the Company (but not including any projects or other
items set forth in the Closing Funnel Report (as defined below)) before
interest, taxes, depreciation and amortization (“EBITDA”)
equal
to Buyer’s determination of such Seller’s Proportionate Interest of the EBITDA
Earn-Out Payments for said Earn-Out Period. Subject to execution of a
Non-Disclosure Agreement in customary form, Sellers shall have the right, at
Sellers’ expense, once during each EBITDA Earn-Out Period, at reasonable times
and upon reasonable notice, to examine, and to have one representative, who
shall initially be Xxxxx Xxxxxxxx or Sellers’ authorized agent, (the
“Sellers’
Representative”)
examine, the books and records relating to the Company to determine whether
the
calculation and payment of the EBITDA Earn-Out Payment are being conducted
in
accordance with the provisions of this Agreement.
(b) Disputes
Regarding EBITDA Earn-Out Worksheet.
In the
event that Sellers dispute any amounts reflected on any EBITDA Earn-Out
Worksheet, Sellers’ Representative shall notify Buyer in writing (such notice, a
“Section
2.5(b) Notice”),
within 30 days after the delivery of the EBITDA Earn-Out Worksheet, setting
forth the amount, nature and basis of the dispute. Within the following 10
days,
the parties shall use their reasonable best efforts to resolve in good faith
such dispute. Upon their failure to do so, Sellers’ Representative and Buyer
shall, within 10 days from the end of such 10 day period, jointly engage an
Independent Accountant (the “Section
2.5(b) Accountants”).
The
Section 2.5(b) Accountants shall be engaged jointly by Buyer and Sellers’
Representative to decide the dispute with respect to the EBITDA Earn-Out
Worksheet within 30 days from its appointment; such decision to be communicated
to both parties in writing. The decision of the Section 2.5(b) Accountants
shall
be final and binding upon the parties and accordingly a declaratory judgment
by
a court of competent jurisdiction may be entered in accordance therewith. The
fees and expenses of such Section 2.5(b) Accountants shall be borne by one-half
by Buyer and one-half by Sellers’ Representative.
(c) Calculation
of EBITDA Earn-Out Payment.
Subject
to the $600,000 limitation on payment set forth herein, the EBITDA Earn-Out
Payment (the “EBITDA
Earn-Out Payment”)
for
each of the two twelve 12 month periods beginning on January 1, 2008 and ending
on December 31, 2008 and beginning on January 1, 2009 and ending on December
31,
2009 (each such twelve-month period individually, an “EBITDA
Earn-Out Period,”)
shall
be determined as follows with respect to any EBITDA Earn-Out
Period:
(i) to
the
extent EBITDA during any EBITDA Earn-Out Period is less than or equal to
$600,000, the Earn-Out Payment shall equal $0.00;
9
(ii) to
the
extent EBITDA during any EBITDA Earn-Out Period is greater than $600,000, the
EBITDA Earn-Out Payment shall equal $150,000 plus the sum of (x) $1 for every
dollar of EBITDA between $600,000 and $750,000; and
(iii) in
addition to subsection 2.5(c)(ii), to the extent EBITDA during any EBITDA
Earn-Out Period is greater than $750,000, the EBITDA Earn-Out Payment shall
equal 20% of such excess amount.
2.6. Project
Earn-Out.
A
Closing Funnel Report (the “Closing
Funnel Report”)
outlining all Company projects under contract as of the Closing Date, and as
shall be amended from time to time to include any project or proposal that
comes
under contract through December 31, 2008, shall be delivered by Sellers to
the
Buyer at Closing. In addition to any EBITDA Earn-Out Payment, Sellers shall
be
entitled to a one-time contingent payment equal to 50% of the after tax profit
earned on the projects set forth in the Closing Funnel Report (the “Project
Earn-Out Payment”,
and
together with the EBITDA Earn-Out Payment, the “Earn-Out
Payments”),
which
Project Earn-Out Payment, if any, will be paid to the Sellers on March 31,
2009.
2.7. Payment
of Earn-Outs.
Subject
to the provisions of Section 2.8, Buyer shall deliver any Earn-Out Payment
to
Sellers, or an authorized agent designated by Sellers, based on each Seller’s
Proportionate Interest; provided, that notwithstanding anything to the contrary
set forth herein, in no event shall Sellers be entitled to receive any Earn-Out
Payments in excess of $600,000 in the aggregate.
2.8. Right
of Set-Off.
Buyer’s
obligation to make the Earn-Out Payments is subject to reduction or non-payment
due to (a) any claim for Damages that a Buyer Indemnified Party may have against
Sellers in accordance with Article VIII and (b) any decrease in the Purchase
Price pursuant to Section 2.4(c).
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES RELATING TO THE COMPANY
The
Sellers and the Company jointly and severally represent and warrant to Buyer
as
follows:
3.1. Organization
and Standing.
The
Company is a corporation, duly organized, validly existing and in good standing
under the Laws of the State of Illinois and has all requisite power and
authority to own, lease and operate its properties and assets and to carry
on
its business as now being conducted. The Company does not have any direct or
indirect subsidiaries, and does not own, directly or indirectly, any shares
of
or other ownership interest in any Person. The Company is duly licensed or
qualified to do business and is in good standing in each jurisdiction in which
such qualification or licensing is necessary because of the property and assets
owned, leased or operated by it or because of the nature of its business as
now
being conducted, except for any failure to so qualify or be licensed or in
good
standing that, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect. Schedule
3.1
lists
the jurisdictions in which the Company is qualified to conduct business as
a
foreign corporation. The Company has made available to Buyer true, complete
and
correct copies of the constitutive documents of the Company, as amended to
the
date of this Agreement, and has made available to Buyer each such entity’s its
minute books and stock records. The Company is not in violation of any provision
of its respective certificate or articles of incorporation, by-laws or similar
constitutive document.
10
3.2. Authorization.
The
execution, delivery and performance by the Company of this Agreement and the
consummation by each of the transactions contemplated hereby and thereby are
within the Company’s power and have been duly authorized by all necessary action
on the part of the Company. This Agreement constitutes (assuming the due
execution and delivery by each of the other parties hereto) the legal, valid
and
binding obligation of the Company enforceable against the Company in accordance
with its terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar Laws relating to or
affecting creditors’ rights generally and general equitable principles (whether
considered in a proceeding in equity or at Law).
3.3. Noncontravention.
Except
as set forth in Schedule
3.3,
the
execution, delivery and performance of this Agreement and the transactions
contemplated hereby by the Company does not, and the consummation by the Company
of the transactions contemplated hereby will not, (a) contravene or violate
any
material provision of the organizational documents of the Company or (b)
contravene or violate any material provision of, or result in the termination
or
acceleration of, or entitle any party to accelerate any obligation or
indebtedness under, or result in the imposition of any Encumbrance (other than
a
Permitted Encumbrance) on the Company pursuant to any mortgage, lease,
franchise, license, permit, agreement, instrument, Law, order, arbitration
award, judgment or decree to which the Company is a party or by which the
Company is bound.
3.4. Consents
and Filings.
No
consent, approval, license, permit, order or authorization (each, a
“Consent”)
of, or
registration, declaration or filing (each, a “Filing”)
with,
any Governmental Entity is required for or in connection with the execution
and
delivery of this Agreement by the Company or the consummation by the Company
of
the transactions contemplated hereby.
3.5. Capital
Stock.
The
authorized capital stock of the Company consists of 1,000,000 shares of SMLB
Common Stock, of which 1,000 shares of SMLB Common Stock are outstanding as
of
the date hereof. Sellers own 100% of the issued and outstanding shares of Common
Stock. All of the issued and outstanding shares of SMLB Common Stock are duly
authorized, validly issued, fully paid and nonassessable. None of the Shares
were issued in violation of (a) any purchase option, right of first refusal,
preemptive, subscription or similar rights under any provision of applicable
Law, (b) the organizational documents of the Company, (c) any agreement to
which
the Company is subject or by which it is bound, or (d) the Securities Act of
1933 (the “Securities Act”) or any state blue sky laws. There are no outstanding
warrants, options, rights, agreements, convertible or exchangeable securities
or
other commitments pursuant to which the Company is or may become obligated
to
issue, sell, purchase, return or redeem any shares of capital stock of the
Company. There are no voting trusts or other similar agreements with respect
to
the voting of the SMLB Common Stock.
11
3.6. Financial
Statements.
Attached hereto as Schedule
3.6
are true
and correct copies of (a) the balance sheets as of December 31, 2006 and the
related statements of operations, changes in stockholders’ equity and cash flows
for the years then ended for the Company, and b) the unaudited balance sheets
as
of November 30, 2007 and the related statements of operations and cash flows
of
the Company for the 11 month period then ended (collectively “Financial
Statements”).
The
Financial Statements have been prepared in accordance with GAAP consistently
applied (except as may be indicated in the notes thereto) during the periods
involved and fairly present in all material respects the financial position
and
the results of operations and cash flows of the Company as of the dates and
for
the periods presented therein.
3.7. Absence
of Undisclosed Liabilities.
Except
as set forth on Schedule
3.7,
the
Company does not have any material liabilities except liabilities (a) reflected
on, accrued or reserved against in the Financial Statements or the notes thereto
or (b) incurred in the ordinary course of business since January
1, 2007
3.8. Absence
of Certain Changes.
Since
January 1, 2007, the Company has operated its business in the ordinary course,
consistent with past practice and there has not been any event or occurrence
that has had or could reasonably be expected to have a Material Adverse Effect.
Without limiting the scope of the foregoing, except as set forth on Schedule
3.8:
(a) The
Company has not sold, transferred, disposed of, or agreed to sell, transfer
or
dispose of, any material assets other than in the ordinary course of
business;
(b) The
Company has not acquired any material assets except in the ordinary course
of
business, nor acquired or merged with any other business;
(c) No
material tangible asset or property owned, leased or licensed by the Company
has
been destroyed, damaged or otherwise lost (whether or not covered by
insurance);
(d) The
Company has not increased the salary or other compensation payable or to become
payable to any of its respective officers, directors, partners or employees
or
obligated itself to pay any bonus or other additional salary or compensation
(including, without limitation, through any deferred compensation, severance,
retirement, change of control, retention or similar agreement or arrangement)
to
any such person other than in the ordinary course of business and consistent
with past practice;
(e) The
Company has not made any material change in any pricing, marketing, purchasing,
tax or accounting practice, or made any material tax election or settled or
compromised any material income tax liability;
(f) The
Company has not made any declaration, setting aside or payment of any dividend
or other distribution with respect to any shares of its capital stock, or any
repurchase, redemption or other acquisition of any outstanding shares of its
capital stock or other securities;
(g) The
Company has not made any loan, advance or capital contribution to or investment
in any Person;
12
(h) The
Company has not amended, rescinded or terminated (and not renewed) any existing
Material Contract or arrangement and no such Material Contract or arrangement
has expired or terminated (and not been renewed) by its terms;
(i) The
Company has not settled or compromised any material Legal Proceeding;
and
(j) The
Company has not entered into any commitment (contingent or otherwise) to do
any
of the foregoing.
3.9. Litigation.
Except
as set forth in Schedule
3.9,
(a)
there are no Legal Proceedings by or before any Governmental Entity or
arbitration tribunal pending, or to the Knowledge of the Company, threatened,
against the Company, and (b) no injunction, writ, temporary restraining order,
decree or any order of any nature has been issued by any court or other
Governmental Entity relating to the Company or seeking or purporting to enjoin
or restrain the execution, delivery and performance by the Company of this
Agreement or the consummation of the transactions contemplated
hereby.
3.10. Compliance
with Laws.
(a) The
Company conducts its business in material compliance with all applicable Laws.
(b) The
Company has all material Permits necessary for the conduct of its business
as
presently conducted, all of such Permits are valid and in full force and effect
and the Company is in compliance with the terms of all of such Permits. Except
as set forth in Schedule
3.10(b),
the
consummation of the transactions contemplated by this Agreement will not result
in the non-renewal, revocation or termination of any Permit.
3.11. Material
Contracts.
(a) Set
forth
in Schedule
3.11(a)
is a
list of the following agreements in effect on the date of this
Agreement:
each
commitment or agreement (other than purchase orders and similar agreements
entered into in the ordinary course of business) for the purchase of any
materials, supplies, goods, products, services or equipment or licensing of
rights that requires an annual expenditure by the Company of more than $50,000
that cannot be terminated on not more than ninety calendar days’ notice without
payment of any penalty;
(i) each
personal property under which the Company is a lessee that requires annual
payments of more than $50,000 that cannot be terminated on not more than ninety
calendar days’ notice without payment of any penalty;
(ii) any
partnership, joint venture or other similar agreement or arrangement to which
the Company is a party;
(iii) any
agreement relating to the merger or consolidation with, or acquisition or
disposition of the securities or all or substantially all of the business or
assets of, any other Person;
13
(iv) any
agreement relating to indebtedness for borrowed money (whether incurred,
assumed, guaranteed or secured by any asset);
(v) any
agreement between any Seller or any controlled Affiliate of any Seller, on
the
one hand, and the Company, on the other hand;
(vi) any
employment, consulting, severance, retention and deferred compensation
agreements involving the Company;
(vii) any
agreement that limits in any material respect the freedom of the Company to
compete in any line of business or with any Person or in any area;
and
(viii) any
other
agreement that is material to the business of the Company.
(b) Except
as
set forth in Schedule
3.11(b),
(i)
each Material Contract is a legal, valid and binding obligation of the Company,
in full force and effect and enforceable against the Company in accordance
with
its terms, (ii) the Company has not received written notice, and has no reason
to believe, that any Material Contract is not a legal, valid and binding
obligation of the counterparty thereto, in full force and effect and enforceable
against such counterparty in accordance with its terms, (iii) the Company has
not received notice of any material default under any Material Contract, and
(iv) the Company has not issued a notice to any counterparty to a Material
Contract that such party is in default under any Material Contract. The Company
has made available to Buyer accurate copies of the Material
Contracts.
3.12. Intellectual
Property.
(a) Schedule
3.12(a)
sets
forth a list of all U.S. and foreign patents, registrations and applications
for
Intellectual Property and all material unregistered Intellectual Property owned
by the Company. The Company owns or has the right to use all of the Intellectual
Property used in its business and all of the patents, registrations and
applications listed on Schedule
3.12(a)
are
unexpired and subsisting, and have not been abandoned or cancelled.
(b)
The
Company has taken all reasonable steps to maintain the confidentiality of all
information that constitutes a material trade secret of the
Company.
(c) Schedule
3.12(c)
sets
forth a complete and accurate list of (i) all material agreements granting
to
the Company any material right under or with respect to any Intellectual
Property owned by a third party that is used in connection with the business
of
the Company (collectively, the “Inbound
Licenses”),
other
than commercially available standard software applications and (ii) all material
license agreements under which the Company has granted any rights under any
Intellectual Property to any third party (collectively, the “Outbound
Licenses”),
other
than non-exclusive licenses granted in the ordinary course of business in a
standard form (which form has been provided to Buyer). No loss or expiration
of
any material Intellectual Property licensed to the Company under any Inbound
License is pending or, to the Knowledge of the Company, reasonably foreseeable
or threatened. There is no outstanding or, to the Knowledge of the Company,
threatened dispute or disagreement with respect to any Inbound License or
Outbound License. The consummation of the transactions contemplated by this
Agreement will not result in the loss or impairment of, or give rise to any
right of any third party to terminate or re-price or otherwise modify any of
the
Company’s rights or obligations under any Inbound License or any Outbound
License.
14
(d) The
Intellectual Property owned by the Company or licensed under any Inbound License
constitutes all the material Intellectual Property rights necessary for the
conduct of the businesses of the Company as each is currently
conducted.
(e) None
of
the products or services distributed, sold or offered by the Company, nor any
technology, content, materials or other Intellectual Property used, displayed,
published, sold, distributed or otherwise commercially exploited by or for
the
Company materially infringes upon, misappropriates, or violates any Intellectual
Property of any third party. The Company has not received any written notice
or
claim asserting that any such infringement, misappropriation or violation is
occurring or has occurred. To the Knowledge of the Company, no third party
is
misappropriating or infringing any material Intellectual Property owned by
the
Company.
3.13. Benefit
Plans.
(a) Schedule
3.13(a)
lists
each material “employee
benefit plan”
within
the meaning of Section 3(3) of the Employee Retirement Income Security Act
of
1974, as amended (“ERISA”),
and
each material severance, change in control or employment plan, program or
agreement, and vacation, incentive, bonus, stock option, stock purchase and
restricted stock plan, program or policy sponsored or maintained by the Company
for the benefit of current and former employees of the Company (each, a
“Company
Plan”).
Copies or descriptions of each Company Plan have been or will be furnished
or
made available to Buyer.
(b) Except
as
set forth in Schedule
3.13(b),
each
Company Plan is in compliance with ERISA, the Code and other applicable Laws
and
has been administered in all material respects in accordance with the terms
of
such plan and all applicable Laws. Each Company Plan that is intended to be
qualified within the meaning of Section 401 of the Code has received a favorable
determination letter as to its qualification, and to the Knowledge of the
Company, nothing has occurred that could reasonably be expected to adversely
affect such qualification.
(c) Except
as
set forth in Schedule
3.13(c),
no
Legal Proceedings involving any Company Plan has occurred or, to the Knowledge
of the Company, is threatened (other than routine claims for benefits by
participants).
(d) The
Company does not contribute to any “multiemployer
plan”
(within
the meaning of Section 3(37) of ERISA) or has incurred any withdrawal liability
under any such multiemployer plan under Title IV of ERISA which remains
unsatisfied.
3.14. Labor;
Employees.
(a) Except
as
set forth in Schedule
3.14,
the
Company is neither a party to or bound by any collective bargaining or similar
labor agreement, nor is one presently being negotiated, there are no existing
or, to the Knowledge of the Company, threatened strikes, lockouts or other
labor
stoppages involving the employees of the Company, there is no union organization
campaign being conducted with respect to employees of the Company, and there
is
no litigation relating to employment matters pending against the
Company.
15
(b) Schedule
3.14(b)
sets
forth a true and correct list of the name and current annual salary of each
officer or employee of the Company whose annual base salary exceeds $50,000
and
any other form of compensation (other than salary, bonuses or customary
benefits) paid or payable by the Company to each such officer or employee for
the current fiscal year.
3.15. Taxes.
Except
as set forth in Schedule
3.15,
(a) all
Tax Returns required to be filed by the Company have been filed (except those
under valid extension), (b) all Taxes which were shown to be due on such Tax
Returns have been paid (unless such Taxes are being contested in good faith),
(c) there is no Legal Proceeding or audit now pending against, or with respect
to, the Company in respect of any Taxes or assessments, (d) the Company has
never been a member of an affiliated group (other than a group the common parent
of which is the Company filing a consolidated Return, (e) the Company does
not
have any liability for Taxes of any Person arising from the application of
Treasury Regulation Section 1.1502-6 or any analogous provision of state, local
or foreign Law, or as a transferee or successor, by contract, or otherwise,
(f)
the Company is not a party to any Tax sharing agreement or any agreement that
obligates it to make any payment computed by reference to the Taxes, taxable
income or taxable losses of any other Person, (g) all Taxes required to be
withheld, collected or deposited by or with respect to the Company have been
timely withheld, collected or deposited as the case may be, and to the extent
required, have been paid to the relevant Tax Authority and (h) there are no
liens with respect to Taxes upon the assets of the Company except for statutory
liens for Taxes not yet due and payable or liens for Taxes that are being
contested in good faith.
3.16. Environmental
Matters.
Except
as disclosed in Schedule
3.16
(a) the
Company complies with all applicable Laws protecting the quality of the ambient
air, soil, surface water or groundwater or otherwise relating to pollution,
contamination or protection of the environment and possesses and complies with
all applicable Permits required under any such Laws to operate as it currently
operates; and (b) there are no Legal Proceedings pending or, to the Knowledge
of
the Company, threatened, that seek to enforce or impose liability under any
such
Law against the Company, or to revoke or modify any such Permit held by the
Company.
3.17. Real
Property.
Schedule
3.17
hereto
sets forth a complete and correct list of all real property owned or leased
by
the Company, identifying in each case whether such property is owned or leased.
The Company has good title to, or a valid and binding leasehold interest in
the
real property owned by the Company, free and clear of all Encumbrances (other
than Permitted Encumbrances). Each lease with respect to any real property
leased by the Company (a “Lease”)
is in
full force and effect as of the date hereof and the Company is not in breach
or
default or has repudiated any provision of any Lease, and, to the Knowledge
of
the Company, neither has any counterparty to any Lease. No event has occurred
which, with notice or lapse of time, would constitute a breach or default or
permit termination, modification or acceleration under any Lease. There are
no
material disputes, oral agreements, or forbearance programs in effect as to
any
Lease. The Company has not assigned, transferred, conveyed, subleased,
mortgaged, deeded in trust or encumbered any interest in the leasehold
interest.
16
3.18. Personal
Property.
The
Company owns or has a valid leasehold interest in all personal property used
in
its business and all such personal property is in good working order, wear
and
tear excepted, and no material maintenance or replacement projects are required
or scheduled for the next 12 months.
3.19. Sufficiency
of Assets.
The
assets of the Company constitute all of the assets (whether real or personal,
tangible or intangible) that are reasonably necessary for the continued conduct
of the business of the Company after the Closing in the same manner as presently
conducted. All of such assets are either reflected on the Financial Statements
or were acquired since December 31, 2006, except for inventories sold since
such
date in the ordinary course of business.
3.20. Insurance.
Schedule
3.20
contains
an accurate and complete description of all material policies of fire,
liability, workers’ compensation, property, casualty and other forms of
insurance owned or held by the Company. All such policies are in full force
and
effect, all premiums with respect thereto covering all periods up to and
including the Closing Date will have been paid, and no notice of cancellation
or
termination has been received with respect to any such policy.
3.21. Suppliers
and Customers.
Schedule
3.21
lists
the top 20 suppliers (by amount paid to them) and the top 20 customers (by
the
amount paid by them) of the Company, taken as a whole, for the year ended
December 31, 2006 and for the 11 months ended November 30, 2007. The Company
has
not (a) received any written notice of, or has any reason to believe that there
are, any outstanding or threatened disputes with any material supplier or
customer that have not been resolved, or (b) any reason to believe that there
exist any reasonable grounds for any such dispute. No material supplier or
customer has indicated in the last twelve months that it intends to stop,
materially decrease the rate of, or materially change the terms on which it
does
business with the Company.
3.22. Bank
Accounts; Authorized Signatories.
Schedule
3.22
contains
a complete and correct list of the names and locations of all banks in which
the
Company has a bank account, lock box, safe deposit box and a list of all persons
authorized to withdraw funds from or otherwise take actions with respect
thereto.
3.23. Brokers.
Neither
the Company nor any Seller has employed any investment banker, broker or finder
or incurred any liability for any investment banking fees, brokerage fees,
agent’s commissions or finders’ fees in connection with the transactions
contemplated by this Agreement for which Buyer or the Company has, will have
or
may have any liability.
3.24. Affiliate
Transactions.
Except
for employment and consulting relationships and the payment of compensation
and
benefits in the ordinary course of business or as disclosed Schedules
3.8 or 3.11,
the
Company is not a party to any material agreement or arrangement with any
stockholder, officer, director or Affiliate of the Company.
3.25. Books
and Records.
The
minutes of the meetings of the Company’s stockholders, boards of directors and
committees thereof and the written consents executed in lieu of the holding
of a
meeting contained in the minute books of the Company delivered to Buyer are
true
and correct.
17
3.26. Restrictions
on Business Activities.
Except
as set forth on Schedule
3.26,
there
is no agreement, judgment, injunction, order or decree binding upon the Company
which has the effect of prohibiting or impairing any current business practice
of the Company, any acquisition of property by the Company or the conduct of
business by the Company as currently conducted.
3.27. Certain
Business Practices.
The
Company has not: (a) used any funds for material unlawful contributions, gifts,
entertainment or other unlawful payments relating to political activity; (b)
made any material unlawful payment to any foreign or domestic government
official or employee or to any foreign or domestic political party or campaign
or violated any provision of the Foreign Corrupt Practices Act of 1977, as
amended; (c) consummated any transaction, made any payment, entered into any
agreement or arrangement or taken any other action in violation of Section
1128B(b) of the Social Security Act, as amended; or (d) made any other material
unlawful payment.
3.28. Takeover
Statutes.
No
applicable takeover statute or similar Law and no provision of the certificate
of incorporation or bylaws, or other organizational document or governing
instruments of the Company or any contract to which the Company is a party
(a)
would or would purport to impose restrictions which might adversely affect
or
delay the consummation of the transactions contemplated by this Agreement or
(b)
as a result of the consummation of the transactions contemplated by this
Agreement or the acquisition of Acquired Interest by Buyer (i) would or would
purport to restrict or impair the ability of Buyer to vote or otherwise exercise
the rights of a stockholder with respect to securities of the Company or (ii)
would or would purport to entitle any Person to acquire securities of the
Company.
3.29. Disclosure.
Neither
this Agreement (including the exhibits and schedules hereto) nor any certificate
or statement provided or to be provided to Buyer by or on behalf of the Company
pursuant hereto, taken together as a whole, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances under which they were made or necessary
to provide a prospective purchaser of the Company with all information material
thereto.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES RELATING TO THE SELLERS
Each
Seller, severally and not jointly, hereby represents and warrants to Buyer
as
follows:
4.1. Authorization.
The
execution, delivery and performance by such Seller of this Agreement and the
consummation by such Seller of the transactions contemplated hereby and thereby
are within such Seller’s powers and have been duly authorized by all necessary
action on the part of such Seller. This Agreement constitutes (assuming the
due
execution and delivery by each of the other parties hereto) the legal, valid
and
binding obligation of such Seller, enforceable against such Seller in accordance
with its terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other Laws relating to or affecting
creditors’ rights generally and general equitable principles (whether considered
in a proceeding in equity or at Law).
18
4.2. The
Shares.
Such
Seller is the record and beneficial owner of the Shares to be sold by such
Seller hereunder, free and clear of any Encumbrances and, upon transfer of
the
Shares to Buyer on the Closing Date in accordance with the terms of this
Agreement, Buyer will receive good and valid title to the Shares, free and
clear
of any Encumbrances.
4.3. Consents
and Filings.
No
Consent or Filing with, any Governmental Entity is required for or in connection
with the execution and delivery of this Agreement by such Seller, and the
consummation by such Seller of the transactions contemplated hereby.
4.4. Noncontravention.
The
execution, delivery and performance of this Agreement by such Seller does not,
and the consummation by such Seller of the transactions contemplated hereby
will
not, (a) contravene or violate any provision of the organizational documents
of
such Seller, or (b) contravene or violate any provision of, or result in the
termination or acceleration of, or entitle any party to accelerate any
obligation or indebtedness under, or result in an adverse claim to the Shares
held by such Seller pursuant to any mortgage, lease, franchise, license, permit,
agreement, instrument, law, order, arbitration award, judgment or decree to
which such Seller is a party or by which such Seller is bound.
4.5. No
Legal Proceedings.
No
Legal Proceedings are pending or threatened against such Seller relating to,
or
that could prevent or delay the consummation of, the transactions contemplated
hereby.
4.6. Receipt
of Buyer Common Stock for Seller’s Own Account.
The
Buyer Common Stock is being acquired for investment for such Seller’s own
account, not as a nominee or agent, and not with a view to the sale or
distribution of all or any part thereof in violation of federal or state
securities laws.
4.7. Accredited
Investor.
Each
Seller is an “accredited investor” as defined in Rule 501(a) under the
Securities Act. Each Seller agrees to furnish any additional information
requested to assure compliance with applicable federal and state securities
laws
in connection with the purchase of the Buyer Common Stock and sale of the
Shares.
4.8. Disclosure
of Information.
Each
Seller represents and warrants that (a) he or she has had an opportunity to
discuss the Buyer’s business, management, financial affairs and is aware of the
character, business acumen and general business and financial circumstances
of
Buyer, (b) has the requisite knowledge and experience to assess the relative
merits and risks of a sale of the Shares and a purchase of the Buyer Common
Stock, (c) has received and has carefully read and evaluated copies of all
documents relevant to the sale and purchase contemplated by this Agreement,
and
(d) has had full opportunity to ask questions and receive answers concerning
the
historical business and operations of the Buyer, as well to evaluate the
prospects, future financial condition and the likelihood of success of
Buyer.
19
4.9. Restricted
Securities.
Each
Seller is
aware
that the Buyer Common Stock is subject to significant restrictions on transfer
and may not be freely sold for one year from the date of initial transfer to
Sellers or Escrow Agent. Such Seller represents that he or she (a) has liquid
assets sufficient to assure that the purchase contemplated by this Agreement
will cause no undue financial difficulties, (b) can afford the complete loss
of
his or her investment, and (c) can provide for current needs and possible
contingencies without the need to sell or dispose of the Buyer Common
Stock.
4.10. Legends.
In
addition to any legend placed on the certificates pursuant to any other
agreement or arrangement among the parties, each certificate evidencing Buyer
Common Stock shall bear the following legends (unless Buyer receives an
acceptable opinion of counsel that any such legend is not required):
THE
SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED OR
QUALIFIED UNDER THE SECURITIES ACT OF 1933 OR THE LAWS OF ANY STATE, AND MAY
NOT
BE SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SAID ACT AND APPLICABLE STATE LAWS, OR AN EXEMPTION FROM THE
REGISTRATION AND QUALIFICATION REQUIREMENTS THEREOF.
ARTICLE
V
REPRESENTATIONS
AND WARRANTIES OF BUYER
Buyer
hereby represents and warrants to the Company and to the Sellers as
follows:
5.1. Organization
and Existence.
Buyer
is a corporation duly organized, validly existing and in good standing under
the
Laws of the State of Delaware and has all requisite power and authority to
enter
into this Agreement and to consummate the transactions contemplated
hereby.
5.2. Authorization.
The
execution, delivery and performance by Buyer of this Agreement and the
consummation by Buyer of the transactions contemplated hereby are within Buyer’s
powers and have been duly authorized by all necessary action on the part of
Buyer. This Agreement constitutes (assuming the due execution and delivery
by
each of the other parties hereto) the legal, valid and binding obligation of
Buyer, enforceable against Buyer in accordance with their terms, subject to
the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar Laws relating to or affecting creditors’ rights
generally and general equitable principles (whether considered in a proceeding
in equity or at Law).
5.3. Consents
and Filings.
No
Consent of, or Filing with, any Governmental Entity by Buyer is required for
or
in connection with the execution and delivery of this Agreement and the
consummation by Buyer of the transactions contemplated hereby.
5.4. Noncontravention.
The
execution, delivery and performance by Buyer of this Agreement do not, and
the
consummation by Buyer of the transactions contemplated hereby and thereby will
not, (a) contravene or violate any provision of the organizational documents
of
Buyer, or (b) contravene or violate any provision of, or result in the
termination or acceleration of, or entitle any party to accelerate any
obligation or indebtedness under, any mortgage, lease, franchise, license,
permit, agreement, instrument, Law, order, arbitration award, judgment or decree
to which Buyer is a party or by which Buyer is bound, except in the case of
clause (b) to the extent that any such events would not materially impair or
materially delay the ability of Buyer to effect the Closing.
20
5.5. No
Legal Proceedings.
There
are no Legal Proceedings pending against Buyer, and Buyer is not subject to
any
judgment, decree, injunction or order of any Governmental Entity which,
individually or in the aggregate would, enjoin, rescind or materially delay
the
transactions contemplated by this Agreement or otherwise prevent Buyer from
complying in all material respects with the terms and provisions hereof or
thereof.
5.6. Valid
Issuance of Buyer Common Stock.
The
Buyer Common Stock, when issued and delivered in accordance with the terms
and
for the consideration set forth in this Agreement, will be validly issued,
fully
paid and nonassessable. Assuming the accuracy of each Seller’s representations
above, the Buyer Common Stock will be issued in compliance with applicable
federal and state securities laws.
5.7. Brokers.
Neither
Buyer nor any of Buyer’s directors, officers, employees or agents has employed
any investment banker, broker or finder or incurred any liability for any
investment banking fees, brokerage fees, commissions or finders’ fees or any
other fees or commissions to investment bankers, brokers or finders in
connection with the transactions contemplated by this Agreement for which any
Seller, or, in the event the Closing does not occur, the Company, has, will
have
or may have any liability.
ARTICLE
VI
COVENANTS
6.1. Conduct
of the Business.
From
the date hereof until the Closing Date, Sellers shall cause the Company to
(a)
operate its business in the ordinary course in all material respects, (b)
promptly advise Buyer of any material adverse change in the Company that has
occurred or that would reasonably be expected to occur, (c) comply in all
material respects with all Laws applicable to the Company in the conduct of
its
business, (d) use its reasonable efforts to maintain its assets and properties
in good operating condition in all material respects (ordinary wear and tear
excepted), (e) use reasonable efforts to keep available the services of its
officers and employees, (f) perform all of its material obligations under the
Material Contracts, and (g) make all Filings and pay any fees necessary to
maintain in good standing all Permits. From the date hereof until the Closing
Date, Sellers shall not permit the Company to, do or take any action that would
have been required to be disclosed on Schedule
3.8
if it
had been taken prior to the date hereof.
6.2. Access.
From
the date of this Agreement until the Closing, Sellers shall cause the Company
to
give Buyer and its lenders, financial sources and authorized representatives
full access to the personnel, offices, properties, books and records of the
Company and shall furnish Buyer and its lenders, financial sources and
authorized representatives with such financial and operating data and other
information concerning the Company as may reasonably be requested. Without
limiting the generality of the foregoing, from the date of this Agreement to
the
Closing, to the extent permitted by applicable Law, Sellers shall inform Buyer
of, and consult with Buyer concerning, all material transactions and decisions
affecting the business of the Company, with the understanding that management
of
the Company will have final decision making authority through the Closing
Date.
21
6.3. Government
Filings.
Each of
the Company, Buyer and Sellers, agree to use its respective commercially
reasonable efforts to (a) obtain any and all licenses, permits, consents,
approvals, authorizations, qualifications and orders of federal, state, local
and foreign Governmental Entities as are required in connection with the
consummation of the transactions contemplated hereby, (b) defend any lawsuits
or
other legal proceedings, whether judicial or administrative, whether brought
derivatively or on behalf of third parties (including Governmental Entities
or
officials), challenging this Agreement or the consummation of the transactions
contemplated hereby, and (c) furnish to each other such information and
assistance and to consult with respect to the terms of any registration, filing,
application or undertaking as reasonably may be requested in connection with
the
foregoing.
6.4. Further
Actions.
Each
Party shall use commercially reasonable efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary, proper or
advisable under applicable Law to consummate and make effective the transactions
contemplated by this Agreement.
6.5. Tax
Returns.
The
Company shall prepare or cause to be prepared and file or cause to be filed
all
Returns (including any amendments thereto) for the Company for all Tax periods,
whether ending on, prior to or after the Closing Date.
6.6. No
Solicitation of Other Proposals.
(a) From
the
date hereof until the earlier of the Closing or the termination of this
Agreement in accordance with its terms, neither the Company nor any Seller
shall, authorize or permit any of its respective officers, directors, employees,
representatives or agents (collectively, the “Company
Representatives”)
directly or indirectly to, (i) solicit, facilitate, initiate, encourage or
take
any action to solicit, facilitate, initiate or encourage, any inquiries or
communications or the making of any proposal or offer that constitutes or may
constitute an Acquisition Proposal or (ii) participate or engage in any
discussions or negotiations with, or provide any information to or take any
other action with the intent to facilitate the efforts of, any Person concerning
any possible Acquisition Proposal or any inquiry or communication which might
reasonably be expected to result in an Acquisition Proposal. For purposes of
this Agreement, the term “Acquisition
Proposal”
shall
mean any inquiry, proposal or offer from any Person (other than Buyer or any
of
its Affiliates) relating to any merger, consolidation, recapitalization,
liquidation or other direct or indirect business combination or reorganization,
involving the Company or the issuance or acquisition of shares of capital stock
or other securities of the Company or any tender or exchange offer that if
consummated would result in any Person, together with all Affiliates thereof,
beneficially owning shares of capital stock or other securities of the Company,
or the sale, lease, exchange, license (whether exclusive or not), or other
disposition of any significant portion of the business or other assets of either
Company, or any other transaction, the consummation of which could reasonably
be
expected to impede, interfere with, prevent or materially delay the consummation
of the transactions contemplated hereby or which would reasonably be expected
to
diminish significantly the benefits to Buyer or its Affiliates of the
transactions contemplated hereby. The Company shall immediately cease and cause
to be terminated and shall cause all Company Representatives to immediately
terminate and cause to be terminated all existing discussions or negotiations
with any Persons conducted heretofore with respect to, or that could reasonably
be expected to lead to, an Acquisition Proposal. The Company shall promptly
notify the Company Representative of its obligations under this Section 6.6.
Without limiting the foregoing, it is agreed that any violation of the
restrictions set forth above by any Affiliate of the Company or any Company
Representative, whether or not such Person is purporting to act on behalf of
the
Company, shall be deemed to be a breach of this Section 6.6 by the
Company.
22
(b) From
the
date hereof until the earlier of the Closing or the termination of this
Agreement in accordance with its terms, neither the Board of Directors of the
Company nor any committee thereof shall (i) approve or recommend, or propose
to
approve or recommend, any Acquisition Proposal other than the sale of the Shares
to Buyer contemplated by this Agreement, (ii) subject to applicable Law,
withdraw or modify or propose to withdraw or modify in a manner adverse to
Buyer
its approval or recommendation of the sale of the Shares to Buyer, this
Agreement or the transactions contemplated hereby, (iii) upon a request by
Buyer
to reaffirm its approval or recommendation of this Agreement or the sale of
the
Shares to Buyer, fail to do so within two Business Days after such request
is
made, (iv) approve, enter or permit or cause either Company to enter, into
any
letter of intent, agreement in principle, acquisition agreement or other similar
agreement related to any Acquisition Proposal or (v) resolve or announce its
intention to do any of the foregoing.
(c) In
addition to the other obligations of the Company set forth in this Section
6.6,
the Company shall immediately advise Buyer orally and in writing of any
Acquisition Proposal, any request for information with respect to any
Acquisition Proposal, or any inquiry with respect to or which could result
in an
Acquisition Proposal, the material terms and conditions of such request,
Acquisition Proposal or inquiry, and the identity of the Person making the
same.
ARTICLE
VII
CONDITIONS
TO CLOSING
7.1. Conditions
Precedent to Buyer’s Obligations.
The
obligation of Buyer to consummate the Closing and the other transactions
contemplated by this Agreement is expressly subject to the fulfillment or
express written waiver of the following conditions on or prior to the Closing
Date:
(a) Representations
and Warranties True.
Each of
the representations and warranties contained in Article III and Article IV
shall
be true and correct in all material respects at and as of the Closing, except
for those (x) representations and warranties that are qualified by materiality,
which representations and warranties shall be true and correct in all respects,
and (y) representations and warranties that expressly relates to an earlier
date, in which case such representation and warranty shall be true and correct
as of such earlier date.
23
(b) Covenants
Performed.
The
Company and each Seller shall have performed, on or before the Closing Date,
all
material obligations contained in this Agreement which by the terms hereof
are
required to be performed by it on or before the Closing Date.
(c) Compliance
Certificate.
Buyer
shall have received the certificates signed by an officer of the Company
certifying as to the matters set forth in Sections 7.1(a) and 7.1(b)
above.
(d) Required
Consents and Approvals.
All of
the approvals, consents and licenses listed on Schedule
7.1(d)
shall
have been obtained.
(e) No
Injunction, Etc.
There
shall not be any order of any court or governmental agency restraining or
invalidating the material transactions which are the subject of this
Agreement.
(f) Deliverables.
The
Company and the Sellers shall have delivered the items set forth in Section
2.3(b).
(g) Employment
Agreements.
Each of
Xxxxx Xxxxxxxx and Xxxxx Xxxxxxx shall have (i) terminated all existing
employment agreements with the Company entered into prior to the date hereof,
and (ii) executed and delivered Employment Agreements, as of the date hereof,
to
Buyer.
(h) Legal
Opinion.
The
Sellers shall have delivered to Buyer an opinion, dated the Closing Date, of
Sellers’ counsel, substantially in the form of Exhibit
D
attached
hereto.
(i) Good
Standing Certificates.
The
Company shall have delivered to Buyer a certificate of good standing from the
Secretary of State of its jurisdiction of incorporation and the Secretary of
State or other appropriate authority of each jurisdiction in which it is
qualified or licensed to do business. Each such certificate shall be dated
no
more than 10 Business Days prior to the Closing Date.
(j) Resignations.
Each of
the officers and directors of the Company shall have delivered resignations
to
Buyer, in form and substance satisfactory to Buyer.
(k) Due
Diligence.
Buyer
and Buyer’s counsel shall have received from the Company and Sellers all
documents and other materials requested in writing for the purpose of examining
the Company’s technology, assets, financial condition, and the status of the
Company’s rights in and to all such technology and assets, and all such
documents and other materials shall be reasonably satisfactory to Buyer and
such
counsel.
(l) No
Material Adverse Effect.
From
and including the date hereof, there shall not have occurred any event and
no
circumstance shall exist which, alone or together with any one or more other
events or circumstances has had, is having or would reasonably be expected
to
have a Material Adverse Effect.
24
(m) Board
of Directors Approval.
The
approval of the Agreement and the transactions contemplated herein by the Board
of Directors of the Buyer shall have been obtained.
(n) Strategic
Alliance.
A
strategic alliance agreement, in form and substance reasonably satisfactory
to
Buyer, between the Company and Aerico, Inc. shall have been entered into.
(o) Escrow
Agreement.
Buyer
shall have entered into the Escrow Agreement.
(p) Working
Capital.
On the
Closing Date, the Company and Sellers shall deliver to Buyer a certificate,
signed by the Chief Financial Officer (or comparable person) of the Company,
certifying that the Working Capital is at least $300,000.
(q) Shareholders
Agreement.
The
Shareholders Agreement, dated September 14, 2007 shall have been
terminated.
7.2. Conditions
Precedent to the Company’s and Seller’s Obligations.
The
obligation of the Company and each Seller to consummate this Agreement and
the
other transactions contemplated by this Agreement is expressly subject to the
fulfillment or express written waiver of the following conditions on or prior
to
the Closing Date:
(a) Representations
and Warranties True.
Each of
the representations and warranties of Buyer contained in Article V shall be
true
and correct in all material respects at and as of the Closing.
(b) Obligations
Performed.
Buyer
shall have performed in all material respects, on or before the Closing Date,
all obligations contained in this Agreement which by the terms hereof are
required to be performed by Buyer on or before the Closing Date.
(c) Compliance
Certificate.
The
Company shall have received a certificate signed by an authorized officer of
Buyer certifying as to the matters set forth in Sections 7.2(a) and
7.2(b).
(d) Deliverables.
The
Buyer shall have delivered the items set forth in Section 2.3(a).
(e) No
Injunction, Etc.
There
shall not be any order of any court or governmental agency restraining or
invalidating the material transactions which are the subject of this
Agreement.
ARTICLE
VIII
INDEMNIFICATION
OBLIGATIONS
8.1. Survival.
Each of
the representations and warranties of the Company and the Sellers contained
in
Articles III and IV of this Agreement shall survive the Closing and not
terminate until 12 months from the Closing Date, except that the representations
and warranties set forth in Sections 3.1, 3.2, 3.5, 3.15, 3.17, 4.1, and 4.2
shall not terminate and shall survive indefinitely. Notwithstanding the
foregoing, any representation or warranty in respect of which indemnity may
be
sought under Article VIII of this Agreement shall survive the time at which
it
would otherwise terminate pursuant to this Section 8.1 if written notice of
a
good faith claim for indemnification in respect of such representation or
warranty shall have been duly given prior to such time, in which event such
representation or warranty shall survive solely with respect to such claim
until
the final resolution thereof. The obligations of the Sellers and the Company
under Article VI shall survive the Closing and shall continue
indefinitely.
25
8.2. Sellers’
Indemnification Obligations.
From
and after the Closing, the Sellers, jointly and severally, agree to indemnify
and hold Buyer and its Affiliates, including the Company and its respective
officers, directors and stockholders (the “Buyer
Indemnified Parties”)
harmless and shall reimburse Buyer Indemnified Parties for any Damages incurred
or suffered by Buyer Indemnified Parties arising out of any misrepresentation
or
breach of representation or warranty, covenant or agreement made or to be
performed by any Seller (or the Company) under this Agreement, it being
understood and agreed that for purposes of this Article VIII, such
representations and warranties shall be interpreted without giving effect to
any
limitations or qualifications as to “materiality” (including the word
“material”), “Company Material Adverse Effect” or any similar limitations or
qualifications.
8.3. Notice
of Claim.
If a
claim is asserted against a Buyer Indemnified Party by a third party (a
“Third
Party Claim”)
that
could reasonably be expected to give such Buyer Indemnified Party the right
to
be indemnified under this Article VIII, or if a Buyer Indemnified Party believes
that it is entitled to indemnification under this Article VIII on the basis
of a
direct claim against such Buyer Indemnified Party under this Agreement (a
“Direct
Claim”),
then
the Buyer Indemnified Party seeking indemnification hereunder shall give written
notice thereof (a “Notice
of Claim”)
to the
Seller (the “Indemnifying
Party”)
as
promptly as is practicable from the date on which the Buyer Indemnified Party
obtains knowledge of such claim, provided that a delay in notifying the
Indemnifying Party shall not relieve the Indemnifying Party of its obligations
under this Agreement except to the extent that (and only to the extent that)
the
Indemnifying Party is materially prejudiced by such delay. The Notice of Claims
shall specify whether the claim is a Third Party Claim or a Direct Claim, and
shall set forth in reasonable detail the grounds and the amount or estimated
amount of the claim.
8.4. Direct
Claims.
The
Indemnifying Party shall have 20 Business Days from receipt of the Notice of
Claim with respect to any Direct Claim to deliver to the Buyer Indemnified
Party
a written notice objecting to any item or amount set forth in the Notice of
Claim (a “Direct
Claim Counter Notice”).
If no
such objection if given in a timely manner, the Indemnifying Party shall be
deemed to have consented and agreed to such item or amount. Should the Parties,
within such 20 Business Days period (subject to any possible extensions agreed
between them), agree, in whole or in part, upon the Indemnifying Party’s
liability for Damages, the Indemnifying Party shall pay to the Buyer Indemnified
Party the entire agreed upon amount of Damages.
8.5. Third
Party Claims.
Upon
receipt by the Indemnifying Party of a Notice of Claim with respect to a Third
Party Claim, the Indemnifying Party shall have the right to assume the defense
of such Third Party Claim with counsel reasonably satisfactory to the Buyer
Indemnified Party and the Buyer Indemnified Party shall cooperate to the extent
reasonably requested by the Indemnifying Party in defense or prosecution
thereof, provided that the Buyer Indemnified Party is reimbursed by the
Indemnifying Party for its costs in connection therewith. If the Indemnifying
Party elects to assume the defense of such claim, the Buyer Indemnified Party
shall have the right to employ its own counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of the Buyer Indemnified
Party, unless there is, under applicable standards of conduct, a conflict on
any
significant issue between Indemnifying Party and the Buyer Indemnified Party,
in
which case the reasonable fees and expenses of one such counsel shall be at
the
expense of the Indemnifying Party. Unless and until the Indemnifying Party
assumes the defense of a Third Party Claim, the Buyer Indemnified Party may
defend against the Third Party Claim in any manner it may reasonably deem
appropriate, the reasonable costs and expenses of which shall be borne by the
Indemnifying Party. If the Indemnifying Party has assumed the defense of any
claim against the Buyer Indemnified Party, the Indemnifying Party shall not
settle such claim without the prior written consent of the Buyer Indemnified
Party, which consent shall not be unreasonably withheld, delayed or conditioned.
If the Indemnifying Party does not assume the defense of a Third Party Claim,
but does not dispute the Buyer Indemnified Party’s right to indemnification by
delivering to the Buyer Indemnified Party a written notice objecting to any
item
or amount set forth in the Notice of Claim (a “Third
Party Claim Counter Notice”
and
collectively with the Direct Claim Counter Notice, a “Counter Notice”),
the
Indemnifying Party shall have the right to participate in the defense of such
claim through counsel of its choice, at the Indemnifying Party’s expense, and
the Buyer Indemnified Party shall not settle such claim without the prior
written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld, delayed or conditioned.
26
8.6. Disputes.
In the
event that Sellers shall dispute any claim for indemnification made hereunder,
Buyer and the Sellers’ Representative will attempt to resolve such dispute
through good faith negotiation. If Buyer and the Sellers’ Representative are
unable to resolve such dispute through good faith negotiation within 30 days
after the Sellers deliver the Counter Notice, the dispute will be settled by
binding arbitration conducted before a single arbitrator. Either Buyer or the
Sellers’ Representative may submit the dispute to arbitration. The arbitration
will be conducted in accordance with the then applicable Commercial Arbitration
Rules of the American Arbitration Association (“AAA”)
and
will be held in the State of Maryland. The arbitrator shall be mutually agreed
upon by Buyer and the Sellers, but if they are unable to agree on an arbitrator,
the arbitrator shall be appointed by AAA. All arbitration proceedings shall
be
closed to the public and confidential. All records relating thereto shall be
permanently sealed, except as necessary to obtain court confirmation of the
arbitrator’s decision. The arbitrator will be bound by the terms and conditions
of this Agreement and shall have no power, in rendering his or her award, to
alter or depart from any express provision of these agreements, and his or
her
failure to observe this limitation shall constitute grounds for vacating the
award. The award of the arbitrator shall be final and binding upon the parties,
and judgment upon the award may be entered in any court having jurisdiction
thereof.
ARTICLE
IX
TERMINATION,
AMENDMENT AND WAIVER
9.1. Termination.
This
Agreement may be terminated:
(a) at
any
time prior to the Closing Date by mutual written agreement of Buyer and the
Company;
27
(b) by
Sellers, acting unanimously, by written notice to Buyer if any event or
circumstance occurs that makes it impossible to satisfy any condition precedent
under Section 7.2 (unless the failure results primarily from any action or
inaction of the Company or any Seller in violation of the terms of this
Agreement);
(c) by
Sellers, acting unanimously, by written notice to Buyer, if any of Buyer’s
representations and warranties made in Article V were materially inaccurate
when
made or if Buyer is unable to pay the consideration for the Shares at the time
that the Closing is otherwise required to occur;
(d) by
Buyer
by written notice to each of the Sellers if any event or circumstance occurs
that makes it impossible to satisfy any condition precedent under Section 7.1
(unless the failure results primarily from any action or inaction of Buyer
in
violation of the terms of this Agreement); or
(e) by
Buyer
if any of the representations and warranties made in Article III or Article
IV
were materially inaccurate when made or if Buyer will not be able to obtain
good
title, free of all Encumbrances, to all of the Shares at the
Closing.
9.2. Effect
of Termination.
If this
Agreement is terminated as permitted by Section 9.1, such termination shall
be
without liability of any Party to the other Parties. This Section 9.2 and the
provisions of Article X shall survive any termination hereof pursuant to Section
9.1.
ARTICLE
X
MISCELLANEOUS
10.1. Expenses;
Transfer Taxes.
Except
as otherwise provided in this Agreement, whether or not the Closing takes place,
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the Party incurring such
costs
and expenses. For the avoidance of doubt, the Sellers, and not the Company
nor
Buyer, shall be responsible for any and all fees or other costs to any third
party advisors to either Company or the Sellers incurred prior to the Closing.
Notwithstanding any provision of this Agreement to the contrary, (a) any
transfer, documentary, sales, use, registration and other such Taxes incurred
in
connection with the consummation of the transactions contemplated by this
Agreement shall be borne equally by the Sellers, on the one hand, and Buyer,
on
the other hand; and (b) Buyer will pay for the audit of the Company’s 2006
financial statements.
10.2. Notices.
All
notices, requests and other communications hereunder shall be in writing and
shall be sent, delivered or mailed, addressed or sent by
telecopier:
(a) if
to
Buyer (or to the Company after the Closing), to:
0000
Xxxxxx Xxxx Xxxxxxx, Xxxxx 000
Xxxxxxxx,
Xxxxxxxx 00000
Attention:
Xxxxxx X. Xxxxxx
Fax:
(000) 000-0000
28
with
a
copy to:
Xxxxx
Xxxxx Xxxx Xxxxxx Xxxxxxx & Xxxxx, P.C.
000
Xxxxx
Xxxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Attention:
Xxxxxxx X. Xxxx, Esq.
Fax:
(000) 000-0000
(b) if
to the
Company prior to the Closing, to:
SMLB
Ltd.
000
X.
Xxxxxxxxx Xxxx
Xxxxxxxxx
Xxxxxxx, Xxxxxxxx
Attention:
Xxxxxxxx Xxxxxxxx
Fax:
(000) 000-0000
with
a
copy to (which shall not constitute notice):
Xxxxxxx,
Xxxxxxx and Xxxxxxx
000
Xxxx
Xxxxxx Xxxxx - Xxx 000
Xxxxxxx,
Xxxxxxxx 00000
Attention:
Xxxx XxXxxxxxx
Fax:
(000) 000-0000
(c) if
to a
Seller, to the address set forth on such Seller’s signature page hereto.
Each
such
notice, request or other communication shall be given (i) by mail (postage
prepaid, registered or certified mail, return receipt requested), (ii) by hand
delivery, (iii) by nationally recognized courier service or (iv) by telecopier,
receipt confirmed (with a confirmation copy to be sent by first class mail;
provided that the failure to send such confirmation copy shall not prevent
such
telecopier notice from being effective). Each such notice, request or
communication shall be effective (i) if mailed, three calendar days after
mailing at the address specified in this Section 10.2 (or in accordance with
the
latest unrevoked written direction from such Party), (ii) if delivered by hand
or by nationally recognized courier service, when delivered at the address
specified in this Section 10.2 (or in accordance with the latest unrevoked
written direction from the receiving Party) and (iii) if sent by telecopier,
when such telecopy is transmitted to the fax number specified in this Section
10.2 (or in accordance with the latest unrevoked written direction from the
receiving Party), and the appropriate confirmation is received.
10.3. Severability.
The
provisions of this Agreement shall be deemed severable and the invalidity or
unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof. If any provision of this
Agreement, or the application thereof to any Person or any circumstance, is
found to be invalid or unenforceable in any jurisdiction, (a) a suitable and
equitable provision shall be substituted therefor in order to carry out, so
far
as may be valid or enforceable, such provision and (b) the remainder of this
Agreement and the application of such provision to other Persons or
circumstances shall not be affected by such invalidity or unenforceability,
nor
shall such invalidity or unenforceability affect the validity or enforceability
of such provision, or the application thereof, in any other
jurisdiction.
29
10.4. Amendments
and Waivers.
This
Agreement may not be amended, supplemented, modified or terminated except by
an
instrument in writing signed on behalf of Buyer, the Company and Sellers holding
over 50% of the Shares at the time of such termination. The Parties hereto
may,
by an instrument in writing signed on behalf of such Party, waive compliance
by
any other Party with any term or provision of this Agreement that such other
Party was or is obligated to comply with or perform. No failure or delay by
any
Party in exercising any right, power or privilege hereunder shall operate as
a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power
or
privilege. No waiver of any of the provisions of this Agreement shall be deemed,
or shall constitute, a waiver of any other provision of this Agreement, whether
or not similar, nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided.
10.5. Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original and all of which shall, taken together, be considered one
and
the same agreement. The execution of this Agreement by any of the Parties may
be
evidenced by way of a facsimile transmission of such Party’s signature, or a
photocopy of such facsimile transmission, and such facsimile signature shall
be
deemed to constitute the original signature of such Party thereto.
10.6. Entire
Agreement.
This
Agreement (together with the agreements, Schedules and certificates referred
to
herein or delivered pursuant hereto) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral,
among
the parties with respect to the subject matter hereof.
10.7. No
Third Party Beneficiaries.
Except
for the rights of the Buyer Indemnified Parties under Article VIII, this
Agreement is intended solely for the benefit of the Parties hereto and is not
intended to confer upon any other Person any rights or remedies.
10.8. Governing
Law.
This
Agreement and all claims arising out of or relating to it shall be governed
by
and construed in accordance with the Laws of the State of Maryland, without
regard to the conflicts of Laws rules thereof.
10.9. Consent
to Jurisdiction.
Each of
the parties hereto irrevocably submits to the exclusive jurisdiction of the
United States District Court for the District of Maryland, or if such court
does
not have jurisdiction, the Xxxxxx County Circuit Court located in Ellicott
City,
Maryland, or if such court does not have jurisdiction, the Xxxxxx County
District Court, located in Ellicott City, Maryland, for the purposes of any
suit, action or other proceeding arising out of this Agreement or any
transaction contemplated hereby. Each of the parties hereto further agrees
that
service of any process, summons, notice or document by U.S. certified mail
to
such Party’s respective address set forth in Section 10.2 shall be effective
service of process for any Legal Proceeding in Maryland with respect to any
matters to which it has submitted to jurisdiction as set forth above in the
immediately preceding sentence. Each of the parties hereto irrevocably and
unconditionally waives any objection to the laying of venue of any Legal
Proceeding arising out of this Agreement or the transactions contemplated hereby
in (a) the United States District Court for the District of Maryland or (b)
the
Xxxxxx County Circuit Court or Xxxxxx County District Court, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in
any
such court that any such Legal Proceeding brought in any such court has been
brought in an inconvenient forum.
30
10.10. Publicity.
Subject
to its legal obligations (including requirements of stock exchanges and other
similar regulatory bodies), the Parties shall consult with each other with
respect to the timing and content of all announcements regarding this Agreement
or the transactions contemplated hereby and shall use reasonable efforts to
agree upon the text of any such announcement prior to its release; provided,
however, that, to the extent that any announcement regarding this Agreement
or
the transactions contemplated hereby is made at any time, each Party may issue
further announcements (including press releases, tombstones and similar
announcements) without the consent of the other Party so long as such further
announcements are consistent with, and not broader in scope than, the previously
issued announcement.
10.11. Assignment.
Neither
this Agreement nor any of the rights or obligations hereunder shall be assigned
by any of the Parties without the prior written consent of each of the other
Parties, except that Buyer may (a) assign any of its rights under this Agreement
to any one or more Affiliates, (b) make a collateral assignment of any rights
or
benefits hereunder to any lender, or (c) assign any or all of its rights,
interests or obligations hereunder in connection with any sale of Buyer or
the
Company of all or substantially all of the assets of Buyer or the Company.
Subject to the preceding sentence, this Agreement will be binding upon, inure
to
the benefit of and be enforceable by the Parties and their respective successors
and permitted assigns. Any attempted assignment in violation of the terms of
this 10.11 shall be null and void, ab initio.
Assignment by any Party in accordance with the terms of this 10.11 shall not
relieve the assignor of any liability.
31
10.12. Construction.
The
parties have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as of drafted jointly by the parties
and no presumption of burden of proof shall arise favoring or disfavoring any
party by virtue of the authorship of any of the provisions of this Agreement.
References in this Agreement to any gender include references to all genders,
and references to the singular include references to the plural and vice versa.
The words “include”, “includes” and “including” when used in this Agreement
shall be deemed to be followed by the phrase “without limitation”. Unless the
context otherwise requires, references in this Agreement to Articles, Sections,
Exhibits and Schedules shall be deemed references to Articles and Sections
of,
and Exhibits and Schedules to this Agreement. Unless the context otherwise
requires, the words “hereof”, “hereby”, “hereunder” and “herein” and words of
similar meaning when used in this Agreement refer to this Agreement in its
entirety and not to any particular Article, Section or provision of this
Agreement. All references in this Agreement to “dollars” and “$” are to United
States dollars. Any definition of or reference to any Law, agreement, instrument
or other document herein will be construed as referring to such Law, agreement,
instrument or other document as from time to time amended, supplemented or
otherwise modified. Any definition of or reference to any statute will be
construed as referring also to any rules and regulations promulgated
thereunder.
[SIGNATURE
PAGE FOLLOWS]
32
IN
WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
as
of the day and year first above written.
FORTRESS INTERNATIONAL GROUP, INC. | SMLB LTD. | ||
By:
/s/
Xxxxxx X. Xxxxxx
|
By: /s/ Xxxxxxxx X. Xxxxxxxx | ||
Name:
Xxxxxx
X. Xxxxxx
|
Name:
Xxxxxxxx
X. Xxxxxxxx
|
||
Title:
Chief
Executive Officer
|
Title:
President
|
[Counterpart
Signature Pages of the Sellers follow]
[Counterpart
Signature Page to Stock Purchase Agreement for the Sellers]
IN
WITNESS WHEREOF, the undersigned Seller has caused this Stock Purchase Agreement
to be executed as of the date first written above.
SELLER:
Xxxx
Xxxxx
Print
or
Type Name of Seller (must match stock certificate)
/s/
Xxxx Xxxxx
|
|||
Signature
of Seller or Authorized Signatory
|
_____________________________________________
Print
or
Type Name and Title of Authorized Signatory
Number
of
Shares of Company Held: 250
Notice
Address:
_____________________
Street
Address
_____________________
City State Zip
Code
Telecopy
No.: (
)
Taxpayer
Identification Number: ________
[Counterpart
Signature Page to Stock Purchase Agreement for the Sellers]
IN
WITNESS WHEREOF, the undersigned Seller has caused this Stock Purchase Agreement
to be executed as of the date first written above.
SELLER:
Xxxxxxx
X. Xxxxxxx
Print
or
Type Name of Seller (must match stock certificate)
/s/ Xxxxxxx X. Xxxxxxx | |||
Signature of Seller or Authorized Signatory |
_____________________________________________
Print
or
Type Name and Title of Authorized Signatory
Number
of
Shares of Company Held: 250
Notice
Address:
_____________________
Street
Address
_____________________
City State Zip
Code
Telecopy
No.: (
)
Taxpayer
Identification Number: ________
2
[Counterpart
Signature Page to Stock Purchase Agreement for the Sellers]
IN
WITNESS WHEREOF, the undersigned Seller has caused this Stock Purchase Agreement
to be executed as of the date first written above.
SELLER:
Xxxxx
Xxxxxxx
Print
or
Type Name of Seller (must match stock certificate)
/s/ Xxxxx Xxxxxxx | |||
Signature of Seller or Authorized Signatory |
_____________________________________________
Print
or
Type Name and Title of Authorized Signatory
Number
of
Shares of Company Held: 250
Notice
Address:
_____________________
Street
Address
_____________________
City State Zip
Code
Telecopy
No.: (
)
Taxpayer
Identification Number: ________
3
[Counterpart
Signature Page to Stock Purchase Agreement for the Sellers]
IN
WITNESS WHEREOF, the undersigned Seller has caused this Stock Purchase Agreement
to be executed as of the date first written above.
SELLER:
Xxxxxxxx
Xxxxxxxx
Print
or
Type Name of Seller (must match stock certificate)
/s/ Xxxxxxxx Xxxxxxxx | |||
Signature
of Seller or Authorized Signatory
|
_____________________________________________
Print
or
Type Name and Title of Authorized Signatory
Number
of
Shares of Company Held: 250
Notice
Address:
_____________________
Street
Address
_____________________
City State Zip
Code
Telecopy
No.: (
)
Taxpayer
Identification Number: ________
4
SCHEDULE
A
SCHEDULE
OF SELLERS
Name
and Address of Seller
|
Shares
of the Company Owned
|
Percentage
Interest
|
Cash
Consideration Paid to Seller at Closing
|
Stock
Consideration placed in Escrow
|
Proportion
of Note to be Paid to Seller 1
|
|||||||||||
Xxxxx
Xxxxxxxx
|
250
|
25
|
%
|
$
|
500,000
|
24,224
|
$
|
125,000
|
||||||||
Xxxxx
Xxxxxxx
|
250
|
25
|
%
|
$
|
500,000
|
24,224
|
$
|
125,000
|
||||||||
Xxxxxxx
X. Xxxxxxx
|
250
|
25
|
%
|
$
|
500,000
|
24,224
|
$
|
125,000
|
||||||||
Xxxx
Xxxxx
|
250
|
25
|
%
|
$
|
500,000
|
24,224
|
$
|
125,000
|
1 Assumes full payment of $500,000 Note.
5