ASSET PURCHASE AGREEMENT By And Among INX INC., MARKETWARE INC., AND TIMOTHY DARRYL JOHNSON December 31, 2009
Exhibit
10.1
By
And Among
INX
INC.,
MARKETWARE
INC.,
AND
XXXXXXX
XXXXXX XXXXXXX
December
31, 2009
This Asset Purchase Agreement (“Agreement”) is made
this 31st day
of December, 2009 (the “Agreement Date”), by
and among: INX Inc., a Delaware corporation (“Buyer”); Marketware
Inc., a California corporation (“Seller”) and Xxxxxxx
Xxxxxx Xxxxxxx, individually (“Shareholder”).
WHEREAS,
Seller is engaged in the business of providing desktop hardware, software and
licensing agreements to the State of California and the designing, installing
and supporting of networks, unified communications, IP based solutions including
access control, video surveillance, digital media systems , computer server,
computer desktop and data storage systems and related technology in selected
cities in the United States and specifically in California and to the State of
California (the “Seller’s
Business”);
WHEREAS,
Seller desires to sell to Buyer and Buyer desires to purchase from Seller,
certain assets, properties and rights of Seller utilized by it in connection
with the operation of Seller’s Business upon the terms and conditions of this
Agreement;
WHEREAS,
Shareholder owns 100% of the outstanding capital stock of
Seller;
WHEREAS, as an inducement to Buyer to
enter into this Agreement, Shareholder has approved this Agreement
and desires to become a party to this Agreement pursuant to the terms hereof;
and
WHEREAS, Seller has provided the Seller
disclosure letter dated the same date as this Agreement, together with related
schedules, attachments and exhibits thereto the “Seller Disclosure
Letter”), which is attached hereto as Exhibit A and
incorporated by reference.
NOW,
THEREFORE, in consideration of the foregoing recitals, the mutual covenants
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as
follows:
ARTICLE
I.
PURCHASE AND SALE OF
ASSETS
1.1 Purchase and Sale
of Assets. Pursuant to the
terms and subject to the conditions set forth in this Agreement, at the Closing
(defined Section 1.8 below), Seller shall sell, assign, transfer, convey and
deliver to Buyer, free and clear of all mortgages, pledges, liens, claims,
charges, encumbrances and other security interests (collectively, “Security Interests”)
other than Permitted Liens (as defined in 3.1(d) below), and Buyer shall
purchase only the assets, properties, and rights of Seller described below (all
of such specifically described assets, properties and rights being hereinafter
collectively referred to as the “Purchased
Assets”):
(a) Personal
Property. All of the equipment, computer hardware, furniture,
fixtures, appliances, furnishings, all computer and telecommunications
equipment, appliances and systems which are owned by Seller and all leasehold
improvements together with all other personal property listed on Schedule 1.1(a) to
the Seller Disclosure Letter;
(b) Intellectual
Property. (i) All inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, including the right to enforce any rights embodied
therein and to collect damages for any past, infringement of such rights by
third parties, (ii) ideas and conceptions to the extent that such are legally
recognized as a proprietary intangible right under common law or by a national
(including the United States) or multinational statutory invention
registrations, patents, patent registrations and patent applications (including
all reissues, divisions, continuations, continuations-in-part, extensions and
reexaminations) and all rights therein provided by international treaties or
conventions and all improvements to the inventions disclosed in each such
registration, patent or application, (iii) all trademarks, service marks, trade
dress, logos, trade names, and corporate names, together with all translations,
adaptations, derivations, and combinations thereof and including all goodwill
associated therewith, all applications, registrations, and renewals in
connection therewith, and the right to register, perfect and enforce any rights
embodied therein and to collect damages for any past, infringement of such
rights by third parties, (iv) all copyrightable works, all copyrights, and all
applications, registrations, and renewals in connection therewith, (v) all mask
works and all applications, registrations, and renewals in connection therewith,
(vi) all trade secrets and confidential business information (including ideas,
research and development, know-how, formulas, techniques, technical data,
designs, drawings, specifications, customer, supplier and vendor lists, pricing
and cost information, and business and marketing plans and proposals), (vii) all
computer software (including data and related documentation) developed or owned
by Seller, including source code, operating
systems and specifications, data, databases files, documentation and other
materials and documentation related thereto, (viii) all other proprietary
rights, (ix) all licenses, and (x) all copies and tangible embodiments thereof
(in whatever form or medium) (collectively, (i) through (x) above, the “Intellectual
Property”);
(c) Domain
Names. All of Seller’s right, title and interest in and to
each domain name and the registration thereof, all associated universal resource
locators, whether registered in the name of Seller or by any other person on
behalf of Seller, together with all goodwill connected with and symbolized by
such domain names or locators, and any intellectual property rights relating
thereto, including, but not limited to, e-mail addresses, websites,
translations, adaptations, derivations, copyrights, and combinations thereof,
all applications, registrations, and renewals in connection therewith, and the
right to register, perfect and enforce any rights embodied therein, including
the right to collect damages for any past, infringement of such rights by third
parties to the extent any such intellectual property rights exist (the “Domain Names”), each
of which is listed on Schedule 1.1(c) to
the Seller Disclosure Letter;
(d) Documents. A
copy of all of Seller’s books, records, papers and documents which relate to the
Purchased Assets, including all purchase and sales records and customer and
supplier records;
(e) Inventory. All
inventories of product including raw material, work-in-process, finished
products, packing materials, stores and supplies, spare parts, samples, point of
sale material and merchandise of Seller held for resale by Seller, but only to
the extent listed on Schedule 1.1(e) to
the Seller Disclosure Letter (the “Inventory”);
(f) Contract
Rights.
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(i)
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All
rights under the uncompleted portion of the Acquired Partially Completed
Contracts (as defined in Section
2.21);
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(ii)
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All
rights whatsoever to all contracts, agreements, joint ventures,
commitments, leases, licenses, purchase orders and other agreements,
whether oral or written arising out of the operation of Seller’s Business
(other than the Retained Partially Completed Contracts and the Acquired
Partially Completed Contracts), including but not limited to those listed
on Schedule
1.1(f)(ii) to the Seller Disclosure Letter (collectively, the
“Acquired
Contracts”)
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(g) Name. The
right to use the name “Marketware Inc.,” “Marketware Technologies” and all
variants thereof;
(h) Manufactures’ and Vendors’
Warranties. All rights under manufacturers’ and vendors’
warranties related to items included in the Purchased Assets, including but not
limited to such of the foregoing as are listed on Schedule 1.1(h) to
the Seller Disclosure Letter.
(i) Supplier
Rebates. All rights to all vendor rebates and credits
relating to periods before or after the Closing; provided, however, that such
rights shall not include any rights to rebates or credits relating to (A)
defective products or inventory for which Seller has, prior to the Closing (i)
submitted a written claim, (ii) returned such defective product or inventory and
(iii) recorded a receivable on Seller’s financial records or (B) any fully
accrued Dell, Microsoft, Apple, HP and Cisco rebates that have been
properly accounted for by Seller prior to the Closing Date.
(j) Deposits. All
cash and collateral deposits made under the terms of leases and other contracts
included in clauses (a) through (i) above.
1.2 Assets Excluded
from Sale. Other than the
Purchased Assets, Buyer is not purchasing and Seller is not selling any other
asset or right of Seller and the parties hereby expressly exclude the assets set
forth on Schedule
1.2 to the Seller Disclosure Letter.
1.3 Transfer of
Purchased Assets. Seller shall
deliver or cause to be delivered to Buyer such other good and sufficient
instruments reasonably requested by Buyer transferring to Buyer title to all of
the Purchased Assets or Seller’s interest therein, all in accordance with this
Agreement. Such instruments of transfer (a) shall be in the form
which is usual and customary for transferring the type of property involved
under the laws of the jurisdictions applicable to such transfers, (b) shall
be in form and substance reasonably satisfactory to Buyer and its counsel,
(c) shall effectively vest in Buyer good and marketable title, or Seller’s
interest therein as provided in this Agreement, to all of the Purchased Assets,
free and clear of all Security Interests other than Permitted Liens, and
(d) where applicable, shall be accompanied by evidence of the discharge of
all Security Interests against the Purchased Assets.
1.4 Retained
Liabilities. Buyer shall
not assume and shall not be liable for any Liabilities (as defined below) of
Seller other than the Assumed Liabilities (as defined in Section 1.5 below)
(collectively, the “Retained
Liabilities”), and all such Retained Liabilities shall be and remain the
responsibility of Seller, including, without limitation, (a) any Liabilities
arising out of or the result of any activity associated with the Purchased
Assets prior to the Closing, (b) Liabilities under any contract to which Seller
is a party (excluding, however, all Liabilities assumed by Buyer hereunder under
the Acquired Contracts and the Acquired Partially Completed Contracts), (c)
Liabilities with respect to all Taxes (as defined in Section 2.12 below),
Liabilities relating to, or arising under or in connection with, any Employee
Benefit Plan (as defined in Section 3.1(p) below), and (e) any Liabilities of
Seller related to any Environmental Law (as defined in Section 3.1(t)
below). Seller shall discharge in a timely manner or shall make
adequate provision for all Retained Liabilities and Shareholder and Seller shall
jointly and severally indemnify Buyer and hold it harmless against all Retained
Liabilities. As used in this Agreement, the term “Liability” and “Liabilities” shall
mean and include any direct or indirect indebtedness, guaranty, endorsement,
claim, loss, damage, deficiency, cost, expense, obligation or responsibility,
fixed or unfixed, known or unknown, asserted or unasserted, liquidated or
unliquidated, secured or unsecured.
1.5
Assumed Liabilities. As of the Closing, Buyer will assume and
thereafter in due course pay and fully satisfy, as and when the same shall
become due and payable, the following liabilities and obligations (the “Assumed
Liabilities”):
(a) the
Liabilities and obligations of Seller arising in the regular and ordinary course
of the conduct of Seller’s Business consistent with past practice prior to the
Closing Date, under (i) the Acquired Contracts and (ii) the obligations
remaining after the Closing under the Acquired Partially Completed Contracts,
but excluding any liabilities resulting from (A) the Retained Partially
Completed Contracts or (B) any warranty claim or breach of any contract prior to
the Closing Date;
(b) all
payment liabilities arising under the vendor accounts listed on Schedule 1.5(b) to
the Seller Disclosure Letter;
(c) all
Liabilities arising after the Closing Date under the office space lease contract
for the office space located at 0000 Xxxxx Xx., Xxxxx 000, Xxxxxxxxxx,
Xxxxxxxxxx 00000, which property lease contract is set forth on Schedule 3.1(j)(ii)
to the Seller Disclosure Letter; provided, however, that all rent payment
obligations paid by Seller under such leases prior to Closing for any period
after the Closing shall be prorated between Seller and Buyer based on the time
period the leased space was occupied by Seller prior to Closing;
(d) all
Liabilities arising after the Closing Date under the equipment lease contracts
listed on Schedule
1.5(d) to the Seller Disclosure Letter, with an aggregate remaining
balance of approximately $25,000.
1.6 Purchase
Price. The purchase
price for the Purchased Assets and the covenants of Shareholder and Seller
included herein, is an aggregate purchase price of three hundred and fifty
thousand dollars ($350,000.00) in immediately available funds which shall be
paid at Closing by Buyer to Seller as follows: (i) three hundred and fifteen
thousand dollars ($315,000.00) in immediately available funds shall be paid by
Buyer to Seller at Closing (the “Closing Cash”) and
(ii) thirty-five thousand dollars ($35,000.00) shall be retained by Buyer and
hold in escrow in accordance with Section 2.19 below (the “Holdback
Cash”).
1.7 Additional
Purchase Consideration. As additional consideration for the
Purchased Assets, Buyer will pay additional purchase consideration to the Seller
following the Closing Date based on and contingent upon certain post-Closing
financial performance beginning on the first day of the first full calendar
month after the Closing (the “Additional Purchase
Consideration”) as set forth in this section 1.7.
(a) Buyer
will pay Seller a variable contingent payment based on and contingent upon the
financial performance of Buyer’s business unit that is comprised, after the
Closing Date, solely of (i) those business activities conducted by Seller at its
current location in Sacramento, California at and immediately prior to the
Closing Date, which are being acquired pursuant to this Agreement and (ii) those
business activities conducted by Buyer at its current location in Sacramento,
California (collectively clauses (i) and (ii), the “Acquired Business
Operations”). For purposes of this Agreement, the term “Acquired Business Operating
Income Contribution” means the Operating Income (as defined by GAAP as
applied by Buyer in operating its business) contribution attributable to the
Acquired Business Operations before any allocation of Buyer’s corporate-level
operations and administrative expenses, all as reasonably determined by Buyer
using its normal accounting methodologies and processes, in accordance with
Generally Accepted Accounting Principles (“GAAP”) and subject to
review by Seller. For the purposes of determining Acquired Business
Operating Income Contribution, the cost of amortization of assets (other than
intangible assets) acquired pursuant to this Agreement will be considered an
expense of the Acquired Business Operations but the cost of amortization of all
intangible assets acquired pursuant to this Agreement will be excluded as an
expense of the Acquired Business Operations. The Additional Purchase
Consideration will be calculated and paid in two annual components - the first
based on the first 12-month period following the Closing Date (the “First Year Measurement
Period”) and the second based on the second 12-month period following the
Closing Date (the “Second Year Measurement
Period”), as set forth below.
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(i)
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First
Year. The amount of Additional Purchase Consideration to
which Seller will be entitled to in respect of the First Year Measurement
Period shall be calculated based on achievement of Acquired Business
Operating Income Contribution during the First Year Measurement Period and
will be an amount equal to Three Hundred Thirty-Seven Thousand Five
Hundred Dollars ($337,500) times the Attainment Percentage (defined
below). As used in this Section 1.7(a)(i), the term “Performance
Ratio” shall mean the percentage resulting from
dividing the Acquired Business Operating Income Contribution
during the First Year Measurement Period by Four Hundred Fifty Thousand
Dollars ($450,000). After establishing the Performance Ratio,
the percentage used to calculate the amount of the Additional Purchase
Consideration shall be calculated (as used in this Section 1.7(a)(i), the
“Attainment
Percentage”) as follows: The Attainment Percentage shall
be equal to the Performance Ratio if the Performance Ratio is 100%,
however, if the Performance Ratio is less than 100%, the Attainment
Percentage shall be reduced by 1% for each 1% that the Performance Ratio
is less than 100%, and if the Performance Ratio is more than 100%, the
Attainment Percentage shall be increased by 1% for each 1% that the
Performance Ratio exceeds 100% up to 150%, and shall increase by 0.5% for
each 1% between 150% and 200%; provided, however, if the above calculation
results in an Attainment Percentage that is less than 50%, then the
Attainment Percentage shall be zero. In no event shall the
amount of Additional Purchase Consideration payable in respect of the
First Year Measurement Period exceed five hundred ninety thousand six
hundred and twenty-five dollars
($590,625).
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(ii)
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Second
Year. The amount of Additional Purchase Consideration to
which Seller will be entitled to in respect of the Second Year Measurement
Period shall be calculated based on achievement of Acquired Business
Operating Income Contribution during the Second Year Measurement Period
and will be an amount equal to Seven Hundred Fifty Thousand
Dollars ($750,000) times the Attainment Percentage (defined
below). As used in this Section 1.7(a)(ii), the term “Performance
Ratio” shall mean the percentage resulting from dividing
the Acquired Business Operating Income Contribution during the
Second Year Measurement Period by One Million Dollars
($1,000,000). After establishing the Performance Ratio, the
percentage used to calculate the amount of the Additional Purchase
Consideration shall be calculated (as used in this Section 1.7(a)(ii), the
“Attainment
Percentage”) as follows: The Attainment Percentage shall
be equal to the Performance Ratio if the Performance Ratio is 100%,
however, if the Performance Ratio is less than 100%, the Attainment
Percentage shall be reduced by 1% for each 1% that the Performance Ratio
is less than 100%, and if the Performance Ratio is more than 100%, the
Attainment Percentage shall be increased by 1% for each 1% that the
Performance Ratio exceeds 100% up to 150%, and shall increase by 0.5% for
each 1% between 150% and 200%; provided, however, if the above calculation
results in an Attainment Percentage that is less than 50%, then the
Attainment Percentage shall be zero. In no event shall the amount of
Additional Purchase Consideration payable in respect of the Second Year
Measurement Period exceed one million three hundred twelve thousand five
hundred dollars ($1,312,500).
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(b) Each
payment of Additional Purchase Consideration shall be calculated and paid by
Buyer to Seller within ninety (90) days of the end of the applicable measurement
period to which such payment relates. In addition, at least seventy-five percent
(75%) of all Additional Purchase Consideration payable in respect of the First
Year Measurement Period and at least fifty percent (50%) of all of all
Additional Purchase Consideration payable in respect of the Second Year
Measurement Period shall be paid in cash and the remainder shall be paid to the
Seller, at Buyer’s option, in either cash or the issuance to Seller of such
number of shares of common stock, $0.001 par value, of Buyer (“Buyer Common Stock”),
determined by dividing the percentage of the Additional Purchase Consideration
to be paid in shares of Buyer’s Common Stock by the price of Buyer’s Common
Stock using the average closing price per share for the Common Stock as reported
by the NASDAQ for the five (5) consecutive trading days ending prior to the
second day before the date of funding of such payment of Additional Purchase
Consideration. Promptly upon calculating the amount of Additional
Purchase Consideration, if any, payable to Seller, Buyer shall provide Seller
with a copy of the combined regional statement of financial results upon which
such calculations are based.
1.8
Closing. The consummation
of the transactions contemplated by this Agreement (the “Closing”) shall take
place at the offices of INX Inc. at 00000 Xxxx Xxxxxxx, 0xx Xxxxx, Xxxxxxx,
Xxxxx 00000 on the later of (a) the Agreement Date, or (b) the first business
day after all of the conditions set forth in Articles VI and VII hereof have
been satisfied or waived, or such other place and time as the parties may
mutually agree (the “Closing
Date”). All of the deliveries and other transactions required
to take place at the Closing and all documents relating thereto shall be
interdependent and none shall be effective unless and until all are effective
(except to the extent that the party entitled to the benefit thereof has waived
satisfaction or performance thereof in writing as a condition precedent
hereto).
1.9 Deliveries at the
Closing. At the Closing,
(a) Seller shall deliver to Buyer the various certificates, instruments and
documents referred to in Article VI below, and (b) Buyer will deliver to Seller
the various certificates, instruments, and documents referred to in Article VII
below.
1.10 Consummation of
Closing. All acts,
deliveries, and confirmations comprising the Closing, regardless of
chronological sequence, shall be deemed to occur contemporaneously and
simultaneously upon the occurrence of the last act, delivery, or confirmation of
the Closing and none of such acts, deliveries, or confirmations shall be
effective unless and until the last of the same shall have
occurred.
ARTICLE
II.
ADDITIONAL
AGREEMENTS
2.1 Non-Competition,
Non-Solicitation and Confidentiality. For purposes of
this Agreement, the following definitions shall apply:
(a) “Affiliate” with
respect to any Person, shall mean and include any Person controlling, controlled
by or under common control with such Person either as of or following the date
of this Agreement;
(b) “Company Activities”
shall mean either (i) designing, installing or supporting computer data
networks, IP telephony systems, desktop hardware, software and licensing systems
and/or datacenter virtualization projects, (ii) designing, installing or
supporting computer networks, unified communications, datacenters, computer
servers or data storage systems and related technology, (iii) promoting,
marketing or selling computer data network equipment, IP telephony systems,
laptop computers, desktop computers, computer servers or data storage systems,
or other datacenter related equipment, (iii) designing, implementing, promoting,
marketing or selling software applications for IP telephony applications,
virtualization software or software to manage datacenters, or (iv) engaging in
any other business activities which are conducted, offered or provided by
Seller, Buyer or any Affiliate of either of them at any time during the 12-month
period prior to the date of this Agreement, including, without limitation, all
activities associated with Seller’s Business but expressly excluding any of
these activities if performed (A) in conjunction with employment
duties for a manufacturer representing or supporting such manufacturer’s
products or (B) as part of an organization’s internal IT staff
supporting such organization's internal IT systems.
(c) “Confidential
Information” shall mean any data or information (whether written or not,
tangible or intangible), of Buyer, Seller or any Affiliate of either of them,
other than Trade Secrets (as defined below), which is valuable to Buyer, Seller
or any Affiliate of either of them and not generally known to competitors or
which by its nature is generally treated as confidential or proprietary,
including, but not limited to, the existence and terms of this
Agreement.
(d) “Non-Compete Period”
shall mean the period from the Closing Date through the date five years after
the Closing Date.
(e) “Non-Solicitation
Period” shall mean the period from the Closing Date through the date five
years after the Closing Date.
(f) “Person” shall mean
any individual, corporation, partnership, limited liability company, firm, joint
venture, association, joint-stock company, trust, unincorporated organization or
other entity.
(g) “Protected Area” shall
mean the states of California, Nevada and Oregon.
(h) “Trade Secrets” shall
mean all technical or nontechnical data, formulas, patterns, compilations, or
programs, including, without limitation, computer software and related source
codes, devices, methods, techniques, drawings, processes, financial data,
financial plans, product plans, lists of actual or potential customers or
suppliers, or other information similar to any of the foregoing, which derives
economic value, actual or potential, from not being generally known to, and not
being readily ascertainable by proper means by, other persons who can derive
economic value from its disclosure or use.
2.2 Confidentiality. Buyer, Seller and
Shareholder shall keep confidential and not disclose the existence of this
Agreement, the transactions described herein and all Confidential Information;
provided, however, that Seller and Shareholder may, upon obtaining the prior
written consent of the Buyer, disclose the existence of this Agreement and the
terms hereof, but solely in the manner and subject to any restrictions or
limitations imposed on such disclosure by Buyer in connection with granting such
prior written consent. The provisions of this Section 2.2 shall not
apply with respect to any Confidential Information which (a) was already known
by one party when such information was received from the other party, (b) was
available to the general public at the time of such receipt, (c) subsequently
becomes known to the general public through no fault or omission by a party
hereto, (d) is subsequently disclosed by a third party which has the bona fide
right to make such disclosure, (e) is disclosed by any party hereto in
confidence to its professional advisors or by Buyer to potential lenders and
investors who agree to keep such information confidential, (f) is required to be
disclosed by law or a governmental agency, including for income tax reporting
purposes and in connection with any filing to be made by Buyer with the
Securities and Exchange Commission, or (g) is required to be disclosed in order
to enforce this Agreement.
2.3 Trade
Secrets. Seller and
Shareholder shall hold in confidence at all times after the date hereof all
Trade Secrets related to Seller, Buyer and each of their respective Affiliates
and shall not disclose, publish or make use of those Trade Secrets at any time
after the date hereof, without the prior written consent of
Buyer. The provisions of this Section 2.3 shall not apply with
respect to any Trade Secret which (a) was already known by one party when such
information was received from the other party, (b) was available to the general
public at the time of such receipt, (c) subsequently becomes known to the
general public through no fault or omission by a party hereto, (d) is
subsequently disclosed by a third party which has the bona fide right to make
such disclosure, (e) is disclosed by either in confidence to its professional
advisors or by Buyer to potential lenders and investors who agree to keep such
information confidential, (f) is required to be disclosed by law or a
governmental agency, including for income tax reporting purposes and in
connection with any filing to be made by Buyer with the Securities and Exchange
Commission, or (g) is required to be disclosed in order to enforce this
Agreement. Nothing in this Agreement shall diminish the rights of
Seller or Buyer regarding the protection of Trade Secrets, Confidential
Information and other intellectual property pursuant to applicable
law.
2.4 Trade
Name. Seller and Shareholder shall not, directly or by assisting others,
own, manage, operate, join, control or participate in the ownership, management,
operation or control of any business conducted under the corporate or trade name
of Seller (or any variation thereof) or any of its Affiliates (other than as an
employee of Buyer or one of its Affiliates) without the prior written consent of
Buyer
2.5 Non-Competition.
(a) Coverage. Seller
and Shareholder hereby acknowledge that Buyer, either directly or indirectly
through one or more of its Affiliates, conducts or will conduct Company
Activities throughout the Protected Area, and acknowledges that to protect
adequately the interest of Buyer in the operation of each Person through which
it will engage in Company Activities after the date of this Agreement, it is
essential that any non-compete covenant with respect thereto cover all Company
Activities in the Protected Area except as specifically provided in Section
2.5(b) below.
(b) Covenant. During
the Non-compete Period, neither Seller nor Shareholder shall in any manner,
directly or indirectly, engage in or have an equity or profit interest in, or
render services to any business that conducts any Company Activities in the
Protected Area, including any federal, state or local government or agency
located in the Protected Area. Notwithstanding anything herein to the
contrary, nothing in this Agreement shall prevent or prohibit Seller or
Shareholder from owning not more than 5% of a class of equity securities issued
by any entity listed on any national securities exchange or interdealer
quotation system.
2.6 Non-Solicitation
of and Non-Interference with Employees, Customers and Vendors. During the
applicable Non-Solicitation Period, neither Seller nor Shareholder shall, in any
manner, directly or indirectly:
(a) solicit
or attempt to solicit any business from any customers or prospective customers
of Buyer or any of its Affiliates for purposes of engaging in any Company
Activities in any Protected Area;
(b) recruit
or hire away or attempt to recruit or hire away, on its behalf or on behalf of
any other person, firm or corporation, any employee of Buyer or any of its
Affiliates; or
(c) interfere
with or otherwise attempt to affect Buyer’s relationship with any employee,
customer, or prospective customer, supplier or vendor of Buyer or any of its
Affiliates.
2.7 Consideration
and Acknowledgment. In consideration
for the covenants and agreements made by Shareholder in Sections 2.2, 2.3, 2.4,
2.5 and 2.6, at Closing the Buyer shall deliver to Shareholder one thousand
dollars ($1,000) in cash payable at Closing. Seller, Shareholder and
Buyer each acknowledge and agree that the covenants set forth in Sections 2.2,
2.3, 2.4, 2.5 and 2.6 are reasonable as to time, scope and territory given
Buyer’s need to protect its Trade Secrets, Confidential Information and its
substantial investment in the Purchased Assets, its employees, customers and
vendors, particularly given the complexity and competitive nature of Buyer’s and
its Affiliate’s business. Seller and Shareholder further acknowledge
that (a) it would be difficult to calculate damages to Buyer and its Affiliates
from any breach of Seller’s or Shareholder’s obligations under either of
Sections 2.2, 2.3, 2.4, 2.5 or 2.6, (b) that injuries to Buyer and its
Affiliates from any such breach would be irreparable and impossible to measure,
and (c) that the remedy at law for any breach or threatened breach of Seller’s
or Shareholder’s obligations under either of Sections 2.2, 2.3, 2.4, 2.5 or 2.6
of this Agreement would therefore be an inadequate remedy, and accordingly,
Buyer shall, in addition to all other available remedies (including without
limitation seeking such damages as it can show it and its Affiliates have
sustained by reason of such breach or the exercise of all other rights it has
under this Agreement), be entitled to injunctive and other similar equitable
remedies.
2.8 Further
Assurances. Each party hereto
from time to time hereafter at any other party's request and without further
consideration shall execute and deliver to such other party such instruments of
transfer, conveyance and assignment in addition to those delivered pursuant to
this Agreement as shall be reasonably requested to transfer, convey and assign
more effectively the Purchased Assets to Buyer, the costs of which shall be paid
by the requesting party.
2.9 Expenses. Except as
otherwise provided herein, Buyer, Seller and Shareholder shall each be
responsible for their own expenses incurred in connection with the negotiations
among the parties, and the authorization, preparation, execution and performance
of this Agreement and the transactions contemplated hereby.
2.10 Brokers. Buyer shall
indemnify Seller and hold it harmless from and against all claims or demands for
commissions or other compensation by any broker, finder, or similar agent
claiming to have been employed by or on behalf of Buyer. Seller and
Shareholder shall jointly and severally indemnify Buyer and hold it harmless
from and against all claims or demands for commissions or other compensation by
any broker, finder or similar agent claiming to have been employed by or on
behalf of Seller or any Shareholder.
2.11 Publicity. After the Closing
Date, all press releases and other public announcements respecting the subject
matter hereof shall be made only by Buyer; provided, however, that Seller may
make any disclosure required to be made under applicable law if it has
determined in good faith that it is necessary to do so and used its best
efforts, prior to the issuance of the disclosure, to provide Buyer with a copy
of the proposed disclosure and to discuss the proposed disclosure with
Buyer.
2.12 Liability for
Taxes.
(a) Definition. As
used herein, “Tax” or “Taxes” means all
taxes, however denominated, including any interest or penalties or additions
thereto whether disputed or not, including any obligation to indemnify or
otherwise assume or succeed to the tax Liability of any other Person that may
become payable in respect thereof, imposed by any federal, state, local or
foreign government or any agency or political subdivision of any such
government, which taxes shall include, without limiting the generality of the
foregoing, all income taxes (including, but not limited to, United States
federal income taxes and state income Taxes), payroll and employee withholding
taxes, unemployment insurance, social security, sales and use taxes, excise
taxes, environmental taxes, franchise taxes, gross receipts taxes, occupation
taxes, real and personal property taxes, stamp taxes, transfer taxes,
withholding taxes, workers’ compensation taxes, escheat, value-added taxes,
alternative or add-on minimum taxes and other obligations of the same or of a
similar nature, whether discovered before, on or after the Closing.
(b) Taxes Before the
Closing. Seller shall be liable for, and shall together with
Shareholder jointly and severally, indemnify and hold Buyer harmless from, (a)
all Taxes (as defined above) and Security Interests relating to any Taxes that
are imposed on (either before or after the Closing Date) or incurred with
respect to the Purchased Assets for any period ending on or before the Closing
Date, (b) any Taxes payable as a result of a breach by Seller or Shareholder of
any of the representations set forth in Section 3.1(i) hereof, and (c) any
necessary and reasonable attorneys’ fees or other costs incurred by Buyer or its
Affiliates in connection with any payment from Seller under this Section
2.12(b). Buyer and Seller agree to provide assistance to one another
and to cooperate fully with one another after the Closing Date to account for
all Taxes that may be imposed on or incurred with respect to the Purchased
Assets during any period prior to the Closing Date.
(c)
Taxes Following the
Closing. Buyer shall be liable for, and shall indemnify and
hold Seller and Shareholder harmless from, (a) all Taxes (as defined above) and
Security Interests relating to any Taxes that are imposed on or incurred with
respect to the Purchased Assets for any period commencing and ending after the
Closing Date, and (b) any necessary and reasonable attorneys’ fees or other
costs incurred by Seller or Shareholder in connection with any payment from
Buyer under this Section 2.12(c).
(d) Sales, Transfer and Excise
Taxes. Buyer shall pay directly all excise, sales, transfer
and other similar Taxes, levies and charges from any California state taxing
authority, (including all bulk sales taxes, if any), that may be imposed upon,
or payable or collectible or incurred in connection with, this Agreement and the
transactions contemplated herein. All obligations under this Section
2.12 shall survive the Closing hereunder and continue until 30 days following
the expiration of the statute of limitations on assessment of the relevant
Tax.
2.13 Right to
Refunds. If Seller, on the
one hand, or Buyer, on the other hand, receives a refund of any Taxes for which
the other has paid such Taxes, then the party receiving such refund shall,
within 30 days after its receipt, remit such refund to the party who paid such
Taxes; provided, however, that this section shall not affect the Liability of
the parties for Taxes as set forth in Section 2.12(b) or 2.12(c)
hereof.
2.14 Intercompany
Transactions. Prior to the Closing, all intercompany payables
and receivables between Seller and Shareholder and between Seller and any of its
Affiliates that in any way are related to or otherwise affect any Purchased
Asset shall be released by Seller, Shareholder or any Affiliate of either of
them, as the case may be, and Shareholder hereby release any claims or other
rights he or she may have in and to any of the Purchased Assets.
2.15 Allocation of
Purchase Price. For all income
tax purposes, each of the parties shall report the transactions contemplated by
this Agreement as an “applicable asset acquisition” by Buyer within the meaning
of Section 1060 of the Internal Revenue Code of 1986, as amended. In
connection therewith, each of the parties hereby agrees that the fair market
value of any Class I, Class II, Class III, Class IV or Class V assets (as
described in Section 1.1060-1(c)(2) of the Treasury Regulations) of Seller at
the Closing will be equal to their respective federal income tax bases to Seller
immediately prior thereto, and the excess of the total consideration (as
determined pursuant to Section 1.1060-1(c)(1) of the Treasury Regulations) paid
for the Purchased Assets by Buyer over such aggregate tax bases shall be
allocable to Class VI and Class VII assets as described in such Treasury
Regulations. Buyer and Seller shall cooperate in good faith to
mutually agree upon and complete IRS Form 8594 (Asset Acquisition Statement
Under Section 1060). Buyer shall prepare and deliver a draft IRS Form
8594 (Asset Acquisition Statement Under Section 1060) to Seller within 180 days
after the Closing Date and unless Seller objects to such draft IRS Form 8594
within ten day of its receipt from Buyer, Seller shall be deemed to have agreed
to such draft IRS Form 8594. Seller shall timely file such Form 8594
with the IRS reporting the transaction in compliance with this Section
2.15. In any proceeding related to the determination of any Tax, no
party may contend or represent that the allocation is not a current
allocation.
2.16 Name
Change. Seller shall
execute and deliver an amendment to its Articles of Incorporation to change its
name to a name other than Marketware Inc., Marketware Technologies or any
variant thereof in acceptable form to be filed with the California Secretary of
State office and any other jurisdiction where Seller is qualified to do business
within 180 days following the date of this Agreement; provided, however, that
for a period of one year following the Closing Date, Buyer hereby grants to
Seller the non-exclusive and terminable right and license to use the
name “Marketware Technologies” solely for purposes of facilitating
invoicing and billing of customers party to any Retained Partially Completed
Contract.
2.17 Employees. The term “Key Employees” shall
be defined as those individuals listed on Schedule 2.17 to the
Seller Disclosure Letter. Buyer hereby agrees to employ each Key
Employee in accordance with Buyer’s or Buyer’s affiliate’s form of
employment agreement (subject to such changes as the respective parties thereto
may hereafter agree in writing). Other than the Key Employees, Buyer
shall have no obligation to offer employment to any of Seller’s existing
employees.
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2.18
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Consent of Third
Parties.
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(a) Despite
anything to the contrary in this Agreement, this Agreement shall not constitute
an assignment or transfer of, or an agreement to assign or transfer, any
Governmental Approval (defined below), contract, instrument, lease, permit or
other agreement or arrangement or any claim, right or benefit arising thereunder
or resulting therefrom if an assignment or transfer or an attempt to make such
an assignment or transfer without the consent of a third party would constitute
a breach or violation thereof or would violate any applicable law or regulation,
or would otherwise affect adversely the rights of Seller or Buyer thereunder;
and any transfer or assignment by Seller of any interest under any such
Governmental Approval, contract, instrument, lease, permit or other agreement or
arrangement that requires the consent or approval of a third party shall be made
subject to such consent or approval being first obtained. As used
herein, “Governmental
Approval” means any consent, approval, authorization, waiver, permit,
grant, franchise, concession, agreement, license, exemption or order of,
registration, certificate, declaration or filing with, or report or notice to,
any federal, state or local government, or any political subdivision thereof,
any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, including, without
limitation, any governmental authority, agency, department, board, commission or
instrumentality of the United States, any state of the United States or any
political subdivision thereof, and any tribunal or arbitrator(s) of competent
jurisdiction, and any self-regulatory organization.
(b) Seller
will give any required notices, and Buyer and Seller will cooperate following
the Closing, using their respective commercially reasonable best efforts, in
order to obtain necessary third party consents to the sale and transfer of the
Purchased Assets as contemplated by this Agreement.
(c) Seller
and Buyer will give any notices to, make any filings with, and use its
commercially reasonable efforts to obtain any Governmental Approval in
connection with the consummation of the transactions contemplated by this
Agreement.
(d) With
respect to any consents or approvals that have not been obtained on or before
the Closing Date, Seller and Buyer shall cooperate in any lawful arrangement
that is reasonable for both Buyer and Seller (considering all relevant factors
including practicality, financial burden and risk) to provide that Buyer shall
receive the interest of Seller in the net benefits under any such Governmental
Approval, contract, instrument, lease, permit or other agreement or arrangement
or any claim, right or benefit arising thereunder or resulting
therefrom. Such arrangements may include (if lawful and reasonable
considering all relevant factors) the performance by Buyer as agent for Seller
such that Buyer will derive the benefit of such agreement to the extent that
Buyer would have benefited if the necessary third party consent or approval had
been obtained. Seller and Buyer agree to use their respective good
faith, commercially reasonable efforts to negotiate and document any such
arrangements.
2.19 Holdback
Cash. On the Closing Date Buyer shall retain the Holdback Cash
to be held by Xxxxxxx Xxxxxxx, P.C. (“Escrow Agent”) in
escrow to satisfy any claims by Buyer against Seller or Shareholder for a period
of up to one (1) year after the Closing Date (the “Escrow Period”), in
accordance with the terms of this Agreement and that certain Escrow Agreement,
dated December 31, 2009, among, Buyer, Seller Shareholder. At the end
of each calendar month during the Escrow Period Buyer shall, in good faith,
determine the amount of any claims under this Agreement and deliver to Seller
notice of the amount of Holdback Cash to be disbursed to address any such claims
by Buyer. Following the expiration of the Escrow Period, Buyer shall
cause the remaining balance of the Holdback Cash, after the payment of all such
claims and reservation of amounts reasonably deemed sufficient to satisfy
unresolved claims of which Seller has been provided prior written notice, to be
distributed by the Escrow Agent to Seller within five (5) Business Days in
accordance with the terms of this Agreement. The costs and expenses
associated with the establishment and maintenance of the escrow of the Holdback
Cash shall be borne solely by Buyer.
2.20 Retained
Partially Completed Contracts. There are certain uncompleted
customer contracts of Seller that will be retained by Seller after Closing,
either because such contracts were already substantially fulfilled and billed by
Seller prior to Closing, or because the consent to assignment of the contract
cannot be obtained from the customer, or for other reasons. All of
these retained partially completed customer contracts (the “Retained Partially Completed
Contracts”) are listed on Schedule 2.20 to the
Seller Disclosure Letter. Seller shall retain the Retained Partially
Completed Contracts following the Closing, and will retain the obligations and
duties under the Retained Partially Completed Contracts following
Closing. Seller hereby agrees to utilize Buyer exclusively as
Seller’s agent to perform the services to the customer required to complete each
Retained Partially Completed Contracts (other than Prohibited Retained Partially
Completed Contracts) following Closing. Seller and Buyer shall
cooperate with each other in good faith to ensure that all customers party to a
Retained Partially Completed Contract (other than Prohibited Retained Partially
Completed Contracts), properly direct to Seller all payments owed to Seller
thereunder. In the event that through error or mistake, any customer
party to a Retained Partially Completed Contract (other than Prohibited Retained
Partially Completed Contracts), directly pays Buyer for any amount owed by such
customer to Seller under a party to a Retained Partially Completed Contract
(other than Prohibited Retained Partially Completed Contracts), Buyer shall
promptly forward such misdirected amounts to Seller. Buyer and its Affiliates
shall have no obligation to perform any of Seller’s obligations under any
Prohibited Retained Partially Completed Contract; provided, however, that Seller
shall promptly pay to Buyer any gross profit generated by Seller under a
Prohibited Retained Partially Completed Contract after the Closing such that
upon paying Buyer such gross profit, no gross profit is realized by Seller
following the Closing under such Prohibited Retained Partially Completed
Contract. For purposes of this Agreement, the term “Prohibited
Retained Partially Completed Contract” shall mean a Retained Partially Completed
Contract that by its express written terms prohibits Seller from having Seller’s
obligations under such Retained Partially Completed Contract performed by Buyer
or its Affiliates as Seller’s subcontractor.
(a) In
order to fulfill any obligation or duty under the Retained Partially Completed
Contracts to deliver products to the customer following the Closing, Seller
shall acquire such products exclusively from Buyer, at a price equal to the
price to be billed to the customer under the Retained Partially Completed
Contract, such that any gross profit generated from deliveries of products to
the customer under the Retained Partially Completed Contracts after the Closing
is fully realized by Buyer and no gross profit is realized by Seller following
the Closing.
(b) Seller
shall engage Buyer, as Seller’s exclusive agent, to perform any and all services
that are required to complete the Retained Partially Completed Contracts (other
than Prohibited Retained Partially Completed Contracts), billing Seller for such
services at Buyer’s Service Billing Rates (defined below) for such
services. Buyer’s hourly billing rates for service work, which shall
apply for all purposes under this Agreement, are set forth on Schedule 2.20(b) to
the Seller Disclosure Letter (the “Buyer’s Service Billing
Rates”).
2.21 Acquired
Partially Completed Contracts. There will be certain partially
completed customer contracts of Seller, other than the
Acquired Contacts (as defined below), that will be assigned or
conveyed to Buyer by Seller pursuant to this Agreement for which Seller has
already performed a certain portion of such contracts prior to closing, and/or
Seller has already billed the customer prior to Closing for a portion of such
contracts, which acquired partially completed contracts are listed on Schedule 2.21 to the
Seller Disclosure Letter (the “Acquired Partially Completed
Contracts”). Following the Closing, Seller and Buyer shall
cooperate to ensure that Buyer and Seller share in the Economic Benefit (defined
below) of each of the Acquired Partially Completed Contracts based on the
percentage of the total contract that was completed by Seller prior to the
Closing as compared to the total percentage of the contract that was completed
by Buyer following the Closing. For this purpose, the percentage of
completion of each such Acquired Partially Completed Contract shall be
calculated based upon the total Direct Cost (defined below) of performing such
contract incurred by Seller prior to the Closing, as compared to the total
Direct Cost of performing such contract by Buyer following the Closing,
calculated after the Acquired Partially Completed Contract is completed by Buyer
following the Closing. As used in this Section 2.21, the term “Direct Cost” shall
mean any (a) direct cost of inventory, goods and equipment, including freight
and shipping costs, (b) direct, unburdened labor cost of technician and/or
engineering employees, and (c) direct cost of a subcontractor used to perform
the contract; provided that Seller’s Direct Cost shall be reduced by the amount
of any warranty claim by customer or rejection of deliverables by customer that
occur after the Closing but relate to goods or services provided by Seller prior
to the Closing. Buyer shall incur no Direct Cost of performing such
contracts prior to the Closing and Seller shall incur no Direct Cost of
performing such contracts after the Closing. Schedule 2.21 to the
Seller Disclosure Letter sets forth all of the Direct Cost that Seller has
incurred in performing the Acquired Partially Completed Contracts as of the
Closing Date and shall be the Direct Cost used following the Closing to
calculate the percentage of total Direct Cost incurred by Seller prior to the
Closing as compared to the percentage of total Direct Cost incurred by Buyer
following the Closing. After each of the Acquired Partially Completed
Contracts has been completed by Buyer following the Closing, Buyer shall, as
soon as practicable, provide Seller with a complete accounting of the cost
incurred by Buyer in performing such contract, and Buyer shall pay Seller, or
Seller shall pay Buyer, as the case may be, in order to ensure that Buyer and
Seller each receive their appropriate percentage of the total Economic Benefit
from each such contract. As used in this Section 2.21, the term
“Economic
Benefit” shall mean the total contract amount less the total of all
combined Direct Costs incurred by Seller and Buyer in the performance of such
contract, and shall take into consideration which party (Buyer or Seller)
received funds from the customer in payment of such contract.
2.22 Warranty
Matters. Buyer is not assuming any liability to perform
warranty work for equipment or services provided by Seller to customers prior to
the Closing Date. Seller shall be responsible for the cost of
supplying warranty service, if any, after the Closing Date related to revenue
recognized by Seller prior to the Closing. Because (i) Seller will
not have the necessary resources to perform such warranty service after the
Closing, (ii) performing such warranty service in a satisfactory manner is
necessary in order to maintain a satisfactory customer relationship between the
customer and Buyer following the Closing, (iii) the cost of performing such
warranty service cannot be determined until the warranty service period is
completed, and (iv) if Seller was unable or unwilling to ensure that such
warranty service was provided such could result in a material adverse effect on
Buyer’s relationship with a customer following the Closing, Buyer and Seller
agree as follows:
(a) After
the Closing, Buyer will perform the above-referenced warranty service on behalf
of Seller, using commercially reasonable efforts to perform such warranty
services in a satisfactory and efficient manner.
(b) Buyer
shall invoice Seller for all such warranty service, invoicing Seller for such
services at a rate of seventy five percent (75%) of Buyer’s Service Billing
Rates for service work and at a ten percent (10%) markup for parts, inventory,
or subcontracted services used in the performance of such warranty service, and
Seller shall pay such invoices within thirty (30) days of invoice date. Any
amounts that remain unpaid by Seller to Buyer for the performance by Buyer of
the above-mentioned warranty service shall be offset from the Additional
Purchase Consideration or any other amount owed or payable by Buyer to Seller or
Shareholder under this Agreement.
2.23 Buyer Purchase of
Required Unreceived Inventory. Buyer shall purchase, as
required to fulfill orders for customers, the products that Seller had on order
with Seller’s vendors on the Closing Date, but which were not received into
Seller’s inventory on the Closing Date, including the inventory which was on
order with Seller’s vendors on the Closing Date listed on Schedule 2.23 to the
Seller Disclosure Letter, but only to the extent necessary to fulfill Buyer’s
customers orders, including but not limited to the Acquired Contracts and
Buyer’s acquired interest in the Acquired Partially Completed
Contracts. The price paid by Buyer for Seller’s inventory shall be
equal to Seller’s actual cost from Seller’s vendor of such inventory, including
freight and shipping cost from Seller’s vendor for such products, and Buyer
shall pay Seller for such inventory purchases on the date that Seller’s invoice
is due to Seller’s vendor or finance company for Seller’s purchase of such
inventory from Seller’s vendor.
2.24 Customer
Payments. Following the Closing, it is anticipated that
certain customers might possibly pay the incorrect party for invoices of the
other party, due to administrative error, or for other reasons. Buyer
and Seller agree to pay to the other party any payments received by one party
that rightfully belong to the other party within five business days of receipt
of such payment.
2.25 Post-Closing
Activity of Seller. In order to ensure that Seller meets its
financial obligations to Buyer as provided for in Sections 2.20, 2.21, 2.22 and
2.24 hereof following the Closing, Seller and Shareholder agree as
follows:
(a) Until
the earlier of (i) the expiration of the Escrow Period or (ii) Buyer has issued
written instruction to the Escrow Agent to release the entire balance of the
Holdback Cash to Seller as provided for herein, Shareholder will be the only
officer, director and shareholder of Seller;
(b) Until
the earlier of (i) the expiration of the Escrow Period or (ii) Buyer has issued
written instruction to the Escrow Agent to release the entire balance of the
Holdback Cash to Seller as provided for herein, Shareholder will cause Seller to
maintain capital sufficient to meet Seller’s obligations to Buyer under Sections
2.20, 2.21, 2.22 and 2.24 hereof;
(c) Until
the earlier of (i) the expiration of the Escrow Period or (ii) Buyer has issued
written instruction to the Escrow Agent to release the entire balance of the
Holdback Cash to Seller as provided for herein, neither Seller nor Shareholder
shall grant any Security Interest in any assets of Seller; and
(d) Shareholder
hereby personally guarantees the prompt and complete payment of all amounts owed
by Seller to Buyer under Sections 2.20, 2.21, 2.22 and 2.24 hereof.
(e) Shareholder
and Seller hereby acknowledge and agree that Buyer shall have the right but not
the obligation to set-off any amount payable to Buyer by Seller or Shareholder
pursuant to Sections 2.20, 2.21, 2.22, 2.23 or 2.24 against Additional Purchase
Consideration or any amount owed or payable by Buyer to Seller or Shareholder
under this Agreement at Closing or thereafter.
(f)
Seller shall maintain and operate all Employee Benefit Plans (as defined in
Section 3.1(p)(i) below) in accordance with all applicable requirements of
ERISA, the Internal Revenue Code and all other applicable laws. In
the event that Seller elects to terminate any Employee Benefits Plan Seller
shall be responsible for all costs associated with terminating such Employee
Benefit Plan.
ARTICLE
III.
REPRESENTATIONS AND
WARRANTIES CONCERNING THE TRANSACTION
3.1 Representations
and Warranties of Seller and Shareholder. Seller and
Shareholder jointly and severally represent and warrant to Buyer that the
statements contained in this Section 3.1 are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Section 3.1 with respect to
itself). Seller and Shareholder further jointly and severally
represent and warrant to Buyer as follows:
(a) Organization, Qualification,
and Corporate Power. Seller is a corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its
incorporation. Seller is duly authorized to conduct business and is
in good standing under the laws of each jurisdiction where such qualification is
required, except where the lack of such qualification would not have a Material
Adverse Effect on the business, financial condition, operations, results of
operations, or future prospects of Seller. Seller has full corporate
power and authority to carry on the businesses in which it is engaged and to own
and use the properties owned and used by it. Schedule 3.1(a) to
the Seller Disclosure Letter lists the shareholders, directors and officers of
Seller. For purposes of this Agreement, the term "Material Adverse
Effect" shall mean, with respect to any Person, any change or effect that
is materially adverse to the business, assets, operations, financial condition
or results of operations or future prospects of such Person and its
subsidiaries, either separately or when taken as a whole.
(b) Non-Contravention. Neither
the execution and the delivery of this Agreement or any Ancillary Agreement (as
defined in Section 3.1(u) below) to which Seller is party, nor the consummation
of the transactions contemplated hereby or thereby, will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which Seller is subject or any provision of the charter or bylaws of
Seller or (ii) conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any agreement,
contract, lease, license, instrument, or other arrangement to which Seller is a
party or by which it is bound or to which its assets are subject (or result in
the imposition of any Security Interest upon any of its assets), except where
the violation, conflict, breach, default, acceleration, termination,
modification, cancellation, failure to give notice, or Security Interest would
not have a Material Adverse Effect on Seller or on the ability of the parties to
consummate the transactions contemplated by this Agreement. Seller
does not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the parties to consummate the transactions contemplated by this
Agreement, except where the failure to give notice, to file, or to obtain any
authorization, consent, or approval would not have a Material Adverse Effect on
Seller or on the ability of the parties to consummate the transactions
contemplated by this Agreement.
(c) Brokers' Fees.
Neither Seller nor any Shareholder has any liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
(d) Title to Assets.
Except for the Security Interests expressly set forth on Schedule 3.1(d) to
the Seller Disclosure Letter (the “Permitted Liens”),
Seller has good and marketable title to, or a valid leasehold interest in, the
Purchased Assets, free and clear of any Security Interest. Upon the
sale, assignment, transfer and conveyance of the Purchased Assets to Buyer
hereunder, there will be vested in Buyer good and marketable title to all
Purchased Assets, free and clear of all Security Interests other than Permitted
Liens.
(e) Financial Statements.
Attached as Schedule
3.1(e) to the Seller Disclosure Letter are the balance sheets and
statements of income, as of and for the fiscal years ended December 31, 2007 and
December 31, 2008 (the “Most Recent Fiscal Year
End”), as well as for the eleven months ended November 30, 2009 for
Seller (collectively the “Financial
Statements”), which Seller represents are the true and correct balance
sheets and statements of income for such periods, and which have been prepared
on a consistent basis.
(f) Events Subsequent to Most
Recent Fiscal Year End. Since the Most Recent Fiscal Year End,
Seller has operated consistent with past custom and practice, including with
respect to quantity and frequency and in compliance with all applicable laws and
regulations (the “Ordinary Course of
Business”); all of Seller’s financial statements for monthly periods
since the Most Recent Fiscal Year End have been prepared on a consistent basis;
and there has not been any Material Adverse Effect. Without limiting the
generality of the foregoing since that date:
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(i)
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no
party (including Seller) has accelerated, terminated, made material
modifications to, or canceled any material agreement, contract, lease, or
license to which any of Seller or its Affiliates is a party or by which
any of them is bound;
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(ii)
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Seller
has not imposed any Security Interest upon any of its assets, tangible or
intangible other than Permitted
Liens;
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(iii)
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Seller
has not granted any license or sublicense of or Security Interest in any
material rights under or with respect to any Intellectual
Property;
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(iv)
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Seller
has not experienced any material damage, destruction, or loss (whether or
not covered by insurance) to the Purchased
Assets;
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(v) Except
as set forth on Schedule 3.1(f)(v) to
the Seller Disclosure Letter, Seller has not granted any increase in the base
compensation of any of its directors, officers, and employees outside of the
Ordinary Course of Business;
(vi) Seller
has not suffered any Material Adverse Effect and no event has occurred which, so
far as reasonably can be foreseen, may result in any such Material Adverse
Effect;
(vi)
Seller
has not committed to do any of the foregoing actions in this Section
3.1(f).
(g) Undisclosed
Liabilities. Seller does not have any material liability,
whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due, including any liability for Taxes, except for
(i) Liabilities set forth on the face of the Financial Statements (rather than
in any notes thereto) and (ii) Liabilities which have arisen after the Most
Recent Fiscal Year End in the Ordinary Course of Business.
(h) Legal
Compliance. Seller has complied with all applicable laws
(including rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof), and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, or notice has been
filed or commenced against it alleging any failure so to comply, except where
the failure to comply would not have a Material Adverse Effect on the Purchased
Assets.
(i) Tax
Matters.
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(i)
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Seller
and each of its Affiliates have filed all income tax returns that they
were required to file. All such income tax returns were correct
and complete in all material respects. All Taxes owed by Seller (whether
or not shown on any income tax return) have been paid. Seller currently is
not the beneficiary of any extension of time within which to file any
income tax return.
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(ii)
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There
is no material dispute or claim concerning any liability of Seller or any
of its Affiliates for any Taxes either (A) claimed or raised by any
authority in writing or (B) as to which Seller or any director or officer
of Seller has knowledge.
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(iii)
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Neither
Seller nor any of its Affiliates has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to an
income tax assessment or
deficiency.
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(iv)
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Seller
has not filed a consent under Section 341(f) of the Internal Revenue Code
concerning collapsible corporations. Seller has not made any material
payments, is not obligated to make any material payments, or is not a
party to any agreement that under certain circumstances could obligate it
to make any material payments that will not be deductible under Section
280G of the Internal Revenue Code. Seller has never been a United States
real property holding corporation within the meaning of Section 897(c)(2)
of the Internal Revenue Code during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Internal Revenue Code. Seller is not a
party to any tax allocation or sharing agreement. Seller (A) has never
been a member of an affiliated group filing a consolidated federal income
tax return (other than a group the common parent of which was Seller) or
(B) does not have any liability for the Taxes of any person (other than
Seller) under Reg. §1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or
otherwise.
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(v)
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Seller
has withheld and paid or has sufficient cash reserved for all Taxes
required to have been withheld and paid in connection with amounts paid or
owing to or on behalf of any employee, independent contractor, creditor,
stockholder, or other third party.
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(j)
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Real
Property.
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(i) Seller
does not own any real property.
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(ii)
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Schedule
3.1(j)(ii) to the Seller Disclosure Letter lists and describes
briefly all real property leased or subleased by Seller. Seller has
delivered to Buyer correct and complete copies of the leases and subleases
listed in Schedule 3.1
(j)(ii). With respect to each material lease and sublease listed in
Schedule
3.1(j)(ii):
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(A)
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the
lease or sublease is legal, valid, binding, enforceable, and in full force
and effect in all material
respects;
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(B)
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to
the knowledge of Seller, no party to the lease or sublease is in material
breach or default, and no event has occurred which, with notice or lapse
of time, would constitute a material breach or default or permit
termination, modification, or acceleration
thereunder;
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(C)
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no
party to the lease or sublease has repudiated any material provision
thereof;
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(D)
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there
are no material disputes, oral agreements, or forbearance programs in
effect as to the lease or sublease;
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(E)
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Seller
has not assigned, transferred, conveyed, mortgaged, deeded in trust, or
encumbered any interest in the leasehold or subleasehold;
and
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(F)
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to
the knowledge of Seller, all facilities leased or subleased thereunder
have received all approvals of governmental authorities (including
material licenses and permits) required in connection with the operation
thereof, and have been operated and maintained in accordance with
applicable laws, rules, and regulations in all material
respects.
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(k)
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Intellectual
Property.
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(i)
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To
the knowledge of Seller, neither Seller nor any of its Affiliates has
interfered with, infringed upon, misappropriated, or violated any
intellectual property rights of third parties in any material respect, and
Seller has never received any charge, complaint, claim, demand, or notice
alleging any such interference, infringement, misappropriation, or
violation (including any claim that Seller or any of its Affiliates must
license or refrain from using any intellectual property rights of any
third party). To the knowledge of Seller, no third party has interfered
with, infringed upon, misappropriated, or violated any intellectual
property rights of Seller in any material
respect.
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(ii)
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Schedule
3.1(k)(ii) to the Seller Disclosure Letter identifies each patent
or registration which has been issued to Seller with respect to any of its
intellectual property, identifies each pending patent application or
application for registration which Seller has made with respect to any of
its intellectual property, and identifies and describes each material
license, agreement, or other permission which Seller has granted to any
third party with respect to any of its intellectual property (together
with any exceptions). Seller has delivered to Buyer correct and complete
copies of all such patents, registrations, applications, licenses,
agreements, and permissions (as amended to date). Schedule
3.1(k)(ii) also identifies each domain name, universal resource
locator, trademark, service xxxx, trade name, copyright or unregistered
trademark used by Seller in connection with Seller’s Business. With
respect to each item of intellectual property required to be identified in
Schedule
3.1(k)(ii):
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(A)
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Seller
possesses all right, title, and interest in and to the item, free and
clear of any Security Interest, licenses, or other
restrictions;
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(B)
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the
item is not subject to any outstanding injunction, judgment, order,
decree, ruling, or charge;
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(C)
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no
action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand is pending or, to the knowledge of Seller, threatened
which challenges the legality, validity, enforceability, use, or ownership
of the item; and
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(D)
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Seller
has not agreed to indemnify any person for or against any interference,
infringement, misappropriation, or other conflict with respect to the
item.
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(iii)
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Schedule
3.1(k)(iii) to the Seller Disclosure Letter identifies each
material item of intellectual property that any third party owns and that
Seller uses pursuant to license, sublicense, agreement, or permission,
other than commercially available shrink-wrap software license agreements
for off-the-shelf software products entered into by Seller in the ordinary
course of business. Seller has delivered to Buyer correct and complete
copies of all such licenses, sublicenses, agreements, and permissions (as
amended to date). With respect to each item of intellectual property
required to be identified in Schedule
3.1(k)(iii):
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(A)
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to
the knowledge of Seller, the license, sublicense, agreement, or permission
covering the item is legal, valid, binding, enforceable, and in full force
and effect in all material
respects;
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(B)
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no
party to the license, sublicense, agreement, or permission is in material
breach or default, and no event has occurred which with notice or lapse of
time would constitute a material breach or default or permit termination,
modification, or acceleration
thereunder;
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(C)
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no
party to the license, sublicense, agreement, or permission has repudiated
any material provision thereof; and
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(D)
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Seller
has not granted any sublicense or similar right with respect to the
license, sublicense, agreement, or
permission.
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(iv)
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Seller
has secured valid written assignments of intellectual property rights from
all independent contractors, consultants and employees who contributed to
the creation or development of the Purchased Assets that Seller does not
already own by operation of law.
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(v)
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Seller
has taken all necessary and appropriate steps to protect and preserve the
confidentiality of all proprietary Purchased Assets not otherwise
protected by patents, patent applications or copyrights. All
use, disclosure or appropriation of all assets owned by Seller or licensed
to Seller by a third party have been pursuant to the terms of a written
agreement between Seller, on the one hand, and such third party, on the
other hand.
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(vi)
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to
the best knowledge of Seller, no employee of Seller is obligated under any
contract (including licenses, covenants or commitments of any nature) or
other agreement, or subject to any judgment, decree or order of any court
or administrative agency, that would interfere with the use of such
employee’s best efforts to promote the interests of Seller and no employee
of Seller was hired in tortious interference with an employment
arrangement.
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(l) Inventory;
Contracts.
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(i)
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To
the best of Seller’s knowledge, the Inventory (a) consists of items which
are in all material respects free of any defect, fault, imperfection,
impurity or dangerous propensity of any kind, (b) is of a quality and
quantity usable and salable in the ordinary and usual course of business
and (c) is owned by Seller.
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(ii)
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There
are no contracts or other agreements to which Seller is a party that in
any way burdens or otherwise effects any of the Purchased Assets,
restricts Seller’s use of any of the Purchased Assets for their intended
purpose or obligates Seller to pay any other party based on Seller’s
ownership and use of the Purchased
Assets.
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(iii)
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Seller
has delivered to Buyer all contracts and other agreements to which Seller
is a party and that are included in the Purchased Assets (subject only to
the receipt of all necessary consents to the assignment of such contracts
and agreements to Buyer),
including:
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(A) any
agreement (or group of related agreements) for the lease of real or personal
property to or from any Person providing for lease or rental
payments;
(B) all
customer contracts related to Seller’s Business as of the date of this
Agreement;
(C) any
agreement or group of related agreements for the sale of supplies, products, or
other personal property, or for the furnishing or receipt of services, the
performance of which will extend over a period of more than one year from the
date of such agreement or from the date of this Agreement;
(D) any
agreement concerning a partnership or joint venture;
(E) any
agreement or group of related agreements under which Seller created, incurred,
assumed, or guaranteed any indebtedness for borrowed money, or any capitalized
lease obligation, or under which Seller has imposed an encumbrance of any kind
on any of the Purchased Assets, tangible or intangible;
(F) any
agreement concerning confidentiality or non-competition with respect to Seller’s
Business; and
(G) any
agreement under which the consequences of a default or termination could
possibly have a Material Adverse Effect on Seller’s Business.
With
respect to each of the contracts and / or agreements mentioned above in this
Section 3.1(l), (1) to the best of Seller knowledge, the agreement is legal,
valid, binding, enforceable, and in full force and effect; (2) the agreement
will continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby, subject to the receipt of all necessary consents to the
assignment of such agreements to Buyer to the extent such agreements may be
assigned, and, with respect to enforcement, except as such enforcement may be
limited by bankruptcy, insolvency, moratorium and other similar laws affecting
creditors’ rights generally and to general principles of equity, (3) Seller is
not in breach or default, and no other party is in breach or default, under the
agreement, and no event has occurred which with notice or lapse of time would
constitute a breach or default, or permit termination, modification, or
acceleration, under the agreement; and (4) Seller has not repudiated and no
other party has repudiated, any provision of the
agreement. Seller makes no warranty to Buyer regarding the
assignability of any individual contract and/or agreement other than as
indicated by the specific terms and/or conditions set forth
therein. However, Seller and Shareholder agree to use reasonable
commercial efforts to assist Buyer in securing assignment of the contracts
and/or agreements mentioned above in this Section 3.1(l).
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(m)
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[INTENTIONALLY
OMITTED]
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(n) Litigation. Schedule 3.1(n) to
the Seller Disclosure Letter sets forth each instance in which Seller (i) is
subject to any outstanding injunction, judgment, order, decree, ruling, or
charge or (ii) is a party or, to the knowledge of Seller, is
threatened to be made a party to any action, suit, proceeding, hearing, or
investigation of, in, or before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator.
(o) Employees. To the
knowledge of Seller, no executive, key employee, or significant group of
employees plans to terminate employment with Seller, except as contemplated by
consummation of the transaction provided for in this Agreement. Seller is not a
party to or bound by any collective bargaining agreement, nor has it experienced
any strike or material grievance, claim of unfair labor practices, or other
collective bargaining dispute within the past three years. Seller has
not committed any material unfair labor practice. Neither Seller nor any of the
directors and officers of Seller has any knowledge of any organizational effort
presently being made or threatened by or on behalf of any labor union with
respect to employees of Seller. Schedule 3.1(o) to
the Seller Disclosure Letter sets forth a true and complete list
of: (i) the names, title and current salaries of all officers of
Seller; (ii) the wage rates (or wages if applicable) for each exempt and
nonexempt, salaried and hourly employees of Seller; (iii) all scheduled or
contemplated increases in compensation or bonuses; and (iv) all scheduled or
contemplated employee promotions.
(p) Employee
Benefits.
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(i)
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Schedule 3.1(p)
to the Seller Disclosure Letter lists any plan, program, arrangement,
agreement or commitment which is an employment, consulting,
non-competition or deferred compensation agreement, or an executive
compensation, incentive bonus or other bonus, employee pension, profit
sharing, savings, retirement, stock option, stock purchase, stock
appreciation rights, severance pay, life, health, disability or accident
insurance plan, corporate-owned or key-man life insurance or other
employee benefit plan as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”) that
Seller maintains or to which Seller contributes or has any obligation to
contribute (each an “Employee Benefit
Plan”).
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(A)
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Each
Employee Benefit Plan (and each related trust, insurance contract, or
fund) complies in form and in operation in all material respects with the
applicable requirements of ERISA, the Internal Revenue Code of 1986, as
amended (the “Internal Revenue
Code”), and other applicable
laws.
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(B)
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All
required reports and descriptions (including Form 5500 Annual Reports,
summary annual reports, PBGC-l's, and summary plan descriptions) have been
timely filed and distributed appropriately with respect to each Employee
Benefit Plan. The requirements of COBRA have been met in all
material respects with respect to each Employee Benefit Plan which is an
Employee Welfare Benefit Plan (as defined in ERISA
§3(1)).
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(C)
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All
contributions (including all employer contributions and employee salary
reduction contributions) which are due have been paid to each Employee
Benefit Plan which is an Employee Pension Benefit Plan (as defined in
ERISA §3(2)) and all contributions for any period ending on or before the
Closing Date which are not yet due have been paid to each Employee Pension
Benefit Plan or accrued in accordance with the past custom and practice of
Seller. All premiums or other payments for all periods ending on or before
the Closing Date have been paid with respect to each Employee Benefit Plan
which is an Employee Welfare Benefit
Plan.
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(D)
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Each
Employee Benefit Plan which is an Employee Pension Benefit Plan meets the
requirements of a "qualified plan" under Internal Revenue Code §401(a),
has received, within the last two years, a favorable determination letter
from the Internal Revenue Service that it is a "qualified plan," and
Seller is not aware of any facts or circumstances that could result in the
revocation of such determination
letter.
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(ii)
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With
respect to each Employee Benefit Plan that Seller and any ERISA affiliate
maintains or ever has maintained or to which any of them contributes, ever
has contributed, or ever has been required to
contribute:
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(A)
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No
Employee Benefit Plan which is an Employee Pension Benefit Plan (other
than any Multiemployer Plan) has been completely or partially terminated
or been the subject of a reportable event as to which notices would be
required to be filed with the PBGC. No proceeding by the PBGC to terminate
any Employee Pension Benefit Plan (other than any Multiemployer Plan) has
been instituted or threatened.
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(B)
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There
have been no prohibited transactions with respect to any Employee Benefit
Plan. No fiduciary has any Liability for material breach of fiduciary duty
or any other material failure to act or comply in connection with the
administration or investment of the assets of any Employee Benefit Plan.
No action, suit, proceeding, hearing, or investigation with respect to the
administration or the investment of the assets of any Employee Benefit
Plan (other than routine claims for benefits) is pending or
threatened.
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(C)
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Seller
has not incurred any Liability to the PBGC (other than PBGC premium
payments) or otherwise under Title IV of ERISA (including any withdrawal
liability as defined in ERISA §4201) or under the Internal Revenue Code
with respect to any Employee Benefit Plan which is an Employee Pension
Benefit Plan.
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(iii)
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Seller
does not contribute to, has never contributed to, and never has been
required to contribute to any multiemployer plan or has any Liability,
including any withdrawal liability (as defined in ERISA §4201), under any
Multiemployer Plan.
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(iv)
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Except
as otherwise disclosed on Schedule 3.1(p)
to the Seller Disclosure Letter, Seller does not maintain and has never
maintained or contributed, or ever has been required to contribute to any
Employee Welfare Benefit Plan providing medical, health, or life insurance
or other welfare-type benefits for current or future retired or terminated
employees, their spouses, or their dependents (other than in accordance
with COBRA).
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(q) Guaranties. Seller
is not a guarantor of, nor is Seller otherwise responsible for, any Liability of
any other Person.
(r) Authorization of
Transaction. Seller has full power and authority to execute and deliver
this Agreement and each of the Ancillary Agreements to which it is a party and
to perform its obligations hereunder and thereunder. Shareholder has
full legal capacity to enter into, execute and deliver this Agreement and each
Ancillary Agreement to which such Shareholder is a party, to fully perform his
obligations hereunder and thereunder. This Agreement and each of the
Ancillary Agreements constitutes the valid and legally binding obligation of
Seller and Shareholder, enforceable in accordance with their respective terms
and conditions, except (i) as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or other laws of general application now
or hereafter in effect relating to the rights and remedies of creditors, and
(ii) that the availability of the remedy of specific performance or of
injunctive or other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding
therefore may be brought. Neither Seller nor any shareholder needs to
give any notice to, make any filing with, or obtain any authorization, consent,
or approval of any government or governmental agency in order to consummate the
transactions contemplated by this Agreement or any of the Ancillary
Agreements.
(s) Tangible
Assets. Except as set forth in Schedule 3.1(s) to
the Seller Disclosure Letter, the Purchased Assets are free from defects (patent
and latent), have been maintained in accordance with normal industry practice,
are in good operating condition and repair (subject to normal wear and tear),
and are suitable for the purposes for which it presently is used and presently
is proposed to be used. The Personal Property items listed on Schedule 1.1(a) to
the Seller Disclosure Letter are substantially all of the tangible assets that
are being used by Seller to operate the Seller’s Business.
(t) Environmental
Matters.
(i) Except
as set forth in Schedule 3.1(t) to
the Seller Disclosure Letter or in compliance with applicable Environmental
Laws, (A) to the best of Seller’s and Shareholder’s knowledge, Seller has never
generated, transported, used, stored, treated, disposed of or managed any
Hazardous Waste (as defined below); (B) while Seller has leased the real
property listed on Schedule 3.1(j)(ii)
to the Seller Disclosure Letter, no Hazardous Material (as defined below) has
ever been spilled, released or disposed of at the real property listed on Schedule 3.1(j)(ii),
or has ever been located in the soil or groundwater at any such property; (C)
while Seller has leased the real property listed on Schedule 3.1(j)(ii),
no Hazardous Material has ever been transported from any real property listed on
Schedule
3.1(j)(ii) for treatment, storage or disposal at any other place; (D) to
the best of Seller’s and Shareholder’s knowledge, Seller does not presently own,
operate, lease or use any site on which underground storage tanks are located;
and (E) while Seller has leased the real property listed on Schedule 3.1(j)(ii),
no Security Interest has ever been imposed by any governmental agency on any of
the Purchased Assets as a result of the violations of Environmental Laws (as
defined below).
(ii) Except
as set forth in Schedule 3.1(t) to
the Seller Disclosure Letter, (A) to the best of Seller’s knowledge, Seller has
no material liability under, nor has it ever violated, any Environmental Law (as
defined below) with respect to any property listed on Schedule 3.1(j)(ii)
to the Seller Disclosure Letter; (B) each property listed on Schedule 3.1(j)(ii)
and any facilities and operations thereon, are presently in compliance with all
applicable Environmental Laws; (C) Seller has never entered into or been subject
to any judgment, consent decree, compliance order or administrative order with
respect to any environmental or health and safety matter or received any request
for information, notice, demand letter, administrative inquiry or formal or
informal complaint or claim with respect to any environmental or health and
safety matter or the enforcement of any Environmental Law; and (D) Seller has no
reason to believe that any of the items enumerated in clause (C) of this
Subsection will be forthcoming.
(iii) Except
as set forth in Schedule 3.1(t) to
the Seller Disclosure Letter, to the knowledge of Seller, no property listed on
Schedule
3.1(j)(ii) to the Seller Disclosure Letter contains any asbestos or
asbestos-containing material, any polychlorinated biphenyls (“PCB”s) or equipment
containing PCBs, or any urea formaldehyde foam insulation.
(iv) Seller
shall provide to Buyer, at or prior to the Closing, copies of all documents,
records, and information available to it concerning any environmental or health
and safety matter relevant to Seller regarding any of the property listed on
Schedule
3.1(j)(ii) to the Seller Disclosure Letter, whether generated by Seller
or others, including, without limitation, environmental audits, environmental
risk assessments, site assessments, documentation regarding off-site disposal of
Hazardous Materials, spill control plans and reports, correspondence, permits,
licenses, approvals, consents and other authorizations related to environmental
or health and safety matters issued by any governmental agency.
(v) For
purposes of this Section 3.1(t), (i) “Hazardous Material”
shall mean and include any hazardous waste, hazardous material, hazardous
substance, petroleum product, oil, toxic substance, pollutant, contaminant or
other substance which may pose a threat to the environment or to human health or
safety, as defined or regulated under any Environmental Law; (ii) “Hazardous Waste”
shall mean and include any hazardous waste as defined or regulated under any
Environmental Law; and (iii) “Environmental Law”
shall mean any environmental or health and safety-related law, regulation, rule,
ordinance or bylaw at the foreign, federal, state or local level, whether
existing as of the date hereof, previously enforced or subsequently
enacted.
(u) Consents. Except
as set forth on Schedule 3.1(u), no
consent of any third party is required to be obtained by Seller for the
execution, delivery and performance of this Agreement, the Assignment, Xxxx of
Sale and Assumption Agreement, dated as of the Agreement Date,
between Buyer and Seller in the form attached hereto as Exhibit B (the “Assignment
Agreement”), or the Lock-Up Agreements, dated as of the Agreement Date,
between Buyer and Shareholder and Seller, respectively in the form attached
hereto as Exhibit
C (the “Lock-Up
Agreements” and together with the Assignment Agreement collectively, the
“Ancillary
Agreements”) or the consummation of the transactions contemplated hereby
or thereby.
(v) Disclosure. This
Agreement and the schedules, attachments, written statements, documents,
certificates, or other items prepared or supplied to Buyer by or on behalf of
Seller with respect to the transactions contemplated in this Agreement and each
Ancillary Agreement are correct, complete and authentic, and all contracts and
other agreements or instruments included hereunder or thereunder are valid,
subsisting and binding on the parties thereto in accordance with their
terms. Neither this Agreement, nor any other Ancillary Agreement nor
any of the schedules, attachments, written statements, documents, certificates,
or other items prepared or supplied to Buyer by or on behalf of Seller with
respect to the transactions contemplated in this Agreement (the “Transaction
Documents”) contain any untrue statement of a material fact or omit a
material fact necessary to make each statement contained herein or therein not
misleading. Neither Seller nor any responsible officer or manager or
Shareholder has intentionally concealed any fact known by such person to have a
Material Adverse Effect. There is no fact known by Seller or any
Shareholder not disclosed in writing to Buyer by Seller or Shareholder that
materially and adversely affects, or so far as may reasonably be foreseen by the
Seller, is likely to materially and adversely affect, the Purchased Assets, the
condition of their commercialization or the ability of Seller or Shareholder to
perform the transactions contemplated by this Agreement.
(w) Investor
Qualifications.
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(i)
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Seller
and Shareholder understand that any shares of Buyer Common Stock to be
received in partial payment of the purchase price are characterized as
"restricted securities" under the federal securities laws inasmuch as they
are being received from Buyer in a transaction not involving a public
offering, are being offered and sold without registration under the
Securities Act of 1933, as amended (the “Securities
Act”), in a private placement that is exempt from the registration
provisions of the Securities Act and that under such laws and applicable
regulations such securities may be resold without registration under the
Securities Act only in limited circumstances. Seller and
Shareholder understand that each must bear the economic risk of the
acquisition of the Buyer Common Stock made in connection herewith for an
indefinite period of time because, among other reasons, the shares of
Buyer Common Stock issued to Seller hereunder will not have been
registered under the Securities Act or under the securities laws of
certain states and, therefore, cannot be resold, assigned or otherwise
disposed of unless they are subsequently registered under the Securities
Act and under the applicable securities laws of such states or an
exemption from such registration is available. Seller and
Shareholder further understand that the certificate representing the
shares of Buyer Common Stock shall bear a legend in substantially the
following form:
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"THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER
ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER AND
COMPLIANCE WITH APPLICABLE STATE SECURITIES
LAWS";
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(ii) Seller
and Shareholder can bear the economic risk of their respective investment in the
Buyer Common Stock and have such knowledge and experience in financial and
business matters that they are each capable of evaluating the merits and the
risks of the investment in Buyer. Seller and Shareholder understand
that the per share value of the Buyer Common Stock may fluctuate from time to
time and that the per share value of the Buyer Common Stock at the time of
Closing or at the time of issuance to Seller is not a representation by Buyer
that Seller or any Shareholder could now or at any time in the future receive
such per share amount in connection with any transaction involving the Buyer
Common Stock. Seller and Shareholder have been furnished with all
materials relating to the business, finances and operations of Buyer which have
been requested, including, without limitation all certificates, instruments,
agreements and other documents defining the rights, limitations and preferences
of the Buyer Common Stock. Seller and Shareholder have conducted
their own investigation of Buyer and are not relying on any representations or
warranties of Buyer other than those expressly set forth
herein. Seller and Shareholder understand that Buyer is under no
obligation to register the Buyer Common Stock on the behalf of Seller or any
Shareholder;
(iii) Seller
is acquiring the Buyer Common Stock for its own account with the present
intention of holding such securities for purposes of investment, and that it has
no intention of selling such securities in a public distribution in violation of
the federal securities laws or any applicable state securities laws;
and
3.2 Representations
and Warranties of Buyer. Buyer represents and warrants to Seller that the
statements contained in this Section 3.2 are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this Section 3.2), except as set forth in Schedule 3.2 to the
Seller Disclosure Letter.
(a) Organization of
Buyer. Buyer is a corporation duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its formation.
(b) Authorization of
Transaction. Buyer has full power and authority (including full corporate
power and authority) to execute and deliver this Agreement and to perform its
obligations hereunder. The shares of Buyer Common Stock issued by
Buyer as Additional Purchase Consideration, if any, when issued in accordance
with the terms and conditions of this Agreement will be validly issued, fully
paid, non-assessable and not otherwise pledged to any third party.
This Agreement constitutes the valid and legally binding obligation of Buyer,
enforceable against Buyer in accordance with its terms and conditions, except as
enforcement may be limited by (i) applicable bankruptcy, insolvency,
reorganization or other laws of general application relating to or affecting the
rights of creditors generally and (ii) the effect of rules of law governing
the availability of equitable remedies. Buyer need not give any notice to, make
any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order to consummate the transactions
contemplated by this Agreement.
(c) Non-Contravention.
Neither the execution and the delivery of this Agreement, nor the consummation
of the transactions contemplated hereby, will (i) violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court to which
Buyer is subject, or any provision of Buyer’s charter or bylaws or (ii) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which Buyer is a party or by which it is
bound or to which any of its assets is subject.
(d) Brokers' Fees. Buyer
has no liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this Agreement
for which Seller could become liable or obligated.
(e) No Other Representations or
Warranties. Buyer hereby acknowledges that with the exception
of Seller’s and Shareholder’s representations and warranties set forth in the
Transaction Documents, Seller and Shareholder make no other representations or
warranties, express or implied, to Seller with respect to the Purchased
Assets.
ARTICLE
IV.
COVENANTS OF SELLER AND THE
SHAREHOLDERS
Seller and Shareholder jointly and
severally covenant and agree with Buyer as follows:
4.1 Consummation of
Agreement. Seller and
Shareholder shall use commercially reasonable efforts to perform and fulfill all
conditions and obligations on its part to be performed and fulfilled under this
Agreement, to the end that the transactions contemplated by this Agreement shall
be fully carried out.
4.2 Satisfaction of
Conditions. Seller and
Shareholder will use reasonable efforts to obtain as promptly as practicable the
satisfaction of the conditions to Closing set forth in Article VI and any
necessary consents or waivers under or amendments to leases and other contracts
by which Seller is bound.
4.3 Notices and
Consents. Seller will give any notices to, make any filings
with, and use its reasonable best efforts to obtain any authorizations,
consents, and approvals of governments and governmental agencies.
4.4 Regular Course of
Business. Between the date
of this Agreement and the Closing Shareholder will not cause or permit Seller to
engage in any practice, take any action, or enter into any transaction outside
the Ordinary Course of Business. Further, Seller will operate
Seller’s Business in accordance with the reasonable judgment of its management
diligently and in good faith, consistent with past management practices, and
continue to use its reasonable efforts to keep available the services of present
officers and employees (other than planned retirements) and to preserve its
present relationships with persons having business dealings with
it. Shareholder will not cause or permit Seller to take any actions
which would require a supplement or amendment to the items required to be
disclosed pursuant to Section 3.1. Further, between the date of this
Agreement and the Closing Date, Seller will:
(a) communicate
regularly with Buyer and keep Buyer closely advised of any material developments
relating to Seller and the Purchased Assets;
(b) pay
all of its trade accounts payable as they become due in the Ordinary Course of
its Business;
(c) maintain
its books and records in the usual, regular and ordinary manner, on a basis
consistent with prior periods, and will comply with all laws applicable to
each;
(d) keep
and maintain all approvals, authorizations, consents, licenses, domain name
registrations, operating authorities, certificates of public convenience, orders
and other permits in full force and effect, continue to operate Seller’s
Business pursuant to such approvals, authorizations, consents, licenses,
operating authorities, certificates of public convenience, orders and other
permits and take all steps necessary to meet requirements on pending
applications for approvals, authorizations, consents, licenses, operating
authorities, certificates of public convenience, orders and permits;
and
(e) not
increase the discounts or other sales promotions it offers to customers over the
discounts and promotions offered by Seller during the 3 month period immediately
preceding the date of this Agreement.
4.5 Preservation of
Business. Seller agrees
that the Purchased Assets will be used, preserved, and maintained, as far as
practicable, in the Ordinary Course of Business, to the same extent and in the
same condition as said assets, property, and rights are used, preserved and
maintained on the date of this Agreement, and no unusual or novel methods of
purchase, sale, management, or operation of said Purchased Assets or Seller’s
Business will be made or instituted. Without the prior consent of
Buyer, Seller will not encumber any of the Purchased Assets or make any
commitments relating to such assets, property, or business, except in the
Ordinary Course of Business.
4.6 Insurance. Seller will keep
or cause to be kept in effect and undiminished the insurance now in effect on
its various properties and assets, and will purchase such additional insurance,
at Buyer's cost, as Buyer may request.
4.7 Employees. Seller will not
grant to any employee of Seller any promotion, any increase in compensation, or
any bonus or other award other than promotions, increases, or awards that are
regularly scheduled in the Ordinary Course of Business or contemplated on the
date of this Agreement or that are, in the reasonable judgment of management of
Seller, in its best interest.
4.8 No
Violations. Seller will
comply in all material respects with all statutes, laws, ordinances, rules, and
regulations applicable to Seller’s Business.
4.9 Public
Announcements. Shareholder will
not and will cause Seller not to issue any press release or other announcement
to the employees, customers, or suppliers of Seller related to this Agreement or
this purchase without the approval of Buyer, unless required by law, in which
case Buyer and Seller will consult with each other regarding the
announcement. Buyer will provide written approval of communications
to Seller’s employees, customers or suppliers necessary to effect the
transaction contemplated by this Agreement.
4.10 Company
Examinations and Investigations. Prior to the
Closing Date, Seller agrees that Buyer shall be entitled, through its employees
and representatives, including, without limitation, its attorneys and
accountants, to make such investigation of Seller and such examination of the
books, records and financial condition of Seller as Buyer reasonably
desires. Any such investigation and examination shall be conducted at
reasonable times and under reasonable circumstances and Seller shall cooperate
fully therein. In order that Buyer may have full opportunity to make
such business, accounting and legal review, examination or investigation as it
may wish of the business and affairs of Seller, Seller shall furnish the
representatives of Buyer during such period with all such information concerning
the affairs of Seller as such representatives may reasonably request and cause
its officers, employees, consultants, agents, accountants and attorneys to
cooperate fully with such representatives in connection with such review and
examination and to make full disclosure to Buyer of all material facts affecting
the financial condition and business operation of Seller.
4.11 Continued
Effectiveness of Representations and Warranties of Seller. From the date
hereof through the Closing Date, Seller shall conduct its Seller’s Business in a
commercially reasonable manner and in such a manner so that the representations
and warranties contained in Section 3.1 shall continue to be true and correct on
and as of the Closing Date as if made on and as of the Closing
Date.
4.12 Supplements to
Schedules. From time to time
prior to the Closing, Seller will promptly supplement or amend the disclosure
schedules with respect to any matter hereafter arising that, if existing or
occurring at the date of this Agreement, would have been required to be set
forth or described in any schedule and will promptly notify Buyer of any breach
by Seller that it discovers of any representation, warranty, or covenant
contained in this Agreement. No supplement or amendment of any
Schedule made pursuant to this section will be deemed to cure any breach of any
representation of or warranty made in this Agreement unless Buyer specifically
and reasonably agrees thereto in writing.
4.13 No
Solicitation. Until the Closing
or termination pursuant to Article VIII of this Agreement, neither Seller nor
any of its directors, officers, employees, or agents shall, directly or
indirectly, encourage, solicit, initiate, or enter into any discussions or
negotiations concerning any disposition of any of the capital stock or all or
substantially all of the assets of Seller (other than pursuant to this
Agreement), or any proposal therefore, or furnish or cause to be furnished any
information concerning Seller to any party in connection with any transaction
involving the acquisition of the capital stock or the Purchased Assets of Seller
by any person other than Buyer. Seller will promptly inform Buyer of
any inquiry (including the terms thereof and the person making such inquiry)
received by any responsible officer or director of Seller after the date hereof
and believed by such person to be a bona fide, serious inquiry relating to any
such proposal.
4.14 Loss or
Threatened Loss of Customer or Supplier. Other than as set
forth on Schedule 4.14, prior to the Closing, Seller shall promptly notify Buyer
in the event of a loss or threatened loss of any material supplier, customer or
affiliate of Seller, and shall cause employees of Seller to be made available to
call upon such customer, supplier or affiliate, together with Buyer to assist
Buyer in regaining or retaining such customer, supplier or
affiliate.
4.15 Notice of
Developments. Seller will give
prompt written notice to Buyer of any material development causing a breach of
any of its own representations and warranties in Section 3.1 above.
ARTICLE V.
COVENANTS OF
BUYER
Buyer covenants and agrees with Seller
as follows:
5.1 Efforts of
Buyer. Buyer shall use
commercially reasonable efforts to perform and fulfill all conditions and
obligations on its part to be performed and fulfilled under this Agreement, to
the end that the transactions contemplated by this Agreement shall be fully
carried out.
5.2 Public
Announcements. Subject to
applicable law, at all times Buyer will promptly advise, and obtain the approval
of, Seller before issuing or permitting any of Buyer’s directors, officers,
employees, representatives, agents or subsidiaries to issue any press release
with respect to this Agreement or the transactions contemplated
hereby.
5.3 Notices and
Consents. Buyer will give
any notices to, make any filings with, and use its reasonable best efforts to
obtain any authorizations, consents, and approvals of governments and
governmental agencies.
5.4 Notice of
Developments. Buyer will give
prompt written notice to Seller of any material development causing a breach of
any of its own representations and warranties in Section 3.2 above.
ARTICLE
VI.
CONDITIONS TO BUYER’S
OBLIGATIONS
Each and every obligation of Buyer
under this Agreement is subject to the satisfaction, at or before the Closing,
of each of the following conditions:
6.1 Representations
and Warranties; Performance. Each of the
representations and warranties made by Seller and Shareholder herein will be
true and correct in all material respects as of the Closing with the same effect
as though made at that time except for changes specifically contemplated,
permitted, or required by this Agreement; Seller and Shareholder will have
performed and complied with all agreements, covenants, and conditions required
by this Agreement to be performed and complied with by each prior to the
Closing; and Buyer will have received, at the Closing, a certificate of the
Chief Executive Officer of Seller, signed on behalf of Seller, stating that each
of the representations and warranties made by Seller herein is true and correct
in all material respects as of the Closing except for changes contemplated,
permitted, or required by this Agreement and that Seller has performed and
complied with all agreements, covenants, and conditions required by this
Agreement to be performed and complied with by it prior to the
Closing. For the purposes of this section and determining whether a
provision has been breached in a material respect, any representation or
warranty of a party that is qualified by a materiality standard shall be read
without regard to any such materiality qualification as if such qualification
were not contained herein.
6.2 Litigation. No material
action, suit, or proceeding before any court, governmental or regulatory
authority will have been commenced and be continuing, and no investigation by
any governmental or regulatory authority will have been commenced and be
continuing, and no action, investigation, suit, or proceeding will be threatened
at the time of Closing, against Seller, Shareholder, Buyer or any of their
Affiliates, associates, officers, managers or directors, seeking to restrain,
prevent, or change the transactions contemplated hereby, questioning the
validity or legality of the transactions contemplated hereby, or seeking damages
in connection with the transactions contemplated hereby.
6.3 Absence of
Material Change. From the date of
this Agreement to the Closing, there shall not have occurred any event, change,
effect, act, discovery, or occurrence (or any combination of the forgoing)
(whether or not referred to or described herein or in any Exhibit or Schedule
hereto) that individually or in the aggregate would have, or would reasonably be
expected to have, a Material Adverse Effect.
6.4 Company
Action. Seller will have
furnished to Buyer a copy, certified by an officer of Seller, of the resolutions
of the Board of Directors of Seller and the shareholders of Seller authorizing
the execution, delivery and performance of this Agreement.
6.5 Consents. Seller shall have
made all filings with and notifications of governmental authorities and
regulatory agencies required to be made by it in connection with the execution
and delivery of this Agreement, the performance of the transactions contemplated
hereby and the continued operation of Seller’s business by Buyer subsequent to
the Closing, and Buyer shall have received such governmental consents or permits
required to use and own the Purchased Assets, if any.
6.6 Release of
Liens. All Security
Interests on the Purchased Assets, other than Permitted Liens, shall have been
terminated and released, and Buyer shall have received releases and such other
documents evidencing such transactions.
6.7 Assignment, Xxxx
of Sale and Assumption Agreement. Seller shall have
executed and delivered an Assignment Agreement.
6.8 Employment
Agreement. Each Key Employee
and each other employee of Seller that has been extended an offer of employment
with Buyer or Buyer’s affiliate shall each have executed and delivered Buyer’s
or Buyer’s affiliate’s form of employment agreement (subject to such changes as
the respective parties thereto may hereafter agree in writing).
6.9 Confidentiality,
Development and Non-Interference Agreement. Buyer (or Buyer’s
affiliate), each Key Employee and each other employee of Seller that has been
extended an offer of employment with Buyer or Buyer’s affiliate shall have
executed and delivered Buyer’s or Buyer’s affiliate’s form of Confidentiality,
Development and Non-Interference Agreement (subject to such changes as the
respective parties thereto may hereafter agree in writing).
6.10 Lock-Up
Agreement. Seller and the
Shareholder shall each have executed and delivered Buyer’s form of Lock-Up
Agreement.
6.11 Legal Opinion of
Seller’s Counsel. Buyer shall have
received an opinion of Seller’s legal counsel, Xxxxx & Block, LLP, in a form
acceptable to Buyer.
6.12 Financial
Performance. Buyer, in its sole
discretion, shall have determined, in good faith, based upon the financial
statements certified by Seller at Closing, that Seller is likely to fully
satisfy the financial projections set forth in Schedule 6.12 of to
the Seller Disclosure Letter.
ARTICLE
VII.
CONDITIONS TO SELLER’S
OBLIGATIONS
Each and every obligation of Seller
under this Agreement is subject to the satisfaction, at or before the Closing,
of each of the following conditions:
7.1 Representations
and Warranties; Performance. Each of the
representations and warranties made by Buyer herein will be true and correct in
all material respects as of the Closing with the same effect as though made at
that time except for changes contemplated, permitted, or required by this
Agreement; Buyer will have performed and complied with all agreements,
covenants, and conditions required by this Agreement to be performed and
complied with by it prior to the Closing; and Seller will have received, at the
Closing, a certificate of Buyer, stating that each of the representations and
warranties made by Buyer herein is true and correct in all material respects as
of the Closing except for changes contemplated, permitted, or required by this
Agreement and that Buyer has performed and complied with all agreements,
covenants, and conditions required by this Agreement to be performed and
complied with by it prior to the Closing. For the purposes of this section and
determining whether a provision has been breached in a material respect, any
representation or warranty of a party that is qualified by a materiality
standard shall be read without regard to any such materiality qualification as
if such qualification were not contained herein.
7.2 Corporate
Action. Buyer will have
furnished to Seller a copy, certified by an officer of Buyer, of the resolutions
of the Board of Directors of Buyer authorizing the execution, delivery, and
performance of this Agreement.
7.3 Absence
of Material
Change. From the date of
this Agreement to the Closing, there has not occurred any event, change, effect,
act, discovery, or occurrence (or any combination of the forgoing) (whether or
not referred to or described herein or in any Exhibit or Schedule hereto) that
individually or in the aggregate would have, or would reasonably be expected to
have, a Material Adverse Effect.
7.4 Assignment, Xxxx
of Sale and Assumption Agreement. Buyer shall have
executed and delivered an Assignment Agreement.
7.5 Purchase
Price. Buyer shall have
tendered delivery of the purchase price set forth in Section 1.6 to
Seller.
7.6 Employment
Agreement. [INTENTIONALLY OMITTED].
7.7 Litigation. No material
action, suit, or proceeding before any court, governmental or regulatory
authority will have been commenced and be continuing, and no investigation by
any governmental or regulatory authority will have been commenced and be
continuing, and no action, investigation, suit, or proceeding will be threatened
at the time of Closing, against Buyer or any of its Affiliates,
associates, officers, managers or directors, seeking to restrain, prevent, or
change the transactions contemplated hereby, questioning the validity or
legality of the transactions contemplated hereby, or seeking damages in
connection with the transactions contemplated hereby.
7.8 Stock
Options. Buyer
shall have approved the issuance under the INX Inc. Incentive Plan, as amended
and restated effective July 28, 2003 and adopted by the Board of Directors of
the Company and approved by shareholders on July 28, 2003 (as amended from time
to time) to each of the persons set forth on Exhibit D hereto an
option to purchase such number of shares of Buyer Common Stock set forth
opposite such person’s name on Exhibit D
hereto.
ARTICLE
VIII.
TERMINATION
8.1 Termination By
Buyer. Buyer may
terminate this Agreement by giving written notice to Seller at any time prior to
the Closing (a) in the event Seller or any Shareholder has breached any
representation, warranty, or covenant contained in this Agreement in any
material respect, Buyer has notified Seller and Shareholder of the breach, and
the breach has continued without cure for a period of 15 days after the notice
of breach or is otherwise not reasonably susceptible to cure or (b) if the
Closing shall not have occurred on or before January 31, 2010, by reason of the
failure of any condition precedent under Article VI hereof (unless the failure
results primarily from Buyer breaching any representation, warranty, or covenant
contained in this Agreement). For the purposes of this section and
determining whether a provision has been breached in a material respect, any
representation or warranty of a party that is qualified by a materiality
standard shall be read without regard to any such materiality qualification as
if such qualification were not contained herein.
8.2 Termination By
Seller. Seller may
terminate this Agreement by giving written notice to Buyer at any time prior to
the Closing (a) in the event Buyer has breached any representation, warranty, or
covenant contained in this Agreement in any material respect, Seller has
notified Buyer of the breach, and the breach has continued without cure for a
period of 15 days after the notice of breach or is otherwise not reasonably
susceptible to cure or (b) if the Closing shall not have occurred on or before
January 31, 2010, by reason of the failure of any condition precedent under
Article VII hereof (unless the failure results primarily from Seller breaching
any representation, warranty, or covenant contained in this Agreement). For the
purposes of this section and determining whether a representation or warranty
has been breached in a material respect, any representation or warranty of a
party that is qualified by a materiality standard shall be read without regard
to any such materiality qualification as if such qualification were not
contained herein.
8.3 Termination By
Mutual Consent. Anything herein
or elsewhere to the contrary notwithstanding, this Agreement may be terminated
and abandoned at any time prior to the Closing without further obligation or
liability on the part of any party by the mutual written consent of Buyer and
Seller.
8.4 Effect of
Termination. If this Agreement
terminates pursuant to any provision of this Article VIII and the transactions
contemplated hereunder are not consummated, this Agreement shall be null and
void and have no further force or effect, except that any such termination shall
be without prejudice to the rights of any party on account of the
nonsatisfaction of the conditions set forth in Articles VI and VII resulting
from the breach or violation of the representations, warranties, covenants or
agreements of another party under this Agreement.
ARTICLE
IX.
INDEMNIFICATION
9.1 Survival. Each
covenant or agreement in this Agreement shall survive the Closing without
limitation as to time until fully performed in accordance with its
terms. Each representation and warranty in this Agreement, any
Transaction Document or in the Schedules or Exhibits shall survive the Closing
until the twenty-four-month anniversary of the Closing Date (the “Survival
Date”). Notwithstanding the foregoing, the following
representations and warranties (collectively, the “Specified
Representations”) shall survive the Closing as follows: (a)
the representations and warranties contained in Sections 3.1(a), (b), (c), (d),
(g) and (r) shall survive the Closing without limitation as to time, and (b) the
representations and warranties contained in Sections 3.1(i), 3.1(p) and 3.1(t)
shall survive the Closing until 30 days after the expiration of the statutes of
limitations, if any, applicable to the matters addressed therein.
9.2 Indemnification by Seller and
Shareholder. From and after
the date hereof, Seller and the Shareholder agree, jointly and severally, to
indemnify fully, hold harmless, protect and defend Buyer and its Affiliates, and
their respective directors, officers, agents and employees, successors and
assigns from and against:
(a) any
and all Losses (as defined below) incurred by any of them arising out of,
relating to or based upon any inaccuracy in, or breach of, any of the
representations or warranties of any of Seller or Shareholder contained in this
Agreement, any Transaction Document or in the Schedules or Exhibits hereto or
thereto;
(b) any
and all Losses incurred by any of them arising out of, relating to or based upon
any failure to perform, or other breach of, any of the covenants or agreements
of any of Seller or Shareholder contained in or incorporated into this
Agreement, any Transaction Document or in the Schedules or Exhibits hereto or
thereto;
(c) any
and all Losses incurred by any of them arising out of, relating to or based upon
any of Seller’s assets that are not Purchased Assets or any of the Retained
Liabilities;
(d) any
and all Losses incurred by any of them arising out of, relating to or based upon
Seller’s ownership or use of the Purchased Assets prior to the Closing,
including any Liability for any Taxes;
(e) any
and all Losses incurred by any of them arising out of, relating to or based upon
the operation of Seller’s business prior to or after the Closing;
and
(f) any
and all Losses incurred by any of them arising out of, relating to or based upon
any claims made for workers’ compensation benefits or under any Employee Benefit
Plan due with respect to any event occurring or circumstance existing prior to
the Closing.
The right
of Buyer and its Affiliates (and their respective directors, officers, agents
and employees, successors and assigns) to be indemnified hereunder for any Loss
shall not be limited or affected by any investigation conducted or notice or
knowledge obtained by or on behalf of any such Persons.
9.3 Indemnification by
Buyer. From and after
the date hereof, Buyer agrees to indemnify fully, hold harmless, protect and
defend Seller and Shareholder, and their respective directors, officers, agents
and employees, successors and assigns from and against:
(a) any
and all Losses (as defined below) incurred by any of them arising out of,
relating to or based upon any inaccuracy in, or breach of, any of the
representations or warranties of Buyer contained in this Agreement, any
Transaction Document or in the Schedules or Exhibits hereto or
thereto;
(b) any
and all Losses incurred by any of them arising out of, relating to or based upon
any failure to perform, or other breach of, any of the covenants or agreements
of Buyer contained in or incorporated into this Agreement, any Transaction
Document or in the Schedules or Exhibits hereto or thereto;
(c) any
and all Losses incurred by any of them arising out of, relating to or based upon
Buyer’s ownership, use or control of the Purchased Assets after the
Closing or failure to perform any of the obligations assumed by Buyer after the
Closing with respect to the Assumed Liabilities after the Closing;
and
(d) any
and all Losses incurred by any of them arising out of, relating to or based upon
Buyer and/or its Affiliates Liability for any Taxes related to the Purchased
Assets after the Closing; and
(e) any
and all Losses incurred by any of them arising out of, relating to or based upon
the operation of Buyer’s business after the Closing.
The right
of the Seller and Shareholder (and their respective directors, officers, agents
and employees, successors and assigns) to be indemnified hereunder for any Loss
shall not be limited or affected by any investigation conducted or notice or
knowledge obtained by or on behalf of any such Persons.
9.4 Losses.
For purposes of this Agreement the term “Losses” shall mean
any and all losses, costs, claims, damages, Taxes, Liabilities, obligations,
judgments, settlements, awards, demands, offsets, reasonable out-of-pocket
costs, expenses and attorneys’ fees (including any such reasonable costs,
expenses and attorneys’ fees incurred in enforcing a party’s right to
indemnification against any indemnifying party or with respect to any appeal)
and penalties and interest, if any.
9.5 Procedure for
Indemnification for Third Party Claims.
(a) Promptly
after receipt by an indemnified party under Sections 9.2 and 9.3 of notice of
the commencement of any proceeding against it, but in no event later than ninety
(90) days from receipt, such indemnified party will, if a claim is to be made
against an indemnifying party under such Section, give notice to the
indemnifying party of the commencement of such claim, but the failure to notify
the indemnifying party will not relieve the indemnifying party of any Liability
that it may have to any indemnified party, except to the extent that the
indemnifying party demonstrates that the defense of such action is prejudiced by
the indemnifying party’s failure to give such notice.
(b) If
any proceeding referred to in Section 9.5(a) is brought against an indemnified
party and it gives notice to the indemnifying party of the commencement of such
proceeding, the indemnifying party will be entitled to participate in such
proceeding and, to the extent that it wishes (unless (i) the indemnifying party
is also a party to such proceeding and the indemnified party determines in good
faith that joint representation would be inappropriate, or (ii) the indemnifying
party fails to provide reasonable assurance to the indemnified party of its
financial capacity to defend such proceeding and provide indemnification with
respect to such proceeding), to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party and, after notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such proceeding, the indemnifying party will not, as long as it
diligently conducts such defense, be liable to the indemnified party under this
Article IX for any fees of other counsel or any other expenses with respect to
the defense of such proceeding, in each case subsequently incurred by the
indemnified party in connection with the defense of such proceeding, other than
reasonable costs of investigation. If the indemnifying party assumes
the defense of a proceeding (as opposed to participating in the defense as
provided above), (i) it will be conclusively established for purposes of this
Agreement that the claims made in that proceeding are within the scope of and
subject to indemnification; (ii) no compromise or settlement of such claims may
be effected by the indemnifying party without the indemnified party’s consent,
which shall not be unreasonably withheld, unless (A) there is no finding or
admission of any violation of law or any violation of the rights of any Person
and no effect on any other claims that may be made against the indemnified
party, and (B) the sole relief provided is monetary damages that are paid in
full by the indemnifying party; and (iii) the indemnified party will have no
Liability with respect to any compromise or settlement of such claims effected
without its consent. If notice is given to an indemnifying party of
the commencement of any proceeding and the indemnifying party does not, within
10 days after the indemnified party’s notice is given, give notice to the
indemnified party of its election to assume the defense of such proceeding, the
indemnifying party will be bound by any determination made in such proceeding or
any compromise or settlement effected by the indemnified party.
(c) Notwithstanding
the foregoing, if an indemnified party determines in good faith that there is a
reasonable probability that a proceeding may adversely affect it or its
Affiliates other than as a result of monetary damages for which it would be
entitled to indemnification under this Agreement, the indemnified party may, by
notice to the indemnifying party, assume the exclusive right to defend,
compromise, or settle such proceeding, but the indemnifying party will not be
bound by any determination of a proceeding so defended or any compromise or
settlement effected without its consent (which may not be unreasonably
withheld).
(d) Both
parties hereby consent to the non-exclusive jurisdiction of any court in which a
proceeding is brought by a third party against any indemnified person for
purposes of any claim that an indemnified person may have under this Agreement
with respect to such proceeding or the matters alleged therein, and agree that
process may be served on either party with respect to such a claim anywhere in
the world.
9.6 Set-Off Rights;
Character of Indemnity
Payments. The indemnifying
party shall promptly pay the indemnified party any amount due under this Article
IX. Buyer shall have the right, but not the obligation, to set-off
against the Additional Purchase Consideration any amount Seller or any
Shareholder may be obligated to pay Buyer under the terms of this
Agreement. If, contrary to the intent of the parties, any payment
made pursuant to this Article IX is treated as taxable income to the recipient,
then the payor shall indemnify and hold harmless the recipient from any
Liability for Taxes attributable to the receipt of such payment. For
purposes of this Section 9.6, the indemnified party will be considered to be
liable for Tax in respect of any payment treated as taxable income at the
highest marginal tax rate then in effect for corporations in the jurisdiction so
characterizing the payment for the year such payment is considered to be earned
by the indemnified party.
9.7 Limitation on
Shareholder’s
Liability. Each
of the parties hereby agrees that the maximum liability of Shareholder under
this Agreement in respect of any indemnity claims under this Article IX shall
not exceed the aggregate purchase price (including any Additional Purchase
Consideration) under this Agreement.
ARTICLE
X.
MISCELLANEOUS
10.1 Notices. All notices,
communications and deliveries hereunder shall be made in writing signed by the
party making the same, shall specify the Section hereunder pursuant to which it
is given or being made, and shall be delivered by registered or certified mail
(with postage and other fees prepaid) as follows:
To Buyer:
Attn: Xxxxx X. Xxxx,
Chairman & Chief Executive Officer
00000 Xxxx Xxxxxxx
0xx Xxxxx
Xxxxxxx, Xxxxx 00000
Telecopy: (000) 000-0000
Email: xxx.xxxx@xxxx.xxx
With a copy to:
Xxxxx Xxxxx LLP
Attn: Xxxxxx X. Xxxx, Xx.
000 Xxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx,
Xxxxx 00000
Telecopy: (000)
000-0000
Email: xxxxx@xxxxxxxxxx.xxx
To Seller or Shareholder:
Xxxxxxx
Xxxxxx Xxxxxxx
0000
Xxxxxxx Xxxxx
Xxxxxxx
Xxx, Xxxxxxxxxx 00000
Telecopy: (916)
(791-3513
Email: xx0000@xxxxxxxx.xxx
with a copy
to:
Xxxxx
& Block, LLP
Attn: Xxxxx Xxxxxxxxx
Block
0000 Xxxxx Xxxxx Xxxxx, Xxxxx
000
Xxxxxxxxxx,
Xxxxxxxxxx 00000
Telecopy: (000)
000-0000
Email: xxxxxx@xxxxxxxxxx.xxx
or to
such other representative or at such other address of a party as such party
hereto may furnish to the other parties in writing. Such notice shall be
effective upon the date of delivery or the intended recipient’s refusal to
accept delivery. After any notice is made hereunder, the party taking
such action will use its best efforts to deliver a copy of such notice to the
e-mail address of the intended recipients as soon as practical but in no event
later than 12 hours after such action has been taken.
10.2 Attachments. All schedules and
exhibits attached hereto are hereby incorporated into this Agreement and are
hereby made a part hereof as if set out in full in this Agreement.
10.3 Assignment;
Successors in Interest. No assignment or transfer by any party
of its respective rights and obligations hereunder shall be made except with the
prior written consent of the other parties hereto, except Buyer shall be
permitted to assign its rights and obligations hereunder to one of its
Affiliates, but no such assignment will release Buyer from its obligations
hereunder. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their successors and permitted assigns and
any reference hereto shall also be a reference to a permitted successor or
assign.
10.4 Number;
Gender. Whenever the
context so requires, the singular number shall include the plural and the plural
shall include the singular, and the gender of any pronoun shall include the
other genders.
10.5 Captions. The titles and
captions contained in this Agreement are inserted herein only as a matter of
convenience and for reference and in no way define, limit, extend or describe
the scope of this Agreement or the intent of any provision hereof. Unless
otherwise specified to the contrary, all references to Articles and Sections are
references to Articles and Sections of this Agreement and all references to
Exhibits are references to Exhibits to this Agreement.
10.6 Controlling Law;
Venue; Integration: Amendment. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Texas without regard to choice of law provisions, statutes, regulations or
principles of this or any other jurisdiction. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts of the State of Texas for any action, suit or proceeding arising in
connection with this Agreement, and agrees that any such action suit or
proceeding shall be brought only in any such court in Houston, Texas (and waives
any objection based on forum non conveniens or any other jurisdiction to venue
therein). This Agreement (and the related written agreements to be
entered into in connection with this Agreement) supersedes all negotiations,
agreements and understandings among the parties with respect to the subject
matter hereof and constitutes the entire agreement among the parties hereto.
This Agreement may not be amended, modified or supplemented except by the
written agreement of Seller and Buyer. EACH PARTY IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
AND ALL RIGHTS TO TRIAL BY JURY IN CONNECTION WITH ANY LITIGATION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
10.7 Counterparts. This Agreement
may be executed in counterparts, including the signature pages, each of which
shall be deemed an original and all of which together shall constitute one and
the same agreement. In addition, the parties agree that the
counterparts of this Agreement so signed may be evidenced by delivery of a
telecopy or other electronic transmission of the signature page image to this
Agreement to the other party at the number listed in Section 10.1 and that such
telecopied signature pages shall be treated for all purposes as original
signatures to this Agreement.
10.8 Enforcement of
Certain Rights. Nothing expressed
or implied in this Agreement is intended, or shall be construed, to confer upon
or give any person, firm or corporation other than the parties hereto, their
successors or permitted assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, or result in such person, firm
or corporation being deemed a third party beneficiary of this
Agreement.
10.9 Waiver. Any agreement on
the part of a party hereto to any extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party. A
waiver by one party of the performance of any covenant, agreement, obligation,
condition, representation or warranty shall not be construed as a waiver of any
other covenant, agreement, obligation, condition, representation or warranty. A
waiver by any party of the performance of any act shall not constitute a waiver
of the performance of any other act or an identical act required to be performed
at a later time.
10.10 Arbitration; Legal
Proceedings.
(a) The
parties shall attempt in good faith to resolve any dispute arising out of or
relating to this Agreement, the breach, termination or validity hereof or the
transactions contemplated herein promptly by negotiation between a
representative of Buyer and Seller. Either Seller or Buyer may give
the other written notice that a dispute exists (a “Notice of Dispute”).
The Notice of Dispute shall include a statement of such party's position and the
name and title of the representative who will represent such party. Within ten
(10) days of the delivery of the Notice of Dispute, a representative from each
party hereto shall meet at a mutually acceptable time and place, and thereafter
as long as they reasonably deem necessary, to attempt to resolve the dispute.
All documents and other information or data on which each party relies
concerning the dispute shall be furnished or made available on reasonable terms
to the other party at or before the first meeting of the parties as provided by
this paragraph.
(b) Except
as provided in Section 10.10(d) below, any controversy or claim arising out of
or relating to this Agreement, the breach, termination or validity hereof, or
the transactions contemplated herein, if not settled by negotiation as provided
in paragraph (a) of this Section 10.10, shall be settled by arbitration in
accordance with the Commercial Arbitration Rules (“CAR”) of the American
Arbitration Association (“AAA”), by one
arbitrator selected by mutual agreement of the parties. In the event
the parties cannot agree to an arbitrator, the arbitrator shall be selected by
the CAR, Selection of Arbitrators. Either party may initiate
arbitration by delivering a written election to arbitrate to the other party at
any time after twenty (20) days following the delivery of a Notice of Dispute if
the dispute has not then been settled by negotiation, or sooner if the other
party fails to participate in negotiation in accordance with paragraph (a)
above. The arbitration procedure shall be governed by the United States
Arbitration Act, 9 U.S.C. Section 1-16 (the “Act”) and shall be
held in Houston, Texas, and the award rendered by the arbitrator shall be final
and binding on the parties and may be entered in any court having jurisdiction
thereof, subject to the court’s authority to modify or review the award as
provided in the Act.
(c) Each
party shall bear its own costs and shall share equally the fees and expenses of
the arbitrator.
(d) Each
party hereby acknowledges and agrees that this Section 10.10 shall not apply to
any claim, controversy, action suit or proceeding in which a party hereto seeks
specific performance, injunctive relief or any other equitable relief and that
such party may initiate any such claim, controversy, action suit or proceeding
in accordance with Section 10.6 hereof.
10.11 Reliance on
Counsel and Other Advisors. Each party has
consulted such legal, financial, technical or other experts as it deems
necessary or desirable before entering into this Agreement. Each party
represents and warrants that it has read, knows, understands and agrees with the
terms and conditions of this Agreement.
10.12 Injunctive
Relief. The parties to
this Agreement hereby agree that any remedy at law for any breach of the
provisions contained in this Agreement shall be inadequate and that any party,
to the extent permitted by applicable law, shall be entitled to injunction
relief in addition to any other remedy such party might have under this
Agreement.
10.13 Severability. If a judicial or
arbitral determination is made that any of the provisions of this Agreement
constitutes an unreasonable or otherwise unenforceable restriction against
Seller or Shareholder the provisions of this Agreement shall be rendered void
only to the extent that such judicial or arbitral determination finds such
provisions to be unreasonable or otherwise unenforceable with respect to Seller
or Shareholder.
10.14 Attorney Fees.
In the event of a dispute arising under this Agreement, the prevailing
party in any subsequent arbitration or litigation proceeding brought to enforce
this Agreement shall be entitled to reimbursement of costs and reasonable
attorney fees.
[Signature Page
Follows]
IN WITNESS WHEREOF, the parties have
executed this Asset Purchase Agreement as of the day and year first written
above.
| BUYER: |
SELLER:
|
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|
MARKETWARE
INC.
|
||||
|
/s/
Xxxxx Xxxxxxx
|
/s/
Xxxxxxx Xxxxxx
Xxxxxxx
|
|||
|
Xxxxx
Xxxxxxx,
|
Xxxxxxx
Xxxxxx Xxxxxxx
|
|||
|
Vice
President & Chief Financial Officer
|
Chief
Executive Officer
|
SHAREHOLDER:
|
/s/
Xxxxxxx Xxxxxx
Xxxxxxx
|
|
|||
|
Xxxxxxx
Xxxxxx Xxxxxxx, individually
|
|
|||
|
|
|
