STOCK PURCHASE AGREEMENT by and among NATIONAL INVESTMENT MANAGERS INC., PENSION TECHNICAL SERVICES, INC., RALPH W. SHAW, individually, and EILEEN A. BALDWIN-SHAW, individually Dated as of September 25, 2008
Exhibit
10.90
EXECUTION
COPY
by
and among
PENSION
TECHNICAL SERVICES, INC.,
XXXXX
X. XXXX, individually,
and
XXXXXX
X. XXXXXXX-XXXX, individually
Dated
as of September 25, 2008
TABLE
OF CONTENTS
Page
|
|||
I.
|
DEFINITIONS
|
1
|
|
II.
|
PURCHASE
AND SALE
|
10
|
|
2.1.
|
Purchase
and Sale of the Shares
|
10
|
|
2.2.
|
Retained
Assets
|
10
|
|
2.3.
|
Purchase
Price
|
10
|
|
2.4.
|
Calculation
of the Number of Purchaser Shares
|
11
|
|
2.5.
|
Payment
of the Purchase Price
|
11
|
|
2.6.
|
Adjustments
to the Notes
|
11
|
|
III.
|
CLOSING,
DELIVERIES AND OTHER ACTIONS
|
13
|
|
3.1.
|
Time
and Place of Closing
|
13
|
|
3.2.
|
Deliveries
by the Sellers
|
13
|
|
3.3.
|
Deliveries
by the Purchaser
|
14
|
|
IV.
|
REPRESENTATIONS
AND WARRANTIES OF THE SELLERS
|
15
|
|
4.1.
|
Authority,
Validity and Effect
|
15
|
|
4.2.
|
Title
to Shares
|
15
|
|
4.3.
|
No
Conflict
|
15
|
|
4.4.
|
Consents
|
15
|
|
4.5.
|
Litigation
|
15
|
|
4.6.
|
Brokers
|
16
|
|
4.7.
|
Purchaser
Shares Legend
|
16
|
|
4.8.
|
Rule144
|
16
|
|
4.9.
|
Investment
Representations
|
16
|
|
V.
|
REPRESENTATION
AND WARRANTIES RELATING TO THE COMPANY
|
17
|
|
5.1.
|
Existence
and Good Standing
|
17
|
|
5.2.
|
Power
|
17
|
|
5.3.
|
Capitalization
of the Company
|
17
|
|
5.4.
|
Property
|
17
|
|
5.5.
|
Litigation
|
18
|
|
5.6.
|
Compliance
with Laws
|
18
|
|
5.7.
|
Necessary
Property
|
19
|
-i-
TABLE
OF CONTENTS
(continued)
Page
|
|||
5.8.
|
Conduct
of Business
|
19
|
|
5.9.
|
Labor
Matters
|
20
|
|
5.10.
|
Employee
Benefit Plans
|
22
|
|
5.11.
|
Environmental
|
24
|
|
5.12.
|
Contracts
|
24
|
|
5.13.
|
Permits
|
25
|
|
5.14.
|
Intellectual
Property
|
25
|
|
5.15.
|
Insurance
|
26
|
|
5.16.
|
Financial
Statements
|
27
|
|
5.17.
|
Undisclosed
Liabilities
|
27
|
|
5.18.
|
Accounts
Receivable
|
27
|
|
5.19.
|
Bank
Accounts
|
27
|
|
5.20.
|
Product
Liability and Warranty
|
28
|
|
5.21.
|
Indebtedness
|
28
|
|
5.22.
|
Taxes
|
28
|
|
5.23.
|
Customers
|
30
|
|
5.24.
|
Disclosure
|
30
|
|
5.25.
|
Related
Party Transactions
|
30
|
|
5.26.
|
Brokers
|
31
|
|
VI.
|
REPRESENTATIONS
AND WARRANTIES OF THE PURCHASER
|
31
|
|
6.1.
|
Existence
and Good Standing
|
31
|
|
6.2.
|
Power
|
31
|
|
6.3.
|
Validity
and Enforceability
|
31
|
|
6.4.
|
No
Conflict
|
31
|
|
6.5.
|
Consents
|
31
|
|
6.6.
|
Brokers
|
31
|
|
VII.
|
TAX
MATTERS
|
31
|
|
7.1.
|
Returns
|
31
|
|
7.2.
|
Apportionment
of Taxes
|
32
|
|
7.3.
|
Cooperation;
Audits
|
33
|
-ii-
TABLE
OF CONTENTS
(continued)
Page
|
|||
7.4.
|
Certain
Controversies
|
33
|
|
7.5.
|
Tax
Sharing Agreements
|
33
|
|
VIII.
|
CERTAIN
COVENANTS AND AGREEMENTS
|
33
|
|
8.1.
|
Pre-Closing
Covenants
|
33
|
|
8.2.
|
Post-Closing
Covenants
|
35
|
|
IX.
|
CONDITIONS
TO CLOSING
|
36
|
|
9.1.
|
Conditions
Precedent to the Purchaser’s Obligations
|
36
|
|
9.2.
|
Conditions
Precedent to the Sellers’ Obligations
|
37
|
|
X.
|
REMEDIES
|
37
|
|
10.1.
|
General
Indemnification Obligation
|
37
|
|
10.2.
|
Notice
and Third Party Liability
|
38
|
|
10.3.
|
Survivability;
Limitations
|
39
|
|
10.4.
|
Specific
Performance
|
40
|
|
10.5.
|
Adjustment
to the Purchase Price
|
41
|
|
10.6.
|
Set-Off
|
41
|
|
10.7.
|
Exclusive
Remedy
|
41
|
|
XI.
|
MISCELLANEOUS
|
41
|
|
11.1.
|
Competitive
Activity; Non-Solicitation; Confidentiality
|
41
|
|
11.2.
|
Further
Assurances
|
43
|
|
11.3.
|
Press
Release and Announcements
|
43
|
|
11.4.
|
Termination
|
43
|
|
11.5.
|
Expenses
|
44
|
|
11.6.
|
No
Assignment
|
44
|
|
11.7.
|
Headings
|
44
|
|
11.8.
|
Integration,
Modification and Waiver
|
44
|
|
11.9.
|
Construction
|
44
|
|
11.10.
|
Severability
|
45
|
|
11.11.
|
Notices
|
45
|
|
11.12.
|
Governing
Law
|
46
|
|
11.13.
|
Counterparts
|
46
|
-iii-
LIST
OF EXHIBITS AND DISCLOSURE SCHEDULES
Exhibits
ExhibitA
|
Form
of Notes
|
ExhibitB
|
Form
of X. Xxxx Employment Agreement
|
ExhibitC
|
Form
of X. Xxxx Employment Agreement
|
ExhibitD
|
Form
of Release
|
Disclosure
Schedules
Schedule1.1(a)
|
Adjusted
EBITDA Principles
|
Schedule1.1(b)
|
Bonus
Amounts
|
Schedule1.1(c)
|
Permitted
Exceptions
|
Schedule2.5
|
Wire
Accounts
|
Schedule4.4
|
Consents
|
Schedule5.1
|
Foreign
Qualifications
|
Schedule5.3
|
Capitalization
|
Schedule5.4(b)
|
Leased
Real Property
|
Schedule5.4(c)
|
Tangible
Personal Property
|
Schedule5.4(d)
|
Violations
|
Schedule5.5
|
Litigation
|
Schedule5.8
|
Conduct
of Business
|
Schedule5.9(a)
|
Union
and Employee Contracts
|
Schedule5.9(b)
|
List
of Employees, Etc.
|
Schedule5.10(a)
|
Employee
Benefit Plans
|
Schedule5.11
|
Environmental
|
Schedule5.12
|
Contracts
|
Schedule5.13
|
Permits
|
Schedule5.14
|
Intellectual
Property
|
Schedule5.15
|
Insurance
|
Schedule5.16(a)
|
Financial
Statements
|
Schedule5.17
|
Liabilities
|
Schedule5.19
|
Bank
Accounts
|
Schedule5.20
|
Terms
and Conditions
|
Schedule5.21
|
Indebtedness
|
Schedule5.22(j)
|
Tax
Jurisdictions
|
Schedule5.23
|
Material
Customers
|
Schedule5.25
|
Related
Party Transactions
|
Schedule8.1(e)
|
Excluded
Assets
|
This
STOCK PURCHASE AGREEMENT, dated as of September 25, 2008 (this “Agreement”),
is by
and among National Investment Managers Inc., a Florida corporation (the
“Purchaser”),
Pension Technical Services, Inc. d/b/a REPTECH Corp., a Colorado corporation
(the “Company”),
Xxxxx
X. Xxxx, an individual resident of the State of Colorado (“X.
Xxxx”),
and
Xxxxxx X. Xxxxxxx-Xxxx, an individual resident of the State of Colorado
(“X.
Xxxx”,
and
together with X. Xxxx, the “Sellers”).
The
Purchaser, the Sellers and the Company are sometimes referred to in this
Agreement collectively as the “Parties”
or
individually as a “Party”.
BACKGROUND
A. The
Sellers are the registered and beneficial owners of all of the issued and
outstanding shares of capital stock of the Company (the “Shares”).
B. The
Sellers desire to sell to the Purchaser, and the Purchaser desires to purchase
from the Sellers, all of the Shares, subject to the terms and conditions
contemplated by this Agreement.
C. The
respective Boards of Directors of the Purchaser and the Company have each
determined that the transactions contemplated by this Agreement are advisable,
fair to and in the best interests of their respective companies and shareholders
and accordingly have approved such transactions.
AGREEMENT
NOW,
THEREFORE, in consideration of the foregoing and the respective representations,
warranties, covenants and agreements set forth in this Agreement and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties, intending to be legally bound, hereby agree as
follows:
I.
DEFINITIONS
“Actions”
means
any claim, demand, charge, complaint, action, suit, proceeding, hearing, audit,
investigation, interference, opposition, re-examination, concurrent use,
cancellation or other dispute resolution or proceeding, whether judicial,
administrative or arbitrative, of any Person or Governmental
Authority.
“Adjusted
EBITDA”
means
EBITDA, as adjusted in accordance with the principles set forth in Schedule 1.1(a).
“Affiliate”
means
with respect to any Person, a Person that directly or indirectly controls,
is
controlled by, or is under common control with, any such Person. The term
“control” (including the terms “controlled by” or “under common control with”)
means, the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of such Person, whether through
ownership of voting securities, membership interests, by contract or otherwise.
The term “Affiliate”
also
includes any child, stepchild, grandchild, parent, stepparent, grandparent,
spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law or sister-in-law, including adoptive relationships, of such
Person.
“Agreement”
has
the
meaning set forth in the Preamble.
“Ancillary
Agreements”
means
each other agreement, document, instrument or certificate contemplated by this
Agreement or to be executed by the Purchaser or any of the Sellers in connection
with the consummation of the transactions contemplated by this Agreement, in
each case only as applicable to the relevant party or parties to such Ancillary
Agreement, as indicated by the context in which such term is used.
“Bonus
Amounts”
means
any and all bonus and incentive compensation amounts payable to the officers,
directors, employees and consultants of the Company (including the employer
portion of any employment, payroll or unemployment taxes related to such Bonus
Amounts), which amounts and employees are set forth on Schedule 1.1(b).
The
certificate referenced in Section 3.2(l)
sets
forth the entire amount of the Bonus Amounts (indicating the amount and the
Person to whom such Bonus Amount has been paid or is owed).
“Bonus
Payment”
has
the
meaning set forth in Section 8.2(c).
“Cash
Proceeds”
has
the
meaning set forth in Section 2.3(a).
“Cash
Purchase Price”
has
the
meaning set forth in Section 2.3(a).
“Claims”
has
the
meaning set forth in Section 10.2(b).
“Claims
Notice”
has
the
meaning set forth in Section 10.2(a).
“Closing”
has
the
meaning set forth in Section 3.1.
“Closing
Date”
has
the
meaning set forth in Section 3.1.
“Closing
Date Balance Sheet”
has
the
meaning set forth in Section
8.2(d).
“Code”
means
the Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder.
“Company”
has
the
meaning set forth in the Preamble.
“Company’s
Knowledge”
means
the knowledge obtained or obtainable after due inquiry by either Seller or
any
officer or director of the Company.
“Consent”
means
any consent, approval, authorization, qualification, waiver, registration or
notification required to be obtained from, filed with or delivered to a
Governmental Authority or any other Person in connection with the consummation
of the transactions provided for herein.
“Contracts”
means
all written and oral contracts, agreements (including, without limitation,
employment agreements and non-competition agreements), leases (whether real
or
personal property), licenses, commitments, arrangements, instruments,
guarantees, bids, orders and proposals.
2
“Controlled
Group”
means
any trade or business (whether or not incorporated) (a) under common
control within the meaning of Section 4001(b)(1) of ERISA with the Company
or (b) which together with the Company is treated as a single employer
under Section 414(t) of the Code.
“Conversion
Transaction”
means
a
merger, consolidation, recapitalization or other transaction to which the
Purchaser is a party that results in the Purchaser Shares being converted into
the right to receive cash or other securities.
“X.
Xxxx”
has
the
meaning set forth in the Preamble.
“X.
Xxxx Employment Agreement”
has
the
meaning set forth in Section 3.2(c).
“EBITDA”
means
the earnings of the Company before deduction for interest, taxes, depreciation
and amortization, determined in accordance with GAAP.
“EBITDA
Shortfall”
has
the
meaning set forth in Section 2.6(b)(i).
“Employee
Plan”
and
“Employee
Plans”
have
the meaning set forth in Section 5.10(a).
“Employment
Agreements”
has
the
meaning set forth in Section 3.2(d).
“Environment”
means
soil, surface waters, groundwater, land, stream sediments, surface or subsurface
strata, ambient air, or indoor air, including, without limitation, any material
or substance used in the physical structure of any building or improvement
and
any environmental medium.
“Environmental
Condition”
shall
mean any condition of the Environment with respect to the Real Property, with
respect to any property previously owned, leased or operated by the Company
to
the extent such condition of the Environment existed at the time of such
ownership, lease or operation, or with respect to any other real property at
which any Hazardous Material generated by the operation of the business of
the
Company has been handled, treated, stored or disposed of, which violates any
Environmental Law, or even though not violative of any Environmental Law,
nevertheless results in any Release, or Threat of Release, damage, loss, cost,
expense, claim, demand, order or liability.
“Environmental
Law”
shall
mean any Law relating to health or safety or protection of the Environment,
Releases of Hazardous Materials or injury to persons relating to exposure to
any
Hazardous Materials.
“ERISA”
means
the Employee Retirement Income Security Act of 1974, as amended.
“Excess
EBITDA”
has
the
meaning set forth in Section 2.6(b)(iii).
“Excluded
Assets”
has
the
meaning set forth in Section 8.1(e).
3
“Expiration
Date”
has
the
meaning set forth in Section 10.3(a).
“Extension”
has
the
meaning set forth in Section 5.22(a).
“Fair
Market Value”
means
the average closing price of Purchaser Common Stock as quoted on the OTC
Bulletin Board (or other exchange in which Purchaser Common Stock may then
be
quoted) over a period of 5 consecutive trading days, the latest of which will
be
the trading day immediately preceding the Closing Date.
“Final
EBITDA”
has
the
meaning set forth in Section 2.6(b)(i).
“Financial
Statements”
has
the
meaning set forth in Section 5.16(a).
“First
Measurement Period”
has
the
meaning set forth in Section 2.6(a).
“Foreign
Plan”
has
the
meaning set forth in Section 5.10(k).
“GAAP”
means
accounting principles generally accepted in the United States of America as
in
effect on the Closing Date.
“General
Enforceability Exceptions”
has
the
meaning set forth in Section 4.1.
“Governmental
Authority”
means
any government or political subdivision or regulatory authority, whether
federal, state, local or foreign, or any agency or instrumentality of any such
government or political subdivision or regulatory authority, or any federal
state, local or foreign court or arbitrator.
“Gross
Proceeds”
has
the
meaning set forth in Section 2.3(a).
“Guarantee”
by
any
Person means any obligation, contingent or otherwise, of such Person directly
or
indirectly guaranteeing or otherwise supporting in whole or in part the payment
of any Indebtedness or other obligation of any other Person and, without
limiting the generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of such Person (a) to purchase or pay (or advance
or supply funds for the purchase or payment of) such Indebtedness or other
obligation of such other Person (whether arising by virtue of partnership
arrangements, by agreement to keep well, to purchase assets, goods, securities
or services, to take or pay, or to maintain financial statement conditions
or
otherwise) or (b) entered into for the purpose of assuring in any other
manner the obligee of such Indebtedness or other obligations of the payment
of
such Indebtedness or to protect such obligee against loss in respect of such
Indebtedness (in whole or in part). The term “Guarantee”
used
as
a verb has a correlative meaning.
“Hazardous
Material”
shall
mean any pollutant, toxic substance including asbestos and asbestos-containing
materials, hazardous waste, hazardous material, hazardous substance,
contaminant, petroleum or petroleum-containing materials, infectious or medical
wastes, radiation and radioactive materials, leaded paints, toxic mold and
other
harmful biological agents, and polychlorinated biphenyls as defined in, the
subject of, or which could give rise to liability under any Environmental
Law.
4
“Holdback
Amount”
means
$150,000.
“Indebtedness”
of
any
Person means: either (a) any liability of such Person (i) for borrowed
money (including the current portion thereof), (ii) under any reimbursement
obligation relating to a letter of credit, bankers’ acceptance or note purchase
facility, (iii) evidenced by a bond, note, debenture or similar instrument
(including a purchase money obligation), (iv) for the payment of money
relating to any lease that is required to be classified as a capitalized lease
obligation in accordance with GAAP, (v) for all or any part of the deferred
purchase price of property or services (including, without limitation, accounts
and trade payables (whether or not invoiced)), including any “earnout” or
similar payments or any non-compete payments, (vi) under interest rate
swap, hedging or similar agreements, (vii) for income Taxes payable (other
than VAT taxes incurred in the Ordinary Course of Business), (viii) for any
deferred compensation or accrued incentive compensation, or (ix) for any
severance payable to individuals or organizations; or (b) any liability of
others described in the preceding clause (a) that such Person has
Guaranteed, that is recourse to such Person or any of its assets or that is
otherwise its legal liability or that is secured in whole or in part by the
assets of such Person. For purposes of this Agreement, Indebtedness includes
(A) any and all accrued interest, success fees, prepayment premiums, make
whole premiums or penalties and fees or expenses actually incurred (including
attorneys’ fees) associated with the prepayment of any Indebtedness,
(B) all “cut” but uncashed checks issued by the Company that are
outstanding as of the Closing Date, (C) cash, book or bank account
overdrafts and (D) any and all amounts owed by the Company to any of its
Affiliates, including, without limitation, any of the Sellers or any of their
Affiliates.
“Indemnified
Party”
has
the
meaning set forth in Section 10.2(a).
“Indemnifying
Party”
has
the
meaning set forth in Section 10.2(a).
“Independent
Arbitrator”
has
the
meaning set forth in Section 2.6(a).
“Information
Systems”
means
all computer hardware, databases and data storage systems, computer, data,
database and communications networks (other than the Internet), architecture
interfaces and firewalls (whether for data, voice, video or other media access,
transmission or reception) and other apparatus used to create, store, transmit,
exchange or receive information in any form.
“Intellectual
Property”
means
all of the following that is used in the business of the Company, along with
all
income, royalties, damages and payments due or payable on the Closing Date
or
thereafter, including, without limitation, damages and payments for past or
future infringements or misappropriations thereof, the right to xxx and recover
for past infringements or misappropriations thereof and any and all
corresponding rights that, now or hereafter, may be secured throughout the
world: (a) patents, patent applications, patent disclosures and inventions
(whether or not patentable and whether or not reduced to practice) and any
reissue, continuation, continuation in part, revision, extension or
reexamination thereof; (b) trademarks, service marks, trade dress, logos,
Internet domain names, trade names and corporate names together with all
goodwill associated therewith, including, without limitation, the use of the
current corporate name and all translations, adaptations, derivations and
combinations of the foregoing; (c) copyrights and copyrightable works;
(d) all registrations, applications and renewals for any of the foregoing;
(e) trade secrets and confidential business information (including, without
limitation, ideas, formulae, compositions, know how, manufacturing and
production processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical data, financial,
business and marketing plans, sales and promotional literature, and customer
and
supplier lists
and
related information); (f) computer software and websites (including,
without limitation, source code and object code and any data and related
documentation); (g) other intellectual property rights; and (h) all
copies and tangible embodiments of the foregoing (in whatever form or medium),
in each case including, without limitation, the items set forth on Schedule 5.14.
5
“Investment”
means
any equity interest, directly or indirectly, in any Person.
“IRCA”
has
the
meaning set forth in Section 5.9(d).
“IRS”
means
the Internal Revenue Service.
“Law”
means
any law, common law, statute, code, ordinance, regulation or other requirement
of any Governmental Authority as well as foreign collective bargaining
agreements and regulations of the employers’ liability insurance
association.
“Leased
Real Property”
has
the
meaning set forth in Section 5.4(b).
“Liability
Claim”
has
the
meaning set forth in Section 10.2(a).
“Liens”
has
the
meaning set forth in Section 2.1.
“Litigation
Conditions”
has
the
meaning set forth in Section 10.2(b).
“Loss”
and
“Losses”
means
all losses, liabilities, claims, damages, penalties, fines, judgments, awards,
settlements, Taxes, costs, fees, expenses (including but not limited to
reasonable attorneys’ fees) and disbursements and, with respect to any Liability
Claim asserted by a Purchaser Indemnified Party related to any inaccuracy or
misrepresentation regarding the Company’s pre-Closing Adjusted EBITDA,
diminution in value of the Company determined using the multiple of Adjusted
EBITDA relied upon by the Purchaser to determine the Gross
Proceeds.
“Measurement
Periods”
has
the
meaning set forth in Section 2.6(a).
“Non-Compete
Period”
means
the 2-year period immediately following the Closing Date.
“Note”
and
“Notes”
have
the meaning set forth in Section 2.3(a).
“Objections
Statement”
has
the
meaning set forth in Section 2.6(a).
“Order”
means
any order, judgment, injunction, award, decree, ruling, charge or writ of any
Governmental Authority.
6
“Ordinary
Course of Business”
means
the ordinary course of business consistent with past custom and practice
(including with respect to quantity and frequency).
“OTC
Bulletin Board”
means
the regulated electronic quotation service offered by the National Association
of Securities Dealers that displays real-time quotes, last-sale prices, and
volume information in over-the-counter equity securities.
“Party”
and
“Parties”
have
the meaning set forth in the Preamble.
“Permits”
means
any license, permit, authorization, certificate of authority, accreditation,
qualification or similar document or authority that has been issued or granted
by any Governmental Authority.
“Permitted
Exceptions”
means
(a) Liens for current Taxes, assessments, fees and other charges by
Governmental Authorities that are not due and payable as of the Closing Date
and
(b) those matters that are set forth on Schedule 1.1(c).
“Person”
means
any individual, sole proprietorship, partnership, corporation, limited liability
company, unincorporated society or association, trust or other entity, or any
division of such Person.
“Post-Closing
Straddle Period”
has
the
meaning set forth in Section 7.2(b).
“Pre-Closing
Straddle Period”
has
the
meaning set forth in Section 7.2(b).
“Pre-Closing
Tax Period”
means
any Tax period ending on or before the Closing Date.
“Privilege
Period”
has
the
meaning set forth in Section 7.2(c)(iv).
“Purchase
Price”
has
the
meaning set forth in Section 2.3(a).
“Purchaser”
has
the
meaning set forth in the Preamble.
“Purchaser’s
Advisors”
has
the
meaning set forth in Section 8.1(a).
“Purchaser
Common Stock”
means
the common stock, par value $0.001 per share, of Purchaser.
“Purchaser
Indemnified Party”
has
the
meaning set forth in Section 10.1(a).
“Purchaser
Shares”
has
the
meaning set forth in Section 2.3(a).
“X.
Xxxx”
has
the
meaning set forth in the Preamble.
“X.
Xxxx Employment Agreement”
has
the
meaning set forth in Section 3.2(d).
“Real
Property”
means
any and all real property and interests in real property of the Company,
including the Leased Real Property, any real property leaseholds and
subleaseholds, purchase options, easements, licenses, rights to access and
rights of way and any other real property otherwise owned, occupied or used
by
the Company.
7
“Real
Property Leases”
has
the
meaning set forth in Section 5.4(b).
“Release”
shall
mean any releasing, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, migrating, disposing or dumping
of a
Hazardous Material into the Environment (including, without limitation, the
abandonment or discarding of barrels, containers and other closed receptacles
containing any Hazardous Materials) and any condition that results in the
exposure of a Person to a Hazardous Material.
“Restricted
Territory”
means:
(a) the State of Colorado, each State contiguous thereto, and each State or
Commonwealth in which the Company’s customers are located on the Closing Date;
and (b) all of the specific customer accounts of the Company, whether
within or outside of the geographic area described in clause (a) above,
with which any of the Sellers had any contact or for which any of the Sellers
had any responsibility (either direct or supervisory) immediately prior to
the
Closing, at any time during the 2-year period prior to the Closing, or at any
time during the Non-Compete Period.
“Retained
Accounts Receivable” means
all
accounts receivable and other receivables generated in the Ordinary Course
of
the Company’s business, including, without limitation, notes receivables of the
Company existing as of the Closing Date. The certificate referenced in
Section 3.2(l)
sets
forth a true and complete list of all Retained Accounts Receivable as of the
Closing Date.
“Returns”
means
all returns, declarations, statements, reports, claims for refund, information
returns and forms relating to Taxes, including any schedule or attachment
thereto, and including any amendment thereof.
“Second
Measurement Period”
has
the
meaning set forth in Section 2.6(a).
“Securities
Act”
means
the Securities Act of 1933, as amended.
“Sellers”
has
the
meaning set forth in the Preamble.
“Selling
Expenses”
means
all (a) unpaid costs, fees and expenses of outside professionals incurred
by the Company (including expenses incurred by the Company on behalf of the
Sellers) relating to the process of selling the Company whether incurred in
connection with this Agreement or otherwise, including, without limitation,
all
legal, accounting, consulting, tax and investment banking fees and expenses,
and
(b) severance obligations, retention bonuses, “stay” bonuses and sale
bonuses owed by the Company triggered prior to or in connection with the
transactions contemplated by this Agreement (including the employer portion
of
any payroll, social security, unemployment or similar Taxes). The certificate
referenced in Section 3.2(l)
sets
forth the entire amount of the Selling Expenses (indicating the amount and
the
Person to whom such Selling Expense has been paid or is owed).
“Shares”
has
the
meaning set forth in Background Paragraph A.
8
“Special
Representations”
means
the representations and warranties listed in clauses (i), (ii) and (iii) of
Section 10.3(a).
“Statement
of Operations”
has
the
meaning set forth in Section 2.6(a).
“Straddle
Period”
has
the
meaning set forth in Section 7.2(b).
“Subsidiary”
or
“Subsidiaries”
means
any Person of which at least 20% of the outstanding shares or other equity
interests having ordinary voting power for the election of directors or
comparable managers of such Person are at the time owned by the Company, by
one
or more directly or indirectly wholly or partially owned subsidiaries of the
Company or by the Company and one or more such subsidiaries, whether or not
at
the time the shares of any other class or classes or other equity interests
of
such Person shall have or might have voting power by reason of the happening
of
any contingency.
“Tangible
Personal Property”
has
the
meaning set forth in Section 5.4(c).
“Target
EBITDA”
means
(a) with respect to the First Measurement Period, $761,585, and
(b) with respect to the Second Measurement Period, $811,088.
“Tax”
means
any (a) foreign, United States federal, state, or local net income,
alternative or add-on minimum tax, gross income, gross receipts, sales, use,
ad
valorem, value added, transfer, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with
any
interest, penalty, addition to tax or additional amount imposed by any Law
or
Taxing Authority, whether disputed or not, (b) any liability for the
payment of any amounts of any of the foregoing types as a result of being a
member of an affiliated, consolidated, combined or unitary group, or being
a
party to any agreement or arrangement whereby liability for payment of such
amounts was determined or taken into account with reference to the liability
of
any other Person and (c) any liability for the payment of any amounts of
any of the foregoing types as a result of being a party to any agreements or
arrangements (whether or not written) or with respect to the payment of any
amounts of any of the foregoing types as a result of any express or implied
obligation to indemnify any other Person.
“Tax
Matter”
means
any inquiries, claims, assessments, audits or similar events with respect to
Taxes of the Company.
Taxing
Authority”
means
any Governmental Authority responsible for the administration or imposition
of
any Tax.
“Third
Party Claim”
has
the
meaning set forth in Section 10.2(b).
“Threat
of Release”
shall
mean a substantial likelihood of a Release that requires action to prevent
or
mitigate damage or injury to health, safety or the Environment that might result
from such Release.
“Transfer
Taxes”
has
the
meaning set forth in Section 7.2(e).
9
II.
PURCHASE AND SALE
2.1. Purchase
and Sale of the Shares.
At the
Closing, the Purchaser shall purchase (or cause to be purchased) from the
Sellers, and the Sellers shall sell, transfer, assign, convey and deliver to
the
Purchaser, all of the Shares, free and clear of any mortgage, pledge,
hypothecation, rights of others, claim, security interest, encumbrance, title
defect, title retention agreement, voting trust agreement, interest, option,
lien, charge or similar restrictions or limitations (collectively, “Liens”).
2.2. Retained
Assets.
The
Parties agree that the Company shall have the right, at or prior to the Closing,
to distribute (a) all of the cash of the Company (other than customer
deposits or advances for services not yet completed), (b) the Retained
Accounts Receivable and (c) the Excluded Assets in accordance with
Section 8.1(e),
without
adjustment to the Purchase Price.
2.3. Purchase
Price.
(a) In
full
consideration for the transfer of the Shares, at the Closing, the Purchaser
shall pay (or cause to be paid) to the Sellers an aggregate amount equal to
$3,575,520 (in aggregate, the “Gross
Proceeds”)
(or
such lesser amount resulting from deductions, if any, pursuant to this
Section 2.3(a))
consisting of: (i) $1,937,760 in cash (the “Cash
Proceeds”)
minus
(A) any and all outstanding Indebtedness of the Company as of the Closing
Date, (B) any and all Selling Expenses, (C) any and all Bonus Amounts,
and (D) the Holdback Amount (such amount resulting from the deductions, if
any,
to the Cash Proceeds is referred to herein as the “Cash
Purchase Price”);
(ii)
$922,656 payable under two promissory notes (one payable 14 months after the
Closing and one payable 26 months after the Closing, subject to extension as
provided therein), each in the amount of $461,328 and substantially in the
form
attached hereto as Exhibit A
(each, a
“Note”
and
collectively, the “Notes”);
and
(iii) $715,104 payable in shares of Purchaser Common Stock, which number of
shares shall be calculated pursuant to Section 2.4
(such
number of shares resulting from the calculation, the “Purchaser
Shares”,
and
together with the Cash Purchase Price and the Notes, the “Purchase
Price”).
Subject to the terms of Article X,
on the
3-month anniversary of the Closing Date (but in no event before January 2,
2009), the Purchaser shall pay or cause to be paid to the Sellers the Holdback
Amount, minus
the
amount required to satisfy any unresolved Claims made by the Purchaser or any
Purchaser Indemnified Party in accordance with the terms of Article X.
Simple
interest shall accrue on the Holdback Amount, as the same may be reduced from
time to time, at the rate of 6.00% computed on the basis of a 360-day year
for
the actual number of days from the Closing Date to the date paid. The Purchaser
shall pay or cause to be paid to the Sellers all accrued but unpaid interest
on
the portion of the Holdback Amount actually paid to the Sellers concurrently
with payment of such portion of the Holdback Amount. The Holdback Amount (or
any
portion thereof and including any interest thereon) shall be paid when due
by
bank wire transfer of immediately available funds to the account(s) designated
pursuant to Section 2.5.
(b) At
the
Closing, the Purchaser shall pay (or cause to be paid) (i) to the Persons
entitled thereto, all of the Indebtedness of the Company to the extent it is
to
be repaid in connection therewith as determined by the Purchaser, (ii) to
the Persons entitled thereto, all of the Selling Expenses to the extent unpaid,
and (iii) to the Persons entitled thereto, when due and payable and as
reduced by applicable employment or withholding Taxes, the Bonus Amounts. The
Purchaser may, at its option, pay the Bonus Amounts to the Company, which in
turn shall pay such amounts to the Persons entitled thereto (less applicable
employment or withholding Tax).
10
2.4. Calculation
of the Number of Purchaser Shares.
The
number of the Purchaser Shares shall equal the quotient of (a) $715,104
divided
by
(b) the Fair Market Value of one share of Purchaser Common Stock as of the
Closing Date.
2.5. Payment
of the Purchase Price.
On the
Closing Date, the Purchaser shall (a) pay to the Sellers the Cash Purchase
Price by bank wire transfer of immediately available funds to the account(s)
listed on Schedule 2.5,
and
(b) deliver to the Sellers the Notes. As soon as is reasonably practicable
after the Closing, the Purchaser shall deliver to the Sellers the Purchaser
Shares. In no event will the Purchaser or the Company have any responsibility
or
liability for the allocation of the Purchase Price (including any payments
for
adjustments made thereto) between the Sellers or the distribution of the
Purchase Price (including any payments for adjustments made thereto) between
the
Sellers.
2.6. Adjustments
to the Notes.
(a) Statement
of Operations Calculation.
Within
60 days after each of (i) the period beginning on the first day of the
first full calendar month following the Closing and ending on the day
immediately preceding the one-year anniversary of such date (the “First
Measurement Period”)
and
(ii) the period beginning on the day after expiration of the First
Measurement Period and ending on the day immediately preceding the one-year
anniversary of such date (the “Second
Measurement Period”,
and
together with the First Measurement Period, the “Measurement
Periods”),
the
Purchaser shall cause to be prepared and delivered to the Sellers a statement
of
operations of the Company (the “Statement
of Operations”)
for
the applicable Measurement Period, determined in accordance with GAAP. Each
Statement of Operations shall include a (A) calculation of the Company’s
Adjusted EBITDA for the applicable Measurement Period, and (B) written
determination of whether the Company achieved the Target EBITDA for such
Measurement Period. If the Sellers have any objections to the Statement of
Operations for the applicable Measurement Period, the Sellers shall deliver
to
the Purchaser a statement setting forth their objections thereto, including
supporting calculations and documentation (an “Objections
Statement”).
If an
Objections Statement is not delivered to the Purchaser within 30 days after
delivery of the Statement of Operations for such Measurement Period, the
Statement of Operations shall be final, binding and non-appealable by the
Parties. The Sellers, on the one hand, and the Purchaser, on the other hand,
shall negotiate in good faith to resolve any such objections, but if they do
not
reach a final resolution within 30 days after the delivery of an Objections
Statement, then the Sellers and the Purchaser shall submit such dispute for
resolution to an independent accounting firm (the “Independent
Arbitrator”)
mutually appointed by the Sellers, on the one hand, and the Purchaser, on the
other hand. If the Sellers, on the one hand, and the Purchaser, on the other
hand, cannot agree on the identity of the Independent Arbitrator, then they
shall select the Independent Arbitrator from a list of regional accounting
firms
that maintain offices in the Columbus, Ohio area; provided,
however,
no firm
selected shall have (or have had) a material relationship with the Sellers,
the
Purchaser or their respective Affiliates. If either the Sellers, on the one
hand, or the Purchaser, on the other hand, fail to cooperate in selecting the
Independent Arbitrator, the cooperating Party may apply to the American
Arbitration Association office located in Columbus, Ohio, which office shall
have the power to designate the Independent Arbitrator. The Sellers and the
Purchaser shall use their commercially reasonably efforts to cause the
Independent Arbitrator to resolve all disagreements as soon as practicable.
The
resolution of the dispute by the Independent Arbitrator, or any written
agreement of the Sellers and the Purchaser as to the resolution of such dispute,
shall be final and binding on, and non-appealable by, the Parties. The costs
and
expenses of the Independent Arbitrator shall be allocated between the Purchaser,
on the one hand, and the Sellers, on the other hand, based upon the percentage
that the portion of the contested amount not awarded to each Party bears to
the
amount actually contested by such Party. For example, if the Sellers claim
Adjusted EBITDA for the applicable Measurement Period is $1,000 greater than
the
amount determined by the Purchaser, and the Purchaser contests only $500 of
the
amount claimed by the Sellers, and if the Independent Arbitrator ultimately
resolves the dispute by awarding the Sellers $300 of the $500 contested, then
the costs and expenses of arbitration will be allocated 60% (i.e., 300 ÷ 500) to
the Purchaser and 40% (i.e., 200 ÷ 500) to the Sellers.
11
(b) Adjustments.
(i) If
Adjusted EBITDA as finally determined pursuant to Section 2.6(a)
(“Final
EBITDA”)
for
the First Measurement Period is less than the Target EBITDA for the First
Measurement Period, then the principal amount of the Note payable 14 months
after the Closing (subject to extension as provided therein) shall decrease
in
an amount equal to the difference of (A) Target EBITDA minus
(B) Final EBITDA, for the First Measurement Period (the “EBITDA
Shortfall”).
(ii) If
Final
EBITDA for the Second Measurement Period is less than the Target EBITDA for
the
Second Measurement Period, then the principal amount of the Note payable 26
months after the Closing (subject to extension as provided therein) shall
decrease in an amount equal to the difference of (A) Target EBITDA
minus
(B) Final EBITDA, for the Second Measurement Period.
(iii) If
a
reduction is made to the Note payable 14 months after the Closing (subject
to
extension as provided therein) pursuant to Section 2.6(b)(i)
and
Final EBITDA for the Second Measurement Period is greater than Target EBITDA
for
the Second Measurement Period, then the principal amount of the Note payable
26
months after the Closing (subject to extension as provided therein) shall
increase in an amount equal to the lesser of (A) the difference of
(x) Final EBITDA minus
(y) Target EBITDA, for the Second Measurement Period (“Excess
EBITDA”),
or
(B) the EBITDA Shortfall. For the avoidance of doubt, in no event shall the
Notes exceed their aggregate value on the Closing Date.
(c) Access.
After
delivery of the Statement of Operations, and solely in connection therewith,
the
Purchaser shall permit the Sellers and their representatives to have reasonable
access to the books, records and other documents (including work papers)
pertaining to or used in connection with preparation of the Statement of
Operations, and shall provide the Sellers with copies thereof as reasonably
requested by the Sellers. The Sellers and their representatives may make
inquiries of the Purchaser and the Company and their respective employees,
accountants and representatives regarding the Statement of Operations arising
in
the course of their review thereof, and the Purchaser shall use, and shall
cause
the Company to use, their commercially reasonable efforts to cause any such
employees, accountants and representatives to cooperate with and respond to
such
inquiries.
12
III.
CLOSING,
DELIVERIES AND OTHER ACTIONS
3.1. Time
and Place of Closing. The
closing of the transactions contemplated hereby (the “Closing”)
shall
take place remotely via the exchange of documents and signatures on the second
business day after satisfaction or waiver of the conditions (excluding
conditions that, by their terms, cannot be satisfied until the Closing Date
but
subject to the satisfaction or waiver of those conditions) set forth in
Article IX,
or in
such other manner and such other time as the Purchaser and the Sellers shall
agree in writing. The date on which the Closing occurs is referred to herein
as
the “Closing
Date”.
3.2. Deliveries
by the Sellers.
At the
Closing, the Sellers shall deliver, or cause to be delivered, to the Purchaser
the following items:
(a) (i) stock
certificates representing all of the Shares with duly executed stock powers
attached in proper form for transfer to the Purchaser and (ii) any other
documents that are necessary to transfer to the Purchaser good and valid title
to the Shares free and clear of any Liens, with any necessary transfer tax
stamps affixed or accompanied by evidence that all stock transfer taxes have
been paid;
(b) a
receipt, duly executed by the Sellers, evidencing receipt by the Sellers of
the
Purchase Price;
(c) an
employment agreement, in the form attached hereto as Exhibit B,
by and
between the Company and X. Xxxx (the “X.
Xxxx Employment Agreement”),
duly
executed by X. Xxxx;
(d) an
employment agreement, in the form attached hereto as Exhibit C,
by and
between the Company and X. Xxxx (the “X.
Xxxx Employment Agreement”,
and
together with the X. Xxxx Employment Agreement, the “Employment
Agreements”),
duly
executed by X. Xxxx;
(e) releases,
each in the form of Exhibit D,
duly
executed by each Seller;
(f) reasonably
current good standing certificates (or equivalent document) for the Company
issued by the appropriate Governmental Authority in the Company’s jurisdiction
of incorporation and in each jurisdiction where the Company is qualified to
do
business as a foreign corporation;
(g) copies
of
the Certificate of Incorporation (or equivalent document) of the Company,
certified by the secretary of state of its jurisdiction of incorporation, and
copies of the Bylaws (or equivalent document) of the Company, certified by
an
officer of the Company;
(h) the
original corporate record books and stock record books of the Company, and
all
books and records (including data stored on discs, tapes or other media) related
to the Company’s business, including, to the extent available, all current and
historical financial, accounting and Tax records);
13
(i) all
of
the Consents listed on Schedules 4.4
and
5.4(b);
(j) certificates
of the Sellers required pursuant to Sections 9.1(c)
and
(f);
(k) non-foreign
person affidavits that comply with the requirements of Section 1445 of the
Code, duly executed by each Seller and reasonably satisfactory to the
Purchaser;
(l) a
certificate of the Sellers, dated as of the Closing Date, setting forth in
sufficient detail acceptable to the Purchaser (i) all Indebtedness of the
Company (other than accounts and trade payables not yet invoiced as of the
Closing Date, which accounts and trade payables shall be a liability of the
Sellers as Indebtedness), (ii) all Selling Expenses, (iii) all Bonus
Amounts, and (iv) all Retained Accounts Receivable, in each case as of the
Closing Date;
(m) [intentionally
omitted];
(n) appropriate
termination statements under the Uniform Commercial Code and other instruments
as may be reasonably requested by the Purchaser to evidence the release of
any
and all Liens (other than Permitted Encumbrances) on any of the assets or
properties of the Company;
(o) written
resignations of each director and officer of the Company;
(p) joinder
agreements, guarantees, security pledges, subordination agreements,
certificates, and any other documents requested by the Purchaser’s lenders in
connection with any required consent of such lenders to the transactions
contemplated by this Agreement and the Ancillary Agreements, each to be
effective only as of the Closing Date and in form and substance satisfactory
to
the Purchaser and its lenders; and
(q) such
other documents and instruments as the Purchaser reasonably requests to
consummate the transactions contemplated hereby.
3.3. Deliveries
by the Purchaser.
At the
Closing, the Purchaser shall deliver, or cause to be delivered, to the Sellers
(unless otherwise indicated herein) the following items:
(a) the
Purchase Price (comprised of the Cash Purchase Price and the Notes) payable
as
set forth in Section 2.5;
(b) the
Employment Agreements, duly executed by the Company;
(c) a
certificate of the Purchaser required pursuant to Sections
9.2(c);
and
(d) such
other documents and instruments as the Sellers reasonably request to consummate
the transactions contemplated hereby.
14
IV.
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The
Sellers hereby severally represent and warrant to the Purchaser as
follows:
4.1. Authority,
Validity and Effect.
Each
Seller has all requisite authority and full legal capacity to enter into and
perform his or her obligations under this Agreement and any Ancillary Agreement
to which such Seller is a party and to consummate the transactions contemplated
herein and therein. This Agreement and such Ancillary Agreements have been
duly
executed and delivered by each Seller pursuant to all necessary authorization
and are the legal, valid and binding obligation of each Seller, enforceable
against each Seller in accordance with their terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation, fraudulent
conveyance and other similar Laws and principles of equity affecting creditors’
rights and remedies generally (the “General
Enforceability Exceptions”).
No
further action on the part of any Seller is or will be required in connection
with the transactions contemplated by this Agreement or the Ancillary
Agreements.
4.2. Title
to Shares.
The
Sellers (a) are the record and beneficial owners of the Shares as set forth
on Schedule 5.3,
(b) have full power, right and authority, and any approval required by Law,
to make and enter into this Agreement and to sell, assign, transfer and deliver
the Shares to the Purchaser, and (c) have good and valid title to the
Shares free and clear of all Liens. Upon the consummation of the transactions
contemplated by this Agreement in accordance with the terms hereof, at the
Closing, the Purchaser will acquire good and valid title to the Shares, free
and
clear of all Liens, other than Liens created by the Purchaser.
4.3. No
Conflict.
Neither
the execution of this Agreement or the Ancillary Agreements, nor the performance
by the Sellers of their respective obligations hereunder or thereunder will
(a) violate or conflict with the Certificate of Incorporation (or
equivalent document) or the Bylaws (or equivalent document) of the Company,
or
any Law or Order, (b) violate, conflict with or result in a breach or
termination of, or otherwise give any Person additional rights or compensation
under, or the right to terminate or accelerate, or constitute (with notice
or
lapse of time, or both) a default under the terms of any note, deed, mortgage,
or Contract or oral understanding to which the Company, or any Seller is a
party
or by which any of their respective assets or properties are bound, (c)
result in the creation or imposition of any Lien with respect to, or otherwise
have an adverse effect upon, the Shares or any of the assets or properties
of
the Company or any Seller, or (d) invalidate or adversely affect any Permit
required for the conduct of the businesses of the Company, including, without
limitation, any business license.
4.4. Consents.
Except
as set forth on Schedule 4.4,
no
Consent of any third party or Governmental Authority is required in connection
with the execution and delivery by the Sellers of this Agreement or the
Ancillary Agreements to which such Seller is a party, or the consummation of
the
transactions contemplated hereby or thereby.
4.5. Litigation.
There is
no Order and no Action pending, or to the Company’s Knowledge, threatened
against any Seller that would give any Person the right to enjoin or rescind
the
transactions contemplated by this Agreement or otherwise prevent any Seller
from
complying with the terms of this Agreement.
15
4.6. Brokers.
No
Person has acted directly or indirectly as a broker, finder or financial advisor
for the Company or any Seller in connection with the negotiations relating
to
the transactions contemplated by this Agreement for which the Purchaser or
the
Company will become obligated to pay a fee or commission.
4.7. Purchaser
Shares Legend.
The
Sellers acknowledge and accept that until such time as the Purchaser Shares
have
been registered under the Securities Act or otherwise may be sold pursuant
to
Rule 144 under the Securities Act without any restriction as to the amount
of shares that may be immediately sold as of a particular date, the certificates
representing the Purchaser Shares shall be issued with restrictive legends
substantially similar to the following form (and a stop-transfer order may
be
placed against any transfer):
“The
securities represented by this certificate have not been registered under the
Securities Act of 1933, as amended. The securities may not be sold, transferred
or assigned in the absence of an effective registration statement for the
securities under said Act, or an opinion of counsel, in form, substance and
scope customary for opinions of counsel in comparable transactions, that
registration is not required under said Act or unless sold pursuant to
Rule 144 under said Act.”
4.8. Rule 144.
The
Sellers acknowledge and accept that until such time as the Purchaser Shares
have
been registered under the Securities Act or a Conversion Transaction occurs,
if
any Seller desires to sell any of his or her respective shares of the Purchaser
Shares, then such Seller must comply with the terms and conditions of
Rule 144 under the Securities Act, which terms and conditions include,
among other things, mandatory holding periods.
4.9. Investment
Representations.
(a) The
Purchaser Shares acquired by the Sellers are being acquired for investment
only
and not with a view of any distribution thereof that would violate the
Securities Act or any applicable state securities laws.
(b) The
Sellers (i) are financially able to hold the Purchaser Shares for long-term
investment, (ii) understand that the nature and amount of the Purchaser
Shares being purchased is consistent with their overall investment program
and
financial position and (iii) recognize that there are substantial risks
involved in the acquisition of the Purchaser Shares, including risk of loss
of
the entire amount of such investment.
(c) The
Sellers confirm that they (i) are familiar with the Purchaser,
(ii) have been given the opportunity to ask questions of the officers and
directors of the Purchaser and to obtain (and have received to their
satisfaction) such information about the business and financial condition of
the
Purchaser as they have reasonably requested and (iii) have such knowledge
and experience in financial and business matters that they are capable of
evaluating the merits and risks of the investment in the Purchaser
Shares.
(d) Each
Seller is an “accredited investor” as such term is defined in Rule 501 of
Regulation D promulgated under the Securities Act.
16
V.
REPRESENTATION AND WARRANTIES RELATING TO THE COMPANY
Each
Seller hereby, jointly and severally, represents and warrants to the Purchaser
as follows:
5.1. Existence
and Good Standing.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Colorado and is duly authorized, qualified or
licensed to do business as a foreign corporation in each of the jurisdictions
set forth on Schedule 5.1,
which
are the only jurisdictions in which the Company is required to be so
qualified.
5.2. Power.
The
Company has the necessary power and authority to (a) own, operate and lease
its properties and assets as and where currently owned, operated and leased
and
(b) carry on its business as currently conducted.
5.3. Capitalization
of the Company.
The
authorized capital stock of the Company consists of 50,000 shares of common
stock, without par value, of which 1,818 shares are issued and outstanding
all
of which have been (a) duly authorized and validly issued and are fully
paid and non assessable and (b) issued in compliance with all securities
laws and all applicable agreements. All of the Shares are owned beneficially
and
of record by the Sellers in each case free and clear of any Liens. There are
no
outstanding options, warrants, rights, calls, subscriptions, claims of any
character, agreements, obligations, convertible or exchangeable securities
or
other commitments, contingent or otherwise, of any kind obligating the Company
to issue, directly or indirectly, any additional shares of its capital stock
or
other equity securities. The Shares represent the only issued and outstanding
shares of capital stock of the Company. No former equity owner of the Company
or
any of its respective predecessors, and no former holder of any right to acquire
any interest in the Company or any of its respective predecessors (whether
by
warrant, option, convertible instrument or otherwise) has any claim or rights
against the Company. There are no Contracts relating to the issuance, sale,
transfer or voting of any equity securities or other securities of the Company.
Schedule 5.3
sets
forth a true and complete statement of the capitalization of the Company. The
Company has no Subsidiaries or Investments.
5.4. Property.
(a) Title.
Other
than the Permitted Exceptions, the Company has good and marketable title to,
valid and enforceable leasehold interests in, or a valid and enforceable license
to, all of its tangible assets and properties (including, without limitation,
the Leased Property) free and clear of any Liens. The assets and properties
owned, leased or licensed by the Company are in good condition and repair
(subject to normal wear and tear consistent with the age of the assets and
properties) and are sufficient for the operation of the business of the Company
as it is currently conducted and proposed to be conducted. The Company owns
no
real property.
17
(b) Real
Property Leases.
Schedule 5.4(b)
sets
forth a true and complete description of all real property leased, licensed
to
or otherwise used or occupied (but not owned) by the Company (collectively,
the
“Leased
Real Property”),
including the address thereof, the annual fixed rental, the expiration of the
term, any extension options and any security deposits. A true and correct copy
of each such lease, license or occupancy agreement, and any amendments thereto,
with respect to the Leased Real Property (collectively, the “Real
Property Leases”)
has
been delivered to the Purchaser, and no changes have been made to any Real
Property Leases since the date of delivery. All of the Leased Real Property
is
used or occupied by the Company pursuant to a Real Property Lease. Each Real
Property Lease is valid, binding and enforceable in accordance with its terms
and is in full force and effect. There are no existing defaults by the Company
or the lessor under any of the Real Property Leases, and no event has occurred
which (with notice, lapse of time or both) could reasonably be expected to
constitute a breach or default under any of the Real Property Leases by any
party or give any party the right to terminate, accelerate or modify any Real
Property Lease. Except as set forth on Schedule 5.4(b),
(i) no Consent is required from the lessor under any of the Real Property
Leases to consummate the transactions contemplated by this Agreement and the
Ancillary Agreements and (ii) no Affiliate of the Company or any Seller is
the owner or lessor of any Leased Real Property. The Company has not leased
or
sublet as lessor or sublessor, and no third party is in possession of, any
of
the Real Property.
(c) Tangible
Personal Property.
Schedule 5.4(c)
sets
forth a true and complete list, by category, of all equipment, machinery and
other similar tangible personal property, with an individual original cost
of
$1,000 or more, that is owned or leased by the Company (the “Tangible
Personal Property”).
The
Company is in full possession of all of its Tangible Personal
Property.
(d) Absence
of Violations.
Except
as set forth on Schedule 5.4(d),
(i) none of the Real Property, nor the leasing, occupancy or use of the
Real Property, is in violation of any Law, including, without limitation, any
building, zoning, environmental or other ordinance, code, rule or regulation,
and (ii) the condition and use of the Real Property conforms to each
applicable certificate of occupancy and all other Permits required to be issued
in connection with the Real Property. The Company has obtained all Permits
necessary for the operation of its business at the Real Property.
5.5. Litigation.
Except
as set forth on Schedule 5.5,
there
is no instance in which the Company is or has been within the previous five
years (a) subject to any unsatisfied Order, or (b) a party or is
threatened to be made a party to any Action. Except as set forth on Schedule 5.5,
no
event has occurred or circumstances exist that could give rise to or serve
as a
basis for the commencement of any Action. There are no Actions pending or
threatened that question the validity of this Agreement, the Ancillary
Agreements or any of the transactions contemplated hereby or
thereby.
5.6. Compliance
with Laws.
The
Company is now, and has been at all times during the previous five years, in
compliance with all Laws and Orders, including, without limitation, those
respecting (a) pension administration, (b) labor relations or
employment matters and related foreign social security laws, (c) zoning,
(d) delivery practices and procedures, and (e) intellectual property.
To the Company’s Knowledge, no proposed Law or Order exists that would be
applicable to the Company and that would adversely affect any assets,
properties, liabilities, operations or prospects of the Company. Neither the
Company nor any Seller has received any notification or communication from
any
Governmental Authority threatening to revoke any Permit owned or held by the
Company.
18
5.7. Necessary
Property.
The
Company is the only operation through which the business of the Company is
conducted, and no similar business is conducted by any Affiliate of the Company
or of any Seller. The assets and properties currently owned, leased or licensed
by the Company, constitute all of the assets and properties used in or necessary
to conduct the business of the Company as it is currently conducted and proposed
to be conducted.
5.8. Conduct
of Business.
Since
December 31, 2007, the business and operations of the Company have been
conducted in the Ordinary Course of Business and there has not been any adverse
change in the operation of the business or the performance or financial
condition of the Company. Without limiting the generality of the foregoing,
since December 31, 2007 and except as set forth on Schedule 5.8,
the
Company has not:
(a) borrowed
any amount or incurred or become subject to any liability except
(i) current liabilities incurred in the Ordinary Course of Business,
(ii) liabilities under Contracts entered into in the Ordinary Course of
Business, and (iii) borrowings under lines of credit existing on such
date;
(b) sold,
assigned or transferred (including, without limitation, transfers to any
employees, shareholders or Affiliates) any assets or properties except in the
Ordinary Course of Business, or canceled any debts or claims;
(c) waived
any rights of value or suffered any losses;
(d) declared
or paid any dividends or other distributions with respect to any shares of
its
capital stock or redeemed or purchased, directly or indirectly, any shares
of
its capital stock, any options or any other rights to acquire any of its equity
interests;
(e) taken
any
other action or entered into any other transaction (including any transactions
with employees, shareholders or Affiliates) other than in the Ordinary Course
of
Business or other than the transactions contemplated by this Agreement and
the
Ancillary Agreements;
(f) (i) increased
the salary, wages or other compensation rates of any officer, employee, director
or consultant, (ii) made or granted any increase in benefits under any
Employee Plan, or amended or terminated any existing Employee Plan, or adopted
any new Employee Plan or (iii) made any commitment or incurred any
liability to any labor organization;
(g) made
any
capital expenditures in excess of $1,000 in the aggregate or any commitments
therefor;
(h) made
any
change in accounting or Tax principles, practices or policies from those
utilized in the preparation of the Financial Statements;
(i) made,
changed or rescinded any Tax election;
(j) made
any
write off or write down of or made any determination to write off or write
down
any of its assets and properties;
19
(k) made
any
change in its general pricing practices or policies or any change in its credit
or allowance practices or policies;
(l) entered
into any amendment, modification, termination (partial or complete) or granted
any waiver under or given any Consent with respect to any Contract that is
required to be disclosed in the Schedules to this Agreement;
(m) commenced
or terminated any line of business;
(n) received
notice from any customer or supplier that such customer or supplier has ceased,
may cease or will cease to do business with it; or
(o) (i) delayed,
or taken any action to delay, payment of any accounts payable of the Company
or
failed to pay any accounts payable of the Company when due in accordance with
their terms, or (ii) accelerated, or taken any action to accelerate, the
payment of any accounts receivable of the Company or the collection of customer
deposits by the Company.
5.9. Labor
Matters.
(a) Union
and Employee Contracts.
(i) The Company is not a party to or bound by any union contract,
collective bargaining agreement or other similar type of contract; (ii) the
Company has not agreed to recognize any union or other collective bargaining
representative; and (iii) no union or collective bargaining representative
has been certified as representing any employees of the Company and no
organizational attempt has been made or threatened by or on behalf of any labor
union or collective bargaining representative with respect to any employees
of
the Company. Neither the Company nor any of its predecessors has experienced
any
labor strike, dispute, slowdown or stoppage or any other material labor
difficulty during the past five years and to the Company’s Knowledge there are
no facts or circumstances that might lead to any such labor dispute. Except
as
set forth on Schedule 5.9(a),
the
Company is not a party to or bound by any employment contract, independent
contractor agreement, consultation agreement or other similar type of
contract.
(b) List
of Employees, Etc.
Schedule 5.9(b)
sets
forth a list of all officers, directors, employees (which term shall include
any
managing director), consultants and independent contractors of the Company,
the
rate of all regular and special compensation payable to each such Person in
any
and all capacities and any regular or special compensation that will be payable
to each such Person in any and all capacities other than the then current
accrual of regular payroll compensation, and any potentially existing
change-in-control clause. Except as set forth on Schedule 5.9(b),
the
Company does not employ any employee who cannot be dismissed immediately,
whether currently or immediately after the transactions contemplated by this
Agreement and the Ancillary Agreements, without notice or cause and without
further liability to the Company. To the Company’s Knowledge, no employee of the
Company intends to terminate his or her employment relationship with the
Company.
(c) WARN
Act.
With
respect to the employees of the Company, during the last twelve months, there
has been no mass layoff, plant closing, or shutdown that implicates the Worker
Adjustment Retraining & Notification Act of 1988, as amended, or any similar
Law.
20
(d) IRCA.
To the
Company’s Knowledge, all current employees of the Company who work in the United
States are, and all former employees of the Company who worked in the United
States whose employment terminated, voluntarily or involuntarily, within the
previous three years, were legally authorized to work in the United States.
The
Company has completed and retained the necessary employment verification
paperwork under the Immigration Reform and Control Act of 1986 (“IRCA”)
for
all employees. Further, at all times, the Company was in material compliance
with both the employment verification provisions (including the paperwork and
documentation requirements) and the anti-discrimination provisions of
IRCA.
(e) Unemployment,
Social Security and Other Benefits.
The
Company is not liable for any payment to any trust or other fund or to any
Governmental Entity, with respect to unemployment compensation benefits, social
security or other benefits or obligations for employees (other than routine
payments to be made in the ordinary course of business and consistently with
past practice). There are no pending claims against the Company under any
workers compensation plan or policy or for long term disability.
(f) Former
Employment Arrangements.
To the
Company’s Knowledge, no employee of the Company is in violation, in any material
respect, of any term of any employment agreement, nondisclosure agreement,
common law nondisclosure obligation, fiduciary duty, non-competition agreement
or restrictive covenant to a former employer.
(g) Manuals,
Handbooks, Policies, Etc.
True
and complete copies have been made available to the Purchaser of the material
written personnel manuals, handbooks, policies, rules or procedures applicable
to any employee of the Company.
(h) Compliance
and Investigations.
The
Company is not a party to, or otherwise bound by, any consent decree with,
or
citation by, any Governmental Entity relating to employees or employment
practices. Neither the Company nor any of its executive officers has received
within the past five years any notice of intent by any Governmental Entity
responsible for the enforcement of labor or employment laws to conduct an
investigation relating to the Company or any of its Subsidiaries and, to the
Company’s Knowledge, no such investigation is in progress.
(i) Effect
of Execution and Delivery.
None of
the execution and delivery of this Agreement or the consummation of any
transaction contemplated hereby or any termination of employment or service
in
connection therewith or subsequent thereto will (i) result in any payment
(including severance, golden parachute, bonus or otherwise) becoming due to
any
Person, (ii) materially increase any benefits otherwise payable by the
Company, (iii) result in the acceleration of the time of payment or vesting
of any such benefits, (iv) increase the amount of compensation due to any
Person, or (v) result in the forgiveness in whole or in part of any
outstanding loans made by the Company to any Person.
(j) Effect
of Other Agreements.
To the
Company’s Knowledge, no current employee or current officer or director of the
Company is a party to, or is otherwise bound by, any agreement or arrangement,
including any confidentiality, non-competition or proprietary rights agreement,
between such employee, officer or director and any other Person that in any
way
materially and adversely affects (i) the performance of his or her duties
as an employee, officer or director of the Company or (ii) the ability of
the Company to conduct the business now being conducted by it.
21
5.10. Employee
Benefit Plans.
(a) Schedule 5.10(a)
sets
forth a complete list of (i) all “employee benefit plans,” as defined in
Section 3(3) of ERISA, (ii) all other severance pay, salary
continuation, bonus, incentive, stock option, enhanced redundancy or other
severance schemes, share incentive schemes, share option schemes, bonus or
profit sharing schemes, retirement, pension, profit sharing or deferred
compensation plans, contracts, programs, funds or arrangements of any kind,
and
(iii) all other employee benefit plans, contracts, programs, funds or
arrangements (whether written or oral, qualified or nonqualified, funded or
unfunded, foreign or domestic, currently effective or terminated) and any trust,
escrow or similar agreement related thereto, whether or not funded, in respect
of any present or former employees, directors, officers, shareholders,
consultants, or independent contractors of the Company that are sponsored or
maintained by the Company or any member of the Controlled Group or with respect
to which the Company or any member of the Controlled Group has made or is
required to make payments, transfers, or contributions (all of the above being
hereinafter individually or collectively referred to as an “Employee
Plan”
or
“Employee
Plans”,
respectively). The Company has no liability with respect to any plan,
arrangement or practice of the type described in the preceding sentence other
than the Employee Plans.
(b) True
and
complete copies of the following materials have been delivered or made available
to the Purchaser: (i) all current and prior plan documents for each
Employee Plan or, in the case of an unwritten Employee Plan, a written
description thereof, (ii) all determination letters from the IRS with
respect to any of the Employee Plans, (iii) all current and prior summary
plan descriptions, summaries of material modifications, annual reports, and
summary annual reports with respect to the Employee Plans, (iv) all current
and prior trust agreements, insurance contracts, and other documents relating
to
the funding or payment of benefits under any Employee Plan, and (v) any
other documents, forms or other instruments relating to any Employee Plan
reasonably requested by the Purchaser.
(c) Each
Employee Plan has been maintained, operated, and administered in compliance
with
its terms and any related documents or agreements and in compliance with all
applicable Laws. There have been no prohibited transactions or breaches of
any
of the duties imposed on “fiduciaries” (within the meaning of Section 3(21)
of ERISA) by ERISA with respect to the Employee Plans that could result in
any
liability or excise Tax under ERISA or the Code being imposed on the Company.
All contributions, transfers and payments in respect of any Employee Plan,
other
than transfers incident to an incentive stock option plan within the meaning
of
Section 422 of the Code, have been or are fully deductible under the Code.
There is no pending or threatened assessment, Action, complaint, proceeding,
or
investigation of any kind before any Governmental Authority with respect to
any
Employee Plan (other than routine claims for benefits), nor is there any basis
for one. The Company has reserved all rights necessary to amend or terminate
each of the Employee Plans without the consent of any other Person.
22
(d) Each
Employee Plan intended to be qualified under Section 401(a) of the Code is
so qualified and has been determined by the IRS to be so qualified, and each
trust created under any Employee Plan has been determined by the IRS to be
exempt from Tax under the provisions of Section 501(a) of the Code, and
nothing has occurred since the date of any such determination that could
reasonably be expected to give the IRS grounds to revoke such
determination.
(e) Except
as
set forth in Schedule
5.10(e),
neither
the Company nor any member of the Controlled Group currently has and at no
time
in the past has had an obligation to contribute to a “defined benefit plan” as
defined in Section 3(35) of ERISA, a pension plan subject to the funding
standards of Section 302 of ERISA or Section 412 of the Code, a
“multiemployer plan” as defined in Section 3(37) of ERISA or
Section 414(f) of the Code or a “multiple employer plan” within the meaning
of Section 210(a) of ERISA or Section 413(c) of the Code. There are no
unfunded liabilities with respect to any Employee Plan listed in Schedule
5.10(e) that are not reflected on the Financial Statements or incurred in the
Ordinary Course of Business since the date of the most recent Financial
Statements.
(f) With
respect to each group health plan benefiting any current or former employee
of
the Company or any member of the Controlled Group that is subject to
Section 4980B of the Code, the Company and each member of the Controlled
Group has complied with the continuation coverage requirements of
Section 4980B of the Code and Part 6 of Subtitle B of
Title I of ERISA. No Employee Plan is or at any time was funded through a
“welfare benefit fund” as defined in Section 419(e) of the Code, and no
benefits under any Employee Plan are or at any time have been provided through
a
voluntary employees’ beneficiary association (within the meaning of
subsection 501(c)(9) of the Code) or a supplemental unemployment benefit
plan (within the meaning of Section 501(c)(17) of the Code).
(g) All
(i) insurance premiums required to be paid with respect to,
(ii) benefits, expenses, and other amounts due and payable under, and
(iii) contributions, transfers, or payments required to be made to, any
Employee Plan prior to the Closing Date will have been paid, made or accrued
on
or before the Closing Date. With respect to any insurance policy providing
funding for benefits under any Employee Plan, (A) there is no liability of
the Company, in the nature of a retroactive rate adjustment, loss sharing
arrangement, or other actual or contingent liability, nor would there be any
such liability if such insurance policy was terminated on the Closing Date, and
(B) no insurance company issuing any such policy is in receivership,
conservatorship, liquidation or similar proceeding and, to the Company’s
Knowledge, no such proceedings with respect to any insurer are
imminent.
(h) No
Employee Plan provides benefits, including, without limitation, death or medical
benefits, beyond termination of service or retirement other than
(i) coverage mandated by Law, or (ii) death or retirement benefits
under any Employee Plan that is intended to be qualified under
Section 401(a) of the Code. No Employee Plan provides benefits to any
individual who is not a current or former employee of the Company, or the
dependents or other beneficiaries of any such current or former
employee.
23
(i) The
execution and performance of this Agreement and the Ancillary Agreements will
not (i) constitute a stated triggering event under any Employee Plan that
will result in any payment (whether of severance pay or otherwise) becoming
due
from the Company to any current or former officer, employee, director or
consultant (or dependents of such Persons), or (ii) accelerate the time of
payment or vesting (other than vesting resulting from termination of the
Company’s retirement plans by the Purchaser after the Closing), or increase the
amount of compensation due to any current or former officer, employee, director
or consultant (or dependents of such Persons) of the Company. No amount that
could be received (whether in cash or property or the vesting of property)
as a
result of any of the transactions contemplated by this Agreement by any
employee, officer or director of the Company or any of its affiliates who is
a
“disqualified individual” (as such term is defined in Treasury Regulation
Section 1.280G-1) under any employment, severance or termination agreement,
other compensation arrangement or Employee Plan currently in effect would be
characterized as an “excess parachute payment” (as such term is defined in
Section 280G(b)(1) of the Code).
(j) All
Employee Plans subject to Section 409A of the Code comply in both form and
operation with Section 409A of the Code and the rules and regulations
thereunder.
(k) The
term
“Foreign
Plan”
shall
mean any Employee Plan that is maintained outside of the United States. The
Company does not currently maintain, contribute to or is not otherwise obligated
under, nor in the past has it maintained, contributed to or was otherwise
obligated under, any Foreign Plans.
5.11. Environmental.
Except
as set forth on Schedule 5.11,
the
Company is presently and has been at all times in compliance with all
Environmental Laws applicable to the Real Property, formerly owned, leased
or
operated locations, or its business, and there exists no Environmental
Conditions that require reporting, investigation, assessment, cleanup,
remediation or any other type of response action pursuant to any Environmental
Law or that could be the basis for any liability of any kind pursuant to any
Environmental Law.
5.12. Contracts. Schedule 5.12
sets
forth all of the Contracts, including, without limitation, any contract,
agreement, lease, instrument, guarantee, bid, order or proposal to which the
Company is a party or to which any of the assets of the Company are bound,
(a) governing the borrowing of money or the Guarantee or the repayment of
Indebtedness of the Company or granting of Liens on any property or asset of
the
Company (including any such contract under which the Company has incurred any
Indebtedness); (b) providing for the employment of any Person;
(c) containing covenants limiting the freedom of the Company to compete in
any line of business or with any Person or in any geographic area or market;
(d) for the use of or restricting the use of the Intellectual Property;
(e) with any shareholders, directors, officers, employees of the Company or
its respective Affiliates or Affiliates of any Seller; (f) providing for
the purchase, maintenance or acquisition, or the sale or furnishing, of
materials, supplies, merchandise, equipment or services (including, without
limitation, computer hardware or software or other property or services) in
excess of $10,000; (g) granting to any Person a first refusal, first offer
or similar preferential right to purchase or acquire any right, asset or
property of the Company; (h) pertaining to the lease of equipment or other
personal property; (i) providing for any offset, countertrade or barter
arrangement; (j) involving a distributor, sales representative, broker,
franchise or advertising arrangement; (k) involving a joint venture;
(l) involving management services, consulting services, support services or
any other similar services, including, without limitation, service agreements
under which the Company is required to provide services to insurers, self
insured employees or any governmental or private health plan, managed care
plan
or other similar Person; (m) involving the acquisition of any business
enterprise whether via stock or asset purchase or otherwise; or (n) any
other material contract or agreement. The Company has provided to the Purchaser
true and complete copies of each such Contract, as amended to date. Each
Contract listed on Schedule 5.12
(or
required to be listed on Schedule 5.12)
is a
valid, binding and enforceable obligation of the Company enforceable in
accordance with its terms, subject to General Enforceability Exceptions. With
respect to the Contracts listed on Schedule 5.12
(or
required to be listed on Schedule 5.12):
(a) neither the Company nor any other party thereto is in material default
under or in violation of any Contract; (b) no event has occurred which,
with notice or lapse of time or both, would constitute such a default or
violation; and (c) the Company has not released any of its rights under any
Contract.
24
5.13. Permits. Schedule 5.13
sets
forth a true and complete list and description of all Permits issued to the
Company and used in the conduct of its business. The Company is in compliance
with the terms of such Permits, and all such Permits are in full force and
effect. There is no pending or, to the Company’s Knowledge, threatened
termination, expiration or revocation of any such Permits. Neither the execution
of this Agreement or the Ancillary Agreements, nor the performance by the
Sellers of their respective obligations hereunder or thereunder will invalidate
or adversely affect any such Permits. Except as set forth on Schedule 5.13,
there
are no other Permits that are necessary or required for the conduct of the
business of the Company.
5.14. Intellectual
Property.
(a) Schedule 5.14
sets
forth, with the application number, application date, registration/issue number,
registration/issue date, title or xxxx, country or other jurisdiction and
owner(s), as applicable, a complete and correct list of all the following
Intellectual Property: (i) Patents; (ii) registered Trademarks and
applications therefor; (ii) registered Copyrights and applications
therefor; and (iv) Internet domain names. Any and all renewal and
maintenance fees, taxes, annuities or other fees payable in respect of the
Intellectual Property and due before the Closing have been paid in full through
the Closing, and except as set forth on Schedule 5.14,
no such
fees are due in the two-month period after the Closing. All actions required
to
record each owner throughout the entire chain of title of all of the
Intellectual Property required to have been listed on Schedule 5.14
with
each applicable Governmental Authority up through the Closing, have been taken,
including payment of all costs, fees, taxes and expenses associated with such
recording activities.
(b) Except
as
set forth on Schedule 5.14,
(i) the Company owns and possesses all right, title and interest in and to
the Intellectual Property, free and clear of all Liens; (ii) the Company
has the sole and exclusive right to use the Intellectual Property for the life
thereof; (iii) no claim by any Person contesting the validity,
enforceability or ownership of any of the Intellectual Property has been made,
is currently outstanding or, to the Company’s Knowledge, is threatened and there
are no grounds for the same; (iv) no loss or expiration of any part of the
Intellectual Property is pending or reasonably foreseeable; (v) neither the
Company nor any Seller has received any notices of, and is not aware of any
facts that indicate a likelihood of, any infringement or misappropriation by,
or
conflict with, any Person with respect to the Intellectual Property; and
(vi) the Company has not infringed, misappropriated or otherwise conflicted
with any intellectual property rights or other rights of any Person and neither
the Company nor any Seller is aware of any infringement, misappropriation or
conflict that will occur as a result of the continued operation of the business
of the Company, nor has the Company or any Seller received any demand or request
that the Company license any rights from any Person.
25
(c) The
Intellectual Property comprises all of the intellectual property rights used
in
or necessary for the operation of the business of the Company as conducted
or
proposed to be conducted. The transactions contemplated by this Agreement and
the Ancillary Agreements will have no adverse effect on the Company’s right,
title and interest in and to the Intellectual Property. The Company has taken
all necessary action to maintain and protect the Intellectual Property so as
to
not adversely affect the validity or enforceability of the Intellectual
Property. To the Company’s Knowledge, the owners of any intellectual property
licensed to the Company have taken all necessary and desirable action to
maintain and protect that portion of the intellectual property subject to such
licenses. Except pursuant to a Contract set forth on Schedule 5.12,
the
Company has not licensed or otherwise granted any right to any Person under
any
Intellectual Property owned by the Company or has otherwise agreed not to assert
any such Intellectual Property against any Person.
(d) All
former and current consultants or contractors to the Company have executed
and
delivered valid written instruments that assign to the Company all rights to
any
Intellectual Property developed by them in the course of their performing
services for the Company. All employees of the Company who participated in
the
creation or contributed to the conception or development of Intellectual
Property were employees of the Company at the time of rendering such services
and such services were within the scope of their employment or such employees
have otherwise validly assigned such Intellectual Property to the Company.
No
director, officer, shareholder, employee, consultant, contractor, agent or
other
representative of the Company, owns or claims any rights in (nor has any of
them
made application for) any Intellectual Property.
(e) Except
as
set forth on Schedule 5.14,
all
Information Systems used by the Company in the conduct of its business are
owned, controlled and operated by the Company and are not wholly or partly
dependent upon any Information System of any other Person (other than the
Internet).
5.15. Insurance. Schedule 5.15
sets
forth a true and complete list and brief description (including all applicable
premiums and deductibles) of all policies of, and binders evidencing, life,
fire, workmen’s compensation, product liability, general liability and other
forms of insurance, including title insurance, owned or maintained by the
Company. Such policies are in full force and effect, and the Company is not
in
default under any of them. No notice of cancellation or termination or non
renewal has been received with respect to any such policy. During the last
three
years, the Company has not been refused any insurance with respect to its
business or its assets, nor has coverage been limited by any insurance carrier
to which the Company has applied for insurance or with which the Company has
carried insurance. No event relating to the Company has occurred that could
reasonably be expected to result in a retroactive upward adjustment in premiums
under any of the insurance policies set forth on Schedule 5.15.
The
insurance maintained by the Company is sufficient to comply with all applicable
Laws and Contracts to which the Company is a party. No insurance carrier
providing insurance to the Company is in receivership, conservatorship,
liquidation or similar proceedings, and to the Company’s Knowledge, no such
proceeding with respect to any such carrier is imminent.
26
5.16. Financial
Statements.
(a) Schedule 5.16(a)
sets
forth true and complete copies of (i) the audited balance sheet of the
Company as of December 31, 2007, and the related audited statements of income,
retained earnings and cash flows for the fiscal year then ended, (ii) the
unaudited balance sheets of the Company as of December 31, 2005 and 2006, and
the related unaudited statements of income, retained earnings and cash flows
for
the fiscal years then ended, and (iii) the unaudited balance sheet of the
Company as of June 30, 2008, and the related unaudited statements of income,
retained earnings and cash flows for the 6-month period then ended
(collectively, the “Financial
Statements”).
(b) The
Financial Statements present fairly, in all material respects, the financial
position, results of operations, shareholders’ equity and cash flows of the
Company at the dates and for the time periods indicated and have been prepared
in accordance with GAAP (except as otherwise stated therein) consistently
applied throughout the periods indicated and reviewed by the management of
the
Company. The Financial Statements were derived from the books and records of
the
Company, which are accurate and complete and there are no material inaccuracies
or discrepancies of any kind contained or reflected therein. The Company’s
internal controls and procedures are sufficient to ensure that the Financial
Statements are accurate in all material respects.
5.17. Undisclosed
Liabilities.
The
Company has no liabilities (whether accrued, absolute, contingent, unliquidated
or otherwise, whether due or to become due, whether known or unknown, regardless
of when asserted) arising out of transactions or events, or any action or
inaction, or any state of facts existing, with respect to or based upon
transactions or events entered into by the Sellers or the Company, except
(a) liabilities reflected in the Financial Statements; (b) liabilities
that have arisen after the date of the Financial Statements in the Ordinary
Course of Business, none of which relates to (i) breach of Contract,
(ii) breach of warranty, (iii) tort, (iv) infringement,
(v) violation of Law or (vi) any environmental liability; or
(c) as otherwise set forth on Schedule 5.17.
5.18. Accounts
Receivable.
All
accounts and notes receivable of the Company represent sales actually made
in
the Ordinary Course of Business or valid claims as to which full performance
has
been rendered by the Company. The reserve on the Financial Statements against
the accounts receivable for bad debts has been calculated in a manner consistent
with past practice.
5.19. Bank
Accounts. Schedule 5.19
sets
forth a true and complete list of the name and address of (a) each bank or
financial institution with which the Company has an account or safe deposit
box
and the name of each Person authorized to draw thereon or have access thereto,
and (b) the name of each Person holding a power of attorney on behalf of
the Company.
27
5.20. Product
Liability and Warranty.
(a) Each
product or service sold or otherwise delivered by the Company has been in
conformity with all applicable contractual commitments and all express and
implied warranties, and the Company has no liability (and there is no basis
for
any present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand against, or recall by, the Company) for replacement
or repair of any such products or services or other damages in connection
therewith, subject only to the reserve for product and service warranty claims
set forth in the Financial Statements. No product manufactured, sold, leased
or
delivered, and no service provided, by the Company is subject to any recall
or
any guaranty, warranty or other indemnity beyond the applicable standard terms
and conditions of sale, lease or service. Schedule 5.20 sets
forth true and complete copies of the standard terms and conditions of sale,
lease or service of the Company (containing applicable guaranty, warranty and
indemnity provisions). There have been no recalls of any of the products
manufactured, sold, distributed, leased, delivered or provided by the Company
and there exists no basis that could result in any such recalls.
(b) The
Company has no liability, and there is no basis for any present or future Action
against the Company giving rise to any liability, arising out of any injury
to
Person or property as a result of the ownership, possession or use of a product
or service manufactured, sold, distributed, leased, delivered or provided by
the
Company.
5.21. Indebtedness. Schedule 5.21
sets
forth a true and complete list of the individual components (indicating the
amount and the Person to whom such Indebtedness is owed) of all the Indebtedness
outstanding with respect to the Company.
5.22. Taxes.
(a) All
Returns required to be filed with any Taxing Authority with respect to any
Pre-Closing Tax Period by or on behalf of the Company have been filed when
due
in accordance with all applicable Laws.
(b) All
Returns with respect to Pre-Closing Tax Periods (i) correctly and
completely reflect the facts regarding the income, business, assets, operations,
activities and status of the Company, (ii) were correct and complete in all
respects and (iii) have been prepared in accordance with all applicable
Laws. The Company is not currently a beneficiary of any extension of time within
which to file any Return.
(c) All
Taxes
owed by the Company (whether or not shown as due and payable on any Return)
have
been timely paid or withheld and remitted to the appropriate Taxing
Authority.
(d) No
Return
of the Company with respect to any Pre-Closing Tax Period has ever been audited
by any Taxing Authority.
(e) There
is
no Action now pending or, to the Company’s Knowledge, threatened against or with
respect to the Company in respect of any Tax.
28
(f) The
Company has no Tax liabilities (whether due or to become due) with respect
to
the income, property and operations of the Company that relate to any
Pre-Closing Tax Periods or Pre-Closing Straddle Periods, except for Tax
liabilities reflected in the Financial Statements or that have arisen after
the
date of the Financial Statements in the Ordinary Course of Business (including
payroll Taxes and other similar Taxes), which Tax liabilities shall remain
the
sole liability of the Sellers after the Closing.
(g) Neither
the Company nor any member of any affiliated, consolidated, combined or unitary
group of which the Company is or has been a member has granted any extension
or
waiver of the statute of limitations period applicable to any Return, which
period (after giving effect to such extension or waiver) has not yet
expired.
(h) There
are
no Liens for Taxes upon any of the assets or properties of the Company, except
for Permitted Exceptions.
(i) The
Company has not been a member of an affiliated, consolidated, combined or
unitary group or participated in any other arrangement whereby any income,
revenues, receipts, gain or loss was determined or taken into account for Tax
purposes with reference to or in conjunction with any income, revenues,
receipts, gain, loss, asset or liability of any other Person other than a group
of which the Company was the parent. The Company is not liable for the Taxes
of
any Person under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign Law) as a transferee or successor, by
contract or otherwise.
(j) Schedule 5.22(j)
contains
a list of all jurisdictions (whether foreign or domestic) to which any Tax
imposed on overall net income is properly payable by the Company.
(k) Neither
the Company nor any Seller has received notice of any claim by a Taxing
Authority in a jurisdiction where the Company does not file Returns that the
Company is or may be subject to taxation by that jurisdiction or Taxing
Authority.
(l) The
Company has withheld and timely paid all Taxes required to have been withheld
and paid in connection with amounts paid or owing to any employee, independent
contractor, creditor, shareholder or other third party.
(m) The
Company has disclosed on its federal income Tax Returns (to the extent
applicable) all positions taken in such Returns that could give rise to a
substantial understatement of federal income Tax within the meaning of
Section 6662 of the Code.
(n) The
Company will not be required to include any item of income in, or exclude any
item of deduction from, taxable income for any period ending after the Closing
Date as a result of (i) any change in method of accounting for a
Pre-Closing Tax Period, (ii) any “closing agreement” as described in Code
Section 7121 (or any corresponding or similar provision of state, local or
foreign law) executed on or prior to the Closing Date, (iii) any
intercompany transactions or any excess loss account described in Treasury
Regulation Section 1.1502-19 (or any corresponding or similar provision of
state, local or foreign law), (iv) the installment method of accounting,
the completed contract method of accounting or the cash method of accounting
with respect to a transaction that occurred prior to the Closing Date, or
(v) any prepaid amount received on or prior to the Closing
Date.
29
(o) The
Company is not a party to any Tax allocation or sharing agreement or
arrangement.
(p) The
Company has not been a United States real property holding corporation within
the meaning of Section 897(c)(2) during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code. The Company has not distributed the
stock of another Person, nor had its stock distributed by another Person, in
a
transaction that was purported or intended to be governed in whole or in part
by
Section 355 of the Code.
(q) The
Company has not participated in a reportable transaction as defined in
Section 6707A of the Code or Treasury Regulation Section 1.6011-4(b)
and (c)(3) (or any predecessor provision thereto).
5.23. Customers.
Except
as set forth on Schedule 5.23,
(i) all material customers continue to be customers of the Company and none
of such material customers has reduced materially its business with the Company
from the levels achieved during the year ended December 31, 2007, and to
the Company’s Knowledge, no such reduction will occur; (ii) no material
customer has terminated its relationship with the Company or has threatened
to
do so; (iii) the Company is not involved in any claim, dispute or
controversy with any material customer; and (iv) the Company is not
involved in any claim, dispute or controversy with any of its other customers
that, individually or in the aggregate could reasonably be anticipated to have
a
material adverse effect on the condition (financial or otherwise), business,
results of operations or prospects of the Company.
5.24. Disclosure.
Neither
the Company nor any Seller has withheld from the Purchaser any material facts
relating to the assets, properties, liabilities, business operations, financial
condition, results of operations or prospects of the Company’s business. Neither
this Agreement (including the Exhibits and Schedules hereto) or the Ancillary
Agreements nor any other agreement, document, certificate or written statement
furnished to the Purchaser by or on behalf of the Company in connection with
this Agreement, the Ancillary Agreements or the transactions contemplated
hereunder or thereunder contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading. The Company has delivered to the
Purchaser a true and complete copy of each document disclosed or required to
be
disclosed on the Schedules to this Agreement.
5.25. Related
Party Transactions.
Except
as set forth on Schedule 5.25,
none of
the Company, the Sellers or any of their respective Affiliates, nor any current
or former director, officer or employee of the Company, (a) has or during
the last three fiscal years has had any direct or indirect interest (i) in,
or is or during the last three fiscal years was, a director, officer or employee
of, any Person that is a client, customer, supplier, lessor, lessee, debtor,
creditor or competitor of the Company, or (ii) in any material property,
asset or right that is owned or used by the Company in the conduct of its
business, or (b) is, or during the last three fiscal years has been, a
party to any agreement or transaction with the Company. Except as set forth
on
Schedule 5.25,
there
is no outstanding Indebtedness owed to the Company from any current or former
director, officer, employee or consultant of the Company or any Seller or any
of
their respective Affiliates.
30
5.26. Brokers.
No
Person has acted directly or indirectly as a broker, finder or financial advisor
for the Company or any Seller in connection with the negotiations relating
to
the transactions contemplated by this Agreement for which the Purchaser or
the
Company will become obligated to pay a fee or commission.
VI.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The
Purchaser hereby represents and warrants to the Sellers as follows:
6.1. Existence
and Good Standing.
The
Purchaser is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Florida.
6.2. Power.
The
Purchaser has the corporate power and authority to execute, deliver and perform
fully its respective obligations under this Agreement and the Ancillary
Agreements.
6.3. Validity
and Enforceability.
The
Purchaser has the capacity to execute, deliver and perform its obligations
under
this Agreement and the Ancillary Agreements. This Agreement and each of the
Ancillary Agreements to which the Purchaser is a party have been duly executed
and delivered by the Purchaser and, assuming due authorization, execution and
delivery by the Sellers or any other party thereto, represent the legal, valid
and binding obligation of the Purchaser, enforceable against the Purchaser
in
accordance with their respective terms, subject to General Enforceability
Exceptions.
6.4. No
Conflict.
Neither
the execution of this Agreement or the Ancillary Agreements, nor the performance
by the Purchaser of its obligations hereunder or thereunder will violate or
conflict with the Purchaser’s Certificate of Incorporation (or equivalent
document) or Bylaws (or equivalent document) or any Law or Order.
6.5. Consents.
Except
as set forth in Section 9.1(h),
no
Consent of any third party or Governmental Authority is required in connection
with the execution and delivery by the Purchaser of this Agreement or the
Ancillary Agreements to which the Purchaser is a party or the consummation
of
the transactions contemplated hereby or thereby.
6.6. Brokers.
No
Person has acted directly or indirectly as a broker, finder or financial advisor
for the Purchaser in connection with the negotiations relating to the
transactions contemplated by this Agreement for which the Sellers will become
obligated to pay a fee or commission.
VII.
TAX MATTERS
7.1. Returns.
The
Purchaser shall prepare and timely file, or cause to be prepared and timely
filed, all Returns of the Company that are due with respect to any Pre-Closing
Tax Period or Straddle Period. The Sellers shall pay all Taxes owed with respect
to any Return (in the case of a Return for a Straddle Period, Taxes attributable
to the Pre-Closing Straddle Period) within 5 days of the Purchaser’s request
therefor.
31
7.2. Apportionment
of Taxes.
(a) Liability.
The
Sellers will be liable for the payment of all Taxes of the Company that are
attributable to any Pre-Closing Tax Period or Pre-Closing Straddle Period
whether or not shown on any Returns.
(b) Apportionment
of Tax.
For
purposes of this Agreement, the portion of Tax, with respect to the income,
property or operations of the Company that is attributable to any Tax period
that begins on or before the Closing Date and ends after the Closing Date (a
“Straddle
Period”)
will
be apportioned with respect to such Straddle Period based on the period ending
on the Closing Date (the “Pre-Closing
Straddle Period”)
and
the period that begins on the day after the Closing Date (the “Post-Closing
Straddle Period”)
in
accordance with this Section 7.2.
(c) Pre-Closing
Straddle Period Calculation.
The
portion of Tax attributable to the Pre-Closing Straddle Period will be
calculated as follows:
(i) In
the
case of any Taxes other than sales or use taxes, value added taxes, employment
taxes, withholding taxes, and any Tax based on or measured by income, receipts
or profits earned during a Straddle Period, be deemed to be the amount of such
Tax for the entire taxable period multiplied by a fraction, the numerator of
which is the number of days in the Pre-Closing Straddle Period and denominator
of which is the number of days in the Straddle Period.
(ii) In
the
case of any sales or use taxes, value added taxes, employment taxes, withholding
taxes, and any Tax based on or measured by income, receipts or profits earned
during a Straddle Period, be deemed equal to the amount that would be payable
if
the Straddle Period ended on and included the Closing Date.
(iii) To
the
extent that any Tax for a Straddle Period is based on the greater of a Tax
on
net income, on the one hand, and a Tax measured by net worth or some other
basis
not otherwise measured by income, on the other hand, the portion of such Tax
related to the Pre-Closing Straddle Period will be deemed to be (A) if the
amount of such Tax for the Straddle Period is measured by net worth or such
other basis, the amount of such Tax determined as though the taxable values
for
the entire Straddle Period equal the respective values as of the end of the
Closing Date and multiplying the amount of such Tax by a fraction, the numerator
of which is the number of days during the Straddle Period that are in the
Pre-Closing Straddle Period, and the denominator of which is the number of
days
in the Straddle Period or (B) if the amount of such Tax for the Straddle
Period is measured by net income, the amount of such Tax determined as though
the applicable Tax period terminated at the end of the day on the Closing
Date.
(iv) In
the
case of a Tax that is (A) paid for the privilege of doing business during a
period (a “Privilege
Period”)
and
(B) computed based on business activity occurring during an accounting
period ending prior to the Privilege Period, any reference to a “Tax period,” a
“tax period” or a “taxable period” shall mean such accounting period and not the
Privilege Period.
32
(d) Post-Closing
Straddle Period Apportionment.
The
portion of Tax attributable to a Post-Closing Straddle Period will be calculated
in a corresponding manner to the calculation of the portion of Tax attributable
to a Pre-Closing Straddle Period described in Section 7.2(c).
(e) Transfer
Taxes.
All
transfer, excise, franchise, property, documentary, sales, use, stamp,
registration, value added and other such Taxes and fees (including any penalties
and interest) imposed on the Purchaser or the Company in connection with this
Agreement and the Ancillary Agreements (“Transfer
Taxes”)
will
be borne and paid by the Sellers when due, and the Sellers, will cause to be
filed all necessary Returns and other documentation with respect to all such
Transfer Taxes.
7.3. Cooperation;
Audits.
In
connection with the preparation of Returns, audit examinations, and any
administrative or judicial proceedings relating to the Tax liabilities imposed
on the Company for all Pre-Closing Tax Periods, the Purchaser and the Company,
on the one hand, and the Sellers, on the other hand, shall cooperate fully
with
each other, including, without limitation, the furnishing or making available
during normal business hours of records, personnel (as reasonably required),
books of account, powers of attorney or other materials necessary or helpful
for
the preparation of such Returns, the conduct of audit examinations or the
defense of claims by Taxing Authorities as to the imposition of Taxes. The
Sellers shall within 10 days of the Purchaser’s request therefor deliver any
information required to be reported by the Purchaser or the Company pursuant
to
Section 6043A of the Code.
7.4. Certain
Controversies.
Notwithstanding Section 10.2,
the
Purchaser (or the Company after the date hereof), at its sole expense, will
have
the exclusive authority to represent the interests of the Company with respect
to any Tax Matter that does not relate solely to a Pre-Closing Tax Period before
the IRS or any other Tax Authority and will have the sole right to extend or
waive the statute of limitations with respect to such a Tax Matter and to
control the defense, compromise or other resolution of any such Tax Matter,
including responding to inquiries, filing Returns and settling audits;
provided,
however,
that
the Purchaser (or the Company after the date hereof) will not enter into any
settlement of or otherwise compromise any Tax Matter that adversely affects
or
may adversely affect the indemnification obligations of the Sellers hereunder
without the prior written consent of the Sellers, which consent may not be
unreasonably withheld or delayed. The Purchaser shall, in good faith, allow
the
Sellers to consult with the Purchaser regarding the conduct of or positions
taken in any such proceeding.
7.5. Tax
Sharing Agreements.
All Tax
sharing agreements or similar agreements with respect to or involving the
Company will be terminated as of the Closing Date and, after the Closing Date,
the Company will not be bound thereby or have any liability
thereunder.
VIII.
CERTAIN COVENANTS AND AGREEMENTS
8.1. Pre-Closing
Covenants.
(a) Access
to Information.
Until
the Closing, the Sellers shall, and shall cause the Company and its respective
representatives to, (i) afford the Purchaser and its counsel, accountants,
lenders and other representatives (collectively, “Purchaser’s
Advisors”)
full
and free access to the Company’s personnel, customers, suppliers, landlords,
properties, facilities, offices, contracts, books and records, permits and
other
documents and data during normal business hours and upon reasonable notice,
(ii) furnish the Purchaser and Purchaser’s Advisors with copies of all such
contracts, books and records, permits and other existing documents and data
as
the Purchaser may reasonably request and (iii) furnish the Purchaser and
Purchaser’s Advisors with such additional financial, operating and other data
and information as the Purchaser may reasonably request. Any such access shall
be conducted at the Purchaser’s expense, and shall be managed by and conducted
through the Sellers and subject to such additional limitations the Sellers
may
reasonably require to prevent the unreasonable disruption of the Company’s
business.
33
(b) Conduct
of Business in Normal Course.
The
Sellers covenant and agree to (i) use reasonable best efforts to keep the
Company’s present business organization intact, (ii) keep available the
services of the present officers, employees and agents of the Company,
(iii) preserve present relationships and good will with suppliers,
customers, landlords, creditors, employees, agents and other Persons having
business dealings with the Company, (iv) generally operate the business of
the Company in the Ordinary Course of Business, (v) maintain the Company’s
books and records in accordance with good business practice and GAAP,
(vi) maintain all Permits necessary for the conduct of the Company’s
business and (vii) use reasonable efforts to operate the Company in such a
manner as to cause the representations and warranties relating to the Company
set forth in this Agreement to be true and correct in all material respects
as
of the Closing. The Sellers covenant and agree that, except as otherwise
expressly contemplated by this Agreement, required by applicable Law or as
specifically consented to in writing by the Purchaser, the Sellers shall not
undertake or permit any action that would (x) require disclosure under
Schedule 5.8,
(y) result in a breach of the representations and warranties contained in
Section 5.8
or
(z) likely result in a material adverse effect on the Company’s condition
(financial or otherwise), business, assets, properties, liabilities, results
of
operations or prospects.
(c) Notification
of Certain Matters.
The
Sellers, on the one hand, and the Purchaser, on the other hand, agree to give
prompt notice to the other of (i) any circumstance that would likely cause
any of such Party’s representations or warranties contained in this Agreement to
be untrue or inaccurate, (ii) any failure on such Party’s part to comply
with or satisfy any covenant or agreement to be complied with or satisfied
by
such Party hereunder and (iii) any circumstance that may make the
satisfaction of the conditions in Article IX
impossible or unlikely.
(d) Commercially
Reasonable Efforts.
Prior
to the Closing Date or the earlier termination of this Agreement, (i) the
Parties agree to use all reasonable efforts to obtain the closing deliverables
specified in this Agreement necessary to consummate the transactions
contemplated hereby, and (ii) the Sellers agree, and agree to cause the
Company to, use all reasonable efforts to obtain any required consent of the
Purchaser’s lenders to the transactions contemplated by this Agreement and the
Ancillary Agreements, including, without limitation, by providing the access
described in Section 8.1(a)
and
delivering the items that may be requested pursuant to Section 3.2(p).
34
(e) Excluded
Assets.
Effective as of or prior to the Closing, the Company shall, and the Sellers
shall cause the Company to, distribute to the Sellers (or any of them) pursuant
to documentation reasonably acceptable to the Purchaser all of the assets listed
on Schedule 8.1(e)
of the
Company (the “Excluded
Assets”).
Schedule 8.1(e)
sets
forth a true and complete list of all Excluded Assets, including the true and
correct book value of each Excluded Asset.
8.2. Post-Closing
Covenants.
(a) Purchaser
Shares.
No
Seller will transfer any Purchaser Shares in the absence of a Conversion
Transaction or an effective registration statement unless such Seller has
furnished the Purchaser with an opinion of counsel, reasonably satisfactory
to
the Purchaser, that such disposition does not require registration of such
Purchaser Shares under the Securities Act, or the Purchaser determines that
such
opinion of counsel is unnecessary. The Purchaser will not require opinions
of
counsel for transfers of Purchaser Shares made pursuant to Rule 144 under
the Securities Act if the Purchaser is provided with any certificates or other
evidence of compliance with Rule 144 under Securities Act reasonably
required by it in connection with such transfer (including a copy of the
relevant Form 144).
(b) Retained
Accounts Receivable.
If the
Purchaser or the Company receives any payment on account of or relating to
any
Retained Accounts Receivable, such payment shall be the property of, and shall
be immediately forwarded and remitted to the Sellers. The Purchaser and the
Company shall promptly endorse and deliver to the Sellers any cash, checks
or
other documents received by the Purchaser or the Company on account of any
such
Retained Accounts Receivable. The Purchaser and the Company shall advise the
Sellers (promptly following the Purchaser or the Company becoming aware thereof)
of any counterclaims or set-offs that may arise subsequent to the Closing Date
with respect to any Retained Accounts Receivable.
(c) Bonus
Pool.
For all
Measurement Periods containing Excess EBITDA, the Company shall pay to its
employees an aggregate amount equal to 10% of Excess EBITDA (each, a
“Bonus
Payment”)
to be
allocated among the Company’s employees (or any of them) as determined by the
Sellers in their reasonable discretion. Each Bonus Payment, if any, shall be
paid by the Company to such employees within 60 days of determination of the
amount of Excess EBITDA.
(d) Closing
Date Balance Sheet.
Within
15 days after the Closing Date, the Sellers shall prepare (or cause to be
prepared) and deliver to the Purchaser an unaudited balance sheet of the Company
as of the Closing Date (the “Closing
Date Balance Sheet”),
including a trial balance with respect thereto, prepared in accordance with
GAAP. The Sellers agree that the Closing Date Balance Sheet will present fairly,
in all material respects, the financial position of the Company as of the
Closing Date. Thereafter, upon the Purchaser’s request, the Sellers will provide
the Purchaser with true and complete copies of any work papers or other
supporting documentation used in connection with preparing the Closing Date
Balance Sheet.
35
IX.
CONDITIONS TO CLOSING
9.1. Conditions
Precedent to the Purchaser’s Obligations.
The
obligations of the Purchaser to consummate the transactions contemplated by
this
Agreement are expressly subject to the fulfillment or express written waiver
of
the following conditions on or prior to the Closing Date:
(a) Representations
and Warranties True.
Each of
the representations and warranties of the Sellers contained in this Agreement
that are not expressly limited or qualified as to the Company’s Knowledge or
materiality shall be true and correct in all material respects as if made at
and
as of the Closing Date, and each of the representations and warranties of the
Sellers contained in this Agreement that are expressly limited or qualified
as
to the Company’s Knowledge or materiality shall be true and correct in all
respects as if made at and as of the Closing Date (except, in both instances,
(i) as a result of any event, circumstance or transaction contemplated by
this Agreement or otherwise approved in writing by the Purchaser, and
(ii) for any representation or warranty that expressly relates to an
earlier date, in which case such representation and warranty shall be true
and
correct in all respects as if made as of such date).
(b) Covenants
Performed.
The
Sellers and/or the Company shall have performed in all material respects, on
or
before the Closing Date, all obligations contained in this Agreement which
by
the terms hereof are required to be performed by the Sellers and/or the Company
on or before the Closing Date.
(c) Compliance
Certificate.
The
Purchaser shall have received a certificate signed by the Sellers certifying
as
to the matters set forth in Sections 9.1(a)
and
(b).
(d) No
Injunction, etc.
There
will not be any Law or Order of any Governmental Authority prohibiting, delaying
or invalidating the transactions contemplated by this Agreement, or any pending
or threatened Action by an unrelated third party to such effect or seeking
damages from the Purchaser or the Company if the transactions contemplated
by
this Agreement are completed.
(e) The
Sellers’ Closing Deliverables.
The
Sellers shall have delivered or caused to be delivered to the Purchaser the
items listed in Section 3.2.
(f) Material
Adverse Effect.
Since
December 31, 2007, there shall have been no change, event or condition of any
character (whether or not covered by insurance) that, in the aggregate, has
had,
or would reasonably be expected to have, a material adverse effect on the
condition (financial or otherwise), business, assets, properties, liabilities,
results of operations or prospects of the Company, and the Purchaser will have
received a certificate attesting thereto duly executed by the
Sellers.
(g) Due
Diligence Investigation.
The
Purchaser shall be satisfied in its sole discretion with its due diligence
investigation of the Company.
(h) Lender
Consent.
The
Purchaser’s lenders shall have granted any required consents to the transactions
contemplated by this Agreement and the Ancillary Agreements, without any adverse
conditions or stipulations on the Purchaser or any of its Affiliates, as
determined by the Purchaser in its sole discretion.
36
9.2. Conditions
Precedent to the Sellers’ Obligations.
The
obligations of the Sellers to sell the Shares are subject to the fulfillment
or
express written waiver of the following conditions on or prior to the Closing
Date:
(a) Representations
and Warranties True.
Each of
the representations and warranties of the Purchaser contained in this Agreement
that are not expressly limited or qualified as to materiality shall be true
and
correct in all material respects as if made at and as of the Closing Date,
and
each of the representations and warranties of the Purchaser contained in this
Agreement that are expressly limited or qualified as to materiality shall be
true and correct in all respects as if made at and as of the Closing Date
(except, in both instances, (i) as a result of any event, circumstance or
transaction contemplated by this Agreement or otherwise approved in writing
by
the Sellers, and (ii) for any representation or warranty that expressly
relates to an earlier date, in which case such representation and warranty
shall
be true and correct in all respects as if made as of such date).
(b) Covenants
Performed.
The
Purchaser shall have performed in all material respects, on or before the
Closing Date, all obligations contained in this Agreement which by the terms
hereof are required to be performed by the Purchaser on or before the Closing
Date.
(c) Compliance
Certificate.
The
Sellers shall have received a certificate signed by an authorized officer of
the
Purchaser certifying as to the matters set forth in Sections 9.2(a)
and
(b).
(d) No
Injunction, etc.
There
will not be any Law or Order of any Governmental Authority prohibiting, delaying
or invalidating the transactions contemplated by this Agreement, or any pending
or threatened Action by an unrelated third party to such effect or seeking
damages from the Sellers if the transactions contemplated by this Agreement
are
completed.
(e) Purchaser
Closing Deliverables.
The
Purchaser shall have delivered or caused to be delivered to the Sellers the
items listed in Section 3.3.
X.
REMEDIES
10.1. General
Indemnification Obligation.
(a) Sellers’
Indemnification Obligations.
The
Sellers jointly and severally shall indemnify and hold harmless the Purchaser,
the Company and their respective officers, directors, employees, agents and
Affiliates (each a “Purchaser
Indemnified Party”)
from
and against any and all Losses incurred or suffered by any Purchaser Indemnified
Party based upon, arising out of, or otherwise in respect of:
(i) any
inaccuracies in or any breach of any representation or warranty of the Sellers
contained in this Agreement or any Ancillary Agreement, in each case, determined
without regard to any qualification with respect to materiality, material
adverse effect or other similar qualification;
37
(ii) any
breach of any covenant or agreement of any Seller contained in this Agreement
or
any Ancillary Agreement;
(iii) claims
arising in whole or in part out of the operation of the Company prior to the
Closing;
(iv) any
Indebtedness of the Company, Selling Expenses, or Bonus Amounts not fully paid
or taken as a reduction to the Purchase Price at the Closing; or
(v) (A) any
Taxes of the Company attributable to any Pre-Closing Tax Period or Pre-Closing
Straddle Period; (B) all Taxes of any member of an affiliated, combined or
unitary group of which the Company is or was a member on or prior to the Closing
Date, including pursuant to Treasury Regulation Section 1.1502-6 or any
analogous or similar state, local or foreign Law; and (C) any and all Taxes
of any Person (other than the Company) imposed on the Company as a transferee
or
successor, by contract or pursuant to any Law, which Taxes relate to an event
or
transaction occurring on or before the Closing.
(b) Purchaser’s
Indemnification Obligations.
The
Purchaser shall indemnify and hold harmless the Sellers from and against any
and
all Losses incurred or suffered by any Seller based upon, arising out of, or
otherwise in respect of (i) any inaccuracies in or any breach of any
representation or warranty of the Purchaser contained in this Agreement or
any
Ancillary Agreement, or (ii) any breach of any covenant or agreement of the
Purchaser contained in this Agreement or any Ancillary Agreement.
10.2. Notice
and Third Party Liability.
(a) Notice
of Asserted Liability.
As soon
as is reasonably practicable after any Seller, on the one hand, or the
Purchaser, on the other hand, becomes aware of any claim that such Party (or,
with respect to the Purchaser, any Purchaser Indemnified Party) has under
Section 10.1
that may
result in a Loss for which such Party (or, with respect to the Purchaser, any
Purchaser Indemnified Party) is entitled to indemnification hereunder (a
“Liability
Claim”),
such
Party (the “Indemnified
Party”)
shall
give notice of such Liability Claim (a “Claims
Notice”)
to the
other Party (the “Indemnifying
Party”).
A
Claims Notice must describe the Liability Claim in reasonable detail and must
indicate the amount (estimated, if necessary and to the extent feasible) of
the
Loss that has been or may be suffered by the Indemnified Party. No delay in
or
failure to give a Claims Notice by the Indemnified Party to the Indemnifying
Party pursuant to this Section 10.2(a)
will
adversely affect any of the other rights or remedies that the Indemnified Party
has under this Agreement or alter or relieve the Indemnifying Party of its
obligation to indemnify the Indemnified Party except to the extent that such
delay or failure has prejudiced the Indemnifying Party.
38
(b) Third
Party Claims.
If any
Claims Notice identifies a Liability Claim brought by a third party (a
“Third
Party Claim”
and
together with the Liability Claims, the “Claims”),
then
the Indemnifying Party has the right, exercisable by written notice to the
Indemnified Party within 10 days after receipt of such Claims Notice, to assume
and conduct the defense of such Third Party Claim in accordance with the limits
set forth in this Agreement with counsel selected by the Indemnifying Party
and
reasonably acceptable to the Indemnified Party; provided,
however,
that
(i) the defense of such Third Party Claim by the Indemnifying Party will
not, in the reasonable judgment of the Indemnified Party, have a material
adverse effect on the Indemnified Party; (ii) the Indemnifying Party has
sufficient financial resources, in the reasonable judgment of the Indemnified
Party, to satisfy the amount of any adverse monetary judgment that is reasonably
likely to result; (iii) the Third Party Claim solely seeks (and continues
to seek) monetary damages; and (iv) the Indemnifying Party expressly agrees
in writing that as between the Indemnifying Party and the Indemnified Party,
the
Indemnifying Party may only satisfy and discharge the Third Party Claim in
accordance with the limits set forth in this Agreement (the conditions set
forth
in clauses (i) through (iv) are, collectively, the “Litigation
Conditions”).
If
the Indemnifying Party does not assume the defense of a Third Party Claim in
accordance with this Section 10.2(b),
the
Indemnified Party may continue to defend the Third Party Claim. Notwithstanding
the foregoing, if (i) any of the Litigation Conditions cease to be met or
(ii) the Indemnifying Party fails to take reasonable steps necessary to
defend diligently such Third Party Claim, the Indemnified Party may assume
its
own defense, and the Indemnifying Party will be liable for all reasonable costs
or expenses paid or incurred in connection with such defense. The Indemnifying
Party or the Indemnified Party, as the case may be, has the right to participate
in (but not control), at its own expense, the defense of any Third Party Claim
which the other is defending as provided in this Agreement. The Indemnifying
Party, if it has assumed the defense of any Third Party Claim as provided in
this Agreement, may not, without the prior written consent of the Indemnified
Party, consent to a settlement of, or the entry of any judgment arising from,
any such Third Party Claim that (i) does not include as an unconditional
term thereof the giving by the claimant or the plaintiff to the Indemnified
Party a complete release from all liability in respect of such Third Party
Claim, (ii) grants any injunctive or equitable relief or (iii) may
reasonably be expected to have a material adverse effect on the Indemnified
Party. The Indemnified Party has the right to settle any Third Party Claim,
the
defense of which has not been assumed by the Indemnifying Party.
10.3. Survivability;
Limitations.
(a) The
representations and warranties of the Sellers and the Purchaser contained in
this Agreement or in any Ancillary Agreement will survive for a period of
24 months following the Closing (the “Expiration
Date”);
provided,
however,
that:
(i) the
Expiration Date for any Claims relating to a breach of or inaccuracy in the
representations and warranties set forth in Sections 5.6
(Compliance with Laws),
5.10 (Employee
Benefit Plans)
and
5.11 (Environmental)
will be
the longer of the 5-year anniversary of the Closing or the expiration of the
applicable statute of limitations as extended;
(ii) the
Expiration Date for any Claims relating to a breach of or inaccuracy in the
representations and warranties set forth in Section
5.22 (Taxes)
will be
the expiration of the applicable statute of limitations as
extended;
(iii) there
will be no Expiration Date for any Claims relating to a breach of or inaccuracy
in the representations and warranties set forth in Sections
4.1 (Authority, Validity and Effect),
4.2 (Title
to Shares),
4.3 (No
Conflict),
4.4 (Consents),
4.6 (Brokers),
4.7 (Purchaser
Shares Legend),
4.8 (Rule 144),
4.9 (Investment
Representations),
5.1 (Existence
and Good Standing),
5.2 (Power),
5.3 (Capitalization
of the Company),
the
first sentence of 5.4(a) (Title),
5.14(b)(i) (Intellectual
Property),
5.17 (Undisclosed
Liabilities),
5.21 (Indebtedness),
5.25 (Related
Party Transactions)
and
5.26 (Brokers);
and
39
(iv) any
Claims pending on any Expiration Date for which notice has been given in
accordance with Section 10.2
on or
before such Expiration Date may continue to be asserted and indemnified against
until finally resolved.
(b) Notwithstanding
anything to the contrary contained in this Article X:
(i) the
Sellers will not have any liability as a result of any breach of or inaccuracy
in any of the representations and warranties contained in this Agreement (other
than the Special Representations), until the aggregate amount of all such Losses
sustained by the Purchaser Indemnified Parties exceeds $20,000, in which case
the Sellers will be jointly and severally liable for all such Losses exceeding
such amount; and
(ii) the
Purchaser will not have any liability as a result of any breach of or inaccuracy
in any of the representations and warranties contained in this Agreement until
the aggregate amount of all such Losses sustained by the Sellers exceeds
$20,000, in which case the Purchaser will be liable for all such Losses
exceeding such amount.
(c) Notwithstanding
anything to the contrary in this Agreement,
(i) any
indemnification obligations of the Sellers shall first be drawn from the
Holdback Amount, and thereafter, the Sellers will be jointly and severally
liable for all indemnification obligations pursuant to this Agreement;
provided that,
if
(A) the Holdback Amount is insufficient to satisfy any Claim(s) or has
otherwise been disbursed to the Sellers, and (B) either Note matures by its
terms not later than thirty (30) days after the date that any Purchaser
Indemnified Party first asserts a Claim, then the indemnification obligations
of
the Sellers with respect to such Claim(s) shall be satisfied by offset against
such Note in accordance with Section 10.6
and,
only if such offset results in a deficiency with respect to such Claim(s),
will
the Sellers be obligated to satisfy the balance of the indemnification
obligation by making out-of-pocket payments; and
(ii) with
respect to Losses based solely upon any shortfall in the Company’s Adjusted
EBITDA below $715,104 as of the Closing Date (except to the extent based on
fraud), the Purchaser shall not be entitled to reduce the principal amount
of
the Notes with respect to such Losses to the extent the Purchaser has already
recovered from the Sellers any and all such Losses, including for any diminution
in value of the Company as more specifically described in the definition of
“Losses” herein.
10.4. Specific
Performance.
Each
Party’s obligation under this Agreement is unique. If any Party should breach
its covenants under this Agreement, each of the Parties acknowledge that it
would be extremely impracticable to measure the resulting damages; accordingly,
the non-breaching Party or Parties, in addition to any other available rights
or
remedies, may xxx in equity for specific performance, and each Party expressly
waives the defense that a remedy in damages will be adequate.
40
10.5. Adjustment
to the Purchase Price.
Any
indemnification payments made pursuant to this Article 10
shall be
treated as an adjustment to the Purchase Price, unless otherwise required by
Law.
10.6. Set-Off.
If the
Sellers are obligated to indemnify any Purchaser Indemnified Party, the
Purchaser shall be entitled, in addition to any other right or remedy such
Purchaser Indemnified Party may have, but subject to the limitations set forth
in Section 10.3,
to
exercise rights of set-off against any amounts due and payable by the Purchaser
to the Sellers arising under this Agreement or any Ancillary Agreement or that
may thereafter be due and payable to the Sellers under this Agreement or any
Ancillary Agreement.
10.7. Exclusive
Remedy.
Except
as may be required to enforce post-Closing covenants contained in this
Agreement, after the Closing Date the indemnification rights in this
Article X
are and
shall be the sole and exclusive remedies of the Parties with respect to this
Agreement and the transactions contemplated hereby; provided,
however,
that
this sentence shall not be deemed a waiver by any Party of its right to seek
specific performance or injunctive relief in the case of another Party’s failure
to comply with the post-Closing covenants made by such other Party; and
provided,
further,
that
this sentence shall not be deemed a waiver by any Party of its right to pursue
claims for fraud, intentional or knowing misrepresentation, or active
concealment, all of which shall be claims that are outside the terms and
conditions of this Agreement.
XI.
MISCELLANEOUS
11.1. Competitive
Activity; Non-Solicitation; Confidentiality.
(a) Non-Competition.
As
additional consideration for the Purchase Price, each Seller agrees that, during
the Non-Compete Period, he or she shall not, directly or indirectly,
(i) enter into, engage in, consult, manage or otherwise participate in the
operation of any business which competes with the business of the Company within
the Restricted Territory; (ii) solicit customers, business, patronage or
orders for, or sell, any products and services in competition with, or for
any
business that competes with, the business of the Company within the Restricted
Territory; (iii) divert, entice or otherwise take away any existing or
potential customers, business, patronage or orders of the Company within or
outside the Restricted Territory, or attempt to do so; or (iv) promote or
assist, financially or otherwise, any Person engaged in any business that
competes with the business of the Company within the Restricted Territory.
Nothing contained in this Section 11.1
shall
prohibit the Sellers from acquiring or holding at any one time a passive
investment of less than 2 percent of the outstanding shares of capital stock
of
any publicly traded corporation that may compete with the Company within the
Restricted Territory. For the purposes of this Section 11.1,
the
Company shall also include any and all direct and indirect subsidiary, parent,
affiliated, or related companies of the Company. For the avoidance of doubt,
the
practice of law by X. Xxxx shall not be deemed to be competitive with the
business of the Company.
41
(b) Non-Solicitation.
During
the Non-Compete Period, each Seller agrees that he or she shall not directly
or
indirectly at any time solicit or induce or attempt to solicit or induce any
employee(s), sales representative(s), agent(s) or consultant(s) of the Company
and/or of its parent, or its other subsidiary, affiliated or related companies
to terminate their employment, representation or other association with the
Company and/or its parent or its other subsidiary, affiliated or related
companies, without obtaining written consent of the Company prior to such
solicitation or inducement.
(c) Non-Disclosure.
(i) Each
Seller will keep in strict confidence, and will not, directly or indirectly,
at
any time, disclose, furnish, disseminate, make available or, except in the
course of performing the Sellers’ respective duties as employees of the Company,
use any trade secrets or confidential business and technical information of
the
Company, any of its subsidiary, affiliated or related companies, or any of
its
customers or vendors, without limitation as to when or how the Sellers may
have
acquired such information. Such confidential information shall include, without
limitation, the Company’s unique selling and servicing methods and business
techniques, training, service and business manuals, promotional materials,
training courses and other training and instructional materials, vendor and
product information, customer and prospective customer lists, other customer
and
prospective customer information and other business information. The Sellers
specifically acknowledge that all such confidential information, whether reduced
to writing, maintained on any form of electronic media, or maintained in the
mind or memory of either Seller whether compiled by the Company and/or the
Sellers, derives independent economic value from not being readily known to
or
ascertainable by proper means by others who can obtain economic value from
its
disclosure or use, that reasonable efforts have been made by the Company to
maintain the secrecy of such information, that such information is the sole
property of the Company and that any retention and use of such information
by
either Seller (except in the course of performing their respective duties and
obligations to the Company) shall constitute a misappropriation of the Company’s
trade secrets.
(ii) Each
Seller agrees that at any time upon the request of the Company, such Seller
shall return to the Company, in good condition, all property of the Company,
including, without limitation, the originals and all copies of any materials
that contain, reflect, summarize, describe, analyze or refer or relate to any
items of information listed in Section 11.1(c)(i).
If such
items are not so returned, then the Company will have the right to charge such
Seller for all reasonable damages, costs, attorneys’ fees and other expenses
incurred in searching for, taking, removing and/or recovering such
property.
(d) Acknowledgment
and Relief.
The
Sellers acknowledge that (i) their obligations under this Section 11.1
are
reasonable in the context of the nature of the business of the Company and
the
competitive injuries likely to be sustained by the Company if the Sellers were
to violate such obligations, (ii) the covenants in this Section 11.1
are
adequately supported by consideration from the Purchaser for the benefit of
the
Company after the Closing Date, and (iii) the foregoing makes it necessary
for the protection of the business of the Company that the Sellers not compete
with the Company for the reasonable period contained herein. Accordingly, the
Sellers acknowledge and agree that the remedy at law available to the Company
for breach of any of the Sellers’ obligations under this Section 11.1
would be
inadequate; therefore, in addition to any other rights or remedies that the
Company may have at law or in equity, temporary and permanent injunctive relief
may be granted in any proceeding which may be brought to enforce any provision
contained in this Section 11.1,
without
the necessity of proof of actual damage. If it shall be judicially determined
that any Seller has violated this Section 11.1,
then
the period applicable to each obligation that such Seller has been determined
to
have violated will automatically be extended by a period of time equal in length
to the period during which such violation(s) occurred.
42
(e) Employment
Agreement.
The
obligations and restrictions set forth in this Section 11.1
are in
addition to the provisions of any employment or other agreement between the
Company and the applicable Seller that may be entered into from time to time
and
addresses the same or similar subject matter covered by this Section 11.1 (including,
without limitation, the Employment Agreements).
11.2. Further
Assurances.
From and
after the Closing Date, at the request of the Purchaser, the Sellers shall
execute and deliver or cause to be executed and delivered to the Purchaser
or
the Company, such instruments and other documents as the Purchaser or the
Company may reasonably request in order to implement the transactions
contemplated by this Agreement and the Ancillary Agreements.
11.3. Press
Release and Announcements.
No
Seller may issue any press release or other public announcement relating to
the
existence or subject matter of this Agreement or any Ancillary Agreement or
the
transactions contemplated hereby or thereby without the prior approval of the
Purchaser; provided,
however,
nothing
in this Section 11.3 will
preclude any Seller from making any disclosures necessary and proper in
conjunction with the filing of any Tax Return or other document required to
be
filed in connection with making or obtaining (as the case may) consents from
any
Governmental Authority.
11.4. Termination.
(a) Right
to Terminate.
Notwithstanding anything contained in this Agreement to the contrary, this
Agreement may be terminated at any time prior to the Closing:
(i) by
mutual
written consent of the Purchaser, on the one hand, and the Sellers, on the
other
hand;
(ii) by
the
Purchaser, if the Sellers shall have breached or failed to perform in any
material respect any of their covenants or agreements under this Agreement
required to be performed before the Closing Date, or if any of the
representations and warranties of the Sellers set forth in this Agreement shall
not be true in any material respect;
(iii) by
the
Sellers, if the Purchaser shall have breached or failed to perform in any
material respect any of its covenants or agreements under this Agreement
required to be performed before the Closing Date, or if any of the
representations and warranties of the Purchaser set forth in this Agreement
shall not be true in any material respect;
43
(iv) by
either
the Purchaser or the Sellers if the Closing has not occurred by October 17,
2008
other than as a result of any breach of the party attempting such termination,
or such other date, if any, as the Purchaser and the Sellers may agree in
writing;
(v) by
either
the Purchaser or the Sellers if any Governmental Authority has issued an Order
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement; or
(vi) by
the
Purchaser if it is not satisfied in its sole discretion with the results of
its
due diligence investigation or if it is unable to obtain the consent of its
lenders to the transactions contemplated by this Agreement and the Ancillary
Agreements.
(b) Effect
of Termination.
Each
Party’s right of termination under Section 11.4(a)
is in
addition to any other rights it may have under this Agreement or otherwise
and
the exercise of a right of termination will not be an election of remedies.
If
this Agreement is terminated pursuant to Section 11.4(a),
written
notice thereof must be given by the terminating Party to all other Parties
specifying the provision of Section 11.4(a)
pursuant
to which such termination is made, and this Agreement will terminate and become
void and of no further force and effect and there will be no further liability
or obligation on the part of any Party, except that the provisions of this
Section 11.4,
and
Sections 11.5
through
11.11
shall
survive any termination of this Agreement. Nothing in this Section 11.4(b)
shall
relieve any Party of liability for any breach of this Agreement.
11.5. Expenses.
Except
as otherwise provided in this Agreement, each of the Parties shall bear their
respective expenses incurred or to be incurred in connection with the execution
and delivery of this Agreement and the Ancillary Agreements and the consummation
of the transactions contemplated hereby and thereby.
11.6. No
Assignment.
The
rights and obligations of the Sellers under this Agreement may not be assigned
without the prior written consent of the Purchaser. The Purchaser may, without
the consent of the Sellers, assign its rights and obligations under this
Agreement.
11.7. Headings.
The
headings contained in this Agreement are included for purposes of convenience
only, and do not affect the meaning or interpretation of this
Agreement.
11.8. Integration,
Modification and Waiver.
This
Agreement, together with the Exhibits, Schedules and certificates or other
instruments delivered under this Agreement, constitutes the entire agreement
between the Parties with respect to the subject matter hereof and supersedes
all
prior understandings of the Parties. No supplement, modification or amendment
of
this Agreement will be binding unless executed in writing by the Purchaser.
No
waiver of any of the provisions of this Agreement will be deemed to be or will
constitute a continuing waiver. No waiver will be binding unless executed in
writing by the Party making the waiver.
11.9. Construction.
The
Parties have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the Parties
and no presumption or burden of proof shall arise favoring or disfavoring any
Party by virtue of the authorship of any of the provisions of this Agreement.
Any reference to any federal, state, local or foreign statute or law will be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise. The word “including” shall mean including
without limitation. Any reference to the singular in this Agreement shall also
include the plural and vice versa.
44
11.10. Severability.
If any
provision of this Agreement or the application of any provision of this
Agreement to any Party or circumstance is, to any extent, adjudged invalid
or
unenforceable, the application of the remainder of such provision to such Party
or circumstance, the application of such provision to other Parties or
circumstances, and the application of the remainder of this Agreement will
not
be affected thereby.
11.11. Notices.
All
notices and other communications required or permitted under this Agreement
must
be in writing and will be deemed to have been duly given (a) when delivered
in person, (b) when dispatched by electronic facsimile transfer (if
confirmed in writing by mail simultaneously dispatched), (c) one business
day after having been dispatched by a nationally recognized overnight courier
service or (d) five (5) business days after being sent by registered or
certified mail, return receipt requested, postage prepaid, to the appropriate
Party at the address or facsimile number specified below:
If
to the
Sellers:
REPTECH
Corp.
0000
Xxxxx Xxxxxxx’s Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention:
Xxxxx X. Xxxx
Facsimile
No.: (000) 000-0000
with
a
copy to:
McGloin,
Davenport, Xxxxxxxx and Snow, P.C.
0000
Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxx,
Xxxxxxxx 00000
Attention:
Xxxxxx X. Xxxxxxxx, Esq.
Facsimile
No.: (000) 000-0000
If
to the
Purchaser:
000
Xxxxx
Xxxxx Xxxxx, Xxxxx 000
Xxxxxx,
Xxxx 00000
Attention:
Xxxx X. Xxxxx
Facsimile
No.: (000) 000-0000
45
with
a
copy to:
Xxxxx
Day
000
Xxxx
X. XxXxxxxxx Xxxx., Xxxxx 000
Xxxxxxxx,
Xxxx 00000
Attention:
Xxxxxxx X. Xxxxx, Esq.
Facsimile
No.: (000) 000-0000
11.12. Governing
Law.
This
Agreement will be governed by and construed and enforced in accordance with
the
laws of the State of Ohio without regard to principles of conflicts of
law.
11.13. Counterparts.
This
Agreement may be executed in two or more counterparts, each of which will be
deemed an original, but all of which together will constitute one and the same
instrument. Delivery of an executed signature page to this Agreement by
facsimile or electronic transmission will be effective as delivery of a manually
executed counterpart to this Agreement.
[Remainder
of Page Intentionally Blank - Signature Page Follows]
46
IN
WITNESS WHEREOF, the Parties have executed this Agreement as of the day and
year
first above written.
By:
|
|||
|
Name:
|
||
|
Title:
|
PENSION
TECHNICAL SERVICES, INC.
|
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By:
|
|||
|
Name:
|
||
|
Title:
|
Xxxxx
X. Xxxx, individually
|
Xxxxxx
X. Xxxxxxx-Xxxx, individually
|
EXHIBIT
A
Form
of Notes
[attached]
EXHIBIT
B
Form
of X. Xxxx Employment Agreement
[attached]
EXHIBIT
C
Form
of X. Xxxx Employment Agreement
[attached]
EXHIBIT
D
Form
of Release
[attached]