EXHIBIT 99.1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
by and among
ACTIVANT SOLUTIONS INC.,
P21 MERGER CORPORATION,
PROPHET 21, INC.,
and, for purposes of
Sections 2.08, 6.06, 7.03, 10.03, 11.07, 13.01,
13.03, 13.04, 13.08, 13.13 and ARTICLE IX only,
XXXXX XXXXXXX EQUITY PARTNERS, LLC, as the Representative
August 15, 2005
TABLE OF CONTENTS
ARTICLE I THE MERGER.....................................................................................1
1.01 The Merger......................................................................................1
1.02 Effective Time..................................................................................2
1.03 Effects.........................................................................................2
1.04 Certificate of Incorporation; Bylaws............................................................2
1.05 Directors.......................................................................................2
1.06 Officers........................................................................................3
ARTICLE II EFFECT ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS...................................3
2.01 Effect on Capital Stock of Merger Sub...........................................................3
2.02 Effect on Capital Stock of the Company..........................................................3
2.03 Merger Consideration; Allocation Schedule.......................................................3
2.04 Delivery of Estimated Merger Consideration Calculation..........................................4
2.05 The Closing.....................................................................................4
2.06 Appraisal Rights................................................................................5
2.07 Exchange Procedures.............................................................................5
2.08 Final Merger Consideration Calculation..........................................................6
ARTICLE III CONDITIONS TO CLOSING........................................................................8
3.01 Conditions to Buyer's and Merger Sub's Obligations..............................................8
3.02 Conditions to the Company's Obligations........................................................10
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................................12
4.01 Organization and Corporate Power...............................................................12
4.02 Subsidiaries...................................................................................12
4.03 Authorization; No Breach; Valid and Binding Agreement..........................................13
4.04 Governmental Consents, etc.....................................................................13
4.05 Capital Stock..................................................................................14
4.06 Financial Statements...........................................................................14
4.07 Absence of Certain Developments................................................................14
4.08 Accounts Receivable............................................................................16
4.09 Inventory......................................................................................16
4.10 Title to Properties............................................................................16
4.11 Tax Matters....................................................................................17
4.12 Material Contracts and Commitments.............................................................19
4.13 Undisclosed Liabilities........................................................................20
4.14 Intellectual Property..........................................................................21
4.15 Litigation.....................................................................................24
4.16 Employee Benefit Plans.........................................................................24
4.17 Insurance......................................................................................25
4.18 Compliance with Laws; Permits..................................................................25
4.19 Environmental Matters..........................................................................25
4.20 Affiliated Transactions........................................................................26
4.21 Employees......................................................................................26
4.22 Brokerage......................................................................................27
4.23 Customers and Suppliers........................................................................27
4.24 Minute Books; Stock Record Books...............................................................27
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ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB........................................27
5.01 Organization and Power.........................................................................27
5.02 Authorization; Valid and Binding Agreement.....................................................28
5.03 No Breach......................................................................................28
5.04 Governmental Consents, etc.....................................................................28
5.05 Litigation.....................................................................................28
5.06 Brokerage......................................................................................28
5.07 Investment Representation......................................................................28
5.08 Sufficient Funds...............................................................................29
5.09 Solvency.......................................................................................29
5.10 No Knowledge of Misrepresentations or Omissions................................................29
ARTICLE VI CERTAIN PRE-CLOSING COVENANTS................................................................30
6.01 Conduct of the Business........................................................................30
6.02 Access to Books and Records....................................................................30
6.03 Exclusive Dealing..............................................................................31
6.04 Stockholder Approval...........................................................................31
6.05 Consents.......................................................................................31
6.06 Cooperation with Financing.....................................................................32
6.07 Reports........................................................................................32
ARTICLE VII CERTAIN COVENANTS OF BUYER AND MERGER SUB...................................................32
7.01 Buyer's Solvency...............................................................................32
7.02 Contact with Customers and Suppliers...........................................................32
7.03 Access to Books and Records....................................................................33
7.04 Certain Charter Provisions.....................................................................33
7.05 Facility Closings; Employee Layoffs............................................................33
7.06 Employee Benefits..............................................................................33
ARTICLE VIII TERMINATION................................................................................35
8.01 Termination....................................................................................35
8.02 Effect of Termination..........................................................................36
ARTICLE IX REPRESENTATIVE...............................................................................36
9.01 Designation....................................................................................36
9.02 Authority......................................................................................36
9.03 Authority; Indemnification.....................................................................37
9.04 Exculpation....................................................................................38
ARTICLE X INDEMNIFICATION...............................................................................38
10.01 Agreement to Indemnify.........................................................................38
10.02 Survival of Representations, Warranties and Covenants..........................................40
10.03 Claims for Indemnification.....................................................................41
10.04 Defense of Claims..............................................................................41
10.05 Nature of Payments.............................................................................42
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ARTICLE XI ADDITIONAL COVENANTS AND AGREEMENTS..........................................................42
11.01 Additional Limitations.........................................................................42
11.02 Disclosure Generally...........................................................................43
11.03 Commercially Reasonable Efforts................................................................44
11.04 Notification...................................................................................44
11.05 Regulatory Act Compliance......................................................................44
11.06 Acknowledgments by Buyer and Merger Sub........................................................45
11.07 Tax Matters....................................................................................45
11.08 Legal Representation...........................................................................47
11.09 Further Assurances.............................................................................47
ARTICLE XII DEFINITIONS.................................................................................47
12.01 Definitions....................................................................................47
12.02 Cross-Reference of Other Definitions...........................................................52
12.03 Construction...................................................................................54
ARTICLE XIII MISCELLANEOUS..............................................................................55
13.01 Press Releases and Communications..............................................................55
13.02 Expenses.......................................................................................55
13.03 Notices........................................................................................55
13.04 Assignment.....................................................................................57
13.05 Severability...................................................................................57
13.06 Third Party Beneficiaries......................................................................57
13.07 No Strict Construction.........................................................................57
13.08 Amendment and Waiver...........................................................................58
13.09 Complete Agreement.............................................................................58
13.10 Counterparts...................................................................................58
13.11 Governing Law..................................................................................58
13.12 WAIVER OF TRIAL BY JURY........................................................................58
13.13 Dispute Resolution.............................................................................58
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EXHIBITS
Exhibit A Form of Certificate of Incorporation of the Surviving
Corporation
Exhibit B Form of Escrow Agreement
Exhibit C Form of Closing Certificate of the Company
Exhibit D Form of Closing Certificate of Buyer and Merger Sub
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SCHEDULES
Section Reference
-----------------
Affiliated Transactions Schedule........................................4.19
Authorization Schedule..................................................4.03
Brokerage Schedule......................................................4.22
Buyer Authorization Schedule............................................5.04
Customers and Suppliers Schedule........................................4.23
Developments Schedule...................................................4.07
EBITDA Calculation Schedule..........................................3.01(g)
Employee Benefits Schedule..............................................4.16
Employee Schedule.......................................................4.21
Environmental Matters Schedule..........................................4.19
Financial Statements Schedule...........................................4.06
Indebtedness Schedule..................................................12.01
Insurance Schedule......................................................4.17
Intellectual Property Schedule..........................................4.14
Leased Real Property Schedule...........................................4.10
Litigation Schedule.....................................................4.15
Material Contracts Schedule.............................................4.12
Net Working Capital Schedule...........................................12.01
Owned Real Property Schedule............................................4.10
Permits Schedule........................................................4.18
Permitted Liens Schedule...............................................12.01
Stockholders Schedule............................................4.05, 12.01
Subsidiary Schedule...............................................4.02, 4.04
Taxes Schedule..........................................................4.11
Terminated Contracts Schedule...........................................3.01
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made as of
August 15, 2005, by and among Activant Solutions Inc., a Delaware corporation
("Buyer"), P21 Merger Corporation, a Delaware corporation and a wholly owned
Subsidiary of Buyer ("Merger Sub"), Prophet 21, Inc., a Delaware corporation
(the "Company"), and, for purposes of Sections 2.08, 6.06, 7.03, 10.03, 11.07,
13.01, 13.03, 13.04, 13.08, 13.13 and ARTICLE IX only, Xxxxx Xxxxxxx Equity
Partners, LLC, a Delaware limited liability company, as representative of the
Sellers (in such capacity, the "Representative"). Capitalized terms used and not
otherwise defined herein have the meanings set forth in ARTICLE XII.
WHEREAS, the Company is a corporation duly organized and validly
existing under the laws of the State of Delaware;
WHEREAS, Buyer is a corporation duly organized and validly existing
under the laws of the State of Delaware;
WHEREAS, Merger Sub, a wholly owned subsidiary of Buyer, is a
corporation duly organized and validly existing under the laws of the State of
Delaware;
WHEREAS, in accordance with the Delaware General Corporation Law
("DGCL") the respective Boards of Directors of Buyer, Merger Sub and the Company
have approved this Agreement, the merger of Merger Sub with and into the Company
(the "Merger") and the related transactions contemplated hereby, upon the terms
and subject to the conditions set forth herein, and declared the Merger
advisable and in the best interests of their respective stockholders; and
WHEREAS, immediately following the execution and delivery of this
Agreement by the parties, the stockholders of the Company holding at least 90%
of the issued and outstanding Company Shares will execute and deliver a written
consent approving this Agreement and the transactions contemplated hereby and,
as provided herein, within ten business days of the execution of this Agreement,
the remaining stockholders will execute such written consent (as executed by all
stockholders of the Company, the "Stockholder Consent").
NOW, THEREFORE, in consideration of the premises, representations and
warranties and mutual covenants contained herein and of other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, do hereby agree as follows:
ARTICLE I
THE MERGER
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1.01 The Merger. On the terms and subject to the conditions set forth
in this Agreement and in accordance with the relevant provisions of the DGCL, at
the Effective Time, Merger Sub shall be merged with and into the Company. At the
Effective Time, the separate corporate existence of Merger Sub shall cease and
the Company shall continue as the surviving corporation and as a wholly owned
Subsidiary of Buyer (as such, the "Surviving Corporation").
1.02 Effective Time. Prior to the Closing, the Company shall prepare,
and on the Closing Date, upon satisfaction of the terms and conditions set forth
herein, the Company shall file with the Secretary of State of the State of
Delaware, a certificate of merger reasonably acceptable to Buyer and Merger Sub
(the "Certificate of Merger") executed in accordance with the relevant
provisions of the DGCL and shall make all other filings or recordings required
under the DGCL. The Merger shall become effective at such time as the
Certificate of Merger is duly filed with such Secretary of State of the State of
Delaware or at such other time as Buyer and the Company shall agree and specify
in the Certificate of Merger (the time the Merger becomes effective being the
"Effective Time").
1.03 Effects. The Merger shall have the effects set forth in this
Agreement, the Certificate of Merger and the applicable provisions of the DGCL.
Without limiting the generality of the foregoing, the Surviving Corporation
shall succeed to all the assets, rights, privileges, powers and franchises and
be subject to all of the liabilities, restrictions and duties of the Company and
Merger Sub, including under this Agreement, all as provided under the DGCL.
1.04 Certificate of Incorporation; Bylaws. At the Effective Time:
(a) The certificate of incorporation of Merger Sub, as in effect
immediately prior to the Effective Time and substantially in the form of Exhibit
A hereto, shall be amended at the Effective Time to change the corporate name
set forth therein to "Prophet 21, Inc." (or such other name as Buyer may
determine, in its sole discretion) and, as so amended, shall be the certificate
of incorporation of the Surviving Corporation until thereafter changed or
amended in accordance with the provisions thereof and applicable law.
(b) The bylaws of Merger Sub as in effect immediately prior to
the Effective Time shall be the bylaws of the Surviving Corporation until
thereafter changed or amended in accordance with the provisions thereof, the
provisions of the certificate of incorporation of the Surviving Corporation and
applicable law.
1.05 Directors. At the Effective Time, the directors of Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, until the earlier of their resignation or removal or
until their respective successors are duly elected and qualified, as the case
may be.
1.06 Officers. At the Effective Time, the officers of Merger Sub
immediately prior to the Effective Time shall be the initial officers of the
Surviving Corporation, until the earlier of their resignation or removal or
until their respective successors are duly elected and qualified, as the case
may be.
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ARTICLE II
EFFECT ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS
-----------------------------------------------------------
2.01 Effect on Capital Stock of Merger Sub. At the Effective Time,
each issued and outstanding share of common stock of Merger Sub, par value $.01
per share, by virtue of the Merger and without any action on the part of Buyer,
Merger Sub, the Company or the holder thereof, shall be converted into and
become one fully paid and nonassessable share of common stock, par value $0.01
per share, of the Surviving Corporation.
2.02 Effect on Capital Stock of the Company.
(a) At the Effective Time, by virtue of the Merger and without
any action on the part of the holder of any shares of capital stock of the
Company, each Common Share outstanding as of the Effective Time shall be
converted into the right to receive, subject to the terms of this Agreement, an
amount in cash equal to the portion of the Merger Consideration allocated in
respect thereof in accordance with Section 2.03 below and payable as provided in
Section 2.07 below.
(b) Notwithstanding the foregoing, any Common Shares owned by
the Company (including those held as treasury shares), Merger Sub or Buyer,
shall not convert as described in subsection (a) above but shall instead, by
virtue of the Merger and without any action on the part of Buyer, Merger Sub,
the Company or the holder thereof, be extinguished and cancelled without the
right to receive any consideration (with no payment being made hereunder with
respect thereto).
2.03 Merger Consideration; Allocation Schedule.
(a) At least three days prior to the Closing Date, the Company
shall prepare and deliver to Buyer a schedule setting forth the portion of the
Merger Consideration payable to each holder of Common Shares (each a "Company
Share") upon the consummation of the Merger in respect of each Company Share
held by such holder (including a calculation indicating the portion of the
Escrow Amount allocable to each such Seller and to be withheld from the Merger
Consideration payable at Closing) (the "Allocation Schedule"). In formulating
the Allocation Schedule, the Company shall determine the portion of the Merger
Consideration due and payable in respect of each Company Share held by any
holder as if the Merger Consideration were distributed to all of the holders
(other than the Company, Merger Sub or Buyer) of Company Shares pursuant to the
terms of the Company's certificate of incorporation, taking into account the
Escrow Amount to be deducted from the Estimated Merger Consideration payable at
Closing.
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(b) For purposes of this Agreement, "Merger Consideration" shall
mean an amount equal to $215,000,000 (as adjusted pursuant to Section 2.08(a)
below), plus (i) the total amount of Cash on Hand immediately prior to the
Closing (the "Cash Amount"), minus (ii) the outstanding amount of Indebtedness
immediately prior to the Closing (the "Indebtedness Amount"), plus or minus
(iii) the amount by which the Estimated Working Capital is outside of (i.e., is
an amount greater than the top of, or less than the bottom of) the Working
Capital Target Range (the "Working Capital Spread"), minus (iv) the amount of
unpaid Transaction Expenses of the Sellers or the Company (the "Transaction
Expense Amount"), minus, in the event Adjusted EBITDA is less than $21.9
million, (v) an amount equal to the product of (A) $22.0 million minus Adjusted
EBITDA, multiplied by (B) 9.0 (the "EBITDA Adjustment Amount").
2.04 Delivery of Estimated Merger Consideration Calculation. At least
three days prior to the Closing Date, the Company shall deliver to Buyer (a) its
good faith calculation of the Merger Consideration as of the Closing Date (as
agreed to by Buyer, the "Estimated Merger Consideration") and each of the
components in the calculation thereof, including its estimate of Net Working
Capital (the "Estimated Net Working Capital") and its estimate of the Working
Capital Spread, the Cash Amount, the Indebtedness Amount, the Transaction
Expense Amount and the EBITDA Adjustment Amount and (b) audited financial
statements of the Company for the fiscal year ended June 30, 2005.
2.05 The Closing.
(a) The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxxxxxx & Xxxxx
LLP located at 000 Xxxx Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx at 10:00 a.m. on
September 22, 2005, or, if any of the conditions to the Closing set forth in
ARTICLE III (other than those to be satisfied at the Closing) have not been
satisfied or waived by the party entitled to the benefit thereof on or before
such date, then on the third business day following satisfaction or waiver of
all of the conditions to the Closing set forth in ARTICLE III (other than those
to be satisfied at the Closing) or on such other date as is mutually agreeable
to Buyer and the Company. The date and time of the Closing are referred to
herein as the "Closing Date."
(b) Simultaneously with the Closing, Buyer shall pay to each
Seller, in accordance with Section 2.07, such Seller's pro rata portion of the
Estimated Merger Consideration minus such Seller's pro rata portion of the
Escrow Amount.
(c) Simultaneously with the Closing, Buyer shall deposit, for
the benefit of the Sellers, the Escrow Amount into an escrow account (the
"Escrow Account") established pursuant to the terms and conditions of an escrow
agreement (substantially in the form of Exhibit B, the "Escrow Agreement") by
and among the Escrow Agent, Buyer and the Representative. Other than a final
distribution, if any, owed to the Sellers in accordance with the terms of the
Escrow Agreement, the Escrow Amount will be available solely to satisfy amounts
owed to Buyer pursuant to Sections 2.08(c), 10.01(a) and 11.07(b)(iii) hereof,
to satisfy amounts owed to the Independent Auditor as contemplated herein and to
satisfy amounts owed to the Escrow Agent in accordance with the terms of the
Escrow Agreement.
(d) Simultaneously with the Closing, Buyer shall pay, or cause
to be repaid, on behalf of the Company and its Subsidiaries, the Indebtedness
Amount by wire transfer of immediately available funds as directed by the
holders of such Indebtedness.
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2.06 Appraisal Rights. Notwithstanding anything in this Agreement to
the contrary, Company Shares that are outstanding immediately prior to the
Effective Time and that are held by any person who is entitled to dissent from
and properly dissents from this Agreement pursuant to, and who complies in all
respects with the applicable provisions of the DGCL in each case to the extent
applicable (the "Appraisal Statute"), shall not be converted as described in
Section 2.02 above ("Dissent Shares"), but rather the holder(s) of Dissent
Shares shall be entitled to the right to receive payment of the fair cash value
of such Dissent Shares in accordance with the Appraisal Statute (and at the
Effective Time, such Dissent Shares shall no longer be outstanding and shall
automatically be canceled and shall cease to exist, and such holder shall cease
to have any rights with respect thereto, except the right to receive the fair
value of such Dissent Shares in accordance with the provisions of Section 262 of
the DGCL); provided, however, that if any such holder shall fail to perfect or
otherwise shall waive, withdraw or lose the right to receive payment of the fair
cash value under the Appraisal Statute, then the right of such holder to be paid
the fair cash value of such holder's Dissent Shares shall cease and such Dissent
Shares shall be deemed to have been converted as of the Effective Time as
described in Section 2.02 above. The Company shall give prompt notice to Buyer
of any objections or demands received by the Company for appraisal of Company
Shares pursuant to the Appraisal Statute, and Buyer shall have the right to
participate in, prior to the Closing, and direct, after the Closing, all
negotiations and proceedings with respect to such objections or demands. The
Company shall not, without the prior consent of Buyer, make any payment with
respect to, or settle or offer to settle, any such objections or demands, or
agree to do any of the foregoing.
2.07 Exchange Procedures.
(a) Payment of Merger Consideration; Delivery of Letters of
Transmittal at the Closing. At the Closing, upon delivery by a Seller of (i) a
duly executed letter of transmittal containing representations as to title, due
authorization and absence of liens in a form reasonably acceptable to Buyer and
the Company (the "Letter of Transmittal"), and (ii) any certificate or
certificates held by such Seller which immediately prior to the Effective Time
represented outstanding Company Shares (or, in lieu thereof, properly executed
affidavits of lost certificate in a form reasonably acceptable to Buyer)
("Certificates"), Buyer shall pay to such Seller the consideration payable to
such Seller as set forth in Section 2.03 above by wire transfer of immediately
available funds to an account designated in writing by such holder to Buyer
prior to the Closing.
(b) Delivery of Letters of Transmittal and Certificates After
the Closing. With respect to any holder of Company Shares listed on the
Allocation Schedule failing to deliver a Letter of Transmittal and Certificates
to Buyer at or prior to the Closing, Buyer shall promptly thereafter mail to any
such holder at the address listed on the Allocation Schedule instructions for
delivering such Letter of Transmittal and Certificates in exchange for the
payment to such holder of the consideration to which he, she or it is entitled
under Section 2.03 above. Upon delivery to Buyer of such appropriate Letter of
Transmittal and Certificates, Buyer shall deliver to the holder of the Company
Shares the amounts set forth in the Allocation Schedule.
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(c) No Interest Accrual; Conditions to Payment. No interest will
be paid or accrued on the Merger Consideration. If payment is to be made to a
Person other than the Person in whose name a Company Share is registered, it
shall be a condition of payment that the Person requesting such payment shall
pay any transfer or similar Taxes required by reason of the payment to a Person
other than the holder of record or shall establish to the satisfaction of Buyer
that such Tax has been paid or is not applicable. Until the respective Letter of
Transmittal and Certificates are delivered with respect to any Company Share at
the Effective Time, such Company Share shall represent for all purposes only the
right to receive payment of the amounts specified in Section 2.02 above in
respect of such Company Share.
(d) Unclaimed Funds. Any amount of the Merger Consideration
(less the Escrow Amount) which remains undistributed to the holders of Company
Shares for one year after the Effective Time shall be delivered to the Surviving
Corporation for all purposes, and any holder of Company Shares who has not
theretofore complied with this Section 2.07 shall thereafter look only as a
general claimant to the Surviving Corporation for payment of the sums to which
such holder is entitled pursuant to this Agreement.
(e) No Liability. Neither Buyer nor the Surviving Corporation
shall be liable to any holder of Company Shares for any cash delivered by Buyer
or the Surviving Corporation in good faith to a public official pursuant to an
applicable abandoned property, escheat or similar law.
(f) No Further Ownership Rights in Company Shares; Transfer
Books. After the Effective Time, there shall be no further registration of
transfers on the Surviving Corporation's equity transfer books of any Company
Share that was outstanding immediately prior to the Effective Time. At the
Effective Time, the equity transfer books of the Company shall be closed.
(g) Withholding Rights. The Company shall be entitled to deduct
and withhold such amounts as may be required under the Code or any provision of
state, local or foreign tax law to be deducted and withheld from the
consideration otherwise payable to any holder of Company Shares pursuant to this
Agreement. To the extent that amounts are so deducted and withheld by the
Company and paid over to the appropriate taxing authority, such deducted and
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to such holder of Company Shares in respect of which such deduction
and withholding was made by the Company.
2.08 Final Merger Consideration Calculation.
(a) Promptly, but in any event within 60 days after the Closing
Date, Buyer will deliver to the Representative its calculation of Net Working
Capital, Working Capital Spread, the Cash Amount, the Indebtedness Amount, the
Transaction Expense Amount and the resulting final Merger Consideration (the
"Preliminary Closing Statement"). The Representative shall cooperate with Buyer
and its representatives in the preparation of the Preliminary Closing Statement,
including the provision on a timely basis of all information necessary or useful
in preparing the Preliminary Closing Statement. Buyer shall cooperate with the
Representative in connection with its review of the Preliminary Closing
Statement (and its determination of Net Working Capital, Working Capital Spread,
Cash on Hand and the final Merger Consideration), including, without limitation,
providing the Representative and its accountants reasonable access during
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business hours to materials (including accountants' work papers) used in the
preparation of all such materials and, as appropriate, reasonable access to the
books, records, facilities and employees of Buyer. Unless within the 30-day
period following the Representative's receipt of the Preliminary Closing
Statement, the Representative delivers written notice to Buyer (the "Objections
Statement") setting forth in reasonable detail any and all items of disagreement
related to the Preliminary Closing Statement, including the nature and dollar
amount thereof (each, an "Item of Dispute"), subject to the resolution of any
issues in the Objections Statement, the Preliminary Closing Statement (and its
determination of Net Working Capital, Working Capital Spread, Cash on Hand and
the final Merger Consideration) shall be conclusive and binding upon the
Representative and Buyer; provided that the only basis on which the
Representative shall be permitted to submit an Item of Dispute is that such Item
of Dispute was not prepared in accordance with this Section 2.08(a) (as further
defined or clarified by the definitions herein) or that a mathematical error was
made.
(b) If the Representative delivers an Objections Statement to
Buyer within such 30-day period, Buyer and the Representative shall use
commercially reasonable efforts to resolve their differences concerning the
Items of Dispute, and if any Item of Dispute is so resolved, the Preliminary
Closing Statement shall be modified as necessary to reflect such resolution. If
all Items of Dispute are so resolved, the Preliminary Closing Statement (as so
modified) (and its determination of Net Working Capital, Working Capital Spread,
Cash on Hand and the final Merger Consideration) shall be conclusive and binding
on the Representative and Buyer. If any Item of Dispute remains unresolved for a
period of fifteen (15) business days after Buyer's receipt of the Objections
Statement, Buyer and the Representative shall submit the remaining Items of
Dispute to a nationally recognized accounting firm mutually selected by Buyer
and the Representative (the "Independent Auditor"). Buyer and the Representative
shall request that the Independent Auditor render a determination (which
determination shall be solely based on whether such Item of Dispute was prepared
in accordance with the terms of Section 2.08(a) or whether a mathematical error
was made) as to each unresolved Item of Dispute within forty-five (45) days
after its retention, and Buyer and the Representative shall cooperate fully with
the Independent Auditor so as to enable it to make such determination as quickly
and as accurately as practicable. The Independent Auditor's determination as to
each Item of Dispute submitted to it shall be (i) based solely on presentations
by Buyer and the Representative which are in accordance with the guidelines and
procedures set forth in this Agreement (i.e., not on the basis of an independent
review), (ii) in writing and (iii) conclusive and binding upon Buyer and the
Representative, and the Preliminary Closing Statement shall be modified to the
extent necessary to reflect such determination. The Independent Auditor shall
consider only the remaining Items of Dispute and the Independent Auditor may not
assign a value to any Item of Dispute greater than the greatest value assigned
by Buyer, on the one hand, or the Representative, on the other hand, or less
than the smallest value for such item assigned by Buyer, on the one hand, or the
Representative, on the other hand. The costs and expenses of the Independent
Auditor shall be allocated between Buyer, on the one hand, and the Sellers, on
the other hand (with such amount to be paid solely out of the Escrow Account),
based upon the percentage which the portion of the contested amount not awarded
to Buyer or the Representative (on behalf of the Sellers) bears to the amount
actually contested by such party, as determined by the Independent Auditor. For
example, if the Representative claims Net Working Capital is $1,000 less than
the amount determined by Buyer's accountants, and Buyer contests only $500 of
the amount claimed by the Representative, and if the Independent Auditor
ultimately resolves the dispute by awarding the Representative $300 of the $500
contested, then the costs and expenses of arbitration will be allocated 60%
(i.e., 300 / 500) to the funds in the Escrow Account and 40% (i.e., 200 / 500)
to the Representative.
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(c) If the Merger Consideration as finally determined pursuant
to Section 2.08(a) above is greater than the Estimated Merger Consideration,
then Buyer shall pay to the Representative (on behalf of the Sellers) such
excess by wire transfer of immediately available funds. The Representative shall
promptly deliver such amount to the Sellers (based on each Seller's share
thereof as set forth on the Allocation Schedule). If the Merger Consideration as
finally determined pursuant to Section 2.08(a) above is less than the Estimated
Merger Consideration, then Buyer's sole recourse shall be to withdraw an amount
from the Escrow Account equal to the lesser of (i) such excess and (ii) the
funds in the Escrow Account. If recourse is to be made to the Escrow Account,
Buyer and Representative shall deliver, within three business days of the final
determination of the Merger Consideration, joint written disbursement
instructions to the Escrow Agent, directing the Escrow Agent to deliver to Buyer
such amount as is owed to Buyer pursuant to this Section 2.08. All payments
determined to be due under this Section 2.08(c) to Buyer or the Representative,
as the case may be, shall be made within three business days of such
determination in the case of any payment to be made to Sellers and three days
following receipt by the Escrow Agent of the disbursement instructions referred
to in the immediately preceding sentence in the case of any payment to be made
to Buyer.
ARTICLE III
CONDITIONS TO CLOSING
---------------------
3.01 Conditions to Buyer's and Merger Sub's Obligations. The
obligations of Buyer and Merger Sub to consummate the transactions contemplated
by this Agreement are subject to the satisfaction of the following conditions as
of the Closing Date, any one or more of which may be waived by Buyer and Merger
Sub:
(a) The representations and warranties set forth in ARTICLE IV
other than the Special Representations shall be true and correct at and as of
the Closing Date as though then made and as though the Closing Date were
substituted for the date of this Agreement throughout such representations and
warranties (other than for changes contemplated or permitted by this Agreement
and other than those representations and warranties that address matters as of
particular dates which shall be true and correct at and as of such particular
dates) except where the failure of such representations and warranties to be so
true and correct, in the aggregate, would not reasonably be expected to have a
Material Adverse Effect (it being understood that, for purposes of determining
the accuracy of such representations and warranties, all "Material Adverse
Effect" qualifications and other materiality qualifications contained in such
representations and warranties shall be disregarded) and (ii) each of the
Special Representations shall be true and correct in all material respects at
and as of the Closing Date as though then made and as though the Closing Date
were substituted for the date of this Agreement throughout such representations
and warranties;
8
(b) The Company shall have performed and complied in all
material respects with all of the covenants and agreements required to be
performed by it under this Agreement at or prior to the Closing;
(c) The applicable waiting period under the HSR Act (including
any new waiting period instituted due to the passage of time) shall have expired
or have been terminated;
(d) No judgment, decree or order shall have been entered which
would prevent the performance of this Agreement or the consummation of any
material part of the transactions contemplated hereby, declare void or unlawful
the transactions contemplated by this Agreement or cause such transactions to be
rescinded;
(e) All material approvals and actions of or by, and all notices
to, all Governmental Entities which are necessary to consummate the transactions
contemplated hereby shall have been obtained or taken place;
(f) Any and all consents, waivers, approvals, authorizations and
notices which are marked with an asterisk (*) on the Authorizations Schedule
shall have been obtained or delivered;
(g) The Company shall have delivered to Buyer audited financial
statements for its fiscal year ended June 30, 2005 and such audited financial
statements shall reflect Adjusted EBITDA for such period of at least $21.0
million. For purposes hereof, "Adjusted EBITDA" shall mean income plus interest,
taxes, depreciation, and amortization, and plus deferred revenue adjustments
related to purchase accounting for previous acquisitions, management fees and
acquisition expenses in the amounts set forth on the EBITDA Calculation
Schedule, and shall be consistent with the calculation of Adjusted EBITDA for
the nine months ended March 31, 2005, as set forth on the EBITDA Calculation
Schedule.
(h) The Company shall have delivered to Buyer each of the
following:
(i) a certificate of the Company in the form set forth in
Exhibit C, dated the Closing Date, stating that the preconditions
specified in subsections (a) and (b) above, as they relate to the
Company, have been satisfied;
(ii) appropriate payoff letters, together with evidence of
arrangements to deliver UCC-3 termination statements or similar
documents evidencing the termination of all Liens held by the lenders
under Indebtedness outstanding immediately prior to the Effective
Time, in form and substance reasonably satisfactory to Buyer;
(iii) a copy of the Company's and each of its Subsidiaries'
certificates of incorporation certified by the Secretary of State of
the State of Delaware and certificates of good standing from Delaware,
in each case dated within ten days of the Closing Date;
(iv) certified copies of the resolutions duly adopted by the
Company's board of directors and stockholders authorizing its
execution, delivery and performance of this Agreement and the other
agreements contemplated hereby to which it is a party, and the
consummation of all transactions contemplated hereby and thereby;
9
(v) a certified copy of the Company's bylaws, with all
amendments thereto, dated within ten days prior to the Closing Date;
(vi) a counterpart signature page to the Escrow Agreement,
duly executed by the Escrow Agent, the Company and the Representative;
(vii) the Stockholder Consent;
(viii) the Certificate of Merger, duly executed by an
authorized officer of the Company;
(ix) a certificate of non-foreign status meeting the
requirements of Section 1445 of the Code;
(x) all other agreements, certificates, instruments,
certifications and documents contemplated by this Agreement or
reasonably requested by Buyer in order to fully consummate the
transactions contemplated by this Agreement and carry out the purposes
and intent of this Agreement;
(i) There shall not have been or occurred any Material Adverse
Effect since the date of the Latest Balance Sheet.
(j) The Company shall have terminated those contracts and
agreements listed on the Terminated Contracts Schedule. If the Closing occurs,
all closing conditions set forth in this Section 3.01 which have not been fully
satisfied as of the Closing shall be deemed to have been fully waived by Buyer
and Merger Sub.
3.02 Conditions to the Company's Obligations.
The obligation of the Company to consummate the transactions
contemplated by this Agreement is subject to the satisfaction of the following
conditions as of the Closing Date:
(a) The representations and warranties set forth in ARTICLE V
shall be true and correct at and as of the Closing Date as though then made and
as though the Closing Date were substituted for the date of this Agreement
throughout such representations and warranties (other than for changes
contemplated or permitted by this Agreement and other than those representations
and warranties that address matters as of particular dates which shall be true
and correct at and as of such particular dates) except where the failure of such
representations and warranties to be so true and correct, in the aggregate,
would not reasonably be expected to have a material adverse effect on each of
Buyer's and Merger Sub's ability to consummate the transactions contemplated
hereby (it being understood that, for purposes of determining the accuracy of
such representations and warranties, all "Material Adverse Effect"
qualifications and other materiality qualifications contained in such
representations and warranties shall be disregarded);
(b) Each of Buyer and Merger Sub shall have performed and complied in
all material respects with all of the covenants and agreements required to be
performed by them under this Agreement at or prior to the Closing;
10
(c) The applicable waiting period under the HSR Act (including any
new waiting period instituted due to the passage of time) shall have expired or
have been terminated;
(d) No judgment, decree or order shall have been entered which would
prevent the performance of this Agreement or the consummation of any material
part of the transactions contemplated hereby, declare void or unlawful the
transactions contemplated by this Agreement or cause such transactions to be
rescinded;
(e) All material approvals and actions of or by, and all notices to,
all Governmental Entities which are necessary to consummate the transactions
contemplated hereby shall have been obtained or taken place;
(f) Buyer and Merger Sub, as the case may be, shall have delivered to
the Company each of the following:
(i) a certificate in the form set forth as Exhibit D, dated
the Closing Date, stating that the preconditions specified in
subsections (a) and (b) above have been satisfied;
(ii) certified copies of the resolutions duly adopted by the
board of directors of Buyer authorizing its execution, delivery and
performance of this Agreement and the other agreements contemplated
hereby to which it is a party, and the consummation of all
transactions contemplated hereby and thereby;
(iii) certified copies of the resolutions duly adopted by
the board of directors and stockholders of Merger Sub authorizing its
execution, delivery and performance of this Agreement and the other
agreements contemplated hereby to which it is a party, and the
consummation of all transactions contemplated hereby and thereby;
(iv) a counterpart signature page to the Escrow Agreement,
duly executed by Buyer;
(v) the solvency opinion referred to in Section 7.01 below
(if applicable); and
(vi) all other agreements, certificates, instruments,
certifications and documents contemplated by this Agreement or
reasonably requested by the Company in order to fully consummate the
transactions contemplated by this Agreement and carry out the purposes
and intent of this Agreement; and
(g) Buyer shall have delivered the consideration contemplated by
Section 2.07.
If the Closing occurs, all closing conditions set forth in this Section 3.02
which have not been fully satisfied as of the Closing shall be deemed to have
been fully waived by the Company.
11
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
Except as set forth in a disclosure schedule referenced herein (each
such Schedule qualifying only those representations and warranties or covenants
to the extent (i) specifically stated therein, (ii) specifically
cross-referenced to the appropriate Schedule or (iii) the relevance to such
representation, warranty or covenant is readily apparent based solely on a
review of the Schedules and this Agreement), the Company represents and warrants
to Buyer and Merger Sub that:
4.01 Organization and Corporate Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and the Company has all requisite corporate power and
authority and all authorizations, licenses and permits necessary to own and
operate its properties and to carry on its businesses as now conducted. The
Company is qualified or licensed and in good standing to do business in every
other jurisdiction in which its ownership of property or the conduct of its
businesses as now conducted requires it to qualify or be licensed, except where
the failure to be so qualified, licensed or in good standing would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company and its Subsidiaries, taken as a whole. The
Company has made available to Buyer a complete copy of the certificate of
incorporation and bylaws, each as amended to date, of the Company.
4.02 Subsidiaries. Except as set forth on the attached Subsidiary
Schedule, neither the Company nor any of its Subsidiaries owns or holds the
right to acquire any stock, partnership interest, joint venture interest or
other equity ownership interest in any other Person. Each Subsidiary is either
wholly owned by the Company, a Subsidiary or Subsidiaries as indicated on the
Subsidiary Schedule. Except as set forth on the attached Subsidiary Schedule and
except for Permitted Liens, each outstanding share of capital stock of or other
equity interest in each of the Company's Subsidiaries is owned by the Company or
a Subsidiary, is validly issued, fully paid and non-assessable, and assuming
termination of those agreements listed on the attached Terminated Contracts
Schedule, is free and clear of any Liens. There is no existing option, warrant,
call, right or contract to which any Subsidiary is a party requiring, and there
are no convertible securities of any Company Subsidiary outstanding which upon
conversion would require, the issuance of any shares of capital stock or other
equity interests of any Company Subsidiary or other securities convertible into
shares of capital stock or other equity interests of any Company Subsidiary.
Each of the Subsidiaries identified on the Subsidiary Schedule is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, has all requisite corporate
power and authority and all authorizations, licenses and permits necessary to
own its properties and to carry on its businesses as now conducted and is
qualified or licensed and in good standing to do business in every other
jurisdiction in which its ownership of property or the conduct of its businesses
as now conducted requires it to qualify or be licensed, except where the failure
to be so qualified, licensed or in good standing in such foreign jurisdictions
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company and its Subsidiaries, taken as a whole.
The Company has made available to Buyer complete and correct copies of its
Subsidiaries' certificates of incorporation and bylaws (or other organizational
documents), as currently in effect.
12
4.03 Authorization; No Breach; Valid and Binding Agreement.
(a) The Company has all necessary corporate power and authority
to execute and deliver this Agreement and to perform its obligations hereunder.
Except for requisite stockholder approval, this Agreement has been duly
authorized, executed and delivered by the Company. Except (i) as set forth on
the attached Authorization Schedule and (ii) for (A) the applicable
requirements, if any, of state securities or "blue sky" laws ("Blue Sky Laws")
and (B) the pre-merger notification requirements of the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
thereunder (the "HSR Act"), the execution, delivery and performance of this
Agreement by the Company and the consummation of the transactions contemplated
hereby do not (x) conflict with or result in any material breach of, constitute
a material default under, result in a material violation of, or require any
material authorization, consent, approval, exemption or other action by or
notice to any court or other Governmental Entity, under (1) the provisions of
the Company's or any of its Subsidiaries' certificate or articles of
incorporation or bylaws, (2) any material indenture, mortgage, lease, loan
agreement or other material agreement or instrument to which the Company or any
of its Subsidiaries is a party or by which any of the Company, or any of its
Subsidiaries or their respective assets or properties are bound, or (3) any law,
statute, rule or regulation or order, judgment or decree to which the Company or
any of its Subsidiaries is subject or (y) result in the creation of any material
Lien upon any material assets or properties of the Company or any of its
Subsidiaries. Assuming the due authorization, execution and delivery by Buyer
and the other parties hereto, this Agreement constitutes a valid and binding
obligation of the Company, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy laws, other similar laws affecting
creditors' rights and general principles of equity affecting the availability of
specific performance and other equitable remedies.
(b) The board of directors of the Company (the "Company Board")
has, by unanimous vote of those present (who constituted 100% of the directors
then in office), duly and validly, in accordance with the DGCL, authorized the
execution and delivery of this Agreement and approved the consummation of the
transactions contemplated hereby, and taken all corporate actions required to be
taken by the Company Board for the consummation of the transactions, including
the Merger, contemplated hereby and has resolved to recommend that the
stockholders of the Company approve and adopt this Agreement. The Company Board
has directed that this Agreement be submitted to the stockholders of the Company
for their approval. The affirmative approval of the holders of Company Shares
representing a majority of the votes that may be cast by the holders of all
outstanding shares of Company Shares are the only votes of the holders of any
class or series of capital stock of the Company necessary to adopt this
Agreement and approve the transactions contemplated hereby, including the
Merger.
4.04 Governmental Consents, etc. Except for the applicable
requirements of the HSR Act and Blue Sky Laws and the clearance, consent and
approval requirements listed on the Authorization Schedule, none of the Company
or any of its Subsidiaries is required to submit any notice or report to, or
approval application or other filing with any Governmental Entity and no
clearance, consent, approval or authorization of any Governmental Entity or any
other party or Person is required to be obtained by the Company or any of its
Subsidiaries in connection with the execution, delivery or performance by it of
this Agreement or the consummation of the transactions contemplated hereby.
13
4.05 Capital Stock. The authorized number of shares of capital stock
of the Company consists of 75,000 Preferred Shares of which none are issued and
outstanding, and 20,000,000 Common Shares of which 13,775,178.6775 shares are
issued and outstanding and owned of record as set forth on the Stockholders
Schedule. All Company Shares have been duly authorized and are validly issued,
fully paid and nonassessable and free of preemptive rights. Except as set forth
on the Stockholders Schedule, the Company does not have any other capital stock,
equity securities or securities containing any equity features authorized,
issued or outstanding, and there are no agreements, subscriptions, options,
warrants, conversion rights, or other rights or arrangements existing or
outstanding which provide for the sale or issuance of any of the foregoing by
the Company. Except as set forth on the Stockholders Schedule or the Terminated
Contracts Schedule, there are no stockholders agreements, voting trusts or other
agreements or other obligations (contingent or otherwise) which require the
Company to repurchase or otherwise acquire any shares of the Company's capital
stock or other equity securities.
4.06 Financial Statements. The Company has furnished Buyer with
complete copies of its (a) unaudited consolidated balance sheet with respect to
the Company and its Subsidiaries as of May 31, 2005 (the "Latest Balance
Sheet"), and the related statements of income and cash flows for the 11-month
period then ended and (b) audited consolidated balance sheet and statements of
income and cash flows with respect to the Company and its Subsidiaries as of and
for the fiscal years ended June 30, 2004 and June 30, 2003. Except as set forth
on the attached Financial Statements Schedule, such financial statements present
fairly, in all material respects, the consolidated financial condition, results
of operations and changes in cash flows of the Company and its Subsidiaries
(taken as a whole) as of the times and for the periods referred to therein in
accordance with GAAP (subject, in the case of the unaudited financial
statements, to changes resulting from normal year-end audit adjustments, absence
of footnotes and other presentation items), applied on a consistent basis
throughout the periods covered thereby and are consistent, in all material
respects, with the Company's books and records.
4.07 Absence of Certain Developments. Since the date of the Latest
Balance Sheet, the Company and its Subsidiaries have conducted business in all
material respects in the ordinary course of business consistent with past
practice and there has not occurred any change, effect, event or occurrence that
has had or would reasonably be expected to have, individually or in the
aggregate, Material Adverse Effect. Except as set forth on the attached
Developments Schedule or except as expressly contemplated by this Agreement,
since the date of the Latest Balance Sheet, neither the Company nor any
Subsidiary has:
(a) borrowed any amount or incurred or become subject to any
material liabilities (other than liabilities incurred in the ordinary course of
business, liabilities under contracts entered into in the ordinary course of
business and borrowings from banks (or similar financial institutions) necessary
to meet ordinary course working capital requirements) and not individually or in
the aggregate in excess of $100,000);
14
(b) mortgaged, pledged or subjected to any material Lien, any
material portion of its assets, except Permitted Liens;
(c) sold, assigned or transferred any material portion of its
tangible assets, except in the ordinary course of business;
(d) sold, assigned or transferred any material Intellectual
Property, except in the ordinary course of business;
(e) suffered any material extraordinary losses or waived any
rights of material value;
(f) issued, sold or transferred any of its capital stock or
other equity securities, securities convertible into its capital stock or other
equity securities or warrants, options or other rights to acquire its capital
stock or other equity securities, or any bonds or debt securities;
(g) made any capital expenditures in excess of $300,000 in the
aggregate or commitments therefor in excess of $100,000;
(h) amended its or any of its Subsidiaries' certificate of
incorporation, bylaws or other relevant organizational documents;
(i) declared, set aside or paid any dividend or other
distribution in respect of any shares of capital stock of the Company, or
repurchased, redeemed or otherwise acquired any equity securities;
(j) guaranteed, endorsed, or otherwise incurred or assumed any
material liability (whether directly, contingently or otherwise) for the
obligations of any other person, other than in the ordinary course of business
consistent with past practice;
(k) made any loan, advance or capital contribution to or
investment in any person other than advances to employees of the Company or any
Subsidiary made in the ordinary course of business consistent with past
practice;
(l) made any material change in any method of accounting or
accounting principles or practice, except for any such change required by reason
of a change in GAAP;
(m) adopted, entered into, amended, altered or terminated
(partially or completely) any Plan except as contemplated by this Agreement or
to the extent required by applicable law;
(n) revalued of any of the Company's or any Subsidiary's
material assets;
(o) cancelled, waived, released or forgave any material debts or
obligations of, or rights or material claims against, third parties;
(p) suffered any material damage, destruction or loss (whether
or not covered by insurance) to any material assets of the Company or any
Subsidiary;
15
(q) suffered any strike, slowdown or demand for recognition by a
labor organization by or with respect to any of the employees of the Company or
any Subsidiary;
(r) directly or indirectly acquired any assets, except in the
ordinary course of business, with a purchase price in excess of $100,000;
(s) settled or compromised any litigation, proceeding or
investigation material to the Company and its Subsidiaries taken as a whole; or
(t) committed or agreed to do any of the foregoing.
4.08 Accounts Receivable. All accounts receivable of the Company and
its Subsidiaries, including without limitation all accounts receivable as shown
on the Latest Balance Sheet, are valid receivables and were incurred in the
ordinary course of business for bona fide products delivered or services
rendered. As of the date of this Agreement, the Company has no knowledge of any
written notice received from any account debtor that any amount of such accounts
receivable are subject to any pending or threatened set-off, discount or
counterclaim of any kind, other than consistent with past practices and subject
to the reserves set forth on the Company's books and records.
4.09 Inventory. All Inventory, including without limitation all
Inventory shown on the Latest Balance Sheet and all Inventory thereafter created
or acquired by the Company or its Subsidiaries prior to the Closing Date, has
been created or acquired in the ordinary course of business and is useable and
salable in the ordinary course of business, subject to the reserves set forth on
the Company's books and records.
4.10 Title to Properties.
(a) Except as disclosed in the Owned Real Property Schedule, the
Company or one of its Subsidiaries owns good and marketable title to, or holds
pursuant to valid and enforceable leases, or otherwise has a valid right to use,
all of the personal property shown to be owned by them on the Latest Balance
Sheet, free and clear of all Liens except for Permitted Liens. All material
personal property shown to be owned by the Company and its Subsidiaries on the
Latest Balance Sheet have been maintained in accordance with the Company's and
its Subsidiaries' normal practices and are in usable condition for the operation
of the Company's and its Subsidiaries' business, ordinary wear and tear and
aging excepted.
(b) The attached Owned Real Property Schedule sets forth all of
the real property owned in fee simple by the Company or any of its Subsidiaries
(the "Owned Real Property"). Each of the Company and its Subsidiaries owns good
and valid title to each parcel of real property owned by it, which shall be free
and clear of all Liens as of the Closing Date, except for Permitted Liens and
except as disclosed in the Owned Real Property Schedule.
(c) The real property demised by the leases described on the
attached Leased Real Property Schedule (the "Leased Real Property") constitutes
all of the real property leased by the Company and its Subsidiaries. Except as
set forth on the attached Leased Real Property Schedule, the Leased Real
Property leases are in full force and effect, subject to proper authorization
and execution of such lease by the other party and the application of any
16
bankruptcy or creditor's rights laws or general principles of equity. The
Company has delivered or made available to Buyer complete and accurate copies of
each of the leases described on the Leased Real Property Schedule, and none of
the leases has been modified in any material respect, except to the extent that
such modifications are disclosed on the Leased Real Property Schedule. As of the
date of this Agreement, neither the Company nor any Subsidiary, or to the
knowledge of the Company, the landlord is in default in any material respect
under any of such leases. Each of the Company and its Subsidiaries have a good
and valid leasehold interest in all of the property described in the Leased Real
Property Schedule, free and clear of Liens, except Permitted Liens.
4.11 Tax Matters. Any claim of breach of representation or warranty
regarding Taxes shall be made only under this Section 4.11 and shall not be made
under any other representation or warranty contained in this Agreement (except
for any claim of breach of representation or warranty regarding matters
addressed in Section 4.16, which shall be brought under such section). The
Company and its Subsidiaries have duly and timely filed with the appropriate
Taxing Authority all federal, foreign, state, county and local income and other
material Tax Returns which are required to be filed by or on behalf of them
(taking into account any extensions of time to file which have been duly
perfected), and all such Tax Returns are true, correct, and complete in all
respects. Except as set forth on the attached Taxes Schedule, all Taxes shown as
owing on all such Tax Returns by the Company and its Subsidiaries have been
fully paid or properly accrued on the Latest Balance Sheet. With respect to any
period ending prior to the date of the Latest Balance Sheet for which Tax
Returns of the Company or any of its Subsidiaries have not yet been filed or for
which Taxes are not yet due or owing, due and sufficient accruals for such Taxes
have been made on the Latest Balance Sheet. All Taxes which the Company or any
Subsidiary is obligated to withhold from amounts owing to any employee, creditor
or third party have been fully paid to the appropriate Taxing Authority or
properly accrued on the Latest Balance Sheet. There are no material Liens with
respect to any Taxes upon any of the Company's or its Subsidiaries' assets,
other than Taxes, the payment of which is not yet due.
(b) All required estimated Tax payments for the current year
have been made by or on behalf of the Company and its Subsidiaries with respect
to any period for which Tax Returns have not yet been filed.
(c) The Company has made available to Buyer complete copies of
(i) all federal, state, local, and foreign income or franchise Tax Returns of
the Company and its Subsidiaries relating to the taxable periods ended on or
after December 31, 2001 and (ii) any audit report issued within the last three
years relating to any Taxes due from or with respect to the Company or any of
its Subsidiaries. Neither the Company nor any of its Subsidiaries has agreed to
extend the statute of limitations with respect to any Tax Return.
(d) No claim has been made by a Governmental Entity in a
jurisdiction where the Company or any of its Subsidiaries does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction.
17
(e) All deficiencies asserted or assessments made as a result of
any examinations by any Governmental Entity of the Tax Returns of, or including,
the Company or any of its Subsidiaries have been fully paid (except where
contested in good faith by appropriate proceedings, provided such deficiencies
have been reserved for on the Latest Balance Sheet), and there are no other
audits or investigations by any Governmental Entity in progress, nor has the
Company or any of its Subsidiaries received any written notice from any
Governmental Entity that it intends to conduct such an audit or investigation.
(f) Neither the Company nor any of its Subsidiaries nor any
other person on their behalf has (i) filed a consent pursuant to Section 341(f)
of the Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as such term is defined in Section
341(f)(4) of the Code) owned by the Company or such Subsidiary, (ii) requested
any extension of time within which to file any Tax Return, which Tax Return has
since not been filed, (iii) been granted any extension for the assessment or
collection of Taxes, which Taxes have not since been paid, or (iv) granted to
any person any power of attorney that is currently in force with respect to any
Tax matter.
(g) Neither the Company nor any of its Subsidiaries will be
required to include any item of income in, or exclude any item of deduction
from, taxable income for any taxable period (or portion thereof) ending after
the Closing Date as a result of any (i) change in method of accounting for a
taxable period ending on or prior to the Closing Date, (ii) "closing agreement"
as described in Section 7121 of the Code (or any corresponding or similar
provision of state, local, or foreign income Law) executed on or prior to the
Closing Date, (iii) installment sale or open transaction disposition made on or
prior to the Closing Date, or (iv) prepaid amount received on or prior to the
Closing Date.
(h) Neither the Company nor any of its Subsidiaries is a party
to any tax sharing, allocation, indemnity or similar agreement or arrangement
(whether or not written) pursuant to which it will have any obligations to make
any payments after the Closing.
(i) There is no contract, agreement, plan or arrangement
covering any person that, individually or collectively, could give rise to the
payment of any amount that would not be deductible by the Company or any of its
Subsidiary by reason of Section 280G of the Code as a result of the transactions
contemplated by this Agreement.
(j) Neither the Company nor any of its Subsidiaries is subject
to any private letter ruling of the IRS or comparable rulings of any
Governmental Entity.
(k) Neither the Company nor any of its Subsidiaries has ever
been a member of any consolidated, combined, affiliated or unitary group of
corporations for any Tax purposes other than a group in which the Company was
the common parent.
(l) Neither the Company nor any of its Subsidiaries has
constituted either a "distributing corporation" or a "controlled corporation"
(within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of
stock qualifying for tax-free treatment under Section 355 of the Code (A) in the
two (2) years prior to the date of this Agreement or (B) in a distribution which
could otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) in conjunction with the
transactions contemplated by this Agreement.
18
(m) The Company and its Subsidiaries have disclosed on their
federal income Tax Returns all positions taken therein that could give rise to
substantial understatement of federal income tax within the meaning of Section
6662 of the Code.
4.12 Material Contracts and Commitments.
(a) Except as set forth on the attached Material Contracts
Schedule, neither the Company nor any of its Subsidiaries as of the date of this
Agreement is a party to any written:
(i) contract relating to the incurrence, assumption or
guarantee of any indebtedness or to mortgaging, pledging or otherwise
placing a Lien on any of the Company's and its Subsidiaries' assets,
other than Permitted Liens;
(ii) license or royalty agreement involving expected
payments of more than $100,000 in 2005;
(iii) contract imposing any geographic restrictions upon the
ability of the Company and its Subsidiaries to freely engage in their
businesses anywhere in the world or limiting their right to compete in
any line of business;
(iv) guaranty of any obligation of any Person (other than
the Company or its Subsidiaries);
(v) contract relating to the supply, manufacturing,
distribution, marketing, advertising or promotion of products or
services (to or for the Company or its Subsidiaries) involving in any
such case payments of more than $100,000 per year (other than sales or
purchases made pursuant to purchase orders in the ordinary course of
business);
(vi) contract relating to the pending acquisition of a
business or, except for inventory and other tangible property acquired
in the ordinary course of business, assets having a fair market value
in excess of $100,000;
(vii) contract relating to the pending sale of any assets or
the grant to any Person of any preferential rights to purchase any of
its assets involving more than $100,000, other than sales of inventory
in the ordinary course of business;
(viii) contract with any labor union or association or
collective bargaining agreement;
(ix) consulting agreement providing for payments thereunder
by the Company in excess of $100,000 per year;
(x) Intellectual Property Licenses (excluding (A) licenses
for software licensed to the Company or any of its Subsidiaries on
customary terms for a license fee in any one year of no more than
$50,000 and (B) licenses granted by the Company or any of its
Subsidiaries in the ordinary course of business);
19
(xi) contract (other than Terminated Contracts) under which
a Person (other than the Company or any Subsidiary) is advanced or
loaned an amount exceeding $100,000;
(xii) contract with any stockholder or any current or former
officer, director, stockholder or Affiliate of the Company or any of
its Subsidiaries;
(xiii) contract pursuant to which any party is required to
purchase or sell a stated portion of its requirements or output from
or to another party; or
(xiv) contract providing for severance, retention, change in
control or other similar payments;
(xv) contract for the employment of any individual on a
full-time, part-time or consulting or other basis providing annual
compensation in excess of $100,000; or
(xvi) contract (or group of related contracts) not otherwise
listed on the Material Contracts Schedule which involves the
expenditure of more than $250,000 annually or $500,000 in the
aggregate.
(xvii) outstanding material agreement of guaranty, surety or
indemnification (excluding Intellectual Property Licenses entered into
in the ordinary course of business), by the Company or any of its
Subsidiaries.
(b) The Company has made available to Buyer a true and correct
copy of all written contracts which are referred to on the Material Contracts
Schedule, together with all material amendments, waivers or other changes
thereto.
(c) Each of the contracts listed on the Material Contracts
Schedule is in full force and effect and is the legal, valid and binding
obligation of the Company and/or its Subsidiaries, enforceable against them in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or in
equity) and except as would not reasonably be expected to result, individually
or in the aggregate, in a Material Adverse Effect. Neither the Company nor any
of its Subsidiaries is in material default under any contract listed on the
Material Contracts Schedule, nor to the knowledge of the Company, is any other
party to any contract listed on the Material Contracts Schedule in default
thereunder, and to the knowledge of the Company no event has occurred that with
the lapse of time or the giving of notice or both would constitute a material
default thereunder. To the Company's knowledge, no party to any of the contracts
listed on the Material Contracts Schedule has exercised any termination or
indemnification rights with respect thereto.
4.13 Undisclosed Liabilities. Except (i) as set forth on the attached
Undisclosed Liabilities Schedule, (ii) for liabilities to be performed under
existing contracts or agreements in the ordinary course of business, (iii) as
reflected or reserved against (or not required under GAAP to be so reflected or
reserved against) on the Latest Balance Sheet and the associated statements of
income and cash flows for the 11-month period ended May 31, 2005 or the notes
20
thereto or (iv) for Liabilities that have arisen after the date of the Latest
Balance Sheet in the ordinary course of business (none of which results from,
arises out of, relates to, is in the nature of, or was caused by any breach of
contract, breach of warranty, tort or violation of law), neither the Company nor
any of its Subsidiaries has liabilities of any nature whatsoever (whether
absolute, accrued, contingent, disputed or otherwise).
4.14 Intellectual Property.
(a) Section 4.14(a) of the Intellectual Property Schedule
contains a true and complete list of all of the issued Patents and pending
Patent applications, registered trademarks and service marks and pending
applications for the registration of trademarks and service marks, registered
Copyrights and pending applications for the registration of Copyrights, and
Internet domain name registrations, owned or filed by the Company or any of its
Subsidiaries (collectively, "Registered Intellectual Property"). Section 4.14(a)
of the Intellectual Property Schedule further lists (i) the record owner of each
such item of Registered Intellectual Property, (ii) the jurisdictions in which
each such item of Registered Intellectual Property has been issued or registered
or in which each such application for issuance or registration of such item of
Registered Intellectual Property has been filed; and (iii) the material
unregistered trademarks and service marks and the corporate names and trade
names used currently by the Company or any of its Subsidiaries in their
respective businesses.
(b) Except as set forth on Section 4.14(b) of the Intellectual
Property Schedule, the Company or one of its Subsidiaries is the sole and
exclusive owner of all right, title and interest in and to the Registered
Intellectual Property, except for non-exclusive licenses granted by the Company
or any of its Subsidiaries for its respective products in the ordinary course of
business under written license agreements, copies of which the Company has made
available to Buyer. To the knowledge of the Company, the Company and each of its
Subsidiaries is either the sole and exclusive owner of, or has a valid and
enforceable right to use, sell, license or otherwise commercially exploit, as
the case may be, all other Intellectual Property used, sold, licensed or
otherwise commercially exploited by the Company and each of its Subsidiaries in
their respective businesses as currently conducted, free and clear of all Liens
(except for Permitted Liens).
(c) Except as set forth in Section 4.14(c) of the Intellectual
Property Schedule, the Intellectual Property owned by or licensed to the Company
or any of its Subsidiaries includes in all material respects the intellectual
property rights reasonably necessary to enable the Company and its Subsidiaries
to conduct their businesses in the manner in which such businesses are currently
being conducted.
(d) Except as set forth in Section 4.14(d) of the Intellectual
Property Schedule: (i) neither the Company nor any of its Subsidiaries has
received any unsolicited offer to license any Intellectual Property from any
third Person; and (ii) to the knowledge of the Company, no third Person is
infringing, violating or misusing or has misappropriated any Intellectual
Property owned by the Company or any of its Subsidiaries, and no such claims
have been made against any Person by the Company or any of its Subsidiaries
within the five (5) year period prior to the date of this Agreement.
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(e) Except as set forth in Section 4.14(e) of the Intellectual
Property Schedule, neither the Company nor any of its Subsidiaries: (i) has
licensed to any third Person any source code for any of the Company's or any of
its Subsidiaries' products; or (ii) is currently a party to a source code escrow
agreement or any other agreement (or is currently a party to any agreement
obligating the Company or any of its Subsidiaries to enter into a source code
escrow agreement or other agreement) requiring the deposit of source code or
related materials for any of the Company's or any of its Subsidiaries' products.
(f) To the knowledge of the Company, the use, practice or other
commercial exploitation of the Company's Intellectual Property by the Company or
any of its Subsidiaries and the manufacturing, licensing, marketing,
importation, offer for sale, sale or use of the Company's Software, and the
operation of the Company's and its Subsidiaries' businesses do not infringe,
constitute an unauthorized use of or misappropriate any Intellectual Property of
any third Person or constitute unfair competition or trade practices under the
laws of any jurisdiction.
(g) Neither the Company nor any of its Subsidiaries is the
subject of any pending or, to the Company's knowledge, threatened claim, action,
suit, arbitration, mediation, inquiry, proceeding or investigation that involves
a claim of infringement, unauthorized use, or violation of any Intellectual
Property by any Person against the Company or any of its Subsidiaries or that
challenges the ownership, use, validity or enforceability of any Intellectual
Property owned or used by the Company or any of its Subsidiaries. Neither the
Company nor any of its Subsidiaries has received any written (including by
electronic mail) notice of any such threatened claim. To the knowledge of the
Company, all of the Company's and its Subsidiaries' respective rights in and to
the Intellectual Property owned by the Company or any of its Subsidiaries are
valid and enforceable.
(h) There are no orders, injunctions, judgments, decrees,
rulings, settlement agreements, stipulations, writs, assessments or arbitration
awards to which the Company or any of its Subsidiaries is a party or, to the
Company's knowledge, by which the Company or any of its Subsidiaries is bound
that restrict the Company's or any of its Subsidiaries' right to use any
Intellectual Property.
(i) All registration, maintenance, renewal and other relevant
filing fees due through the date hereof in connection with Registered
Intellectual Property owned by the Company or any of its Subsidiaries have been
timely paid, and all necessary documents and certificates in connection with
such Registered Intellectual Property have been timely filed with the relevant
patent, trademark, copyright or other relevant authorities in the United States
or foreign jurisdictions, as the case may be, for the purpose of maintaining
such Registered Intellectual Property.
(j) Neither the Company nor any of its Subsidiaries is required
to make any payments by way of royalties, fees or otherwise in excess, in the
aggregate, of $50,000 in any one year to any particular owner or licensor of or
other claimant to any Intellectual Property, or other third party, with respect
to the use of any Intellectual Property in connection with the conduct of the
businesses of the Company and its Subsidiaries as currently conducted.
22
(k) No Trade Secret or any other non-public, proprietary
information material to the businesses of the Company or its Subsidiaries as
currently conducted has been authorized to be disclosed or, to the knowledge of
the Company, has been actually disclosed by the Company or any of its
Subsidiaries to any employee or any third party other than pursuant to a written
nondisclosure agreement restricting the disclosure and use of such Trade Secrets
and proprietary information. The Company and its Subsidiaries have taken
commercially reasonable security measures to protect the secrecy,
confidentiality and value of all material Trade Secrets of the Company and its
Subsidiaries. Each employee, consultant and independent contractor of the
Company or its Subsidiaries whose duties include the development, creation or
conception of any Intellectual Property or any products or services of the
Company or any of its Subsidiaries has entered into a written nondisclosure and
invention assignment agreement with the Company or the applicable Subsidiary in
a form provided to Buyer.
(l) The Intellectual Property Schedule sets forth a complete and
accurate list of (i) all Software products licensed to third Persons by or on
behalf of the Company or any of its Subsidiaries and (ii) all Software not
exclusively owned by the Company or any of its Subsidiaries and incorporated,
embedded or bundled with any Software product listed in subclause (i) above
(excluding such Software licensed to the Company or any of its Subsidiaries
under a shrink-wrap or click-through agreement on reasonable terms through
commercial distributors or in consumer retail stores for a license fee of no
more than $10,000).
(m) Neither the Company nor any of its Subsidiaries has
incorporated and distributed any "open source," "freeware," "shareware" or other
Software products developed, licensed and distributed by the Company or any of
its Subsidiaries in such a way as to require the disclosure of the Company's or
any of its Subsidiaries' source code to the general public on terms other than
terms utilized by the Company or any of its Subsidiaries in the ordinary course.
(n) The consummation of the transactions contemplated hereby
will not result in the loss or impairment of the Surviving Corporation's or its
Subsidiaries right to own or use any of the Intellectual Property owned or used
by the Company and its Subsidiaries immediately prior to the Closing; provided,
however, that it shall not be a breach of this representation by Sellers if,
upon the consummation of the transactions contemplated hereby, there is a loss
or impairment of the Surviving Corporation's or its Subsidiaries' right to own
or use any of the Intellectual Property owned or used by the Company and its
Subsidiaries immediately prior to the Closing, that is caused by a preexisting
obligation of Buyer.
(o) To the knowledge of the Company, neither this Agreement nor
any transaction contemplated by this Agreement will result in the grant of any
right or license with respect to any Intellectual Property owned or used by the
Company or any of its Subsidiaries, to any Person pursuant to any agreement or
contract to which the Company or any of its Subsidiaries is a party or, to the
Company's knowledge, by which any of the Company's or any of its Subsidiaries'
assets or properties are bound.
(p) There are no outstanding claims for breach of an express
warranty given by the Company or any of its Subsidiaries in connection with any
products licensed or sold, or any services provided, by or on behalf of the
Company or any of its Subsidiaries to any Person.
23
4.15 Litigation. Except as set forth on the attached Litigation
Schedule, there are no material actions, suits or proceedings or, to the
knowledge of the Company, claims or investigations pending or, of which the
Company has knowledge, overtly threatened against the Company or any Subsidiary
or their assets or properties, at law or in equity, or before or by any federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign and neither the Company nor any
Subsidiary is subject to any outstanding judgment, writ, injunction order or
decree of any court or Governmental Entity.
4.16 Employee Benefit Plans.
(a) Except as listed on the attached Employee Benefits Schedule,
with respect to employees of the Company or any of its Subsidiaries, neither the
Company nor any Subsidiary maintains or contributes to any "employee benefit
plans" (as defined under Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")) or any other employee benefit plans,
policies, agreements or arrangements or payroll practices, including, without
limitation, individual consulting or other compensation agreements, bonus or
other incentive compensation, stock purchase, equity or equity-based
compensation, deferred compensation, change in control, retention, severance,
sick leave, vacation, loans, salary continuation, health or life insurance or
education assistance plans, policies, agreements or arrangements with respect to
which the Company or any of its Subsidiaries has any obligation or liability,
contingent or otherwise, for current or former employees, consultants or
directors of the Company or any of its Subsidiaries (the "Plans"). Neither the
Company, nor any of its Subsidiaries nor any trade or business (whether or not
incorporated) which is under common control, or which is treated as a single
employer, with any of them under Section 414(b), (c), (m) or (o) of the Code
has, at any time within the last six years, maintained, contributed to, or had
any obligation to contribute to, or has any liability (fixed or contingent) with
respect to, any plan subject to Title IV of ERISA or to the funding requirements
of Section 412 of the Code including any plan which constituted a "multiemployer
plan" as defined in Section 4001(a)(3) of ERISA or any plan subject to Sections
4063 or 4064 of ERISA. Each of the Plans that is intended to be qualified under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
has received a favorable determination letter from the Internal Revenue Service
(the "IRS") and nothing has occurred with respect to the operation of the Plans
that could reasonably be expected to cause the loss of such qualification or
exemption, or the imposition of any liability, penalty or tax under ERISA or the
Code. The Plans comply in form and in operation in all material respects with
their terms and the requirements of the Code, ERISA and all other applicable
law.
(b) Correct and complete copies of the following documents with
respect to each of the Plans have been delivered or otherwise made available to
Buyer by the Company to the extent applicable: (i) any plans and related trust
documents, insurance contracts or other funding arrangements, and all amendments
thereto; (ii) the most recent Forms 5500 and all schedules thereto, (iii) the
most recent actuarial report, if any; (iv) the most recent IRS determination
letter; (v) the most recent summary plan descriptions; and (vi) written
summaries of all non-written Plans.
(c) The Company has not incurred any liability as a result of
the failure to comply with the requirements of COBRA, nor does the Company
reasonably expect to incur any such liability as a result of any other trade or
business that, together with the Company, is treated as a single employer under
Section 414(b) or (c) of the Code or Section 4001 of XXXXX.
00
(x) Xxxx of the Plans provides for medical or death benefits
beyond termination of service or retirement, other than (i) pursuant to COBRA
and at the expense of the participant or a beneficiary of a participant or (ii)
death or retirement benefits under a Plan qualified under Section 401(a) of the
Code.
(e) Except as set forth on the Employee Benefits Schedule,
neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will, without regard to any action taken by
Buyer or the Surviving Corporation following the Effective Time, (i) result in
any payment becoming due to any employee of the Company or its Subsidiaries,
(ii) increase any benefits otherwise payable under any Plan, (iii) result in the
acceleration of the time of payment or vesting of rights (other than rights
consisting solely of equity securities, the vesting of which does not alter the
representation made in Section 4.05)to any such benefits under any Plan (other
than a Plan consisting solely of interests in the equity securities of the
Company) or (iv) require any contributions or payments to fund any obligations
under any Plan.
(f) There are no material pending actions, claims or lawsuits
arising from or relating to any Plan (other than routine benefit claims).
4.17 Insurance. The attached Insurance Schedule lists each material
insurance policy maintained by the Company and its Subsidiaries. All of such
insurance policies are in full force and effect, and neither the Company nor any
Subsidiary is in material default with respect to its obligations under any of
such insurance policies, except for defaults of which the Company has no
knowledge.
4.18 Compliance with Laws; Permits. The Company and each Subsidiary
is in material compliance with all applicable laws and regulations of foreign,
federal, state and local governments and all agencies thereof. Except as set
forth on the attached Permits Schedule, the Company and its Subsidiaries hold
and are in material compliance with, all material permits, licenses,
certificates, accreditations or other authorizations or consents of a
Governmental Entity ("Permits") required for the conduct of the businesses of
the Company and its Subsidiaries (including the operation of the Company's and
its Subsidiaries' real property and tangible assets). This Section 4.18 does not
address compliance with, or permits, licenses and other authorizations required
under, Environmental Requirements, which are addressed solely in Section 4.19.
4.19 Environmental Matters. Except as set forth on the attached
Environmental Matters Schedule:
(a) The Company and its Subsidiaries are and have for the past
three years been in compliance with all Environmental Requirements other than
any failures to comply that would not individually or in the aggregate
reasonably be expected to result in the Company or its Subsidiaries incurring
material liability of Damages under Environmental Requirements.
25
(b) The Company and its Subsidiaries have obtained and currently
maintain all permits, licenses and other authorizations required under
Environmental Requirements, other than such requirements of which the Company
has no knowledge, and the Company and its Subsidiaries are and have been in
material compliance with such permits, licenses and authorizations other than
for failures to comply that would not individually or in the aggregate
reasonably be expected to result in the Company or its Subsidiaries incurring
material liability of Damages under Environmental Requirements.
(c) Neither the Company nor any Subsidiary has, within the past
three years, received any written notice of violation of Environmental
Requirements or any liability arising under Environmental Requirements,
including any investigatory, remedial or corrective obligation, relating to the
Company, its Subsidiaries or their facilities, the subject of which is
unresolved, and neither the Company nor any of its Subsidiaries is subject to
any pending or, to the knowledge of the Company, threatened action, proceeding
or suit alleging material noncompliance with or material liability under any
Environmental Requirements.
(d) As of the date of this Agreement, neither the Company nor
any of its Subsidiaries is party to, or subject to the terms of, any material
governmental order that imposes a material liability or obligation under any
Environmental Requirements in connection with its respective businesses.
(e) The Company has provided or made available to Buyer copies
of all material environmental, health and safety assessments, audits,
investigations, analyses and other such reports relating to the Company or any
of its Subsidiaries or any real property currently or formerly owned or operated
by the Company or any of its Subsidiaries in each case that are in the
possession or under the reasonable control of the Company.
This Section 4.19 constitutes the sole and exclusive representations
and warranties of the Company with respect to any environmental, health or
safety matters, including any arising under Environmental Requirements.
4.20 Affiliated Transactions. Except as set forth on the attached
Affiliated Transactions Schedule, the Company has no knowledge that any officer,
director, stockholder or Affiliate of the Company or its Subsidiaries is a party
to any material agreement, contract, commitment or transaction with the Company
or its Subsidiaries or has any material interest in any material property used
by the Company or its Subsidiaries.
4.21 Employees. Except as set forth on the attached Employee
Schedule, none of the Company and its Subsidiaries has experienced any strike,
work stoppage, slowdowns, lockouts or material grievance, claim of unfair labor
practices, or other collective bargaining dispute within the past two years, nor
does the Company have knowledge of any facts nor circumstances which could
reasonably be expected to form the bases for any of the foregoing and none of
the Company and its Subsidiaries has committed any material unfair labor
practice. Except as set forth on the attached Employee Schedule, that Company
has no knowledge that any organizational effort is presently being made or
threatened by or on behalf of any labor union with respect to employees of any
of the Company and its Subsidiaries. The attached Employee Schedule sets forth a
true and complete list as of the date of this Agreement of each employee of the
Company and its Subsidiaries whose annual salary exceeds $150,000. Except as set
forth on the attached Employee Schedule, none of the Company or any of its
Subsidiaries is party to any written employment agreement.
26
(b) The Company and its Subsidiaries are in compliance in all
material respects with all Laws relating to the employment of labor, including
all such laws relating to wages, hours, the Worker Adjustment and Retraining
Notification Act, 29 U.S.C. ss. 2101, et seq. ("WARN"), collective bargaining,
discrimination, civil rights, safety and health, workers' compensation and the
collection and payment of withholding and/or Social Security Taxes and any
similar Tax.
(c) There are no complaints, charges or claims against the
Company or any Subsidiary pending or, to the Company's knowledge, threatened to
be brought or filed with any Governmental Entity or arbitrator based on, arising
out of, in connection with or otherwise relating to the employment or services,
or termination of employment or services, of any individual by the Company or
any Subsidiary and, to the knowledge of the Company, there are no facts and
circumstances which could reasonably be expected to form the basis for any of
the foregoing.
4.22 Brokerage. Except as described on the Brokerage Schedule, no
Person is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based on any
arrangement or agreement made by or on behalf of the Company for which Buyer
could become liable or obligated.
4.23 Customers and Suppliers. The Customers and Suppliers Schedule
sets forth (a) a list of the ten largest customers of the Company and its
Subsidiaries based on sales during the fiscal year ended June 30, 2004, and (b)
a list of the ten largest suppliers of the Company and its Subsidiaries based on
purchases during the fiscal year ended June 30, 2004.
4.24 Minute Books; Stock Record Books. True copies of the Company's
and its Subsidiaries' minute books and stock record books have been made
available to Buyer and Merger Sub. The minute books of the Company and its
Subsidiaries contain, or will contain at Closing, complete originals or copies
of all minutes of meetings of and actions by their respective stockholders,
boards and all committees thereof, and accurately reflect in all material
respects all corporate actions of the Company and its Subsidiaries which are
required by law, their respective certificate of incorporation or bylaws (or
other organizational documents) to be passed upon by their respective boards or
stockholders.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER AND MERGER SUB
------------------------------------------------------
Buyer and Merger Sub jointly and severally represent and warrant to
the Company that:
5.01 Organization and Power. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
with full corporate power and authority to enter into this Agreement and perform
its obligations hereunder. Merger Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, with full
corporate power and authority to enter into this Agreement and perform its
obligations hereunder.
27
5.02 Authorization; Valid and Binding Agreement. The execution,
delivery and performance of this Agreement by each of Buyer and Merger Sub and
the consummation of the transactions contemplated hereby have been duly and
validly authorized by all requisite corporate action, and no other corporate
proceedings on the part of Buyer or Merger Sub are necessary to authorize the
execution, delivery or performance of this Agreement. This Agreement has been
duly executed and delivered by each of Buyer and Merger Sub and, assuming the
due authorization, execution and delivery by the other parties hereto,
constitutes a legal, valid and binding obligation of each such party,
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy laws, other similar laws affecting creditors' rights and
general principles of equity affecting the availability of specific performance
and other equitable remedies.
5.03 No Breach. Neither Buyer nor Merger Sub is subject to or
obligated under its respective certificate of incorporation or bylaws any
applicable law, or rule or regulation of any governmental authority, or any
material agreement or instrument, or any material license, franchise or permit,
or subject to any order, writ, injunction or decree, which would materially and
adversely affect the ability of Buyer or Merger Sub to consummate the
transactions contemplated hereby.
5.04 Governmental Consents, etc.. Except for the applicable
requirements of the HSR Act and Blue Sky Laws, corporate authorizations already
obtained and the clearance, consent and approval requirements listed on the
Buyer Authorization Schedule, neither Buyer nor Merger Sub is required to submit
any notice or report to, or approval application or other filing with any
Governmental Entity and no clearance, consent, approval or authorization of any
Governmental Entity or any other party or Person is required to be obtained by
Buyer or Merger Sub in connection with the execution, delivery or performance by
it of this Agreement or the consummation of the transactions contemplated
hereby. Neither Buyer nor Merger Sub is subject to any outstanding judgment,
order or decree of any court or Governmental Entity which could prohibit or
adversely affect its respective ability to enter into this Agreement or
consummate the transactions contemplated hereby.
5.05 Litigation. There are no actions, suits or proceedings pending
or, to Buyer's knowledge, overtly threatened against Buyer or Merger Sub at law
or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, which would adversely affect Buyer's or Merger Sub's
performance under this Agreement or the consummation of the transactions
contemplated hereby.
28
5.06 Brokerage. There are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of Buyer or Merger Sub for which the Company, the Representative or
the Sellers could become liable or obligated.
5.07 Investment Representation. Buyer is acquiring the Company Shares
for its own account with the present intention of holding such securities for
investment purposes and not with a view to any public distribution of such
securities in violation of any federal or state securities laws. Buyer is an
"accredited investor" as defined in Regulation D promulgated by the Securities
and Exchange Commission under the Securities Act. Buyer acknowledges that the
Company Shares have not been registered under the Securities Act or the Exchange
Act or any state or foreign securities laws and that the Company Shares may not
be sold, transferred, offered for sale, pledged, hypothecated or otherwise
disposed of unless such sale, transfer, offer, pledge, hypothecation or other
disposition is pursuant to the terms of an effective registration statement
under the Securities Act and are registered under any applicable state or
foreign securities laws or pursuant to an exemption from registration under the
Securities Act or the Exchange Act and any applicable state or foreign
securities laws.
5.08 Sufficient Funds. Cash available to Buyer, together with funds
to be borrowed under committed borrowing facilities the ("Financing") are
sufficient to enable Buyer to consummate the transactions contemplated hereby
and to pay all related fees and expenses for which Buyer will be responsible.
The Company affirms that it is not a condition to Closing or any of its other
obligations under this Agreement that Buyer and/or Merger Sub obtain financing
for or related to any of the transactions contemplated hereby.
5.09 Solvency. Immediately after giving effect to the transactions
contemplated by this Agreement, the Surviving Corporation and each of its
Subsidiaries shall be Solvent. No transfer of property is being made and no
obligation is being incurred in connection with the transactions contemplated by
this Agreement with the intent to hinder, delay or defraud either present or
future creditors of the Company or its Subsidiaries. For purposes of this
Agreement, "Solvent" when used with respect to the Surviving Corporation, means
that, as of any date of determination (i) the Present Fair Salable Value of its
assets will, as of such date, exceed all of its liabilities, contingent or
otherwise, as of such date, (ii) the Surviving Corporation will not have, as of
such date, an unreasonably small amount of capital for the business in which it
is engaged or will be engaged and (iii) the Surviving Corporation will be able
to pay its debts as they become absolute and mature, in the ordinary course of
business, taking into account the timing of and amounts of cash to be received
by it and the timing of and amounts of cash to be payable on or in respect of
its indebtedness, in each case after giving effect to the transactions
contemplated by this Agreement. The term "Solvency" shall have a correlative
meaning. For purposes of the definition of "Solvent", (A) "debt" means liability
on a "claim"; and (B) "claim" means (i) any right to payment, whether or not
such a right is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, unmatured, disputed, undisputed, secured or unsecured or
(ii) the right to an equitable remedy for a breach in performance if such breach
gives rise to a right to payment, whether or not such equitable remedy is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured.
"Present Fair Salable Value" means the amount that may be realized if the
aggregate assets of the Surviving Corporation (including goodwill) are sold as
an entirety with reasonable promptness in an arms length transaction under
present conditions for the sale of comparable business enterprises.
29
5.10 No Knowledge of Misrepresentations or Omissions. Buyer has no
knowledge that the representations and warranties of the Company in this
Agreement and the schedules are untrue or incorrect in any material respect, and
Buyer has no knowledge of any material errors in, or material omissions from,
the schedules to this Agreement. For purposes of this Section 5.10, the term
"knowledge" means the actual personal knowledge, without imputation of any other
Person and without independent investigation, of A. Xxxxxxxx Xxxxx, Xxxx Xxxx
Xxxxxx, Xxxxxxx Xxx, Xxxxxxx Xxxxxxxx and Xxxxxx Xxxxxxx.ARTICLE VI
CERTAIN PRE-CLOSING COVENANTS
-----------------------------
6.01 Conduct of the Business.
(a) From the date hereof until the Effective Time or the earlier
termination of this Agreement, the Company shall use its commercially reasonable
efforts to carry on its and its Subsidiaries' businesses in the ordinary course
of business and substantially in the same manner as previously conducted unless
Buyer shall have consented (which consent will not be unreasonably withheld or
delayed).
(b) From the date hereof until the Effective Time or the earlier
termination of this Agreement, except as otherwise provided for by this
Agreement, required by law, or consented to by Buyer (which consent shall not be
unreasonably withheld or delayed), the Company shall not, and shall not permit
any Subsidiary to, (i) issue, sell dispose of, pledge, redeem or otherwise
encumber any shares of its or any Subsidiary's capital stock, (ii) issue, sell
dispose of, pledge, redeem or otherwise encumber any securities convertible
into, or options with respect to, warrants to purchase, or rights to subscribe
for, any shares of its or any Subsidiary's capital stock, (iii) effect any
recapitalization, reclassification, stock dividend, stock split or like change
in its capitalization (iv) amend its or any Subsidiary's certificate or articles
of incorporation or bylaws (or equivalent organizational documents), except for
amendments which do not impair the consummation of the transactions contemplated
hereby, (v) take any of the actions listed in Section 4.07, (vi) materially
modify, amend, terminate or relinquish any material contract, license or other
right (including, any insurance policy naming it as a beneficiary or a loss
payable payee), other than transactions, commitments, contracts or agreements in
the ordinary course of business consistent with past practice and those
contemplated by this Agreement, (vii) (A) grant any severance or termination pay
to any director, officer or employee of the Company or any of its Subsidiaries;
(B) enter into any employment, deferred compensation or other similar agreement
(or any amendment to any such existing agreement) with any director, officer or
employee of the Company or any of its Subsidiaries; (C) increase benefits
payable under any existing severance or termination pay policies or employment
agreements; or (D) increase compensation, bonus or other benefits payable to
directors, officers or employees of the Company or any of its Subsidiaries, or
(viii) (A) make or revoke any material election relating to Taxes, (B) settle or
compromise any material claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to Taxes, (C) file any
amended Tax Return, or (D) change any material methods of reporting income or
deductions for federal income tax purposes.
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6.02 Access to Books and Records. From the date hereof until the
Effective Time or the earlier termination of this Agreement, subject to Section
7.02 below, the Company shall provide Buyer and its authorized representatives
("Buyer's Representatives") with commercially reasonable access, at all
reasonable times and upon reasonable notice, to the offices, properties,
personnel, books and records of the Company and its Subsidiaries in order for
Buyer to have the opportunity to make such investigation as it shall reasonably
desire to make of the affairs of the Company and its Subsidiaries; provided,
however, that such investigation shall not unreasonably interfere with the
business operations of the Company and its Subsidiaries. Buyer acknowledges that
it remains bound by the Confidentiality Agreement, dated June 1, 2005, for the
benefit of the Company (the "Confidentiality Agreement"); provided that such
Confidentiality Agreement shall terminate automatically, notwithstanding any
terms or conditions therein to the contrary, at the Effective Time.
6.03 Exclusive Dealing. During the period from the date of this
Agreement through the Effective Time or the earlier termination of this
Agreement pursuant to Section 8.01 below, the Company shall not encourage,
initiate or engage in or take other actions to facilitate discussions or
negotiations with, or provide any information to, or enter into any agreement
with any Person (other than Buyer and Buyer's Representatives) concerning any
purchase of the capital stock of the Company, any merger, consolidation,
business combination, reorganization, recapitalization, liquidation, dissolution
or similar transaction involving the Company, any sale of all or substantially
all of the assets of the Company and its Subsidiaries or similar transaction
involving the Company (other than assets sold in the ordinary course of
business).
6.04 Stockholder Approval. The Company shall deliver to Buyer (i)
immediately following the execution and delivery of this Agreement by the
parties, a written consent, executed by stockholders of the Company holding at
least 90% of the issued and outstanding Company Shares, approving this Agreement
and the transactions contemplated hereby and (ii) as soon as reasonably
practicable after the date hereof, but in no event more than ten (10) business
days after the execution of this Agreement, a written consent, executed by the
remaining stockholders, approving this Agreement and the transactions
contemplated hereby.
6.05 Consents. Buyer and Merger Sub acknowledge that certain consents
to the transactions contemplated by this Agreement may be required from parties
to contracts, leases, licenses or other agreements to which the Company and/or
its Subsidiaries is a party and such consents have not been obtained. Buyer and
Merger Sub agree that neither the Company nor any Seller shall have any
liability whatsoever to Buyer or Merger Sub (and Buyer shall not be entitled to
assert any claims against the Escrow Account) arising out of or relating to the
failure to obtain any consents set forth herein or in the Schedules hereto that
may have been or may be required in connection with the transactions
contemplated by this Agreement or because of the default, acceleration or
termination of any such contract, lease, license or other agreement as a result
thereof. Buyer and Merger Sub further agree that no representation, warranty or
covenant of the Company contained herein shall be breached or deemed breached
and no condition of Buyer or Merger Sub shall be deemed not to be satisfied as a
result of the failure to obtain any consent set forth herein or in the Schedules
hereto or as a result of any such default, acceleration or termination or any
lawsuit, action, claim, proceeding or investigation commenced or threatened by
or on behalf of any Person arising out of or relating to the failure to obtain
any consent or any such default, acceleration or termination as a result
thereof. Prior to the Closing, the Company and Buyer shall cooperate in any
reasonable manner and use their reasonable best efforts, to obtain any such
consents; provided that such cooperation shall not include any requirement of
Buyer, the Company or any of their respective Affiliates to commence any
litigation or offer or grant any accommodation (financial or otherwise) or pay
any consideration to any third party from whom such consent or approval is
required.
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6.06 Cooperation with Financing. In order to assist with obtaining
the Financing, the Representative and the Company shall, and the Company shall
cause its Subsidiaries to, provide such assistance and cooperation as Buyer and
its Affiliates may reasonably request, including (i) assisting Buyer in
preparing any offering memorandum or similar document or marketing material,
and, cooperating with initial purchasers or placement agents, (ii) making senior
management of the Company and its Subsidiaries reasonably available for
customary "roadshow" or syndication, presentations, lender or proposed financing
source meetings and rating agencies presentations, and (iii) cooperating with
prospective lenders, underwriters, placement agents or initial purchasers and
their respective advisors in performing their due diligence.
6.07 Reports.
The Company shall deliver, within 25 days after the end of each month
ended prior to the Effective Time, a monthly report consisting of the monthly
financial data generated by the Company's internal accounting system for use by
senior and financial management.
6.08 Minute Books. Prior to Closing, the Company shall deliver to
Buyer true and correct copies of the minute books and stock records of the
Company's Subsidiaries. Such minute books shall contain complete originals or
copies of each Subsidiary's certificate of incorporation and bylaws (or other
similar organizational documents), all minutes of meetings of and actions by
their respective stockholders, boards and all committees thereof, including such
minutes and/or written consents indicating the current officers and directors of
each such Subsidiary and shall be in such conditions as is reasonably acceptable
to Buyer.
ARTICLE VII
CERTAIN COVENANTS OF BUYER AND MERGER SUB
-----------------------------------------
7.01 Buyer's Solvency. Buyer shall furnish or cause to be furnished
to the Company copies of any solvency opinions obtained by Buyer from third
parties in connection with the financing of the transactions contemplated by
this Agreement, to the extent contractually permitted by the issuer of such
opinion; provided, however that this Section 7.01 shall not obligate Buyer to
provide any such opinion unless it is otherwise required by any third person
(other than the Company) to be issued for any reason. Buyer shall use
commercially reasonable efforts to cause the firms issuing any such solvency
opinions to allow the Company to rely thereon; provided that Buyer shall have no
obligation to do so to the extent the expense associated with obtaining such
reliance would exceed $100,000. Buyer shall furnish or cause to be furnished to
the Company copies of any solvency certificates delivered by Buyer, Merger Sub
or any of their respective Subsidiaries or Affiliates to any of their respective
sources of financing in connection with the transactions contemplated hereby and
such certificates shall permit the Company's reliance thereon.
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7.02 Contact with Customers and Suppliers. Prior to the Effective
Time, Buyer and Buyer's Representatives shall not contact or otherwise
communicate with the customers and suppliers of the Company and its Subsidiaries
without the prior written consent of the Company; provided, however, that Buyer
and Buyer's representatives shall be permitted to communicate in the ordinary
course of business with such customers and suppliers with whom Buyer and its
Representatives currently do business.
7.03 Access to Books and Records. From and after the Effective Time,
Buyer shall, and shall cause the Surviving Corporation and its Subsidiaries to,
provide the Representative (on behalf of the Sellers) and its authorized
representatives with access at all reasonable times to the offices, properties,
personnel and books and records of the Surviving Corporation and its
Subsidiaries with respect to periods prior to the Closing Date in connection
with any insurance claims by, legal proceedings against or governmental
investigations of the Sellers, or the preparation of Tax Returns; provided,
however, that such investigation shall not unreasonably interfere with the
business operations of the Surviving Corporation and its Subsidiaries. Unless
otherwise consented to by the Representative, Buyer and Merger Sub shall not
permit the Surviving Corporation or its Subsidiaries, for a period of three
years following the Closing Date, to destroy, alter or otherwise dispose of any
material books and records of the Surviving Corporation or its Subsidiaries, or
any portions thereof, relating to periods prior to the Closing Date without
first giving reasonable prior notice to the Representative and offering to
surrender to the Representative (on behalf of the Sellers) such books and
records or such portions thereof.
7.04 Certain Charter Provisions.
(a) For a period of six years after the Closing, Buyer shall
not, and shall not permit the Surviving Corporation or any of its Subsidiaries
to, amend, repeal or modify any provision in the Surviving Corporation's or any
of its Subsidiaries' certificate or articles of incorporation or bylaws or code
of regulations (or equivalent governance documents) relating to the exculpation
or indemnification of any officers and directors (unless required by law) as is
effect on the date hereof, it being the intent of the parties that the officers
and directors of the Company and its Subsidiaries shall continue to be entitled
to such exculpation and indemnification to the full extent of the law.
(b) In the event that Buyer, the Surviving Corporation, or any
of their respective successors or assigns (i) consolidates with or merges into
any other Person and shall not be the continuing or surviving corporation or
entity in such consolidation or merger or (ii) transfers all or substantially
all of its properties and assets to any Person, then, and in each case, proper
provision shall be made so that the successors and assigns of Buyer or the
Surviving Corporation, as the case may be, honor the obligations set forth in
this Section 7.04.
7.05 Facility Closings; Employee Layoffs. For a period of ninety (90)
days after the Closing Date, neither Buyer nor the Surviving Corporation shall
terminate any employees of the Company or any of its Subsidiaries in such
numbers as would trigger any Liability under WARN or any state plant closing or
severance law. Buyer shall cause the Surviving Corporation and its subsidiaries
to comply with any notice or filing requirements under WARN and any state plant
closing or severance law.
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7.06 Employee Benefits.
(a) Buyer and the Surviving Corporation shall provide employees
of the Surviving Corporation and its Subsidiaries as of the Closing Date with
compensation and benefits that are substantially comparable in the aggregate
(taking into account base pay, bonus, and other incentive compensation, but
excluding any equity compensation) to those in effect immediately prior to the
Closing Date for a period of at least one year following the Closing Date. In
addition, Buyer shall cause the Surviving Corporation and its Subsidiaries to
provide severance benefits to any employee of the Surviving Corporation or its
Subsidiaries who is terminated within one year after the Closing Date that are
at least as favorable as those that exist under current Company policies and
plans.
(b) Without limiting the generality of paragraph (a) of this
Section 7.06, with respect to any employee benefit plans as may be maintained
for employees of the Surviving Corporation and its Subsidiaries from time to
time following the Effective Time by Buyer, the Surviving Corporation or any
Subsidiary of the Surviving Corporation (including without limitation plans or
policies providing severance benefits and vacation entitlement), service by such
employees performed for the Company and any of its Subsidiaries (or a
predecessor to the Company's or any of its Subsidiaries' business or assets)
shall be treated as service with Buyer, the Surviving Corporation or any of
their respective Subsidiaries, as the case may be, for purposes of determining
eligibility to participate and vesting but not for purposes of benefit accrual
(except for purposes of calculating benefits under any vacation, severance or
sick leave plan). Such service also shall apply for purposes of satisfying any
waiting periods, evidence of insurability requirements, or the application of
any preexisting condition limitations, and Buyer shall credit or cause the
Surviving Corporation to credit towards co-payments, deductibles and
out-of-pocket maximums under any employee welfare benefit plan maintained by
Buyer, the Surviving Corporation or any of their respective Subsidiaries any
analogous payments by any such employees under a Plan in the plan year in which
the Effective Time occurs. Buyer also shall honor or cause the Surviving
Corporation to honor all vacation, personal and sick days accrued by the such
employees under the plans, policies, programs and arrangements of the Company or
any of its Subsidiaries immediately prior to the Effective Time.
(c) Without limiting the generality of paragraph (a) of this
Section 7.06, Buyer shall cause the Surviving Corporation and its Subsidiaries
to honor, in accordance with their terms, and shall, or shall cause its
Subsidiaries (including the Surviving Corporation) to, make required payments
when due under, all benefit plans maintained or contributed to by the Company or
any of its Subsidiaries or to which the Company or any of its Subsidiaries is a
party (including without limitation employment, incentive and severance
agreements and arrangements and the Company's and its Subsidiaries' 2005 bonus
plan as it exists on the date hereof), that are applicable with respect to any
employees of the Company, the Surviving Corporation or any of their respective
Subsidiaries or any director of the Company or any of its Subsidiaries (whether
current, former or retired) or their beneficiaries. For the avoidance of doubt,
nothing herein shall be interpreted as preventing Buyer or Surviving Corporation
from amending, modifying or terminating any Plans or other employee benefit
plans, contracts, arrangements, commitments or understandings in accordance with
their terms and applicable laws and regulations.
34
(d) At Buyer's request, which shall be made no later than 60
days prior to the Closing Date, the Company shall take all actions necessary to
terminate the Company Employees Profit Sharing Plan effective immediately prior
to the Closing Date. As soon as practicable following the Closing Date, but in
no event more than sixty (60) days thereafter, Buyer shall take any and all
necessary action to cause the trustee of the savings plan designated or
established by Buyer ("Buyer's Savings Plan"), if requested by the participant
of the Company Employees Profit Sharing Plan, to accept a direct "rollover" in
cash of all or a portion of such employee's distribution in accordance with the
terms and conditions of such plan from the Company Employees Profit Sharing
Plan. In the case of a participant with an outstanding loan under the Company
Employees Profit Sharing Plan, Buyer and the Company shall take any and all
necessary action to permit the participant to make a direct rollover of such
outstanding loan balance to Buyer's Savings Plan; provided, however, that any
such direct rollover shall be of the participant's entire account balance under
the Company Employees Profit Sharing Plan.
ARTICLE VIII
TERMINATION
-----------
8.01 Termination. This Agreement may be terminated in writing at any
time prior to the Effective Time:
(a) by the mutual written consent of Buyer, Merger Sub and the
Company;
(b) by Buyer and Merger Sub, if there has been a violation or
breach by the Company of any covenant, agreement, representation or warranty
contained in this Agreement that would cause any condition to the obligations of
Buyer and Merger Sub at the Closing not to be satisfied and such violation or
breach has not been waived by Buyer and Merger Sub or, in the case of a covenant
or agreement breach, cured by the Company within fifteen days after notice
thereof to the Company from Buyer and Merger Sub;
(c) by the Company, if there has been a violation or breach by
Buyer or Merger Sub of any covenant, agreement, representation or warranty
contained in this Agreement that would cause any condition to the obligations of
the Company at the Closing not to be satisfied and such violation or breach has
not been waived by the Company or, in the case of a covenant or agreement
breach, cured by Buyer or Merger Sub, as the case may be, within fifteen days
after notice thereof to Buyer or Merger Sub, as the case may be, by the Company;
provided that, the failure of Buyer and Merger Sub to deliver the consideration
as required pursuant to Section 2.07 above shall not be subject to cure
hereunder;
(d) by either the Representative and the Company, on the one
hand, or Buyer and Merger Sub, on the other hand, if (i) the transactions
contemplated hereby shall violate any writ, judgment, decree, injunction or
similar order of any Governmental Entity that shall have become final and
nonappealable or (ii) there shall be any law, statute, rule, regulation,
ordinance or other pronouncement having the effect of law of the United States
of America, any foreign country or any domestic or foreign state, county, city
or other political subdivision or of any Governmental Entity which makes the
transactions contemplated hereby illegal or otherwise prohibited; or
35
(e) by Buyer, Merger Sub or the Company, if the transactions
contemplated hereby have not been consummated by September 30, 2005; provided,
however, that the party seeking termination pursuant to clauses (b)-(e) above is
not then in material breach of any of its representations, warranties, covenants
or agreements contained in this Agreement.
8.02 Effect of Termination. In the event of termination of this
Agreement by Buyer, Merger Sub or the Company as provided above, the provisions
of this Agreement shall immediately become void and of no further force and
effect (other than this Section 8.02, ARTICLE XIII and the Confidentiality
Agreement each of which shall survive the termination of this Agreement), and
there shall be no liability on the part of any of Buyer, Merger Sub, the Company
(or any of their respective Affiliates, officers, directors or stockholders) to
one another, except for fraud or any willful breaches of the covenants or
agreements set forth in this Agreement, or any other willful breaches of the
representations or warranties contained in this Agreement at or prior to the
time of such termination; provided, however, that the termination of this
Agreement by the Company as provided above shall not relieve Buyer of liability
for its failure to consummate the transactions contemplated hereby as a result
of Buyer's failure to have sufficient funds to consummate the Merger, so long as
all other conditions to Buyer's obligation to close have been satisfied..
ARTICLE IX
REPRESENTATIVE
--------------
9.01 Designation. The parties have agreed that it is desirable to
designate a representative to act on behalf of the Sellers for certain limited
purposes. The Representative shall serve as the representative of the Sellers
with respect to the matters expressly set forth in this Agreement to be
performed by the Representative.
9.02 Authority. The Company and, by their submission of a Letter of
Transmittal, each of the Sellers irrevocably appoints the Representative as the
agent, proxy and attorney-in-fact for such Seller for all purposes of this
Agreement (including the full power and authority on such Seller's behalf (i) to
consummate the transactions contemplated herein; (ii) to amend this Agreement or
waive any provision hereof; provided, however, in no event shall any such
amendment or waiver have a disproportionate impact on any individual Seller or
any group of Sellers; (iii) to disburse any funds received hereunder to such
Seller and each other Seller, in accordance with the terms and conditions
hereof; (iv) to execute such further instruments of assignment and ancillary
agreements, statements, certificates, notices or other documents as Buyer or
Merger Sub shall reasonably request in order to effect the Merger and the other
transactions contemplated by this agreement; provided, however, in no event
shall any such instrument or assignment have a disproportionate impact on any
individual Seller or any group of Sellers; (v) to take all other actions to be
taken by or on behalf of such Seller in connection herewith; and (vi) to do each
and every act and exercise any and all rights which such Seller or the Sellers
collectively are permitted or required to do or exercise under this Agreement).
Each Seller agrees that such agency and proxy are coupled with an interest, are
36
therefore irrevocable without the consent of the Representative and shall
survive the death, incapacity, bankruptcy, dissolution or liquidation of any
Seller. All decisions and actions by the Representative (to the extent
authorized by this Agreement) taken in accordance with the terms and conditions
of this Section 9.02 shall be binding upon all of the Sellers, and no Seller
shall have the right to object, dissent, protest or otherwise contest the same.
The Representative shall be entitled to engage such counsel, experts,
consultants and other advisors as it shall deem necessary in connection with
exercising its powers and performing its functions hereunder and (in the absence
of fraud, bad faith, willful misconduct or gross negligence on the part of the
Representative) shall be entitled to conclusively rely on the opinions and
advice of such Persons. The Representative may (but need not) consult with any
Seller in connection with exercising its powers and performing its functions
hereunder and each Seller shall cooperate with and offer reasonable assistance
to the Representative in connection therewith.
9.03 Authority; Indemnification. Each Seller by execution of a Letter
of Transmittal, has agreed that Buyer, Merger Sub and the Surviving Corporation
shall be entitled to rely on any action taken by the Representative, on behalf
of such Seller, pursuant to and in accordance with Section 9.02 above (an
"Authorized Action"), and that each Authorized Action shall be binding on each
Seller as fully as if such Seller had taken such Authorized Action. Buyer and
Merger Sub agree that the Representative shall have no liability to Buyer and
Merger Sub for any Authorized Action, except to the extent that such Authorized
Action is found by a final order of a court of competent jurisdiction to have
constituted fraud, bad faith, willful misconduct or gross negligence. Each
Seller hereby severally, for itself only and not jointly and severally, agrees
to indemnify and hold harmless the Representative against all losses, damages,
costs, expenses and liabilities of any kind (including reasonable attorneys'
fees) incurred by the Representative in connection with, or arising out of, any
actions taken or omitted to be taken in its capacity as the Sellers'
representative hereunder (except for those arising out of the Representative's
bad faith or willful misconduct). The cost of such indemnification shall be an
expense of the Representative and shall be satisfied firstly (but not
exclusively) by setoff against the funds remaining in the Escrow Account at such
time as such funds would otherwise be distributed from the Escrow Account to the
Sellers.
9.04 Exculpation. The Representative shall not have by reason of this
Agreement a fiduciary relationship in respect of any Seller, except in respect
of amounts received on behalf of such Seller. The Representative shall not be
liable to any Seller for any action taken or omitted by it or any agent employed
by it hereunder or under any other document entered into in connection herewith,
except that the Representative shall not be relieved of any liability imposed by
law for willful misconduct. The Representative shall not be liable to the
Sellers for any apportionment or distribution of payments made by the
Representative in good faith, and if any such apportionment or distribution is
subsequently determined to have been made in error the sole recourse of any
Seller to whom payment was due, but not made, shall be to recover from other
Sellers any payment in excess of the amount to which they are determined to have
been entitled. The Representative shall not be required to make any inquiry
concerning either the performance or observance of any of the terms, provisions
or conditions of this Agreement. Neither the Representative nor any agent
employed by it shall incur any liability to any Seller by virtue of the failure
or refusal of the Representative for any reason to consummate the transactions
contemplated hereby or relating to the performance of its other duties
hereunder, except for actions or omissions constituting fraud or bad faith.
37
ARTICLE X
INDEMNIFICATION
---------------
10.01 Agreement to Indemnify.
(a) From and after the Closing Date and subject to the terms and
conditions of this ARTICLE X (including the limitations set forth in the last
sentence of this Section 10.01(a), Buyer, the Surviving Corporation and their
respective officers, directors, employees, partners, members, agents,
representatives, successors and permitted assigns (collectively, the "Buyer
Indemnitees") each shall be indemnified and held harmless out of the Escrow
Account to the extent set forth in this ARTICLE X in respect of any and all
Damages directly incurred by any Buyer Indemnitee as a result of, or arising out
of, (i) any inaccuracy or misrepresentation in, or breach of, or failure to
perform, on or prior to the Effective Time, any representation, warranty,
covenant or agreement made by the Company in this Agreement or (ii) any of the
matters set forth on the Special Indemnified Matters Schedule (the "Scheduled
Matters"). Notwithstanding the foregoing, (i) no Buyer Indemnitee shall be
indemnified under this Section 10.01(a) in respect of any individual claim of
Damages that results in Damages of less than $10,000 (and any such Damages shall
be disregarded for all purposes of this Section 10.01(a), including in
determining whether the Deductible Amount (as defined below) has been exceeded);
provided, however, that the $10,000 threshold referred to in this subsection (i)
shall not apply to claims for Damages relating to the Scheduled Matters; (ii) no
Buyer Indemnitee shall be indemnified under this Section 10.01(a) (except with
respect to any inaccuracy or misrepresentation in, or breach of the Special
Representations, any covenant or agreement contained herein or the Scheduled
Matters) unless and until the aggregate amount of all Damages incurred by any or
all of the Buyer Indemnitees hereunder exceeds $1,075,000 (the "Deductible
Amount"), whereupon the Buyer Indemnitees shall be entitled to indemnification
for all Damages incurred by them; and (iii) the maximum aggregate amount of
indemnification that the Buyer Indemnitees may recover under this Section
10.01(a) (except with respect to any inaccuracy or misrepresentation in, or
breach of the Special Representations) shall not exceed the remaining funds in
the Escrow Account and recourse for such amount shall be limited solely to
offsets against the Escrow Account in accordance with this Agreement and the
Escrow Agreement.
(b) From and after the Closing Date and subject to the terms of
this ARTICLE X (including the last sentence of this Section 10.01(b)), the
Sellers, their Affiliates and their respective officers, directors, employees,
partners, members, agents, representatives, successors and permitted assigns
(collectively, the "Seller Indemnitees") shall each be indemnified and held
harmless to the extent set forth in this ARTICLE X by Buyer in respect of any
and all Damages arising out of or in any manner incident, relating or
attributable to any inaccuracy or misrepresentation in, or breach of, or failure
to perform, any representation, warranty, covenant or agreement made by Buyer or
Merger Sub in this Agreement. Notwithstanding the foregoing (i) no Seller
Indemnitee shall be indemnified under this Section 10.01(b) except with respect
to any inaccuracy or misrepresentation or breach of Section 5.02) unless and
until the aggregate amount of all Damages incurred by any or all of the Seller
Indemnitees hereunder exceeds $1,075,000 (ii) the maximum aggregate amount of
indemnification that the Seller Indemnitees may recover under this Section
10.01(b) shall not exceed the Merger Consideration.
38
(c) This ARTICLE X constitutes the Buyer Indemnitees' and Seller
Indemnitees' sole and exclusive remedy for any and all Damages or other claims
(excluding any actions for specific performance or similar injunctive relief)
relating to or arising from this Agreement, any of the agreements, documents and
instruments executed and delivered in connection herewith and the transactions
contemplated by any of the foregoing, except for claims that may arise against
any Seller as a result of the inaccuracy of any letter of transmittal or breach
of any representation or warranty of any Seller contained therein. Neither the
Buyer Indemnitees nor the Seller Indemnitees may avoid such limitation on
liability by seeking damages for breach of contract, tort or pursuant to any
other theory of liability, other than claims based on fraud. Notwithstanding any
implication herein to the contrary, any indemnification of the Buyer Indemnitees
shall be satisfied solely and exclusively by setoff against the funds remaining
in the Escrow Account pursuant to the terms hereof and the Escrow Agreement,
including the payment of fees and expenses incurred in connection with the
defense of a Third Party Claim by the Buyer Indemnitee as set forth in Section
10.04 below. Except as otherwise provided in this Section 10.01 or for claims
based on fraud, no claim shall be brought or maintained by Buyer, its
Subsidiaries (including, after the Effective Time, the Surviving Corporation and
its Subsidiaries) or its or their respective Affiliates, successors or permitted
assigns or any other Buyer Indemnitee against any of the Seller Indemnitees, and
no recourse shall be brought or granted against any of them, by virtue of or
based upon any alleged misrepresentation or inaccuracy in or breach of any of
the representations, warranties or covenants of the Company or any other Person
set forth or contained in this Agreement, or any of the agreements, documents
and instruments executed and delivered in connection herewith, the subject
matter of this Agreement, any information, document or material furnished or
made available to Buyer in "data rooms," management presentations or in any
other form in anticipation of or in connection with the transactions
contemplated by this Agreement, the ownership, operation, management, use,
control of, and other actions or omissions with respect to, the business of the
Company and its Subsidiaries, any of their assets, any of the transactions
contemplated hereby or any other actions or omissions at or prior to the Closing
Date or the Effective Time. Buyer, its Subsidiaries (including, after the
Effective Time, the Surviving Corporation and its Subsidiaries), and its and
their respective Affiliates, successors and permitted assigns and any other
Buyer Indemnitee hereby irrevocably waive all such claims of any type or
description and hereby agree to indemnify and hold harmless each of the Seller
Indemnitees from and against and in respect of any and all Damages and other
losses incurred by any Seller Indemnitee as a result of any such claim brought
or maintained by any such party against any Seller Indemnitee in contravention
of this Section 10.01(c). EACH RELEASING PARTY EXPRESSLY WAIVES ALL RIGHTS
AFFORDED BY ANY STATUTE WHICH LIMITS THE EFFECT OF A RELEASE WITH RESPECT TO
UNKNOWN CLAIMS. EACH RELEASING PARTY UNDERSTANDS THE SIGNIFICANCE OF THIS
RELEASE OF UNKNOWN CLAIMS AND WAIVER OF STATUTORY PROTECTION AGAINST A RELEASE
OF UNKNOWN CLAIMS. EACH RELEASING PARTY ACKNOWLEDGES AND AGREES THAT THIS WAIVER
IS AN ESSENTIAL AND MATERIAL TERM OF THIS AGREEMENT.
39
(d) Each Buyer Indemnitee and Seller Indemnitee shall take all
commercially reasonable steps to mitigate any Damages for which such Person may
be entitled to indemnification hereunder (including to first seek any recoveries
of the type described in clause (ii) of the definition of Damages) to the extent
mitigation is required under law. If the amount to be netted (in accordance with
clause (ii) of the definition of Damages) from any payment required under this
ARTICLE X is determined after payment by the Indemnifying Party of an amount
otherwise required to be paid to an Indemnitee pursuant to this ARTICLE X, the
Indemnitee shall repay to the Indemnifying Party, promptly after such
determination, any amount that the Indemnifying Party would not have had to pay
pursuant to this ARTICLE X had such determination been made at the time of such
payment.
(e) With respect to any particular matter, no party shall be
entitled to any indemnification under this ARTICLE X if such matter was
disclosed and accounted for in the Latest Balance Sheet or in the Preliminary
Closing Statement and such party has fully recovered its indemnifiable Damages
as a result thereof.
10.02 Survival of Representations, Warranties and Covenants.
(a) All representations and warranties of, any Person contained
herein and all claims of any Buyer Indemnitee or Seller Indemnitee in respect of
any breach of any such representation, warranty, covenant or agreement contained
in this Agreement shall survive the Closing and shall expire on the date that is
15 (fifteen) months after the Closing Date, provided, however, that all of the
representations and warranties of the Parties contained in the Special
Representations and in Section 5.02 (Authorization; Valid and Binding Agreement)
shall survive the Closing and continue in full force and effect forever
thereafter (subject to any applicable statutes of limitations). Any claim
pending on the expiration date of any applicable survival period for which a
Notice of Claim has been given in accordance with Section 10.03 on or before
such expiration date may continue to be asserted and indemnified against until
finally resolved. The covenants in this Agreement that are to be performed after
the Closing Date shall survive the Closing in accordance with their terms.
(b) No party hereto shall be deemed to have breached any
representation, warranty or covenant prior to the Closing contained herein if
the other parties were aware prior to the Closing of the breach of, or
inaccuracy in, such representation, warranty or covenant. For purposes of this
Section 10.02(b), the term "aware," in the case of Buyer or Merger Sub, means
the actual personal knowledge, without imputation of any other Person and
without independent investigation, of Xxxxxxxx Xxxxx, Xxxx Xxxx Xxxxxx, Xxxxxxx
Xxx, Xxxxxxx Xxxxxxxx and Xxxxxx Xxxxxxx.
10.03 Claims for Indemnification. If any Indemnitee shall believe
that such Indemnitee is entitled to indemnification pursuant to this ARTICLE X
in respect of any Damages, such Indemnitee shall promptly give the appropriate
Indemnifying Party written notice of such claim (a "Notice of Claim") before the
expiration of the time period specified in Section 10.02. Any such Notice of
Claim shall set forth in reasonable detail and to the extent then known the
basis for such claim for indemnification and the amount of the claim, to the
extent specified or otherwise known. As long as the Notice of Claim is delivered
within the time period specified in Section 10.02, the failure of such
Indemnitee to give the Notice of Claim for indemnification promptly shall not
40
adversely affect such Indemnitee's right to indemnity hereunder, except to the
extent that the defense of any claim is materially prejudiced by such failure.
The Representative shall act on behalf of all Sellers in the case of all claims
with respect to which a Buyer Indemnitee is seeking indemnification under
Section 10.01(a). If the Representative objects to the matters contained in the
Notice of Claim, it shall advise the Surviving Corporation of such objection in
writing (an "Objection Notice") prior to the expiration of the thirty (30) day
period after the Representative's receipt of the Notice of Claim. The Objection
Notice shall state in reasonable detail the Representative's reasons for
objecting to the matters contained in the Notice of Claim. If the Parties cannot
mutually settle their dispute within sixty days after receipt of an Objection
Notice, then they shall be free to pursue any remedy available to them under
this Agreement. If the Representative shall not provide such an Objection Notice
within thirty (30) days after receipt of any Notice of Claim, the Buyer
Indemnitees shall be reimbursed from the Escrow Account for the amount set forth
in the Notice of Claim, and the Representative shall execute such documents
required by the Escrow Agent in order to release such funds.
10.04 Defense of Claims. In connection with any claim that may give
rise to indemnity under this ARTICLE X resulting from or arising out of any
action, suit, proceeding or arbitration against an Indemnitee by a Person that
is not a party hereto (a "Third Party Claim"), the Indemnifying Party (through
the Representative if the Sellers are the Indemnifying Party) shall be entitled
to participate, at its sole expense, in the defense thereof and, if it so
chooses, to assume the defense thereof with counsel selected by the Indemnifying
Party. If the Indemnifying Party assumes such defense, the Indemnitee shall have
the right to participate in the defense thereof and to employ counsel, at its
own expense, separate from the counsel employed by the Indemnifying Party, it
being understood that the Indemnifying Party shall control such defense;
provided, however, that the Indemnitee shall be entitled to participate in such
defense with separate counsel at the expense of the Indemnifying Party if (i) so
requested by the Indemnifying Party to participate or (ii) in the reasonable
opinion of counsel to the Indemnitee, a conflict or potential conflict exists
between the Indemnitee and the Indemnifying Party that would make such
representation advisable; provided further, that the Indemnifying Party shall
not be required to pay for more than one such counsel for all Indemnitees in
connection with any Third Party Claim. If the Indemnitee participates in the
defense of any Third Party Claim, then the Indemnifying Party shall reimburse
the Indemnitee for the expenses of defending such Third Party Claim upon
submission of periodic bills. The Indemnifying Party shall be liable for the
fees and expenses of counsel employed by the Indemnitee for any period during
which the Indemnifying Party has not assumed the defense thereof (other than
during any period in which the Indemnitee shall have failed to give notice of
the Third Party Claim as provided above). The Parties agree to cooperate fully
with each other in the defense or prosecution of any Third Party Claim. Whether
or not the Indemnifying Party assumes the defense of a Third Party Claim, no
Indemnitee shall admit any liability with respect to, or settle, compromise or
discharge, such Third Party Claim without the Indemnifying Party's prior written
consent (which consent shall not be unreasonably withheld). The Indemnifying
Party shall obtain the consent of any affected Indemnitee (which consent shall
not be unreasonably withheld) before entering into any settlement, adjustment or
compromise of such claims or ceasing to defend against such claims, if as a
result thereof, or pursuant thereto, (i) there would be imposed on such
Indemnitee any material liability or obligation not covered by the Escrow Amount
(including, without limitation, any injunctive relief or other similar remedy),
or (ii) in the case of a settlement of a claim arising by virtue of a breach of
41
any representation or warranty in Section 4.11, settlement of such claim would
result in adverse tax consequences to the Surviving Corporation in taxable
periods subsequent to the Closing Date. If the Indemnifying Party fails to
defend or if, after commencing or undertaking any such defense, the Indemnifying
Party fails to prosecute or withdraws from such defense, the Indemnitee shall
have the right to undertake the defense or settlement thereof, at the
Indemnifying Party's expense. In connection with any Third Party Claim, the
Indemnitee or the Indemnifying Party, if it has assumed the defense of such
claim pursuant to this Section 10.04, shall diligently pursue the defense of
such Third Party Claim.
10.05 Nature of Payments. Any indemnity payments made under this
ARTICLE X shall be treated for tax purposes as an adjustment of the purchase
price consideration paid under this Agreement to the extent such
characterization is proper and permissible under relevant Tax authorities.
ARTICLE XI
ADDITIONAL COVENANTS AND AGREEMENTS
-----------------------------------
11.01 Additional Limitations.
(a) Except as provided in Section 10.01, no claim shall be
brought or maintained (and all claims, rights or causes of action, including
those that any of them may now or in the future have under any Environmental
Requirements (including the Comprehensive Environmental Response, Compensation,
and Liability Act, the Resource Conservation and Recovery Act, the Clean Water
Act, the Clean Air Act, any analogous state law, and any common law providing
for any remedy or right of recovery with respect to environmental matters), are
hereby waived) by (i) any of Buyer, the Surviving Corporation and their
respective Subsidiaries or any of their respective successors or permitted
assigns against any officer, director or employee (present or former) of the
Company or any of its Subsidiaries or the Representative, and no recourse shall
be brought or granted against any officer, director or employee (present or
former) of the Company or any of its Subsidiaries or the Representative, by
virtue of or based upon any alleged misrepresentation or inaccuracy in or breach
of any of the representations, warranties or covenants of the Company set forth
or contained in this Agreement or any Exhibit or Schedule hereto or any
certificate delivered by the Company hereunder, and (ii) by any of the Sellers
or any of their respective successors or permitted assigns against any officer,
director or employee (present or former) of Buyer or any of its Subsidiaries,
and no recourse shall be brought or granted against any officer, director or
employee (present or former) of Buyer or any of its Subsidiaries, by virtue of
or based upon any alleged misrepresentation or inaccuracy in or breach of any of
the representations, warranties or covenants of Buyer or Merger Sub set forth or
contained in this Agreement or any Exhibit or Schedule hereto or any certificate
delivered by Buyer or Merger Sub hereunder, in each case except to the extent
that the same shall have been the result of fraud by any such Person (and in the
event of such fraud, such recourse shall be brought or granted solely against
the Person or Persons committing such fraud).
(b) Each of Buyer, the Surviving Corporation and their
respective Subsidiaries and their respective successors and permitted assigns
hereby waives any right to seek contribution or other recovery from any officer,
director or employee (present or former) of the Company, its Subsidiaries or any
securityholder that any of them may now or in the future have under any
Environmental Requirements (including the Comprehensive Environmental Response,
Compensation, and Liability Act, the Resource Conservation and Recovery Act, the
42
Clean Water Act, the Clean Air Act, any analogous state law, and any common law
providing for any remedy or right of recovery with respect to environmental
matters), except to the extent that the same shall have been the result of fraud
by any such Person (and in the event of such fraud, such recourse shall be
brought or granted solely against the Person or Persons committing such fraud).
Each of Buyer, the Surviving Corporation and their respective Subsidiaries and
their respective successors and permitted assigns hereby releases all officers,
directors and employees (present or former) of the Company and its Subsidiaries
and securityholders from any and all such claims, demands and causes of action
that any of them may now or in the future have under such Environmental
Requirements, except to the extent that the same shall have been the result of
fraud by any such Person (and in the event of such fraud, such recourse shall be
brought or granted solely against the Person or Persons committing such fraud).
11.02 Disclosure Generally. All Schedules attached hereto are
incorporated herein and expressly made a part of this Agreement as though
completely set forth herein. All references to this Agreement herein or in any
of the Schedules shall be deemed to refer to this entire Agreement, including
all Schedules. Any item or matter disclosed on any Schedule to this Agreement
shall be deemed to have been disclosed for purposes of all representations and
warranties under this Agreement, without the need for specific references on
each Schedule or cross-references thereto to the extent such reference thereto
is readily apparent based solely on a review of the Schedules and the Agreement.
The specification of any dollar amount in the representations and warranties
contained in this Agreement or the inclusion of any specific item in the
Schedules hereto is not intended to imply that such amounts, or higher or lower
amounts, or the items so included, or other items, are or are not required to be
disclosed or are within or outside of the ordinary course of business or are or
are not material, and neither party shall use the fact of the setting forth of
such amounts in the representations and warranties or the fact of the inclusion
of any such item in the Schedules in any dispute or controversy with any party
as to whether any obligation, item or matter not described herein or included in
a Schedule hereto is or is not required to be disclosed (including, without
limitation, whether such amounts or items are required to be disclosed as
material) or in the ordinary course of business for the purposes of this
Agreement. The information contained in the Schedules hereto is disclosed solely
for the purposes of this Agreement, and no information contained therein shall
be deemed to be an admission by any party hereto to any third party of any
matter whatsoever, including of any violation of law or breach of any agreement.
11.03 Commercially Reasonable Efforts. Subject to the terms of this
Agreement (including the limitations set forth in this Section 11.03), each of
Buyer, Merger Sub and the Company shall use commercially reasonable efforts to
cause the Closing to occur and to obtain all approvals, consents, registrations,
permits and authorizations from any Person necessary to consummate the Merger.
Without limiting the generality of the foregoing or the provisions of Section
11.05, for purposes of this Section 11.03 and Section 11.05, the "commercially
reasonable efforts" of Buyer, Merger Sub or the Company shall include such
party's agreement not to seek an injunction against or otherwise oppose, the
transactions contemplated hereby, on such terms as may be required by any
Governmental Entity; provided, however, that in no event shall any requirement
of any party to use "commercially reasonable efforts" require any party to (i)
hold separate (including by trust or otherwise) or divest any of their
respective businesses or assets, (ii) except as expressly contemplated hereby,
43
agree to any material limitation on the operation or conduct of their respective
businesses or (iii) waive any of the conditions set forth in Article III of this
Agreement. The "commercially reasonable efforts" of the Company shall not
require the Company or any of its respective Subsidiaries or Affiliates to
expend any material amounts of money to remedy any breach of any representation,
warranty or covenant hereunder or to satisfy any condition to Buyer consummating
the transactions described herein.
11.04 Notification. From the date hereof until the Closing Date, each
of Buyer and the Company shall disclose to each other in writing (in the form of
updated schedules) any material variances from the representations and
warranties contained in ARTICLE IV and ARTICLE V promptly upon discovery
thereof. Any such disclosures of inadvertent breaches of representations and
warranties as of the date of this Agreement or of events, circumstances or other
developments after the date of this Agreement shall amend and supplement the
appropriate schedules delivered on the date hereof or otherwise amend or modify
the representations and warranties contained in ARTICLE IV and ARTICLE V;
provided, however, that the delivery of any notice pursuant to this Section
11.04 shall not (i) cure any breach of, or non-compliance with, any other
provisions of this Agreement, (ii) limit the remedies available to the Party
receiving such notice or (iii) have any effect on the satisfaction of the
conditions to closing set forth in ARTICLE III; provided, however, if the
Closing shall occur, then Buyer shall be deemed to have waived any right or
claim pursuant to the terms of this Agreement or otherwise, including pursuant
to ARTICLE X hereof, with respect to any and all matters disclosed pursuant to
any such supplement or amendment at or prior to the Closing.
11.05 Regulatory Act Compliance. Buyer, Merger Sub and the Company
shall each file or jointly file, if applicable, or cause to be filed, promptly
(but in any event within seven business days) after the date of this Agreement,
any notifications, approval applications or the like required to be filed under
the HSR Act and other merger control laws with respect to the transactions
contemplated hereby and Buyer shall pay all filing and similar fees and related
expenses payable in connection therewith. With respect to filings under the HSR
Act, each of the parties hereto shall seek early termination of the waiting
period under the HSR Act. Buyer, Merger Sub and the Company shall use their
respective reasonable best efforts to respond to any requests for additional
information made by any Governmental Entity promptly (and in any event within
five business days) and to cause the waiting or approval periods or other
requirements under the HSR Act and other merger control laws to terminate or
expire at the earliest possible date and to resist in good faith, at each of
their respective cost and expense (including the institution or defense of legal
proceedings), any assertion that the transactions contemplated hereby constitute
a violation of any antitrust or merger control laws, all to the end of
expediting consummation of the transactions contemplated hereby. Each of Buyer,
Merger Sub and the Company shall (i) provide notice to the other parties of any
notices or communications received by such party in respect of such filings and
(ii) consult with the other prior to any meetings, by telephone or in person,
with the staff of the Federal Trade Commission, the United States Department of
Justice or any other Governmental Entity administering other merger control
laws, and each of Buyer, Merger Sub and the Company shall have the right to have
a representative present at any such meeting.
11.06 Acknowledgments by Buyer and Merger Sub.
44
(a) Each of Buyer and Merger Sub acknowledges that it has
conducted to its satisfaction an independent investigation and verification of
the financial condition, operations, assets, liabilities, properties and
projected operations of the Company and its Subsidiaries and, in making its
determination to proceed with the transactions contemplated by this Agreement,
has relied on the results of its own independent investigation and verification
and the representations and warranties of the Company expressly and specifically
set forth in this Agreement, including the schedules. SUCH REPRESENTATIONS AND
WARRANTIES BY THE COMPANY CONSTITUTE THE SOLE AND EXCLUSIVE REPRESENTATIONS AND
WARRANTIES OF THE COMPANY TO BUYER AND MERGER SUB IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED HEREBY, AND EACH OF BUYER AND MERGER SUB UNDERSTANDS,
ACKNOWLEDGES AND AGREES THAT ALL OTHER REPRESENTATIONS AND WARRANTIES OF ANY
KIND OR NATURE, HOWSOEVER CONVEYED, AND EXPRESS OR IMPLIED (INCLUDING ANY
RELATING TO THE FUTURE OR HISTORICAL FINANCIAL CONDITION, RESULTS OF OPERATIONS,
ASSETS OR LIABILITIES OF THE COMPANY) ARE SPECIFICALLY DISCLAIMED BY THE
COMPANY.
(b) In connection with Buyer's investigation of the Company and
its Subsidiaries, Buyer has received from or on behalf of the Company certain
projections, including projected statements of operating revenues and income
from operations of the Company and its Subsidiaries for the fiscal year ending
June 30, 2004 and for subsequent fiscal years and certain business plan
information for such fiscal year and succeeding fiscal years. Buyer acknowledges
that there are uncertainties inherent in attempting to make such estimates,
projections and other forecasts and plans, that Buyer is familiar with such
uncertainties, that Buyer is taking full responsibility for making its own
evaluation of the adequacy and accuracy of all estimates, projections and other
forecasts and plans so furnished to it (including the reasonableness of the
assumptions underlying such estimates, projections and forecasts), and that
Buyer shall have no claim against the Company, the Sellers, the Representative
or any other Person with respect thereto. Accordingly, the Company makes no
representations or warranties whatsoever with respect to such estimates,
projections and other forecasts and plans (including the reasonableness of the
assumptions underlying such estimates, projections and forecasts).
11.07 Tax Matters.
(a) Transfer Taxes. Buyer will pay, and will indemnify and hold
the Sellers harmless against, any real or personal property transfer or gains
Tax, stamp Tax, stock transfer Tax, sales or use Tax, or other similar Tax
imposed on the Company and its Subsidiaries or one or more Sellers as a result
of the transactions contemplated by this Agreement (collectively, "Transfer
Taxes"), and any penalties or interest with respect to the Transfer Taxes. The
Representative agrees to cooperate with Buyer in the filing of any returns with
respect to the Transfer Taxes, including promptly supplying any information in
its possession that is reasonably necessary to complete such returns.
(b) Responsibility for Filing Tax Returns.
(i) The Representative shall cause the Company and its
Subsidiaries to timely file all Tax Returns required to be filed by
them on or prior to the Closing Date and the Company and its
Subsidiaries (as applicable) shall pay or cause to be paid all Taxes
45
shown due thereon. All such Tax Returns shall be prepared in a manner
consistent with prior practice. The Representative shall cause the
Company and its Subsidiaries to provide Buyer with copies of such
completed Tax Returns at least twenty (20) days prior to the due date
for filing thereof, along with supporting workpapers, for Buyer's
review and approval (such approval not to be unreasonably withheld).
The Representative and Buyer shall attempt in good faith to resolve
any disagreements regarding such Tax Returns prior to the due date for
filing. In the event that the Representative and Buyer are unable to
resolve any dispute with respect to such Tax Return at least ten (10)
days prior to the due date for filing, such dispute shall be resolved
by the Independent Auditor. Any fees and expenses of the Independent
Auditor incurred pursuant to this Section 11.07(b)(i) shall be borne
equally by the Sellers, on the one hand, and Buyer on the other. If
any dispute with respect to a Tax Return is not resolved prior to the
due date of such Tax Return, such Tax Return shall be filed in the
manner which the party responsible for preparing such Tax Return deems
correct.
(ii) Following the Closing, Buyer shall cause to be timely
filed all Tax Returns required to be filed by the Company and its
Subsidiaries after the Closing Date and pay or cause to be paid all
Taxes shown due thereon.
(iii) The Representative and Buyer will, unless prohibited
by applicable Law, close the taxable period of the Company and its
Subsidiaries as of the close of business on the Closing Date. If
applicable Law does not permit the Company or a Subsidiary to close
its taxable year on the Closing Date or in any case in which a Tax is
assessed with respect to a taxable period which includes the Closing
Date (but does not begin or end on that day) (a "Straddle Period"),
the Taxes, if any, attributable to a Straddle Period shall be
allocated (x) to the Sellers for the period up to and including the
close of business on the Closing Date, and (y) to Buyer for the period
subsequent to the Closing Date. Any allocation of income or deductions
required to determine any Taxes attributable to a Straddle Period
shall be made by means of a closing of the books and records of the
Company and its Subsidiaries as of the close of the Closing Date,
provided that exemptions, allowances or deductions that are calculated
on an annual basis (including, but not limited to, depreciation and
amortization deductions) as well as Taxes not based on income or
receipts shall be allocated between the period ending on the Closing
Date and the period after the Closing Date in proportion to the number
of days in each such period. To the extent any Taxes allocated to
Sellers under this Section 11.07(b)(iii) are not reflected on the
Latest Balance Sheet, Buyer shall be entitled to the payment for such
amount out of the Escrow Account.
11.08 Legal Representation. Each of the parties to this Agreement
hereby agrees, on its own behalf and on behalf of its directors, members,
partners, officers, employees and Affiliates, that Xxxxxxxx & Xxxxx LLP may
serve as counsel to Xxxxx Xxxxxxx Equity Partners, LLC and its Affiliates
(collectively, the "Seller Group"), on the one hand, and the Company and its
Subsidiaries, on the other hand, in connection with the negotiation,
preparation, execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, and that, following consummation of the
transactions contemplated hereby, Xxxxxxxx & Xxxxx LLP (or any successor) may
serve as counsel to (x) the Seller Group or any director, member, partner,
46
officer, employee or Affiliate of the Seller Group or (y) any other Seller in
the event such person so requests, in either case in connection with any
litigation, claim or obligation arising out of or relating to this Agreement or
the transactions contemplated by this Agreement or any other matter
notwithstanding such representation (or any continued representation) of the
Company and/or any of its Subsidiaries, and each of the parties hereto hereby
consents thereto and waives any conflict of interest arising therefrom, and each
of such parties shall cause any Affiliate thereof to consent to waive any
conflict of interest arising from such representation.
11.09 Further Assurances. From time to time, as and when requested by
any party hereto and at such party's expense, any other party shall execute and
deliver, or cause to be executed and delivered, all such documents and
instruments and shall take, or cause to be taken, all such further or other
actions as the requesting party may reasonably deem necessary or desirable to
evidence and effectuate the transactions contemplated by this Agreement.
ARTICLE XII
DEFINITIONS
-----------
12.01 Definitions. For purposes hereof, the following terms, when
used herein with initial capital letters, shall have the respective meanings set
forth herein:
"Affiliate" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person.
For the purposes of this definition, "control" means the possession, directly or
indirectly, of the power to direct the management and policies of a Person
whether through the ownership of voting securities, contract or otherwise.
"Affiliated Group" means an affiliated group as defined in
Section 1504 of the Code (or any analogous combined, consolidated or unitary
group defined under state, local or foreign income Tax law) of which the Company
is or has been a member.
"Cash on Hand" means, with respect to the Company and its
Subsidiaries, all cash, cash equivalents, marketable securities, short-term
investments, determined in accordance with GAAP. Notwithstanding anything to the
contrary, Cash on Hand shall (i) be calculated net of issued but uncleared
checks and drafts and (ii) include checks and drafts deposited for the account
of the Company and its Subsidiaries.
"COBRA" means the healthcare continuation requirements of
Section 4980B of the Code and Part 6 of Subtitle B of Title I of ERISA.
"Common Share" means a share of common stock, par value $.01 per
share, of the Company.
"Company Shares" means the Common Shares of the Company.
47
"Damages" means any and all actual out-of-pocket Claims,
liabilities, obligations, losses, damages, costs, expenses and liabilities of
any kind (including reasonable attorneys' fees, and other reasonable costs and
expenses); provided, however, that Damages shall (i) not include consequential
(such as loss of business or profits), incidental, special, punitive or
exemplary losses, damages, costs, expenses or liabilities or any diminution in
value and shall not be calculated by using or taking into account any multiple
of earnings, book value, cash flow or other measure unless such losses, damages,
costs, expenses or liabilities or diminution are included in any Order entered
against an Indemnitee or in a settlement agreement to which an Indemnitee is a
party and (ii) be net of (A) any amounts actually recovered by an Indemnitee and
its Affiliates pursuant to any indemnification by or indemnification agreement
with any third party, (B) any insurance proceeds or other cash receipts or
sources of reimbursement received as an offset against such Damages, and (C) any
other recoveries realized by the Indemnitee and its Affiliates.
"Environmental Requirements" means all federal, state, local and
foreign statutes, regulations, and ordinances and other legally binding
requirements (including common law requirements) enacted and in effect on or
prior to the Closing Date, concerning pollution or protection of the environment
and human health and safety as it relates to environmental protection, including
all those relating to the presence, use, production, generation, handling,
transportation, treatment, storage, disposal, distribution, labeling, testing,
processing, discharge, release, threatened release, control, or cleanup of any
hazardous materials, substances or wastes.
"Escrow Agent" means LaSalle Bank National Association.
"Escrow Amount" means $10,750,000, as such amount is reduced in
accordance with the Escrow Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"GAAP" means United States generally accepted accounting
principles, applied in a manner consistent with that used in preparing the
Latest Balance Sheet.
"Governmental Entity" means any (a) nation, region, state,
province, county, city, town, village, district or other jurisdiction, (b)
federal, state, local, municipal, foreign or other government, (c) governmental
or quasi-governmental authority of any nature (including any governmental
agency, branch, department or other entity, (d) multinational organization or
(e) body entitled to exercise any judicial, administrative, executive or
regulatory power of any nature.
"Indebtedness" means, without duplication, (i) the principal,
premium and accrued interest (if any) in respect of (A) indebtedness of the
Company and its Subsidiaries for money borrowed and (B) indebtedness evidenced
by notes, debentures, bonds or other similar instruments for the payment of
which the Company or any Subsidiary is responsible or liable; (ii) all
obligations of the Company or any Subsidiary under leases required to be
capitalized in accordance with GAAP; (iii) all obligations of the Company or any
Subsidiary for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction; (iv) a negative Cash on Hand
balance; or (v) any guaranty, endorsements, assumptions and other contingent
obligations of the Company or any Subsidiary in respect of, or to purchase or to
otherwise acquire, (A) indebtedness for borrowed money of others by the Company
or any Subsidiary or (B) all obligations of the type referred to in clauses (i)
through (iv) above.
48
"Indemnifying Party" means: (a) with respect to any Buyer
Indemnitee asserting a claim under Section 10.01, the Sellers (provided that all
actions, decisions and determinations under such Section shall be made by the
Representative acting in its sole discretion) and (b) with respect to any Seller
Indemnitee asserting a claim under Section 10.01, Buyer.
"Indemnitee" means a Person pursuing indemnification hereunder.
"Intellectual Property" means all of the following and related
priority rights arising under the laws of the United States or any other
jurisdiction or under any international convention: (a) patents and patent
applications, including continuations, continuations-in-part, divisionals,
extensions, re-examinations, renewals, reissues and patents issuing thereon
("Patents"); (b) trademarks, service marks, trade names, trade dress, logos,
corporate names and Internet domain names, together with the goodwill associated
therewith ("Marks"); (c) all copyrights, works of authorship and mask work
rights ("Copyrights"); (d) confidential and proprietary information, including
trade secrets, know how, discoveries, concepts, ideas, formulae, inventions
(whether or not patentable), compositions, manufacturing and production
processes and techniques, data, procedures, designs, drawings, specifications,
databases, customer lists, supplier lists, pricing and cost information, and
business and marketing plans and proposals, in each case excluding any rights in
respect of any of the foregoing that comprise or are protected by copyrights or
Patents ("Trade Secrets"); (e) registrations and applications for registration
of any and all of the foregoing in subclauses (a) through (c) and (f) Software.
"Intellectual Property Licenses" means (a) any written grant to
a Person of any right to use any Intellectual Property owned or used by the
Company or any of its Subsidiaries, whether by license, sublicense, agreement,
consent, permission or otherwise, and (b) any written grant to the Company or
any of its Subsidiaries of a right to use a third Person's Intellectual
Property, whether by license, sublicense, agreement, consent, permission or
otherwise.
"Inventory" means all raw materials, work-in-process, finished
goods and merchandise, spare parts, packaging materials and other supplies
related thereto.
"Law" means any federal, state, local or foreign law (including
common law), statute, code, ordinance, rule, regulation or other requirement.
"Liens" means all title defects, liens, security interests,
claims, mortgages, assessments, easements, rights of way, equitable interests,
options, pledges, rights of first refusal or other encumbrances or restrictions
of any kind, including any restrictions on use, voting, transfer, receipt of
income or exercise of any other attribute of ownership.
"Material Adverse Effect" means any change, effect, event,
occurrence, state of facts or development that, individually or in the aggregate
with any other change, effect, event, occurrence, state of facts or development
is or is reasonably likely to be materially adverse to the assets, properties,
financial condition or results of operations of the Company and its Subsidiaries
taken as a whole or the ability of a Party to consummate the transactions
contemplated hereby; provided that none of the following shall be deemed in
itself, or in any combination, to constitute, and none of the following shall be
49
taken into account in determining whether there has been or will be, a Material
Adverse Effect: (a) any adverse change, effect, event, occurrence, state of
facts or development attributable to the announcement or pendency of the
transactions contemplated by this Agreement; (b) any adverse change, effect,
event, occurrence, state of facts or development attributable to conditions
affecting the industry in which the Company and its Subsidiaries participate,
the U.S. economy as a whole or the capital markets in general, other than any
adverse change, effect, event, occurrence, state of facts or development which
disproportionately affects the Company and its Subsidiaries; (c) any adverse
change, effect, event, occurrence, state of facts or development resulting from
or relating to compliance with the terms of, or the taking of any action
required by, this Agreement; (d) any adverse change, effect, event, occurrence,
state of facts or development arising from or relating to any change in
accounting requirements or principles or any change in applicable laws, rules or
regulations or the interpretation thereof; (e) any matter set forth on any
disclosure schedule attached hereto; or (f) any adverse change, effect, event,
occurrence, state of facts or development arising from or relating to the
commencement, continuation or escalation of a war, material armed hostilities or
other material international or national calamity or act of terrorism directly
or indirectly involving the United States of America.
"Net Working Capital" means (i) all current assets (excluding
Cash on Hand and deferred taxes) of the Company and its Subsidiaries as of the
close of business on the date immediately preceding the Closing Date as reported
by the Company, minus (ii) all current liabilities (excluding Indebtedness and
deferred income) of the Company and its Subsidiaries as of the close of business
on the date immediately preceding the Closing Date as reported by the Company.
Net Working Capital shall be determined in the manner set forth on the Net
Working Capital Schedule attached hereto, and, to the extent consistent with the
Net Working Capital Schedule, using accounting policies and procedures
consistent with those used by the Company prior to the Closing Date and in
accordance with GAAP. No adjustments shall be made to any accruals.
"Permitted Liens" means (i) statutory liens for current Taxes or
other governmental charges not yet due and payable or the amount or validity of
which is being contested in good faith by appropriate proceedings and are
adequately reserved as shown in the Company's most recent quarterly financial
statements; (ii) mechanics', carriers', workers', repairers' and similar
statutory liens arising or incurred in the ordinary course of business for
amounts which are not delinquent and which are not, individually or in the
aggregate, significant or which are being contested by appropriate proceedings;
(iii) zoning, entitlement, building and other land use regulations imposed by
governmental agencies having jurisdiction over the Leased Real Property which
are not violated by the current use and operation of the Leased Real Property;
(iv) covenants, conditions, restrictions, easements and other similar matters of
record affecting title to the Leased Real Property which do not materially
impair the occupancy or use of the Leased Real Property for the purposes for
which it is currently used in connection with the Company's and its
Subsidiaries' businesses; (v) public roads and highways; (vi) liens arising
under worker's compensation, unemployment insurance, social security, retirement
and similar legislation; (vii) liens listed on the Permitted Liens Schedule and
(viii) licenses granted by the Company or any Subsidiary in the ordinary course
of business.
50
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a Governmental Entity or any
department, agency or political subdivision thereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller" means those persons listed on the Stockholders
Schedule.
"Software" means (a) computer programs, including any and all
software implementations of algorithms, models and methodologies, whether in
source code or object code, (b) databases and compilations, including any and
all data and collections of data, whether machine readable or otherwise, and (c)
screens, user interfaces, firmware, development tools, templates, menus, buttons
and icons.
"Special Representations" means the representations and
warranties in Sections 4.03 (Authorization; No Breach; Valid and Binding
Agreement) and 4.05 (Capital Stock).
"Subsidiary" means, with respect to any person, any corporation,
partnership, limited liability company, association or other business entity of
which (i) if a corporation, Person, any other Person of which a majority of the
total voting power of shares of stock entitled (irrespective of whether, at the
time, stock of any other class or classes of such corporation shall have or
might have voting power by reason of the happening of any contingency) to vote
in the election of directors, managers or trustees thereof is at the time owned
or other equity interest is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
person or a combination thereof, or (ii) if a partnership, limited liability
company, association or other business entity, a majority of the partnership or
other similar ownership interest thereof is at the time owned or controlled,
directly or indirectly, by that person or one or more Subsidiaries of that
person of the other Subsidiaries of that Person or a combination thereof.
"Tax" or "Taxes" means any federal, state, local or foreign
taxes, charges, fees, imports, levies or other assessments, including without
limitation, all income, gross receipts, franchise, profits, estimated,
alternative minimum, add-on minimum, sales, use, transfer, real property gains,
ad valorem registration, value added, excise, natural resources, inventory,
severance, stamp, occupation, premium, windfall profit, environmental, customs,
duties, real property, special assessment, personal property, capital stock,
social security, unemployment, disability, payroll, license, employee or other
withholding, or other tax, of any kind whatsoever, including any interest,
penalties or additions to tax or additional amounts in respect of the foregoing;
the foregoing shall include any transferee or secondary liability for a Tax and
any liability assumed by agreement or arising as a result of being (or ceasing
to be) a member of any Affiliated Group (or by being included (or required to be
included) in any Tax Return relating thereto).
"Tax Returns" means any return, report, information return or
other document (including schedules or any related or supporting information)
filed or required to be filed with any Governmental Entity or other authority in
connection with the determination, assessment or collection of any Tax, claim
for refund, amended return or declaration of estimated Tax or the administration
of any laws, regulations or administrative requirements relating to any Tax.
51
"Transaction Expenses" means all costs, expenses and fees
incurred in connection with the negotiation, execution and delivery of this
Agreement and any related agreements and the consummation of the transactions
contemplated hereby and thereby.
"Treasury Regulations" means the regulation in effect and
promulgated under the Code.
"Working Capital Target Range" means $3,000,000 to $5,000,000.
For clarity, for purposes of calculating the Working Capital Spread, Estimated
Merger Consideration and Merger Consideration in accordance with Sections 2.03
and 2.08, if Net Working Capital is an amount greater than or equal to
$3,000,000 and less than or equal to $5,000,000, no adjustment will be made to
the Working Capital Spread, Estimated Merger Consideration or Merger
Consideration. If Net Working Capital is an amount greater than $5,000,000, then
the Working Capital Spread, Estimated Merger Consideration and Merger
Consideration will be increased by the amount by which Net Working Capital
exceeds $5,000,000. If Net Working Capital is an amount less than $3,000,000,
then the Working Capital Spread, Estimated Merger Consideration and Merger
Consideration will be decreased by the amount by which Net Working Capital is
less than $3,000,0000.
12.02 Cross-Reference of Other Definitions. Each capitalized term
listed below is defined in the indicated Section of this Agreement:
Term Section No.
Adjusted EBITDA 3.01(g)
Agreement Preamble
Allocation Schedule 2.03(a)
Appraisal Statute 2.06
Authorized Action 9.03
Buyer Preamble
Buyer Indemnitees 10.01(a)
Buyer's Representatives 6.02
Buyer's Saving Plan 7.06(d)
Blue Sky Laws 4.03(a)
Cash Amount 2.03(b)
Certificate of Merger 1.02
Certificates 2.07(a)
Closing 2.05(a)
Closing Date 2.05(a)
Code 4.16(a)
Company Preamble
Company Board 4.03(b)
Company Share 2.03(a)
Confidentiality Agreement 6.02
52
Copyrights 12.01
Deductible Amount 10.01(a)
DGCL Recitals
Dissent Shares 2.06
EBITDA Adjustment Amount 2.04
Effective Time 1.02
ERISA 4.16(a)
Escrow Account 2.05(c)
Escrow Agreement 2.05(c)
Estimated Merger Consideration 2.04
Estimated Net Working Capital 2.04
Financing 5.08
HSR Act 4.03(a)
Indebtedness Amount 2.03(b)
Independent Auditor 2.08(a)
Institute 13.13(a)
Item of Dispute 2.08(a)
IRS 4.16(a)
Latest Balance Sheet 4.06
Leased Real Property 4.10(c)
Letter of Transmittal 2.07(a)
Marks 12.01
Merger Preamble
Merger Consideration 2.03(b)
Merger Sub Preamble
Notice of Claim 10.03
Objection Notice 10.03
Objections Statement 2.08(a)
Owned Real Property 4.10(b)
Patents 12.01
Permits 4.18
Plans 4.16
Preliminary Closing Statement 2.08(a)
Present Fair Saleable Value 5.09
Registered Intellectual Property 4.14(a)
Representative Preamble
Scheduled Matters 10.01(a)
Seller Group 11.08
Seller Indemnitees 10.01(b)
Solvent 5.09
Stockholder Consent Recitals
Straddle Period 11.07(b)(iii)
Surviving Corporation 1.01
Third Party Claim 10.04
Trade Secrets 12.01
Transaction Expense Amount 2.03(b)
Transfer Taxes 11.07(a)
WARN 4.21(b)
Working Capital Spread 2.03(b)
53
12.03 Construction.
(a) Unless the context otherwise requires, as used in this
Agreement: (i) an accounting term not otherwise defined herein has the meaning
ascribed to it in accordance with GAAP; (ii) "or" is not exclusive; (iii)
"including" and its variants mean "including, without limitation" and its
variants; (iv) words defined in the singular have the parallel meaning in the
plural and vice versa; (v) references to "written" or "in writing" include in
visual electronic form; (vi) words of one gender shall be construed to apply to
each gender; (vii) the terms "hereof", "herein", "hereby", "hereto", and
derivative or similar words refer to this entire Agreement, including the
Schedules hereto; and (viii) the terms "Article", "Section", and "Schedule"
refer to the specified Article, Section, or Schedule of or to this Agreement.
(b) In each case under this Agreement in which the Company
represents and warrants that it has furnished or provided Buyer with, or made
available to Buyer, any documents (including, without limitation, contracts,
financial statements, reports and audits), such representation and warranty
shall be deemed true to the extent such documents were available to Buyer, as of
the date of such representation in the "electronic data room" maintained by
Intralinks.
(c) A reference to any Person includes such Person's successors
and permitted assigns.
(d) Any reference to "days" means calendar days unless business
days are expressly specified.
(e) Any references to "dollars" or "$" means dollars of the
United States of America.
(f) For purposes of this Agreement, the terms "the Company's
knowledge", "knowledge of the Company", "the Company has no knowledge", or words
or phrases of similar import or meaning as used herein shall mean the actual
personal knowledge after reasonable inquiry, without imputation of any other
Person and without independent investigation, of Messrs. Xxxxxxx X. Xxxxx, III,
Xxxxxx X. Xxxxxxxx, Xxxx Xxxxx, Xxxx Xxxxxx and Xxxx Xxxxxxx. The term
"knowledge" is used to qualify and limit the scope of any representation or
warranty in which it appears, such that the representation or warranty is not
true and correct and therefore breached only if the specified individuals have
actual conscious awareness on the date(s) such representation and warranty is
made of an undisclosed exception to such representation and warranty which the
Company is required to disclose; the use of the term "knowledge" is not an
affirmation of any Person's "superior knowledge" that the representation or
warranty in which it is used is true.
54
ARTICLE XIII
MISCELLANEOUS
-------------
13.01 Press Releases and Communications. No press release or public
announcement or prior to the Closing, any other general or personal announcement
or general personal communication to the customers or suppliers of the Company
and its Subsidiaries, in each case as such press release or public announcement
relates to this Agreement or the transactions contemplated herein, shall be
issued or made by any party hereto without the joint approval of Buyer, Merger
Sub and the Representative unless required by law, in which case Buyer, Merger
Sub and the Representative shall to the extent practicable have the right to
review such press release, announcement or communication prior to its issuance,
distribution or publication and the parties shall work together in good faith to
reach an agreement on the content of any such press release, announcement or
communication; provided, however, that the foregoing shall not prohibit the
Representative from disclosing financial information concerning its investment
in the Company to its partners or potential partners.
13.02 Expenses. Except as otherwise expressly provided herein, the
Company, Buyer and Merger Sub shall each pay their own expenses (including
attorneys' and accountants' fees and expenses) in connection with the
negotiation of this Agreement, the performance of their obligations hereunder
and the consummation of the transactions contemplated by this Agreement.
13.03 Notices. Except as may be otherwise provided herein, all
notices, requests, demands, consents and other communications to be given or
delivered under or by reason of the provisions of this Agreement shall be in
writing and shall be deemed to have been given (a) when personally delivered,
(b) when received when sent by facsimile at the applicable facsimile number set
forth below, (c) one day after deposit with Federal Express or similar overnight
courier service or (d) three days after being mailed by first class mail, return
receipt requested. Notices, requests, demands, consents and other communications
to Buyer, Merger Sub, the Company and the Representative shall, unless another
address is specified in writing, be sent to the addresses indicated below:
55
Notices to Buyer, Merger Sub or the Surviving Corporation:
----------------------------------------------------------
Activant Solutions Inc.
000 Xxx Xxxxx Xxxxxxx
Xxxxxx, Xxxxx 00000
Attn: General Counsel
Facsimile No.: (000) 000-0000
with a copies to:
Hicks, Muse, Xxxx & Xxxxx Incorporated
000 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxx X. Xxxxxxx
Facsimile No.: (000) 000-0000
and
Weil, Gotshal & Xxxxxx LLP
000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000-0000
Attention: Xxxxx X. Xxxx, Esq. and Xxxxxxx X. Xxxx, Esq.
Facsimile: (000) 000-0000
Notices to the Representative:
------------------------------
Xxxxx Xxxxxxx Equity Partners, LLC
000 Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxx
Facsimile No.: (000) 000-0000
with a copy to:
---------------
Xxxxxxxx & Xxxxx LLP
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxx
Facsimile No.: (000) 000-0000
56
Notices to Company (prior to the Closing):
------------------------------------------
Prophet 21, Inc.
00 Xxxx Xxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: CEO and CFO
Facsimile No.: (000) 000-0000
with copies to:
---------------
Xxxxx Xxxxxxx Equity Partners, LLC
000 Xxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxx
Facsimile No.: (000) 000-0000
Xxxxxxxx & Xxxxx LLP
Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxx
Facsimile No.: (000) 000-0000
13.04 Assignment. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, except that neither this Agreement
nor any of the rights, interests or obligations hereunder may be assigned or
delegated by any party without the prior consent of Buyer and the
Representative.
13.05 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement.
13.06 Third Party Beneficiaries. Certain provisions of this Agreement
are intended for the benefit of, and shall be enforceable by, the Sellers.
Section 11.08 is intended for the benefit of, and shall be enforceable by, the
Seller Group and Xxxxxxxx & Xxxxx LLP. Unless expressly stated herein to the
contrary, no other third-party beneficiary shall have any legal or equitable
right, remedy or claim under or with respect to any provision of this Agreement.
13.07 No Strict Construction. The parties hereto are sophisticated
and have been represented by lawyers who have carefully reviewed and negotiated
the provisions hereof. As a consequence, the language used in this Agreement
shall be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
Person.
57
13.08 Amendment and Waiver. Any provision of this Agreement or the
schedules or exhibits may be amended or waived only in a writing duly authorized
and signed by Buyer, Merger Sub, the Company and the Representative. No waiver
of any provision hereunder or any breach or default thereof shall extend to or
affect in any way any other provision or prior or subsequent breach or default,
and no failure or delay to enforce, or partial enforcement of, any provision
hereof shall operate as a waiver of such provision or of any other provision.
13.09 Complete Agreement. This Agreement and the documents referred
to herein (including the Confidentiality Agreement and the schedules and
exhibits hereto) contain the complete agreement among the parties hereto and
supersede any prior understandings, agreements or representations by or among
the parties, written or oral, which may have related to the subject matter
hereof in any way.
13.10 Counterparts. This Agreement may be executed in multiple
counterparts (including by means of facsimile signature pages), any one of which
need not contain the signatures of more than one party, but all such
counterparts taken together shall constitute one and the same instrument.
13.11 Governing Law. All matters relating to the interpretation,
construction, validity and enforcement of this Agreement shall be governed by
and construed in accordance with the domestic laws of the State of New York
without giving effect to any choice or conflict of law provision or rule
(whether of the State of New York or any other jurisdiction) that would cause
the application of laws of any jurisdiction other than the State of New York.
13.12 WAIVER OF TRIAL BY JURY. THE PARTIES HERETO WAIVE THE RIGHT TO
A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING UNDER THIS AGREEMENT OR ANY
ACTION OR PROCEEDING ARISING OUT OF THE TRANSACTIONS CONTEMPLATED HEREBY,
REGARDLESS OF WHICH PARTY INITIATES SUCH ACTION OR PROCEEDING.
13.13 Dispute Resolution.
(a) In the event any dispute or disagreement between the parties
hereto as to the interpretation of any provision of this Agreement (or the
performance of any obligations hereunder), the matter, upon written request of
any party hereto, shall be referred to the Representative and a representative
of Buyer for decision. Such Persons shall promptly meet in a good faith effort
to resolve the dispute. If such Persons do not agree upon a decision within 30
calendar days after reference of the matter to them, any controversy, dispute or
claim arising out of or relating in any way to this Agreement or the
transactions arising hereunder that shall (except as provided in Section 2.08)
be settled exclusively by arbitration in the City of Chicago, Illinois. Such
arbitration shall be administered by the Center for Public Resources Institute
for Dispute Resolutions (the "Institute") in accordance with its then prevailing
Rules for Non-Administered Arbitration of Business Disputes (except as otherwise
provided herein), by one independent and impartial arbitrator selected in
accordance with such Rules. Notwithstanding anything to the contrary provided in
Section 13.12 hereof, the arbitration shall be governed by the United States
Arbitration Act, 9 U.S.C. ss. 1 et seq.
58
(b) The fees and expenses of the Institute and the arbitrator
shall be shared equally by Buyer and the Representative and advanced by them
from time to time as required; provided that at the conclusion of the
arbitration, the arbitrators shall award costs and expenses (including the costs
of the arbitration previously advanced and the fees and expenses of attorneys,
accountants and other experts) and interest at a rate of 6% to the prevailing
party.
(c) The arbitration shall be conducted in accordance with the
following rules:
(i) Not later than twenty (20) business days after the
appointment of the arbitrator, each party shall exchange with the
other party copies of all documents that the party intends to offer as
evidence at the arbitration hearing and a list of witnesses that it
will or may call to testify.
(ii) Any arbitration pursuant hereto shall be conducted by
the arbitrator under the guidance of the Federal Rules of Civil
Procedure and the Federal Rules of Evidence, as modified hereby, but
the arbitrator shall not be required to comply strictly with such
Rules in conducting any such arbitration. In furtherance of the
foregoing, the arbitrator, at the request of a party, may order that
the other party produce documents or information available to it, or a
witness within its control, in response to a Request to Produce or
Request for Deposition that provides, as applicable, (1) a description
of the document or information sought in sufficient detail (including
subject matter) of a narrow and specific requested category of
documents or information that is reasonably believed to exist; (2) a
description of how the document or information or witness requested is
relevant and material to the outcome of the case; and (3) a statement
that the document or information requested is not in the possession,
custody or control of the requesting party, and of the reason why that
party assumes the document or information requested to be in the
possession, custody or control of the other party or witness. There
shall be no interrogatories or requests to admit.
(iii) There shall be no outside expert testimony or reports,
unless the arbitrator deems it useful or necessary on specific issues
designated by the arbitrator. Any expert appointed by the arbitrator
may request a party to provide any relevant and material information
or to provide access to any relevant documents, goods, samples,
property or site for inspection. The parties and their representatives
shall have the right to receive any such information and to attend any
such inspection. The appointed expert shall provide a report in
writing to the arbitrator (who will forward copies to the parties)
setting forth the method, evidence and information used in arriving at
the expert's conclusions, including any non-compliance by the parties
with requests for information or access.
(iv) Not later than twenty (20) business days prior to the
start of arbitration hearings, each party shall exchange in writing
with the other party a final list of exhibits that the party intends
to offer as evidence at the arbitration hearings and a final list of
witnesses that will be called to testify. After said exchange, no
additional documents may be offered or witnesses called except with
the approval of the arbitrator upon a showing of good cause.
59
(v) There shall be no stenographic record of the arbitration
hearings unless requested by the arbitrator.
(vi) Witnesses at the arbitration hearing shall give their
testimony under oath.
(vii) Arbitration hearings shall begin at the earliest date
after the twentieth (20th) business day after the exchange of exhibit
lists on which the arbitrator is available to conduct hearings for at
least three (3) consecutive days during normal business hours and
shall continue during said hours until completed, absent emergency
circumstances of the arbitrator.
(viii) The rules for hearing testimony, receiving evidence
and hearing arguments and for any other matters in connection with the
arbitration that are set forth herein shall be decided by the
arbitrator consistent with the purposes of reaching a fair result
under this Agreement in a manner that is speedy, efficient and
inexpensive.
(d) Buyer and the Representative shall instruct the arbitrator
to render his written award (including a detailed description setting forth the
arbitrator's reasoning for the award) within 30 days following the conclusion of
the arbitration hearing. The arbitrator shall be empowered to award Damages to
any party (but no other types of damages) in connection with any dispute between
the parties arising out of or relating in any way to this Agreement or the
transactions arising hereunder, and each party hereby irrevocably waives any
right to recover consequential, incidental, special, punitive or exemplary
damages. Notwithstanding anything to the contrary provided in this Section 13.13
and without prejudice to the above procedures, either party may apply to any
court of competent jurisdiction for temporary injunctive or other provisional
judicial relief if such action is necessary to avoid irreparable damage or to
preserve the status quo until such time as the arbitration panel is convened and
available to hear such party's request for temporary relief. The award rendered
by the arbitrators shall be final and not subject to judicial review and
judgment thereon may be entered in any court of competent jurisdiction.
* * * *
60
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement and Plan of Merger on the day and year first above written.
COMPANY:
PROPHET 21, INC.
By: /s/ Xxxxxxx X. Xxxxx, III
------------------------------------------
Name: Xxxxxxx X. Xxxxx, III
Its: President & Chief Executive Officer
BUYER:
ACTIVANT SOLUTIONS INC.
By: /s/ A. Xxxxxxxx Xxxxx
------------------------------------------
Name: A. Xxxxxxxx Xxxxx
Its: President & Chief Executive Officer
MERGER SUB:
P21 MERGER CORPORATION
By: /s/ A. Xxxxxxxx Xxxxx
------------------------------------------
Name: A. Xxxxxxxx Xxxxx
Its: President & Chief Executive Officer
REPRESENTATIVE (for purposes of Sections 2.08,
6.06, 7.03, 10.03 11.07, 13.01,13.03, 13.04,
13.08 13.13 and ARTICLE IX only):
XXXXX XXXXXXX EQUITY PARTNERS, LLC
By: /s/ Xxxxx Xxxxxxx
------------------------------------------
Name: Xxxxx Xxxxxxx
Its: Partner
61
EXHIBIT A
---------
CERTIFICATE OF INCORPORATION
OF
P21 MERGER CORPORATION
THE UNDERSIGNED, being a natural person, for the purpose of
organizing a corporation under the General Corporation Law of the State of
Delaware, hereby certifies that:
FIRST: The name of the corporation is P21 Merger Corporation (the
"Corporation").
SECOND: The address of the Corporation's registered office in the
State of Delaware is 0000 Xxxxxxxxxxx Xxxx, Xxxxx 000, in the City of
Wilmington, County of New Castle (zip code 19808). The name of the Corporation's
registered agent at such address is Corporation Service Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware, as from time to time amended.
FOURTH: The total number of shares of capital stock that the
Corporation shall have authority to issue is 1,000 shares, par value $0.01 per
share, designated Common Stock.
FIFTH : The name and mailing address of the incorporator of the
Corporation are Xxxxx X. Xxxxx, c/o Weil, Gotshal & Xxxxxx LLP, 000 Xxxxxxxx
Xxxxx, Xxxxx 000, Xxxxxx, Xxxxx 00000.
SIXTH: In furtherance and not in limitation of the powers conferred
by law, subject to any limitations contained elsewhere in this Certificate of
Incorporation, bylaws of the Corporation may be adopted, amended or repealed by
a majority of the board of directors of the Corporation, but any bylaws adopted
by the board of directors may be amended or repealed by the stockholders
entitled to vote thereon. Election of directors need not be by written ballot.
SEVENTH: In addition to the powers and authority herein before or by
statute expressly conferred upon them, the board of directors is hereby
empowered to exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation, subject, nevertheless, to the provisions
of the Delaware General Corporation Law, this Certificate of Incorporation, and
the bylaws of the Corporation.
EIGHTH: The number of directors constituting the initial board of
directors is two (2), and the name and mailing address of each person who is to
serve as director until the first annual meeting of stockholders or until his or
her successor is elected and qualified is set forth below:
------------------------------------------ -------------------------------------
Name Mailing Address
---- ---------------
------------------------------------------ -------------------------------------
Xxxxx X. Xxxxxxx 000 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
------------------------------------------ -------------------------------------
A. Xxxxxxxx Xxxxx 000 Xxx Xxxxx Xxxxxxx
Xxxxxx, Xxxxx 00000
------------------------------------------ -------------------------------------
NINTH: (a) A director of the Corporation shall not be personally
liable either to the Corporation or to any stockholder for monetary damages for
breach of fiduciary duty as a director, except (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, or (ii) for
acts or omissions that are not in good faith or that involve intentional
misconduct or knowing violation of the law, or (iii) for any matter in respect
of which such director shall be liable under Section 174 of Title 8 of the
General Corporation Law of the State of Delaware or any amendment thereto or
successor provision thereto, or (iv) for any transaction from which the director
shall have derived an improper personal benefit. Neither amendment nor repeal of
this paragraph (a) nor the adoption of any provision of the Certificate of
Incorporation inconsistent with this paragraph (a) shall eliminate or reduce the
effect of this paragraph (a) in respect of any matter occurring, or any cause of
action, suit or claim that, but for this paragraph (a) of this Article Ninth,
would accrue or arise, prior to such amendment, repeal or adoption of an
inconsistent provision.
(b) The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to, or testifies in, any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative in nature, by reason of the fact that such person is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, employee benefit plan, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding to the full extent permitted
by law, and the Corporation may adopt bylaws or enter into agreements with any
such person for the purpose of providing for such indemnification.
TENTH: The Corporation hereby elects in this, its original
Certificate of Incorporation, not to be governed by Section 203 of the General
Corporation Law of the State of Delaware.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
2
IN WITNESS WHEREOF, the undersigned has duly executed this
Certificate of Incorporation on this 12th day of August, 2005.
/s/ Xxxxx X. Xxxxx
-----------------------------
Xxxxx X. Xxxxx
Incorporator
3
EXHIBIT B
---------
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made and entered into as
of ____________ ___, 2005, by and among Activant Solutions Inc., a Delaware
corporation ("Buyer"), Xxxxx Xxxxxxx Equity Partners, LLC, a Delaware limited
liability company, as representative of the Sellers (in such capacity,
"Representative"), and LaSalle Bank National Association, a national banking
association, as escrow agent (the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, Buyer, Representative, P21 Merger Corporation, a Delaware
corporation and a wholly owned Subsidiary of Buyer ("Merger Sub") and Prophet
21, Inc., a Delaware corporation (the "Company") are parties to that certain
Agreement and Plan of Merger, dated as of August ____, 2005 (as the same may be
amended or modified from time to time in accordance with its terms, the "Merger
Agreement"), pursuant to which, subject to the terms and conditions set forth
therein, Merger Sub shall merge with and into the Company;
WHEREAS, pursuant to the terms of the Merger Agreement, the Escrow
Amount (as defined below) shall provide the sole and exclusive source of funds
for satisfaction of amounts owing to Buyer, if any, pursuant to Section 2.08,
Article X and Section 11.07(b)(iii) of the Merger Agreement; and
WHEREAS, the parties to this Escrow Agreement have agreed upon and
wish to set forth the terms and conditions with respect to the deposit into
escrow and retention and disbursement by the Escrow Agent of certain amounts as
contemplated by the Merger Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties to this Agreement hereby agree as
follows:
1. Definitions. Capitalized terms used but not otherwise defined
herein shall have the meanings specified in the Merger Agreement.
2. Appointment of Escrow Agent. Representative and Buyer hereby
designate and appoint the Escrow Agent to serve as escrow agent in accordance
with the terms, conditions and provisions of this Agreement, and the Escrow
Agent hereby accepts such appointment and agrees to act as such, upon the terms,
conditions and provisions provided in this Agreement.
3. Escrow Account; Deposit of Escrow Amount. On behalf of Sellers and
Buyer, the Escrow Agent shall establish an escrow account (the "Escrow
Account"), which shall be governed by the terms and conditions of this
Agreement. Concurrently with the execution of this Agreement, Buyer shall
deliver to the Escrow Agent for deposit into the Escrow Account the amount of
Ten Million Seven Hundred Fifty Thousand Dollars ($10,750,000) (the "Escrow
Amount"). It is understood that the Escrow Agent will not necessarily have
knowledge that the Closing has occurred and that it shall have no responsibility
with respect to performance of Buyer's obligation to deliver the Escrow Amount.
4. Distribution of Escrow Amount. The Escrow Amount shall be paid and
distributed by the Escrow Agent subject to the terms and conditions of this
Agreement as follows:
(a) Adjustment Amount. Following the final determination of the
Merger Consideration in accordance with Section 2.08 of the Merger Agreement, to
the extent the Merger Consideration is less than the Estimated Merger
Consideration, the Escrow Agent shall pay and disburse the amount of such
shortfall (the "Adjustment Amount") from the Escrow Account within three (3)
Business Days following delivery by Representative and Buyer to Escrow Agent of
a joint written disbursement instruction, which shall direct the Escrow Agent
the manner in which to pay and disburse the Adjustment Amount.
(b) Escrow Amount. Within three (3) Business Days following the
fifteen (15) month anniversary of the Closing Date, Representative and Buyer
shall deliver to Escrow Agent a joint written disbursement instruction, which
shall direct the Escrow Agent to distribute to an account designated by
Representative, and Escrow Agent shall promptly distribute, an amount equal to
the then current balance of the Escrow Amount less an amount, if any, equal to
the aggregate amount of claims which remain unresolved as of such date and which
were asserted in any Indemnification Notice (as defined below) (each such claim,
an "Unresolved Disputed Amount"). Each Unresolved Disputed Amount shall continue
to be held in the Escrow Account until the Escrow Agent has received either (i)
written disbursement instructions jointly executed by Buyer and Representative
or (ii) a copy of (A) a final, non-appealable order from a court of competent
jurisdiction, or (B) a final award of an arbitrator selected by Buyer and
Representative pursuant to the Merger Agreement, concerning the amount of such
Unresolved Disputed Amount. The Escrow Agent shall be entitled to receive, and
may conclusively rely upon, an opinion of counsel from Representative or Buyer's
respective legal counsel accompanying each order or award, to the effect that
the relevant court or arbitrator had authority to determine the amount and
liability with respect to the claim and that such court or arbitrator has
rendered a final judgment for which all related rights to appeal have been
denied, are expired or are not available. Any such amounts shall be disbursed
only in accordance with the terms of such joint instructions or order.
5. Claims by Buyer against Escrow Amount.
(a) If, on or prior to the fifteen (15) month anniversary of the
Closing Date (the "Escrow Period"), Buyer incurs any Damages for which Buyer is
entitled to indemnification under the Merger Agreement, Buyer may request a
payment or payments from the Escrow Amount to the extent that such claim against
the Escrow Amount is a claim permitted under the Merger Agreement. To make any
such claim, Buyer shall notify Representative and the Escrow Agent in writing of
such request (which shall set forth in reasonable detail and to the extent then
known the basis for such claim), the amount of the payment requested and
disbursement instructions (an "Indemnification Notice"). Within three (3)
Business Days following the date which is thirty (30) days following receipt of
such Indemnification Notice by Representative, the Escrow Agent shall disburse
to Buyer from the Escrow Account the claim amount requested by Buyer in such
Indemnification Notice, unless prior to the date of such disbursement
Representative delivers to the Escrow Agent and Buyer a written notice disputing
(a "Dispute Notice") Buyer's right to all or any portion of the amount set forth
in the Indemnification Notice (a "Disputed Amount").
2
(b) If Representative delivers a Dispute Notice to the Escrow Agent
and Buyer pursuant to Section 5(a), then the Escrow Agent shall continue to hold
the Disputed Amount until receipt by the Escrow Agent of written instructions
jointly executed by Buyer and Representative or a copy of (i) a final,
non-appealable order from a court of competent jurisdiction or (ii) a final
award of an arbitrator selected by Buyer and Representative pursuant to the
Merger Agreement concerning the amount of such Disputed Amount, and shall only
disburse the Disputed Amount in accordance with such joint instructions or
determination. The Escrow Agent shall be entitled to receive, and may
conclusively rely upon, an opinion of counsel from Representative or Buyer's
respective legal counsel accompanying each order or award, to the effect that
the relevant court or arbitrator had authority to determine the amount and
liability with respect to the claim and that such court or arbitrator has
rendered a final judgment or award for which all related rights to appeal have
been denied, are expired or are not available.
(c) If Buyer and Representative jointly execute a written notice to
the Escrow Agent providing the Escrow Agent with disbursement instructions for
all or any portion of the Escrow Amount, the Escrow Agent shall disburse funds
from the Escrow Account in accordance with the instructions contained in such
notice.
6. Investment of Escrow Amount.
(a) The Escrow Agent, as directed jointly in writing by Buyer and
Representative, shall invest and reinvest the Escrow Amount in a money market
fund rated in its highest rating category by either Xxxxx'x or S&P. Initially
and in the absence of joint written instructions to invest in a different money
market fund, the Escrow Agent shall invest as soon as reasonably practicable all
balances in the Federated Treasury Obligations Fund (Trust Shares). The Escrow
Agent shall not be liable or responsible in any manner for any loss or
depreciation resulting from any such investment or liquidation, or for any costs
in connection therewith, and all of said losses and costs shall be borne by the
Escrow Amount.
(b) All income, interest, increments and realized gains paid upon the
Escrow Amount held in the Escrow Account shall become part of the Escrow Amount,
and for tax purposes shall be income to the Sellers. All parties hereto shall
file tax returns consistent with such treatment.
7. Tax Matters. Notwithstanding anything herein to the contrary,
Escrow Agent shall have no obligation to file or prepare any tax returns or to
prepare any other reports for any taxing authorities concerning the matters
covered by this Agreement.
8. Responsibilities of the Escrow Agent.
(a) The Escrow Agent shall have no duties or responsibilities other
than those expressly set forth herein. The Escrow Agent shall have no
responsibility for the validity of any agreements referred to in this Agreement,
or for the performance of any such agreements by any party thereto or for
interpretation of any of the provisions of any of such agreements. The liability
3
of the Escrow Agent hereunder shall be limited solely to bad faith, willful
misconduct or gross negligence on its part. The Escrow Agent shall be protected
in acting and may rely upon any certificate, notice, instruction, request,
statement, confirmation, agreement, consent or other instrument whatsoever
received by the Escrow Agent under or in connection with this Agreement, not
only as to its due execution and the validity and effectiveness of its
provisions, but also as to the truth and accuracy of any information therein
contained, which the Escrow Agent in good faith believes to be genuine and to
have been signed or presented by a proper person or persons; provided, however,
that the Escrow Agent otherwise complies with the terms hereof. The Escrow Agent
does not have and will not have any interest in the funds deposited hereunder
but is serving only as escrow holder and having only possession thereof.
(b) The Escrow Agent shall have no responsibility as to the validity,
collectibility or value of any property held by it in escrow pursuant to this
Agreement. In the event that the Escrow Agent shall be uncertain as to its
duties or rights hereunder or shall receive instructions with respect to any
property held by it in escrow pursuant to this Agreement which, in the opinion
of the Escrow Agent, are in conflict with any of the provisions of this
Agreement, the Escrow Agent shall be entitled to refrain from taking any action
until it shall be directed otherwise in a joint writing executed by Buyer and
Representative or by an order of a court of competent jurisdiction. The Escrow
Agent shall be deemed to have no notice of, or obligations under, any agreement
or agreements with respect to any property held by it in escrow pursuant to this
Agreement other than as set forth herein. This Agreement sets forth the entire
agreement among the parties hereto and the Escrow Agent as escrow agent.
Notwithstanding any provision to the contrary contained in any other agreement
(excluding any amendment to this Agreement) between or among any of the parties
hereto, the Escrow Agent shall have no interest in the property held by it in
escrow pursuant to this Agreement except as provided in this Agreement. With
respect to the Escrow Agent, in the event that any of the terms and provisions
of any other agreement (excluding any amendment to this Agreement) between or
among any of the parties hereto conflict or are inconsistent with any of the
terms and provisions of this Agreement, the terms and provisions of this
Agreement shall govern and control in all respects.
9. Amendment and Cancellation. Representative and Buyer shall not be
bound by any cancellation, waiver, modification or amendment of this Agreement,
including the transfer of any interest hereunder, unless such modification is in
writing and signed by Representative and Buyer and, if the duties of the Escrow
Agent hereunder are affected in any way, unless the Escrow Agent also shall have
given its written consent thereto.
10. Legal Counsel. The Escrow Agent may consult with, and obtain
advice from, legal counsel in the event of any question as to any of the
provisions hereof or its duties hereunder, and it shall incur no liability and
shall be fully protected in acting in good faith in accordance with the
reasonable opinion and instructions of such counsel. The reasonable cost of such
services shall be added to and be a part of the Escrow Agent's fee hereunder.
11. Resignation. The Escrow Agent shall have the right, in its
discretion, to resign as escrow agent at any time, by giving at least thirty
(30) days' prior written notice of such resignation to Representative and Buyer.
In such event, Representative and Buyer will promptly select a bank or trust
company with capital, surplus and undivided profits of not less than
$100,000,000, which will be appointed as successor Escrow Agent, and Buyer and
Representative will enter into an agreement with such bank or trust company in
4
substantially the form of this Agreement. If a substitute for the Escrow Agent
hereunder shall not have been selected as aforesaid, the Escrow Agent shall be
entitled to petition any court for the appointment of a substitute for it
hereunder or, in the alternative, it may (a) transfer and deliver the funds
deposited in the Escrow Account to or upon the order of such court, or (b) keep
safely all funds in the Escrow Account until it receives joint notice from Buyer
and Representative of a substitute appointment. The Escrow Agent shall be
discharged from all further duties hereunder upon acceptance by the substitute
Escrow Agent of its duties hereunder or upon transfer and delivery of the said
funds in said Escrow Account to or upon the order of any court. The Escrow Agent
shall be paid any outstanding fees and expenses prior to transferring assets to
a successor escrow agent.
12. Fees. As compensation for its services to be rendered under this
Agreement, for each year or any portion thereof, the Escrow Agent shall receive
a fee in the amount specified in Schedule A to this Agreement and shall be
reimbursed upon request for all reasonable expenses, disbursements and advances,
including reasonable fees of outside counsel, if any, incurred or made by it in
connection with the preparation of this Agreement and the carrying out of its
duties under this Agreement. All such fees and expenses shall be split equally
between Sellers, on the one hand, and Buyer, on the other hand, and Sellers'
portion of such fees and expenses shall be paid out of the Escrow Amount.
13. Payments. At any time the Escrow Agent is required to disburse,
distribute or pay over any amounts or property held by or received by it under
any of the provisions of this Agreement to Sellers or Buyer, such distribution
and payment shall be effected by issuance of the Escrow Agent's check in the
appropriate amount payable to Representative or Buyer and by mailing of such
check to Representative or Buyer; provided, however, that Representative or
Buyer may, by written notice delivered to the Escrow Agent, direct that payment
of cash required to be distributed to Representative or Buyer be effected (i) by
deposit or wire transfer of such amounts to an account designated by
Representative or Buyer, as the case may be, or (ii) by mailing the Escrow
Agent's check for such amounts to any other or changed address specified in such
notice, and payments after such notice is received shall be made in accordance
with such notice (until changed by subsequent notice delivered to the Escrow
Agent).
14. Notices. Except as may be otherwise provided herein, all notices,
requests, demands, consents and other communications to be given or delivered
under or by reason of the provisions of this Agreement shall be in writing and
shall be deemed to have been given (a) when personally delivered, (b) when
received when sent by facsimile at the applicable facsimile number set forth
below, (c) one day after deposit with Federal Express or similar overnight
courier service or (d) three days after being mailed by first class mail, return
receipt requested. Notices, requests, demands, consents and other communications
to the Escrow Agent, Buyer and Representative shall, unless another address is
specified in writing, be sent to the addresses indicated below.
5
Notices to Buyer: with copies to:
----------------- ---------------
Activant Solutions Inc. Hicks, Muse, Xxxx & Xxxxx Incorporated
000 Xxx Xxxxx Xxxxxxx 000 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000 Xxxxxx, Xxxxx 00000
Attn: General Counsel Attention: Xxxxx X. Xxxxxxx
Telephone: (000) 000-0000 Facsimile No.: (000) 000-0000
Facsimile No.: (000) 000-0000
and
Weil, Gotshal & Xxxxxx LLP
000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000-0000
Attention: Xxxxx X. Xxxx, Esq. and
Xxxxxxx X. Xxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Notices to Representative: with copies to:
-------------------------- --------------
Xxxxx Xxxxxxx Equity Partners Xxxxxxxx & Xxxxx LLP
One Embarcadero Center, Suite 2930 000 Xxxx Xxxxxxxx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000 Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxx Xxxxx Attn: Xxxxxx X. Xxxxx
Telephone: (000) 000-0000 Telephone: (000) 000-0000
Facsimile No.: (000) 000-0000 Facsimile No.: (000) 000-0000
Notices to Escrow Agent:
------------------------
LaSalle Bank National Association
000 Xxxxx XxXxxxx Xxxxxx - Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxx XxXxxxxx
Telephone: (000) 000-0000
Facsimile No.: (000) 000-0000
15. Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. The rights, obligations or liabilities of the
Representative hereunder shall not be assignable by Representative other than to
an affiliate of Representative without the prior written consent of Buyer.
16. Receipt by Escrow Agent. At the request of Buyer and/or
Representative, the Escrow Agent shall provide a written receipt evidencing its
receipt of the Escrow Amount.
6
17. Indemnification of Escrow Agent. The parties to this Agreement
hereby agree, severally but not jointly, to indemnify and hold the Escrow Agent,
its corporate parent, its subsidiary corporations or any of its related
companies, its employees, agents, officers, and directors, harmless from and
against all costs, damages, judgments, attorney's fees, expenses, obligations
and liabilities of every kind and nature which the Escrow Agent may incur,
sustain, or be required to pay in connection with or arising out of this
Agreement, unless the aforementioned results from the Escrow Agent's gross
negligence, bad faith or willful misconduct, and to pay the Escrow Agent on
demand the amount of all such costs, damages, judgments, attorney's fees,
expenses, obligations and liabilities. The foregoing indemnities in this
paragraph shall survive the resignation or substitution of the Escrow Agent or
the termination of this Agreement.
18. Disagreements. If any disagreement or dispute arises between the
parties to this Agreement concerning the meaning or validity of any provision
under this Agreement or concerning any other matter relating to this Agreement,
the Escrow Agent (a) shall be under no obligation to act, except under process
or order of court or until it has been adequately indemnified to its full
satisfaction, and shall sustain no liability for its failure to act pending such
process or court order or indemnification, and (b) may deposit, in its sole and
absolute discretion, the Escrow Amount or that portion of the Escrow Amount it
then holds with any court of competent jurisdiction and interplead the parties.
Upon such deposit and filing of interpleader, the Escrow Agent shall be relieved
of all liability as to the Escrow Amount and shall be entitled to recover from
the parties its reasonable attorneys' fees and other costs incurred in
commencing and maintaining such action.
19. Waiver. Any party hereto may (i) extend the time for the
performance of any obligation or other act of any other party hereto or (ii)
waive compliance with any agreement or condition contained herein. Any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed by the party or parties to be bound thereby. Any waiver of any term or
condition shall not be construed as a waiver of any subsequent breach or a
subsequent waiver of the same term or condition, or a waiver of any other term
of condition, of this Agreement. The failure of any party to assert any of its
rights hereunder shall not constitute a waiver of any of such rights.
20. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic and legal substance of
the transactions contemplated by this Agreement is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner in order that the transactions contemplated by this Agreement be
consummated as originally contemplated to the fullest extent possible.
21. Entire Agreement. This Agreement and the Merger Agreement
constitute the entire agreement of all parties hereto with respect to the
subject matter hereof and supersede all prior agreements and undertakings, both
written and oral, among the parties hereto with respect to the subject matter
hereof. The Escrow Agent is not a party to the Merger Agreement and shall,
therefore, act only in accordance with the terms and conditions contained in
this Agreement, and it shall not have any liability under, nor duty to inquire
into, the terms and provisions of the Merger Agreement.
7
22. Termination. This Agreement shall terminate on the date on which
there are no funds or other property remaining in the Escrow Account.
23. Counterparts. This Agreement may be executed in multiple
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together shall constitute one and the
same instrument.
24. Governing Law. All matters relating to the interpretation,
construction, validity and enforcement of this Agreement shall be governed by
and construed in accordance with the domestic laws of the State of New York
without giving effect to any choice or conflict of law provision or rule
(whether of the State of New York or any other jurisdiction) that would cause
the application of laws of any jurisdiction other than the State of New York.
25. Descriptive Headings: Interpretation. The descriptive headings of
this Agreement are inserted for convenience only and do not constitute a part
hereof or define, limit or otherwise affect the meaning of any of the terms or
provisions hereof. The use of the word "including" in this Agreement shall be by
way of example rather than by limitation and shall be deemed to include the
phrase "including without limitation."
26. Construction of Certain Terms and Phrases: Business Day. Unless
the context of this Agreement otherwise requires, (a) words of any gender
include each other gender; (b) words using the singular or plural number also
include the plural or singular number, respectively; (c) the terms "hereof,"
"herein," "hereby" and derivative or similar words refer to this entire Escrow
Agreement; and (d) the term "Section" refers to the specified Section of this
Agreement. Whenever this Agreement refers to a number of days, such number shall
refer to calendar days unless Business Days are specified. As used herein, the
term "Business Day" means any day that is not a Saturday, a Sunday or other day
on which banks are required or authorized by law to be closed in the City of New
York or the City of Chicago.
27. No Third Party Beneficiaries. This Agreement is for the sole
benefit of the parties hereto and their permitted assigns, and nothing herein,
express or implied, is intended to or shall confer upon any other person or
entity any legal or equitable right, benefit or remedy of any nature whatsoever
under or by reason of this Agreement.
28. Delivery by Facsimile. This Agreement and any signed agreement
entered into in connection herewith or contemplated hereby, and any amendments
hereto or thereto, to the extent signed and delivered by means of a facsimile
machine, shall be treated in all manner and respects as an original signed
agreement and shall be considered to have the same binding legal effects as if
it were the original signed version thereof delivered in person. At the request
of any party hereto or to any such agreement, each other party hereto or thereto
shall re-execute original forms thereof and deliver them to all other parties.
No party hereto or to any such agreement shall raise the use of a facsimile
machine to deliver a signature or the fact that any signature or agreement was
transmitted or communicated through the use of a facsimile machine as a defense
to the formation of an agreement and each such party forever waives any such
defense.
****
8
IN WITNESS WHEREOF, the parties hereto have duly caused this
Agreement to be executed as of the first day above written.
XXXXX XXXXXXX EQUITY PARTNERS, LLC (a
Representative of Sellers)
By:
------------------------------------
Name:
Title:
ACTIVANT SOLUTIONS INC.
By:
------------------------------------
Name:
Title:
LASALLE BANK NATIONAL ASSOCIATION, solely as
Escrow Agent hereunder and not in its
individual capacity
By:
------------------------------------
Name: X. X. Xxxxxxx
Title: First Vice President
9
SCHEDULE A
ESCROW AGENT
SCHEDULE OF FEES
Acceptance Fee: $ 500.00
Annual Administration Fee: $ 2,500.00
THE ACCEPTANCE AND FIRST YEAR'S ANNUAL ADMINISTRATION FEES ARE DUE UPON
EXECUTION OF THE ESCROW AGREEMENT.
Any investment transaction not in a money market fund or a LaSalle Enhanced
Liquidity Management account will incur a $150.00 per transaction fee. The
parties to the agreement understand and agree that the Escrow Agent may receive
certain revenue on certain mutual fund investments. These revenues take one of
two forms:
Shareholder Servicing Payments: The Escrow Agent may receive Shareholder
Servicing Payments as compensation for providing certain services for the
benefit of the Money Market Fund Company. Shareholder Services typically
provided by LaSalle include the maintenance of shareholder ownership records,
distributing prospectuses and other shareholder information materials to
investors and handling proxy-voting materials. Typically Shareholder Servicing
payments are paid under a Money Market Fund's 12b-1 distribution plan and impact
the investment performance of the Fund by the amount of the fee. The shareholder
servicing fee payable from any money market fund is detailed in the Fund's
prospectus that will be provided to you.
Revenue Sharing Payments: The Escrow Agent may receive revenue sharing payments
from a Money Market Fund Company. These payments represent a reallocation to the
Escrow Agent of a portion of the compensation payable to the fund company in
connection with your account's money market fund investment. Revenue Sharing
payments constitute a form of fee sharing between the fund company and the
Escrow Agent and do not, as a general rule, result in any additional charge or
expense in connection with a money market fund investment, are not paid under a
12b-1 plan, and do not impact the investment performance of the Fund. The amount
of any revenue share, if any, payable to Escrow Agent with respect to your
account's investments is available upon request.
All out-of-pocket expenses will be billed at the Escrow Agent's cost.
Out-of-pocket expenses include, but are not limited to, professional services
(e.g. legal or accounting), travel expenses, postage (including express mail and
overnight delivery charges), and copying charges.
EXHIBIT C
---------
PROPHET 21, INC.
CLOSING CERTIFICATE
Reference is made to the Agreement and Plan of Merger, dated as of
August 15, 2005 (the "Agreement"), by and among Activant Solutions Inc., a
Delaware corporation ("Buyer"), P21 Merger Corporation, a Delaware corporation
and a wholly owned Subsidiary of Buyer ("Merger Sub"), Prophet 21, Inc., a
Delaware corporation (the "Company"), and Xxxxx Xxxxxxx Equity Partners, LLC, a
Delaware limited liability company (the "Representative").
The Company hereby certifies that the preconditions specified in
Section 3.01(a) and (b) of the Agreement, as such preconditions relate to the
Company, have been satisfied as of the date hereof. For the avoidance of doubt,
any party's recourse pursuant to this Closing Certificate shall be governed by
the terms and limitations set forth in ARTICLE X of the Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Closing
Certificate as of this ____ day of ________________, 2005.
PROPHET 21, INC.
By:
--------------------------------
Name:
Its:
EXHIBIT D
---------
Activant Solutions Inc.
P21 Merger Corporation
CLOSING CERTIFICATE
Reference is made to the Agreement and Plan of Merger dated as of
August 15, 2005 (the "Agreement"), by and among Activant Solutions Inc., a
Delaware corporation ("Buyer"), P21 Merger Corporation, a Delaware corporation
and a wholly owned Subsidiary of Buyer ("Merger Sub"), Prophet 21, Inc., a
Delaware corporation (the "Company"), and Xxxxx Xxxxxxx Equity Partners, LLC, a
Delaware limited liability company (the "Representative").
Each of Buyer and Merger Sub hereby certifies that the preconditions
specified in Section 3.02(a) and (b) of the Agreement, as such preconditions
relate to such party, have been satisfied as of the date hereof. For the
avoidance of doubt, any party's recourse pursuant to this Closing Certificate
shall be governed by the terms and limitations set forth in ARTICLE X of the
Agreement.
IN WITNESS WHEREOF, the undersigned has executed this Closing
Certificate as of this ____ day of _____________, 2005.
ACTIVANT SOLUTIONS INC.
By:
--------------------------------
Name:
Its:
P21 MERGER CORPORATION
By:
--------------------------------
Name:
Its:
