Exhibit 2.1
EXECUTION COPY
TABLE OF CONTENTS
Page
----
ARTICLE I THE PURCHASE AND SALE................................................................................. 1
1.1 The Purchase and Sale.......................................................................... 1
1.2 Excluded Assets................................................................................ 3
1.3 Assumption of Certain Liabilities.............................................................. 3
1.4 The Closing.................................................................................... 5
1.5 Purchase Price and Payment..................................................................... 5
1.6 Purchase Price Adjustment...................................................................... 5
1.7 Purchase Price Allocation...................................................................... 8
1.8 Escrow......................................................................................... 8
1.9 Deliveries by the Seller....................................................................... 8
1.10 Deliveries by Buyer............................................................................ 9
1.11 Delivery by Parent............................................................................. 10
1.12 Delivery of Convergent......................................................................... 10
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER AND CONVERGENT............................................... 10
2.1 Organization of the Seller..................................................................... 10
2.2 Seller Capital Structure....................................................................... 10
2.3 Intentionally Omitted.......................................................................... 10
2.4 Authority...................................................................................... 10
2.5 Seller Schedule................................................................................ 11
2.6 No Undisclosed Liabilities..................................................................... 11
2.7 No Changes..................................................................................... 11
2.8 Tax Matters.................................................................................... 13
2.9 Restrictions on Business Activities............................................................ 13
2.10 Title of Properties; Absence of Liens and Encumbrances; Condition of Equipment................. 13
2.11 Intellectual Property.......................................................................... 14
2.12 Agreements, Contracts and Commitments.......................................................... 15
2.13 Interested Party Transactions.................................................................. 16
2.14 Governmental Authorization..................................................................... 17
2.15 Litigation..................................................................................... 17
2.16 Accounts Receivable............................................................................ 17
2.17 Environmental Matters.......................................................................... 17
2.18 Brokers' and Finders' Fees; Third Party Expenses............................................... 18
2.19 Insurance...................................................................................... 18
2.20 Employees...................................................................................... 19
2.21 Compliance with Laws........................................................................... 19
2.22 Complete Copies of Materials................................................................... 19
-i-
2.23 Representations Complete........................................................................... 19
2.24 Inventory.......................................................................................... 20
2.25 Assets............................................................................................. 20
2.26 No Material Adverse Change......................................................................... 20
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT................................................... 20
3.1 Organization, Standing and Power................................................................... 20
3.2 Authority.......................................................................................... 20
3.3 Litigation......................................................................................... 20
3.4 No Violation....................................................................................... 21
3.5 Consents and Approvals............................................................................. 21
3.6 Reliance Upon Information.......................................................................... 21
ARTICLE IV CONDUCT PRIOR TO THE CLOSING.......................................................................... 21
4.1 Conduct of Business of the Seller.................................................................. 21
4.2 No Solicitation.................................................................................... 23
4.3 No Encumbrance..................................................................................... 23
ARTICLE V ADDITIONAL AGREEMENTS.................................................................................. 23
5.1 Offers of Employment............................................................................... 23
5.2 Access to Information.............................................................................. 24
5.3 Confidentiality.................................................................................... 24
5.4 Expenses........................................................................................... 24
5.5 Public Disclosure.................................................................................. 25
5.6 Tax Matters........................................................................................ 25
5.7 Third-Party Consents............................................................................... 26
5.8 Commercially Reasonable Efforts.................................................................... 26
5.9 Notification of Certain Matters.................................................................... 27
5.10 Bulk Sales Compliance.............................................................................. 27
5.11 Additional Documents and Further Assurances........................................................ 27
5.12 Agreement Regarding Inventory...................................................................... 27
5.13 Agreement Regarding Accounts Receivable............................................................ 28
5.14 Collection of Accounts Receivable.................................................................. 28
5.15 Agreement Not to Compete and Nondisclosure......................................................... 29
ARTICLE VI CONDITIONS TO THE ACQUISITION......................................................................... 30
6.1 Conditions to Obligations of Each Party to Effect the Acquisition.................................. 30
6.2 Additional Conditions to Obligations of Seller..................................................... 30
6.3 Additional Conditions to the Obligations of Buyer and Parent....................................... 31
ARTICLE VII SURVIVAL; INDEMNIFICATION; ESCROW.................................................................... 32
7.1 Survival; Limitations on Indemnification........................................................... 32
7.2 Indemnification Procedures......................................................................... 33
7.3 Escrow Arrangements................................................................................ 35
-ii-
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER................................................................... 40
8.1 Termination.................................................................................... 40
8.2 Effect of Termination.......................................................................... 41
8.3 Amendment...................................................................................... 41
8.4 Extension; Waiver.............................................................................. 41
ARTICLE IX GENERAL PROVISIONS.................................................................................... 42
9.1 Notices........................................................................................ 42
9.2 Interpretation................................................................................. 43
9.3 Counterparts................................................................................... 43
9.4 Entire Agreement; Assignment................................................................... 43
9.5 Severability................................................................................... 43
9.6 Other Remedies................................................................................. 43
9.7 Governing Law.................................................................................. 43
9.8 Rules of Construction.......................................................................... 43
INDEX OF EXHIBITS
Exhibit Description
------- -----------
Exhibit A Seller Schedules
Exhibit B Form of Legal Opinion to be issued by Xxxxxx X.
Xxxxxxx, Executive Vice President and General
Counsel of Seller
Exhibit C Form of Bill of Sale
-iii-
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into
---------
as of December 30, 2000 by and among Inter-tel Technologies, Inc. ("Buyer"), an
-----
Arizona corporation and a wholly-owned subsidiary of Inter-tel Incorporated, an
Arizona corporation ("Parent"), Parent, Convergent Communications Services,
------
Inc., a Colorado corporation ("Seller") and a wholly-owned subsidiary of
------
Convergent Communications, Inc., a Colorado corporation ("Convergent"), and
----------
Convergent.
RECITALS
A. The Boards of Directors of each of Seller, Convergent, Parent and
Buyer believe it is in the best interests of each company and their respective
shareholders that Buyer acquire certain of the assets of, and assume certain of
the liabilities of, the Seller relating solely to Seller's voice interconnect
business as currently conducted (the "Business").
--------
B. Subject to the terms and conditions of this Agreement, Buyer and
Seller will consummate the acquisition of such assets and the assumption of such
liabilities (the "Acquisition") in consideration for the Purchase Price, as set
-----------
forth in Article I hereof.
C. A portion of the cash otherwise payable by Buyer in connection with
the Acquisition will be placed in escrow by Xxxxx, the release of which amount
will be contingent upon certain events and conditions, all as more fully set
forth in Article VII, Section 7.3 hereof.
X. Xxxxxx, Convergent, Parent and Buyer desire to make certain
representations and warranties and enter into other agreements in connection
with the Acquisition.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the parties hereto agree as follows:
ARTICLE I
THE PURCHASE AND SALE
1.1 The Purchase and Sale. At the Closing (as defined in Section 1.4
---------------------
below) and subject to and upon the terms and conditions of this Agreement, the
Seller agrees to sell, transfer, convey, assign and deliver to Buyer, and Xxxxx
agrees to purchase from the Seller, all of the Seller's right, title and
interest in and to the assets and properties described on Schedule 1.1 hereto
(collectively, the "Assets" or the "Acquired Assets"), free and clear of all
liens, pledges, charges, claims, security interests or other encumbrances of any
sort, including without limitation, any debts, obligations, or liabilities of
Seller other than any such debt, obligation or liability that is an Assumed
Liability hereunder, including without limitation, the following Assets of the
Seller:
(a) all trade accounts, notes and other receivables existing as of
the Closing Date generated by the Assets whether or not disclosed on the Closing
Schedule (as defined below); provided, however, that no accounts receivable
shall have an invoice date that is in excess of ninety (90) days prior to the
Closing Date;
(b) the leaseholds and subleaseholds therein, including security
deposits in connection with such leaseholds and subleaseholds, improvements,
fixtures, and fittings thereon, and easements, rights-of-way, and other
appurtenants thereto (such as appurtenant rights in and to public streets) set
forth on Schedule 1.1(b) (collectively, the "Leased Premises");
---------------
(c) tangible personal property (such as machinery, equipment,
inventories of raw materials and supplies, manufactured and purchased parts,
goods in process and finished goods, computers and other office equipment,
furniture, vehicles, tools, and other similar items) located at the Leased
Premises or used in the Business and listed on Schedule 1.1(c), which schedule
shall include such information by location and which schedule shall be subject
to adjustments by Seller at the request of Buyer in Buyer's sole discretion,
prior to or as of the Closing Date, as set forth in Section 1.4(b);
(d) all Seller Intellectual Property Rights (listed on Schedule 2.11
hereof), goodwill associated therewith, licenses and sublicenses granted and
obtained with respect thereto, and rights thereunder, remedies against
infringements thereof, and rights to protection of interests therein under the
laws of all jurisdictions;
(e) the agreements, contracts, indentures, mortgages, instruments,
encumbrances, guaranties, other similar arrangements, and rights thereunder,
including all sales contracts (provided that and only to the extent that Buyer
receives all proceeds and consideration due on or after the Closing Date, with
respect to such sales contracts and orders) utilized in the Business and set
forth on Schedule 1.1(e); all non-disclosure and non-solicitation agreements and
similar agreements relative to the employees and assets of the Business; all
non-competition/non-solicitation agreements relating to the Business, to the
extent assignable; the vendor agreements listed on Schedule 1.1(e), and which in
any event shall be pursuant to the terms and conditions reasonably acceptable to
the Buyer as set forth in a consent to assignment in form and substance
reasonably acceptable to Buyer, executed by the parties to any such agreement;
and all post-petition contracts pursuant to consent agreements (including any
interest in such post-petition contracts) in form and substance reasonably
satisfactory to Buyer;
(f) claims, deposits, prepayments, refunds, causes of action, chooses
in action, rights of recovery, rights of set off, and rights of recoupment
(excluding any such item relating to Taxes) relating to the Business;
(g) books, records, ledgers, files, documents, correspondence, lists,
customer lists, plats, architectural plans, drawings, and specifications,
creative materials, advertising and promotional materials, studies, reports, and
other printed or written materials relating to the Business;
-2-
(h) a complete list of (x) the customers of Seller with installed
equipment, or with equipment installations pending, as of the Closing Date,
including any information known by Seller about the configuration of such
customer's systems that specifies the type and quantities of such equipment; and
(y) the prospective customers of Seller, including all documentation relating
thereto, each such list relating solely to the Business (collectively,
"Customers"); and
---------
(i) all raw materials, components, any work in process, finished
goods, parts, free stock, materials and related items used in or related to the
Business, wherever located and as set forth on Schedule 1.1(i) (the
"Inventory").
---------
1.2 Excluded Assets. Notwithstanding the foregoing, in no event shall the
---------------
Acquired Assets include any Excluded Asset. An "Excluded Asset" shall mean any
--------------
asset or property of Seller which is not specifically listed on Schedule 1.1
(including Schedule 1.1(c) as adjusted by Seller pursuant to requests by Buyer
prior to or as of the Closing Date, as set forth in Section 1.4(b)).
1.3 Assumption of Certain Liabilities.
---------------------------------
(a) Upon the terms and subject to the conditions of this Agreement,
Buyer hereby assumes, effective as of the Closing, and agrees to pay, perform
and discharge when due (i) all accrued liabilities which (A) relate to the
Business, (B) are reflected as liabilities on the Closing Schedule (as defined
in Section 1.6(a)) and (C) are listed on Schedule 1.3; (ii) all liabilities
accruing on and after the Closing Date under the contracts, agreements, licenses
and leases included in the Acquired Assets (including any operating and real
property leases) and listed on Schedule 1.3; and (iii) all liabilities accruing
on and after the Closing Date as a result of Buyer's ownership of the Acquired
Assets, with the liabilities in clauses (i) and (ii) constituting the "Assumed
-------
Liabilities." For avoidance of doubt, the parties hereto understand and agree
-----------
that, except as otherwise specified in this Agreement, and including subsections
(A) and (B) of the immediately preceding sentence, all obligations due in
respect of periods occurring or arising prior to Closing shall be paid in full
or otherwise satisfied by Seller and all obligations due in respect of periods
occurring or arising on and after Closing shall be paid in full or otherwise
satisfied by Buyer. All obligations that must be prorated shall be prorated on
the basis of a thirty (30) day month. Notwithstanding the foregoing, in no event
shall the Assumed Liabilities include any Excluded Liability (as defined in
Section 1.3(b) below).
(b) The term "Excluded Liabilities" means:
--------------------
(i) any obligation or liability of the Seller or Convergent
not expressly stated to be assumed pursuant to Section 1.3(a);
(ii) any obligation or liability of the Seller, Convergent or
any other shareholder of the Seller or Convergent for Taxes (as defined in
Section 2.8(a)) for all taxable periods ending on, prior to or after the Closing
Date (including any obligation or liability for income Taxes attributable to the
Business and Taxes arising from or associated with the sale and transfer from
the Seller to Buyer of the Acquired Assets);
-3-
(iii) subject to Section 5.6, any obligation or liability of
the Seller in respect of Taxes (including real or personal property Taxes) for
the period prior to the Closing Date or attributable to the transactions
contemplated by this Agreement;
(iv) any obligation or liability of the Seller or Convergent
which is contrary to any representation or warranty of the Seller or Convergent
contained in this Agreement or which was incurred in violation of any covenant,
agreement or condition contained in this Agreement; provided however that to the
-------- -------
extent any such obligation or liability is an Excluded Liability, it cannot also
constitute a breach of any such covenant, agreement, or condition.
(v) any obligation or liability of the Seller in favor of
Convergent or any of the Seller's other affiliates;
(vi) any obligation or liability of the Seller or Convergent
incurred after the Closing Date;
(vii) the General Debts (defined in Section 1.5);
(viii) any obligation pursuant to any maintenance contract
originating after the Closing Date, other than those contracts in which Buyer
and/or Parent shall have assumed any and all revenue or full rights to payment
of revenue under any such maintenance contract and as are listed on Schedule
1.3(b)(viii);
(ix) any obligation pursuant to product warranties (including
manufacturer's warranties) that are not covered by manufacturer's product
warranties made by Mitel, Northern Telecom and Nitsuko, unless such obligations
are disclosed on Schedule 1.3(b)(ix) and accepted by Buyer prior to the Closing
Date;
(x) any employee stock ownership plan, defined benefit plan
or any other employee benefit plan, program, arrangement or agreement of the
Seller or Convergent, including without limitation any Liabilities or
obligations arising out of, relating to, resulting from or pursuant to any
employee benefit plan as defined in Section 3(3) of ERISA;
(xi) any obligation or liability relating to allegations
against the Seller or Convergent or any of its or their respective successors,
assigns or affiliates of sexual harassment, workplace harassment, unpaid salary
or benefits or otherwise, made by any employee of Seller or Convergent or any of
his or her successors, assigns, relatives or affiliates to the extent relating
to events occurring prior to the Closing Date; and
(xii) any liability, debts, obligation or commitments of Seller
or Convergent related to claims based on (A) any violation of environmental laws
which occurred or is alleged to have occurred prior to the Closing Date, (B)
termination of Seller's employees by Seller whether prior to, on or after the
Closing Date or (C) any other claims to the extent such obligations arise out of
any default or breach by Seller.
-4-
The Buyer will not assume or have any responsibility whatsoever with
respect to any other obligation or liability of the Seller not included within
the definition of Assumed Liabilities.
1.4 The Closing.
-----------
(a) Unless this Agreement is earlier terminated pursuant to Section
8.1, the closing of the Acquisition (the "Closing") will take place as promptly
-------
as practicable following satisfaction or waiver of the conditions set forth in
Article VI hereof, at the offices of the Parent in Phoenix, Arizona, unless
another place or time is mutually agreed to in writing by Xxxxx and the Seller.
The date upon which the Closing actually occurs is herein referred to as the
"Closing Date."
------------
(b) At any time on or before the Closing Date, Buyer, in Xxxxx's sole
discretion upon written notice to Seller, may request that Seller make
adjustments to Schedule 1.1(c) to either (i) remove or reduce, or (ii) increase
or add, certain items of tangible personal property (including but not limited
to computers and other office equipment, furniture, vehicles, tools and other
similar items), such that Schedule 1.1(c) shall reflect only those items of
tangible personal property required by Xxxxx, as indicated in Xxxxx's written
notice to Seller, based on the number and location of employees of Seller that
Buyer expects to hire following the Closing Date and the tangible personal
property assigned to or used by those employees prior to the Closing Date. Any
adjustments to Schedule 1.1(c) shall be reflected on the Closing Schedule.
1.5 Purchase Price and Payment. Subject to adjustment as set forth in
--------------------------
Section 1.6 below and subject to the refund by operation of Sections 5.12 and/or
5.13, the aggregate purchase price to be paid by Buyer to the Seller for the
Assets will be Eleven Million Nine Hundred Seventy Five Thousand One Hundred
Sixty Two dollars ($11,975,162) (the "Aggregate Maximum Consideration") less any
-------------------------------
and all payment obligations of the Seller (including all principal and interest
payments) arising under, relating to or otherwise in connection with any and all
institutional, shareholder, and/or officer loans, credit lines, long term
mortgage or bank debt, accrued interest, income taxes, deferred taxes payable or
receivable, and notes payable generated by the Business (collectively, the
"General Debts") (the Aggregate Maximum Consideration, less any payment
-------------
obligations of the Seller under the General Debts shall be hereinafter referred
to as the "Purchase Price"). Notwithstanding the foregoing, the Aggregate
--------------
Maximum Consideration to be paid to the Seller at the Closing shall not be
reduced by the General Debts, if there is deposited into Escrow prior to the
Closing a document reasonably satisfactory to Buyer and Xxxxx's counsel signed
by the Seller, representing and warranting to Buyer that all of the General
Debts have been paid (the "General Debt Payment Warranty"). Buyer shall pay to
-----------------------------
the Seller the Purchase Price (excluding the Escrow Amount as defined in Section
1.8), by cashier's check or wire transfer of immediately available funds to an
account of the Seller at banks specified by the Seller at the Closing.
1.6 Purchase Price Adjustment. The Purchase Price will be subject to
-------------------------
adjustment as follows:
(a) Closing Schedule. Prior to execution of this Agreement, the
----------------
Seller shall have (i) prepared (or cause to be prepared), paid for and delivered
to Parent a schedule stating the Acquired Assets and Assumed Liabilities (the
"November Schedule"). Within 60 days following the
-----------------
-5-
Closing, the Seller shall prepare (or cause to be prepared), pay for and deliver
to Parent a schedule stating the Acquired Assets and the Assumed Liabilities as
of the Closing Date (the "Closing Schedule"). The November Schedule and the
----------------
Closing Schedule shall be prepared in accordance with United States generally
accepted accounting principles ("GAAP") as in effect as of November 30, 2000 and
----
as of the Closing Date, respectively, consistent with the basis of accounting
and classification procedures, judgments and estimation methodologies employed
historically by Convergent in preparation of its audited financial statements.
To the extent any employee terminated by Seller and hired by Xxxxx and/or Xxxxxx
makes a claim against Seller or Convergent for accrued vacation pay, Seller
shall be entitled to reduce the amount of the assumed vacation liability
reflected on the Closing Schedule by the amount of such claim to the extent of
the lesser of what is shown on the November Schedule for such employee or up to
eighty (80) hours of vacation time.
(b) Parent's Review of the Closing Schedule. Parent and Parent's
---------------------------------------
accountants, at Parent's sole expense, will have 60 days (the "Parent Review
-------------
Period") from Parent's receipt of the Closing Schedule to review the Closing
------
Schedule and during such period the Seller and its accountants will cooperate
with Parent and Xxxxxx's accountants and answer Parent and Parent's accountants'
questions and provide such additional schedules and materials as Parent and
Parent's accountants may reasonably request in order for Parent and Xxxxxx's
accountants to have a meaningful review of the Closing Schedule.
(c) Adjustment of Purchase Price. Subject to the provisions of
----------------------------
Section 1.6(d), the Purchase Price will be adjusted as follows:
(i) For purposes of this Agreement, the term "Closing Net
-----------
Equity" will mean the amount equal to the sum of (x) Acquired Assets less (y)
------
Assumed Liabilities, in each case as set forth in the Closing Schedule delivered
by the Seller, or, if any items in such schedule are disputed by Parent, the
Closing Schedule mutually agreed upon by Parent and the Seller after resolution
of their disputes, or, if no resolution is had, the Closing Schedule reflecting
the determination of the Accountants (as defined in Section 1.6(d)(ii) below);
and the term "November Net Equity" will mean the amount equal to the sum of (x)
-------------------
Acquired Assets less (y) Assumed Liabilities in each case as set forth on the
November Schedule previously delivered to Parent by the Seller. In determining
the Closing Net Equity, there shall not be taken into account any accrual of
Excluded Liabilities.
(ii) If pursuant to the terms of this Section 1.6 the November
Net Equity shall exceed the Closing Net Equity, the Seller will pay to Parent
within three business days after the date on which the Closing Net Equity is
finally determined pursuant to Section 1.6(d) hereof, an amount (the
"Adjustment") equal to such excess plus interest thereon at the rate of 8.00%
----------
per annum, compounded annually from the Closing Date to the date of payment. The
payment by the Seller to Parent of the Adjustment pursuant to this Section
1.6(c)(ii) will be made at the direction of the Seller by the Escrow Agent from
the Escrow Fund by wire transfer of immediately available funds to an account of
Parent at a bank specified by Parent.
-6-
(iii) Buyer shall be entitled to any Adjustments resulting from any
removal or reduction of scheduled items pursuant to Section 1.4(b). To the
extent that the increase or addition of scheduled items pursuant to Section
1.4(b) causes the Closing Net Equity to exceed the November Net Equity, Buyer
shall pay to Seller within three business days after the date on which the
Closing Net Equity is finally determined pursuant to Section 1.6(d) hereof an
amount equal to such excess plus interest thereon at a rate of 8.00% per annum,
compounded annually from the Closing Date to the date of payment. Any payment by
Buyer to Seller pursuant to this Section 1.6(c)(iii) shall be made by wire
transfer of immediately available funds to an account of Seller at a bank
specified by Seller.
(d) Disputes.
--------
(i) Subject to Section 1.6(d)(ii), the Closing Schedule
delivered by the Seller to Parent will be final, binding and conclusive on the
parties hereto.
(ii) Parent may dispute the Closing Schedule (A) with respect to
whether the Assets listed on the Closing Schedule were actually in existence and
acquired by Buyer and not with respect to the value of the Assets listed on the
Closing Schedule and (B) to the extent the net effect of all such disputed
amounts related to the Closing Schedule in the aggregate would (x) affect the
amount to be paid by the Seller pursuant to Section 1.6(c)(ii) and (y) amount to
greater than 3% of the Closing Net Equity determined from the Closing Schedule
originally submitted to Parent by the Seller pursuant to Section 1.6(a) hereof,
provided, that, Parent will notify the Seller in writing of each disputed item,
-------- ----
and will specify the amount thereof in dispute, not later than the expiration of
the Parent Review Period. If Parent and the Seller are able to resolve all the
disputed items, then the Closing Schedule agreed upon by Xxxxxx and the Seller
will be final, binding and conclusive on the parties hereto. If Parent and the
Seller are unable to resolve some or all of such disputed items and are
therefore unable to agree as to the Closing Schedule and the resultant Closing
Net Equity within 20 days following the expiration of the Parent Review Period,
Parent and the Seller will submit within 30 days following the expiration of the
Parent Review Period the items remaining in dispute for resolution to a
nationally recognized accounting firm (the member of which who will be primarily
responsible for resolving such disputes will have had substantial auditing
experience and substantial experience in arbitration or other dispute resolution
proceedings concerning accounting issues) selected by mutual agreement of Parent
and the Seller (or failing such agreement between Parent and the Seller, as
selected by mutual agreement of Parent's independent accountants and Seller's
independent accountants, or failing such agreement between Xxxxxx's independent
accountants and the Seller's independent accountants, as appointed by the
American Arbitration Association) (the "Accountants"), which will, within 30
-----------
days after submission, determine, based solely on presentations by Parent and
the Seller (and their respective accountants) and not by independent review, and
render a written report to the parties upon, such remaining disputed items and
the resultant calculation of the Closing Schedule and the Closing Net Equity in
accordance with the provisions hereof, and such report and the resultant Closing
Schedule will be final, binding and conclusive on the parties hereto. Any
arbitration pursuant to this Section 1.6(d) shall be held in Phoenix, Arizona.
In resolving any disputed item, the Accountants may not assign a value to such
item greater than the greatest value for such item claimed by either party or
less than the smallest
-7-
value for such item claimed by either party. The fees and disbursements of the
Accountants (and of the American Arbitration Association, if any) (a) will be
borne by Parent if the Closing Net Equity finally determined pursuant to this
Section 1.6(d)(ii) shall be equal to or greater than 103% of the Closing Net
Equity determined from the Closing Schedule originally submitted to Parent by
the Seller pursuant to Section 1.6(a) hereof; (b) shall be borne by the Seller
if the Closing Net Equity finally determined pursuant to this Section 1.6(d)(ii)
shall be equal to or less than 97% of the Closing Net Equity determined from the
Closing Schedule originally submitted to Parent by the Seller pursuant to
Section 1.6(a) hereof or (c) shall be borne 50% by Seller and 50% by Parent if
the Closing Net Equity finally determined pursuant to this Section 1.6(d)(ii)
shall be between 97% and 103% of the Closing Net Equity determined from the
Closing Schedule originally submitted to Parent by the Seller pursuant to
Section 1.6(a) hereof.
1.7 Purchase Price Allocation. Within sixty (60) days following the
-------------------------
Closing Date, Parent and Seller shall agree upon allocation of the Purchase
Price, as adjusted, and the Assumed Liabilities (to the extent that they
constitute part of the amount realized by the Seller for federal income tax
purposes) among the Assets (the "Final Allocation"), which Final Allocation
----------------
shall be in accordance with Section 1060 of the Code. Each party hereto shall
adopt and utilize the Final Allocation for purposes of all tax returns filed by
them and shall not voluntarily take any position inconsistent with the foregoing
in connection with any examination of any tax return, any refund claim, any
litigation proceeding or otherwise. In the event that the Final Allocation is
disputed by any taxing authority, the party receiving notice of the dispute
shall promptly notify the other parties hereto of such dispute and the parties
hereto shall consult with each other concerning resolution of the dispute. Each
party agrees to timely file Internal Revenue Service Form 8594 reflecting the
Final Allocation with its applicable federal tax return for the taxable year
that includes the Closing Date. Notwithstanding anything in this Section 1.7 to
the contrary, the parties shall determine prior to or on the Closing Date the
portion of the Purchase Price that will be allocated to fixed assets in the
Final Allocation, as set forth in Schedule 1.7 by location.
1.8 Escrow. At the Closing, Buyer shall deposit on behalf of Seller and
------
Seller will be deemed to have received and deposited an aggregate cash amount
equal to seventy-five percent (75%) of the Aggregate Maximum Consideration (or
Eight Million Nine Hundred Eighty One Thousand Three Hundred Seventy One dollars
($8,981,371)) (the "Escrow Amount") into an escrow account in accordance with
-------------
the provisions of Article VII below.
1.9 Deliveries by the Seller. At the Closing, the Seller and Convergent
------------------------
shall deliver to Buyer and Parent the following:
(a) signed and executed bills of sale and instruments of assignment
conveying the Assets, in each case in form and substance reasonably satisfactory
to Parent and its counsel;
(b) a copy of the Seller's Articles of Incorporation, as amended
through the date hereof, certified by the Secretary of State of the State of
Colorado;
-8-
(c) a certificate of the Secretary of State of the State of Colorado
dated a date no more than two (2) days prior to the date hereof to the effect
that the Seller is legally existing and in good standing under the laws of such
state;
(d) a certificate of the appropriate governmental authorities of the
State of Colorado dated a date no more than two (2) days prior to the date
hereof to the effect that the Seller has filed all tax returns required to be
filed and has no outstanding tax liability (so-called "tax good standing"
certificates);
(e) a certificate of the Secretary of Seller dated the date hereof
(i) certifying that Seller's Articles of Incorporation and Bylaws and the
resolutions of the Board of Directors and sole shareholder of the Seller
relating to the transactions contemplated hereby are true, correct and complete
and that such Articles, Bylaws and resolutions have not been rescinded,
superseded or otherwise modified since the date thereof, and (ii) attesting to
the incumbency and signatures of the appropriate officers of Seller; and
(f) consents to the contracts set out on Schedule 1.9(f) (which shall
include any contracts between either of Seller or Convergent and secured lending
parties) in form and substance reasonably satisfactory to Buyer (it being
understood and acknowledged that Buyer will not accept any consent to a contract
which enables the party to such contract giving consent to cancel such contract
(or any material provision thereof) if it determines Parent or Buyer to be a
competitor of such party).
1.10 Deliveries by Xxxxx. At the Closing, Buyer shall deliver to Seller
-------------------
the following:
(a) the payments required by Section 1.4 hereof, by delivery by wire
transfer to such accounts as the Seller shall indicate to Buyer at least two (2)
business days prior to the Closing and the payment required by Section 1.8
hereof to the Escrow Agent by wire transfer;
(b) a certificate of the Secretary of State of the State of Arizona
dated a date no more than two (2) days prior to the Closing Date to the effect
that Buyer is legally existing and in good standing under the laws of such
state;
(c) a certificate of the Secretary of Xxxxx dated the date hereof (i)
certifying that Xxxxx's Articles of Incorporation, Bylaws and the resolutions of
the Board of Directors of Buyer relating to the transactions contemplated hereby
are true, correct and complete and that such Articles, Bylaws and resolutions
have not been rescinded, superseded or otherwise modified since the date
thereof, and (ii) attesting to the incumbency and signatures of the appropriate
officers of Buyer; and
(d) resale exemption certificates for sales tax purposes in those
states where Xxxxx is taking possession of the Inventory.
-9-
1.11 Delivery by Xxxxxx. At the Closing, Parent shall deliver a
------------------
certificate of the Secretary of Parent dated the date hereof certifying as to
the resolutions of the Board of Directors of Parent relating to the transactions
contemplated hereby.
1.12 Delivery of Convergent. At the Closing, Convergent shall deliver a
----------------------
certificate of the Secretary of Convergent dated the date hereof certifying as
to the resolutions of the Board of Directors of Convergent relating to the
transactions contemplated hereby.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER AND CONVERGENT
Each of the Seller and Convergent jointly and severally represents and
warrants to Buyer, subject to such exceptions as are specifically disclosed in
the disclosure letter supplied by the Seller and Convergent to Buyer and Parent
(the "Seller Schedules") and dated as of the date hereof, and attached hereto as
----------------
Exhibit A, as follows:
2.1 Organization of the Seller. The Seller is a corporation duly
--------------------------
organized, validly existing and in good standing under the laws of the State of
Colorado. Seller is qualified to do business in all foreign jurisdictions in
which it is required to be so qualified, except where failure to be so qualified
would not have a material adverse effect on the Business. Seller has all
necessary authorizations, approvals, orders, licenses, certificates, permits and
clearances from each court, administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign (each a
"Governmental Entity") to own, lease or sell its properties and products and to
-------------------
conduct its business as presently conducted and is not in violation of any such
authorization, approval, order, license, certificate, permit or clearance, which
are in full force and effect, and no suspension or cancellation thereof has been
threatened that individually or in the aggregate would have a material adverse
effect on the Business. The Seller has the corporate power to own the Acquired
Assets and to carry on the Business as now being conducted. The Seller has
delivered a true and correct copy of its Articles of Incorporation and Bylaws,
each as amended to date, to Buyer and each of which is in full force and effect.
2.2 Seller Capital Structure. All issued and outstanding capital stock
------------------------
of Seller is owned by Convergent. All outstanding shares of the Seller's capital
Stock are duly authorized, validly issued, fully paid and non-assessable and not
subject to preemptive rights created by statute, the Articles of Incorporation
or Bylaws of the Seller or any agreement to which the Seller is a party or by
which it is bound.
2.3 Intentionally Omitted.
---------------------
2.4 Authority. The Seller has all requisite corporate power and
---------
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Seller. The Seller's Board
of Directors has unanimously approved, and Seller's sole shareholder has
approved, the Acquisition, this
-10-
Agreement and the transactions contemplated hereby and thereby. This Agreement
has been duly executed and delivered by the Seller and constitutes the valid and
binding obligation of the Seller, enforceable in accordance with its terms
except as such enforceability may be limited by principles of public policy and
subject to the laws of general application relating to bankruptcy, insolvency
and the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies. Except as set forth on Schedule
2.4, the execution and delivery of this Agreement by the Seller does not, and,
as of the Closing, the consummation of the transactions contemplated hereby will
not, conflict with, or result in any violation of, or default under (with or
without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
benefit under (any such event, a "Conflict") (i) any provision of the Articles
--------
of Incorporation or Bylaws of the Seller or (ii) any mortgage, indenture, lease,
contract or other agreement or instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Seller or its properties or assets, except, with respect to
any such Conflict in clause (ii) above only, where such Conflict would result in
a material adverse effect on the Business. No consent, waiver, approval, order
or authorization of, or registration, declaration or filing with, any
Governmental Entity or any third party (so as not to trigger any Conflict), is
required by or with respect to the Seller in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, except for (i) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal and state securities laws, (ii) compliance with the
provisions of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR Act") and (iii) such other consents, waivers, authorizations,
-------
filings, approvals and registrations which are set forth on Schedule 2.4.
2.5 Seller Schedule. Schedule 2.5 sets forth the November Schedule. The
---------------
November Schedule states the Acquired Assets and Assumed Liabilities and has
been prepared in accordance with GAAP as in effect as of November 30, 2000 and
as applied on a consistent basis with the accounting and classification
procedures, judgments and estimation methodologies employed by Convergent in the
preparation of its audited financial statements, except as expressly stated on
Schedule 2.5.
2.6 No Undisclosed Liabilities. Except as set forth in Schedule 2.6 at
--------------------------
the date hereof, the Seller does not have any liability, indebtedness,
obligation, expense, claim, deficiency, guaranty or endorsement of any type,
whether accrued, absolute, contingent, matured, unmatured, known, unknown or
other (whether or not required to be reflected in financial statements in
accordance with GAAP consistently applied) with respect to the Acquired Assets.
2.7 No Changes. Except as set forth in Schedule 2.7, since the date of
----------
the November Schedule, there has not been, occurred or arisen any:
(a) transaction by the Seller relating to the Business except in the
ordinary course of business as conducted on that date;
(b) capital expenditure or commitment by the Seller relating to the
Business, either individually or in the aggregate, exceeding $25,000;
-11-
(c) destruction of, damage to or loss of any Assets (whether or not
covered by insurance);
(d) labor trouble or claim of wrongful discharge or other unlawful
labor practice or action relating to the Business;
(e) change in accounting methods or practices (including any change
in depreciation or amortization policies or rates) by the Seller and relating to
the Business;
(f) write-up by the Seller of any of the Assets;
(g) increase in the salary or other compensation payable or to become
payable by the Seller to any of its officers, directors, employees or advisors
employed in the Business, or the declaration, payment or commitment or
obligation of any kind for the payment, by the Seller, of a bonus or other
additional salary or compensation to any such person except as otherwise
contemplated by this Agreement or the transactions contemplated hereby, other
than normal course of business salary increases in connection with ongoing
yearly reviews or promotions (none of which exceeds 10% of the previous year's
salary);
(h) acquisition, sale or transfer of any Asset of the Seller, except
in the ordinary course of business as conducted on that date;
(i) amendment or termination of any material contract, agreement or
license to which the Seller is a party or by which it or its properties or
assets is bound and which is utilized in the Business;
(j) waiver or release of any right or claim of the Seller related to
the Business, including any write-off or other compromise of any account
receivable of the Seller related to the Business;
(k) the commencement or notice or, to the knowledge of Seller, threat
of commencement of any lawsuit or proceeding against or investigation of the
Seller or its affairs relating to the Business;
(l) notice of any claim of ownership by a third party of Seller
Intellectual Property Rights (as defined in Section 2.11 below) or of
infringement by the Seller of any third party's intellectual property rights
relating to the Business;
(m) change in pricing or royalties set or charged by the Seller
relating to the Business;
(n) any event or condition of any character that has or could be
reasonably expected to impair the Seller's Business or the value of the
Business; or
-12-
(o) negotiation or agreement by the Seller or any officer or
employees thereof to do any of the things described in the preceding clauses (a)
through (n) (other than negotiations with Buyer and its representatives
regarding the transactions contemplated by this Agreement).
2.8 Tax Matters.
-----------
(a) Definition of Taxes. For the purposes of this Agreement, "Tax"
------------------- ---
or, collectively, a "Taxes", means any and all federal, state, local and foreign
-----
taxes, assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts and any obligations under any agreements or arrangements with
any other person with respect to such amounts and including liability for taxes
of a predecessor entity.
(b) Tax Returns and Audits. Except as set forth in Schedule 2.8:
----------------------
(i) The Seller as of the Closing will have prepared and filed
all required federal, state, local and foreign returns, estimates, information
statements and reports ("Returns") that are due before the Closing, relating to
-------
any and all Taxes concerning or attributable to the Assets, the Assumed
Liabilities or to the Business. All Taxes shown to be due and payable on such
Returns have been or will be paid as of the Closing.
(ii) There are (and as of immediately following the Closing
there will be) no liens, pledges, charges, claims, security interests or other
encumbrances of any sort ("Liens") on the Assets relating to or attributable to
-----
Taxes, other than Liens for Taxes not yet due and payable.
(iii) The Seller has no knowledge of any basis for the assertion
of any claim relating or attributable to Taxes which, if adversely determined,
would result in any Lien on the assets of the Seller or otherwise materially
adversely affect Buyer, Parent, the Assets or the Business.
2.9 Restrictions on Business Activities. There is no agreement (non-
-----------------------------------
compete or otherwise), commitment, judgment, injunction, order or decree to
which the Seller or Convergent is a party or otherwise binding upon the Seller
or Convergent which has or reasonably could be expected to have the effect of
prohibiting or impairing any business practice of the Seller, any acquisition of
property (tangible or intangible) by the Seller or the conduct of the Business.
2.10 Title of Properties; Absence of Liens and Encumbrances; Condition of
--------------------------------------------------------------------
Equipment.
---------
(a) The Seller owns no real property, nor has it ever owned any real
property that is utilized in the Business. The Seller has not leased any real
property utilized in the Business other than those properties listed on Schedule
2.10(a) (the "Business Properties"). All current leases of the Seller of the
-------------------
Business Properties are in full force and effect, are valid and effective in
accordance with their respective terms, and there is not with respect to the
Seller and to the knowledge of the
-13-
Seller, any other party to such leases, under any of such leases, any existing
default or event of default (or event which with notice or lapse of time, or
both, would constitute a default).
(b) The Seller has, in the case of the Business Properties, valid
leasehold interests in, all of its tangible properties and assets, real,
personal and mixed, used or held for use in the Business, free and clear of any
Liens, except for (i) such Liens that will be terminated prior to or as of the
Closing Date, (ii) such Liens that constitute Assumed Liabilities and (iii)
Liens for taxes not yet due and payable.
2.11 Intellectual Property.
---------------------
(a) The Seller owns, or is licensed or otherwise possesses legally
enforceable rights to use, all patents, trademarks, trade names, service marks,
copyrights, and any applications therefor, maskworks, net lists, schematics,
technology, know-how, computer software programs or applications (in both source
code and object code form), and tangible or intangible proprietary information
or material (excluding Commercial Software as defined in Paragraph (c) below)
that are material to the Business as currently conducted by Seller
(collectively, the "Seller Intellectual Property Rights" and each, a "Seller
----------------------------------- ------
Intellectual Property Right").
---------------------------
(b) Schedule 2.11 sets forth a complete list of all patents,
trademarks, registered copyrights, registered maskworks, trade names and service
marks, and any applications therefor in respect of any of the foregoing,
included in the Seller Intellectual Property Rights, and specifies, where
applicable, the jurisdictions in which each such Seller Intellectual Property
Right has been issued or registered or in which an application for such issuance
and registration has been filed, including the respective registration or
application numbers and the names of all registered owners. Schedule 2.11 also
sets forth a complete list of all licenses, sublicenses and other agreements as
to which the Seller is a party and pursuant to which the Seller or any other
person is authorized to use any Seller Intellectual Property Right (excluding
object code end-user licenses granted to end-users in the ordinary course of
business that permit use of software products without a right to modify,
distribute or sublicense the same ("End-User Licenses")) or other trade secret
-----------------
material to the Business, and includes the identity of all parties thereto, a
description of the nature and subject matter thereof, the applicable royalty and
the term thereof. Except as provided in Schedule 2.11, the Seller is not in
violation of any license, sublicense or agreement described on such list. The
execution and delivery of this Agreement by the Seller, and the consummation of
the transactions contemplated hereby, (A) will not cause the Seller to be in
violation or default under any such license, sublicense or agreement, (B)
entitle any other party to any such license, sublicense or agreement to
terminate or modify such license, sublicense or agreement or (C) will not
require the Seller to repay any funds already received by it from a third party.
The Seller is the sole and exclusive owner or licensee of, with all right, title
and interest in and to (free and clear of any liens or encumbrances), the Seller
Intellectual Property Rights, and has sole and exclusive rights (and is not
contractually obligated to pay any compensation to any third party in respect
thereof) to the use thereof or the material covered thereby in connection with
the services or products in respect of which the Seller Intellectual Property
Rights are being used.
-14-
(c) Except as set forth in Schedule 2.11(c), no claims with respect
to the Seller Intellectual Property Rights have been asserted or, to the
knowledge of Seller, are threatened by any person nor are there any valid
grounds, to the knowledge of the Seller, for any bona fide claims (i) to the
effect that the manufacture, sale, licensing or use of any of the products of
the Business as now manufactured, sold or licensed or used for manufacture, use,
sale or licensing by the Seller infringes on any copyright, patent, trade mark,
service mark, trade secret or other proprietary right of any third party, (ii)
against the use by the Seller of any trademarks, service marks, trade names,
trade secrets, copyrights, maskworks, patents, technology, know-how or computer
software programs and applications used in the Business as currently conducted
by the Seller, or (iii) challenging the ownership by the Seller, validity or
effectiveness of any of the Seller Intellectual Property Rights. All registered
patents, trademarks, service marks and copyrights held by the Seller that are
used in the Business are valid and subsisting. To the knowledge of the Seller,
there is no material unauthorized use, infringement or misappropriation of any
of the Seller Intellectual Property Rights by any third party, including any
employee or former employee of the Seller. No Seller Intellectual Property Right
or product of the Business is subject to any outstanding decree, order,
judgment, or stipulation restricting in any manner the licensing thereof by the
Seller. The Seller has not entered into any agreement (other than exclusive
distribution agreements identified as such in the Seller Schedules) under which
the Seller is restricted from selling, licensing or otherwise distributing any
products of the Business to any class of customers, in any geographic area,
during any period of time or in any segment of the market. Except as set forth
on Schedule 2.11(c), each employee of Seller employed in the Business has
executed a proprietary information and confidentiality agreement.
(d) "Commercial Software" means packaged commercially available
-------------------
software programs generally available to the public through retail dealers in
computer software which have been licensed to the Seller pursuant to end-user
licenses and which are used in the Seller's business but are in no way a
component of or incorporated in or specifically required to develop or support
any of the Seller's products and related trademarks, technology and know-how.
2.12 Agreements, Contracts and Commitments.
-------------------------------------
(a) Except as set forth on Schedules 1.1, 1.1(b), 1.1(c), 1.1(e), 1.2
and 2.12(a), the Seller does not have, is not a party to nor is it bound by:
(i) any fidelity or surety bond or completion bond relating to
the Business,
(ii) any lease of personal property relating to the Business
having a value in excess of $15,000 individually or $35,000 in the aggregate.
(iii) any agreement of indemnification or guaranty relating to
the Business,
(iv) any agreement, contract or commitment containing any
covenant limiting the freedom of the Seller to engage in the Business or to
compete with any person,
-15-
(v) any agreement, contract or commitment regarding capital
expenditures relating to the Business and involving future payments in excess of
$15,000,
(vi) any agreement, contract or commitment relating to the
disposition or acquisition of the Assets or any interest in the Business,
(vii) any mortgages, indentures, loans or credit agreements,
security agreements or other agreements or instruments relating to the borrowing
of money or extension of credit, including guaranties referred to in clause
(iii) hereof, relating to the Business,
(viii) any purchase order or contract for the purchase of raw
materials relating to the Business involving amounts individually in excess of
$15,000, or in the aggregate in excess of $50,000,
(ix) any construction contracts relating to the Business,
(x) any distribution, joint marketing or development
agreement relating to the Business, or
(xi) any other agreement, contract or commitment that involves
$15,000 or more or is not cancelable without penalty within thirty (30) days
relating to the Business,
(b) Except as provided in Schedule 2.12(b), the Seller has not
breached, violated or defaulted under, or received notice that it has breached,
violated or defaulted under, any of the terms or conditions of any agreement,
contract or commitment to which it is a party or by which it is bound relating
to the Business (any such agreement, contract or commitment, a "Contract"). Each
--------
Contract set forth in any of the Seller Schedules is in full force and effect
and, except as otherwise disclosed in Schedule 2.12(b) is not subject to any
default thereunder of which the Seller has knowledge by any party obligated to
the Seller pursuant thereto. The Seller has obtained, or will obtain prior to
the Closing, all necessary consents, waivers and approvals of parties to any
Contract as are required in connection with the Acquisition.
(c) Seller has delivered to Buyer correct and complete copies of each
of its (i) standard form of gold-level customer contract, (ii) standard form of
silver-level customer contract, and (iii) standard form of platinum-level
customer contract (collectively, the "Standard Form Agreements"). Except as
------------------------
provided in Schedule 2.12(c), none of the maintenance agreements or other
Contracts with Customers set forth on Schedule 1.1 or Schedule 1.1(e) to this
Agreement subject either Seller, or will subject Buyer as a result of the
transactions contemplated by this Agreement, to any guaranty, warranty,
obligation, condition, liability, contingency, penalty or other indemnity,
beyond the applicable terms and conditions of such Standard Form Agreements or
beyond the ordinary course of Seller's business.
2.13 Interested Party Transactions. No officer and director of the Seller
-----------------------------
(nor any ancestor, sibling, descendant or spouse of any of such persons, or any
trust, partnership or corporation in which any of such persons has an interest),
has any direct or indirect (i) interest in any entity which
-16-
furnished or sold, or furnishes or sells, services or products that the Seller
furnishes or sells, or proposes to furnish or sell, which relate to the Business
or (ii) interest in any entity that purchases from or sells or furnishes to, the
Seller, any goods or services relating to the Business, or (iii) beneficial
interest in any contract or agreement set forth in Schedule 2.12; provided,
--------
that, ownership of no more than one percent (1%) of the outstanding voting stock
----
of a publicly traded corporation shall not be deemed an "interest in any entity"
for purposes of this Section 2.13.
2.14 Governmental Authorization. Schedule 2.14 accurately lists each
--------------------------
consent, license, permit, grant or other authorization issued to the Seller by a
Governmental Entity (i) pursuant to which the Seller currently operates or holds
any interest in any of its Assets or (ii) which is required for the operation of
the Business (hereinafter collectively referred to as "Seller Authorizations"),
---------------------
which Seller Authorizations are in full force and effect and constitute all
Seller Authorizations required to permit the Seller to operate or conduct its
Business substantially as it is currently and has been conducted or hold any
interest in its Assets.
2.15 Litigation. There is no action, suit, claim or proceeding of any
----------
nature pending or, to the knowledge of the Seller, threatened against the
Seller, Convergent (in each case with respect to the Business) or their
respective properties or assets or any of the Seller's officers or directors,
nor, to the knowledge of the Seller and Convergent, is there any basis therefor.
Except as set forth in Schedule 2.15, there is no investigation pending or
threatened against the Seller, Convergent (in each case with respect to the
Business) or their respective properties or assets or any of the Seller's
officers or directors (nor, to the knowledge of the Seller and Convergent, is
there any basis therefor) by or before any Governmental Entity. Schedule 2.15
sets forth, with respect to any pending or, to the knowledge of Seller,
threatened action, suit, proceeding or investigation, the parties thereto, the
subject matter thereof and the amount of damages claimed or other remedy hereby
requested, if any. No Governmental Entity has at any time challenged or
questioned the legal right of the Seller to manufacture, offer or sell any of
its products in the present manner or style thereof with respect to the Assets
or the Business or to conduct the Business.
2.16 Accounts Receivable. The Seller has made available to Buyer a list of
-------------------
all accounts receivable with respect to the Business as reflected on the
November Schedule ("Accounts Receivable"), along with a range of days elapsed
-------------------
since invoice. Except as set forth on Schedule 2.16(b), all the Accounts
Receivable included in the Acquired Assets (i) represent actual indebtedness
incurred by the applicable account debtors, (ii) represent amounts in respect of
which Seller is not required to deliver, or perform on behalf of, the applicable
account debtor any additional products or services; (iii) have arisen in the
ordinary course of the Business's business; and (iv) will be subject on the
Closing Date to no prior assignment, claim, Xxxx, charge or encumbrance of any
nature whatsoever. As of the Closing Date, no person will have any Lien on any
of such Accounts Receivable and no agreement for material deduction or discount
has been made with respect to any of such Accounts Receivable.
2.17 Environmental Matters.
---------------------
(a) Hazardous Material. No underground storage tanks and no amount
------------------
of any substance that has been designated by any Governmental Entity or by
applicable federal, state or
-17-
local law to be radioactive, toxic, hazardous or otherwise a danger to health or
the environment, including, without limitation, PCBs, asbestos, petroleum, urea-
formaldehyde and all substances listed as hazardous substances pursuant to the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws (a "Hazardous Material"), but excluding office
------------------
and janitorial supplies, are present, as a result of the deliberate actions of
the Seller, or, to the Seller's knowledge, as a result of any actions of any
third party or otherwise, in, on or under any property, including the land and
the improvements, ground water and surface water thereof, that the Seller has at
any time owned, operated, occupied or leased in connection with the Business.
(b) Hazardous Materials Activities. In conducting the Business, the
------------------------------
Seller has not transported, stored, used, manufactured, disposed of, released or
exposed its employees or others to Hazardous Materials in violation of any law
in effect on or before the Closing Date, nor has the Seller disposed of,
transported, sold, manufactured or stored any product containing a Hazardous
Material (collectively "Hazardous Materials Activities") in violation of any
------------------------------
rule, regulation, treaty or statute promulgated by any Governmental Entity in
effect prior to or as of the date hereof to prohibit, regulate or control
Hazardous Materials or any Hazardous Material Activity.
(c) Permits. The Seller currently holds all environmental approvals,
-------
permits, licenses, clearances and consents (the "Environmental Permits")
---------------------
necessary for the conduct of the Business and specifically for the Business's
Hazardous Material Activities as such activities are currently being conducted.
(d) Environmental Liabilities. No material action, proceeding,
-------------------------
revocation proceeding, amendment procedure, writ, injunction or claim is pending
or, to the knowledge of Seller, threatened concerning any Environmental Permit,
Hazardous Material or any Hazardous Materials Activity of the Business. The
Seller is not aware of any fact or circumstance, which could involve the
Business in any material environmental litigation or impose upon the Seller any
material environmental liability related to the Business.
(e) Capital Expenditures. The Seller is not aware of any capital
--------------------
expenditures related to the Business which are required in order for it to
comply with Environmental Laws.
2.18 Brokers' and Finders' Fees; Third Party Expenses. Other than fees and
------------------------------------------------
expenses incurred in connection with the services to the Seller of Xxxxxxxx
Xxxxx Xxxxxx & Xxxxx Capital, which fees and expenses shall be borne by the
Seller, the Seller has not incurred, nor will it incur, directly or indirectly,
any liability for brokerage or finders' fees or agents' commissions or any
similar charges in connection with this Agreement or any transaction
contemplated hereby.
2.19 Insurance. With respect to the insurance policies and fidelity bonds
---------
covering the Assets or the Business or the employees, officers and directors of
the Seller, except as set forth on Schedule 2.19, there is no claim by the
Seller pending under any of such policies or bonds as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or bonds.
All premiums due and payable under all such policies and bonds have been paid
and the
-18-
Seller is otherwise in material compliance with the terms of such policies and
bonds (or other policies and bonds providing substantially similar insurance
coverage). The Seller has no knowledge of any threatened termination of, or
material premium increase with respect to, any of such policies.
2.20 Employees
---------
(a) Definition. For purposes of this Agreement, the term "Employee"
---------- --------
shall mean any current, former, or retired officer, director or employee of the
Seller or any affiliate of the Seller, employed in the Business, including but
not limited to the employees listed on Schedule 2.20(a).
(b) Employment Matters. With respect to the Employees, the Seller (i)
------------------
is in compliance in all material respects with all applicable federal and state
laws, rules and regulations respecting employment, employment practices, terms
and conditions of employment and wages and hours; (ii) has withheld all amounts
required by law or by agreement to be withheld from the wages, salaries and
other payments; (iii) is not liable for any arrears of wages or any taxes or any
penalty for failure to comply with any of the foregoing; and (iv) is not liable
for any payment to any trust or other fund or to any governmental or
administrative authority, with respect to unemployment compensation benefits,
social security, or other benefits.
(c) Labor. With respect to the Business, no work stoppage or labor
-----
strike against the Seller is pending or, to the knowledge of Seller, threatened.
The Seller is not involved in or, to its knowledge, is threatened with, any
labor dispute, grievance, or litigation relating to labor, safety or
discrimination matters involving any Employee, including, without limitation,
charges of unfair labor practices or discrimination complaints, which, if
adversely determined, would, individually or in the aggregate, result in
material liability to the Seller. Neither the Seller nor any of its subsidiaries
has engaged in any unfair labor practices with respect to an Employee within the
meaning of the National Labor Relations Act which would, individually or in the
aggregate, directly or indirectly result in a material liability to the Seller.
The Seller is not presently, nor has it been in the past, a party to, or bound
by, any collective bargaining agreement or union contract with respect to
Employees and no collective bargaining agreement is being negotiated by the
Seller. The Seller is not aware that any current Employee of the Seller has any
present intention of terminating such Employee's employment with the Seller.
2.21 Compliance with Laws. The Seller has materially complied with, is not
--------------------
in material violation of, and has not received any notices of violation with
respect to, any federal, state or local statute, law or regulation, domestic or
foreign relating to the Business or the Assets.
2.22 Complete Copies of Materials. The Seller has delivered or made
----------------------------
available true and complete copies of each document that has been requested by
Buyer or its counsel.
2.23 Representations Complete. None of the representations or warranties
------------------------
made by the Seller (as modified by the Seller Schedules), nor any statement made
in any Seller Schedule, exhibit or certificate furnished by the Seller pursuant
to this Agreement, contains or will contain at the Closing, any untrue statement
of a material fact, or omits or will omit at the Closing to state any
-19-
material fact, necessary in order to make the statements contained herein or
therein, in the light of the circumstances under which they were made, not
misleading.
2.24 Inventory. All Inventory consists of a quality and quantity usable
---------
and salable in the ordinary course of business, except for those items which in
the reasonable opinion of Seller are obsolete, all of which have been written
off or written down to net realizable value in the November Schedule. All
Inventory not written off has been priced at net book value, which equals cost
less reserves in accordance with GAAP as in effect as of the Closing Date
consistent with the basis of accounting and classification procedures, judgments
and estimation methodologies employed historically by Convergent in preparation
of its audited financial statements.
2.25 Assets. The Assets are in good working order in the ordinary course
------
of business and are free from any material defects.
2.26 No Material Adverse Change. Except as set forth on Schedule 2.26
--------------------------
hereto, since November 30, 2000, the Business has been operated in the ordinary
course, and since such date, there has not occurred any material adverse change
in the Business or Assets.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER AND PARENT
Each of Buyer and Parent represent and warrant to the Seller as follows:
3.1 Organization, Standing and Power. Buyer is a corporation duly
--------------------------------
organized, validly existing and in good standing under the laws of the State of
Arizona. Parent is a corporation duly organized, validly existing and in good
standing under the laws of the State of Arizona. Each of Buyer and Parent has
the corporate power to own its respective properties and to carry on its
respective business as now being conducted and is duly qualified to do business
and is in good standing in each jurisdiction in which the failure to be so
qualified would have a material adverse effect on the ability of Buyer or Parent
(as applicable) to consummate the transactions contemplated hereby.
3.2 Authority. Each of Buyer and Parent has all requisite corporate power
---------
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of each of Buyer and Parent. This
Agreement has been duly executed and delivered by Xxxxx and Parent and
constitutes the valid and binding obligations of Buyer and Parent, enforceable
in accordance with its terms, except as such enforceability may be limited by
principles of public policy and subject to the laws of general application
relating to bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other equitable remedies.
3.3 Litigation. There is no action, suit, proceeding, claim, arbitration
----------
or investigation pending, or as to which Buyer or Parent has received any notice
of assertion against Buyer or Parent
-20-
which in any manner challenges or seeks to prevent, enjoin, alter or materially
delay Xxxxx's purchase of the Assets contemplated by this Agreement.
3.4 No Violation. The execution and delivery of this Agreement by each of
------------
Buyer and Parent, and the performance by each of Buyer and Parent of its
obligations hereunder does not, and, as of the Closing, the consummation of the
transactions contemplated hereby will not result in a Conflict with or under (i)
any provision of the Articles of Incorporation or Bylaws of the Buyer or Parent
or (ii) any mortgage, indenture, lease, contract or other agreement or
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Buyer or Parent or
their properties or assets.
3.5 Consents and Approvals. Other than compliance with the HSR act, no
----------------------
filing or registration with, no notice to and no permit, authorization, consent
or approval of any third party or governmental authority is necessary for the
consummation by Buyer or Parent of the transactions contemplated by this
Agreement.
3.6 Reliance Upon Information. In consummating the transactions
-------------------------
contemplated by this Agreement, each of Buyer and Parent is relying upon this
Agreement (including all Exhibits) and the Seller Schedules, and upon no other
records, lists, contracts, documents or other written information supplied to
Buyer or Parent by Convergent or the Seller.
ARTICLE IV
CONDUCT PRIOR TO THE CLOSING
4.1 Conduct of Business of the Seller. During the period from the date of
---------------------------------
this Agreement and continuing until the earlier of the termination of this
Agreement or the Closing, the Seller agrees to carry on the Business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted, to pay its debts and Taxes when due, to pay or perform
other obligations when due, and, to the extent consistent with the Business, use
all reasonable efforts consistent with past practice and policies to preserve
intact the Business's present business organizations and to collect all
outstanding accounts receivable related to the Business, keep available for the
Business the services of its present officers and key employees and preserve
their relationships with customers, suppliers, distributors, licensors,
licensees, and others having business dealings with it to the extent such
relationships are related to the Business, all with the goal of preserving
unimpaired the Seller's goodwill and ongoing Business at the Closing. The Seller
shall promptly notify Parent of any event or occurrence or emergency not in the
ordinary course of business of the Seller, and any material event involving the
Seller relating to the Business. Except as expressly contemplated by this
Agreement or as set forth on Schedule 4.1, the Seller shall not, without the
prior written consent of Parent:
(a) Enter into any commitment or transaction not in the ordinary
course of business of the Business or any commitment or transaction of the type
described in Section 2.7 hereof;
-21-
(b) Transfer to any person or entity any Seller Intellectual Property
Right (other than pursuant to end user licenses in the ordinary course of
business);
(c) Enter into or amend any agreements pursuant to which any other
party is granted marketing, distribution or similar rights of any type or scope
with respect to any products of the Business;
(d) Amend or otherwise modify (or agree to do so), except in the
ordinary course of business, or violate the terms of, any of the agreements set
forth or described in the Seller Schedules;
(e) Commence any litigation relating to the Business;
(f) Cause or permit any amendments to its Articles of Incorporation
or Bylaws that would have a material adverse effect on the Business or impair
the Assets;
(g) Acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets, which in any of such events would result in the acquisition of Assets
that are material, individually or in the aggregate, to the Business;
(h) Sell, lease, license or otherwise dispose of any of the Assets;
(i) Grant any severance or termination pay (i) to any director or
officer or (ii) to any other employee engaged in the Business except payments
made pursuant to standard written agreements outstanding on the date hereof or
as described in Schedule 2.12(a);
(j) Write up any of the Assets, including without limitation writing
down the value of inventory or writing off notes or accounts receivable other
than in the ordinary course of business consistent with past practices;
(k) Pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise) of the
Business, other than the payment, discharge or satisfaction in the ordinary
course of business of liabilities reflected or adequately reserved against in
the November Schedule;
(l) Make or change any material election in respect of Taxes, adopt
or change any accounting method in respect of Taxes, enter into any closing
agreement, settle any claim or assessment in respect of Taxes, or consent to any
extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes relating to the Business;
(m) Enter into any strategic alliance or joint marketing arrangement
or agreement which would relate or effect the Business; or
-22-
(n) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.1(a) through (o) above, or any other action that
would prevent the Seller from performing or cause the Seller not to perform its
covenants hereunder.
4.2 No Solicitation. Until the Closing, neither the Seller nor Convergent
---------------
will (nor will the Seller or Convergent permit any of its respective officers,
directors, agents, brokers, representatives or Affiliates to) directly or
indirectly, take any of the following actions with any party other than Parent,
Buyer or any of their designees:
(a) solicit, encourage, initiate or participate in any negotiations
or discussions with respect to, any offer or proposal to acquire all or any
portion of the Business or Assets whether by merger, private offering,
consolidation, purchase of assets, tender offer or otherwise,
(b) disclose any information relating to the Business not customarily
disclosed to customers and others in the ordinary course of business other than
its attorneys or financial advisors concerning the Seller's Business and
Business Properties or afford to any person or entity access to its properties,
books or records, or
(c) assist or cooperate with any person to make any proposal to
purchase, directly or indirectly, all or any part of the Assets, whether by
merger, private offering, consolidation, purchase of assets, tender offer or
otherwise, other than selling products of the Seller in the ordinary course of
business.
In the event the Seller shall receive during the period specified in this
Section 4.2 any offer or proposal, directly or indirectly, of the type referred
to in clause (a) or (c) above, or any request for disclosure or access pursuant
to clause (b) above, the Seller shall immediately inform Parent as to any such
offer or proposal.
4.3 No Encumbrance. Until the earlier of the Closing Date or the date of
--------------
termination of this Agreement, the Seller and Convergent will not (nor will the
Seller or Convergent permit any of the Seller's or Convergent's respective
officers, directors, agents, brokers, representatives or Affiliates directly or
indirectly to), take any action which could in any way and at any time impair
the Seller's good and valid title to all Assets or could cause or lead to the
creation of any lien, claim, charge, restriction, pledge, security interest,
option, right of any nature or other legal or equitable encumbrance with regard
to any Assets.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Offers of Employment. The Buyer and/or Parent shall make offers of
--------------------
post-Closing employment to at least 240 employees employed by Seller in the
Business as of the Closing provided however that Buyer and/or Parent reserve the
-------- -------
right to make such offers conditional upon (x) satisfactory completion by each
such employee of Parent's customary mandatory drug testing
-23-
program as currently in effect and (y) execution by each such employee of the
Parent's customary proprietary information and inventions assignment agreement.
In the event Seller is required to pay any employee terminated by Seller and
hired by Xxxxx and/or Parent for accrued vacation pay, Xxxxx agrees to reimburse
Seller the amount of such payment (up to a maximum of the lesser of what was
shown on the November Schedule for the employee or eighty (80) hours of vacation
time) within three (3) days of Buyer's receipt of notice of payment from Seller
to the extent the amount of such payment was not already reflected as an
adjustment on the Closing Schedule pursuant to the last sentence of Section
1.6(a). Xxxxx and/or Parent further agrees to give up to eighty (80) hours of
vacation credit, if earned and not taken, to all employees terminated by Seller
and hired by Xxxxx and/or Parent.
5.2 Access to Information. The Seller shall afford Buyer and/or Parent and
---------------------
their respective accountants, counsel and other representatives, reasonable
access during normal business hours during the period prior to the Closing to
(a) all of the Seller's properties, books, contracts, commitments and records,
and (b) all other information concerning the Business and the Assets, including
all personnel engaged in the Business (subject to restrictions imposed by
applicable law or by contract, which contracts are listed in Schedule 5.2) of
the Seller as Buyer and/or Parent may reasonably request. The Seller agrees to
provide to Buyer and/or Parent and their respective accountants, counsel and
other representatives' copies of internal financial statements promptly upon
request. No information or knowledge obtained in any investigation pursuant to
this Section 5.2 shall affect or be deemed to modify any representation or
warranty contained herein (except as disclosed in the Seller Schedules) or the
conditions to the obligations of the parties to consummate the Acquisition.
5.3 Confidentiality. Each of the parties hereto hereby agrees to keep such
---------------
information or knowledge obtained in any investigation pursuant to Section 5.2,
or pursuant to the negotiation and execution of this Agreement or the
effectuation of the transactions contemplated hereby, confidential
("Confidential Information"); provided, however, that the foregoing shall not
------------------------ -------- -------
apply to information or knowledge which (a) a party can demonstrate was already
lawfully in its possession prior to the disclosure thereof by the other party,
(b) is generally known to the public and did not become so known through any
violation of law, (c) became known to the public through no fault of such party,
(d) is later lawfully acquired by such party from other sources, (e) is required
to be disclosed by order of court or government agency with subpoena powers, (f)
is disclosed in the course of any litigation between any of the parties hereto,
(g) is developed independently by either party without reference to, or specific
knowledge of, the other parties' Confidential Information, or (h) is conveyed by
a party to a party's accountants, attorneys, brokers or advisors solely for
purposes of consummating the transactions contemplated by this Agreement,
provided that those entities are obligated to keep the Confidential Information
confidential or, in the case of Seller, is conveyed to Seller's vendors
(provided, that, such conveyance is approved in advance by Parent).
-------- ----
5.4 Expenses. Except for (x) expenses related to the preparation of the
--------
Closing Schedule which expenses shall be paid for by Seller and (y) all filing
fees incurred by any party hereto related to any and all filings made pursuant
to the HSR Act or any successor law, which expenses shall be borne equally by
Parent and Seller, whether or not the Acquisition is consummated, all fees and
-24-
expenses incurred in connection with the Acquisition including, without
limitation, all legal, accounting, financial advisory, other regulatory and
consulting and all other fees and expenses of third parties ("Third Party
-----------
Expenses") incurred by a party in connection with the negotiation and
--------
effectuation of the terms and conditions of this Agreement and the transactions
contemplated hereby, shall be the obligation of the respective party incurring
such fees and expenses.
5.5 Public Disclosure. Unless otherwise required by the securities law
-----------------
obligations of Parent and Convergent or other applicable law, prior to the
Closing, no disclosure (whether or not in response to an inquiry) of the subject
matter of this Agreement shall be made by any party hereto unless approved by
Parent and the Seller prior to release, provided, that, such approval shall not
-------- ----
be unreasonably withheld.
5.6 Tax Matters.
-----------
(a) To the extent relevant to the Assets and the Assumed Liabilities,
the Seller and Convergent on the one hand and the Buyer and Parent on the other
hand shall (i) provide the other with such assistance as may reasonably be
required in connection with the preparation of any Tax Return and the conduct of
any audit or other examination by any taxing authority or in connection with
judicial or administrative proceedings relating to any liability for Taxes and
(ii) retain and provide the other party with all records or other information
that may be relevant to the preparation of any Tax Returns, or the conduct of
any audit or examination, or other tax proceeding. The Seller shall retain all
relevant documents, including prior years' Tax Returns, supporting work
schedules and other records or information that may be relevant to such returns
and shall not destroy or otherwise dispose of any such records without the prior
written consent of Buyer and Parent, unless the statute of limitations for audit
and assessment has expired.
(b) Any sales and use taxes incurred in connection with this
Agreement and the transactions contemplated hereby shall be borne equally by
Xxxxx and Seller. Seller shall assume responsibility for the remittance and
reporting of all such sales and use taxes, and shall produce and deliver
summaries of the tax calculations to Buyer. Within three (3) days of receipt of
such summaries, Buyer shall reimburse Seller for Xxxxx's portion of the sales
and use taxes.
(c) Seller shall be responsible for and pay all taxes of Seller and
its affiliates arising at any time and all taxes relating to the Business or
Assets arising at any time with respect to the periods (or portion thereof)
ending on or prior to the Closing Date, including the portion of real, personal
or other property taxes attributable to the period which includes the Closing
Date. Seller shall reimburse Buyer within three (3) business days following
receipt of proof of payment for all property taxes relating to the periods (or
portion thereof) ending on or prior to the Closing Date that are paid by Xxxxx.
Buyer shall reimburse Seller within three (3) business days following receipt of
proof of payment for all property taxes relating to the periods after the
Closing Date that are paid by Seller with respect to the Assets acquired by
Buyer pursuant to this Agreement, including property taxes attributable to
Assets under lease that are either sold or transferred to Buyer subject to
lease. To the extent that any property tax bills paid by Seller or Buyer include
property taxes attributable to both the Assets acquired by Buyer pursuant to
this Agreement and assets retained by Seller, the allocation of such property
taxes between Buyer and Seller shall be calculated by a mutually agreed
-25-
upon third party property tax compliance firm in accordance with this Section
5.6(c). To the extent that Buyer or Seller, as applicable, does not timely
reimburse the other party for such payments of property taxes after the later of
receipt of proof of payment or determination of the allocation of such property
taxes by a third party firm in accordance with this Section 5.6(c), the amounts
owed by Buyer to Seller or by Seller to Buyer, as applicable, shall accrue
interest at a rate of 8.00% per annum.
5.7 Third-Party Consents.
--------------------
(a) The Seller shall use its commercially reasonable efforts to
obtain the consents, waivers and approvals under any of the contracts as may be
required in connection with the Acquisition (all of which consents, waivers and
approvals are set forth in Schedule 2.4) so as to preserve all rights of, and
benefits to, the Seller thereunder. Other than consents for the contracts listed
on Schedule 1.9(f) (which consents listed in Section 1.9(f) shall be obtained
prior to the Closing) and notwithstanding the preceding sentence or anything to
the contrary contained in Section 5.8 below, the Seller agrees to use its
commercially reasonable efforts to obtain third-party consents to all other
contracts, commitments, agreements, licenses, leases and the like that are
material to the Business as currently conducted and as currently proposed to be
conducted and are listed in Schedule 5.7, within thirty (30) days of the Closing
Date. If the Seller is unable to obtain such consents within thirty (30) days
after the Closing, the Seller shall cooperate with Xxxxx and agrees to enter
into or effect any reasonable arrangement, if possible and if allowed by the
third party, designed to provide for Buyer the benefits under any such
contracts, commitments, agreements, licenses, leases and the like, including the
enforcement, for the benefit of Buyer, of any and all rights of the Seller
against any such third party arising out of the breach or cancellation thereof
by such third party or otherwise.
(b) Notwithstanding anything to the contrary in this Agreement,
Xxxxxx agrees to use its commercially reasonable efforts to obtain consents to
its agreements with each of Nortel, Mitel and Nitsuko prior to the Closing Date.
Seller further agrees that, with respect to each of Nortel, Mitel and Xxxxxxx,
Seller's commercially reasonable efforts prior to and following the Closing Date
shall include but shall not be limited to (A) providing appropriate executive-
level interactions to attempt to solicit the support and agreement of each of
Nortel, Mitel and Nitsuko to post-Closing arrangements and technical support for
the Customers, (B) cooperating with Buyer in pursuing legal actions to enforce,
perfect and secure, for the benefit of Buyer, Seller's rights pursuant to
agreements with each of Nortel, Mitel and Nitsuko, at an aggregate expense of up
to $35,000 for Seller, with any additional expenses or obligations of Seller to
be agreed upon by Xxxxx and Seller in such event, and (C) engaging in any
general business activities intended to provide Buyer with the benefit of post-
Closing arrangements with each of Nortel, Mitel and Nitsuko.
5.8 Commercially Reasonable Efforts. Subject to the terms and conditions
-------------------------------
provided in this Agreement, each of the parties hereto shall use its
commercially reasonable efforts to take promptly, or cause to be taken, all
actions, and to do promptly, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated hereby, to obtain all necessary waivers,
consents and
-26-
approvals (including any approvals required under the HSR Act) and to effect all
necessary registrations and filings and to remove any injunctions or other
impediments or delays, legal or otherwise, in order to consummate and make
effective the transactions contemplated by this Agreement for the purpose of
securing to the parties hereto the benefits contemplated by this Agreement;
provided, that, Parent shall not be required to agree to any divestiture by
-------- ----
Parent or the Seller or any of Parent's subsidiaries or affiliates of shares of
capital stock or of any business, assets or property of Parent or its
subsidiaries or affiliates or the Seller or its affiliates, or the imposition of
any material limitation on the ability of any of them to conduct their
businesses or to own or exercise control of such assets, properties and stock.
5.9 Notification of Certain Matters. The Seller shall give prompt notice
-------------------------------
to Parent, and Parent and/or Buyer shall give prompt notice to the Seller, of
(i) the occurrence or non-occurrence of any event, the occurrence or non-
occurrence of which is likely to cause any representation or warranty of the
Seller on the one hand, and Buyer and/or Parent on the other hand, contained in
this Agreement to be untrue or inaccurate in any material respect at or prior to
the Closing and (ii) any failure of the Seller on the one hand and Buyer and/or
Parent on the other hand, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder in any material respect; provided, however, that the delivery of any
notice pursuant to this Section 5.9 shall not limit or otherwise affect any
remedies available to the party receiving such notice.
5.10 Bulk Sales Compliance. The Seller and Parent shall comply in all
---------------------
respects, and provide Buyer all information required to comply with the
provisions of any so-called "bulk sales law" of any relevant jurisdiction in
connection with the sale of the Acquired Assets to Buyer.
5.11 Additional Documents and Further Assurances. Each party hereto, at
-------------------------------------------
the reasonable request of another party hereto, shall execute and deliver such
other instruments and do and perform such other acts and things as may be
necessary or desirable for effecting completely the consummation of this
Agreement and the transactions contemplated hereby.
5.12 Agreement Regarding Inventory. Prior to the Closing Date or within
-----------------------------
thirty (30) days following the Closing Date, Buyer shall allocate the Inventory
listed on Schedule 1.1(i) to two categories; the first category (the "Category
One Inventory") consisting of inventory items that are considered fast-moving,
and the second category (the "Category Two Inventory") consisting of items that
are considered old and/or slow-moving. Seller shall provide assistance to Buyer
to enable Buyer to determine such allocations. Buyer shall identify at least
$3.5 million of Category One Inventory that Xxxxx agrees to purchase from Seller
and Xxxxxx agrees to sell to Buyer in the Acquisition. The Aggregate Maximum
Consideration shall include the purchase price paid for the Category One
Inventory pursuant to Section 1.5 hereof. Additionally, Xxxxx agrees to take
possession of the Category Two Inventory for the purposes of sales by Xxxxx to
third parties. From time to time commencing on the Closing Date and ending on
the one year anniversary thereof (the "Inventory Period"). Xxxxx agrees to pay
to Seller payments (the "Inventory Payments") at a rate equal to sixty-five
percent (65%) of Seller's book value (which information regarding Seller's book
values shall previously have been provided by Seller to Buyer) on any item of
Category Two Inventory that
-27-
Xxxxx sells to any third party. Each Inventory Payment shall be evidenced by an
invoice generated by Buyer on a quarterly basis and shall be made to Seller
within twenty (20) days after the end of each quarterly period. Promptly
following the termination of the Inventory Payment Period, Buyer shall have the
right to return all remaining Category Two Inventory to Seller at Seller's
expense; provided, however, that in such event, Seller may elect to have such
Category Two Inventory destroyed at Seller's expense.
5.13 Agreement Regarding Accounts Receivable. Beginning ninety (90) days
---------------------------------------
after the Closing Date and ending upon the expiration of the Second Escrow
Period (as defined below), Buyer shall have the right to return uncollected
Accounts Receivable (each a "Returned Account Receivable") to Seller. Seller
---------------------------
agrees to accept each Returned Account Receivable to the extent not collected by
Buyer. The parties acknowledge and agree that Buyer shall receive compensation
from the Escrow Fund within twenty (20) days of return by Buyer of the Returned
Account Receivable for each Returned Account Receivable equal to the value of
such Returned Accounts Receivable as set forth on the Closing Schedule.
5.14 Collection of Accounts Receivable.
---------------------------------
(a) Promptly after the Closing, the Seller shall prepare and
deliver to Buyer a list of all Accounts Receivable outstanding on the Closing
Date. For a period of 90 days after the Closing Date (the "Collection Period")
Buyer shall use commercially reasonable efforts to collect the Accounts
Receivable. Buyer may, but shall not be obligated to, use a collection agency or
commence legal actions in connection with such collection efforts. Promptly
after the expiration of the Collection Period, Buyer shall advise Seller of
those Accounts Receivable which have not been collected as of the end of the
Collection Period which Buyer wishes to have Seller repurchase pursuant to
Section 5.13. Within twenty (20) days of receipt of such advice from Buyer,
Seller shall purchase (without recourse to Buyer) such designated Accounts
Receivable then remaining unpaid for a purchase price thereof equal to the face
amount thereof.
(b) Upon Seller's repurchase of any unpaid Accounts Receivable
pursuant to this Section 5.14, (i) Buyer shall promptly deliver to Seller any
tangible evidence of such Account Receivable then in the possession of Buyer or
under its control, and (ii) Seller shall be entitled to take any and all actions
which it may deem necessary or desirable in order to collect such unpaid Account
Receivable. Buyer will, from time to time after such repurchase, execute and
deliver to Seller such instruments and other documents as Seller may reasonably
request to assist Seller in its collection efforts.
(c) In the event that any payment received by Buyer during the
Collection Period is remitted by a customer which is indebted under both
Accounts Receivable and an account receivable arising out of the sale of
inventory in the ordinary course of business after the Closing Date (a "New
Receivable"), such payments shall first be applied to the Accounts Receivable
due from such customer and the balance remaining after payment in full of all
Accounts Receivable due from such customer shall be applied to the New
Receivable; provided, however, that with respect to any Account Receivable which
is contested or disputed by the payor thereof in writing prior to the Closing
Date or during the Collection Period, the amount in dispute shall be deemed to
have been
-28-
collected by Buyer in respect of the New Receivable due from such customer
(unless otherwise directed by the customer) (it being understood that undisputed
amounts of Accounts Receivable shall be applied in accordance with the
priorities set forth above in this Section 5.14).
(d) Buyer will cooperate, at Seller's expense, with Seller in
collecting any Accounts Receivable which are repurchased by Seller pursuant to
this Section 5.14; provided, however, that the foregoing shall not require Buyer
to be a party to any action brought by Seller to collect such Accounts
Receivable.
(e) Xxxxx agrees to furnish Seller within ten (10) days after the
end of each month during the Collection Period a statement setting forth the
Accounts Receivable collected during such month and a trial balance of the
uncollected Accounts Receivable showing the aging thereof as of the end of such
month.
(f) Seller hereby authorizes Buyer to open any and all mail
addressed to Seller (if delivered to Buyer) if received on or after the Closing
Date and hereby grants to Buyer a power of attorney to endorse and cash any
checks or instruments made payable or endorsed to Seller or its order and
received by Buyer with respect to Accounts Receivable.
(g) Any sums received by Xxxxx in respect of Accounts Receivable
(and so identified by the relevant account debtor) after their repurchase by
Seller pursuant to Section 5.14 hereof, shall be promptly transmitted by Buyer
to Seller. In addition, if receipt by Buyer of unidentified sums of money from
an account debtor who owes any Account Receivable repurchased by Seller pursuant
to Section 5.14 hereof results in such account debtor having an aggregate credit
balance with Buyer, Buyer shall promptly transmit to Seller an amount of money
equal to the lesser of (A) such aggregate credit balance or (B) the remaining
unpaid balance of all Accounts Receivable which have been repurchased by Seller
and are payable by such account debtor to Seller. Buyer hereby grants to Seller
a power of attorney to endorse and cash any checks or instruments made payable
or endorsed to Buyer received by Seller with respect to the Accounts Receivable
which are repurchased by Seller pursuant to this Section 5.14.
5.15 Agreement Not to Compete and Nondisclosure
------------------------------------------
(a) Seller and Convergent understand that Buyer shall be entitled to
protect and preserve the going concern value of the Business related to the
Acquired Assets to the extent permitted by law and that Buyer would not have
entered into this Agreement absent the provisions of this Section 5.15, and
therefore agree that Seller and Convergent will not (i) after the Closing Date
and prior to the fifth anniversary of the Closing Date, directly or indirectly
engage in, or be connected with, any sales of any customer premises voice
networking equipment to any Customers set forth on the customer lists provided
by Seller to Buyer pursuant to Section 1.1(h), (ii) after the Closing Date and
prior to the fifth anniversary of the Closing Date, utilize proprietary voice
equipment related data of prior sales or otherwise for purposes of a directed or
targeted marketing campaign to any of the Customers, (iii) after the Closing
Date and prior to the fifth anniversary of the Closing Date, directly or
indirectly induce any former employee of Seller retained by Xxxxx in connection
with Section 5.1 of this Agreement to leave the employ of Buyer or to accept any
other
-29-
position of employment (provided, however, that general solicitations such as
general advertisements, participation in job fairs and other such activities
shall not be prohibited), and (iv) at any time communicate or divulge any
confidential information, knowledge or data related to the Acquired Assets or
the Business, including but not limited to the customer lists provided pursuant
to Section 1.1(h), all of which it agrees to hold in a fiduciary capacity for
the benefit of Buyer, to any party other than Buyer. Notwithstanding the
foregoing, any confidential information, knowledge or data related to the
Business represented by the Acquired Assets shall not be subject to the
restrictions of this Section 5.15 if the information, knowledge or data (a) is
generally known to the public and did not become so known through any violation
of law, (b) became known to the public through no fault of Seller or Convergent,
(c) is required to be disclosed by order of court or government agency with
subpoena powers, (d) is disclosed in the course of any litigation between any of
the parties hereto or (e) is conveyed by a party to a party's accountants,
attorneys, brokers or advisors solely for purposes of consummating the
transactions contemplated by this Agreement, provided that those entities are
obligated to keep the information, knowledge or data confidential.
(b) For purposes of this Section 5.15, the phrase "directly or
indirectly engage in" shall include having a direct or indirect ownership
interest (other than ownership of less than five percent of the outstanding
voting securities of an entity which is registered under Section 12 of the
Exchange Act) in any entity that engages in the business in question.
ARTICLE VI
CONDITIONS TO THE ACQUISITION
6.1 Conditions to Obligations of Each Party to Effect the Acquisition.
-----------------------------------------------------------------
The respective obligations of each party to this Agreement to effect the
Acquisition shall be subject to the satisfaction at or prior to the Closing of
the following conditions:
(a) No Injunctions or Restraints; Illegality. No temporary
----------------------------------------
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Acquisition shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending; nor shall there be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable to the
Acquisition, which makes the consummation of the Acquisition illegal.
(b) HSR Act Waiting Period. Any waiting period applicable to the
----------------------
consummation of the transactions contemplated by this Agreement under the HSR
Act shall have expired or terminated.
6.2 Additional Conditions to Obligations of Seller. The obligations of
----------------------------------------------
the Seller to consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Closing of each of the following conditions, any of which may be waived, in
writing, exclusively by the Seller:
-30-
(a) Representations, Warranties and Covenants. The representations
-----------------------------------------
and warranties of Buyer and Parent in this Agreement shall be true and correct
on and as of the Closing as though such representations and warranties were made
on and as of such time and Buyer and Parent shall have performed and complied
with all covenants, obligations and conditions of this Agreement required to be
performed and complied with by it as of the Closing.
(b) Certificate of Buyer. Seller shall have been provided with a
--------------------
certificate executed on behalf of Parent by one of its executive officers to the
effect that, as of the Closing:
(i) all representations and warranties made by Buyer and Parent
in this Agreement are true and correct in all material respects; and
(ii) all covenants, obligations and conditions of this Agreement
to be performed by Buyer and Parent on or before such date have been so
performed, including, but not limited to, payment of the Purchase Price.
6.3 Additional Conditions to the Obligations of Buyer and Parent. The
------------------------------------------------------------
obligations of Buyer and Parent to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Closing of each of the following conditions, any of which may be
waived, in writing, exclusively by Parent:
(a) Representations, Warranties and Covenants. The representations
-----------------------------------------
and warranties of the Seller and Convergent in this Agreement shall be true and
correct in all material respects on and as of the Closing as though such
representations and warranties were made on and as of such time and the Seller
and Convergent shall have performed and complied with all covenants, obligations
and conditions of this Agreement required to be performed and complied with by
it as of the Closing.
(b) Certificate of Seller. Parent shall have been provided with a
---------------------
certificate executed on behalf of the Seller by an executive officer to the
effect that, as of the Closing:
(i) all representations and warranties made by the Seller and
Convergent in this Agreement are true and correct in all material respects;
(ii) all covenants, obligations and conditions of this
Agreement to be performed by the Seller and Convergent on or before such date
have been so performed; and
(iii) there has not occurred since the date of this Agreement
any material adverse change in the Business or Assets.
(c) Claims. There shall not have occurred any claims since the date
------
of execution of the Agreement (whether or not asserted in litigation) which may
materially and adversely affect the consummation of the transactions
contemplated hereby or the Business or Assets.
-31-
(d) Legal Opinion. Parent shall have received a legal opinion from
-------------
Xxxxxx X. Xxxxxxx, Executive Vice President and General Counsel of Seller,
substantially in the form of Exhibit B hereto.
(e) No Injunctions or Restraints on Conduct of Business. No temporary
---------------------------------------------------
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
provision challenging Buyer's or Parent's proposed acquisition of the Business,
or limiting or restricting Buyer's or Parent's conduct or operation of the
business of the Business following the Acquisition shall be in effect, nor shall
any proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending.
(f) Litigation. Thereshall be no action, suit, claim or proceeding
----------
of any nature pending, or threatened, against Buyer, Parent, the Seller or
Convergent, their respective properties or any of their officers or directors,
arising out of, or in any way connected with, the Acquisition or the other
transactions contemplated by the terms of this Agreement.
(g) Bill of Sale. The Seller shall have delivered to Parent bills of
------------
sale conveying the Assets, in each case in substantially the form attached
hereto as Exhibit C.
(h) Third Party Consents. The Seller shall have delivered to Parent
--------------------
each third party consent listed on Schedule 1.9(f) in form and substance
reasonably satisfactory to Parent and its counsel.
ARTICLE VII
SURVIVAL; INDEMNIFICATION; ESCROW
7.1 Survival; Limitations on Indemnification.
----------------------------------------
(a) The representations and warranties and covenants and agreements
of the parties contained herein will survive the Closing, subject to the time
limitations set forth in Section 7.1(b) below. Notwithstanding the first
sentence of this Section 7.1, and without limiting the generality thereof, any
representation or warranty, covenant or agreement in respect of which indemnity
may be sought under any section of this Agreement will survive the time at which
it would otherwise terminate pursuant to this Agreement, if notice of the breach
of the representation or warranty, covenant or agreement giving rise to such
indemnity shall have been given to the party against whom such indemnity may be
sought, prior to such time. If Xxxxx has reason to know of any misrepresentation
or breach of warranty, covenant or condition herein prior to the Closing, Xxxxx
agrees to promptly notify Seller of such occurrence and Buyer and Seller agree
to use commercially reasonable efforts to cure such misrepresentation or breach
in a manner mutually satisfactory to Buyer and Seller. If such parties have not
reached agreement regarding a mutually satisfactory cure and all other
conditions to Closing hereunder are otherwise satisfied, then Xxxxx may agree to
effect
-32-
the Acquisition and thereafter make a claim for indemnification under this
Section 7.1 in respect of any Losses incurred by Xxxxx and/or Parent arising
from such uncured misrepresentation or breach.
(b) If the Closing occurs, (x) Seller and Convergent will have no
liability (for indemnification or otherwise) pursuant to this Article VII with
respect to any representation or warranty, or covenant or obligation to be
performed and complied with prior to the Closing Date, other than those
contained in Sections 2.2, 2.8 and 2.17 and other than claims based upon the
Excluded Liabilities unless on or before the date that is one (1) year after the
date of Closing, an Indemnitee (defined in Section 7.2(a)) notifies Convergent
of a claim specifying the factual basis of that claim in reasonable detail to
the extent then known to Parent or Buyer (in accordance with Section 7.2) and
(y) Buyer and Parent will have no liability (for indemnification or otherwise)
pursuant to this Article VII with respect to any representation or warranty, or
covenant or obligation to be performed or complied with prior to the Closing
Date, unless on or before the date that is one (1) year after the Closing Date,
an Indemnitee (defined in Section 7.2(a)) notifies Buyer or Parent of a claim
specifying the factual basis of that claim in reasonable detail to the extent
known to Seller or Convergent (in accordance with Section 7.2). Any claim made
by Buyer, its officers, directors or affiliates (including Parent) (each, a
"Buyer Indemnitee" and collectively, the "Buyer Indemnitees") with respect to
---------------- -----------------
Sections 2.2, 2.8 and 2.17 and the Excluded Liabilities may be made at any time,
subject to applicable statutes of limitations. The Seller and Convergent
acknowledge and agree that any claim made by a Buyer Indemnitee in respect of
any Adjustment made to the Purchase Price pursuant to Section 1.6 hereof shall
not preclude any Buyer Indemnitee from asserting a claim for indemnification
made pursuant to Section 7.2 hereof for any Losses (defined in Section 7.2(a))
incurred by such Buyer Indemnitee (or its affiliates) arising out of any breach
of any representation or warranty, covenant or other agreement of Seller or
Convergent contained or incorporated by reference herein, with respect to facts
that did not give rise to the Adjustment.
(c) Notwithstanding anything herein to the contrary, except as
provided in the last sentence of this Section 7.1(c), in no event will Seller or
Convergent be liable to pay an amount to Buyer pursuant to the terms hereof,
whether an indemnification or otherwise, greater than the Aggregate Maximum
Consideration payable to Seller under Section 1.5 hereof. The parties expressly
agree, however, that there shall be no maximum liability for Seller or
Convergent pursuant to this section or otherwise with respect to matters related
to Sections 2.8 and 5.6 or to any Excluded Liability.
7.2 Indemnification Procedures.
--------------------------
(a) Each party will indemnify the other party, its officers,
directors, or affiliates (including any parent entity thereof) (each, an
"Indemnitee" and collectively, the "Indemnitees") against and hold harmless from
---------- -----------
any and all damage, loss, liability, claim, obligation of any nature whatsoever
and expense (including without limitation, reasonable expenses of investigation
and reasonable attorneys' fees and expenses) ("Loss") incurred by any Indemnitee
----
arising out of any breach of any representation or warranty, covenant or other
agreement of the other party contained or incorporated by reference herein. In
addition, notwithstanding any disclosures made pursuant to this Agreement or any
other disclosures made by Convergent or the Seller to Buyer and Parent,
-33-
except as disclosed in the Seller Schedules, Convergent and/or the Seller will
also indemnify the Buyer Indemnitees against and hold harmless from any Loss
relating to or resulting from any liabilities (including the Excluded
Liabilities), obligations or commitments of, and all claims against the Seller
or Convergent arising from or based upon any condition, event or action existing
on or occurring prior to the Closing Date, except for (i) liabilities set forth
on the face of the Closing Schedule (as adjusted, if at all, pursuant to the
provisions of Section 1.6(d) hereof) to the extent of the amount recorded for
such liabilities on the face of the balance sheet contained in such financial
statements, and (ii) payment or performance obligations arising out of contracts
and agreements to which the Seller is a party and which are disclosed pursuant
to Sections 2.11 or 2.12 of this Agreement or are not required to be disclosed
pursuant to the terms of Sections 2.11 or 2.12 hereof.
Notwithstanding the foregoing, no party shall be required to provide
indemnification hereunder until the other party shall have first made a written
demand for payment with respect to any Losses and the demand shall have either
been rejected or not paid within twenty (20) days after receipt thereof.
(b) If seeking indemnification pursuant to Section 7.2, an Indemnitee
(the "indemnified party") will give prompt notice to the party to the other
-----------------
party from whom indemnification is sought (as applicable) (the "indemnifying
------------
party") of the assertion of any claim, or the commencement of any action or
-----
proceeding, in respect of which indemnity may be sought hereunder. The
indemnified party will have the right in its sole discretion to control the
defense of and settle any such claim; provided, however, that except with the
-------- -------
consent of the indemnifying party, no settlement of any such claim will alone be
determinative of the amount of any indemnity hereunder. In the event that the
indemnifying party has consented to any such settlement, the indemnifying party
will have no power or authority to object under any provision of this Article
VII to the amount of any indemnification claim by the indemnified party with
respect to such settlement. The indemnifying party will be entitled, at its
expense, to participate in such defense. No investigation by the indemnified
party at or prior to the Closing will relieve the indemnifying party of any
liability hereunder, except as disclosed in the Seller Schedules.
(c) If any third party shall notify the indemnified party with
respect to any matter (a "Third Party Claim") which may give rise to a claim for
-----------------
indemnification against the indemnifying party under this Article VII, the
indemnified party shall promptly notify the indemnifying party thereof in
writing; provided, however, that no delay on the part of the indemnified party
-------- -------
in notifying any indemnifying party shall relieve the indemnifying party from
any obligation hereunder unless (and then solely to the extent) the indemnifying
party thereby is substantially prejudiced.
(d) The indemnified party may defend against, and consent to the
entry of any judgment or enter into any settlement with respect to, the Third
Party Claim in any manner such indemnified party reasonably may deem appropriate
(and such indemnified party need not consult with, or obtain any consent from,
any indemnifying party in connection therewith), and the indemnifying party will
remain responsible for any Losses the indemnified party may suffer resulting
from, xxxxxxx out of, relating to, in the nature of, or caused by the Third
Party Claim to the fullest extent provided in this Article VII. Notwithstanding
the foregoing sentence, (i) counsel for
-34-
the indemnifying party shall be permitted to monitor the indemnified party's
defense of a Third Party Claim for the purpose of advising the indemnifying
party of the status and progress of the defense. Any such activity shall be at
the sole expense of the indemnifying party and (ii) Seller shall have the right
to defend against all Third Party claims relating to Tax matters as to periods
ending on or prior to the Closing.
(e) Notwithstanding anything contained herein to the contrary but
subject to the proviso below, an indemnifying party shall not have any liability
or obligation to indemnify the indemnified parties for any Losses unless and
until Losses equal or exceed $200,000 in the aggregate for all Losses
(aggregating, in the case of losses incurred by Seller and Convergent, all
Losses arising from or relating to both Convergent and the Seller) (the "Basket
------
Amount") and Officer's Certificates (as hereinafter defined) shall have been
------
delivered to such indemnifying party with respect to such Losses; provided,
--------
however, that this Basket Amount shall not apply to any Losses arising out of
-------
any breach of any representation, warranty or covenant contained in Section 2.8
"Tax Matters" or Section 2.15 "Litigation," or to Losses related to any Excluded
Liability. At such time as Officer's Certificates with respect to Losses subject
to the Basket Amount which in the aggregate equal the Basket Amount have been
delivered, the indemnified parties shall be entitled to indemnification for all
Losses, including the Basket Amount. An indemnified party shall not be entitled
to recover consequential damages resulting from any Loss.
(f) Notwithstanding the provisions of Article VII to the contrary, in
the event any indemnification claim of a Buyer Indemnitee is based on an
Excluded Liability (an "Excluded Liability Claim"), the Seller shall have
------------------------
discretion, upon written notice to the indemnified party, to control the defense
of and settle any such claim. Failure of the Seller to actively defend an
Excluded Liability Claim shall entitle the indemnified party to control the
defense of and settle such claim as provided above. Nothing herein shall prevent
the indemnified party from participating or monitoring such defense of Excluded
Liability Claims, provided such participation or monitoring is at the cost and
expense of the indemnified party if the Seller is actively conducting a defense
of such claim. The Seller may consent to the entry of any judgment or enter into
any settlement with respect to any Excluded Liability Claim in any manner the
Seller reasonably may deem appropriate (and such Seller need not consult with,
or obtain any consent from, the indemnified party in connection therewith). The
Seller shall pay all Losses relating to Excluded Liability Claims to the extent
required under this Article VII. Nevertheless, if a Buyer Indemnitee is named as
a party in an Excluded Liability Claim, then such party shall have the ability
to control its own defense of and settle any such Excluded Liability Claim and
shall be indemnified by the Seller and/or Convergent for any Losses arising out
of or relating to such Excluded Liability Claim.
(g) All indemnification by Seller under this Article VII shall be
effected first by offset against the Escrow Fund.
7.3 Escrow Arrangements.
-------------------
(a) Escrow Fund. At the Closing, Buyer shall deposit on behalf of
-----------
Seller and the Seller will be deemed to have received and deposited with the
Escrow Agent (as defined below) the Escrow Amount (together with any interest
earned thereon during the term of the escrow set forth in
-35-
this Section 7.3, the "Escrow Fund") without any act of the Seller. On the
-----------
Closing Date, the Escrow Amount, without any act of the Seller, will be
deposited by Buyer with Bank One (the "Escrow Agent"). The Escrow Fund will be
------------
governed by the terms set forth herein. The Escrow Fund will be available (i) to
effect any Adjustment to the Purchase Price made pursuant to Section 1.6, (ii)
to serve as partial security for the Seller's indemnification obligations under
Section 7.2(a) hereof and (iii) to compensate Buyer for Accounts Receivable
returned to Seller pursuant to Section 5.13 hereof. All interest accruing on any
portion of Escrow Fund shall be paid to the party ultimately entitled to such
Escrow Fund portion by operation of this Section 7.3.
(b) Escrow Periods; Distribution upon Termination of Escrow Period.
--------------------------------------------------------------
The Escrow Fund shall be released to Seller upon occurrence of the following
events:
(i) First Escrow Period. Within three (3) business days
-------------------
following the 100/th/ day following the Closing (the "First Escrow Period"), the
-------------------
Escrow Agent shall release to Seller by wire transfer of a portion of the Escrow
Fund into a bank account designated by Seller, a cash amount equal to two-thirds
of the Escrow Fund, less an amount equal to the sum of (x) all amounts
theretofore distributed out of the Escrow Fund to the Buyer Indemnitees pursuant
to this Section 7.3, and (y) an amount that would be equal, together with the
balance of the Escrow Fund that would otherwise remain in the Escrow Fund, to
such portion of the Escrow Fund which, in the judgment of Parent, subject to the
reasonable objection of the Seller and the subsequent arbitration of the matter
in the manner provided in Section 7.3(f) hereof, is necessary to satisfy any
unsatisfied claims specified in any Officer's Certificate delivered to the
Escrow Agent prior to termination of the First Escrow Period, which amount shall
remain in the Escrow Fund until such claims have been resolved.
(ii) Second Escrow Period. Within three (3) business days
--------------------
following the 180/th/ day following the Closing (the "Second Escrow Period" and,
--------------------
together with the First Escrow Period, the "Escrow Periods") the Escrow Agent
--------------
shall release to Seller, by wire transfer of a portion of the Escrow Fund, into
a bank account designated by Seller, a cash amount equal to the remaining
balance of the Escrow Fund, less an amount equal to the sum of such portion of
the remaining Escrow Fund which, in the judgment of Parent, subject to the
reasonable objection of the Seller and the subsequent arbitration of the matter
in the manner provided in Section 7.3(f) hereof, is necessary to satisfy any
unsatisfied claims specified in any Officer's Certificate delivered to the
Escrow Agent prior to termination of the Second Escrow Period, which amount
shall remain in the Escrow Fund (and the Escrow Fund shall remain in existence)
until such claims have been resolved. As soon as all such claims have been
resolved (such resolution to be evidenced by the written agreement of the Seller
and the Parent or the written decision of the arbitrators as described in
Section 7.3(f)), the Escrow Agent will deliver to the Seller the remaining
portion of the Escrow Fund (along with all accrued interest thereon) not
required to satisfy such claims. The parties agree and acknowledge that any
portion of the Escrow Fund excluded from distribution to Seller by operation of
clauses (x) or (y) of Section 7.3(b)(i) shall not also be excluded from
distribution to Seller by operation of this Section 7.3(b)(ii).
(c) Protection of Escrow Fund. The Escrow Agent will hold and
-------------------------
safeguard the Escrow Fund during the Escrow Periods, will treat such fund as a
trust fund in accordance with the
-36-
terms of this Agreement and not as the property of the Buyer Indemnitees or the
Seller and will hold and dispose of the Escrow Fund only in accordance with the
terms hereof. The Escrow Fund will be invested by Escrow Agent in demand and
time deposits in banks or savings institutions, short term certificates of
deposits or Treasury bills, or money market account instruments ("Permitted
---------
Investments"). Seller will at any time direct the Escrow Agent in writing
-----------
regarding the investment of all or any part of the Escrowed Funds, provided (i)
such directed investments are Permitted Investments, and (ii) Parent consents
thereto, which consent shall not be unreasonably withheld.
(d) Claims Upon Escrow Fund. Upon receipt by the Escrow Agent at any
-----------------------
time on or before the last day of the Second Escrow Period of a certificate
signed by any officer of Parent (an "Officer's Certificate"): (A) stating that
---------------------
either Buyer or Parent has paid for any item of Loss and (B) specifying in
reasonable detail the individual items of Losses included in the amount so
stated, the date each such item was paid and the nature of the
misrepresentation, breach of warranty or covenant to which such item is related,
the Escrow Agent will, subject to the provisions of Section 7.3(e) and (f)
hereof, deliver to Parent on behalf of such Buyer Indemnities out of the Escrow
Fund an amount equal to such Losses by wire transfer (within three business
days) of immediately available funds to an account of Parent specified by
Parent. To the extent that the Escrow Fund is or becomes exhausted, Seller or
Convergent will, subject to the provisions of Section 7.3(e) and (f) hereof,
deliver to Parent an amount equal to such Losses by wire transfer (within three
business days) of immediately available funds to an account of Parent specified
by Parent.
(e) Objections to Claims. At the time of delivery of any Officer's
--------------------
Certificate to the Escrow Agent, a duplicate copy of such certificate will be
delivered to the Seller and for a period of thirty (30) days after such
delivery, the Escrow Agent will make no delivery to Buyer or Parent of any
Escrow Funds pursuant to Section 7.3(d) hereof unless the Escrow Agent shall
have received written authorization from the Seller to make such delivery. After
the expiration of such thirty (30) day period, the Escrow Agent will make
delivery from the Escrow Fund in accordance with Section 7.3(d) hereof,
provided, that, no such payment or delivery may be made if the Seller shall
-------- ----
object in a written statement to the claim made in the Officer's Certificate,
and such statement shall have been delivered to the Escrow Agent prior to the
expiration of such thirty (30) day period.
(f) Resolution of Conflicts; Arbitration.
------------------------------------
(i) In case the Seller shall so object in writing to any claim
or claims made in any Officer's Certificate, Parent (on behalf of the Buyer
Indemnitees) and the Seller will attempt in good faith to agree upon the rights
of the respective parties with respect to each of such claims. If Parent and the
Seller should so agree, a memorandum setting forth such agreement will be
prepared and signed by both parties and will be furnished to the Escrow Agent.
The Escrow Agent will be entitled to rely on any such memorandum and distribute
funds from the Escrow Fund in accordance with the terms thereof.
(ii) If no such agreement can be reached after good faith
negotiation, either Parent (on behalf of the Buyer Indemnitees) or the Seller
may demand arbitration of the matter unless the amount of the damage or loss is
at issue in pending litigation with a third party, in which
-37-
event arbitration will not be commenced until such amount is ascertained or both
parties agree to arbitration; and in either such event the matter will be
settled by arbitration conducted by one arbitrator. Parent and the Seller shall
in good faith mutually agree upon the selection of the arbitrator. The
arbitrator will set a limited time period and establish procedures designed to
reduce the cost and time for discovery while allowing the parties an
opportunity, adequate in the sole judgment of the arbitrator, to discover
relevant information from the opposing parties about the subject matter of the
dispute. The decision of the arbitrator as to the validity and amount of any
claim in such Officer's Certificate will be binding and conclusive upon the
parties to this Agreement, and notwithstanding anything in Section 7.3(e)
hereof, the Escrow Agent will be entitled to act in accordance with such
decision and make or withhold payments out of the Escrow Fund in accordance
therewith. Such decision will be written and will be supported by written
findings of fact and conclusions which will set forth the award, judgment,
decree or order awarded by the arbitrator.
(iii) Judgment upon any award rendered by the arbitrator may be
entered in any court having jurisdiction. Any such arbitration will be held in
Phoenix, Arizona, under the rules then in effect of the American Arbitration
Association. Parent (on behalf of the Buyer Indemnities) and the Seller shall
each pay its own expenses related to the arbitration plus fifty percent (50%) of
the costs of arbitration, including but not limited to the fees of the
arbitrator and the administrative fee of the American Arbitration Association,
except where the arbitrator in its order finds that the non-prevailing party
should pay the costs of the arbitration.
(g) Escrow Agent's Duties.
---------------------
(i) The Escrow Agent will be obligated only for the
performance of such duties as are specifically set forth herein, and as set
forth in any additional written escrow instructions which the Escrow Agent may
receive after the date of this Agreement which are signed by an officer of Buyer
and an officer of the Seller, and may rely and will be protected in relying or
refraining from acting on any instrument reasonably believed to be genuine and
to have been signed or presented by the proper party or parties. The Escrow
Agent will not be liable for any act done or omitted hereunder as Xxxxxx Agent
while acting in good faith and in the exercise of reasonable judgment, and any
act done or omitted pursuant to the advice of counsel will be conclusive
evidence of such good faith.
(ii) The Escrow Agent is hereby expressly authorized to
disregard any and all warnings given by any of the parties hereto or by any
other person, excepting only orders or process of courts of law, and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case the Escrow Agent obeys or complies with any such order, judgment
or decree of any court, the Escrow Agent will not be liable to any of the
parties hereto or to any other person by reason of such compliance,
notwithstanding any such order, judgment or decree being subsequently reversed,
modified, annulled, set aside, vacated or found to have been entered without
jurisdiction.
-38-
(iii) The Escrow Agent will not be liable in any respect on
account of the identity, authority or rights of the parties executing or
delivering or purporting to execute or deliver this Agreement or any documents
or papers deposited or called for hereunder.
(iv) The Escrow Agent will not be liable for the expiration of
any rights under any statute of limitations with respect to this Agreement or
any documents deposited with the Escrow Agent.
(v) In performing any duties under the Agreement, the Escrow
Agent will not be liable to any party for damages, losses, or expenses, except
for gross negligence or willful misconduct on the part of the Escrow Agent. The
Escrow Agent will not incur any such liability for (A) any act or failure to act
made or omitted in good faith, or (B) any action taken or omitted in reliance
upon any instrument, including any written statement of affidavit provided for
in this Agreement that the Escrow Agent shall in good faith believe to be
genuine, nor will the Escrow Agent be liable or responsible for forgeries,
fraud, impersonations, or determining the scope of any representative authority.
In addition, the Escrow Agent may consult with legal counsel in connection with
Escrow Agent's duties under this Agreement and shall be fully protected in any
act taken, suffered, or permitted by him/her in good faith in accordance with
the advice of counsel. The Escrow Agent is not responsible for determining and
verifying the authority of any person acting or purporting to act on behalf of
any party to this Agreement.
(vi) If any controversy arises between the parties to this
Agreement, or with any other party, concerning the subject matter of this
Agreement, its terms or conditions, the Escrow Agent will not be required to
determine the controversy or to take any action regarding it. The Escrow Agent
may hold all documents and the Escrow Fund and may wait for settlement of any
such controversy by final appropriate legal proceedings or other means as, in
the Escrow Agent's discretion, the Escrow Agent may be required, despite what
may be set forth elsewhere in this Agreement. In such event, the Escrow Agent
will not be liable for damage.
Furthermore, the Escrow Agent may at its option, file an action of
interpleader requiring the parties to answer and litigate any claims and rights
among themselves. The Escrow Agent is authorized to deposit with the clerk of
the court all documents and funds held in escrow, except all cost, expenses,
charges and reasonable attorney fees incurred by the Escrow Agent due to the
interpleader action and which the parties jointly and severally agree to pay.
Upon initiating such action, the Escrow Agent shall be fully released and
discharged of and from all obligations and liability imposed by the terms of
this Agreement.
(vii) The parties and their respective successors and assigns
agree jointly and severally to indemnify and hold the Escrow Agent harmless
against any and all losses, claims, damages, liabilities, and expenses,
including reasonable costs of investigation, counsel fees, and disbursements
that may be imposed on the Escrow Agent or incurred by the Escrow Agent in
connection with the performance of his/her duties under this Agreement,
including but not limited to any litigation arising from this Agreement or
involving its subject matter.
-39-
(viii) The Escrow Agent may resign at any time upon giving at
least thirty (30) days written notice to the parties; provided, however, that no
-------- -------
such resignation will become effective until the appointment of a successor
escrow agent which will be accomplished as follows: Xxxxxx (on behalf of the
Buyer Indemnities) and the Seller will use their commercially reasonable efforts
to mutually agree on a successor escrow agent within thirty (30) days after
receiving such notice. If Xxxxxx and the Seller fail to agree upon a successor
escrow agent within such time, the Escrow Agent will have the right to appoint a
successor escrow agent authorized to do business in the State of Arizona. The
successor escrow agent will execute and deliver an instrument accepting such
appointment and it will, without further acts, be vested with all the estates,
properties, rights, powers, and duties of the predecessor escrow agent as if
originally named as escrow agent. The Escrow Agent will be discharged from any
further duties and liability under this Agreement.
(h) Fees. Half of all fees of the Escrow Agent for performance of
----
its duties hereunder will be paid by the Seller and half of all such fees will
be paid by Xxxxxx (on behalf of the Buyer Indemnities). It is understood that
the fees and usual charges agreed upon for services of the Escrow Agent will be
considered compensation for ordinary services as contemplated by this Agreement.
In the event that the conditions of this Agreement are not promptly fulfilled,
or if the Escrow Agent renders any service not provided for in this Agreement,
or if the parties request a substantial modification of its terms, or if any
controversy arises, or if the Escrow Agent is made a party to, or intervenes in,
any litigation pertaining to this escrow or its subject matter, the Escrow Agent
will be reasonably compensated for such extraordinary services and reimbursed
for all costs, attorney's fees, and expenses occasioned by such default, delay,
controversy or litigation. Each of Parent (on behalf of the Buyer Indemnities)
and the Seller promises to pay one half of these sums upon demand.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. Except as provided in Section 8.2 below, this Agreement
-----------
may be terminated and the Acquisition abandoned at any time prior to the
Closing:
(a) by mutual consent of Seller and Xxxxxx;
(b) by Parent, Buyer, Convergent or the Seller if: (i) the Closing
has not occurred by February 28, 2001; (ii) there shall be a final nonappealable
order of a federal or state court in effect preventing consummation of the
Acquisition; or (iii) there shall be any statute, rule, regulation or order
enacted, promulgated or issued or deemed applicable to the Acquisition by any
governmental entity that would make consummation of the Acquisition illegal;
(c) by Parent if there shall be any action taken, or any statute,
rule, regulation or order enacted, promulgated or issued or deemed applicable to
the Acquisition by any Governmental Entity, which would: (i) prohibit Parent's,
Xxxxx's or the Seller's ownership or operation of all or a
-40-
portion of the Business or (ii) compel Parent, Buyer or the Seller to dispose of
or hold separate all or a portion of the Business or Assets as a result of the
Acquisition;
(d) by Parent or Buyer if (x) it is not in material breach of its
obligations under this Agreement and there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of the Seller and such breach has not been cured within five (5)
business days after written notice to the Seller (provided, that, no cure period
-------- ----
shall be required for a breach which by its nature cannot be cured) or (y) there
has occurred a material adverse change in the Business or Assets; or
(e) by the Seller or by Convergent if neither is in material breach
of its respective obligations under this Agreement and there has been a material
breach of any representation, warranty, covenant or agreement contained in this
Agreement on the part of Buyer or Parent and such breach has not been cured
within five (5) business days after written notice to Buyer or Parent (as
applicable) (provided, that, no cure period shall be required for a breach which
-------- ----
by its nature cannot be cured).
Where action is taken to terminate this Agreement pursuant to this Section
8.1, it shall be sufficient for such action to be authorized by the Board of
Directors (as applicable) of the party taking such action.
8.2 Effect of Termination. In the event of termination of this Agreement
---------------------
as provided in Section 8.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of Parent, Buyer, the Seller or
Convergent, or their respective officers, directors or shareholders, provided,
--------
that, each party shall remain liable for any breaches of this Agreement prior to
----
its termination; and provided, further, that the provisions of Sections 5.3, 5.4
-------- -------
and 5.5 of this Agreement shall remain in full force and effect and survive any
termination of this Agreement.
8.3 Amendment. This Agreement may be amended by the parties hereto at any
---------
time by execution of an instrument in writing signed on behalf of each of the
parties hereto (excluding the Escrow Agent with respect to all matters other
than those contained in Article VII hereto).
8.4 Extension; Waiver. At any time prior to the Closing, Buyer and Parent,
-----------------
on the one hand, and the Seller and Convergent, on the other hand, may, to the
extent legally allowed, (i) extend the time for the performance of any of the
obligations of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
-41-
ARTICLE IX
GENERAL PROVISIONS
9.1 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with acknowledgment of complete transmission)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to Buyer or Parent, to:
Inter-Tel, Incorporated
000 Xxxxx 00/xx/ Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000-0000
with a copy at the same address to the attention of Mr. Xxxx
Xxxxxxx
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C.
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-1050
Attention: Xxxxx X. Xxxx, Esq.
(b) if to the Seller or Convergent, to:
Convergent Communications Services, Inc.
000 Xxxxxxxxx Xxxxx Xxxxx, 0/xx/ Xxxxx
Xxxxxxxxx, XX 00000
Attention: Legal Department
with a copy to:
Xxxxxx, Xxxx & Xxxxxxxx LLP
0000 Xxxxxxxxxx Xxxxxx, Xxx. 0000
Xxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
(c) if to Escrow Agent, to:
Bank One, Arizona, N.A.
Corporate Trust Services, AZ 1-0000
000 Xxxxx Xxxxxxx Xxxxxx, 00/xx/ Xxxxx
Xxxxxxx, Xxxxxxx
Attention: [Xxxxx X. Xxxxxxxx]
-42-
9.2 Interpretation. The words "include," "includes" and "including" when
--------------
used herein shall be deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.3 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
9.4 Entire Agreement; Assignment. This Agreement, the schedules and
----------------------------
Exhibits hereto, and the documents and instruments and other agreements among
the parties hereto referenced herein: (a) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; (b) are not intended to confer upon any
other person any rights or remedies hereunder; and (c) shall not be assigned by
operation of law or otherwise except as otherwise specifically provided, except
that Parent or Buyer may assign their respective rights and delegate their
respective obligations hereunder to their respective affiliates, so long as
Parent agrees to continue to remain liable for all obligations of Xxxxxx and
Buyer hereunder.
9.5 Severability. In the event that any provision of this Agreement or
------------
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
9.6 Other Remedies. Except as otherwise provided herein, any and all
--------------
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
9.7 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
9.8 Rules of Construction. The parties hereto agree that they have been
---------------------
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
* * *
-43-
IN WITNESS WHEREOF, Xxxxx, Parent and the Seller have caused this Asset
Purchase Agreement to be signed by their duly authorized respective officers,
all as of the date first written above.
Parent:
Buyer: Seller:
Inter-Tel Technologies, Inc. Convergent Communications Services, Inc.
_________________________________ _________________________________________
By: /s/ Xxxxx X. Xxxxxxx By: /s/ Xxxxxx X. Xxxx
------------------------------ --------------------------------------
Name: XXXXX X. XXXXXXX Name: XXXXXX X. XXXX
---------------------------- ------------------------------------
Title: PRESIDENT Title: CEO
--------------------------- -----------------------------------
Parent: Convergent:
Inter-Tel, Incorporated Convergent Communications, Inc.
__________________________________ _________________________________________
By: /s/ Xxxxx X. Xxxxxxx By: /s/ Xxxxxx X. Xxxx
------------------------------- --------------------------------------
Name: XXXXX X. XXXXXXX Name: XXXXXX X. XXXX
----------------------------- ------------------------------------
Title: EVP Title: CEO
---------------------------- -----------------------------------
***ASSET PURCHASE AGREEMENT***
Escrow Agent:
(with respect to Article VII only)
BANK ONE TRUST COMPANY, NA
--------------------------
By: /s/ Xxxxxx X. Xxxxx
-----------------------
Name: XXXXXX X. XXXXX
---------------------
Title: VICE PRESIDENT
--------------------
***ASSET PURCHASE AGREEMENT***
