AGREEMENT FOR PURCHASE AND SALE OF ASSETS
PREAMBLE
This Agreement for Purchase and Sale of Assets ("Agreement") is dated as of
February 26, 2001 ("Effective Date") by and among (i) AremisSoft Hospitality
(US), Inc., a Delaware corporation (the "Purchaser"), (ii) Rio Systems
International, Inc., a Nevada corporation (the"Company"); and (iii) each and all
of the shareholders listed on the signature page hereof under the caption
"Shareholders" (collectively, the "Shareholders," and individually with respect
to each, as the "Shareholder".) Shareholders and Company are collectively
referred to in this Agreement as "Selling Parties". Selling Parties and
Purchaser are collectively referred to in this Agreement as the "Parties".
RECITALS
WHEREAS, this Agreement contemplates a transaction in which the Purchaser
will purchase all of the assets (and assume certain liabilities) of the Company
in consideration of the Purchase Price;
WHEREAS, Purchaser desires to acquire on the terms and subject to the
conditions reflected below, the assets of the Company;
WHEREAS, the Selling Parties desire that the transaction contemplated
herein be consummated and that Selling Parties take any and all actions
necessary therefore;
NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties contained herein, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
Parties hereby agree as follows:
ARTICLE I.
DEFINITIONS
1. Definitions. For purposes of this Agreement, the following terms shall
have the meanings specified with respect thereto below:
"Acquired Assets" shall have the meaning set forth in Section 2.1.
"Action" shall mean any action, suit, litigation, complaint,
counterclaim, claim, petition, mediation contest, or administrative
proceeding, whether at Law, in equity, in arbitration or otherwise, and
whether conducted by or before any Government or other Person.
"Affiliate" of any specified Person shall mean any other Person
directly or indirectly Controlling, Controlled by, or under direct or
indirect common Control with such specified Person.
"Affiliated Entity" or "Affiliated Entities" shall have the meaning
set forth in Section 3.16.
"Agreement" shall have the meaning set forth in the Preamble.
"Assumed Liabilities" shall have the meaning set forth in Section 2.2.
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"Basis" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis
for any specified consequence.
"Business Day" shall mean any day other than a Saturday, a Sunday or a
day on which commercial banks in the United States are required or
authorized to be closed.
"Closing" shall have the meaning set forth in Section 9.1.
"Closing Date" shall have the meaning set forth in Section 9.1.
"Company Contracts" means all existing written and oral material
agreements and commitments of the Company, including, without limitation,
all employment and consulting contracts, union contracts, distributorship
agreements, agreements with suppliers and customers (except purchase or
sale orders entered into in the ordinary course of business involving the
purchase or sale of goods or services for not more than $10,000 and for a
term of not more than 12 months), leases, licenses, employee benefit plans,
deferred compensation agreements, indentures, notes, bonds, mortgages,
security agreements, loan agreements, guarantees, franchise agreements,
agreements in respect of the issuance, sale, powers of attorney, and any
contract which involves a payment by the Company of more than $10,000 or
has a term or requires performance by the Company over a period of more
than 90 days.
"Company Pension Plan" shall have the meaning set forth in Section
3.21.
"Confidential Information" shall mean any information concerning the
business and affairs of the Company that is not already generally available
to the public.
"Control" means a Person who possesses, directly or indirectly, the
power to direct or cause the direction of the management and policies of
another Person, whether through the ownership of voting securities, by
contract or otherwise.
"Disclosure Memorandum" shall have the meaning set forth in the
introduction to Article III.
"Earn-out Target" shall have the meaning set forth in Schedule 2.4.
"Earn-out Period" shall have the meaning set forth in Schedule 2.4.
"Environmental Laws" shall mean all Laws, general or particular
conditions, requirements, decrees, and covenants relating to health, safety
and the environment, including, without limitation, Laws and covenants
relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals, or industrial, toxic or Hazardous
Materials or wastes of every kind and nature into the environment
(including without limitation ambient air, surface water, ground water,
soil and subsoil), or otherwise relating to the manufacture, generation,
processing, distribution, application, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes, or to occupational or
worker safety and health, and any and all Laws, directives, guidelines,
policies, plans, Orders, stipulations, provisions and conditions of
Environmental Permits, licenses, stipulations, certificates of
authorization, and other operating authorizations, notices or demand
letters issued, entered, promulgated or approved thereunder.
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"Environmental Permits" shall mean all permits, licenses,
certificates, approvals, authorizations, regulatory plans or compliance
schedules required by applicable Environmental Laws, or issued by a
Government pursuant to applicable Environmental Laws, or entered into by
agreement of the party to be bound, relating to activities that affect
human health or the environment, including, without limitation, permits,
licenses, certificates, approvals, authorizations, regulatory plans and
compliance schedules for air emissions, water discharges, pesticide and
herbicide or other agricultural chemical storage, use or application, and
Hazardous Material or Solid Waste generation, use, storage, treatment and
disposal.
"ERISA" shall have the meaning set forth in Section 3.18.
"ERISA Plans" shall have the meaning set forth in Section 3.21.
"Escrow Agreement" shall have the meaning set forth in Section 10.4.
"Escrow Fund" shall have the meaning set forth in Section 10.4.
"Financial Statements" shall have the meaning set forth in Section
3.6.
"Forum" shall mean any federal, national, state, local, municipal or
foreign court, governmental agency, administrative body or agency,
tribunal, private alternative dispute resolution system, or arbitration
panel.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"Government" shall mean any federal, national, state, provincial,
local, municipal, or foreign government or any department, commission,
board, bureau, agency, instrumentality, unit, or taxing authority thereof.
"Hazardous Material" shall mean any substance or material, including
without limitation raw materials, commercial products and wastes or waste
products that, because of its quantity, concentration, or physical,
chemical or infectious characteristics may cause or significantly
contribute to an increase in mortality or an increase in serious,
irreversible or incapacitating illness, or pose a substantial hazard to
human health or the environment, including without limitation petroleum and
all substances and materials designated as hazardous or toxic under any
applicable Environmental Law.
"hereof," "herein," "hereunder" and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and "article," "section," "Exhibit"
and like references are to this Agreement unless otherwise specified.
"Improvements" shall mean all buildings, structures and other
improvements of any and every nature located on the Real Property and all
fixtures attached or affixed, actually or constructively, to the Real
Property or to any such buildings, structures or other improvements.
"Indemnified Losses" shall have the meaning set forth in Section 10.1.
"Indemnitees" shall have the meaning set forth in Section 10.1.
"Intellectual Property" shall have the meaning set forth in Section
2.1(iv).
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"known," "to the knowledge of," "aware" or words of similar import
employed in this Agreement with reference to any individual or entity shall
be conclusively presumed to mean that the individual or entity has made
reasonable efforts under the circumstances to become knowledgeable; in the
case of the Company, "knowledge" shall be deemed to be the individual and
collective knowledge (as defined above) of its directors and senior
officers and managers.
"Law" shall mean all federal, national, state, provincial, local,
municipal or foreign constitutions, statutes, rules, regulations, norms,
ordinances, acts, codes, legislation, treaties, conventions, common law
principles, judicial decisions and similar laws and legal requirements,
whether of the United States of America or any other jurisdiction as in
effect from time to time.
"Leased Real Property" shall have the meaning set forth in Section
3.12(b).
"Liability" shall mean any liability or obligation whether known or
unknown, asserted or unasserted, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated and whether due or to become due.
"Lien" shall mean any mortgage, pledge, hypothecation, security
interest, encumbrance, claim, restriction on use, lien or charge of any
kind, or any rights of others, however evidenced or created (including any
agreement to give any of the foregoing, any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the lien notice records or
other similar legislation of any jurisdiction).
"Orders" shall mean all applicable orders, writs, judgments,
injunctions, decrees, rulings, consent agreements, and awards of or by any
Forum or entered by consent of the party to be bound.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to
quantity and frequency).
"Other Agreements" shall have the meaning set forth in Section 3.1(b).
"Owned Real Property" shall have the meaning set forth in Section
3.12(a).
"Person" shall include an individual, a partnership, a joint venture,
a corporation, a limited liability company, a trust, an unincorporated
organization and a Government.
"Product" shall mean those services , equipment and software provided
to a customer which relates directly or indirectly to the Acquired Assets.
"Purchase Price" shall have the meaning set forth in Section 2.3.
"Real Property" shall have the meaning set forth in Section 3.12(b).
"Real Property Lease" shall have the meaning set forth in Section
3.12(b).
"Reference Date" shall have the meaning set forth in Section 3.6.
"Reference Date Balance Sheets" shall have the meaning set forth in
Section 3.6.
"Related Parties" shall have the meaning set forth in Section 3.24.
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"Resulting Business" shall mean, for the purpose of tracking the
earn-out as provided for in Section 2.4, the business of the Company which
was acquired pursuant to this Agreement.
"Returns" shall have the meaning set forth in Section 3.19.
"Security Interest" shall mean any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a) mechanic's,
materialman's, and similar liens, (b) liens for taxes not yet due and
payable or for taxes that the taxpayer is contesting in good faith through
appropriate proceedings, (c) purchase money liens and liens securing rental
payments under capital lease arrangements, and (d) other liens arising in
the Ordinary Course of Business and not incurred in connection with the
borrowing of money.
"Shareholder" or "Shareholders" shall have the meaning set forth in
the Preamble.
"Solid Waste" shall mean any garbage, refuse, sludge from a waste
treatment plant, water supply treatment plant, or air pollution control
facility and other discarded material, including solid, liquid, semisolid,
or contained gaseous material resulting from industrial, commercial, mining
and agricultural operations, and from community activities.
"Survival Period" shall have the meaning set forth in Section 10.3.
"Tax" or "Taxes" shall mean any present or future taxes, levies,
imposts, duties, fees, assessments, deductions, withholdings or other
charges of whatever nature, including without limitation income, gross
receipts, excise, property, sales, use, customs, value added, consumption,
transfer, license, payroll, employee income, withholding, social security,
and franchise taxes, now or hereafter imposed or levied by the United
States of America or any Government or by any department, agency or other
political subdivision or taxing authority thereof or therein, all deposits
required in connection therewith, and all interests, penalties, additions
to tax, and other similar Liabilities with respect thereto.
ARTICLE II.
PURCHASE AND SALE OF ASSETS
2.1. Sale and Transfer of Assets. Subject to the terms and conditions set
forth in this Agreement, the Company agrees to sell, convey, transfer, assign,
and deliver to Purchaser, and Purchaser agrees to purchase from the Company, all
the assets, properties, business, and rights of the Company of every kind,
character, and description, whether tangible, intangible, real, personal, or
mixed, and wherever located, including the cash and accounts receivable (all of
which are sometimes collectively referred to herein as the "Acquired Assets").
The Acquired Assets include but are not limited to the following:
(i) Those assets which are reflected in the Reference Date Balance
Sheet, attached as Schedule 2.1(i), adjusted to account for additions or
deletions thereto through the Closing Date, effected through the operation
of the Company's Ordinary Course of Business (including the preparation for
this transaction and the Closing of this transaction), a listing of
substantially all such assets which are tangible (including all of such
tangible assets which are material) and a listing of the Company's account,
note, and other receivables (both reasonably complete as of the date(s)
specified thereon), are attached as Schedule 2.1(i);
(ii) All sales and business records, personnel records of the
Company's employees, credit records of the Company's customers, customer
lists and other documents developed by Selling Parties and used or useful
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in connection with the business operations of the Company, and all records,
logs, files, research materials, proprietary information, and other records
pertaining to the business operations of the Company except for the
Company's accounting, tax, and the Company's corporate records;
(iii) All contracts and agreements (including, without limitation,
leases and subleases of real and personal property) entered into by the
Selling Parties in connection with the business operation of the Company. A
complete list of all Company Contracts are attached as Schedule 2.1(iii);
(iv) All goodwill and all of Selling Parties' right, title and
interest in all other "Intellectual Property Rights," intangible assets,
properties or rights of any kind or nature associated with the business
operations of the Company, including but not limited to software code and
web sites. "Intellectual Property Rights" means, collectively all
intellectual property rights of whatsoever nature, including without
limitations:
(a) All trademarks, trademark registrations, trademark
applications, service marks, service xxxx registrations,
service xxxx applications, rights under registered user
agreements, trade names and other trademark rights,
including the right to the trade name "RIO SYSTEMS
INTERNATIONAL, INC.";
(b) All copyrights and industrial designs and registrations
thereof and applications therefore;
(c) All inventions, patents, patent applications and patent
rights (including any patents issuing on such applications
or rights);
(d) All licenses, sublicenses and franchises;
(e) All trade secrets and confidential information;
(f) All computer software and rights related thereto;
(g) All renewals, modifications and extensions of any of the
items listed in this Section 2.1(iv) inclusive hereof; and
(h) All patterns, plans, designs, research data, other
proprietary know-how, processes, drawings, technology,
inventions, formulae, specifications, performance data,
quality control information, unpatented blue prints, flow
sheets, equipment and parts lists, instructions, manuals,
records and procedures, and all licenses, agreements and
other contracts and commitments relating to any of the
foregoing.
Such Acquired Assets shall be free and clear of and expressly
exclude all debts, Liabilities, obligations, Taxes, Liens and
encumbrances of any kind, character or description, whether accrued,
absolute, contingent or otherwise, whether or not relating to
equipment lease transactions (and whether or not reflected or reserved
against in the balance sheets, books of account and records of the
Company).
2.2. Assumed Liabilities. On and subject to the terms and conditions of
this Agreement, the Purchaser agrees to assume and become responsible for all of
the assumed liabilities of the Company as set forth in Schedule 2.2 ("Assumed
Liabilities"). It is expressly understood and agreed that except for Assumed
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Liabilities set forth in Schedule 2.2, Purchaser shall not be liable for any of
the obligations or liabilities of the Company or the Shareholders of any kind
and nature including but in no way limited to the following:
a. Any Taxes, including, but not limited to income, sales, and use tax
imposed on the Company or Shareholder because of the sales of its assets
and business.
b. Any Liabilities or expenses of the Company or Shareholder incurred
in negotiating and carrying out its obligations under, or any dissolution
and liquidation resulting from this Agreement.
c. Any obligations incurred by the Company or Shareholder after the
Closing Date.
d. Any Liabilities or obligations incurred by the Company or
Shareholder in violation of, or as a result of the Company's or
Shareholder's violation of this Agreement.
2.3. Purchase Price. Subject to adjustment as provided in Sections 2.4
and 10.1(ii), Purchaser agrees to pay to the Company at the Closing, in
accordance with the provisions of Section 8.3, Two Million Four Hundred and
Forty Thousand Dollars (US$2,440,000) (the "Purchase Price") in cash by wire
transfer or delivery of other immediately available funds.
2.4. Adjustment for Future Performance - Earnout. The Company may be
entitled to receive additional consideration for the Acquired Assets calculated,
determined and paid as set forth in Schedule 2.4.
2.5. Purchase Price and Allocation. The Purchase Price (including the
Acquired Liabilities) shall be allocated among the Acquired Assets in accordance
with the allocation schedule (the "Allocation Schedule"). The Allocation
Schedule shall be based on the Purchase Price for the various components of the
Acquired Assets as determined in accordance with this Agreement and mutually
agreed upon by the Company and Purchaser. The Company and Purchaser agree to
jointly prepare and file the Form 8594, as required by the Internal Revenue
Service within 90 days after the Closing.
2.6. Excise and Property Taxes. The Company shall pay all sales and use
taxes arising out of the transfer of the Acquired Assets and shall pay its
portion, prorated as of the Closing Date, of state and local real and personal
property taxes of the business. Purchaser shall not be responsible for any
business, occupation, withholding, or similar tax, or any taxes of any kind
related to any period before the Closing Date, except for those taxes
specifically identified as an Assumed Liability.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLING PARTIES
The Shareholders and the Company have delivered to Purchaser the disclosure
memorandum attached hereto (the "Disclosure Memorandum") which contains certain
information regarding the Company. The information contained in the Disclosure
Memorandum shall be deemed to be part of and qualify only those sections of this
Article III which correspond to or are referred to in the sections of the
Disclosure Memorandum. Any section of this Article III may be qualified by
specific facts (but not by knowledge or materiality or words of similar import)
described in a corresponding section of the Disclosure Memorandum, whether or
not a specific reference to the Disclosure Memorandum is made in the applicable
section of this Article III. In addition to the Disclosure Memorandum, the
Shareholders and the Company have delivered to Purchaser certain documents and
materials as a part of Purchaser's due diligence investigation, and the
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Disclosure Memorandum and all such documents and materials are or were true,
correct and complete as of the date furnished, and any and all modifications or
amendments thereto have been or will be delivered to Purchaser. At all times
prior to and including the date of the Closing, the Shareholders and the Company
shall promptly provide Purchaser with written notification of any event,
occurrence or other information of any kind whatsoever which affects or may
affect, the continued truth, correctness or completeness of any representation
or warranty made in this Agreement or any information contained in the
Disclosure Memorandum. To induce Purchaser to enter into and perform this
Agreement, the Shareholders and the Company represent and warrant to Purchaser
as follows:
3.1. Organization, Authority and Qualification. (a) The Company is a
corporation duly organized and validly existing under the laws of the state of
Nevada. The Company has offices and places of business at the locations
specified in the Disclosure Memorandum. The Company has full corporate power and
authority and is entitled to own or lease its properties and to carry on its
business as and in all places where such business is conducted and such
properties are owned or leased. The Company is not required to be qualified as a
foreign corporation in any jurisdiction except as described in the Disclosure
Memorandum. The Selling Parties have previously furnished to Purchaser true,
correct and complete copies of the articles or certificate of incorporation and
bylaws of the Company, as amended to date.
(b) The Company has the full corporate power and authority to
execute, deliver and perform this Agreement and any other agreements or
instruments contemplated by this Agreement ("Other Agreements") to which it is a
party. This Agreement has been and the Other Agreements have been duly and
validly executed and delivered by the Company and constitute the valid and
legally binding obligations of the Company, subject to general equity
principles, enforceable in accordance with their respective terms, except as the
same may be limited by bankruptcy, insolvency, reorganization or similar laws
affecting the rights of creditors generally.
3.2. Capacity; Inconsistent Obligations. (a) Each Shareholder has the
full right, power and legal capacity to execute, deliver and perform his
obligations under this Agreement and the Other Agreements to which such
Shareholder is a party. This Agreement and the Other Agreements have been duly
and validly executed and delivered by such Shareholder and constitute the valid
and legally binding obligations of such Shareholder, subject to general equity
principles, enforceable in accordance with their respective terms, except as the
same may be limited by bankruptcy, insolvency or similar Laws affecting the
rights of creditors generally.
(b) The execution, delivery and performance of this Agreement and
the Other Agreements to which any Shareholder or the Company is a party will not
(i) result in a violation of the Company's articles of incorporation or bylaws,
or any Law, or (ii) result in a breach of, conflict with or default under any
term or provision of any indenture, note, mortgage, bond, security agreement,
loan agreement, guaranty, pledge, or other instrument, contract, agreement or
commitment or any order, to which the Company or any Shareholder is a party or
by which any of them or any of their respective assets and properties is subject
or bound; nor will such actions result in (w) the creation of any Lien on any of
the any of the Company's assets or properties, (x) the acceleration or creation
of any Liability of the Company, (y) the forfeiture of any right or privilege of
the Company, or (z) the forfeiture of any right or privilege of any Shareholder
which may affect such Shareholder's ability to perform under this Agreement.
3.3. Consents. Except as set forth in the Disclosure Memorandum, the
execution, delivery and performance by each Shareholder and the Company of this
Agreement and the Other Agreements to which he, she or it is a party, and the
consummation of the transactions contemplated herein and therein does not (a)
require the consent, approval or action of, or any filing with or notice to, any
Government or other Person.
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3.4. No Violation; Compliance with Laws. Except as set forth in the
Disclosure Memorandum, the Company is not in default under or in violation of
(a) its articles of incorporation or bylaws or (b) any order. Except as set
forth in the Disclosure Memorandum, the operations of the Company and its
predecessors have been conducted in all material respects in compliance with all
applicable Laws. (For purposes of this section, any violation of applicable Law
that could result in imposition of a fine or other monetary penalty upon the
Company shall be deemed to be a material non-compliance). Neither the Company
nor any Shareholder has received any notification of any asserted past or
present failure by the Company to comply with any applicable Law.
3.5. Possession of Licenses. Except as set forth in the Disclosure
Memorandum, the Company possesses all franchises, certificates, licenses,
permits and other authorizations from Governments and all other Persons, free
from burdensome restrictions, that are necessary for the ownership, maintenance
and operation of its properties and assets and the conduct of its business, and
the Company is not in violation thereof.
3.6. Financial Statements, Financial Condition. (a) Prior to the date
hereof, the Selling Parties have delivered to Purchaser copies of the Company's
financial statements and related documents as identified in the Disclosure
Memorandum (collectively, the "Financial Statements"). The Financial Statements
include the Company's most recent balance sheet as of January 31, 2001(the
"Reference Date Balance Sheet"). The date of the Reference Date Balance Sheet is
referred to herein as the "Reference Date". Except as set forth in the
Disclosure Memorandum and in the accompanying "Notes to Financial Statements",
the Financial Statements are true and correct, in all material respects, have
been prepared in accordance with GAAP consistently applied, present fairly the
financial condition of the Company as at the respective dates thereof and the
results of the Company's operations and cash flows for the periods then ended,
and are consistent with the books and records of the Company. The books and
records of the Company are true, correct and complete in all material respects
and, except as set forth in the Disclosure Memorandum, are maintained in
accordance with GAAP.
3.7 Events Subsequent to Reference Date Balance Sheet. Since the
Reference Date Balance Sheet, there has not been any adverse change in the
business, financial condition, operations, results of operations, or future
prospects of the Company. Without limiting the generality of the foregoing,
since that Reference Date:
(i) the Company has not sold, leased, transferred, or assigned any of
its assets, tangible or intangible, other than for a fair consideration in
the Ordinary Course of Business;
(ii) the Company has not has entered into any agreement, contract,
lease, or license (or series of related agreements, contracts, leases, and
licenses) either involving more than $10,000 or outside the Ordinary Course
of Business;
(iii) the Company has not accelerated, terminated, modified, or
cancelled any agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) involving more than $10,000 to
which the Company is a party or by which any of them is bound;
(iv) the Company has not imposed any Security Interest upon any of its
assets, tangible or intangible;
(v) the Company has not made any capital expenditure (or series of
related capital expenditures) either involving more than $10,000 or outside
the Ordinary Course of Business;
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(vi) the Company has not made any capital investment in, any loan to,
or any acquisition of the securities or assets of, any other Person (or
series of related capital investments, loans, and acquisitions) either
involving more than $10,000 or outside the Ordinary Course of Business;
(vii) the Company has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation either involving more than
$10,000 singly or $30,000 in the aggregate;
(viii) the Company has not delayed or postponed the payment of
accounts payable and other Liabilities outside the Ordinary Course of
Business;
(ix) the Company has not cancelled, compromised, waived, or released
any right or claim (or series of related rights and claims) either
involving more than $10,000 or outside the Ordinary Course of Business;
(x) the Company has not granted any license or sublicense of any
rights under or with respect to any Intellectual Property, except for
licensing the right use the Intellectual Property in conjuction with the
Products sold to Customers in the Ordinary Course of Business;
(xi) there has been no change made or authorized in the charter or
bylaws of the Company;
(xii) the Company has not issued, sold, or otherwise disposed of any
of its capital stock, or granted any options, warrants, or other rights to
purchase or obtain (including upon conversion, exchange, or exercise) any
of its capital stock, except for the issuance of 111 shares of the
Company's Common Stock to Xxxxx X. Xxxxxxx. As of the date there are
1,219,805 shares of stock that have been issued by the Company;
(xiii) the Company has not declared, set aside, or paid any dividend
or made any distribution with respect to its capital stock (whether in cash
or in kind) or redeemed, purchased, or otherwise acquired any of its
capital stock;
(xiv) the Company has not experienced any damage, destruction, or loss
(whether or not covered by insurance) to its property;
(xv) the Company has not made any loan to, or entered into any other
transaction with, any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xvi) the Company has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms of
any existing such contract or agreement;
(xvii) the Company has not granted any increase in the base
compensation of any of its directors, officers, and employees outside the
Ordinary Course of Business;
(xviii)the Company has not adopted, amended, modified, or terminated
any bonus, profit-sharing, incentive, severance, or other plan, contract,
or commitment for the benefit of any of its directors, officers, and
employees (or taken any such action with respect to any other ERISA Plan);
(xix) the Company has not made any other change in employment terms
for any of its directors, officers, and employees outside the Ordinary
Course of Business;
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(xx) the Company has not made or pledged to make any charitable or
other capital contribution outside the Ordinary Course of Business;
(xxi) the Company has not paid any amount to any third party with
respect to any Liability or obligation (including any costs and expenses
the Seller has incurred or may incur in connection with this Agreement and
the transactions contemplated hereby) which would not constitute an Assumed
Liability if in existence as of the Closing;
(xxii) there has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary
Course of Business involving the Company; and
(xxiii)the Company has not committed to any of the foregoing.
3.8. Undisclosed Liabilities. The Company has no Liability (and there is
no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability), except for (i) Liabilities set forth in the Disclosure
Memorandum, and (ii) Liabilities which have arisen after the Reference Date in
the Ordinary Course of Business (none of which results from, arises out of,
relates to, is in the nature of, or was caused by any breach of contract, breach
of warranty, tort, infringement, or violation of law).
3.9. Title to Properties. Except as set forth in the Disclosure
Memorandum, the Company has good and complete title to all properties and assets
reflected in the Reference Date Balance Sheet, except inventories and other
immaterial assets which have been disposed of in the Ordinary Course of Business
since the Reference Date, and all other properties and assets necessary to
conduct its business as currently being conducted and as conducted during the
periods covered by the Financial Statements (other than any leased property),
free and clear of Liens, except as may be set forth on the face of the Reference
Date Balance Sheet (rather than in any notes thereto).
3.10. Receivables. Except as set forth in the Disclosure Memorandum, all
notes and accounts receivable shown on the Reference Date Balance Sheet and all
such receivables now held by the Company are valid and collectible obligations
and were not and are not subject to any offset or counterclaim, except for
amounts reserved against such receivables which are reflected on the Reference
Date Balance Sheet or otherwise set forth in the Disclosure Memorandum and, with
respect to notes and accounts receivable arising after the Reference Date and
now outstanding, except for a percentage thereof equal to the percentage which
said reserved amounts on the Reference Date Balance Sheet or in the Disclosure
Memorandum constituted of the aggregate of notes and accounts receivable on such
Reference Date Balance Sheet. A "Secured Promissory Note" secured by accounts
receivable in the amount of $75,000 and payable to the Purchaser is herewith
acknowledged. Except as set forth in the Disclosure Memorandum the Company has
no knowledge of any accounts receivables that are not collectible.
3.11. Personal Property. (a) Except as set forth in the Disclosure
Memorandum, all machinery, equipment, vehicles, and other items of tangible
personal property which are owned or leased by the Company are in good condition
and repair, subject to normal wear and tear, suited for the use intended and are
and have been operated in conformity with all applicable Laws. To the knowledge
of the Company and the Shareholders, except as set forth in the Disclosure
Memorandum, there are no defects or conditions which would cause such tangible
personal property to be or become inoperable or unsafe.
(b) To the knowledge of the Company and the Shareholders, except
as set forth in the Disclosure Memorandum, all lessors of machinery, equipment
or other tangible personal property leased by the Company have performed and
13
satisfied their respective duties and obligations under such leases. The Company
has not brought or threatened any Action against any such lessors for failure to
perform and satisfy its duties and obligations thereunder.
3.12. Real Property. (a) The Company has good title to all of the real
property reflected on the Reference Date Balance Sheet as owned by the Company
(collectively, the "Owned Real Property"), free and clear from all defects and
Liens, except as may be set forth in the notes to the Reference Date Balance
Sheet or in the Disclosure Memorandum. The Disclosure Memorandum lists all Real
Property, whether or not owned by the Company, listing with respect to each
parcel the street address and the owner or lessor.
(b) Except as set forth in the Disclosure Memorandum, each parcel
or tract of real property which is used by the Company in its business and that
is not Owned Real Property (the "Leased Real Property," and collectively with
the Owned Real Property, the "Real Property") is subject to a written lease or
sublease to which the Company is a party as lessee or sublessee (individually a
"Real Property Lease"). All such Real Property Leases are valid and in full
force and effect in accordance with their terms. The Shareholders have
previously furnished Purchaser with true, correct and complete copies of all
Real Property Leases. There is not, with respect to any Real Property Lease (i)
any default by the Company, or any event of default or event which with notice
or lapse of time, or both, would constitute a default by the Company or (ii) to
the knowledge of the Company and the Shareholders, any existing default by any
other party to any Real Property Lease, or event of default or event which with
notice or lapse of time, or both, would constitute a default by any other party
to any Real Property Lease.
(c) All of the Real Property is free from development, use or
occupancy restrictions, except those imposed by applicable Law, and from special
taxes or assessments, except those generally applicable to other properties in
the tax districts in which the Real Property is located or as otherwise
described in the Disclosure Memorandum. No options have been granted to others
to purchase, lease or otherwise acquire any interest in the Real Property. The
Company has the exclusive right of possession of each tract or parcel comprising
its Real Property.
(d) Except as set forth in the Disclosure Memorandum, the present
use, occupancy and operation of the Real Property, and all aspects of the
Improvements to the Real Property are in compliance with all Laws and private
restrictive covenants, and to the Company's and the Shareholders' knowledge
there has not been any proposed change thereto that would affect any of the Real
Property or its use, occupancy or operation. There exists no conflict or dispute
with any Government or other Person relating to any Real Property or the
activities thereon. No portion of the Real Property is subject to any
classification, designation or preliminary determination of any Government or
pursuant to any Law which would restrict its use, development, occupancy or
operation in connection with the Company's business. Except as set forth in the
Disclosure Memorandum, all Improvements are in good condition and repair, and
are suited for the operation of the Company's business.
(e) Neither the Company nor any other Person has caused any work
or improvements to be performed upon or made to any of the Real Property for
which there remains outstanding any payment obligation that would or might serve
as the basis for any Lien in favor of the Person who performed the work.
(f) Except as set forth in the Disclosure Memorandum, all
requisite certificates of occupancy and other permits and approvals required
with respect to the Real Property or the Improvements and the use, occupancy and
operation thereof have been obtained and paid for and are currently in effect
and free of restrictions.
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3.13. Intellectual Property. (a) The Company own or have the right to
use pursuant to license, sublicense, agreement, or permission all Intellectual
Property necessary for the operation of the businesses of the Company as
presently conducted. Each item of Intellectual Property owned or used by the
Company immediately prior to the Closing hereunder will be owned or available
for use by the Purchaser on identical terms and conditions immediately
subsequent to the Closing hereunder. The Company has taken all necessary action
to maintain and protect each item of Intellectual Property that it owns or uses.
(b) The Company has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of third parties, and none of the Selling Parties has ever received any
charge, complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that the
Company must license or refrain from using any Intellectual Property rights of
any third party). To the knowledge of any of the Selling Parties, no third party
has interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of the Company.
(c) The Disclosure Memorandum identifies each patent or
registration which has been issued to the Company with respect to any of its
Intellectual Property, identifies each pending patent application or application
for registration which the Company has made with respect to any of its
Intellectual Property, and identifies each license, agreement, or other
permission which the Company has granted to any third party with respect to any
of its Intellectual Property (together with any exceptions). The Company has
delivered to the Purchaser correct and complete copies of all such patents,
registrations, applications, licenses, agreements, and permissions (as amended
to date) and has made available to the Purchaser correct and complete copies of
all other written documentation evidencing ownership and prosecution (if
applicable) of each such item. The Disclosure Memorandum also identifies each
trade name or unregistered trademark used by the Company in connection with any
of its businesses. With respect to each item of Intellectual Property required
to be identified in the Disclosure Memorandum:
(i) the Company possess all right, title, and interest in
and to the item, free and clear of any Lien, license,
or other restriction;
(ii) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(iii)no Action, proceeding, hearing, investigation, charge,
or demand is pending or is threatened which challenges
the legality, validity, enforceability, use, or
ownership of the item; and
(iv) The Company has never agreed to indemnify any Person
for or against any interference, infringement,
misappropriation, or other conflict with respect to the
item.
(v) The Disclosure Memorandum identifies each item of
Intellectual Property that any third party owns and
that the Company uses pursuant to license, sublicense,
agreement, or permission. The Company has delivered to
the Purchaser correct and complete copies of all such
licenses, sublicenses, agreements, and permissions (as
amended to date). With respect to each item of
Intellectual Property required to be identified in the
Disclosure Memorandum;
15
(A) the license, sublicense, agreement, or permission
covering the item is legal, valid, binding,
enforceable, and in full force and effect;
(B) the license, sublicense, agreement, or permission will
continue to be legal, valid, binding, enforceable, and
in full force and effect on identical terms following
the consummation of the transactions contemplated
hereby (including the assignments and assumptions
referred to in Article II above);
(C) no party to the license, sublicense, agreement, or
permission is in breach or default, and no event has
occurred which with notice or lapse of time would
constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(D) no party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
(E) with respect to each sublicense, the representations
and warranties set forth in subsections (A) through (D)
above are true and correct with respect to the
underlying license;
(F) the underlying item of Intellectual Property is not
subject to any outstanding injunction, judgment, Order,
decree, ruling, or charge;
(G) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or is
threatened which challenges the legality, validity, or
enforceability of the underlying item of Intellectual
Property; and
(H) The Company has not granted any sublicense or similar
right with respect to the license, sublicense,
agreement, or permission.
(v) To the Knowledge of any of the Selling Parties, the
Company will not interfere with, infringe upon,
misappropriate, or otherwise come into conflict with,
any Intellectual Property rights of third parties as a
result of the continued operation of its businesses as
presently conducted.
3.14. Product Warranty. Each product manufactured, sold, leased, or
delivered by the Company has been in conformity with all applicable contractual
commitments and all express and implied warranties, and the Company has no
Liability (and there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
any of them giving rise to any Liability) for replacement or repair thereof or
other damages in connection therewith, subject only to the reserve for product
warranty claims set forth on the face of the Most Recent Balance Sheet (rather
than in any notes thereto) as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of the Company. No
product manufactured, sold, leased, or delivered by the Company is subject to
any guaranty, warranty, or other indemnity beyond the applicable standard terms
and conditions of sale or lease. The Company has previously provided Purchaser
true, correct, and complete copies of the standard terms and conditions of sale
or lease for the Company (containing applicable guaranty, warranty, and
indemnity provisions).
16
3.15. Product Liability. The Company has no Liability (and there is no
Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability) arising out of any injury to individuals or property as a
result of the ownership, possession, or use of any product manufactured, sold,
leased, or delivered by the Company.
3.16. Contracts. (a) Except as set forth in the Disclosure Memorandum,
all Company Contracts have been entered into in the Ordinary Course of Business
on commercially reasonable terms, are valid and enforceable in all material
respects in accordance with their terms, are in full force and effect, and will
continue to be valid and enforceable and in full force and effect on identical
terms following the date of the Closing. Except as set forth in the Disclosure
Memorandum, no Company Contract is likely to result in a loss to the Company
upon completion of performance, and all Company Contracts can be fulfilled or
performed by the Company in accordance with their respective terms without undue
or unusual expenditures of money or effort. All Company Contracts are listed on
Schedule 2.1(iii), and a true, correct and complete copies of all Company
Contracts have been delivered to Purchaser.
(b) There are no existing material defaults, events of default or
events which, with the giving of notice or lapse of time, or both, would
constitute a material default by the Company under any Company Contract. No
event has occurred which may hereafter give rise to any right of termination,
acceleration, damages or any other remedy under any Company Contract.
(c) To the Company and Shareholders' knowledge, neither this
Agreement, the Closing or the relationship between the Company and the Purchaser
has caused or is likely to cause the termination or nonrenewal of any Company
Contract.
3.17. Insurance. The Company has obtained and maintains insurance
policies which provide adequate coverage to insure its assets, properties and
business against such risks and in such amounts as are prudent and customary in
the industry in which the Company operates, and all such policies are in full
force and effect. All premiums due on such policies have been paid, and the
Company has not received any notice of cancellation with respect thereto. The
Company has no Liability for premiums or for retrospective premium adjustments
for any period. The Disclosure Memorandum lists the types, amounts of coverage
and deductibles of all such insurance policies, and true, correct and complete
copies thereof have been delivered to Purchaser prior to the date hereof.
3.18. Litigation; Contingencies. Except as set forth in the Disclosure
Memorandum, no Action is pending or, to the knowledge of the Shareholders and
the Company, threatened against, by or affecting the Company. There are no
unsatisfied judgments or Orders against the Company or any Shareholder to which
any of them or their assets and properties are subject.
3.19. Taxes. Except as set forth in the Disclosure Memorandum, the
Company and any entity at any time eligible or required to file a consolidated
or combined Tax return with the Company (individually, an "Affiliated Entity"
and collectively, the "Affiliated Entities"), has duly and timely filed all
federal, state, municipal, local and foreign, if any, Tax returns and reports
(including returns for estimated tax), and all reports and returns of all other
Governments having jurisdiction (collectively, "Returns") with respect to all
Taxes (including, without limitation, consolidated or combined Tax returns of
some or all of the Company and the Affiliated Entities); all such Tax returns
and reports show the correct and proper amount due; and the Taxes shown on all
Tax returns and reports and all Tax assessments received by the Company or any
Affiliated Entities have been paid to the extent that such Taxes or estimates
are due. The Company has previously provided to the Purchaser true, correct and
complete copies of all Returns filed with respect to the two (2) tax years
preceding the date hereof. Except as set forth in the Disclosure Memorandum, all
17
Taxes imposed on the Company and its Affiliated Entities by any Government
(including all deposits in connection therewith required by applicable Law, and
all interest and penalties thereon) which have become due and payable by the
Company for all periods through the date hereof have been paid in full, and
adequate reserves for all other Taxes, whether or not due and payable, and
whether or not disputed, have been set up on the books of the Company, and such
reserves will be adequate to pay all Taxes of the Company for all periods
through the Closing. There is not now any proposed assessment against the
Company or any Affiliated Entity of additional Taxes of any kind. The Company is
not a party to any Tax sharing or Tax allocation agreement, understanding,
arrangement or commitment. There is no dispute or Action concerning any Tax
Liability of the Company raised by a Government in writing.
3.20. Employment and Labor Matters. (a) Except as set forth in the
Disclosure Memorandum, to the Company's and the Shareholders' knowledge, no
employee, agent, consultant or independent contractor who performs services on a
regular basis for the Company plans to discontinue such relationship with the
Company.
(b) The Company is not a party to any agreement of any kind which
deals with wages, conditions of employment, benefits or other matters affecting
the employer/employee relationship with any union, labor organization or
employee group. There are no controversies pending, or to the Company's and the
Shareholders' knowledge threatened, between the Company and any union, labor
organization or employee group representing, or seeking to represent, any of its
employees, and there has been no attempt by any union, labor organization or
employee group to organize any of the Company's employees at any time in the
past five years. The Company has substantially complied with all applicable Laws
relating to wages, hours, health and safety, payment of social security
withholding and other taxes, maintenance of workers' compensation insurance,
labor and employment relations and employment discrimination.
(c) The Disclosure Memorandum lists all contracts, agreements or
arrangements (written or oral) concerning the employment of any individual by
the Company, including each such individual's title, compensation and duties.
3.21. Employee Benefit Matters. (a) The Disclosure Memorandum lists all
"employee benefit plans" (the "ERISA Plans") within the meaning of Section 3(3)
of Employee Retirement Income Security Act of 1974, as amended ("ERISA") to
which the Company contributes or is required to contribute and all other
practices, commitments, arrangements and agreements pursuant to which the
Company provides, directly or indirectly, any benefits for employees. The
Company is not required to contribute, and has never been required to
contribute, to any multi-employer plan within the meaning of Section 3(37)(A) of
ERISA. True, correct and complete copies of all ERISA Plans, together with
related trusts, insurance contracts, summary plan descriptions, annual reports
and Form 5500 filings for the past three years, have been delivered to
Purchaser.
(b) Each ERISA Plan has been operated and administered in all
material respects in accordance with all applicable Laws, including, without
limitation, ERISA and the Code. Neither the Company nor the Shareholders, nor to
the Company's and the Shareholders' knowledge any "party in interest" or
"disqualified person" (as such terms are defined in Section 3(14) of ERISA and
Section 4975 of the Code) has been engaged in or been a party to any "prohibited
transaction" (as such term is defined in Section 406 of ERISA or Section 4975 of
the Code), nor has any such person been involved in or caused an ERISA Plan to
be involved in a breach of fiduciary duty under Section 404 of ERISA. Each ERISA
Plan that is a group health plan within the meaning of Section 607(1) of ERISA
and Section 4980B of the Code has complied with and is in compliance with the
continuation coverage requirements of Section 601 of ERISA and Section 4980B of
the Code. There are no pending claims or, to the Company's and the Shareholders'
knowledge threatened claims, by or against any of the ERISA Plans by any
18
employee or beneficiary covered under such ERISA Plan, or by any Government or
otherwise involving such ERISA Plan or any of its fiduciaries (other than for
routine claims for benefits).
(c) The Disclosure Memorandum separately identifies any ERISA
Plan that is an "employee pension benefit plan" within the meaning of Section
3(2) of ERISA ("Company Pension Plan") and also lists any Company Pension Plan
that has been terminated in the last five years. Each Company Pension Plan
constitutes a qualified plan within the meaning of Section 401(a) of the Code
and the trust thereunder is exempt from federal income tax under Section 501(a)
of the Code. All Company and employee contributions required to be made to each
Company Pension Plan have been made in a timely manner.
(d) Except for a Company Pension Plan, the Company is not bound
to provide, and the Company does not provide, benefits, including, without
limitation, death, health or medical benefits (whether or not insured), with
respect to current or former employees of the Company beyond their retirement or
other termination of service with the Company other than as required by
applicable Law. Neither this Agreement nor any transaction contemplated hereby
will entitle any current or former employee, officer or director of the Company
to severance pay, unemployment compensation or any similar payment.
3.22. Environmental Matters. Except as set forth in the Disclosure
Memorandum, the Company holds all Environmental Permits necessary for conducting
its business and operations and has conducted, and is presently conducting, its
business and operations in full compliance with all applicable Environmental
Laws and Environmental Permits, including, without limitation, all record
keeping and filing requirements. There is no existing or, to the knowledge of
the Company or Shareholders, pending Environmental Law with a future compliance
date that will require material operational changes, business practice
modifications or capital expenditures at any Real Property (or any other
property presently or formerly owned, operated or controlled by the Company or
as to which the Company may bear responsibility or Liability), or any of the
Improvements thereon. Except as set forth in the Disclosure Memorandum, all
Hazardous Materials and Solid Waste on, in, or under the Real Property or real
property operated by the Company, wherever located, have been properly removed
and disposed of, and no past or present disposal, discharge, spill or other
release of, or treatment, transportation or other handling of Hazardous
Materials or Solid Waste on, in, under or off-site from any Real Property, or,
to the knowledge of the Company and the Shareholders, adjacent property, will
subject the Company or any subsequent owner, occupant or operator of such Real
Property to corrective or compliance action or any other Liability. There are no
presently pending, or to the Company's and the Shareholders' knowledge,
threatened Actions or Orders against or involving the Company (including any
Person for whose acts or omissions the Company is responsible) relating to any
alleged, past or ongoing violation.
3.23. Absence of Certain Business Practices. Neither the Company nor the
Shareholders, nor any other person acting on behalf of the Company, has,
directly or indirectly, within the past five years, given or agreed to give any
gift or similar benefit to any Person who is or may be in a position to help or
hinder the Company's business (or assist the Company in connection with any
actual or proposed transaction) which (a) might subject the Company to any
material damage or penalty in any Action or which might have an effect on the
Company or its assets and properties, (b) if not given in the past, might have
had an effect on the Company's business or its assets and properties, or (c) if
not continued in the future, might have an effect on the Company or which might
subject the Company to suit or penalty in any Action.
3.24. Agreements and Transactions with Related Parties. Except as set
forth in the Disclosure Memorandum, the Company is not directly or indirectly a
party to any contract, agreement or lease with, or any other commitment to, (a)
19
any Person owning, or formerly owning, beneficially or of record, directly or
indirectly, any equity interest in the Company, (b) any Affiliate of such
Person, (c) any director or officer of the Company, (d) any Person in which any
of the foregoing Persons has, directly or indirectly, at least a three percent
(3.0%) beneficial interest in the capital stock or other type of equity interest
of such Person, or (e) any partnership in which any of the foregoing Persons is
a general partner or has at least a three percent (3.0%) beneficial interest
(any or all of the foregoing being referred to herein as "Related Parties").
Without limiting the generality of the foregoing, (x) no Related Party, directly
or indirectly, owns or controls any assets or properties which are or have been
used in the Company's business, and (y) no Related Party, directly or
indirectly, engages in or has any significant interest in or connection with any
business (i) which is or which within the last three years has been a
competitor, customer or supplier of the Company or has done business with the
Company, or (ii) which as of the date hereof sells or distributes products or
services which are similar or related to the Company's products or services.
3.25. Full Disclosure. No representation or warranty of any Shareholder
contained in this Agreement, the Other Agreements, the Disclosure Memorandum, or
any instrument, certificate, agreement or other writing delivered by or on
behalf of any Shareholder or the Company pursuant to this Agreement or any Other
Agreement or in connection with the transactions contemplated herein or therein
contains any untrue or incomplete statement of a material fact or omits (or will
omit) to state a material fact necessary to make the statements contained herein
and therein not misleading. To the Company's and the Shareholders' knowledge,
there is no fact which adversely affects, or in the future may adversely affect,
the business, assets, properties, Liabilities, affairs, results of operations,
condition (financial or otherwise), cash flows or prospects of the Company which
has not been or is not disclosed in this Agreement, the Disclosure Memorandum or
in the other instruments, certificates, agreements or writings furnished to
Purchaser by or on behalf of the Shareholders pursuant to this Agreement or the
Other Agreements or in connection with the transactions contemplated herein.
ARTICLE IV
PURCHASER'S REPRESENTATIONS AND WARRANTIES
As an inducement to the Company and the Shareholders to enter into and perform
this Agreement, Purchaser hereby represents and warrants as follows:
4.1. Organization. Purchaser is a corporation duly organized and
validly existing under the Laws of the State of Delaware.
4.2. Authorization; No Inconsistent Agreements. Purchaser has full
corporate power and authority to execute, deliver and perform this Agreement and
the Other Agreements to which it is a party. This Agreement has been, and such
Other Agreements have been duly and validly executed and delivered by Purchaser
and constitute the valid and legally binding obligations of Purchaser, subject
to general equity principles, enforceable in accordance with their respective
terms, except as the same may be limited by bankruptcy, insolvency,
reorganization or similar Laws affecting the rights of creditors generally.
4.3. Inconsistent Obligations. The execution, delivery and performance
of this Agreement and the Other Agreements to which Purchaser is a party, will
not (i) result in a violation of their respective charter or certificate of
incorporation or bylaws or any Law, or (ii) result in a breach of, conflict with
or default under any term or provision of any indenture, note, mortgage, bond,
security agreement, loan agreement, guaranty, pledge or other instrument,
contract, agreement or commitment or any Order to which Purchaser is a party or
by which any of the assets of Purchaser is subject or bound, nor will such
actions result in the creation of any Lien on any of the assets of Purchaser or
the acceleration or creation of any Liability.
20
4.4. Consents. The execution, delivery and performance by Purchaser of
this Agreement and the Other Agreements to which they are a party, and the
consummation of the transactions contemplated herein and therein does not
require the consent, approval or action of, or any filing with or notice to, any
Government or other Person.
4.5. Full Disclosure. No representation or warranty of Purchaser
contained in this Agreement or any Other Agreement, or in any instrument,
certificate, agreement or other writing delivered by Purchaser pursuant to this
Agreement or the Other Agreements or in connection with the transactions
contemplated herein or therein contains any untrue statement of a material fact
or omits to state a material fact necessary to make the statements contained
herein or therein not misleading.
4.6. Litigation . There is no action, suit, proceeding, dispute,
litigation, claim, complaint or investigation by or before any court, tribunal,
governmental body or arbitrator pending or, to the best of Purchaser's
knowledge, threatened against Purchaser which challenges or would challenge any
of the actions required to be taken by Purchaser under this Agreement.
4.7. Non-Contravention . The execution and delivery of this Agreement (i)
will not result in any violation or breach of any agreement or other instrument
to which Purchaser is a party or by which Purchaser is bound, and (ii) will not
result in a violation of any law, rule, regulation, treaty, ruling, directive,
order, arbitration award, judgment or decree to which Purchaser is subject.
4.8. Approvals. No authorization, consent or approval of, or
registration or filing with, any governmental authority or any other person is
required to be obtained or made by Purchaser in connection with the execution,
delivery or performance of this Agreement or any Other Agreement.
ARTICLE V
SELLING PARTIES' OBLIGATIONS BEFORE CLOSING
Selling Parties covenant that from the date of this Agreement until the Closing:
5.1. Purchaser's Access to Premises and Information. Purchaser and its
counsel, accountants, and other representatives shall have full access during
normal business hours to all properties, books, accounts, records, contracts,
and documents of or relating to the Company and the operation of its business.
The Company shall furnish or cause to be furnished to Purchaser and its
representatives all data and information concerning the business, finances, and
properties of the Company that may reasonably be requested.
5.2. Interim Operations of the Company. The Selling Parties covenant and
agree that, except (i) as expressly provided in this Agreement; or (ii) with the
prior written consent of the Purchaser, after the date hereof and prior to the
Closing Date:
a. The business of the Company shall be conducted only in the
ordinary and customary course consistent with past practice and, to the extent
consistent therewith, the Company shall use its reasonable best efforts to
preserve its business organization intact and maintain its existing relations
with customers, suppliers, employees, creditors, and business partners;
b. The Company shall not transfer, lease, license, sell,
mortgage, pledge, dispose of, or encumber any material assets other than in the
ordinary and usual course of business and consistent with past practice;
21
provided, however, that in no event may the Company undertake any such action
involving an amount greater than $25,000;
c. The Company shall not modify, amend, or terminate any of
the Company's Agreements or waive, release, or assign any material rights or
claims, except in the ordinary course of business and consistent with past
practice;
d. The Company shall not pay, discharge, or satisfy any
claims, liabilities, or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise) in an aggregate amount greater than $25,000, without
the written consent of the Purchaser;
e. Unless and until this Agreement shall have been terminated
pursuant to the provisions of Article XII hereof, the Company shall not adopt a
plan of complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization, or other reorganization of the Company;
f. The Selling Parties shall not knowingly take, or knowingly
agree to take, any action that would make any representation or warranty of the
Company contained herein inaccurate in any respect at, or as of any time prior
to, the Closing Date;
g. The Company shall not voluntarily make, or agree to make, any
changes in tax accounting methods, waive or consent to the extension of any
statute of limitations with respect to taxes, or consent to any assessment of
taxes, or settle any judicial proceeding affecting taxes; and
h. The Company shall not enter into an agreement, contract,
commitment, or arrangement to do any of the foregoing, or to authorize,
recommend, propose, or announce an intention to do any of the foregoing.
5.3. Preservation of Business and Relationships. The Company will use
its best efforts, without making any commitments on behalf of Purchaser, to
preserve its respective business organizations intact and to preserve its
present relationships with suppliers, customers, and others having business
relationships with it.
5.4. Risk of Loss; Maintenance of Insurance. The risk of any loss,
damage or destruction to any of the Acquired Assets from fire or other casualty
or cause shall be borne by the Company at all times prior to the Closing
hereunder. Upon the occurrence of any loss or damage as a result of fire,
casualty, accident or other causes prior to the Closing, except for losses or
damages which would not have a material adverse effect upon the value of the
Acquired Assets to be transferred, the business, financial condition or results
of operations of the Company, shall immediately notify Purchaser of same in
writing stating with particularity the extent of loss or damage incurred, the
cause thereof if known and the extent to which restoration, replacement and
repair of the Acquired Assets lost or destroyed will be reimbursed under any
insurance policy with respect thereto. If the Acquired Assets and operation of
the Company cannot be substantially repaired or restored within thirty (30) days
after such loss, Purchaser shall have the option, exercisable within ten (10)
days after receipt of written notice from the Company to: (i) terminate this
Agreement; or (ii) elect to consummate the Closing and accept the property in
its "then" condition, in which event the Company and Shareholder shall assign to
Purchaser all rights under any insurance claim covering the loss and pay over to
the Purchaser any proceeds under any such insurance policy thereafter received
by either the Company or Shareholder with respect thereto.
The Company will continue through Closing to carry its existing
insurance, subject to variations in amounts required by the ordinary operations
of their businesses. At the request of Purchaser and at Purchaser's sole
22
expense, the amount of insurance against fire and other casualties that, at the
date of this Agreement, the Company carries on any of its properties or in
respect of its operations shall be increased by the amount or amounts Purchaser
shall specify. Effective upon execution hereof, Selling Parties shall cause
Purchaser to be named as an additional insured on each existing insurance policy
carried by the Company.
5.5. Corporate and Shareholder Approvals. The Company will deliver to
Purchaser, on or before the Closing Date, a written consent resolution of its
shareholders authorizing and approving the sale of the Acquired Assets to
Purchaser on the terms and conditions provided in this Agreement.
ARTICLE VI
BUYER'S OBLIGATIONS BEFORE CLOSING
6.1. Cooperation in Securing Consents of Third Parties. Purchaser shall
use its best efforts to assist the Company in obtaining the consent of all
necessary Persons and agencies to the assignment and transfer to Purchaser of
any and all properties and assets to be assigned and transferred under the terms
of this Agreement.
ARTICLE VII
CONDITIONS PRECEDENT TO PURCHASER'S PERFORMANCE
The obligations of Purchaser to purchase the Acquired Assets under this
Agreement are subject to the satisfaction, at or before the Closing, of all the
conditions set out below in this Article VII. Purchaser may waive any or all of
these conditions in whole or in part without prior notice; provided, however,
that no such waiver of a condition shall constitute a waiver by Purchaser of any
of its other rights or remedies, at law or in equity, if Shareholder or the
Company shall be in default of any of their representations, warranties, or
covenants under this Agreement.
7.1. Accuracy of Selling Parties' Representations and Warranties. Except
as otherwise permitted by this Agreement, all representations and warranties by
each of the Selling Parties in this Agreement, or in any written statement that
any of them shall cause to be delivered to Purchaser under this Agreement, shall
be true in all material respects from and as of the date of the execution of
this Agreement through the Closing Date as though made at such times.
7.2. Performance by Selling Parties. Selling Parties shall have
performed, satisfied, and complied in all material respects with all covenants,
agreements, and conditions required by this Agreement to be performed or
complied with by them, or either of them, on or before the Closing Date.
7.3. No Material Adverse Change. The Company shall not have sustained
any material loss or damage to its Acquired Assets, whether or not insured, that
materially affects its ability to conduct its business in any material way.
7.4. Corporate Approval. The execution and delivery of this Agreement by
the Company, and the performance of its covenants and obligations under it,
shall have been duly authorized by all necessary corporate action, and Purchaser
shall have received copies of all resolutions pertaining to that authorization,
certified by the Secretary of the Company.
7.5. Consents. All necessary agreements and consents of any Parties to
the consummation of the transactions contemplated by this Agreement, or
otherwise pertaining to the matters covered by it, shall have been obtained by
Selling Parties and delivered to Purchaser.
23
7.6. Approval of Documentation. The form and substance of all
certificates, instruments, opinions, and other documents delivered to Purchaser
under this Agreement shall be satisfactory in all reasonable respects to
Purchaser and its counsel.
7.7. Department of Labor Release. Purchaser shall have received a tax
clearance certificate from the Georgia Department of Labor stating that, as of a
date not more than thirty (30) days before the Closing Date, no contributions,
interest, or penalties are due to the Department of Labor from the Company.
7.8. Sales and Use Tax on Prior Sales. The Company agrees to furnish to
Purchaser a tax clearance certificate from the Georgia Department of Revenue and
any related certificates that Purchaser may reasonably request as evidence that
all sales and use tax liabilities of the Company accruing before the Closing
Date have been fully satisfied or provided for.
7.9. Payroll Taxes Release. Purchaser shall have received a tax
clearance certificate from the Georgia Department of Revenue stating that all
payroll withholding tax liabilities of the Company accruing, as of a date not
more than thirty (30) days before the Closing Date, no contributions, interest,
or penalties are due to the Department of Revenue from the Company.
7.10. Corporation Taxes Release. Purchaser shall have received a tax clearance
certificate from the Georgia Department of Revenue stating that all corporate
income and net worth tax liabilities of the Company accruing, as of a date not
more than thirty (30) days before the Closing Date, no contributions, interest,
or penalties are due to the Department of Revenue from the Company.
ARTICLE VIII
CONDITIONS PRECEDENT TO SELLING PARTIES' PERFORMANCE
The obligations of the Company to sell and transfer the Acquired Assets under
this Agreement are subject to the satisfaction, at or before the Closing, of all
the following conditions. The Company may waive any or all of these conditions
in whole or in part without prior notice; provided, however, that no such waiver
of a condition shall constitute a waiver by the Company of any of its other
rights or remedies, at law or in equity, if Purchaser should be in default of
any of its representations, warranties, or covenants under this Agreement.
8.1. Accuracy of Purchaser's Representations and Warranties. All
representations and warranties by Purchaser contained in this Agreement or in
any written statement delivered by Purchaser under this Agreement shall be
truein all material respects from and as of the date of the execution of this
Agreement through the Closing Date as though such representations and warranties
were made at such times.
8.2. Purchaser's Performance. Purchaser shall have performed and
complied with all covenants and agreements and satisfied all conditions that it
is required by this Agreement to perform, comply with, or satisfy, before or at
the Closing.
8.3. Purchaser's Corporate Approval. The board of directors of Purchaser
shall have duly authorized and approved the execution and delivery of this
Agreement and all corporate action necessary or proper to fulfill the
Purchaser's obligations to be performed under this Agreement on or before the
Closing Date.
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ARTICLE IX
THE CLOSING
9.1. Time and Place. The transfer of the Acquired Assets to Purchaser
pursuant hereto (the "Closing") shall take place at the office of Purchaser's
counsel, Xxxxxx Eng & Xxxxxxxx, a law corporation, 000 Xxxxxxx Xxxx, Xxxxx 0000,
Xxxxxxxxxx, Xxxxxxxxxx 00000, at 12:00 p.m., Pacific Time, on February 28, 2001,
or at such other time and place as the Parties may agree to in writing (the
"Closing Date").
9.2. Selling Parties' Obligations at Closing. At the Closing, each of
the Selling Parties shall deliver or cause to be delivered to Purchaser each of
the following as may be required pursuant hereto with respect to each such
Party:
a. Assignments of all leaseholds, properly executed and acknowledged
by Assignor, and accompanied by all consents of lessors required by this
Agreement and the leases being assigned;
b. Instruments of assignment of and transfer of all properties of the
Company or Shareholder transferred under this Agreement including but not
limited to such bills of sale, assignments, and other good and sufficient
instruments of sale, transfer and conveyance in such form and substance as
Purchaser shall reasonably request, as shall be effective to vest in
Purchaser all right and title to, and interest in, the Acquired Assets as
well as all books and records and other data relating to the Acquired
Assets.
c. Certified written consent resolutions of the Company's board of
directors and of the Company's shareholders, in form satisfactory to
counsel for Purchaser, authorizing the execution and performance of this
Agreement and all actions to be taken by the Corporation under this
Agreement; and
d. A certificate executed by the president or vice president and the
secretary or treasurer of the Company certifying that all the Company's
representations and warranties under this Agreement are true as of the
Closing Date, as though each of those representations and warranties had
been made on that date.
e. An opinion of counsel to the Company addressed to Purchaser,
directly, substantially in the form as attached hereto as Exhibit A.
f. A tax clearance certificate as required pursuant to Sections 7.7,
7.8, 7.9 and 7.10.
Simultaneously with the consummation of the transfer, the Company,
through its officers, agents, employees, and Shareholder, will put Purchaser
into full possession and enjoyment of all properties and assets to be conveyed
and transferred by this Agreement.
Selling Parties, at any time before or after the Closing Date, will
execute, acknowledge, and deliver any further deeds, assignments, conveyances,
and other assurances, documents, and instruments of transfer, reasonably
requested by Purchaser, and will take any other action consistent with the terms
of this Agreement that may reasonably be requested by Purchaser for the purpose
of assigning, transferring, granting, conveying, and confirming to Purchaser, or
reducing to possession, any or all property to be conveyed and transferred under
this Agreement. If requested by Purchaser, the Company further agrees to
prosecute or otherwise enforce in its own name for the benefit of Purchaser any
claims, rights, or benefits that are transferred to Purchaser under this
Agreement and that require prosecution or enforcement in the Company's name. Any
prosecution or enforcement of claims, rights, or benefits under this section
25
shall be solely at Purchaser's expense, unless the prosecution or enforcement is
made necessary by a breach of this Agreement by any of the Selling Parties.
9.3. Purchaser's Obligations at Closing. At the Closing, Purchaser shall
execute and deliver to the Company and the Shareholders the documents described
on Schedule 9.3.
9.4. Offers of Employment. Subject to the terms and conditions of this
Agreement, promptly after the Closing, Purchaser shall offer employment to the
employees of the Company as set forth in Schedule 9.4, on terms and conditions
acceptable to Purchaser. Purchaser shall not be liable for any liabilities
associated with any employee terminated by the Company. The Purchaser will not
be liable, in any manner, for any payments or other compensation which may be
required to be paid to such employees upon their termination by the Company
pursuant to any federal, state or local law or rule.
ARTICLE X
INDEMNIFICATION
10.1. Indemnification by the Selling Parties. (a) In accordance with and
subject to the provisions of this Section 10.1, the Selling Parties shall
indemnify and hold harmless the Purchaser, their respective Affiliates, and the
officers, directors, agents and employees of the Purchaser and their Affiliates
(collectively, the "Indemnitees") from and against and in respect of any and all
loss, damage, diminution in value, liability, cost and expense, including
reasonable attorneys' fees and amounts paidto an unaffiliated third party in
settlement (collectively, the "Indemnified Losses"), suffered or incurred by any
one or more of the Indemnitees by reason of, or arising out of:
(i) any misrepresentation or breach of representation or warranty
contained in this Agreement, or any certificate, instrument, agreement
or other writing delivered by or on behalf of any Shareholder or the
Company pursuant to this Agreement or in connection with the
transactions contemplated herein, or the breach of any covenant or
agreement of any Shareholder or the Company contained in this
Agreement, or any certificate, instrument, agreement or other writing
delivered to Purchaser by or on behalf of any Shareholder or the
Company pursuant to this Agreement or in connection with the
transactions contemplated herein;
(ii) any misrepresentation or breach of representation or
warranty to those matters described on Schedule 10.1(ii);
(iii) any and all liabilities of the Company arising or incurred
prior to the Closing except for any liability arising from those
matters described on Schedule 2.2;
(iv) any and all liabilities arising from the matters described
on Schedule 10.1(iv);
(v) any and all actions, orders, assessments, fees and expenses
incident to any of the foregoing or incurred in investigating or
attempting to avoid the same or to oppose the imposition thereof, or
in enforcing this indemnification.
(b) The Selling Parties shall reimburse Indemnitees on demand for any
Indemnified Losses suffered by the Indemnitees, based on the judgment of
any court of competent jurisdiction or pursuant to a bona fide compromise
or settlement of claims, demands, or actions in respect of any Indemnified
Losses. The Selling Parties shall have the opportunity to defend at their
expense any claim, action or demand for which the Indemnitees claim
indemnity against the Selling Parties; provided that (i) the defense is
26
conducted by reputable counsel approved by the Indemnitees, which approval
shall not be unreasonably withheld or delayed; (ii) the defense is
expressly assumed in writing within ten (10) days after written notice of
the claim, action or demand is given to the Selling Parties; and (iii)
counsel for the Indemnitees, at Indemnitees' own expense, may participate
at all times and in all proceedings (formal and informal) relating to the
defense, compromise and settlement of the claim, action or demand at the
expense of the Indemnitees.
10.2. Limitations and Payment on Claims. No claim shall be brought by
any Indemnitee under this Article X for breach of any representation or
warranty, and none of them shall be entitled to receive any payment with respect
thereto, unless and until the aggregate amount of such claim(s) equals or
exceeds $10,000 (exclusive of the amounts held in escrow for taxes) and after
such time as the amount of such claim(s) equals or exceeds $10,000, the
Indemnitees may assert all such prior and all future claims against the Selling
Parties hereunder, and any such delay in asserting a claim or claims against the
Selling Parties pursuant to this Section 10.2, shall in no way prejudice the
Indemnitees under any statute or period of limitations or similar law or under
any principle of equity. Anything to the contrary notwithstanding, (i) each of
the Selling Parties will be liable to the Indemnitees for the Indemnified
Losses; (ii) the Selling Parties shall not be liable to the Indemnitees under
this Article X for Indemnified Losses, if any, in excess of the aggregate value,
as of the date of Closing, of the Purchase Price; provided, however, that such
limitation shall not apply to any loss suffered by the Indemnitees attributable
to fraudulent misrepresentations.
10.3. Survival. The representations and warranties of each of the
Selling Parties contained in this Agreement, or in any certificate, instrument,
agreement or other writing delivered by or on behalf of any Shareholder or the
Company pursuant to this Agreement or in connection with the transactions
contemplated herein shall survive any investigation heretofore or hereafter made
by or on behalf of Purchaser and the consummation of the transactions
contemplated herein and all suchcovenants, representations and warranties shall
be of no further force and effect after the expiration of three (3) years from
the date of the Closing ("Survival Period"); provided, however, that the
Survival Period shall not apply to the representations, warranties, covenants,
agreements and indemnities set forth in Sections 3.8, 3.19, 3.21 and 3.22
hereof, but shall apply the applicable statute of limitation with respect to
such matters. Anything to the contrary notwithstanding, a claim for
indemnification which is made but not resolved prior to the expiration of the
Survival Period may be pursued and resolved after such expiration.
10.4. Escrow. Each of the Selling Parties agrees that the Purchaser
shall hold in escrow an amount representing ten percent (10%) of the Purchase
Price (the "Escrow Fund") as an escrow fund to be administered in accordance
with the terms and provisions of the Escrow Agreement in substantially the form
attached hereto as Exhibit B (the "Escrow Agreement"). Each of the Selling
Parties agrees that the Purchaser shall have the right to transfer to the
appropriate Indemnitee in accordance with the terms of the Escrow Agreement a
portion of the Escrow Fund approximately equal in value to the total amount of
the Indemnified Losses. To the extent that the Indemnified Losses exceed the
value of the Escrow Fund, the Selling Parties shall make payment for Indemnified
Losses under this Article X in cash legal tender of the United States of America
to the extent sufficient to satisfy all Indemnified Losses.
10.5. Purchaser Indemnification of Selling Parties. Purchaser agrees to
indemnify and hold harmless the Company and the Shareholder against, and in
respect of, any and all claims, losses, expenses, costs, reasonable attorney's
fees, obligations, and liabilities either of them may incur in a bona fide
settlement of claims or by judgment by reason of Purchaser's breach of or
failure to perform any of its warranties, guaranties, commitments, or covenants
in this Agreement.
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ARTICLE XI
ADDITIONAL AGREEMENTS
11.1. Expenses. Except as otherwise provided herein, all expenses
incurred by Purchaser in connection with the negotiations among the parties, and
the authorization, preparation, execution and performance of this Agreement and
the transactions contemplated hereby shall be paid by Purchaser, as the case
maybe. Except as otherwise provided herein, all expenses incurred by the Selling
Parties in connection with the negotiations among the parties, and the
authorization, preparation, execution and performance of this Agreement and the
consummation of the transactions contemplated hereby shall be paid by the
Selling Parties.
11.2. Publicity. All press releases and other public announcements
respecting the subject matter hereof shall be made only by Purchaser; provided,
however, that the Company may make any disclosure required to be made under
applicable Law if it has determined in good faith that it is necessary to do so
and used its best efforts, prior to the issuance of the disclosure, to provide
Purchaser with a copy of the proposed disclosure and to discuss the proposed
disclosure with Purchaser.
11.3. Cooperation. The parties shall cooperate fully with each other and
with their respective counsel and accountants in connection with any steps
required to be taken as part of their respective obligations hereunder, and all
parties shall use commercially reasonable efforts to consummate the transactions
contemplated herein and to fulfill their obligations hereunder. From time to
time and at any time, at the Purchaser's request, whether on or after the date
hereof, and without further consideration, the Company and Shareholders shall,
at their expense, execute and deliver such further documents and instruments of
conveyance, assignment, and transfer and shall take such further reasonable
actions as may be necessary or desirable, in the opinion of the Company, in
connection with the consummation of the transactions described herein.
11.4. Noncompetition Covenant. For a period of five years from and after
the Closing Date, none of the Selling Parties will engage directly or indirectly
in any business that any of the Purchaser and its Subsidiaries conduct as of the
Closing Date; provided, that no owner of less than 1% of the outstanding stock
of a publicly trade corporation shall be deemed to engage solely by reason
thereof in any of its businesses. If the final judgment of the court of
competent jurisdiction declares that any term or provision of this Section 11.4
is invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of the term or provision, to delete specific words
or phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed.
11.5. Confidentiality. The Company and each of the Shareholder will
treat and hold as such all Confidential Information, refrain from using any of
the Confidential Information except in connection with this Agreement, and
deliver promptly to the Buyer or destroy, at the request and option of the
Purchaser, all tangible embodiments (and all copies) of the Confidential
Information which are in his or its possession. In the event that any of the
Selling Parties is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential
Information, that Selling Party will notify the Purchaser promptly of the
request or requirement so that the Purchaser may seek an appropriate protective
order or waive compliance with the provisions of this Section 11.5. If, in the
absence of a protective order or the receipt of a waiver hereunder, any of the
Selling Parties is, on the advice of counsel, compelled to disclose any
Confidential Information to any tribunal or else stand liable for contempt, that
Selling Party may disclose the Confidential Information to the tribunal;
28
provided, however, that the disclosing Selling Party shall use his or its best
efforts to obtain, at the request of the Purchaser, an order or other assurance
that confidential treatment will be accorded to such portion of the Confidential
Information required to be disclosed as the Buyer shall designate.
11.6. Employment Agreement. Each of the individuals set forth in
Schedule 11.6 shall have executed and delivered an employment agreement with the
Purchaser in substantially the form of Exhibit C attached to the Agreement and
each of such agreements shall be in full force and effect as of the Closing
Date.
11.7. Change of Company's Name. The Company agrees, upon request of the
Purchaser at any time after the Closing Date, that it will take and cause to be
taken all necessary action by its board of directors, shareholders, and any
other Persons in order to change the Company's name to a name other than "Rio
Systems International, Inc.", or any similar combination of words. From the
period of time between the Closing Date until the Company's name change, the
Purchaser is granted a limited license to use the name "Rio Systems
International, Inc." only for the purposes of identification.
11.8. Expenses after Closing. Purchaser shall be solely responsible for
any and all expenses relating directly or indirectly to the Acquired Assets
which expenses arise after the date of closing. Purchaser shall immediately
following closing notify all vendors and trade creditors of Company that
purchaser is obligated for all future acquisitions of products and services. No
products or services shall be purchased in the name of the Company following the
closing.
ARTICLE XII
TERMINATION
12.1. Conditions Permitting Termination. Subject to the provisions of
Section 9.1, relating to the postponement of the Closing Date, any Party, except
as specifically set forth below, may on the Closing Date upon written
notification to the non-terminating Parties, terminate this Agreement:
(a) If any bona fide action or proceeding shall be pending
against any Party on the Closing Date that could result in an unfavorable
judgment, decree, or order that would prevent or make unlawful the performance
of this Agreement or if any agency of the federal or of any state government
shall have objected at or before the Closing Date to this acquisition or to any
other action required by or in connection with this Agreement;
(b) If the legality and sufficiency of all steps taken and to be
taken by the Parties and their shareholders in carrying out this Agreement shall
not have been approved by counsel.
12.2. Defaults Permitting Termination. If either Purchaser or Selling
Parties materially default in the due and timely performance of any of its or
their obligations, warranties, covenants, conditions precedent or agreements
under this Agreement, the nondefaulting Party or Parties, at its or their
option, may on the Closing Date give notice of termination of this Agreement, in
the manner provided in Section 13.11. The notice shall specify with
particularity the default or defaults on which the notice is based. The
termination shall be effective five (5) days after the Closing Date, unless the
specified defaults shall have been cured on or before the Effective Date for
termination, or unless otherwise set forth in a writing executed by all Parties
hereto.
12.3. Liabilities in Event of Termination. In the event of any
termination of this Agreement as provided in Section 12.1, this Agreement shall
forthwith become wholly void and of no further force and effect, and there shall
29
be no liability on the part of Purchaser, Selling Parties or their respective
officers, directors or agents, to any other party hereto, except that in the
case that a default exists by either of these parties, then the nondefaulting
party shall have such rights and remedies as provided herein (with the exception
of specific performance) and as available at law and in equity and the
defaulting party shall be liable for any and all damages sustained by the
nondefaulting party. In the event that termination occurs pursuant to Section
12.2, the nondefaulting party shall have such rights and remedies as provided
herein (with the exception of specific performance) and as available at law and
in equity and the defaulting party shall be liable for any and all damages
sustained by the nondefaulting party.
ARTICLE XIII
MISCELLANEOUS
13.1. Effect of Headings. The subject headings of the sections and
subsections of this Agreement are included for convenience only and shall not
affect the construction or interpretation of any of its provisions.
13.2. Entire Agreement; Modification; Waiver. This Agreement constitutes
the entire agreement between the Parties pertaining to the subject matter
contained in it and supersedes all prior and contemporaneous agreements,
representations, and understandings of the Parties. The Recitals are
incorporated as part of the Agreement. No supplement, modification, or amendment
of this Agreement shall be binding unless executed in writing by all the
Parties. No waiver of any of the provisions of this Agreement shall be deemed,
or shall constitute, a waiver of any other provision, whether or not similar,
nor shall any waiver constitute a continuing waiver. No waiver shall be binding
unless executed in writing by the Party making the waiver.
13.3. Counterparts. This Agreement may be executed simultaneously in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
13.4. Parties in Interest. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by reason of this
Agreement on any Persons other than the Parties to it and their respective
successors and assigns, nor is anything in this Agreement intended to relieve or
discharge the obligation or liability of any third persons to any Party to this
Agreement, nor shall any provision give any third persons any right of
subrogation or action over or against any Party to this Agreement.
13.5. Assignment. This Agreement shall be binding on, and shall inure to
the benefit of, the Parties to it and their respective heirs, legal
representatives, successors, and assigns. However, no assignment of any of the
rights or obligations pursuant to this Agreement by any Party to this Agreement
shall be effective without the prior written authorization of the non-assigning
Parties to this Agreement.
13.6. Remedies Cumulative. The remedies provided to Selling Parties and
Purchaser by this Agreement shall be in addition to, and, except as stated in
Section 13.7 below, not in lieu of, any other remedies to which the respective
Parties are entitled at law or in equity for any breach of or noncompliance with
the provisions of this Agreement by the other Parties.
13.7. Specific Performance and Waiver of Rescission Rights. Each Party's
obligation under this Agreement is unique. If any Party should default in its
performance of obligations under this Agreement, the Parties each acknowledge
that it would be extremely impracticable to measure the resulting damages;
accordingly, the nondefaulting Party or Parties, in addition to any other
available rights or remedies, may xxx in equity for specific performance, and
30
the Parties each expressly waive the defense that a remedy in damages will be
adequate.
13.8. Recovery of Litigation Costs. If any legal action or any
arbitration or other proceeding is brought for the enforcement of this
Agreement, or because of an alleged dispute, breach, default, or
misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing Party or Parties shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it or they may be entitled.
13.9. Finder's or Broker's Fees. Each Party represents and warrants that
it has dealt with no broker or finder in connection with any transaction
contemplated by this Agreement, and, as far as it knows, no broker or other
Person is entitled to any commission or finder's fee in connection with any of
these transactions, except that the Company has agreed to pay a finder's fee of
four percent, two percent of the Purchase Price to Berkus Technology Venutures
and two percent of the Purchase Price to Xxxxx Xxxxxxxxxx.
13.10. Expenses. Each Party shall pay all costs and expenses incurred or
to be incurred by it in negotiating and preparing this Agreement and in closing
and carrying out the transactions contemplated by this Agreement, including all
fees and costs of such Party for attorneys and/or accountants who may act on
such Party's behalf.
13.11. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Selling Parties: Rio Systems International, Inc.
00-X Xxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attn: Xxxxxx Xxxxx
Phone: 000-000-0000
Fax: 000-000-0000
Copy to: Xxxxxx, Xxxxxxxx & Xxxxxx
Xxxxxx X. Xxxxxx, Esq.
0000 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Phone: 000-000-0000
Fax: 000-000-0000
If to the Purchaser: AremisSoft Hospitality (US), Inc.
0000 Xxxxxxx Xxxx., Xxxxx 000
Xxxxxxxx, XX 00000
Attn: Xxxx Xxxxxxx
Phone: 000-000-0000
Fax: 000-000-0000
31
Copy to: Xxxxxx Eng & Xxxxxxxx
Xxxxx X. Xxxxxx, Esq.
000 Xxxxxxx Xxxx, Xxxxx 0000
Xxxxxxxxxx, XX 00000
Phone No.: 000-000-0000
Fax No.: 000-000-0000
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
13.12. Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Parties. The Company may consent to any such amendment at any time prior to the
Closing with the prior authorization of its board of directors. No waiver by any
Party of any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
13.13. Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. Nothing in the
Disclosure Memorandum shall be deemed adequate to disclose an exception to a
representation or warranty made herein unless the Disclosure Memorandum
identifies the exception with particularity and describes the relevant facts in
reasonable detail. Without limiting the generality of the foregoing, the mere
listing (or inclusion of a copy) of a document or other item shall not be deemed
adequate to disclose an exception to a representation or warranty made herein
(unless the representation or warranty has to do with the existence of the
document or other item itself). The Parties intend that each representation,
warranty, and covenant contained herein shall have independent significance. If
any Party has breached any representation, warranty, or covenant contained
herein in any respect, the fact that there exists another representation,
warranty, or covenant relating to the same subject matter (regardless of the
relative levels of specificity) which the Party has not breached shall not
detract from or mitigate the fact that the Party is in breach of the first
representation, warranty, or covenant.
13.14. Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
13.15. Resolution of Disputes: Any dispute that may arise under this
contract if not resolved between the parties within thirty (30) days shall be
submitted to arbitration, in the county of Xxxxxx, State of Georgia, pursuant to
the rules of the American Arbitration Association. The decision in arbitration
shall be conclusive and binding on the parties and any judgment may be entered
upon it in any court having jurisdiction.
32
13.16. Governing Law. This Agreement shall be construed in accordance
with, and governed by, the laws of the State of Georgia as applied to contracts
that are executed and performed entirely in Georgia.
13.17. Severability. If any provision of this Agreement is held invalid
or unenforceable by any court of final jurisdiction, it is the intent of the
Parties that all other provisions of this Agreement be construed to remain fully
valid, enforceable, and binding on the Parties.
IN WITNESS WHEREOF, the Parties to this Agreement have duly executed it
on the date and year first written above:
PURCHASER
AremisSoft Hospitality (US), Inc.
By:
Roys Poyiadjis, Chief Executive Officer
COMPANY
Rio Systems International, Inc.
By:
Xxxxxx Xxxxx, President
By:
Xxxxx Xxxxx, Secretary
SHAREHOLDERS
Xxxxx Xxxxxx
Xxxxx Xxxxxxxxxx
Xxxxx Xxxxx
Xxxxxx Xxxxx
EXHIBITS AND SCHEDULES
The following Exhibits and Schedules are a part of this Agreement:
EXHIBITS
Exhibit A - Legal Opinion of Harris, Phillips, Xxxxxx P.C.
Exhibit B - Escrow Agreement - The Chicago Trust Company of California
Exhibit C - Form of Employment Agreement
SCHEDULES:
Schedule 2.1(i) - Reference Date Balance Sheet, including list of Acquired
Assets and Company's account
Schedule 2.1(iii) - List of Company Contracts
Schedule 2.2 - Assumed Liabilities
Schedule 2.4 - Adjustment for future performance - earnout
Schedule 9.3 - Purchaser's Deliveries
Schedule 9.4 - Employment Offers
Schedule 10.1(ii) - Adjustment of Purchase Price for breach
Schedule 10.1(iv) - Special Indemnity Items
Schedule 11.6 - List of Key Employees
SCHEDULE 2.1(i)
to the
Agreement for the Purchase and Sale of Assets
to which
AremisSoft Hospitality (US), Inc., as Purchaser,
Rio Systems International, Inc., as Company, and the Shareholders
are parties
REFERENCE DATE BALANCE SHEET, INCLUDING LIST OF
ACQUIRED ASSETS AND COMPANY'S ACCOUNT
SCHEDULE 2.1(iii)
to the
Agreement for the Purchase and Sale of Assets
to which
AremisSoft Hospitality (US), Inc., as Purchaser,
Rio Systems International, Inc., as Company, and the Shareholders
are parties
LIST OF COMPANY CONTRACTS
SCHEDULE 2.2
to the
Agreement for the Purchase and Sale of Assets
to which
AremisSoft Hospitality (US), Inc., as Purchaser,
Rio Systems International, Inc., as Company, and the Shareholders
are parties
ASSUMED LIABILITIES
The Purchaser will assume and be responsible for the following matters:
1. Leased Real Property as identified on Section 3.12(a) of the Disclosure
Memorandum.
Pursuant to the lease identified on Section 3.12(a) of the Disclosure
Memorandum for the premises listed below, the lessee is responsible for common
area maintenance expenses in addition to standard rent. The lessee makes
estimated payments at the time of each rental payment for such expenses. At the
end of each calendar year, the lessor of each property determines whether such
estimated payments have met actual expenses and either credits overpayments to
the lessee or requires additional expense contributions from the lessee to the
extent of underpayments. To the extent that refunds are paid to the Purchaser as
lessee, such refunds shall be prorated for the period to which they relate
between the Purchaser and the Company. To the extent that any additional amounts
are required to be paid by the Purchaser to the landlords, the Company shall
contribute a pro rata amount relating to the period prior to Closing.
2. The accounts payable of the Company as reflected in the Reference Date
Balance Sheet, as adjusted to account for additions or deletions thereto through
the Closing Date, effected through the Ordinary Course of Business. A listing of
Company's account payables (reasonably complete as of the date specified
thereon) has been delivered to the Purchaser.
3. Up to $345,000 in loans from the Shareholders, but excluding accrued and/or
deferred compensation owed to the Shareholders, as reflected in the Reference
Date Balance Sheet.
4. List the loans - see Balance Sheet at Schedule 2.1(i).
5. Those known Liabilities with respect to the Company Contracts assumed by the
Purchaser hereunder, as identified in Schedule 2.1(iii) to this Acquired
Business Disclosure Document.
SCHEDULE 2.4
to the
Agreement for the Purchase and Sale of Assets
to which
AremisSoft Hospitality (US), Inc., as Purchaser,
Rio Systems International, Inc., as Company, and the Shareholders
are parties
ADJUSTMENT FOR FUTURE PERFORMANCE - EARNOUT
In addition to the Purchase Price set forth in Section 2.2, additional
considerations will be paid to the Company upon the achievement of the earn-out
targets set forth below ("Earn-out Target"). It is understood that the Earn-out
Target is designed to be beneficial to all parties and that the Resulting
Business is intended to be part of the Purchaser's business. For purposes of
determining the satisfaction of the Earn-out Target, the "gross profit" of the
Resulting Business shall be tracked for a period of twelve consecutive months
from the date of the Closing (the "Earn-out Period"). In addition, revenues and
gross profits generated from deals "closed" by the Resulting Business within the
Earn-out Period shall be included in the earn-out calculations for determining
the satisfaction of the Earn-out Target. Closed deals are defined as signed
contract received from a customer with the proper and necessary down payment or
deposit, and installed within the Earn-out Period. The Earn-out Target
consideration will be paid as follows:
(i) No additional consideration shall be paid for the first $1.75 million
in gross profit during the Earn-out Period;
(ii) An amount equal to $2.612 for each $1 in gross profit in excess of
$1.75 million up to $2.42 million during the Earn-out Period shall be paid as
additional consideration;
(iii) An amount equal to $0.714 for each $1 in gross profit in excess of
$2.42 million up to $3.82 million during the Earn-out Period shall be paid as
additional consideration;
(iv) An amount equal to $1.143 for each $1 in gross profit in excess of
$3.82 million up to $5.57 million during the Earn-out Period shall be paid as
additional consideration; and
(v) No additional consideration shall be paid for gross profit in excess of
$5.57 million during the Earn-out Period.
In addition to the payments based on the Earn-out Target as provided above,
the Purchaser will also pay the Company an additional consideration for the
gross profit generated from contract (i) that has been signed within the
Earn-out Period, (ii) the necessary down payment or deposit is made by the
customer within the Earn-out Period, and (iii) revenue recognition occurs within
the first three months after the Earn-out Period, based on the continuation of
the above Earn-out Target rate schedule achieved by the Resulting Business
during the Earn-out Period.
For example, the Resulting Business achieved gross profit of $2.12 million
during the Earn-out Period, the Company will be entitled $966,440. Now, assuming
that $500,000 in gross profit was recorded for contracts which was signed and
necessary deposit paid during the Earn-out Period, and the installation occurred
within the first three months after the Earn-out Period, then the Company will
be entitled to an additional $926,400 (783,600+142,800) (The continuation of the
Earn-out Target rate which was achieved during the Earn-out Period was $2.612
for each $1 in gross profit for the next $300,000, thereafter the Earn-out rate
will be $0.714 for each $1 in gross profit).
All payments (subject to any adjustment under Article X) shall be paid
within ninety (90) days after the end of the Earn-out Period.
Notwithstanding anything to the contrary in the Agreement, the following
terms are specifically defined for this Schedule 2.4:
(a) "gross profit" shall mean the revenue (as recognized under GAAP) minus
the cost of goods sold.
(b) "cost of goods sold" shall mean the cost of hardware, cost of software,
cost of training and installation, cost of support and services, and any other
direct cost on selling the Product. Cost of software, as referred to above,
shall mean the cost of third party software purchased by the Resulting Business
and resold to the end-users. Examples of this are database licenses (for
instance "Oracle") and operating system software. Cost of training and
installation (hereinafter "T & I") services shall include all direct costs
associated with running the T & I department. Examples of these costs are T & I
payroll and related expenses, travel and related costs, and contract personnel
utilized in implementing client systems inclusive of any third party contractors
utilized. Cost of support and services shall include all direct costs associated
with providing client support ("help desk support") to users of the Resulting
Business's products. Examples of these costs are support department payroll and
related expenses, travel and related costs, telephone costs associated with
client support of the Resulting Business's systems, and any contractors utilized
in performing the Resulting Business client support. Other direct cost of
selling the Product shall mean any other direct cost associated with selling the
Resulting Business' Product. Examples of these costs would include sales
commissions and royalties to third parties for third party products used in
delivering the Resulting Business' Product.
(c) "revenue" shall mean (i) one hundred (100%) percent of revenues
recognized by the Resulting Business on sales in North America in accordance
with Purchaser's current accounting policies on revenue recognition and in
conformity with GAAP, (ii) sixty (60%) percent of revenues recognized by the
Resulting Business on sales outside of North America in accordance with
Purchaser's current accounting policies on revenue recognition and in conformity
with GAAP, and (iii) fifty (50%) percent of revenues recognized on the sale of
the Purchaser's products to Ritz Carlton Hotels in accordance with Purchaser's
current accounting policies on revenue recognition and in conformity with GAAP.
The Purchaser's Products are all products, licenses, services other than
Products of the Resulting Business. Currently, the Purchaser recognizes revenues
on sales of hardware and software upon shipment of those products to the
end-users (FOB shipping point), assuming all other revenue recognition criteria
are met. Revenues shall be recorded net of any sales discount granted to
clients. Revenues on Training and Installation ("T & I") services are recognized
upon completion of those services to the end-user. Revenues on maintenance fees
billed annually or quarterly in advance are prorated over the appropriate
service period covered.
SCHEDULE 9.3
to the
Agreement for the Purchase and Sale of Assets
to which
AremisSoft Hospitality (US), Inc., as Purchaser,
Rio Systems International, Inc., as Company, and the Shareholders
are parties
PURCHASER'S DELIVERIES
A. Purchase Price. The Purchaser shall deliver to the Company the purchase
price of $2,440,000, less:
1) $244,000 as the Escrow Fund to The Chicago Trust Company of California;
2) $1,000 as prepayment of Company's share of the Escrow Fee to The
Chicago Trust Company of California; and
3) $50,000 to Xxxxxx, Xxxxxxxx and Xxxxxx as escrow agent pursuant to the
Escrow Agreement attached as "Attachment A".
B. Certificates of Purchaser. Purchaser shall deliver to the Company a
certificate executed by one of its officers, dated the date of the Closing,
certifying in such detail as the Company may reasonably request that (i) the
representations and warranties of Purchaser contained in this Agreement and any
Other Agreement are true and correct in all material respects, and (ii)
Purchaser has performed and complied with in all material respects all
covenants, agreements and conditions required by this Agreement to be performed
or complied with by Purchaser prior to or on the date of the Closing.
C. Resolutions. Purchaser shall deliver to the Company duly adopted
resolutions of the Board of Directors of Purchaser certified by the President or
Secretary of Purchaser as the case may be as of the date of the Closing,
authorizing and approving the execution hereof and the taking of all other
actions necessary to enable Purchaser to comply with the terms hereof and to
consummate the transactions contemplated herein.
D. Escrow Agreement. Purchaser shall execute and deliver the Escrow
Agreement.
SCHEDULE 9.4
to the
Agreement for the Purchase and Sale of Assets
to which
AremisSoft Hospitality (US), Inc., as Purchaser,
Rio Systems International, Inc., as Company, and the Shareholders
are parties
EMPLOYMENT OFFERS
SCHEDULE 10.1(ii)
to the
Agreement for the Purchase and Sale of Assets
to which
AremisSoft Hospitality (US), Inc., as Purchaser,
Rio Systems International, Inc., as Company, and the Shareholders
are parties
ADJUSTMENT OF PURCHASER PRICE FOR BREACH
A. Receivables. The Selling Parties represents and warrants to the
Purchaser that the statements contained in Section 3.10 are correct and complete
as of the date of the Agreement and through the Closing Date. Notwithstanding
Section 10.2, in the event the Selling Parties breaches any of the
representations, warranties and covenants contained in Section 3.10, the
Purchaser shall have the right to adjust (reduce but not increase) the Purchase
Price to the extent of that breach. In addition to Purchaser's right to seek
indemnification under Article X, the Purchaser shall have the right, but not the
obligation, to offset the additional consideration that may be payable by the
Purchaser under Section 2.4.
SCHEDULE 10.1(iv)
to the
Agreement for the Purchase and Sale of Assets
to which
AremisSoft Hospitality (US), Inc., as Purchaser,
Rio Systems International, Inc., as Company, and the Shareholders
are parties
SPECIAL INDEMNITY ITEMS
A. Taxes. Any and all liabilities arising from the Company's Taxes, whether
or not disclosed.
SCHEDULE 11.6
to the
Agreement for the Purchase and Sale of Assets
to which
AremisSoft Hospitality (US), Inc., as Purchaser,
Rio Systems International, Inc., as Company, and the Shareholders
are parties
LIST OF KEY EMPLOYEES
