STOCK PURCHASE AGREEMENT dated as of September 3, 2014 by and among PRIORITY FULFILLMENT SERVICES, INC., REV SOLUTIONS LIMITED, STEVEN J. STEPHAN, THE ASHU CHAHAL IRREVOCABLE CHILDREN’S TRUST, THE BABU VENKATESH IRREVOCABLE CHILDREN’S TRUST, BABU...
Exhibit 10.1
dated as of September 3, 2014
by and among
PRIORITY FULFILLMENT SERVICES, INC.,
REV SOLUTIONS LIMITED,
XXXXXX X. XXXXXXX,
THE XXXX XXXXXX IRREVOCABLE CHILDREN’S TRUST,
THE BABU VENKATESH IRREVOCABLE CHILDREN’S TRUST,
BABU VENKATESH
and
XXXX XXXXXX
THIS STOCK PURCHASE AGREEMENT (this “Agreement”), dated as of September 3, 2014, is made by and among PRIORITY FULFILLMENT SERVICES, Inc., a Delaware corporation (“Purchaser”), REV SOLUTIONS LIMITED, an International Offshore Business Company incorporated pursuant to the RAK Investment Authority of Dubai, United Arab Emirates (“Seller”), XXXXXX X. XXXXXXX, an individual (“Xxxxxxx”), The Xxxx Xxxxxx Irrevocable Children’s Trust (the “AC Trust”), The Babu Venkatesh Irrevocable Children’s Trust (the “BV Trust”), BABU VENKATESH, an individual (“Venkatesh”) and XXXX XXXXXX, an individual (“Xxxxxx”). Each of Seller, Stephan, AC Trust, BV Trust, Venkatesh and Xxxxxx may sometimes be referred to herein as a “Selling Party” and collectively referred to herein as the “Selling Parties.” The Purchaser and the Selling Parties, individually and collectively, may sometimes be referred to herein individually as a “Party” and collectively as the “Parties”. Certain terms used herein are defined in Article 1 hereof.
WHEREAS, the Selling Parties (other than the Seller) own all of the legal and beneficial interest in the outstanding Securities of the Seller; and
WHEREAS, the Seller owns all of the legal and beneficial interest in the REV-US Shares issued by REV SOLUTIONS, INC., a Delaware corporation (“REV-US”), and the REV-India Shares issued by REVTECH SOLUTIONS INDIA PRIVATE LIMITED, an Indian corporation (“REV-India” and collectively with REV-US, the “Companies” and each, individually, a “Company”); and
WHEREAS, the Selling Parties and the Purchaser wish to enter into this Agreement to evidence their understanding and agreement regarding the sale, transfer and assignment of all of the Shares to the Purchaser, for the consideration and subject to the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:
Article 1
CERTAIN DEFINITIONS
Section 1.1 Certain Definitions. In addition to the terms defined in the Preamble hereto, as used in this Agreement, the following terms have the respective meanings set forth below.
“2014 Earn-out” has the meaning set forth in Section 2.3(a).
“2015 Earn-out” has the meaning set forth in Section 2.3(b).
“Accounting Firm” has the meaning set forth in Section 2.2(b)(ii)(C).
“Acquisition Transaction” has the meaning set forth in Section 7.5.
“Affiliate” means, with respect to any Person, any other Person who directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. The term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlled” and “controlling” have meanings correlative thereto.
“Affiliate Agreement” has the meaning set forth in Section 4.18.
“Agreement” has the meaning set forth in the introductory paragraph to this Agreement.
“Allocation” has the meaning set forth in Section 7.2(c).
“Ancillary Document(s)” means all of and each agreement, document, instrument or certificate contemplated by this Agreement (other than this Agreement) to be executed in connection with the transactions contemplated hereby.
“Applicable Law” means any statute, law (including common law), code, ordinance, rule, regulation, decree or other requirement or rule of law, domestic or foreign, enacted, issued, promulgated, enforced or entered by any Governmental Entity.
“Applicable Indian Law” means any Applicable Law to which REV-India or any of its assets or property has been or is subject, including the Foreign Exchange Xxxxxxxxxx Xxx, 0000; Xxxxxxxxxxxx Xxx, 0000; Xxxxxxxxx Xxxxx Xxx, 0000; Maternity Benefit Act,
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1961; Karnataka Shops and Xxxxxxxxxxxxx Xxx, 0000; Sexual Harassment of Women At Workplace (Prevention, Prohibition and Xxxxxxxxx) Xxx, 0000; Indian Xxxxxxxx Xxx, 0000; Equal Remuneration Act; Minimum Wages Act; Bonus Act; and Employment Xxxxxxxx Xxx, 0000.
“Base Balance Sheet” means the combined balance sheet of the Companies as shown in the column under the heading “Q2 Adjustments” attached as Appendix I (Estimated Closing Balance Sheet) to the LOI.
“Base Total Capital” means the line item “Total Capital” shown on the Base Balance Sheet.
“Business Day” means any day, other than a Saturday, Sunday or other day, on which commercial banks in New York City are permitted or required to close.
“Business Intellectual Property” means (a) all Intellectual Property owned by any Company (in whole or in part), including the Intellectual Property listed on Schedule 4.12(a), and (b) the Intellectual Property licensed to any Company under the IP Contracts or for which any Company has other valid rights to use.
“CERCLA” means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended.
“Claim” has the meaning set forth in Section 11.1(a)(ii).
“Closing” has the meaning set forth in Section 3.1.
“Closing Date” has the meaning set forth in Section 3.1.
“Closing Date Balance Sheet” means the combined balance sheet of the Companies as of the Closing Date, which shall contain the corresponding line items set forth on the Base Balance Sheet, plus accruals for Seller Expenses, Pre-Closing Taxes and such other items as required by GAAP, in each case, as finally determined in accordance with the provisions hereof.
“Code” means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.
“Commercial Software” means commercially available non-custom Software such as, by way of example, Microsoft Office.
“Commercial Software Contract” means any Contract under which a Company licenses or has a right to use Commercial Software on standard terms involving annual payments from the Company of less than $25,000.
“Company” and “Companies” has the meaning set forth in the Preamble hereto.
“Company Business” means the business of implementation and support of ecommerce web platforms, including, by way of example and without limitation, Demandware, Oracle Commerce and Hybris. The term “Company Business” does not include providing consulting services regarding operating a professional services firm in India whose primary activity does not involve the implementation and support of ecommerce web platforms.
“Company Employee” has the meaning set forth in Section 7.11(b).
“Company Material Adverse Effect” means (x) a material adverse effect upon the ability of the Selling Parties to fulfill their respective obligations hereunder or to consummate the transactions contemplated by this Agreement and the Ancillary Documents or (y) any result, occurrence, fact, change, event or effect that has had, or would reasonably be expected to have, individually or together with one or more other results, occurrences, facts, changes, events or effects, a material adverse effect upon the business, financial condition, liabilities, assets or results of operations of the Companies, taken as a whole; provided, however, that for purposes of clause (y), any adverse result, occurrence, fact, change, event or effect, directly or indirectly, arising from or related to any of the following shall not be taken into account in determining whether a “Company Material Adverse Effect” has occurred: (i) conditions affecting the United States and/or India economy generally, (ii) changes in the United States and/or India financial, banking or securities markets in general, (iii) changes in GAAP pursuant to which any Company is required to change prior accounting policies or practices, (iv) changes in any Applicable Law or interpretation thereof, or (v) the public announcement or pendency of the transactions contemplated by this Agreement.
“Company Products and Services” has the meaning set forth in Section 4.19(a).
“Company Registered IP” has the meaning set forth in Section 4.12(a).
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“Competing Business” has the meaning set forth in Section 7.11(a).
“Confidentiality Agreement” means the Mutual Nondisclosure Agreement, dated as of January 28, 2014, by and between Commera Capital LLC, on behalf of Purchaser, and REV-US.
“Consideration” has the meaning set forth in Section 2.2(a).
“Contract” means any written or oral contract, license, agreement, commitment, instrument or other legally binding obligation or arrangement to which a Person is a party, by which a Person is bound or by which any of the assets or properties of a Person is bound.
“Copyrights” means all copyrights, including in and to works of authorship and all other rights corresponding thereto throughout the world, whether published or unpublished, including rights to prepare, reproduce, perform, display and distribute copyrighted works and copies, compilations and derivative works thereof, including all renewals and extensions thereof, and whether registered or unregistered, and registrations and applications for registration thereof.
“Deductible” has the meaning set forth in Section 10.5(a)(i).
“DOL” means the United States Department of Labor.
“Earn-out Payments” has the meaning set forth in Section 2.3.
“Earn-out Statement” means, for any calendar year, a written statement setting forth the calculation and determination of the India Income for such year, as finally determined in accordance with the provisions hereof.
“Employee Benefit Plan” means each “employee benefit plan” (as such term is defined in Section 3(3) of ERISA) and each and every other written, unwritten, formal or informal plan, agreement, program, policy or other arrangement involving direct or indirect compensation (other than workers’ compensation, unemployment compensation and other government programs), employment, severance, consulting, disability benefits, supplemental unemployment benefits, vacation benefits, retirement benefits, deferred compensation, profit-sharing, bonuses, stock or unit options, profits-interest awards, stock appreciation rights, other forms of incentive compensation, post-retirement insurance benefits, or other benefits, entered into, maintained or contributed to by any Company or with respect to which any Company has or may in the future have any liability (contingent or otherwise).
“Environmental Laws” means all Applicable Laws and all orders, policies and guidelines of all Governmental Entities, in each case concerning pollution or protection of the environment, natural resources, and occupational health and safety, as such of the foregoing are enacted and in effect on or prior to the Closing Date, including CERCLA.
“Equity Interest” means, with respect to any Person (the “Issuer”), any obligation convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire, any Securities of the Issuer, or any options, calls, restricted stock, deferred stock awards, stock units, “phantom” awards, dividend equivalents, or commitments relating to, or any stock appreciation right or other instrument the value of which is determined in whole or in part by reference to the market price or value of, or any other right of any kind under which, pursuant to which or in respect of which the holder thereof may acquire any Security of the Issuer.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“ERISA Affiliate” means any Person that, together with the Company, would be deemed a “single employer” within the meaning of Section 414(b), (c), (m) or (o) of the Code.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.
“Financial Statements” has the meaning set forth in Section 4.5(a).
“Fundamental Representations” means the respective representations and warranties set forth in Section 4.1(a) and (b), Section 4.2, Section 4.4, Section 4.16, Section 5.1, Section 5.2(a),(b) and (d), Section 6.1, Section 6.2, Section 6.3 and Section 6.4.
“GAAP” means, as to each Company, generally accepted accounting principles as in effect in its applicable jurisdiction and applicable to such Company.
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“Governing Document” means any charter, articles, memorandum, bylaws, certificate or similar document adopted, filed or registered in connection with the creation, formation, organization or governance of an entity, and shall be deemed to include any partnership, stockholders’, members’, registration rights, voting and similar agreements regarding the rights or obligations of the equity holders of such entity.
“Governmental Entity” means any (i) federal, state, local, municipal, foreign or other government, (ii) governmental or quasi-governmental entity of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal), (iii) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature, including any arbitral tribunal or (iv) any “self-regulatory organization” as defined in Section 3(a)(26) of the Exchange Act and any other U.S. or foreign securities exchange, futures exchange, commodities exchange, contract market, any other exchange or corporation or similar self-regulatory body or organization.
“Hazardous Materials” means all materials, wastes or substances defined by, or regulated under, any Environmental Law as a hazardous waste, hazardous material, hazardous substance, extremely hazardous waste, restricted hazardous waste, toxic waste, or toxic substance.
“Indebtedness” means, for any Person, (a) all indebtedness or other obligations of such Person (i) for borrowed money or (ii) evidenced by notes, bonds or similar instruments, (b) obligations of such Person for the deferred purchase price of property or services, conditional sale obligations or title retention policies (excluding trade accounts payable), (c) all obligations under leases that are or should be, in accordance with GAAP, recorded as capital leases in respect of which such Person is liable as lessee, (d) all obligations owed pursuant to any letter of credit or interest rate, currency swap or hedging agreement or transaction, (e) any of the foregoing obligations which is secured by a Lien on the property or assets of such Person, and (f) any of the foregoing for which such Person is liable as an obligor, guarantor, surety or otherwise.
“Indemnified Party” has the meaning set forth in Section 10.3(a).
“Indemnifying Party” has the meaning set forth in Section 10.3(a).
“India Income” means, for any period, the product obtained by multiplying (i) all operating expenses incurred or accrued by REV-India for such period, as determined in accordance with GAAP, excluding (1) Taxes, (2) expenses paid or payable to any Selling Party, REV-US, Purchaser or any Affiliate thereof, (3) Seller Expenses, (4) the Consideration and the Key Employee Bonus Amounts, (5) expenses in excess of $25,000, on a cumulative aggregate basis, arising from warranty claims relating to work performed prior to the Closing Date, (6) incremental rent expense for additional office space paid with respect to the period October 1, 2014 through December 31, 2014, if any, and (7) expenses arising from or relating to any event, state of facts, circumstance or occurrence which constitutes a breach of any representation or warranty set forth in Article 4 hereof, by (ii) 1.25. Schedule 1.1(a) sets forth a calculation of India Income as of July 31, 2014, and India Income shall be calculated in a manner consistent with the methodologies used in the calculation set forth therein. India Income shall be expressed in U.S. Dollars based upon a fixed exchange rate of 60 Indian Rupees (INR) equals U.S. $1.00, regardless of the then prevailing exchange rate.
“Insolvent” means that the sum of the debts and other probable Liabilities of a Person exceeds the present fair saleable value of the assets of such Person.
“Intellectual Property” means, as they exist anywhere in the world, all intellectual property and industrial property rights and assets, and all rights, interests and protections that are associated with, similar to, or required for the exercise of, any of the foregoing, however arising, pursuant to the Applicable Laws of any jurisdiction throughout the world, whether registered or unregistered, including any and all Copyrights, Trademarks, Software, Trade Secrets, Patents, Internet Assets, and all rights to xxx at law or in equity for any infringement, misappropriation or other impairment of any of the foregoing and the right to collect damages and proceeds therefrom.
“Interim Tax Period” means with respect to any Straddle Period, the portion of such Straddle Period that begins on the first day of such Straddle Period and ends on the Closing Date.
“Internet Assets” means all internet domain names, whether or not trademarks, registered in any top-level domain by any authorized private registrar or Governmental Entity, web addresses, web pages, websites and related content, accounts with Twitter, Facebook and other social media companies and the content found thereon and related thereto, URLs and similar rights and items.
“IP Contracts” has the meaning set forth in Section 4.12(b).
“IRS” refers to the Internal Revenue Service.
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“IT Systems” has the meaning set forth in Section 4.12(m).
“Key Employees” means Xxxxxxx Xxxxxxxx and Xxxx Xxxxxx.
“Key Employee Bonus Amount” has the meaning set forth in Section 2.3(k).
“Key Employee Employment Letters” has the meaning set forth in Section 8.2(f).
“Knowledge” means, as to any Xxxxxxx, the current, actual knowledge of such Person following reasonable inquiry of the individuals listed in Schedule 1.1(b), and with respect to any other Person, the current, actual knowledge of such Person following reasonable inquiry.
“Latest Balance Sheet” means, as to each Company, the most recent balance sheet included in its Financial Statements.
“Leased Real Property” has the meaning set forth in Section 4.17(a).
“Liabilities” means, with respect to any Person, any and all liabilities and obligations of any kind (whether known or unknown, contingent, accrued, due or to become due, secured or unsecured, matured or otherwise), including but not limited to accounts payable, all liabilities and obligations related to Indebtedness or guarantees, costs, expenses, royalties payable, and other reserves, wages, accrued bonuses and commissions, accrued vacation and any other form of leave, termination payment obligations, penalties, employee expense obligations and all other liabilities and obligations of such Person or any of its subsidiaries or Affiliates, regardless of whether such liabilities are required to be reflected on a balance sheet in accordance with GAAP.
“Lien” means any mortgage, pledge, security interest, lien (statutory or otherwise), charge, claim, option, right of first refusal, right of first offer, attachment, easement, covenant or other right, restriction or encumbrance of any kind, including any collateral security arrangement, conditional or installment sales agreement or other restriction of any kind (other than those applicable under the securities laws of the United States and India).
“Limitations Representations” means the representations and warranties set forth in Section 4.10 (Employee Plans), Section 4.11 (Environmental Matters) and Section 4.15 (Tax Matters).
“LOI” means the non-binding letter of intent dated May 29, 2014 executed by Parent and certain of the Selling Parties.
“Loss Contract” has the meaning set forth in Section 4.19(b).
“Losses” has the meaning set forth in Section 10.2(a).
“Material Contract(s)” means, collectively and individually, as applicable, all Contracts listed in Section 4.6(a), Real Property Leases, Personal Property Leases, Services Agreements, IP Contracts and Affiliate Agreements.
“Minority REV-India Shares” means, collectively, the one share of capital stock of REV-India owned by each of Xxxxxxx Xxxxxxxx and XX Xxxxxxxxx.
“Multiemployer Plan” has the meaning set forth in Section 3(37) of ERISA.
“Non-Fundamental Representations” means all representations and warranties of the Parties contained herein other than the Fundamental Representations and the Limitations Representations.
“Notice of Claim” means a written notice that specifies in reasonable detail the breach of covenant, warranty or representation set forth in this Agreement or any certificate furnished under this Agreement (including the sections of this Agreement that are the subject of such breach) pursuant to which Losses are being claimed by an Indemnified Party.
“Open Source Materials” has the meaning set forth in Section 4.12(i).
“Order” means any order, judgment, decision, decree, writ, injunction or other ruling entered or issued by any Governmental Entity.
“Parent” means PFSweb, Inc., a Delaware corporation.
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“Parent Stock” means the common stock, $0.001 par value, of Parent, as the same may be changed into or exchanged for a different number or kind of shares or other securities of the Parent, or of another corporation, whether by reason of reorganization, merger, consolidation, recapitalization, reclassification, stock split-up, stock dividend, combination of shares or otherwise.
“Parties” has the meaning set forth in the introductory paragraph to this Agreement.
“Patents” means all patents, patent applications and inventions, designs and improvements described and claimed therein, patentable inventions, and other patent rights (including any divisions, continuations, continuations-in-part, reissues, reexaminations or interferences thereof, whether or not patents are issued on any such applications and whether or not any such applications are modified, withdrawn or resubmitted).
“Permits” has the meaning set forth in Section 4.9.
“Permitted Liens” means (a) mechanics’, materialmen’s, carriers’, repairers’ and other similar Liens arising or incurred in the ordinary course of business for amounts that are not yet due and payable or are being contested in good faith Proceedings and for which adequate reserves have been provided on the Financial Statements, (b) Liens for Taxes not yet due and payable, (c) Liens described on Schedule 1.1(c), (d) Liens relative to landlords’ and lessors’ interests under leases or rental agreements, (e) deposits or pledges made in connection with, or to secure payment of, workers’ compensation, unemployment insurance or similar programs mandated by Applicable Law, (f) zoning, entitlement, building and other land use regulations imposed by any Governmental Entity having jurisdiction over leased real property and (g) such imperfections of title, liens and easements as do not and will not materially detract from or interfere with the use of the properties subject thereto or affected thereby, or otherwise materially impair business operations involving such properties.
“Person” means an individual, partnership, corporation, limited liability company, joint stock company, unincorporated organization or association, trust, joint venture, association or other similar entity, whether or not a legal entity.
“Personal Information” means any information that identifies an individual or is deemed to be personal information under any Applicable Law.
“Personal Property Lease” has the meaning set forth in Section 4.17(b).
“Pre-Closing Tax Period” means any tax period (or portion thereof) ending on or before the Closing Date.
“Pre-Closing Taxes” means all liabilities for Taxes for the Pre-Closing Tax Period and the Interim Tax Period. For purposes of calculating such liability for the Interim Tax Period, the portion of any Tax that is allocable to the Interim Tax Period shall be deemed to equal: (a) in the case of Taxes based upon or related to income or receipts, the amount that would be payable if the Straddle Period had ended on the Closing Date and the books of each Company closed as of the close of such date; (b) in the case of Taxes imposed on specific transactions or events, Taxes imposed on specific transactions or events occurring on or before the Closing Date; and (c) in the case of any Taxes not covered by clause (a) or clause (b), the amount of such Taxes for the entire Straddle Period multiplied by a fraction (i) the numerator of which is the number of calendar days in the period ending on the Closing Date and (ii) the denominator of which is the number of calendar days in the entire Straddle Period.
“Proceeding” has the meaning set forth in Section 4.8.
“Purchase and Sale” has the meaning set forth in Section 2.1.
“Purchaser” has the meaning set forth in the introductory paragraph to this Agreement.
“Purchaser Indemnitee” has the meaning set forth in Section 10.2(a).
“Real Property Lease” has the meaning set forth in Section 4.17(a).
“Release” means any release, spill, emission, discharge, leaking, pumping, pouring, dumping, injection, deposit, disposal, dispersal, leaching or migration into the environment (including, ambient air, surface water, groundwater and surface or subsurface strata).
“Released Party” has the meaning set forth in Section 7.9.
“Releasing Party” has the meaning set forth in Section 7.9.
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“Representative” has the meaning set forth in Section 11.1.
“Restricted Period” means (i) for Xxxxxxx, the period commencing on the Closing Date and continuing until the earlier of (x) March 31, 2018 and (y) the failure and breach by Purchaser of its obligation to pay any Earn-out Payment due and owing hereunder, which failure is not cured within 30 days after receipt of written notice of breach, and (ii) for the Selling Parties other than Xxxxxxx, the two year anniversary of the closing Date.
“Restrictive Covenant” means the obligations of the Selling Parties set forth in Section 7.11 hereof.
“REV-India Shares” means 4,999,998 issued shares of the authorized share capital of REV-India.
“REV-US Shares” means 1,000 shares of common stock, no par value, of REV-US.
“Schedules” means the schedules to this Agreement.
“Security” or “Securities” means, with respect to any Person, any shares of common stock, preferred stock or capital stock, membership interests, partnership interests (whether limited, general or otherwise designated) and any other ownership, equity or capital interest of such Person, however described and whether voting or non-voting.
“Seller Closing Payment” has the meaning set forth in Section 2.2(a)(i).
“Seller Expenses” means, without duplication, all of the fees, expenses, costs, charges, payments and other obligations that are incurred by or on behalf of any Company or any of the Selling Parties (in each case to the extent paid or payable by any Company) or for which any Company is otherwise liable in connection with the transactions contemplated by this Agreement and the Ancillary Documents (whether incurred or to be paid prior to, at or after Closing), including (i) the fees and expenses of counsel, accountants, advisors, agents and representatives, and (ii) any success, change of control, special or other bonuses or similar amounts payable by any Company to any employee or director upon or in connection with the consummation of the transactions contemplated by this Agreement and the Ancillary Documents.
“Seller Indemnitee” has the meaning set forth in Section 10.2(c).
“Services Agreements” has the meaning set forth in Section 4.19(b).
“Shares” means, collectively, the REV-India Shares and the REV-US Shares.
“Software” means all computer software, including source code, object code, algorithms, formulas, methods, databases, comments, user interfaces, administration, e-mail and customer relationship management tools, menus, buttons and icons, and all files, data, manuals, design notes and other items and documentation related thereto or associated therewith, and any derivative works, foreign language versions, fixes, upgrades, updates, enhancements, new versions or previous versions thereof; and all media and other tangible property necessary for the delivery or transfer thereof.
“Xxxxxxx Closing Payment” has the meaning set forth in Section 2.2(a) (ii).
“Xxxxxxx Employment Agreement” has the meaning set forth in Section 8.2(g).
“Straddle Period” means any Tax period that includes but does not end on the Closing Date.
“Subsidiary” of any Person means another Person, an amount of the voting securities, other voting rights or voting membership or partnership interests of which is sufficient to elect at least a majority of its board of directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which) is owned directly or indirectly by such first Person.
“Tax” means (i) any and all federal, state, local, foreign or other taxes, including income, gross receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use, transfer, real property gains, registration, value added, excise, natural resources, severance, stamp, occupation, premium, windfall profits, environmental (under Section 59A of the Code), customs, duties, real property, personal property, capital stock, social security (or similar), unemployment, disability, payroll, license, employee or other withholding, or other tax, duty, fee, levy, imposts, unclaimed property liability or other charge of any kind whatsoever imposed by a Governmental Entity, including any interest, additions, fines and penalties in respect of the foregoing, whether disputed or not and including any obligations to indemnify or otherwise assume or succeed to the Tax liability of any other Person and (ii) any liability for
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amounts described in clause (i) as a result of (1) being a member of an affiliated, consolidated, combined or unitary group, (2) as a transferee or successor, or (3) by contract or otherwise.
“Tax Return” has the meaning set forth in Section 4.15(a).
“Termination Date” has the meaning set forth in Section 9.1(d).
“Third Party Claim” has the meaning set forth in Section 10.4(a).
“Total Capital” means the line item designated as Total Capital on the Base Balance Sheet and the Closing Date Balance Sheet, as applicable.
“Trademarks” means all trademarks, service marks, logos, designs, trade names, brand names, and trade dress, including trademarks used in column headings, section names, department names and editorial feature titles, corporate names, and all registrations and applications for registration thereof, and all rights and goodwill associated therewith.
“Trade Secrets” means all trade secrets, concepts, ideas, designs, research, processes, procedures, techniques, methods, know-how, formulas, algorithms, data, mask works, discoveries, developments, inventions, modifications, extensions, improvements, confidential business information, and other confidential or proprietary rights (whether or not patentable or subject to copyright, mask work, or trade secret protection).
“Treasury Regulations” means the regulations promulgated under the Code by the United States Department of the Treasury.
“Withholding Amount” has the meaning set forth in Section 2.4.
Article 2
PURCHASE AND SALE
Section 2.1 Purchase and Sale of the Shares. Subject to the terms and conditions of this Agreement, at the Closing, the Seller shall sell, convey, transfer, assign and deliver to Purchaser, free and clear of all Liens, and Purchaser shall purchase from the Seller, all of the Seller’s right, title and interest in, to and under all of the Shares (such purchase and sale of the Shares by the Purchaser shall be referred to collectively as the “Purchase and Sale”).
Section 2.2 Consideration.
(a) Consideration. The aggregate consideration (the “Consideration”) to be paid by the Purchaser hereunder for the Purchase and Sale and the covenants, agreements and obligations undertaken by the Selling Parties hereunder, including the Restrictive Covenant, shall consist of the following:
(i) the sum of Two Million Two Hundred Fifty Thousand Dollars ($2,250,000.00) (the “Seller Closing Payment”), to be paid in equal shares to the AC Trust and BV Trust at Closing in cash by wire transfer in accordance with the wire transfer instructions set forth on Schedule 2.2(a)(i);
(ii) the sum of Three Hundred Thirty Thousand Dollars ($330,000.00) (the “Xxxxxxx Closing Payment” and, collectively with the Seller Closing Payment, the “Closing Payments”), subject to the post-Closing adjustment set forth below, to be paid to Xxxxxxx at Closing in cash by wire transfer in accordance with the wire transfer instructions set forth on Schedule 2.2(a)(ii);
(iii) the sum of Twenty Thousand Dollars ($20,000.00) to be paid to each of the Key Employees, in cash by wire transfer in accordance with the wire transfer instructions set forth on Schedule 2.2(a)(iii); and
(iv) the Earn-out Payments.
All amounts referred to in this Agreement are payable in U.S. dollars.
(b) Adjustment of Xxxxxxx Closing Payment. The Xxxxxxx Closing Payment shall be adjusted and finally determined as follows:
(i) Closing Date Balance Sheet. The Xxxxxxx Closing Payment shall be adjusted based upon the difference between the Base Total Capital and the Total Capital shown on the Closing Date Balance Sheet as hereinafter provided. For such
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purpose, the Base Total Capital and the Closing Date Balance Sheet shall be adjusted in accordance with the adjustments set forth on Schedule 2.2(b)(i).
(ii) Post-Closing Adjustment.
(A) Purchaser shall cause to be prepared and, as soon as practical, but in no event later than ninety (90) days after the Closing Date, shall cause to be delivered to Xxxxxxx, the Purchaser’s calculation of the Closing Date Balance Sheet (the “Purchaser Closing Date Balance Sheet”), together with a calculation of the following adjustment to the Xxxxxxx Closing Payment, as applicable (1) increasing the amount thereof by the excess, if any, of the Total Capital shown on the Purchaser Closing Date Balance Sheet over the Base Total Capital (such excess, the “Closing Date Balance Sheet Positive Adjustment”), or (2) decreasing the amount thereof by the excess, if any, of the Base Total Capital over the Total Capital shown on the Purchaser Closing Date Balance Sheet (such excess, the “Closing Date Balance Sheet Negative Adjustment”). Within five (5) Business Days of its delivery of the Purchaser Closing Date Balance Sheet, Purchaser shall pay to Xxxxxxx the amount of the Closing Date Balance Sheet Positive Adjustment, if any, as determined by the Purchaser Closing Date Balance Sheet (the “Estimated Closing Adjustment Payment”) in accordance with such payment instructions as Xxxxxxx shall designate. In the event that Purchaser does not deliver the Purchaser Closing Date Balance Sheet within such ninety (90)-day period, Xxxxxxx shall have the right to prepare the Closing Date Balance Sheet and Purchaser shall be deemed to have accepted in full the Closing Date Balance Sheet as prepared by Xxxxxxx, and, for purposes of determining the Closing Date Balance Sheet Positive Adjustment or Closing Date Balance Sheet Negative Adjustment, as applicable, such Closing Date Balance Sheet shall be deemed final, binding and conclusive upon Purchaser and Xxxxxxx.
(B) The Purchaser shall promptly furnish to Xxxxxxx such work papers, documents, general ledger records and other documents and information relating to the Purchaser Closing Date Balance Sheet, and promptly provide access to personnel and answer questions, as Xxxxxxx may reasonably request for the purpose of evaluating and verifying data in the Purchaser Closing Date Balance Sheet and/or for preparing the Closing Date Balance Sheet, as applicable.
(C) If Xxxxxxx disagrees in whole or in part with the Purchaser Closing Date Balance Sheet, then within thirty (30) days after his receipt thereof, Xxxxxxx shall notify Purchaser of such disagreement in writing (the “Closing Notice of Disagreement”), setting forth in reasonable detail the particulars of any such disagreement. To be effective, any such Closing Notice of Disagreement shall include a copy of Purchaser Closing Date Balance Sheet marked to indicate the specific line items of the Purchaser Closing Date Balance Sheet that are in dispute (the “Disputed Closing Date Balance Sheet Line Items”) and shall be accompanied by Stephan’s calculation of each of the Disputed Closing Date Balance Sheet Line Items and Stephan’s determination of the Closing Date Balance Sheet and the Closing Date Balance Sheet Positive Adjustment or Closing Date Balance Sheet Negative Adjustment, as applicable. All items that are not Disputed Closing Date Balance Sheet Line Items shall be final, binding and conclusive for purposes of determining the Closing Date Balance Sheet Positive Adjustment or Closing Date Balance Sheet Negative Adjustment, as applicable, hereunder unless the resolution of a Disputed Closing Date Balance Sheet Line Item affects an undisputed item, in which case such undisputed item shall remain open and be considered a Disputed Closing Date Balance Sheet Line Item to the extent of such corresponding effect. In the event that Xxxxxxx does not provide a Closing Notice of Disagreement within such thirty (30)-day period, Xxxxxxx shall be deemed to have accepted in full the Purchaser Closing Date Balance Sheet, and, for purposes of determining the Closing Date Balance Sheet Positive Adjustment or Closing Date Balance Sheet Negative Adjustment, as applicable, such Purchaser Closing Date Balance Sheet shall become final, binding and conclusive upon Purchaser and Xxxxxxx. In the event any Closing Notice of Disagreement is properly and timely provided, Purchaser and Xxxxxxx shall use their respective commercially reasonable efforts for a period of fifteen (15) days (or such longer period as they may mutually agree) to resolve any Disputed Closing Date Balance Sheet Line Items. During Stephan’s aforesaid thirty (30) day period and until the Closing Date Balance Sheet shall be finally determined as provided herein, Purchaser and Xxxxxxx shall cooperate with each other and shall have reasonable access to the books and records, working papers, schedules and calculations of the other in order to prepare, or used in the preparation of, their respective Closing Date Balance Sheet. If, at the end of such period, Purchaser and Xxxxxxx are unable to resolve all Disputed Closing Date Balance Sheet Line Items, then any such remaining Disputed Closing Date Balance Sheet Line Items shall be referred to an independent accounting firm jointly designated by Purchaser and Xxxxxxx (the “Accounting Firm”); provided, that in the event the Purchaser and Xxxxxxx cannot mutually agree as to the designation of the Accounting Firm, each such Party will designate an accounting firm, and the two accounting firms will designate a third accounting firm to act as the Accounting Firm, except that Xxxxx Xxxxxxxx LLP shall not be selected as the Accounting Firm, unless the Purchaser and Xxxxxxx mutually agree.
(D) Purchaser and Xxxxxxx will enter into reasonable and customary arrangements for the services to be rendered by the Accounting Firm under this Section 2.2(b)(ii), such services to be provided in the Accounting Firm’s capacity as an accounting expert and not an arbitrator. The Accounting Firm shall be directed to determine as promptly as practicable (and Purchaser and Xxxxxxx shall use commercially reasonable efforts to cause such determination to occur within thirty (30) days) the resolution of the Disputed Closing Date Balance Sheet Line Items. In making any determination of the Disputed Closing Date Balance Sheet Line Items, the Accounting Firm may not assign a value greater than the greatest value for such item claimed by either Party or smaller than the smallest value for such item claimed by either Party, and the Accounting Firm may only make a determination regarding the matters in dispute between Purchaser and Xxxxxxx. Purchaser and Xxxxxxx shall each furnish to the Accounting Firm such work papers
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and other documents and information relating to the Disputed Closing Date Balance Sheet Line Items, and shall provide access to personnel and answer questions, as such Accounting Firm may reasonably request. The determination of the Disputed Closing Date Balance Sheet Line Items by the Accounting Firm shall be set forth in writing and shall be final, conclusive and binding on the Purchaser and Xxxxxxx for purposes of determining the Closing Date Balance Sheet absent fraud or manifest error and shall be based solely on the terms of this Agreement and the written submissions by Purchaser and Xxxxxxx and not by independent review or investigation. The Parties agree that judgment may be entered upon the award of the Accounting Firm in any court having jurisdiction pursuant to Section 12.13 hereof.
(E) Subject to the next sentence, each Party shall be responsible for its own fees and expenses incurred in connection with this Section 2.2(b). The Purchaser and Xxxxxxx shall each pay one half of the fees and expenses payable to the Accounting Firm in connection with resolving any dispute under this Section 2.2(b), except that, subject to Purchaser’s compliance with its obligations under Section 2.2(b)(ii)(B), in the event that one Party’s determination of the Disputed Closing Date Balance Sheet Line Items as a whole varies by 20% or more from the determination of the Disputed Closing Date Balance Sheet Line Items as a whole by the Accounting Firm hereunder, then such Party shall be solely responsible for the fees and expenses of the Accounting Firm.
(F) Promptly following (x) the Disputed Closing Date Balance Sheet Line Items have been finally determined or (y) the Closing Date Balance Sheet has been finally determined pursuant to clause (A) of Section 2.2(b)(ii), Purchaser shall prepare, and deliver to Xxxxxxx (or Xxxxxxx shall prepare and deliver to Purchaser if the last sentence of Section 2.2(b)(ii)(A) is applicable), the Closing Date Balance Sheet and the calculation of the Closing Date Balance Sheet Positive Adjustment or Closing Date Balance Sheet Negative Adjustment, as applicable, whereupon the following payment shall be made:
(1) If the Closing Date Balance Sheet Positive Adjustment, as finally determined, exceeds the Estimated Closing Adjustment Payment, then Purchaser shall pay an amount in cash equal to such excess to Xxxxxxx in accordance with such payment instructions as Xxxxxxx shall designate; or
(2) If (x) the Estimated Closing Adjustment Payment exceeds the Closing Date Balance Sheet Positive Adjustment, as finally determined, or (y) there is a Closing Date Balance Sheet Negative Adjustment, then Xxxxxxx shall pay an amount in cash equal to such excess or the Closing Date Balance Sheet Negative Adjustment, as applicable, to Purchaser in accordance with such payment instructions as Purchaser shall designate.
(G) Any amount payable pursuant to Section 2.2(b)(ii)(F) shall be paid within five (5) Business Days after the delivery of the Closing Date Balance Sheet via wire transfer of immediately available funds to the account designated herein by the recipient thereof.
(H) Payments pursuant to Section 2.2(b)(ii)(F) shall be treated for all purposes as adjustments to the Consideration.
Section 2.3 Earn-out Payments. Subject to the term and provisions contained herein, the Purchaser covenants and agrees to pay Xxxxxxx the following amounts (collectively, the “Earn-out Payments”):
(a) An amount (the “2014 Earn-out”) equal to the product obtained by multiplying (i) ninety percent (90%) by (ii) 0.743 times the amount of India Income for calendar year 2014, provided, however, that, regardless of the amount of India Income, the 2014 Earn-out shall not be less than $630,000.00, nor more than $1,350,000.00.
(b) An amount (the “2015 Earn-out”) equal to the product obtained by multiplying (i) ninety percent (90%) by (ii) 0.615 times the amount of India Income for calendar year 2015, provided, however, that, regardless of the amount of India Income, the 2015 Earn-out shall not be less than $630,000.00, nor more than $1,575,000.00.
(c) The right to receive any Earn-out Payment shall not be represented by any form of certificate or other instrument, is not assignable or transferable (other than by operation of Applicable Law relating to descent and distribution, divorce and community property), may not be pledged or encumbered by the party entitled thereto and does not constitute an equity or ownership interest in Purchaser or any Company.
(d) As promptly as practicable following the end of each of calendar years 2014 and 2015, but in any event no later than (x) March 31, 2015, in the case of calendar year 2014 and (y) March 31, 2016 in the case of the calendar year 2015, Purchaser shall deliver to Xxxxxxx its calculation of the Earn-out Statement for the immediately preceding calendar year, accompanied by reasonable supporting documentation sufficient to enable Xxxxxxx to verify the calculations contained therein (a “Purchaser Earn-out Statement”). Within five (5) Business Days of its delivery of the Purchaser Earn-out Statement, Purchaser shall pay to Xxxxxxx the amount of the Earn-out Payment as calculated in accordance with the Purchaser Earn-out Statement (the “Estimated Earn-out Payment”), in
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accordance with such payment instructions as Xxxxxxx shall designate, and/or issue shares of Parent Stock in accordance with Section 2.3(j) below. In the event that Purchaser does not deliver the Purchaser Earn-out Statement within the applicable time period, the full Earn-out Payment for the applicable period shall be deemed earned and payable hereunder.
(e) The Purchaser shall promptly furnish to Xxxxxxx such work papers, documents, general ledger records and other documents and information relating to the Purchaser Earn-out Statement, and promptly provide access to personnel and answer questions, as Xxxxxxx may reasonably request for the purpose of evaluating and verifying data in the Purchaser Earn-out Statement.
(f) If Xxxxxxx disagrees in whole or in part with the Purchaser Earn-out Statement, then within thirty (30) days after his receipt thereof, Xxxxxxx shall notify Purchaser of such disagreement in writing (the “Earn-out Notice of Disagreement”), setting forth in reasonable detail the particulars of any such disagreement. To be effective, any such Earn-out Notice of Disagreement shall include a copy of the Purchaser Earn-out Statement marked to indicate the specific line items of the Purchaser Earn-out Statement that are in dispute (the “Earn-out Disputed Line Items”) and shall be accompanied by Stephan’s calculation of each of the Earn-out Disputed Line Items and Stephan’s calculation of the Earn-out Statement (the “Xxxxxxx Earn-out Statement”). All items that are not Earn-out Disputed Line Items shall be final, binding and conclusive for purposes of determining the Earn-out Payments hereunder unless the resolution of an Earn-out Disputed Line Item affects an undisputed item, in which case such undisputed item shall remain open and be considered an Earn-out Disputed Line Item to the extent of such corresponding effect. In the event that Xxxxxxx does not provide an Earn-out Notice of Disagreement within such thirty (30)-day period, Xxxxxxx shall be deemed to have accepted in full the Purchaser Earn-out Statement, and, for purposes of determining the Earn-out Payments, such Purchaser Earn-out Statement shall become final, binding and conclusive upon Purchaser and Xxxxxxx. In the event any Earn-out Notice of Disagreement is properly and timely provided, Purchaser and Xxxxxxx shall use their respective commercially reasonable efforts for a period of fifteen (15) days (or such longer period as they may mutually agree) to resolve any Earn-out Disputed Line Items. During Stephan’s aforesaid thirty (30) day period and until the applicable Earn-out Statement shall be finally determined as provided herein, Purchaser and Xxxxxxx shall cooperate with each other and shall have reasonable access to the books and records, working papers, schedules and calculations of the other in order to prepare, or used in the preparation of, their respective Earn-out Statement. If, at the end of such period, Purchaser and Xxxxxxx are unable to resolve all Earn-out Disputed Line Items, then any such remaining Earn-out Disputed Line Items shall be referred to an Accounting Firm designated in accordance with Section 2.2(b)(ii)(C) above.
(g) Purchaser and Xxxxxxx will enter into reasonable and customary arrangements for the services to be rendered by the Accounting Firm under this Section 2.3, such services to be provided in the Accounting Firm’s capacity as an accounting expert and not an arbitrator. The Accounting Firm shall be directed to determine as promptly as practicable (and Purchaser and Xxxxxxx shall use commercially reasonable efforts to cause such determination to occur within thirty (30) days) the resolution of the Earn-out Disputed Line Items. In making any determination of the Earn-out Disputed Line Items, the Accounting Firm may not assign a value greater than the greatest value for such item claimed by either Party or smaller than the smallest value for such item claimed by either Party, and the Accounting Firm may only make a determination regarding the matters in dispute between Purchaser and Xxxxxxx. Purchaser and Xxxxxxx shall each furnish to the Accounting Firm such work papers and other documents and information relating to the Earn-out Disputed Line Items, and shall provide access to personnel and answer questions, as such Accounting Firm may reasonably request. The determination of the Earn-out Disputed Line Items by the Accounting Firm shall be set forth in writing and shall be final, conclusive and binding on the Purchaser and Xxxxxxx for purposes of determining the Earn-out Payment absent fraud or manifest error and shall be based solely on the terms of this Agreement and the written submissions by Purchaser and Xxxxxxx and not by independent review or investigation. The Parties agree that judgment may be entered upon the award of the Accounting Firm in any court having jurisdiction pursuant to Section 12.13 hereof.
(h) Subject to the next sentence, each Party shall be responsible for its own fees and expenses incurred in connection with this Section 2.3. The Purchaser and Xxxxxxx shall each pay one half of the fees and expenses payable to the Accounting Firm in connection with resolving any dispute under this Section 2.3, except that, subject to Purchaser’s compliance with its obligations under Section 2.3(c), in the event that one Party’s determination of the Earn-out Disputed Line Items as a whole varies by 20% or more from the determination of the Earn-out Disputed Line Items as a whole by the Accounting Firm hereunder, then such Party shall be solely responsible for the fees and expenses of the Accounting Firm.
(i) Promptly following (x) the Earn-out Disputed Line Items have been finally determined or (y) the Earn-out Statement has been finally determined pursuant to paragraph (f) of Section 2.3, Purchaser shall prepare, and deliver to Xxxxxxx, the Earn-out Statement and the calculation of the corresponding Earn-out Payment, and within five (5) Business Days thereafter (or five Business Days after the Earn-out Payment is deemed earned in accordance with the last sentence of Section 2.3(d) if applicable), Purchaser shall pay to Xxxxxxx, in accordance with such payment instructions as Xxxxxxx shall designate, the excess, if any, of the Earn-out Payment, as finally determined, over the Estimated Earn-out Payment, or, if applicable, Xxxxxxx shall pay to Purchaser, in accordance with such payment instructions as Purchaser shall designate, the excess, if any, of the Estimated Earn-out Payment over the Earn-out Payment, as finally determined.
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(j) At Purchaser’s election, up to $200,000 of the 2014 Earn-out, and up to $250,000 of the 2015 Earn-out, may be made by the issuance of unregistered shares of Parent Stock, which shares shall (i) be valued based upon the volume weighted average price of the Parent Stock upon the NASDAQ Capital Market (or such other principal exchange upon which the Parent Stock shall then be listed for trading) during the twenty (20) Business Days prior to the issuance of the shares and (ii) bear such restrictive legends as may be required under Applicable Law. Any such election by Purchaser shall be exercised by written notice to Xxxxxxx delivered concurrently with the delivery of the Earn-out Statement pursuant to Section 2.3(i), and Purchaser shall use commercially reasonable efforts to deliver such shares in certificate or uncertificated form, as Xxxxxxx shall designate, subject to Applicable Law and the ordinary policies and procedures of the transfer agent for the Parent Stock.
(k) Under the terms of the Key Employee Employment Letters, the Purchaser has agreed to pay to each Key Employee as bonus compensation (collectively, the “Key Employee Bonus Amounts”):
(i) An amount equal to the product obtained by multiplying (i) five percent (5%) by (ii) 0.743 times the amount of India Income for calendar year 2014, provided, however, that, regardless of the amount of India Income, such payment shall not be less than $35,000.00, nor more than $75,000.00.
(ii) An amount equal to the product obtained by multiplying (i) five percent (5%) by (ii) 0.615 times the amount of India Income for calendar year 2015, provided, however, that, regardless of the amount of India Income, such payment shall not be less than $35,000.00, nor more than $87,500.00.
In the event that a Key Employee forfeits his right to receive his Key Employee Bonus Amount under the terms of a Key Employee Employment Letter, then the corresponding Earn-out Payment to Xxxxxxx for such calendar year shall be increased by the amount of such forfeited Key Employee Bonus Amount.
(l) Notwithstanding the foregoing or anything contained herein, (i) payment of the Earn-out Payments is contingent upon, and subject to, compliance by Xxxxxxx with his Restrictive Covenant contained herein and (ii) subject to the preceding clause (i), upon termination of Stephan’s employment under the Xxxxxxx Employment Agreement without Cause or for Good Reason (as defined therein), Xxxxxxx shall be deemed to have earned the maximum amount of the Earn-out Payments for the calendar year in which such event occurs and each year thereafter, as applicable, which shall be payable (without regard to the amount of India Income) on the dates and otherwise in accordance with the terms herein.
(m) Following the Closing, Purchaser shall have sole discretion with regard to all matters relating to the operation of the Companies, and Purchaser has no obligation to operate the Companies, or take any other action or step, in order to achieve any Earn-out Payment or to maximize the amount of any Earn-out Payment; provided, however, the Purchaser shall not divert business generated by a Company away from the Companies. Purchaser expressly disclaims any assurance that Xxxxxxx will receive any Earn-Out Payment, and Purchaser does not promise or project, nor has promised or projected, any Earn-Out Payment, except for the minimum Earn-out Payments set forth in this Section 2.3, subject to the terms and provisions of this Agreement.
Section 2.4 Withholding Rights. Notwithstanding anything to the contrary contained herein, Purchaser shall be entitled to deduct and withhold from payments made in connection with any of the transactions contemplated by this Agreement such amounts as it is required to deduct and withhold with respect to the making of such payment under the Code and any other Applicable Law. To the extent that amounts are so deducted and withheld by Purchaser, such deducted and withheld amounts (i) shall be remitted by Purchaser to the applicable Governmental Entity and (ii) shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made by Purchaser. Based upon the representations and warranties of the Selling Parties contained herein, the Purchaser shall, and the Selling Parties authorize the Purchaser to, withhold from the Closing Payments the amount set forth in Schedule 2.4 (the “Withholding Amount”).
Article 3
CLOSING; ACTIONS AT CLOSING
Section 3.1 Closing. The closing of the Purchase and Sale (the “Closing”) shall take place at 10:00 a.m., U.S. Central time, on September 3, 2014, subject to the satisfaction (or waiver) of the conditions set forth in Article 8 (excluding conditions that, by their terms, are to be satisfied at the Closing but subject to the satisfaction or waiver of such conditions at the Closing), at the offices of the Purchaser, unless another time, date or place is agreed to in writing by Purchaser and the Selling Parties. The Closing shall be deemed effective as of, and the “Closing Date” shall be, regardless of the actual time and date of the Closing, 12:01 a.m., U.S. Central time, on September 1, 2014.
Section 3.2 Actions at Closing. Subject to the satisfaction of the conditions precedent set forth herein, at the Closing, Purchaser will pay the Closing Payments and the amounts set forth in Section 2.2(a)(iii) against receipt of such certificates,
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assignments, stock powers, resolutions, or other instruments of assignment and transfer as Purchaser may reasonably require to evidence and effectuate the Purchase and Sale, including the stamping or other validation of any or all of the foregoing as may be required by Applicable Law (the “Share Transfer Documents”), whereupon Purchaser shall be absolutely and irrevocably vested with full and unrestricted title and record and beneficial ownership of the Shares, free and clear of any and all Liens, other than as arising through Purchaser.
Article 4
REPRESENTATIONS AND WARRANTIES REGARDING EACH COMPANY
Xxxxxxx hereby represents and warrant to Purchaser, as of the date hereof and as of the Closing Date, as follows:
Section 4.1 Organization and Qualification.
(a) Each of REV-US and REV-India is duly organized, validly existing and in good standing (or the equivalent thereof, if applicable) under the laws of Delaware and India, respectively. Each Company has the requisite power and authority to own, lease and operate its properties and to carry on its business.
(b) Each Company is duly qualified or licensed to transact business and is in good standing (if applicable) in each jurisdiction in which the property and assets owned, leased or operated by it, or the nature of the business conducted by it, makes such qualification or licensing necessary (which such jurisdictions are set forth on Schedule 4.1(b)), except in such jurisdictions where the failure to be so duly qualified or licensed and in good standing would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
(c) Each Company has made available to Purchaser prior to the date hereof an accurate and complete copy of each Governing Document of such Company. Such Governing Documents are in full force and effect and no other Governing Documents are applicable to or binding upon the Companies. The Companies are not currently in violation of any provision of their Governing Documents. No Proceedings to dissolve any Company are pending, or to Stephan’s Knowledge, threatened. Schedule 4.1(c) sets forth the name of each officer and director of Seller and each Company.
Section 4.2 Capitalization of the Company.
(a) Schedule 4.2(a) sets forth the name and address of each beneficial and record holder of any Securities or Equity Interests in each Company, the number of such Securities or Equity Interests so held and the date of, and consideration paid for, the acquisition thereof. Except as set forth on Schedule 4.2(a), there are no: (i) outstanding Equity Interests or Securities of any kind or nature of any Company, (ii) Liens, proxies, voting trusts or voting agreements with respect to any Equity Interests or Securities of any Company, or bonds, debentures, notes or other Indebtedness of any Company having the right to vote (or convertible into, or exchangeable for, Securities having the right to vote) on any matters on which holders of the Equity Interests or Securities of any Company may vote, (iii) obligations to redeem, repurchase or otherwise acquire Equity Interests or Securities of any Company, or (iv) Equity Interests or Securities of any kind or nature of any Company evidenced by physical stock certificates or other paper form. When transferred to Purchaser at the Closing, the Shares will be owned by Purchaser free and clear of all Liens, other than those arising by virtue of any actions taken by or on behalf of Purchaser. The REV-US Shares are duly authorized, validly issued, fully paid and nonassessable, and constitute all of the outstanding Securities and Equity Interests of REV-US. The REV-India Shares are duly authorized, validly issued, fully paid and nonassessable, and, together with the Minority REV-India Shares, constitute all of the outstanding Securities and Equity Interests of REV-India.
(b) No Company, directly or indirectly, has any Subsidiary or owns any equity, debt or similar interest in, or any interest convertible into or exchangeable or exercisable for, at any time, any equity or similar interest in, or controls, directly or indirectly, any other Person, and no Company is, directly or indirectly, a party to, member of or partner in any partnership, joint venture or similar business entity.
Section 4.3 [deleted].
Section 4.4 Consents and Approvals; No Violations. Neither the execution or delivery of this Agreement, nor the consummation of the transactions contemplated hereby will (i) conflict with or result in any breach of any provision of any Company’s Governing Documents, (ii) except as set forth on Schedule 4.4, result in a violation or breach of, result in any loss of rights or additional obligations under, or constitute (with or without due notice or lapse of time or both) a default or give rise to any right of termination, cancellation or acceleration under, any of the terms, conditions or provisions of, or result in the payment of any additional amounts or consideration under, any Material Contract or Permit, (iii) cause any Company to be in violation of any Order or Applicable Law or (iv) result in the creation of any Lien upon any of the assets of any Company.
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Section 4.5 Financial Statements; Liabilities; Internal Controls; Solvency; Accounts Receivable.
(a) Attached hereto as Schedule 4.5(a) are true and complete copies of the following financial statements (such financial statements, the “Financial Statements”):
(i) the audited balance sheet of REV-US as of December 31, 2013, and the related audited statements of income, cash flows and stockholders’ equity for the fiscal year then ended (the “Audited US Financial Statements”);
(ii) the audited balance sheet of REV-India as of March 31, 2014, and the related audited statements of income, cash flows and stockholders’ equity for the fiscal year then ended (the “Audited Indian Financial Statements,” and together with the Audited US Financial Statements, the “Audited Financial Statements”);
(iii) the unaudited balance sheet of REV-US as of July 31, 2014, and the related unaudited statement of income for the seven (7) month period then ended (the “Unaudited US Financial Statements”); and
(iv) the unaudited balance sheet of REV-India as of July 31, 2014, and the related unaudited statement of income equity for the four (4) month period then ended (the “Unaudited Indian Financial Statements” and together with the Unaudited US Financial Statements, the “Unaudited Financial Statements”).
(b) The Financial Statements have been prepared from the books and records of the Companies on a consistent basis throughout the periods covered thereby. Except as set forth in Schedule 4.5(b), the Financial Statements fairly present in all material respects (i) the financial position of each Company as of the dates thereof and (ii) the results of operations, stockholders’ equity and cash flows, as applicable, of each Company for the fiscal periods covered thereby. The Audited Financial Statements have been prepared in accordance with GAAP.
(c) Except as set forth on Schedule 4.5(c) and for matters reflected or reserved against in the Financial Statements or noted in the notes thereto, no Company has any Liabilities (required to be reflected in such Financial Statements under GAAP) of any nature, direct, indirect, contingent, liquidated, unliquidated or otherwise, except Liabilities that (i) were incurred since the date of its Financial Statement in the ordinary course of business consistent with past practice that are not material individually or in the aggregate, or (ii) are incurred in connection with the transactions contemplated by this Agreement. No Company has any “off-balance sheet arrangements” (as such term is defined in Item 303(a)(4) of Regulation S-K promulgated under the Exchange Act).
(d) True, correct and complete copies of the books of account, stock record books, minute books, bank accounts, statutory registers and other corporate records of each Company have been made available to Purchaser and its representatives, including Xxxxx Xxxxxxxx LLP and Xxxxx Xxxxxxxx India LLP, and such books and records have been maintained in accordance with good business practices and Applicable Law.
(e) Except as set forth on Schedule 4.5(e), the minute books of each Company contain records of all meetings held, and an accurate and complete record of the actions taken, by the stockholders, the Board of Directors, and any committees of the Board of Directors of each Company, and no meeting at which any action has been taken by any such stockholders, Board of Directors, or committee has been held for which minutes have not been prepared and are not contained in such minute books. At the Closing, all of those books and records will be in the possession of the applicable Company.
(f) None of the directors, officers, agents or employees of any Company or any of its Affiliates acting with, on behalf of, or for the benefit of, any Company has established, maintained or created any fund, asset or liability that has not been recorded in the books and records of the applicable Company.
(g) Each Company has established internal accounting controls so that (i) transactions are executed with management’s authorization; (ii) transactions are recorded as necessary to permit preparation of the financial statements and to maintain accountability for its assets; (iii) the reporting of its assets is compared with existing assets at regular intervals; and (iv) accounts and other receivables are recorded accurately, and procedures are implemented to effect the collection and/or valuation thereof on a current and timely basis.
(h) Except as disclosed in the auditor’s notes to the Audited Financial Statements, Xxxxxxx has no Knowledge of (i) any current material weakness or other deficiencies in the system of internal accounting controls utilized by any Company, (ii) any fraud, whether or not material, that involves management or other employees of any Company who have a role in the preparation of financial statements or the internal accounting controls utilized by such Company or (iii) any claim or allegation regarding any of the foregoing.
(i) No Company is Insolvent nor will be rendered Insolvent by any of the transactions contemplated by this Agreement. Each Company is able to pay its Liabilities as they become due in the ordinary course of business, has assets (calculated at fair market
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value) that exceed its Liabilities, and taking into account all pending and threatened litigation, does not reasonably anticipate that judgments against it in actions for money damages will be rendered at a time when, or in amounts such that, such Company will be unable to satisfy any such judgments promptly in accordance with their terms (taking into account all other obligations of the Company and the maximum probable amount of such judgments in any such actions and the earliest reasonable time at which such judgments might be rendered). The cash available to each Company, after taking into account all other anticipated uses of such cash, is sufficient to pay all its debts and judgments of such Company promptly in accordance with their terms.
(j) All of the accounts receivable reflected in the Financial Statements (the “Accounts Receivable”) represent bona fide transactions of the applicable Company that arose in the ordinary course of business consistent with past practice, are not subject to defenses, setoffs or counterclaims in excess of any applicable reserves set forth in the Financial Statements and, to Stephan’s Knowledge, except as set forth on Schedule 4.5(j), are current and collectible within ninety (90) days of the applicable invoice date, subject to the applicable reserves set forth in the Financial Statements. No Person has any Lien on any Account Receivable, and, except in the ordinary course of business consistent with past practice, no agreement for material deduction or material discount has been made with respect to any Account Receivable. No Company has received written notice from any customer that such customer disputes or does not intend to pay any Account Receivable.
Section 4.6 Material Contracts.
(a) Except for the Contracts listed on Schedule 4.6(a), and other than Contracts solely between the Companies, no Company is a party to or bound by any:
(i) Contract that will require a payment by the Company upon or following the Closing hereunder which payment is not payable in the absence of the Closing (such as, by way of example, any Contract that requires payment upon a “change in control” of the Company);
(ii) commission or sales Contract (A) with any current employee, individual consultant, contractor or salesperson, (B) with any partner of the Company or any marketer or distributor of any Company Products and Services providing for the payment of any commissions or other sales compensation to any employees or agents of such partner or marketer or distributor, or (C) under which a Person provides commission or sales-based services to the Company;
(iii) Contract that obligates the Company to provide indemnification or a guarantee, including any Contract whereby the Company has guaranteed or otherwise agreed to cause, insure or become liable or indemnify for, or pledged any of its assets to secure, the performance or payment of, any obligation or other liability of any Person;
(iv) Contract relating to Indebtedness;
(v) Contract relating to capital expenditures and involving required annual future payments by the Company in excess of $25,000;
(vi) Contract under which the Company is lessee of or holds or operates any tangible property (other than real property), owned by any other Person, other than ordinary equipment leases under which the Company is obligated to make annual lease payments not exceeding $25,000 and which do not require the purchase of the underlying equipment (other than for a nominal amount);
(vii) Contract under which the Company is lessor of or permits any third party to hold or operate any tangible property (other than real property), owned or controlled by the Company;
(viii) partnership agreement, joint venture, strategic alliance, funding or similar Contract or other Contract involving the sharing of profits, losses, costs or Liabilities with any Person;
(ix) Contract prohibiting the Company or any Affiliate of the Company from freely engaging in any line of business, or containing covenants that limit or purport to limit the ability of the Company or any Affiliate of the Company to (A) compete in any business or with any Person or in any geographic area, (B) sell, supply, provide or distribute any service or product, (C) hire or solicit Persons for employment, (D) incur or guarantee any Indebtedness or to xxxxx x Xxxx on the assets of the Company, or (E) use or enforce the Business Intellectual Property rights, including, in each case, any nondisclosure, non-competition, settlement, coexistence, standstill or confidentiality agreements;
(x) collective bargaining agreement or other Contract with any collective bargaining representative or other Contracts with a labor union, labor organization or similar body;
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(xi) settlement or similar Contract pursuant to which the Company is obligated to pay consideration after the date hereof in settlement of any Proceeding;
(xii) Contract that relates to any prior (within the past five (5) years) or future disposition or acquisition of properties, of assets or of any interest in any business enterprise by the Company, or any merger or business combination with respect to the Company;
(xiii) powers of attorney;
(xiv) Contract (A) providing for the Company to be the exclusive provider or preferred provider of any product or service to any Person or that otherwise involves the granting by any Person to the Company of exclusive or preferred rights of any kind, (B) providing for any Person to be the exclusive or preferred provider of any product or services to the Company or that otherwise involves the granting by the Company to any Person of exclusive or preferred rights, (C) granting to any Person a right of first refusal or right of first offer on the sale of any part of the business of the Company, (D) containing a provision of the type commonly referred to as “most favored nation” provision for the benefit of a Person, or (E) pursuant to which the Company has agreed to provide future services for a fixed price or maximum fee, or pursuant to any cap or other provision that provides for payment other than on an unrestricted “time and materials” basis;
(xv) Contract that obligates the Company to pay an amount in excess of $100,000 during any twelve (12)-month period after the date hereof or relates to the sale of goods or the provision of services pursuant to which the Company expects to accrue revenue in excess of $100,000 during any twelve (12)-month period after the date hereof;
(xvi) sales representative, dealer, distribution, joint marketing, data sharing, development, value added re-seller, remarketer, content provider, destination site or similar Contract;
(xvii) Contract with any customer or third party to provide support or maintenance, to develop or customize any product or service, or to provide, support, customize or develop any third-party product, service or platform involving future annual payments to or from the Company in excess of $25,000;
(xviii) Contract providing for the use, disclosure or sale of any Personal Information;
(xix) Contract with any Governmental Entity;
(xx) Contract with any Selling Party or any Affiliate of any Selling Party;
(xxi) Contract for the employment, retention or engagement of any Company employee, consultant, agent or representative which cannot be terminated by the Company without cause and without payment of any premium, penalty, termination fee, severance or similar payment upon not more than 90 days’ prior notice;
(xxii) Contract (including any end-user licenses and all Services Agreements) with any customer or client of the Company that provides for the payment of, or is reasonably likely to result in the payment of, fees or other consideration to the Company in excess of $25,000 in the twelve (12)-month period following the date hereof;
(xxiii) Contract that guarantees or warrants that any of the Company Products and Services is fit for any particular purpose or that guarantees a result or commits to performance levels;
(xxiv) Contract providing for any license or franchise granted by the Company pursuant to which the Company has agreed to provide any Person with access to source code or to provide for source code to be put in escrow or to refrain from granting license or franchise rights to any other Person;
(xxv) Contract under which the Company, as licensor or licensee, licenses or sublicenses any Business Intellectual Property, other than Commercial Software Contracts;
(xxvi) Contract for the assignment of inventions to or from the Company;
(xxvii) Contract under which any Company has any obligation to deliver Company Products and Services in the future in respect of which the Company reasonably expects its operating margin to be earned on such Contract to be lower than its operating margin for the 12 month period ended June 30, 2014 by 25% or more;
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(xxviii) Contract under which any Company has any current or future obligation to issue any Equity Interests or Securities; and
(xxix) Contract not otherwise included in any of the foregoing that is material to the business of the Company.
(b) Except as set forth on Schedule 4.6(b), each Material Contract is valid and binding on the Company subject thereto and enforceable in accordance with its terms against such Company and, to Stephan’s Knowledge, against each other party thereto (subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting generally the enforcement of creditors’ rights and subject to general principles of equity). Each Material Contract is in full force and effect and will be in full force and effect in accordance with its terms upon consummation of the transactions contemplated hereby. Except as set forth on Schedule 4.6(b), each Company and, to Stephan’s Knowledge, each of the other parties thereto, have performed all obligations required to be performed by it under each Material Contract except where any such non-performance has not caused or will not cause, individually or in the aggregate, a Company Material Adverse Effect. Except as set forth on Schedule 4.6(b), no Company has received, nor has any Company delivered, any notice of default or breach or alleging any default or breach under any Material Contract. Except as set forth on Schedule 4.6(b), no Company has received any notice from any party terminating or stating its intention to terminate any Material Contract or to exercise any option not to renew thereunder. Each Company has delivered or made available to Purchaser true, complete and correct copies of all Material Contracts, and no Material Contract has been modified, rescinded or terminated after being delivered or made available to Purchaser.
Section 4.7 Absence of Changes. Except as set forth on Schedule 4.7, since the date of the Latest Balance Sheet, (i) no Company Material Adverse Effect has occurred or existed, (ii) each Company has conducted its business in all material respects in the ordinary course consistent with past practices and (iii) no Company has taken any action that if taken after the date of this Agreement would constitute a violation of Section 7.1(c).
Section 4.8 Litigation. Except as set forth on Schedule 4.8, there is no, and during the three (3) year period prior to the date of this Agreement there has not been any, suit, litigation, arbitration, mediation, alternative dispute resolution procedure, claim, action, proceeding, hearing, audit, inquiry, examination or investigation of any nature (each, a “Proceeding”) pending or, to Stephan’s Knowledge, threatened or under investigation against any Company or any Company’s properties or assets or, to Stephan’s Knowledge, any Company’s directors, officers or employees. Without limiting the foregoing, there is no such Proceeding pending or to Stephan’s Knowledge threatened which (i) is brought by or on behalf of a Governmental Entity, or (ii) seeks injunctive relief or non-monetary damages. Except as set forth on Schedule 4.8, the Company is not subject to any outstanding Order.
Section 4.9 Permits; Compliance with Applicable Law.
(a) Schedule 4.9(a) contains a true, correct and complete list of all material permits, licenses, approvals, certificates and other authorizations of any Governmental Entity that are held by any Company to permit such Company to conduct its business (collectively, “Permits”). Except as set forth on Schedule 4.9(a), (i) each Company holds, and currently is (and during the last three (3) years has been) in compliance in all material respects with all Permits necessary for the lawful conduct of its business as presently conducted, (ii) all such Permits are (and during the last three (3) years have been) in full force and effect and (iii) during the past three (3) years, (A) no Company has received written notice of any alleged violation or noncompliance with respect to any Permit and (B) no Company has received written notice relating to the revocation or modification of any Permits. No Proceeding is pending or, to Stephan’s Knowledge, threatened to revoke or limit any Permit, nor has any such Proceeding been pending at any time during the prior three (3) years.
(b) Each Company is, and for the three (3) years has been, in compliance in all respects with all Applicable Laws, except where the failure to be in compliance will not cause a Company Material Adverse Effect. Except as set forth on Schedule 4.9(b), no Company has received any written communication during the past three (3) years from a Governmental Entity that alleges that any Company is not in compliance with any Applicable Laws which has not heretofore been cured or for which there is any remaining Liability.
(c) Neither any Company nor its properties or assets, or to Stephan’s Knowledge, any of each Company’s directors, officers or employees (solely in their capacities as such), are currently, nor have any such Persons been at any time during the past three (3) years, subject to any Orders that would materially impair each Company’s ability to operate its business as presently conducted.
Section 4.10 Employee Plans.
(a) Schedule 4.10(a) sets forth a true and complete list of each Employee Benefit Plan, and, except as set forth therein, no Company has ever created, maintained, offered or incurred any obligation under any other Employee Benefit Plan.
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(b) Each Company has delivered the following documents to Purchaser with respect to each of its Employee Benefit Plan: (i) true, correct and complete copies of all documents embodying such Employee Benefit Plan, including all amendments thereto, and all related trust documents, (ii) a written description of any Employee Benefit Plan that is not set forth in a written document, (iii) the most recent summary plan description together with the summary or summaries of material modifications thereto, if any, (iv) all IRS or DOL determination, opinion, notification and advisory letters, (v) the three most recent annual reports (Form Series 5500 and all schedules and financial statements attached thereto), if any, (vi) all material correspondence to or from any Governmental Entity received in the last three (3) years, (vii) all discrimination tests for the most recent three (3) plan years (if any), and (viii) all material written agreements and contracts currently in effect, including administrative service agreements, group annuity contracts, and group insurance contracts.
(c) Each Employee Benefit Plan has been maintained and administered in all respects in material compliance with its terms and with the requirements prescribed by Applicable Law, including the timely and accurate filing of all reports and returns. All contributions, reserves or premium payments required to be made or accrued as of the date hereof to the Employee Benefit Plans have been timely made or accrued. Each Employee Benefit Plan intended to be qualified under Section 401(a) of the Code and each trust intended to qualify under Section 501(a) of the Code is so qualified and has obtained a currently effective favorable determination notification, advisory or opinion letter, as applicable, as to its qualified status (or the qualified status of the master or prototype form on which it is established) from the IRS covering the amendments to the Code effected by the Tax Reform Act of 1986 and all subsequent legislation for which the IRS will currently issue such a letter, and no amendment to such Employee Benefit Plan has been adopted since the date of such letter covering such Employee Benefit Plan that would adversely affect such favorable determination. The most recent determination notification, advisory or opinion letter for each such Employee Benefit Plan intended to qualify under Section 501(a) of the Code has not been revoked, and, to Stephan’s Knowledge, no fact or event exists that could reasonably be expected to result in the revocation of such qualified status.
(d) Except as set forth on Schedule 4.10(d), no plan currently or ever in the past maintained, sponsored, contributed to or required to be contributed to by any Company or its current or former ERISA Affiliates is or ever in the past was (i) a Multiemployer Plan, (ii) a plan described in Section 413 of the Code, (iii) a plan subject to Title IV of ERISA, (iv) a plan subject to the minimum funding standards of Section 412 of the Code or Section 302 of ERISA, or (v) a plan maintained in connection with any trust described in Section 501(c)(9) of the Code.
(e) No Company is subject to any liability or penalty under Sections 4975 through 4980B of the Code or Title I of ERISA. REV-US has materially complied with all applicable health care continuation requirements under COBRA. No “Prohibited Transaction,” within the meaning of Section 4975 of the Code or Sections 406 or 407 of ERISA and not otherwise exempt under Section 408 of ERISA, has occurred with respect to any Employee Benefit Plan.
(f) Except as set forth on Schedule 4.10(f), no Employee Benefit Plan of REV-US provides, or reflects or represents any liability to provide, benefits (including death or medical benefits), whether or not insured, with respect to any former or current employee, or any spouse or dependent of any such employee, beyond the employee’s retirement or other termination of employment with any Company other than (i) coverage mandated by COBRA, (ii) retirement or death benefits under any plan intended to be qualified under Section 401(a) of the Code, (iii) disability benefits that have been fully provided for by insurance under an Employee Benefit Plan that constitutes an “employee welfare benefit plan” within the meaning of Section (3)(1) of ERISA, or (iv) benefits in the nature of severance pay with respect to one or more of the employment contracts set forth on Schedule 4.10(f).
(g) There is no contract, plan or arrangement covering any officer, employee or former officer or employee of REV-US that, individually or collectively, could give rise to the payment as a result of the transactions contemplated by this Agreement of any amount that would not be deductible by such Company by reason of Section 280G of the Code. For purposes of the foregoing sentence, the term “payment” shall include any payment, acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits. Except as set forth on Schedule 4.10(g), execution of this Agreement and the consummation of the transactions contemplated by this Agreement (alone or together with any other event which, standing alone, would not by itself trigger such entitlement or acceleration) will not (i) entitle any Person to any payment, forgiveness of indebtedness, vesting, distribution, or increase in benefits under or with respect to any Employee Benefit Plan, (ii) otherwise trigger any acceleration (of vesting or payment of benefits or otherwise) under or with respect to any Employee Benefit Plan, or (iii) trigger any obligation to fund any Employee Benefit Plan.
(h) Except as set forth on Schedule 4.10(h), no Proceeding (excluding claims for benefits incurred in the ordinary course) has been brought or is pending or threatened against or with respect to any Employee Benefit Plan or the assets or any fiduciary thereof (in that Person’s capacity as a fiduciary of such Employee Benefit Plan). There are no Proceedings pending or threatened by the IRS, DOL, or other Governmental Entity with respect to any Employee Benefit Plan.
(i) With respect to each Employee Benefit Plan that is a “nonqualified deferred compensation plan” (as defined for purposes of Section 409A(d)(1) of the Code), such plan has been maintained and operated in compliance with Section 409A of the
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Code and the applicable IRS guidance promulgated thereunder to the extent such plan is subject to Section 409A of the Code and so as to avoid any tax, interest or penalty thereunder. Except as set forth on Schedule 4.10(i), no Securities or Equity Interests in any Company are subject to a substantial risk of forfeiture within the meaning of Section 83 of the Code with respect to which a valid election under Section 83(b) of the Code has not been made.
(j) Except as set forth on Schedule 4.10(j), all payments to funds and schemes for the benefit of the employees of REV-India as mandated under Applicable Indian Law have been made by REV-India, including any payments made towards employees’ state insurance, employees’ provident fund and any other pension scheme instituted or mandated for its employees.
(k) Each Company has, and after Closing will have, all power and authority necessary to amend or terminate its participation in each Employee Benefit Plan not mandated to be provided under Applicable Law without incurring any penalty or liability when done in compliance with the requirements of Applicable Law.
Section 4.11 Environmental Matters. Except as set forth on Schedule 4.11: Each Company is, and for the previous three (3) years has been, in compliance with all Environmental Laws, except where such non-compliance has not caused, nor will cause, a Company Material Adverse Effect. Each Company holds and is (and has been at all times during the past three (3) years) in compliance with all Permits that are required pursuant to Environmental Laws, and has timely applied for all required renewals thereof. During the past three (3) years, no Company has received any notice of any Proceeding or investigation alleging any material violation of, or material liability (including any investigatory, corrective or remedial obligation) under, any Environmental Laws. Neither any Company nor any of its agents, employees or contractors acting on behalf of any Company has Released any Hazardous Materials at, on, under, or from any property currently or formerly owned, leased or operated by any Company, and to Stephan’s Knowledge, there are no Hazardous Materials at, on, under, or emanating from any property currently or formerly owned, leased or operated by any Company that could give rise to a material liability of any Company under Environmental Laws.
Section 4.12 Intellectual Property.
(a) Each Company either exclusively owns, free and clear of any Liens, or has a valid written license for or other valid right to use, all of its Business Intellectual Property. Schedule 4.12(a) sets forth a correct and complete list of (i) all registrations of and applications to register any Business Intellectual Property owned by or filed under the name of any Company (“Company Registered IP”), including the name of the current owner, registrant or applicant, the jurisdictions by or in which any such registrations or applications have been issued or filed, the respective registration or application numbers and dates of issuance, registrations or filing, and (ii) all unregistered Business Intellectual Property which is material to the operation of the business of any Company (other than Commercial Software licensed or used by a Company under a Commercial Software Contract). To Stephan’s Knowledge, each Company’s rights in its Business Intellectual Property, including the Company Registered IP, are valid, subsisting and fully enforceable.
(b) Except as set forth on Schedule 4.12(b), there are no Contracts to which any Company is a party (excluding Contracts exclusively between the Companies) relating to any Intellectual Property (other than Commercial Software Contracts), including any such Contract pursuant to which any Company has (i) transferred ownership of any Intellectual Property, or granted any license or option to any other Person with respect to any Business Intellectual Property (including any Contract pursuant to which any Company has granted or may be obligated to grant in the future, to any Person, a source code license or option or other right to use or acquire source code that is part of Business Intellectual Property); or (ii) obtained a license or option to the Intellectual Property of another Person; or (iii) has had Software developed for it by any Person other than the Company (collectively, the “IP Contracts”).
(c) To Stephan’s Knowledge and except as set forth on Schedule 4.12(c), no Company has infringed upon or otherwise violated the Intellectual Property rights of any other Person or received any written claim, charge, demand or notice alleging any such infringement or other violation. The conduct of its business of each Company as currently conducted and its Company Products and Services do not, to Stephan’s Knowledge, infringe upon, misappropriate or otherwise violate the Intellectual Property rights or rights of publicity or privacy of, or libels or defames, any other Person or constitute unfair competition or trade practices. Each Company is not, nor has been, during the three (3) years preceding the date of this Agreement, a party to any Proceedings, nor, to Stephan’s Knowledge, are any Proceedings threatened, that challenges the validity, enforceability, ownership, or right to use, sell or license any of the Business Intellectual Property. To Stephan’s Knowledge, no other Person has infringed or misappropriated or is infringing upon or misappropriating any of the Business Intellectual Property rights of any Company. No Company has sent any written notice to any third party alleging infringement, misappropriation or unauthorized use of any Business Intellectual Property. To Stephan’s Knowledge, none of the Business Intellectual Property of any Company is subject to any Proceeding or Order which restrict in any manner its validity, use, enforceability, transfer or license.
(d) No Company is, nor, as a result of the execution, delivery or consummation of this Agreement will be, in breach or violation of any IP Contract. Each IP Contract is valid and binding on the Company party thereto and enforceable in accordance with its terms against such Company and, to Stephan’s Knowledge, each other party thereto (subject to applicable bankruptcy, insolvency,
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reorganization, moratorium or other laws affecting generally the enforcement of creditors’ rights and subject to general principles of equity). Each IP Contract is in full force and effect and will be in full force and effect in accordance with its terms upon consummation of the transactions contemplated hereby. Except as set forth in Schedule 4.12(d), immediately following the Closing, each Company will be permitted to exercise all of such Company’s rights under all of its IP Contracts to the same extent that the Company would have been able to exercise such rights at such time had the transactions contemplated by this Agreement not occurred and without the payment of any additional amounts or consideration, other than fees, royalties or payments which the Company would otherwise have been required to pay had the transactions contemplated by this Agreement not occurred. Except as set forth in Schedule 4.12(d), the execution and delivery of this Agreement and the Ancillary Documents, and the consummation of the transactions contemplated herein and therein, will not result in (i) Purchaser or any of its Affiliates granting to any other Person any right to or with respect to any Intellectual Property right owned by, or licensed to, Purchaser or any of its Affiliates, or (ii) Purchaser or any of its Affiliates being bound by, or subject to, any non-compete or other restriction on the operation or scope of its business, in each case, except as otherwise arising by reason of any other Contract, Order or Proceeding to which the Purchaser or any of its Affiliates is a party or by which its property or assets are subject.
(e) Each Company has taken reasonable measures to safeguard and maintain all of its Business Intellectual Property and the secrecy and confidentiality of the Trade Secrets that are part of its Business Intellectual Property. To Stephan’s Knowledge, there has been no material disclosure by any Person bound by such confidentiality obligations to any third Person who was not bound by a confidentiality obligation to any Company of any Trade Secrets or other confidential information used in connection with the conduct of the business of any Company. Each Company has validly maintained, and has not taken any steps that could constitute abandonment of or that could invalidate, its rights in and to its Business Intellectual Property.
(f) Schedule 4.12(f) sets forth the Contract between each present or past founder, manager, officer, employee or consultant of any Company or any other Person who developed any part of any Company Product or Service (including Software) or any other Intellectual Property for any Company that is or will be used, usable or intended for use in connection with the Company’s business, and, to Stephan’s Knowledge, no such founder, manager, officer, employee or consultant is in violation of any term of any such Contract or any other Contract or agreement relating to the relationship of any such founder, manager, officer, employee or consultant with the Company. No current or former founder, officer, employee, agent or consultant of any Company (i) owns any Intellectual Property rights used or held for use by any Company or (ii) to Stephan’s Knowledge, has made any claims with respect to, or has any right, license, claim or interest whatsoever in, such Intellectual Property rights.
(g) To Stephan’s Knowledge, no Company Product or Service contains any “back door,” “drop dead device,” “time bomb,” “Trojan horse,” “virus,” “worm,” “spyware” or “adware” (as such terms are commonly understood in the software industry) or any other code (collectively, “Malicious Code”) designed or intended to have, or capable of performing or facilitating, any of the following functions: disrupting, disabling, harming, or otherwise impeding in any manner the operation of, or providing unauthorized access to, a computer system or network or other device on which such code is stored or installed. Each Company maintains reasonable measures designed to prevent the introduction of Malicious Code into Company Products and Services, including firewall protections and regular virus scans.
(h) Except as set forth on Schedule 4.12(h), and except for source code produced as a “work for hire” for a Company customer under a Material Contract (“Customer Source Code”), no Company has provided or made available to any Person the source code to any Software owned, licensed or used by any Company, and no Company is bound by or party to any Contract pursuant to which (i) the Company is obligated to provide to any Person any such source code or (ii) the Company has deposited, or is or may be required to deposit, with an escrow agent or other Person, any such source code. No circumstance or condition currently exists that, with or without notice or lapse of time or both, will, or would reasonably be expected to, result in the delivery or disclosure of any such source code (other than Customer Source Code) to any Person who is not, as of the date of this Agreement, an employee, independent contractor or other agent of any Company.
(i) Schedule 4.12(i) contains a complete and accurate list of all Software that is distributed or made available as “open source software” or “public software” or under a similar licensing or distribution model (including the GNU General Public License (GPL), GNU Lesser General Public License (LGPL), Mozilla Public License (MPL), BSD licenses, the Netscape Public License, the Sun Community Source License (SCSL), the Sun Industry Standards License (SISL) and the Apache License) (“Open Source Materials”) which is used or intended for use by any Company or in connection with any Company’s business or incorporated in or used or intended for use in connection with any Company Products and Services, including an identification of the applicable open source license agreement, and a description of the manner in which such Open Source Materials are used, including whether (and, if so, how) the Open Source Materials were modified or distributed, by the Company. Each Company has complied with the terms of the license agreements applicable to any such Open Source Materials. Except as expressly set forth in Schedule 4.12(i), no Company has (i) incorporated Open Source Materials in conjunction with any Company Product or Service, (ii) distributed Open Source Materials in conjunction with any Company Product or Service, or (iii) used, incorporated or distributed Open Source Materials that require or could require, or condition or could condition, the use or distribution of such Open Source Materials on, the granting to any Person by the Company of any right or immunity with respect to any Business Intellectual Property (including any requirement or condition that
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other Software incorporated into, derived from, or distributed with such Open Source Materials be (A) disclosed or distributed in source code form, (B) licensed for the purpose of making derivative works, or (C) redistributable at no or nominal charge).
(j) To Stephan’s Knowledge, no funding, facilities (if provided by specific grant or authorization), or personnel of any public or private university, college or other educational or research institution or Governmental Entity were used, to develop or create, any Business Intellectual Property except where a Company has a valid license therefrom. No Company is or has ever been a member of, or a contributor to, any industry standards body or similar organization that could compel the Company to grant or offer to any Person any license or right to any Business Intellectual Property.
(k) [deleted].
(l) Each Company, including with respect to its conduct and provision of Company Products and Services, is in compliance in all material respects with all Applicable Laws that relate to or govern the collection, compilation, use, storage, sale and transfer of Personal Information it receives or obtains in the conduct of its business, including Customer Information. With respect to such information, each Company has taken reasonable measures (including implementing and monitoring compliance with adequate measures with respect to technical and physical security) to protect such information against loss and against unauthorized access, use, modification, disclosure or other misuse or use in a manner that violates the privacy rights of any Person. To Stephan’s Knowledge, there has been no unauthorized access of any Company’s security systems used for the collection, storage or retrieval of Personal Information or Customer Information or unauthorized access to or misuse of Personal Information or Customer Information.
(m) Each Company has taken reasonable measures consistent with industry practice to protect its internal information technology systems (“IT Systems”) from Malicious Code. Each Company’s IT Systems, as a whole, are adequate in all material respects for the conduct of the business of the Company as currently conducted and are subject to reasonable disaster recovery and business continuity procedures. In the last eighteen (18) months, there has not been any material failure with respect to any of the IT Systems that has not been remedied in all material respects or replaced. To Stephan’s Knowledge, there have been no unauthorized intrusions or breaches of the security of any Company’s IT Systems, and the data and information which they store or process has not been corrupted in any material manner or accessed without the authorization of the Company.
Section 4.13 Labor Matters.
(a) Except as set forth on Schedule 4.13(a), currently and during the past three (3) years: (i) no Company has been a party to, or bound by, any labor Contract with respect to its employees, (ii) no employee of any Company has been employed on any terms other than “at-will employment” or upon terms which restrict or condition the ability of the Company to terminate the employment of the employee without cause, subject to any restrictions of Applicable Indian Law, (iii) no labor union, labor organization, or works council has represented any employees of any Company, (iv) to Stephan’s Knowledge, no union organization campaign or other activities to organize any employees of any Company or compel any Company to bargain with any labor organization has been in progress, or threatened, and no question concerning representation has arisen respecting employees of any Company, (v) there have been no strikes, walkouts, work stoppages, slowdowns, leafleting, picketing, boycotts, or lockouts, with respect to any employees of any Company, or, to Stephan’s Knowledge, threats thereof, (vi) there have been no material union grievances or labor arbitrations against any Company, or, to Stephan’s Knowledge, threats thereof, and no Company has breached or failed to comply with the provisions of any collective bargaining agreement, and (vii) there have been no unfair labor practice charges, Proceedings, or complaints against any Company before the National Labor Relations Board or other similar Governmental Entity, domestic or foreign, or, to Stephan’s Knowledge, threats thereof, and no Company has been found by the National Labor Relations Board or any other Governmental Entity, domestic or foreign, to have engaged in any unfair labor practice in violation of the National Labor Relations Act or any similar Applicable Laws, domestic or foreign.
(b) Each Company has complied, and is in compliance, with all Applicable Laws relating to labor or employment, except for such noncompliance which has not and will not cause a Company Material Adverse Effect. Except as set forth on Schedule 4.13(b), during the past three (3) years, no Company has been a party to any Proceeding with respect to any employment-related issues, including Proceedings before or initiated by the Office of Federal Contract Compliance Programs, the Occupational Safety and Health Administration, the Department of Labor, or other Governmental Entity, domestic or foreign, or subject to any fines, penalties, or assessments associated with any such Proceeding.
(c) Except as set forth on Schedule 4.13(c), REV-US has no liability, whether absolute or contingent, including any obligations under any Employee Benefit Plans, with respect to any misclassification of any person under any wage and hour laws, including any misclassification as an independent contractor or consultant rather than as an employee.
(d) During the preceding three (3) years, REV-US has not incurred any liability or obligation under the Worker Adjustment and Retraining Notification Act of 1988, 29 U.S.C. § 2101 et seq., as amended, or any similar state or local laws.
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(e) During the preceding three (3) years, no present or former employee of any Company has given notice to the Company of any claim against such Company (whether under Applicable Law, any employment agreement or otherwise) on account of or for (i) overtime pay, other than overtime pay for the current payroll period, (ii) wages or salary (excluding current bonus, accruals and amounts accruing under Employee Benefit Plans) for any period other than the current payroll period, (iii) vacation, time off or pay in lieu of vacation or time off, other than that earned in respect of the current fiscal year or (iv) any violation of any Applicable Law relating to minimum wages or maximum hours of work.
(f) No Person or Governmental Entity has filed or otherwise commenced any Proceeding against any Company arising out of any Applicable Law relating to discrimination in employment, employment practices (including wrongful termination), family leave, or occupational safety and health standards. For the past three (3) years, no Company has received any written notice from any Government Entity alleging a violation of occupational safety or health standards. As of the date hereof, there are no pending workers compensation claims involving any Company and for the past three (3) years, there have not been any workers compensation claims against any Company relating to the workplace setting of such Company.
Section 4.14 Insurance. Schedule 4.14 contains a list of all policies of fire, liability, workers’ compensation, property, casualty, errors and omissions, employment practices, crime, cybersecurity and other forms of insurance (other than insurance relating to any Employee Benefit Plan that is listed in Schedule 4.10(a)) owned or held by each Company. All such policies are in full force and effect, all premiums with respect thereto have been paid, no notice of cancellation or termination or intent to cancel has been received by any Company with respect to any such policy during the past three (3) years and are sufficient for compliance with all Applicable Laws and Contracts to which each Company is a party or by which it is bound. No Company is in default under any such insurance policies. Except as set forth on Schedule 4.14, (i) no Company has made any claim under any such policy during the past three (3) years with respect to which an insurer has questioned, denied or disputed or otherwise reserved its rights with respect to coverage and (ii) no Company has received any writing in which an insurer has threatened to cancel any such policy.
Section 4.15 Tax Matters. Except as set forth on Schedule 4.15 (and identified by the corresponding paragraph of this Section 4.15):
(a) Each Company has duly and timely filed (or has had duly and timely filed on its behalf) with the appropriate domestic federal, state, local and foreign taxing authorities all tax returns, information returns, statements, forms, filings and reports (including any schedule or attachment thereto and any amendment thereof) (each a “Tax Return”) required to be filed by it and no Company is presently the beneficiary of any extension of time within which to file any Tax Return; no Company has waived any statute of limitations with respect to any Tax Return; all Tax Returns filed by each Company are true, complete and correct in all material respects; all Taxes required to have been paid by each Company (whether or not shown on any Tax Return), whether disputed or not, have been duly and timely paid, including Taxes which each Company is required to withhold and any estimated Tax required to be paid for the current taxable year except for Taxes not yet due and payable; Taxes imposed upon each Company have been adequately provided for on the Financial Statements of the Company; and since the date of the Financial Statements, no Company has incurred any liability for Taxes outside of the ordinary course of business; and there are no liens for Taxes (other than Taxes not yet due and payable) upon any of the assets of any Company;
(b) No Company is currently the subject of a Tax Proceeding, no such Proceeding is pending or, to Stephan’s Knowledge, threatened with respect to any Company, and no officer, director or employer responsible for Tax matters of any Company has reason to believe or personal knowledge that any Governmental Entity will propose or assess any additional Taxes in any material amount with respect to any Company for the subject periods covered by the Tax Returns;
(c) No Company has received from any Governmental Entity any notice of proposed adjustment, deficiency, underpayment of Taxes or any other such notice which has not since been satisfied by payment or been withdrawn nor has any Company been notified by any Governmental Entity of a specific intent to raise such issues;
(d) No Company has received notice that any claim has been made by any Governmental Entity in a jurisdiction where any Company does not file Tax Returns that the Company is or may be subject to taxation by that jurisdiction;
(e) No Company is liable for Tax of another Person, as transferee or successor, by contract or otherwise, nor is a party to or bound by, or liable for any Taxes as a result of, any Tax allocation, indemnity or sharing agreement. No Company has been a member of an affiliated, combined, consolidated or unitary Tax group for Tax purposes, other than with the other Company.
(f) No Company is, nor has it been, a United States real property holding corporation (as defined in Section 897(c)(2) of the Code) during the applicable period specified in Section 897(c)(1)(a) of the Code. No Company has engaged in any transaction that is a “reportable transaction” under Section 1.6011-4(b) of the Treasury Regulations. No Company has been a “distributing corporation” or a “controlled corporation” in connection with a distribution described in Section 355 of the Code;
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(g) No power of attorney granted by or with respect to any Company for Taxes is currently in force, other than to accountants for each Company and ADP, and no ruling with respect to Taxes has been requested by or on behalf of any Company; and no closing agreement pursuant to Section 7121 of the Code (or any predecessor provision) or any similar provision of any state, local or foreign law has been entered into by or with respect to any Company;
(h) Each Company has provided or made available to Purchaser prior to the date hereof true, correct and complete copies of all Tax Returns, examination reports, and statements of deficiencies filed, assessed against, or agreed to by the Company with respect to Taxes and all correspondence by the Company (or its officers, employees or advisors) with any Governmental Entity regarding Taxes of the Company for the prior three (3) years;
(i) No Company has changed or revoked, or permitted to be changed or revoked, any election or method of accounting with respect to Taxes affecting or relating to the Company and is not required to make any adjustment pursuant to Section 481(a) of the Code (or any predecessor provision) or any similar provision of state, local or foreign Tax law by reason of any change in any accounting methods;
(j) Each Company has (i) withheld all required amounts from its employees, agents, shareholders, contractors and other third parties in accordance with information provided to such Company and remitted such amounts to the proper authorities; (ii) paid when due all employer contributions and premiums; and (iii) is in compliance with all reporting obligations and Applicable Laws with respect to employee income Tax withholding, social security, unemployment Taxes and premiums;
(k) No Company will be required to include any item of income in, or exclude any item of deduction from, taxable income for any period (or any portion thereof) ending after the Closing Date as a result of any: (i) installment sale or other open transaction disposition made on or prior to the Closing Date; or (ii) prepaid amount received on or prior to the Closing Date;
(l) No Company is a party to any joint venture, partnership or other arrangement or contract that could be treated as a partnership for federal income tax purposes;
(m) There is currently no limitation on the utilization of net operating losses, capital losses, built-in losses, tax credits or similar items of any Company under Sections 269, 382, 383, 384 or 1502 of the Code and the Treasury Regulations thereunder (and comparable provisions of state, local or foreign Applicable Law); and
(n) Schedule 4.15(n) sets forth: (i) all jurisdictions in which each Company currently files, or has filed within the last three (3) years, any Tax Return, is engaged in business or has a permanent establishment, (ii) the taxable years of each Company as to which the applicable statutes of limitations on the assessment and collection of Taxes have not expired; (iii) those years for which examinations by the Taxing authorities have been completed; and (iv) those taxable years for which examinations by Taxing authorities are presently being conducted. All deficiencies asserted, or assessments made, against any Company as a result of any examinations by any Taxing authority have been fully paid.
Section 4.16 Brokers. No broker, finder, financial advisor or investment banker is entitled to any broker’s, finder’s, financial advisor’s, investment banker’s fee or commission or similar payment in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of any Company.
Section 4.17 Real and Personal Property; Sufficiency of Assets.
(a) No Company owns any real property. Schedule 4.17(a) sets forth a true and complete list of all leases (each a “Real Property Lease”) of real property (the “Leased Real Property”) pursuant to which any Company is a tenant or has any rights of occupancy or possession. Except as set forth on Schedule 4.17(a), (i) each Real Property Lease is valid and binding on the Company subject thereto and enforceable in accordance with its terms against such Company and, to Stephan’s Knowledge, against each other party thereto (subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting generally the enforcement of creditors’ rights and subject to general principles of equity), (ii) no Company, nor, to Stephan’s Knowledge, the other parties thereto, are in breach or default under each Real Property Lease, and, to Stephan’s Knowledge, no circumstances or state of facts presently exists which, with the giving of notice or passage of time, or both, would constitute a breach or default under any Real Property Lease, (iii) there are no written or oral subleases, concessions or other contracts granting to any Person the right to use or occupy any Leased Real Property, (iv) the execution and delivery of this Agreement and the consummation of the transaction contemplated herein, do not and will not require the consent, approval, authorization or agreement of any party to, or under, any Real Property Lease, nor will trigger any right of recapture, termination, relocation or other provision set forth therein, (v) to Stephan’s Knowledge, all buildings, structures, fixtures, building and mechanical systems and equipment and components which are part of any Leased Real Property are in reasonable operating condition, subject to normal wear, and are sufficient for the operation of each Company’s business as presently conducted therein, and comply with all Applicable Law, (vi) to Stephan’s Knowledge, there is no pending or written threat of condemnation or similar proceeding affecting the Leased Real Property or any portion thereof, (vii) to
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Stephan’s Knowledge, no portion of any facility, building, improvement or other structure located on any of the Leased Real Property has suffered any material damage by fire or other casualty within the past three (3) years which has not been substantially repaired or restored, (viii) each Real Property Lease required under Applicable Law to be stamped, recorded or registered with any Governmental Entity has been so stamped, recorded or registered and (ix) each Company has made available to Purchaser prior to the date hereof true, correct and complete copies of each Real Property Lease and the same have not been amended, modified, waived or supplemented except pursuant to written instruments, true, correct and complete copies of which have been delivered or made available to Purchaser.
(b) Schedule 4.17(b) sets forth a true and complete list of all leases (each a “Personal Property Lease”) of tangible personal property, including equipment, furniture, fixtures, computer hardware and leasehold improvements (the “Leased Personal Property”) pursuant to which any Company is a lessee or has any rights of use or possession. Except as set forth on Schedule 4.17(b), (i) each Personal Property Lease is valid and binding on the Company subject thereto and enforceable in accordance with its terms against such Company and, to Stephan’s Knowledge, against each other party thereto (subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting generally the enforcement of creditors’ rights and subject to general principles of equity), (ii) no Company, nor, to Stephan’s Knowledge, the other parties thereto, are in breach or default under each Personal Property Lease, and, to Stephan’s Knowledge, no circumstances or state of facts presently exists which, with the giving of notice or passage of time, or both, would constitute a breach or default under any Personal Property Lease, (iii) there are no written or oral subleases, concessions or other contracts granting to any Person the right to use or possess any Leased Personal Property, (iv) the execution and delivery of this Agreement, and the consummation of the transaction contemplated herein, do not and will not require the consent, approval, authorization or agreement of any party to, or under, any Personal Property Lease, nor will trigger any right of recapture, termination, relocation or other provision set forth therein, (v) to Stephan’s Knowledge, all Leased Personal Property are in reasonable operating condition, subject to normal wear, considering the age and ordinary course of use of such property, and are sufficient for the operation of each Company’s business as presently conducted therein, and comply with all Applicable Law, (vi) no portion of any Leased Personal Property has suffered any material damage by fire or other casualty within the past three (3) years which has not been substantially repaired or restored and (vii) each Company has made available to Purchaser prior to the date hereof true, correct and complete copies of each Personal Property Lease and the same have not been amended, modified, waived or supplemented except pursuant to written instruments, true, correct and complete copies of which have been delivered or made available to Purchaser.
(c) Each Company has good, valid and marketable title to all of the tangible assets, properties and interests owned (or a valid leasehold interest with respect to assets that are leased) by such Company and reflected on the Latest Balance Sheet, or acquired after the Latest Balance Sheet Date, free and clear of all Liens, except for Permitted Liens.
(d) The buildings, plants, structures, furniture, fixtures, machinery, equipment, vehicles and other items of tangible personal property currently owned or leased by each Company, together with all other properties and assets of such Company, are sufficient for the continued conduct of such Company’s business after the Closing in substantially the same manner as conducted prior to the Closing and constitute all of the rights, property and assets necessary to conduct the business of such Company as currently conducted.
Section 4.18 Transactions with Affiliates. Schedule 4.18 sets forth all Contracts or other arrangements between any Company, on the one hand, and any Selling Party, stockholder, partner, member, director, officer, employee or Affiliate of any Company, any member of such Person’s immediate family or any trust, partnership or corporation in which any of the foregoing Persons has a material economic interest, or any other Affiliate of any Selling Party, on the other hand (each, an “Affiliate Agreement”). Except as set forth on Schedule 4.18, no Company is indebted to any Selling Party or stockholder, partner, member, director, officer, employee or Affiliate of any Company (or any member of such Person’s immediate family or any trust, partnership or corporation in which any such Person has a material economic interest, or any other Affiliate of any Selling Party), except for amounts due as normal salaries and bonuses and in reimbursement of ordinary course expenses and as normal costs and expenses of Employee Benefit Plans, and no such Person is indebted to any Company.
Section 4.19 Product Warranties; Defects; Services.
(a) Each product (including any Software product) or service (including Software hosted as a service) developed, manufactured, sold, licensed, provided, leased or delivered by any Company, including all deliverables, in any form, thereunder (collectively, the “Company Products and Services”) has been developed, manufactured, sold, licensed, provided, leased or delivered in conformity in all material respects with the specifications for such Company Product and Service and all applicable contractual commitments and all applicable express and implied warranties. Except for liabilities or obligations for replacement or repair incurred in the ordinary course of business consistent with past practice, no Company has any liability or obligation (and to Stephan’s Knowledge, there is no basis for any present or future Proceeding against any Company) for replacement or repair of any Company Products and Services or other damages in connection therewith.
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(b) Schedule 4.19(b) sets forth (i) all Contracts that obligate any Company to provide Company Products and Services after the date hereof and (ii) all Contracts under which any Company has previously provided Company Products and Services and for which such Company has received a request for repair or replacement thereof which remains unsatisfied (the “Services Agreements”). Except as specifically disclosed in Schedule 4.19(b), no Company has any “loss contract” or other agreement (a “Loss Contract”) where the expected cost to complete the Contract exceeds either (i) the fees and payments to be received pursuant to such Contract or (ii) the Company’s budgeted expense with respect thereto, and there is no reasonable basis to conclude that any Contract to which any Company is a party will become a Loss Contract.
Section 4.20 Customers and Suppliers. Schedule 4.20 sets forth a correct and complete list of: (i) the names of each of the top ten (10) customers (as determined by revenue) and suppliers (as determined by amounts incurred) of each Company for the fiscal year ended December 31, 2013 and the 12 month period ended July 31, 2014; and (ii) the total amount of revenues received from, and amounts incurred, from each such customer and supplier, respectively, in such periods. Each Company maintains good commercial working relationships with each of the customers and suppliers set forth on Schedule 4.20. To Stephan’s Knowledge, the acquisition of the Shares by Purchaser will not adversely affect the relationship of Purchaser (as successor to each Company’s business) with any such customer or supplier or any other Person with whom any Company does business.
Section 4.21 Banks, Officers and Powers of Attorney. Schedule 4.21 lists (i) the name, branch address and account numbers of all banks and financial institutions in which any Company has an account or safe deposit box and the names of all persons authorized to draw thereon or have access thereto, (ii) the names of all incumbent directors or officers (or similar positions) of each Company and (iii) the names of all persons holding powers of attorney from any Company and the purpose therefor.
Section 4.22 Questionable Payments. No Company nor, to Stephan’s Knowledge, any of their respective directors, officers, persons holding similar positions to directors or officers, agents, employees or any other person or entity acting on behalf of any Company has, on behalf of any Company: (i) used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity, (ii) made any direct or indirect unlawful payments to government officials or employees, or foreign government officials or employees, from corporate funds, (iii) established or maintained any unlawful or unrecorded fund of corporate monies or other assets, (iv) made any false or fictitious entries on the books of account of any Company for the purpose of disguising any unlawful contributions, gifts, expenses or payments, or (v) made or received any bribe, payoff, influence payment, kickback or other unlawful payment.
Section 4.23 REV-India. Without limitation of any other representation or warranty contained herein, REV-India has complied with and currently is in compliance with all Applicable Indian Laws except where such non-compliance has not caused, nor will cause, a Company Material Adverse Effect.
Article 5
REPRESENTATIONS AND WARRANTIES
OF THE SELLING PARTIES
Section 5.1 Representations Regarding Seller. Each of the Selling Parties, jointly and severally, hereby represents and warrants, in each case, as of the date hereof and as of the Closing Date, to Purchaser as follows: Seller is duly organized, validly existing and in good standing (or the equivalent thereof, if applicable) under the laws of its jurisdiction of formation and has the requisite power and authority to own, lease and operate its properties and to carry on its business. Seller has the requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary action on the part of Seller, and no other actions on the part of Seller is or will be necessary. This Agreement has been duly executed and delivered by Seller and constitutes the valid, legal and binding agreement of Seller, enforceable against Seller in accordance with their terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the enforcement of creditors’ rights generally. Seller is the sole legal and beneficial owner and holder of the Shares, free and clear of any and all Liens, and the Selling Parties (other than Seller) are the sole legal and beneficial owners and holders of all outstanding Securities and Equity Interests of the Seller. Except as set forth on Schedule 5.1, no notices to, filings with, or authorizations, consents or approvals of any Person or Governmental Entity are necessary for the execution, delivery or performance by Seller of this Agreement or the consummation by Seller of the transactions contemplated hereby.
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Section 5.2 Representations Regarding Selling Parties other than Seller. Each of the Selling Parties other than Seller, individually, as to himself or itself, as applicable (with (x) Xxxxxx and the AC Trust, and (y) Venkatesh and the BV Trust, each being treated for this purpose as a single Person), hereby represents and warrants, in each case, as of the date hereof and as of the Closing Date, to Purchaser as follows:
(a) Such Person has the requisite power and authority or, with respect to individuals, the capacity, to execute and deliver this Agreement and the Ancillary Documents to which he or it is, or is specified to be, a party and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Ancillary Documents to which he or it is, or is specified to be, a party and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary action (trust or otherwise) on the part of such Person, and no other actions (trust or otherwise) on the part of any Person are necessary to consummate the transactions contemplated hereby or thereby. This Agreement and the Ancillary Documents to which he or it is, or is specified to be, a party has been or will be duly executed and delivered by such Person and constitute the valid, legal and binding agreement of such Person, enforceable against such Person in accordance with their terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the enforcement of creditors’ rights generally. Xxxxxx on behalf of the AC Trust, and Venkatesh on behalf of the BV Trust, is duly authorized, and has the full power, to execute and deliver this Agreement on behalf of the AC Trust and BV Trust, respectively, and such execution fully binds such Selling Party.
(b) Except as set forth on Schedule 5.2(b), no notices to, filings with, or authorizations, consents or approvals of any Person or Governmental Entity are necessary for the execution, delivery or performance by such Person of this Agreement or the Ancillary Documents to which to which he or it is, or is specified to be, a party or the consummation by such Person of the transactions contemplated hereby or thereby. Neither the execution, delivery nor performance by such Person of this Agreement or the Ancillary Documents to which he or it is, or is specified to be, a party nor the consummation by such Person of the transactions contemplated hereby or thereby will (i) conflict with or result in any breach of any provision of such Person’s Governing Documents (if applicable), (ii) result in a violation or breach of, result in any loss of rights or additional obligations under, or constitute (with or without due notice or lapse of time or both) a default or give rise to any right of termination, cancellation or acceleration under, any of the terms, conditions or provisions of any Contract to which such Person is a party, (iii) violate any Order or Applicable Law to which such Person or (iv) result in the creation of any Lien upon any property or assets owned by such Person.
(c) Such Person has carefully reviewed this Agreement and the Ancillary Documents to which to which he or it is, or is specified to be a party, and, to the extent believed by such Person to be necessary, has discussed with such Person’s financial and legal advisors, the representations, warranties and agreements being made by the Selling Parties herein, and after completing such review, consideration and consultation, such Person understands the terms and conditions of hereof and thereof.
(d) No broker, finder, financial advisor or investment banker is entitled to any brokerage, finder’s, financial advisor’s, investment banker’s fee or commission or similar payment in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of such Person.
(e) There is no Proceeding pending or, to the Knowledge of such Person, threatened or under investigation, against or affecting such Person, nor, to the Knowledge of such Person, is there any reasonable basis therefor, in which it is sought to restrain or prohibit or to obtain damages or other relief in connection with the transactions contemplated hereby.
(f) The representations and warranties set forth in this Section 5.2 do not contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.
Article 6
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to each Selling Party, as of the date hereof and as of the Closing Date, as follows:
Section 6.1 Organization. Purchaser is a corporation, duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation and has all requisite power and authority to carry on its businesses as now being conducted, except where the failure to have such power or authority would not prevent or materially delay the consummation of the Purchase and Sale.
Section 6.2 Authority. Purchaser has the requisite power and authority to execute and deliver this Agreement and the Ancillary Documents to which Purchaser is a party and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Ancillary Documents to which Purchaser is a party and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of Purchaser and no other
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corporate actions on the part of Purchaser are necessary. This Agreement and the Ancillary Documents to which Purchaser is a party has been or will be duly and validly executed and delivered by Purchaser and constitute the valid, legal and binding agreement of Purchaser, enforceable against Purchaser in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the enforcement of creditors’ rights generally.
Section 6.3 Consents and Approvals; No Violations. No notices to, filings with, or authorization, consent or approval of any Governmental Entity is necessary for the execution, delivery or performance of this Agreement by Purchaser or the Ancillary Documents to which Purchaser is a party or the consummation by Purchaser of the transactions contemplated hereby or thereby, except for those to be done or obtained by each Company and Selling Party and those set forth on Schedule 6.3. Neither the execution, delivery nor performance by Purchaser of this Agreement or the Ancillary Documents to which Purchaser is, or is specified to be, a party nor the consummation by Purchaser of the transactions contemplated hereby or thereby will (a) conflict with or result in any breach of any provision of Purchaser’s Governing Documents, (b) except as set forth on Schedule 6.3, result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default or give rise to any right of termination, cancellation or acceleration under, any of the terms, conditions or provisions of any Contract to which Purchaser is a party or by which Purchaser or any of its properties or assets may be bound, or (c) violate any Order or Applicable Law to which Purchaser or any of its properties or assets is subject to or bound, except in the case of clauses (b) and (c) above, for violations which would not prevent or materially delay the consummation of the transactions contemplated hereby.
Section 6.4 Brokers. No broker, finder, financial advisor or investment banker is entitled to any broker’s, finder’s, financial advisor’s or investment banker’s fee or commission or similar payment in connection with the transactions contemplated by this Agreement based upon arrangements made by and on behalf of Purchaser any of its Affiliates except as set forth on Schedule 6.4.
Section 6.5 Financial Ability. Purchaser has the financial ability to consummate the transactions contemplated by this Agreement.
Section 6.6 Investment Intent. Purchaser is acquiring the Shares as an investment for its own account and not with a view to the distribution thereof. Purchaser shall not sell, transfer, assign, pledge or hypothecate any of the Shares in the absence of registration under, or pursuant to an applicable exemption from, Federal and applicable state securities laws.
Section 6.7 Anti-Sandbagging. Purchaser represents that, as of the date hereof, it has no Knowledge of any misrepresentation or breach of warranty of the Selling Parties contained in this Agreement.
Article 7
COVENANTS
Section 7.1 Conduct of Business of each Company. From and after the date hereof until the earlier of the Closing or the termination of this Agreement in accordance with its terms, Seller shall cause each Company to: (a) conduct its business in the ordinary and regular course in substantially the same manner heretofore conducted (including any conduct that is reasonably related, complementary or incidental thereto), (b) use commercially reasonable efforts to preserve substantially intact its business organization and to preserve the present commercial relationships with key Persons with whom it does business and (c) without the prior written consent of the Purchaser, not do or take any of the following actions:
(i) take or omit to take any action that would reasonably be expected to result in, individually or in the aggregate, a Company Material Adverse Effect;
(ii) declare, set aside or pay a dividend on, or make any other distribution in respect of, any Equity Interests or Securities;
(iii) reclassify, split, combine, subdivide or redeem, purchase or otherwise acquire, directly or indirectly, any of its Equity Interests or Securities or effect any recapitalization, stock dividends, stock split or like change in its capitalization;
(iv) acquire or agree to acquire in any manner (whether by merger or consolidation, the purchase of an equity interest in or a material portion of the assets of or otherwise) any business or any corporation, partnership, association or other business organization or division thereof of any other Person;
(v) amend, extend, renew, enter into or terminate any new or existing Material Contract, as applicable, except any renewal or extension in the ordinary course of an existing Material Contract which is terminable on 60 days’ notice or less without penalty;
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(vi) increase the compensation, bonus, pension, welfare, severance or other fringe benefits payable to any Person by more than 5%; make any equity awards to any Person; pay or grant any severance, termination or change-of-control benefit to any Person; adopt, amend or terminate any Employee Benefit Plan or plan that would be an Employee Benefit Plan if in effect on the date hereof (unless such adoption or amendment is required to reflect applicable changes in the law) or amend the terms of any outstanding equity-based awards; take any action to accelerate the vesting or payment, or fund or in any other way secure the payment, of compensation or benefits under any Employee Benefit Plan, to the extent not already provided in the mandatory provisions, if any, of such Employee Benefit Plan; change the manner in which contributions to Employee Benefit Plans are made or the basis on which such contributions are determined, except as may be required by GAAP or Applicable Law; or make or forgive any loans to directors, members, managers, officers or employees of the Company (other than advances of expenses made in the ordinary course);
(vii) enter into a collective bargaining agreement;
(viii) incur or assume any Indebtedness, except current liabilities incurred in the ordinary course of business consistent with past practice;
(ix) issue, sell, pledge, dispose of, grant, transfer or encumber, or authorize the issuance, sale, pledge, disposition, grant, transfer or encumbrance of any Equity Interests or Securities;
(x) adopt any amendments to its Governing Documents;
(xi) make, change or revoke any Tax election, adopt or change any accounting period or any accounting method, file any amended Tax Return, enter into any closing agreement, settle any material Tax claim or assessment relating to the Company, surrender any right to claim a refund of Taxes, consent to any extension or waiver of the limitation period applicable to any Tax claim or assessment relating to the Company, or destroy or dispose of any books and records with respect to Tax matters relating to periods beginning before the Closing and for which the statute of limitations is still open or under which a record retention agreement is in place with a Governmental Entity;
(xii) sell or otherwise dispose of any assets in excess of $25,000 in the aggregate or subject to any Lien any of its properties or assets, except for Permitted Liens;
(xiii) make any material change in its accounting principles or the methods by which such principles are applied for financial reporting purposes;
(xiv) write-down or write-up the value of any material asset, or write-off any accounts receivable or notes receivable, other than in the ordinary course of business consistent with past practice and upon notice to Purchaser;
(xv) accelerate or delay the payment of accounts payable, accelerate or delay the collection of any notes or accounts receivable or otherwise fail to pay accounts payable and other business obligations or to collect accounts receivable, in each case other than in the ordinary course of business consistent with past practice;
(xvi) settle any Proceedings that, as a condition to such settlement, require payment in excess of $25,000 or result in any limitation of the conduct of the Company’s business;
(xvii) make any capital expenditures, other than in the ordinary course of business consistent with past practice;
(xviii) adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization;
(xix) incur or commit to any other obligations or liabilities other than in the ordinary course of business consistent with past practice;
(xx) exercise any rights of renewal with respect to any Real Property Lease or Personal Property Lease that by its terms would otherwise expire, except any renewal or extension in the ordinary course of an existing Real Property Lease or Personal Property Lease which is terminable on 60 days’ notice or less without penalty;
(xxi) grant any licenses under any Company Intellectual Property rights, other than non-exclusive licenses to customers in the ordinary course of business consistent with past practice;
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(xxii) fail to use commercially reasonable efforts to prevent any insurance policy naming it as a beneficiary or loss-payable payee to be cancelled or terminated, except for ordinary course terminations and cancellations of such policies that are being replaced with policies providing for substantially equivalent coverage;
(xxiii) cancel, surrender, allow to expire or fail to renew, any Permits;
(xxiv) materially change an existing line of business or enter into any new line of business; or
(xxv) authorize, commit or agree to take or do, whether in writing or otherwise, any of the actions specified in this clause (c).
Section 7.2 Tax Matters.
(a) Except for such Taxes which are required to be withheld from payment of the Consideration, all transfer taxes, recording fees and other similar Taxes (and any interest, penalties or additions to Tax with respect thereto) that are imposed on any of the Parties hereto by any Governmental Entity in connection with the transactions contemplated by the Agreement shall be paid by the Party responsible for the payment thereof under Applicable Law.
(b) Xxxxxxx shall cause each Company to timely file all of its Tax Returns that are due on or prior to the Closing Date, and Xxxxxxx shall cause each Company to timely pay any Taxes shown to be due thereon. Purchaser shall cause each Company to timely file or cause to be timely filed all Tax Returns of each Company that are due after the Closing Date.
(c) Schedule 7.2(c) sets forth the Tax allocation of the Consideration among the Shares (the “Allocation”). Each of the Parties agrees to (i) be bound by the Allocation, (ii) act in accordance with the Allocation in the preparation, filing and audit of any Tax Return (including the filing of a federal income Tax Return for the taxable year that includes the date of the Closing) except as otherwise required by Applicable Law, (iii) cooperate in the filing of any forms required to be filed with regard to the Allocation and (iv) take no position, and cause its Affiliates to take no position, inconsistent with the Allocation on any applicable Tax Return or in any proceeding before any Governmental Entity. If the Allocation is disputed by any Governmental Entity, the Party receiving notice of the dispute shall promptly notify the other Parties, and the Parties agree (and shall cause their respective Affiliates) to defend such Allocation in any Proceeding.
Section 7.3 Access to Information. From and after the date hereof until the earlier of the Closing or the termination of this Agreement in accordance with its terms, upon reasonable notice, Xxxxxxx shall cause each Company to: (i) provide to Purchaser and its authorized representatives during normal business hours reasonable access to all books, records, assets, properties and personnel of the Company (in a manner so as to not interfere with the normal business operations of the Company) and (ii) furnish as promptly as practicable to Purchaser and its authorized representatives any information concerning the Company that Purchaser may reasonably request. All of such information shall be treated as Confidential Information pursuant to the terms of the Confidentiality Agreement.
Section 7.4 Efforts to Consummate. Subject to the terms and conditions herein provided, each of the Parties hereto shall use commercially reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things reasonably necessary, proper or advisable to consummate and make effective as promptly as practicable the transactions contemplated by this Agreement (including the satisfaction, but not waiver, of the closing conditions set forth in Article 8 ). Each Party shall use commercially reasonable efforts to notify and to obtain consents of all Governmental Entities and other Persons as necessary or advisable to consummate the transactions contemplated by this Agreement.
Section 7.5 Exclusive Dealing. During the period from the date of this Agreement through the earlier of the Closing or the termination of this Agreement in accordance with its terms, the Selling Parties shall not take, nor permit Seller or any Company to take, nor permit any of their respective Affiliates, officers, directors, employees, representatives, consultants, financial advisors, attorneys, accountants or other agents or representatives to take, any action to solicit, encourage, initiate, engage in or continue discussions, negotiations or other communications with, provide any information to or otherwise cooperate in any way with, or accept any proposal or offer from, or enter into any agreement with any Person (other than Purchaser or its Affiliates) concerning (i) any direct or indirect purchase of any Equity Interests or Securities of Seller or any Company or all or substantially all of Seller or any Company’s assets, (ii) any merger, consolidation, business combination, recapitalization, reorganization, or similar transaction involving Seller or any Company, or (iii) any other transaction in lieu of or that conflicts with the transactions contemplated by this Agreement (each such transaction, an “Acquisition Transaction”). Each Selling Party shall notify Purchaser promptly, but in any event within twenty-four (24) hours, orally and in writing if any proposal, offer, inquiry or other contact with or by any Person with respect to an Acquisition Transaction, is made. Any such notice to Purchaser shall indicate in reasonable detail the identity of the Person making such proposal, offer, inquiry or other contact and the terms and conditions of such proposal, offer, inquiry or other contact.
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Section 7.6 [Intentionally Omitted].
Section 7.7 [Intentionally Omitted].
Section 7.8 Notification and Schedule Updates.
(a) From the date hereof until the Closing Date, each of the Selling Parties, on the one hand, and Purchaser, on the other hand, shall give prompt written notice to the other Parties of any of the following (it being agreed such notification does not constitute a waiver of any other term or provision of this Agreement or any rights hereunder):
(i) any change, event or action that, individually or in the aggregate, has had or could reasonably be expected to (A) have a Company Material Adverse Effect, (B) result in any representation or warranty of such Party under this Agreement being inaccurate in any respect or (C) result in a breach of any covenant of such Party contained in this Agreement or the failure to satisfy any condition specified in Article 8;
(ii) any written notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement;
(iii) any written notice or other communication from any Governmental Entity in connection with the transactions contemplated by this Agreement;
(iv) the commencement or receipt of written threat of commencement of any Proceeding relating to or involving or otherwise affecting any Company or that relates to the consummation of the transactions contemplated by this Agreement; and
(v) the damage or destruction by fire or other casualty of any assets of any Company or the taking thereof or of any right relating thereto by condemnation, eminent domain or other similar governmental action.
(b) From the date hereof through the Closing, Xxxxxxx and the other Selling Parties, as applicable, shall promptly supplement or amend the Schedules that they have delivered (i) with respect to any matter first existing or occurring following the date of this Agreement that (A) if existing or occurring at or prior to the date of this Agreement, would have been required to be set forth or described in the Schedules or (B) is necessary to correct any information in the Schedules that has been rendered inaccurate thereby and (ii) to the extent necessary to correct any information in the Schedules that was inaccurate as of the date hereof. No such supplement or amendment to any Schedule shall have any effect for the purpose of determining satisfaction of the conditions set forth in Article 8 or the obligations of any of the Parties hereunder.
Section 7.9 Releases. In consideration of the execution, delivery and performance by Purchaser of this Agreement, effective as of the Closing, each of the Selling Parties, on behalf of itself and its Affiliates (each, a “Releasing Party”) hereby releases, waives, acquits and forever discharges each Company, Purchaser and each of their respective Affiliates, together with their respective past and present officers, directors, partners, members, trustees, employees, stockholders, agents, attorneys and representatives (each, a “Released Party”), from any and all Losses, Liabilities, costs, expenses, claims, damages, actions, causes of action, or suits in law or equity, of whatever kind or nature that any Releasing Party ever had or may now have against any Released Party and that have accrued or arisen prior to the Closing Date, including those based on any fact or circumstance arising from such Releasing Party’s past or current ownership of any Equity Interests or Securities issued by any Company or any employment or other compensation arrangement or agreement (including any claims relating to actual or alleged breaches of fiduciary or other duties by any Company’s directors, officers, partners, members or stockholders), whether based on contract or any Applicable Law (including tort, statute, local ordinance, regulation or any comparable law) in any jurisdiction; provided, however, that nothing in this Section 7.9 shall or be deemed to release any rights or obligations pursuant to, or other rights set forth in, (i) this Agreement and any Ancillary Document, (ii) any agreement or Applicable Law providing for defense, indemnification or advancement of expenses with respect to any claims against Xxxxxxx in his capacity as an employee, officer, director or agent of any Company (except claims known to Xxxxxxx prior to the Closing Date and not disclosed to Purchaser) and (iii) provisions of Applicable Law which cannot be released by a Releasing Party.
Section 7.10 Resignation of Officers. At the Purchaser’s request, Xxxxxxx shall obtain the resignations of all of the officers and/or directors of each Company effective as of the Closing, it being understood and agreed that such resignation shall represent solely such Person’s resignation from his or her official officer and/or director capacity with the applicable Company, and shall not otherwise affect such Person’s employment status with such Company, and shall not be deemed a breach or waiver by any such person of any rights under any employment or similar agreement to which such Person is a party.
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Section 7.11 Restrictive Covenant.
(a) Each of the Seller and Xxxxxxx agrees that during the Restricted Period, such Person shall not, and such Person shall cause its Affiliates and representatives not to, (i) engage, either directly or indirectly, for his or its own account or solely or jointly for the benefit of others, in any business, domestic or foreign, which competes with any Company Business (a “Competing Business”) in any country, territory, jurisdiction, state, province, county, city, municipality or town (a “Restricted Territory”) in which any Company or Purchaser or any of their Affiliates now or at any time during the Restricted Period conducts or engages in any Company Business; (ii) solicit, directly or indirectly, any Competing Business in a Restricted Territory from any Person other than to or for the benefit of any Company, Purchaser or any of their Affiliates; (iii) invest, either directly or indirectly, in any Person engaged in any Competing Business in a Restricted Territory; or (iv) divert, entice or otherwise take away from any Company or Purchaser or any of their Affiliates the business or patronage of any customer, client, supplier or vendor, including the Persons listed on Schedule 4.20, or attempt to do so; provided, that nothing contained in this Section 7.11(a) shall be deemed to prevent such Person or any Affiliate thereof from owning less than five percent (5%) of a class of stock of a publicly-held corporation which is traded on a national securities exchange or in the over-the-counter market, so long as such Person or Affiliate, as applicable, does not have any active participation in the business or management of such entity.
(b) Each of the Selling Parties (with (x) Xxxxxx and the AC Trust, and (y) Venkatesh and the BV Trust, each being treated for this purpose as a single Person) agrees, as to himself or itself, that during the Restricted Period, such Person shall not, and such Person shall cause its Affiliates and representatives not to, directly or indirectly, through any Person or contractual arrangement, solicit, recruit, employ or hire, directly or indirectly, any Person who at the time of the Closing or at any time during the two year period thereafter is employed by or engaged to work for Purchaser, any Company or any of their Affiliates, whether as an employee, independent contractor or consultant (a “Company Employee”); provided, that the foregoing shall not prohibit a general solicitation to the public of general advertising or similar methods of solicitation by search firms not specifically directed at Company Employees or the hiring of any Person who has not been a Company Employee for a consecutive period of not less than six (6) months.
(c) Each of the Selling Parties acknowledge and confirm that the Restrictive Covenant represents a material inducement to the Purchaser to consummate the Purchase and Sale, and the Purchaser would not have entered into this Agreement in the absence of the Restrictive Covenant contained herein.
(d) Each of the Selling Parties acknowledges and agrees that the restrictions and provisions contained in the Restrictive Covenant are reasonable and necessary to protect the legitimate interests of the Purchaser, that the provisions contained in the Restrictive Covenant are required to preserve for the Purchaser the goodwill it is purchasing under this Agreement, that the Purchaser would not have entered into this Agreement in the absence of such Restrictive Covenant, that any violation of such Restrictive Covenant will result in irreparable injury to the Purchaser, that the remedy at law for any breach of the foregoing restrictions will be inadequate, and that, in the event of any such breach, the Purchaser, in addition to any other relief available to it, shall be entitled to temporary and permanent injunctive relief. The Selling Parties further specifically acknowledge and agree that the Purchaser shall be entitled to an equitable accounting of all earnings, profits and other benefits arising from any such breach, and further agree to pay the reasonable legal fees and expenses incurred by the Purchaser in successfully enforcing the provisions contained herein. The Selling Parties acknowledge that they have agreed to the Restrictive Covenant with full understanding and acceptance of the terms hereof and that the restrictions imposed herein are fair and reasonable and are required for the protection of the Purchaser and are given as an integral part of the transactions contemplated by this Agreement. The Selling Parties expressly agree that the provisions contained herein are severable independent covenants and are reasonable limitations as to time, geographical area and scope of activity, and such restrictions do not impose a greater restraint than is necessary to protect the goodwill or other business interests purchased by the Purchaser. If any of the covenants contained in this Restrictive Covenant, or any part hereof, is hereinafter construed to be invalid or unenforceable, the same shall not affect the remainder of the covenant or covenants, which shall be given full effect, without regard to the invalid portions. If any of the covenants contained in this Restrictive Covenant, or any part hereof, is held to be unenforceable because of the duration of such provision or the area covered thereby, the Parties agree that the court making such determination shall have the power to reduce the duration and/or geographic area of such provision and, in its reduced form, said provision shall then be enforceable. The Selling Parties acknowledge that the parties intend to and hereby confer jurisdiction to enforce the covenants contained in this Restrictive Covenant upon the courts of any jurisdiction within the geographical scope of such covenants. In the event that the courts of any one or more of such jurisdictions shall hold such covenants wholly unenforceable by reason of the breadth of such scope or otherwise, it is the intention of the Parties hereto that such determination not bar or in any way affect the right of the Purchaser to the relief provided above in the courts of any other jurisdiction within the geographical scope of such covenants, as to breaches of such covenants in such other respective jurisdictions, the above covenants as they relate to each jurisdiction being, for this purpose, severable into diverse and independent covenants.
Section 7.12 Confidentiality. The Parties acknowledge that the Confidentiality Agreement will continue in full force and effect in accordance with its terms and the provisions of which are by this reference incorporated herein, except that effective as of the Closing Date, the Purchaser shall have no further liabilities or obligations thereunder.
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Section 7.13 Financial Statements and Reports. From the date hereof to the Closing Date, Xxxxxxx shall cause each Company to furnish to Purchaser as soon as available monthly unaudited balance sheets and monthly income statements of the Company showing its financial condition as of the close of such month and the results of operations during such month and for the elapsed portion of the Company’s fiscal year, in each case, setting forth comparative figures for the corresponding month in the prior fiscal year and the corresponding elapsed portion of the prior fiscal year.
Section 7.14 [Intentionally Omitted] .
Section 7.15 Further Assurances. From time to time following the Closing, each of the Parties shall, and shall cause their respective Affiliates to, use commercially reasonable efforts to, execute, acknowledge and deliver such conveyances, notices, assumptions, releases, consents, documents and other instruments and papers, and perform such further acts as may be reasonably required or desirable to carry out the provisions hereof and the transactions contemplated by this Agreement, including obtaining any Permits, consents, authorizations, approvals of, or effecting the notification of or filing with, each Person, whether private or governmental, whose consent or approval is required in order to permit the consummation of, and to give full effect to, the transactions contemplated by this Agreement.
Article 8
CONDITIONS TO CONSUMMATION OF THE PURCHASE AND SALE
Section 8.1 Conditions to the Obligations of the Selling Parties and Purchaser. The obligations of the Selling Parties and Purchaser to consummate the transactions contemplated by this Agreement are subject to the satisfaction (or, if permitted by Applicable Law, waiver by the party for whose benefit such condition exists) of the following conditions:
(a) All authorizations, consents, permits, orders or approvals of, or declarations or filings with or expiration or termination of waiting periods imposed by, any Governmental Entity pursuant to Applicable Law or any Person under any Material Contract necessary for the consummation of the transactions contemplated hereby shall have been obtained or made or shall have occurred; and
(b) No Applicable Law, executive order, decree, temporary restraining order, preliminary or permanent injunction or other Order issued by any Governmental Entity or other legal restraint or prohibition preventing, prohibiting or rendering unlawful the consummation of the transactions contemplated by this Agreement and the Ancillary Documents shall be in effect.
Section 8.2 Other Conditions to the Obligations of Purchaser. The obligations of Purchaser to consummate the Purchase and Sale are subject to the satisfaction or, waiver by Purchaser of the following further conditions:
(a) Each of the (i) Fundamental Representations shall be true and correct in all respects as of the date hereof and as of the Closing Date as though then made, (ii) representations and warranties of the Selling Parties or any of them contained in this Agreement (other than the Fundamental Representations) that are qualified as to materiality or Company Material Adverse Effect shall be true and correct in all respects as of the date hereof and as of the Closing Date (except for such representations and warranties that are made as of a specific date which shall speak only as of such date) and (iii) representations and warranties of the Selling Parties or any of them contained in this Agreement (other than the Fundamental Representations) that are not qualified as to materiality or Company Material Adverse Effect shall be true and correct in all material respects as of the date hereof and as of the Closing Date (except for such representations and warranties that are made as of a specific date which shall speak only as of such date);
(b) The Selling Parties shall have performed and complied in all material respects with all agreements and covenants required to be performed or complied with by them under this Agreement on or prior to the Closing Date;
(c) Since the date of this Agreement, there shall not have occurred or exist a Company Material Adverse Effect;
(d) Concurrently with the Closing, each of Xxxxxxx Xxxxxxxx and XX Xxxxxxxxx shall xxxxx an irrevocable option to purchase, free and clear of all Liens, all of the Equity Interests and Securities in REV-India owned by them, to the Purchaser or its designee, pursuant to such instruments or agreements as shall be required by Applicable Law and otherwise reasonably satisfactory to Purchaser.
(e) [Intentionally Omitted].
(f) Each of the Key Employees shall have executed and delivered to the Purchaser an employment letter substantially in the form of Schedule 8.2(f) (the “Key Employee Employment Letters”).
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(g) Xxxxxxx shall have executed and delivered to the Purchaser an employment agreement between Xxxxxxx and REV-US substantially in the form of Schedule 8.2(g) (the “Xxxxxxx Employment Agreement”).
(h) The Seller and each Company, as applicable, shall have executed and delivered the Share Transfer Documents to the Purchaser.
(i) If so requested, Purchaser shall have received true, correct and complete copies of duly executed written resignations of one or more of the officers and/or directors of each Company.
(j) Without limitation of Section 8.1(a), the Purchaser shall have received true, correct and complete copies of the authorizations, consents, permits, orders or approvals set forth on Schedule 4.4, and all of the declarations, filings and notices set forth on Schedule 4.4 shall have been properly given and the notice period required thereunder shall have expired and the Selling Parties shall have delivered to Purchaser evidence thereof, in each case, in form and substance reasonably satisfactory to Purchaser.
(k) Purchaser shall have received such certificates, affidavits and other documents from the Selling Parties as it reasonably determines to be necessary or advisable in order to determine the Withholding Amount and such other Tax withholding from the payment of the Consideration as may be required under Applicable Law.
(l) The Purchaser shall have received the following certificates, each dated as of the Closing Date, in form and substance reasonably acceptable to Purchaser:
(i) a certificate executed by Xxxxxxx certifying that the conditions specified in Section 8.2(a), Section 8.2(b) and Section 8.2(c) are satisfied;
(ii) a certificate executed by each of the Selling Parties, in his or its capacity as a Selling Party, certifying that, as to such Selling Party, the conditions specified in Section 8.2(a) and Section 8.2(b) are satisfied;
(iii) a certificate executed by Xxxxxxx, in his capacity as the chief executive officer of Seller and each Company, certifying (A) the good standing of Seller and each Company in its jurisdiction of organization and in each other jurisdiction where it is qualified to do business (with copies of all applicable good standing certificates, certificates of existence or comparable certificates attached to such certificate), (B) that the Governing Documents of each Company (copies of which shall be attached to the certificate) are all true, complete and correct in all respects and remain unamended and in full force and effect and (C) that the stockholders and directors of Seller and each Company have duly approved and authorized the execution and delivery of this Agreement and the consummation of the transactions contemplated herein (a copy of which shall be attached to the certificate); and
(iv) a certificate executed by each of Venkatesh and Xxxxxx, in their respective capacities as the trustees of the BV Trust and the AC Trust, certifying that each is the duly authorized trustee thereof and has the power and authority to execute and deliver this Agreement on behalf of the BV Trust and AC Trust, respectively (and attaching a copy of the trust instrument for each such trust).
(n) The Purchaser shall have received all other documents reasonably required or requested by Purchaser or its counsel to effectuate, implement or evidence the Purchase and Sale or to otherwise consummate the transactions contemplated by this Agreement.
Section 8.3 Other Conditions to the Obligations of the Selling Parties. The obligations of the Selling Parties to consummate the Purchase and Sale are subject to the satisfaction or waiver by them of the following further conditions:
(a) The representations and warranties of Purchaser set forth in Article 6 hereof shall be true and correct in all material respects as of the Closing Date as though made on and as of the Closing Date (other than such representations and warranties that expressly relate to a specified date, in which case such representations and warranties shall be true and correct as of the specified date).
(b) Purchaser shall have performed and complied in all material respects with all covenants required to be performed or complied with by Purchaser under this Agreement on or prior to the Closing Date;
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(c) The Selling Parties shall have received the following certificates, each dated as of the Closing Date, in form and substance reasonably acceptable to Xxxxxxx:
(i) a certificate executed by an authorized officer of Purchaser certifying that the conditions specified in Section 8.3(a) and Section 8.3(b) have been satisfied certifying,
(ii) a certificate executed by an authorized officer of Purchaser certifying the good standing of the Purchaser in its jurisdiction of organization (with copies of all applicable good standing certificates, certificates of existence or comparable certificates attached to such certificate), and
(iii) a certificate executed by an authorized officer of Purchaser certifying that the directors of the Purchaser have duly approved and authorized the execution and delivery of this Agreement and the Ancillary Documents to which Purchaser may be a party and the consummation of the transactions contemplated herein and therein;
(d) Without limitation of Section 8.1(a), Xxxxxxx shall have received true, correct and complete copies of the authorizations, consents, permits, orders or approvals set forth on Schedule 6.3, and all of the declarations, filings and notices set forth on Schedule 6.3 shall have been properly given and the notice period required thereunder shall have expired and the Purchaser shall have delivered to Xxxxxxx evidence thereof, in each case, in form and substance reasonably satisfactory to Xxxxxxx;
(e) An authorized officer of REV-US shall have executed and delivered to Xxxxxxx the Xxxxxxx Employment Agreement; and
(f) Purchaser shall have paid the Closing Payments and other amounts set forth in Section 2.2(a)(iii) in accordance with the provisions of Section 2.2.
Article 9
TERMINATION
Section 9.1 Termination. This Agreement may be terminated and the transactions contemplated by this Agreement may be abandoned at any time prior to the Closing:
(a) by mutual written consent of Purchaser and the Selling Parties;
(b) by Purchaser, if any Selling Party shall have breached any of the representations or warranties of any Selling Party set forth in this Agreement or in any certificate delivered pursuant to this Agreement or if any Selling Party has failed to perform any covenant or agreement binding upon it or him set forth in this Agreement (including an obligation to consummate the Closing) such that such breach or failure to perform, as applicable, (x) would result in a failure of the condition to Closing set forth in either Section 8.2(a) or Section 8.2(b) to be satisfied and (y) cannot be cured on or before the Termination Date, or, if curable, is not cured within ten (10) days after written notice thereof is delivered to Xxxxxxx; provided, however, that Purchaser shall not have the right to terminate this Agreement pursuant to this Section 9.1(b) if Purchaser is then in material breach of this Agreement;
(c) by the Selling Parties, if Purchaser shall have breached any of the representations or warranties set forth in this Agreement or in any certificate delivered pursuant to this Agreement or if Purchaser has failed to perform any covenant or agreement on the part of Purchaser set forth in this Agreement (including an obligation to consummate the Closing) such that such breach or failure to perform, as applicable, (x) would result in a failure of the condition to Closing set forth in either Section 8.3(a) or Section 8.3(b) to be satisfied and (y) cannot be cured on or before the Termination Date, or, if curable, is not cured within ten (10) days after written notice thereof is delivered to Purchaser; provided, however, that the Selling Parties shall not have the right to terminate this Agreement pursuant to this Section 9.1(c) if any of the Companies or Selling Parties is then in material breach of this Agreement; or
(d) by either Purchaser, on the one hand, or the Selling Parties, on the other hand, if the transactions contemplated by this Agreement shall not have been consummated on or prior to the date that is ninety (90) days after the date hereof (the “Termination Date”); provided, however, that any Party that has breached this Agreement, which breach has resulted in the failure of a condition in Article 8, shall not be entitled to terminate this Agreement pursuant to this Section 9.1(d).
Section 9.2 Effect of Termination. In the event of the termination of this Agreement pursuant to Section 9.1, written notice thereof shall be given to the other Parties, specifying the provisions hereof pursuant to which such termination is made and the basis therefor described in reasonable detail, and this entire Agreement shall forthwith become void and of no further force and effect and all rights and obligations of any Party hereto shall cease with the exception of the provisions of Section 7.12, Section 9.2, Article 11 and Article 12 (and any defined terms associated therewith), each of which provisions shall survive such termination and remain valid
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and binding obligations of the Parties. Termination of this Agreement shall not be deemed to release, or limit the liabilities of, any Party from any liability or damages arising from any fraud or willful breach by such Party of any representation, warranty or covenant contained in this Agreement.
Article 10
SURVIVAL OF REPRESENTATIONS AND COVENANTS; INDEMNIFICATION
Section 10.1 Survival of Representations and Covenants; Tolling.
(a) The representations and warranties of the Parties contained in this Agreement, or in any certificate delivered hereunder, shall survive the Closing until the twenty-four (24) month anniversary of the Closing Date, except that (a) the Fundamental Representations shall survive indefinitely and (b) the Limitations Representations shall survive until sixty (60) days after any claims based on such sections are barred by the applicable statute of limitations. All covenants and agreements set forth herein requiring performance shall survive the Closing in accordance with their respective terms and shall survive until performed or expire in accordance with their respective terms.
(b) Notwithstanding anything herein, any representation or warranty in respect of which indemnity may be sought under this Article 10, and the indemnity with respect thereto, shall survive the time at which it would otherwise terminate pursuant to this Section 10.1 if written notice of the inaccuracy or breach or potential inaccuracy or breach thereof giving rise to such right or potential right of indemnity shall have been given to the party against whom such indemnity may be sought prior to such time, and in any such case such representation or warranty shall survive until any claim for indemnity related to such inaccuracy or breach or potential inaccuracy or breach is resolved, but solely with respect to the breach claimed prior to the date the represent or warranty otherwise terminated.
Section 10.2 Indemnification.
(a) Subject to the other provisions of this Article 10, Xxxxxxx shall indemnify, defend and hold each of Purchaser and each Company and their respective officers, directors, employees, partners, stockholders, Affiliates, agents and representatives, and each of the successors and assigns of any of the foregoing (each a “Purchaser Indemnitee”) harmless from and against any and all damages, losses, liabilities, obligations, claims of any kind, fines, penalties, Taxes, interest, costs or expenses (including reasonable attorneys’, accountants’ and other professionals’ fees and expenses) (collectively, “Losses”) that are incurred or arise out of or result, directly or indirectly, from:
(i) any breach of any representation or warranty made by Xxxxxxx contained in Article 4, or, as to Xxxxxxx only, Section 5.1 or Section 5.2 of this Agreement or in any certificate or other instrument or document delivered by Xxxxxxx to Purchaser pursuant to Section 8.2(l) of this Agreement;
(ii) any breach by Xxxxxxx of any of his covenants or agreements contained herein;
(iii) any Third Party Claim alleging any interest in or rights with respect to any Equity Interests or Securities of any Company, which interest or rights arise from any event, state of facts, circumstance or occurrence in existence prior to the Closing Date;
(iv) any Pre-Closing Taxes, Seller Expenses, claim for indemnification or other Liability asserted against or due and owing by any Company by or to any Person or Governmental Entity, or any Proceeding to which any Company may be a party, whether before or after the Closing Date, and arising from any action, event or occurrence in existence prior to or as of the Closing Date, whether or not disclosed in any Schedule hereto, except to the extent reserved against in the Closing Date Balance Sheet (and if so reserved, such exception shall be limited to the amount so reserved) (it being the understanding and agreement of the Parties that Xxxxxxx shall have no indemnification liability or obligation in respect of any Liabilities shown on or reserved against in the Closing Date Balance Sheet to the extent so shown or reserved); and
(v) any Proceeding by any Governmental Entity imposing or seeking to impose liability or obligation upon the Purchaser with respect to any Tax withholding arising from the Purchase and Sale in excess of the Withholding Amount.
(b) Subject to the other provisions of this Article 10, each of the Selling Parties (excluding Xxxxxxx), jointly and severally, shall indemnify, defend and hold each Purchaser Indemnitee harmless from and against any and all Losses that are incurred or arise out of or result, directly or indirectly, from:
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(i) any breach of any representation or warranty made by any Selling Party (excluding Xxxxxxx) contained in Article 5 of this Agreement or in any certificate or other instrument or document delivered by the Selling Parties to Purchaser pursuant to Section 8.2(l) of this Agreement; and
(ii) any breach by any Selling Party (excluding Xxxxxxx) of any of his or its covenants or agreements contained herein.
(c) Effective as of the Closing, and subject to the other provisions of this Article 10, Purchaser shall indemnify, defend and hold each Selling Party and their respective Affiliates, officers, directors, employees, partners, stockholders, agents and representatives, and each of the heirs, executors, successors and assigns of any of the foregoing (each a “Seller Indemnitee”) harmless from any Loss incurred that arises out of or results, directly or indirectly, from:
(i) any breach of any representation or warranty made by the Purchaser contained in Article 6 of this Agreement or in any certificate or other instrument or document delivered by Purchaser pursuant to Section 8.3(c) of this Agreement; and
(ii) any breach by the Purchaser of any of its covenants or agreements contained herein.
Section 10.3 Indemnification Claims.
(a) If any Purchaser Indemnitee or Seller Indemnitee (each, an “Indemnified Party”) seeks indemnification pursuant to this Article 10, the Indemnified Party shall provide the other Party or Parties from whom such indemnification is sought (the “Indemnifying Party”) with a written Notice of Claim setting forth, to the extent then known, the reasonable details of its claim and all Losses arising therefrom.
(b) In the case of a claim for indemnification not based upon a Third Party Claim, the Indemnifying Party shall have thirty (30) days from its receipt of the Notice of Claim to (i) admit its obligation to provide indemnification, and, without limitation of any future Losses arising thereunder, pay all Losses set forth in the Notice of Claim or (ii) dispute the matters and claim for indemnification set forth in the Notice of Claim (a “Notice of Claim Dispute”). If the Indemnifying Party does not deliver a Notice of Claim Dispute within such thirty (30) day period, the Indemnifying Party shall be conclusively deemed obligated to provide such indemnification hereunder and shall be deemed to waive its right to deliver a Notice of Claim Dispute.
(c) The delivery of a Notice of Claim by an Indemnified Party, or a Notice of Claim Dispute by an Indemnifying Party, shall not restrict or preclude the Indemnified Party or Indemnifying Party, as the case may be, from thereafter asserting or alleging additional matters, including further Losses or defenses, from or in connection with the matters giving rise to the Notice of Claim or Notice of Claim Dispute, as applicable. An Indemnified Party seeking indemnification for a Third Party Claim may also seek indemnification under any applicable clause(s) of Section 10.1 or Section 10.2 and the same may be set forth in one or more Notices of Claim as the Indemnified Party shall determine in its sole discretion.
Section 10.4 Third Party Claims.
(a) If a Proceeding is initiated by any Person who is not a Party hereto or an Affiliate thereof (a “Third Party Claim”) against an Indemnified Party, and if such Indemnified Party intends to seek indemnification with respect thereto under this Article 10, such Indemnified Party shall promptly, after receipt of written notice of such Proceeding, provide written notice of such Proceeding to the party or parties from whom the Indemnified Party intends to seek indemnification (the “Responsible Party”), which notice shall describe such Proceeding in reasonable detail and the amount thereof (if known and quantifiable), provided that the failure to so notify a Responsible Party shall not relieve such Responsible Party of its obligations hereunder unless and to the extent the Responsible Party shall be actually and materially prejudiced by such failure to so notify. A Responsible Party shall be entitled to participate in the defense of such Proceeding giving rise to an Indemnified Party’s claim for indemnification at such Responsible Party’s expense, and, at its option (subject to the limitations set forth below), shall be entitled to assume the defense thereof by appointing a reputable counsel reasonably acceptable to the Indemnified Party to be the lead counsel in connection with such defense within thirty (30) days of its receipt of notice of the Proceeding, provided that prior to the Responsible Party assuming control of such defense, it shall (x) demonstrate to the Indemnified Party in writing such Responsible Party’s financial ability to provide full indemnification to the Indemnified Party with respect to such Proceeding (including the ability to post any bond required by the court or adjudicative body before which such Proceeding is taking place), and (y) agree in writing to be fully responsible for all Losses relating to such Proceeding, provided, further, that:
(i) the Indemnified Party shall be entitled to participate in the defense of such claim and to employ counsel of its choice for such purpose;
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(ii) the Indemnified Party is authorized to file any motion, answer or other pleading that it shall deem necessary or appropriate to protect its interests;
(iii) the Responsible Party shall not be entitled to assume control of such defense if (A) the claim for indemnification relates to or arises in connection with any criminal proceeding, action, indictment, allegation or investigation, (B) the Indemnified Party reasonably believes an adverse determination with respect to the Proceeding giving rise to such claim for indemnification would materially injure the Indemnified Party’s reputation or future business prospects, (C) such claim seeks an injunction or equitable relief against the Indemnified Party, (D) a conflict of interest exists between the Responsible Party and the Indemnified Party, or (E) the Responsible Party failed or is failing to vigorously prosecute or defend such claim; and
(iv) if the Responsible Party shall control the defense of any such claim, the Responsible Party shall obtain the prior written consent of the Indemnified Party before entering into any settlement of a Proceeding or ceasing to defend such Proceeding if, pursuant to or as a result of such settlement or cessation, injunctive or other equitable relief will be imposed against the Indemnified Party or if such settlement does not expressly and unconditionally release the Indemnified Party from all Liabilities and obligations with respect to such claim.
(b) If the Proceeding is by a Governmental Entity relating to a period ending on or prior to the Closing Date, Purchaser is the Indemnified Party and Purchaser, in its capacity as such Indemnified Party, intends to seek indemnification pursuant to the terms hereof, notice thereof shall be sent to the Selling Parties and, to the extent consistent with the foregoing, the Representative shall be afforded the opportunity to participate in and respond with Purchaser to such Proceeding.
Section 10.5 Limitations on Indemnification Obligations.
(a) The rights of the Purchaser Indemnitees to indemnification pursuant to the provision of Section 10.2 other than as arising in respect of a Third Party Claim are subject to the following limitations:
(i) The Purchaser Indemnitees shall not be entitled to recover Losses for claims made against Xxxxxxx under Section 10.2(a)(i)(A) with respect to breaches of the Non-Fundamental Representations (1) until the cumulative aggregate amount which the Purchaser Indemnitees would recover under Section 10.2(a)(i) exceeds $75,000 (the “Deductible”), in which case the Purchaser Indemnitees shall be entitled to recover the aggregate amount of all such Losses in excess of the Deductible and (2) for an amount in excess of the lower of (x) $1,000,000.00 or (y) the aggregate Earn-out Payments actually paid or payable hereunder, and (B) with respect to breaches of the Fundamental Representations for an amount in excess of the aggregate Earn-out Payments actually paid or payable hereunder;
(ii) The Purchaser Indemnitees shall not be entitled to recover Losses for claims made against the Selling Parties other than Xxxxxxx under Section 10.2(b)(i) (A) with respect to breaches of the Non-Fundamental Representations (1) until the cumulative aggregate amount which the Purchaser Indemnitees would recover under Section 10.2(b)(i) exceeds the Deductible, in which case the Purchaser Indemnitees shall be entitled to recover the aggregate amount of all such Losses in excess of the Deductible and (2) for an amount in excess of $1,000,000.00, and (B) with respect to breaches of the Fundamental Representations for an amount in excess of the Seller Closing Payment; and
(iii) In the event a Purchaser Indemnitee recovers the full amount of Losses sought pursuant to Section 10.2 from an Indemnifying Party and thereafter receives (A) insurance proceeds directly attributable to, and in payment or reimbursement of, the Losses, (B) indemnity or contribution amounts from third parties (other than Purchaser or any Company) with respect to such Losses, or (C) any direct, recognizable Tax benefit as a result of any such Losses, then the Purchaser Indemnitee shall refund to such Indemnifying Party the amount thereof (net of costs of collection and similar costs). To the extent an indemnifiable Loss is covered by insurance and such coverage is confirmed by the insurer, then the Indemnifying Party shall not be liable for the amount of the Loss so covered by insurance to the extent of the amount received by the Indemnified Party.
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(b) Any claim for indemnification hereunder arising from a single event or occurrence may be asserted under one or more of the separate clauses set forth in Section 10.2, and the assertion of a claim for indemnification under one clause shall not preclude or restrict the indemnified party from asserting a claim for indemnification under one or more different clauses, provided, however, that any Losses recovered by an Indemnified Party under one clause shall be credited against Losses sought to be recovered under a different clause and arising from the same event, occurrence or facts.
(c) Except for a breach of his Restrictive Covenant, and except as set forth in Sections 10.7(i), (ii) or (iii), the maximum amount of Losses for which Xxxxxxx may be liable under this Article 10 shall not exceed the Consideration paid or payable to Xxxxxxx hereunder.
(d) Notwithstanding the foregoing, the Parties agree that, with respect to the matters set forth on Schedule 10.5(d), the terms, provisions and limitations set forth therein shall apply in lieu of any provisions set forth herein otherwise applicable thereto.
Section 10.6 Limitation on Damages. Except as expressly set forth in Section 7.11, no Party hereto shall be liable for any punitive, special, consequential, incidental, indirect, exemplary or remote damages (other than those required to be paid to a third party as part of a Third Party Claim under Section 10.2).
Section 10.7 Exclusive Remedy; Right of Set-Off. Except (i) in the case of common law fraud or intentional misrepresentation, (ii) with respect to the matters covered by Article 2 or Section 7.11 and (iii) in the case of a Party seeking to obtain specific performance of any term or provision of this Agreement, the rights of the Parties to indemnification pursuant to the provisions of this Article 10 shall be the exclusive remedy for the Parties with respect to Section 10.2 of this Agreement. Notwithstanding the foregoing or any term or provision of this Agreement or any Ancillary Document to the contrary, Purchaser shall have the right to set off any Losses of the Purchaser Indemnitees for which indemnification is available under Section 10.2(a) against any Earn-out Payments. In such event, any such set off shall first be applied against the shares of Parent Stock issuable under Section 2.3(j).
Section 10.8 Partial Materiality Strip. For the purposes of determining the amount of any Losses related to a breach of any representation or warranty, the amount of the Losses shall be determined without regard to any materiality or knowledge qualification (including terms such as “material” and “Company Material Adverse Effect”) set forth therein. For avoidance of doubt, any and all such qualifiers shall remain in full force and effect for purposes determining whether such a breach of any representation or warranty shall have occurred.
Section 10.9 Tax Classification of Indemnification Payments. For purposes of this Article 10, Losses shall include any Tax costs (net of any offsetting Tax savings, Tax credits or other Tax benefits) incurred by an Indemnified Party in respect of any indemnification payments received by it hereunder. The Parties hereto agree to treat any indemnification payments made pursuant to this Agreement as an adjustment to the Consideration for all Tax purposes, except as otherwise required pursuant to a determination within the meaning of Section 1313(a) of the Code (or any similar or corresponding provision of Applicable Law).
Section 10.10 Right to Indemnification Not Affected by Knowledge. Without prejudice to any indemnification right of the Selling Parties with respect to the representation contained in Section 6.7, the right to indemnification and payment of Losses based on any breach of representations, warranties or covenants will not be affected by any investigation conducted, or any knowledge acquired (or capable of being acquired) at any time, whether before or after the execution and delivery of this Agreement or the Closing Date, with respect to the accuracy or inaccuracy of or compliance with, any such representation or warranty or covenant. The waiver of any condition based on the accuracy of any representation or warranty, or on the performance of or compliance with any covenant or obligation, will not affect the right to indemnification, payment of Losses or other remedy based on such representations, warranties, covenants and obligations. It is the express understanding and agreement of the Parties that the representations and warranties made by the Parties in this Agreement is for the purpose of, among other things, allocating risk between the Purchaser, on the one hand, and the Selling Parties, on the other hand, regardless of any due diligence investigation conducted by the Purchaser, without prejudice to any indemnification right of the Selling Parties with respect to the representation contained in Section 6.7.
Section 10.11 No Contribution. No Selling Party or Seller Indemnitee or any of their respective employees or agents shall have any right of contribution, subrogation, right of indemnity or other right or remedy against any Company, or any of its Affiliates, successors or assigns, in connection with any indemnification obligation or any other liability to which he or it may become subject under or in connection with this Agreement, it being understood and agreed that the representations, warranties, covenants and agreements of the Selling Parties are solely for the benefit of Purchaser and the Purchaser Indemnitees. For the avoidance of doubt, the provisions of this Section do not apply to any right of contribution, subrogation, right of indemnity or other right or remedy which any Selling Party may have or assert against any other Selling Party.
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Article 11
REPRESENTATIVE OF SELLING PARTIES
Section 11.1 Authorization of Representative.
(a) The Selling Parties irrevocably appoint, authorize and empower Xxxxxxx to act as the exclusive agent, representative and attorney-in-fact (the “Representative”) on behalf of each Selling Party, in connection with and to facilitate the consummation of the transactions contemplated hereby, which shall include the power and authority:
(i) To execute and deliver such waivers, modifications, amendments and consents in connection with this Agreement and the consummation of the transactions contemplated hereby as the Representative, in his sole discretion, may deem necessary or desirable, except that, without the prior written consent of all the Selling Parties, the Representative may not amend, modify or waive the provisions of the following: Section 2.2(a)(i), Section 2.4, Article 5, Section 7.2(c), Section 7.11, Section 8.3(f), Section 10.2(b), Section 10.2(c), Section 10.5(a)(ii), Section 10.5(a)(iii), Section 10.6 or Article 11;
(ii) To enforce and protect the rights and interests of the Selling Parties (including the Representative, in his capacity as a Selling Party) and to enforce and protect the rights and interests of the Representative arising out of or under or in any manner relating to this Agreement, and each other agreement, document, instrument or certificate referred to herein or therein or the transactions provided for herein or therein (including in connection with any and all claims for indemnification brought under Article 10 hereof), and to take any and all actions which the Representative believes are necessary or appropriate under this Agreement, including asserting or pursuing any claim, action, proceeding or investigation (a “Claim”) against Purchaser, defending any Third Party Claims, consenting to, compromising or settling any such Claims, conducting negotiations with Purchaser and its representatives regarding such Claims, and, in connection therewith, to: (A) assert any claim or institute any action, proceeding or investigation; (B) investigate, defend, contest or litigate any claim, action, proceeding or investigation initiated by Purchaser or any other Person, or by any federal, state or local Governmental Entity against the Representative or any of the Selling Parties, and receive process on behalf of any or all of the Selling Parties in any such claim, action, proceeding or investigation and compromise or settle on such terms as the Representative shall determine to be appropriate, and give receipts, releases and discharges with respect to, any such claim, action, proceeding or investigation; (C) file any proofs of debt, claims and petitions as the Representative may deem advisable or necessary; (D) settle or compromise any claims asserted under this Agreement; and (E) file and prosecute appeals from any decision, judgment or award rendered in any such action, proceeding or investigation, it being understood that the Representative shall not have any obligation to take any such actions, and shall not have any liability for any failure to take any such actions;
(iii) To refrain from enforcing any right of any Selling Party arising out of or under or in any manner relating to this Agreement (other than the right of the Selling Parties to receive the Seller Closing Payment) or any other agreement, instrument or document in connection with the foregoing; provided, however, that no such failure to act on the part of the Representative, except as otherwise provided in this Agreement, shall be deemed a waiver of any such right or interest by the Representative or by such Selling Party unless such waiver is in writing signed by the Representative; and
(iv) To make, execute, acknowledge, deliver and receive all such other agreements, guarantees, orders, receipts, endorsements, notices, requests, instructions, certificates, stock powers, letters and other writings, and, in general, to do any and all things and to take any and all action that the Representative, in his sole and absolute discretion, may consider necessary or proper or convenient in connection with or to carry out the transactions contemplated by this Agreement and all other agreements, documents or instruments referred to herein or therein or executed in connection herewith and therewith.
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(b) All of the indemnities, immunities and powers granted to the Representative under this Agreement shall survive the Closing Date or any termination of this Agreement.
(c) Purchaser and each Company shall have the right to rely upon all actions taken or omitted to be taken by the Representative pursuant to this Agreement, all of which actions or omissions shall be legally binding upon the Selling Parties.
(d) The grant of authority provided for herein (i) is coupled with an interest and shall be irrevocable and survive the death, incompetency, bankruptcy or liquidation of any Selling Party, and (ii) shall survive the consummation of the Purchase and Sale.
(e) The Representative shall not be liable for any act done or omitted hereunder as Representative while acting in good faith and in the exercise of reasonable judgment. The Selling Parties (other than Xxxxxxx) shall indemnify the Representative and hold the Representative harmless against any loss, liability or expense incurred without gross negligence or bad faith on the part of the Representative and arising out of or in connection with the acceptance or administration of the Representative’s duties hereunder, including the reasonable fees and expenses of any legal counsel retained by the Representative.
Article 12
MISCELLANEOUS
Section 12.1 Entire Agreement; Assignment. This Agreement (including the Schedules, the Ancillary Documents and the Confidentiality Agreement) (a) constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and thereof and supersedes the LOI and all other prior agreements and understandings, both written and oral, among the parties hereto with respect to the subject matter hereof and (b) shall not be assigned by any party hereto (whether by operation of law or otherwise), other than for collateral purposes, without the prior written consent of Purchaser and the Representative; provided, Purchaser may assign this Agreement or any rights or obligations hereunder to any of its Affiliates; provided, further, that any assignment pursuant to the preceding proviso shall not relieve Purchaser of any obligation under this Agreement. Any attempted assignment of this Agreement not in accordance with the terms of this Section 12.1 shall be void.
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Section 12.2 Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given by delivery in person, by facsimile, e-mail or by reputable overnight courier service (charges prepaid) and shall be deemed given when so delivered personally, by facsimile, by e-mail or one day after being sent by overnight courier, to the other parties hereto as follows:
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Purchaser: |
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Priority Fulfillment Services, Inc. |
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000 Xxxxxxxxxx Xxxxx |
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Xxxxx, XX 00000 |
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Att: Xxx Xxxxxx |
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Fax: (000) 000-0000 |
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Email: xxxxxxx@xxxxxx.xxx |
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With a copy to: |
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Xxxxx & Samson PC |
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Xxx Xxxxxx Xxxxx |
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Xxxx Xxxxxx, XX 00000 |
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Att: Xxxxxx Xxxxxxxxxx, Esq. |
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Fax: 000-000-0000 |
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Email: xxxxxxxxxxx@xxxxxxxxxxx.xxx |
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Selling Parties: |
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Xxxxxx X. Xxxxxxx |
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Representative of the Selling Parties |
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0000 Xxxxxx Xxxxx |
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Xxxxxx, XX 00000 |
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E-mail: xxxxxx.xxxxxxx@xxxxxxxxxxxxxxx.xxx |
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With a copy to: |
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Xxxx & Xxxxxxx, A Professional Association |
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000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000 |
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Xxxxxxxxxxx, XX 00000 |
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Attn: Xxxxxxxxxxx Xxxxx |
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Fax: (000) 000-0000 |
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E-mail: Xxxxx.Xxxxx@xxxxxxx.xxx |
or to such other address as the person to whom notice is given may have previously furnished to the other in writing in the manner set forth above.
Section 12.3 Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware applicable to agreements made and to be performed entirely within such State.
Section 12.4 Fees and Expenses. Except as otherwise set forth in this Agreement, whether or not the Purchase and Sale is consummated, all fees and expenses incurred in connection with the Purchase and Sale, this Agreement and the transactions contemplated by this Agreement, including the fees and disbursements of counsel, financial advisors and accountants, shall be paid by the Party hereto incurring such fees or expenses.
Section 12.5 Construction; Interpretation. The term “this Agreement” means this Purchase Agreement together with all Schedules hereto, as the same may from time to time be amended, modified, supplemented or restated in accordance with the terms hereof. Except as expressly set forth in this Agreement, no Party assumes any other liability or obligation hereunder, including any implied duty of good faith and fair dealing. The headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. No party hereto, nor its respective counsel, shall be deemed the drafter of this Agreement for purposes of construing the provisions hereof, and all provisions of this Agreement shall be construed according to their fair meaning and not strictly for or against any party. Unless otherwise indicated to the contrary herein by the context or use thereof: (i) the words, “herein,” “hereto,” “hereof” and words of similar import refer to this Agreement as a whole, including the Schedules, and not to any particular section, subsection paragraph, subparagraph or clause contained in this Agreement; (ii) masculine gender shall also include the feminine and neutral genders, and vice versa; (iii) words importing the singular shall also include the plural, and vice versa; (iv) the words “include,” “includes,” “including” and “inclusive of” shall be deemed to be followed by the words “without limitation”; (v) the word “will” shall be construed to have the same meaning as the word “shall”; (vi) the phrase
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“to the extent” shall mean the extent or degree to which a subject or thing extends, and shall not simply be construed to mean the word “if”; and (vii) the term “or” shall not be exclusive.
Section 12.6 Schedules. All Schedules or other documents expressly incorporated into this Agreement, are hereby incorporated into this Agreement and are hereby made a part hereof as if set out in full in this Agreement.
Section 12.7 Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each Party and its successors and permitted assigns and, except as provided in Article 10, nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any rights, benefits or remedies of any nature whatsoever under or by reason of this Agreement.
Section 12.8 Severability. If any term or other provision of this Agreement is invalid, illegal or unenforceable, all other provisions of this Agreement shall remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party.
Section 12.9 Amendment. Prior to the Closing, subject to the provisions of Section 11.1(a)(i) and Section 12.10, this Agreement may be amended or modified only by a written agreement executed and delivered by a duly authorized officer of Purchaser and the Representative (on behalf of the Selling Parties). After the Closing, this Agreement may be amended or modified only by written agreement executed and delivered by a duly authorized officer of Purchaser and the Representative, except as otherwise provided in Section 11.1(a)(i). This Agreement may not be modified or amended except as provided in the immediately preceding two sentences and any purported amendment by any party or parties hereto effected in a manner which does not comply with this Section 12.9 shall be void.
Section 12.10 Extension; Waiver. Subject to the provisions of Section 11.1(a)(i), at any time prior to the Closing, the Representative (on behalf of the Selling Parties) may (a) extend the time for the performance of any of the obligations or other acts of Purchaser contained herein, (b) waive any inaccuracies in the representations and warranties of Purchaser contained herein or in any document, certificate or writing delivered by Purchaser pursuant hereto or (c) waive compliance by Purchaser with any of the agreements or conditions contained herein. At any time prior to the Closing, Purchaser may (i) extend the time for the performance of any of the obligations or other acts of any of the Selling Parties contained herein, (ii) waive any inaccuracies in the representations and warranties of any Selling Party contained herein or in any document, certificate or writing delivered by to Purchaser pursuant hereto or (iii) waive compliance by any Selling Party with any of the agreements or conditions contained herein. Any agreement on the part of any Party hereto to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such Party. The failure of any Party hereto to assert any of its rights hereunder shall not constitute a waiver of such rights.
Section 12.11 Counterparts; Facsimile Signatures. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by facsimile, pdf or scanned pages shall be effective as delivery of a manually executed counterpart to this Agreement.
Section 12.12 Waiver of Jury Trial; Specific Performance. EACH OF THE PARTIES HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION (I) ARISING UNDER THIS AGREEMENT OR (II) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS RELATED HERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY, OR OTHERWISE. THE PARTIES TO THIS AGREEMENT EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY. EACH PARTY SHALL BE ENTITLED TO PURSUE EQUITABLE RELIEF, INCLUDING THE REMEDY OF SPECIFIC PERFORMANCE, WITH RESPECT TO ANY BREACH OR ATTEMPTED BREACH OF THIS AGREEMENT BY THE OTHER PARTIES HERETO.
Section 12.13 Jurisdiction and Venue. EACH OF THE PARTIES SUBMITS TO THE EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN DALLAS, TEXAS IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, AGREES THAT ALL CLAIMS IN RESPECT OF THE ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND AGREES NOT TO BRING ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY IN ANY OTHER COURT. EACH OF THE PARTIES WAIVES ANY DEFENSE OF INCONVENIENT FORUM TO THE MAINTENANCE OF ANY ACTION OR PROCEEDING SO BROUGHT.
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Section 12.14 Attorneys’ Fees. Except as otherwise provided herein, if any legal action or other legal proceeding relating to the Purchase and Sale or the enforcement of any provision of this Agreement is brought against any Party hereto, the prevailing Party shall be entitled to recover reasonable attorneys’ fees, costs and disbursements (in addition to any other relief to which the prevailing Party may be entitled).
Section 12.15 Representation. THE AC TRUST, THE BV TRUST, VENKATESH AND XXXXXX EACH ACKNOWLEDGE AND AGREE THAT THEY HAVE BEEN ADVISED TO SEEK INDEPENDENT REPRESENTATION WITH RESPECT TO THIS AGREEMENT AND THEY HAVE BEEN ADVISED THAT XXXX & XXXXXXX SOLELY REPRESENTS XXXXXXX AND NO OTHER PARTY TO THIS AGREEMENT.
[Signature Pages Follow]
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IN WITNESS WHEREOF, each of the Parties has caused this Stock Purchase Agreement to be duly executed on its behalf as of the day and year first above written.
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PRIORITY FULFILLMENT SERVICES, INC. |
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By: |
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Name: |
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Title: |
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REV SOLUTIONS LIMITED |
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By: |
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XXXXXX X. XXXXXXX, President |
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XXXXXX X. XXXXXXX, individually |
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THE XXXX XXXXXX IRREVOCABLE |
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CHILDRENS’ TRUST |
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By: |
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XXXX XXXXXX, as Trustee |
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THE BABU VENKATESH IRREVOCABLE |
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CHILDRENS’ TRUST |
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By: |
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BABU VENKATESH, as Trustee |
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BABU VENKATESH, individually |
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XXXX XXXXXX, individually |
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[Signature page to Stock Purchase Agreement]
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