Exhibit 2.1
Execution Version
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ASSET PURCHASE AGREEMENT
BETWEEN
EASTPOINT TECHNOLOGIES, LLC,
AND
EP ACQUISITION CORP.
CLOSING DATE JUNE 18, 2004
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TABLE OF CONTENTS
PAGE
1 DEFINITIONS................................................................. 1
2 SALE OF ASSETS; CLOSING..................................................... 4
2.1. Sale of Assets........................................................ 4
2.2. Consideration......................................................... 5
2.3. Net Current Assets Adjustment to Purchase Price....................... 5
2.4. Accounts Receivable Adjustment to Purchase Price...................... 6
2.5. Buyer's Assumption of Liabilities..................................... 7
2.6. Closing............................................................... 7
2.7. Deliveries by Seller at Closing....................................... 7
2.8. Deliveries by Buyer at Closing........................................ 8
3 REPRESENTATIONS AND WARRANTIES OF SELLER.................................... 9
3.1. Organization and Power................................................ 9
3.2. Authorization......................................................... 9
3.3. No Conflict........................................................... 9
3.4. Title to Purchased Assets............................................. 9
3.5. Condition of Purchased Assets......................................... 10
3.6. Financial Statements.................................................. 10
3.7. Accounts Receivable; Credits.......................................... 10
3.8. Pre-Xxxx.............................................................. 10
3.9. Litigation............................................................ 10
3.10. Compliance with Law................................................... 10
3.11. Absence of Undisclosed Liabilities.................................... 11
3.12. Absence of Certain Changes............................................ 11
3.13. Contracts............................................................. 12
3.14. Intellectual Property................................................. 12
3.15. Real Property......................................................... 14
3.16. Environmental Matters................................................. 15
3.17. Labor; ERISA.......................................................... 15
3.18. Taxes................................................................. 16
3.19. Capitalization; Relationships with Related Persons.................... 16
3.20. Brokers............................................................... 17
3.21. Insurance............................................................. 17
3.22. Powers of Attorney.................................................... 17
3.23. Debt.................................................................. 17
3.24. Solvency.............................................................. 17
3.25. Statements not Misleading............................................. 17
4 REPRESENTATIONS AND WARRANTIES OF BUYER..................................... 18
4.1. Organization and Power of Buyer....................................... 18
4.2. Authorization; Shares Duly Issued..................................... 18
4.3. No Conflict........................................................... 18
4.4. Brokers' Fees......................................................... 18
4.5. Litigation and Claims................................................. 18
4.6. Regulatory Approvals.................................................. 18
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4.7. Consummation of Transaction........................................... 18
4.8. License and Permits................................................... 18
5 COVENANTS................................................................... 19
5.1. Further Assurances.................................................... 19
5.2. Covenants not to Compete.............................................. 19
5.3. Use of Names.......................................................... 22
5.4. Passage of Title and Risk of Loss..................................... 22
5.5. Transfer of Goodwill and Business..................................... 22
5.6. Expenses; Transfer Taxes.............................................. 22
5.7. Taxes................................................................. 22
5.8. Employment Matters.................................................... 23
5.9. Members Have No Liability Under the Agreement......................... 23
5.10. Continuing Availability and Usage of Services; Contingent Payment..... 23
5.11. Use of Proceeds....................................................... 25
6 INDEMNIFICATION............................................................. 24
6.1. Indemnified Losses.................................................... 24
6.2. Indemnification By Seller............................................. 24
6.3. Indemnification By Buyer.............................................. 25
6.4. Third Party Claims Against Buyer...................................... 25
6.5 Third Party Claims Against Seller..................................... 25
6.6. Procedures............................................................ 25
6.7. Limitations on Indemnification By Seller.............................. 27
6.8. Set-Off............................................................... 27
6.9. Survival.............................................................. 27
6.10. Exclusive Remedy...................................................... 27
7 MISCELLANEOUS............................................................... 28
7.1. Notices............................................................... 28
7.2. Entire Agreement...................................................... 29
7.3. Counterparts.......................................................... 29
7.4. Parties in Interest; Assignment....................................... 29
7.5. Governing Law......................................................... 29
7.6. Schedules and Headings................................................ 29
7.7. Amendment............................................................. 29
7.8. Waiver................................................................ 29
7.9 Press Release......................................................... 31
7.10 Liability For Failure to Obtain Third Party Consents.................. 31
7.11 Acknowledgement....................................................... 31
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EXHIBITS AND SCHEDULES
Exhibit A -- Escrow Agreement
Exhibit B -- Opinion of Counsel to Seller
Exhibit C -- Xxxx of Sale, Assignment and Conveyance
Exhibit D -- Form of Lease Assignments
Exhibit E -- Non-Competition Agreement
Exhibit F -- Buyer's Standard NDA/Invention Assignment Agreement
Exhibit G -- Assumption of Liabilities
Schedule 1A -- Assumed Liabilities
Schedule 1B -- Purchased Assets
Schedule 2.4(a) -- Adjusted Accounts Receivable
Schedule 3.3 -- Consents, Etc.
Schedule 3.4 -- Title to Purchased Assets
Schedule 3.6 -- Reference Date Balance Sheet
Schedule 3.7 -- Customer Credits
Schedule 3.13 -- Contracts
Schedule 3.14 -- Intellectual Property
Schedule 3.15 -- Real Property
Schedule 3.17 -- Labor; ERISA
Schedule 3.20 -- Brokers
Schedule 3.21 -- Insurance
Schedule 3.23 -- Debt
Schedule 5.10(a) -- Continuation of Services
Schedule 5.10(b) -- Specified Customer
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") is executed as of June 18,
2004, by and among EASTPOINT TECHNOLOGIES, LLC, a limited liability company
formed under the laws of the State of Delaware ("Seller") and EP ACQUISITION
CORP., a corporation incorporated under the laws of the State of Delaware
("Buyer") (collectively, the "parties").
RECITALS
WHEREAS, Buyer wishes to purchase from Seller, and Seller wishes to sell
to Buyer, the Purchased Assets (as defined below) upon the terms and conditions
of this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter set forth, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement, the following terms shall have the
following meanings:
"Accounts Receivable" shall mean (a) all trade accounts receivable and
other rights to payment from customers of Seller and the full benefit of all
security for such accounts or rights to payment, including all trade accounts
receivable representing amounts receivable in respect of goods shipped or
products sold or services rendered to customers of Seller, (b) all other
accounts or notes receivable of Seller and the full benefit of all security for
such accounts or notes, and (c) any claim, remedy or other right related to any
of the foregoing.
"Assumed Liabilities" shall mean only the duties, liabilities or
obligations of Seller, if any, arising after the Closing Date in connection with
the items identified on Schedule 1A, except as otherwise noted on Schedule 1A,
and shall specifically exclude, among other things, (i) any liabilities for
employment, income, sales, property or other Taxes incurred or accrued by
Seller, including without limitation as a result of this transaction; (ii) any
fees or expenses incurred by Seller in connection with this transaction; (iii)
any debt, payables or other liabilities to Related Persons other than salary and
other payroll related expenses that may be specifically set forth on Schedule
1A; (iv) any liabilities related to any employee benefit plan, including,
without limitation, any 401(k), any profit sharing or pension plan, whether or
not sponsored by Seller, any deferred compensation payables, accrued bonus
payables, other accrued liabilities, and any COBRA-related obligations; (v) any
and all liability related to Seller's Real Property except those obligations and
liabilities resulting from the Lease Assignments; (vi) any litigation pending
against Seller; and (vii) any warranty liability to Seller's customers,
including any liability arising out of or relating to any breach by Seller of
any obligation to a customer that occurred prior to the Closing.
"Business" shall mean the business of developing, marketing and providing
data processing services to banks, including, without limitation, the licensing
of Seller's "EastPoint Enterprise Banking System" software product and related
services.
"Closing" shall mean the consummation of the purchase and sale transaction
described herein.
"Closing Date" shall mean the date on which the Closing occurs, as
specified in Section 2.4.
"Current Assets" shall mean all assets listed as current assets on the
Reference Date Balance Sheet, including without limitation, Accounts Receivable.
"Current Liabilities" shall mean all liabilities listed as current
liabilities on the Reference Date Balance Sheet, including without limitation,
trade accounts payable.
"Debt", as applied to any Person, means: (a) indebtedness or liability of
such Person for borrowed money, or with respect to deposits or advances of any
kind, or for the deferred purchase price of property or services; (b) all
obligations of such Person evidenced by notes bonds, debentures or similar
instruments, (c) all obligations of such Person under conditional sale or other
title retention agreements relating to property or assets purchased by such
Person, (d) all obligations of such Person for the deferred purchase price of
property or services; (e) all obligations of such Person as lessee under capital
leases; (f) current liabilities of such Person in respect of the present value
of unfunded vested benefits under any employee benefit plan; (g) obligations of
such Person under letters of credit, bankers acceptances, or comparable
arrangements; (h) obligations of such Person arising under acceptance
facilities; (i) guaranties; endorsements (other than for collection or deposit
in the ordinary course of business), and other contingent obligations of such
Person to purchase, to provide funds for payment, to supply funds to invest in
any Persons, or otherwise to assure a creditor against loss; (j) all obligations
of such Person secured by any Lien on any of such Person's assets or property,
whether or not the obligations have assumed, and (k) all obligations of such
Person in respect of interest rate protection agreements, foreign currency
exchange agreements or other interest or exchange rate hedging arrangements.
"Excluded Assets" shall mean those items listed as such on Schedule 1B
hereto.
"Financial Statements" shall have the meaning assigned to it in Section
3.6.
"GAAP" shall mean United States generally accepted accounting principles
consistently applied.
"Governmental Entity" shall mean any court, administrative agency,
commission, state, municipality or other governmental authority or
instrumentality, domestic or foreign, national or international.
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"Knowledge" - an individual will be deemed to have "Knowledge" of a fact
or other matter if:
(a) such individual is actually aware of that fact or matter; or
(b) a prudent individual could be expected to discover or otherwise become
aware of that fact or matter in the course of conducting a reasonably
comprehensive investigation regarding the accuracy of any representation or
warranty contained in this Agreement.
Seller will be deemed to have "Knowledge" of a particular fact or other
matter if Xxxxx Xxxx or Xxxxx Xxxxxx (the "Listed Persons") and/or any other
individual who is serving or who has at any time since May 31, 2004 been or
served as a manager, director or officer of Seller (or in any similar capacity,
including, without limitation, as a member of Seller's Executive Committee
(sometimes referred to by Seller as Seller's Board of Directors)) has, or at any
time had, Knowledge of that fact or other matter (as set forth in (a) and (b)
above with respect to a Listed Person, or as set forth in (a) above, but not (b)
above, as to others).
"Leases" shall mean the following leases: (i) that certain Lease Agreement
dated December 30, 2003 between Seller and North Star Bank for premises located
at 0000 X. Xxxxxxx 00, Xxxxx Xxxx Xxxx, Xxxxxxxxx; and (ii) that certain Full
Service Lease Agreement dated August 7, 1996 by and among Xxxxxx X. Xxxxxx and
Xxxxxx X. Xxxxxx, Xx. or EastPoint Properties, Inc. and Xxxxxxxx & Ilsley
Corporation, through EP Acquisition Corp., as assigned to Seller by that certain
Assignment and Assumption of Lease dated June 29, 2001 by and between Seller and
M&I EastPoint Technology, Inc. (f/k/a EP Acquisition Corp.), and as extended by
that certain Full Service Lease Extension dated April 26, 2004 between Xxxxxx X.
Xxxxxx and Seller, for premises located at 000 Xxxxx Xxxxx Xxxx, Xxxxxxx, Xxx
Xxxxxxxxx.
"Liens" shall mean all liabilities, claims, liens, charges, pledges,
security interests, options, restrictions or other encumbrances of any kind.
"Material Adverse Effect" means any circumstance, change in, or effect on,
the Business or the Seller that, individually or in the aggregate with any other
circumstances, changes in, or effects on, the Seller or the Business: (a) is, or
could be, materially adverse to the business, operations, assets or liabilities
(including, without limitation, contingent liabilities), employee relationships,
customer or supplier relationships, prospects, results of operations or the
condition (financial or otherwise) of the Business, or (b) could materially
adversely affect the ability of Buyer to operate or conduct the Business in the
manner in which it is currently operated or conducted, or contemplated to be
conducted, by the Seller, or (c) could impair the ability of Seller to
consummate the transactions contemplated by this Agreement.
"Members" shall have the meaning assigned to it in Section 5.9.
"Net Current Assets" shall mean the amount of Current Assets included in
the Purchased Assets minus the amount of Current Liabilities included in the
Assumed Liabilities.
"Permitted Liens" shall have the meaning assigned to it in Section 3.4.
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"Person" means any legal person, including, without limitation, any
natural person, a partnership, a corporation, a limited liability company, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or a Governmental Entity (or any department, agency or political
subdivision thereof).
"Purchase Price" shall mean the aggregate amount to be paid by Buyer to
Seller for the Purchased Assets and includes the cash consideration payable
pursuant to Section 2.2(a), the Primary Escrow Funds payable pursuant to Section
2.2(b) and the Contingency Escrow Funds payable pursuant to Section 2.2(c).
"Purchased Assets" shall mean all of Seller's property and assets, whether
real, personal or mixed, tangible and intangible, of every kind and description,
wherever located, including without limitation those items identified on
Schedule 1B, but excluding the Excluded Assets.
"Records" shall mean all books of account, general, financial and
accounting records, files, invoices, payment authorizations, correspondence to
and from customers, suppliers and payors, and other data and information owned
by Seller.
"Reference Date" shall mean May 31, 2004.
"Reference Date Balance Sheet" shall mean the unaudited balance sheet for
Seller as of the Reference Date.
"Related Person" shall mean any officer, manager, member, employee or
consultant of Seller or any holder of any class of membership interests of
Seller or any member of the immediate family of any such officer, manager,
member, employee or consultant or any entity controlled by any such officer,
manager, member, employee or consultant.
"Returns" shall have the meaning assigned to it in Section 3.18.
"Taxes" (or "Tax" where the context requires) shall mean all federal,
state, county, city, local, foreign and other taxes (including, without
limitation, premium, excise, value added, sales, use, occupancy, gross receipts,
franchise, ad valorem, severance, capital levy, production, transfer,
withholding, employment, unemployment compensation, payroll-related and property
taxes, import duties and other governmental charges and assessments), whether or
not measured in whole or in part by net income, including deficiencies,
interest, additions to tax or interest or penalties with respect thereto.
ARTICLE 2
SALE OF ASSETS; CLOSING
SECTION 2.1. SALE OF ASSETS. At the Closing, Seller shall sell, assign,
transfer, convey and deliver to Buyer, free and clear of all Liens (except
Permitted Liens), good and marketable title to all of the Purchased Assets. It
is intended that the consummation of the purchase and sale of the Purchased
Assets will transfer the Business to Buyer as a going concern with all of the
assets,
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properties and rights used in or required for the operation and conduct of the
Business as of the Closing Date except for the Excluded Assets.
SECTION 2.2. CONSIDERATION. The Purchase Price shall be Seven Million
Dollars ($7,000,000), subject to any adjustments set forth in this Agreement.
Buyer shall pay the Purchase Price by delivery in the following manner:
(a) $5,750,000 in cash by wire transfer at Closing to Seller;
(b) $900,000 (the "Primary Escrow Funds") in cash by wire transfer at
Closing to U.S. Bank National Association (the "Escrow Agent"), to be held under
an escrow agreement in substantially the form of Exhibit A (the "Escrow
Agreement"), said Primary Escrow Funds to be paid to Seller on the two (2) year
anniversary of the Closing Date in accordance with the Escrow Agreement, but
subject to Buyer's rights to recover amounts from the Primary Escrow Funds on
account of purchase price adjustments and indemnity claims on the terms and
conditions described in Sections 2.3, 2.4 and 6.8 and the Escrow Agreement; and
(c) $350,000 (the "Contingency Escrow Funds") in cash by wire transfer at
Closing to the Escrow Agent, to be held under the Escrow Agreement, said
Contingency Escrow Funds to be paid to Seller as provided in Section 5.10(b),
but subject to Buyer's rights to recover the Contingency Escrow Funds as
provided in Section 5.10(b) and the Escrow Agreement.
SECTION 2.3. NET CURRENT ASSETS ADJUSTMENT TO PURCHASE PRICE.
(a) Estimated Net Current Assets. Within sixty (60) days following the
Closing Date, Buyer will prepare, or cause to have prepared, and deliver to
Seller a balance sheet of the Business and a statement of the Net Current Assets
of the Business as of the Closing Date. As prepared by Buyer, this statement of
the Net Current Assets shall be referred to as the "Estimated Net Current
Assets." The Estimated Net Current Assets shall be prepared in accordance with
GAAP.
(b) Objection. The Estimated Net Current Assets shall be deemed accepted
by Seller and binding unless Seller sends Buyer a written objection thereto
within fifteen (15) days following Seller's receipt thereof. In the event that
Seller delivers a timely written objection as aforesaid, and Buyer and Seller
are unable to resolve such objection within fifteen (15) days after Buyer is
notified of Seller's objection, the matters in dispute shall be submitted for
final and binding determination to a firm of independent certified public
accountants of national recognition and standing jointly selected by Buyer and
Seller (the "Accountants"). The Accountants shall prepare their resolution
statement within forty-five (45) days of appointment. In the event that the
parties are required to agree on the identity of the Accountants but are unable
to do so, then the firm to be used shall be selected by lot from among the "Big
4" accounting firms having offices in the Hartford, Connecticut area, other than
those firms which have had a material relationship with Buyer or Seller. The
Estimated Net Current Assets proposed by Buyer, as adjusted by agreement of
Seller and Buyer or finally determined by the Accountants, as applicable, to
reflect the resolution of any timely objections made thereto by Seller in
accordance with this paragraph, shall constitute the "Final Net Current Assets"
and shall be binding on the parties hereto. Buyer and Seller shall each pay
their own expenses of
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preparing and analyzing the Estimated Net Current Assets and resolving
objections thereto. The fees and expenses of the Accountants used to resolve
objections will be borne equally by Buyer and Seller.
(c) Access to Information. Solely in connection with the preparation of
the Estimated Net Current Assets and the Final Net Current Assets:
(i) Buyer shall give Seller and its accountants reasonable access to
the books and records of the Business, and shall cause employees of the
Business to cooperate with them and provide them with all information
reasonably requested, all after receiving reasonable notice from them of
their requirements and reaching agreement as to mutually convenient times
for review; and
(ii) Buyer and Seller, to the extent within their respective
control, shall give to each other and their agents access to the books,
financial records, work papers and other materials and documents used or
produced in connection with the preparation of the Estimated Net Current
Assets and the Final Net Current Assets.
(d) Final Net Current Assets. In the event that the Final Net Current
Assets are less than $19,500 (the difference is referred to as a "Reduction in
Net Current Assets"), Seller shall be liable for such difference as a reduction
in the cash portion of the Purchase Price. Buyer shall be entitled to recover
the amount of such Reduction in Net Current Assets from the Primary Escrow
Funds, and, to the extent the Reduction in Net Current Assets exceeds the amount
of the Primary Escrow Funds then available under the Escrow Agreement, Seller
shall pay the difference to Buyer within (10) days after receipt of written
demand therefor.
SECTION 2.4. ACCOUNTS RECEIVABLE ADJUSTMENT TO PURCHASE PRICE.
(a) Receivable Shortfall. Buyer and Seller agree that the Purchase Price
payable to Seller shall be reduced to the extent that the Adjusted Accounts
Receivable (hereinafter defined) have not been collected by Buyer, net of an
aggregate bad debt reserve of $50,000, within ninety (90) days following the
Closing Date (the "Collection Period"). For purposes of this Agreement,
"Adjusted Accounts Receivable" shall mean all Accounts Receivable except those
which are, as of the Closing Date (i) disputed, (ii) subject to pending (or to
the best of Seller's Knowledge) threatened litigation; or (iii) older than
ninety (90) days.
(b) Adjustment to Purchase Price. Within sixty (60) days following the end
of the Collection Period, Buyer shall prepare and furnish to Seller a statement
setting forth the Adjusted Accounts Receivable and all payments made thereon,
calculated as of the end of the Collection Period, and the amount, if any, owing
from Seller to Buyer pursuant to Section 2.4(a) (a "Receivable Shortfall").
Seller shall be liable for the Receivable Shortfall. Buyer shall be entitled to
recover the Receivable Shortfall from the Primary Escrow Funds and, to the
extent the amount of the Receivable Shortfall exceeds the amount of the Primary
Escrow Funds then available under the Escrow Agreement, Seller shall pay the
difference to Buyer within (10) days after receipt of written demand therefor.
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(c) Collection of Adjusted Accounts Receivable. Between the Closing Date
and the end of the Collection Period, Buyer shall use reasonable efforts
consistent with its usual and customary collection practices to collect the
Adjusted Accounts Receivable and take other action reasonably requested by
Seller to collect the Adjusted Accounts Receivable, provided that Buyer shall
not be obligated to resort to litigation. After the end of the Collection
Period, Buyer shall continue with such collection efforts as are reasonable with
respect to Adjusted Accounts Receivable not collected during the Collection
Period, provided that such efforts may take into account the aging of such
uncollected Adjusted Accounts Receivable and Buyer shall not be obligated to
resort to litigation. Any amounts received by Buyer on account of Adjusted
Accounts Receivable as to which a Receivable Shortfall has been recovered shall
be paid by Buyer into the Primary Escrow Fund.
SECTION 2.5. BUYER'S ASSUMPTION OF LIABILITIES. On the terms and subject
to the conditions set forth in this Agreement, and in further consideration of
the transfer of the Purchased Assets, at the Closing Buyer shall assume only
those duties, liabilities or obligations of Seller included in the Assumed
Liabilities.
SECTION 2.6. CLOSING. The Closing shall take place (via facsimile,
telephone, mail and other mutually acceptable means of communication and
delivery) simultaneously at the offices of Buyer's counsel, Xxxxxxx & Xxxxxxx
LLP in Hartford, Connecticut and Seller's counsel, Xxxxxxx Xxxxxx Xxxxxxxx &
Xxxxxxx LLP in Washington, D.C. on the date hereof or at such other time and
location as the parties hereto shall agree in writing.
SECTION 2.7. DELIVERIES BY SELLER AT CLOSING. At the Closing, Seller shall
convey, transfer, assign and deliver to Buyer all of the Purchased Assets.
Seller shall deliver to Buyer:
(a) The Escrow Agreement fully executed by Seller and Escrow Agent;
(b) An opinion of Seller's counsel, dated the Closing Date, to the effect
and substantially in the form of Exhibit B to this Agreement;
(c) Evidence of authorization to change Seller's name, and documents
sufficient to effectuate such change and to convey all rights in the names
"EastPoint," "EastPoint Technologies" and "XxxxXxxxx.xxx" to Buyer;
(d) Xxxx of Sale in the form of Exhibit C; and execute and deliver to
Buyer such assignments and other instruments of transfer as Buyer and its
counsel may reasonably request, and with such consents to the conveyance,
transfer and assignment thereof as may be reasonably necessary to effect the
conveyance, transfer, assignment and delivery of the Purchased Assets and to
vest in Buyer the title specified in this Section and to assure to Buyer the
full benefit of the Purchased Assets, including without limitation:
(i) the transfer of all registered Proprietary Rights of Seller (as
such term is defined in Section 3.14 hereof) and applications therefor;
and
(ii) the consents listed on Schedule 3.3;
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(e) Releases of all Liens (other than Permitted Liens) on the Purchased
Assets;
(f) Assignments of Lease with respect to the Leases (the "Lease
Assignments"), in substantially the form attached hereto as Exhibit D, fully
executed by Seller;
(g) Good Standing Certificates of recent date for Seller from the
Secretary of State of the States of Delaware and New Hampshire;
(h) A Managers' Certificate with respect to certain organizational matters
of Seller, in form and substance reasonably satisfactory to Buyer;
(i) A Non-Competition Agreement in the form attached hereto as Exhibit E,
fully executed by certain Members, as agreed upon by the parties (the
"Non-Competition Agreement"); and
(j) Evidence of the amendment to Seller's limited liability company
agreement, pursuant to which each Member's right to receive source code for any
of Seller's software upon dissolution or liquidation of Seller or in any other
circumstance is terminated.
Simultaneously with the delivery referred to in this Section, Seller shall
take or cause to be taken all such actions as may reasonably be required to put
Buyer in actual possession and operating control of the Purchased Assets. In
connection with Closing, Buyer is requiring that all employees of Seller who
Buyer is hiring enter into Buyer's standard form of NDA/invention assignment
agreement in the form of Exhibit F.
SECTION 2.8. DELIVERIES BY BUYER AT CLOSING. At the Closing, Buyer shall
deliver to Seller:
(a) The Escrow Agreement fully executed by Buyer;
(b) Assumption Agreement in the form attached hereto as Exhibit G, fully
executed by Buyer, pursuant to which Buyer assumes, as of the Closing Date, the
Assumed Liabilities;
(c) The Lease Assignments, fully executed by Buyer;
(d) In accordance with Section 2.2(a) of this Agreement, Buyer shall
deliver to Seller an amount equal to $5,750,000, constituting the cash portion
of the Purchase Price;
(e) In accordance with Sections 2.2(b) and (c) of this Agreement, Buyer
shall deliver to the Escrow Agent the Primary Escrow Funds and the Contingency
Escrow Funds;
(f) Good Standing Certificates of recent date for Buyer from the Secretary
of State of the State of Delaware; and
(g) An Officer's Certificate with respect to certain authorization
organizational matters of Buyer, in form and substance reasonably satisfactory
to Seller.
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At or prior to Closing, Buyer shall cooperate with Seller and take or
cause to be taken all such actions as Seller may reasonably request and as are
customary in order to put Buyer in operating control of the Business and the
Purchased Assets.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as of the Closing Date (or
such other date as is expressly set forth below) as follows:
SECTION 3.1. ORGANIZATION AND POWER. Seller is a limited liability company
duly organized, validly existing and in good standing under the laws of
Delaware. Seller has full power and authority to own its properties and conduct
the Business. Seller has full legal power, authority and capacity to execute
this Agreement and to consummate the transactions contemplated by this
Agreement.
SECTION 3.2. AUTHORIZATION. The execution, delivery and performance of
this Agreement by Seller have been duly authorized and approved by all requisite
action on the part of Seller (including, without limitation, its managers and
members). This Agreement constitutes the valid and binding obligation of Seller
and is enforceable against Seller in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, and other similar laws relating to or limiting creditors' rights
generally and by equitable principles.
SECTION 3.3. NO CONFLICT. The execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated hereby and the
compliance with the terms hereof will not (a) violate any law, judgment, order,
decree statute, ordinance, rule or regulation applicable to the Business or the
Purchased Assets, or any permit, license or approval of any Governmental Entity,
(b) conflict with any provision of Seller's certificate of formation or limited
liability company agreement, (c) subject to obtaining the consents set forth on
Schedule 3.3, result in any violation of, and will not conflict with, or result
in a breach of any terms of, or constitute a default under, any mortgage,
license, instrument or agreement to which Seller is a party or by which Seller
or any of the Purchased Assets is bound or create any Lien upon any of the
Purchased Assets, or (d) except as set forth on Schedule 3.3, require any notice
to, or consent, approval, order or authorization of, or the registration,
declaration or filing with, any Governmental Entity or other Person.
SECTION 3.4. TITLE TO PURCHASED ASSETS. Seller has good, valid and
marketable title to all of the Purchased Assets, free and clear of all Liens,
except those Liens set forth on Schedule 3.4 ("Permitted Liens"). No other party
has any rights or claims to possession of any of the Purchased Assets. None of
the Purchased Assets are subject to any option, contract, arrangement or
understanding that would restrict Seller's ability to transfer the Purchased
Assets to Buyer as contemplated herein. The Purchased Assets constitute all
assets, rights and properties used by Seller to operate, or necessary to operate
the Business as operated by Seller prior to Closing. No member, manager or other
Related Person of Seller owns, leases or licenses assets, properties or
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other rights used in the conduct of the Business. All employees engaged in
conducting the Business are employees of Seller.
SECTION 3.5. CONDITION OF PURCHASED ASSETS. All of the tangible property
included in the Purchased Assets is in good operating condition and repair,
ordinary wear and tear excepted, and in the state of maintenance, repair and
operating condition required for the proper operation and use thereof in the
ordinary and usual course of business by Seller.
SECTION 3.6. FINANCIAL STATEMENTS. Seller has delivered to Buyer financial
information respecting Seller (the "Financial Statements"), as follows: (i) the
Reference Date Balance Sheet, a copy of which is attached hereto as Schedule
3.6; (ii) unaudited profit and loss statements of Seller for the 5 months ended
as of the Reference Date; (iii) audited balance sheet for Seller as of December
31, 2003; and (iv) audited profit and loss statements for Seller for the fiscal
year ended December 31, 2003. The Financial Statements were prepared by Seller
in accordance with GAAP consistently applied and fairly present the financial
position and results of operations of Seller for the periods then ended and the
financial position of Seller at the dates thereof. Except as set forth on
Schedule 3.6, Seller's books of account are and, during the period covered by
the Financial Statements were, correct and complete in all material respects,
fairly and accurately reflect or reflected the income, expenses, assets and
liabilities of Seller, including the nature thereof and the transactions giving
rise thereto, and provide or provided a fair and accurate basis for the
preparation of the Financial Statements.
SECTION 3.7. ACCOUNTS RECEIVABLE; CREDITS. Except as set forth on Schedule
3.6, the Accounts Receivable recorded on the books of Seller, less a bad debt
reserve in the amount of $33,301 (which was determined on a basis consistent
with Seller's prior accounting practices) are bona fide and good, and are
collectible in the amounts shown on the books of account of Seller. Except as
set forth on Schedule 3.7, no Account Receivable has been released by Seller, in
whole or in part, so as to reduce its value by more than $10,000. There are no
outstanding customer credits or allowances (including allowances for bad debts)
which have been authorized by Seller prior to the Closing Date.
SECTION 3.8. PRE-XXXX. Seller has not pre-billed or received prepayment
for products to be sold, services to be rendered, or expenses to be incurred
subsequent to the Closing Date, except in the ordinary course of business and
consistent with Seller's prior practices, with a corresponding current liability
included on the Reference Date Balance Sheet.
SECTION 3.9. LITIGATION. There is no suit, action or proceeding pending
against or, to Seller's Knowledge, affecting Seller, or the members, managers or
employees of Seller relating to the Business, the Purchased Assets, or the
transactions contemplated hereby, nor to Seller's Knowledge, is there any such
suit, action or proceeding threatened against Seller, or any member, manager or
employee of Seller. Seller is not subject to any order of a Governmental Entity
issued as a result of a suit, action, proceeding or investigation.
SECTION 3.10. COMPLIANCE WITH LAW. Seller has all necessary licenses,
permits and other approvals of Governmental Entities necessary to operate the
Business as now conducted, and Seller has conducted the Business and properly
filed all necessary reports in accordance with applicable laws and regulations
in all material respects.
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SECTION 3.11. ABSENCE OF UNDISCLOSED LIABILITIES. Seller does not have any
liabilities or obligations, either accrued, contingent or otherwise, which are
not reflected in (i) the Reference Date Balance Sheet or (ii) this Agreement or
the Schedules hereto, except as have been incurred in the ordinary course of
business since the Reference Date.
SECTION 3.12. ABSENCE OF CERTAIN CHANGES. Except as set forth on Schedule
3.12, since the Reference Date, neither Seller nor the Business has or will have
as of the Closing:
(a) suffered any adverse change in its financial condition, assets,
liabilities, net worth or business from that shown on the Reference Date Balance
Sheet that, either individually or in the aggregate, has had a Material Adverse
Effect;
(b) suffered any damage, destruction or loss, whether or not covered by
insurance, adversely affecting any material portion of its properties or the
Business;
(c) other than in the ordinary course of business consistent with prior
practice, declared or made or agreed to declare or make any distributions of any
assets of any kind whatsoever, including without limitation any distribution of
cash to members;
(d) mortgaged, pledged, hypothecated or otherwise encumbered any of the
Purchased Assets;
(e) sold or transferred any of its assets, property or rights, or canceled
or agreed to cancel any of its debts or claims, except for fair value and in the
ordinary course of business;
(f) suffered any adverse change with respect to its relationships with
customers or employees, or with respect to its contracts with customers which
has had or could reasonably be expected to have a Material Adverse Effect;
(g) incurred any commitment (through negotiations or otherwise) or any
liability to any labor organization, or been involved in any material labor
dispute;
(h) materially increased the amount of its indebtedness, obligations or
liabilities by more than Five Thousand Dollars ($5,000) in the aggregate;
(i) entered or agreed to enter into any agreement or arrangement granting
any preferential rights to purchase a material part of its assets, property or
rights;
(j) placed any orders for materials, merchandise or supplies in
exceptional or unusual quantities based upon past operating practices or
accepted orders from customers under conditions relating to price, terms or
payment, time or delivery, or like matters materially different from the
conditions regularly and usually specified on acceptance of orders for similar
merchandise from customers similarly situated;
(k) made any change in the accounting practices or methods followed by it;
(l) engaged in any restructuring or changed its constitutive documents; or
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(m) entered into any other transaction, or been involved in any event or
experienced any condition of any character, that, either individually or in the
aggregate, has had a Material Adverse Effect.
SECTION 3.13. CONTRACTS. Schedule 3.13 lists all of the contracts, leases,
arrangements and understandings including, without limitation, sales orders,
purchase orders and distribution agreements, which relate to the Business as it
is conducted by Seller, other than the Proprietary Agreements (which are listed
on Schedule 3.14) and other than any agreement involving solely the payment or
receipt of money by Seller and involving (and expected to involve for future
periods) less than $20,000 of payments or receipts in any one year (the
"Contracts"), each of which was entered into, arrived at or conducted on behalf
of Seller with appropriate authority and in accordance with Seller's customary
practices. Neither Seller nor, to Seller's Knowledge, the other parties to such
Contracts, arrangements and understandings are in material default thereof and
all Contracts are valid and in effect, except as may be limited by bankruptcy
and principles of equity. No customer, supplier or vendor of Seller has given
any notice or, to Seller's Knowledge, made any threat or otherwise revealed an
intent to cancel or otherwise terminate its relationship with Seller, to
materially and adversely change the relationship, to substantially reduce the
volume of business it currently does with Seller or to refuse to renew any
Contract when it expires.
SECTION 3.14. INTELLECTUAL PROPERTY.
(a) Except as set forth on Schedule 3.14(a), Seller either owns or
possesses the perpetual, royalty-free license and other rights to use the
Proprietary Rights (as defined in Section 3.14(h) below) used by Seller in
connection with the Business or related to any Purchased Asset, including,
without limitation, the EastPoint Enterprise Banking System and any Proprietary
Rights necessary to develop, manufacture, publish, market, license and sell the
proprietary computer software and programs known as the EastPoint Enterprise
Banking System (collectively, the "EastPoint Software"), reference manuals,
CD-ROMs and other materials and products published, marketed or licensed by
Seller (collectively, the "Products"), all of which are in good standing and
uncontested and free and clear of any liens or any deposit arrangements and none
of the same are owned or licensed or held by any Related Person.
(b) Except as set forth on Schedule 3.14(b), Seller is not infringing upon
or, otherwise acting adversely to, any Proprietary Rights, including trade
secrets, owned by any other Person or Persons. Except as set forth on Schedule
3.14(b), no claim, suit, demand, proceeding or, investigation is pending or has
been asserted and, to the Knowledge of Seller, no claim, suit, demand,
proceeding or investigation is threatened with respect to, based on or alleging
infringement of, any such rights of any third party, or challenging the validity
or effectiveness of any license for such rights, and there is no basis for any
such claim, suit, demand, proceeding or investigation. Except as set forth on
Schedule 3.14(b), no such Proprietary Rights infringe or violate any Proprietary
Rights of any Person. Seller has taken all actions reasonably necessary to
maintain and protect those Proprietary Rights which it owns or uses or have been
licensed to Seller.
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(c) Schedule 3.14(c) contains a list of all contracts, agreements,
commitments or licenses relating to the Proprietary Rights or the Products to
which Seller is a party or by which it is bound, including, without limitation,
all license agreements (including, without limitation, all forms of "shrink
wrap" or "click wrap" and other license agreements), agreements for software
acquisition, development agreements, author agreements, publishing agreements
and OEM, VAR and other distribution agreements (the "Proprietary Rights
Agreements"). The Proprietary Rights Agreements include all such contracts,
agreements, commitments or licenses to which Seller is a party or by which it is
bound related to Seller's Proprietary Rights. Seller has delivered or made
available to Buyer true and complete copies of all of the Proprietary Rights
Agreements (other than end user agreements on a form provided to Buyer in
accordance with Section 3.14(f) below) prior to the execution of this Agreement.
To Seller's Knowledge all of the Proprietary Rights Agreements are in full force
and effect and enforceable in accordance with their terms and there is no
violation or default under the Proprietary Rights Agreements. To Seller's
Knowledge, no event has occurred or circumstance exists which with notice or
lapse of time or both would constitute an event of default, or give rise to a
right of termination or cancellation, or result in the loss or adverse
modification of any right or benefit under any of the Proprietary Rights
Agreements. No party to any Proprietary Rights Agreement has given Seller
written notice of or made a claim with respect to, and Seller has no Knowledge
of, any material breach or default under any thereof. There have been no oral or
written modifications to the terms or provisions of any of the Proprietary
Rights Agreements. No amount payable to Seller or reserved under any Proprietary
Rights Agreement has been assigned by Seller or anticipated and no amount
payable to Seller under any Proprietary Rights Agreement is in arrears or has
been collected in advance and to Seller's Knowledge, there exists no offset or
defense to payment of any amount under a Proprietary Rights Agreement.
(d) Except as set forth on Schedule 3.14(d), Seller has the exclusive
right to manufacture, develop, publish, market, license or sell the Products
(all of which are listed on Schedule 3.14(d)) in any and all media and by print
or electronic means. No Person other than Seller may manufacture, develop,
publish, market, license or sell the Products without the prior consent of
Seller and Seller has not given any such consent and Seller owns, or is the
exclusive licensee of, all right, title and interest in and to the Products and
the exclusive right to apply for copyright protection therefor. None of the
individuals or entities who have performed services in connection with the
development of any of the Products, as employees or as independent contractors
of Seller, holds any proprietary rights with respect to such Products. Each of
such employees and independent contractors has signed a nondisclosure and
invention assignment agreement with or for the benefit of Seller.
(e) Schedule 3.14(e) contains a true and complete list of all software
owned, developed, published or sold by Seller, including, without limitation,
the EastPoint Software, with all such software owned by Seller designated by an
asterisk (*) (the "Company Software"), as well as a description of any
instructions or sequences of instructions, in whatever form embodied, which are
included in any of the Company Software and which requires the consent (whether
subject to royalty or otherwise) of a party other than Seller in order for any
such Company Software to be sold, licensed, updated, enhanced or modified or
integrated with the software by Seller, together with true and correct copies of
all contracts between or among Seller, on the one hand, and any author or
licensor of the software, on the other hand.
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(f) There has been no publication or public distribution by Seller of any
of the source codes of any of the Company Software that would in any way affect
the right of Seller to seek copyright protection for the Company Software.
Schedule 3.14(f) contains true and correct copies of each form of license
agreement which has been used by Seller, in connection with the marketing,
license and distribution of the Company Software. Each end user of the Company
Software has either signed a license agreement or has acquired the Company
Software pursuant to a so-called "shrink wrap" or "click wrap" license with
Seller. With respect to any contracts pertaining to the Company Software entered
into by Seller, Seller has licensed the Company Software and not sold it, thus
retaining ownership of the Company Software. Seller has no Knowledge of any
claims actually or purporting to be within the scope of the warranty coverage
afforded to purchasers of any of the Company Software, or of any efforts,
omissions or failures to perform. There are no bugs in any of the Company
Software reasonably detectable with normal use, and the EastPoint Software
functions in accordance with the specifications provided to Buyer and attached
as part of Schedule 3.14(f).
(g) Schedule 3.14(g) contains a true and complete list of all trademarks,
trademark registrations, and applications therefor, service marks, service
names, trade names, domain names, patents and patent applications, copyrights
and copyright registrations, and applications therefor, wholly or partially
owned, licensed held or used by Seller or in the conduct of the Business.
(h) For purposes hereof, "Proprietary Rights" shall mean know-how,
technology or other intellectual property, including, without limitation, all
trade secrets, customer and vendor information, lists and databases, including,
without limitation, customer, mailing and subscription lists, proprietary
processes, methods and apparatus, information not known to the general public,
any literary work, whether or not copyrightable, ideas, concepts, designs,
discoveries, formulae, patents, patent applications, product and service
developments, inventions, improvements, processes, disclosures, trademarks,
trademark applications, trade names, fictional business names, service marks,
copyrights, copyright applications, logos, all rights in internet web sites and
internet domain names, software, source codes and materials, object codes and
materials, algorithms, techniques, architecture, mask work rights, prototypes,
engineering and design models, information with respect to firmware and
hardware, and any information relating to any product or program which has
either been developed, acquired or licensed for or by Seller, including the
maintenance, modification or enhancement thereof and all publishing and
manufacturing information (including with respect to custom chips, boards and
other components) and all license agreements (whether as licensor or licensee)
relating thereto.
SECTION 3.15. REAL PROPERTY. Seller has delivered to Buyer a true, correct
and complete copy of the Leases and any and all ancillary documents pertaining
thereto (including, but not limited to, all amendments, consents for alterations
and documents recording variations and evidence of commencement dates and
expiration dates). The Leases are legal, valid, binding, enforceable against
Seller and in full force and effect and represent the entire agreement between
the landlords thereunder and Seller with respect to the property subject
thereto. To Seller's Knowledge, nothing impairs Seller's ability to enforce its
rights under the Leases against the landlords. Seller has not received any
notice of a breach or default under any of the Leases, and
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Seller has not granted to any other Person any rights, adverse or otherwise,
under any of the Leases. Neither Seller nor (to the Knowledge of Seller) any
other party to the Leases, is in breach or default in any material respect, and,
to the Knowledge of Seller, no event has occurred that, with notice or lapse of
time would constitute such a breach or default or permit termination,
modification or acceleration under the Leases. The rental set forth in the
Leases is the actual rental being paid, and there are no separate agreements or
understandings with respect to the same.
SECTION 3.16. ENVIRONMENTAL MATTERS. Seller is not now and has not been in
the past in material violation of any applicable statute, law or regulation
relating to the environment or occupational health and safety and to Seller's
Knowledge, no material expenditures are or will be required in order to comply
with any such existing statute, law or regulation. No Hazardous Materials (as
defined below) are used or have been used, stored, or disposed of by Seller or,
to the Knowledge of Seller, by any other Person on the Real Property. For the
purposes of the preceding sentence, "Hazardous Materials" shall mean (a)
materials which are listed or otherwise defined as "hazardous" or "toxic" under
any applicable local, state, federal and/or foreign laws and regulations that
govern the existence and/or remedy of contamination on property, the protection
of the environment from contamination, the control of hazardous wastes, or other
activities involving hazardous substances, including building materials or (b)
any petroleum products or nuclear materials.
SECTION 3.17. LABOR; ERISA. (a) Except as set forth on Schedule 3.17,
Seller is not, and, as of the Closing Date will not be, a party to any
employment, severance or consulting agreement or to any collective bargaining
agreement, nor are its employees members of a collective bargaining unit or
union, nor has there been any unionization activity. Seller has complied in all
material respects with all laws relating to the employment of labor, including
provisions relating to wages, hours, collective bargaining, and the payment of
unemployment, workers' compensation, Social Security, payroll, withholding and
similar Taxes, and is not liable for any arrears of wages, compensation fund
contributions or any Taxes or penalties for failure to comply with such laws.
Schedule 3.17 attached hereto contains a list of all persons employed by Seller
at the Closing Date with their respective current salaries, any commission
compensation received during the last twelve (12) months and a description of
all benefits provided by Seller to its employees. No employee of Seller has
given any notice or, to Seller's Knowledge, made any threat, or otherwise
revealed an intent, to cancel or otherwise terminate his or her relationship
with Seller or indicated an intention not to accept employment with Buyer, if
employment is offered. At the Closing Date, all employees are terminable at will
by Seller and will be free of all employment obligations to Seller and all
non-competition and confidentiality covenants in favor of Seller and will be
free to become employees of Buyer, if Buyer so desires.
(b) Schedule 3.17 lists of all "employee benefit plans" as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") and any other plans pursuant to which Seller has any continuing
obligation to provide benefits (including without limitation, equity, deferred
compensation, severance, retirement, and medical or life insurance) to any
present or former employee, or any beneficiary thereof. Seller has furnished
Buyer with a complete and accurate copy of each such plan. No such plan requires
Buyer to assume any employment, compensation, fringe benefit, pension, profit
sharing or deferred
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compensation agreement or plan in respect of any employee, and Seller does not
and has not contributed to or maintained a "multiemployer plan" (as defined in
ERISA Section 3(37)).
SECTION 3.18. TAXES.
(a) Seller has prepared and filed or caused to be prepared and filed, all
federal, state, local and foreign returns, estimates, information statements and
reports, including without limitation, all informational returns ("Returns")
relating to any and all Taxes concerning or attributable to Seller, the
Purchased Assets or the Business which Seller is required to file on or before
the Closing and such Returns were true and accurate and were completed in
substantial compliance with applicable laws and regulations when filed.
(b) Seller has (i) paid all Taxes it is required to pay and (ii) withheld
with respect to its employees all federal and state income taxes, FICA, FUTA and
other Taxes required to be withheld, and Seller has not been delinquent in the
payment of any Tax nor is there any Tax deficiency outstanding, proposed or
assessed against Seller.
(c) No audit or other examination of any Return of Seller is presently in
progress, nor has Seller been notified of any request for such an audit or other
examination.
(d) Seller does not have any liabilities for unpaid Taxes which have not
been accrued or reserved against on the Reference Date Balance Sheet, whether
asserted or unasserted, contingent or otherwise, and to Seller's Knowledge,
there is no basis for the assertion of any such liability attributable to
Seller, the Purchased Assets or the Business.
(e) The transactions contemplated herein are not subject to the tax
withholding provisions of Code Section 3406 or Subchapter A of Chapter 3 of the
Code or any other provision of law.
SECTION 3.19. CAPITALIZATION; RELATIONSHIPS WITH RELATED PERSONS. (a)
Schedule 3.19 sets forth a list of all of the members of Seller, and other than
the membership interests of Seller set forth on such Schedule 3.19, there are no
outstanding membership interests or other equity securities or rights to acquire
equity securities of Seller.
(b) Except as set forth on Schedule 3.19, no member, no manager and no
other Related Person of Seller or of any member or manager has any interest in
any property (whether real, personal, or mixed and whether tangible or
intangible) used in or pertaining to the Business. Neither Seller, its members
and managers nor any Related Person of Seller, is, or has owned (of record or as
a beneficial owner) an equity interest or any other financial or profit interest
in, a Person that has (a) had business dealings or a material financial interest
in any transaction with the Business, or (b) engaged in competition with Seller
with respect to any line of the products or services of Seller (a "Competing
Business") in any market presently served by Seller. No member, manager or other
Related Person of Seller is a party to any Proprietary Agreement or Contract.
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SECTION 3.20. BROKERS. Except as set forth on Schedule 3.20, there are no
claims for brokerage commissions, finder's fees or similar compensation arising
out of or due to any act of or on behalf of Seller in connection with the
transactions contemplated by this Agreement.
SECTION 3.21. INSURANCE. Schedule 3.21 lists all policies of insurance and
bonds covering the assets and operations of Seller as of the date hereof. All of
such insurance policies and bonds covering Seller and the Business are in full
force and effect and no written notice of termination of any such insurance
policies or bonds has been received by Seller. Seller has not received any
written communication or other written notice regarding any actual or possible
refusal of any coverage or rejection of any claim related to the Business.
SECTION 3.22. POWERS OF ATTORNEY. Seller has not granted to any Person a
power of attorney to act on behalf of Seller in connection with any of its
properties or business affairs other than such powers to so act as normally
pertain to the officers or managers of Seller.
SECTION 3.23. DEBT. Set forth in Schedule 3.23 hereto is a complete and
correct list of all Debt of Seller other than trade debt incurred in the
ordinary course of business, none of which is overdue unless such trade debt is
being contested diligently and in good faith by appropriate proceedings and
appropriate cash reserves have been established therefor. The maximum principal
or face amounts of the obligations set forth, which are outstanding and which
can be outstanding, are correctly stated, and all Liens of any nature given or
agreed to be given as security therefor are correctly described or indicated in
such Schedule.
SECTION 3.24. SOLVENCY. (a) To Seller's Knowledge, Seller is not now
insolvent and will not be rendered insolvent by the transactions contemplated by
this Agreement. As used in this section, "insolvent" means that the sum of the
debts and other probable liabilities of Seller exceeds the present fair saleable
value of Seller's assets.
(b) To Seller's Knowledge, immediately after giving effect to the
consummation of the transactions contemplated by this Agreement: (i) Seller will
be able to pay its liabilities as they become due in the usual course of its
business; (ii) Seller will not have unreasonably small capital with which to
conduct its present or proposed business; (iii) Seller will have assets
(calculated at fair market value) that exceed its liabilities; and (iv) taking
into account all pending and threatened litigation, final judgments against
Seller in actions for money damages are not reasonably anticipated to be
rendered at a time when, or in amounts such that, Seller will be unable to
satisfy any such judgments promptly in accordance with their terms (taking into
account the maximum probable amount of such judgments in any such actions and
the earliest reasonable time at which such judgments might be rendered) as well
as all other obligations of Seller. The cash available to Seller after Closing,
after taking into account all other anticipated uses of the cash, will be
sufficient to pay all such debts and judgments promptly in accordance with their
terms.
SECTION 3.25. STATEMENTS NOT MISLEADING. Seller has disclosed all facts,
events or transactions which are specific to Seller (as opposed to general
regulators, economic, industry or market information) and material to the
Purchased Assets and the Business and which a reasonable and prudent buyer of
the Purchased Assets of the Business would consider material.
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No representation or warranty of Seller or document furnished by Seller
hereunder is false or inaccurate in any material respect or contains or will
contain any untrue statement of a material fact or omits or will omit to state
any fact necessary to make the statements contained herein or therein not
misleading, when such representations, warranties and documents are taken as a
whole.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller, as of the Closing Date, as
follows:
SECTION 4.1. ORGANIZATION AND POWER OF BUYER. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Buyer has full corporate power and authority to own its properties and
conduct the business presently being conducted by it, to execute this Agreement,
and to consummate the transactions contemplated by this Agreement.
SECTION 4.2. AUTHORIZATION; SHARES DULY ISSUED. The execution, delivery
and performance of this Agreement by Buyer have been duly authorized and
approved by all requisite action on the part of Buyer, and this Agreement
constitutes the valid and binding obligation of Buyer and is enforceable against
Buyer in accordance with its terms, except as such enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium, and other similar laws
relating to or limiting creditors' rights generally and by equitable principles.
SECTION 4.3. NO CONFLICT. The execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated hereby and the
compliance with the terms hereof will not, (a) violate any law, judgment, order,
decree, statute, ordinance, rule or regulation applicable to Buyer, or any
permit, license or approval of any Governmental Entity, (b) conflict with any
provision of Buyer's certificate of incorporation or by-laws, (c) result in any
violation of, and will not conflict with, or result in a breach of any terms of,
or constitute a default under, any mortgage, instrument or agreement to which
Buyer is a party or by which Buyer is bound, or (d) require any notice to, or
consent, approval, order or authorization of, or the registration, declaration
or filing with, any Governmental Entity or other third party, which, in the case
of clause (c) or (d), would have a material adverse effect on Buyer's ability to
consummate the transactions contemplated by this Agreement.
SECTION 4.4. BROKERS' FEES. The Buyer has no liability to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which the Seller could become liable or
obligated.
SECTION 4.5. LITIGATION AND CLAIMS. There is no litigation, action, suit,
investigation or proceeding pending or, to the Knowledge of the Buyer,
threatened against the Buyer which would materially impact the Buyer's ability
to consummate the transaction.
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SECTION 4.6. REGULATORY APPROVALS. The Buyer has no knowledge of any fact
or condition that will prevent the Buyer from obtaining any of the necessary
approvals to consummate the transactions contemplated by this Agreement.
SECTION 4.7. CONSUMMATION OF TRANSACTION. There is not in effect any
statute, rule or regulation which makes it illegal for Buyer to consummate the
transactions contemplated hereby or any order, decree or judgment which enjoins
Buyer from consummating the transactions contemplated hereby or which requires
any material part of the Business or Purchased Assets to be held separate or
divested.
SECTION 4.8. LICENSES AND PERMITS. Buyer has obtained all permits,
licenses and other governmental and official authorizations and approvals
necessary for Buyer to consummate the transactions contemplated by this
Agreement.
ARTICLE 5
COVENANTS
SECTION 5.1. FURTHER ASSURANCES. (a) Seller will provide such other
information, and execute and deliver all such other and additional instruments,
notices, releases, undertakings, consents and other documents, and will do all
such other acts and things, as may be reasonably requested by Buyer as necessary
to assure to Buyer all the rights and interests granted or intended to be
granted under this Agreement. Seller shall take or shall cause to be taken such
other reasonable actions as Buyer may request more effectively to transfer,
convey and assign to, and vest in, Buyer, and put Buyer in possession of, the
Purchased Assets as contemplated by this Agreement. In the event that any of the
Purchased Assets cannot be fully and effectively transferred to Buyer without
the consent of a third party or parties, and if at the Closing Buyer shall have
waived its right to receive at the Closing such consent, Seller shall thereafter
be obligated to use its reasonable best efforts to assure to Buyer the benefits
of such contract, commitment, other arrangement or other Purchased Asset.
(b) Each of the parties shall use all reasonable efforts to not take any
action, or enter into any transaction, which would cause any of the
representations or warranties of such party contained in this Agreement to be
untrue or would result in a breach of any covenant made by it in this Agreement.
SECTION 5.2. COVENANTS NOT TO COMPETE.
(a) Non-Competition. For the Non-Compete Period (as that term is defined
below), Seller shall not, directly or indirectly, anywhere in the world (the
"Territory") engage in competition with Buyer or an affiliate thereof, in any
manner or capacity (e.g., as an advisor, principal, agent, partner, member,
officer, director, shareholder, employee, member of any association, or
otherwise), in the Business (together, the "Competitive Activities"), or in the
design, development, manufacture, distribution, marketing, licensing or selling
of products, services or systems which are competitive with the products,
services or systems being sold, marketed or produced by, or which are under
development by, Buyer or an affiliate thereof at the
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time of the Closing or during the Non-Compete Period. Seller shall not own,
participate in the ownership of, lend money, guarantee loans, make gifts of
money or other property, or otherwise lend financial or other assistance in any
form to any Person, firm, association, partnership, venture, corporation or
other business entity which is engaged in, or will within the Non-Compete Period
engage in, any of the activities prohibited by this Section 5.2.
(b) Limitation on Covenant. Ownership by Seller, as a passive investment,
of less than one percent (1%) of the outstanding shares of capital stock of any
corporation listed on a national securities exchange or publicly traded in the
over-the-counter market shall not constitute a breach of this Section 5.2.
(c) Employees. For a period of three (3) years from the Closing Date,
Seller shall not, either on its own account or in conjunction with or on behalf
of any other Person, firm or company, employ, solicit, entice away or attempt to
employ, solicit or entice away from Buyer or any affiliate of Buyer any person
who at the date hereof is, or at the date of or within the year preceding such
employment, solicitation, enticement or attempt shall have been, an officer,
director, consultant or employee of Buyer or any affiliate of Buyer.
(d) Confidentiality. Seller will not at any time hereafter make use of or
disclose or divulge to any Person (other than to officers or employees of Buyer
whose province it is to know the same) any information (other than any
information properly available to the public) relating to Buyer or the Business,
the identity of the customers and suppliers of Buyer or the Business, or the
products, finances, contractual arrangements, business or methods of business of
Buyer or the Business and shall use its best endeavors to prevent the
publication or disclosure of any such information. Notwithstanding the
foregoing, in the event that Seller is requested or required (by oral question
or request for information or documents in any legal proceeding, interrogatory,
subpoena, civil investigative demand or similar process) to disclose any such
information, Seller will notify the Buyer, if permitted by law, promptly of the
request or requirement so that Buyer may seek an appropriate protective order or
waive compliance with the provisions of this 5.2(d). If, in the absence of a
protective order or the receipt of a waiver hereunder, Seller is, on the written
advice of counsel, compelled to disclose any such information to any tribunal or
else stand liable for contempt, Seller may disclose such information to the
tribunal; provided, however, that Seller shall use its reasonable best efforts
to obtain, at the reasonable request of Buyer, an order or other assurance that
confidential treatment will be accorded to such portion of the information
required to be disclosed as the Buyer shall designate. Seller acknowledges that
the Purchased Assets include trade secrets which Buyer has purchased and which
Seller is forever restricted from using or disclosing. If, in connection with
the business or affairs of Seller, Seller shall have obtained trade secrets or
other confidential information belonging to any third party under an agreement
which contained restrictions on disclosure by Seller, Seller will not at any
time infringe such restrictions.
(e) Injunctive Relief. Seller acknowledges that any violation of any
provision of this Section 5.2 will cause irreparable harm to Buyer, that damages
for such harm will be incapable of precise measurement and that, as a result,
Buyer will not have an adequate remedy at law to redress the harm caused by such
violations. Therefore, in the event of a violation of Section 5.2 by Seller,
Seller agrees that, in addition to its other remedies, Buyer shall be entitled,
without the
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necessity of either proof of actual damage or the posting of a bond, to
injunctive relief, including but not limited to an immediate temporary
injunction, temporary restraining order and/or preliminary or permanent
injunction to restrain or enjoin any such violation. Seller acknowledges that
any violation of this Section 5.2 will cause Buyer irreparable harm and that
such irreparable harm will affect Buyer at its principal place of business in
Glastonbury, Connecticut, and, therefore, Seller does hereby submit to
jurisdiction before any state or federal court sitting in the State of
Connecticut, at Buyer's election, and Seller hereby waives any right to raise
the question of jurisdiction and venue in any action that Buyer may bring in any
such court against Seller.
(f) Severability. The parties understand and agree that the covenant set
forth in this Section 5.2 shall be construed as a series of separate covenants
not to compete, one covenant for each country, state and province within the
Territory, one for each separate line of the Competitive Activities, and one for
each month of the Non-Compete Period. Should any clause, portion or paragraph of
this Section 5.2 be unenforceable or invalid for any reason, such
unenforceability or invalidity shall not affect the enforceability or validity
of the remainder of this Section 5.2. Should any particular covenant or
restriction, including but not limited to the covenants and restrictions of
Section 5.2(a), 5.2(c) and 5.2(d), be held to be unreasonable or unenforceable
for any reason, including without limitation the time period, geographical area
and scope of activity covered by such covenant, then a court may modify any such
covenant or restriction in order to give it effect and allow it to be enforced
to the greatest extent that would be reasonable and enforceable.
(g) Acknowledgment. Seller acknowledges that this covenant not to compete
is a mandatory condition precedent to the Closing of the transactions
contemplated by this Agreement, and that, in the absence of the preceding
covenant not to compete, Buyer would not have consented to the Closing.
(h) Seller's Non-Compete Period.
(i) With respect to Seller, the Non-Compete Period shall be three
(3) years after the Closing Date or, if ordered by a court of competent
jurisdiction, one of the periods of time listed in clause (ii).
(ii) If ordered by a court of competent jurisdiction, the
Non-Compete Period for Seller shall be one of the following periods of
time:
(A) two (2) years and six (6) months from the Closing Date;
(B) two (2) years from the Closing Date;
(C) one (1) year and six (6) months from the Closing Date;
(D) one (1) year from the Closing Date; or
(E) six (6) months from the Closing Date.
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SECTION 5.3. USE OF NAMES. From and after the Closing Date, Seller shall
cease to use the names EastPoint, EastPoint Technologies, XxxxXxxxx.xxx or any
similar name and, as indicated in Section 2.5(c), shall change its name at
Closing.
SECTION 5.4. PASSAGE OF TITLE AND RISK OF LOSS. Legal title, equitable
title, and risk of loss with respect to the property and rights to be
transferred hereunder shall not pass to Buyer until the property or right is
transferred at the Closing and possession thereof is delivered to Buyer.
SECTION 5.5. TRANSFER OF GOODWILL AND BUSINESS. From and after the Closing
Date, Seller shall, when requested to do so by Buyer, provide reasonable good
faith assistance to effectuate a smooth transfer of the Business and goodwill to
Buyer.
SECTION 5.6. EXPENSES; TRANSFER TAXES. All costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expense. Any sales, use, franchise, conveyance
or other transfer Tax which becomes payable by any of the parties to this
Agreement as a result of the conveyance and transfer from Seller to Buyer of the
Purchased Assets or otherwise as a result of the transactions contemplated
hereby and any other transfer or documentary Taxes or any filing or recording
fees applicable to such conveyance and transfer shall be paid by Seller, and
Seller shall promptly provide Buyer with proof of payment of such Taxes.
SECTION 5.7. TAXES.
(a) Continuing Obligation. Seller shall be responsible for and pay or
cause to be paid when due all of Seller's Taxes attributable to, levied or
imposed upon or incurred in connection with the Purchased Assets or the Business
relating or pertaining to the period (or that portion of any period) ending on
or prior to the Closing Date. Seller shall continue to timely file within the
time period for filing, or any extension granted with respect thereto, all of
Seller's Returns required to be filed in connection with the Purchased Assets
relating or pertaining to periods (or that portion of any periods) ending on or
prior to the Closing Date, and such Returns shall be true and correct and
completed in substantial compliance with applicable laws and regulations.
(b) Tax Elections. No new elections with respect to Taxes, or any changes
in current elections with respect to Taxes, affecting the Purchased Assets shall
be made by Seller after the date of this Agreement without the prior written
consent of Buyer, not to be unreasonably withheld.
(c) Cooperation and Records Retention. Seller and Buyer shall each (i)
provide the others with such assistance as may reasonably be requested by any of
them in connection with the preparation of any Return, audit or other
examination by any taxing authority or judicial or administrative proceeding
relating to liability for Taxes, (ii) retain and provide the others with any
records or other information which may be relevant to such Return, audit or
examination, proceeding or determination, and (iii) provide the other with any
final determination of any such audit or examination, proceeding or
determination that affects any amount required to be shown on any Return of the
others for any period. Without limiting the generality of the foregoing, Buyer
and Seller shall retain, until the applicable statutes of limitations (including
any
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extensions) have expired, copies of all Returns, supporting work schedules and
other records or information which may be relevant to such Returns for all Tax
periods or portions thereof ending before or including the Closing Date and
shall not destroy or otherwise dispose of any such records without first
providing the other party with a reasonable opportunity to review and copy the
same.
SECTION 5.8. EMPLOYMENT MATTERS. Seller will terminate, effective upon
Closing, the employment of all employees of the Business whom Buyer has
indicated a desire to employ, and Seller shall pay all compensation or other
money due to such employees with respect to their employment and termination by
Seller through and including the Closing Date. Seller shall cooperate with Buyer
in Buyer's efforts to hire such employees as Buyer deems desirable for the
continuation of the Business, and Seller shall, and hereby does, release those
employees who accept employment with Buyer from their obligations under any
non-competition or confidentiality agreement in favor of Seller, to the extent
necessary to allow them to become employed by Buyer.
SECTION 5.9. MEMBERS HAVE NO LIABILITY UNDER THE AGREEMENT.
Notwithstanding anything to the contrary in this Agreement, Buyer acknowledges
that none of the members of Seller as of the date of this Agreement (each of
which is individually referred to herein as a "Member" and all of which are
collectively referred to herein as "Members") is a party to this Agreement, and
therefore no such Member shall have liability or obligation pursuant to this
Agreement.
SECTION 5.10. CONTINUING AVAILABILITY AND USAGE OF SERVICES; CONTINGENT
PAYMENT.
(a) Buyer shall continue to provide for a period of 3 years from the
Closing Date, the core data processing system and services currently provided by
Seller to any Member who requests such continuation. Buyer shall make available
to each such Member, Buyer's core data processing system and services in
accordance with Schedule 5.10(a).
(b) One of the customer agreements that Seller is assigning to Buyer and
that Buyer is assuming from Seller is the agreement (the "Specified Customer
Agreement") with the customer listed on Schedule 5.10(b) (the "Specified
Customer"). Seller shall be entitled to receive the Contingency Escrow Funds if,
and only if, either (i) the Specified Customer continues as a customer of Buyer,
using the core data processing system acquired by Buyer from Seller and related
services pursuant to the Specified Customer Agreement at least through the
second anniversary of the Closing Date (the "Second Anniversary") and the
Specified Customer remains, at all times through the Second Anniversary, or (ii)
prior to the Second Anniversary, the Specified Customer enters into a new
agreement with Buyer (the "Replacement Agreement") pursuant to which the
Specified Customer converts from Seller's core data processing system and
services to Buyer's core data processing system and services, and such
Replacement Agreement has an initial term that runs at least through the Second
Anniversary. If Seller is not entitled to receive the Contingency Escrow Funds
pursuant to the preceding sentence, then Buyer shall instead receive the
Contingency Escrow Funds. If at time prior to the satisfaction of either
condition set forth in clauses (i) and (ii) above, the Specified Customer ceases
to be a customer of Buyer under an agreement assumed by Buyer from Seller or
under a Replacement
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Agreement, such that the conditions set forth above will not be satisfied, then
Buyer shall at such time be entitled to recover the Contingency Escrow Funds,
without the requirement that Buyer wait until the Second Anniversary to recover
the Contingency Escrow Funds. Seller shall be entitled to recover the
Contingency Escrow Funds within 30 days of the satisfaction of either condition
set forth in clauses (i) and (ii) above. The procedures set forth in Sections
6.8(b) and (c) with respect to Buyer's assertion of claims against the Primary
Escrow Funds for indemnity claims shall apply as well to any claim by Buyer for
recovery of the Contingency Escrow Funds under this Section 5.10(b). Buyer shall
assert any claim for recovery of the Contingency Escrow Funds within 30 days of
the Second Anniversary.
SECTION 5.11. USE OF PROCEEDS. Seller agrees that any and all of Seller's
expenses and employment related payments (including severance payments but
excluding ordinary payroll) to be paid by Seller in connection with the
transactions contemplated by this Agreement shall be paid by Seller from the
cash portion of the Purchase Price and not with cash on hand prior to Closing.
ARTICLE 6
INDEMNIFICATION
SECTION 6.1. INDEMNIFIED LOSSES. For the purpose of this Article 6 and
when used elsewhere in this Agreement, "Losses" shall mean and include any and
all liability, loss, damage, claim, expense, cost, fine, fee, penalty,
obligation or injury including those resulting from any and all actions, suits,
proceedings, demands, assessments or judgments, together with reasonable costs
and expenses including the attorneys' fees and other legal costs and expenses
relating thereto.
SECTION 6.2. INDEMNIFICATION BY SELLER. Seller hereby agrees to indemnify
and hold harmless Buyer against and in respect of any Losses which arise out of
or result from:
(a) any breach by Seller of any representation or warranty of Seller made
herein or in any certificate, document, writing or instrument delivered by
Seller pursuant to this Agreement;
(b) any breach by Seller of any covenant or obligation of Seller in this
Agreement or in any certificate, document, writing or instrument delivered by
Seller pursuant to this Agreement;
(c) any liability or obligation of Seller or the Business as operated
through the Closing Date or otherwise arising out of the ownership or operation
of Seller, the Business or the Purchased Assets prior to the Closing, other than
the Assumed Liabilities, whether or not such liability or obligation was
disclosed to Buyer, including, without limitation, sales and use Taxes for all
periods ending on or prior to the Closing Date;
(d) any noncompliance with or claims arising under bulk sales or
fraudulent conveyance laws with respect to the transactions contemplated by this
Agreement; and
(e) as provided in Section 6.4 hereof.
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Notwithstanding anything to the contrary set forth in this Section 6.2, Buyer
shall not be entitled to indemnification for its own negligence or misconduct,
unless the same represents a continuation of conduct on practices engaged in by
Seller with respect to the Business.
SECTION 6.3. INDEMNIFICATION BY BUYER. Subject to the limitations set
forth in this Article 6, Buyer agrees to indemnify and hold harmless Seller
against and in respect of any Losses which arise out of or result from:
(a) any breach by Buyer of any representation or warranty of Buyer made
herein or in any certificate, document, writing or instrument delivered by Buyer
pursuant to this Agreement;
(b) any breach by Buyer of any covenant or obligation of Buyer in this
Agreement or in any other certificate, document, writing or instrument delivered
by Buyer pursuant to this Agreement;
(c) the Assumed Liabilities; and
(d) as provided in Section 6.5 hereof.
Notwithstanding anything to the contrary set forth in this Section 6.3, Seller
shall not be entitled to indemnification for its own negligence or misconduct.
SECTION 6.4. THIRD PARTY CLAIMS AGAINST BUYER. Subject to the limitations
set forth in this Article 6, Seller further agrees to indemnify and hold Buyer
harmless from and against any and all Losses resulting from causes of action or
claims of any kind asserted by unrelated third parties arising from any
liability of any nature incurred in connection with any action, suit,
proceeding, claim or demand by any person or entity where any of the alleged or
actual breach, default, act, omission or other grounds therefore is attributable
to events occurring prior to the Closing and related to Seller, the Business or
the Purchased Assets, including, without limitation, any and all Losses
attributable to goods, products and services provided by Seller prior to the
Closing Date, whether or not such litigation, proceeding or claim is pending,
threatened, or asserted before, on or after the Closing Date.
SECTION 6.5. THIRD PARTY CLAIMS AGAINST SELLER. Subject to the limitations
set forth in this Article 6, Buyer further agrees to indemnify and hold Seller
harmless from and against any and all Losses resulting from causes of action or
claims of any kind asserted by unrelated third parties arising from any
liability of any nature incurred in connection with any action, suit,
proceeding, claim or demand by any person or entity where any of the alleged or
actual breach, default, act, omission or other grounds therefore is attributable
to events occurring after the Closing and related to Buyer or the Purchased
Assets, whether or not such litigation, proceeding or claim is pending,
threatened, or asserted before, on or after the Closing Date.
SECTION 6.6. PROCEDURES. All claims for indemnification by a party
pursuant to this Article 6 arising from any action, suit or proceeding relating
to a third party claim shall be made in accordance with the provisions of this
Section 6.6. The party entitled to indemnification under
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this Article 6 (the "Indemnified Person") shall give prompt written notification
to the Person obligated to provide such indemnification (the "Indemnifying
Person") of the commencement of any action, suit or proceeding relating to a
third party claim for which indemnification pursuant to this Article 6 may be
sought (a "Claim Notice"); provided, however, that no delay on the part of the
Indemnified Person in notifying the Indemnifying Person shall relieve the
Indemnifying Person from any liability or obligation under this Article 6 except
to the extent of any damage or liability caused solely by or arising out of such
delay. If known to the Indemnified Person, any Claim Notice shall include (i) a
summary description of the facts upon which such claim is based and shall
specify the estimated amount of the Losses thereof and, (ii) if liquidated and
known, the amount which is payable to the Indemnified Person pursuant to this
Article 6. In connection with the Indemnifying Person's evaluation of any Claim
Notice, the Indemnified Person shall, at the Indemnifying Person's expense,
provide the Indemnifying Person with reasonable access to the necessary books
and records (or extracts thereof) of the Indemnified Person and, subject to the
implementation of reasonable procedures to protect the confidentiality of such
information, supply such factual and technical information as the Indemnifying
Person may reasonably require in connection with the evaluation of such Claim
Notice. Within 20 days after delivery of such notification, the Indemnifying
Person may, upon written notice thereof to the Indemnified Person, assume
control of the defense of such action, suit or proceeding with counsel
reasonably satisfactory to the Indemnified Person, provided (i) the Indemnifying
Person acknowledges in writing to the Indemnified Person that the Indemnifying
Person shall indemnify the Indemnified Person with respect to all elements of
such action, suit or proceeding and any damages, fines, costs or other
liabilities that may be assessed against the Indemnified Person in connection
with such action, suit or proceeding, (ii) the third party seeks monetary
damages only, and (iii) the Indemnifying Person must conduct the defense of a
third person claim actively and diligently thereafter to preserve its rights in
this regard. If the Indemnifying Person chooses to assume the defense of a third
person claim, the Indemnified Person shall reasonably cooperate in the defense
of or prosecution thereof. Such cooperation shall include the retention and
(upon the Indemnifying Person's request) the provision to the Indemnifying
Person of records and information (or extracts therefrom) that are reasonably
relevant to such third person claim, and making employees available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder. If the Indemnifying Person does not so assume
control of such defense, the Indemnified Person shall control such defense. The
party not controlling such defense may participate therein at its own expense;
provided, that if the Indemnifying Person assumes control of such defense and
the Indemnified Person is advised by counsel in writing that the Indemnifying
Person and the Indemnified Person may have conflicting interests or different
defenses available with respect to such action, suit or proceeding, the
reasonable fees and expenses of counsel to the Indemnified Person shall be
considered "Losses" for purposes of this Agreement. The party controlling such
defense shall keep the other party advised of the status of such action, suit or
proceeding and the defense thereof and shall consider in good faith
recommendations made by the other party with respect thereto. An Indemnified
Person shall not agree to any settlement of such action, suit or proceeding
without the prior written consent of the Indemnifying Person, which shall not be
unreasonably withheld or delayed. The Indemnifying Person shall not agree to any
settlement or the entry of a judgment in any action, suit or proceeding without
the prior written consent of the Indemnified Person, which shall not be
unreasonably withheld (it being understood that it is reasonable to withhold
such consent if, among other things, the settlement or the entry of a
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judgment (A) lacks a complete release of the Indemnified Person for all
liability with respect thereto or (B) imposes any liability or obligation on the
Indemnified Person).
SECTION 6.7. LIMITATIONS ON INDEMNIFICATION BY SELLER. Notwithstanding any
other provision of this Article 6, Seller shall not be liable to Buyer under
Section 6.2(a) for breach of representations and warranties (a) until the total
of all Losses with respect to such matters exceeds $70,000 (the "Threshold"),
after which Seller shall be liable for all Losses back to dollar one, so that
such amount is a threshold and not a deductible, and (b) for Losses in excess of
$7,000,000 (the "Cap").
SECTION 6.8. SET-OFF. (a) Buyer shall be entitled to a set-off against the
Primary Escrow Funds for any amounts payable to Buyer pursuant to this Article 6
(a "Claimed Set-Off"). Nothing in this Section 6.8 shall be construed or
interpreted as a limitation on Buyer's right to indemnification in accordance
with this Article 6.
(b) Buyer shall give Seller written notice of any Claimed Set-Off. Seller
shall have fifteen (15) days from the date of Buyer's written notice to object
to the Claimed Set-Off. Seller shall make any objection to a Claimed Set-Off in
writing and shall forward the same to both Buyer and the Escrow Agent in the
case of a claim against the Primary Escrow Funds (an "Escrow Claim"). If Seller
does not timely object to an Escrow Claim, Buyer may give unilateral written
notice to the Escrow Agent to release a portion of the Primary Escrow Funds
equivalent to the Claimed Set-Off, which written notice Seller hereby
acknowledge to be sufficient to authorize the Escrow Agent to release the
Primary Escrow Funds as directed by Buyer.
(c) If Seller does timely object to a Claimed Set-Off, the Escrow Agent
shall not release any portion of the Primary Escrow Funds to Buyer until the
Escrow Agent receives instructions which are signed by Buyer and one of Seller,
or until the dispute has been definitively resolved by court proceedings. If
Seller does timely object and Seller and Buyer are unable to agree to the amount
of the Claimed Set-Off within thirty (30) days, either Seller or Buyer may
institute court proceedings for a determination of the amount of the Claimed
Set-Off. If Seller objects to a Claimed Set-Off, or during the pendency of
Seller's fifteen (15) day notice period, Buyer may require the Escrow Agent to
retain a portion of the Primary Escrow Funds to cover an Escrow Claim by giving
the Escrow Agent unilateral written notice to retain said portion of the Primary
Escrow Funds, which written notice Seller hereby acknowledges to be sufficient
to authorize the Escrow Agent to retain said portion of the Primary Escrow Funds
as directed by Buyer, and in which event the Escrow Agent shall not release that
portion of the Primary Escrow Funds to Seller in accordance with the Escrow
Agreement until the Escrow Agent receives instructions which are signed by both
Buyer and one of Seller, or until the dispute has been definitively resolved by
court proceedings.
SECTION 6.9. SURVIVAL. All representations and warranties made by Seller
and Buyer herein, or in any certificate, document, writing or instrument
delivered pursuant to this Agreement, shall survive the Closing for a period of
two (2) years following the Closing Date.
SECTION 6.10. EXCLUSIVE REMEDY. The provisions of this Article 6 set forth
the sole and exclusive remedy of the parties hereto with respect to any matter
or event described in this
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Article 6, provided however that the provisions of this Article 6 shall not
limit the rights or remedies of Buyer with respect to the breach of Sections 5.2
or 5.3.
ARTICLE 7
MISCELLANEOUS
SECTION 7.1. NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and delivered personally or sent by
overnight delivery, postage prepaid to the addresses set forth below:
To Buyer:
EP Acquisition Corp.
000 Xxxxxxx Xxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
Attention: Chief Financial Officer
With a copy to:
Xxxxxx X. Xxxxxxx, Esq.
Vice President & General Counsel
Open Solutions Inc.
000 Xxxxxxx Xxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
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To Seller:
Xxxxxxx Xxxx
Chairman, EastPoint Technologies, LLC.
c/o Berkshire Hills Bancorp, Inc.
Berkshire Hills Bancorp, Inc.
00 Xxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxxxx 00000
With a copy to:
Xxxxxxxx X. X. Spaccasi, Esq.
Xxxxxxx Xxxxxx Xxxxxxxx & Xxxxxxx LLP
0000 Xxxxxxxxx Xxxxxx, XX
Xxxxxxxxxx, XX 00000
SECTION 7.2. ENTIRE AGREEMENT. This Agreement (including the schedules and
exhibits hereto) constitutes the sole understanding of the parties with respect
to the subject matter hereof.
SECTION 7.3. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 7.4. PARTIES IN INTEREST; ASSIGNMENT. This Agreement shall inure
to the benefit of, and be binding upon, the parties hereto and their respective
successors and assigns, provided that Seller may not assign or delegate this
Agreement or any right, liability or obligation hereunder without Buyer's prior
written consent and any assignment or delegation by Seller without the prior
written consent of Buyer shall be void and of no force or effect.
SECTION 7.5. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Connecticut, without
reference to its conflicts of laws principles.
SECTION 7.6. SCHEDULES AND HEADINGS. All of the schedules and exhibits
attached hereto are a part of this Agreement and all of the matters contained
therein are incorporated herein by reference. The descriptive headings of the
several Articles and Sections of this Agreement are inserted for convenience
only and do not constitute part of this Agreement.
SECTION 7.7. AMENDMENT. This Agreement may be amended only by the parties
hereto by any instrument in writing signed by or on behalf of each of the
parties hereto.
SECTION 7.8. WAIVER. Any term or provision of this Agreement may be waived
only in writing by the party or parties who are entitled to the benefits being
waived.
SECTION 7.9 PRESS RELEASE. Seller shall not make any public announcement
or issue any press release relating to this Agreement or any related agreements
or transactions contemplated hereby or thereby unless Seller has obtained
Buyer's prior consent with respect to such public
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announcement or press release, provided however, that nothing herein shall
prevent Seller from making any disclosure required by law.
SECTION 7.10 LIABILITY FOR FAILURE TO OBTAIN THIRD PARTY CONSENTS. Buyer
and Seller hereby agree to bear all of their own liabilities, costs, damages and
expenses arising out of or related to the failure of Seller to obtain any
required third party consents specified in Schedule 3.3.
SECTION 7.11 ACKNOWLEDGEMENT. Buyer hereby acknowledges that Seller may
liquidate and dissolve at any time following the Closing. The parties hereby
agree that upon any such dissolution, (i) any and all correspondence, notices
and other communications to be sent to Seller pursuant to this Agreement or any
other agreement executed in connection herewith, and (ii) any and all consents,
notices, and other communications to be sent by or obtained from Seller pursuant
to this Agreement or any other agreement executed in connection herewith, shall
be deemed sent to Seller or received from Seller, as applicable, when sent to or
received from Xxxxxxx Xxxx, c/o Berkshire Hills Bancorp, Inc., 00 Xxxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxxxxxxxxx 00000.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK; THE NEXT SUCCEEDING
PAGE IS A SIGNATURE PAGE.]
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IN WITNESS WHEREOF, the parties hereto have duly executed this Asset
Purchase Agreement as of the date first above written.
EASTPOINT TECHNOLOGIES, LLC EP ACQUISITION CORP.
By: /s/ Xxxxx Xxxx By: /s/ Xxxx Xxxxxxxx
--------------------------------- -------------------------------
Name: Xxxxx Xxxx Name: Xxxx Xxxxxxxx
Title: Chief Executive Officer Title: Secretary
Omitted Schedules
Pursuant to Item 601(b)(2) of Regulation S-K promulgated by the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended, Open Solutions
Inc. (the "Company") has, with respect to the Asset Purchase Agreement, dated as
of June 18, 2004, between Eastpoint Technologies, LLC and EP Acquisition Corp.,
omitted to file the schedules listed in the table of contents herewith. These
schedules will be supplementally furnished to the Commission upon request.
