Exhibit 10.1
Execution Copy
ASSET PURCHASE AGREEMENT
BY AND AMONG
GLOBALOPTIONS GROUP, INC.
AND
XXXXX XXX XXXX ASSOCIATES, LLC
DATED AS OF JANUARY 13, 2006
EXHIBITS
EXHIBIT A: Form of True-up Statement
EXHIBIT A-1: Form of Closing Date Statement
EXHIBIT B: Form of Promissory Note
EXHIBIT C: Earnout
EXHIBIT D: Allocation of Purchase Price
EXHIBIT E: Reserved
EXHIBIT F: Form of Assignment and Assumption of Lease
EXHIBIT G: Form of Escrow Agreement
EXHIBIT H: Form of Xxxx Employment Agreement
EXHIBIT I: Stock Option Plan
SCHEDULES
Schedule 1.1(a) Real Property
Schedule 1.1(b) Tangible Property
Schedule 1.1(c) Accounts Receivable
Schedule 1.1(d) Seller Contracts
Schedule 1.1(e) Governmental Authorizations
Schedule 1.1(g) Intellectual Property Assets
Schedule 1.1(i) Third Party Claims By Seller
Schedule 1.1(j) Deposits and Prepayments
Schedule 1.1(k) Independent Contractor Agreements
Schedule 1.2(h) Certain Excluded Assets
Schedule 1.4(a)(iv) Certain Assumed Liabilities
Schedule 2.1(a) Foreign Jurisdictions
Schedule 2.1(c) Equity Securities of Other Persons owned by Seller
Schedule 2.2(b) Conflicts
Schedule 2.2(c) Consents or Notices Required
Schedule 2.3 Membership Interests
Schedule 2.4 Financial Statements
Schedule 2.6 Real Property
Schedule 2.7(a) Title
Schedule 2.7(b) Tangible Personal Property
Schedule 2.9 Employees
Schedule 2.10 Employee Benefits
Schedule 2.11(b) Non-Transferable Governmental Authorizations Non-Transferable
Schedule 2.12(a) Legal Proceedings
Schedule 2.13 Insurance Policies
Schedule 2.14(a) Seller Contracts
Schedule 2.14(b) Independent Contractor Agreements
Schedule 2.16 Related Person Transactions
Schedule 2.20 Accounts Receivable
Schedule 2.21 Material Customers
Schedule 2.23 Customer Prepayments and Deposits
Schedule 3.3 Buyer Consents and Approvals
Schedule 3.6(a) Buyer Outstanding Convertible or Exchangeable Securities
Schedule 8.1(a) Buyer Employee Benefits
Schedule 8.10 Seller Sick Leave as of the Closing Date
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT") is made as of January
13, 2006, by and among GLOBALOPTIONS GROUP, INC., a Nevada corporation ("BUYER")
and XXXXX XXX XXXX ASSOCIATES, LLC, a Delaware limited liability company
("SELLER"). All capitalized terms used herein but not otherwise defined shall
have the meanings given such terms in ANNEX A, attached hereto.
RECITALS
Seller desires to sell, and Buyer desires to purchase, the Assets (as
defined below) of Seller for the consideration and on the terms set forth in
this Agreement.
AGREEMENT
The parties, intending to be legally bound, hereby agree as follows:
ARTICLE I
SALE AND TRANSFER OF ASSETS; CLOSING
SECTION 1.1 ASSETS TO BE SOLD. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing (as defined in SECTION
1.6 below), Seller shall sell, convey, assign, transfer and deliver to Buyer,
and Buyer shall purchase and acquire from Seller, free and clear of any charge,
claim, equitable interest, lien, option, pledge, security interest, mortgage,
encroachment, or restriction of any kind (an "ENCUMBRANCE"), other than any
Encumbrance identified on ANNEX B (a "PERMITTED ENCUMBRANCE"), all of Seller's
property and assets, real, personal or mixed, tangible and intangible, of every
kind and description, wherever located, necessary to conduct Seller's crisis and
emergency management consulting business (the "BUSINESS"), as currently
conducted as of the Closing, excluding the Excluded Assets, but including the
following:
(a) all leasehold interest in all real property leased by
Seller (the "REAL PROPERTY") described in SCHEDULE 1.1(A);
(b) all equipment, furniture, office equipment, computer
hardware, supplies, materials, vehicles, the RV, and other items of tangible
personal property (other than inventory) of every kind owned or leased by Seller
(the "TANGIBLE PERSONAL PROPERTY") described in SCHEDULE 1.1(B);
(c) all trade accounts receivable and all other accounts or
notes receivable of Seller described in SCHEDULE 1.1(C), as updated from time to
time (the "ACCOUNTS RECEIVABLE");
(d) excluding the NDAs (as defined on SCHEDULE 1.4(A)(IV)),
the Assumed Employment Agreements, the Equipment Leases, the Leases and the
Independent Contractor Agreements, any oral or written contract or agreement
described on SCHEDULE 1.1(D) (i) under which Seller has or may acquire any
rights or benefits, (ii) under which Seller has or may become subject to any
obligation or liability, (iii) by which Seller or any of the Assets is or may
become bound (any such contract or agreement, a "SELLER CONTRACT");
(e) all Governmental Authorizations (as defined in SECTION
2.11(B)) and all pending applications therefor or renewals thereof, set forth on
SCHEDULE 1.1(E), in each case to the extent transferable to Buyer;
(f) all data and records related to the operations of
Seller, and copies of all records referenced in SECTION 1.2(E) below;
(g) all of the intangible rights and property of Seller,
including the Intellectual Property Assets (as defined in SECTION 2.15)
described on SCHEDULE 1.1(G) and the Proprietary Assets (as defined in SECTION
2.15), going concern value, goodwill, telephone, telecopy and e-mail addresses,
and listings including the name "Xxxxx Xxx Xxxx Associates, LLC" and
abbreviations thereof, except as set forth in SECTION 1.2 below;
(h) all insurance benefits, including rights and proceeds,
arising from or relating to the Assets after the date hereof and prior to the
Closing Date, unless expended prior to the Closing Date in accordance with this
Agreement;
(i) all claims of Seller against third parties relating to
the Asset set forth on SCHEDULE 1.1(I);
(j) all rights of Seller relating to employee advances,
deposits and prepaid expenses, claims for refunds and rights to offset in
respect thereof which are not excluded under SECTION 1.2(F), set forth on
SCHEDULE 1.1(J) (the "DEPOSITS AND PREPAYMENTS"); and
(k) all rights under all subcontractor and independent
consultant agreements set forth on SCHEDULE 1.1(K) (the "INDEPENDENT CONTRACTOR
AGREEMENTS").
Notwithstanding the foregoing, the transfer of the Assets pursuant to this
Agreement will not include the assumption of any liability or obligation in
respect thereof unless Buyer expressly assumes such liability or obligation
pursuant to SECTION 1.4(A).
SECTION 1.2 EXCLUDED ASSETS. Notwithstanding anything to the
contrary contained in SECTION 1.1 or elsewhere in this Agreement, the following
items (collectively, the "EXCLUDED ASSETS") are not part of the sale and
purchase contemplated hereunder, are excluded from the Assets, and will remain
the property of Seller after the Closing:
(a) cash, cash equivalents and short-term investments;
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(b) the certificate of organization (and any amendments
thereto), minute book, membership records and company seal of Seller;
(c) the membership interests of Seller;
(d) all of Seller's insurance policies and rights thereunder
(except to the extent specified in SECTIONS 1.1(H) and (I));
(e) all personnel records and other records that Seller is
required by law to retain in its possession;
(f) all claims for refund of taxes and other governmental
charges of whatever nature;
(g) all rights in connection with and assets of any Employee
Benefit Plans (as defined in SECTION 2.10 below);
(h) all rights of Seller under this Agreement and in
connection with the transactions contemplated hereby, including without
limitation the rights of Seller under the Xxxx of Sale, the Assignment and
Assumption Agreement, the Assignment and Assumption of Lease, the Promissory
Note, and the Escrow Agreement;
(i) the property and assets expressly designated in
SCHEDULE 1.2(H); and
(j) the use of the name "Xxxxx Xxx Xxxx" by Xxxxx Xxx Xxxx,
an individual and member of Seller, for non-commercial purposes, and for certain
commercial purposes following the termination of the Xxxx Employment Agreement
which uses do not conflict with any provisions of the Xxxx Employment Agreement.
SECTION 1.3 PURCHASE PRICE.
(a) The initial consideration for the Assets (the "INITIAL
PURCHASE PRICE") will be Six Million and No/100 Dollars ($6,000,000)
wherein the Initial Purchase Price shall include: (i) cash in the
amount of Three Million Six Hundred Thousand and No/100 Dollars
($3,600,000); (ii) a promissory note in the principal amount of Four
Hundred Thousand and No/100 Dollars ($400,000), in the form of EXHIBIT
B (the "PROMISSORY NOTE"); (iii) such number of shares of Buyer Common
Stock which equals Two Million and No/100 Dollars ($2,000,000) ("STOCK
PORTION"), as such Stock Portion is determined in accordance with
SECTION 1.3(D); and (iv) the assumption of the Assumed Liabilities (as
defined in SECTION 1.4 below); PROVIDED, HOWEVER, (a) there shall be a
dollar-for-dollar increase adjustment to the Initial Purchase Price, if
at the Closing Date, the sum of (x) the Accounts Receivable and (y)
Deposits and Prepayments exceeds the sum of (1) the amount outstanding
under Seller's Bank Line of Credit as of the Closing Date, (2) the
Trade Accounts Payable and (3) Accrued Expenses, or (b) there shall be
a dollar-for-dollar decrease to the Initial Purchase Price, if at the
Closing Date the sum of (x) the amount outstanding under Seller's Bank
Line of Credit as of the Closing Date, (y) the Trade Accounts Payable
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and (z) Accrued Expenses exceeds the sum of (1) the Accounts Receivable
and (2) Deposits and Prepayments. Such adjustment shall be equal to the
amount of excess, and shall be paid to either Seller, in cash, if the
excess increases the Initial Purchase Price or Buyer, in cash, if the
excess decreases the Initial Purchase Price, as applicable as part of
the Initial Purchase Price within ninety (90) days following the
Closing Date (the "PURCHASE PRICE ADJUSTMENT"). Buyer shall return,
assign, transfer, convey and deliver to Seller and any all such
Accounts Receivable which have not been collected in full by Buyer as
of the day that is ninety (90) days following the Closing Date, and
Buyer shall relinquish all of its rights with respect to such Accounts
Receivable, provided that if such Account Receivable was included in
the Closing Date Statement (defined below) then such Account Receivable
was not included in the True-Up Statement. Seller shall have the sole
right to any amounts collected by Seller with respect to such Accounts
Receivable returned to Seller by Buyer.
(b) Seller shall prepare a closing date statement which
contains estimates only and which estimates shall be based upon
Seller's books and records as of the close of business on the business
day immediately preceding the Closing Date (the "CLOSING DATE
STATEMENT"), which shall be in the form of EXHIBIT A-1, and shall be
delivered at Closing. On or before ninety (90) days after the Closing
Date, Seller shall prepare a True-up Statement, substantially in the
form of EXHIBIT A, in order to calculate the Purchase Price Adjustment,
if any, to the Initial Purchase Price.
(c) In accordance with SECTION 1.7(B), at the Closing, the
Initial Purchase Price shall be delivered by Buyer to Seller and Escrow
Agent, as follows: (i) the payment of Three Million Six Hundred
Thousand and No/100 Dollars ($3,600,000) shall be delivered to Seller
by wire transfer of immediately available funds to an account specified
by Seller; (ii) the Promissory Note shall be delivered to Seller; (iii)
stock certificates representing such number of shares of the Buyer
Common Stock determined in accordance with SECTION 1.3(D), which shares
of Buyer Common Stock shall have a value equal to One Million Eight
Hundred Thousand and No/100 Dollars ($1,800,000) (the "CLOSING STOCK
PAYMENT") shall be delivered to Seller; and (iv) stock certificates
representing such number of shares of the Buyer Common Stock determined
in accordance with SECTION 1.3(D), which shares of Buyer Common Stock
shall have a value equal to Two Hundred Thousand and No/100 Dollars
($200,000) (the "ESCROWED STOCK") shall be delivered to the Escrow
Agent and held by the Escrow Agent pursuant to the Escrow Agreement.
The Promissory Note shall be paid, and the Escrowed Stock shall be
released, in accordance with the terms of the Promissory Note and the
Escrow Agreement, respectively.
(d) The number of shares of Buyer Common Stock comprising
the Stock Portion shall be equal to the number of shares resulting from
$2,000,000 divided by the Fair Market Value of a Share (which thirty
(30) trading day period referenced in the definition of the Fair Market
Value of a Share shall end at the close of business on the trading day
immediately preceding the Closing Date).
(e) As set forth in more detail below, Buyer shall pay
additional consideration to Seller if Seller Division achieves certain
revenue goals subsequent to the Closing Date (the "EARNOUT") and said
amount of the Earnout shall be included as part of the purchase price.
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(i) For the twelve (12) month periods ended on the
first, second, third and fourth anniversaries of the Closing
Date (the "EARNOUT PERIOD"), Seller shall be paid an Earnout
in such amounts upon the meeting of such targets by Seller
Division during each twelve (12) month period, as set forth on
EXHIBIT C hereto setting forth the Earnout calculation. The
Earnout shall be limited to a cumulative amount of $15,400,000
(the "MAXIMUM EARNOUT Amount") during the Earnout Period and
subject to SECTIONS 1.3(E)(III) - (IV), below. Notwithstanding
the foregoing, for a period of twelve (12) months immediately
following the Closing Date, the first $400,000 of the Earnout
shall be subject to offset for any unrecorded or undisclosed
liabilities or claims of Seller paid by Buyer as a result of
this transaction (the "$400,000 OFFSET") if the Promissory
Note and the Escrowed Stock are insufficient to cover such
claims.
(ii) During the Earnout Period, the Earnout shall be
paid by Buyer to Seller within sixty (60) days of the date of
the respective anniversary of the Closing Date as follows:
(A) the first $4,000,000 of the Earnout shall be
paid in cash; and
(B) the remainder of the Earnout shall be paid 50%
in cash and 50% in shares of Buyer Common Stock (which number
of shares shall be calculated by dividing the total amount
payable of the Earnout in shares of Buyer Common Stock by the
Fair Market Value of a Share which shall be determined on the
last day of the last month of the twelve (12) month period in
which the Earnout is earned).
(iii) The following forms of revenue shall be included
in the calculation of revenue targets of the Earnout set forth
in EXHIBIT C:
(A) any revenue with a Gross Margin of at least
50% that is generated by Seller Division which is attributable
to Seller's historical lines of business and operations;
(B) any revenue generated from any "tuck-in"
acquisition or other acquisition by Seller Division, provided
such revenue exceeds a 50% Gross Margin and such revenue
exceeds the baseline revenue used for determining the purchase
price of such "tuck-in" acquisition; and
(C) any revenue generated by Buyer or other
divisions of Buyer which are attributable to introductions
made by Seller Division or employees or advisors of Seller
Division, provided such revenues exceed a 50% Gross Margin.
(iv) The Earnout payable by Buyer to Seller shall be
modified if the following events occur:
(A) If the Xxxx Employment Agreement (as defined
in SECTION 1.7(A)(VI) below) is terminated in case of death or
disability, or is terminated by Buyer or its affiliate without
Cause (as such term is defined in the Xxxx Employment
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Agreement), or by Xxxx for Good Reason (as such term is
defined in the Xxxx Employment Agreement) any time during the
Earnout Period, the Earnout shall continue to accrue and be
paid for a period of twelve (12) months from the date of such
termination, if such Earnout is earned. The Earnout shall be
paid in accordance with SECTION 1.3(E)(II); PROVIDED, HOWEVER,
that if the twelve (12) months following such termination do
not elapse on an anniversary of the Closing Date, then the
portion of the Earnout which accrues following the anniversary
shall be paid within thirty (30) days of the anniversary of
the date of termination of the Xxxx Employment Agreement;
(B) If Xxxx terminates the Xxxx Employment
Agreement without Good Reason, the Earnout shall cease
immediately, and no payment of any Earnout for said year or
thereafter shall be paid; or
(C) If Buyer or its affiliate terminates the Xxxx
Employment Agreement for Cause, the Earnout shall be prorated
and paid for such period up and until the date of termination,
if any Earnout has been earned prior to such date of
termination, and the Earnout shall be discontinued from such
termination date.
SECTION 1.4 LIABILITIES.
(a) At the Closing, Buyer shall assume and agree to fully
discharge Seller's Bank Line of Credit and only the following specifically
enumerated liabilities and obligations of Seller (the "ASSUMED LIABILITIES"):
(i) any trade account payable of Seller which
remains unpaid at the Closing (the "TRADE ACCOUNTS PAYABLE");
(ii) any debt, liability, or obligation of Seller
relating to the ownership or operation of the Assets (other than the Retained
Liabilities) arising after the Closing Date;
(iii) any obligations of Seller under any Seller
Contract or Independent Contractor Agreement arising, on, prior to or after the
Closing Date (other than any liability arising out of a breach which occurred
prior to the Closing);
(iv) any liability of Seller described in SCHEDULE
1.4(A)(IV), including amounts owed to Xxxxxxxx Bank under Seller's Bank Line of
Credit;
(v) any liability or obligations of Seller arising
subsequent to Closing out of or relating to the employment agreements between
Seller and each of Xxxx Xxxxxxx, Xxxxx Xxxxxxx and Xxxx Xxxxx (the "ASSUMED
EMPLOYMENT AGREEMENTS"); and
(vi) the following accrued expenses of Seller:
finders' fees associated with such Finders Fees Agreements (as such term is
defined in SCHEDULE 1.1(D)), accrued vacation, insurance expenses related to any
Account Receivable, payroll taxes related to any Account Receivable, sales/use
taxes related to any Account Receivable, prepayments and retainers, lease
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deposits, and other miscellaneous expenses related to Accounts Receivable
(collectively, "ACCRUED EXPENSES").
(b) All liabilities and obligations of Seller including,
without limitation any legal and accounting fees incurred by Seller in
connection with the transactions contemplated by this Agreement, whether arising
prior to or after the Closing Date, other than the Assumed Liabilities, are
referred to as the "RETAINED LIABILITIES". All of the Retained Liabilities will
remain the sole responsibility of and will be retained, paid, performed and
discharged solely by Seller.
SECTION 1.5 ALLOCATION. The Purchase Price will be allocated as set
forth in EXHIBIT D. After the Closing, the parties shall make consistent use of
the allocation specified in EXHIBIT D for all tax purposes and in any tax
returns filed with the Internal Revenue Service in respect thereof, including
IRS Form 8594.
SECTION 1.6 CLOSING. The consummation of the purchase and sale
provided for in this Agreement (the "CLOSING") will take place at the offices of
Buyer's legal counsel's office at 0000 00xx Xxxxxx, X.X. Xxxxxx Xxxxx,
Xxxxxxxxxx, X.X. 00000, at 10:00 a.m. (local time) on a date mutually agreed to
by the parties but not later than February 28, 2006 (the "CLOSING DATE");
PROVIDED, HOWEVER, that the Closing Date shall automatically be extended, if
necessary, to permit Seller sufficient time to deliver to Buyer the audited
financial statements in a form which complies with SECTION 2.4 hereof.
SECTION 1.7 CLOSING OBLIGATIONS.
(a) At the Closing, Seller shall deliver, or caused to be
delivered, to Buyer:
(i) a xxxx of sale for all of the Assets in a form
to be agreed upon (the "XXXX OF SALE"), executed by Seller;
(ii) an assignment of all of the Assets which are
intangible personal property in a form to be agreed upon, which assignment will
also contain Buyer's undertaking and assumption of the Assumed Liabilities
including, without limitation, the Assumed Employment Agreements (the
"ASSIGNMENT AND ASSUMPTION AGREEMENT"), executed by Seller;
(iii) with respect to each leasehold interest in real
property leased by Seller as set forth in SCHEDULE 1.1(A), an Assignment and
Assumption of Lease in the form of EXHIBIT F (the "ASSIGNMENT AND ASSUMPTION OF
LEASE"), executed by Seller, and a consent to such Assignment and Assumption of
Lease by the lessor, if such lessor's consent to assignment is required by the
terms of the applicable lease;
(iv) copies of any Pre-Closing Consent or
Non-Material Consent, obtained by Seller prior to Closing;
(v) an escrow agreement in the form of EXHIBIT G,
executed by Seller and the Escrow Agent (the "ESCROW AGREEMENT");
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(vi) the employment agreement between Xxxx and Buyer,
in the form of EXHIBIT H, executed by Xxxx (the "XXXX EMPLOYMENT AGREEMENT") and
any amendments to the Assumed Employment Agreements, if any, required to make
such agreements' non-compete provisions materially consistent with those
contained in the Xxxx Employment Agreement;
(vii) a certificate of an officer or authorized
representative of Seller certifying (A) as complete and accurate as of the
Closing, attached copies of the Operating Agreement of Seller, (B) attached
requisite resolutions or actions of the requisite Members of Sellers approving
the execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby and the change of name contemplated by SECTION
8.7, (C) the incumbency of the officers or authorized representative of Seller
executing this Agreement and any other document relating to the transactions
contemplated hereby;
(viii) the certificate of organization and all
amendments thereto of Seller, duly certified as of a recent date by the
Secretary of State of Delaware;
(ix) certificates as to the good standing of Seller,
executed by the appropriate officials of the jurisdiction of Seller's
organization and each foreign jurisdiction in which Seller is licensed or
qualified to do business as specified in SCHEDULE 2.1(A);
(x) the Closing Date Statement; and
(xi) any amendments or supplements to the Schedules
attached to this Agreement for the purposes of including in such Schedules any
matter hereafter arising or discovered which, if existing or known as of the
date of this Agreement, would have been required to be set forth or described in
such Schedules or that is necessary to complete or correct any information in
any representation or warranty of Seller contained in this Agreement. Upon
receipt of such updated schedules, Buyer may either elect to terminate this
Agreement, if a disclosure on such updated schedules would have resulted in a
breach of this Agreement if such updated disclosure was not made, or Buyer may
elect to consummate the transaction contemplated by this Agreement. In either
such case, Buyer shall waive any other remedy that Buyer may have had with
respect to disclosures made to Buyer after the date hereof which appear on the
updated schedules.
(b) At the Closing, Buyer shall deliver to Seller:
(i) Three Million Six Hundred Thousand and No/100
Dollars ($3,600,000), by wire transfer of immediately available funds to an
account specified in writing by Seller (which wire transfer instructions must be
delivered by Seller to Buyer at least one (1) Business Day prior to Closing);
and the Closing Stock Payment;
(ii) the Assignment and Assumption Agreement,
executed by Buyer;
(iii) the Escrow Agreement, executed by Buyer and the
Escrow Agent;
(iv) the Xxxx Employment Agreement and the amendments
to the Assumed Employment Agreements, if any, required to make such agreements'
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non-compete provisions materially consistent with those contained in the Xxxx
Employment Agreement, each executed by Buyer;
(v) a certificate of the Secretary of Buyer
certifying, as complete and accurate as of the Closing, attached copies of the
bylaws of Buyer and certifying and attaching all requisite resolutions or
actions of Buyer's board of directors approving the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
(including the reservation of shares of Buyer Common Stock to be issued in
connection with the transactions contemplated hereby) and certifying to the
incumbency of the officers of Buyer executing this Agreement and any other
document relating to the transactions contemplated hereby;
(vi) a stock option plan, attached hereto as EXHIBIT
I for the former employees of Seller to be available to said employees from
Buyer subsequent to the Closing Date, and said option plan will contain in part:
(x) stock options at the value of $500,000 as of the Closing Date, based upon
the fair market value of a share of Buyer's Common Stock as of the Closing Date
(as fair market value is defined in such stock option plan, attached hereto as
EXHIBIT I); (y) with a vesting schedule of four years; and (z) distribution list
of said stock options to employees determined by Xxxx;
(vii) the certificate of incorporation (and all
amendments thereto) of Buyer, duly certified as of a recent date by the
Secretary of State of the State of Nevada;
(viii) the Promissory Note; and
(ix) any amendments or supplements to the Schedules
attached to this Agreement for the purposes of including in such Schedules any
matter hereafter arising or discovered which, if existing or known as of the
date of this Agreement, would have been required to be set forth or described in
such Schedules or that is necessary to complete or correct any information in
any representation or warranty of Seller contained in this Agreement. Upon
receipt of such updated schedules, Seller may either elect to terminate this
Agreement, if a disclosure on such updated schedules would have resulted in a
breach of this Agreement if such updated disclosure was not made, or Seller may
elect to consummate the transaction contemplated by this Agreement; PROVIDED,
HOWEVER, that Seller may not terminate this Agreement if any amendments or
supplements to SCHEDULE 3.6(A) relate to acquisitions made by Buyer or financing
provided to Buyer. In either such case, Seller shall waive any other remedy that
Seller may have had with respect to disclosures made to Seller after the date
hereof which appear on the updated schedules.
(c) At the Closing, Buyer shall deliver to the Escrow Agent
the Escrowed Stock.
SECTION 1.8 CONSENTS. Seller shall use its commercially
reasonable efforts to obtain consent or Novation for assignment or transfer, as
applicable, of Seller Contracts relating to the Material Customers and the
Governmental Authorizations, to the extent the law permits assignment or
transfer thereof (the "PRE-CLOSING CONSENTS") prior to Closing. Except for the
Pre-Closing Consents, prior to the Closing Seller shall not be required to
obtain consent to assignment of any agreement or contract from any other party
identified on SCHEDULE 2.2(C) (collectively, the "NON-MATERIAL CONSENTS").
Notwithstanding anything to the contrary in this Agreement, if any Pre-Closing
Consents or Non-Material Consents have not been obtained at or prior to the
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Closing, this Agreement will not constitute an assignment or an agreement to
assign if such assignment or attempted assignment would constitute a breach of
the underlying agreement, contract or Government Authorization or result in a
loss or diminution related thereto; PROVIDED, HOWEVER, that with respect to each
Non-Material Consent and Pre-Closing Consent not obtained prior to Closing,
Seller shall take commercially reasonable steps after the Closing to obtain such
Pre-Closing Consents and Non-Material Consents. Buyer shall cooperate with
Seller in obtaining such Pre-Closing Consents and Non-Material Consents. In
addition, until such consents are obtained, Seller shall cooperate with Buyer to
the extent legally permissible and feasible in any reasonable arrangement
designed to provide for Buyer the benefits of the underlying agreement, contract
or Governmental Authorizations, including, without limitation, the enforcement,
for the account and benefit of Buyer, of any and all rights of Seller against
any other Person with respect to such underlying agreement, contract or
Governmental Authorization, and Buyer shall reimburse Seller for any liabilities
or expenses incurred by Seller relating to such underlying agreement, contract
or Governmental Authorization during such period.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as of the date hereof and as of
the Closing Date, as follows:
SECTION 2.1 ORGANIZATION AND GOOD STANDING.
(a) Seller is a limited liability company duly
organized, validly existing, and in good standing under the laws of the State of
Delaware, with the requisite limited liability company power and authority to
conduct its business as it is now being conducted, to own or use its properties
and assets, and to perform all its obligations under its contracts. Seller is
duly qualified to do business as a foreign entity under the laws of each state
or other jurisdiction set forth in SCHEDULE 2.1(A). Seller is in good standing
under the laws of each of the states listed on SCHEDULE 2.1(A).
(b) Complete and accurate copies of the certificate
of organization and operating agreement of Seller (collectively, the "GOVERNING
DOCUMENTS"), as currently in effect, have been delivered to Buyer.
(c) Except as set forth in SCHEDULE 2.1(C), Seller
does not own and has not entered into any agreement or contract to acquire any
equity securities or other securities of any Person or any direct or indirect
equity ownership interest in any other business.
SECTION 2.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and
binding obligation of Seller, enforceable against Seller in accordance with its
terms except as enforcement may be limited by applicable bankruptcy, insolvency,
reorganization or similar laws from time to time in effect affecting creditors'
rights generally and by legal and equitable limitations on the availability of
specific remedies ("ENFORCEABILITY LIMITATIONS"). Upon the due execution and
delivery by Seller of each of the documents and instruments to be executed and
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delivered by Seller at Closing pursuant to SECTION 1.7(A) (collectively, the
"SELLER'S CLOSING DOCUMENTS"), each of Seller's Closing Documents will
constitute the legal, valid, and binding obligation of Seller enforceable
against Seller in accordance with their respective terms. Seller has the
requisite limited liability company and power to execute and deliver this
Agreement and Seller's Closing Documents and to perform its obligations under
this Agreement and Seller's Closing Documents, and such action has been duly
authorized by all necessary limited liability company action.
(b) Except as set forth in SCHEDULE 2.2(B), to the
best of Seller's knowledge, neither the execution and delivery of this Agreement
nor the consummation or performance of any of the transactions contemplated
hereby will (with or without notice or lapse of time): (i) contravene, conflict
with, or result in a violation of any provision of any of the Governing
Documents of Seller, (ii) contravene, conflict with, or result in a violation of
any Legal Requirement (as defined in SECTION 2.11(A) below) (except for
contraventions, conflicts or violations that would not have a material adverse
impact on the Assets or the Business) or Order (as defined in SECTION 2.12(B)
below) of any court or governmental authority to which Seller or any of the
Assets are subject, or (iii) breach any provision of, give any Person the right
to declare a default, accelerate the maturity or performance of or payment
under, result in the creation or imposition of any Encumbrance (except a
Permitted Encumbrance) upon any of the Assets under, or cancel, or terminate,
any contract to which Seller is a party or by which Seller or the Assets are
bound (except to the extent any of the foregoing would not have a material
adverse impact on the Assets or the Business).
(c) Except as set forth in SCHEDULE 2.2(C), Seller
is not required to give any notice to or obtain any consent from any Person in
connection with the execution and delivery of this Agreement or the consummation
or performance of the transactions contemplated hereby (including the assignment
of Seller Contracts hereunder).
SECTION 2.3 CAPITALIZATION. The authorized equity of Seller consists
of membership interests held entirely by the Persons listed on SCHEDULE 2.3. The
members of Seller listed on SCHEDULE 2.3 own one hundred percent (100%) of the
membership interests of Seller.
SECTION 2.4 FINANCIAL STATEMENTS. Attached hereto as SCHEDULE 2.4
are Seller's unaudited balance sheet as of December 31, 2004, unaudited profit
and loss statement for the twelve months ended December 31, 2004, unaudited
balance sheet as of October 31, 2005 and unaudited profit and loss statement for
the ten (10) months ended October 31, 2005 (the "FINANCIAL STATEMENTS"). Except
as set forth on SCHEDULE 2.4, the Financial Statements fairly present the
financial condition and the results of operations of Seller as at the respective
dates of and for the periods referred to in such Financial Statements, all in
accordance with generally accepted accounting principals ("GAAP"). Except as set
forth on SCHEDULE 2.4, Seller shall provide to Buyer, on or before Closing,
audited financial statements for the years ended December 31, 2004 and December
31, 2005, and such financial statements shall be materially consistent with the
Financial Statements, but only with respect to the period that the Financial
Statements represent. The aforementioned audited financial statements must be in
the form and an opinion of an independent certified public accountant to meet
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the standards required by the Securities and Exchange Commission and the
independent certified public accountant must provide its consent to the use of
the Seller's audited financial statements in the Buyer's 8-K and other
registration filings with the Securities and Exchange Commission. Further, the
Seller's independent public accountant shall make all of its work papers and
other supporting documents it utilized in proving its opinion available, if
needed for review by the Buyer's independent certified public accountant.
SECTION 2.5 SUFFICIENCY OF ASSETS. The Assets constitute all of the
assets, tangible and intangible, necessary to conduct Seller's business in the
manner presently operated by Seller.
SECTION 2.6 REAL PROPERTY LEASES. SCHEDULE 1.1(A) sets forth all
leases of Real Property to which Seller is a party (the "LEASES"). Complete and
true copies in all material respects of the Leases, as amended or modified, have
been delivered to Buyer. Except as set forth on Schedule 2.6, the Leases are in
full force and effect, and to Seller's knowledge, are binding and enforceable on
each of the parties thereto in accordance with their respective terms (except as
limited by Enforceability Limitations), and have not been amended or modified
since the date of delivery to Buyer. No party to any Lease has sent written
notice to the other claiming that such party is in default thereunder, which
alleged default remains uncured. Seller's possession and quiet enjoyment of any
Real Property have not been materially disturbed.
SECTION 2.7 PERSONAL PROPERTY.
(a) as set forth on SCHEDULE 2.7(A), Seller owns good and
transferable title to all of its Assets (excluding its interest in the Real
Property described in SCHEDULE 1.1(A)), free and clear of any Encumbrances other
than Permitted Encumbrances.
(b) Except as set forth in SCHEDULE 2.7(B), each item of
Tangible Personal Property set forth set forth on SCHEDULE 1.1(B) is in
reasonable good repair and good operating condition, ordinary wear and tear
excepted. Except as set forth on SCHEDULE 2.7(B), all Tangible Personal Property
is in the possession of Seller.
SECTION 2.8 TAXES. Seller has timely filed all material income tax
returns that it was required to file, and has paid all material income taxes
shown thereon as due. To Seller's knowledge, all such income tax returns were
true and complete in all material respects. There are no Encumbrances for taxes
on any of the Assets, other than Permitted Encumbrances. To Seller's knowledge,
all material taxes that Seller was required by Legal Requirements to withhold,
deduct or collect, and pay over have been duly withheld, deducted or collected
and, to the extent required, have been paid to the proper governmental
authority.
SECTION 2.9 EMPLOYEES. SCHEDULE 2.9 sets forth a complete and
accurate list, giving name, job title, current compensation paid or payable,
vacation leave that is accrued but unused, and services credited for purposes of
vesting and eligibility to participate under any Employee Benefit Plan (as
defined below) (in each case, to the extent applicable), for each employee of
Seller, including each employee on leave of absence or layoff status (the
"EMPLOYEES"). Seller has not experienced any organized slowdown, work
interruption strike or work stoppage by its employees, and, to the knowledge of
Seller, there is no strike, labor dispute or union organization activities
pending or threatened in writing against Seller. None of the Employees belongs
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to any union or collective bargaining unit. Except as set forth on SCHEDULE 2.9,
no Employee of Seller is bound by (a) any employment or similar contract or
agreement with Seller, or (b) to Seller's knowledge, any contract or agreement
that purports to limit or restrict the ability of such Employee to (i) perform
his duties as an employee of Seller, or (ii) engage in any conduct, activity, or
practice relating to Seller's business.
SECTION 2.10 EMPLOYEE BENEFITS. SCHEDULE 2.10 sets forth all plans,
programs, or arrangements that Seller has maintained, adopted or obligated
itself under with respect to employees' benefits, including pension or
retirement plans, medical or dental plans, life or long-term disability
insurance, bonus or incentive compensation, stock option or equity participation
plans (the "EMPLOYEE BENEFIT PLANS"). Seller has no liability or obligation with
respect to any Employee under any Employee Benefit Plan other than normal salary
or wage accruals and paid vacation, sick leave and holiday accruals in
accordance with Seller's past practice and policy. Seller has performed all
obligations required to be performed under, and has complied with all Legal
Requirements in connection with, all such Employee Benefit Plans and is not in
arrears under any of the terms thereof.
SECTION 2.11 COMPLIANCE WITH LEGAL REQUIREMENTS, GOVERNMENTAL
AUTHORIZATIONS.
(a) To Seller's knowledge, Seller is, and at all times since
January 1, 2004, has been, in compliance in all material respects with any
federal, state, or local law, ordinance or regulation (including with respect to
environmental, disposal of hazardous substances, or public health or safety) (a
"LEGAL REQUIREMENT"), applicable to the operation of the Business as currently
conducted or the ownership or use of any of the Assets, except where the failure
to so comply would not have a material adverse effect on the Assets (taken as a
whole) or the Business.
(b) SCHEDULE 1.1(E) contains a complete and accurate list of
all Novations, approvals, licenses or permits that are necessary for Seller to
lawfully conduct the Business as currently conducted and to permit Seller to own
and use the Assets in the manner in which it currently owns and uses the Assets
(the "GOVERNMENTAL AUTHORIZATIONS"), except where the failure to so possess such
approval, license or permit would not have a material adverse effect on the
Assets or the Business. Except as set forth on SCHEDULE 2.11(B), each such
license or permit is transferable to Buyer as of the Closing.
SECTION 2.12 LEGAL PROCEEDINGS, ORDERS.
(a) Except as set forth in SCHEDULE 2.12(A), there are no
actions or proceedings pending by or against Seller or against Seller in respect
of the Assets or the Business. To the knowledge of Seller, no such action or
proceeding has been threatened in writing.
(b) There are no outstanding orders, injunctions, judgments
or decrees (an "ORDER") against Seller issued by a court of competent
jurisdiction or a regulatory body having authority over Seller.
SECTION 2.13 INSURANCE. SCHEDULE 2.13 sets forth a complete and
accurate list of all current insurance policies under which any of the assets or
properties of Seller is covered or otherwise relating to the Business. All
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policies listed in SCHEDULE 2.13 are in full force and effect, and Seller has
paid all premiums due, and no event of default exists under any of the policies
listed in SCHEDULE 2.13, except for such defaults as would not have a material
adverse effect on the Assets or the Business.
SECTION 2.14 CONTRACTS; NO DEFAULTS.
(a) SCHEDULE 1.1(D) contains a true and complete list of
each Seller Contract necessary to operate the Business as currently conducted.
Seller has delivered to Buyer an accurate and materially complete copy of each
written Seller Contract, and has provided Buyer with a true and accurate
description (in all material respects) of each oral Seller Contract. Each Seller
Contract is valid and binding against Seller and in full force and effect.
Except as set forth on SCHEDULE 2.14(A), with respect to each Seller Contract,
Seller and, to Seller's knowledge, the other party thereto is in compliance with
all material terms and requirements of each Seller Contract. There are no
existing events of default under Seller Contracts, and no events have occurred,
that with the giving of notice or lapse of time, or both, would constitute a
default of Seller under any Seller Contract.
(b) SCHEDULE 1.1(K) contains a true and complete list of
each Independent Contractor Agreement which are currently used by Seller in the
operation of the Business as currently conducted. Seller has delivered to Buyer
an accurate and materially complete form of the terms and conditions that are
incorporated into each Independent Contractor Agreement, as well as unexecuted
final versions of each Independent Contractor Agreement. Seller has executed
copies of each Independent Contractor Agreement on file, which files will be
transferred to Buyer at Closing. Each Independent Contractor Agreement is valid
and binding against Seller and in full force and effect. Except as set forth on
SCHEDULE 2.14(B), with respect to each Independent Contractor Agreement, Seller
and, to Seller's knowledge, the other party thereto is in compliance with all
material terms and requirements of each Independent Contractor Agreement.
SECTION 2.15 INTELLECTUAL PROPERTY. SCHEDULE 1.1(G) lists any legal
names, assumed names, registered or unregistered trade names, patents,
registered trademarks, registered or unregistered service marks, registered or
unregistered copyrights, applications for any of the foregoing, computer
software, and internet domain names, owned or licensed by Seller, in each such
case which are necessary to the Business as currently conducted by Seller
(collectively, the "INTELLECTUAL PROPERTY ASSETS"). The documentation relating
to (a) such Intellectual Property Assets and (b) any trade secrets, know-how,
confidential or proprietary information and customer lists of Seller, in each
such case which are necessary to the Business as currently conducted by Seller
(the items referenced in clause (b), the "PROPRIETARY ASSETS") is accurate, and
reasonable in detail and content to allow the use by Seller in the Business as
currently conducted. Seller has not received any written notice from any third
Person that Seller's use of the Intellectual Property Assets and Proprietary
Assets conflicts with the intellectual property rights of any third Person.
SECTION 2.16 RELATIONSHIPS WITH RELATED PERSONS. Except as set forth
in SCHEDULE 2.16, no member or any Related Person (as defined below) of the
members, other than Seller, has any interest in any property (whether real,
personal, or mixed and whether tangible or intangible), used in or pertaining to
Seller's business. To the knowledge of Seller, no Member or any Related Person
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of any Member owns an equity interest or any other financial interest in any
Person that has (a) had business dealings or a material financial interest in
any transaction with Seller other than business dealings or transactions
disclosed in SCHEDULE 2.16, each of which has been conducted in the Ordinary
Course of Business at substantially prevailing market prices and on
substantially prevailing market terms, or (b) engaged in competition with Seller
with respect to Seller's business. Except as set forth on SCHEDULE 2.16, Seller
is not indebted, directly or indirectly, to any Person who is an officer,
director or Member of Seller or any Affiliate of any such Person in any amount
other than for salaries for services rendered or reimbursable business expenses,
and no such officer, director, Member or Affiliate is indebted to Seller, except
for advances made to employees of Seller in the Ordinary Course of Business to
meet reimbursable business expenses anticipated to be incurred by such Person.
For the purposes of this SECTION 2.16, "RELATED PERSON" means, with respect to
any individual: (i) an individual's spouse, siblings, siblings' children,
children, grandchildren or parents; or (ii) a trust, corporation, partnership or
other entity, the beneficiaries, stockholders, partners, or owners, or Persons
holding a controlling interest of which consist of such individuals referred to
in the immediately preceding clause (i).
SECTION 2.17 NO MATERIAL UNDISCLOSED LIABILITIES. Except for
liabilities or obligations reflected or reserved against in the unaudited
balance sheet as of October 31, 2005 (the "INTERIM BALANCE SHEET") and current
liabilities incurred in the Ordinary Course of Business of Seller, to Seller's
knowledge, Seller has no liabilities or obligations which in the aggregate are
material and adverse to the Business.
SECTION 2.18 INTENTIONALLY DELETED.
SECTION 2.19 BROKERS OR FINDERS. Neither Seller nor to Seller's
knowledge, any of its officers, directors, employees or agents, in each case on
behalf of Seller, has incurred any liability or obligation for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement or the transactions contemplated hereby.
SECTION 2.20 ACCOUNTS RECEIVABLE. All Accounts Receivable set forth
on SCHEDULE 1.1(C) represent or will represent valid claims against the account
debtors that were generated by Seller in the Ordinary Course of Business. Except
to the extent paid prior to the Closing Date and except as set on SCHEDULE 2.20,
to Seller's knowledge, such Accounts Receivable are or will be as of the Closing
Date collectible net of the respective reserves shown on the Interim Balance
Sheet (which reserves are adequate to Seller's knowledge, and calculated
consistent with past practice) without any set-off, within 365 days after the
day on which it first becomes due and payable.
SECTION 2.21 CUSTOMERS. Except as set forth on SCHEDULE 2.21, Since
September 30, 2005, Seller has not received any written notice that any customer
listed on SCHEDULE 2.21 (each, a "MATERIAL CUSTOMER") has terminated or intends
to terminate its business with Seller.
SECTION 2.22 BOOKS AND RECORDS. The books of account and other
financial records of Seller are materially complete and correct and have been
maintained in accordance with sound business practices.
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SECTION 2.23 PREPAYMENTS AND DEPOSITS. SCHEDULE 2.23 sets forth a
materially complete and accurate list of all prepayments or deposits from
customers for services to be performed after the Closing Date which have been
received by Seller as of the date hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as of the date hereof and as of
the Closing Date, as follows:
SECTION 3.1 ORGANIZATION AND GOOD STANDING.
(a) Buyer is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Nevada, with full corporate
power and authority to conduct its business as it is now being conducted.
(b) Complete and accurate copies of the certificate of
incorporation (as amended) and bylaws (as amended) of Buyer (collectively, the
"BUYER GOVERNING DOCUMENTS"), as currently in effect, have been delivered to
Seller.
SECTION 3.2 AUTHORITY, NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against it in accordance with its terms. Upon
the execution and delivery by Buyer of each of the documents and instruments to
be executed and delivered by Buyer at Closing pursuant to SECTION 1.7(B)
(collectively, the "BUYER'S CLOSING DOCUMENTS"), each of Buyer's Closing
Documents will constitute the legal, valid, and binding obligation of Buyer,
enforceable against it in accordance with its terms. Buyer has the absolute
right, power and authority to execute and deliver this Agreement and Buyer's
Closing Documents and to perform its obligations under this Agreement and
Buyer's Closing Documents, and such action has been duly authorized by all
necessary corporate action.
(b) Neither the execution and delivery of this Agreement by
Buyer nor the consummation or performance of any of the transactions
contemplated hereby by Buyer will (with or without notice or lapse of time): (i)
contravene, conflict with or result in a violation of any provision of Buyer
Governing Documents; (ii) contravene, conflict with or result in a violation of
any Legal Requirement or Order of any court or governmental authority to which
Buyer or its assets are subject; or (iii) conflict with or result in the breach
or termination of any term or provision of, or constitute a default under, or
cause any acceleration under, or cause the creation of any Encumbrance upon the
properties or assets of Buyer pursuant to, any indenture, mortgage, deed of
trust or other agreement or instrument to which Buyer is a party or by which
Buyer or any of its properties is or may be bound.
SECTION 3.3 CONSENTS AND APPROVALS. SCHEDULE 3.3 sets forth a
complete and accurate list of all consents and approvals of third parties that
are required in connection with the consummation by Buyer of the transactions
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contemplated by this Agreement, all of which consents and approvals either have
been obtained or will be obtained prior to the Closing Date.
SECTION 3.4 REGULATORY APPROVALS. All consents, approvals,
authorizations or other requirements prescribed by any law, rule or regulation
that must be obtained or satisfied by Buyer and that are necessary for the
consummation of the transactions contemplated by this Agreement have been, or
will be prior to the Closing Date, obtained and satisfied.
SECTION 3.5 AVAILABILITY OF FINANCING. Buyer has no reason to
believe that the private placement for the funds necessary to finance Buyer to
consummate the transactions contemplated by this Agreement will not be available
to Buyer on the Closing Date.
SECTION 3.6 CAPITALIZATION.
(a) Except as set forth on SCHEDULE 3.6(A), there has been
no material change in the number of outstanding shares of Buyer Common Stock
since the date of Buyer's most recent SEC Filing (defined below). All of the
issued and outstanding shares of Buyer Common Stock have been duly authorized
and validly issued and are fully paid and non-assessable. Except as disclosed in
the SEC Filings (as defined below) or as set forth in SCHEDULE 3.6(A), Buyer
does not have outstanding securities convertible into or exchangeable for any
shares of Buyer's capital stock, nor will it have outstanding any rights to
subscribe for or to purchase, or any options for the purchase of, or any
agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to, any shares of Buyer's
capital stock or any securities convertible into or exchangeable for any shares
of Buyer's capital stock. As of the Closing, Buyer will not be subject to any
obligation (contingent or otherwise) to repurchase or otherwise, acquire or
retire any shares of its capital stock.
(b) The preferences, rights, privileges, powers and
restrictions in respect of the Buyer Common Stock are as set forth in the
certificate of incorporation of Buyer and all such preferences, rights,
privileges, powers and restrictions are valid, binding and enforceable and in
accordance with all applicable laws.
SECTION 3.7 ISSUANCE OF SHARES. The issuance and delivery of shares
comprising the Stock Portion were, and any shares paid in respect of the Earnout
in accordance with this Agreement shall be, duly authorized by all necessary
corporate action on the part of Buyer, and all the shares comprising the Stock
Portion have been duly reserved and the shares to be paid in respect of the
Earnout will be available for issuance. The shares comprising the Stock Portion
and the shares anticipated to be paid in respect of the Earnout, when issued and
delivered, in accordance with the provisions of this Agreement shall be duly and
validly issued, fully paid and non-assessable.
SECTION 3.8 NO MATERIAL UNDISCLOSED LIABILITIES. Except for
liabilities or obligations reflected or reserved against in the audited balance
sheet as of September 30, 2005 and current liabilities incurred in the Ordinary
Course of Business of Buyer, Buyer has no liabilities or obligations which in
the aggregate are material to the Business.
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SECTION 3.9 INTENTIONALLY DELETED.
SECTION 3.10 SEC FILINGS. Buyer has delivered to Seller true and
complete copies of all reports, registration statements (other than registration
statements on Form S-8), proxy statements and other definitive filings filed by
Buyer with the Securities and Exchange Commission since January 1, 2004 (such
reports, registration statements, proxy statements and other definitive filings,
as amended, are sometimes collectively referred to as the "SEC FILINGS"). To the
Buyer's knowledge, the SEC Filings comply in all material respects with the
Securities Act of 1933, as amended and the Securities Exchange Act of 1934, as
amended (the "EXCHANGE Act"), and did not as of the dates thereof contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements contained therein not misleading. The audited
financial statements included in the SEC Filings were prepared in accordance
with generally accepted accounting principles applied on a consistent basis and
fairly present the financial position of Buyer as at the dates thereof and the
results of operations and cash flow for the periods then ended.
SECTION 3.11 BROKERS OR FINDERS. Neither Seller nor any of its
officers, directors, employees or agents on behalf of Seller has incurred any
liability or obligation for brokerage or finders' fees or agents' commissions or
other similar payment in connection with this Agreement or the transactions
contemplated hereby.
ARTICLE IV
COVENANTS OF SELLER PRIOR TO CLOSING
SECTION 4.1 ACCESS AND INVESTIGATION. Prior to the Closing Date, and
upon reasonable advance notice received from Buyer for purposes of facilitating
the completion of the audit of Seller required in connection with Buyer's due
diligence, Seller shall afford Buyer and its counsel reasonable access, during
normal business hours, to Seller's management personnel offices, and books and
records, such rights of access to be exercised in a manner that does not
unreasonably interfere with the operations of Seller.
SECTION 4.2 OPERATION OF THE BUSINESS OF SELLER. Between the date of
this Agreement and the Closing Date, Seller shall:
(a) conduct the business of Seller only in the Ordinary
Course of Business, unless Seller has conferred with Buyer prior to any material
change;
(b) use its commercially reasonable efforts to preserve
intact the current business organization of Seller, keep available the services
of Seller's officers, employees, and agents, and maintain Seller's relations and
good will with suppliers, customers, landlords, creditors, employees, agents,
and others having business relationships with it;
(c) confer with Buyer prior to implementing operational
decisions of a material nature; and
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(d) otherwise report periodically (but no more often than
weekly) to Buyer concerning the status of the business, operations, and finances
of Seller.
SECTION 4.3 NEGATIVE COVENANT. Except in the Ordinary Course of
Business or as otherwise expressly permitted herein, between the date of this
Agreement and the Closing Date, Seller shall not, without the prior written
consent of Buyer:
(a) increase any bonuses, salaries, or other compensation to
any shareholder, director, officer or employee or enter into any severance or
similar contract with any director, officer, or employee;
(b) adopt, amend or increase the payments to or benefits
under, any Employee Benefit Plan with respect to the Employees;
(c) mortgage, pledge, or impose any Encumbrance on any Asset
of Seller;
(d) materially and adversely modify any material Seller
Contract or Governmental Authorization;
(e) cancel or waive any claims or rights with a value to
Seller in excess of $50,000; or
(f) agree, whether orally or in writing, to do any of the
foregoing.
SECTION 4.4 NOTIFICATION. Between the date of this Agreement and the
Closing Date, Seller shall promptly notify Buyer in writing if it becomes aware
of any fact or condition that causes or constitutes a breach of any of Seller's
representations and warranties made as of the date of this Agreement. Should any
such fact or condition require any change to the Schedules, Seller shall deliver
to Buyer a supplement to the Schedules specifying such change prior to the
Closing Date.
SECTION 4.5 PAYMENT OF LIABILITIES. Seller shall pay or otherwise
satisfy in the Ordinary Course of Business all of its liabilities and
obligations as they become due. Buyer and Seller hereby waive compliance with
the bulk transfer provisions of the Uniform Commercial Code (or any similar law)
in connection with the contemplated transactions.
ARTICLE V
COVENANTS OF BUYER PRIOR TO CLOSING
SECTION 5.1 REQUIRED APPROVALS. As promptly as practicable after the
date of this Agreement, Buyer shall obtain all consents and approvals as
identified in SCHEDULE 3.3. Buyer also shall fully cooperate with Seller in
obtaining all consents identified in SCHEDULE 2.2(C).
SECTION 5.2 BEST EFFORTS. Buyer shall use its best efforts to cause
the conditions in Article VI and Article VII to be satisfied.
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ARTICLE VI
CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Assets and to take the other actions
required to be taken by Buyer at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Buyer, in whole or in part):
SECTION 6.1 ACCURACY OF REPRESENTATIONS. The representations and
warranties of Seller in this Agreement shall be accurate in all material
respects as of the Closing Date as if made on the Closing Date, except for any
changes consented to in writing by Buyer.
SECTION 6.2 SELLER'S PERFORMANCE. All of the covenants and
obligations that Seller is required to perform or to comply with pursuant to
this Agreement at or prior to the Closing must have been performed and complied
with in all material respects.
SECTION 6.3 CONSENTS. Any Pre-Closing Consent obtained prior to
Closing shall be delivered to Buyer and shall be in full force and effect.
SECTION 6.4 AVAILABILITY OF FINANCING. Buyer shall have received
financing in an amount sufficient to consummate the transactions contemplated
under this Agreement.
SECTION 6.5 ADDITIONAL DOCUMENTS. Seller must have caused the
documents and instruments required by SECTION 1.7(A) and the following documents
to be delivered (or tendered subject only to Closing) to Buyer:
(a) releases of all Encumbrances on the Assets, other than
Permitted Encumbrances; and
(b) an opinion of Xxxxxxx Berlin LLP, dated as of the
Closing Date, in a form customary for similar transactions.
SECTION 6.6 NO PROCEEDINGS. Since the date of this Agreement, there
has not been commenced or threatened proceeding or action (a) involving any
challenge to, or seeking damages or other relief in connection with, any of the
contemplated transactions, or (b) that may have the effect of preventing, making
illegal, imposing limitations or conditions on, or otherwise interfering, with
any of the contemplated transactions.
SECTION 6.7 NO MATERIAL ADVERSE CHANGE. Between the date of this
Agreement and the Closing Date (a) there shall not have been any material
adverse change in the Assets, results of operations or condition (financial or
otherwise) of Seller (in each case taken as a whole); (b) there shall not have
been any sale, lease, or other disposition of any Asset other than in the
Ordinary Course of Business, or any Encumbrance on any Asset; and (c) Seller
shall have conducted its business only in the Ordinary Course of Business.
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ARTICLE VII
CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE
Seller's obligation to sell the Assets and to take the other actions
required to be taken by Seller at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by Seller, in whole or in part):
SECTION 7.1 ACCURACY OF REPRESENTATIONS. All of Buyer's
representations and warranties in this Agreement must be accurate in all
material respects as of the Closing Date as if made on the Closing Date.
SECTION 7.2 BUYER'S PERFORMANCE. All of the covenants and
obligations that Buyer is required to perform or to comply with pursuant to this
Agreement at or prior to the Closing must have been performed and complied with
in all material respects.
SECTION 7.3 CONSENTS. Any consent required to be obtained by Buyer
as identified in SCHEDULE 3.3, shall be obtained and delivered to Seller by
Buyer, and shall be in full force and effect.
SECTION 7.4 ADDITIONAL DELIVERIES. Buyer must have caused the
documents, instruments and deliverables required by SECTION 1.7(B) and (C) to be
delivered to Seller or Escrow Agent (as applicable) and the following documents
to be delivered (or tendered subject only to Closing) to Seller:
(a) an opinion of the Law Offices of Xxxxxx X. Xxxxxxx,
dated as of the Closing Date, in a form customary for similar transactions; and
(b) such other documents as Seller may reasonably request
for the purpose of evidencing the satisfaction of any condition referred to in
this Article VII.
SECTION 7.5 NO PROCEEDINGS. Since the date of this Agreement, there
has not been commenced or threatened proceeding or action (a) involving any
challenge to, or seeking damages or other relief in connection with, any of the
contemplated transactions, or (b) that may have the effect of preventing, making
illegal, imposing limitations or conditions on, or otherwise interfering, with
any of the contemplated transactions.
SECTION 7.6 NO MATERIAL ADVERSE CHANGE. Between the date of this
Agreement and the Closing Date (a) there shall not have been any material
adverse change in the assets of Buyer, results of operations or condition
(financial or otherwise) of Buyer (in each case taken as a whole); (b) there
shall not have been any sale, lease, or other disposition of any asset of Buyer
other than in the Ordinary Course of Business; and (c) Buyer shall have
conducted its business only in the Ordinary Course of Business.
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ARTICLE VIII
ADDITIONAL COVENANTS
SECTION 8.1 EMPLOYEES AND EMPLOYEE BENEFITS.
(a) Effective immediately before the Closing Date, Seller
shall terminate the employment of all of its Employees and shall release such
Employees from the provisions of any restrictive covenants and/or agreements
with Seller with respect to Buyer so as to enable Buyer to employ such
individuals. Buyer shall offer employment to all of the Employees (the
"AVAILABLE EMPLOYEES") following the Closing at the same base salary and
incentive bonus arrangements, and the same or substantially the same group
health insurance and other benefits, as each such Available Employee has with
Seller, which Buyer benefits are described on SCHEDULE 8.1(A). Available
Employees shall receive credit for all of their service with Seller under all
welfare and benefit plans including but not limited to eligibility,
participation, vesting, entitlement to benefits, and amount of benefits (other
than the accrual of benefits under a defined benefit pension plan). Without
limiting the foregoing, Buyer covenants and agrees that any Available Employee
who is an Employee of Seller as of the Closing Date, shall be entitled to three
(3) weeks of vacation per year for each year following such Available Employee's
first anniversary of such Employee's hire date with Seller until such Available
Employee should be entitled to more than three (3) weeks of vacation per year
under Buyer's vacation plan and/or policy. No pre-existing condition limitation
or exclusion shall apply to participation and coverage for such Available
Employees under a group welfare or health benefit plan.
(b) It is understood and agreed that (i) any offer of
employment made by Buyer as referenced in SECTION 8.1(A) above will not
constitute any commitment, contract or understanding (expressed or implied) of
any obligation on the part of Buyer to a post-Closing Date employment
relationship of any fixed term or duration or upon any terms or conditions other
than those that Buyer may establish pursuant to individual offers of employment
consistent with the terms herein; and (ii) employment offered by Buyer is "at
will" and may be terminated by Buyer or by an employee at anytime for any reason
(subject to any written commitments to the contrary made by Buyer).
(c) Seller will be responsible for the payment of all wages
and other remuneration due to its Employees with respect to their services as
employees of Seller through the close of business on the Closing Date. Seller
will be liable for any claims made or incurred by the Employees and their
beneficiaries under the Employee Benefit Plans prior to the Closing, and Buyer
will not have any responsibility, liability or obligation, to the Employees or
to any other Person with respect to any Employee Benefit Plan.
(d) Employees and their eligible dependents who experience a
"qualifying event" (as defined in Code section 4980B) on or after the Closing
Date shall be eligible to elect health plan continuation coverage the
Consolidated Omnibus Budget Reconciliation Act of 1985(COBRA) under Buyer's
group health plan. Employees of the Seller and their eligible dependents who are
either (i) receiving COBRA continuation coverage under Seller's group health
plan prior to the Closing Date or (ii) do whom Buyer does not offer employment
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and who experience a "qualifying event" as defined in Code section 4980B shall
be eligible to elect COBRA continuation coverage under Seller's group health
plan.
SECTION 8.2 PAYMENT OF TAXES RESULTING FROM SALE OF ASSETS. Seller
shall pay in a timely manner all taxes (other than income taxes) imposed on it
resulting from or payable in connection with the sale of the Assets pursuant to
this Agreement.
SECTION 8.3 PAYMENT OF OTHER RETAINED LIABILITIES. In addition to
payment of taxes pursuant to SECTION 8.2, Seller shall pay, or make adequate
provision for the payment, in full of all of the Retained Liabilities. If any
such Retained Liabilities are not so paid or provided for, or if Buyer
reasonably determines that failure to make any payments will impair Buyer's use
or enjoyment of the Assets or conduct of the business of Seller previously
conducted using the Assets, Buyer may at any time after the Closing Date elect
to make all such payments directly or through the escrow (but shall have no
obligation to do so) and will be promptly reimbursed therefor by Seller.
SECTION 8.4 COVENANT NOT TO COMPETE.
(a) In consideration of the Purchase Price to be received
under this Agreement, Seller agrees that, for a period of three (3) years after
the Closing Date, Seller shall not directly or indirectly, do any of the
following:
(i) engage in, or invest in, own, manage, operate,
finance, control, be employed by, associated with or in any manner connected
with, or render services or advice to, any Person engaged in or planning to
become engaged in, or any other business whose products or activities compete in
whole or in part with, the business of Buyer, or any business carried on by
Buyer utilizing the Assets, anywhere within the continental United States;
(ii) induce or attempt to induce any employee of
Buyer to leave the employ of Buyer, or solicit, offer employment to, otherwise
attempt to hire, employ, or otherwise engage as an employee, independent
contractor, or otherwise, any such employee of Buyer; or
(iii) induce or attempt to induce any Person that was
a customer or client of Buyer at any time during the one (1) year period
preceding the Closing Date to cease doing business with Buyer, in any way
interfere with the relationship between Buyer and any such customer or client,
or solicit the business of any such customer or client.
(b) Seller acknowledges that all of the foregoing provisions
are reasonable and are necessary to protect and preserve the value of the Assets
and to prevent any unfair advantage being conferred on Seller. If any of the
covenants set forth in this SECTION 8.4 are held to be unreasonable, arbitrary,
or against public policy, the restrictive time period will be deemed to be the
longest period permissible by law under the circumstances and the restrictive
geographical area will be deemed to comprise the largest territory permissible
by law under the circumstances.
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SECTION 8.5 SATISFACTION OF RETAINED LIABILITIES. After the Closing,
Seller shall satisfy the Retained Liabilities in a manner which is not
materially detrimental to the Business and the Assets.
SECTION 8.6 RETENTION AND ACCESS TO RECORDS. After the Closing Date,
Buyer shall retain for a period of seven (7) years those records of Seller
delivered to Buyer. Buyer also shall provide Seller, Seller's representatives,
Seller's members and representatives of the members of Seller access thereto,
during normal business hours and on at least three (3) days' prior written
notice, to enable them to prepare financial statements or tax returns or deal
with tax audits or for any purpose associated with any Seller Contracts as
required thereunder. After the Closing Date, Seller shall provide Buyer and
Buyer's representatives reasonable access to records that are Excluded Assets,
(except for membership records and the Governing Documents) during normal
business hours and on at least three (3) days' prior written notice, for any
reasonable business purpose specified by Buyer in such notice. After the Closing
Date, Buyer shall notify Seller if it becomes aware of any alleged breach of a
Seller Contract that occurred prior to the Closing Date.
SECTION 8.7 CHANGE OF NAME. Within thirty (30) days following the
Closing Date, Seller shall take all actions necessary to amend its certificate
of organization and change its name to one sufficiently dissimilar to Seller's
present name to avoid confusion.
SECTION 8.8 UPDATING ACCOUNTS RECEIVABLE. Seller shall prepare and
deliver to Buyer a revised SCHEDULE 1.1(C) showing actual Accounts Receivable as
of the Closing Date, within thirty (30) days following the Closing. Buyer shall
permit employees of Seller who become employees of Buyer after the Closing to
continue their respective roles with the collection of Accounts Receivable
assumed by Buyer at the Closing.
SECTION 8.9 POST-CLOSING OPERATIONS OF SELLER DIVISION.
(a) During the period from the date of the Closing through
the Earnout Period, with respect to Seller Division, Buyer shall:
(i) At or prior to the Closing create, and
thereafter maintain: (A) a wholly owned subsidiary or a separate and distinct
operating division of Buyer to be known as "XXXXX XXX XXXX DIVISION", or some
other mutually acceptable name (in either case, the "SELLER DIVISION"); and (B)
true, complete and correct separate financial books and records of the results
of operations, assets and liabilities of Seller Division ("SELLER DIVISION
RECORDS") of sufficient detail so as to permit the accurate calculation of the
Earnout and the production of financial statements of and for Seller Division,
including without limitation, a profit and loss statement, aged accounts
receivable schedule and bad debts schedule; and (ii) record all transactions in
Seller Division Records, and prepare such financial statements in accordance
with generally accepted accounting principles applied on a consistent basis and
on a basis consistent with Buyer's prior practices, except as herein expressly
provided to the contrary;
(ii) At the Closing allocate to Seller Division, the
Business and the Assets; and thereafter conduct the Business and utilize the
Assets for the account and on behalf of Seller Division;
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(iii) Allocate to Seller Division and/or charge to its
operations, in addition to the Assets only such other and further assets and
liabilities as shall be acquired or incurred, as the case may be, by Seller
Division in the Ordinary Course of Business of Seller or with the prior written
consent of Xxxx and which consent shall not be unreasonably withheld or delayed
(such assets and liabilities collectively, respectively, the "OTHER ASSETS" and
"OTHER LIABILITIES");
(iv) Carry on and maintain the Business in the
Ordinary Course of Business of Seller and in substantially the same manner as
heretofore operated; perform, in all material respects all of the material
agreements, leases and documents assumed and/or acquired from Seller and/or in
the Ordinary Course of Business of the Seller Division subsequent to the Closing
as herein provided; and use its commercially reasonable efforts to preserve,
intact, the relationships with its customers and employees;
(v) Maintain its corporate existence in full force
and effect and good standing in each jurisdiction where the nature of the
business of Seller Division and/or ownership of Seller Division assets requires
Buyer to be qualified to do business; and use its commercially reasonable
efforts, to obtain and/or maintain all material licenses, consents or approvals
(from every governmental or regulatory body, or other person) required to be
obtained and/or held by Buyer for or with respect to Seller Division Business
(as defined below) and/or its assets; and
(vi) Permit Xxxx to supervise the day-to-day
operations of Seller Division (including, without limitation, approving the
corporate and accounting policies of the Seller Division, subject to the review
and approval of the Buyer's independent certified public accounting firm).
(b) Without limiting the generality of SECTION
8.9(A) hereof and in furtherance and not in limitation thereof, Buyer shall,
during the Earnout Period:
(i) Cause and/or permit Seller Division to engage in
only: (A) the Business; and (B) such other and further business lines to which
Xxxx may consent and which consent shall not be unreasonably withheld or delayed
(the "OTHER Business");
(ii) Provide or make available to the Seller Division
all reasonable working capital funds required for the full and uninterrupted
operation of the Business and Other Business (collectively, the "SELLER DIVISION
BUSINESS") and full and timely satisfaction of the obligations of Seller
Division and/or Buyer, provided such working capital funds were budgeted and
forecasted by the Seller Division and approved by the Buyer;
(iii) Provide Xxxx: (A) with a full and complete
financial package of Seller Division, (B) such additional reports as may be
reasonably necessary for the management of Seller Division, as reasonably
requested by Xxxx; (C) to secure from Buyer such information as Xxxx shall
reasonably deem necessary or appropriate; and (D) the right to review and copy
such reasonable other, further and additional financial and operating data,
materials and information as to Seller Division Business as may be reasonably
requested by Xxxx; such access not to materially interfere with day-to-day
operations of Buyer;
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(iv) Take and perform any and all reasonable actions
necessary to satisfy the covenants required to be performed by Buyer under
SECTION 1.3 of this Agreement;
(v) Except as expressly provided herein to the
contrary:
(A) within thirty (30) days following the
close of each calendar month distribute to Xxxx copies of the financial
statements of Seller Division as at the end of such calendar month, PROVIDED,
HOWEVER, the Seller Division must provide financial information to the Buyer in
a timely manner; and
(B) within sixty (60) days following each
anniversary of the Closing Date distribute to Xxxx copies of the financial
statements of Seller Division as of the end of such twelve (12) month period and
for the twelve (12) month period then ending.
(c) Without limiting the generality of SECTIONS 8.9(A) or
(B) hereof and in furtherance and not in limitation thereof, Buyer shall not,
nor shall Buyer authorize or permit Seller Division, unless such inaction would
materially adversely effect the business of the Buyer during the Earnout Period
(without the prior written consent of Xxxx in each instance, which consent shall
not be unreasonably withheld or delayed), to:
(i) Dispose of and/or discontinue or terminate, the
line of business conducted by Seller prior to the Closing;
(ii) Take or perform any action which would or might
prevent, inhibit or preclude the satisfaction, in whole or in part, of the
covenants required to be performed by Buyer under SECTION 1.3 of this Agreement;
(iii) Other than as expressly required by GAAP, change
the business, operations or financial condition, or the manner of managing or
conducting Seller Division Business and operations if such changes, if any, may
reasonably have a material adverse effect on such Seller Division Business or
the operations or financial condition of Seller Division, taken as a whole;
(iv) Except to the extent the same are inconsistent
with the GAAP practices of Buyer, change the accounting methods or practices
(including, without limitation, recognition of income) applied to Seller
Division;
(v) (A) Engage effective as of the Closing any
individuals other than those designated by Xxxx and at the respective
compensation levels in effect as of the date of the Closing; (B) subsequent to
the Closing engage as an employee, consultant and/or independent contractor any
person and/or entity to operate or manage Seller Division Business for so long
as Xxxx is employed by Buyer; and (C) other than to Xxxx, permit any
unreasonable increase in the salary or other compensation payable or to become
payable to any of Seller Division's officers, directors, employees or agents (in
their respective capacities as such), or the declaration, payment or commitment
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or obligation of any kind, nature or description for the payment to any of them
of an unreasonable bonus or other unreasonable additional salary or compensation
to any person;
(vi) Other than in the Ordinary Course of Business,
write off or take any charge or expense with regard to a receivable of Seller
Division without either giving Xxxx the opportunity to review, discuss and
assist in the handling of the claim;
(vii) Take any charge or expense to net income with
regard to the reduction or write-off of a receivable for the purpose of
accommodating a customer relation, litigation or similar concern of Buyer
relating in whole or in part to a business of Buyer other than Seller Division,
and in such event, provide a reasonable credit for such reduction or write-off
to Seller Division;
(viii) Sell, lease, abandon, assign, transfer, license
or otherwise dispose of any of the Assets constituting a material asset, or
enter into any agreement and/or option for or with respect to any of the
foregoing, which has or may have a material adverse effect on Seller Division
Business, the financial condition of Seller Division, its assets or prospects;
(ix) Amend, modify or provide for the early
termination of any material agreement or license to which it is a party and
which it acquired from Seller, which has or may have a material adverse effect
on Seller Division Business, the financial condition of Seller Division, and
Seller Division's assets or properties; or
(x) Permit the allocation to Seller Division
Business of, or burden Seller Division Business with, any corporate overhead
charge other than what is consistently charged to other divisions or affiliated
entities of Buyer for similar charges or burdens.
(d) During the Earnout Period, if there is (i) a Buyer
Change of Control, then prior to the consummation of the Buyer Change of
Control, the Buyer shall cause the successor to Buyer to execute and deliver to
Seller an undertaking covenanting to perform any obligations of Buyer which
survive the Closing Date, including without limitation, Sections 1.3 and 8.9
(the "SUCCESSOR UNDERTAKING"), or (ii) a Buyer Private Change of Control, then
prior to the consummation of the Buyer Change of Control, the Buyer shall cause
the successor to Buyer to execute and deliver to Seller a Successor Undertaking,
and such Successor Undertaking shall include an additional covenant which
obligates such successor to pay the Earnout in cash only.
(e) If a Triggering Event shall occur during the Earnout
Period, then prior to the consummation of such Triggering Event, Buyer shall pay
to Seller the Remainder Earnout Amount, if any. The Remainder Earnout Amount
shall be determined by a Qualified Appraiser(s) in accordance with this Section
8.9(e), as follows:
(i) At least thirty (30) days prior to the
consummation of a Triggering Event, Buyer shall notify Seller of such
prospective Triggering Event. Within ten (10) days of Seller's receipt of such
notice, Seller and Buyer shall attempt to mutually agree upon a Qualified
Appraiser to determine the Remainder Earnout Amount (including any amounts
necessary for the calculation thereof). If Seller and Buyer cannot mutually
agree upon a Qualified Appraiser by the end of such ten (10) day period, then
Seller and Buyer shall each appoint, by notice to the other, a Qualified
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Appraiser within ten (10) days. Within thirty (30) days after such appointment,
each Qualified Appraiser shall submit its determination of the Remainder Earnout
Payment to Seller and Buyer. If either party fails to appoint a Qualified
Appraiser within the ten (10) day period described above or if a Qualified
Appraiser so appointed fails to submit its determination of the Remainder
Earnout Payment within the required thirty (30) day period, and if such failure
continues for twenty (20) days after notice of such failure from the other
party, the fully-appointed Qualified Appraiser's timely determination of the
Remainder Earnout Payment shall be deemed approved by each of Seller and Buyer
for all purposes.
(ii) If two Qualified Appraisers are appointed and
deliver reports in timely fashion and if the Remainder Earnout Payments
determined by the Qualified Appraisers vary by 10% or less, the average of the
valuations shall be deemed approved by each of Seller and Buyer for all
purposes. If the two Remainder Earnout Payments vary by more than 10%, the two
Qualified Appraisers shall select a third Qualified Appraiser within fourteen
(14) days after delivery of their respective reports to Buyer and Seller. If the
two Qualified Appraisers are unable to agree upon the appointment of a third
Qualified Appraiser pursuant to this SECTION 8.9(E)(II) within such fourteen
(14) day period, either Seller or Buyer may, upon written notice to the other,
request that such appointment be made by a judge sitting for a state or federal
court of competent jurisdiction in New York.
(iii) If all three Qualified Appraisers cannot agree
upon the Remainder Earnout Payment within thirty (30) days following the
selection of the third Qualified Appraiser (which agreed Remainder Earnout
Payment shall in no event be higher than the higher, or lower than the lower, of
the two previously submitted Remainder Earnout Payments), the third Qualified
Appraiser shall, within thirty (30) days thereafter, submit its determination as
to the Remainder Earnout Payment to the other two Qualified Appraisers and to
Buyer and Seller in writing, and the average of the two numerically closest
Remainder Earnout Payments (or, if the Remainder Earnout Payments are
equidistant, the average of all three Remainder Earnout Payments) shall be
deemed approved by each of Buyer and Seller for all purposes.
(iv) If any Qualified Appraiser appointed hereunder
resigns, refuses to perform or is unable to perform any obligation hereunder for
reasons unrelated to the acts or omissions of the appointing party, then the
party or parties appointing such Qualified Appraiser shall have the right
unilaterally to appoint a substitute Qualified Appraiser and the deadline for
the production of such Qualified Appraiser's report and determination of the
Remainder Earnout Payment shall be subject to an extension of not more than
thirty (30) days.
(v) In connection with any process required by this
SECTION 8.9(E), Buyer will provide the Qualified Appraisers full access during
normal business hours to examine all pertinent books, records and files,
agreements and other documents. The fees and expenses of the Qualified Appraiser
or Appraisers shall be borne by Buyer. In the event that a Triggering Event
shall occur prior to a final determination of the Remainder Earnout Payment in
accordance with this SECTION 8.9(E) and the delivery of such Remainder Earnout
Payment to Seller, then prior to the consummation of such Triggering Event,
Buyer shall place into escrow a reasonable amount of money (as such amount shall
be reasonably determined by Buyer and shall be subject to Seller's reasonable
approval), in order to secure payment to Seller of the Remainder Earnout
Payment.
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SECTION 8.10 TREATMENT OF ACCRUED SICK LEAVE. If subsequent to the
date of this Agreement, Buyer assumes or agrees to assume sick leave of any
other Person, then Buyer shall pay to Seller an amount equal to the total cost
of accrued sick leave of Seller as of the Closing Date, as set forth on SCHEDULE
8.10. Buyer hereby represents and warrants that through the date hereof, Buyer
has not assumed any accrued liability with respect to sick leave of any Person.
ARTICLE IX
TERMINATION
SECTION 9.1 TERMINATION EVENTS. This Agreement may be terminated by
written notice given prior to or at the Closing, subject to SECTION 9.2 as
follows:
(a) by Buyer or Seller if a material breach of any provision
of this Agreement has been committed by the other party and such breach has not
been waived by the non-breaching party;
(b) by Buyer if any condition in Article VI has not been
satisfied as of the date specified for Closing Date; or if satisfaction of such
a condition by such date is or becomes impossible (other than through the
failure of Buyer to comply with its obligations under this Agreement) and Buyer
has not waived such condition on or before such date;
(c) by Seller, if any condition in Article VII has not been
satisfied as of the date specified for Closing Date or if satisfaction of such a
condition by such date is or becomes impossible (other than through the failure
of Seller to comply with its obligations under this Agreement) and Seller has
not waived such condition on or before such date;
(d) by mutual consent of Buyer and Seller;
(e) by Seller, if Buyer has not received the funds necessary
to finance Buyer to consummate the transactions contemplated by this Agreement;
or
(f) by Buyer or Seller if the Closing has not occurred on or
before February 28, 2006 (provided that such date shall automatically be
extended, if necessary, to permit Seller sufficient time to deliver to Buyer the
audited financial statements in a form which complies with Section 2.4 hereof),
or such later date as the parties may agree or as provided in this Agreement.
SECTION 9.2 EFFECT OF TERMINATION. Each party's right of termination
under SECTION 9.1 is in addition to any other rights it may have under this
Agreement or otherwise, and the exercise of such right of termination will not
be an election of remedies. If the Agreement is terminated pursuant to SECTION
9.1, all obligations of the parties under this Agreement will terminate, except
that the obligations of (a) the parties in this SECTION 9.2; and (b) Buyer in
SECTION 9.3, will survive; PROVIDED, HOWEVER, that if this Agreement is
terminated because of a breach of this Agreement by the non-terminating party or
because one or more of the conditions to the terminating party's obligations
under this Agreement is not satisfied as a result of the party's failure to
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comply with its obligations under this Agreement, the terminating party's right
to pursue all legal remedies will survive such termination unimpaired.
SECTION 9.3 FINANCING FEES. In the event this Agreement is terminated
due to Buyer failing to accomplish the financing contemplated in SECTION 3.5 or
Buyer materially breaches any term hereof on or before the Closing Date, Buyer
shall immediately pay to Seller an amount in cash equal to the total amount of
any out-of-pocket expenses and third-party fees and expenses incurred by Seller
in connection with this Agreement or the transactions contemplated by this
Agreement, including all counsel fees and expenses, and all audit and accounting
fees and expenses incurred in connection with the preparation of the audited
financials statements, in an amount not to exceed $50,000.
ARTICLE X
INDEMNIFICATION
SECTION 10.1 SURVIVAL. All representations, warranties, covenants, and
obligations in this Agreement, the Schedules attached hereto, and the
certificates delivered pursuant to SECTION 1.7, will survive the Closing and the
consummation of the transactions contemplated hereby for a period of twelve (12)
months, except that (a) the obligations of Buyer under SECTION 1.3(E) survive
until the last Earnout payment is received by Seller following the expiration of
the Earnout Period, unless the maximum amount of the Earnout is earned and paid
prior to such expiration, then at such date as the maximum amount of the Earnout
is paid to Seller, and (b) the obligations of Seller and Buyer as applicable
under Article VIII shall survive until such covenants are fulfilled in
accordance with their terms. Buyer is not aware of any facts or circumstances
that would serve as the basis for a claim by Buyer against Seller based upon a
breach of any of the representations and warranties of Seller contained in this
Agreement or breach by any of Seller's covenants or agreements to be performed
by any of them at or prior to Closing. Buyer will be deemed to have waived in
full any breach of any of Seller's representations and warranties and any such
covenants and agreements of which Buyer has such awareness at the Closing.
SECTION 10.2 INDEMNIFICATION AND REIMBURSEMENT BY SELLER. Seller
shall indemnify and hold harmless Buyer, and its directors, stockholders,
members, partners, employees, representatives and agents (collectively, the
"BUYER INDEMNIFIED PERSONS"), and shall reimburse Buyer Indemnified Persons, for
any loss, liability, claim, damage (including incidental and consequential
damages), or expense (including costs of investigation and defense and
reasonable attorneys' fees and expenses) whether or not involving a third-party
claim (collectively, "DAMAGES"), arising, directly or indirectly, from or in
connection with:
(a) any breach of any representation or warranty made by
Seller in this Agreement, or in any certificate of Seller delivered pursuant to
SECTION 1.7(A);
(b) any breach of any covenant or obligation of Seller in
this Agreement; and
(c) any Retained Liabilities.
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SECTION 10.3 INDEMNIFICATION AND REIMBURSEMENT BY BUYER. Buyer shall
indemnify and hold harmless Seller and its directors, members, partners,
employees, representatives and agents (collectively, the "SELLER INDEMNIFIED
PERSONS") and shall reimburse Seller Indemnified Persons for any Damages
arising, directly or indirectly, from or in connection with:
(a) any breach of any representation or warranty made by
Buyer in this Agreement or in any certificate or document delivered by Buyer
pursuant to this Agreement;
(b) any breach of any covenant or obligation of Buyer in
this Agreement or in any other document, writing or instrument delivered by
Buyer pursuant to this Agreement; and
(c) the Assumed Liabilities.
SECTION 10.4 LIMITATIONS.
(a) Seller will have no indemnification liability for the
breach of any representation or warranty set forth in Article II, unless on or
before the first anniversary of the Closing Date, Buyer notifies Seller of a
claim specifying the factual basis of that claim in reasonable detail to the
extent then known by Buyer; PROVIDED, HOWEVER, that any claim with respect to
SECTION 2.8 taxes, 2.10 employee benefits or 2.11 only with respect to
environmental matters may be made at any time, subject to the applicable period
of statute of limitations.
(b) Buyer will have no indemnification liability for the
breach of any representation or warranty set forth in Article III, unless on or
before the first anniversary of the Closing Date, Seller notifies Buyer of a
claim specifying the factual basis of that claim in reasonable detail to the
extent then known by Seller.
(c) Notwithstanding anything to the contrary contained
herein, except in the case of fraud, neither Buyer nor Seller shall have any
liability for any amounts of Damages exceeding $1,000,000 in the aggregate for
all claims made by the other party under this Article X. In addition, the amount
of any Damages of any Seller Indemnified Party shall be reduced by any amount
received by such Seller Indemnified Party with respect thereto under any
insurance coverage. Likewise, the amount of any Damages of any Buyer Indemnified
Party shall be reduced by any amount received by such Buyer Indemnified Party
with respect thereto under any insurance coverage. Such Seller Indemnified Party
or Buyer Indemnified Party, as applicable, shall use commercially reasonable
efforts to collect any amounts available under such insurance coverage. If a
Seller Indemnified Party or a Buyer Indemnified Party, as applicable, receives
an amount under insurance coverage at any time subsequent to any indemnification
provided by Buyer or Seller, as applicable, then such Seller Indemnified Party
or Buyer Indemnified Party, as applicable, shall promptly reimburse Buyer or
Seller, as applicable, for any payment made or expense incurred by Buyer or
Seller, as applicable, in connection with providing such indemnification, up to
such amount received by such Seller Indemnified Party or Buyer Indemnified
Party, as applicable, but net of any expenses incurred by such Seller
Indemnified Party or Buyer Indemnified Party in collecting such amount.
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(d) The Promissory Note, the Escrowed Shares, and $400,000
Offset (collectively, the "INDEMNITY FUNDS"), shall be the sole recourse
available to Buyer Indemnified Parties for any claims under ARTICLE X, and any
obligation of Seller to compensate any Buyer Indemnified Party for any Damages
shall be satisfied in Indemnity Funds; PROVIDED, HOWEVER, that nothing herein
shall limit the remedies that Buyer Indemnified Parties may have for Damages
based on fraud. In furtherance of the foregoing, any claim for Damages made
against the Indemnity Funds shall first be debited against the Promissory Note
until the principal amount and any interest accrued through the date of such
claim shall equal zero, next debited against the Escrowed Stock, which shares of
Escrowed Stock shall have a Fair Market Value Per Share as of the date such
claim is made against the Escrowed Stock, and last debited against the $400,000
Offset.
SECTION 10.5 PROCEDURE FOR INDEMNIFICATION - THIRD PARTY CLAIMS. If,
after the Closing Date, either a Buyer Indemnified Person or Seller Indemnified
Person, as the case may be (the "INDEMNITEE"), receives notice of any
third-party claim or alleged third-party claim asserting the existence of any
matter of a nature as to which the Indemnitee is entitled to be indemnified
under this Agreement, the Indemnitee shall promptly notify Seller, or Buyer, as
the case may be (the "INDEMNITOR"), in writing with respect thereto, but the
failure to notify the Indemnitor will not relieve the Indemnitor of any
liability that it may have to an Indemnitee, except to the extent that the
Indemnitor demonstrates that the defense of such action has been prejudiced by
the Indemnitee's failure to give such notice. The Indemnitor will have the right
to defend against any such claim provided (a) that the Indemnitor, within ten
(10) days after the giving of such notice by Indemnitee, notifies Indemnitee in
writing that (i) Indemnitor disputes such claim and gives reasons therefor, and
(ii) Indemnitor will, at its own cost and expense, defend the same, and (b) such
defense is instituted and continuously maintained in good faith by Indemnitor.
Indemnitee may, if it so elects, designate its own counsel to participate with
the counsel selected by Indemnitor in the conduct of such defense. Indemnitor
will not permit any lien or execution to attach to the assets of Indemnitee as a
result of such claim, and the Indemnitor shall provide such bonds or deposits as
are necessary to prevent the same. In any event, Indemnitor will keep Indemnitee
fully advised as to the status of such defense. If Indemnitor is given notice of
a claim as aforesaid and fails to notify Indemnitee of its election to defend
such claim within the time prescribed herein, or after having elected to defend
such claim fails to institute and maintain such defense as prescribed herein, or
if such defense is unsuccessful then, in any such event, the Indemnitor shall
fully satisfy and discharge the claim within ten (10) days after notice from the
Indemnitee requesting Indemnitor to do so. If the Indemnitor assumes the defense
of any action or proceeding (y) no compromise or settlement of such claims may
be effected by the Indemnitor without the Indemnitee's consent unless (A) there
is no finding or admission of any violation of any legal requirement or any
violation of the rights of any Person and no effect on any other claims that may
be made against the Indemnitee, and (B) the sole relief provided is monetary
damages that are paid in full by the Indemnitor; and (z) the Indemnitee will
have no liability with respect to any compromise or settlement of such claims
effected without its consent.
SECTION 10.6 PROCEDURE FOR INDEMNIFICATION - OTHER CLAIMS. A claim
for indemnification for any matter not involving a third-party claim may be
asserted by notice to the party from whom indemnification is sought.
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ARTICLE X
GENERAL PROVISIONS
SECTION 11.1 EXPENSES. Except as otherwise expressly provided in this
Agreement, each party to this Agreement shall bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the transactions contemplated hereby, including all fees and
expenses of its representatives.
SECTION 11.2 NOTICES. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by hand (with written confirmation of
receipt), (b) sent by facsimile with confirmation of transmission by the
transmitting equipment, (c) received by the addressee, if sent by certified
mail, return receipt requested, or (d) received by the addressee, if sent by a
nationally recognized overnight delivery service, in each case to the
appropriate addresses or facsimile numbers set forth below (or to such other
addresses or facsimile numbers as a party may designate by notice to the other
parties):
Buyer: GlobalOptions Group, Inc.
00 Xxxxxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx Xxxxxxx
Fax: 000-000-0000
Email: xxxxxxxx@xxxxxxxxxxxxx.xxx
with a copy to: Xxxxxx X. Xxxxxxx, Esq.
0000 00xx Xxxxxx, X.X., Xxxxxx Xxxxx
Xxxxxxxxxx, X.X. 00000
Fax: 000-000-0000
Email: xxxxxxxx@xxxxxx.xxx
Seller: Xxxxx Xxx Xxxx Associates, LLC
000 00xx Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxx Xxx Xxxx
Fax: 000-000-0000
Email: xxxxxx@xxxxxxxxxxxxxx.xxx
with a copy to: Xxxxxxx Berlin LLP
0000 X Xxxxxx, X.X., Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxxx X. Xxx, Esq.
Fax: 000-000-0000
Email: xxxxx@xxxxxxx.xxx
SECTION 11.3 JURISDICTION. The parties agree that the state and
federal courts located in New York, New York, will be the sole venue and will
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have sole jurisdiction for the resolution of all disputes arising hereunder.
Process in any action or proceeding referred to in the preceding sentence may be
served on any party anywhere in the world.
SECTION 11.4 WAIVER. No failure to exercise, and no delay in
exercising, on the part of either party, any right hereunder will operate as a
waiver thereof, nor will any single or partial exercise of any right hereunder
preclude further exercise of any other right hereunder.
SECTION 11.5 ENTIRE AGREEMENT AND MODIFICATION. This Agreement,
together with the Schedules, Exhibits and other documents delivered pursuant to
this Agreement, constitutes a complete and exclusive statement of the terms of
the agreement between the parties with respect to its subject matter and
supersedes all prior agreements, whether written or oral, between the parties
with respect to its subject matter. This Agreement may not be amended except by
a written agreement signed on behalf of each of the parties hereto; PROVIDED,
HOWEVER, Buyer may waive any conditions contained in Article VI, and Seller may
waive any conditions contained in Article VII, each without the consent of the
other.
SECTION 11.6 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. No
party may assign any of its rights or delegate any of its obligations under this
Agreement without the prior written consent of the other parties, except that
Buyer may assign any of its rights and delegate any of its obligations under
this Agreement (i) to any wholly-owned affiliate of Buyer; and (ii) in
connection with the sale of all or substantially all of the assets of Buyer,
provided that no such assignment or delegation will relieve Buyer from any of
its obligations hereunder. Subject to the preceding sentence, this Agreement
will apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing in this Agreement will
be construed to give any Person other than the parties to this Agreement any
legal or equitable right under or with respect to this Agreement or any
provision of this Agreement, except such rights as shall inure to a successor or
permitted assignee pursuant to this SECTION 11.6.
SECTION 11.7 SEVERABILITY. If any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. The parties
agree that if any provision contained herein is, to any extent, held invalid or
unenforceable in any respect under the laws governing this Agreement, they shall
take any actions necessary to render the remaining provisions of this Agreement
valid and enforceable to the fullest extent permitted by law and, to the extent
necessary, shall amend or otherwise modify this Agreement to replace any
provision contained herein that is held invalid or unenforceable with a valid
and enforceable provision giving effect to the intent of the parties.
SECTION 11.8 SECTION HEADINGS, CONSTRUCTION. The headings of Articles
and Sections in this Agreement are provided for convenience only and will not
affect its construction or interpretation. All Exhibits and Schedules to this
Agreement are incorporated into and constitute an integral part of this
Agreement as if fully set forth herein. All words used in this Agreement will be
construed to be of such gender or number as the context requires. The language
used in the Agreement shall be construed, in all cases, according to its fair
meaning, and not for or against any party hereto. The parties acknowledge that
each party has reviewed this Agreement and that rules of construction to the
effect that any ambiguities are to be resolved against the drafting party will
not be available in the interpretation of this Agreement.
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SECTION 11.9 GOVERNING LAW. This Agreement will be governed by and
construed under the laws of the State of New York without regard to conflicts of
laws principles that would require the application of any other law.
SECTION 11.10 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
SECTION 11.11 FURTHER ASSURANCES. The parties shall cooperate
reasonably with each other and with their respective representatives in
connection with any steps required to be taken as part of their respective
obligations under this Agreement, and the parties agree (a) to furnish upon
request to each other such further information, (b) to execute and deliver to
each other such other documents, and (c) to do such other acts and things, all
as the other party may reasonably request for the purpose of carrying out the
intent of this Agreement and the transactions contemplated hereby.
SECTION 11.12 LEGAL FEES. In the event that legal proceedings are
commenced by Buyer against Seller, or by Seller against Buyer, in connection
with this Agreement or the transactions contemplated hereby, the party or
parties that do not prevail in such proceedings shall pay the reasonable
attorneys' fees and expenses incurred by the prevailing party in such
proceedings.
[SIGNATURE PAGE FOLLOWS.]
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ASSET PURCHASE AGREEMENT
SIGNATURE PAGE
IN WITNESS WHEREOF, the parties have executed this Asset Purchase
Agreement as of the date first written above.
BUYER:
GLOBALOPTIONS GROUP, INC.
By: /s/ Xxxxxx X. Xxxxxxx
--------------------------------------------
Name: Xxxxxx X. Xxxxxxxx
-----------------------------------------
Title: Chairman and CEO
----------------------------------------
SELLER:
XXXXX XXX XXXX ASSOCIATES, LLC
By: /s/ Xxxxx X. Xxxx
-------------------------------------------
Name: Xxxxx X. Xxxx
Title: Member, The Holder of the Majority of the Outstanding
Class A Common Interests
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ANNEX A
"$400,000 OFFSET" shall have the meaning given such term in Section 1.3(e)(i).
"ACCOUNTS RECEIVABLE" shall have the meaning given such term in Section 1.1(c).
"ACCRUED EXPENSES" shall have the meaning given such term in Section 1.4(a)(vi).
"AGREEMENT" shall have the meaning given such term in the preamble of this
Agreement.
"ASSETS" shall mean all of the property and assets to be transferred to Buyer by
Seller under this Agreement.
"ASSIGNMENT AND ASSUMPTION AGREEMENT" shall have the meaning given such term in
Section 1.7(a)(ii).
"ASSIGNMENT AND ASSUMPTION OF LEASE" shall have the meaning given such term in
Section 1.7(a)(iii).
"ASSUMED EMPLOYMENT AGREEMENTS" shall have the meaning given such term in
Section 1.4(a)(v).
"ASSUMED LIABILITIES" shall have the meaning given such term in Section 1.4.
"AVAILABLE EMPLOYEES" shall have the meaning given such term in Section 8.1(a).
"BAD DEBT WRITE-OFF" shall mean any uncollected accounts receivable of Seller
Division written-off and charged to the bad debt reserve consistent with the
Seller Division's corporate and accounting policies during the Earnout Period.
"XXXX OF SALE" shall have the meaning given such term in Section 1.7(a)(i).
"BOARD OF DIRECTORS" shall mean the Board of Directors.
"BUSINESS" shall have the meaning given such term in Section 1.1.
"BUYER" shall have the meaning given such term in the preamble of this
Agreement.
"BUYER CHANGE OF CONTROL" shall be deemed to have occurred if (i) a Person,
which shall include a "group" (within the meaning of section 13(d) of the
Exchange Act) who does not currently own directly or indirectly 40% or more of
the combined voting power of Buyer's outstanding securities becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Act) of securities of
Buyer's representing more than 40% of the combined voting power of Buyer's
then-outstanding securities; or (ii) the stockholders of Buyer approve a merger
or consolidation of Buyer with any other publicly held corporation, other than a
merger or consolidation which would result in the voting securities of Buyer
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 60% of the combined voting power of the voting
securities of Buyer or such surviving entity outstanding immediately after such
merger or consolidation; PROVIDED, HOWEVER, that if the merger or consolidation
is not consummated following such stockholder approval and the transaction is
abandoned, then the Change of Control shall be deemed not to have occurred.
"BUYER PRIVATE CHANGE OF CONTROL" shall be deemed to have occurred if the
stockholders of Buyer approve a merger or consolidation of Buyer with a
privately held corporation, other than a merger or consolidation which would
result in the voting securities of Buyer outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least 50% of the combined
voting power of the voting securities of Buyer or such surviving entity
outstanding immediately after such merger or consolidation.
"BUYER COMMON STOCK" shall mean the common stock of Buyer, with a par value of
$.001 per share, outstanding as of the date hereof, or any other shares of
equity securities into which common stock of Buyer is converted, exchanged, or
reclassified.
"BUYER GOVERNING DOCUMENTS" shall have the meaning given such term in Section
3.1(b).
"BUYER INDEMNIFIED PERSONS" shall have the meaning given such term in Section
10.2.
"BUYER'S CLOSING DOCUMENTS" shall have the meaning given such term in Section
3.2(a).
"CLOSING" shall have the meaning given such term in Section 1.6.
"CLOSING DATE" shall have the meaning given such term in Section 1.6.
"CLOSING DATE STATEMENT" shall have the meaning given such term in Section
1.3(b).
"CLOSING STOCK PAYMENT" shall have the meaning given such term in Section
1.3(c).
"CLOSING" shall have the meaning given such term in Section 1.6.
"DAMAGES" shall have the meaning given such term in Section 10.2.
"DEPOSITS AND PREPAYMENTS" shall have the meaning given such term in Section
1.1(j).
"EARNOUT PERIOD" shall have the meaning given such term in Section 1.3(e)(i).
"EARNOUT" shall have the meaning given such term in Section 1.3(e).
"EMPLOYEE BENEFIT PLANS" shall have the meaning given such term in Section 2.10.
"EMPLOYEES" shall have the meaning given such term in Section 2.9.
"ENCUMBRANCE" shall have the meaning given such term in Section 1.1.
"ENFORCEABILITY LIMITATIONS" shall have the meaning given such term in Section
2.2(a).
"ESCROW AGENT" shall be Xxxxxxx Berlin LLP, unless the parties hereto mutually
agree upon another third party.
"ESCROW AGREEMENT" shall have the meaning given such term in Section 1.7(a)(v).
"ESCROWED STOCK" shall have the meaning given such term in Section 1.3(c).
"EXCHANGE ACT" shall have the meaning given such term in Section 3.10.
"EXCLUDED ASSETS" shall have the meaning given such term in Section 1.2.
"FAIR MARKET VALUE OF A SHARE" means the average of the closing prices of the
sales of Buyer Common Stock on all securities exchanges on which Buyer Common
Stock may at the time be listed, or, if there have been no sales on any such
exchange on any day, the average of the highest bid and lowest asked prices on
all such exchanges at the end of such day, or, if on any day Buyer Common Stock
are not so listed, the average of the representative bid and asked prices quoted
in the NASDAQ System as of 4:00 P.M., New York time, or, if on any day Buyer
Common Stock are not quoted in the NASDAQ System, the average of the highest bid
and lowest asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau Incorporated, or any similar successor
organization, in each such case averaged over a period of 30 trading days
consisting of the trading day as of which the Fair Market Value of a Share is
being determined and the 29 consecutive trading days prior to such day. If at
any time Buyer Common Stock is not listed on any securities exchange or quoted
in the NASDAQ System or the over-the-counter market, the Fair Market Value of a
Share will be the fair value of such Buyer Common Stock as determined in good
faith by the Board of Directors and set forth in a notice, which shall be
delivered to Seller within ten (10) days after such 30 day period referred to in
the foregoing sentence. If Seller disagrees with such determination, Seller
shall deliver to the Board of Directors a written notice of objection within ten
days. Upon receipt of Seller's written notice of objection, the Board of
Directors and Seller will negotiate in good faith to agree on such Fair Market
Value of a Share. If such agreement is not reached within 30 days after the
delivery of Seller's objection, (i) Fair Market Value of a Share shall be
determined by an appraiser jointly selected by the Board of Directors and
Seller, in the event the Board of Directors' determination and Seller's
determination differ by more than ten percent (10%) or (ii) Fair Market Value of
a Share shall be deemed to be the average of the Board of Directors'
determination and Seller's determination if the two determinations do not differ
by more than ten percent (10%). If Fair Market Value of a Share is to be
determined by an appraiser, such appraiser shall submit to the Board of
Directors and Seller a report within 30 days of its engagement setting forth
such determination. If the parties are unable to agree on an appraiser within 45
days after delivery of Seller's objection, within seven days, each party shall
submit the names of four independent firms which are engaged in the business of
valuing non-public securities, and each party shall be entitled to strike two
names from the other party's list of firms, and the appraiser shall be selected
by lot from the remaining four firms. The expenses of such appraiser shall be
borne by Buyer. The determination of such appraiser as to Fair Market Value of a
Share shall be final and binding upon all parties. Notwithstanding anything to
the contrary herein, the determination of Fair Market Value of a Share shall not
include any premium (or discount) for control (or lack of control).
"FINANCIAL STATEMENTS" shall have the meaning given such term in Section 2.4.
"GAAP" shall have the meaning given such term in Section 2.4.
"GOVERNING DOCUMENTS" shall have the meaning given such term in Section 2.1(b).
"GOVERNMENTAL AUTHORIZATIONS" shall have the meaning given such term in Section
2.11(b).
"GROSS MARGIN" shall mean revenue less all direct labor expense (i.e., salary
and benefits of billed personnel) and all other direct expenses, including but
not limited to: Bad Debt Write-off of Seller Division, referral fees, travel and
entertainment directly attributable to the effort, and cost of outsourced labor.
"INDEMNITEE" shall have the meaning given such term in Section 10.5.
"INDEMNITOR" shall have the meaning given such term in Section 10.5.
"INDEMNITY FUNDS" shall have the meaning given such term in Section 10.4(d).
"INDEPENDENT CONTRACTOR AGREEMENT" shall have the meaning given such term in
Section 1.1(k).
"INITIAL PURCHASE PRICE" shall have the meaning given such term in Section
1.3(a).
"INTELLECTUAL PROPERTY ASSETS" shall have the meaning given such term in Section
2.15.
"INTERIM BALANCE SHEET" shall have the meaning given such term in Section 2.17.
"LEASES" shall have the meaning given such term in Section 2.6.
"LEGAL REQUIREMENT" shall have the meaning given such term in Section 2.11(a).
"MATERIAL CONSENTS" shall have the meaning given such term in Section 6.3.
"MATERIAL CUSTOMER" shall have the meaning given such term in Section 2.21.
"MAXIMUM EARNOUT" shall have the meaning given such term in Section 1.3(e)(i).
"NON-MATERIAL CONSENTS" shall have the meaning given such term in Section 1.8.
"NOVATION" shall mean a novation required under any Seller Contract, and/or
required by federal, state or local law or regulation. Any Seller Contract
between Seller and any federal government or federal governmental entity is
subject to 48 CFR 42.12.
"ORDER" shall have the meaning given such term in Section 2.12(b).
"ORDINARY COURSE OF BUSINESS" means an action that is consistent in nature and
scope with Seller's or Buyer's past practices, as the case may be, taken in the
ordinary course of the normal day-to-day operations of Seller or Buyer, as the
case may be, and that does not require specific authorization by the Board of
Directors of Seller or of Buyer, as the case may be, or authorization of the
members of Seller or stockholders of Buyer, as the case may be.
"OTHER ASSETS" shall have the meaning given such term in Section 8.9(a)(ii).
"OTHER BUSINESS" shall have the meaning given such term in Section 8.9(b)(i).
"OTHER LIABILITIES" shall have the meaning given such term in Section
8.9(a)(ii).
"PERMITTED ENCUMBRANCE" shall have the meaning given such term in Section 1.1.
"PERSON" shall mean any individual, corporation, association, partnership
(general or limited), joint venture, trust, unincorporated organization, limited
liability company, any other entity or organization of any kind or a government
or any department, agency, authority, instrumentality or political Seller
Division thereof.
"PRE-CLOSING CONSENTS" shall have the meaning given such term in Section 1.8.
"PROMISSORY NOTE" shall have the meaning given such term in Section 1.3(c).
"PROPRIETARY ASSETS" shall have the meaning given such term in Section 2.15.
"PURCHASE PRICE ADJUSTMENT" shall have the meaning given such term in Section
1.3(a).
"QUALIFIED APPRAISER" shall mean an appraiser duly appointed in accordance with
Section 8.9(e).
"REAL PROPERTY" shall have the meaning given such term in Section 1.1(a).
"RELATED PERSON" shall have the meaning given such term in Section 2.16.
"REMAINDER EARNOUT AMOUNT" shall mean the amount equal to (i) the total Earnout
that Seller may have received during the entire Earnout Period according to
EXHIBIT C, but for the Triggering Event, less (ii) the amount of Earnout already
paid to Seller.
"RETAINED LIABILITIES" shall have the meaning given such term in Section 1.4(b).
"SEC FILINGS" shall have the meaning given such term in Section 3.9.
"SELLER CONTRACT" shall have the meaning given such term in Section 1.1(d).
"SELLER DIVISION" shall have the meaning given such term in Section 8.9(a)(i).
"SELLER DIVISION BUSINESS" shall have the meaning given such term in Section
8.9(b)(ii).
"SELLER DIVISION RECORDS" shall have the meaning given such term in Section
8.9(a)(i).
"SELLER INDEMNIFIED PERSONS" shall have the meaning given such term in Section
10.3.
"SELLER'S BANK LINE OF CREDIT" shall mean that certain revolving credit facility
between Seller and Xxxxxxxx Bank.
"SELLER'S CLOSING DOCUMENTS" shall have the meaning given such term in Section
2.2(a).
"SELLER" shall have the meaning given such term in the preamble of this
Agreement.
"STOCK PORTION" shall have the meaning given such term in Section 1.3(a).
"TANGIBLE PERSONAL PROPERTY" shall have the meaning given such term in Section
1.1(b).
"TRADE ACCOUNTS PAYABLE" shall have the meaning given such term in Section
1.4(a)(i).
"TRIGGERING EVENT" shall be deemed to occur if (i) the Seller Division is
liquidated, reorganized, restructured or otherwise significantly altered without
Xxxx'x consent; (ii) prior to the consummation of a Buyer Change of Control, the
successor to Buyer does not execute and deliver to Seller a Successor
Undertaking; (iii) prior to the consummation of a Buyer Private Change of
Control, the successor to Buyer does not execute and deliver to Seller a
Successor Undertaking containing an additional covenant that obligates the
successor to pay the Earnout in cash only; (iv) more than 50% of the assets of
the Seller Division are sold or otherwise disposed without Xxxx'x consent; or
(v) the stockholders of Buyer approve a plan of complete liquidation of Buyer or
an agreement for the sale or disposition by Buyer of all or substantially all of
Buyer's assets (unless such liquidation or sale or disposition is not actually
consummated). Notwithstanding the foregoing, a Triggering Event shall not be
deemed to have occurred if the merger, plan of liquidation or sale of
substantially all assets approved by stockholders is not consummated following
such stockholder approval and the transaction is abandoned, then a Triggering
Event shall be deemed not to have occurred.
"TRUE-UP STATEMENT" shall mean that statement that is prepared by Seller on or
before ninety (90) days after the Closing in connection with calculating the
Purchase Price Adjustment, substantially in the form of EXHIBIT A.
"XXXX EMPLOYMENT AGREEMENT" shall have the meaning given such term in Section
1.7(a)(vi).
"XXXX" shall mean Xxxxx Xxx Xxxx, an individual.
ANNEX B:
PERMITTED ENCUMBRANCES
Permitted Encumbrances shall include the following:
(i) purchase money Encumbrances on any property
acquired by Seller in the Ordinary Course of Business, provided that
the value of such lien does not exceed the value of the property so
acquired;
(ii) Encumbrances, deposits or pledges required to
secure payments due in connection with workmen's compensation,
unemployment insurance or other social security or old age pension
obligations;
(iii) Encumbrances for taxes, assessments or
governmental charges which are not yet due or which are subject to a
contest;
(iv) legal or equitable Encumbrances arising in
connection with legal proceedings if the same is subject to a contest;
(v) minor defects, irregularities, encumbrances and
clouds on title and statutory liens which do not materially impair the
property affected thereby;
(vi) liens to secure performance of bids, tenders,
contracts (other than for the repayment of borrowed money) or leases,
or for purposes of like general nature in the Ordinary Course of
Business;
(vii) mechanic's, workmen's, materialmen's,
construction or other like liens arising in the Ordinary Course of
Business; and
(xii) any easements.
