Exhibit 2
ASSET PURCHASE AGREEMENT
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THIS ASSET PURCHASE AGREEMENT is entered into and effective as of July 23,
2001, by and between RSPNETWORK, INC., a Minnesota corporation (the "Seller"),
XXXXXXXXXXX.XXX, INC., a Minnesota corporation and the sole shareholder of
Seller ("VirtualFund"), and RSP ACQUISITIONS, LLC, an Iowa limited liability
company (the "Buyer").
RECITALS
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WHEREAS, Seller is engaged in the business of information systems
integration providing IT solutions for businesses (the "Purchased Business");
and
WHEREAS, Seller desires to sell and transfer to Buyer, and Buyer desires to
purchase and acquire from Seller, substantially all of the assets of Seller used
by Seller in the Purchased Business upon the terms, conditions and provisions
hereinafter set forth.
AGREEMENT
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NOW, THEREFORE, in consideration of the foregoing and the mutual promises
set forth below, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
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Certain capitalized terms are defined in the body of this Agreement. The
capitalized terms referred to below have the following meanings:
"Accounts Receivable" shall have the meaning set forth in Section 2.1(a)
below.
"Agreement" means this Asset Purchase Agreement and the schedules and
exhibits hereto and the other agreements attached hereto or made a part of this
Agreement.
"Ancillary Agreements" means the other documents and agreements called for
in this Agreement.
"Applicable Law" means all laws, statutes, treaties, rules, codes,
ordinances, regulations, permits, certificates, orders and licenses of any
Governmental Authority, interpretations of any of the foregoing by a
Governmental Authority having jurisdiction or any arbitrator or other judicial
or quasi-judicial tribunal (including without limitation those pertaining to
health, safety and the environment).
"Assumed Liabilities" means the liabilities of Seller described in Section
2.5.
"Change of Business" means, with respect to Buyer's operation of the
Purchased Business following the Closing Date, any transaction or series of
transactions, or any decision or series of decisions, which, individually or in
the aggregate, (i) would result in the Purchased Business being operated in a
manner materially different than the operation of the Purchased Business by
Seller prior to the Closing Date, and (ii) would reasonably be expected to
materially diminish the Purchased Business' ability to produce Earnout Payments.
"Change of Control" means, with respect to Buyer, the occurrence of any of
the following events: (i) the consummation of the sale of all or substantially
all of the assets of the Purchased Business, whether sold separately or as part
of a sale of Buyer; (ii) the consummation of a reorganization, merger or
consolidation to which Buyer is a party, if the stockholders of Buyer
immediately prior thereto (excluding any person participating in the Change of
Control transaction) own less than 50% of Buyer's voting power immediately
thereafter; (iii) the acquisition by any person or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended)
of beneficial ownership (within the meaning of Rule 13d-3 promulgated under such
Act) of more than forty-five percent (45%) of the voting power of those classes
of voting stock entitled to vote for the election of directors; or (iv) any
other transaction, whether through change in directorships or otherwise, which
has the purpose or effect of substantially changing the persons entitled to
direct the affairs of Buyer.
"Closing" shall have the meaning set forth in Section 2.7(a) below.
"Closing Date" shall have the meaning set forth in Section 2.7(a) below.
"Contracts" shall have the meaning set forth in Section 2.1(d) below.
"Customer Deposits" shall have the meaning set forth in Section 2.1(h)
below.
"Earnout Payment" shall have the meaning set forth in Section 2.3(b)(i)(A)
below.
"Earnout Payment Cap" shall have the meaning set forth in Section
2.3(b)(i)(B) below.
"Earnout Payment Date" shall have the meaning set forth in Section
2.3(b)(i) below.
"Equipment" shall have the meaning set forth in Section 2.1(f) below.
"Excluded Liabilities" means the Liabilities of Seller described in Section
2.6 below.
"ERISA" shall have the meaning set forth in Section 4.8 below.
"Financial Statements" shall have the meaning set forth in Section 4.9
below.
"Governmental Authority" means any supranational, national, federal, state,
departmental, county, municipal, regional or other governmental authority,
agency, board, body, instrumentality or court in whatever country having
jurisdiction in whole or in part over Seller or the Purchased Business.
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"Hazardous Substance" means any substance, material or waste or petroleum
product, oil, pollutant or contaminant which is regulated by any Governmental
Authority or Applicable Law as of the Closing Date, including, but not limited
to, any of the foregoing which is designated as a hazardous or polluting
substance or subject to regulation as a hazardous or toxic substance or waste
pursuant to Applicable Law.
"Inventory" has the meaning set forth in Section 2.1(b) below.
"Knowledge" with respect to Seller means the actual knowledge of Xxxxx
Xxxxxxx. "Knowledge" with respect to Buyer means the actual knowledge of Xxxxx
Xxxxxx and Xxxx Xxxxxxx.
"Liability" means any liability, whether known or unknown, asserted or
unasserted, absolute or contingent, whether accrued or unaccrued, liquidated or
unliquidated, and whether due or to become due, including but not limited to any
liability for Taxes.
"Loss" shall have the meaning set forth in Section 10.1 below.
"Material Adverse Effect" means any single or a series of related
conditions, events, changes or occurrences that have or may reasonably be
expected to have an effect on the business, operations, results of operations or
financial condition of the Purchased Business which involves one or more losses,
damages, expense or diminution in value or loss of benefit which are,
individually or in the aggregate, material in nature.
"Minnesota Courts" shall have the meaning set forth in Section 11.10 below.
"Operating Permits" means all of the permits, licenses, certifications,
approvals, authorities or other franchises granted by any Governmental Authority
or other third party required or appropriate for the continued operation of the
Purchased Business in the manner heretofore operated where the failure to
maintain such permit, license, certification, approval, authority or franchise
would have a Material Adverse Effect on the Purchased Business.
"Prepaid Expenses" has the meaning set forth in Section 2.1(c) below.
"Proprietary Rights" has the meaning set forth in Section 2.1(e) below.
"Purchased Assets" has the meaning set forth in Section 2.1 below.
"Purchased Business" has the meaning set forth in the recitals above.
"Purchase Price" has the meaning set forth in Section 2.3 below.
"Records" shall have the meaning set forth in Section 2.1(g) below.
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"Reseller-Based Revenues" shall have the meaning set forth in Section
2.3(b)(i)(D) below.
"Service-Based Revenues" shall have the meaning set forth in Section
2.3(b)(i)(D) below.
"Taxes" means all state, local or foreign taxes, social security
contributions, fees, imposts, levies or other assessments, including, without
limitation, all net income, gross receipts, sales, use, ad valorem, value added,
transfer, recording, franchise, profits, inventory, capital stock, license,
withholding, payroll, stamp, occupation and property taxes, customs duties or
other similar fees, assessments and charges, however denominated, together with
all interest, penalties, surcharges, additions to tax or additional amounts
imposed by any Governmental Authority, and any transfer Liability in respect of
any of the foregoing taxes.
ARTICLE II
ACQUISITION OF ASSETS
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2.1 Purchased Assets. On and subject to the terms and conditions set
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forth in this Agreement, and the exceptions set forth in Seller's Disclosure
Schedules, Buyer will purchase from Seller, and Seller will sell, transfer,
assign, convey and deliver to Buyer on the Closing Date, free and clear of all
liens, encumbrances, security interests, purchase rights, pledges, charges,
mortgages, claims or any other limitations or restrictions whatsoever, all of
Seller's right, title and interest in and to all properties and assets used in
the Purchased Business other than the Excluded Assets (collectively, the
"Purchased Assets"), including but not limited to the following:
(a) All accounts receivable and trade receivables of Seller relating to
goods which have been shipped or services performed on or prior to the Closing
Date, other than the receivables identified as Excluded Assets (the "Accounts
Receivable");
(b) All inventories on hand or materials, goods or products ordered and
intended for inventory but not as yet received or paid for, as of the Closing
Date, including all raw materials, work in process, finished goods, packaging
and supplies held for and used in connection with the Purchased Business, other
than the inventory identified as Excluded Assets ("Inventory");
(c) All of Seller's prepaid deposits with vendors, prepaid expenses or
deposits on leased real or personal property (to the extent Buyer is assuming
Liability for such lease or entering into a substitute lease) (the "Prepaid
Expenses");
(d) All of Seller's entire right, title and interest in and to the
contracts, licenses, unfilled sales orders, personal property leases and other
contracts relating to the Purchased Business, other than the contracts
identified as Excluded Assets (the "Contracts");
(e) All of Seller's entire right, title and interest and associated
goodwill in all intellectual property owned or licensed by Seller and used in
connection with the Purchased Business, including but not limited to the
intellectual property set forth on Schedule 2.1(e), but
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specifically excluding the intellectual property identified as Excluded Assets
(the "Proprietary Rights");
(f) All machinery, tools, warehouse equipment, furniture, fixtures, office
equipment, software, testing equipment (including all related spare parts,
accessories and supplies) and other similar equipment that is owned or leased by
Seller and used in connection with the Purchased Business, but specifically
excluding the equipment identified as Excluded Assets (the "Equipment");
(g) A copy of all books and records pertaining to Inventory, Equipment,
Proprietary Rights, Contracts, sales prospects and suppliers used by Seller in
connection with the Purchased Business (the "Records");
(h) All customer advances and deposits, prepaid contracts, maintenance
fees or installation fees and all similar pre-payments relating to an Assumed
Liability (the "Customer Deposits"); and
(i) Any and all other assets of Seller not expressly excluded under
Section 2.2 below.
2.2 Excluded Assets. It is understood and agreed that the purchase of the
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Purchased Assets under Section 2.1 excludes the following assets of Seller as of
the Closing Date:
(a) All corporate charter documents and minutes books, stock books, tax
returns, schedules, tax work papers and other corporate records of Seller;
(b) All tax refunds against payments made by Seller prior to Closing;
(c) All cash of Seller as of the close of business on the Closing Date,
including cash on hand, in checking accounts, savings accounts, savings
certificates and other similar temporary investments, but excluding the Customer
Deposits;
(d) All of Seller's and/or VirtualFund's right, title and interest in the
intellectual property right(s) identified on Schedule 2.2(d); and
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(e) All of Seller's and/or VirtualFund's right title, and interest in the
contract(s) identified on Schedule 2.2(e); and
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(f) All of Seller's and/or VirtualFund's right, title and interest in the
equipment and inventory identified on Schedule 2.2(f);
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(g) All of Seller's right, title and interest in the receivables
identified on Schedule 2.2(g);
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(g) Any and all tangible and intangible assets of VirtualFund.
5
2.3 Purchase Price and Terms of Payment. The payments set forth in this
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Section 2.3(a) and (b) shall be collectively referred to as the "Purchase
Price", subject to the post-Closing adjustment described in Section 2.4:
(a) Buyer shall assume the specified liabilities set forth in Section 2.5.
(b) Buyer shall pay to Seller the following Earnout Payments (as defined
below) in accordance with the following terms and conditions:
(i) Commencing on January 1, 2003 and, subject to the terms and
conditions set forth in this Section 2.3(b), on each of the next four (4)
anniversaries of such date (each, an "Earnout Payment Date"), Buyer shall
pay to Seller an Earnout Payment (as defined below). The Earnout Payment
shall be payable by certified check or wire transfer within thirty (30)
days of each Earnout Payment Date.
(A) If and to the extent the Service-Based Revenues (as defined
below) of the Purchased Business exceed Two Million Dollars
($2,000,000) in the calendar year preceding the then-current Earnout
Payment Date, Buyer shall pay to Seller an "Earnout Payment" equal to
the sum of (x) five percent (5%) of all Service-Based Revenues in
excess of Two Million Dollars ($2,000,000), plus (y) one percent of
all Reseller-Based Revenues (as defined below). If the Service-based
Revenues of the Purchased Business do not exceed Two Million Dollars
($2,000,000) in the calendar year preceding the then-current Earnout
Payment Date, no Earnout Payment will be due on such Earnout Payment
Date.
(B) Notwithstanding the foregoing, the cumulative Earnout
Payments under this Section 2.3(b) shall not exceed One Million
Dollars ($1,000,000) (the "Earnout Payment Cap"), and the Earnout
Payment obligations of Buyer shall cease upon reaching the Earnout
Payment Cap. If the Earnout Payment due for a given year would cause
Buyer's cumulative Earnout Payments to exceed the Earnout Payment Cap,
Buyer shall pay to Seller a final Earnout Payment in an amount that
will cause all cumulative Earnout Payments to equal the Earnout
Payment Cap.
(C) If as of January 1, 2007, cumulative Earnout Payments
(including the Earnout Payment due on such date, if any) by Buyer to
Seller have not reached the Earnout Payment Cap, Buyer shall not be
liable for the difference between the Earnout Payment Cap and the
cumulative Earnout Payments, or for any further Earnout Payments
thereafter.
(D) "Service-Based Revenues" shall mean the revenues
historically identified by the Purchased Business as service-based
revenues, including but not limited to income from remote support,
training, staff augmentation, hosting/access and Internet services.
"Reseller-Based Revenues" shall mean the revenues historically
identified by the Purchased Business as reseller-based revenues;
specifically, VAR product income and related freight. "Service-Based
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Revenues" and "Reseller-Based Revenues" shall not include any charges
for bad debt which are reflected on Buyer's tax returns.
(ii) Upon a Change of Control of Buyer or a Change of Business, Buyer
shall pay to Seller a final Earnout Payment equal to (x) the Earnout
Payment Cap, less (y) cumulative Earnout Payments to date. The final
Earnout Payment under this Section 2.3(b)(ii) shall be payable by or on
behalf of Buyer by certified check or wire transfer prior to or
contemporaneously with the effective date of such Change of Control or
Change of Business. Buyer shall provide written notice to Seller
(describing the material terms and proposed effective date of the Change of
Control or Change of Business and certifying as to the amount and date of
the final Earnout Payment) at least thirty (30) days prior to the proposed
effective date of such Change of Control or Change of Business. Buyer
agrees and acknowledges that Seller will be entitled to obtain injunctive
relief in a Minnesota Court (as defined in Section 11.10) to prevent the
consummation of any Change of Control or Change of Business if Seller
reasonably believes that Buyer may consummate the transaction or decision
without paying the final Earnout Payment to Seller.
(iii) Seller shall have the right to audit the books of Buyer, at
Seller's expense, to confirm that it is receiving proper Earnout Payments
under Sections 2.3(b)(i) and (ii). If such audit reveals an underpayment
to Seller of more than five percent (5%), (A) Buyer shall reimburse Seller
for the costs of the audit, and (B) Buyer shall pay to Seller as liquidated
damages an amount equal to twenty percent (20%) of the amount of the
underpayment.
2.4 Post-Closing Purchase Price Adjustment. The Purchase Price described
--------------------------------------
in Section 2.3 is subject to the following post-Closing adjustment:
(a) As soon as practicable after the Closing Date, Buyer shall prepare and
deliver to Seller a final balance sheet dated as of the Closing Date (the
"Closing Balance Sheet"), which Closing Balance Sheet shall be reviewed by
Seller's independent accounting firm as part of their audit of the financial
statements for the fiscal year ending June 30, 2001. From this Closing Balance
Sheet, Seller shall prepare and deliver to Buyer a schedule setting forth the
amount of the Purchase Price adjustment, if any, described in Section 2.4(b)
below.
(b) If the net assets of the Company as indicated on the Closing Balance
Sheet exceed Seven Hundred-Fifty Thousand Dollars ($750,000), the Purchase Price
shall be adjusted upward in an amount equal to (i) the net assets reflected on
the Closing Balance Sheet, less (ii) Seven Hundred-Fifty Thousand Dollars
($750,000). The Purchase Price adjustment shall be effected by Buyer's transfer
of Purchased Assets equal in value to the Purchase Price adjustment to Seller,
such transfer to occur within ten (10) days of delivery of the Purchase Price
adjustment schedule. Seller shall have the right to approve Buyer's
identification of such transferred assets, such approval not to be unreasonably
withheld.
2.5 Assumed Liabilities. Buyer shall be responsible for, and shall assume
-------------------
and agrees to pay or discharge, all Liabilities of the Purchased Business or
that relate to the Purchased
7
Assets other than the Excluded Liabilities (the "Assumed Liabilities"),
including but not limited to the following:
(a) any and all Liability arising out of any event that occurs, products
which are sold, or services which are performed by Buyer on or after the Closing
Date, or arising out of Buyer's operation of the Purchased Business on or after
the Closing Date;
(b) any and all product warranty Liability, including, without limitation,
the cost of services and materials of Buyer's responding to and providing
service or materials to any purchaser of a product manufactured by Seller which
product is covered by valid and unexpired warranty given by Seller, or imposed
by law, prior to the Closing Date, or given by Buyer, or imposed by law, after
the Closing Date;
(c) any and all Liabilities of Seller arising under acquired Contracts;
(d) any and all Liabilities of Seller in connection with acquired
Equipment;
(e) any and all accounts payable and trade payables of Seller that relate
to the Purchased Business;
(f) any and all Liabilities for sales or excise Taxes arising out of the
subject sale of the Purchased Assets; and
(g) any and all Liabilities relating to the Proprietary Rights;
(h) any and all Liabilities to employees of Seller continuing in the
employ of Buyer following the Closing Date, including but not limited to any
liability for wages, salary, bonuses, vacation pay, sick leave pay or any other
pay for time not worked, back pay and damages payable under make whole remedies
pursuant to Applicable Law governing employment practices, whether such
Liabilities arose prior to or subsequent to the Closing Date;
(i) any and all Liabilities of Seller arising under or related to each of
the employment agreements between Seller, on the one hand, and Xxxxxx and
Xxxxxxx, respectively, on the other hand;
(j) any and all Liabilities arising out of the performance of the
conditions attached the municipal business development grant in the amount of
Forty-five Thousand Dollars ($45,000) from the City of Cedar Falls, Iowa;
(k) any and all Liability for Taxes arising prior to December 18, 1998;
and
(l) any and all other Liabilities of the Purchased Business or that relate
to the Purchased Assets that are not expressly excluded under Section 2.6 below.
2.6 Excluded Liabilities. Seller hereby represents, covenants and agrees
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that Buyer shall not assume, and shall not in any way become liable for the
following contracts, obligations
8
and Liabilities of Seller (the "Excluded Liabilities"), which shall be paid,
performed or otherwise discharged by Seller and shall not be assumed by Buyer:
(a) any obligation or Liability of Seller incurred by Seller after the
Closing Date;
(b) any Liability of Seller with respect to its outstanding shares of
capital stock or any warrants, options or rights to purchase its shares which
may be outstanding;
(c) any Liability for deferred Taxes or for Taxes, penalties or interest
occurring as a result of an examination of Seller's federal or state Tax returns
filed by Seller, other than Liability for Taxes arising prior to December 18,
1998;
(d) any Liabilities to employees or former employees of Seller not
continuing in the employ of the Buyer following the Closing Date, including but
not limited to any liability for wages, salary, bonuses vacation pay, sick leave
pay or any other pay for time not worked, back pay and damages payable under
make whole remedies pursuant to Applicable Law governing employment practices;
(e) any obligation of Seller to perform this Agreement, and any
Liabilities and obligations incurred by Seller in connection with this Agreement
or the consummation of the transactions provided herein or contemplated hereby,
including, without limitation, fees and expenses of Seller's counsel,
accountants, investment banker and other experts and all other expenses incurred
by Seller incident to the negotiation, preparation and execution of this
Agreement or any transaction incident hereto or contemplated hereby, including
expenses incurred in proving or perfecting title to property, commissions and
all other expenses of Seller pertaining to the performance by it of its
obligations under this Agreement;
(f) any debt, obligation or Liability of Seller which may arise out any
litigation (including but not limited to the claims disclosed in Schedule 4.6 of
Seller's Disclosure Schedule) other than litigation, if any, arising out of or
related to any Liability assumed by Buyer under Section 2.5, above; and
(g) any debt, obligation or Liability resulting from or arising in
connection with the storage, release or disposal by Seller or any of its
predecessors of any Hazardous Substance, whether resulting from violation of
Applicable Law or otherwise.
2.7 Closing Transactions.
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(a) The closing of the transactions contemplated by this Agreement (the
"Closing") will take place at the offices of Robins, Kaplan, Xxxxxx & Xxxxxx
L.L.P. in Minneapolis, Minnesota, on July 23, 2001, or on such other date and
such other place, if any, as is mutually agreeable to Buyer and Seller. The
Closing shall be effective as of 11:59 p.m., July 23, 2001 and such time and
date shall be referred to herein as the "Closing Date."
(b) Subject to the conditions set forth in this Agreement, and exceptions
scheduled in Seller's Disclosure Schedules, on the Closing Date:
9
(i) Seller will convey to Buyer good title to all of the Purchased
Assets, free and clear of all liens, charges, security interests and other
encumbrances, and will deliver to Buyer duly executed bills of sale,
assignments, and other instruments of conveyance which are necessary or
desirable to effect such transfer of the Purchased Assets; and
(ii) Buyer will assume the Assumed Liabilities of Seller as provided
in Section 2.3(a).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
To induce Seller to enter into this Agreement, Buyer represents and
warrants to Seller that the following are true and correct on the date hereof
and will be true and correct as of the Closing Date:
3.1 Organization. Buyer is a limited liability company lawfully existing
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and in good standing under the laws of the State of Iowa, with full power and
authority to own or lease its properties and to conduct its business in the
manner and in the places where such properties are owned or leased or such
business is conducted by it.
3.2 Binding Nature of Agreement. This Agreement has been duly and validly
---------------------------
executed and delivered by Buyer and is, and each Ancillary Agreement
contemplated hereby when executed and delivered will be, the legal, valid and
binding obligation of Buyer, enforceable in accordance with its respective
terms, except as such may be limited by bankruptcy, insolvency, reorganization
or similar laws affecting creditors' rights generally, and by general equitable
principles.
3.3 No Violation. The execution, delivery and performance of this
------------
Agreement by Buyer and the consummation by Buyer of the transactions
contemplated hereby do not and will not contravene or constitute a default under
or give rise to a right of termination, cancellation or acceleration of any
right or obligation of Buyer or to a loss of any benefit to which Buyer is
entitled under (a) any provision of Applicable Law or regulation; (b) the
Articles of Incorporation or Bylaws of Buyer; or (c) any judgment, injunction,
order, decree, administrative, interpretation, award or other instrument binding
upon Buyer.
3.4 Regulatory Approvals. All consents, approvals and authorizations and
--------------------
all other requirements prescribed by any Applicable Law which must be obtained
or satisfied by Buyer and which are necessary for the execution and delivery by
Buyer of this Agreement and the documents to be executed and delivered by Buyer
in connection herewith and in order to permit the consummation of the
transactions contemplated by this Agreement have been obtained and satisfied or
shall be obtained and satisfied by Closing.
3.5 No Brokerage Fees. No broker or finder has acted for Buyer in
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connection with this Agreement or the transactions contemplated hereby, and no
broker or finder is entitled to any
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brokerage or finder's fees or other commission in respect of such transactions
based in any way on agreements, arrangements or understandings made by or on
behalf of Buyer.
3.6 Litigation. There is no litigation pending or, to Buyer's Knowledge,
----------
threatened, which seeks to enjoin or obtain damages in respect of the
consummation of the transactions contemplated hereby.
3.7 No Known Breach. Buyer acknowledges that its principal members have
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been operating the Purchased Business as a wholly-owned subsidiary of
VirtualFund since December 1998 and as a stand-alone business prior to that, and
that Buyer therefore has substantial knowledge regarding the Purchased Business.
To the Knowledge of Buyer, there is no breach, and there will not be any breach
as of the Closing Date, of Seller's representations or warranties. To the
Knowledge of Buyer, Seller's Disclosure Schedules are, and, as of the Closing
Date will be, complete and accurate in all material respects.
3.8 Ordinary Course. The Purchased Business has been operated only in the
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usual course of business consistent with past practice. Without limiting the
foregoing, the Purchased Business has deposited all checks and other payments in
a timely manner and there have been and are no agreements or communications
between the Purchased Business and any vendor or other third-party relating to
the timing of any payments from or to any such third-party.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
To induce Buyer to enter into this Agreement, Seller (but not VirtualFund)
represents and warrants to Buyer that the following are true and correct on the
date hereof and will be true and correct as of the Closing Date, subject to such
exceptions as are specifically disclosed in Seller's Disclosure Schedules:
4.1 Authority of Seller. The execution, delivery and performance of this
-------------------
Agreement and the Ancillary Agreements by Seller and the consummation of the
transactions contemplated by this Agreement and the Ancillary Agreements have
been duly authorized by all necessary corporate action on the part of Seller.
The execution, delivery and performance of this Agreement and the Ancillary
Agreements by Seller do not and will not conflict with, result in a default of,
constitute a default under, or create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under (a) any provision of
the Articles of Incorporation or Bylaws of Seller or (b) any Applicable Law to
which Seller or the Purchased Assets may be subject.
4.2 Organization and Qualification. Seller is a corporation lawfully
------------------------------
existing and in good standing under the laws of Minnesota with full power and
authority to own or lease its properties and to conduct its business in the
manner and in the places where such properties are owned or leased or such
business is conducted by it.
4.3 Binding Nature of Agreement. This Agreement has been duly and validly
---------------------------
executed and delivered by Seller and is, and each Ancillary Agreements
contemplated hereby
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when executed and delivered will be, the legal, valid and binding obligation of
Seller, enforceable in accordance with its respective terms, except as such may
be limited by bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally, and by general equitable principles.
4.4 Title to Tangible Personal Properties.
-------------------------------------
(a) Seller is the sole owner of all tangible personal property included in
the Purchased Assets (including without limitation all Inventory and Equipment)
and has good title to all such tangible personal property, free and clear of all
liens, charges, purchase rights, claims, pledges, mortgages, security interests,
encumbrances or other limitations or restrictions whatsoever, except (i)
encumbrances which do not materially affect the operation of such tangible
personal property; or (ii) tangible personal property used by Seller in the
Purchased Business pursuant to a Contract included in the Purchased Assets and
subject to the rights of third parties pursuant thereto.
(b) The tangible personal property included in the Purchased Assets sold
by Seller hereunder are sold as is, where is, with all faults and Seller makes
no representations or warranties as to the fitness for purpose or
merchantability of such tangible personal property.
4.5 Proprietary Rights. Seller has the sole and exclusive right and
------------------
authority to use, and to transfer to Buyer at Closing, the Proprietary Rights.
Such Proprietary Rights are free of any liens or encumbrances. To Seller's
Knowledge, no one is infringing upon any rights of Seller with respect to any
Proprietary Rights. To Seller's Knowledge, in its conduct of the Purchased
Business, Seller is not infringing on intellectual property rights of third
parties, nor has it been accused of doing so by a third party. There are no
agreements relating to or affecting the Proprietary Rights or the use or
ownership of any Proprietary Rights by Seller, including, but not limited to,
confidentiality and non-disclosure agreements, assignments or agreements to
assign, development agreements, settlement agreements, and the like.
4.6 Litigation. There are no legal actions, suits, arbitrations or other
----------
legal, administrative or other governmental proceedings or investigations
pending, or, to the Knowledge of Seller, threatened against Seller which in any
way relate to the Purchased Business. Seller is not subject to any judgment,
order or decree entered in a lawsuit or proceeding which might have a Material
Adverse Effect on the Purchased Business or render it unable in any material
respect to acquire any property or conduct business (in the manner presently
conducted) in any jurisdiction.
4.7 Warranty or Other Claims. To the Knowledge of Seller, all products
------------------------
manufactured, distributed or sold by Seller, and all services provided in
connection therewith, have in all material respects been in conformity with all
Applicable Laws, contractual commitments and all express warranties, and except
for warranty service provided in the ordinary course of business, there are no
existing claims against Seller for goods or services which are defective or fail
to meet any express product or service warranties.
12
4.8 Employees; Employee Benefit Plans. Seller has made available to Buyer
---------------------------------
a complete list of all employees of Seller as of the Closing Date together with
current salary (including bonuses) or a classified hourly wage schedule for all
nonsalaried employees of Seller. Seller has made available to Buyer a true and
complete list of all written employment contracts (including severance
arrangements or any other arrangements under which the employees will be
entitled to receive payment, or accelerate any payment due from Seller as a
result of the transactions contemplated by this Agreement). Seller has made
available to Buyer a complete and accurate description of all employee benefit
plans, if any, and all collective bargaining agreements, if any, relating to
employee benefits with respect to which Seller has or may incur any future or
contingent obligations, including, without limitation, all plans, agreements,
arrangements, or policies relating to deferred compensation, pensions, profit
sharing, retirement income or other benefits, stock purchase and stock option
plans, bonuses, severance arrangements health benefits, insurance benefits and
all other employee benefit or fringe benefits, including any employee welfare
benefit plans and employee pensions benefit plans within the meaning of Sections
3(1) and 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA").
4.9 Financial Statements. Attached hereto as Schedule 4.9 are the
-------------------- ------------
unaudited financial statements of the Purchased Business for the fiscal year
ended June 30, 2001 (the "Financial Statements"). To the Knowledge of Buyer and
Seller, said Financial Statements are complete and correct in all material
respects and present fairly in all material respects the financial condition of
the Purchased Business at the dates of said statements as they relate to the
information contained therein. Each of Buyer, Seller and VirtualFund agree and
acknowledge that, following the Closing Date, Seller and VirtualFund will be
obtaining audited financial statements for the fiscal year ended June 30, 2001
and that as part of this audit and the subsequent footnote disclosure, there
will be a review of the financial statements for the period commencing as of
June 30, 2001 and ending as of the Closing Date to ensure the financial
statements for such time period are in conformity with generally accepted
accounting principles.
4.10 Contracts. All Contracts are in full force and effect, and neither
---------
Seller nor, to the Knowledge of Seller, the other party thereto is in default
under any Contract (nor, to the Knowledge of Seller, has any event occurred
which with notice, lapse of time or both would constitute a default thereunder).
Seller has not received any notice (a) of any alleged default under any Contract
prior to the date of this Agreement or (b) that any Contract will be cancelled.
There are no oral agreements to which Seller is a party which in any way
restrict, enlarge or conflict with any rights, liabilities, duties and
obligations of any of the parties under any of the Contracts. Each Contract is
assignable without the consent of the party or parties thereto, and neither such
assignment nor the consummation of any of the transactions contemplated by this
Agreement will result in a default under, or termination of or payment penalty
under, any Contract, which non-assignability, failure to obtain such assignment
or where any such default, penalty or termination would reasonably be expected
to have a Material Adverse Effect on the Purchased Business.
4.11 Compliance with Laws. Seller is in compliance in all material
--------------------
respects with all applicable statutes, ordinances, orders, judgments, decrees,
rules and regulations promulgated by any federal, state, municipal or other
governmental authority, and Seller has not received notice
13
of a violation or alleged violation of any such statute, ordinance, order,
judgment, decree, rule or regulation, in each case which relates to the
Purchased Business or the Purchased Assets.
4.12 Permits and Approvals. All Operating Permits are valid and in full
---------------------
force and effect, and Seller is operating the Purchased Business in compliance
therewith. All such Operating Permits, to the extent assignable, shall be
assigned to Buyer and will remain in full force and effect notwithstanding
Buyer's purchase of the Purchased Assets in a manner sufficient to permit Buyer
to conduct the Purchased Business as presently conducted by Seller.
4.13 No Brokerage Fees. No broker or finder has acted for Seller in
-----------------
connection with this Agreement or the transactions contemplated hereby, and no
broker or finder is entitled to any brokerage or finder's fees or other
commission in respect of such transactions based in any way on agreements,
arrangements or understandings made by or on behalf of Seller.
ARTICLE V
CONDITIONS TO CLOSING
---------------------
5.1 Conditions to Buyer's Obligation. The obligation of Buyer to
--------------------------------
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions on or before the Closing Date, and
Seller shall exert its best efforts to insure that each such condition is
fulfilled:
(a) The representations and warranties of Seller set forth in Article 4
hereof or in any document delivered to Buyer pursuant to this Agreement will be
true and correct in all material respects at and as of the Closing as though
then made and as though the Closing Date was substituted for the date of this
Agreement;
(b) Seller will have performed and complied with, in all material
respects, all of the covenants and agreements required to be performed and
complied with by it under this Agreement prior to the Closing;
(c) There will have been no Material Adverse Effect on the Purchased
Business, other than the decision of Seller to sell the Purchased Assets, and
there will have been no material casualty or other loss or damage to the
Purchased Assets, whether or not covered by insurance;
(d) On the Closing Date, Seller will have delivered to Buyer all of the
following:
(i) a certificate signed by Seller dated as of the Closing Date,
stating that the preconditions specified in subsections (a) and (b) have
been satisfied;
(ii) a certificate executed by the Secretary of Seller (A) certifying
as to the attached copy of the Joint Written Action of the Directors and
Sole Shareholder of Seller, authorizing the transactions contemplated by
this Agreement, and (B) setting forth the names of each of the officers of
Seller authorized to execute this Agreement and the Ancillary Agreements;
14
(iii) copies of all necessary third party and governmental consents,
releases, approvals and filings required in order to effect the
transactions contemplated by this Agreement;
(iv) the Ancillary Agreements, duly executed by Seller, including but
not limited to such instruments of sale, transfer, assignment, conveyance
and delivery, in form and substance satisfactory to counsel for Buyer, as
are required in order to transfer to Buyer good and marketable title to the
Purchased Assets, free and clear of all liens, charges, security interests
and other encumbrances, except as indicated otherwise in Disclosure
Schedules;
(v) the Transition Services Agreement, substantially in the form set
forth as Exhibit C hereto, executed by Seller and VirtualFund;
---------
(vi) all other documents, instruments or writings required to be
delivered to Buyer at or prior to Closing pursuant to this Agreement, and
such other certificates of authority and documents as Buyer may reasonably
request.
Any condition specified in this Section 5.1 may be waived by Buyer;
provided that no such waiver will be effective unless it is set forth in a
writing executed by Buyer.
5.2 Conditions to Seller's Obligations. The obligations of Seller to
----------------------------------
consummate the transactions contemplated by this Agreement are subject to the
satisfaction of the following conditions on or before the Closing Date, and
Buyer shall exert its best efforts to insure that each such condition is
fulfilled:
(a) The representations and warranties of Buyer set forth in Article 3
hereof or in any document delivered to Seller pursuant to this Agreement will be
true and correct in all material respects as of the Closing as though then made
and as though the Closing Date was substituted for the date of this Agreement;
(b) Buyer will have performed and complied with, in all materials
respects, all of the covenants and agreements required to be performed and
complied with by it under this Agreement prior to Closing;
(c) On the Closing Date, Buyer shall have assumed the employment
agreements between Seller and each of Xxxxxx and Xxxxxxx, and offered (i) at-
will employment to each of the other employees of the Purchased Business in an
amount equivalent or superior to each employee's base salary at the Closing
Date, plus incentive compensation under a plan equivalent or superior to the
existing plan of the Purchased Business as of the Closing Date, and (ii) health
insurance benefits to all of the employees of the Purchased Business who accept
such employment with Buyer, which policies are equivalent to the policies of the
Purchased Business as of the Closing Date; and
(d) On the Closing Date, Buyer will have delivered to Seller all of the
following:
15
(i) a certificate dated as of the Closing Date, stating that the
preconditions specified in subsections (a) through (c) have been satisfied;
(ii) a certificate executed by the Secretary of Buyer (A) certifying
as to attached copies of resolutions of Buyer's Board of Governors
approving the Agreement and (B) setting forth the names of each of the
officers of Buyer authorized to execute this Agreement and the Ancillary
Agreements and other documents;
(iii) the Purchase Price due and payable in accordance with Section
2.3(a);
(iv) the Ancillary Agreements duly executed by Buyer;
(v) Releases, substantially in the form set forth as Exhibit A
---------
hereto, executed by each of Xxxxx Xxxxxx and Xxxx Xxxxxxx, releasing
Seller, VirtualFund and all affiliates thereof from any and all Liability
related to the employment of Messrs. Xxxxxx and Xxxxxxx by Seller prior to
the Closing Date;
(vi) A Lease Termination Agreement, substantially in the form set
forth as Exhibit B hereto, executed by Team Property Management terminating
---------
the Lease Agreement Between Team Property Management and Seller and
releasing Seller, VirtualFund and all affiliates thereof from any and all
Liabilities arising in connection with such property following the Closing
Date;
(vii) the Transition Services Agreement, substantially in the form
set forth as Exhibit C hereto, executed by Seller, Buyer, VirtualFund,
---------
Xxxxxx and Xxxxxxx; and
(viii) the Joint Representation Agreement, substantially in the form
set forth as Exhibit D hereto, executed by each of Seller, Buyer,
---------
VirtualFund, Xxxxxx and Xxxxxxx and the other parties thereto.
Any condition specified in this Section 5.2 may be waived by Seller;
provided that no such waiver will be effective unless it is set forth in a
writing executed by Seller.
ARTICLE VI
COVENANTS PRIOR TO CLOSING
--------------------------
6.1 Seller's Covenants.
------------------
(a) Prior to the Closing, Seller will conduct the Purchased Business only
in the usual and ordinary course of business as heretofore conducted, including
but not limited to the following:
(i) Use reasonable efforts to preserve its present customer and
vendor relationships; and
16
(ii) maintain the Purchased Assets in their current state of repair,
order and condition and maintain insurance reasonably comparable to that in
effect on the date of this Agreement, and in the event of any casualty,
loss or damage to any of the Purchased Assets prior to the Closing, Seller
will either repair or replace such property or, if Buyer agrees, transfer
to Buyer at the Closing the proceeds of any insurance recovery thereto.
(b) Prior to the Closing, Seller shall promptly inform Buyer in writing of
any variances from the representations and warranties contained in Article IV
hereof.
(c) Prior to the Closing, Seller shall not take or omit to take any action
which could be reasonably anticipated to have a Material Adverse Effect upon the
Purchased Business or the Purchased Assets.
6.2 Buyer's Covenants.
-----------------
(a) Buyer shall use its best efforts to cause the consummation of the
transactions contemplated by this Agreement in accordance with the terms and
conditions hereof and Applicable Law.
(b) On the Closing Date, Buyer shall have offered (i) at-will employment
to each of the employees of the Purchased Business in an amount equivalent or
superior to each employee's base salary at the Closing Date, plus incentive
compensation under a plan equivalent or superior to the existing plan of the
Purchased Business as of the Closing Date, and (ii) health insurance benefits to
all of the employees of the Purchased Business who accept such employment with
Buyer which are equivalent to the policies of the Purchased Business as of the
Closing Date.
(c) Prior to the Closing, Buyer shall promptly inform Seller in writing of
any variances from the representation and warranties contained in Article III
hereof.
ARTICLE VII
POST-CLOSING COVENANTS
----------------------
7.1 Transition Assistance. Buyer, Seller, VirtualFund, Xxxxxx and Xxxxxxx
---------------------
shall provide the transition services set forth in the Transition Services
Agreement executed at Closing.
7.2 Press Release and Announcements. Buyer, Seller and VirtualFund shall
-------------------------------
not issue any press release or other public statement, or make any disclosure to
any other person other than employees and representatives who have a need to
know in connection with the evaluation or negotiation of the proposed
transaction, relating to this Agreement or the transactions contemplated hereby
without the prior written consent of the other parties, except as may be
required by Applicable Law, in which case the issuing party shall consult with
the other parties prior to issuing any such press release or other public
statement. Notwithstanding the foregoing, Seller and VirtualFund shall be
entitled to make any disclosure required by the rules of the Securities and
Exchange Commission without such prior consultation with Buyer.
17
7.3 Further Transfers. Seller will execute and deliver such further
-----------------
instruments of conveyance and transfer and take such additional action as Buyer
may reasonably request to effect, consummate, confirm or evidence the transfer
to Buyer of the Purchased Assets. Seller will execute such documents as may be
reasonably necessary to assist Buyer in preserving or perfecting its rights in
the Purchased Assets.
7.4 Confidentiality. If the transactions contemplated by this Agreement
---------------
are not consummated, Buyer will use its best efforts to maintain the
confidentiality of all information and materials reasonably designated by Seller
or VirtualFund as confidential, and Buyer will return, or destroy and certify
the destruction of, all materials (and all copies of such materials) received in
connection with this Agreement and the transactions contemplated hereby. If the
transactions contemplated by this Agreement are consummated, Seller and
VirtualFund will maintain the confidentiality of all information and materials
relating to the Purchased Business, except as necessary to file tax returns and
other reports to governmental agencies. Whether or not the transactions
contemplated hereby are consummated, Seller and VirtualFund will use best
efforts to maintain the confidentiality of all information and materials
regarding Buyer designated as confidential by Buyer.
7.5 Bulk Sales. Buyer and Seller waive compliance with the terms and
----------
conditions of any applicable bulk sales law.
7.6 Dispute Resolution. Any dispute, controversy or claim arising out of
------------------
or relating to this Agreement or any Ancillary Agreements or the performance by
the parties of its or their terms shall be settled by binding arbitration held
in Minneapolis, Minnesota in accordance with the Commercial Arbitration Rules of
the American Arbitration Association then in effect, except as specifically
otherwise provided in this Section 7.6. The panel to be appointed shall consist
of one neutral arbitrator. All arbitration proceedings, and all evidence given
or discovered pursuant hereto, shall be maintained by in confidence by the
parties. The fact that the dispute resolution procedures specified in this
Section 7.6 shall have been or may be invoked shall not excuse any party from
performing its obligations under this Agreement and during the pendency of any
such procedure all parties shall continue to perform their respective
obligations in good faith, subject to any rights to terminate this Agreement
that may be available to any party. Notwithstanding anything to the contrary in
this Section 7.6, a party may apply to a court of competent jurisdiction for
equitable relief from any violation or threatened violation of covenants of the
other party or parties for which there is no adequate remedy at law.
7.7 Employees. On the Closing Date, Buyer shall have assumed the
---------
employment agreements between Seller and each Xxxxxx and Xxxxxxx, and shall have
offered (a) at-will employment to each of the other employees of the Purchased
Business in an amount equivalent or superior to each such employee's base salary
at the Closing Date, plus incentive compensation under a plan equivalent or
superior to the existing plan of the Purchased Business as of the Closing Date,
and (b) health insurance benefits to all of the employees of the Purchased
Business who accept such employment with Buyer which are equivalent to the
policies of the Purchased Business as of the Closing Date. For all purposes
under the employee benefit plans of Buyer providing benefits to employees of the
Purchased Business after the Closing Date, each employee (including Xxxxxx and
Xxxxxxx) shall be credited with his or her years of service with
18
Seller prior to the Closing Date. Without limiting the foregoing, (y) for
purposes of each of Buyer's plans providing medical, dental, pharmaceutical
and/or vision benefits to an employee the Purchased Business following the
Closing Date, Buyer shall cause all preexisting condition exclusions and
actively at work requirements of such plans to be waived for all such employees
and their dependents, and Buyer shall cause any eligible expense incurred by
such employees and their covered dependents during the portion of the plan year
of Seller's plan ending on the date such employee's participation in the
corresponding Buyer's plan begins to be taken into account under such Buyer's
plan for purposes of satisfying all deductible, coinsurance and maximum out of
pocket requirements applicable to such employee and his or her covered
dependents for the applicable Buyer's plan as if such amount had been paid in
accordance with Buyer's plan, and (z) Buyer shall honor all accrued vacation,
flex time and similar arrangements provided by Seller as of the Closing Date.
ARTICLE VIII
TERMINATION
-----------
8.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Closing:
(a) by mutual consent of Buyer and Seller;
(b) by either Buyer or Seller if there has been a material
misrepresentation or material breach of warranty on the part of the other party
in the representations and warranties set forth in this Agreement, or if events
have occurred which have made it impossible to satisfy a condition precedent to
the terminating party's obligations to consummate the transactions contemplated
hereby (other than as a result of the willful acts or omissions of the
terminating party); or
(c) by either Buyer or Seller if the transactions contemplated hereby have
not been consummated by July 31, 2001; provided that neither Buyer nor Seller
will be entitled to terminate pursuant to this paragraph (c) if the terminating
party has without just cause prevented the consummation of the transactions
contemplated hereby.
8.2 Effect of Termination. In the event of termination of this Agreement
---------------------
by either Buyer or Seller as provided in Section 8.1, this Agreement will become
void, and there will be no liability on the part of Buyer, Seller or
VirtualFund, except for breaches of this Agreement prior to the time of such
termination. Upon termination, Buyer shall promptly return all documents,
contracts or records of Seller or VirtualFund furnished to Buyer by Seller or
VirtualFund without retaining any copies or summaries thereof, and the
confidentiality obligations set forth in Section 7.4 shall remain in full force
and effect.
ARTICLE IX
NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES
-----------------------------------------------------
9.1 Nature of Statements. All statements contained in this Agreement or
--------------------
any Schedule or Exhibit hereto shall be deemed representations and warranties of
the party executing or delivering the same; provided, however, that only
-------- -------
representations and warranties expressly
19
made by VirtualFund in this Agreement or any Schedule or Exhibit shall be deemed
representations or warranties of VirtualFund.
9.2 Survival of Representations and Warranties. All covenants,
------------------------------------------
agreements, representations and warranties made hereunder or pursuant hereto or
any Schedule or Exhibit hereto or in connection with the transaction
contemplated hereby and thereby shall survive for a period of twelve (12) months
following the Closing Date, except that (a) the representations and warranties
set forth in Sections 3.1, 3.2, 3.3, 4.1 (first sentence only), 4.2 and 4.3
shall survive until the expiration of all statutes of limitation applicable to
matters referred to therein, and (b) if an indemnified party delivers notice of
Losses or reasonably anticipated Losses arising out of a breach of
representation or warranty of the indemnifying party, then such representation
or warranty shall survive until, but only for purposes of, the resolution of the
matter covered by such notice.
ARTICLE X
INDEMNIFICATION
---------------
10.1 Indemnification by Seller. Seller and VirtualFund (subject to the
-------------------------
limitations set forth in this Section 10.1) agree to indemnify and hold harmless
Buyer and its successors and assigns, together with any of their officers,
directors, or shareholders, from and against any and all losses, damages,
liabilities, obligations, costs or expenses (any one such item being herein
called a "Loss" and all such items being herein collectively called "Losses")
which are caused by or arise out of (a) any breach or default in the performance
by Seller of any covenant or agreement of Seller contained in this Agreement,
(b) any breach of warranty or inaccurate or erroneous representation made by
Seller herein, in any Schedule delivered to Buyer pursuant hereto or in any
certificate or other instrument delivered by or on behalf of Seller pursuant
hereto, (c) any claim made against Buyer in respect of the Excluded Liabilities,
and (d) any and all actions, suits, proceedings, claims, demands, judgments,
costs and expenses (including reasonable legal fees) arising out of the
foregoing. Notwithstanding the foregoing, VirtualFund shall only be required to
indemnify Buyer and its indemnitees if and to the extent that Seller is unable
to indemnify any Losses arising under this Section 10.1.
10.2 Indemnification by Buyer. The Buyer agrees to indemnify and hold
------------------------
harmless Seller and its successors and assigns, together with any of their
officers, directors, and shareholders, from and against any Losses which are
caused by or arise out of (a) any breach or default in the performance by Buyer
of any covenant or agreement of Buyer contained in this Agreement, (b) any
breach of warranty or inaccurate or erroneous representation made by Buyer
herein or in any certificate or other instrument delivered by or on behalf of
Buyer pursuant hereto, (c) any claim made against Seller in respect of the
Assumed Liabilities, and (d) any and all actions, suits, proceedings, claims,
demands, judgments, costs and expenses (including reasonable legal fees) arising
out of the foregoing.
10.3 Third Party Claims. If any third person asserts a claim against an
------------------
indemnified party hereunder that, if successful, might result in a claim for
indemnification against any indemnifying party hereunder, the indemnifying party
shall be given prompt written notice thereof and shall have the right (a) to
participate in the defense thereof and be represented, at his or its own
expense, by advisory counsel selected by it, and (b) to approve any settlement
if the
20
indemnifying party is, or will be, required to pay any amounts in connection
therewith. Notwithstanding the foregoing, if within ten (10) business days after
delivery of the indemnified party's notice described above, the indemnifying
party indicates in writing to the indemnified party that, as between such
parties, such claims shall be fully indemnified for by the indemnifying party as
provided herein, then the indemnifying party shall have the right to control the
defense of such claim, provided that the indemnified party shall have the right
(y) to participate in the defense thereof and be represented, at his or its own
expenses, by advisory counsel selected by it, and (z) to approve any settlement
if the indemnified party's interests are, or would be, affected thereby, which
approval shall not be unreasonably withheld, conditioned or delayed.
10.4 Exclusive Remedy. The enforcement of the agreements of
----------------
indemnification contained in this Article X shall be, after the date hereof, the
exclusive remedy of the parties hereto for any breach of any representation,
warranty, agreement or covenant hereof or any certificate delivered pursuant to
this Agreement, whether sounding in tort, contract or otherwise, and the parties
hereto waive all remedies otherwise available to such parties save only remedies
which by law may not be waived.
10.5 Limitations on Seller's Liability. Notwithstanding the foregoing
---------------------------------
provisions of this Article X, neither Seller nor VirtualFund shall be obligated
to indemnify Buyer pursuant to Section 10.1 until the aggregate of all Losses
has exceeded $40,000, after which Seller or VirtualFund or some combination
thereof, as applicable, shall be responsible for all Losses in excess of
$40,000. In addition, notwithstanding the foregoing provisions of this Article
X, the maximum aggregate amount of Losses for which Buyer shall be entitled to
indemnification (regardless of whether such Losses are indemnified by Seller,
VirtualFund or some combination thereof) shall be Two Hundred Thousand Dollars
($200,000). Notwithstanding any other provision in this Agreement to the
contrary, Buyer shall not be able to avoid the liability limitations expressly
set forth in this Article X by electing to pursue some other remedy.
ARTICLE XI
MISCELLANEOUS
-------------
11.1 Expenses. Each party will pay all of its expenses, including
--------
attorney's fees incurred in connection with the negotiation of this Agreement,
the performance of its obligations hereunder and the consummation of the
transactions of the transactions contemplated by this Agreement.
11.2 Sales Tax. Any and all sales tax liability arising as a result of
---------
the sale and purchase of the Purchased Assets shall be the sole responsibility
of, and shall be paid by, Buyer.
11.3 Notices. All notices, demands and other communications to be given
-------
or delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given when personally delivered or
mailed by first class mail, return receipt requested. Notices, demands and
communications to Seller and Buyer will, unless another address is specified in
writing, be sent to the addresses indicated below:
21
BUYER:
RSP Acquisitions, LLC
0000 Xxxxxxxxxx Xxxxxxx
Xxxxxxxx, XX 00000
With a copy to:
Xxxx, Xxxx & Xxxx, P.C.
Attn: Xxx X. Xxxx, esq.
0000 Xxxxxxx Xxxxxx
X.X. Xxx 0000
Xxxxxxxx, XX 00000-0000
SELLER:
RSPNetwork, Inc.
c/o XxxxxxxXxxx.xxx, Inc.
0000 Xxxx Xxxx Xxxxxxx, Xxxxx 000
Xxxx Xxxxxxx, XX 00000
Attn: Chief Executive Officer
With a copy to:
Robins, Kaplan, Xxxxxx & Xxxxxx L.L.P.
0000 XxXxxxx Xxxxx
000 XxXxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxx, Esq.
VIRTUALFUND:
XxxxxxxXxxx.xxx, Inc.
0000 Xxxx Xxxx Xxxxxxx, Xxxxx 000
Xxxx Xxxxxxx, XX 00000
Attn: Chief Executive Officer
With a copy to:
Robins, Kaplan, Xxxxxx & Xxxxxx L.L.P.
0000 XxXxxxx Xxxxx
000 XxXxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxx, Esq.
11.4 Entire Agreement; Amendment. This Agreement constitutes the entire
---------------------------
agreement between the parties and supersedes all prior discussions, negotiations
and
22
understanding relating to the subject matter hereof, whether written or oral.
This Agreement shall not be amended, altered, enlarged, supplemented, abridged,
modified, or any provisions waived, except by a writing duly signed by all of
the parties hereto.
11.5 Benefit; Assignability. This Agreement shall be enforceable by, and
----------------------
shall inure to the benefit of, the parties to this Agreement and their
respective successors and assigns. Except as otherwise expressly provided
herein, Buyer may not assign its rights or obligations under this Agreement
without the consent of the other parties hereto. Seller and VirtualFund may
assign their respective rights or obligations under this Agreement effective
upon written notice to Buyer.
11.6 Severability. Whenever possible, each provision of this Agreement
------------
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provisions or the remaining provisions of this Agreement.
11.7 No Strict Construction. The language used in this Agreement shall be
----------------------
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any person.
11.8 Captions. The captions used in this Agreement are for convenience of
--------
reference only and do not constitute a part of this Agreement and will not be
deemed to limit, characterize or in any way affect any provision of this
Agreement, and all provisions of this Agreement will be enforced and construed
as if no caption had been used in this Agreement.
11.9 Counterparts. This Agreement may be executed by facsimile signature
------------
and in two or more counterparts, all of which taken together will constitute one
and the same instrument.
11.10 Governing Law. The law of the State of Minnesota without respect to
-------------
conflict of laws principles will govern all questions concerning the
construction, validity and interpretation of this Agreement and the performance
of the obligations imposed by this Agreement. With respect to any obligation
not subject to the exclusive remedy of arbitration set forth in Section 7.6,
each of the parties hereto irrevocably and unconditionally consents to the sole
and exclusive jurisdiction of the courts of the State of Minnesota and of the
United States of America located in the State of Minnesota (the "Minnesota
Courts") for any litigation among the parties hereto arising out of or relating
to this Agreement or the negotiation, validity or performance of this Agreement,
waives any objection to the laying of venue of any such litigation in the
Minnesota Courts and agrees not to plead or claim in any Minnesota Court that
such litigation brought therein has been brought in any inconvenient forum or
that there are indispensable parties to such litigation that are not subject to
the jurisdiction of the Minnesota Courts.
11.11 Tax Treatment. It is expressly understood and agreed that Buyer and
-------------
Seller, or their respective officers, agents, accountants and attorneys have not
made any warranty or
23
agreement, express or implied, as to the Tax consequences of this transaction or
the Tax consequences of any transaction pursuant to or arising out of this
Agreement.
11.12 Non-Exclusivity. Subject to Section 10.4 herein, the rights,
---------------
remedies, powers and privileges provided in this Agreement are cumulative and
not exclusive and shall be in addition to any and all rights, remedies, powers
and privileges granted by law, rule, regulation or instrument.
* * * * * * *
24
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
SELLER: BUYER:
RSPNETWORK, INC.: RSP ACQUISITIONS, LLC:
By: /s/ XXXXXXX X. XXXXX By: /s/ XXXXX XXXXXX
----------------------------- ---------------------------
Xxxxxxx X. Duuos Xxxxx Xxxxxx
Its: Chairman Its: President
By: /s/ XXXXXX X. XXXXX By: /s/ XXXX XXXXXXX
----------------------------- ---------------------------
Xxxxxx X. Xxxxx Xxxx Xxxxxxx
Its: Director Its: Secretary
XXXXXXXXXXX.XXX, INC.:
By: /s/ XXXXXXX X. XXXXX
-----------------------------
Xxxxxxx X. Duuos
Its: Chairman
By: /s/ XXXXXX X. XXXXX
-----------------------------
Xxxxxx X. Xxxxx
Its: Director
25
Schedule 2.1(e)
---------------
Proprietary Rights
1. Trademarks and Servicemarks
a. RSPNetwork
b. XXXXxx.xxx
c. Internet Time(SM) Computer Hosting Services
d. The Global Extranet Experts
e. Hosting the Digital Dialtone
f. Fixed Price, On Time
g. StorageVault
h. M/3/
i. Net-Centric Hosting Tools and Service(SM)
2. Domain Names
a. xxxxxxxxxx.xxx
b. xxxxxxxxxx.xxx
c. xxxx.xxx
d. xxxxxx.xxx
e. xxxxxxxxxxxx.xxx
f. xxxxxxx.xxx
g. xxxxxxxxxxx.xxx
26
Schedule 2.2(d)
---------------
Excluded Intellectual Property
1. Any and all agreements and amendments and modifications thereto granting
Seller and/or VirtualFund the right to utilize software and other technology of
Great Plains Dynamics.
2. Any and all source code of Seller relating to B2BExchange in any manner.
3. Any and all software of Seller relating to "ecommerce" and agreements, if
any, and amendments and modifications thereto granting Seller the right to
utilize such software.
4. Any and all software of Seller referred to as "common line software" and
agreements, if any, and amendments and modifications thereto granting Seller the
right to utilize such software.
5. The following domain names:
(a) xxxxxxxxxx.xxx
(b) xxxxxxxxxxxxxxx.xxx
27
Schedule 2.2(e)
---------------
Excluded Contracts
1. See Schedule 2.2(d), Items 1, 3 and 4.
--- ---------------
28
Schedule 2.2(f)
---------------
Excluded Equipment/Inventory
-------------------------------------------------------------------------------
Item Model # Serial #
-------------------------------------------------------------------------------
Macintosh G4 XB03428KJ3C
-------------------------------------------------------------------------------
Macintosh X0 XX000X0XXXX
-------------------------------------------------------------------------------
Macintosh G3 XA9251F7GJ7
-------------------------------------------------------------------------------
Macintosh G3 XA925139GJ7
-------------------------------------------------------------------------------
Macintosh G3 XA9251F2GJ7
-------------------------------------------------------------------------------
Macintosh G3 XB9420WWWHM0
-------------------------------------------------------------------------------
Macintosh G4 XB9420Z9HM0
-------------------------------------------------------------------------------
Monitor Mitsubishi 205001960
-------------------------------------------------------------------------------
Monitor NEC JC1731VWA-3 4334727LA
-------------------------------------------------------------------------------
Monitor Hitachi CM2095 5696
-------------------------------------------------------------------------------
Monitor CXT-1785GM XXX-428011530
-------------------------------------------------------------------------------
Monitor NEC JC2143UMA 21in. 5803556DB
-------------------------------------------------------------------------------
Monitor NEC JC2143UMA 21in. 5901108DH
-------------------------------------------------------------------------------
Monitor Sony CPD-300FT 7135282
-------------------------------------------------------------------------------
Monitor Hyundai MFEHA801500272
-------------------------------------------------------------------------------
Monitor ADI Microscan 931G 8350012T60106809
-------------------------------------------------------------------------------
Monitor CTX-VL700SL XXX-43500137
-------------------------------------------------------------------------------
Monitor CTX-VL700SL 1P191210401
-------------------------------------------------------------------------------
Monitor CTX-VL700SL 1P191210391
-------------------------------------------------------------------------------
Monitor CTX-VL700SL 1P190918073
-------------------------------------------------------------------------------
Monitor CTX-VL700SL 1P191202544
-------------------------------------------------------------------------------
Monitor CTX-VL700SL 1P191210412
-------------------------------------------------------------------------------
Monitor CTX-VL710S 17in. OR690900630
-------------------------------------------------------------------------------
Monitor CTX-VL710S 17in. OR690900623
-------------------------------------------------------------------------------
Monitor CTX-VL7105 17in. OR690900627
-------------------------------------------------------------------------------
Monitor CTX-VL710S 17in. OR690900631
-------------------------------------------------------------------------------
Monitor Hyundai M7A20HA955000042
-------------------------------------------------------------------------------
Monitor Mitsubishi - 17" 905511378
-------------------------------------------------------------------------------
Monitor Mitsubishi - 17" 905511178
-------------------------------------------------------------------------------
Monitor Optiquest-Q95 9L01922974
-------------------------------------------------------------------------------
Monitor Optiquest-Q95 9L01922724
-------------------------------------------------------------------------------
Monitor Optiquest-Q95 9L02341210
-------------------------------------------------------------------------------
Monitor Optiquest-Q95 9L02441351
-------------------------------------------------------------------------------
Monitor Optiquest-Q95 9L01922969
-------------------------------------------------------------------------------
Monitor Optiquest-Q95 9L01922730
-------------------------------------------------------------------------------
Monitor Optiquest-Q95 9L01618771
-------------------------------------------------------------------------------
Monitor Viewsonic PF775 DZO1401288
-------------------------------------------------------------------------------
Monitor Viewsonic PF775 DZO1402573
-------------------------------------------------------------------------------
Monitor Viewsonic PF790 MU02300296
-------------------------------------------------------------------------------
Monitor Viewsonic PF795 ML02805026
-------------------------------------------------------------------------------
29
-------------------------------------------------------------------------------
Item Model # Serial #
-------------------------------------------------------------------------------
Monitor Viewsonic PF795 ML01703384
-------------------------------------------------------------------------------
Monitor Viewsonic PT795 ME91504944-1M
-------------------------------------------------------------------------------
PC DELL Dimension XPS D233 (Training machine)
-------------------------------------------------------------------------------
PC DELL Dimension XPS D233 (Training machine)
-------------------------------------------------------------------------------
PC DELL Dimension XPS D233 (Training machine)
-------------------------------------------------------------------------------
PC DELL Dimension XPS D233 (Training machine)
-------------------------------------------------------------------------------
PC DELL Dimension XPS D233 (Training machine)
-------------------------------------------------------------------------------
PC DELL Dimension XPS D233 (Training machine)
-------------------------------------------------------------------------------
PC DELL Dimension XPS D233 (Training machine)
-------------------------------------------------------------------------------
PC RS1000 IMAN74300676
-------------------------------------------------------------------------------
PC RS1000 IMAN82300064
-------------------------------------------------------------------------------
PC CS4000 TY7264410121
-------------------------------------------------------------------------------
PC CS4000 978483
-------------------------------------------------------------------------------
PC CS4000 TY0000000000
-------------------------------------------------------------------------------
PC CS4000 TY7265210332
-------------------------------------------------------------------------------
Server Dell 2300 410KJ
-------------------------------------------------------------------------------
Server Dell 2300 1DF9V
-------------------------------------------------------------------------------
Xxxxxx Xxxx 0000 XX0X0
-------------------------------------------------------------------------------
Server Dell 4300 UMZ56
-------------------------------------------------------------------------------
Server Dell 4400 9VBQ20B
-------------------------------------------------------------------------------
Server Dell 4400 7VBQ20B
-------------------------------------------------------------------------------
Xxxxxx Xxxx 0000 0XXXX
-------------------------------------------------------------------------------
Server Sun 420R 035C1607
-------------------------------------------------------------------------------
Server Sun 420R 042C0262
-------------------------------------------------------------------------------
30
Schedule 2.2(g)
---------------
Excluded Receivables
1. Any receivable of the Purchased Business of any kind from Xxxx Xxxxxxxx or
an affiliate thereof.
31
SELLER'S DISCLOSURE SCHEDULES
The following are exceptions to the representations and warranties of
Seller contained in the Asset Purchase Agreement by and between Seller and
Buyer. The section numbers in this Disclosure Schedule correspond to the
section numbers in the Asset Purchase Agreement; provided, however, that
any information disclosed herein under any section number shall be deemed
disclosed and incorporated into any other section under Seller's Disclosure
Schedules if the applicability of such information is readily apparent to
such other section or subsection. Capitalized terms used but not defined
herein shall have the meanings given to them in the Asset Purchase
Agreement.
Schedule 4.1 (Authority of Seller). None.
----------------------------------
Schedule 4.2 (Organization and Qualification). Seller filed its annual
---------------------------------------------
report returning Seller to good standing on July 19, 2001. Prior to such
filing, Seller was not in good standing in the State of Minnesota. Seller
is not presently registered as a foreign corporation in Iowa but intends to
so register following the Closing.
Schedule 4.3 (Binding Nature of Agreement). The Purchased Assets are
------------------------------------------
subject to the non-terminated or unexpired security interests identified
in Schedule 4.4(a) below.
---------------
Schedule 4.4(a) (Title to Tangible Properties). The Purchased Assets are
----------------------------------------------
subject to the non-terminated or unexpired security interests identified
below:
------------------------------------------------------------------------------------------------------------------------------------
Debtor Secured Party Collateral Filing Date Filing Office File No. Status
------------------------------------------------------------------------------------------------------------------------------------
XXXXxx.xxx, Inc. Coast Business Credit, Accounts; General intangibles; 7/26/99 MN SOS 2150131 Effective.
00000 Xxxxxxxx Xxxx., chattel paper; documents; letters
Suite 1400, Los of credit; instruments; deposit
Xxxxxxx, XX 00000 accounts; inventory; farm products;
investment property; fixtures;
equipment and all proceeds and
products of each of the foregoing.
------------------------------------------------------------------------------------------------------------------------------------
XXXXxx.xxx, Inc., Firstar Bank Iowa, General intangible(s); account(s); 7/20/99 MS SOS 2148287 Effective.
successor in N.A., 222 Second chattel paper; contract rights;
interest by Avenue, SE, Cedar negotiable instruments; inventory;
merger to K & R Rapids, IA 52401 equipment; fixtures and all proceeds
Technical and products of each of the foregoing.
Services, Inc.
------------------------------------------------------------------------------------------------------------------------------------
XXXXxx.xxx, Inc., Firstar Bank Iowa, N.A. General intangibles(s); account(s); 7/20/99 IA SOS P030939 Effective.
successor in Collateral Dept, P.O. chattel paper; contract rights;
interest by Xxx 0000, Xxxxxxx, XX inventory; equipment; negotiable
merger to K & 54903 instrument and all proceeds and
R Technical products of each of the foregoing.
Services, Inc.
------------------------------------------------------------------------------------------------------------------------------------
XXXXxx.xxx, Inc., Firstar Bank, N.A., 222 IA SOS K303322 Amendment
successor in Washington Street, P.O. filed
interest by Xxx 00, Xxxxx Xxxxx, XX 7/20/99
merger to K & 50613 (File No.
R Technical P030726)
Services, Inc.
------------------------------------------------------------------------------------------------------------------------------------
XXXXxx.xxx, Inc. Firstbank N.A. 9/17/98 IA SOS K948866 Amendment
X.X. Xxx 0000 xxxxx
Xxxxxxx, XX 00000 11/12/99
(File No.
P056272);
Amendment
filed
7/20/99
(File No.
P030727)
------------------------------------------------------------------------------------------------------------------------------------
32
------------------------------------------------------------------------------------------------------------------------------------
Debtor Secured Party Collateral Filing Date Filing Office File No. Status
------------------------------------------------------------------------------------------------------------------------------------
RSPNet, Com, Inc Firstar Bank N.A. 7/16/91 IA SOS K260910 Amendment
(assignee), X.X. Xxx xxxxx
0000, Xxxxxxx, XX 00000 3/26/01
(File No.
P175207);
Amendment
filed
11/12/99
(File No.
P056271);
Amendment
filed
7/20/99
(File No.
P030729).
------------------------------------------------------------------------------------------------------------------------------------
RSPNet, Com, Inc Firstar Bank N.A. 7/16/91 IA SOS K260912 Amendment
(assignee), X.X. Xxx xxxxx
0000, Xxxxxxx, XX 00000 3/26/01
(File No.
P175208);
Amendment
filed
11/12/99
(File No.
P056270);
Amendment
filed
7/20/99
(File No.
P030728)
------------------------------------------------------------------------------------------------------------------------------------
Schedule 4.5 (Proprietary Rights). The Purchased Assets are subject to the
---------------------------------
non-terminated or unexpired security interests identified in
Schedule 4.4(a) above.
---------------
Schedule 4.6 (Litigation). Seller is a party in the following litigation
-------------------------
and arbitration:
In the Matter of the Arbitration Between Xxxx Xxxxxxxx, Claimant, and
---------------------------------------------------------------------
VirtualFund, Inc. and RSPNet, Inc., Respondents
-----------------------------------------------
XXXXxx.xxx, Inc. x. Xxxxxxx Communications, Inc., Court File No. EM00-
------------------------------------------------
012122 (Minn. D. Ct., Hennepin County)
Schedule 4.7 (Warranty or Other Claims). None.
---------------------------------------
Schedule 4.8 (Employees; Employee Benefit Plans). None.
------------ -----------------------------------
Schedule 4.9 (Financial Statements). See Attached.
------------ ---------------------- --- --------
Schedule 4.10 (Contracts). Seller's rights in some Contracts may be
-------------------------
subject to the non-terminated or unexpired security interests identified
in Schedule 4.4(a) above.
---------------
Schedule 4.11 (Compliance with Laws). None.
------------------------------------
Schedule 4.12 (Permits and Approvals). None.
-------------------------------------
Schedule 4.13 (No Brokerage Fees). None.
---------------------------------
33
EXHIBIT A
---------
Form of Release
1. Form of Release (Xxxxxx). See Attached.
--- --------
2. Form of Release (Xxxxxxx). See Attached.
--- --------
34
EXHIBIT B
---------
Form of Lease Termination Agreement
1. See Attached.
--- --------
35
EXHIBIT C
---------
Form of Transition Services Agreement
1. See Attached.
--- --------
36
EXHIBIT D
---------
Form of Joint Representation Agreement
1. See Attached.
--- --------
37
