EXECUTION VERSION
CONFIDENTIAL
ASSET PURCHASE AGREEMENT
between
NATIONAL INVESTMENT MANAGERS INC.
and
AMERICAN BENEFIT RESOURCES, INC.
Dated as of November 1, 2005
TABLE OF CONTENTS
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ARTICLE I DEFINITIONS................................................................................4
ARTICLE II PURCHASE AND SALE OF ASSETS; CLOSING.....................................................10
Section 2.1 Sale and Transfer of Assets..............................................10
Section 2.2 Assumed Liabilities......................................................11
Section 2.3 Excluded Liabilities.....................................................12
Section 2.4 Purchase Price; Allocation; Deposit......................................12
Section 2.5 Closing; Closing Date....................................................13
Section 2.6 Deliveries and Actions at Closing........................................13
Section 2.7 Adjustment...............................................................15
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER............................................16
Section 3.1 Status and Authority.....................................................16
Section 3.2 No Conflicts.............................................................16
Section 3.3 Title to Assets..........................................................17
Section 3.4 Subsidiaries.............................................................17
Section 3.5 Financial Statements.....................................................17
Section 3.6 Absence of Undisclosed Liabilities.......................................18
Section 3.7 Properties...............................................................18
Section 3.8 Employees................................................................18
Section 3.9 Employee Benefit Plans...................................................19
Section 3.10 Contracts................................................................19
Section 3.11 Insurance................................................................20
Section 3.12 Governmental Authorizations; Compliance with Law.........................20
Section 3.13 Litigation; Compliance with Laws.........................................20
Section 3.14 Condition of Tangible Personal Property..................................21
Section 3.15 Intellectual Property....................................................21
Section 3.16 Taxes....................................................................21
Section 3.17 Environmental Matters....................................................21
Section 3.18 Permits..................................................................23
Section 3.19 Absence of Changes.......................................................23
Section 3.20 Brokers..................................................................23
Section 3.21 Accounts Receivable......................................................23
Section 3.22 Computer Software........................................................24
Section 3.23 Transactions with Affiliates; No Conflicting Shareholder Interests.......24
Section 3.24 Books and Records........................................................24
Section 3.25 Improper Payments........................................................24
Section 3.26 Additional Information Regarding Banking Matters.........................25
Section 3.27 Powers of Attorney.......................................................25
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER..............................................25
Section 4.1 Corporate Status and Authority...........................................25
Section 4.2 No Conflicts.............................................................25
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Section 4.3 Brokers..................................................................26
Section 4.4 Investment Intent........................................................26
Section 4.5 Funding..................................................................26
ARTICLE V COVENANTS AND AGREEMENTS..................................................................26
Section 5.1 Conduct of Business......................................................26
Section 5.2 Court Approval...........................................................27
Section 5.3 Restricted Cash..........................................................27
Section 5.4 Expenses.................................................................28
Section 5.5 Publicity................................................................28
Section 5.6 Preservation of Records..................................................28
Section 5.7 Further Assurances.......................................................28
Section 5.8 Assignment of Assigned Contracts.........................................28
Section 5.9 Required Consents........................................................29
Section 5.10 Name Change..............................................................29
Section 5.11 Deposit Escrow Agreement.................................................29
Section 5.12 Employment Agreements....................................................29
Section 5.13 Indemnification Escrow Agreement.........................................29
Section 5.14 A/R Escrow Agreement.....................................................29
Section 5.15 Assumption Agreement.....................................................29
Section 5.16 Registration Rights Agreement............................................29
Section 5.17 Put Agreement............................................................29
Section 5.18 A/R Collections..........................................................29
Section 5.19 No Negotiation...........................................................30
Section 5.20 Notice of Events.........................................................30
Section 5.21 Transfer Taxes...........................................................31
Section 5.22 Buyer's Investigation....................................................31
Section 5.23 Payoff Letters...........................................................31
ARTICLE VI CONDITIONS PRECEDENT TO THE OBLIGATION OF THE BUYER TO CLOSE.............................31
Section 6.1 No Orders................................................................32
Section 6.2 Court Approval...........................................................32
Section 6.3 Representations and Warranties...........................................32
Section 6.4 Performance..............................................................32
Section 6.5 Indemnification Escrow Agreement.........................................32
Section 6.6 A/R Escrow Agreement.....................................................32
Section 6.7 Xxxx of Sale.............................................................32
Section 6.8 Assignment of Trademarks.................................................32
Section 6.9 Required Consents........................................................32
Section 6.10 No Material Adverse Effect...............................................33
ARTICLE VII CONDITIONS PRECEDENT TO THE OBLIGATION OF THE SELLER TO CLOSE..........................33
Section 7.1 No Orders................................................................33
Section 7.2 Court Approval...........................................................33
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Section 7.3 Representations and Warranties...........................................33
Section 7.4 Performance..............................................................33
Section 7.5 Indemnification Escrow Agreement.........................................33
Section 7.6 A/R Escrow Agreement.....................................................33
Section 7.7 Assumption Agreement.....................................................33
Section 7.8 Registration Rights Agreement............................................33
Section 7.9 Put Agreement............................................................33
Section 7.10 Required Consents........................................................33
ARTICLE VIII SURVIVAL; INDEMNIFICATION..............................................................34
Section 8.1 Survival.................................................................34
Section 8.2 Indemnification of Buyer Indemnitees.....................................34
Section 8.3 Indemnification of Seller Indemnitees....................................34
Section 8.4 Exclusive Remedy.........................................................34
Section 8.5 Limitations on Indemnification of Buyer Indemnitees......................35
Section 8.6 Limitations on Indemnification of Seller Indemnitees.....................35
Section 8.7 Procedures...............................................................35
Section 8.8 Adjustment to Purchase Price.............................................38
ARTICLE IX TERMINATION..............................................................................38
Section 9.1 Termination..............................................................38
Section 9.2 Effect of Termination....................................................39
ARTICLE X MISCELLANEOUS.............................................................................40
Section 10.1 Consent to Jurisdiction; Service of Process; Waiver of Jury Trial........40
Section 10.2 Notices..................................................................40
Section 10.3 Entire Agreement.........................................................41
Section 10.4 Waivers and Amendments...................................................41
Section 10.5 Governing Law............................................................42
Section 10.6 Binding Effect; Assignment...............................................42
Section 10.7 Usage....................................................................42
Section 10.8 Articles and Sections....................................................42
Section 10.9 Interpretation...........................................................42
Section 10.10 Severability of Provisions...............................................42
Section 10.11 No Third Party Beneficiaries.............................................42
Section 10.12 Counterparts.............................................................43
Section 10.13 Further Assurances.......................................................43
Section 10.14 Exhibits and Schedules...................................................43
Section 10.15 Enforcement of Agreement.................................................43
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of November 1, 2005, by and between National Investment Managers Inc., a
Florida corporation (the "Buyer"), and American Benefit Resources, Inc., a
Connecticut corporation (the "Seller").
RECITALS
(a) The Seller and its Subsidiaries (as defined below) are engaged
in the business of providing comprehensive retirement services to small and
medium-sized companies ("Seller's Business").
(b) The Seller wishes to sell to the Buyer, and the Buyer wishes to
purchase, substantially all of the assets of Seller.
(c) Upon the terms and subject to the conditions set forth in this
Agreement (the "Asset Purchase"), the Buyer will purchase the Assets (as defined
below) and will assume the Assumed Liabilities (as defined below).
(d) The parties to this Agreement desire to make certain
representations, warranties, covenants and agreements in connection with the
Asset Purchase and also to prescribe certain conditions to the Asset Purchase.
Accordingly, in consideration of the mutual representations,
warranties, covenants and agreements contained in this Agreement, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties to this Agreement agree as follows:
ARTICLE I
DEFINITIONS
For all purposes of this Agreement, the terms set forth below shall
have the respective meanings set forth in this Article I:
"ABR Contracts" has the meaning set forth in Section 3.10.
"Accounts Receivable" means all trade accounts receivable (including
without limitation, accounts receivable of the type recorded by Seller as
"unearned revenue," consistent with past practices) and all notes, bonds and
other evidences of indebtedness and rights to receive payment, including,
without limitation, rebates, refunds and similar payments and any other item
that would be characterized as an account or note receivable in accordance with
GAAP.
"Action" means any action, suit, litigation, arbitration, proceeding
or hearing conducted or heard by or before, or otherwise involving, any court or
other Governmental Body or authority or any arbitrator or arbitration panel.
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"Affiliate" means, with respect to any Person, any other Person
controlling, controlled by or under common control with such Person. The term
"control" (including, with correlative meaning, the terms "controlled by" and
"under common control with"), as applied to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
or other securities, by contract or otherwise.
"A/R Escrow Agreement" means an escrow agreement by and among the
Buyer, the Seller and the Escrow Agent substantially in the form of Exhibit
5.14, to be executed and delivered at the Closing.
"A/R Escrow Amount" means an amount equal to the excess of the
Overdue A/R over the sum of (a) the reserves established by Seller for Accounts
Receivable as reflected in the books and records of the Seller as of the Overdue
A/R Measurement Date, and (b) the aggregate amount in respect of Overdue A/R
collected between the Overdue A/R Measurement Date and the Closing Date.
"A/R Collection Period" has the meaning set forth in Section 5.18.
"Arbitration Firm" means Xxxxxxxx, Xxxxxx & Green, LLP or, if such
firm is unable or unwilling to act, such other nationally recognized independent
public accounting firm as shall be agreed upon by Buyer and Seller in writing.
"Asset Purchase" has the meaning set forth in the Recitals.
"Assets" has the meaning set forth in Section 2.1.
"Assigned Contracts" has the meaning set forth in Section 2.1(d).
"Assumed Liabilities" has the meaning set forth in Section 2.2.
"Assumed Notes" has the meaning set forth in Section 2.3(a).
"Assumption Agreement" has the meaning set forth in Section 5.15.
"Balance Sheet" means the audited consolidated balance sheet of
Seller as of December 31, 2004.
"Basket" has the meaning set forth in Section 8.5(a).
"Xxxx of Sale" has the meaning set forth in Section 6.7.
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in New York, New York are authorized or obligated by law to
close.
"Buyer Indemnitees" has the meaning set forth in Section 8.2(a).
"Cash Portion" has the meaning set forth in Section 2.4(a)(i).
"Claims Notice" has the meaning set forth in Section 8.7(a).
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"Closing" has the meaning set forth in Section 2.5.
"Closing Date" has the meaning set forth in Section 2.5.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidentiality Agreement" means the Confidentiality Agreement,
dated as of March 3, 2005, between the Seller and Xxxxxx Capital Financial
Group.
"Contract" means any contract, lease, license, agreement or other
legally binding commitment.
"Court Approval" means the entry of an order of the United States
Bankruptcy Court for the Southern District of New York approving of the
execution and delivery of this Agreement and of the transactions contemplated
hereby substantially in the form attached hereto as Exhibit A.
"Credit Line" means the Loan and Security Agreement, dated as of
September ___, 2004, between EuroAmerican Investment Corp. and the Seller,
BPI/PPA, Inc., Benefit Management, Inc. and National Associates, Inc.
"Damages" has the meaning set forth in Section 8.2.
"Deposit" has the meaning set forth in Section 2.4(c).
"Deposit Escrow Agreement" means the Deposit Escrow Agreement, dated
as of the date hereof, by and among the Buyer, the Seller and the Escrow Agent.
"Dispute Notice" has the meaning set forth in Section 8.7(b)(i).
"Dispute Period" has the meaning set forth in Section 8.7(b)(i).
"Xxxxxxx Money" has the meaning set forth in Section 2.4(c).
"Employment Agreement" means the employment agreement by and between
Buyer or Buyer's designee(s) and Xx. Xxxx X. Xxxxx described in Section 5.12.
"Environmental Laws" means any federal, state or local laws, rules
or regulations relating to pollution or protection of the environment (including
ambient air, surface water, ground water, land surface or subsurface strata),
including but not limited to any law or regulation relating to emissions,
discharges or releases of, or otherwise relating to the manufacture, processing,
distribution, importation, use, treatment, storage, disposal, transport or
handling of, Hazardous Materials.
"ERISA" has the meaning set forth in Section 3.9.
"Escrow Agent" means XX Xxxxxx Chase Bank, N.A.
"Escrow Claim" has the meaning set forth in Section 8.7(b)(i).
"Escrow Claim Notice" has the meaning set forth in Section
8.7(b)(i).
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"Excluded Liabilities" has the meaning set forth in Section 2.3.
"Final Net Liabilities" has the meaning set forth in Section 2.7(a).
"Financial Statements" means (a) the audited consolidated financial
statements of the Seller as of December 31, 2003 and December 31, 2004 and for
the years then ended, including a consolidated balance sheet, a consolidated
statement of operations and a consolidated statement of cash flows, together
with the notes to such financial statements and the unqualified report thereon
of Xxxxxx LLP, independent certified public accountants; and (b) the Seller's
Interim Financial Statements.
"GAAP" means United States generally accepted accounting principles,
consistently applied.
"GAAP Liabilities" has the meaning set forth in Section 2.2(a).
"Governmental Bodies" means any court, tribunal, arbitrator,
executive or regulatory authority, tax authority, agency, commission, official
or other instrumentality of the United States of America, any foreign country or
any domestic or foreign state, county, city, municipality or other political
subdivision.
"Hazardous Materials" include chemicals, pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products and means materials
that meet the following criteria: (i) any solid, liquid, gas, or combination
thereof, including but not limited to asbestos or asbestos-containing materials,
vinyl chloride or chlorofluorocarbons, that may impair the natural environment,
injure or damage property or plant or animal life, harm or impair the health of
any individual, or endanger individual safety, public health and safety, or
employee health, which is (ii) regulated by or the subject of any Environmental
Law.
"IBF" means IBF Fund Liquidating LLC, a Delaware limited liability
company.
"Income Tax" means any federal, state, local or foreign Tax (as such
term is hereinafter defined) that is (a) based upon, measured by or calculated
with respect to income, profits, capital stock, net worth or receipts, in each
case whether gross, net or adjusted (including, without limitation, capital
gains Taxes and minimum Taxes), or (b) based upon, measured by or calculated
with respect to multiple bases (including, without limitation, corporate
franchise Taxes) if one or more of the bases on which such Tax may be based,
measured or calculated with respect to, is described in clause (a), in each case
together with any interest, penalties or additions to any Tax in respect of any
of the foregoing, whether disputed or not, and any obligation to indemnify,
assume or succeed to the liability of any other Person in respect of the
foregoing (including, without limitation, as a transferee pursuant to Section
6901 of the Code or otherwise) as a result of Treasury Regulation ss.1.1502-6 or
any similar provision of applicable law, or as a result of a tax sharing or
similar agreement, arrangement or understanding.
"Indemnification Escrow Agreement" means an agreement by and among
the Buyer, the Seller and the Escrow Agent substantially in the form of Exhibit
5.13, to be executed and delivered at the Closing.
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"Indemnification Escrow Amount" means Eight Hundred Thousand Dollars
($800,000).
"Indemnified Party" has the meaning set forth in Section 8.7(c).
"Indemnifying Party" has the meaning set forth in Section 8.7(c).
"Intellectual Property" has the meaning set forth in Section
3.15(b).
"Interim Financial Statements" means the unaudited consolidated
financial statements of the Seller as of September 30, 2005 and for the nine
months then ended, including a consolidated balance sheet, a consolidated
statement of operations and a consolidated statement of cash flows and the
consolidating balance sheet of the Seller as of such date and the consolidating
statement of operations of the Seller for the period then ended.
"Laws" means any law, statute, rule, regulation or code issued,
enacted, promulgated or implemented by any Governmental Body.
"Legal Requirement" of a Person means any Law, or any order,
judgment or other direction of a court, arbitration panel or other tribunal
resolution or any Governmental Body, or any other Authorization applicable to
such Person, or to any of its properties, assets or business.
"Lien" means any lien, pledge, mortgage, security interest, charge,
option, transfer restriction or other similar encumbrance.
"Material Adverse Effect" means any event, change or effect that is
materially adverse to the financial condition or results of operations of the
Seller and the Subsidiaries taken as a whole, other than events, changes or
effects: (i) resulting from general economic conditions; (ii) occurring
generally in the industry in which the Seller does business; (iii) resulting
from the announcement to third-parties and the public of the transactions
contemplated by this Agreement; (iv) resulting from changes in Laws after the
date hereof; or (v) resulting from an outbreak or escalation of hostilities
involving any country where the Seller does business, the declaration by any
country where the Seller does business of a national emergency or war, or the
occurrence of any acts of terrorism and any actions or reactions thereto.
"Net Liabilities" means the excess of (i) the aggregate amount of
GAAP Liabilities, excluding deferred tax liabilities, constituting a portion of
the Assumed Liabilities over (ii) the book value of the Assets, excluding
deferred tax assets and goodwill, each as of the Closing Date.
"Net Liabilities Statement" has the meaning set forth in Section
2.7(a).
"NIM Shares" has the meaning set forth in Section 2.4(a)(ii).
"Notice" has the meaning set forth in Section 8.7(b)(i).
"Notice of Disagreement" has the meaning set forth in Section
2.7(b).
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"Order" means any order, judgment, injunction, award, decree or writ
handed down, adopted or imposed by any Governmental Body.
"Organizational Documents" means, with respect to any entity, the
certificate of incorporation, operating agreement, by-laws, certificate(s) of
designation or other constitutional documents of such entity.
"Overdue A/R" means the aggregate amount of uncollected Accounts
Receivable (excluding accounts receivable of the type recorded by Seller as
"unearned revenue," consistent with past practices) that are more than sixty
(60) days past due as of the Overdue A/R Measurement Date.
"Overdue A/R Measurement Date" means the last day of the month ended
immediately prior to the Closing Date or, if the applicable Accounts Receivable
information is not available on the Closing Date, the last day of the previous
month.
"Parties" means the parties to this Agreement, consisting of the
Buyer and the Seller.
"Permits" or "Authorizations" means all licenses, permits,
franchises, approvals, authorizations, qualifications, concessions or the like,
issued or granted by any federal, state, local or foreign Governmental Body,
including, without limitation, SEC and NASD licenses and registrations, or by
any nongovernmental entity to any Person or which in any way relate to the
business, operations, activities, properties and assets of such Person.
"Person" means any individual, corporation, partnership, limited
liability company, limited liability partnership, firm, joint venture,
association, trust, unincorporated organization or other entity.
"Plans" has the meaning set forth in Section 3.9.
"Purchase Price" has the meaning set forth in Section 2.4.
"Put Agreement" has the meaning set forth in Section 5.17.
"Registration Rights Agreement" has the meaning set forth in Section
5.16.
"Required Consents" has the meaning set forth in Section 5.9.
"Restricted Cash" has the meaning set forth in Section 2.1(k).
"Securities Act" has the meaning set forth in Section 3.28.
"Seller Indemnitees" has the meaning set forth in Section 8.3.
"Seller Notes" has the meaning set forth in Section 2.2(b).
"Seller's Business" has the meaning set forth in the Recitals.
"Seller's Disclosure Schedule" means the Disclosure Schedule
prepared by Seller that is being delivered to the Buyer concurrently herewith.
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"Shares" has the meaning set forth in Section 2.1(b).
"Subsidiary" or "Subsidiaries" has the meaning set forth in Section
3.4.
"Subsidiary Assets" has the meaning set forth in Section 3.3.
"Systems" means material computer hardware and software, including,
without limitation, application software data and database, applications and all
related documentation utilized in the Seller's Business.
"Tangible Property" means all furniture, fixtures, equipment,
computers, office equipment and apparatus, tools and supplies, together with any
express or implied warranty by the manufacturers, sellers or lessors of any item
or component part thereof and all maintenance records and other documents
relating thereto.
"Tax Return" means any federal, state, local or foreign return,
declaration, report, claim for refund or credit, document, or other information
or filing (including any schedule or exhibit thereto) that is filed or required
to be supplied to any Governmental Body in respect of or relating to any Tax,
and any amendment thereof, whether on a consolidated, combined, unitary or
separate basis.
"Tax" or "Taxes" means any and all taxes, charges, fees, levies,
deficiencies or other assessments of any nature whatsoever, including, without
limitation, any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (pursuant to Section 59A of the Code or
otherwise), custom duties, capital stock, net worth, franchise, recording,
employee's income withholding, foreign withholding, social security (or its
equivalent), unemployment, disability, real property, personal property,
intangible property, sales, use, transfer, value added, occupancy, registration,
customs, recording, gains, alternative or add-on minimum, estimated or other
tax, charge, fee, levy, deficiency or other assessment of whatever kind or
nature, including any interest, penalties or additions to tax in respect of the
foregoing, whether disputed or not, and any obligation to indemnify, assume or
succeed to the liability of any other Person in respect of the foregoing
(including, without limitation, as a transferee (pursuant to Section 6901 of the
Code or otherwise), as a result of Treasury Regulations ss.1.1502-6 or similar
provision of applicable law, or as a result of a tax sharing or similar
agreement, arrangement or understanding).
"Third-Party Claim" has the meaning set forth in Section 8.7(c).
ARTICLE II
PURCHASE AND SALE OF ASSETS; CLOSING
Section 2.1 Sale and Transfer of Assets. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing, Seller shall sell,
transfer, assign, convey and deliver to Buyer, and Buyer shall purchase, acquire
and accept from Seller, all of Seller's right, title and interest in and to all
of Seller's property and assets, real, personal or mixed, tangible or
intangible, of every kind and description, wherever located, including, but not
limited to, the following, but excluding any deferred tax assets and one or more
bank accounts to be opened by Seller for the purpose of receiving the Cash
Portion (such properties, rights and assets are hereinafter collectively
referred to as the "Assets"):
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(a) cash and cash equivalents of Seller;
(b) all shares of capital stock of each Subsidiary owned by the Seller
(the "Shares");
(c) all Accounts Receivable of Seller;
(d) all Contracts to which Seller is a party (the "Assigned Contracts");
(e) all Tangible Property owned or leased by Seller;
(f) the real property (including buildings, structures and improvements
located thereon, fixtures contained therein and appurtenances thereto) leased by
Seller;
(g) all Intellectual Property of the Seller, including, but not limited
to, American Benefit Resources, Inc.(TM) and RetireGold(TM);
(h) all general, financial and personnel records, ledgers, sales invoices,
accounts and payable records, files, books and documents, correspondence and
other files and records, including customer lists and sales records, of Seller
pertaining to the Seller's Business;
(i) all Permits of Seller (to the extent transferable);
(j) all business names, including all of Seller's rights to use the name
"American Benefit Resources, Inc." and derivations thereof;
(k) restricted cash held for the benefit of clients for deposit into
clients' accounts (the "Restricted Cash");
(l) all claims against any third party (including, without limitation, the
Subsidiaries), whether matured or unmatured, liquidated or unliquidated, direct
or contingent, arising out of, resulting from or relating to any occurrence
prior to the Closing, including, without limitation, all rights under express or
implied warranties and guarantees and other similar contractual rights made by
third parties arising out of, resulting from or relating to the Seller's
Business or any of the Assets; and
(m) all other assets and property of Seller of whatever kind and nature,
real or personal, tangible or intangible, that are owned, leased or licensed by
Seller on the Closing Date.
Section 2.2 Assumed Liabilities. Subject to the terms and conditions set
forth in this Agreement, at the Closing, Buyer shall assume all of the
liabilities of Seller, other than the Excluded Liabilities (the "Assumed
Liabilities"), including, without limitation, the following Assumed Liabilities:
(a) the Credit Line, which is to be included in the Assumed Liabilities,
but paid by Buyer at Closing pursuant to Section 2.6(a)(iii);
(b) all other recorded liabilities of the type that would be required to
be included on a balance sheet prepared in accordance with GAAP ("GAAP
Liabilities"), including the outstanding seller note obligations of Seller (the
"Seller Notes"), other than as set forth in Section 2.3(e) below; provided that
the amount of such liabilities to be assumed shall not exceed an amount equal to
the difference between (x) $7,560,000 and (y) the amounts to be paid by Buyer
pursuant to Section 2.6(a)(iii); a schedule of the types of liabilities intended
to be covered by this Section 2.2(a) and the amounts as of September 30, 2005 is
attached as Schedule 2.2(a) of the Seller's Disclosure Schedule; and
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(c) all liabilities to perform the Assigned Contracts and the ABR
Contracts following the Closing.
The Assumed Liabilities shall be the sole responsibility of, and shall be paid,
performed and discharged solely by, Buyer.
Section 2.3 Excluded Liabilities. The Excluded Liabilities shall remain
the sole responsibility of, and shall be retained, paid, performed and
discharged solely by, Seller. "Excluded Liabilities" shall mean only the
following liabilities of Seller:
(a) the aggregate amount of all liabilities of Seller to IBF, including,
without limitation, the liabilities of Seller to IBF (including interest and
penalties) set forth in Schedule 2.3(a) of the Seller's Disclosure Schedule,
except for liabilities under the Promissory Note, dated August 31, 2005, made by
the Seller in favor of IBF in the original principal amount of $350,000 and the
Promissory Note, dated September 30, 2005, made by the Seller in favor of IBF in
the original principal amount of $377,125 (the "Assumed Notes"); Buyer shall pay
to IBF all amounts due from Seller under the Assumed Notes at Closing in
accordance with Section 2.6(a)(iii);
(b) GAAP Liabilities in existence on the Closing Date in excess of the
amount assumed pursuant to Section 2.2(b);
(c) any deferred tax liabilities of the Seller and its Subsidiaries;
(d) liabilities of Seller and its Subsidiaries under the Credit Line
(which shall however be repaid by Buyer at Closing pursuant to Section
2.6(a)(iii));
(e) the aggregate amount of the installments of the outstanding Seller
Notes that have come due in accordance with their terms on or before the Closing
in excess of (i) $1,000,000 in the aggregate, minus (ii) the aggregate amount of
the Assumed Notes. The term "Seller Notes" includes Seller's deferred
consideration obligation payable to Xx. Xxxx X. Xxxxx and Xx. Xxxxxx Xxxxxxx
pursuant to the Stock Purchase Agreement dated as of June 30, 2003 by and among
Investment & Benefit Services, Inc., Xx. Xxxxx, Xx. Xxxxxxx and Xxxxx-Xxxxxxx
Associates, Inc. in the amount of $125,000 notwithstanding that such amount is
not evidenced by a note; and
(f) liabilities of Seller under the Employment Agreement dated as of
January 1, 2005 between Seller and Xx. Xxxxxx X. Xxxxxxx (as such contract is
not being assigned to, or assumed by, Buyer).
Section 2.4 Purchase Price; Allocation; Deposit.
(a) The consideration for the Assets (the "Purchase Price") will consist
of the following:
(i) $8,000,000 in cash (the "Cash Portion") payable in accordance with
Section 2.6(a) at the Closing;
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(ii) 671,141 shares of common stock, par value $0.001 per share (the "NIM
Shares"), of Buyer; and
(iii) the assumption by Buyer of the Assumed Liabilities.
(b) The Purchase Price, including the book value of the Assumed
Liabilities, shall be allocated by the Seller and the Buyer in the manner set
forth on Exhibit 2.4. Each of the Seller and the Buyer agrees to prepare and
file their own state, local and foreign income Tax Returns and other filings
reflecting the transactions contemplated by this Agreement on a basis consistent
with such allocation. In any Action related to the determination of any Tax,
neither the Seller nor the Buyer shall contend or represent that such allocation
is not a correct allocation.
(c) Simultaneously with the execution of this Agreement by the Parties,
the Buyer shall deliver to the Escrow Agent One Million Dollars ($1,000,000) in
cash (the "Deposit"). The Deposit, together with the interest thereon but less
any applicable escrow fees and expenses to which Escrow Agent is entitled
pursuant to the Deposit Escrow Agreement, shall constitute the "Xxxxxxx Money"
and shall be held by the Escrow Agent pursuant to the Deposit Escrow Agreement
but separate and apart from the Indemnification Escrow Amount and the A/R Escrow
Amount. Subject to and in accordance with the terms of the Deposit Escrow
Agreement, at the Closing, the Xxxxxxx Money shall be distributed to the Seller
and applied against the Purchase Price. In the event this Agreement is
terminated prior to Closing in accordance with the provisions of Section 9.1(c)
of this Agreement, the Xxxxxxx Money shall be disbursed to the Seller in
accordance with Section 9.2(d) of this Agreement. In the event that this
Agreement is terminated prior to Closing for any other reason, the Xxxxxxx Money
shall be disbursed and/or paid to Buyer in accordance with Section 9.2(f) of
this Agreement.
Section 2.5 Closing; Closing Date. The closing of the Asset Purchase (the
"Closing") shall take place at the offices of Xxxx Xxxxxxx LLP, 000 Xxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000 at 10:00 a.m. local time, on the date that is two
Business Days following the date on which the conditions to Closing set forth in
Article VI and Article VII have been satisfied, or such other time or date as
the Parties may mutually agree in writing. The date upon which the Closing
occurs is referred to as the "Closing Date".
Section 2.6 Deliveries and Actions at Closing.
(a) At the Closing, the Buyer shall deliver:
(i) the Indemnification Escrow Amount to the Escrow Agent, to be
held and disbursed in accordance with the terms of the
Indemnification Escrow Agreement;
(ii) the A/R Escrow Amount to the Escrow Agent, to be held and
disbursed in accordance with the terms of the A/R Escrow
Agreement;
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(iii) on behalf of Seller: (A) to EuroAmerican Investment Corp., the
outstanding principal amount ($953,000 as of the date hereof),
together with all other amounts due, including without
limitation, accrued and unpaid interest through the Closing
Date, but excluding prepayment or other penalties or premiums,
if any, owed with respect to the Credit Line, except to the
extent such amounts have been paid by Seller or IBF prior to
the Closing Date, in which case Buyer shall pay such amounts
to Seller or IBF as the case may be, by wire transfer of
immediately available funds; provided that all payments by the
Buyer to the Seller, IBF or EuroAmerican Investment Corp., as
the case may be under this clause (A) shall not exceed
$1,000,000, (B) to the holders of the Seller Notes, the
aggregate amount of the installments of the Seller Notes that
have come due in accordance with their terms on or before the
Closing and have not been paid by IBF prior to the Closing as
set forth on Schedule 2.6(a)(iii) and (C) to IBF, all
principal and interest due from Seller to IBF under the
Assumed Notes;
(iv) the excess of the Cash Portion over the sum of the
Indemnification Escrow Amount, the A/R Escrow Amount and the
Deposit, to Seller in cash, by wire transfer of immediately
available funds;
(v) a release, substantially in the form of Exhibit 2.6(a)(v)
hereof, of any and all claims that Buyer has or may have
against Seller for liabilities arising prior to the Closing
other than the Excluded Liabilities;
(vi) certificates representing the NIM Shares;
(vii) the Assumption Agreement;
(viii) the Registration Rights Agreement; and
(ix) the Put Agreement.
(b) At the Closing, the Seller shall deliver to the Buyer:
(i) the Xxxx of Sale;
(ii) certificates representing the Shares, duly endorsed or
accompanied by duly executed stock powers for transfer to
Buyer;
(iii) the Registration Rights Agreement;
(iv) the Put Agreement;
(v) the Required Consents;
(vi) resignations of (A) Xx. Xxxx Xxxxx as an officer and director
of the Seller, (B) Mr. Xxxxxx Xxxxx as an officer and director
of the Seller and (C) Xx. Xxxxxx Xxxxxxx as an officer of the
Seller;
(vii) evidence that each of Messrs. Xxxxx, Xxxxx and Xxxxxxx have
been removed from any bank accounts or lockboxes maintained by
the Seller or any Subsidiary to which they are an authorized
signatory; and
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(viii) such instruments of assignment and consents of third parties
and Governmental Bodies as shall be required to vest in the
Buyer good and marketable title to the Assets, including,
without limitation, assignments of the Assigned Contracts.
(c) On or prior to the Closing Date, the Buyer and the Seller shall enter
into the Indemnification Escrow Agreement and the A/R Escrow Agreement with the
Escrow Agent. At the Closing, Buyer shall deposit, or cause to be deposited, the
Indemnification Escrow Amount and the A/R Escrow Amount with the Escrow Agent in
the escrow accounts contemplated by the Indemnification Escrow Agreement and the
A/R Escrow Agreement.
(d) At the Closing, the parties shall deliver such other certificates,
instruments or documents as required by Article VI or Article VII or any other
provision of this Agreement.
Section 2.7 Adjustment.
(a) Net Liabilities Statement. As soon as practicable but in no event
later than sixty (60) days after the Closing Date, Buyer shall deliver to Seller
a statement (the "Net Liabilities Statement") of the Net Liabilities as of the
close of business on the Closing Date without giving effect to any of the
transactions contemplated hereby (the "Final Net Liabilities"), together with
related supporting schedules, calculations and documentation.
(b) Dispute. Within thirty (30) days following receipt by Seller of the
Net Liabilities Statement, Seller shall deliver written notice (the "Notice of
Disagreement") to Buyer of any dispute Seller has with respect to the
preparation or content of the Net Liabilities Statement or the Final Net
Liabilities reflected therein. The Notice of Disagreement must describe in
reasonable detail the items contained in the Net Liabilities Statement that
Seller disputes and the basis for any such disputes. If Seller does not notify
Buyer of a dispute with respect to the Net Liabilities Statement within such
30-day period, such Net Liabilities Statement and the Final Net Liabilities
reflected therein will be final, conclusive and binding on the Parties. In the
event a Notice of Disagreement is delivered to Buyer, Buyer and Seller shall
negotiate in good faith to resolve such dispute. If Buyer and Seller,
notwithstanding such good faith effort, fail to resolve such dispute within
fourteen (14) days after Seller advises Buyer of its objections, then Buyer and
Seller jointly shall engage the Arbitration Firm to resolve such dispute in
accordance with the standards set forth in this Section 2.7(b). Seller and Buyer
shall use reasonable efforts to cause the Arbitration Firm to render a written
decision resolving the matters submitted to the Arbitration Firm within thirty
(30) days of the making of such submission. The Arbitration Firm shall determine
whether and to what extent the Net Liabilities Statement and the Final Net
Liabilities reflected therein require adjustment. The Arbitration Firm is not to
make any other determination. The Arbitration Firm's decision shall be based
solely on written submissions by Seller and Buyer and their respective
representatives and not by independent review. The Arbitration Firm shall
address only those items in dispute and may not assign a value greater than the
greatest value for such item claimed by either party or smaller than the
smallest value for such item claimed by either party. Judgment may be entered
upon the determination of the Arbitration Firm in any court having jurisdiction
over the party against which such determination is to be enforced. Buyer and
Seller shall share equally the fees and expenses of the Arbitration Firm. All
determinations made by the Arbitration Firm will be final, conclusive and
binding on the Parties.
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(c) Access. For purposes of complying with the terms set forth in this
Section 2.7, each Party shall cooperate with and make available to the other
Parties and their respective representatives all information, records, data and
working papers, and shall permit reasonable access to its facilities and
personnel, as may be reasonably required in connection with the preparation and
analysis of the Net Liabilities Statement and the Final Net Liabilities
reflected therein and the resolution of any disputes in connection therewith.
(d) Adjustment. If Final Net Liabilities (as finally determined pursuant
to Section 2.7(a)):
(i) are greater than $3,660,000 but less than or equal to
$3,760,000, Buyer and Seller shall deliver a joint written
authorization to the Escrow Agent within two Business Days
from the date on which the Final Net Liabilities is finally
determined instructing the Escrow Agent to pay to Buyer an
amount equal to the amount by which Final Net Liabilities
exceeds $3,660,000 out of the Indemnification Escrow Amount;
or
(ii) are greater than $3,760,000, within two Business Days from the
date on which the Final Net Liabilities is finally determined,
Seller shall pay to Buyer an amount equal to the amount by
which the Final Net Liabilities exceed $3,660,000.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE SELLER
The Seller represents and warrants to the Buyer as follows:
Section 3.1 Status and Authority. Seller is a corporation organized and
validly existing under the laws of the State of Connecticut and has the power to
own, or has a valid leasehold interest in, the Assets. Each Subsidiary is a
corporation organized and validly existing under the laws of the jurisdiction of
its formation, has the power to conduct its business as presently conducted and
owns, or has a valid leasehold interest in, the assets owned by it as reflected
in the Financial Statements (the "Subsidiary Assets"). The Seller has the power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder, and the execution, delivery and performance of this
Agreement have been duly authorized by its Board of Directors, which constitutes
all necessary action on the part of Seller for such authorization.
Section 3.2 No Conflicts.
(a) Except as otherwise set forth in this Agreement or in Schedule 3.2(a)
to the Seller's Disclosure Schedule, the execution, delivery and performance of
this Agreement by the Seller will not result in (i) any conflict with the
Organizational Documents of the Seller or any Subsidiary, or (ii) any breach or
violation of or default under any Order applicable to Seller or any Subsidiary
or any mortgage, agreement, deed of trust, indenture or any other instrument to
which the Seller or any Subsidiary is a party or by which the Seller or any
Subsidiary or any of the Assets are bound.
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(b) Except as otherwise set forth in this Agreement or in Schedule 3.2(b)
to the Seller's Disclosure Schedule, no consent, approval or authorization of or
filing with any third party or Governmental Body is required on the part of the
Seller or any Subsidiary in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, except
governmental or regulatory filings, consents or approvals which, if not made or
obtained, would not, individually or in the aggregate, have a Material Adverse
Effect; provided, that as a condition to closing of the transactions
contemplated by this Agreement, the Court Approval shall be required.
Section 3.3 Title to Assets. Except as set forth in Schedule 3.3 to the
Seller's Disclosure Schedule, Seller has, and, at the Closing, will transfer and
deliver to the Buyer, good and marketable title to the Assets free and clear of
Liens other than such Liens as are set forth in Schedule 3.3 of the Seller's
Disclosure Schedule or as described in clauses (A) through (C) of Section 3.7.
Upon the consummation of the transactions contemplated hereby, the Buyer will
acquire the right to use, and a valid leasehold interest in, all of the Assets
consisting of leasehold interests, subject to the terms of such leasehold
interests. Except as set forth in Schedule 3.3 to the Seller's Disclosure
Schedule or as described in clauses (A) through (C) of Section 3.7, each
Subsidiary has, and, at the Closing, will continue to have, good and marketable
title to the Subsidiary Assets owned by it, free and clear of all Liens. Upon
the consummation of the transactions contemplated hereby, the Buyer will acquire
the right to use, and a valid leasehold interest in, all of the Subsidiary
Assets consisting of leasehold interests, subject to the terms of such leasehold
interests.
Section 3.4 Subsidiaries. Schedule 3.4 to the Seller's Disclosure Schedule
lists each of the Seller's subsidiaries (each, a "Subsidiary" and together, the
"Subsidiaries") and the authorized, issued and outstanding capital stock of each
Subsidiary. Except as set forth in Schedule 3.4 to the Seller's Disclosure
Schedule, the outstanding shares of capital stock of each Subsidiary are duly
authorized, validly issued, fully paid and non-assessable and are owned by the
Seller, directly or through one or more Subsidiaries, free and clear of any
Liens other than such Liens as are set forth in Schedule 3.4 to the Seller's
Disclosure Schedule. Except as set forth in Schedule 3.4 to the Seller's
Disclosure Schedule, there are no shares of capital stock or other equity
securities of any Subsidiary issued, reserved for issuance or outstanding and no
outstanding options, warrants, convertible or exchangeable securities,
subscriptions, rights (including any preemptive rights), stock appreciation
rights, calls or commitments of any character whatsoever to which the
Subsidiaries are a party or may be bound requiring the issuance or sale of
shares of any capital stock of the Subsidiaries.
Section 3.5 Financial Statements. True, correct and complete copies of the
Financial Statements are set forth in Schedule 3.5 to the Seller's Disclosure
Schedule. Except as otherwise set forth in Schedule 3.5 to the Seller's
Disclosure Schedule, the Financial Statements fairly present in all material
respects the financial condition and results of operations of the Seller and its
Subsidiaries as of the dates and for the periods indicated. The Financial
Statements have been prepared in accordance with GAAP, except as noted therein
and subject, in the case of the Seller's Interim Financial Statements, to
year-end adjustments and the absence of notes.
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Section 3.6 Absence of Undisclosed Liabilities. Except as set forth in
Schedule 3.6 to the Seller's Disclosure Schedule, (i) as of the date of the
balance sheet contained in the Interim Financial Statements, neither Seller nor
any Subsidiary had any liabilities of any kind then required by GAAP to be
reflected in such balance sheet that were not fully reflected in such balance
sheet, and (ii) since the date of such balance sheet, neither Seller nor any
Subsidiary has incurred any material liabilities of any kind required by GAAP to
be reflected in a balance sheet, other than liabilities incurred in the ordinary
course of business consistent with past practice.
Section 3.7 Properties. Schedule 3.7 to the Seller's Disclosure Schedule
lists all items of real property leased by the Seller and its Subsidiaries. No
real property is owned by the Seller or any Subsidiary. Except as otherwise set
forth in Schedule 3.7 to the Seller's Disclosure Schedule, the Seller and each
Subsidiary has (i) valid and subsisting leasehold estates in the real property
listed in Schedule 3.7 to the Seller's Disclosure Schedule as leased by it and
(ii) good and valid title to all of its material tangible personal property,
which personal property is listed on Schedule 3.7 to the Seller's Disclosure
Schedule (except for properties disposed of since such date in the ordinary
course of the Seller's Business) in each case subject to no Liens, except (A)
Liens specifically identified in the Seller's Disclosure Schedule, (B) Liens for
Taxes not due and payable, or which are being contested in good faith by
appropriate proceedings and for which adequate reserves are reflected in the
Financial Statements and (C) statutory Liens arising in the ordinary course of
the Seller's Business and which are not the result of any actual or claimed
breach or failure to perform by the Seller or the Subsidiaries.
Section 3.8 Employees. Seller's Disclosure Schedule lists: (a) the names
and titles of all current employees of the Seller and the Subsidiaries, whether
such employees are full or part time employees or temporary employees with each
of their hourly rates or target salaries (including amounts subject to
performance criteria) and the current annual salary and other remuneration
payable to each such employee as of the date of this Agreement and (b) the
aggregate amount of such remuneration for each such employee for 2004. Except as
set forth in Schedule 3.8 to the Seller's Disclosure Schedule, since December
31, 2004, neither the Seller nor any Subsidiary has agreed (whether orally or in
writing) to any increase in the compensation or benefits payable to, or
otherwise materially modified the terms of employment of, any employee other
than in the ordinary course of business. Except as set forth in Schedule 3.8 to
the Seller's Disclosure Schedule, all employees of the Seller and the
Subsidiaries are "at will" under oral agreement. Except as set forth in Schedule
3.8 to the Seller's Disclosure Schedule, there are no employment agreements,
arrangements or understandings by which the Seller or any Subsidiary is bound.
Neither the Seller nor any Subsidiary is bound by any union or collective
bargaining agreement or other agreement, written or oral, with any trade or
labor union, employees' association or similar organization nor is the Seller or
any Subsidiary subject to any pending labor dispute or organization activity.
Except as set forth in Schedule 3.8 to the Seller's Disclosure Schedule, there
are no pending claims or actions which have been asserted, instituted or
threatened in writing with respect to workers compensation or asserting
employment discrimination, disability, wage and hour, wrongful discharge,
harassment, breach of contract, defamation, invasion of privacy, unemployment
compensation, employee safety or other similar claims under which the Seller or
any Subsidiary may have liability, contingent or otherwise. There are no work
stoppages or other labor difficulties relating to the Seller or any Subsidiary.
Except as set forth in Schedule 3.8 to the Seller's Disclosure Schedule, no
unfair labor practice, wrongful termination, or race, sex, age, disability or
other discrimination complaint is pending or threatened in writing against the
Seller or any Subsidiary before the National Labor Relations Board, Equal
Employment Opportunity Commission or any other Governmental Body, and no
grievance is pending.
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Section 3.9 Employee Benefit Plans. Schedule 3.9 to the Seller's
Disclosure Schedule lists each of the Seller's and the Subsidiaries' employee
pension, profit sharing, deferred compensation, severance, cafeteria, stock
option, stock purchase, incentive, golden parachute, bonus, group or individual
medical and health benefits, welfare, insurance or other employee benefit plan,
program or arrangement (the "Plans") regardless of whether such plan is
described in the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), which is maintained by the Seller or any Subsidiary on behalf of the
employees of the Seller or any Subsidiary. Complete and correct copies of all
such Plans have been made available to the Buyer for its review. There is no
Plan, nor has the Seller or any Subsidiary at any time within the last five
years, maintained, administered, contributed or been required to contribute to
any "employee pension benefit plan" as defined in ERISA (including a
"multi-employer pension plan", as defined in Section 3(37) of ERISA), which is
subject to Title IV of ERISA. Each Plan which is intended to be qualified and
tax-exempt under the provisions of the Code has received a favorable
determination from the Internal Revenue Service. Each Plan and any related trust
agreement has been maintained in compliance with its terms and complies, both as
to form and in operation, in all material respects, with the requirements of
ERISA and the Code. Neither the Seller nor any Subsidiary has any obligation to
make any payment to or with respect to any former employee pursuant to any
retiree medical benefit or other Plan. Except as set forth in Schedule 3.9 to
the Seller's Disclosure Schedule, no benefit, payment or other entitlement under
any Plan, or under any agreement relating to the employment of employees of the
Seller or the Subsidiaries, will be established or become accelerated, vested,
payable or funded by reason of the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby. Except as set forth in
Schedule 3.9 to the Seller's Disclosure Schedule, there are no Actions pending,
or to the knowledge of the Seller, threatened with respect to any Plan or by any
Plan beneficiary with respect to any Plan, other than claims for the payment of
benefits in the ordinary course of operation of such Plan. To the knowledge of
the Seller, no "prohibited transaction" (within the meaning of Section 4975 of
the Code or Section 406 of ERISA) has occurred. There are no unpaid
contributions due prior to the date hereof with respect to any Plan that are
required to have been made under the terms of any Plan or applicable law.
Section 3.10 Contracts. Schedule 3.10 to the Seller's Disclosure Schedule
lists the Assigned Contracts and all Contracts and commitments of the following
types to which any Subsidiary is a party or by which any Subsidiary or any of
their properties is bound as of the date hereof (collectively, the "ABR
Contracts"): (a) joint venture and partnership agreements, (b) mortgages,
indentures, loan or credit agreements, security agreements and other agreements
and instruments relating to the borrowing of money or extension of credit, (c)
Contracts with any service provider or client, including, without limitation,
agent and broker contracts, (d) Contracts with any broker-dealer, investment
advisor, insurance/annuity company or agency or clearing agency, (e) Contracts
with any mutual fund, hedge fund or 401(k) service providers, (f) Contracts
limiting, restricting or prohibiting any Subsidiary from conducting any business
anywhere in the world, (g) employment and consulting agreements and (h) other
material agreements, Contracts and commitments which in any case require payment
by a Subsidiary after the date hereof of more than $10,000 individually or
$50,000 in the aggregate. Complete and correct copies of all such agreements
which are in writing have been made available to the Buyer for review.
Except as set forth on Schedule 3.10 to the Seller's Disclosure Schedule,
each Assigned Contract and each ABR Contract: (i) is in full force and effect;
(ii) is a valid and binding obligation of Seller or any Subsidiary party thereto
enforceable in accordance with its terms; and (iii) has been entered into on an
arm's-length basis in the ordinary course of business and consistent with past
practices. Except as set forth on Schedule 3.10 to the Seller's Disclosure
Schedule, no consent is required for the assignment of any Assigned Contract to
Buyer, and the transactions contemplated hereby will not result in a breach of,
default under or termination of any Assigned Contract or ABR Contract, whether
on account of a change of control or otherwise. Except as set forth on Schedule
3.10 to the Seller's Disclosure Schedule, there is no default under or material
breach by Seller or any Subsidiary (which, with or without the giving of notice
or lapse of time or both) would constitute a default under any Assigned Contract
or ABR Contract and, to the Seller's knowledge, there is no material default
under or breach by any counterparty to any Assigned Contract or ABR Contract.
19
Section 3.11 Insurance. Schedule 3.11 to the Seller's Disclosure Schedule
lists (i) all insurance policies owned by the Seller and the Subsidiaries and,
except as indicated in Schedule 3.11 to the Seller's Disclosure Schedule, all
premiums have been paid on such policies, no notice of termination of any of
such policies has been received by, or is threatened in writing against, the
Seller or any Subsidiary and such policies are in full force and effect; true
and correct copies of such policies have been made available to the Buyer for
its review and (ii) all claims that have been asserted under such policies since
January 1, 2004 and the status of such claims.
Section 3.12 Governmental Authorizations; Compliance with Law. Except as
otherwise set forth in Schedule 3.12 to the Seller's Disclosure Schedule, each
of the Seller and each Subsidiary, and each employee of the Seller and to
Seller's knowledge, each Subsidiary holds all licenses, Permits and other
governmental authorizations that are material to the Seller's Business as
presently conducted and neither the Seller nor any Subsidiary, nor to Seller's
knowledge, any of their respective employees, is in violation of any Law
(including, without limitation, the USA Patriot Act), Order, Permit, concession,
franchise or other governmental authorization or approval applicable to it or to
any of its material properties, except for violations which, individually or in
the aggregate, would not have a Material Adverse Effect.
Section 3.13 Litigation; Compliance with Laws. Except as otherwise set
forth in Schedule 3.13 to the Seller's Disclosure Schedule, there are no
judicial or administrative Actions or investigations pending or threatened in
writing before any Governmental Body, and there is no Order outstanding against
the Seller or the Subsidiaries, the Seller's Business or the assets of Seller or
the Subsidiaries which question the validity of this Agreement or any action
taken or to be taken by the Seller in connection herewith. Neither the Seller
nor any Subsidiary is in violation of, nor has it violated (i) any Law
applicable to the Seller's or such Subsidiary's Business, the assets of the
Seller or any Subsidiary or the Seller's, or any Subsidiary's, operations, or
(ii) any Order or similar action of any Governmental Body applicable to the
Seller's or such Subsidiary's Business or operations, except for such violations
which, individually or in the aggregate, would not have a Material Adverse
Effect. All governmental approvals necessary for the conduct of the Seller's
Business have been duly obtained and are in full force and effect. There are no
Actions pending or threatened in writing that could reasonably be expected to
result in the revocation, cancellation or suspension of any such governmental
approval, and the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not result in any such
revocation, cancellation or suspension.
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Section 3.14 Condition of Tangible Personal Property. Except as set forth
in Schedule 3.14 to the Seller's Disclosure Schedule, the Seller's and the
Subsidiaries' material tangible personal property reasonably required for the
continued operation of the Seller's Business on a basis consistent with the past
practices of the Seller's Business immediately prior to the Closing is, taken as
a whole, in good operating condition and repair adequate for its present use,
reasonable wear and tear and routine or scheduled maintenance excepted.
Section 3.15 Intellectual Property.
(a) Schedule 3.15 to the Seller's Disclosure Schedule sets forth a list of
all trademarks, trade names, service marks, assumed names, and all applications
therefor owned, filed or licensed by the Seller or the Subsidiaries and, with
respect to registered trademarks, all jurisdictions in which such trademarks are
registered.
(b) As used in this Section 3.15(b), "Intellectual Property" shall mean
all intellectual property set forth in the Seller's Disclosure Schedule and all
inventions, invention studies (whether patentable or unpatentable), designs,
copyrights, trademarks, service marks, trade names, secret formulae, trade
secrets, secret processes, computer programs and know-how which are material to
the conduct of the business of the Seller and the Subsidiaries, taken as a
whole, as of the date hereof. Except as set forth in Schedule 3.15 to the
Seller's Disclosure Schedule, (i) the consummation of the transactions
contemplated by this Agreement will not impair any right to use any Intellectual
Property, (ii) all Intellectual Property owned by the Seller or any Subsidiary
is owned by the Seller or such Subsidiary free and clear of all Liens except
those described in clauses (A) through (C) of Section 3.7, (iii) the Seller and
the Subsidiaries own or have the right to use all of the Intellectual Property
and no other person, including, without limitation, any present or former
employee of the Seller or any Subsidiary, owns or has a propriety or financial
interest, directly or indirectly, in any Intellectual Property, (iv) to the
knowledge of the Seller, no claims have been asserted by any Person with respect
to the ownership or use by the Seller or the Subsidiaries of the Intellectual
Property and (v) to the knowledge of the Seller, neither Seller's nor any
Subsidary's use of the Intellectual Property infringes on the rights of any
other Person.
Section 3.16 Taxes.
(a) Except as set forth on Schedule 3.16 to the Seller's Disclosure
Schedule:
(i) The Seller and each Subsidiary has duly and timely (A) filed
with the appropriate Governmental Body all Tax Returns
required to be filed by, including or relating to such
reporting entity, its income, operations, payroll and
business, with respect to all periods ending on or prior to
the date hereof, which Tax Returns are true, correct and
complete; and (B) paid the amount of Tax showing as payable on
such Tax Returns for all periods ending on or prior to the
Closing Date.
(ii) The Seller and each Subsidiary has duly and timely paid all
Taxes due and payable by it on or before the date hereof and
properly accrued on the Financial Statements and books and
records in accordance with GAAP all Taxes in respect of all
periods up to and including the date hereof that are not yet
payable.
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(iii) The Seller and each Subsidiary has complied in all material
respects with all applicable Legal Requirements, rules, and
regulations relating to the collection, withholding and
payment of Taxes. No Governmental Body has proposed, asserted
or assessed (tentatively or otherwise) any adjustment that
could result in an additional Tax for which the Seller or any
Subsidiary is or may be liable or which could result in a Lien
on any of their respective assets that has not been finally
settled and fully paid. There is no pending, proposed or, to
the knowledge of the Seller, threatened audit, examination,
investigation, dispute, deficiency assessment, refund
litigation, claim, or other administrative or judicial
proceeding relating to any Tax for which the Seller or any
Subsidiary is or may be liable and which could result in a
Lien on any of their respective assets.
(iv) None of the Seller's or any Subsidiary's assets is "tax-exempt
use property" or "tax-exempt bond-financed property" within
the meaning of Section 168(g) and (h), respectively, of the
Code.
(v) There are no closing agreements within the meaning of Section
7121 of the Code or any similar provision of applicable law,
ruling requests, requests to consent to change a method of
accounting, Code Section 481 adjustments, subpoenas or
requests for information with or by any Governmental Body that
could reasonably be expected to affect any Tax for which the
Seller or any Subsidiary is or may be liable and which could
result in a Lien on any of their respective assets.
(vi) Schedule 3.16(a)(vi) of the Seller's Disclosure Schedule sets
forth a list of each jurisdiction in which the Seller or any
Subsidiary files or is presently required to file a Tax Return
and the type of Tax Return filed, and except as set forth
thereon, no Governmental Body where the Seller or any
Subsidiary does not file a Tax Return with respect to a
particular Tax has made a claim or assertion that the Seller
or such Subsidiary is subject to such Tax in such jurisdiction
or is required to file a Tax Return with respect to such Tax
in such jurisdiction. Federal Income Tax Returns of the Seller
and the Subsidiaries have been audited and the audits thereof
completed or the statute of limitations has run for all fiscal
years ending on or prior to December 31, 2001.
(vii) All applicable sales taxes and use taxes due in connection
with the Seller's and any Subsidiary's assets and leased
properties (including those set forth on the balance sheets
contained in the Financial Statements and those fixed assets
or leases acquired from that date through the Closing Date)
have been paid in full.
(b) Schedule 3.16(b) of the Seller's Disclosure Schedule sets forth a list
of each state in which the Seller or any Subsidiary conducts business or
operations or has employees or assets.
(c) Neither the Seller nor any Subsidiary has engaged in any transaction
that is a "tax shelter" as defined in Section 6111 of the Code.
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Section 3.17 Environmental Matters. The Seller and the Subsidiaries are,
and at all times during the last year have been, in compliance with all
applicable Environmental Laws, except as would not have a Material Adverse
Effect. Neither Seller nor any Subsidiary has received any written notice or
Order of any actual or potential violation or failure to comply with
Environmental Laws.
Section 3.18 Permits. Schedule 3.18 to the Seller's Disclosure Schedule
lists all Permits possessed by (a) the Seller and the Subsidiaries, and (b) any
employees of the Seller and each Subsidiary that are necessary for the operation
of the Seller's Business. The Seller and each Subsidiary currently have all
Permits necessary or required under applicable Law for the conduct of the
Seller's Business except where the failure to have such Permits would not have a
Material Adverse Effect. All such Permits, to the extent required for the
Seller's Business as currently conducted, are in full force and effect.
Section 3.19 Absence of Changes. Since December 31, 2004, except as
otherwise set forth in this Agreement or reflected in Schedule 3.19 to the
Seller's Disclosure Schedule or the Financial Statements, the Seller's Business
has been conducted in substantially the same manner in which it previously has
been conducted, and the Seller and the Subsidiaries have not:
(a) purchased or redeemed any shares of capital stock or declared or made
any dividend or other distribution in respect of capital stock;
(b) incurred any material liabilities or obligations, except current
liabilities and obligations incurred in the ordinary course of the Seller's
Business and advances from Affiliates consistent with past practice;
(c) mortgaged, pledged or subjected to any Lien any of its properties or
assets;
(d) increased the compensation of any officer or employee, except as
consistent with past practice or custom;
(e) disposed or agreed to dispose of any material properties or assets;
(f) cancelled, waived or forgiven any debts or claims;
(g) entered into any transaction other than in the ordinary course of the
Seller's Business; or
(h) repaid any debt other than in the ordinary course of business or
prepaid any debt prior to the due date for any such payment.
Section 3.20 Brokers. All negotiations relating to this Agreement and the
transactions contemplated hereby have been carried out without the intervention
of any Person acting on behalf of the Seller in such manner as to give rise to
any valid claim against the Buyer or the Seller for any brokerage or finder's
commission, fee or similar compensation, except for Xxxxxx Associates, L.L.C.,
whose fees in respect hereof shall be paid by IBF, and for Xxxxxx Capital Group
LLC and/or Xxxxxxx Xxxxx, whose fees in respect hereof shall be paid by the
Buyer.
Section 3.21 Accounts Receivable. Except as set forth in Schedule 3.21 to
the Seller's Disclosure Schedule, the Accounts Receivable reflected in the
balance sheet included in the Interim Financial Statements (i) represent bona
fide transactions arising in the ordinary course of business and (ii) as of the
date hereof, are not more than sixty (60) days past their applicable due date.
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Section 3.22 Computer Software. Schedule 3.22 to the Seller's Disclosure
Schedule lists all Systems, specifying hardware and software used in the
operation of the Seller's Business. Each of Seller and each Subsidiary has the
right to use (by license, lease or other agreement) its Systems and has obtained
licenses for all users or appropriate site licenses, as set forth on Schedule
3.15 to the Seller's Disclosure Schedule. The Systems perform in all material
respects in accordance with the documentation and written material used in
connection therewith, free from any material defects, and the source codes and
object codes of the underlying computer software and programs are in
machine-readable form and contain all current revisions and modifications,
except where the failure to do so would not have a Material Adverse Effect.
Seller has taken all appropriate measures to protect the confidential nature of
the Systems in accordance with the applicable license, lease or other agreement
governing the use of such Systems, except where the failure to do so would not
have a Material Adverse Effect.
Section 3.23 Transactions with Affiliates; No Conflicting Shareholder
Interests. Except as set forth in Schedule 3.23 to the Seller's Disclosure
Schedule, neither the Seller nor any Subsidiary has had any direct or indirect
dealings or engaged in any business transactions with its Affiliates (other than
Seller or a Subsidiary). Except as set forth in Schedule 3.23 to the Seller's
Disclosure Schedule, neither the Seller nor any Subsidiary has any obligations
to or claims against any of its Affiliates (other than Seller or a Subsidiary).
In furtherance and not in limitation of the foregoing, except as set forth in
Schedule 3.23 to the Seller's Disclosure Schedule, none of the Subsidiaries (i)
owes any indebtedness to any of its officers, directors or employees, or to the
Seller (other than accrued salaries or benefits payable in the ordinary course
of business); or (ii) has any indebtedness owed to it from any of its officers,
directors or employees, or to the Seller, excluding indebtedness for reasonable
travel advances or similar advances for expenses incurred on behalf of and in
the ordinary course of business of the Seller and the Subsidiaries and
consistent with the Seller's past practices.
Section 3.24 Books and Records. Except as provided in Schedule 3.24(1),
the books and records of the Seller and the Subsidiaries to be transferred to
the Buyer hereunder are complete and correct in all material respects and
properly and accurately reflect in all material respects all transactions
engaged in by the Seller and the Subsidiaries with respect to the Seller's
Business and (to the extent that GAAP is applicable thereto) have been
maintained in accordance with GAAP applied on a consistent basis.
Section 3.25 Improper Payments. Neither the Seller nor the Subsidiaries,
or any of their respective officers or agents has made any illegal or improper
payment to, or provided any illegal or improper benefit or inducement for, any
governmental official, customer or other Person, in an attempt to influence any
such Person to take or to refrain from taking any action relating to the
Seller's Business or to engage in any action by or on behalf of the Seller or
any Subsidiary in any way or paid any bribe, payoff, influence payment, kickback
or other unlawful payment.
-----------------------
(1) Schedule 3.24 will refer to accrued bonuses
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Section 3.26 Additional Information Regarding Banking Matters. Schedule
3.26 of the Seller's Disclosure Schedule lists (i) all bank accounts and
lockboxes maintained by the Seller and the Subsidiaries and all authorized
signatories therefor, specifying their respective authority, and contains the
terms of such accounts and lockboxes including, but not limited to, notice
provisions; and (ii) any open letters of credit and/or pre-arranged wire
transfers between the Seller or any Subsidiary, on one hand, and their
respective customers, on the other hand.
Section 3.27 Powers of Attorney. Except as set forth in Schedule 3.27 to
the Seller's Disclosure Schedule, no Subsidiary has granted any powers of
attorney to any third party that in any way relates to its assets, liabilities
or business.
Section 3.28 Investment Intent. Seller is an "accredited investor" within
the meaning of the Securities Act of 1933, as amended (the "Securities Act"),
and is acquiring the NIM Shares for its own account and not with a view to their
distribution within the meaning of Section 2(11) of the Securities Act, except
that the parties acknowledge that Seller may distribute such shares to IBF (and
Buyer agrees to register such shares for transfer to IBF provided that in
connection with any such proposed transfer, IBF provides a similar
representation to Buyer).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller as follows:
Section 4.1 Corporate Status and Authority. The Buyer is a corporation
duly organized and validly existing in good standing under the laws of the state
of Florida, with the power and authority to conduct its business, to own or
lease its properties as now conducted, owned or leased, to execute and deliver
this Agreement and to perform its obligations hereunder. The Buyer has
heretofore made available to the Seller complete and correct copies of its
Organizational Documents as currently in effect. The Buyer has all requisite
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. The execution, delivery and performance of this Agreement
have been duly authorized by all necessary action on the part of the Buyer for
such authorization.
Section 4.2 No Conflicts.
(a) Except as otherwise set forth in this Agreement, the execution,
delivery and performance of this Agreement by the Buyer will not result in (i)
any conflict with the Organizational Documents of the Buyer, (ii) any breach or
violation of or default under any Order or any mortgage, agreement, deed of
trust, indenture or any other instrument by which the Buyer or any of its
properties or assets are bound or (iii) the creation or imposition of any Lien
thereon.
(b) Except as otherwise set forth in this Agreement, no consent, approval
or authorization of or filing with any Governmental Body is required on the part
of the Buyer in connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby.
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Section 4.3 Brokers. All negotiations relating to this Agreement and the
transactions contemplated hereby have been carried out without the intervention
of any Person acting on behalf of the Buyer in such manner as to give rise to
any valid claim against the Buyer or the Seller for any brokerage or finder's
commission, fee or similar compensation, except for Xxxxxx Capital Group LLC
and/or Xxxxxxx Xxxxx, whose fees in respect hereof shall be paid by the Buyer.
Section 4.4 Investment Intent. Buyer is acquiring the Shares for its own
account and not with a view to their distribution within the meaning of Section
2(11) of the Securities Act of 1933, as amended.
Section 4.5 Funding. Buyer has the necessary funding to meet all of its
obligations under this Agreement and the other agreements contemplated by this
Agreement to be entered into by the Buyer at or prior to Closing, including,
without limitation, the Purchase Price, any adjustments thereto and all of its
fees and expenses in order to consummate the transactions contemplated by this
Agreement.
ARTICLE V
COVENANTS AND AGREEMENTS
Section 5.1 Conduct of Business.
(a) The Seller agrees that between the date of this Agreement and the
Closing Date, except as (i) contemplated by this Agreement, (ii) set forth in
the Seller's Disclosure Schedule or (iii) otherwise consented to by the Buyer
(which agrees to respond promptly to any request for such agreement and not to
unreasonably withhold any such consent), the Seller shall, and shall cause the
Subsidiaries to, operate in the ordinary course of business consistent with past
practice and in compliance in all material respects with all applicable
reporting and other applicable regulatory requirements. Between the date of this
Agreement and the Closing Date, the Seller shall not (1) make, or permit any
Subsidiary to make, any payments on account of their respective obligations to
IBF or (2) increase, or incur any additional indebtedness under, the Credit
Line.
(b) Between the date of this Agreement and the Closing Date, the Seller
and IBF shall provide reasonable assistance and cooperation to the Buyer in any
negotiations the Buyer may conduct seeking to (i) cause the indebtedness
evidenced by the Seller Notes to be subordinated to indebtedness incurred by the
Buyer in connection with the transactions contemplated hereby (to the extent the
Seller Notes are not already so subordinated), (ii) obtain the agreement of the
holders of the Seller Notes to remove any provisions set forth in the Seller
Notes that would either (x) accelerate the indebtedness evidenced thereby upon
the termination of Xx. Xxxxx'x association with, and/or change in control of,
the Seller or its Subsidiaries or (y) enable the holders of the Seller Notes to
foreclose upon, or otherwise reacquire, all or a portion of the business
previously sold by them in consideration for the Seller Notes, (iii) obtain the
agreement of the holders of those Seller Notes that have become due prior to the
date hereof (and which have not been paid prior to the date hereof) or will
become due prior to the Closing Date to extend the date for each such payment to
the Closing Date without any requirement of the payment of any fees by the Buyer
and provided that such extension shall not result in the declaration of a
default or acceleration of any indebtedness under the Seller Notes and (iv)
obtain an agreement with the principals of the Los Angeles area administrators
("BPI") to purchase the 20% interest in the entity held by them and to purchase
their interest, or the cash flow related to the BPI business, in CIAS (an entity
owned by the principals of BPI).
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(c) Between the date of this Agreement and the Closing Date, except as set
forth in the Seller's Disclosure Schedule or otherwise agreed by the Buyer
(which agrees to respond promptly to any request for such agreement and not to
unreasonably withhold any such consent), the Seller shall not, nor permit any
Subsidiary to:
(i) amend its Organizational Documents;
(ii) incur any indebtedness for borrowed money, other than from the
Seller consistent with past practice;
(iii) issue, sell or pledge (A) any shares of capital stock or any
other ownership interests or (B) any securities convertible or
exchangeable into, or subscriptions, options, warrants, calls
or other similar commitments to acquire, any such capital
stock or other ownership interests;
(iv) declare, set aside or pay any dividend or distribution with
respect to any shares of capital stock;
(v) sell or convey any of its material assets;
(vi) (A) adopt, terminate or amend any of its employee benefit
plans or (B) grant any material increase (other than increases
required by applicable Laws, under any applicable Contracts or
consistent with past practice) in the compensation of
employees of the Seller or any Subsidiary;
(vii) amend any existing employment agreement to which the Seller or
any Subsidiary is a party;
(viii) amend or terminate any Assigned Contract, any ABR Contract or
any material Contract to which the Seller or any Subsidiary is
a party or by which it may be bound; or
(ix) enter into any agreement, commit or otherwise become obligated
to do any of the foregoing.
(d) Nothing contained in this Agreement shall give the Buyer, directly or
indirectly, any right to control or direct the operations of the Seller or the
Subsidiaries prior to the Closing.
Section 5.2 Court Approval. The Seller shall use its commercially
reasonable efforts to obtain the Court Approval as soon as reasonably
practicable.
Section 5.3 Restricted Cash. Following the Closing, Buyer shall deposit
the Restricted Cash into the appropriate clients' accounts in the ordinary
course of business as required by law or in accordance with applicable
agreements.
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Section 5.4 Expenses. Except as otherwise specifically provided in this
Agreement, the Buyer and the Seller shall bear their respective costs, fees and
expenses incurred in connection with the preparation, execution and performance
of this Agreement and the transactions contemplated hereby, including all costs,
fees and expenses of agents, representatives, counsel and accountants.
Section 5.5 Publicity. Except as may be required by applicable Laws or the
applicable rules of any stock exchange or listing authority, the Parties to this
Agreement agree that no public announcement concerning this Agreement or the
transactions contemplated hereby shall be made without advance approval thereof
by both the Buyer and the Seller. If any public announcement is required by
applicable Laws or the applicable rules of any stock exchange or listing
authority to be made by any Party to this Agreement, then prior to making such
public announcement, such Party will deliver a draft of such public announcement
to the other Party and shall afford the other party a reasonable opportunity to
comment thereon.
Section 5.6 Preservation of Records. The Buyer shall preserve and keep
records held by the Seller and each Subsidiary relating to the Seller for a
period of seven years from the Closing Date, during which time the Buyer shall
make such records available to the Seller as the Seller may reasonably require,
at the Seller's cost and expense to the extent Seller requests that copies be
made thereof, including without limitation for purposes of Seller's preparation
of tax returns and its liquidation and winding-up and at the expiration of such
period, will make such documents available to Seller for copying.
Section 5.7 Further Assurances. Subject to the terms and conditions of
this Agreement, each of the Parties to this Agreement agrees to use its
reasonable efforts to take or cause to be taken all action, and to do or cause
to be done all things, reasonably necessary, proper or advisable to consummate
the transactions contemplated by this Agreement promptly, including: (a) with
respect to each party, contesting any Actions brought against such party
relating to the transactions contemplated hereby; and (b) executing any
additional instruments necessary to consummate the transactions contemplated
hereby.
Section 5.8 Assignment of Assigned Contracts. To the extent that the
assignment hereunder of the rights and obligations of the Seller under the
Assigned Contracts, or any Contract assumed by Buyer hereunder to which a
Subsidiary is a party, shall require the consent of any other Person (or in the
event that any of the same shall be non-assignable), neither this Agreement nor
any actions taken hereunder shall constitute an assignment or an agreement to
assign if such assignment or attempted assignment would constitute a breach
thereof or result in the loss or diminution thereof; provided, however, that in
each such case, the Seller and the Buyer shall use commercially reasonable
efforts to obtain the consent of such other Person to an assignment to the
Buyer. If such consent is not obtained, the Seller shall cooperate with the
Buyer in a reasonable arrangement designed to provide the Buyer with the
benefits and burdens of any such Assigned Contracts, including appointing the
Buyer to act as Seller's agent or subcontractor to perform all of the Seller's
obligations under such Assigned Contracts and to enforce, for the account and
benefit of the Buyer, any and all rights of the Seller against any other Person
arising out of the breach or cancellation of such Assigned Contracts by such
other Person or otherwise (any and all of which arrangements shall constitute,
as between the parties hereto, a deemed assignment or transfer).
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Section 5.9 Required Consents. The Seller shall use commercially
reasonable efforts to obtain any consent, authorization, order or approval of,
or any exemption by, any Governmental Body or any third-party required to be
obtained by Seller in connection with the transactions contemplated by this
Agreement (including, without limitation, the Court Approval and any third party
consent required to effect the assignment of the Assigned Contracts to the
Buyer) (the "Required Consents"), which Required Consents are set forth in
Schedule 5.9 to the Seller's Disclosure Schedule.
Section 5.10 Name Change. The Seller shall, promptly after the Closing
Date, amend its Organizational Documents to change its name to a name not
similar to American Benefit Resources, Inc.
Section 5.11 Deposit Escrow Agreement. Simultaneously with execution and
delivery of this Agreement, the Buyer, the Seller and the Escrow Agent shall
enter into the Deposit Escrow Agreement substantially in the form and on the
terms of Exhibit 5.11.
Section 5.12 Employment Agreements. At the Closing, the Buyer and Xx. Xxxx
X. Xxxxx shall enter into an Employment Agreement reflecting the Term Sheet
attached as Exhibit 5.12.
Section 5.13 Indemnification Escrow Agreement. On the Closing Date, the
Buyer, the Seller and the Escrow Agent shall enter into the Indemnification
Escrow Agreement substantially in the form and on the terms of Exhibit 5.13 (the
"Indemnification Escrow Agreement").
Section 5.14 A/R Escrow Agreement. On the Closing Date, the Buyer, the
Seller and the Escrow Agent shall enter into the A/R Escrow Agreement
substantially in the form and on the terms of Exhibit 5.14 (the "A/R Escrow
Agreement").
Section 5.15 Assumption Agreement. On the Closing Date, the Buyer and the
Seller shall enter into the Assumption Agreement substantially in the form and
on the terms of Exhibit 5.15 (the "Assumption Agreement").
Section 5.16 Registration Rights Agreement. On the Closing Date, the
Buyer, the Seller and Xxxxxx X. Xxxxxxxxx, as Manager of IBF, shall enter into
the Registration Rights Agreement substantially in the form and on the terms of
Exhibit 5.16 (the "Registration Rights Agreement").
Section 5.17 Put Agreement. On the Closing Date, the Seller, IBF, DCI
Master LDC and Xxxxxx Capital Group LLC shall enter into the Put Agreement
substantially in the form and on the terms of Exhibit 5.17 (the "Put
Agreement").
Section 5.18 A/R Collections.
(a) In accordance with the A/R Escrow Agreement, (i) to the extent Buyer
collects amounts in respect of Overdue A/R within ninety (90) days after the end
of the month following the Closing (the "A/R Collection Period") (determined
using the first-in, first-out method and regardless of whether payments are
identified by the payor as applicable to a particular invoice), Buyer shall
instruct the Escrow Agent to release to Seller from the A/R Escrow Amount an
amount equal to the amount collected and (ii) upon the expiration of the A/R
Collection Period (x) Seller shall instruct the Escrow Agent to release the
balance of the A/R Escrow Amount to Buyer and (y) Buyer shall (A) assign any
then remaining uncollected Overdue A/R to Seller, (B) provide Seller with copies
of all documentation related to the remaining uncollected Overdue A/R and (C)
provide reasonable cooperation with Seller in its efforts to collect such
uncollected Overdue A/R.
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(b) Following the expiration of the A/R Collection Period, to the extent
that Buyer collects any amounts from a payor in respect of which there remains
Overdue A/R (determined using the first-in, first-out method and regardless of
whether payments are identified by the payor as applicable to a particular
invoice), Buyer shall promptly remit an amount equal to such amount collected to
Seller in respect of such Overdue A/R. Within ten (10) Business Days following
the end of each quarter ending during the two year period following the Closing
Date, Buyer shall deliver to Seller a statement detailing the amount of Overdue
A/R collected by it during such quarter.
Section 5.19 No Negotiation. Until such time as this Agreement shall be
terminated pursuant to Section 9.1, the Seller shall not directly or indirectly
solicit, initiate or encourage any inquiries or proposals from, discuss or
negotiate with, provide any nonpublic information to or consider the merits of
any inquiries or proposals from, any Person (other than the Buyer) relating to
any business combination transaction involving Seller, including the merger or
consolidation of the Seller or the sale of Seller's Business or any of the
Assets (other than in the ordinary course of business).
Section 5.20 Notice of Events. (a) During the period from the date hereof
to the Closing Date or the earlier termination of this Agreement, the Buyer
shall promptly notify the Seller in writing if the Buyer becomes aware of (i)
the occurrence or non-occurrence of any event or the existence of any fact or
condition that would cause or constitute a breach of any of its representations
or warranties had any such representation or warranty been made as of the time
of the Buyer's discovery of such event, fact or condition and (ii) any material
failure on its part to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder.
(b) During the period prior to the Closing Date or the earlier termination
of this Agreement, the Seller shall promptly notify the Buyer in writing if the
Seller becomes aware of (i) the occurrence or non-occurrence of any event or the
existence of any fact or condition that would cause or constitute a breach of
any of its representations or warranties contained herein had such
representation or warranty been made as of the time of the Company's discovery
of such event, fact or condition and (ii) any material failure on its part to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder. Should any such event, fact or condition require
any change to the Seller's Disclosure Schedule, the Seller shall promptly
deliver to the Buyer a supplement to the Seller's Disclosure Schedule specifying
such change.
(c) In the event that the Seller delivers one or more supplements to the
Seller's Disclosure Schedule pursuant to Section 5.20(b) that reflects any
events, facts or conditions which, individually or in the aggregate, would cause
the conditions set forth in Sections 6.3 or 6.4 not to be satisfied and the
Buyer does not exercise its right to terminate this Agreement on the basis of
such supplements to the Seller's Disclosure Schedule, within ten (10) Business
Days of the Buyer's receipt of such supplements to the Seller's Disclosure
Schedule, the Buyer will be deemed to have accepted such supplemented Seller's
Disclosure Schedule, the delivery of any such supplement will be deemed to have
cured any misrepresentation or breach of warranty that otherwise might have
existed hereunder by reason of such event, fact or condition and, from and after
the Closing Date, no Buyer Indemnitee will have any claim for indemnification
for any such events, facts or conditions.
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Section 5.21 Transfer Taxes. All transfer, documentary, sales, use, stamp,
registration, value added and other such Taxes and fees (including any penalties
and interest) incurred in connection with this Agreement shall be paid by the
Buyer when due, and the Buyer shall, at its own expense, file all necessary Tax
Returns and other documentation with respect to all such Taxes and fees.
Section 5.22 Buyer's Investigation. Seller shall give Buyer and Buyer's
officers, employees, legal counsel, accountants and other representatives
reasonable on-site access to and the right to inspect, during normal business
hours, all of the premises, properties, assets, records, contracts and other
documents of the Seller and the Subsidiaries relating to the Seller's Business,
and shall permit them to consult with the officers, employees, accountants,
legal counsel and agents of the Seller and the Subsidiaries for the purpose of
making such investigation as the Buyer shall reasonably consider appropriate.
Prior to the Closing, the Seller shall, and shall cause the Subsidiaries to,
furnish to the Buyer all such documents and copies of documents and records and
information which relate to the Seller's Business and copies of any working
papers relating thereto as the Buyer shall from time to time reasonably request.
Section 5.23 Payoff Letters. Prior to the Closing Date, Seller shall
provide Buyer with appropriate payoff letters and forms of Lien releases with
respect to the indebtedness of the Seller and the Subsidiaries under the Credit
Line or to IBF.
Section 5.24 Tax Matters.
(a) The Seller and each Subsidiary shall:
(i) duly and timely file or cause to be filed all Tax Returns
required to be filed by, including or relating to the Seller
or such Subsidiary for all periods through and including the
Closing Date, which Tax Returns shall be true, correct and
complete;
(ii) duly and timely pay or cause to be paid all Taxes that are
required to be paid on or before the Closing Date or which
relate to periods ending on or before the Closing Date, and
shall properly accrue on its Financial Statements and books
and records in accordance with GAAP for the payment of any
Taxes that are not yet payable; and
(iii) comply in all material respects with all Legal Requirements
and all other rules and regulations relating to the
collection, withholding and payment of Taxes.
(b) The Seller shall give the Buyer a copy of each Tax Return referred to
in this Section 5.24, together with all related work papers, for its review at
least fifteen (15) Business Days in the case of an Income Tax Return and at
least five (5) Business Days in the case of any other Tax Return prior to filing
such Tax Return. The Buyer's receipt of any Tax Return, review and comments
thereon shall not waive any right the Buyer or its Affiliates may have under
this Agreement.
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ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATION
OF THE BUYER TO CLOSE
The obligation of the Buyer to consummate the transactions
contemplated hereby at the Closing is subject to the fulfillment on or prior to
the Closing Date of the following conditions, any one or more of which may be
waived by the Buyer:
Section 6.1 No Orders. No Order shall have been issued by any Governmental
Body to restrain or prohibit the consummation of the transactions contemplated
hereby.
Section 6.2 Court Approval. The Court Approval shall have been obtained.
Section 6.3 Representations and Warranties. The representations and
warranties of the Seller in this Agreement which are qualified as to materiality
or Material Adverse Effect shall be true and correct in all respects on and as
of the Closing Date as though such representations and warranties were made at
and as of the Closing Date (except for representations and warranties expressly
stated to relate to a specific date, in which case such representation and
warranties shall be true and correct as of such date) and all other
representations and warranties of the Seller in this Agreement shall be true and
correct on and as of the Closing Date as though such representations and
warranties were made at and as of the Closing Date (except for representations
and warranties expressly stated to relate to a specific date, in which case such
representations and warranties shall be true and correct as of such date);
provided that this condition shall be deemed to be satisfied unless any failure
of any such representation or warranty to be true and correct has a Material
Adverse Effect, either alone or when taken in the aggregate with other breaches
of any such representations and warranties.
Section 6.4 Performance. The Seller shall have performed and complied in
all material respects with all agreements, obligations, covenants and conditions
required by this Agreement to be so performed or complied with by the Seller at
or prior to the Closing.
Section 6.5 Indemnification Escrow Agreement. The Seller shall have duly
executed and delivered the Indemnification Escrow Agreement.
Section 6.6 A/R Escrow Agreement. The Seller shall have duly executed and
delivered the A/R Escrow Agreement.
Section 6.7 Xxxx of Sale. The Seller shall have duly executed and
delivered a Xxxx of Sale substantially in the form attached hereto as Exhibit
6.7 (the "Xxxx of Sale").
Section 6.8 Assignment of Trademarks. The Seller shall have duly executed
and delivered an Assignment of Trademarks substantially in the form attached
hereto as Exhibit 6.8.
Section 6.9 Required Consents. The Required Consents shall have been
obtained.
Section 6.10 Arrangements with Holders of Seller Notes.
(a) Xx. Xxxxxx X. Xxxxxxx, Xx. and Xx. Xxxxxx X. XxXxxxx shall have
entered into an agreement pursuant to which all amounts owing to Messrs. Xxxxxxx
and XxXxxxx and BMI Realty Associates shall be deemed fully paid in exchange for
a cash payment of $534,000 and a promissory note in the amount of $117,000,
including, without limitation, the Seller Note which is to be repaid in
accordance with Section 2.6(a)(iii), and Messrs. Xxxxxxx and XxXxxxx shall
deliver to Buyer the stock certificates of Benefit Management, Inc. that were
pledged to them.
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(b) Xx. Xxxx X. Xxxxx and Xx. Xxxxxx Xxxxxxx will have delivered an
estoppel letter stating that following the Closing, their only remaining claim
relates to accounts receivable in the amount of approximately $154,192.
Section 6.11 No Material Adverse Effect. Since the date of this Agreement,
there shall not have been a Material Adverse Effect.
ARTICLE VII
CONDITIONS PRECEDENT TO THE OBLIGATION
OF THE SELLER TO CLOSE
The obligation of the Seller to consummate the transactions
contemplated hereby at the Closing is subject to the fulfillment on or prior to
the Closing Date of the following conditions, any one or more of which may be
waived by the Seller:
Section 7.1 No Orders. No Order shall have been issued by any Governmental
Body to restrain or prohibit the consummation of the transactions contemplated
hereby.
Section 7.2 Court Approval. The Court Approval shall have been obtained.
Section 7.3 Representations and Warranties. The representations and
warranties of Buyer in this Agreement which are qualified as to materiality must
have been accurate in all respects as of the date of this Agreement and must be
accurate in all respects as of the Closing Date as if made on the Closing Date,
and all other representations and warranties of Buyer in this Agreement must
have been accurate in all respects as of the date hereof and as of the Closing
Date as though made at and as of the Closing Date.
Section 7.4 Performance. Buyer shall have performed and complied in all
material respects with all agreements, obligations, covenants and conditions
required by this Agreement to be so performed or complied with by Buyer at or
prior to the Closing Date.
Section 7.5 Indemnification Escrow Agreement. The Buyer shall have duly
executed and delivered the Indemnification Escrow Agreement.
Section 7.6 A/R Escrow Agreement. The Buyer shall have duly executed and
delivered the A/R Escrow Agreement.
Section 7.7 Assumption Agreement. The Buyer shall have duly executed and
delivered the Assumption Agreement.
Section 7.8 Registration Rights Agreement. The Buyer shall have duly
executed and delivered the Registration Rights Agreement.
Section 7.9 Put Agreement. Each of DCI Master LDC and Xxxxxx Capital Group
LLC shall have duly executed and delivered the Put Agreement.
Section 7.10 Required Consents. The Required Consents shall have been
obtained.
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Section 7.11 Xxxxx Contract. The Buyer shall have performed its covenant
set forth in Section 5.12 and Xx. Xxxxx shall have executed and delivered a
release in favor of the Seller against any liability to Xx. Xxxxx under his
current employment agreement.
ARTICLE VIII
SURVIVAL; INDEMNIFICATION
Section 8.1 Survival. The representations, warranties, covenants and
agreements of the Seller, on the one hand, and the Buyer, on the other hand,
contained in this Agreement and the certificates delivered pursuant to this
Agreement will survive the Closing Date until the first anniversary of the
Closing Date, at which point such representations, warranties, covenants and
agreements and any claim for indemnification on account thereof will terminate.
Section 8.2 Indemnification of Buyer Indemnitees. Subject to Section 8.1,
this Section 8.2 and Sections 8.5 and 8.7, from and after the Closing Date, the
Seller will indemnify and hold harmless the Buyer and its successors and
permitted assigns, and the officers, employees, directors and stockholders of
the Buyer and their respective heirs and personal representatives (collectively,
the "Buyer Indemnitees"), solely out of the Indemnification Escrow Amount and
subject to the terms of the Escrow Agreement, for the amount of any and all
out-of-pocket losses, costs, damages, claims, fines, penalties, expenses
(including reasonable fees and expenses of outside attorneys), reasonable costs
of investigation (including reasonable fees and expenses of outside accountants,
consultants and experts reasonably engaged), amounts paid in settlement, court
costs, and other expenses of litigation but excluding any and all internal costs
and expenses incurred by any party entitled to indemnification under this
Article VIII (collectively, "Damages") actually incurred by a Buyer Indemnitee
arising out of (i) any breach of any representation or warranty of the Seller
contained in Article III of this Agreement or (ii) any breach by the Seller of
any of its covenants or agreements contained in this Agreement that survive the
Closing Date.
Section 8.3 Indemnification of Seller Indemnitees. From and after the
Closing Date, the Buyer will indemnify and hold harmless the Seller and its
respective successors and permitted assigns, and the officers, employees,
directors and stockholders of the Seller and its respective heirs and personal
representatives (collectively, the "Seller Indemnitees") for, and will pay to
the Seller Indemnitees the amount of, any Damages actually incurred by a Seller
Indemnitee arising out of (a) any breach of any representation or warranty of
the Buyer contained in this Agreement, (b) any breach by the Buyer of any of its
covenants or agreements contained in this Agreement or any certificate delivered
pursuant to this Agreement that survive the Closing Date, (c) Buyer's failure to
pay, discharge or perform any of its liabilities or obligations constituting or
with respect to the Assumed Liabilities or (d) Buyer's operation of the Seller's
Business and use of the Assets after the Closing.
Section 8.4 Exclusive Remedy. The Parties agree that, from and after the
Closing Date, the exclusive remedies of the Parties for any Damages arising out
of or based upon the matters set forth in this Agreement are the indemnification
obligations of the Parties set forth in this Article VIII.
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Section 8.5 Limitations on Indemnification of Buyer Indemnitees.
Notwithstanding anything herein to the contrary, the right of the Buyer
Indemnitees to indemnification under this Article VIII is limited as follows:
(a) The Buyer Indemnitees will not be entitled to indemnification with
respect to the matters described in Section 8.2 for any Damages until the total
of all such Damages suffered by the Buyer Indemnitees exceeds the sum of One
Hundred Thousand Dollars ($100,000) (the "Basket"), in which event the Buyer
Indemnitees will be entitled to indemnification from the Indemnification Escrow
Amount for all Damages in excess of the Basket.
(b) All claims for Damages made by any Buyer Indemnitee pursuant to
Section 8.2 shall be satisfied solely out of the Indemnification Escrow Amount,
subject to the terms of the Escrow Agreement. In no event shall the Seller be
liable for Damages pursuant to this Article VIII in excess of the
Indemnification Escrow Amount.
(c) The Buyer Indemnitees' right to indemnification pursuant to Section
8.2 on account of any Damages shall be reduced by all insurance or other third
party indemnification proceeds actually received by the Buyer Indemnitees. The
Buyer shall use commercially reasonable efforts to claim and recover any Damages
suffered by the Buyer Indemnitees under any such insurance policies or other
third party indemnities; provided that the Buyer shall not be required to
initiate any Action or expend any material amounts in connection therewith.
(d) Except with respect to Damages actually awarded to a third party in an
action brought against a Buyer Indemnitee, the Buyer Indemnitees shall not be
entitled to indemnification pursuant to Section 8.2 hereof for punitive damages,
or for lost profits, consequential, incidental, exemplary or special damages.
Section 8.6 Limitations on Indemnification of Seller Indemnitees. The
Seller Indemnitees will not be entitled to indemnification pursuant to Section
8.3 hereof for any Damages until the total of all such Damages suffered by the
Seller Indemnitees exceeds the sum of One Hundred Thousand Dollars ($100,000),
in which event the Seller Indemnitees will be entitled to indemnification for
all Damages in excess of One Hundred Thousand Dollars ($100,000) and up to a
maximum of Eight Hundred Thousand Dollars ($800,000).
(a) The Seller Indemnitees' right to indemnification pursuant to Section
8.3 on account of any Damages shall be reduced by all insurance or other third
party indemnification proceeds actually received by the Seller Indemnitees. The
Seller shall use commercially reasonable efforts to claim and recover any
Damages suffered by the Seller Indemnitees under any such insurance policies or
other third party indemnities.
(b) Except with respect to Damages actually awarded to a third party in an
action brought against a Seller Indemnitee, the Seller Indemnitees shall not be
entitled to indemnification pursuant to Section 8.3 hereof for punitive damages,
or for lost profits, consequential, exemplary or special damages.
Section 8.7 Procedures. The following procedures shall apply to all claims
for indemnification pursuant to this Article VIII:
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(a) Notice of Damages by Seller Indemnitee. As soon as is reasonably
practicable after a Seller Indemnitee obtains knowledge of any Damages, the
Seller shall give written notice of such Damages (a "Claims Notice") to the
Buyer describing the Damages in reasonable detail, and indicate the amount
(estimated, if necessary and to the extent feasible) of the Damages that has
been or may be suffered by the applicable Seller Indemnitee. No delay in or
failure to give a Claims Notice by the Seller to the Buyer pursuant to this
Section 8.7(a) will adversely affect any of the other rights or remedies that
the Seller has under this Agreement, or alter or relieve the Buyer of its
obligation to indemnify the applicable Seller Indemnitee except to the extent
that it is materially prejudiced thereby.
(b) Notice of Damages by Buyer Indemnitee.
(i) Claims for Damages. Subject to the limitations set forth in
this Article VIII, if any Buyer Indemnitee believes in good
faith that it has a claim for indemnification from the
Indemnification Escrow Amount (an "Escrow Claim"), the Buyer
shall, as soon as it is reasonably practical after it becomes
aware of such Escrow Claim, notify the Seller and the Escrow
Agent of such Escrow Claim by means of a written notice
specifying the nature, circumstances and amount of such Escrow
Claim accompanied by an affidavit of the Chief Executive
Officer or Chief Financial Officer of the Buyer setting forth
with reasonable particularity the underlying facts actually
known or in good faith believed by the affiant to exist
sufficient to establish, as of the date of such affidavit, the
basis for the Escrow Claim and setting forth the Buyer's good
faith calculation of the Damages incurred by the applicable
Buyer Indemnitee with respect thereto, and including copies of
all written documentation in the possession of the Buyer
Indemnitees relating to the circumstances or events giving
rise to such Escrow Claim (an "Escrow Claim Notice" and,
together with a Claims Notice, a "Notice"). The failure by the
Buyer to promptly deliver an Escrow Claim Notice under this
Section 8.7(b)(i) will not adversely affect the applicable
Buyer Indemnitee's right to indemnification from the
Indemnification Escrow Amount except to the extent the Seller
is materially prejudiced thereby. If, by 5:00 p.m. New York
time on the 30th day following receipt by the Seller of an
Escrow Claim Notice (the "Dispute Period"), the Buyer and the
Escrow Agent have not received from the Seller notice in
writing that the Seller objects to the Escrow Claim (or the
amount of Damages set forth therein) asserted in such Escrow
Claim Notice (a "Dispute Notice"), the Escrow Agent shall pay
to the Buyer from the Indemnification Escrow Amount the amount
of Damages specified in the Claim Notice subject to the
limitations contained in this Article VIII.
(ii) Disputes. If the Seller delivers a Dispute Notice to the Buyer
within the Dispute Period, the Buyer and the Seller shall
promptly meet and use their reasonable efforts to settle the
dispute as to whether and to what extent the Buyer Indemnitees
are entitled to indemnification on account of such Escrow
Claim. If the Buyer and the Seller are able to reach agreement
within 30 days after the Buyer receives such Dispute Notice,
the Buyer and the Seller shall deliver a joint written
instruction to the Escrow Agent setting forth such agreement
and instructing the Escrow Agent to release funds from the
Indemnification Escrow Amount subject to the limitations
contained in this Article VIII. If the Buyer and the Seller
are unable to reach agreement within 30 days after the Buyer
receives such Dispute Notice, then the dispute may be
submitted to a court of competent jurisdiction by either the
Buyer or the Seller. For all purposes of this Article VIII,
the Buyer and the Seller shall cooperate with and make
available to the other party and its representatives all
information, records and data, and shall permit reasonable
access to its facilities and personnel, as may be reasonably
required in connection with the resolution of such disputes.
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(c) Opportunity to Defend Third Party Claims. In the event of any claim by
a third party against any Buyer Indemnitee or Seller Indemnitee for which
indemnification is available under this Article VIII (whether pursuant to a
lawsuit, other legal action or otherwise, a "Third Party Claim"), the party
against whom indemnification or reimbursement, as applicable, may be sought
hereunder (the "Indemnifying Party") shall be entitled and, if it so elects,
shall (subject to Section 8.7(d)) be obligated at its own cost and expense
(which shall not be reimbursed to the Seller from the Indemnification Escrow
Account if the Seller is the Indemnifying Party), (i) to take control of the
defense and investigation of such Third Party Claim and (ii) to pursue the
defense thereof in good faith by appropriate actions or proceedings promptly
taken or instituted and diligently pursued, including, without limitation, to
employ and engage attorneys of its own choice reasonably acceptable to the party
seeking indemnification or reimbursement, as applicable, hereunder (the
"Indemnified Party") to handle and defend such Third Party Claim, and the
Indemnifying Party shall be entitled (but not obligated), if it so elects, to
compromise or settle such claim, which compromise or settlement shall be made
only with the written consent of the Indemnified Party, such consent not to be
unreasonably withheld or delayed; provided that such consent shall not be
required if the Indemnified Party is released from any further liability or
obligation as a condition to such settlement; provided, however, if the
Indemnifying Party controlling the defense of a Third Party claim is the Seller,
the consent of the Indemnified Party shall not be necessary in connection with
any compromise or settlement of such Third Party Claim that solely involves the
payment of monetary damages not exceeding an amount equal to the then remaining
portion of the Indemnification Escrow Amount minus the sum of all Damages
claimed under then pending (but unresolved) Escrow Claims Notices. In the event
the Indemnifying Party elects to assume control of the defense and investigation
of such Third Party Claim in accordance with this Section 8.7(c), the
Indemnified Party may, at its own cost and expense, participate in the
investigation, trial and defense of such Third Party Claim, provided that if the
named Persons to a lawsuit or other legal action include both the Indemnifying
Party and the Indemnified Party and the Indemnified Party has been advised by
counsel that there may be one or more legal defenses available to such
Indemnified Party that are different from or additional to those available to
the Indemnifying Party, the Indemnified Party shall be entitled, at the
Indemnifying Party's cost, risk and expense (which shall not be reimbursed to
the Seller from the Indemnification Escrow Account if the Seller is the
Indemnifying Party), to retain one firm of separate counsel of its own choosing
(along with any required local counsel). If the Indemnifying Party fails to
assume the defense of such Third Party Claim in accordance with this Section
8.7(c) within 14 days after delivery of the Claim Notice in connection with such
Third Party Claim, the Indemnified Party against which such Third Party Claim
has been asserted shall (upon delivering notice to such effect to the
Indemnifying Party) have the right to undertake the defense, compromise and
settlement of such Third Party Claim, and the Indemnifying Party shall be liable
for the costs of such defense and any resulting settlement of such Third Party
Claim and for any final judgment with respect thereto (subject to any right of
appeal), if any, but only to the extent otherwise provided in this Agreement
(including Sections 8.5 and 8.6 hereof), which shall be reimbursed to the Buyer
from the Indemnification Escrow Account at the Buyer's option, to the extent
that funds remain in such account after the payment of any Damages relating
thereto, if the Buyer is the Indemnified Party. In the event the Indemnifying
Party assumes the defense of the claim, the Indemnifying Party shall keep the
Indemnified Party reasonably informed of the progress of any such defense,
compromise or settlement, and in the event the Indemnified Party assumes the
defense of the claim, the Indemnified Party shall keep the Indemnifying Party
reasonably informed of the progress of any such defense, compromise or
settlement.
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(d) Notwithstanding anything set forth herein to the contrary, if the
Indemnifying Party controlling the defense of a Third Party Claim is the Seller,
the Seller's costs and expenses incurred in connection with such defense shall
not be reimbursed to the Seller from the Indemnification Escrow Amount.
Section 8.8 Adjustment to Purchase Price. The Buyer and the Seller agree
that any payments made from the Indemnification Escrow Amount pursuant to this
Article VIII shall be treated as an adjustment to the Purchase Price for all
purposes and shall prepare and file their Tax Returns and other filings in a
manner consistent therewith.
ARTICLE IX
TERMINATION
Section 9.1 Termination. This Agreement may not be terminated prior to the
Closing, except:
(a) by mutual agreement of the Buyer and the Seller;
(b) at the election of the Buyer, if the Seller has breached any of its
material obligations contained in this Agreement, which breach has not been
cured by the Seller within 30 days after the Seller's receipt of written notice
of such breach from the Buyer;
(c) at the election of the Seller, if the Buyer has breached any of its
material obligations contained in this Agreement, which breach has not been
cured by the Buyer within 30 days after the Buyer's receipt of written notice of
such breach from the Seller;
(d) at the election of either the Buyer or the Seller upon prior written
notice, if any Governmental Body shall have issued an Order or taken any other
final action restraining or prohibiting consummation of the transactions
contemplated hereby and such Order is or shall have become non-appealable;
(e) at the election of either the Buyer or the Seller upon prior written
notice, if any of the conditions set forth in Article VI or Article VII,
respectively, has not been fulfilled as of the close of business on December 1,
2005; provided, however, that the party whose conduct substantially results in
the failure of such condition to be fulfilled may not be the terminating party;
or
(f) at the election of either the Buyer or the Seller, to be exercised no
later than 5:00 p.m. New York City time on November 4, 2005, if the holders of
the National Associates, Inc., N.W. Seller Note shall not by 5:00 p.m. New York
City time on November 4, 2005 have delivered an estoppel letter to the effect
that such Seller Note is not in default and a subordination agreement in favor
of the Buyer's lender in a form reasonably satisfactory to Buyer.
38
Section 9.2 Effect of Termination. If this Agreement is terminated
pursuant to Section 9.1 and the transactions contemplated hereby are not
consummated, then:
(a) this Agreement shall become null and void and have no further force or
effect, except that any such termination shall be without prejudice to the
rights of any party on account of the non-satisfaction of the conditions set
forth in Articles VI and VII resulting from the intentional or willful breach or
violation of the covenants or agreements of another party under this Agreement;
(b) notwithstanding anything in this Agreement to the contrary, the
provisions of Section 5.4, Section 5.5, this Section 9.2 and Article X shall
survive any termination of this Agreement;
(c) the Buyer shall promptly return to the Seller all books and records
and all other information furnished by the Seller, its agents, employees or
representatives (including all copies, if any) and shall not use or disclose the
information contained in such books and records for any purpose or make such
information available to any other Person;
(d) in the event this Agreement is terminated by the Seller pursuant to
Section 9.1(c) above, then the Seller shall be entitled to receive the Xxxxxxx
Money from the Escrow Agent;
(e) The Parties agree that the amount of actual damages which the Seller
would suffer as a result of Buyer's material breach of any of its material
obligations contained in this Agreement resulting in Seller's termination of
this Agreement pursuant to Section 9.1(c) of this Agreement would be extremely
difficult to determine, and have agreed that the amount of the Xxxxxxx Money is
a reasonable estimate of Seller's damages and is intended to constitute a fixed
amount of liquidated damages in lieu of other remedies available to Seller in
respect of such breach and is not intended to constitute a penalty. Accordingly,
upon the full and complete payment of the Xxxxxxx Money to Seller following a
termination of this Agreement pursuant to Section 9.1(c), Buyer will be
discharged from any further obligations and liabilities to Seller under this
Agreement; and
(f) If this Agreement is terminated by either Party other than pursuant to
Section 9.1(c), the Xxxxxxx Money will be disbursed by the Escrow Agent to Buyer
from the escrow account established pursuant to the Deposit Escrow Agreement,
subject to and in accordance with the terms of the Deposit Escrow Agreement.
39
ARTICLE X
MISCELLANEOUS
Section 10.1 Consent to Jurisdiction; Service of Process; Waiver of Jury
Trial.
(a) Any legal Action brought by any Party or any of its Affiliates arising
out of or based upon this Agreement shall only be instituted in any federal or
state court in New York County, New York, and each party waives any objection
which it may now or hereafter have to the laying of venue of any such
proceeding, and irrevocably submits to the jurisdiction of such courts in any
such Action.
(b) Any and all service of process and any other notice in any such claim
shall be effective against any party to this Agreement if given personally or by
registered or certified mail, return receipt requested, or by any other means of
mail that requires a signed receipt, postage prepaid, mailed to such party as
provided in Section 10.2. Nothing herein contained shall be deemed to affect the
right of any party to serve process in any manner permitted by Law.
(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT
SUCH PARTY MAY HAVE TO A TRIAL BY JURY.
(d) EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE,
AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE,
THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
WAIVER IN SECTION 10.1(c), (ii) SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF SUCH WAIVER, (iii) SUCH PARTY MAKES SUCH WAIVER VOLUNTARILY AND
(iv) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS, AGREEMENTS AND CERTIFICATIONS IN SECTION 10.1(c) AND
THIS SECTION 10.1(d).
Section 10.2 Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given (a) on the day of delivery if delivered in person, or if delivered by
facsimile upon confirmation of receipt, (b) on the first Business Day following
the date of dispatch if delivered by a nationally recognized express courier
service, or (c) on the fifth Business Day following the date of mailing if
delivered by registered or certified mail, return receipt requested, postage
prepaid. All notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated by notice given in
accordance with this Section 10.2 by the party to receive such notice:
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(a) if to the Buyer, to:
National Investment Managers Inc.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP
000 Xxxxxxxxx Xxx, Xxxxx 0000,
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxx, Esq.
Facsimile: (000) 000-0000
(b) if to the Seller, to:
American Benefit Resources, Inc.
00 Xxxx Xxxxxx, Xxxxx 000
Xxxxx Xxxxxx, XX 00000
Attention: Chief Executive Officer
Facsimile: (000) 000-0000
with copies to:
IBF Fund Liquidating, LLC
c/o Xxxx Xxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxx, Esq., Manager
Facsimile: (000) 000-0000
and
Xxxx Xxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
Section 10.3 Entire Agreement. This Agreement, together with the
Confidentiality Agreement and any other collateral agreements executed in
connection with the consummation of the transactions contemplated hereby,
contain the entire agreement among the Parties with respect to the Asset
Purchase and supersede all prior agreements, written or oral, with respect
thereto.
41
Section 10.4 Waivers and Amendments. This Agreement may be amended,
superseded, canceled, renewed or extended, and the terms hereof may be waived,
only by a written instrument signed by the Buyer and the Seller or, in the case
of a waiver, by the Party waiving compliance. No delay on the part of any party
in exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any Party of any such right, power
or privilege, nor any single or partial exercise of any such right, power or
privilege, preclude any further exercise thereof or the exercise of any other
such right, power or privilege.
Section 10.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
any conflict of laws rules thereof that might indicate the application of the
laws of any other jurisdiction.
Section 10.6 Binding Effect; Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties and their respective successors and
assigns. This Agreement is not assignable by any Party without the prior written
consent of the other party; provided that (i) Buyer may assign its rights
hereunder (but not its obligations) to any Person providing financing to Buyer
in connection with the transactions contemplated hereby; and (ii) prior to the
Closing, Buyer may designate certain of its Affiliates or subsidiaries as the
transferee of the Assets to be acquired hereunder; provided that no such
designation or transfer shall relieve Buyer of any of its obligations hereunder.
Section 10.7 Usage. All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require.
All terms defined in this Agreement in their singular or plural forms have
correlative meanings when used herein in their plural or singular forms,
respectively. Unless otherwise expressly provided, the words "include,"
"includes" and "including" do not limit the preceding words or terms and shall
be deemed to be followed by the words "without limitation." Any reference in
this Agreement to "Dollars" or "$" shall mean U.S. dollars.
Section 10.8 Articles and Sections. All references herein to Articles and
Sections shall be deemed references to such parts of this Agreement, unless the
context shall otherwise require. The Article and Section headings in this
Agreement are for reference only and shall not affect the interpretation of this
Agreement.
Section 10.9 Interpretation. The Parties acknowledge and agree that (a)
each Party and its counsel reviewed and negotiated the terms and provisions of
this Agreement and have contributed to its revision, (b) the rule of
construction to the effect that any ambiguities are resolved against the
drafting party shall not be employed in the interpretation of this Agreement,
and (c) the terms and provisions of this Agreement shall be construed fairly as
to all Parties, regardless of which party was generally responsible for the
preparation of this Agreement.
Section 10.10 Severability of Provisions. If any provision or any portion
of any provision of this Agreement shall be held invalid or unenforceable, the
remaining portion of such provision and the remaining provisions of this
Agreement shall not be affected thereby. If the application of any provision or
any portion of any provision of this Agreement to any Person or circumstance
shall be held invalid or unenforceable, the application of such provision or
portion of such provision to Persons or circumstances other than those as to
which it is held invalid or unenforceable shall not be affected thereby.
Section 10.11 No Third Party Beneficiaries. Except as provided in Article
VIII with respect to the indemnification of the Buyer Indemnitees and Seller
Indemnitees, no provision of this Agreement is intended to, or shall, confer any
third party beneficiary or other rights or remedies upon any Person other than
the parties hereto.
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Section 10.12 Counterparts. This Agreement may be executed by the Parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts together shall constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all, of the Parties
hereto.
Section 10.13 Further Assurances. From time to time after the Closing
Date, at the request of the other Party hereto and at the expense of the Party
so requesting, the Parties hereto shall execute and deliver to such requesting
party such documents and take such other action as such requesting Party may
reasonably request in order to consummate the transactions contemplated hereby.
Section 10.14 Exhibits and Schedules. Any matter, information or item
disclosed in the Seller's Disclosure Schedule or in any of the Schedules
attached hereto, under any specific representation or warranty or section number
hereof, shall be deemed to have been disclosed for all purposes of this
Agreement in response to every representation or warranty in this Agreement in
respect of which such disclosure is reasonably apparent. The inclusion of any
matter, information or item in any Seller's Disclosure Schedule shall not be
deemed to constitute an admission of any liability by the Seller to any third
party or otherwise imply that any such matter, information or item is material
or creates a measure for materiality for the purposes of this Agreement.
Section 10.15 Enforcement of Agreement. The Parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the Parties will be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof, this being in addition to
any other remedy to which they are entitled at law or in equity.
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43
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
BUYER:
NATIONAL INVESTMENT MANAGERS INC.
By:
-------------------------------------
Name:
Title:
SELLER:
AMERICAN BENEFIT RESOURCES, INC.
By:
-------------------------------------
Name:
Title:
