Exhibit 10.38
MASTER TRANSACTION AGREEMENT
BY AND AMONG
INTEGRATED INFORMATION SYSTEMS, INC.
AND
GOLIATH NETWORKS, INC.,
XXXXXXX X. XXXXXX, AS RECEIVER FOR GOLIATH NETWORKS, INC.,
XXXX X. XXXXXX,
AND
ANCHORBANK, FSB
DATED DECEMBER 21, 2001
TABLE OF CONTENTS
PAGE
1. DEFINITIONS................................................................................................1
1.1 DEFINITIONS.......................................................................................1
2. EMPLOYMENT MATTERS; OFFICE LEASES; ASSETS TO BE SOLD; CONSIDERATION; CLOSING; APPROVAL OF
CREDITORS' ACTION..........................................................................................3
2.1 EMPLOYMENT MATTERS................................................................................3
2.2 OFFICE LEASES.....................................................................................4
2.3 ASSETS TO BE SOLD.................................................................................4
2.4 EXCLUDED ASSETS...................................................................................5
2.5 CONSIDERATION.....................................................................................6
2.6 LIABILITIES.......................................................................................7
2.7 ALLOCATION........................................................................................9
2.8 CLOSING...........................................................................................9
2.9 CLOSING OBLIGATIONS...............................................................................9
2.10 APPROVAL OF CHAPTER 128 CREDITORS' ACTION........................................................10
2.11 CONSENT OF THIRD PARTIES.........................................................................11
3. REPRESENTATIONS AND WARRANTIES OF XXXXXX, SHAREHOLDER, RECEIVER AND ANCHOR................................12
3.1 ORGANIZATION AND GOOD STANDING...................................................................12
3.2 ENFORCEABILITY; AUTHORITY; NO CONFLICT...........................................................12
3.3 FINANCIAL STATEMENTS.............................................................................13
3.4 BOOKS AND RECORDS................................................................................13
3.5 TITLE TO ASSETS; ENCUMBRANCES....................................................................14
3.6 CONDITION OF ASSETS..............................................................................14
3.7 NO UNDISCLOSED LIABILITIES.......................................................................14
3.8 TAXES............................................................................................14
3.9 EMPLOYEE BENEFIT PLANS...........................................................................15
3.10 LEGAL PROCEEDINGS; ORDERS........................................................................16
3.11 BUSINESS CONDUCTED IN ORDINARY COURSE............................................................16
3.12 CONTRACTS; NO DEFAULTS...........................................................................17
3.13 EMPLOYEES........................................................................................17
3.14 LABOR; COMPLIANCE................................................................................18
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TABLE OF CONTENTS
(CONTINUED)
3.15 INTELLECTUAL PROPERTY ASSETS.....................................................................18
3.16 BROKERS OR FINDERS...............................................................................19
3.17 CHAPTER 128 CREDITORS' ACTION....................................................................19
3.18 OTHER INDEMNITY ARRANGEMENTS.....................................................................19
3.19 SHAREHOLDER'S PERSONAL INDEBTEDNESS..............................................................20
3.20 DISCLOSURE.......................................................................................20
3.21 ANCHOR'S REPRESENTATIONS AND WARRANTIES..........................................................20
3.22 RECEIVER'S REPRESENTATIONS AND WARRANTIES........................................................21
4. REPRESENTATIONS AND WARRANTIES OF IIS.....................................................................21
4.1 ORGANIZATION AND GOOD STANDING...................................................................21
4.2 AUTHORITY; NO CONFLICT...........................................................................21
4.3 BROKERS OR FINDERS...............................................................................21
4.4 DISCLOSURE.......................................................................................22
4.5 PLEDGED ASSETS...................................................................................22
4.6 FINANCIAL REPORTS................................................................................22
5. COVENANTS OF SELLER AND SHAREHOLDER.......................................................................22
5.1 ACCESS AND INVESTIGATION.........................................................................22
5.2 OPERATION OF THE BUSINESS OF SELLER..............................................................23
5.3 REQUIRED APPROVALS...............................................................................23
5.4 FILINGS..........................................................................................23
6. COVENANT NOT TO COMPETE...................................................................................23
7. CONDITIONS PRECEDENT TO IIS'S OBLIGATION TO CLOSE.........................................................24
7.1 ACCURACY OF REPRESENTATIONS; COVENANTS; DILIGENCE................................................24
7.2 ADDITIONAL DOCUMENTS.............................................................................24
7.3 NO PROCEEDINGS...................................................................................25
7.4 NO CONFLICT......................................................................................25
8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE......................................................25
8.1 ACCURACY OF REPRESENTATIONS; COVENANTS...........................................................25
8.2 ADDITIONAL DOCUMENTS.............................................................................26
8.3 NO INJUNCTION....................................................................................26
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TABLE OF CONTENTS
(CONTINUED)
9. TERMINATION...............................................................................................26
9.1 TERMINATION EVENTS...............................................................................26
9.2 EFFECT OF TERMINATION............................................................................27
10. ADDITIONAL COVENANTS AND AGREEMENTS.......................................................................27
10.1 PAYMENT OF ALL TAXES RESULTING FROM SALE OF PURCHASED ASSETS BY SELLER...........................27
10.2 PAYMENT OF LIABILITIES...........................................................................27
10.3 ASSISTANCE IN PROCEEDINGS........................................................................27
10.4 CUSTOMER AND OTHER BUSINESS RELATIONSHIPS; COOPERATION...........................................27
10.5 SECURITIES FILINGS...............................................................................28
11. INDEMNIFICATION; REMEDIES.................................................................................28
11.1 SURVIVAL.........................................................................................28
11.2 INDEMNIFICATION AND REIMBURSEMENT BY GNI AND SHAREHOLDER.........................................28
11.3 INDEMNIFICATION AND REIMBURSEMENT BY IIS.........................................................29
11.4 INDEMNIFICATION AND REIMBURSEMENT BY ANCHOR......................................................29
12. GENERAL PROVISIONS........................................................................................30
12.1 EXPENSES.........................................................................................30
12.2 PUBLIC ANNOUNCEMENTS.............................................................................30
12.3 NOTICES..........................................................................................30
12.4 ARBITRATION......................................................................................32
12.5 ENTIRE AGREEMENT AND MODIFICATION................................................................32
12.6 ASSIGNMENTS, SUCCESSORS AND NO THIRD-PARTY RIGHTS................................................32
12.7 GOVERNING LAW....................................................................................33
12.8 EXECUTION OF AGREEMENT...........................................................................34
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MASTER TRANSACTION AGREEMENT
This Master Transaction Agreement ("Agreement") is by and among
Integrated Information Systems, Inc., a Delaware corporation ("IIS"), Goliath
Networks, Inc., a Wisconsin corporation ("GNI"), Xxxxxxx X. Xxxxxx as receiver
for GNI ("Receiver"), (the Receiver and GNI are collectively referred to herein
as "Seller"), Xxxx X. Xxxxxx, a resident of Wisconsin ("Xxxxxx" and, as the sole
shareholder of GNI, "Shareholder"), and AnchorBank, fsb ("Anchor"). The
effective date of this Agreement (the "Effective Date") shall be deemed to be
the date the Receiver executes this Agreement, as listed on the signature page
of this Agreement.
RECITALS
A. GNI was engaged in the business of providing information
technology consulting services;
B. Xxxxxxx X. Xxxxxx is the receiver for GNI in a case under
Chapter 128 of the Wisconsin Statutes pending in the Wisconsin Circuit Court for
Dane County (the "Court"), Case No. 01 CV 3506 (the "Chapter 128 Creditors'
Action");
C. It is contemplated that the Purchased Assets will be sold,
transferred and conveyed, and the other transactions contemplated herein will be
consummated, pursuant to an order (the "Sale Order") of the Court under Chapter
128 of the Wisconsin Statutes;
D. IIS desires to employ substantially all of the employees of
Seller and to that end will pay to Seller certain amounts;
E. IIS desires to purchase from Seller and Seller desires to
sell, assign and convey to IIS the Purchased Assets, consisting primarily of
certain incidental fixed and other assets; and
F. The parties mutually desire that IIS make arrangements for IIS
to occupy the premises (or portion thereof) currently occupied by Seller at (i)
0000 Xxxxx Xxxxxxxxx Xxxx, Xxxxxxx , Xxxxxxxxx 00000, as more particularly set
forth in that certain Lease Agreement between GNI as tenant and Xxxx Xxxxxx as
landlord, dated as of March 5, 1997, and amendments thereto and (ii) Xxxxxxxxxx
Xxxxx Xxxxxxxx, 0000 Xxxxx Xxx Xxxxx Third Street, Milwaukee, Wisconsin 53202,
as more particularly set forth in that certain Office Lease between GNI as
tenant and Riverfront Plaza Joint Venture as landlord, dated as of January 1,
2000, and amendments thereto (the "Office Leases").
The parties agree as follows:
1. DEFINITIONS
1.1 DEFINITIONS
In addition to the terms defined throughout this Agreement, for
purposes of this Agreement, the following terms and variations thereof have the
meanings specified or referred to in this Section 1.1:
"ENCUMBRANCE"--any charge, claim, community or other marital property
interest, condition, equitable interest, lien, option, pledge, security
interest, mortgage, right of way, easement, encroachment, servitude, right of
first option, right of first refusal or similar restriction, including any
restriction on use, voting (in the case of any security or equity interest),
transfer, receipt of income or exercise of any other attribute of ownership.
"KNOWLEDGE"--an individual will be deemed to have Knowledge of a
particular fact or other matter if:
(a) that individual is actually aware of that fact or matter; or
(b) a prudent individual could be expected to discover or otherwise become
aware of that fact or matter in the course of conducting a reasonably
comprehensive investigation regarding the accuracy of any
representation or warranty contained in this Agreement.
"LEGAL REQUIREMENT"--any federal, state, local, municipal, foreign,
international, multinational or other constitution, law, ordinance, principle of
common law, code, regulation, statute or treaty.
"LIABILITY"--with respect to any Person, any liability or obligation of
such Person of any kind, character or description, whether known or unknown,
absolute or contingent, accrued or unaccrued, disputed or undisputed, liquidated
or unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined, determinable or otherwise, and
whether or not the same is required to be accrued on the financial statements of
such Person.
"ORDER"--any order, injunction, judgment, decree, ruling, assessment or
arbitration award of any governmental authority or arbitrator.
"PERSON"--an individual, partnership, corporation, business trust,
limited liability company, limited liability partnership, joint stock company,
trust, unincorporated association, joint venture or other entity or a
governmental body.
"PROCEEDING"--any action, arbitration, audit, hearing, investigation,
proceeding, litigation or suit (whether civil, criminal, administrative,
judicial or investigative, whether formal or informal, whether public or
private) commenced, brought, conducted or heard by or before, or otherwise
involving, any governmental body or arbitrator.
"TAX"--any income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, property, environmental, windfall
profit, customs, vehicle, airplane, boat, vessel or other title or registration,
capital stock, franchise, employees' income withholding, foreign or domestic
withholding, social security, unemployment, disability, real property, personal
property, sales, use, transfer, value added, alternative, add-on minimum and
other tax, fee, assessment, levy, tariff, charge or duty of any kind whatsoever
and any interest, penalty, addition or additional amount thereon imposed,
assessed or collected by or under the authority of any governmental body or
payable under any tax-sharing agreement or any other contract.
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"TAX RETURN"--any return (including any information return), report,
statement, schedule, notice, form, declaration, claim for refund or other
document or information filed with or submitted to, or required to be filed with
or submitted to, any governmental body in connection with the determination,
assessment, collection or payment of any Tax or in connection with the
administration, implementation or enforcement of or compliance with any Legal
Requirement relating to any Tax.
2. EMPLOYMENT MATTERS; OFFICE LEASES; ASSETS TO BE SOLD; CONSIDERATION;
CLOSING; APPROVAL OF CREDITORS' ACTION
2.1 EMPLOYMENT MATTERS
(a) IIS has made, with the consent and approval of Seller, employment
offers to substantially all of the employees of Seller (the "Hired
Employees"). The effective start date for the Hired Employees hired
will be deemed to be the Closing Date (as defined in Section 2.8). IIS
will pay such Hired Employees at base compensation rates agreed to by
IIS and such Hired Employees. The terms and conditions of employment
of all Hired Employees will be mutually agreed upon by IIS and such
Hired Employees in each case. The Hired Employees shall have resigned
from employment with Seller and or its subsidiaries and resigned from
any other officer and director positions with Seller and its
subsidiaries, effective as of the Closing Date, and Seller will accept
all such resignations effective as of such date. IIS and certain of
the Hired Employees, each of whom are separately identified on
Schedule 2.1(a) (the "Key Employees"), together will enter into
employment agreements (each an "Employment Agreement," and
collectively the "Employment Agreements") in form and substance
acceptable to IIS and such Key Employees. (For all other purposes of
this Agreement, the term "Hired Employees" shall include the Key
Employees.)
(b) Seller hereby waives any and all noncompetition, nonsolicitation,
confidentiality, assignment of inventions, and other similar
restrictive covenants and agreements by and between Seller and the
Hired Employees with respect to their employment by IIS, effective as
of the Closing Date, and hereby releases the Hired Employees from such
agreements or restrictions solely for such purposes. Seller agrees to
assign and transfer to IIS all of Seller's rights under any such
restrictive or other agreements between Seller and all of its current
and former employees (including the Hired Employees). Seller will, upon
request of IIS, provide reasonable assistance to IIS in such regard.
(c) The obligation to pay all employee and other benefits, including,
without limitation, health, dental, life, accidental death and
disability, retirement, severance, and related or other benefits,
which are payable to employees (including Hired Employees) under
Seller's Employee Plans, including, in the case of Hired Employees,
any that arise, are incurred or are based on events that occur on or
prior to the actual date of hire by IIS (whether or not claims for
such benefits are submitted on or prior to such date), as well as any
statutory or other penalties payable to employees or former employees
(including the Hired Employees) as a result of the late or non-payment
(or underpayment) of wages, 401(k) plan withholdings, contributions or
other compensation, and withholding amounts, will remain the sole
responsibility of GNI, except as set forth in Section 3.21, and will
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not be assumed by IIS, and Shareholder, and to the extent set forth in
Section 11.4, Anchor, will indemnify and hold harmless IIS for such
claims and amounts. IIS will be responsible for any benefits that are
payable to Hired Employees under the terms of IIS's employee plans
that arise, are incurred or are based on events that occur after the
date of actual hire by IIS, including salary and any severance amounts
to which such Hired Employees are or become entitled to under their
arrangements with IIS. For the purpose of this Section 2.1(c), the
term "events" means the item that is the subject matter of the claim
(i.e., medical --- services, layoff, etc.) as well as the condition or
injury leading to the filing of the claim. IIS will not assume or be
responsible for any liability in respect of any benefits that are
payable at any time to, or in respect of, current or former employees
of Seller not employed by IIS. GNI will continue to provide disability
coverage, if applicable, to any Hired Employee who is unable to report
to work with IIS due to short- or long-term disability until such
employee reports to work for IIS, and to any current or former Seller
employees that are not hired by IIS.
(d) Notwithstanding anything to the contrary contained in Section 2.1(c) of
this Agreement, IIS agrees to award to each Hired Employee an amount of
vacation days equal to such Hired Employee's remaining Paid Time Off
("PTO") days as of November 30, 2001, and as adjusted through the date
of Closing, capped at a monetary equivalent of $145,437 (collectively,
the "Hired Employee Vacation Grants"). IIS's obligation to make such
Hired Employee Vacation Grants will be subject to such Hired Employee's
waiver and release of PTO liabilities with Seller.
2.2 OFFICE LEASES
IIS and Seller agree that they will use commercially reasonable efforts
to obtain financial concessions and enter into arrangements with Seller's
landlords for possession by IIS of the office premises (or portion thereof)
covered under the Office Leases at Closing (collectively the "Premises"),
pursuant to which IIS will enter into new leases for the Premises simultaneously
with the termination of the Office Lease, sublet the Premises, or take an
assignment of the Office Leases, or combination thereof, provided the terms are
no less favorable to IIS than those currently provided to Seller and provided
such lease documentation is satisfactory to IIS in form and substance. In the
event IIS does occupy any of the Premises, IIS will reimburse Seller for a
prorated rental payment for that portion of the current month remaining after
the Closing Date for each of the Premises IIS does occupy, and IIS will make
such payments, if any, within ten (10) days after the Closing Date (for purposes
of illustration only, if the Closing Date is January 15, 2002, not later than
January 25, 2001 IIS will reimburse Seller for 16/31 of the rental payment made
to the landlord for January).
2.3 ASSETS TO BE SOLD
Pursuant to the Sale Order and Chapter 128 of the Wisconsin Statutes,
and upon the terms and subject to the conditions set forth in this Agreement, at
the Closing, Seller shall sell, convey, assign, transfer and deliver to IIS, and
IIS shall purchase and acquire from Seller, free and clear of any Encumbrances
in accordance with the Sale Order, all of Seller's right, title and interest in
and to the following assets:
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(a) the clients or customers of Seller ("Transferred Customers") identified
to IIS in writing by Seller within five (5) days of the Effective Date,
together with all other clients or customers on whose accounts or
projects any of the Hired Employees performed services or to whom
products were shipped in the twelve months prior to the date hereof;
(b) the furniture, fixtures and equipment utilized prior to the date hereof
by the Hired Employees, including the fixed assets listed on Schedule
2.3(b)(i), the inventories, raw materials, work-in-progress and
finished goods and supplies of Seller, including those listed on
Schedule 2.3(b)(ii), and the prepaid and other current assets listed on
Schedule 2.3 (b) (iii), and ;
(c) the customer contracts (i) of Transferred Customers and (ii) other
customers of Seller identified to IIS in writing by Seller within five
(5) days of the Effective Date (the "Contracts");
(d) the affiliate agreements, reseller contracts and teaming agreements
identified to IIS in writing by Seller within five (5) days of the
Effective Date (the " Reseller Contracts");
(e) all telephone numbers, the Intellectual Property Assets listed on
Schedule 2.3(e) and the goodwill associated therewith;
(f) all data and records related to the Contracts, Reseller Contracts,
Office Leases, Transferred Customers (and other Seller customers),
Hired Employees and other assets of Seller, including client and
customer lists and records, referral sources, research and development
reports and records, creative materials, advertising materials,
promotional materials, studies, reports, correspondence and other
similar documents and records and, subject to Legal Requirements, and
copies of all personnel records of the Hired Employees;
(g) fifty percent (50%) of the Eligible Anchor Receivables (as defined
below), calculated on the Closing Date; and
(h) all receivables that are more than one hundred and twenty (120) days
past the invoice date as of the Closing Date (the "Delinquent
Receivables").
All of the property and assets to be transferred to IIS hereunder are
herein referred to collectively as the "Purchased Assets." Notwithstanding the
foregoing, the transfer of the Purchased Assets pursuant to this Agreement shall
not include the assumption of any Liability related to the Purchased Assets
unless IIS expressly assumes that Liability in this Agreement as set forth in
Sections 2.5 and 2.6.
2.4 EXCLUDED ASSETS
(a) Notwithstanding anything to the contrary contained in Section 2.3 or
elsewhere in this Agreement, all of the assets of Seller not referenced
or listed in Section 2.3 (collectively, the "Excluded Assets") are not
part of the sale and purchase contemplated hereunder, are excluded from
the Purchased Assets, and shall remain the property of Seller after the
5
Closing. Without limitation of the foregoing, the Excluded Assets
include leased personal property.
(b) Beginning the day of the Closing Date, IIS will receive collection of
Sellers' accounts receivable and GNI accounts receivable sold to
Anchor (including accounts receivable outstanding as of the Closing
Date and accounts receivable related to services provided prior to the
Closing Date and for which Seller invoices within thirty days (3O)
after the Closing Date ("Anchor Receivables"). "Eligible Anchor
Receivables" are identifiable Anchor Receivables that are less than
120 days past the invoice date or less than 120 days past the date
payment is due under Goliaths contract or Reseller Contracts. Anchor
will provide to IIS a list of Eligible Anchor Receivables within three
(3) business days of the signing of this Agreement. IIS is purchasing
fifty percent (50%) of each of the Eligible Anchor Receivables, as
agreed by Anchor and IIS in writing on the Closing Date, and IIS has
the option (the "A/R Option") for thirty (30) days after the Closing
Date to purchase fifty percent (50%) of the receivables that had not
yet been identified as of the closing date as Eligible Anchor
Receivables. To exercise the A/R Option, IIS shall provide Anchor with
written notice identifying said receivable and shall execute an
addendum to the Subordinated Note to increase the principal balance of
the Subordinated Note by fifty percent (50%) of the face amount of the
receivable acquired on exercise of the A/R Option. IIS shall remit
fifty percent (50%) of all amounts that it receives related to the
Eligible Anchor Receiveables purchased at Closing, or acquired on
exercise of the A/R Option, and one hundred percent (100%) percent of
the amounts it collects on Eligible Anchor Receivables that were not
included in its purchase at Closing or acquired on exercise of the A/R
Option on the later of twenty (20) days after the Closing Date or the
15th day of the month following the month in which the Closing takes
place (for purposes of calculating payment periods, for Eligible
Anchor Receivables acquired on exercise of the A/R Option after
Closing, the date of sale shall be deemed to be the Closing Date), and
on or before the 15th day of each month thereafter in which IIS
receives payment. Seller hereby authorizes IIS to endorse in IIS's
name, all notes, checks, drafts, money orders or other instruments of
payment in respect to Anchor Receiveables which come into it or
Seller's possession. In the event a dispute arises regarding amounts
claimed to be owed or collection issues arise, Shareholder shall use
commercially reasonable efforts to aid IIS and Anchor in resolving
said dispute in order to collect the amounts owed on said receivables.
Anchor and IIS agree that neither will take any collection efforts on
the purchased Eligible Anchor Receiveables without the prior written
consent of the other. IIS may take any collection efforts it deems
appropriate as to the Delinquent Receiveables. Anchor may take any
collection efforts it deems appropriate as to the nonpurchased
Eligible Anchor Receivables but shall advise IIS of its intended
course of action prior to commencing said action.
2.5 CONSIDERATION
Subject to the terms and conditions of this Agreement, the
consideration to be paid by IIS for the Purchased Assets (the "Purchase Price")
will consist of three components, (i) the cash component, (ii) the Hired
Employee Vacation Grants, and (iii) the execution by IIS of a subordinated note
(the "Subordinated Note") in favor of Anchor in an amount not to exceed the sum
of $4,250,000 plus 50% of the purchased Eligible Anchor Receivables, calculated
on the
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Closing Date (the "Principal Note Amount"). The principal amount of the
Subordinated Note may include, but shall not be increased beyond the foregoing
sum by, any amounts paid pursuant to Section 12.1(ii). The Subordinated Note
will be in the form of Schedule 2.5. Each of the Purchase Price components will
be paid at the Closing as follows:
(a) IIS will deliver to Anchor for the benefit of Seller $400,000, less the
cash advance of $100,000 as set forth in Section 12.1(i), in cash by
wire transfer or other immediately available funds.
(b) IIS will make the Hired Employee Vacation Grants, as set forth in
Section 2.1(d).
(c) At Closing, IIS will execute the Subordinated Note in favor of Anchor
for the balance of Anchor's loans to Seller as of the Closing Date, in
the Principal Note Amount..
2.6 LIABILITIES
IIS will not assume and does not agree to discharge any Liabilities of
Seller except for the continuing obligations after the Closing under (i) the
Contracts, (ii) the Reseller Contracts, (iii) the Office Leases, (iv) the
Subordinated Note and (v) the Hired Employee Vacation Grants, and then only to
the extent such Contracts, Reseller Contracts, Office Leases, Subordinated Note
or Hired Employee Vacation Grants require or contemplate performance on or after
the Closing Date.
All other Liabilities will remain the sole responsibility of and shall
be retained, paid, performed and discharged by Seller in accordance with the
Chapter 128 Creditors' Action, including, but not limited to:
(a) any Liability arising out of or relating to products or services sold
or provided by Seller to the extent performed, manufactured, or sold,
as the case may be, prior to the Closing Date, including without
limitation any Liabilities for customer claims arising out of such
products or services;
(b) any Liability under any Contract or Reseller Contract assumed by IIS
that arises after the Closing Date to the extent it arises out of or
relates to any breach that occurred prior to the Closing Date;
(c) any Liability for Taxes, including (A) any Taxes arising as a result of
Seller's operation of its business or ownership of the Purchased Assets
prior to the Closing Date including without limitation any withholding
amounts and any fines, fees, penalties or costs relating to Seller's
Employee Plans, (B) any Taxes that will arise as a result of the sale
of the Purchased Assets pursuant to this Agreement, and (C) any
deferred Taxes of any nature;
(d) any Liability under any contract, agreement or other arrangement not
assumed by IIS, including without limitation any Liability arising out
of any credit arrangement or debt, including any Liability arising out
of any credit arrangement or debt with Shareholder, real or personal
property lease, loan, or similar arrangement (including trade payables)
or any loan or security agreement relating thereto;
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(e) any Liability under or pertaining to that certain Rescission Agreement,
by and between GNI and Xxxxxxxxx X. Xxxxxxxx ("Xxxxxxxx") doing
business as e-Volved Solutions, dated June 11, 2001, including any
Liability arising under any of the transaction documents referenced in
Section 1.01 thereof;
(f) any environmental, health and safety liabilities arising out of or
relating to the operation of Seller's business;
(g) any Liability under the Seller Employee Plans or relating to payroll,
vacation, sick leave, workers' compensation, unemployment benefits,
pension benefits, employee stock option or profit-sharing plans, health
care plans or benefits or any other employee plans or benefits of any
kind for Seller's employees or former employees (including any Hired
Employees) or both;
(h) any Liability under any employment, severance, retention or termination
agreement, or any penalties or damages or late-, under- or non-payment
of wages or other compensation, with or relating to any employee or
former employee (including any Hired Employees) of Seller;
(i) any Liability arising out of or relating to any employee grievance
whether or not the employees filing or initiating such grievance are
hired by IIS;
(j) any Liability to indemnify, reimburse or advance amounts to any
shareholder, officer, director, employee or agent of Seller;
(k) any Liability to distribute to any of Seller's shareholders, creditors
or otherwise apply all or any part of the consideration received
hereunder;
(l) any Liability arising out of any proceeding pending as of the Closing
Date;
(m) any Liability arising out of any proceeding commenced after the
Closing Date to the extent arising out of or relating to any
occurrence or event happening prior to the Closing Date;
(n) any Liability arising out of or resulting from Seller's compliance or
noncompliance with any Legal Requirement or Order of any governmental
body, including the Sale Order;
(o) any Liability of Seller under this Agreement or any other document
executed in connection with the transactions contemplated hereby;
(p) any Liability of Seller based upon Seller's acts or omissions
occurring prior to or after the Closing Date; and
(q) any cost, expense, fees or other amounts payable in connection with
the Chapter 128 Creditors' Action, including any fees or expenses
payable to the Receiver or any bonding, surety or similar costs.
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2.7 ALLOCATION
The Purchase Price shall be allocated in accordance with Section 1060
of the Internal Revenue Code of 1986, as amended (the "Code"). After the
Closing, the parties shall make consistent use of such allocation, fair market
value and useful lives required by the Code for all Tax purposes and in all
filings, declarations and reports with the U.S. Internal Revenue Service ("IRS")
in respect thereof. IIS shall undertake in good faith to prepare and deliver IRS
Form 8594 to Seller within sixty (60) days after the Closing Date to be filed
with the IRS.
2.8 CLOSING
The transactions provided for in this Agreement will take place at the
offices of Xxxxx Xxxxxxxxx, LLP, Manchester Place, Suite 200, 0 Xxxx Xxxxxxx
Xxxxxx, Xxxxxxx, Xxxxxxxxx 00000-0000 (the "Closing"), commencing at 10:00 a.m.
(local time) on January 25, 2002 (the "Closing Date"), unless IIS and Seller
otherwise agree. Subject to the provisions of Section 9, failure to consummate
the transactions provided for in this Agreement on the date and time and at the
place determined pursuant to this Section 2.8 will not result in the termination
of this Agreement and will not relieve any party of any obligation under this
Agreement. In such a situation, the Closing will occur as soon as practicable,
subject to Section 9.
2.9 CLOSING OBLIGATIONS
In addition to any other documents to be delivered under other
provisions of this Agreement, at the Closing, except with regard to the items
set forth in Sections 2.9(a)(iv), (v), (viii), (x) and (xi), which conditions
shall be satisfied by 5:00 p.m. Wisconsin time on the day before the hearing on
the approval of the Sale Order:
(a) Seller, Shareholder and Anchor, as the case may be, shall deliver to IIS:
(i) a xxxx of sale for the Purchased Assets that are tangible personal
property in the form of Schedule 2.9(a)(i) (the "Xxxx of Sale"),
executed by Seller;
(ii) an assignment of all of the Purchased Assets that are intangible
personal property in the form of Schedule 2.9(a)(ii) (the "Assignment
of Contract Rights"), executed by Seller;
(iii) assignments of all telephone numbers, assignments of all copyrights
and a separate assignment of all marks, trade secrets and net names
both in the form set forth on Schedule 2.9(a)(iii) (the "Assignment of
Copyrights" and the "Assignment of Marks, Trade Secrets and Net
Names"), executed by Seller;
(iv) valid and binding assignment of Transferred Customer contracts to IIS
and consent to such transfer from the top twenty (20) Transferred
Customers, ranked by invoiced amounts during 2001 (the "Top Twenty
Customers");
(v) valid and binding assignment of those Reseller Contracts to IIS and
consent to such transfer from the counterparties to those Reseller;
9
(vi) a true and correct copy of the Sale Order issued by the Court,
satisfactory to IIS in form and substance, authorizing the sale of the
Purchased Assets to IIS in accordance with the terms hereof, together
with any other necessary or desirable approvals or authorizations of
the Court or any creditors or other parties pursuant to the Chapter
128 Creditors' Action;
(vii) a list of Eligible Anchor Receivables and such other deeds, bills of
sale, assignments, certificates of title, documents and other
instruments of transfer and conveyance as may reasonably be requested
by IIS, each in form and substance reasonably satisfactory to IIS and
its legal counsel and executed by Seller;
viii) written confirmation from the Seller that the Seller has not
received termination or cancellation of any of the Employment
Agreements;
(ix) a certificate executed by Xxxxxx and Shareholder as to the accuracy of
his representations and warranties as of the date of this Agreement
and as of the Closing in accordance with Section 7.1 and as to his
compliance with and performance of his covenants and obligations to be
performed or complied with at or before the Closing in accordance with
Section 7.1;
(x) all consents, waivers, authorizations necessary to transfer, sell and
assign the Purchased Assets and to consummate the other transactions
contemplated hereby; and
(xi) Evidence satisfactory to IIS that Anchor and Shareholder have
terminated or settled the loans of Anchor to Xx. Xxxxxx, in a manner
satisfactory to IIS in the exercise of commercially reasonable
judgment.
(b) IIS shall deliver to or for the benefit of Seller:
(i) $300,000 which shall be paid directly to Anchor for the benefit of
Seller pursuant to Section 2.5(a);
(ii) the Subordinated Note; and
(iii) a certificate executed by IIS as to the accuracy of its
representations and warranties as of the date of this Agreement and as
of the Closing in accordance with Section 8.1 and as to its compliance
with and performance of its covenants and obligations to be performed
or complied with at or before the Closing in accordance with Section
8.1.
2.10 APPROVAL OF CHAPTER 128 CREDITORS' ACTION
(a) Seller and Anchor hereby confirm that it is critical to the process of
arranging an orderly sale of Seller's assets to proceed by selecting
IIS to enter into this Agreement in order to present the Court with
arrangements for obtaining the highest realizable prices for the
Purchased Assets and, that without IIS having committed substantial
time and effort to such process, the Seller would have to employ a
less orderly process of sale and thereby
10
both incur higher costs and risk attracting lower prices. Accordingly,
the contributions of IIS to the process have indisputably provided
very substantial benefit to Seller and Anchor. Seller and Anchor
acknowledge that IIS would not have invested the effort in negotiating
and documenting the transactions provided for in this Agreement and
incurring duties to pay its outside advisors if IIS was not entitled
to the protections provided for in this Section 2.10, including the
Termination Fee.
(b) The Agreement is subject to IIS receiving the Sale Order from the
Court, satisfactory to IIS in form and substance, approving the terms
hereof and authorizing the sale by Seller of the Purchased Assets to
IIS and consummation of the other transactions contemplated hereby.
GNI, Shareholder, Anchor, and consistent with its duties to GNI and
the creditors of GNI, Receiver, agree to undertake in good faith to
cooperate and provide all necessary assistance, including providing
reports, affidavits and attending hearings as required in order to
obtain the Sale Order.
(c) Except as required by the Court with respect to any competing bid for
the Purchased Assets in the Chapter 128 Creditors' Action that is
approved by the Court, until such time as this Agreement shall be
terminated pursuant to Section 9.1, neither Anchor nor Shareholder
shall directly or indirectly solicit, initiate, encourage or entertain
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 IIS) relating to any business
combination transaction involving Seller, including the merger or
consolidation of Seller or the sale of its business, securities or any
significant portion of Seller's assets or the Purchased Assets. Seller
shall notify IIS of any such inquiry or proposal within twenty-four
(24) hours of receipt or awareness of the same by Seller.
(d) Notwithstanding any other provision in this Section 2.10, Seller shall
not accept any competing bid for a substantial portion of the
Purchased Assets unless such competing bid: (i) provides for value to
Seller of at least $150,000 over the sum of the Purchase Price; (ii)
is on terms that, in the Seller's business judgment are not materially
more burdensome of conditional than the terms of this Agreement; (iii)
is not subject to financing contingencies, unperformed due diligence
or other conditions that are more burdensome to Seller than those set
forth in this Agreement; and (iv) does not request or entitle the
bidder to any break-up fee, termination fee, expense reimbursement or
similar type of payment.
(e) If the Receiver ultimately accepts, and the Court approves, a
competing bid, IIS shall be entitled to an amount equal to $50,000
(the "Termination Fee") in addition to any other amount to which it is
entitled to hereunder. Anchor agrees to pay to IIS the Termination Fee
within thirty (30) days of the Court's approval of a competing bid;
provided, however, that Anchor shall not be required to pay IIS the
Termination Fee if the competing bid is not caused by Anchor or if
Anchor is not involved in the competing bid.
2.11 CONSENT OF THIRD PARTIES
Notwithstanding anything to the contrary in this Agreement, this
Agreement shall not constitute an agreement to assign or transfer any
instrument, contract, lease, permit, or other
11
agreement or arrangement or any claim, right or benefit arising thereunder or
resulting therefrom if an assignment or transfer or an attempt to make such an
assignment or transfer without the consent of a third party would constitute a
breach or violation thereof or affect adversely the rights of IIS or Seller
thereunder; and any such transfer or assignment to IIS by Seller that requires
the consent of a third party shall be made subject to such consent or approval
being obtained. In the event any such consent or approval is not obtained on or
prior to the Closing Date, unless the parties hereto shall otherwise agree,
Seller and the Shareholders shall continue to use all reasonable efforts to
obtain any such approval or consent after the Closing Date until such time as
such consent or approval has been obtained, and Seller and Shareholder will
cooperate with IIS in any lawful and economically feasible arrangement to
provide that IIS shall receive the interests of Seller in the benefits under any
such instrument, contract, lease, or permit or other agreement or arrangement,
including performance by Seller, as agent, if economically feasible. Nothing in
this Section 2.11 shall be deemed a waiver by IIS of any rights to have received
on or before the Closing an effective assignment of all of the Purchased Assets,
nor shall this Section 2.11 be deemed to constitute an agreement to exclude from
the Purchased Assets any assets described under Section 2.3.
3. REPRESENTATIONS AND WARRANTIES OF XXXXXX,
SHAREHOLDER, RECEIVER AND ANCHOR
Except for those representations and warranties made to IIS by Anchor
in Section 3.21 and those representations and warranties made to IIS by Receiver
in Section 3.22, Xxxxxx, in his capacity as a director of GNI, Xxxxxx, in his
capacity as an officer of GNI, and Shareholder represent and warrant, jointly
and severally, to IIS as follows:
3.1 ORGANIZATION AND GOOD STANDING
GNI is a corporation duly organized, validly existing and in good
standing under the laws of Wisconsin, with full corporate power and authority to
conduct its business as it is now being conducted, to own or use the properties
and assets that it purports to own or use, and to perform all its obligations
under its contracts. GNI is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each state or other
jurisdiction in which either the ownership or use of the properties owned or
used by it, or the nature of the activities conducted by it, requires such
qualification.
3.2 ENFORCEABILITY; AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid and binding obligation of
GNI and Shareholder, enforceable against them in accordance with its
terms. Upon the execution and delivery by GNI and the Shareholder of
the other agreements to be executed or delivered by any of Seller and
Shareholder at the Closing (collectively, "GNI's Closing Documents"),
each of GNI's Closing Documents will constitute the legal, valid and
binding obligation of each of GNI and Shareholder, enforceable against
each of them in accordance with its terms. GNI has the absolute and
unrestricted right, power and authority to execute and deliver this
Agreement and GNI's Closing Documents to which it is a party and to
perform its obligations under this Agreement and GNI's Closing
Documents, and such action has been duly authorized by all necessary
action by the
12
board of directors and shareholders of GNI. Shareholder has all
necessary legal capacity to enter into this Agreement and GNI's
Closing Documents to which Shareholder is a party and to perform his
obligations hereunder and thereunder.
(b) Subject to the Chapter 128 Creditors' Action, neither the execution
and delivery of this Agreement nor the consummation or performance of
any of the transactions contemplated hereby will, directly or
indirectly (with or without notice or lapse of time): (i) breach (A)
any provision of any of the certificates of incorporation or bylaws of
GNI, (B) any resolution adopted by the board of directors or
shareholders of GNI; (ii) breach or give any governmental body or
other Person the right to challenge any of the contemplated
transactions or to exercise any remedy or obtain any relief under any
Legal Requirement or any Order to which GNI, or any of the Purchased
Assets, may be subject; (iii) contravene, conflict with or result in a
violation or breach of any of the terms or requirements of, or give
any governmental body the right to revoke, withdraw, suspend, cancel,
terminate or modify, any governmental authorization that is held by
GNI or that otherwise relates to the Purchased Assets or to the
business of GNI; (iv) breach any provision of, or give any Person the
right to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or payment under, or to
cancel, terminate or modify, any contract or agreement; or (v) result
in the imposition or creation of any Encumbrance upon or with respect
to any of the Purchased Assets.
(c) GNI has given all notices and obtained all required consents from its
shareholders in connection with the execution and delivery of this
Agreement and the consummation or performance of all of the
contemplated transactions.
3.3 FINANCIAL STATEMENTS.
The financial statements of GNI attached in Schedule 3.3 are complete
and correct and fairly present, except as set forth on Schedule 3.3, the
financial position of GNI, in each case as of the dates thereof and the results
of operations and changes in financial position for the periods then ended
(subject, in the case of the interim financial statements, to the absence of
footnote disclosure and to normal year-end adjustments). For purposes of this
Agreement, "Last Balance Sheet" means the balance sheet of GNI as of November
30, 2001. Since the date of the Last Balance Sheet, there has not been any
change, or any application or request for any change, by GNI in accounting
principles, methods or policies for financial accounting or tax purposes, other
than as required by any applicable tax rule or regulation. Within thirty (30)
days of the Closing Date, Seller will provide an amended Last Balance Sheet
showing the GNI balance sheet as of the Closing Date.
3.4 BOOKS AND RECORDS
The books of account and other financial records of GNI, all of which
have been made available to IIS, are complete and correct and represent actual,
bona fide transactions and have been maintained in accordance with sound
business practices.
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3.5 TITLE TO ASSETS; ENCUMBRANCES
Except as set forth on Schedule 3.5, GNI owns good, marketable and
transferable title to all the Purchased Assets. Seller shall, at or before the
time of Closing, transfer and deliver all Purchased Assets to IIS free and clear
of all Encumbrances in accordance with the Sale Order.
3.6 CONDITION OF ASSETS
Each item of tangible personal property is in good repair and good
operating condition, ordinary wear and tear excepted, is suitable for immediate
use in the ordinary course of business and is free from latent and patent
defects. No item of tangible personal property is in need of repair or
replacement other than as part of routine maintenance in the ordinary course of
business.
3.7 NO UNDISCLOSED LIABILITIES
Except as set forth in Schedule 3.7, GNI has no Liability except for
Liabilities reflected or reserved against in the Last Balance Sheet and current
liabilities incurred in the ordinary course of business of GNI since the date of
the Last Balance Sheet.
3.8 TAXES
(a) Except as set forth in Schedule 3.8(a), GNI has filed or caused to be
filed on a timely basis all Tax Returns and all reports with respect
to Taxes that are or were required to be filed pursuant to applicable
Legal Requirements. All Tax Returns and reports filed by GNI are true,
correct and complete. GNI has paid, or made provision for the payment
of, all Taxes that have or may have become due for all periods covered
by the Tax Returns or otherwise, or pursuant to any assessment
received by GNI, except such Taxes, if any, as are listed in Schedule
3.8(a) and are being contested in good faith and as to which adequate
reserves (determined in accordance with GAAP) have been provided in
the financial statements. GNI currently is not the beneficiary of any
extension of time within which to file any Tax Return. No claim has
ever been made or is expected to be made by any governmental body in a
jurisdiction where GNI does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction. There are no Encumbrances on
any of the Purchased Assets that arose in connection with any failure
(or alleged failure) to pay any Tax, and GNI and Shareholder have no
Knowledge of any basis for assertion of any claims attributable to
Taxes which, if adversely determined, would result in any such
Encumbrance.
(b) Except as set forth in Schedule 3.8(b), all Taxes that GNI is or was
required by Legal Requirements to withhold, deduct or collect have
been duly withheld, deducted and collected and, to the extent
required, have been paid to the proper governmental body or other
Person.
(c) GNI (i) has not been a member of an affiliated group within the
meaning of Section 1504(a) of the Code, or any similar group defined
under a similar provision of state, local or foreign law and (ii) has
no liability for Taxes of any person (other than GNI and its
14
subsidiaries) under Treas. Reg. sect. 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or
successor by contract or otherwise.
(d) GNI has disclosed on its federal income Tax Returns all positions
taken therein that could give rise to a substantial understatement of
federal income Tax within the meaning of Code Section 6662.
3.9 EMPLOYEE BENEFIT PLANS
(a) GNI has delivered or will prior to the Closing deliver to IIS true and
complete copies of each deferred compensation, incentive compensation,
stock purchase, stock option and other equity compensation plan
covering any employee or former employee of GNI, "welfare" plan, fund
or program (within the meaning of Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) covering
any employee or former employee of GNI; each "pension" plan, fund or
program of GNI (within the meaning of Section 3(2) of ERISA) covering
any employee or former employee of GNI; each employment, consulting,
termination or severance agreement to which GNI is a party or by which
it is bound; and each other employee benefit plan, fund, program,
agreement or arrangement, in each case, that is sponsored, maintained
or contributed to or required to be contributed to by GNI, or to which
GNI is a party, whether written or oral, for the benefit of any
employee, former employee, director, independent contractor,
consultants, leased employees or contingent worker of GNI (each an
"Employee Plan" and collectively the "Employee Plans").
(b) With respect to each Employee Plan, GNI has heretofore delivered or
will prior to the Closing deliver or made or will make available to
IIS, along with true and complete copies of the Employee Plan and any
amendments thereto (or if the Employee Plan is not a written Employee
Plan, a description thereof), any related trust or other funding
vehicle, any reports or summaries required under ERISA or the Code and
the most recent determination letter received from the Internal Revenue
Service with respect to each Employee Plan intended to qualify under
Section 401 of the Code.
(c) No Liability under Title IV or Section 302 of ERISA has been incurred
by GNI or any entity, that together with GNI would be deemed a "single
employer" within the meaning of Section 4001(b) of ERISA (an "ERISA
Affiliate") that has not been satisfied in full, and no condition
exists that presents a risk to GNI or any ERISA Affiliate of incurring
any such Liability.
(d) No Employee Plan is subject to Title IV of ERISA or Section 412 of the
Code; nor is any Employee Plan a "multiemployer pension plan," as
defined in Section 3(37) of ERISA, or subject to Section 302 of ERISA;
nor has GNI nor any ERISA Affiliate maintained or contributed to any
multiemployer pension plan in the last six (6) years.
(e) GNI will be responsible for and pay any and all workers' compensation
and other similar claims asserted by or with respect to any employee or
former employee of GNI (including any Hired Employee) in respect of any
injury or other compensable event or occupational illness or disease
which occurred or is attributable to any event, state of
15
facts or condition which existed or occurred prior to the Closing Date
(or prior to the actual start date with IIS with respect to any Hired
Employee).
(f) GNI shall provide IIS all information relating to each employee or
former employee of GNI (including any Hired Employee), as IIS may
reasonably require in connection with its employment of such persons,
including, without limitation, initial employment dates, termination
dates, reemployment dates, hours of service, compensation and tax
withholding history in a form that will be usable by IIS and such
information shall be true and correct in all respects.
3.10 LEGAL PROCEEDINGS; ORDERS
(a) Except for the Chapter 128 Creditors' Action, as set forth in Schedule
3.10 and the action against Xxxxxxxx and Xxxxxx Information Networks
Corporation, there is no pending or, to GNI's and Shareholder's
Knowledge, threatened Proceeding:
(i) by or against GNI or that otherwise relates to or may affect the
Purchased Assets, Transferred Customers, or Hired Employees;
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal or otherwise interfering with, any of
the transactions contemplated hereby;
(iii) Order to which GNI, its business or any of the Purchased Assets
is subject; and
(iv) no officer, director, agent or employee of GNI is subject to any
Order that prohibits such officer, director, agent or employee
from engaging in or continuing any conduct, activity or practice
relating to the business of GNI.
3.11 BUSINESS CONDUCTED IN ORDINARY COURSE
Since December 31, 2000, except for the Chapter 128 Creditors' Action,
there has not been any of the following (except in the ordinary course of
business):
(a) payment (except in the ordinary course of business) or increase by GNI
of any bonuses, salaries or other compensation to any shareholder,
director, officer or employee or entry into any employment, severance
or similar contract with any director, officer or employee, other than
as provided to IIS, prior to the date hereof;
(b) adoption of, amendment to or increase in the payments to or benefits
under, any Employee Plan;
(c) damage to or destruction or loss of any Purchased Asset, whether or not
covered by insurance;
(d) sale, lease or other disposition of any Purchased Asset of GNI
(including the Intellectual Property Assets) or the creation of any
Encumbrance on any Purchased Asset, except as set forth on Schedule
3.5;
16
(e) indication by any Top Twenty Customer of an intention to discontinue
or change the terms of its relationship with GNI; or
(f) contract by GNI to do any of the foregoing.
3.12 CONTRACTS; NO DEFAULTS
(a) GNI has delivered to IIS accurate and complete copies, of each and any
contract or agreement containing covenants that in any way purport to
restrict GNI's business activity or limit the freedom of GNI to engage
in any line of business or to compete with any Person, in each case to
the extent such other contract would restrict IIS's ability to conduct
business with the Transferred Customers or other customers of GNI or
restrict or limit the ability of the Hired Employees to perform
services for IIS after their date of hire.
(b) Each Contract and Reseller Contract is in full force and effect and is
valid and enforceable in accordance with its terms; and, except as
indentified in writing to IIS within five (5) days after the Effective
Date, is assignable by GNI to IIS without the consent of any other
Person.
(c) GNI and each other party thereto is, and at all times since December
31, 2000, has been, in material compliance with all applicable terms
and requirements of each Contract and Reseller Contract. No event has
occurred or circumstance exists that (with or without notice or lapse
of time) may contravene, conflict with or result in a breach of, or
give GNI or other Person the right to declare a default or exercise
any remedy under, or to accelerate the maturity or performance of, or
payment under, or to cancel, terminate or modify, any such Contract or
Reseller Contract. GNI has not given to or received from any other
Person, at any time since December 31, 2000, any notice or other
communication (whether oral or written) regarding any actual, alleged,
possible or potential violation or breach of, or default under, or
cancellation, termination or notice of non-renewal of any Contract or
Reseller Contract.
3.13 EMPLOYEES
(a) GNI has provided to IIS a complete and accurate list of the following
information for each employee, director, independent contractor,
consultant and agent of GNI, including each employee on leave of
absence or layoff status: employer; name; job title; date of hiring or
engagement; date of commencement of employment or engagement; current
compensation paid or payable; sick and vacation leave that is accrued
but unused; and service credited for purposes of vesting and
eligibility to participate under any Employee Plan, or any other
employee or director benefit plan.
(b) GNI has not violated the Worker Adjustment and Retraining Notification
Act (the "WARN Act") or any similar state or local Legal Requirement,
including without limitation Chapter 109 of the Wisconsin Statutes.
During the ninety (90) day period prior to the date of this Agreement,
GNI has not terminated more than 25 employees.
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3.14 LABOR; COMPLIANCE
GNI has complied in all material respects with all Legal Requirements
relating to employment practices, terms and conditions of employment, equal
employment opportunity, nondiscrimination, immigration, wages, hours, benefits,
collective bargaining and other requirements under all Legal Requirements, the
payment of social security and similar Taxes and occupational safety and health.
GNI is not liable for the payment of any Taxes, fines, penalties, or other
amounts, however designated, for failure to comply with any of the foregoing
Legal Requirements. There has not been and is not pending any threatened or
actual strike, slowdown, work stoppage or employee grievance involving GNI.
3.15 INTELLECTUAL PROPERTY ASSETS
(a) The term "Intellectual Property Assets" means all intellectual property
owned or licensed (as licensor or licensee) by Seller in which Seller
has a proprietary interest, and which constitutes part of the Purchased
Assets, including:
(i) GNI's name, all assumed fictional business names, trade names,
registered and unregistered trademarks, service marks and
applications (collectively, "Marks");
(ii) all registered and unregistered copyrights in both published
works and unpublished works (collectively, "Copyrights");
(iii) all rights in mask works;
(iv) all know-how, trade secrets, confidential or proprietary
information, customer lists, software, technical information,
data, process technology, plans, drawings and blue prints
(collectively, "Trade Secrets"); and
(v) all rights in internet web sites and internet domain names
presently used by GNI (collectively "Net Names").
(b) GNI has delivered to IIS accurate and complete copies of all GNI
contracts relating to the Intellectual Property Assets. There is no
outstanding and, to GNI's and Shareholder's Knowledge, no threatened
(overtly or in writing) disputes or disagreements with respect to any
such contract. Except as listed on Schedule 3.15(b), GNI has no
patents, patent applications, or, to its Knowledge, inventions or
discoveries that may be patentable.
(c) GNI is the owner or licensee of all right, title and interest in and to
each of the Intellectual Property Assets, free and clear of all
Encumbrances, and has the right to use without payment to a third party
all of the Intellectual Property Assets. All former and current
employees of GNI have executed written contracts with GNI that assign
to GNI all rights to any inventions, improvements, discoveries or
information relating to the business of GNI.
(d) All of the Intellectual Property Assets are currently in compliance
with formal Legal Requirements, are valid and enforceable, and are not
subject to any maintenance fees or taxes or actions falling due within
ninety (90) days after the Closing Date. No
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Intellectual Property Asset is infringed or, to GNI's and
Shareholder's Knowledge, has been challenged or threatened in any way
and none of the services of GNI or products manufactured or sold, nor
any process or know-how used, by GNI, and none of the Intellectual
Property Assets, infringes or is alleged to infringe any intellectual
property asset or other proprietary right of any other Person and is
not a derivative work based on the work of any other Person.
(e) All Marks have been registered with the United States Patent and
Trademark Office. No Xxxx has been or is now involved in any
opposition, invalidation or cancellation Proceeding and, to GNI's and
Shareholder's Knowledge, no such action is threatened with respect to
any of the Marks. To GNI's and Shareholder's Knowledge, there is no
potentially interfering trademark or trademark application of any other
Person. All products and materials containing a Xxxx xxxx the proper
federal registration notice where permitted by law.
(f) With respect to each Trade Secret, the documentation relating to such
Trade Secret is current, accurate and sufficient in detail and content
to identify and explain it and to allow its full and proper use
without reliance on the knowledge or memory of any individual. GNI has
taken all reasonable precautions to protect the secrecy,
confidentiality and value of all Trade Secrets (including the
enforcement by GNI of a policy requiring each employee or contractor
to execute proprietary information and confidentiality agreements
substantially in GNI's standard form, and all current and former
employees and contractors of GNI have executed such an agreement). GNI
has good title to and an absolute right to use the Trade Secrets. The
Trade Secrets are not part of the public knowledge or literature and
have not been used, divulged or appropriated either for the benefit of
any Person (other than GNI) or to the detriment of GNI.
(g) All Net Names have been registered in the name of GNI. To GNI's and
Shareholder's Knowledge there is no domain name application pending of
any other person which would or would potentially interfere with or
infringe any Net Name.
3.16 BROKERS OR FINDERS
Except as set forth on Schedule 3.16, neither GNI nor any of its
representatives have incurred any obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions or other
similar payments in connection with the transactions contemplated by this
Agreement for which IIS will or could be liable or responsible.
3.17 CHAPTER 128 CREDITORS' ACTION
GNI and Shareholder will comply with all the terms and conditions of
the Chapter 128 Creditors' Action, the Sale Order and all other requirements and
orders issued by the Court.
3.18 OTHER INDEMNITY ARRANGEMENTS
Except as contemplated by the Chapter 128 Creditors' Action and subject
to Section 3.19, Shareholder has not and will not enter into any agreements or
arrangements, whether written or
19
verbal, formal or informal, with any of his affiliates or other parties
(including GNI) with respect to any indemnification, contribution or other loss
sharing arrangement arising out of or relating to the business or operations of
GNI or this Agreement or the documents, agreements or transactions executed or
entered into in connection with this Agreement.
3.19 SHAREHOLDER'S PERSONAL INDEBTEDNESS
Shareholder represents that he has resolved his $1,000,000 personal
bank note in favor of Anchor in such a fashion that he is fully committed to his
employment with IIS without undue distractions.
3.20 DISCLOSURE
No representation or warranty contained in this Agreement, or any
certificate or schedule furnished to IIS in connection with the negotiation or
execution of this Agreement, contains any material misstatement of fact as of
the date when made or omitted to state a material fact or any fact necessary to
make the statements contained herein or therein not materially misleading as of
the date when made.
3.21 ANCHOR'S REPRESENTATIONS AND WARRANTIES
Anchor represents and warrants to IIS as follows:
(a) Anchor has entered into that certain Agreement and Release, dated
December 19, 2001, with Xxxxxx in connection with loans by Anchor to
GNI and other business arrangements between Anchor and GNI, and such
Agreement and Release is in full force and effect.
(b) This Agreement constitutes the legal, valid and binding obligation of
Anchor, enforceable against it accordance with its terms. This
Agreement and the transactions contemplated hereby have been authorized
by all necessary action of Anchor.
(c) Upon the Closing of this transaction, the approval and execution of the
Sale Order by the Court, and IIS execution and delivery of the
Subordinate Note and Security Agreement, Anchor represents and warrants
that it will release its liens against the assets sold to IIS, although
GNI's indebtedness to it will not be paid in full.
(d) At or before Closing of the Agreement, Anchor will satisfy fully sales
taxes which remain owing by GNI, make payment of withheld employee
contributions to the Goliath Networks, Inc. 401(k) Plan (the "GNI
Plan") which are required under the GNI Plan prior to its termination
and will make payment of the administrative and termination fees of the
GNI Plan, but only to the extent the GNI Plan cannot pay such expenses.
(e) Anchor has not contracted with Resource Financial Corporation and has
no obligation to pay Resource Financial Corporation for services.
(f) No representation or warranty of Anchor contained in (x) this
Agreement, (y) any certificate or schedule executed or delivered to IIS
by Anchor that are identified on Schedule 3.21(f) delivered at Closing,
or (z) any certificate or schedule executed or
20
delivered to IIS by Anchor after Closing that states such certificate
or schedule is being delivered pursuant to Schedule 3.21(f), contains
any material misstatement of fact as of the date when made or omitted
to state a material fact or any fact necessary to make the statements
contained herein or therein not materially misleading.
3.22 RECEIVER'S REPRESENTATIONS AND WARRANTIES
Receiver represents and warrants to IIS as follows:
(a) Receiver is the duly appointed receiver for Seller and has the power to
execute and deliver this Agreement and to consummate the transactions
provided for herein, subject to approval of the Court.
(b) The Receiver shall promptly apply to the court to authorize
consummation of the transaction provided for herein.
(c) All of Seller's right, title and interest in the Purchased Assets (or
in the case of any leased or licensed Purchased Assets, Seller's rights
under such lease or licenses) shall be transferred to IIS, free and
clear of all liens, claims and encumbrances in accordance with the Sale
Order.
4. REPRESENTATIONS AND WARRANTIES OF IIS
IIS represents and warrants as follows:
4.1 ORGANIZATION AND GOOD STANDING
To Seller, Xxxxxx, Shareholder and Anchor, IIS is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with full corporate power and authority to conduct its business as it
is now conducted.
4.2 AUTHORITY; NO CONFLICT
To Seller, Xxxxxx, Shareholder and Anchor, this Agreement constitutes
the legal, valid and binding obligation of IIS, enforceable against IIS in
accordance with its terms. Upon the execution and delivery by IIS of the
agreements to be executed or delivered by IIS at Closing (collectively, "IIS's
Closing Documents"), each of IIS's Closing Documents will constitute the legal,
valid and binding obligation of IIS, enforceable against IIS in accordance with
its respective terms. IIS has the absolute and unrestricted right, power and
authority to execute and deliver this Agreement and IIS's Closing Documents and
to perform its obligations under this Agreement and IIS's Closing Documents, and
such action has been duly authorized by all necessary corporate action.
4.3 BROKERS OR FINDERS
To Seller, Xxxxxx, Shareholder and Anchor, neither IIS nor any of its
representatives have incurred any obligation or liability, contingent or
otherwise, for brokerage or finders' fees
21
or agents' commissions or other similar payment in connection with the
transactions contemplated hereby.
4.4 DISCLOSURE
To Seller, Xxxxxx, Shareholder and Anchor, no representation or
warranty contained in this Agreement, or any certificate or schedule furnished
by IIS in connection with the negotiation or execution of this Agreement,
contains any material misstatement of fact as of the date when made or omitted
to state a material fact or any fact necessary to make the statements contained
herein or therein not materially misleading as of the date when made.
4.5 PLEDGED ASSETS
To Anchor, IIS represents and warrants that, at present, no creditors
hold a security interest in the collateral pledged to Anchor as security for the
Subordinated Note. Anchor acknowledges that such collateral was, however,
previously pledged as collateral for obligations to other creditors and that
same collateral remains covered by active financing statements. IIS believes
that it is entitled to have such financing statements terminated and agrees to
use commercially reasonable efforts to effect termination of such financing
statements.
4.6 FINANCIAL REPORTS
To Anchor, IIS represents and warrants that, while there remain amounts
outstanding under the Subordinated Note, it will provide Anchor with: (i)
unaudited quarterly financial statements (for the first three quarters of the
fiscal year) within 45 days following the end of the quarter; (ii) audited
annual financial statements within 90 days following the end of the year; and
(iii) from time to time, as reasonably requested by Anchor (but not more
frequently than monthly), a statement of compliance with the collateral coverage
requirements of the Subordinated Note.
5. COVENANTS OF SELLER AND SHAREHOLDER
5.1 ACCESS AND INVESTIGATION
Between the date of this Agreement and the Closing Date and thereafter
if reasonably required by IIS, Seller and Shareholder shall: (a) afford IIS and
its representatives full and free access, during regular business hours, to
Seller's personnel, properties, contracts, governmental authorizations, books
and records and other documents and data, such rights of access to be exercised
in a manner that does not unreasonably interfere with the operations of Seller;
(b) furnish IIS with copies of all such contracts, governmental authorizations,
books and records and other existing documents and data as IIS may reasonably
request; (c) furnish IIS with such additional financial, operating and other
relevant data and information as IIS may reasonably request; and (d) otherwise
cooperate and assist, to the extent reasonably requested by IIS, with IIS's
investigation of the properties, assets and financial condition related to
Seller.
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5.2 OPERATION OF THE BUSINESS OF SELLER
Between the date of this Agreement and the Closing, Seller and
Shareholder shall: (a) use their best efforts to preserve intact the current
business organization of Seller, keep available the services of Seller's
officers, employees and agents and maintain Seller's relations and goodwill with
suppliers, customers, landlords, creditors, employees, agents and others having
business relationships with it; (b) report periodically to IIS concerning the
status of Seller's business, operations and finances; (c) maintain the Purchased
Assets in a state of repair and condition that complies with Legal Requirements
and is consistent with the requirements and normal conduct of Seller's business;
and (d) comply with all Legal Requirements and contractual obligations
applicable to the operation of Seller's business.
5.3 REQUIRED APPROVALS
Seller and Shareholder shall cooperate with IIS and its representatives
in obtaining the Sale Order and in obtaining all consents necessary to IIS to
assume the Contracts and Reseller Contracts, acquire the Purchased Assets and
otherwise consummate the transactions contemplated hereby.
5.4 FILINGS
For a period of 120 days following the Closing, neither GNI nor
Shareholder will cause, direct or otherwise allow GNI to commence any voluntary
petition under any federal bankruptcy law (now or hereinafter in effect).
6. COVENANT NOT TO COMPETE
As consideration for IIS entering into this Agreement, GNI and its
successor(s) will not at any time during the five (5) year period immediately
following the Effective Date, and Shareholder will not at any time during the
two (2) year period immediately following the Effective Date, directly or
indirectly, in sole proprietorship, in any partnership or joint venture, or as
owner of an equity interest in any corporation, limited liability company or
other business entity (other than the ownership of one percent (1%) or less of
the outstanding equity securities of any publicly-traded corporation or entity),
or as an agent of or consultant to any of the foregoing: (i) engage in any
business of substantially the same character as the business engaged in by it or
him, or provide any services of substantially the same character as the services
provided by it or him, to any person or entity, including without limitation the
Transferred Customers, anywhere in the United States of America; (ii) solicit or
attempt to solicit for employment any person who is, at the time of such
solicitation, a Hired Employee, Key Employee or other employee or officer of
IIS, or induce or attempt to induce any such person to terminate his or her
employment with IIS; or (iii) solicit or attempt to solicit any client or
customer, including without limitation any Transferred Customer, to do business
with GNI or its affiliates or successors, or induce or attempt to induce any
such customer to terminate his or her relationship with IIS.
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Notwithstanding the previous paragraph of this Section 6, if
Shareholder is terminated by IIS without Cause (as defined below), then upon
completion of the severance period, if any, such Shareholder shall not be
restrained from competing with IIS.
"Cause" shall mean and include, as determined by IIS in its good faith
judgment, Shareholder's: (i) conviction of a felony under the laws of the United
States of America or any state or political subdivision thereof; (ii) engagement
in conduct constituting breach of fiduciary duty, willful misconduct or
recklessness relating to IIS or the performance of Shareholder's employment
duties, or fraud; (iii) breach of any non-compete, non-solicit or
confidentiality obligations owed to IIS (whether contained in this Agreement, an
employment agreement or otherwise) in any material respect; (iv) failure to
follow a proper and reasonable directive of IIS within the scope of
Shareholder's employment duties (which shall be capable of being performed by
Shareholder with reasonable effort); (v) failure to substantially meet or
satisfy mutually agreed upon unit requirements after written notice referencing
this subparagraph, specifying the performance required and Shareholder's failure
to perform, within sixty (60) days after such notice; or (vi) any breach of any
of the terms and conditions of this Agreement, which breach materially and
adversely impacts IIS.
7. CONDITIONS PRECEDENT TO IIS'S OBLIGATION TO CLOSE
IIS's obligation to consummate the transactions contemplated hereby and
to take the other actions required to be taken by IIS at the Closing is subject
to the satisfaction, at or prior to the Closing, of each of the following
conditions (any of which may be waived by IIS in its sole discretion, in whole
or in part):
7.1 ACCURACY OF REPRESENTATIONS; COVENANTS; DILIGENCE
GNI's, Shareholder's, the Receiver's and Anchor's representations and
warranties in this Agreement shall have been accurate in all material respects
as of the date of this Agreement, and shall be accurate in all material respects
as of the time of the Closing as if then made, except that any representations
and warranties already qualified by materiality shall be true and correct in all
respects. Each of the covenants and obligations that GNI, the Receiver, Anchor
and Shareholder are required to perform or to comply with pursuant to this
Agreement at or prior to the Closing shall have been duly performed and complied
with in all material respects. Results of the due diligence investigation of IIS
shall be satisfactory to IIS in its sole discretion.
7.2 ADDITIONAL DOCUMENTS
GNI, the Receiver, Anchor and Shareholder shall have caused the
documents and instruments required by Section 2.9(a) and the following documents
to be delivered (or tendered subject only to Closing) to IIS:
(a) the Sale Order from the Court;
(b) such other documents as IIS may reasonably request for the purpose of:
(i) evidencing the accuracy of any of GNI's, the Receiver's, Anchor's
or Shareholder's representations and warranties;
24
(ii) evidencing the performance by GNI, the Receiver, Anchor or
Shareholder, or the compliance by GNI, the Receiver, Anchor and
Shareholder with, any covenant or obligation required to be
performed or complied with by GNI, the Receiver, Anchor or
Shareholder;
(iii) evidencing the satisfaction of any condition referred to in this
Section 7; or
(iv) otherwise facilitating the consummation or performance of any of
the transactions contemplated hereby.
7.3 NO PROCEEDINGS
Except for the Chapter 128 Creditors' Action, since the date of this
Agreement, there shall not have been commenced or threatened against IIS or
Seller, any Proceeding (a) involving any challenge to, or seeking Damages (as
defined in Section 11.2) or other relief in connection with, any of the
transactions contemplated hereby or (b) that may have the effect of preventing,
delaying, making illegal, imposing limitations or conditions on or otherwise
interfering with any of the transactions contemplated hereby.
7.4 NO CONFLICT
Neither the consummation nor the performance of any of the transactions
contemplated hereby will, directly or indirectly (with or without notice or
lapse of time), contravene or conflict with or result in a violation of or cause
IIS to suffer any adverse consequence under (a) any applicable Legal Requirement
or Order, or (b) any governmental authorizations or (c) any material contract
(including the Contracts and Reseller Contracts), agreement or credit
arrangement of Seller.
8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE
Seller's obligation to sell the Purchased Assets and to take the other
actions required to be taken by Seller at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Seller in its sole discretion in whole or in
part):
8.1 ACCURACY OF REPRESENTATIONS; COVENANTS
Each of IIS's representations and warranties in this Agreement shall
have been accurate in all material respects as of the date of this Agreement and
shall be accurate in all material respects as of the time of the Closing as if
then made, except that any representations and warranties already qualified by
materiality shall be true and correct in all respects. Each of the covenants and
obligations that IIS is required to perform or to comply with pursuant to this
Agreement at or prior to the Closing shall have been performed and complied with
in all material respects.
25
8.2 ADDITIONAL DOCUMENTS
IIS shall have caused the documents and instruments required by Section
2.9(b) to be delivered (or tendered subject only to Closing) to Seller and
Anchor.
8.3 NO INJUNCTION
There shall not be in effect any Legal Requirement or any injunction or
other Order that prohibits the consummation of the transactions contemplated
hereby.
9. TERMINATION
9.1 TERMINATION EVENTS
By notice given prior to or at the Closing, subject to Section 9.2,
this Agreement may be terminated as follows:
(a) by IIS if it has not received the Sale Order from the Court by January
31, 2002 authorizing it to acquire the Purchased Assets from Seller;
(b) by IIS if a material breach of any provision of this Agreement has
been committed by GNI, Shareholder or Anchor and such breach has not
been waived by IIS;
(c) by Seller if a material breach of any provision of this Agreement has
been committed by IIS and such breach has not been waived by Seller;
(d) by IIS if any condition in Section 7 has not been satisfied as of the
date specified for Closing or if satisfaction of such a condition by
such date is or becomes impossible (other than through the failure of
IIS to comply with its obligations under this Agreement), and IIS has
not waived such condition on or before such date;
(e) by Seller if any condition in Section 8 has not been satisfied as of
the date specified for Closing or if satisfaction of such a condition
by such date is or becomes impossible (other than through the failure
of Seller or Anchor to comply with their obligations under this
Agreement), and Seller has not waived such condition on or before such
date;
(f) by mutual consent of IIS and GNI;
(g) by IIS or GNI if the Closing has not occurred on or before February
28, 2002, or such later date as the parties may agree upon;
(h) by IIS or GNI if the Court fails to approve the Sale Order;
(i) by Seller if Closing has not taken place within seven days of entry of
the Sale Order, unless extended, in writing, by IIS, Seller and
Anchor; or
(j) by Anchor if IIS does not provide to Anchor prior to Closing (i) its
board of directors resolution approving the Subordinated Note and (ii)
its financial statements contained in
26
its (x) Form 10-K for the year ended December 31, 2000, and (y) Form
10-Q's for the quarters ended March 31, 2001, June 30, 2001 and
September 30, 2001.
9.2 EFFECT OF TERMINATION
Subject to Section 2.10, this Agreement is terminated pursuant to
Section 9.1, all obligations of the parties under this Agreement will terminate,
except that the obligations of the parties in Section 2.10, Section 11 and
Section 12.1 will survive, provided, however, that, if this Agreement is
terminated because of a breach of this Agreement by the non-terminating party or
because one or more of the conditions to the terminating party's obligations
under this Agreement is not satisfied as a result of the party's failure to
comply with its obligations under this Agreement, the terminating party's right
to pursue all legal remedies will survive such termination unimpaired.
10. ADDITIONAL COVENANTS AND AGREEMENTS
10.1 PAYMENT OF ALL TAXES RESULTING FROM SALE OF PURCHASED ASSETS BY SELLER
GNI and Anchor shall pay in a timely manner all Taxes resulting from or
payable in connection with the sale of the Purchased Assets and other
transactions contemplated by this Agreement, regardless of the Person on whom
such Taxes are imposed by Legal Requirements.
10.2 PAYMENT OF LIABILITIES
Seller will comply with all orders and procedures set forth by the
Receiver for the payment of Seller's liabilities and will not take any action
contrary the terms and conditions of the Chapter 128 Creditors' Action under any
Legal Requirement or the Wisconsin Statutes.
10.3 ASSISTANCE IN PROCEEDINGS
Seller, Anchor and Shareholder will reasonably cooperate with IIS and
its counsel in the contest or defense of, and make available its personnel and
provide any testimony and access to its books and records in connection with,
any Proceeding involving or relating to (a) any transaction contemplated
hereunder or (b) any action, activity, circumstance, condition, conduct, event,
fact, failure to act, incident, occurrence, plan, practice, situation, status or
transaction on or before the Closing Date involving Seller or its business.
10.4 CUSTOMER AND OTHER BUSINESS RELATIONSHIPS; COOPERATION
Effective as of the date of this Agreement, GNI and Shareholder will
assist and cooperate fully with IIS in its efforts to transition, continue and
maintain to or for the benefit of IIS those customer and business relationships
of GNI existing on the date hereof and relating to the business to be operated
by IIS, including without limitation any customer relationships with Transferred
Customers and all other customers, relationships with suppliers, technology
partners, government authorities and others, and GNI and Shareholder will
resolve all transactions and dealings with such parties in a manner that is not
detrimental to any of such future relationships with IIS. Seller and/or
Shareholder will refer to IIS all inquiries relating to such business.
27
Neither GNI, Shareholder, nor any of its or his officers, employees or agents
shall take any action that would tend to diminish the value of such
relationships after the date hereof or that would interfere with the business of
IIS to be engaged in after the date hereof, including disparaging the name or
business of IIS.
10.5 SECURITIES FILINGS
Seller and Shareholder will cooperate with, and use its best efforts to
cause its accountants, attorneys and other advisors to cooperate with, IIS in
the timely preparation and filing of any financial statements and other reports
that are required to be filed (i) with the United States Securities and Exchange
pursuant to the Securities Act of 1933, as amended, the Securities Exchange Act
of 1934, as amended and the rules and regulations thereto, and (ii) in
accordance with Nasdaq's rules and regulations.
11. INDEMNIFICATION; REMEDIES
11.1 SURVIVAL
All representations, warranties, covenants and obligations in this
Agreement, including the Schedules attached hereto, and the certificates
delivered pursuant to this Agreement shall survive the Closing and the
consummation of the transactions contemplated hereby until the fourth
anniversary of the Closing Date. The right to indemnification, reimbursement or
other remedy based upon such representations, warranties, covenants and
obligations shall not be affected by any investigation (including any
environmental investigation or assessment) conducted with respect to, or any
Knowledge acquired (or capable of being acquired) at any time after the
execution and delivery of this Agreement or the Closing Date, with respect to
the accuracy or inaccuracy of or compliance with any such representation,
warranty, covenant or obligation. The waiver of any condition based upon the
accuracy of any representation or warranty, or on the performance of or
compliance with any covenant or obligation, will not affect the right to
indemnification, reimbursement or other remedy based upon such representations,
warranties, covenants and obligations.
11.2 INDEMNIFICATION AND REIMBURSEMENT BY GNI AND SHAREHOLDER
GNI and Shareholder will indemnify and hold harmless IIS, and its
representatives, officers, directors, employees, shareholders, subsidiaries and
related persons (collectively, the "IIS Indemnified Persons"), and will
reimburse the IIS Indemnified Persons for any loss, liability, claim, damage,
expense (including costs of investigation and defense and reasonable attorneys'
fees and expenses) or diminution of value, whether or not involving a
third-party claim (collectively, "Damages"), arising from or in connection with:
(a) any breach of any representation or warranty made by GNI or Shareholder
in (i) this Agreement, including the Schedules attached hereto, (ii)
the certificates delivered pursuant to this Agreement (iii) any
transfer instrument or (iv) any other certificate, document, writing or
instrument delivered by GNI or Shareholder pursuant to this Agreement;
28
(b) any breach of any covenant or obligation of GNI or Shareholder in this
Agreement or in any other certificate, document, writing or instrument
delivered by GNI and Shareholder pursuant to this Agreement;
(c) any Liabilities of Seller not expressly assumed by IIS hereunder;
(d) any Liability arising out of the ownership or operation of the
Purchased Assets prior to the Closing Date; or
(e) any Employee Plan established or maintained by Seller.
11.3 INDEMNIFICATION AND REIMBURSEMENT BY IIS
IIS will indemnify and hold harmless GNI and its representatives,
officers, directors employees, shareholders, subsidiaries, and related persons
(collectively, the "GNI Indemnified Persons"), and will reimburse the GNI
Indemnified Persons, for any Damages arising from or in connection with:
(a) any breach of any representation or warranty made by IIS in this
Agreement or in any certificate, document, writing or instrument
delivered by IIS pursuant to this Agreement;
(b) any breach of any covenant or obligation of IIS in this Agreement or
in any other certificate, document, writing or instrument delivered by
IIS pursuant to this Agreement;
(c) any Liabilities of Seller expressly assumed by IIS hereunder; or
(d) any Liability arising out of the ownership or operation of the
Purchased Assets by IIS from and after the Closing Date, except as
otherwise provided by this Agreement.
11.4 INDEMNIFICATION AND REIMBURSEMENT BY ANCHOR
Anchor will indemnify and hold harmless the IIS Indemnified Persons and
will reimburse the IIS Indemnified Persons for any Damages, arising from or in
connection with:
(a) any breach of any representation or warranty made by Anchor in: (i)
this Agreement; (ii) any transfer instrument executed by Anchor; or
(iii) any certificate or schedule executed or delivered to IIS by
Anchor that are identified on Schedule 3.21(f) delivered at Closing, or
(y) in any certificate or schedule executed or delivered to IIS by
Anchor after Closing that states such certificate or schedule is being
delivered pursuant to Schedule 3.21(f); or
(b) any breach of any covenant or obligation of Anchor in this Agreement or
in any certificate or schedule executed or delivered to IIS by Anchor
that are identified on Schedule 3.21(f) delivered at Closing, or (y) in
any certificate or schedule executed or delivered to IIS by Anchor
after Closing that states such certificate or schedule is being
delivered pursuant to Schedule 3.21(f).
29
12. GENERAL PROVISIONS
12.1 EXPENSES
Each party to this Agreement will bear its respective fees and expenses
incurred in connection with the preparation, negotiation, execution and
performance of this Agreement and the transactions contemplated hereby,
including all fees and expense of its representatives.
Notwithstanding the previous sentence:
(i) IIS will advance $100,000 to Anchor upon execution of this
Agreement, which upon Closing will be used to offset the cash
component of the Purchase Price set forth in Section 2.5(a). If
any party terminates this Agreement pursuant to Sections 9.1(a),
(b), (d), (e), (f) or (g), then Anchor shall refund the $100,000
in full to IIS;
(ii) Anchor will advance to GNI its transaction expenses that are
incurred towards the closing of this Agreement, including,
without limitation, payments made by Anchor pursuant to its
representation and warranty in Section 3.21(d) and any payment to
Resource Financial Corporation. Subject to Closing this
Agreement, the amounts advanced to GNI under this item (ii) will
be part of the Principal Note Amount (up to but not exceeding
$100,000). Unless the Closing occurs, IIS will not be liable for
any amounts advanced by Anchor to GNI under this item (ii), and,
if the Closing occurs, IIS will only be liable to Anchor for such
amounts up to $100,000; and
(iii) Anchor agrees to loan the reasonable operating cash needs of GNI
until the earlier of (x) the Closing Date, (y) February 28, 2002
or (z) termination of the Agreement.
12.2 PUBLIC ANNOUNCEMENTS
Except as required by law or the rules of the stock exchange on which
IIS's shares of common stock are publicly traded, neither party will issue any
press release or make any public announcement concerning the subject of this
Agreement without the prior consent of IIS, which shall not be unreasonably
withheld. With respect to any required disclosures, the disclosing party shall
provide advance copies of any press release or public filing and provide the
non-disclosing party a reasonable opportunity to review and revise such release
or filing.
12.3 NOTICES
All notices, consents, waivers and other communications required or
permitted by this Agreement shall be in writing and shall be deemed given to a
party when (a) delivered to the appropriate address by hand or by nationally
recognized overnight courier service (costs prepaid); (b) sent by facsimile or
e-mail with confirmation of transmission by the transmitting equipment; or (c)
received or rejected by the addressee, if sent by certified mail, return receipt
requested, in each case to the following addresses, facsimile numbers or e-mail
addresses and marked to the attention of the person (by name or title)
designated below (or to such other
30
address, facsimile number, e-mail address or person as a party may designate by
notice to the other parties):
RECEIVER: Xxxxxxx Xxxxxx
Xxxx, Xxxxx & Xxxxxxxxx, S.C.
Xxx Xxxxx Xxxx, Xxxxx 0000
000 Xxxx Xxxxxxxx Avenue
Milwaukee, Wisconsin 53202
Fax No.: 000-000-0000
GNI AND
SHAREHOLDER: Goliath Networks, Inc.
0000 Xxxxx Xxxxxxxxx Xxxx
Xxxxxxx, Xxxxxxxxx 00000
Attention: Xxxx X. Xxxxxx
Fax No.: 000-000-0000
WITH A COPY TO: Xxxxxx & Urban
000 X. Xxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxx Xxxxxxx
Fax No.: 000-000-0000
WITH A COPY TO: Xxxxxx & Xxxxxxx, S.C.
University Research Park
000 Xxxxxxx Xxxxx
X.X. Xxx 0000
Xxxxxxx, XX 00000-0000
Attention: Xxx Xxxxxxx
Fax No.: 000-000-0000
ANCHOR: AnchorBank, fsb
00 Xxxx Xxxx Xxxxxx
Xxxxxxx, Xxxxxxxxx 00000
Attention: Xxxx Xxxxxxx
Fax No.: 000-000-0000
WITH A COPY TO: Xxxxx Xxxxxxxxx, LLP
Manchester Place, Suite 200
2 East Mifflin St.
P. O. Box 1767
Madison, Wisconsin 53701-1767
Attention: Xxxxxxxx X. Xxxxxxxx
Fax No.: 000-000-0000
31
IIS: Integrated Information Systems, Inc.
0000 X. Xxxxxxx Xxxxx,
Xxxxx, Xxxxxxx 00000
Attention: Xxxxx Xxxxxx, President
Fax No.: 000-000-0000
WITH A COPY TO: Reinhart, Boerner, Xxx Xxxxxx,
Xxxxxx & Xxxxxxxxxx, S.C.
0000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxx Xxxxxx, Esq.
Fax No.: 000-000-0000
WITH A COPY TO: Xxxxx & Xxxxxx L.L.P
One Arizona Center
000 X. Xxx Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx Xxxxxxx, Esq.
Fax No.: 000-000-0000
12.4 ARBITRATION
Any controversy relating to this Agreement, any transaction
contemplated hereby, or relating to the breach hereof shall be settled by
arbitration in Madison, Wisconsin if there is a Closing or Phoenix, Arizona if
there is no Closing, in each case in accordance with the Commercial Arbitration
Rules of the American Arbitration Association then in effect. The award rendered
by the arbitrator(s) shall be final and judgment upon the award rendered by the
arbitrator(s) may be entered upon it in any court having jurisdiction thereof.
The arbitrator(s) shall possess the powers to issue mandatory orders and
restraining orders concerning such arbitration. The expenses of the arbitration
shall be borne by the losing party unless otherwise allocated by the
arbitrator(s).
12.5 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements, whether written or
oral, between the parties with respect to its subject matter (including any
letter of intent and any confidentiality agreement between any of IIS, GNI,
Shareholder and Anchor) and constitutes (along with the Schedules and other
documents delivered pursuant to this Agreement) a complete and exclusive
statement of the terms of the agreement between the parties with respect to its
subject matter. This Agreement may not be amended, supplemented, or otherwise
modified except by a written agreement executed by the party to be charged with
the amendment.
12.6 ASSIGNMENTS, SUCCESSORS AND NO THIRD-PARTY RIGHTS
No party may assign any of its rights or delegate any of its
obligations under this Agreement without the prior written consent of the other
parties, except that IIS may assign any of its rights and delegate any of its
obligations under this Agreement to any subsidiary, successor or acquirer of
IIS. Subject to the preceding sentence, this Agreement will apply to, be binding
in
32
all respects upon and inure to the benefit of the successors and permitted
assigns of the parties. Nothing expressed or referred to in this Agreement will
be construed to give any Person other than the parties to this Agreement any
legal or equitable right, remedy or claim under or with respect to this
Agreement or any provision of this Agreement, except such rights as shall inure
to a successor or permitted assignee pursuant to this Section 12.6.
12.7 GOVERNING LAW
Except with regard to matters arising under or pertaining to the
Chapter 128 Creditors' Action for which Wisconsin law will govern, this
Agreement will be governed by and construed under the laws of the State of
Arizona without regard to conflicts-of-laws principles that would require the
application of any other law.
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12.8 EXECUTION OF AGREEMENT
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.
The exchange of copies of this Agreement and of signature pages by facsimile
transmission shall constitute effective execution and delivery of this Agreement
as to the parties and may be used in lieu of the original Agreement for all
purposes. Signatures of the parties transmitted by facsimile shall be deemed to
be their original signatures for all purposes.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
INTEGRATED INFORMATION SYSTEMS, INC., GOLIATH NETWORKS, INC., A WISCONSIN
A DELAWARE CORPORATION CORPORATION
By: /s/ Xxxxx X. Xxxxxx, Xx. By: Xxxx X. Xxxxxx
Its: Chief Executive Officer Its: Chief Executive Officer
/s/ Xxxxxxx X. Xxxxxx
AS RECEIVER FOR GOLIATH NETWORKS, INC.
EFFECTIVE DATE: December 21, 2001
ANCHORBANK, FSB
By: Xxxx Xxxxxxx
Its: 1st Vice President
/s/ Xxxx X. Xxxxxx
XXXX X. XXXXXX, SHAREHOLDER
/s/ Xxxx X. Xxxxxx
XXXX X. XXXXXX, IN HIS CAPACITY AS A
DIRECTOR OF GNI
/s/ Xxxx X. Xxxxxx
XXXX X. XXXXXX, IN HIS CAPACITY AS AN
OFFICER OF GNI
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