ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is entered into as of October 13, 2011 by and among World Energy
Solutions, Inc., a Delaware corporation (the “Buyer”), Northeast Energy Solutions, LLC, a
Connecticut limited liability company (the “Seller”), and Xxxxxx Xxxxxxxxxxxxx, Xxxxxxx
Xxxxxxxxxx, and Xxxxxxx Xxxxxxxx, being all of the members of the Seller (the “Members,”
and together with the Seller, the “Selling Parties”).
This Agreement contemplates a transaction in which the Buyer will purchase substantially all
of the assets and assume specified liabilities of the Seller.
Upon and subject to the terms and conditions of this Agreement, and in consideration of the
representations, warranties and covenants contained in this Agreement, the Parties agree as follows
(capitalized terms used in this Agreement will have the meanings ascribed to them in Article IX):
ARTICLE I
THE ASSET PURCHASE
1.1 Purchase and Sale of Assets.
(a) The Buyer will purchase from the Seller, and the Seller will sell, transfer, assign and
deliver to the Buyer all of its right, title and interest in, to, and under the Acquired Assets,
for the consideration specified in Section 1.3.
(b) The Acquired Assets will not include the Excluded Assets (including those assets listed on
Schedule 1.1(b).
1.2 Assumption of Liabilities.
(a) The Buyer will assume and become responsible for, from and after the Closing, only the
Assumed Liabilities.
(b) The Buyer will not assume or become responsible for, and the Seller will remain liable
for, the Retained Liabilities.
(c) Immediately prior to the Closing, Seller will pay and satisfy in full all types of
liabilities of Seller, except for the Retained Liabilities, including those shown on the Most
Recent Balance Sheet, provided that the amounts paid will be the amounts of such liabilities as of
the date of payment.
1.3 Purchase Price. The Purchase Price to be paid by the Buyer for the Acquired
Assets at the Closing will be $4,754,131.39, payable as follows:
(a) $1,004,131.39, will be paid at Closing by wire transfer ($653,570.76 to be wired per
Seller’s instructions and $350,560.63 to be wired directly to Liberty Bank for the purpose of
paying Seller’s outstanding loan amount).
(b) $3,000,000 will be paid by a promissory note of the Buyer in substantially the form
attached as Exhibit C (the “Promissory Note”).
(c) the equivalent of $250,000 in Shares will be issued to the Members at, or within three
days following, the Closing, $150,000 of which shall be as consideration for their respective
Non-solicitation and Non-competition covenants set forth in Sections 6.2 and 6.3 hereof. The
number of Shares shall be determined by the total dollar amount divided by the share price. The
Share price shall be determined based on the volume weighted average price of XWES common stock on
the NASDAQ Capital Market for the thirty (30) consecutive trading days immediately preceding the
Closing Date.
Notwithstanding the foregoing, up to an additional $500,000 will be paid to Seller in
accordance with the terms of Section 1.6 below.
1.4 The Closing.
(a) The Closing will take place remotely commencing at 9:00 a.m. Eastern Daylight Savings Time
on the Closing Date. All transactions at the Closing will be deemed to take place simultaneously,
and no transaction will be deemed to have been completed and no documents or certificates will be
deemed to have been delivered until all other transactions are completed and all other documents
and certificates are delivered.
(b) At the Closing:
(i) the Seller will deliver to the Buyer the various certificates, instruments and documents
referred to in Section 5.1;
(ii) the Buyer will deliver to the Seller the various certificates, instruments and documents
referred to in Section 5.2;
(iii) the Seller will execute and deliver to the Buyer a xxxx of sale substantially in the
form of the xxxx of sale attached as Exhibit A, and such other instruments of conveyance
(such as assigned certificates or documents of title) as the Buyer may reasonably request in order
to effect the sale, transfer, and assignment to the Buyer of valid ownership of the Acquired
Assets;
(iv) the Buyer will execute and deliver to the Seller an assignment and assumption agreement
substantially in the form of the agreement attached as Exhibit B and such other instruments
as the Seller may reasonably request in order to effect the assumption by the Buyer of the Assumed
Liabilities;
(v) the Buyer will pay the cash portion of the Purchase Price to the Seller, payable by wire
transfer or other delivery of immediately available funds to an account designated by the Seller;
(vi) the Buyer will pay the Share portion of the Purchase Price by delivery of stock
certificates representing the Shares; and
(vii) the Buyer will execute and deliver to the Seller the Promissory Note.
1.5 Allocation. The Buyer and the Seller agree to allocate the Purchase Price (and
all other capitalizable costs) among the Acquired Assets and the non-solicitation and
non-competition covenants set forth in Sections 6.2 and 6.3 for all purposes (including financial
accounting and tax purposes) in accordance with the allocation schedule attached as Schedule
1.5. Buyer and Seller agree to use the allocations determined pursuant to this Section 1.5 for
all tax purposes, including without limitation, those matters subject to Section 1060 of the Code,
and the Treasury regulations promulgated thereunder. Buyer and Seller will prepare and submit to
the other for review their IRS Forms 8594 within ninety (90) days after the Closing. Each party
will have thirty (30) days to complete its review.
1.6 Earnout.
(a) 2011 Earnout. If Buyer is approved prior to December 31, 2011 as an authorized
vendor for the Small Business Energy Advantage program of Connecticut Light & Power in 2011 (by
virtue of Buyer’s actions, by virtue of Seller’s actions, or for any reason whatsoever) then Buyer
shall pay Seller an additional $250,000 on or before January 15, 2012.
(b) 2012 Earnout. The Seller will be paid for achieving certain revenue and net
income milestones based on the following:
| Earnout for 2012 Revenue | Earnout for 2012 Net Income | |||||||
| Achievement of target | Achievement of $5,400,000 | Achievement of $807,000 | ||||||
0 — 89.9% |
$ | 0 | $ | 0 | ||||
90 — 94.9% |
$ | 62,500 | $ | 62,500 | ||||
95 — 99.9% |
$ | 93,750 | $ | 93,750 | ||||
100%+ |
$ | 125,000 | $ | 125,000 | ||||
In such event, payment shall be made on or before March 31, 2013.
Upon attainment of the 2011 and/or 2012 earnout goals, the Seller may elect at its option to
receive payment in the form of cash or Shares. The number of Shares shall be determined by the
dollar amount divided by Share price. Share price shall be determined based on the volume weighted
average price of XWES common stock on the NASDAQ Capital Market for the thirty (30) consecutive
trading days immediately preceding the closing date and at time of earnout becomes due.
1.7 Further Assurances. At any time and from time to time after the Closing, at the
request of the Buyer and without further consideration, the Selling Parties will execute and
deliver such other instruments of sale, transfer, conveyance and assignment and take such actions
as the Buyer may reasonably request to more effectively transfer, convey and assign to the Buyer,
and to confirm the Buyer’s rights to, title in and ownership of, the Acquired Assets and to place
the Buyer in actual possession and operating control of the Acquired Assets.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLING PARTIES
The Selling Parties jointly and severally represent and warrant to the Buyer that, except as
set forth in the Disclosure Schedule, the statements contained in this Article II are true and
correct as of the date of this Agreement and will be true and correct as of the Closing as though
made as of the Closing, except to the extent such representations and warranties are specifically
made as of a particular date (in which case such representations and warranties will be true and
correct as of such date). The Disclosure Schedule will be arranged in sections and subsections
corresponding to the numbered and lettered sections and subsections contained in this Article II.
The disclosures in any section or subsection of the Disclosure Schedule will qualify only the
corresponding section or subsection in this Article II.
2.1 Organization, Qualification and Corporate Power. The Seller is a limited
liability company duly organized, validly existing and in good standing under the laws of the State
of Connecticut. The Seller is duly qualified to conduct business and is in good standing
(including tax good standing) under the laws of each jurisdiction listed in Section 2.1 of the
Disclosure Schedule, which jurisdictions constitute the only jurisdictions in which the nature of
the Seller’s businesses or the ownership or leasing of its properties requires such qualification.
The Seller has all requisite power and authority to carry on the businesses in which it is engaged
and to own and use the properties owned and used by it. The Seller has furnished to the Buyer
complete and accurate copies of its organizational and operating documents and agreements
(including its limited liability company operating agreement) and the Seller is not in default
under or in violation of any provision of any such document or agreement. The operating agreement
provided to the Buyer is the only instrument setting forth (i) the rights, preferences and
privileges of the members (including all holders of equity or profits interests) of the Seller with
respect to the Seller and/or among such members, and (ii) matters relating to the operation and
governance of the Seller.
2.2 Members and Membership Interests. The Members constitute all of the members of
the Seller, and Section 2.2 of the Disclosure Schedule sets forth their respective membership
interests in the Seller. There are no options, warrants or other instruments giving any party the
right to acquire any interest in the Seller. There are no outstanding agreements or commitments to
which the Seller is a party or which are binding upon the Seller providing for the redemption of
any of its membership interests.
2.3 Authorization of Transaction.
(a) The Seller has all requisite power and authority to execute and deliver this Agreement and
the Ancillary Agreements and to perform its obligations under this Agreement and thereunder. The
execution and delivery by the Seller of this Agreement and the Ancillary Agreements, the
performance by the Seller of this Agreement and the Ancillary Agreements and the consummation by
the Seller of the transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary action on the part of the Seller and its members.
(b) This Agreement has been duly and validly executed and delivered by the Selling Parties and
constitutes, and each of the Ancillary Agreements, upon its execution and delivery by the Selling
Parties who are party thereto, will constitute, a valid and binding obligation of the Selling
Parties who are party thereto, enforceable in accordance with its terms.
2.4 Noncontravention. Neither the execution and delivery by the Selling Parties of
this Agreement or the Ancillary Agreements to which they are party, nor the consummation by the
Selling Parties of the transactions contemplated hereby or thereby, will (a) conflict with or
violate any provision of the organizational and operational documents and agreement of the Seller
(including its limited liability company operating agreement), (b) require on the part of the
Seller any notice to or filing with, or any permit, authorization, consent or approval of, any
Governmental Entity, (c) except for obligations to be satisfied by Seller at Closing, conflict
with, result in a breach of, constitute (with or without due notice or lapse of time or both) a
default under, result in the acceleration of obligations under, create in any party the right to
terminate, modify or cancel, or require any notice, consent or waiver under, any contract or
instrument to which the Seller is a party or by which the Seller is bound or to which any of their
respective assets is subject, (d) result in the imposition of any Security Interest upon any assets
of the Seller or (e) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Seller or any of its properties or assets.
2.5 Subsidiaries. The Seller has no Subsidiaries. The Seller does not control
directly or indirectly or have any direct or indirect equity participation or similar interest in
any corporation, partnership, limited liability company, joint venture, trust or other business
association or entity.
2.6 Financial Statements. The Seller has provided to the Buyer the Financial
Statements. The Financial Statements fairly present the consolidated financial position of the
Seller as of the dates thereof and the consolidated results of its operations and cash flows for
the periods indicated, consistent with the books and records of the Seller, except that the
unaudited interim financial statements are subject to normal and recurring year-end adjustments
which will not be material in amount or effect and do not include footnotes.
2.7 Absence of Certain Changes. Since December 31, 2010, except as set forth on
Section 2.7 of the Disclosure Schedule there has occurred no event or development which,
individually or in the aggregate, has had, or could reasonably be expected to have in the future, a
Seller Material Adverse Effect.
2.8 Undisclosed Liabilities. The Seller has no liability (whether known or unknown,
whether absolute or contingent, whether liquidated or unliquidated and whether due or to become
due), except for (a) liabilities shown on the Most Recent Balance Sheet, (b) liabilities which have
arisen since the Most Recent Balance Sheet Date in the Ordinary Course of Business and which are
reflected on the Disclosure Schedule, and (c) contractual and other liabilities incurred in the
Ordinary Course of Business which are not required by GAAP to be reflected on a balance sheet.
2.9 Tax Matters.
(a) The Seller has properly filed on a timely basis all material Tax Returns that it is and
was required to file, and, all such Tax Returns were true, correct and complete in all material
respects. The Seller has properly paid on a timely basis all material Taxes that were due and
payable, as shown on its Tax Returns. All material Taxes that the Seller is or was required by law
to withhold or collect have been withheld or collected and, to the extent required, have been
properly paid on a timely basis to the appropriate Governmental Entity. The Seller has complied
with all information reporting and back-up withholding requirements in all material respects,
including maintenance of the required records with respect thereto, in connection with amounts paid
to any employee, independent contractor, creditor or other third party.
(b) The unpaid Taxes of the Seller for periods through the date of the Most Recent Balance
Sheet Date do not materially exceed the accruals and reserves for Taxes (excluding accruals and
reserves for deferred Taxes established to reflect timing differences between book and Tax income)
set forth on the Most Recent Balance Sheet. All Taxes attributable to the period from and after
the Most Recent Balance Sheet Date and continuing through the Closing Date are, or will be,
attributable to the conduct by the Seller of its operations in the Ordinary Course of Business.
(c) No examination or audit of any Tax Return of the Seller by any Governmental Entity is
currently in progress or, to the knowledge of the Seller, threatened or contemplated. Section
2.9(c) of the Disclosure Schedule sets forth each jurisdiction (other than United States federal)
in which the Seller files, or is required to file or has been required to file a material Tax
Return or is or has been liable for material Taxes on a “nexus” basis. The Seller has not been
informed by any jurisdiction that the jurisdiction believes that the Seller was required to file
any Tax Return that was not filed.
(d) The Seller is, and has been since its inception, a limited liability company validly
classified and treated as a partnership for federal income tax purposes and has been validly
treated in a similar manner for purposes of the income Tax laws of all states in which it has been
subject to taxation.
(e) Except as set forth in Section 2.9(e) of the Disclosure Schedules, the Seller has
delivered or made available to the Buyer (i) complete and correct copies of all Tax Returns of the
Seller relating to Taxes for all Taxable periods for which the applicable statute of limitations
has not yet expired and (ii) complete and correct copies of all private letter rulings, revenue
agent reports, information document requests, notices of assessment, notices of proposed
deficiencies, deficiency notices, protests, petitions, closing agreements, settlement agreements,
pending ruling requests and any similar documents submitted by, received by or agreed to by or on
behalf of the Seller relating to Taxes for all Taxable periods for which the applicable statute of
limitations has not yet expired.
(f) The Seller has not (i) waived any statute of limitations with respect to Taxes or agreed
to extend the period for assessment or collection of any Taxes, (ii) requested any extension of
time within which to file any Tax Return, which Tax Return has not yet been filed, or (iii)
executed or filed any power of attorney relating to Taxes with any Governmental Entity.
(g) The Seller is not a party to any litigation regarding Taxes.
(h) There are no Security Interests with respect to Taxes upon any of the Acquired Assets,
other than with respect to Taxes not yet due and payable. To the knowledge of Seller there is no
basis for the assertion of any claim relating or attributable to Taxes.
(i) None of the Acquired Assets (i) is property that is required to be treated as being owned
by any other person pursuant to the provisions of former Section 168(f)(8) of the Internal Revenue
Code of 1954, or (ii) is “tax exempt use property” within the meaning of Section 168(h) of the
Code.
(j) The Seller has maintained complete and accurate records, including all applicable
exemption, resale or other certificates, of (i) all sales to purchasers claiming to be exempt from
sale and use Taxes based on the exempt status of the purchaser, and (ii) all other sales for which
sales Tax or use Tax was not collected by the Seller and as to which the seller is required to
receive and retain resale certificates or other certificates relating to the exempt nature of the
sale or use or non-applicability of the sale and use Taxes.
(k) The Seller is not bound by any Tax indemnity, Tax sharing or Tax allocation agreement.
(l) The Seller is not a “foreign person” within the meaning of Section 1445 of the Code.
2.10 Ownership and Condition of Assets.
(a) The Seller is the true and lawful owner, and has good title to, all of the Acquired
Assets, free and clear of all Security Interests, except as set forth in Section 2.10(a) of the
Disclosure Schedule. Upon the Closing, the Buyer will become the true and lawful owner of, and
will receive good title to, the Acquired Assets, free and clear of all Security Interests.
(b) The Acquired Assets constitute all assets used by the Seller in such businesses. Each
tangible Acquired Asset is in good operating condition and repair (subject to normal wear and tear)
and is suitable for the purposes for which it presently is used.
(c) Section 2.10(c) of the Disclosure Schedule lists individually (i) all Acquired Assets that
are fixed assets (within the meaning of GAAP), indicating the cost, accumulated book depreciation
(if any) and the net book value of each such fixed asset as of the Most Recent Balance Sheet Date,
and (ii) all other Acquired Assets of a tangible nature (other than inventories) whose book value
exceeds $1,000.
2.11 Owned Real Property. The Seller does not own and has never owned any real
property.
2.12 Real Property Leases. Section 2.12 of the Disclosure Schedule lists all Leases
and lists the term of such Lease, any extension and expansion options, and the rent payable
thereunder. The Seller has delivered to the Buyer complete and accurate copies of the Leases.
With respect to each Lease:
(a) such Lease is legal, valid, binding, enforceable and in full force and effect;
(b) such Lease is assignable by the Seller to the Buyer with the consent or approval of the
Landlord and upon such assignment such Lease will continue to be legal, valid, binding, enforceable
and in full force and effect immediately following the Closing in accordance with the terms thereof
as in effect immediately prior to the Closing;
(c) neither the Seller nor, to the knowledge of the Seller, any other party, is in breach or
violation of, or default under, any such Lease, and to the knowledge of Seller no event has
occurred, is pending or, to the knowledge of the Seller, is threatened, which, after the giving of
notice, with lapse of time, or otherwise, would constitute a breach or default by the Seller or, to
the knowledge of the Seller, any other party under such Lease;
(d) there are no disputes, oral agreements or forbearance programs in effect as to such Lease;
(e) The Seller has not assigned, transferred, conveyed, mortgaged, deeded in trust or
encumbered any interest in the leasehold or subleasehold;
(f) to the knowledge of the Seller, all facilities leased or subleased thereunder are supplied
with utilities and other services adequate for the operation of said facilities; and
2.13 Intellectual Property.
(a) Seller Registrations. There are no Seller Registrations.
(b) Prosecution Matters. Seller has no Patent Rights.
(c) Ownership; Sufficiency. Each item of Seller Intellectual Property will be owned or
available for use by the Buyer immediately following the Closing on substantially identical terms
and conditions as it was immediately prior to the Closing. The Seller is the sole and exclusive
owner of all Seller Owned Intellectual Property, free and clear of any Security Interests and all
joint owners of the Seller Owned Intellectual Property are listed in Section 2.13(c) of the
Disclosure Schedule.
(d) Protection Measures. Seller has complied with all applicable contractual and legal
requirements pertaining to information privacy and security. No complaint relating to an improper
use or disclosure of, or a breach in the security of, any such information has been made or, to the
knowledge of the Seller, threatened against the Seller. To the knowledge of the Seller, there has
been no: (i) unauthorized disclosure of any third party proprietary or confidential information in
the possession, custody or control of the Seller or (ii) breach of the Seller’s security procedures
wherein confidential information has been disclosed to a third person.
(e) Infringement by Seller. (i) None of the Customer Offerings, or the Exploitation thereof
by the Seller or by any reseller, distributor, customer or user thereof, or any other activity of
the Seller, infringes or violates, or constitutes a misappropriation of, any Intellectual Property
rights of any third party; (ii) None of the Internal Systems, or the Seller’s
past or current Exploitation thereof, or any other activity undertaken by them in connection
with the Business, infringes or violates, or constitutes a misappropriation of, any Intellectual
Property rights of any third party. Section 2.13(e) of the Disclosure Schedule lists any
complaint, claim or notice, or threat of any of the foregoing (including any notification that a
license under any patent is or may be required), received by the Seller alleging any such
infringement, violation or misappropriation and any request or demand for indemnification or
defense received by the Seller from any reseller, distributor, customer, user or any other third
party; and the Seller has provided to the Buyer copies of all such complaints, claims, notices,
requests, demands or threats, as well as any legal opinions, studies, market surveys and analyses
relating to any alleged or potential infringement, violation or misappropriation.
(f) Infringement of Rights. To the knowledge of the Seller, no person (including, without
limitation, any current or former employee or consultant of Seller) is infringing, violating or
misappropriating any of the Seller Owned Intellectual Property or any Seller Licensed Intellectual
Property which is exclusively licensed to the Seller.
(g) Outbound IP Agreements. Section 2.13(g) of the Disclosure Schedule identifies each
license, covenant or other agreement pursuant to which the Seller has assigned, transferred,
licensed, distributed or otherwise granted any right or access to any person, or covenanted not to
assert any right, with respect to any past, existing or future Seller Intellectual Property. The
Seller has not agreed to indemnify any person against any infringement, violation or
misappropriation of any Intellectual Property rights with respect to any Customer Offerings or any
third party Intellectual Property rights. The Seller is not a member of or party to any patent
pool, industry standards body, trade association or other organization pursuant to the rules of
which it is obligated to license any existing or future Intellectual Property to any person.
(h) Inbound IP Agreements. Section 2.13(h) of the Disclosure Schedule identifies (i) each
item of Seller Licensed Intellectual Property and the license or agreement pursuant to which the
Seller Exploits it (excluding currently-available, off the shelf software programs that are part of
the Internal Systems and are licensed by the Seller pursuant to “shrink wrap” licenses, the total
fees associated with which are less than $2,500) and (ii) each agreement, contract, assignment or
other instrument pursuant to which the Seller has obtained any joint or sole ownership interest in
or to each item of Seller Owned Intellectual Property.
2.14 Inventory. All inventory of the Seller, whether or not reflected on the Most
Recent Balance Sheet, consists of a quality and quantity usable and saleable in the Ordinary Course
of Business, except for obsolete items and items of below-standard quality, all of which have been
written-off or written-down to net realizable value on the Most Recent Balance Sheet. All
inventories not written-off have been priced at the lower of cost or market on a first-in first-out
basis. The quantities of each type of inventory, whether raw materials, work-in-process or
finished goods, are not excessive in the present circumstances of the Seller.
2.15 Contracts.
(a) Section 2.15 of the Disclosure Schedule lists the following agreements (written or oral)
to which the Seller is a party as of the date of this Agreement:
(i) any agreement (or group of related agreements) for the lease of personal property from or
to third parties providing for lease payments in excess of $5,000 per annum or having a remaining
term longer than three months;
(ii) any agreement (or group of related agreements) for the purchase or sale of products or
for the furnishing or receipt of services (A) which calls for performance over a period of more
than one year, (B) which involves more than the sum of $5,000, or (C) in which the Seller has
granted manufacturing rights, “most favored nation” pricing provisions or marketing or distribution
rights relating to any products or territory or has agreed to purchase a minimum quantity of goods
or services or has agreed to purchase goods or services exclusively from a certain party;
(iii) any agreement concerning the establishment or operation of a partnership, joint venture
or limited liability company;
(iv) any agreement (or group of related agreements) under which it has created, incurred,
assumed or guaranteed (or may create, incur, assume or guarantee) indebtedness (including
capitalized lease obligations) involving more than $5,000 or under which it has imposed (or may
impose) a Security Interest on any of its assets, tangible or intangible;
(v) any agreement for the disposition of any significant portion of the assets or business of
the Seller (other than sales of products in the Ordinary Course of Business) or any agreement for
the acquisition of the assets or business of any other entity (other than purchases of inventory or
components in the Ordinary Course of Business);
(vi) any agreement concerning exclusivity or confidentiality;
(vii) any employment or consulting agreement;
(viii) any agreement involving any current or former officer, manager or member of the Seller;
(ix) any agreement under which the consequences of a default or termination would reasonably
be expected to have a Seller Material Adverse Effect;
(x) any agreement which contains any provisions requiring the Seller to indemnify any other
party (excluding indemnities contained in agreements for the purchase, sale or license of products
entered into in the Ordinary Course of Business);
(xi) any agreement that could reasonably be expected to have the effect of prohibiting or
impairing the conduct of the business of the Seller or the Buyer or any of its subsidiaries as
currently conducted and as currently proposed to be conducted;
(xii) any agreement under which the Seller is restricted from selling, licensing or otherwise
distributing any of its technology or products, or providing services to, customers or potential
customers or any class of customers, in any geographic area, during any period of time or any
segment of the market or line of business;
(xiii) any agreement which would entitle any third party to receive a license or any other
right to intellectual property of the Buyer following the Closing; and
(xiv) any other agreement (or group of related agreements) either involving more than $5,000
or not entered into in the Ordinary Course of Business.
(b) The Seller has delivered to the Buyer a complete and accurate copy of each agreement
listed in Section 2.13 or Section 2.15 of the Disclosure Schedule. With respect to each agreement
so listed: (i) he agreement is legal, valid, binding and enforceable and in full force and
effect; (ii) for those agreements to which the Seller is a party and are to be assumed by the Buyer
at Closing, the agreement is assignable by the Seller to the Buyer without the consent or approval
of any party (except as set forth in Section 2.4 of the Disclosure Schedule) or any such consent or
approval shall be obtained by Seller prior to the Closing and will continue to be legal, valid,
binding and enforceable and in full force and effect immediately following the Closing in
accordance with the terms thereof as in effect immediately prior to the Closing; and (iii) neither
the Seller nor, to the knowledge of the Seller, any other party, is in breach or violation of, or
default under, any such agreement, and no event has occurred, is pending or, to the knowledge of
the Seller, is threatened, which, after the giving of notice, with lapse of time, or otherwise,
would constitute a breach or default by the Seller or, to the knowledge of the Seller, any other
party under such agreement.
2.16 Intentionally Omitted
2.17 Insurance. Section 2.17 of the Disclosure Schedule lists each insurance policy
(including fire, theft, casualty, comprehensive general liability, workers compensation, business
interruption, environmental, product liability, errors and omissions, professional liability and
automobile insurance policies and bond and surety arrangements) to which the Seller is a party, all
of which are in full force and effect. There is no material claim pending under any such policy as
to which coverage has been questioned, denied or disputed by the underwriter of such policy. All
premiums due and payable under all such policies have been paid, and to the knowledge of the Seller
the Seller is otherwise in compliance in all material respects with the terms of such policies.
The Seller has no knowledge of any threatened termination of, or premium increase with respect to,
any such policy.
2.18 Litigation. There is no Legal Proceeding which is pending or has been threatened
in writing against the Selling Parties which (a) seeks either damages or equitable relief in any
way relating to the Seller or its business or (b) in any manner challenges or seeks to prevent,
enjoin, alter or delay the transactions contemplated by this Agreement. There are no judgments,
orders or decrees outstanding against the Seller.
2.19 Warranties. Except as set forth in Section 2.19 of the Disclosure Schedule, no product
or service manufactured, sold, leased, licensed or delivered by the Seller is subject to any
guaranty, warranty, right of return, right of credit or other indemnity other than third-party
manufacturers’ warranties for which the Seller has no liability.
2.20 Employees.
(a) Section 2.20 of the Disclosure Schedule contains a list of all employees of the Seller,
along with the position and the annual rate of compensation of each such person. Section 2.20 of
the Disclosure Schedule contains a list of all employees of the Seller who are not citizens of the
United States. To the knowledge of the Seller, no key employee or group of employees has any plans
to terminate employment with the Seller (other than for the purpose of accepting employment with
the Buyer following the Closing) or not to accept employment with the Buyer. The Seller is in
compliance with all applicable laws relating to the hiring and employment of employees.
(b) The Seller is not a party to or bound by any collective bargaining agreement, nor has any
of them experienced any strikes, grievances, claims of unfair labor practices or other collective
bargaining disputes. The Seller has no knowledge of any organizational effort made or threatened,
either currently or within the past two years, by or on behalf of any labor union with respect to
employees of the Seller.
2.21 Employee Benefits.
(a) Section 2.21(a) of the Disclosure Schedule contains a complete and accurate list of all
employee benefits provided by Seller to its employees (Seller Plans).
(b) Each Seller Plan has been administered in all material respects in accordance with its
terms and the Seller has in all material respects met its obligations with respect to each Seller
Plan and has made all required contributions thereto. The Seller and each Seller Plan are in
compliance in all material respects with the currently applicable provisions of ERISA and the Code
and the regulations thereunder (including Section 4980 B of the Code, Subtitle K, Chapter 100 of
the Code and Sections 601 through 608 and Section 701 et seq. of ERISA). All filings and reports
as to each Seller Plan required to have been submitted to the Internal Revenue Service or to the
United States Department of Labor have been duly submitted. No Seller Plan has assets that include
securities issued by the Seller or any ERISA Affiliate.
(c) There are no Legal Proceedings (except claims for benefits payable in the normal operation
of the Seller Plans and proceedings with respect to qualified domestic relations orders) against or
involving any Seller Plan or asserting any rights or claims to benefits under any Seller Plan that
could give rise to any material liability.
(d) All the Seller Plans that are intended to be qualified under Section 401(a) of the Code
have received determination letters from the Internal Revenue Service to the effect that such
Seller Plans are qualified and the plans and the trusts related thereto are exempt from federal
income taxes under Sections 401(a) and 501(a), respectively, of the Code, no such determination
letter has been revoked and revocation has not been threatened, and no such Seller Plan has been
amended since the date of its most recent determination letter or application therefor in any
respect, and no act or omission has occurred, that would adversely affect its qualification or
materially increase its cost. Each Seller Plan which is required to satisfy Section 401(k)(3) or
Section 401(m)(2) of the Code has been tested for compliance with, and satisfies the requirements
of Section 401(k)(3) and Section 401(m)(2) of the Code for each plan year ending prior to the
Closing Date.
(e) The Seller has never maintained an Employee Benefit Plan subject to Section 412 of the
Code or Title IV of ERISA.
(f) At no time has the Seller been obligated to contribute to any “multiemployer plan” (as
defined in Section 4001(a)(3) of ERISA).
(g) There are no unfunded obligations under any Seller Plan providing benefits after
termination of employment to any employee of the Seller (or to any beneficiary of any such
employee), including but not limited to retiree health coverage and deferred compensation, but
excluding continuation of health coverage required to be continued under Section 4980B of the Code
or other applicable law and insurance conversion privileges under state law. The assets of each
Seller Plan which is funded are reported at their fair market value on the books and records of
such Seller Plan.
(h) To the knowledge of the Seller, no act or omission has occurred and no condition exists
with respect to any Seller Plan that would subject the Seller to (i) any material fine, penalty,
tax or liability of any kind imposed under ERISA or the Code or (ii) any contractual
indemnification or contribution obligation protecting any fiduciary, insurer or service provider
with respect to any Seller Plan.
(i) No Seller Plan is funded by, associated with or related to a “voluntary employee’s
beneficiary association” within the meaning of Section 501(c)(9) of the Code.
(j) Each Seller Plan is amendable and terminable unilaterally by the Seller at any time
without liability or expense to the Seller or such Seller Plan as a result thereof (other than for
benefits accrued through the date of termination or amendment and reasonable administrative
expenses related thereto) and no Seller Plan, plan documentation or agreement, summary plan
description or other written communication distributed generally to employees by its terms
prohibits the Seller from amending or terminating any such Seller Plan.
(k) Section 2.21(k) of the Disclosure Schedule discloses each: (i) agreement with any
stockholder, director, executive officer or other key employee of the Seller (A) the benefits of
which are contingent, or the terms of which are altered, upon the occurrence of a transaction
involving the Seller of the nature of any of the transactions contemplated by this Agreement, (B)
providing any term of employment or compensation guarantee or (C) providing severance benefits or
other benefits after the termination of employment of such director, executive officer or key
employee; (ii) agreement, plan or arrangement under which any person may receive payments from the
Seller that may be subject to the tax imposed by Section 4999 of the Code or included in the
determination of such person’s “parachute payment” under Section 280G of the Code; and (iii)
agreement or plan binding the Seller, including any equity option plan, equity appreciation right
plan, restricted equity plan, equity purchase plan, severance benefit plan or Seller Plan, any of
the benefits of which will be increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
(l) Section 2.21(l) of the Disclosure Schedule sets forth the policy of the Seller with
respect to accrued vacation, accrued sick time and earned time off and the amount of such
liabilities as of the date hereof.
(m) Each Seller Plan that is a “nonqualified deferred compensation plan” (as defined in Code
Section 409A(d)(1)) has been operated since January 1, 2005 in good faith compliance with Code
Section 409A and IRS Notice 2005-1. No Seller Plan that is a “nonqualified deferred compensation
plan” has been materially modified (as determined under Notice 2005-1) after October 3, 2004. No
event has occurred that would be treated by Code Section 409A(b) as a transfer of property for
purposes of Code Section 83.
2.22 Environmental Matters.
(a) The Seller has complied with all applicable Environmental Laws. There is no pending or,
to the knowledge of the Seller, threatened civil or criminal litigation, written notice of
violation, formal administrative proceeding, or investigation, inquiry or information request by
any Governmental Entity, relating to any Environmental Law involving the Seller.
(b) The Seller has no liabilities or obligations arising from the release of any Materials of
Environmental Concern into the environment.
(c) The Seller is not a party to or bound by any court order, administrative order, consent
order or other agreement with any Governmental Entity entered into in connection with any legal
obligation or liability arising under any Environmental Law.
(d) Set forth in Section 2.22(d) of the Disclosure Schedule is a list of all documents
(whether in hard copy or electronic form) that contain any environmental reports, investigations
and audits relating to premises currently or previously owned or operated by the Seller (whether
conducted by or on behalf of the Seller or a third party, and whether done at the initiative of the
Seller or directed by a Governmental Entity or other third party) which the Seller has possession
of or access to. A complete and accurate copy of each such document has been provided to the
Buyer.
(e) The Seller is not aware of any material environmental liability of any solid or hazardous
waste transporter or treatment, storage or disposal facility that has been used by the Seller.
2.23 Legal Compliance. The Seller has, at all times, conducted its business in
compliance with each applicable law (including rules and regulations thereunder) of any federal,
state, local or foreign government, or any Governmental Entity. The Seller has not received any
notice or communication from any Governmental Entity alleging noncompliance with any applicable
law, rule or regulation.
2.24 Customers and Suppliers. Section 2.24 of the Disclosure Schedule sets forth a
list of (a) each customer that accounted for more than 1% of the consolidated revenues of the
Seller during the last full fiscal year or the interim period through the Most Recent Balance Sheet
Date and the amount of revenues accounted for by such customer during each such period and (b) each
supplier that is the sole supplier of any significant product or service to the Seller.
No such customer or supplier has indicated within the past year that it will stop, or decrease
the rate of, buying products or supplying products, as applicable, to the Seller. No unfilled
customer order or commitment obligating the Seller to process, manufacture or deliver products or
perform services will, or is likely to, result in a loss to the Seller (or, after the Closing, to
the Buyer, to the extent that such customer order or commitment is assumed by the Buyer), upon
completion of performance. No purchase order or commitment of the Seller is in excess of normal
requirements, nor are prices provided therein in excess of current market prices for the products
or services to be provided thereunder.
2.25 Permits. Section 2.25 of the Disclosure Schedule sets forth a list of all
Permits issued to or held by the Seller. Such listed Permits are the only Permits that are
required for the Seller to conduct their respective businesses as presently conducted. Each such
Permit is in full force and effect; the Seller is in compliance with the terms of each such Permit;
and, to the knowledge of the Seller, no suspension or cancellation of such Permit is threatened and
there is no basis for believing that such Permit will not be renewable upon expiration.
2.26 Brokers’ Fees. The Seller has no liability or obligation to pay any fees or
commissions to any broker, finder or agent with respect to the transactions contemplated by this
Agreement.
2.27 Books and Records. The books and records of the Seller accurately reflect the
assets, liabilities, business, financial condition and results of operations of the Seller and have
been maintained in accordance with good business and bookkeeping practices.
2.28 Disclosure. No representation or warranty by the Seller contained in this
Agreement, and no statement contained in the Disclosure Schedule or any other document, certificate
or other instrument delivered or to be delivered by or on behalf of the Seller pursuant to this
Agreement, contains or will contain any untrue statement of a material fact or omits or will omit
to state any material fact necessary, in light of the circumstances under which it was or will be
made, in order to make the statements in this Agreement or therein not misleading. The Seller has
disclosed to the Buyer all material information relating to the business of the Seller known by the
Seller.
2.29 Controls and Procedures.
(a) The Seller maintains accurate books and records reflecting its assets and liabilities and
maintains proper and adequate internal control over financial reporting which provide assurance
that (i) transactions are executed with management’s authorization, (ii) transactions are recorded
as necessary to permit preparation of the consolidated financial statements of the Seller and to
maintain accountability for the Seller’s consolidated assets, (iii) access to assets of the Seller
is permitted only in accordance with management’s authorization, (iv) the reporting of assets of
the Seller is compared with existing assets at regular intervals and (v) accounts, notes and other
receivables and inventory were recorded accurately, and proper and adequate procedures are
implemented to effect the collection thereof on a current and timely basis.
(b) Since its formation, Seller has not, extended or maintained credit, arranged for the
extension of credit, modified or renewed an extension of credit, in the form of a personal loan or
otherwise, to or for any director or executive officer of the Seller. Section 2.31(c) of the
Disclosure Schedule identifies any loan or extension of credit maintained by the Seller to which
the second sentence of Section 13(k)(1) of the Exchange Act would apply.
2.30 Projections. The projections dated September 14, 2011 provided by the Seller
to the Buyer were prepared by the Seller in good faith using the best information available to
management of the Seller and represent Seller management’s good faith estimates of the future
performance of the Seller for the periods referred to therein. The Buyer acknowledges that such
projections are merely estimates based on the current information available to the Seller and in no
way are to be deemed a warranty, representation or guaranty of the future performance of the
Seller’s business. The Buyer acknowledges and agrees that the Buyer shall have no recourse against
the Seller, the Members, the Purchase Price, the Promissory Note or any other matter resulting from
a discrepancy between the projections and actual future performance, unless the Buyer is
adjudicated to have prepared the projections not in good faith.
2.31 Government Contracts.
(a) The Seller has not been suspended or debarred from bidding on contracts or subcontracts
with any Governmental Entity; no such suspension or debarment has been threatened or initiated; and
the consummation of the transactions contemplated by this Agreement will not result in any such
suspension or debarment of the Seller or the Buyer (assuming that no such suspension or debarment
will result solely from the identity of the Buyer). The Seller has not been or is now being
audited or investigated by the United States Government Accounting Office, the United States
Department of Defense or any of its agencies, the Defense Contract Audit Agency, the contracting or
auditing function of any Governmental Entity with which it is contracting, the United States
Department of Justice, the Inspector General of the United States Governmental Entity, or any prime
contractor with a Governmental Entity; nor, to the knowledge of the Seller, has any such audit or
investigation been threatened. To the knowledge of the Seller, there is no valid basis for (i) the
suspension or debarment of the Seller from bidding on contracts or subcontracts with any
Governmental Entity or (ii) any claim (including any claim for return of funds to the Government)
pursuant to an audit or investigation by any of the entities named in the foregoing sentence. The
Seller has no agreements, contracts or commitments which require it to obtain or maintain a
security clearance with any Governmental Entity. The Seller has no contracts or subcontracts with
any Governmental Entity.
2.32 Securities Laws.
(a) The Seller and the Selling Parties have been furnished all of the materials relating to
the Buyer, and its payment of the Purchase Price, that have been requested and each of them has
been afforded an opportunity to ask questions of, and receive answers from, management of the
Buyer in connection with the payment of the Purchase Price. The Seller and the Selling Parties
have not been furnished with any oral or written representation in connection with the payment of
the Purchase Price by or on behalf of the Buyer that each of them has relied on that is not
contained in this Agreement.
(b) Each of the Seller and the Selling Parties: (i) is an “accredited investor” as defined
in Rule 501 of Regulation D under the Securities Act of 1933, as amended; (ii) has obtained, in
its judgment, sufficient information to evaluate the merits and risks of the payment of the
Purchase Price with securities of the Buyer; (iii) has sufficient knowledge and experience in
financial and business matters to evaluate the merits and risks associated with such payment of
the Purchase Price with securities of the Buyer and to make an informed investment decision with
respect thereto, and (iv) has consulted with his or its own advisors with respect to the receipt
of securities as part of the Purchase Price.
(c) The securities being acquired hereunder are being acquired for each of the Seller and
the Selling Parties’ own account for investment and not for the benefit or account of any other
person and not with a view to, or in connection with, any unlawful resale or distribution
thereof. Each of the Seller and the Selling Parties fully understands and agrees that it must
bear the economic risk of the investment in securities received hereunder for an indefinite
period of time because, among other reasons, such securities received hereunder have not been
registered under the Securities Act of 1933, as amended or under the securities laws of any
states, and, therefore, the securities are “restricted securities” and cannot be resold, pledged,
assigned or otherwise disposed of unless they are subsequently registered under the Securities
Act of 1933, amended and under the applicable securities laws of such states or an exemption from
such registration is otherwise available. Each of the Seller and the Selling Parties understands
that the Buyer is not under any obligation to register such securities on the Seller and the
Selling Parties’ behalf or to assist such Seller and Selling Parties in complying with any
exemption from registration under the Securities Act or applicable state securities laws.
(d) Each of the Seller and the Selling Parties intends that the applicable state securities
law will apply to its receipt of the securities hereunder. Each of the Seller and the Selling
Parties meets all suitability standards imposed by the state securities laws relating to the
receipt of the securities as part of the Purchase Price hereunder without registering any of the
Buyer’s securities under the securities laws of such state.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller that the statements contained in this Article
III are true and correct as of the date of this Agreement and will be true and correct as of the
Closing as though made as of the Closing.
3.1 Organization and Corporate Power. The Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware. The Buyer has all
requisite corporate power and authority to carry on the businesses in which it is engaged and to
own and use the properties owned and used by it.
3.2 Authorization of the Transaction. The Buyer has all requisite power and authority
to execute and deliver this Agreement and the Ancillary Agreements and to perform its
obligations under this Agreement and thereunder. The execution and delivery by the Buyer of
this Agreement and the Ancillary Agreements and the consummation by the Buyer of the transactions
contemplated hereby and thereby have been duly and validly authorized by all necessary corporate
action on the part of the Buyer. This Agreement has been duly and validly executed and delivered
by the Buyer and constitutes a valid and binding obligation of the Buyer, enforceable against it in
accordance with its terms.
3.3 Equity Consideration. The shares of Buyer’s common stock to be issued to Buyer
under this Agreement have been duly and validly authorized by the Buyer. The shares have not been
registered with the Securities and Exchange Commission pursuant to the Securities Act of 1933, and
the Buyer has no intention of effecting any such registration.
3.4 Noncontravention. Neither the execution and delivery by the Buyer of this
Agreement or the Ancillary Agreements, nor the consummation by the Buyer of the transactions
contemplated hereby or thereby, will (a) conflict with or violate any provision of the Certificate
of Incorporation or by-laws of the Buyer, (b) require on the part of the Buyer any filing with, or
permit, authorization, consent or approval of, any Governmental Entity, (c) conflict with, result
in breach of, constitute (with or without due notice or lapse of time or both) a default under,
result in the acceleration of obligations under, create in any party any right to terminate, modify
or cancel, or require any notice, consent or waiver under, any contract or instrument to which the
Buyer is a party or by which it is bound or to which any of its assets is subject, or (d) violate
any order, writ, injunction, decree, statute, rule or regulation applicable to the Buyer or any of
its properties or assets.
ARTICLE IV
PRE-CLOSING COVENANTS
4.1 Closing Efforts. Each of the Parties will use its Reasonable Best Efforts to take
all actions and to do all things necessary, proper or advisable to consummate the transactions
contemplated by this Agreement, including using its Reasonable Best Efforts to cause (i) its
representations and warranties to remain true and correct in all material respects through the
Closing Date and (ii) the conditions to the obligations of the other Parties to consummate the
transactions contemplated by this Agreement to be satisfied.
4.2 Governmental and Third-Party Notices and Consents.
(a) Each Party will use its Reasonable Best Efforts to obtain, at its expense, all waivers,
permits, consents, approvals or other authorizations from Governmental Entities, and to effect all
registrations, filings and notices with or to Governmental Entities, as may be required for such
Party (and the case of the Selling Parties, each other Selling Party) to consummate the
transactions contemplated by this Agreement and to otherwise comply with all applicable laws and
regulations in connection with the consummation of the transactions contemplated by this Agreement.
(b) The Seller will use its Reasonable Best Efforts to obtain, at its expense, all such
waivers, consents or approvals from third parties, and to give all such notices to third parties,
as listed or are required to be listed in the Disclosure Schedule.
(c) If (i) any of the Assigned Contracts or other assets or rights constituting Acquired
Assets may not be assigned and transferred by the Seller to the Buyer (as a result of either the
provisions thereof or applicable law) without the consent or approval of a third party, (ii) the
Seller, after using its Reasonable Best Efforts, is unable to obtain such consent or approval prior
to the Closing and (iii) the Closing occurs nevertheless, then (A) such Assigned Contracts and/or
other assets or rights will not be assigned and transferred by the Seller to the Buyer at the
Closing and the Buyer will not assume the Seller’s liabilities or obligations with respect thereto
at the Closing, (B) the Seller will continue to use its Reasonable Best Efforts to obtain the
necessary consent or approval as soon as practicable after the Closing, (C) upon the obtaining of
such consent or approval, the Buyer and the Seller will execute such further instruments of
conveyance (in substantially the form executed at the Closing) as may be necessary to assign and
transfer such Assigned Contracts and/or other assets or rights (and the associated liabilities and
obligations of the Seller) to the Buyer, and (D) from and after the Closing until the assignment of
each such Assigned Contract pursuant to clause (C) above, the Buyer will perform and fulfill, on a
subcontractor basis, the obligations of the Seller to be performed under such Assigned Contract,
and the Seller will promptly remit to the Buyer all payments received by it under such Assigned
Contract for services performed during such period.
4.3 Access to Information.
The Seller will permit representatives of the Buyer to have reasonable access (at all
reasonable times, and in a manner so as not to interfere with the normal business operations of the
Seller) to all premises, properties, financial, tax and accounting records, contracts, other
records and documents, and personnel, of or pertaining to the Seller, and contacts at Seller’s
principal suppliers and customers, for the purpose of performing such inspections and tests as the
Buyer deems necessary or appropriate.
4.4 Exclusivity.
(a) None of the Selling Parties will, and they will cause each of their officers, directors,
employees, representatives and agents not to, directly or indirectly, (i) initiate, solicit,
encourage or otherwise facilitate any inquiry, proposal, offer or discussion with any party (other
than the Buyer) concerning any merger, reorganization, consolidation, recapitalization, business
combination, liquidation, dissolution, share exchange, sale of stock, sale of material assets or
similar business transaction involving any of the Selling Parties, (ii) furnish any non-public
information concerning the business, properties or assets of the Seller to any party (other than
the Buyer), (iii) engage in discussions or negotiations with any party (other than the Buyer)
concerning any such transaction, or (iv) enter in any agreement with any party (other than the
Buyer) concerning any such transaction.
(b) The Selling Parties will immediately notify any party with which discussions or
negotiations of the nature described in paragraph (a) above were pending that the
Selling Parties are terminating such discussions or negotiations. If any Selling Party
receives any inquiry, proposal or offer of the nature described in paragraph (a) above, such Party
will, within one business day after such receipt, notify the Buyer of such inquiry, proposal or
offer, including the identity of the other party and the terms of such inquiry, proposal or offer.
ARTICLE V
CONDITIONS TO CLOSING
5.1 Conditions to Obligations of the Buyer. The obligation of the Buyer to consummate
the transactions contemplated by this Agreement to be consummated at the Closing is subject to the
satisfaction of the following additional conditions:
(a) the Seller will have obtained at its own expense (and will have provided copies thereof to
the Buyer) all of the waivers, permits, consents, approvals or other authorizations, and effected
all of the registrations, filings and notices, referred to in Section 4.2 which are required on the
part of the Seller;
(b) the representations and warranties of the Seller set forth in Sections 2.1 (first
sentence), 2.2 and 2.3 and any representations and warranties of the Seller set forth in this
Agreement that are qualified as to materiality will be true and correct in all respects, and all
other representations and warranties of the Seller set forth in this Agreement will be true and
correct in all material respects, in each case as of the date of this Agreement and as of the
Closing as though made as of the Closing, except to the extent such representations and warranties
are specifically made as of a particular date (in which case such representations and warranties
will be true and correct as of such date);
(c) the Seller will have performed or complied with its agreements and covenants required to
be performed or complied with under this Agreement as of or prior to the Closing;
(d) no Legal Proceeding will be pending or threatened, and no judgment, order, decree,
stipulation or injunction will be pending, threatened, or in effect which would (i) prevent
consummation of the transactions contemplated by this Agreement, (ii) cause the transactions
contemplated by this Agreement to be rescinded following consummation, or (iii) affect adversely
the right of the Buyer to own, operate or control any of the Acquired Assets, or to conduct the
business of the Seller as currently conducted, following the Closing;
(e) the Seller will have delivered to the Buyer the Seller Certificate;
(f) the Seller will have delivered to the Buyer a good standing certificate with respect to
the sale of the Acquired Assets under this Agreement;
(g) Each of the Members will have entered into employment agreements with the Buyer on terms
satisfactory to the Buyer and such Members;
(h) The Seller will have delivered to the Buyer a Landlord Estoppel Certificate, in the form
attached as Exhibit D; and
(i) the Buyer will have received such other certificates and instruments (including
certificates of good standing of the Seller in its jurisdiction of organization and the various
foreign jurisdictions in which it is qualified, certified organizational and operational documents,
certificates as to the incumbency of officers and the adoption of authorizing resolutions) as it
will reasonably request in connection with the Closing.
5.2 Conditions to Obligations of the Seller. The obligation of the Seller to
consummate the transactions contemplated by this Agreement to be consummated at the Closing is
subject to the satisfaction of the following additional conditions:
(a) The representations and warranties of Buyer set forth in this Agreement that are qualified
as to materiality will be true and correct in all respects, and all other representations and
warranties of the Buyer set forth in this Agreement will be true and correct in all material
respects, in each case as of the date of this Agreement and as of the Closing as though made as of
the Closing, except to the extent such representations and warranties are specifically made as of a
particular date (in which case such representations and warranties will be true and correct as of
such date);
(b) the Buyer will have performed or complied with in all material respects its agreements and
covenants required to be performed or complied with under this Agreement as of or prior to the
Closing;
(c) no Legal Proceeding will be pending or threatened wherein an unfavorable judgment, order,
decree, stipulation or injunction would (i) prevent consummation of the transactions contemplated
by this Agreement or (ii) cause the transactions contemplated by this Agreement to be rescinded
following consummation, and no such judgment, order, decree, stipulation or injunction will be in
effect;
(d) the Buyer will have delivered to the Seller the Buyer Certificate;
(e) the Seller will have received such other certificates and instruments (including
certificates of good standing of the Buyer in its jurisdiction of organization, certificates as to
the incumbency of officers and the adoption of authorizing resolutions) as it will reasonably
request in connection with the Closing; and
ARTICLE VI
POST-CLOSING COVENANTS
6.1 Proprietary Information. From and after the Closing, each Selling Party will not
disclose or make use of (except to pursue its rights, under this Agreement or the Ancillary
Agreements) any knowledge, information or documents of a confidential nature or not generally known
to the public with respect to Acquired Assets, the Seller’s business or the Buyer or its business
(including the financial information, technical information or data relating to the Seller’s
products and names of customers of the Seller), as well as filings and testimony (if any) presented
in the course of any arbitration of a Dispute pursuant to Section 7.3 and the arbitral award and
the Arbitrator’s reasons therefor relating to the same), except to the extent that such
knowledge, information or documents will have become public knowledge other than through
improper disclosure by any of the Selling Parties.
6.2 Solicitation and Hiring. For a period of two (2) years after the Closing Date, no
Selling Party will, either directly or indirectly, (a) solicit or attempt to induce any Restricted
Employee to terminate his employment with the Buyer or any subsidiary of the Buyer or (b) hire or
attempt to hire any Restricted Employee; provided, that this clause (b) will not apply to
any individual whose employment with the Buyer or a subsidiary of the Buyer has been terminated for
a period of six months or longer. Each Selling Party will enforce, for the benefit of the Buyer,
all confidentiality, non-solicitation and non-hiring assignments and similar agreements between the
Seller and any other party which are not Assigned Contracts. Notwithstanding the foregoing, in the
event that Buyer fails to make any two of the three payments contemplated under the Promissory Note
within any applicable cure or grace periods provided in the Promissory Note, the restrictions set
forth in this Section 6.2 shall be null and void, and the each Selling Party shall no longer be
bound by the provisions hereof.
6.3 Non-Competition.
(a) For a period of five (5) year after the Closing Date, each Selling Party will not, either
directly or indirectly as an owner, partner, officer, employee, director, investor, lender,
consultant, independent contractor or otherwise, (i) design, develop, manufacture, market, sell or
license any product or provide any service anywhere in Massachusetts, Connecticut, Rhode Island,
New York, New Jersey, and Pennsylvania(the “Geographic Region”) which is competitive with any
product designed, developed (or under development), manufactured, sold or licensed or any service
provided by the Seller within the three-year period prior to the Closing Date, or (ii) engage
anywhere in the Geographic Region in any business competitive with the business of the Seller as
conducted as of the Closing Date or during the three-year period prior to the Closing Date.
Notwithstanding the foregoing, in the event that Buyer fails to make any two of the three payments
contemplated under the Promissory Note within any applicable cure or grace periods provided in the
Promissory Note, the restrictions set forth in this Section 6.3 shall be null and void, and the
each Selling Party shall no longer be bound by the provisions hereof. For the avoidance of doubt,
the completion of the projects by Seller referenced in Section 6.3 below will not be deemed to be
competitive.
(b) Each Selling Party agrees that the duration and geographic scope of the non-competition
provision set forth in this Section 6.3 are reasonable. In the event that any court determines
that the duration or the geographic scope, or both, are unreasonable and that such provision is to
that extent unenforceable, the Parties agree that the provision will remain in full force and
effect for the greatest time period and in the greatest area that would not render it
unenforceable.
(c) The Selling Parties will refer all inquiries regarding the business, products and services
of the Seller to the Buyer. Notwithstanding the foregoing, Buyer acknowledges that Seller is
currently performing certain projects identified on Schedule 6.3(c) that may not be completed as of
the Closing Date and that are not being assumed by Buyer. Seller will use its best efforts to
substantially complete all field and administrative work on such projects within ten (10) days of
the Closing Date. In the performance of such projects, Seller shall not represent
itself as Buyer but shall instead represent itself as Seller, and shall retain all liabilities
and obligations related to such projects.
6.4 Tax Matters.
(a) All transfer taxes, deed excise stamps and similar charges related to the sale of the
Acquired Assets contemplated by this Agreement will be paid by the Seller.
(b) Tax liabilities (other than Income Taxes) attributable to the Business through the Closing
Date will be borne by the Seller.
(c) All Taxes attributable to the conduct of the Business subsequent to the Closing will be
borne by the Buyer.
(d) All real property taxes, personal property taxes, and similar ad valorem obligations
levied with respect to the Acquired Assets, and all rents, utilities and other charges against the
Seller with respect to the Acquired Assets, for a taxable period that includes (but does not end
on) the Closing Date will be apportioned between the Buyer and the Seller as of the Closing Date
based upon (i) the number of days of such taxable period included in any tax period (or portion
thereof) ending on or before the close of business on the Closing Date (the “Pre-Closing Tax
Period”) and (ii) the number of days of such taxable period included in any tax period (or
portion thereof) beginning after the Closing Date (the “Post-Closing Tax Period”). The
Seller will be liable for all such Taxes relating to the Pre-Closing Tax Period, and the Buyer will
be liable for all such Taxes relating to the Post-Closing Tax Period.
(e) If either party pays any Taxes to be borne by the other party under this Section 6.4, the
other party will promptly reimburse such paying party for the Taxes paid. If, in preparing Tax
returns or payments after the Closing, it appears to the Buyer that the Seller will be asked to pay
additional Taxes, the Buyer will so notify the Seller, and provide the Seller a reasonable
opportunity to review and comment upon any related Tax Returns prior to filing them and paying the
Tax. If either party receives any refunds or credits which are the property of the other party
under this Section 6.4, such party will promptly pay the amount of such refunds or credits to the
other party.
(f) The Buyer will make available to the Seller and its representatives all records and
materials reasonably required by the Seller to prepare, pursue or contest any Tax matters related
to taxable periods (or portions thereof) ending on or before the Closing Date and will provide
reasonable cooperation to the Seller in such case. The Seller will make available to the Buyer and
its representatives all records and materials reasonably required by the Buyer to prepare, pursue
or contest any Tax matters arising after the Closing which have factual reference to the
Pre-Closing Tax Period and will provide reasonable cooperation to the Buyer in such case.
6.5 Sharing of Data.
(a) The Seller will have the right for a period of seven years following the Closing Date to
have reasonable access to such books, records and accounts, including financial and tax
information, correspondence, production records, employment records and other records that are
transferred to the Buyer pursuant to the terms of this Agreement for the limited purposes
of concluding its involvement in the business conducted by the Seller prior to the Closing
Date and for complying with its obligations under applicable securities, tax, environmental,
employment or other laws and regulations. The Buyer will have the right for a period of seven
years following the Closing Date to have reasonable access to those books, records and accounts,
including financial and accounting records, tax records, correspondence, production records,
employment records and other records that are retained by the Seller pursuant to the terms of this
Agreement to the extent that any of the foregoing is needed by the Buyer for the purpose of
conducting the business of the Seller after the Closing and complying with its obligations under
applicable securities, tax, environmental, employment or other laws and regulations. Neither the
Buyer nor the Seller will destroy any such books, records or accounts retained by it without first
providing the other Party with the opportunity to obtain or copy such books, records, or accounts
at such other Party’s expense.
6.6 Use of Name. Except in connection with completion of the projects identified on
Schedule 6.3(c), no Selling Party will use the name Northeast Energy Solutions or any name
reasonably similar thereto after the Closing Date. Within 30 days following the Closing, the
Seller will amend its organizational documents and state filings, where appropriate, and other
records, if necessary, to comply with this provision.
6.7 Cooperation in Litigation. From and after the Closing Date, each Party will
reasonably cooperate with the other in the defense or prosecution of any litigation or proceeding
already instituted or which may be instituted hereafter against or by such other Party relating to
or arising out of the conduct of the business of the Seller or the Buyer prior to or after the
Closing Date (other than litigation among the Parties arising out the transactions contemplated by
this Agreement). The Party requesting such cooperation will pay the reasonable out-of-pocket
expenses incurred in providing such cooperation (including legal fees and disbursements) by the
Party providing such cooperation and by its officers, directors, employees and agents.
6.8 Collection of Accounts Receivable. The Buyer agrees that it will forward promptly
to the Seller any monies, checks or instruments received by the Buyer after the Closing Date with
respect to the accounts receivable of the Seller. The Buyer will provide to the Seller such
reasonable assistance as the Seller may request with respect to the collection of any such accounts
receivable, provided the Seller pays the reasonable out-of-pocket expenses of the Buyer and its
officers, directors and employees incurred in providing such assistance.
6.9 Within thirty (30) days of the Closing, the Seller will have delivered to the
Buyer documents evidencing the release or termination of all Security Interests on the Acquired
Assets, and copies of filed UCC termination statements with respect to all UCC financing statements
evidencing Security Interests;
6.10 Within thirty (30) days of the Closing, the Seller will have delivered to the
Buyer titles to the vehicles listed on Schedule 6.10, each of which titles shall have been signed
over to the Buyer by the Seller;
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification by the Seller. The Selling Parties will jointly and severally
indemnify Buyer (and its officers, directors, and employees) in respect of, and hold the Buyer (and
its officers, directors, and employees) harmless against, Damages actually incurred by the Buyer
resulting from, relating to or constituting:
(a) any breach, as of the date of this Agreement or as of the Closing Date, of any
representation or warranty of any Selling Party contained in this Agreement, any Ancillary
Agreement or any other agreement or instrument furnished by any Selling Party to the Buyer pursuant
to this Agreement;
(b) any failure of any Selling Party to perform any covenant or agreement contained in this
Agreement, any Ancillary Agreement or any agreement or instrument furnished by any Selling Party to
the Buyer pursuant to this Agreement;
(c) any Retained Liabilities; or
7.2 Indemnification by the Buyer. The Buyer will indemnify the Seller in respect of,
and hold it harmless against, any and all Damages actually incurred by the Seller resulting from,
relating to or constituting:
(a) any breach, as of the date of this Agreement or as of the Closing Date, of any
representation or warranty of the Buyer contained in this Agreement, any Ancillary Agreement or any
other agreement or instrument furnished by the Buyer to the Seller pursuant to this Agreement;
(b) any failure of the Buyer to perform any covenant or agreement contained in this Agreement,
any Ancillary Agreement or any other agreement or instrument furnished by the Buyer to the Seller
pursuant to this Agreement; or
(c) any Assumed Liabilities.
7.3 Indemnification Claims.
(a) An Indemnified Party will give written notification to the Indemnifying Party of the
commencement of any Third Party Action. Such notification will be given within 20 days after
receipt by the Indemnified Party of notice of such Third Party Action, and will describe in
reasonable detail (to the extent known by the Indemnified Party) the facts constituting the basis
for such Third Party Action and the amount of the claimed damages; provided, however, that no delay
or failure on the part of the Indemnified Party in so notifying the Indemnifying Party will relieve
the Indemnifying Party of any liability or obligation under this Agreement except to the extent of
any damage or liability caused by or arising out of such failure. Within 20 days after delivery of
such notification, the Indemnifying Party may, upon written notice thereof to the Indemnified
Party, assume control of the defense of such Third Party Action with counsel reasonably
satisfactory to the Indemnified Party; provided that (i) the
Indemnifying Party may only assume control of such defense if (A) it acknowledges in writing
to the Indemnified Party that any damages, fines, costs or other liabilities that may be assessed
against the Indemnified Party in connection with such Third Party Action constitute Damages for
which the Indemnified Party will be indemnified pursuant to this Article VII and (B) the amount of
damages claimed is less than or equal to the amount of Damages for which the Indemnifying Party is
liable under this Article VII and (ii) the Indemnifying Party may not assume control of the defense
of Third Party Action involving criminal liability or in which equitable relief is sought against
the Indemnified Party. If the Indemnifying Party does not, or is not permitted under the terms
hereof to, so assume control of the defense of a Third Party Action, the Indemnified Party will
control such defense. The Non-controlling Party may participate in such defense at its own
expense. The Controlling Party will keep the Non-controlling Party advised of the status of such
Third Party Action and the defense thereof and will consider in good faith recommendations made by
the Non-controlling Party with respect thereto. The Non-controlling Party will furnish the
Controlling Party with such information as it may have with respect to such Third Party Action
(including copies of any summons, complaint or other pleading which may have been served on such
party and any written claim, demand, invoice, billing or other document evidencing or asserting the
same) and will otherwise cooperate with and assist the Controlling Party in the defense of such
Third Party Action. The fees and expenses of counsel to the Indemnified Party with respect to a
Third Party Action will be considered Damages for purposes of this Agreement if (i) the Indemnified
Party controls the defense of such Third Party Action pursuant to the terms of this Section 7.3(a)
or (ii) the Indemnifying Party assumes control of such defense and the Indemnified Party reasonably
concludes that the Indemnifying Party and the Indemnified Party have conflicting interests or
different defenses available with respect to such Third Party Action. The Indemnifying Party will
not agree to any settlement of, or the entry of any judgment arising from, any Third Party Action
without the prior written consent of the Indemnified Party, which will not be unreasonably
withheld, conditioned or delayed. The Indemnified Party will not agree to any settlement of, or
the entry of any judgment arising from, any such Third Party Action without the prior written
consent of the Indemnifying Party, which will not be unreasonably withheld, conditioned or delayed.
(b) In order to seek indemnification under this Article VII, an Indemnified Party will deliver
a Claim Notice to the Indemnifying Party.
(c) Within 30 days after delivery of a Claim Notice, the Indemnifying Party will deliver to
the Indemnified Party a Response, in which the Indemnifying Party will: (i) agree that the
Indemnified Party is entitled to receive all of the Claimed Amount (in which case the Claimed
Amount will be deducted from the Final Payment set forth in the Promissory Note, and if the Claimed
Amount exceeds the remaining funds of the Final Payment, the Response will be accompanied by a
payment by the Indemnifying Party to the Indemnified Party of such excess amount, by check or by
wire transfer), (ii) agree that the Indemnified Party is entitled to receive the Agreed Amount if
during the 30-day period following the delivery of a Claim Notice the Indemnifying Party and the
Indemnified Party have negotiated an Agreed Amount), in which case the Agreed Amount will be
deducted from the Final Payment set forth in the Promissory Note, and if the Agreed Amount exceeds
the remaining funds in the Final Payment, the Response will be accompanied by a payment by the
Indemnifying Party to the Indemnified Party of such excess amount, by check or by wire transfer);
or (iii) dispute that the Indemnified Party is entitled to receive any of the Claimed Amount.
(d) During the 30-day period following the delivery of a Response that reflects a Dispute, the
Indemnifying Party and the Indemnified Party will use good faith efforts to resolve the Dispute.
If the Dispute is not resolved within such 30-day period, the Indemnifying Party and the
Indemnified Party will discuss in good faith the submission of the Dispute to binding arbitration,
and if the Indemnifying Party and the Indemnified Party agree in writing to submit the Dispute to
such arbitration, then the provisions of Section 7.3(e) will become effective with respect to such
Dispute. The provisions of this Section 7.3(d) will not obligate the Indemnifying Party and the
Indemnified Party to submit to arbitration or any other alternative dispute resolution procedure
with respect to any Dispute, and in the absence of an agreement by the Indemnifying Party and the
Indemnified Party to arbitrate any Dispute, such Dispute will be resolved in a state or federal
court sitting in the Commonwealth of Massachusetts, in accordance with Section 10.12.
(e) If, as set forth in Section 7.3(d), the Indemnified Party and the Indemnifying Party agree
to submit any Dispute to binding arbitration, the arbitration will be conducted by the Arbitrator
in accordance with the Commercial Rules in effect from time to time and the following provisions.
(i) If there is a conflict between the Commercial Rules in effect from time to time and the
provisions of this Agreement, the provisions of this Agreement will prevail and be controlling.
(ii) The parties will commence the arbitration by jointly filing a written submission with the
office of the AAA having responsibility for matters to be arbitrated in Hartford, Connecticut, in
accordance with Commercial Rule 5 (or any successor provision).
(iii) No depositions or other discovery will be conducted in connection with the arbitration.
(iv) Not later than 30 days after the conclusion of the arbitration hearing, the Arbitrator
will prepare and distribute to the parties a writing setting forth the arbitral award and the
Arbitrator’s reasons therefor. Any award rendered by the Arbitrator will be final, conclusive and
binding upon the parties, and judgment thereon may be entered and enforced in any court of
competent jurisdiction (subject to Section 10.12), provided that the Arbitrator will have no power
or authority to grant injunctive relief, specific performance or other equitable relief.
(v) The Arbitrator will have no power or authority, under the Commercial Rules or otherwise,
to (x) modify or disregard any provision of this Agreement, including the provisions of this
Section 7.3(e), or (y) address or resolve any issue not submitted by the parties.
(vi) In connection with any arbitration proceeding pursuant to this Agreement, each party will
bear its own costs and expenses, except that the fees and costs of the AAA and the Arbitrator, the
costs and expenses of obtaining the facility where the arbitration hearing is held, and such other
costs and expenses as the Arbitrator may determine to be directly related to the conduct of the
arbitration and appropriately borne jointly by the parties (which will
not include any party’s attorneys’ fees or costs, witness fees (if any), costs of
investigation and similar expenses) will be shared equally by the Indemnified Party and the
Indemnifying Party.
7.4 Survival of Representations and Warranties. The representations and warranties of
the Parties will survive the Closing of this Agreement for a period of eighteen (18) months ,
except that (i) the representations and warranties set forth in Sections 2.1, 2.2, 2.3, 3.1 and 3.2
shall survive the closing without limitation and (ii) the representations and warranties set forth
in Sections 2.9, 2.13, 2.21, and 2.22 shall survive until 30 days following expiration of the
statute of limitations applicable to the matters referred to within each such section. The rights
to indemnification set forth in this Article VII will not be affected by (i) any investigation
conducted by or on behalf of an Indemnified Party or any knowledge acquired (or capable of being
acquired) by an Indemnified Party, whether before or after the date of this Agreement or the
Closing Date (including through supplements to the Disclosure Schedule permitted by Section 4.5),
with respect to the inaccuracy or noncompliance with any representation, warranty, covenant or
obligation which is the subject of indemnification under this Agreement or (ii) any waiver by an
Indemnified Party of any closing condition relating to the accuracy of any representations and
warranties or the performance of or compliance with agreements and covenants.
7.5 Exclusive Remedy.
(a) Except with respect to claims based on fraud, after the Closing, the rights of the
Indemnified Parties under this Article VII will be the exclusive remedy of the Indemnified Parties
with respect to claims resulting from or relating to any misrepresentation, breach of warranty or
failure to perform any covenant or agreement contained in this Agreement.
(b) The Buyer will not attempt to collect any Damages directly from the Selling Parties unless
and until it has exhausted the funds being held back pursuant to the Promissory Note.
7.6 Treatment of Indemnity Payments. Any payments made to an Indemnified Party
pursuant to this Article VII will be treated as an adjustment to the Purchase Price for tax
purposes.
ARTICLE VIII
TERMINATION
8.1 Termination of Agreement. The Parties may terminate this Agreement prior to
the Closing, as follows:
(a) the Parties may terminate this Agreement by mutual written consent;
(b) the Buyer may terminate this Agreement by giving written notice to the Seller if any
Selling Party is in breach of any representation, warranty or covenant contained in this Agreement,
and such breach (i) individually or in combination with any other such breach, would cause the
conditions set forth in Sections 5.1(b) or (c) not to be satisfied and (ii) is not
cured within 20 days following delivery by the Buyer to the Seller of written notice of such
breach;
(c) the Seller may terminate this Agreement by giving written notice to the Buyer in the event
the Buyer is in breach of any representation, warranty or covenant contained in this Agreement, and
such breach (i) individually or in combination with any other such breach, would cause the
conditions set forth in Sections 5.2(a) or (b) not to be satisfied and (ii) is not cured within 20
days following delivery by the Seller to the Buyer of written notice of such breach;
(d) the Buyer may terminate this Agreement by giving written notice to the Seller if the
Closing has not occurred on or before November 30, 2011 by reason of the failure of any condition
precedent under Section 5.1 (unless the failure results primarily from a breach by the Buyer of any
representation, warranty or covenant contained in this Agreement); or
(e) the Seller may terminate this Agreement by giving written notice to the Buyer if the
Closing has not occurred on or before November 30, 2011 by reason of the failure of any condition
precedent under Section 5.2 (unless the failure results primarily from a breach by a Selling Party
of any representation, warranty or covenant contained in this Agreement).
8.2 Effect of Termination. If either the Buyer or the Seller terminates this
Agreement pursuant to Section 8.1, then except for liability for breaches of this Agreement, all
other obligations of the Parties under this Agreement will terminate.
ARTICLE IX
DEFINITIONS
For purposes of this Agreement, each of the following terms will have the meaning set forth
below.
“AAA” will mean the American Arbitration Association.
“Acquired Assets” will mean the interests and rights of the Seller existing as of the
Closing in and to the following assets:
(a) all inventories of raw materials, finished goods, supplies, packaging materials, spare
parts and similar items, wherever located, including consignment inventory and inventory held on
order or in transit;
(b) all computers, machinery, equipment, tools and tooling, furniture, fixtures, supplies,
leasehold improvements, motor vehicles and other tangible personal property;
(c) all leaseholds and subleaseholds in real property, and easements, rights-of-way and other
appurtenants thereto;
(d) all Intellectual Property;
(e) all rights under Assigned Contracts; and
(f) all Permits; all books, records, accounts, ledgers, files, documents, correspondence,
lists (including customer and prospect lists), employment records, manufacturing and procedural
manuals, Intellectual Property records, sales and promotional materials, studies, reports and other
printed or written materials;
“Agreed Amount” will mean part, but not all, of the Claimed Amount, as negotiated and
agreed between the Indemnifying Party and the Indemnified Party in accordance with Section 7.3(c).
“Ancillary Agreements” will mean the xxxx of sale and other instruments of conveyance
referred to in Section 1.5(b)(iii), and the instrument of assumption and other instruments referred
to in Section 1.5(b)(iv).
“Arbitrator” will mean a single arbitrator selected by the Buyer and the Seller in
accordance with the Commercial Rules.
“Assigned Contracts” will mean the customer contracts, supplier contracts and vendor
contracts listed on Section 2.14 of the Disclosure Schedule (except for those vendor contracts that
are specifically indicated as excluded).
“Assumed Liabilities” will mean (a) all obligations of the Seller arising after the
Closing under the Assigned Contracts, other than any liabilities for any breach, act or omission by
the Seller prior to the Closing under any Assigned Contract, and (b) any liability for Taxes in
accordance with Section 6.4(d).
“Buyer” will have the meaning set forth in the first paragraph of this Agreement.
“Buyer Certificate” will mean a certificate to the effect that each of the conditions
specified in clauses (a) through (c) (insofar as clause (c) relates to Legal Proceedings involving
the Buyer) of Section 5.2 is satisfied in all respects.
“CERCLA” will mean the federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
“Claim Notice” will mean written notification which contains (i) a description of the
Damages incurred or reasonably expected to be incurred by the Indemnified Party and the Claimed
Amount of such Damages, to the extent then known, (ii) a statement that the Indemnified Party is
entitled to indemnification under Article VII for such Damages and a reasonable explanation of the
basis therefor, and (iii) a demand for payment in the amount of such Damages.
“Claimed Amount” will mean the amount of any Damages incurred or reasonably expected
to be incurred by the Indemnified Party.
“Closing” will mean the closing of the transactions contemplated by this Agreement.
“Closing Date” will mean October 13, 2011.
“Code” will mean the Internal Revenue Code of 1986, as amended.
“Commercial Rules” will mean the Commercial Arbitration Rules of the AAA.
“Controlling Party” will mean the party controlling the defense of any Third Party
Action.
“Customer Offerings” will mean (a) the services that the Seller (i) currently provides
or makes available to third parties, or (ii) has provided or made available to third parties within
the previous four years, and (b) the products (including Software and Documentation) that the
Seller (i) currently develops, manufactures, markets, distributes, makes available, sells or
licenses to or for third parties, or (ii) has developed, manufactured, marketed, distributed, made
available, sold or licensed to or for third parties within the previous six years. A true and
complete list of all Customer Offerings is set forth in Section 2.13(c) of the Disclosure Schedule.
“Damages” will mean any and all debts, obligations and other liabilities (whether
absolute, accrued, contingent, fixed or otherwise, or whether known or unknown, or due or to become
due or otherwise), diminution in value, monetary damages, fines, fees, penalties, interest
obligations, deficiencies, losses and expenses (including amounts paid in settlement, interest,
court costs, costs of investigators, fees and expenses of attorneys, accountants, financial
advisors and other experts, and other expenses of litigation), other than those costs and expenses
of arbitration of a Dispute which are to be shared equally by the Indemnified Party and the
Indemnifying Party as set forth in Section 7.3(e)(vi) actually incurred.
“Disclosure Schedule” will mean the disclosure schedule provided by the Seller to the
Buyer on the date of this Agreement and accepted in writing by the Buyer.
“Dispute” will mean the dispute resulting if the Indemnifying Party in a Response
disputes its liability for all or part of the Claimed Amount.
“Documentation” will mean printed, visual or electronic materials, reports, white
papers, documentation, specifications, designs, flow charts, code listings, instructions, user
manuals, frequently asked questions, release notes, recall notices, error logs, diagnostic reports,
marketing materials, packaging, labeling, service manuals and other information describing the use,
operation, installation, configuration, features, functionality, pricing, marketing or correction
of a product, whether or not provided to end user.
“Employee Benefit Plan” will mean any “employee pension benefit plan” (as defined in
Section 3(2) of ERISA), any “employee welfare benefit plan” (as defined in Section 3(1) of ERISA),
and any other written or oral plan, agreement or arrangement involving direct or indirect
compensation, including insurance coverage, severance benefits, disability benefits, deferred
compensation, bonuses, stock options, stock purchase, phantom stock, stock appreciation or other
forms of incentive compensation or post-retirement compensation.
“Environmental Law” will mean any federal, state or local law, statute, rule, order,
directive, judgment, Permit or regulation or the common law relating to the environment,
occupational health and safety, or exposure of persons or property to Materials of Environmental
Concern, including any statute, regulation, administrative decision or order pertaining to: (i)
the
presence of or the treatment, storage, disposal, generation, transportation, handling,
distribution, manufacture, processing, use, import, export, labeling, recycling, registration,
investigation or remediation of Materials of Environmental Concern or documentation related to the
foregoing; (ii) air, water and noise pollution; (iii) groundwater and soil contamination; (iv) the
release, threatened release, or accidental release into the environment, the workplace or other
areas of Materials of Environmental Concern, including emissions, discharges, injections, spills,
escapes or dumping of Materials of Environmental Concern; (v) transfer of interests in or control
of real property which may be contaminated; (vi) community or worker right-to-know disclosures with
respect to Materials of Environmental Concern; (vii) the protection of wild life, marine life and
wetlands, and endangered and threatened species; (viii) storage tanks, vessels, containers,
abandoned or discarded barrels and other closed receptacles; and (ix) health and safety of
employees and other persons. As used above, the term “release” will have the meaning set forth in
CERCLA.
“ERISA” will mean the Employee Retirement Income Security Act of 1974, as amended.
“Excluded Assets” will mean the following assets of the Seller:
(a) the governing documents, qualifications to conduct business as a foreign limited liability
company, arrangements with registered agents relating to foreign qualifications, taxpayer and other
identification numbers, seals, minute books, membership or security transfer books and other
documents relating to the organization and existence of the Seller as a limited liability company;
(b) all rights relating to refunds, recovery or recoupment of Taxes;
(c) any of the rights of the Seller under this Agreement or under the Ancillary Agreements;
(d) prepayments by Seller on insurance policies not assumed; and
(e) those assets listed on Schedule 1.1(b);
(f) all cash, short-term investments, deposits, bank accounts and other similar assets;
(g) all trade and other accounts receivable and notes and loans receivable that are payable to
the Seller, and all rights to unbilled amounts for products delivered or services provided,
together with any security held by the Seller for the payment thereof;
(h) all securities owned by the Seller;
(i) all claims, prepayments, deposits, refunds, causes of action, chooses in action, rights of
recovery, rights of setoff and rights of recoupment;
(j) all insurance policies of the Seller, as well as all proceeds which may be payable
thereunder; and
(k) all rights of the Seller in and with respect to the assets associated with its Employee
Benefit Plans.
“Exploit” will mean develop, design, test, modify, make, use, sell, have made, used
and sold, import, reproduce, market, distribute, commercialize, support, maintain, correct and
create derivative works of.
“Financial Statements” will mean:
| (a) | the consolidated balance sheets and statements of income and cash flows of the Seller as of the end of year ended December 31, 2010; and | ||
| (b) | the Most Recent Balance Sheet and the unaudited consolidated statements of income for the nine (9) months ended as of the Most Recent Balance Sheet Date. |
“GAAP” will mean United States generally accepted accounting principles.
“Governmental Entity” will mean any court, arbitrational tribunal, administrative
agency or commission or other governmental or regulatory authority or agency.
“Indemnified Party” will mean a party entitled, or seeking to assert rights, to
indemnification under Article VII.
“Indemnifying Party” will mean the party from whom indemnification is sought by the
Indemnified Party.
“Intellectual Property” will mean the following subsisting throughout the world:
(a) Patent Rights;
(b) copyrights, designs, data and database rights and registrations and applications for
registration thereof, including moral rights of authors;
(c) mask works and registrations and applications for registration thereof and any other
rights in semiconductor topologies under the laws of any jurisdiction;
(d) inventions, invention disclosures, statutory invention registrations, trade secrets and
confidential business information, know-how, manufacturing and product processes and techniques,
research and development information, financial, marketing and business data, pricing and cost
information, business and marketing plans and customer and supplier lists and information, whether
patentable or nonpatentable, whether copyrightable or noncopyrightable and whether or not reduced
to practice; and
(e) other proprietary rights relating to any of the foregoing (including remedies against
infringement thereof and rights of protection of interest therein under the laws of all
jurisdictions).
“Intellectual Property Registrations” means Patent Rights, registered Trademarks,
registered copyrights and designs, mask work registrations and applications for each of the
foregoing.
“Internal Systems” will mean the Software and Documentation and the computer,
communications and network systems (both desktop and enterprise-wide), laboratory equipment,
reagents, materials and test, calibration and measurement apparatus used by the Seller in its
business or operations or to develop, manufacture, fabricate, assemble, provide, distribute,
support, maintain or test the Customer Offerings, whether located on the premises of the Seller or
hosted at a third party site. All Internal Systems that are material to the business of the Seller
is listed and described in Section 2.13(c) of the Disclosure Schedule.
“Lease” will mean any lease or sublease pursuant to which the Seller leases or
subleases from another party any real property.
“Legal Proceeding” will mean any action, suit, proceeding, claim, arbitration or
investigation before any Governmental Entity or before any arbitrator.
“Materials of Environmental Concern” will mean any: pollutants, contaminants or
hazardous substances (as such terms are defined under CERCLA), pesticides (as such term is defined
under the Federal Insecticide, Fungicide and Rodenticide Act), solid wastes and hazardous wastes
(as such terms are defined under the Resource Conservation and Recovery Act), chemicals, other
hazardous, radioactive or toxic materials, oil, petroleum and petroleum products (and fractions
thereof), or any other material (or article containing such material) listed or subject to
regulation under any law, statute, rule, regulation, order, Permit, or directive due to its
potential, directly or indirectly, to harm the environment or the health of humans or other living
beings.
“Member” will have the meaning ascribed in the preamble to this Agreement.
“Most Recent Balance Sheet” will mean the unaudited consolidated balance sheet of the
Seller as of the Most Recent Balance Sheet Date.
“Most Recent Balance Sheet Date” will mean September 30, 2011.
“Net Income” means Revenue minus cost of revenue and operating expenses as detailed in
the 2012 Plan, as set forth on Schedule 1.7
“Non-controlling Party” will mean the party not controlling the defense of any Third
Party Action.
“Ordinary Course of Business” will mean the ordinary course of business consistent
with past custom and practice (including with respect to frequency and amount).
“Parties” will mean the Buyer and the Selling Parties.
“Patent Rights” will mean all patents, patent applications, utility models, design
registrations and certificates of invention and other governmental grants for the protection of
inventions or industrial designs (including all related continuations, continuations-in-part,
divisionals, reissues and reexaminations).
“Permits” will mean all permits, licenses, registrations, certificates, orders,
approvals, franchises, variances and similar rights issued by or obtained from any Governmental
Entity (including those issued or required under Environmental Laws and those relating to the
occupancy or use of owned or leased real property).
“Post-Closing Tax Period” has the meaning set forth in Section 6.4(d).
“Pre-Closing Tax Period” has the meaning set forth in Section 6.4(d).
“Promissory Note” has the meaning set forth in Section 1.4(b)(vii).
“Purchase Price” will mean the purchase price to be paid by the Buyer for the Acquired
Assets.
“Reasonable Best Efforts” will mean best efforts, to the extent commercially
reasonable.
“Response” will mean a written response containing the information provided for in
Section 7.3(c).
“Restricted Employee” will mean any person who either (i) was an employee of the Buyer
on either the date of this Agreement or the Closing Date or (ii) was an employee of the Seller on
either the date of this Agreement or the Closing Date and received an employment offer from the
Buyer within five business days following the Closing Date.
“Retained Liabilities” will mean any and all liabilities or obligations (whether known
or unknown, absolute or contingent, liquidated or unliquidated, due or to become due and accrued or
unaccrued, and whether claims with respect thereto are asserted before or after the Closing) of the
Seller which are not Assumed Liabilities. The Retained Liabilities will include, without
limitation, all liabilities and obligations of the Seller:
(a) for income, transfer, sales, use or other Taxes arising in connection with the
consummation of the transactions contemplated by this Agreement (including any income Taxes arising
as a result of (i) the transfer by the Seller to the Buyer of the Acquired Assets, (ii) any deemed
transfer by a subsidiary of the Seller of its assets pursuant to an election under Section
338(h)(10) of the Code, (iii) the Seller having an “excess loss account” (within the meaning of
Treasury Regulation §1.1502-19) in the stock of any Subsidiary of the Seller, or (iv) the Seller
having deferred gain on any “deferred intercompany transaction” (within the meaning of Treasury
Regulation §1.1502-13));
(b) for costs and expenses incurred in connection with this Agreement or the consummation of
the transactions contemplated by this Agreement;
(c) under this Agreement or the Ancillary Agreements;
(d) for any Taxes, including deferred taxes or taxes measured by income of the Seller earned
prior to the Closing, any liabilities for federal or state income tax and FICA taxes of employees
of the Seller which the Seller is legally obligated to withhold, any liabilities of the Seller for
employer FICA and unemployment taxes incurred, and any liabilities of the Seller for sales, use or
excise taxes or customs and duties;
(e) under any agreements, contracts, leases or licenses which are listed on Schedule
1.1(b);
(f) arising prior to the Closing under the Assigned Contracts, and all liabilities for any
breach, act or omission by the Seller prior to the Closing under any Assigned Contract;
(g) for repair, replacement or return of products manufactured or sold prior to the Closing
or, with respect to the projects listed on Schedule 6.3(c), after the Closing;
(h) related to any warranty claims made by third parties related to products or services
provided by the Seller prior to the Closing, or with respect to the projects listed on Schedule
6.3(c), after the Closing;
(i) arising out of events, conduct or conditions existing or occurring prior to the Closing
that constitute a violation of or non-compliance with any law, rule or regulation (including
Environmental Laws), any judgment, decree or order of any Governmental Entity, or any Permit or
that give rise to liabilities or obligations with respect to Materials of Environmental Concern;
(j) to pay severance benefits to any employee of the Seller whose employment is terminated (or
treated as terminated) in connection with the consummation of the transactions contemplated by this
Agreement, and all liabilities resulting from the termination of employment of employees of the
Seller prior to the Closing that arose under any federal or state law or under any Employee Benefit
Plan established or maintained by the Seller;
(k) to indemnify any person or entity by reason of the fact that such person or entity was a
director, officer, employee, or agent of the Seller or was serving at the request of the Seller as
a partner, trustee, director, officer, employee, or agent of another entity (whether such
indemnification is for judgments, damages, penalties, fines, costs, amounts paid in settlement,
losses, expenses, or otherwise and whether such indemnification is pursuant to any statute, charter
document, bylaw, agreement, or otherwise);
(l) injury to or death of persons or damage to or destruction of property occurring prior to
the Closing (including any workers compensation claim);
(m) for medical, dental and disability (both long-term and short-term benefits), whether
insured or self-insured, owed to employees or former employees of the Seller based upon (A)
exposure to conditions in existence prior to the Closing or (B) disabilities existing prior to the
Closing (including any such disabilities which may have been aggravated following the Closing);
(n) for benefits under any Seller Plan
“Revenue” means the revenue recognized in accordance with GAAP by Buyer from the
provision of energy efficiency services by the Cromwell, Connecticut energy efficiency division.
“Security Interest” will mean any mortgage, pledge, security interest, encumbrance,
charge or other lien (whether arising by contract or by operation of law), other than (i)
mechanic’s, materialmens’, and similar liens, (ii) liens arising under worker’s compensation,
unemployment insurance, social security, retirement, and similar legislation and (iii) liens on
goods in transit incurred pursuant to documentary letters of credit, in each case arising in the
Ordinary Course of Business of the Seller and not material to the Seller.
“Seller” will have the meaning set forth in the first paragraph of this Agreement.
“Selling Parties” will have the meaning set forth in the first paragraph of this
Agreement.
“Seller Certificate” will mean a certificate to the effect that each of the conditions
specified in clauses (a) through (i) (insofar as clause (d) relates to Legal Proceedings involving
the Seller) of Section 5.1 is satisfied in all respects.
“Seller Intellectual Property” will mean will the Seller Owned Intellectual Property
and the Seller Licensed Intellectual Property.
“Seller Licensed Intellectual Property” will mean all Intellectual Property that is
licensed to the Seller by any third party.
“Seller Material Adverse Effect” will mean any material adverse change, event,
circumstance or development with respect to, or material adverse effect on, (i) the business,
assets, liabilities, capitalization, prospects, condition (financial or other), or results of
operations of the Seller, or (ii) the ability of the Buyer to operate the business of the Seller
immediately after the Closing. For the avoidance of doubt, the parties agree that the terms
“material”, “materially” or “materiality” as used in this Agreement with an initial lower case “m”
will have their respective customary and ordinary meanings, without regard to the meaning ascribed
to Seller Material Adverse Effect.
“Seller Owned Intellectual Property” will mean all Intellectual Property owned or
purported to be owned by the Seller, in whole or in part.
“Seller Plan” will mean any Employee Benefit Plan maintained, or contributed to, by
the Seller or any ERISA Affiliate.
“Seller Registrations” will mean Intellectual Property Registrations that are
registered or filed in the name of the Seller, alone or jointly with others.
“Shares” will mean any shares of the Buyer’s common stock issued to the Seller
pursuant to the terms of this Agreement.
“Subsidiary” will mean any corporation, partnership, trust, limited liability company
or other non-corporate business enterprise in which the Seller (or another Subsidiary) holds stock
or other ownership interests representing (a) more than 50% of the voting power of all outstanding
stock or ownership interests of such entity or (b) the right to receive more than 50% of the
net assets of such entity available for distribution to the holders of outstanding stock or
ownership interests upon a liquidation or dissolution of such entity.
“Taxes” will mean any and all taxes, charges, fees, duties, contributions, levies or
other similar assessments or liabilities in the nature of a tax, including, without limitation,
income, gross receipts, corporation, ad valorem, premium, value-added, net worth, capital stock,
capital gains, documentary, recapture, alternative or add-on minimum, disability, estimated,
registration, recording, excise, real property, personal property, sales, use, license, lease,
service, service use, transfer, withholding, employment, unemployment, insurance, social security,
national insurance, business license, business organization, environmental, workers compensation,
payroll, profits, severance, stamp, occupation, windfall profits, customs duties, franchise and
other taxes of any kind whatsoever imposed by the United States of America or any state, local or
foreign government, or any agency or political subdivision thereof, and any interest, fines,
penalties, assessments or additions to tax imposed with respect to such items or any contest or
dispute thereof.
“Tax Returns” will mean any and all reports, returns, declarations, or statements
relating to Taxes, including any schedule or attachment thereto and any related or supporting work
papers or information with respect to any of the foregoing, including any amendment thereof.
“Third Party Action” will mean any suit or proceeding by a person or entity other than
a Party for which indemnification may be sought by a Party under Article VII.
“Trademarks” will mean all registered trademarks and service marks, logos, Internet
domain names, corporate names and doing business designations and all registrations and
applications for registration of the foregoing, common law trademarks and service marks and trade
dress.
ARTICLE X
MISCELLANEOUS
10.1 Press Releases and Announcements. No Party will issue any press release or
public announcement relating to the subject matter of this Agreement without the prior written
approval of the other Party. However, any Party may make any public disclosure it believes in good
faith is required by applicable law, regulation or stock market rule.
10.2 No Third Party Beneficiaries. This Agreement will not confer any rights or
remedies upon any person other than the Parties and their respective successors and permitted
assigns.
10.3 Entire Agreement. This Agreement (including the documents referred to in this
Agreement) constitutes the entire agreement between the Parties and, with one exception, supersedes
any prior understandings, agreements, or representations by or between the Parties, written or
oral, with respect to the subject matter hereof, including, without limitation, that certain letter
of intent dated September 26, 2011. The Confidentiality Agreement dated July 20, 2011 between the
Buyer and the Seller will remain in effect in accordance with its terms.
10.4 Succession and Assignment. This Agreement will be binding upon and inure to the
benefit of the Parties named in this Agreement and their respective successors and permitted
assigns. The Buyer may not assign either this Agreement or any of its rights, interests, or
obligations under this Agreement without the prior written approval of the Seller. None of the
Selling Parties may assign either this Agreement or any of its rights, interests, or obligations
under this Agreement without the prior written approval of the Buyer. Any attempted assignment in
contravention of this provision will be void.
10.5 Counterparts and Facsimile Signature. This Agreement may be executed in two or
more counterparts, each of which will be deemed an original but all of which together will
constitute one and the same instrument. This Agreement may be executed by facsimile signature or
electronic signature.
10.6 Headings. The section headings contained in this Agreement are inserted for
convenience only and will not affect in any way the meaning or interpretation of this Agreement.
10.7 Notices. All notices, requests, demands, claims, and other communications under
this Agreement will be in writing. Any notice, request, demand, claim, or other communication
under this Agreement will be deemed duly delivered four business days after it is sent by
registered or certified mail, return receipt requested, postage prepaid, or one business day after
it is sent for next business day delivery via a reputable nationwide overnight courier service, in
each case to the intended recipient as set forth below:
If to any Selling Party:
|
Copy to: | |
Northeast Energy Solutions LLC
|
Xxxxxxx Xxxxxxx, Esq. | |
2 Alcap Ridge
|
Xxxxx and Carrier, LLP | |
Xxxxxxxx, XX 00000
|
00 Xxxxx Xxxxxx Xxx Xxxxxxx, XX 00000 |
|
If to the Buyer:
|
Copy to: | |
| Xxxxxxx Xxxxx, Esq. | ||
000 Xxxx Xxxxxx
|
Xxxxxx X’Xxxxxxx | |
Xxxxxxxxx, XX 00000
|
000 Xxxxx Xxxxxx | |
Attn: General Counsel
|
Xxxxxxxxx, XX 00000 |
Any Party may give any notice, request, demand, claim, or other communication under this
Agreement using any other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or
other communication will be deemed to have been duly given unless and until it actually is received
by the party for whom it is intended. Each Party may change the address
to which notices, requests, demands, claims, and other communications under this Agreement are
to be delivered by giving the other Parties notice in the manner set forth in this Agreement.
10.8 Governing Law. This Agreement (including the validity and applicability of the
arbitration provisions of this Agreement, the conduct of any arbitration of a Dispute, the
enforcement of any arbitral award made under this Agreement and any other questions of arbitration
law or procedure arising under this Agreement) will be governed by and construed in accordance with
the internal laws of the Commonwealth of Massachusetts , without giving effect to any choice or
conflict of law provision or rule (whether of the Commonwealth of Massachusetts or any other
jurisdiction) that would cause the application of laws of any jurisdictions other than those of
the.
10.9 Amendments and Waivers. The Buyer and the Seller may mutually amend any
provision of this Agreement at any time prior to the Closing. No amendment of any provision of
this Agreement will be valid unless the same will be in writing and signed by each of the Buyer and
the Seller. No waiver by any Party of any right or remedy under this Agreement will be valid
unless the same will be in writing and signed by the Party giving such waiver. No waiver by any
Party with respect to any default, misrepresentation, or breach of warranty or covenant under this
Agreement will be deemed to extend to any prior or subsequent default, misrepresentation, or breach
of warranty or covenant under this Agreement or affect in any way any rights arising by virtue of
any prior or subsequent such occurrence.
10.10 Severability. Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction will not affect the validity or enforceability
of the remaining terms and provisions hereof or the validity or enforceability of the offending
term or provision in any other situation or in any other jurisdiction. If the final judgment of a
court of competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of invalidity or
unenforceability will have the power to limit the term or provision, to delete specific words or
phrases, or to replace any invalid or unenforceable term or provision with a term or provision that
is valid and enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement will be enforceable as so modified.
10.11 Expenses. Except as set forth in Article VII, each Party will bear its own
costs and expenses (including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby.
10.12 Submission to Jurisdiction. Each Party (a) submits to the jurisdiction of any
state or federal court sitting in the Commonwealth of Massachusetts in any action or proceeding
arising out of or relating to this Agreement or the Ancillary Agreements (including any action or
proceeding for the enforcement of any arbitral award made in connection with any arbitration of a
Dispute under this Agreement), (b) agrees that all claims in respect of such action or proceeding
may be heard and determined in any such court, (c) waives any claim of inconvenient forum or other
challenge to venue in such court, (d) agrees not to bring any action or proceeding arising out of
or relating to this Agreement or the Ancillary Agreements in any other court and (e) waives any
right it may have to a trial by jury with respect to any action or proceeding arising out of or
relating to this Agreement or the Ancillary
Agreements; provided in each case that, solely with respect to any arbitration of a Dispute, the Arbitrator will
resolve all threshold issues relating to the validity and applicability of the arbitration
provisions of this Agreement, contract validity, applicability of statutes of limitations and issue
preclusion, and such threshold issues will not be heard or determined by such court. Each party
agrees to accept service of any summons, complaint or other initial pleading made in the manner
provided for the giving of notices in Section 10.7, provided that nothing in this Section 10.12
will affect the right of either Party to serve such summons, complaint or other initial pleading in
any other manner permitted by law.
10.13 Specific Performance. Each Party acknowledges and agrees that the other Party
would be damaged irreparably in the event any of the provisions of this Agreement (including
Sections 6.1, 6.2 and 6.3) are not performed in accordance with their specific terms or otherwise
are breached. Accordingly, each Party agrees that each other Party will be entitled to an
injunction or other equitable relief to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in any action instituted in
any court of the United States or any state thereof having jurisdiction over the Parties and the
matter, in addition to any other remedy to which it may be entitled, at law or in equity.
Notwithstanding the foregoing, the Parties agree that if a Dispute is submitted to arbitration in
accordance with Section 7.3(d) and Section 7.3(e), then the foregoing provisions of this Section
10.13 will not apply to such Dispute, and the provisions of Section 7.3(d) and Section 7.3(e) will
govern availability of injunctive relief, specific performance or other equitable relief with
respect to such Dispute.
10.14 Construction.
(a) The language used in this Agreement will be deemed to be the language chosen by the
Parties to express their mutual intent, and no rule of strict construction will be applied against
any Party.
(b) Any reference to any federal, state, local, or foreign statute or law will be deemed also
to refer to all rules and regulations promulgated thereunder, unless the context requires
otherwise.
(c) Any reference to any Article, Section, paragraph, schedule, or exhibit will be deemed to
refer to an Article, Section, paragraph, schedule or exhibit of this Agreement, unless the context
clearly indicates otherwise.
Executed under seal as of the date first above written.
| Buyer: | ||||||
| World Energy Solutions, Inc. | ||||||
| By: | /s/ Xxxxxx X. Xxxxx | |||||
| Xxxxxx X. Xxxxx, President and COO | ||||||
| Seller: | ||||||
| Northeast Energy Solutions, LLC | ||||||
| By: | /s/ Xxxxxx Xxxxxxxxxxxxx | |||||
| Xxxxxx Xxxxxxxxxxxxx, its Managing Member | ||||||
| Members: | ||||||
| /s/ Xxxxxx Xxxxxxxxxxxxx | ||||||
| Xxxxxx Xxxxxxxxxxxxx | ||||||
| /s/ Xxxxxxx Xxxxxxxxxx | ||||||
| Xxxxxxx Xxxxxxxxxx | ||||||
| /s/ Xxxx Xxxxxxxx | ||||||
| Xxxx Xxxxxxxx | ||||||
Exhibits |
||
Exhibit A
|
Xxxx of Sale | |
Exhibit B
|
Assignment and Assumption Agreement | |
Exhibit C
|
Promissory Note | |
Exhibit D
|
Landlord Estoppel Certificate | |
Schedules |
||
Schedule 1.1(b)
|
Excluded Assets | |
Schedule 1.6
|
Allocation of Purchase Price | |
Schedule 1.7
|
2012 Plan | |
Schedule 6.3(c)
|
Retained Projects | |
Schedule 6.10
|
Vehicles | |
Disclosure Schedule |
GENERAL XXXX OF SALE
REFERENCE is made to the Asset Purchase Agreement dated of even date herewith (the
“Agreement”) by and among World Energy Solutions, Inc., a Delaware Corporation (the “Buyer”),
Northeast Energy Solutions, LLC, a Connecticut limited liability company (the “Seller”) and Xxxxxx
Xxxxxxxxxxxxx, Xxxxxxx Xxxxxxxxxx, and Xxxxxxx Xxxxxxxx, being all the members of the Seller
Capitalized terms not otherwise defined herein shall have the meaning given to them in the
Agreement.
FOR VALUE RECEIVED pursuant to the Agreement, Seller, for itself and its successors and
assigns, does hereby sell, convey, assign, transfer and deliver to and vest in Buyer and its
successors and assigns all right, title and interest in and to all of the Acquired Assets
(collectively, the “Assets”).
Seller warrants that Seller hereby transfers to Buyer good, valid and transferable title to
all of its Assets, free and clear of all liens, encumbrances, restrictions, agreements and adverse
claims of every kind, nature and description, and agrees to defend such title.
Seller further covenants and agrees that, from time to time after the delivery of this
instrument, at Buyer’s request and without further consideration, Seller will do, execute,
acknowledge and deliver, or cause to be done, executed, acknowledged and delivered, all such
further acts, conveyances, transfers, assignments, deeds, documents and assurances as reasonably
may be requested by Buyer more effectively to convey to, transfer to and vest in Buyer all right,
title and interest in and to any of the Assets transferred or assigned hereunder.
Nothing contained in this General Xxxx of Sale shall supersede, modify, limit, eliminate or
otherwise affect any of the representations and warranties, covenants, agreements or indemnities
set forth in the Agreement. This General Xxxx of Sale is executed and delivered pursuant to the
terms of the Agreement, and nothing herein shall be construed to modify, terminate or merge any
rights any party thereto may have pursuant to the terms thereof. In the event of any inconsistency
or conflict between the terms of the Agreement and the terms of this General Xxxx of Sale, the
terms of the Agreement shall prevail.
This General Xxxx of Sale shall be governed by and construed in accordance with the laws of
The Commonwealth of Massachusetts without regard to its conflict of laws provisions.
IN WITNESS WHEREOF, Seller has executed this General Xxxx of Sale as an instrument under seal
as of this 13th day of October, 2011.
| WITNESSED BY: | Northeast Energy Solutions, LLC | |||||||
| By: | ||||||||
Signature
|
Xxxxxx Xxxxxxxxxxxxx, its Managing Member | |||||||
| Printed Name of Witness | ||||||||
ASSIGNMENT AND ASSUMPTION OF CONTRACTS
This Assignment and Assumption of Contracts (this “Assignment”) dated as of October 13, 2011
(the “Effective Date”) is by and between Northeast Energy Solutions, LLC (“Assignor”) and World
Energy Solutions, Inc. (“Assignee”).
RECITALS
Assignor, as seller, and Assignee, as buyer, are parties to an Asset Purchase Agreement dated
as of October 13, 2011 (the “P&S”). Capitalized terms used but not defined in this Assignment have
the meanings ascribed in the P&S.
Assignor desires to assign all of its right, title and interest in and to all of the contracts
set forth on Schedule 1 attached to this Assignment (collectively, the “Contracts”) to Assignee and
Assignee desires to acquire all of Assignor’s right, title and interest in and to the Contracts.
TERMS OF AGREEMENT
For and in consideration of the recitals set forth above, and the covenants and agreements set
forth below and other valuable consideration, the receipt of which is hereby acknowledged, Assignor
and Assignee agree as follows:
1. Assignment. Assignor hereby assigns, sets over and transfers to Assignee all of
Assignor’s right, title and interest in the Contracts. Assignor hereby represents that the
Contracts previously delivered to Assignee are complete, accurate and true copies of the Contracts,
including all amendments.
2. Assumption. Assignee hereby assumes and agrees to perform, fulfill and observe all
of the covenants, agreements, obligations and liabilities of Assignor under the Contracts arising
on and after the Effective Date. Assignor agrees to pay, perform, fulfill and observe all of the
covenants, agreements, obligations and liabilities prior to the Effective Date.
3. Assignee Indemnification. Assignee agrees to indemnify and hold Assignor harmless
from and against all loss, cost, damage and expense, including, without limitation, reasonable
attorneys’ fees, arising out of any act, omission or default by Assignee under the Contracts
arising after the Effective Date.
4. Assignor Indemnification. Assignor agrees to indemnify and hold Assignee harmless
from and against all loss, cost, damage and expense, including, without limitation, reasonable
attorneys’ fees, arising out of any act, omission or default by Assignor under the Contracts
arising before the Effective Date.
5. Notices. All notices, demands, requests and other communications necessary or
desirable under this Assignment shall be in writing and shall be deemed properly served if sent,
by United States mail, postage prepaid, registered or certified mail, return receipt
requested, or national overnight express courier service, addressed as follows:
| (a) | If intended for Assignor: | ||
| Northeast Energy Solutions LLC 0 Xxxxx Xxxxx Xxxxxxxx, XX 00000 |
|||
| With a copy to: | |||
| Xxxxxxx Xxxxxxx, Esq. Xxxxx and Carrier, LLP 00 Xxxxx Xxxxxx Xxx Xxxxxxx, XX 00000 |
|||
| (b) | If intended for Assignee: | ||
| World Energy Solutions, Inc. 000 Xxxx Xxxxxx Xxxxxxxxx, XX 00000 Attn: General Counsel |
|||
| With a copy to: | |||
| Xxxxxxx Xxxxx, Esq. Xxxxxx X’Xxxxxxx 000 Xxxxx Xxxxxx Xxxxxxxxx, XX 00000 |
or at such other address or to such other individual as the party entitled to receive notices shall
designate to the other in writing. Any notice shall be effective upon actual receipt or the date
of the refusal by the addressee to accept delivery of such notice.
6. Binding Effect. The provisions of this Assignment are binding on and inure to the
benefit of Assignor, its successors and assigns, and Assignee, its successors and assigns.
7. Headings. The section headings used in this Assignment are for reference and
convenience only and shall not be used in the interpretation of this Assignment.
8. Counterparts. This Assignment may be signed in several counterparts, each of which
is an original, but all of which constitute a single instrument.
EXECUTED under seal as of the date first written above.
| Assignor: | ||||||
| Northeast Energy Solutions, LLC | ||||||
| By: | ||||||
| Xxxxxx Xxxxxxxxxxxxx, Managing Member | ||||||
| Assignee: | ||||||
| World Energy Solutions, Inc. | ||||||
| By: | ||||||
| Xxxxxx X. Xxxxx, President and COO | ||||||
Schedule 1
| 1. | Lease Dated as of September 1, 2010 for premises located at 0 Xxxxx Xxxxx, Xxxxxxxx, XX approximately 4,120 square feet of space. |
PROMISSORY NOTE
| Maturity Date: December 28, 2012 | Principal Amount: $3,000,000 |
FOR VALUE RECEIVED, World Energy Solutions, Inc. a Delaware corporation having a principal
place of business at 000 Xxxx Xx., Xxxxxxxxx, XX 00000 (the “Maker”), promises to pay to the order
of Northeast Energy Solutions, LLC (the “Payee”), a Connecticut limited liability company having a
principal place of business at 0 Xxxxx Xxxxx, Xxxxxxxx, Xxxxxxxxxxx 00000, pursuant to the terms
and conditions of the Asset Purchase Agreement dated of even date herewith to which Maker and Payee
are parties (the “Asset Purchase Agreement”), the principal sum of THREE MILLION DOLLARS
($3,000,000), subject to set-off as set forth below, together with interest on the unpaid principal
balance of such sum from the date hereof at the rates and terms hereinafter provided, computed on
the basis of a 360-day year at the Note Rate and together with all costs of collection, including a
reasonable attorneys’ fee, incurred in any action to collect this Note.
The Note Rate is five percent (5.0%) interest per year; provided that upon the occurrence of
an Event of Default under this Note or after maturity, the Note Rate shall increase to seven
percent (7%) per year (the “Post Maturity Rate”).
Except
as otherwise provided below, on each of, July 2, 2012, October 1, 2012, and December 28,
2012 (each, a “Payment Date”), the Maker shall pay Payee, in lawful money of the United States by
check payable to Payee and delivered to the Payee’s address stated above or at such other place as
the Payee may designate, $1,000,000 of the unpaid principal amount of this Note, together with the
accrued but unpaid interest on the unpaid principal balance of this Note (each such payment of
principal and interest, a “Cash Payment”); provided that in lieu of receiving a Cash Payment, the
Payee, by written notice delivered to the Maker no less than five days prior to the applicable
Payment Date, may instruct the Maker to issue and deliver to the Payee, or to such designees as
instructed by Payee, such number of shares of the Maker’s common stock as is equal in value to the
amount of the applicable Cash Payment. For the purposes of determining the number of shares to be
issued to the Payee in lieu of a Cash Payment, the per share price of the Maker’s common stock
shall be equal to the volume weighted average price of the Maker’s common stock on the NASDAQ
Capital Market for the thirty (30) day consecutive trading days immediately preceding the
applicable Payment Date.
Notwithstanding anything to the contrary in this Note, if the Maker has delivered to Payee one
or more Claim Notices (as defined in the Asset Purchase Agreement) on or before December 28, 2012,
then Maker, if not already paid, may withhold so much of the final $1,000,000 payment of principal
otherwise due Maker on December 28, 2012 (the “Final Payment”) as may be reasonably required to
satisfy the Claimed Amount in such Claim Notice(s) until such time as the indemnification claim(s)
that is the subject of such Claim Notice(s) is finally resolved. Maker may set-off from the Final
Payment, the aggregate amount of any and all Damages (as defined in the Asset Purchase Agreement)
that Payee must indemnify Maker for with respect to any and all claims that are the subject of any
Claim Notices delivered to the Payee by the Maker on or before December 28, 2012. Notwithstanding
anything to the contrary in this Note, Maker’s withholding and, if applicable, set-off, of the
Final Payment pursuant to the terms of this paragraph will not constitute an Event of Default or
other breach of this Promissory Note. Additionally, if any portion of the Final Payment is
withheld by Maker pursuant to the terms of this paragraph, no interest shall accrue on such portion
of the Final Payment from December 28, 2012 until the date all claims that are subject to Maker’s
Claim Notice(s) delivered to Payee on or before
December 28, 2012 are finally resolved. Maker shall pay to Payee any portion of the Final
Payment not used to pay a Claim Notice.
While this Note remains outstanding, if the Maker raises in excess of $10,000,000 in a single
equity financing, the Maker shall immediately pay the Payee in cash an amount equal to 10% of the
aggregate amount of funds raised in such financing, up to a maximum of the sum of the unpaid
principal balance and accrued but unpaid interest due on this Note as of the closing date of such
financing (an “Accelerated Payment”). An Accelerated Payment will be applied first against the
$1,000,000 payment of unpaid principal due December 281, 2012 to the extent not already paid, then
to the $1,000,000 payment of principal due on October 1, 2012 to the extent not already paid, then
to the $1,000,000 payment due on July 2, 2012 to the extent not already paid, and then to any
accrued but unpaid interest on the Note.
While no Event of Default exists, and except as otherwise provided above with respect to an
Accelerated Payment, each payment under this Note will be applied first to interest then due, and
then to principal due. When an Event of Default exists any payments will be applied to interest
and/or principal as determined by the Payee in its sole discretion.
The Maker may, at any time and without penalty, prepay any part or all of the unpaid principal
balance of this Note.
The occurrence of any one or more of the following events is an Event of Default under this
Note:
(i) Failure of the Maker to pay, perform or observe any of its obligations contained in this
Note within seven (7) days of receipt of written notice thereof from Payee; or
(ii) upon default by the Maker in the performance of any its obligations, covenants or
agreements contained in the Asset Purchase Agreement for a period of seven (7) days after receipt
of written notice thereof from Payee; or
(iii) The termination of existence of the Maker or the involvement of the Maker in any
financial difficulties as evidenced by:
| (a) | an assignment for the benefit of its creditors; or | ||
| (b) | the appointment of a receiver, trustee, custodian, liquidator or conservator of it or its assets not vacated or set aside within sixty (60) days; or | ||
| (c) | the commencement by it of proceedings under any federal or state law relating to bankruptcy, insolvency or relief of debtors; or | ||
| (d) | the commencement against it of proceedings under any federal or state law relating to bankruptcy, insolvency or relief of debtors if the proceedings are not dismissed within sixty (60) days after the date on which commenced; |
If an Event of Default occurs, the Payee may, to the extent permitted by law and without
notice to the Maker, declare the unpaid principal balance and accrued interest to be due
immediately without notice, presentment, demand, protest, notice of intent to accelerate, notice of
acceleration and all other notices of every kind in connection with the delivery, acceptance,
performance or enforcement of this Note all of which are expressly waived. No course of dealing by
the Payee and no delay in exercising any right under this Note will operate as a waiver by the
Payee of its rights, and a waiver of a right on one occasion may not be construed as a waiver of
the right on a future occasion. No delay or omission on the part of the Holder in exercising any
right hereunder shall operate as a waiver of such right or of any
other right of the Holder, nor shall any delay, omission or waiver on any one occasion be deemed a
bar to or waiver of the same or any other right on any future occasion.
WAIVER: IN THE EVENT THAT THE MAKER FILES A PETITION UNDER THE BANKRUPTCY CODE OR UNDER ANY
OTHER SIMILAR FEDERAL OR STATE LAW, THE MAKER UNCONDITIONALLY AND IRREVOCABLY AGREES THAT THE PAYEE
SHALL BE ENTITLED, AND THE MAKER HEREBY UNCONDITIONALLY AND IRREVOCABLY CONSENTS, TO RELIEF FROM
THE AUTOMATIC STAY SO AS TO ALLOW THE PAYEE TO EXERCISE ITS RIGHTS AND REMEDIES UNDER THIS NOTE OR
ANY LOAN DOCUMENT. IN SUCH EVENT, THE MAKER HEREBY AGREES THAT IT SHALL NOT, IN ANY MANNER, OPPOSE
OR OTHERWISE DELAY ANY MOTION FILED BY THE PAYEE FOR RELIEF FROM THE AUTOMATIC STAY. THE PAYEE’S
ENFORCEMENT OF THE RIGHT GRANTED HEREIN FOR RELIEF FROM THE AUTOMATIC STAY IS SUBJECT TO THE
APPROVAL OF THE BANKRUPTCY COURT IN WHICH THE CASE IS THEN PENDING.
THIS NOTE SHALL REMAIN IN FULL FORCE AND EFFECT, WITHOUT ABATEMENT, UNTIL THE LIABILITIES OF
THE MAKER TO PAYEE UNDER THIS NOTE ARE PAID IN FULL AND/OR PERFORMED TO PAYEE’S FULL SATISFACTION,
IT BEING EXPRESSLY UNDERSTOOD AND AGREED BY THE UNDERSIGNED THAT THIS NOTE SHALL CONTINUE TO BE
EFFECTIVE OR SHALL BE REINSTATED, AS THE CASE MAY BE, IF AT ANY TIME PAYMENT IN WHOLE OR IN PART,
OF ANY SUMS DUE TO PAYEE OR ANY SUBSEQUENT HOLDER OF THIS NOTE ARE RESCINDED OR MUST OTHERWISE BE
RESTORED OR RETURNED BY THE PAYEE OR ANY SUBSEQUENT HOLDER OF THIS NOTE UPON THE INSOLVENCY,
BANKRUPTCY, DISSOLUTION, LIQUIDATION OR REORGANIZATION OF THE MAKER.
MAKER WAIVES TRIAL BY JURY IN ANY COURT IN ANY SUIT, ACTION OR PROCEEDING OR IN ANY MATTER
ARISING IN ANY WAY RELATED TO THIS NOTE OR THE DEBT EVIDENCED BY THIS NOTE, AND/OR IN ANY WAY
RELATED TO THE ENFORCEMENT OF ANY OF PAYEE’S OR ANY SUBSEQUENT HOLDER’S RIGHTS AND REMEDIES, HEREBY
ACKNOWLEDGING THAT IT MAKES THIS WAIVER KNOWINGLY, VOLUNTARILY AND ONLY AFTER CONSIDERATION OF THE
RAMIFICATIONS OF THIS WAIVER WITH ITS ATTORNEY(S).
The Maker and Payee entered into a certain Asset Purchase Agreement dated of even date
herewith under which the Maker agreed to purchase and the Payee agreed to sell, among other
matters, substantially all of the business assets of Payee (the “Acquired Assets”). This Note
represents a part of the purchase price under the said Asset Purchase Agreement. Except as
otherwise set forth in said Asset Purchase Agreement, the Maker has fully and thoroughly examined,
investigated and inspected to its full satisfaction, and is relying upon its own investigation,
examination and inspection as to the physical nature and condition of the Acquired Assets financed
hereunder. Except as may otherwise be provided for in said Asset Purchase Agreement, the Maker
shall make no claims and waive any and all claims with respect to the Assets.
This Note shall bind the successors and assigns of each party and all endorsers hereto and
shall inure to the benefit of the Payee, its successor and assigns.
This Note may not be modified or terminated orally.
If any term or provision of this Note, or any portion of any such term or provision, shall be
held invalid or against public policy, or if the application of the same to any person or
circumstance is held invalid or against public policy, then, the remainder of this Note (or the
remainder of such term or provision) and the application thereof to other persons or circumstances
shall not be affected thereby and shall remain valid and in full force and effect to the fullest
extent permitted by law.
This Note shall be governed by the laws of the Commonwealth of Massachusetts, and shall take
effect as an instrument under seal.
This Note will be interpreted and construed under the laws of the Commonwealth of
Massachusetts and will be considered to have been made, executed and performed in Massachusetts.
All claims, disputes and other matters in question arising out of this agreement will be decided by
proceedings instituted and litigated in a court of competent jurisdiction sitting in Massachusetts.
EXECUTED as a sealed instrument as of the 13th day of October, 2011.
| World Energy Solutions, Inc. | ||||||||
| By: | ||||||||
| Witness | Name: Xxxxxx X. Xxxxx | |||||||
| Title: President and COO | ||||||||
LANDLORD ESTOPPEL CERTIFICATE
DATE: October 13, 2011
| TO: | World Energy Solutions, Inc. 000 Xxxx Xx. Xxxxxxxxx, XX 00000 |
RE: 0 Xxxxx Xxxxx, Xxxxxxxx, XX 00000 (the “Property”)
Gentlemen:
The undersigned is the landlord of approximately 4,120 square feet of space (the “Leased Premises”)
at the Property pursuant to a lease between the undersigned, as landlord, and Northeast Energy
Solutions, LLC, as tenant (the “Tenant”), effective September 1, 2010 (the “Lease”). The
undersigned understands and agrees that World Energy Solutions, Inc. may rely on this letter.
The undersigned hereby certifies as follows:
| 1. | The Lease is in full force and effect and has not been modified, amended or supplemented in any way: | |
| 2. | There are no other representations, warranties, agreements, concessions, commitments, or other understandings between the undersigned and the Tenant regarding the Property other than as set forth in the Lease. | |
| 3. | The commencement date of the term of the Lease is five years and the term of the Lease will expire on November 30, 2015. | |
| 4. | Basic rent is currently $19,572 per annum, payable in equal monthly installments on or before the first day of each month at the rate of $1,631 per month. All rent and other sums due Landlord under the Lease due as of October 1, 2011 have been paid. The Tenant has paid in full all other sums presently due and payable under the Lease. | |
| 5. | The Tenant has possession of and is occupying the Leased Premises. The undersigned has completed and delivered, and the Tenant has accepted, the Leased Premises in the condition required by the Lease. All improvements and work required under the Lease to be made by the Landlord and all parking rights facilities required under the Lease to be furnished to the Leased Premises have been completed. | |
| 6. | Tenant has not assigned its interest in the Lease. The Premises, nor any portion thereof, has been sublet to any party. |
| 9. | To the best of the undersigned’s knowledge, the Tenant is not in default under any of the requirements, provisions, terms, conditions or covenants of the Lease to be performed or complied with by the Tenant, and no event has occurred or situation exists which would, with the passage of time and/or the giving of notice, constitute a default by the Tenant under the Lease. | |
| 10. | Any and all approvals required under the Lease, if any, have been given and remain in full force and effect. | |
| 11. | The Tenant is not in default under any of the terms, conditions, or covenants of the Lease to be performed or complied with by the Tenant, and no event has occurred or situation exists which would, with the passage of time and/or the giving of notice, constitute a default by the Tenant under the Lease. | |
| 12. | On the date of this Landlord Estoppel Certificate, there are no existing defenses, offsets, claims, or credits against and the payment of rent or the performance of the undersigned’s obligations under the Lease. | |
| 13. | The Tenant has paid to the undersigned a security deposit of $1,631. |
Very truly yours,
| Alcap Associates, LLC | ||||
By: |
||||
Name: |
||||
Title: |
||||
