SECURITIES PURCHASE AGREEMENT by and among UIL HOLDINGS CORPORATION, XCELECOM, INC. and TEI ACQUISITION CORPORATION November 30, 2006
EXHIBIT
2.6
EXECUTION
COPY
_____________________________________________________________________________________
by
and among
UIL
HOLDINGS CORPORATION,
XCELECOM,
INC.
and
TEI
ACQUISITION CORPORATION
November
30, 2006
_____________________________________________________________________________________
TABLE
OF CONTENTS
1.
|
DEFINITIONS
|
1
|
|
2.
|
PURCHASE
AND SALE OF THE COMPANY SHARES
|
7
|
|
(A)
Basic Transaction
|
7
|
||
(B)
Non-Contingent Payments
|
7
|
||
(i)
Closing Payments and Delivery of Note
|
7
|
||
(ii)
Closing Adjustments
|
8
|
||
(iii)
Cash Adjustments
|
8
|
||
(iv)
Accounts Receivable Adjustment
|
9
|
||
(C)
Contingent Payment
|
10
|
||
(i)
Earn Out Payment
|
10
|
||
(ii)
Earn Out Statement
|
10
|
||
(iii)
Earn Out Statement Review
|
11
|
||
(iv)
Adjusted EBITDA
|
11
|
||
(v)
Operations
and Transcations
|
12
|
||
(vi)
Change
of Control
|
12
|
||
(D)
The Closing
|
12
|
||
(E)
Deliveries at the Closing
|
12
|
||
3.
|
|||
ENTITIES
AND THE BUYER
|
13
|
||
(A)
Representations and Warranties of the Seller Entities
|
13
|
||
(B)
Representations and warranties of the Buyer
|
14
|
||
4.
|
16
|
||
(A)
Organization of the Company
|
16
|
||
(B)
Capitalization
|
17
|
||
(C)
Noncontravention
|
17
|
ii
(D)
Brokerβs Fees
|
17
|
|
(E)
Title to Assets
|
17
|
|
(F)
Financial Statements
|
17
|
|
(G)
Undisclosed Liabilities
|
18
|
|
(H)
Events Subsequent to Most Recent Fiscal Month End
|
18
|
|
(I)
Legal Compliance
|
19
|
|
(J)
Tax Matters
|
19
|
|
(K)
Real Property
|
20
|
|
(L)
Intellectual Property
|
21
|
|
(M)
Contracts
|
22
|
|
(N)
Seller Entity Liabilities
|
23
|
|
(O)
Tangible Assets
|
23
|
|
(P)
Litigation
|
23
|
|
(Q)
Employees
|
23
|
|
(R)
Employee Benefits
|
23
|
|
(S)
Environmental, Health and Safety Matters
|
24
|
|
(T)
Notes and Accounts Receivable
|
25
|
|
(U)
Powers of Attorney
|
25
|
|
(V)
Insurance
|
25
|
|
(W)
Intercompany Liabilities
|
25
|
|
(X)
Disclosure
|
25
|
|
(Y)
Disclaimer of Other Representations and Warranties
|
25
|
|
5.
|
[Intentionally
omitted]
|
25
|
6.
|
POST-CLOSING
CONVENANTS
|
25
|
(A)
General
|
25
|
|
(B)
Litigation Support
|
26
|
|
(C)
Transition
|
26
|
iii
(D)
Employee Benefits Plans
|
26
|
|
(E)
Confidentiality
|
27
|
|
(F)
Covenant not to Compete
|
27
|
|
(G)
Access to Information
|
28
|
|
(H)
Nonassignable Contracts and Permits
|
28
|
|
(I)
Surety Bonds
|
28
|
|
(J)
Certain Liabilities
|
28
|
|
7.
|
CONDITIONS
TO OBLIGATION TO CLOSE
|
29
|
(A)
Conditions to Obligation of the Buyer
|
29
|
|
(B)
Conditions to Obligation of the Seller
|
30
|
|
8.
|
REMEDIES
FOR BREACHES OF THIS AGREEMENT
|
31
|
(A)
Survival
|
31
|
|
(B)
Indemnification Provisions for Benefits of the Buyer
|
31
|
|
(C)
Indemnification Provisions for Benefits of the Seller Entities and
Their
Affiliates
|
32
|
|
(D)
Limitations
|
32
|
|
(E)
Losses Net of Insurance, Etc.
|
33
|
|
(F)
Termination of Indemnification
|
33
|
|
(G)
Procedures Relating to Indemnification
|
33
|
|
(H)
Exclusive Remedy
|
34
|
|
(I)
Collateral Sources
|
34
|
|
(J)
Mitigation
|
34
|
|
9.
|
TAX
MATTERS
|
35
|
(A)
Consolidated Return
|
35
|
|
(B)
Tax Periods Ending on or Before the Closing Date
|
35
|
|
(C)
Tax Periods Beginning Before and Ending After the Closing
Date
|
35
|
iv
(D)
Refund and Tax Benefits
|
36
|
|
(E)
Cooperation on Tax Matters
|
36
|
|
(F)
Tax Sharing Agreements
|
36
|
|
(G)
Transfer Taxes
|
37
|
|
(H)
Representation
|
37
|
|
(I)
Confidentiality
|
37
|
|
(J)
Section 338 Election
|
38
|
|
10.
|
XXXXXXXXXXX
|
00
|
(X)
Xxxxxxxxxxx xx Xxxxxxxxx
|
00
|
|
(X)
Effect of Termination
|
39
|
|
11.
|
MISCELLANEOUS
|
40
|
(A)
Press Releases and Public Announcements
|
40
|
|
(B)
No Third-Party Beneficiaries
|
40
|
|
(C)
Entire Agreement
|
40
|
|
(D)
Succession and Assignment
|
40
|
|
(E)
Counterparts
|
40
|
|
(F)
Headings
|
40
|
|
(G)
Notices
|
40
|
|
(H)
Governing Law
|
41
|
|
(I)
Venue
|
41
|
|
(J)
Waiver of Jury Trial
|
41
|
|
(K)
Amendments and Waivers
|
41
|
|
(L)
Severability
|
41
|
|
(M)
Expenses
|
42
|
|
(N)
Construction
|
42
|
|
(O)
Incorporation of Exhibits and Schedules
|
42
|
v
SECURITIES
PURCHASE AGREEMENT (βAgreementβ),
entered as of November 30, 2006 (the βEffective
Dateβ),
by
and among TEI Acquisition Corporation, a Florida corporation, or its permitted
assignee (the βBuyerβ),
UIL
Holdings Corporation, a Connecticut corporation (the βParentβ)
and
Xcelecom, Inc., a Connecticut corporation (the βSellerβ
and
together with the Parent, the βSeller
Entitiesβ).
The
Buyer and the Seller Entities are referred to collectively herein as the
βPartiesβ
and
individually as a βPartyβ.
1. DEFINITIONS.
βAccounts
Receivableβ
means
all accounts and notes receivable that are outstanding as of the Closing Date
and set forth in Section
A-1 of the Disclosure Schedule.
βAdjusted
EBITDAβ
has
the
meaning set forth in Section 2(c)(iv) below.
βAdjustment
Capβ
has the
meaning set forth in Section 2(b)(iv) below.
βAdjustment
Statementβ
has
the
meaning set forth in Section 2(b)(iii)(C) below.
βAdverse
Consequencesβ
means
all actions, suits, proceedings, hearings, investigations, charges, complaints,
claims, demands, injunctions, judgments, orders, decrees, rulings, damages,
dues, penalties, fines, costs, reasonable amounts paid in settlement,
liabilities, obligations, taxes, liens, losses, expenses, and fees, including
court costs and reasonable attorneys' fees and expenses.
βAgreementβ
has
the
meaning set forth in the preface above.
βAffidavitsβ
means
affidavits substantially in the forms attached as Exhibit
B.
βAffiliateβ
has
the
meaning set forth in Rule 12b-2 of the regulations promulgated under the
Securities Exchange Act.
βAffiliated
Groupβ
means
any affiliated group within the meaning of Code Β§1504(a) or any similar group
defined under a similar provision of state, local, or foreign law.
βAnnual
Financial Statementsβ
has
the
meaning set forth in Section 4(f) below.
βApproved
Transactionβ
has
the
meaning set forth in Section 2(c)(v) below.
βAssociateβ
has
the
meaning set forth in Rule 12b-2 of the regulations promulgated under the
Securities Exchange Act.
1
βBank
Guaranteeβ
means
the guarantee of the Company under the Credit Facility.
βBenefit
Plansβ
has
the
meaning set forth in Section 6(e)(i) below.
βBondsβ
has
the
meaning set forth in Section 6(i) below.
βBuyerβ
has
the
meaning set forth in the preface above.
βBuyer
Bank Financingβ
shall
mean loans to the Buyer or the Company (or loans made to the Buyer and
guaranteed by the Company, or vise versa), or loans made to the shareholders
of
the Buyer to assist the Buyer in facilitating the transactions contemplated
by
this Agreement, from banks and other financial institutions for the sole purpose
of (a) financing or refinancing all or a portion of the Purchase Price, and
(b)
providing working capital and funding or refinancing capital expenditures for
the Company after the Closing Date.
βBuyer
Disclosure Letterβ
means
the disclosure letter provided by the Buyer and attached hereto as Annex
A.
βBuyer
Welfare Plansβ
means
any welfare plan as defined in ERISA Section 3(1) which the Buyer maintains
or
to which the Buyer contributes on or after the Closing.
βCash
Adjustment Periodβ
has
the
meaning set forth in Section 2(b)(iii) below.
βCash
Shortfallβ
has
the
meaning set forth in Section 2(b)(iii)(B) below.
βCash
Statementβ
has
the
meaning set forth in Section 2(b)(iii) below.
βCash
Surplusβ
has
the
meaning set forth in Section 2(b)(iii)(A) below.
βChange
in Controlβ
has
the
meaning set forth in Section 2(c)(vi) below.
βClosingβ
has
the
meaning set forth in Section 2(d) below.
βClosing
Dateβ
has
the
meaning set forth in Section 2(d) below.
βClosing
Paymentβ
has
the
meaning set forth in Section 2(b)(i) below.
βCodeβ
means
the Internal Revenue Code of 1986, as amended.
βCollateral
Sourceβ
has
the
meaning set forth in Section 8(e) below.
βCompanyβ
means
Terryβs Electric, Inc., a Florida corporation.
βCompany
Shareβ
means
any share of the common stock, $1.00 par value per share, of the
Company.
βConfidential
Informationβ
means
any written, oral or visual information in any medium concerning the businesses
and affairs of the Company or any Party that is not already generally available
to the public or, under the circumstances, should reasonably be considered
confidential or proprietary.
βContested
Adjustment Disputeβ
has
the
meaning set forth in Section 2(b)(iii)(C) below.
2
βContested
Adjustment Noticeβ
has
the
meaning set forth in Section 2(b)(iii)(C) below.
βContested
Adjustmentsβ
has
the
meaning set forth in Section 2(b)(iii)(C) below.
βCredit
Facilityβ
means
that Amended and Restated Credit Agreement, dated as of October 25, 2002, as
amended to date, among Bank of America, N.A., successor by merger to Fleet
National Bank (βBank of Americaβ) and the other lending institutions named
therein, the Seller and Bank of America, as agent for itself and such other
lending institutions.
βDisclosure
Scheduleβ
means
the disclosure schedules provided by the Seller Entities and attached hereto
as
Annex
B,
as the
same may be amended in accordance with the terms hereof.
βDisbursementβ
has
the
meaning set forth in Section 2(b)(iii) below.
βEarn
Out Objection Disputeβ
has
the
meaning set forth in Section 2(c)(iii) below.
βEarn
Out Objection Noticeβ
has
the
meaning set forth in Section 2(c)(iii) below.
βEarn
Out Objection Periodβ
has
the
meaning set forth in Section 2(c)(iii) below.
βEarn
Out Periodβ
has
the
meaning set forth in Section 2(c)(i) below.
βEarn
Out Paymentβ
has
the
meaning set forth in Section 2(c)(i) below.
βEarn
Out Statementβ
has
the
meaning set forth in Section 2(c)(ii) below.
βEffective
Dateβ
has
the
meaning set forth in the preface above.
βEmployeeβ
has
the
meaning set forth in Section 4(r) below.
βEmployee
Benefit Planβ
has
the
meaning set forth in Section 4(r)(i) below.
βEnvironmental,
Health, and Safety Requirementsβ
shall
mean all federal, state, local and foreign statutes, regulations, ordinances
and
similar provisions having the force or effect of law and all judicial and
administrative orders and determinations concerning public health and safety,
worker health and safety, and pollution or protection of the environment,
including without limitation all those relating to the presence, use,
production, generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any Hazardous Substances.
βERISAβ
means
the Employee Retirement Income Security Act of 1974, as amended.
βFinancial
Statementsβ
has
the
meaning set forth in Section 4(f) below.
βFMIβ
means
Fails Management Institute, transaction advisor to the Company.
βFull
Year Earn Out Statementβ
has
the
meaning set forth in Section 2(c)(ii) below.
βGAAPβ
means
United States generally accepted accounting principles as in effect from time
to
time.
βGross
Receiptsβ
has
the
meaning set forth in Section 2(b)(iii) below.
3
βHazardous
Substancesβ
shall
have the meaning set forth in Section 101(14) of the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act (βCERCLAβ), 42 U.S.C. Section
9601(14).
βXxxxxxxxβ
means
Houlihan, Lokey, Xxxxxx and Zukin, financial advisor to the Parent.
βIncome
Taxβ
means
any federal, state, local, or foreign income or franchise tax, including any
interest, penalty, or addition thereto, whether disputed or not.
βIncome
Tax Returnβ
means
any return, declaration, report, claim for refund, or information return or
statement relating to Income Taxes, including any schedule or attachment
thereto, and including any amendment thereof.
βIndemnified
Partyβ
has
the
meaning set forth in Section 8(g) below.
βIndemnifying
Partyβ
has
the
meaning set forth in Section 8(g) below.
βIndependent
Accountantβ
means
a
nationally recognized accounting firm jointly selected by Buyer and Seller;
provided,
that if
Buyer and Seller cannot agree on an accounting firm, Buyer and Seller shall
each
select a nationally recognized accounting firm and such accounting firms will
jointly select an accounting firm.
βIntellectual
Propertyβ
means
(a) all inventions (whether patentable or unpatentable and whether or not
reduced to practice), all improvements thereto, and all patents, patent
applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and reexaminations
thereof, (b) all trademarks, service marks, trade dress, logos, trade names,
and
corporate names, together with all translations, adaptations, derivations,
and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connection therewith, (d) all Internet domain names and universal
resource locators (βURLsβ),
(e)
all mask works and all applications, registrations, and renewals in connection
therewith, (f) all trade secrets and confidential business information
(including ideas, research and development, know-how, formulas, compositions,
manufacturing and production processes and techniques, technical data, designs,
drawings, specifications, customer and supplier lists, pricing and cost
information, and business and marketing plans and proposals), (g) all computer
software (including data and related documentation), and (h) all copies and
tangible embodiments of each of the foregoing, in whatever form or
medium.
βKnowledge,β
or
phrases of similar import, with respect to an individual, means an individual
shall be deemed to have knowledge of a particular fact or other matter if that
individual is actually aware of that fact or matter. With respect to a Person,
other than an individual, "Knowledge,"
or
phrases of similar import, means a Person shall be deemed to have knowledge
of a
particular fact or other matter if any individual who is serving as an executive
officer of that Person (or in any similar capacity) is actually aware of that
fact or other matter, provided that (a) the Buyer shall also be deemed to have
knowledge of a fact or other matter if any of B. Xxxxxxx Xxxxxxx, Xxxxxx
Xxxxxxx, Xxx Xxxxxxx, Xxxx Xxxxx, or Xxxx Xxxxx has actual cognizant knowledge
of the fact or matter, and (b) the Parent shall only be deemed to have knowledge
of a fact or other matter if the chief executive officer or chief financial
officer of the Parent is actually aware of such fact or other
matter.
βMaterial
Adverse Effectβ
means
any change, event, fact, occurrence or effect (direct or indirect) which might
reasonably be expected to have a material adverse effect on the assets,
financial condition or results of operation of the Company, other than any
change, fact, circumstance or event (i) generally affecting the industry in
which the Company conducts its business, or resulting from general
4
economic
or market conditions or changes in accounting principles, laws, regulations,
or
regulatory policies of general applicability (or interpretations thereof),
(ii)
resulting from actions or omissions of a Person taken with the prior written
consent of the Parties in contemplation of the transactions contemplated hereby,
or (iii) resulting from the announcement or execution of this Agreement or
the
transactions contemplated herein.
βMost
Recent Financial Statementsβ
has
the
meaning set forth in Section 4(f) below.
βMost
Recent Fiscal Month Endβ
has
the
meaning set forth in Section 4(f) below.
βNet
Cash Amountβ
has
the
meaning set forth in Section 2(b)(iii) below.
βNoteβ
means
a
promissory note substantially in the form attached as Exhibit
A.
βNote
Amountβ
has
the
meaning set forth in Section 2(b)(i) below.
βOrdinary
Course of Businessβ
means
the ordinary course of business consistent with past custom and practice
(including with respect to quantity and frequency).
βOverlap
Periodβ
has
the
meaning set forth in Section 9(c) below.
βParentβ
has
the
meaning set forth in the preface above.
βPartyβ
or
βPartiesβ
has
the
meaning set forth in the preface above.
βPersonβ
means
an individual, a governmental entity (or any department, agency, or political
subdivision thereof), or a partnership, limited liability company, limited
liability partnership, corporation, association, joint stock company, trust,
joint venture, unincorporated organization or similar entity.
βProjected
Adjusted EBITDAβ
has
the
meaning set forth in Section 2(c)(vi) below.
βProjected
Earn Out Statementβ
has
the
meaning set forth in Section 2(c)(ii) below.
βPurchase
Priceβ
has
the
meaning set forth in Section 2(b) below.
βRepresentativesβ
of any
Person means the officers, directors, employees, accountants, counsel,
investment bankers, financial advisors and other representatives of such
Person.
βRequisite
Consentsβ
has
the
meaning set forth in Section 7(a)(v) below.
βSection
338(h)(10) Electionβ
has
the
meaning set forth in Section 9(j)(i) below.
βSecurities
Actβ
means
the Securities Act of 1933, as amended.
βSecurity
Agreementβ
means
the Guarantor Security Agreement, dated as of June 30, 2005, by the Company
in
favor of the Agent (as defined in the Credit Facility) as collateral security
for certain Seller Entity Liabilities.
βSecurities
Exchange Actβ
means
the Securities Exchange Act of 1934, as amended.
5
βSecurity
Interestβ
means
any mortgage, pledge, lien, encumbrance, charge, or other security interest,
other than (a) mechanic's, materialmen's, and similar liens, (b) liens for
taxes
not yet due and payable or for taxes that the taxpayer is contesting in good
faith through appropriate proceedings, (c) purchase money liens and liens
securing rental payments under capital lease arrangements, and (d) other liens
arising in the Ordinary Course of Business and not incurred in connection with
the borrowing of money.
βSellerβ
has
the
meaning set forth in the preface above.
βSeller
401(k) Planβ
has
the
meaning set forth in Section 6(e) below.
βSeller
Entitiesβ
has
the
meaning set forth in the preface above.
βSeller
Entity Liabilitiesβ
shall
mean existing actual or contingent liabilities imposed on the Company by the
Seller, the Parent, or any Affiliate of the Seller or the Parent other than
the
Company, including (a) the Credit Facility, (b) the Bank Guarantee, (c) the
Security Agreement, and (d) each other agreement or liability referenced in
Section
4(n) of the Disclosure Schedule.
βStock
Pledge and Security Agreementβ
means
a
stock pledge and security agreement substantially in the form attached hereto
as
Exhibit
C.
βStub
Period Adjusted EBITDAβ
has
the
meaning set forth in Section 2(c)(vi) below.
βSubordination
Capβ
has
the
meaning set forth in Section 2(b)(i)(B) below.
βSubsidiaryβ
means
any corporation (or other entity) with respect to which a specified Person
or a
Subsidiary thereof owns a majority of the common stock (or analogous equity
interest, as applicable) or has the power to vote or direct the voting of
sufficient securities to elect a majority of members of the board of directors
(or analogous governing body, as applicable).
βTax
Returnsβ
means
federal, state, foreign and local Tax reports, returns, information returns
and
other documents.
βTaxesβ
or
βTaxβ
shall
mean all taxes, assessments, charges, duties, fees, levies or other governmental
charges, including, without limitation, all federal, state, local, foreign
and
other income, franchise, profits, capital gains, capital stock, transfer, sales,
use, registration, value added, occupation, property, excise, severance,
windfall profits, stamp, license, payroll, withholding and other taxes,
assessments, charges, duties, fees, levies or other governmental charges of
any
kind whatsoever (whether payable directly or by withholding and whether or
not
requiring the filing of a Tax Return), all estimated taxes, deficiency
assessments, additions to tax, penalties and interest and shall include any
liability for such amounts as a result either of being a member of a combined,
consolidated, unitary or Affiliated Group or of a contractual obligation to
indemnify any Person.
βTaxing
Authoritiesβ
means
the Internal Revenue Service and any other federal, state or local authority
which has the right to impose Taxes on the Company or a Seller
Entity.
βThird
Party Claimβ
has
the
meaning set forth in Section 8(g) below.
βTransferred
Employeesβ
has
the
meaning set forth in Section 6(e)(i) below.
βTwelve-Month
Financial Statementsβ
has
the
meaning set forth in Section 2(c)(ii) below.
6
βUncollected
A/Rβ
has the
meaning set forth in Section 2(b)(iv)(A) below.
β338
Indemnity Amountβ
has
the
meaning set forth in Section 9(j)(iii) below.
(a) Basic
Transaction.
On and
subject to the terms and conditions of this Agreement, the Buyer agrees to
purchase from the Seller, and the Seller agrees to sell to the Buyer, all of
its
Company Shares for the consideration specified below in this Section
2.
(i) Closing
Payment and Delivery of Note.
At the
Closing, the Buyer shall:
(A) pay
to
the Seller immediately available funds in the amount of One Million Dollars
($1,000,000), by cashierβs check or wire transfer to the Seller's designated
account(s) (the βClosing
Paymentβ);
and
(B) deliver
to the Seller a promissory note substantially in the form of Exhibit
A
(the
βNoteβ).
The
original principal amount of the Note shall be an amount equal to Two Million
Seven Hundred Fifty Thousand Dollars ($2,750,000) (the βNote
Amountβ),
and
the Note shall bear interest at a fixed rate equal to seven percent (7%) per
annum and be amortized over a seven-year term, with interest and principal
paid
quarterly commencing fifteen (15) days after the close of the calendar quarter
next following the Closing Date. The Buyer may prepay the principal balance
on
the Note in whole or in part at any time without penalty during the term of
the
Note. If trailing twelve-month EBITDA of the Company at any time is less than
One Million Dollars ($1,000,000), the Buyer shall have the option of converting
the Note to interest-only quarterly payments until such time as trailing
twelve-month EBITDA exceeds One Million Dollars ($1,000,000). At such time
as
trailing twelve-month EBITDA exceeds One Million Dollars ($1,000,000), the
amortization of the outstanding principal balance shall be adjusted to provide
for full repayment of principal and interest, on a quarterly basis, over the
then-remaining portion of the original seven-year term. Notwithstanding the
foregoing, the remaining principal sum and all accrued interest shall be due
and
payable at the end of the seven-year term in any event. As security for the
Note, the Buyer hereby grants to the Seller (1) a Security Interest in all
of
the assets of the Company, which Security Interest shall be junior, subordinate,
and inferior only to that Security Interest securing Buyer Bank Financing up
to
an aggregate amount equal to Six Million Dollars ($6,000,000) of principal
plus
interest and other related charges (βSubordination
Capβ)
and
senior to all other Security Interests, and (2) a first priority Security
Interest in all of the shares of capital stock of the Company and the Buyer
now
owned or hereafter acquired by the Buyer or the individuals or entities listed
on Schedule
A
to the
Stock Pledge and Security Agreement, under the terms and subject to the
conditions of the Stock Pledge and Security Agreement. The Seller shall execute
and deliver in favor of each bank or other financial institution providing
Buyer
Bank Financing a subordination agreement on a customary form under which the
Seller shall subordinate its Security Interest in the assets of the Company
and
rights to payment from the Buyer, subject to permitted payments, only to the
Security Interest and rights of the banks or financial institutions providing
such Buyer Bank Financing up to the Subordination Cap. The holders of any
Security Interests other than those held by those providing Buyer Bank Financing
up the Subordination Cap shall execute and deliver in favor of the Seller a
subordination agreement on a customary form under which such holders shall
subordinate their Security Interests and rights to payments to the Security
Interest and rights of the Seller.
7
The
purchase price for the Company Shares (the βPurchase
Priceβ)
shall
equal the sum of (x) the Closing Payment, as adjusted pursuant to Section
2(b)(ii), (y) the Note Amount, as adjusted pursuant to Sections 2(b)(iii) and
2(b)(iv), and (z) the Earn Out Payment, and shall be payable as provided in
this
Section 2. The Purchase Price assumes that at or prior to the Closing Date,
the
Seller shall have (1) caused the Company to distribute to the Seller all the
cash and cash equivalents (other than security deposits and similar monies
being
held by other as security for the Companyβs satisfaction of certain
obligations), and (2) canceled or forgiven at or prior to the Closing Date
all
Accounts Payable and notes payable by the Company to the Seller or the Parent.
The Parties agree that the Seller Entities shall be solely responsible for
any
Tax consequences (positive or negative) arising out of the transactions
contemplated by the preceding sentence.
(ii) Closing
Adjustments.
Irrespective of the actual closing date, the Closing shall be deemed to have
occurred as at November 1, 2006. Consequently, the Parties shall cooperate
to
assure at or prior to Closing that they are in agreement with any additions
to
or deductions from the Closing Payment that will be required in order to put
the
Buyer and the Seller in the same position that they would have been in if
Closing should have
actually
occurred on November 1, 2006.
(iii) Cash
Adjustments.
At
least two (2) days prior to the Effective Date, the Seller shall have prepared
and delivered to the Buyer an unaudited statement of cash activity for the
Company (the βCash
Statementβ)
for
the period beginning November 1, 2006 and ending on the Effective Date (the
βCash
Adjustment Periodβ).
The
Cash Statement shall set forth the following amounts: (1) total cash receipts
to
the Company during the Cash Adjustment Period (βGross
Receiptsβ);
and
(2) total cash disbursements from the Company during the Cash Adjustment Period
(βDisbursementsβ).
Gross
Receipts and Disbursements shall be determined by reference to the Sellerβs cash
management system reports from Bank of America. The Cash Statement shall also
set forth a calculation of the βNet
Cash Amountβ
during
the Cash Adjustment Period, which shall equal Gross Receipts, less Disbursements
plus any deposits in transit less all outstanding disbursement checks issued
on
or after November 1, 2006. The Seller shall also make available to the Buyer
copies of all work papers and other documents and data used to prepare the
Cash
Statement (and any items therein) and the Net Cash Amount calculation. The
Buyer
shall have the right to dispute the Cash Statement (and any items therein)
and
the Net Cash Amount calculation and make any proposed adjustments thereto as
provided by Section 2(b)(iii)(C).
(A) If
the
Net Cash Amount, as finally determined in accordance with Section 2(b)(iii)(C),
is a positive number (such surplus being a βCash
Surplusβ),
then
the Seller shall, subject to Section 2(b)(iii)(C), deliver to the Buyer cash
in
an amount equal to such Cash Surplus within thirty (30) days of such final
determination. Notwithstanding anything to the contrary in this Agreement,
if
the Seller fails to pay or otherwise deliver the Cash Surplus to the Buyer
in
accordance with the prior sentence, then the Buyer shall have the right to
set
off against the principal amount of the Note the amount not paid or delivered
by
the Seller of such Cash Surplus, without taking into account any basket or
other
deductible set forth herein.
(B) If
the
Net Cash Amount, as finally determined in accordance with Section 2(b)(iii)(C),
is a negative number (such shortfall being a βCash
Shortfallβ),
then
the Buyer shall, subject to Section 2(b)(iii)(C), deliver to the Parent cash
in
an amount equal to such Cash Shortfall within thirty (30) days of such final
determination.
(C) The
Buyer
shall have until fifteen (15) days after the delivery of the Cash Statement
to
review the calculation set forth therein and propose any adjustments
8
thereto.
The Buyer agrees that it shall not propose adjustments to, or dispute portions
of, the Cash Statement prepared by the Seller if such adjustments or disputes
involve changes in or question the methodology or the practices of the Seller
used in preparing the balance sheet of the Company for the Most Recent Fiscal
Month End. All adjustments proposed by the Buyer shall be set out in detail
in a
written statement delivered to the Seller (an βAdjustment
Statementβ)
and
deemed accepted unless the Seller shall object in writing to such proposed
adjustments within fifteen (15) days of delivery of the Adjustment Statement
(the proposed adjustment or adjustments to which the Seller objects are referred
to herein as the βContested
Adjustmentsβ
and
the
objection notice is referred to herein as the βContested
Adjustment Noticeβ).
If
the Seller delivers a Contested Adjustment Notice, the Seller and the Buyer
shall attempt in good faith to resolve their dispute (a βContested
Adjustment Disputeβ)
regarding the Contested Adjustments, but if a final resolution thereof is not
obtained within fifteen (15) days after delivery of said Contested Adjustment
Notice, the Independent Accountant shall resolve any remaining disputes
concerning the Contested Adjustments. If the Independent Accountant is requested
to resolve a Contested Adjustment Dispute, then (A) the Buyer and the Seller
shall each submit to the Independent Accountant in writing, not later than
thirty (30) days after the Independent Accountant is retained for such purpose,
their respective positions with respect to the Contested Adjustments, together
with such supporting documentation as they deem necessary or as the Independent
Accountant reasonably requests, and (B) the Independent Accountant shall, within
thirty (30) days after receiving the positions of both the Buyer and the Seller
and all supplementary supporting documentation requested by the Independent
Accountant, render its decision as to the Contested Adjustments, which decision
shall be final and binding on, and non-appealable by, the Parties. The decision
of the Independent Accountant shall also include a certificate of the
Independent Accountant setting forth the final Net Cash Amount. The fees and
expenses of the Independent Accountant related to the resolution of Contested
Adjustments shall be paid by the Party whose estimate of the Net Cash Amount
is
farthest from the Independent Accountantβs calculation of Net Cash
Amount.
(iv) Accounts
Receivable Adjustment.
The
Buyer shall use commercially reasonable efforts to collect the Accounts
Receivable after Closing; provided, however, that commercially reasonable
efforts shall not include either the suspension of further services to existing
customers or the commencement of legal action or any other proceeding to collect
any such account except as set forth below. Notwithstanding the foregoing,
the
Buyer shall provide the Seller, on the tenth business day of each of the six
(6)
calendar months after Closing, with a report detailing outstanding Accounts
Receivable. The Buyer shall also provide the Seller with prompt notice upon
becoming aware that any customer of the Company has filed or plans to file
for
bankruptcy, or receiving notice that any customer is refusing to pay, or
asserting a right to make a set-off against, any Account Receivable. Upon the
Sellerβs request, the Buyer shall, at the sole cost and expense of the Seller
and for the account of the Seller (A) file protective liens in respect of any
such Accounts Receivable as directed by the Seller, to the extent that such
protective liens are lawful and timely, and (B) commence legal action in respect
thereof and pursue the same in the name and for the account of the Seller as
reasonably directed by the Seller. The Seller shall indemnify the Buyer for
any
liability imposed on the Buyer as a consequence of its compliance with
instructions from the Seller as contemplated by the preceding sentence. To
the
extent only those Accounts Receivable are not collected in full within one
hundred eighty (180) days after the Closing Date, the Buyer shall be entitled
to
a reduction of the then-outstanding principal balance of the Note in the amount
of such uncollected amount (βUncollected
A/Rβ),
such
amount not to exceed $500,000 (βAdjustment
Capβ).
To
the extent the Uncollected A/R exceeds the balance of the Note, the Buyer shall
be entitled to a reduction of the then-outstanding principal balance of the
Note
until such balance equals $0.00, and the Seller shall pay to
9
the
Buyer
the amount by which the Uncollected A/R exceeds such balance of the Note,
subject always to the Adjustment Cap, within thirty (30) days of delivery of
Buyerβs written request for the same. If the Seller reimburses the Buyer for any
Uncollected A/R, or if the Note is reduced in lieu of reimbursement, the Buyer
shall assign all of its right, title and interest in and to all such Uncollected
A/R to the Seller. The Buyer agrees to make itself available for discussion
regarding any Uncollected A/R assigned to the Seller to assist the Seller in
its
own collection efforts in connection therewith. The Seller shall be entitled
to
pursue all lawful means to collect the Uncollected A/R assigned to it by the
Buyer pursuant to this subparagraph (iv).
(c) Contingent
Payment.
(i) Earn
Out Payment.
During
the period beginning on January 1, 2008 and continuing through December 31,
2012
(βEarn
Out Periodβ),
the
Buyer shall pay to the Parent an amount equal to thirty percent (30%) of the
Adjusted EBITDA for each calendar year in excess of $1.8 million (the
βEarn
Out Paymentβ),
subject to an annual Earn Out Payment cap equal to $400,000 and an aggregate
Earn Out Payment cap over the Earn Out Period equal to $1.5 million. The Buyer
shall pay each Earn Out Payment by cashierβs check or wire transfer to the
Parent's designated account(s) no later than April 1 of each year in respect
of
the immediately preceding calendar yearβs Adjusted EBITDA, commencing April 1,
2009. No Earn Out Payment shall be due or payable in respect of any period
after
December 31, 2012. Acknowledging the Parentβs reliance upon the anticipated
share of the Earn Out Payment as an express condition of entering into this
Agreement, the Buyer shall use commercially reasonable efforts to adequately
service and maintain its customers in accordance with good industry practice,
and use its commercially reasonable efforts to timely recognize and realize
the
maximum revenue generated therefrom during the entire Earn Out
Period.
(ii) Earn
Out Statement.
On or
before April 1 of each year in respect of the immediately preceding calendar
year of the Earn Out Period, the Buyer shall prepare and deliver to the Parent
a
statement setting forth a calculation of the Adjusted EBITDA for the previous
calendar year, and the Earn Out Payment payable hereby, together with a
certificate of a duly authorized officer of the Buyer certifying the foregoing
(the βFull
Year Earn Out Statementβ).
If a
Change of Control has occurred prior to December 31, 2012, within 30 days
following the event giving rise to a Change of Control, the Buyer shall prepare
and deliver to the Parent a statement setting forth a calculation of the
Projected Adjusted EBITDA, and the Earn Out Payment payable hereunder, together
with a certificate of a duly authorized officer of the Buyer certifying the
foregoing (the βProjected
Earn Out Statementβ).
The
Full Year Earn Out Statement or the Projected Earn Out Statement, shall be
referred to as the βEarn
Out Statementβ.
Such
Earn Out Statement shall be prepared (A) in a manner consistent with
Section
2(c) of the Disclosure Schedule,
which
sets forth an example of the calculation of Adjusted EBITDA for the calendar
year ending December 31,
2005
and (B) in accordance with GAAP consistent with the Most Recent Financial
Statements. The Buyer shall also prepare and deliver to the Parent (I) a
preliminary draft of the Earn Out Statement on or before February 15 of each
year in respect of the immediately preceding calendar year, which draft shall
be
non-binding and subject to change in the Buyerβs reasonable discretion, and (II)
the audited financial statements of Buyer for each twelve-month period beginning
on January 1 and ending as of and through December 31 for each calendar year
during the Earn Out Period (the βTwelve-Month
Financial Statementsβ),
on or
before March 15 of the following year.
10
(iii) Earn
Out Statement Review.
The
Parent shall have the right to review, for a period of 60 days commencing on
the
date of delivery by the Buyer of each Earn Out Statement (each period, an
βEarn
Out Objection Periodβ)
(and
the Buyer shall during such period provide reasonable access during normal
business hours), all books, records and supporting work of the Buyer related
to
the calculation of the Adjusted EBITDA or the Projected Adjusted EBITDA and
the
Earn Out Payment and the preparation of such Earn Out Statement. The Parent
shall have the right during each Earn Out Objection Period to provide written
notice to the Buyer of any objections to any item of calculation in the Earn
Out
Statement (the βEarn
Out Objection Noticeβ).
If
the Parent fails to timely object to the calculations set forth in the Earn
Out
Statement during an Earn Out Objection Period, then the Earn Out Statement
for
the calendar year shall become final and binding on the Parties and the Earn
Out
Payment, if any, shall be as set forth in the Earn Out Statement. If the Parent
provides a timely Earn Out Objection Notice, then the Parties shall attempt
in
good faith to resolve any dispute concerning the item(s) subject to such Earn
Out Objection Notice (the βEarn
Out Objection Disputeβ).
If
the Parties do not resolve any Earn Out Objection Dispute within 30 days after
the date of delivery of an Earn Out Objection Notice, which 30-day period may
be
extended by written agreement of the Buyer and the Parent, such dispute shall
be
resolved fully by an Independent Accountant. If the Independent Accountant
is
requested to resolve an Earn Out Objection Dispute, then (A) the Buyer and
the
Seller shall each submit to the Independent Accountant in writing, not later
than thirty (30) days after the Independent Accountant is retained for such
purpose, their respective positions with respect to the Earn Out Objection
Dispute, together with such supporting documentation as they deem necessary
or
as the Independent Accountant reasonably requests, and (B) the Independent
Accountant shall, within thirty (30) days after receiving the positions of
both
the Buyer and the Seller and all supplementary supporting documentation
requested by the Independent Accountant, render its decision as to the Earn
Out
Objection Dispute, which decision shall be final and binding on, and
non-appealable by, the Parties. The fees and expenses of the Independent
Accountant related to any Earn Out Objection Dispute shall be paid by the Party
whose position with respect to the Earn Out Objection Dispute is farthest from
the Independent Accountantβs calculation. Any Earn Out Payment to be made by the
Buyer to the Parent hereby shall be paid in cash by wire transfer of immediately
available funds.
(iv) Adjusted
EBITDA.
As used
herein, the term βAdjusted
EBITDAβ
shall
mean, with respect to the Company, an amount equal to (x) the consolidated
income before income Taxes for such period, plus (y) all depreciation and
amortization expense and all interest expense deducted in calculating the
consolidated income described in clause (x) above (and, in all events, before
deducting all federal, state and local income Taxes), all as determined in
accordance with GAAP,
based on the books and records of the Company maintained in the Ordinary Course
of Business. Notwithstanding
any provision herein to the contrary, in computing Adjusted EBITDA, (A) the
Parties shall not deduct (1) expenses
incurred by the Company relating to the transactions contemplated by this
Agreement to the extent that such costs or expenses otherwise would not have
been incurred by the Company; (2)
expenses
relating
to any advisor or management fees to the extent that such expenses are not
paid
or payable in the ordinary course of business consistent with past practice;
(3)
expenses relating to any severance payment; or (4) expenses relating to any
incentive compensation payments to
any
stockholder of the Buyer or any affiliate of such stockholder to the extent
that
such payments are more than reasonable compensation for services provided or
not
paid or payable in the ordinary course of business consistent with past
practice; and (B) the Parties shall deduct reasonable compensation and benefits
payable by the Company to
11
stockholders
of the Buyer who are employees of the Company and to Affiliates of stockholders
of the Buyer who are employees of the Company.
(v) Operations
and Transactions.
Prior
to January 1, 2013, the Buyer shall operate the business of the Company in
the
Ordinary Course of Business and shall not permit or
cause
any Company to acquire the assets or equity of any other entity outside the
Ordinary Course of Business or sell or otherwise transfer any assets outside
the
Ordinary Course of Business, in either case without the prior written consent
of
the Parent which consent shall not be unreasonably withheld or delayed. Any
such
acquisition or sale to which the Parent has consented is referred to herein
as
an βApproved
Transaction.β
Notwithstanding anything in this Agreement to the contrary, the financial
results, including costs and expenses, of Approved Transactions shall be
included in Adjusted EBITDA or the Projected Adjusted EBITDA in a manner to
be
mutually agreed by the Parties in connection with the grant of consent thereto
by the Parent.
(vi) Change
of Control.
If
there occurs prior to January 1, 2013 (A) any liquidation, dissolution or
winding up of the Company after the Closing, either voluntary or involuntary,
(B) the acquisition of the Company, by an entity other than an Affiliate of
the
Buyer, by means of any transaction or series of related transactions (including,
without limitation, any reorganization, merger or consolidation, but excluding
(x) any merger effected exclusively for the purpose of changing the domicile
of
the corporation, (y) any transfer to an Associate of any stockholder of the
Buyer resulting from the death of such stockholder or (z) any transfer among
the
stockholders of the Buyer), or (C) a sale outside the Ordinary Course of
Business of all, substantially all or any material part of the assets acquired
pursuant to the terms of this Agreement (clauses (A), (B) and (C) are
collectively referred to as a βChange
in Controlβ),
then
the Buyer shall pay to the Parent an amount equal to the aggregate Earn Out
Payment cap over the Earn Out Period, less
the
amount equal to all Earn Out Payments made to date , in full satisfaction of
its
obligations under this Section 2(c).
If a
Change of Control occurs prior to January 1, 2013, the Buyer shall prepare
and
deliver to the Parent a statement setting forth a calculation of the Adjusted
EBITDA for the period beginning January 1 of the calendar year during which
the
Change of Control occurs and ending on the date of the event giving rise to
a
Change of Control (such amount, the βStub
Period Adjusted EBITDAβ).
The
βProjected
Adjusted EBITDAβ
shall
equal the product of (A) the Stub Period Adjusted EBITDA divided by the number
of days in such stub period, multiplied by (B) the number of days in the period
between the date of the event giving rise to a Change of Control through
December 31, 2012.
(d) The
Closing.
The
closing of the transactions contemplated by this Agreement (the βClosingβ)
shall
be deemed to have taken place at the offices of Xxxxxx and Xxxx LLP in Stamford,
Connecticut on November 1, 2006, commencing at 10:00 a.m. local time, or such
other date as the Parties may mutually determine in writing (the βClosing
Dateβ).
The
exchange of copies of this Agreement and all ancillary documents and of all
signature pages by electronic mail or facsimile transmission shall constitute
effective delivery hereof and thereof as to the Parties and may be used in
lieu
of the originals for all purposes. Signatures of the Parties transmitted by
electronic mail or facsimile shall be deemed to be their original signatures
for
all purposes.
(e) Deliveries
at the Closing.
At the
Closing, (i) the Seller will deliver to the Buyer the various certificates,
instruments, and documents referred to in Section 7(a) below, (ii) the Buyer
will deliver to the Seller the various certificates, instruments, and documents
referred to in Section 7(b) below, (iii) the Seller will deliver to the Buyer
stock certificates representing all of
12
its
Company Shares, endorsed in blank or accompanied by duly executed assignment
documents, and (iv) the Buyer will deliver to the Seller the Closing Payment
and
the Note, together with a copy of the duly-filed UCC-1 financing statement
and
all stock certificates representing the stock of the Company and the Buyer
accompanied by stock powers duly executed in blank by the Buyer and the
individuals listed on Schedule
A
to the
Stock Pledge and Security Agreement in support of the Sellerβs Security
Interest.
(a) Representations
and Warranties of the Seller Entities.
Each of
the Seller Entities represents and warrants to the Buyer that except as set
forth in the Disclosure Schedule, the statements contained in this Section
3(a)
are correct and complete as of the date hereof.
(i) Organization.
Each of
the Seller Entities is duly incorporated and validly existing under the laws
of
the State of Connecticut.
(ii) Authorization
of Transaction.
Each of
the Seller Entities has corporate power and authority to execute and deliver
this Agreement and to perform its obligations hereunder. The execution, delivery
and performance of this Agreement and all other agreements and transactions
contemplated hereby have been duly authorized by all required corporate
proceedings of each of the Seller Entities and no other corporate proceedings
are necessary to authorize this Agreement and such agreements contemplated
hereby and transactions contemplated hereby and thereby. This Agreement
constitutes the valid and legally binding obligation of each of the Seller
Entities, enforceable in accordance with its terms and conditions,
except
to
the extent that enforceability may be limited by bankruptcy, insolvency,
moratorium, reorganization and other laws affecting the enforcement of
creditors' rights generally and by general principles of equity.
(iii) Government
Authorizations.
Except
as set forth in Section 3(a)(iii)
of the Disclosure Schedule,
neither
Seller Entity is required to give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any government or governmental agency
in order to consummate the transactions contemplated by this
Agreement.
(iv) Noncontravention.
Neither
the execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which a Seller
Entity is subject or any provision of the charter or bylaws of a Seller Entity
or (B) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any agreement, contract, lease,
license, instrument, or other arrangement set forth in Section
4(m) of the Disclosure Schedule,
excluding
from the foregoing such requirements, conflicts, defaults, rights or violations
(1) that are not, individually or in the aggregate, reasonably likely to have
a
Material Adverse Effect and would not adversely affect, in any material respect,
the ability of the Seller Entities to consummate the transactions contemplated
by this Agreement or (2) that become applicable as a result of the business
or
activities in which the Buyer engages or proposes to be engaged, or as a result
of any acts or omissions by, or the legal status of or any facts pertaining
to,
the Buyer.
(v) Brokers'
Fees.
Neither
Seller Entity has any liability or obligation to pay any fees or commissions
to
any broker, finder, or agent with respect to the transactions
13
contemplated
by this Agreement, other than certain fees to Xxxxxxxx and FMI all of which
fees
shall be paid by the Parent.
(vi) Company
Shares.
The
Seller holds of record and owns beneficially the number of Company Shares set
forth in Section 4(b) below, free and clear of any restrictions on transfer
(other than any restrictions imposed by the Securities Act and state securities
laws), taxes, Security Interests, options, warrants, purchase rights, contracts,
or commitments. Neither Seller Entity is a party to any option, warrant,
purchase right, or other contract or commitment that could require the Seller
to
sell, transfer, or otherwise dispose of any capital stock of the Company (other
than this Agreement). Neither Seller Entity is a party to any voting trust,
proxy, or other agreement or understanding with respect to the voting of any
capital stock of the Company.
(vii) Litigation.
There
is
no action, suit, investigation or proceeding pending against, or to the
Knowledge of the Seller Entities, threatened against or affecting the Seller
Entities before any court or arbitrator or any governmental body, agency or
official which challenges or seeks to prevent, enjoin, alter or delay, in any
material respect, the consummation of the transactions contemplated by this
Agreement.
(b) Representations
and Warranties of the Buyer. The
Buyer
represents and warrants to the Seller Entities that except as set forth in
the
Buyer Disclosure Letter, the statements contained in this Section 3(b) are
correct and complete as of the date hereof.
(i) Organization
of the Buyer.
The
Buyer is a corporation duly organized and validly existing under the laws of
Florida.
(ii) Authorization
of Transaction.
The
Buyer has corporate power and authority to execute and deliver this Agreement
and to perform its obligations hereunder. The execution, delivery and
performance of this Agreement and all other agreements and transactions
contemplated hereby, have been duly authorized by all required corporate
proceedings of the Buyer and its Affiliates, and no other corporate proceedings
are necessary to authorize this Agreement and such agreements contemplated
hereby and the transactions contemplated hereby and thereby. This Agreement
constitutes the valid and legally binding obligation of the Buyer, enforceable
in accordance with its terms and conditions,
except
to
the extent that enforceability may be limited by bankruptcy, insolvency,
moratorium, reorganization and other laws affecting the enforcement of
creditors' rights generally and by general principles of equity.
(iii)
Government
Authorizations.
Except
as set forth in Section
3(b)(iii) of the Buyer Disclosure Letter,
the
Buyer is not required to give any notice to, make any filing with, or obtain
any
authorization, consent, or approval of any government or governmental agency
in
order to consummate the transactions contemplated by this
Agreement.
(iv) Noncontravention.
Neither
the execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which the Buyer
is subject or any provision of its charter or bylaws or (B) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any agreement, contract, lease, license, instrument,
or other arrangement to which the Buyer is a party or by which it is bound
or to
which any of its assets is subject, except
for requirements, conflicts, defaults,
14
rights
or
violations that, individually or in the aggregate, would not materially impair
the ability of Buyer to perform its obligations hereunder.
(v) Brokers'
Fees.
The
Buyer 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, other than certain fees to Strategic Business Advisors, all of which
shall be paid by the Buyer.
(vi) Investment.
The
Buyer is purchasing the Company Shares for its own account and is not acquiring
the Company Shares with a view to, or for sale in connection with, any
distribution thereof within the meaning of the Securities Act. The Buyer
has
no present intention of selling, granting any participation in, or otherwise
distributing any of the Company Shares. None of the Buyer or its Affiliates
has
entered into any contract, undertaking, agreement or arrangement with any Person
for resale of any of the Company Shares. The Buyer acknowledges that the
offering of the Company Shares pursuant to this Agreement has not been and
will
not be registered under the Securities Act or any state securities or blue
sky
laws on the grounds that the offering and sale of the Company Shares
contemplated by this Agreement is exempt from registration pursuant to
exemptions available under such laws, and that the Seller's reliance upon such
exemptions is predicated in part upon the Buyer's representations set forth
in
this Agreement. The Buyer is an βaccredited investorβ within the meaning of
Regulation D promulgated under the Securities Act, and has the knowledge and
experience necessary to evaluate the merits and risks of an investment in the
Company Shares and the consummation of the transactions contemplated
hereby.
(vii) Litigation.
There is
no action, suit, investigation or proceeding pending against, or to the
Knowledge of the Buyer, threatened against or affecting the Buyer before any
court or arbitrator or any governmental body, agency or official which in any
manner challenges or seeks to prevent, enjoin, alter or delay the consummation
of the transactions contemplated by this Agreement.
(viii) Disclaimers.
The
Buyer:
(A)
acknowledges that other than as set forth in Section 4 of this Agreement,
neither the Parent, the Seller nor any of their respective shareholders or
Affiliates, or the Representatives thereof, makes or has made any representation
or warranty, either express or implied, as to the accuracy or completeness
of
any of the information provided or made available to the Buyer or its
shareholders or Affiliates, or the Representatives thereof;
(B)
agrees, to the fullest extent permitted by law, that none of the Parent, the
Seller or any of their respective shareholders or Affiliates, or the
Representatives thereof shall have any liability or responsibility whatsoever
to
the Buyer or its shareholders or Affiliates, or the Representatives thereof,
on
any basis (including in contract or tort, under federal or state securities
laws
or otherwise) based upon any information provided or made available, or
statements made to the Buyer or its shareholders or Affiliates, or the
Representatives thereof (or any omissions therefrom), provided,
however, that
the
foregoing limitations shall not apply to the Seller Entities insofar as the
Seller Entities make the specific representations and warranties set forth
in
Section 4 of this Agreement, but always subject to the limitations and
restrictions contained in Section 8; and
15
(C)
acknowledges and agrees that the specification of any dollar amount in the
representations and warranties contained in this Agreement or the inclusion
of
any specific item in the Disclosure Schedule is not intended to imply that
such
amounts or higher or lower amounts, or the items so included or other items,
are
or are not material, and no Party shall use the fact of the setting of such
amounts or the fact of inclusion of any such item in the Disclosure Schedule
in
any dispute or controversy between the Parties as to whether any obligation,
item or matter not described herein or included in a schedule is or is not
material.
(ix) Legal
Compliance.
The
Buyer is in compliance with all applicable laws (including rules, regulations,
codes, plans, injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, and local governments (and all agencies thereof),
except where the failure to comply would not have a material adverse effect
upon
the ability of the Buyer to perform its obligations under this Agreement. Except
as set forth in Section
3(b)(ix) of the Buyer Disclosure Letter,
the
Buyer holds and is in compliance with all permits, licenses, approvals, and
authorizations of governmental authorities, required for the conduct of its
business as currently conducted, except to the extent that any failure to so
hold or comply would not reasonably be expected to have a material adverse
effect upon the Buyer following the Closing. The Buyer does not reasonably
anticipate any material impediments to its obtaining any required permits,
licenses, approvals or authorizations of governmental authorities listed in
Section
3(b)(iii) of the Buyer Disclosure Letter
required
to consummate the transactions contemplated hereunder.
(xi) Adequate
Funds.
The
Buyer currently has and will at the Closing have sufficient cash and cash
equivalents and will have at the Closing sufficient immediately available funds,
in cash, to pay the Purchase Price, to provide the Company with sufficient
working capital and to pay any other amounts payable by the Buyer pursuant
to
this Agreement and to effect the transactions contemplated hereby.
The
Parent and the Seller represent and warrant to the Buyer that except as set
forth in the Disclosure Schedule, each of the statements contained in this
Section 4 are correct and complete as of the date of this Agreement. The
exceptions, modifications and disclosures made in any Section of the Disclosure
Schedule are made for all purposes of this Agreement or in any agreement or
instrument delivered pursuant to or in connection with this Agreement
notwithstanding the fact that no express cross-reference is made provided,
that
the applicability of any disclosure to another section of the Disclosure
Schedule is reasonably apparent.
(a) Organization
of the Company.
The
Company is a corporation duly organized and validly existing under the laws
of
the jurisdiction of its incorporation and has
full
power and authority to carry on the businesses in which it is engaged and to
own, lease and use the properties owned, leased and used by it, except
where any such failure to be so organized or formed and existing or to have
such
power and authority would not individually or in the aggregate have a Material
Adverse Effect. The
Company
is duly
authorized to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required, except where the lack of
such
qualification would not have a Material Adverse Effect.
16
(b) Capitalization.
(i) Company.
The
authorized capital stock of the Company and the number of Company Shares issued
and outstanding are as set forth in Section
4(b) of the Disclosure Schedule.
All of
the issued and outstanding Company Shares have been duly authorized, are validly
issued, fully paid, and nonassessable, and are held of record by the Seller.
There are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts
or
commitments that could require the Company to issue, sell, or otherwise cause
to
become outstanding any of its capital stock. There are no outstanding or
authorized stock appreciation, phantom stock, profit participation, or similar
rights with respect to the capital stock of the Company.
(ii)
Subsidiaries.
The
Company does not have any Subsidiaries and the Company does not otherwise own
or
control, directly or indirectly, any equity or similar interest or any interest
convertible into or exchangeable or exercisable for any equity or similar
interest in any Person.
(c) Noncontravention.
Except
as set forth in Section
4(c)(i) of the Disclosure Schedule,
neither
the execution and the delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which the
Company is subject or any provision of the charter or bylaws of the Company
or
(ii) conflict with, result in a breach of, constitute a default under, or result
in the acceleration of any agreement, contract, lease, license, instrument,
or
other arrangement to which the Company is a party or by which it is bound or
to
which any of its assets is subject, except where the violation, conflict,
breach, default, or acceleration would not have a Material Adverse Effect or
a
material adverse effect on the ability of the Parties to consummate the
transactions contemplated by this Agreement. Except as set forth in Section
4(c)(ii) of the Disclosure Schedule,
the
Company is not required to give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any government or governmental agency
in order for the Parties to consummate the transactions contemplated by this
Agreement.
(d) Brokers'
Fees.
The
Company does not have any liability or obligation to pay any fees or commissions
to any broker, finder, or agent with respect to the transactions contemplated
by
this Agreement.
(e) Title
to Assets.
The
Company has good and marketable title to, or a valid leasehold interest in,
the
properties and assets used by it, located on its premises, or shown on the
Most
Recent Financial Statements, free and clear of all Security Interests, except
for properties and assets disposed of in the Ordinary Course of Business since
the date of the Most Recent Financial Statements and except as provided in
the
Security Agreement (which will be satisfied and discharged as to the Company
as
provided in Section 7.1) or as set forth on Section
4(e) of the Disclosure Schedule.
(f) Financial
Statements.
Copies
of the following financial statements are attached to Section
4(f) of the Disclosure Schedule:
(i) the
unaudited balance sheet and statements of income, shareholder equity, and cash
flows as of and for the for the fiscal year ended December 31, 2005 for the
Company (the βAnnual
Financial Statementsβ);
and
(ii) an unaudited balance sheet and statements of income, shareholder equity
and
cash flows, as of and for the ten months ended October 31, 2006 for the Company
(the βMost
Recent Financial Statementsβ
and,
together with the Annual Financial Statements, the βFinancial
Statementsβ).
October 31, 2006 is sometimes referred to herein as the βMost
Recent Fiscal Month End.β
The
Financial Statements
17
(including
the notes thereto) have been prepared in accordance with GAAP on a consistent
basis through the periods presented in the Financial Statements and present
fairly, in all material respects, the financial condition of the Company (as
applicable) as of such dates and the results of operations of the Company (as
applicable) for such periods; provided,
however,
that
the Most Recent Financial Statements are subject to normal year-end adjustments
which are not reasonably expected to be material in the aggregate and lack
footnotes and other presentation items.
(g) Undisclosed
Liabilities.
Except
(i) for liabilities and obligations incurred in the Ordinary Course of Business
since the date of the Most Recent Financial Statements, (ii) as otherwise
disclosed herein or in Section
4(g) of the Disclosure Schedule,
and
(iii) as and to the extent disclosed or reserved against in the balance sheet
of
the Company for the Most Recent Fiscal Month End, since the Most Recent Fiscal
Month End, the Company has not incurred any liabilities or obligations (whether
direct, indirect, accrued or contingent) that would, individually or in the
aggregate, be required to be reflected or reserved against in a balance sheet
of
the Company prepared in accordance with GAAP.
(h) Events
Subsequent to Most Recent Fiscal Month End. Since
the
Most Recent Fiscal Month End, there has not been any event or occurrence that
has had, or is reasonably likely to have, a Material Adverse Effect and the
Company has not, without the actual cognizant knowledge of any of B.
Xxxxxxx Xxxxxxx, Xxxxxx Xxxxxxx, Xxx Xxxxxxx, Xxxx Xxxxx, or Xxxx
Xxxxx:
(i)
become legally obligated to sell, assign or otherwise transfer any of its
material assets or properties, other than in the Ordinary Course of
Business;
(ii)
made
any acquisition of all of the capital stock (whether by merger or otherwise)
or
all or substantially all of the assets of any Person;
(iii)
subjected any material asset to a Security Interest;
(iv)
amended or authorized any amendment to its charter or bylaws;
(v)
incurred any indebtedness for borrowed money from a non-affiliated Person or
incurred any liability (contingent or otherwise) in excess of $50,000, other
than trade payables incurred in the Ordinary Course of Business;
(vi)
declared or made any payment or distribution to the Seller, other than in
connection with the Seller advancing funds to, and sweeping cash of, the Company
pursuant to the Sellerβs cash management system with Bank of America in the
Ordinary Course of Business;
(vii)
issued, sold, pledged, disposed of, or encumbered any shares of, or securities
convertible into or exchangeable or exercisable for, or options, warrants,
calls, commitments or rights of any kind to acquire any shares of the capital
stock of the Company;
(viii)
made any change to its accounting policies, principles or practices other than
as required by law or changes in GAAP;
(ix)
made
any loans to any Persons other than (A) advances for business expenses in the
Ordinary Course of Business, and (B) hardship advances to certain non-managerial
employees in amounts consistent with the Companyβs past practices and in no
18
event
exceeding an aggregate amount of $500.00 per individual employee for any such
hardship advances;
(x)
entered into, adopted, amended or terminated any bonus, profit sharing,
compensation or stock option/ownership plan, severance or other Employee Benefit
Plan or other arrangement for the benefit of any director, officer or employee,
or increased in any manner the compensation or fringe benefits of any director
or officer, other than as required under any employment agreement listed in
Section
4(m) of the Disclosure Schedule;
(xi)
waived any right in any contract listed in Section
4(m) of the Disclosure Schedule,
the
waiver of which would reasonably be expected to materially detract from the
value of such contract to the Company; or
(xii)
become obligated to take any of the actions specified in subparagraphs (i)
through (xi) above.
(i) Legal
Compliance.
Except
as set forth in Section
4(i) of the Disclosure Schedule,
the
Company is in compliance in all material respects with
all
applicable laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of federal, state,
and local governments (and all agencies thereof). Except as set forth in
Section
4(i) of the Disclosure Schedule,
the
Company holds and is in compliance in all material respects with
all
permits, licenses, approvals, and authorizations of governmental authorities
required for the conduct of its business as currently conducted.
(j) Tax
Matters.
(i) Except
as
set forth in Section
4(j)(i) of the Disclosure Schedule,
all
Income Tax Returns required to be filed in respect of the Companyβs Affiliated
Group prior to the Closing Date have been filed and all Income Taxes shown
thereon have been paid.
All such
Income Tax Returns were correct and complete in all material respects. All
material Income Taxes owed by a Seller Entity or the Company (whether or not
shown on any Tax Return) have been paid. Except as described above in this
subparagraph (i), neither the Parent, the Seller nor the Company is currently
the beneficiary of any extension of time within which to file any Income Tax
Return. No written claim has ever been made by an authority in a jurisdiction
where the Company does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction. There are no Security Interests on any of the
assets of the Company that arose in connection with any failure (or alleged
failure) to pay any Tax.
(ii) The
Company has filed all state and local Income Tax Returns that it was required
to
file prior to the date hereof, and has paid or has reserved on the Most Recent
Financial Statements adequate funds for the payment of all Income Taxes shown
thereon as owing.
(iii) The
Company has not waived any statute of limitations in respect of Income Taxes
or
agreed to any extension of time with respect to an Income Tax assessment or
deficiency.
(iv) The
Company has withheld and paid all Taxes required to have been withheld and
paid
by it, except payroll taxes which are not due as of the Closing Date and which
have been appropriately reflected as liabilities on the Most Recent Financial
Statements.
19
(v) There
is
no dispute or claim concerning any material liability in respect of any Tax
of a
Seller Entity or the Company either (A) claimed or raised by any authority
in
writing or (B) as to which the Seller Entities have Knowledge.
(vi) Neither
the Parent, the Seller nor the Company has filed a consent under Code Β§ 341(f)
concerning collapsible corporations. Neither the Parent, the Seller nor the
Company has been a United States real property holding corporation within the
meaning of Code Β§ 897(c)(2) during the applicable period specified in Code
Β§897(c)(1)(A)(ii). The Seller Entities and the Company have disclosed on their
respective Income Tax Returns all positions taken therein that could give rise
to a substantial understatement of Income Tax within the meaning of Code Β§ 6662.
Neither the Parent, the Seller nor the Company is a party to any Tax allocation
or sharing agreement which will not be terminated on or before the Closing
Date.
(vii) The
unpaid Taxes of the Company did not, as of the Most Recent Fiscal Month End,
materially exceed the reserve for Tax Liability (rather than any reserve for
deferred Taxes established to reflect timing differences between book and Tax
income) set forth on the face of the Most Recent Financial Statements (rather
than in any notes thereto).
(k) Real
Property.
(i) The
Company does not own any real property (the βReal
Propertyβ).
(ii) Section
4(k)(ii) of the Disclosure Schedule
lists
and briefly describes all parcels of Real Property leased or subleased to the
Company by any other Person. The Seller Entities have made available to the
Buyer correct and complete copies of the leases and subleases listed in
Section
4(k)(ii) of the Disclosure Schedule
and:
(A) each
such
lease or sublease is legal, valid, binding, enforceable, and in full force
and
effect;
(B)
the
consummation of the transactions contemplated hereby is not an event of default
under any such lease or sublease;
(C)
to
the
Knowledge of the Seller Entities, no party to any such lease or sublease is
in
breach or default and no event has occurred which, with notice or lapse of
time,
would constitute a breach or default or permit termination, modification, or
acceleration thereunder;
(D)
to
the
Knowledge of the Seller Entities, no party to any such lease or sublease has
repudiated any provision thereof;
(E)
to
the
Knowledge of the Seller Entities, there are no oral agreements or forbearance
programs in effect as to any such lease or sublease; and
(F) the
Company has not assigned, transferred, conveyed, mortgaged, deeded in trust,
or
encumbered any interest in the leasehold or subleasehold.
20
(i)
To
the
Knowledge of the Seller Entities, the Company has not interfered with, infringed
upon, misappropriated, or violated any material Intellectual Property rights
of
third parties in any material respect, and neither Seller Entity has received
any written charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including any claim
that the Company must license or refrain from using any Intellectual Property
rights of any third party). To the Knowledge of the Seller Entities, no third
party has interfered with, infringed upon, misappropriated, or violated any
material Intellectual Property rights of the Company in any material
respect.
(ii) Section
4(l)(ii) of the Disclosure Schedule
identifies each patent and trademark registration which has been issued to
the
Company with respect to any of its Intellectual Property, identifies each
pending patent or trademark application which the Company has made with respect
to any of its Intellectual Property, and identifies each material license,
agreement, or other permission which the Company has granted to any third party
with respect to any of its Intellectual Property (together with any exceptions).
Section 4(l)(ii)
of the Disclosure Schedule
also
identifies each material trade name or unregistered trademark used by the
Company in connection with any of its businesses. With respect to each item
of
Intellectual Property required to be identified in Section
4(l)(ii) of the Disclosure Schedule:
(A) the
Company possesses all right, title, and interest in and to the item, free and
clear of any Security Interest, license, or other restriction
(B) the
item
is not subject to any outstanding injunction, judgment, order, decree, ruling,
or charge; and
(C) no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
or
demand is pending or, to the Knowledge of the Seller Entities, is threatened
which challenges the legality, validity, enforceability, use, or ownership
of
the item.
(iii) Section
4(l)(iii) of the Disclosure Schedule
lists
and briefly describes all licenses, sublicenses, agreements, and permissions
(as
amended to date), with respect to each material item of Intellectual Property
that any third party owns and that the Company presently uses pursuant to
license, sublicense, agreement, or permission, except for βShrink-wrapsβ and
similar widely available binary code and commercial end-user licenses. With
respect to each item of Intellectual Property required to be identified in
Section
4(l)(iii) of the Disclosure Schedule:
(A) the
license, sublicense, agreement, or permission covering the item is legal, valid,
binding, enforceable, and in full force and effect;
(B) to
the
Knowledge of the Seller Entities, no party to the license, sublicense,
agreement, or permission is in material breach or default and no event has
occurred which with notice or lapse of time would constitute a material breach
or default or permit termination, modification, or acceleration thereunder;
and
(C) to
the
Knowledge of the Seller Entities, no party to the license, sublicense,
agreement, or permission has repudiated any material provision
thereof.
21
(iv) All
Intellectual Property created at the
Company
or any predecessor in interest, or by any employee or consultant working for
the
Company,
has been assigned to the Company and such assignor is contractually obligated
to
assist the Company in registering any such Intellectual Property
rights.
(m) Contracts.
With
respect to each of the contracts listed in Section
4(m) of the Disclosure Schedule:
(A)
the
agreement is legal, valid, binding, enforceable, and in full force and effect
as
to the Company; (B) neither the Company nor, to the Knowledge of the Seller
Entities, any other party is in material breach or default, and to the Knowledge
of the Seller Entities, no event has occurred which with notice or lapse of
time
would constitute a material breach or default, or permit termination,
modification, or acceleration, under the agreement; and (C) to the Knowledge
of
the Seller Entities, no party has repudiated any material provision of the
agreement. Section 4(m) of the
Disclosure Schedule lists the following contracts and other agreements in effect
on the date hereof to which the
Company
is a party:
(i) any
agreement (or group of related agreements) for the lease of real or personal
property to or from any Person providing for lease payments in excess of
$100,000 per annum;
(ii) any
agreement (or group of related agreements) for the purchase or sale of raw
materials, commodities, supplies, products, or other personal property, or
for
the furnishing or receipt of services, the performance of which will extend
over
a period of more than one year or involve consideration in excess of
$100,000;
(iii) any
agreement (or group of related agreements) under which the Company has created,
incurred, assumed, or guaranteed any indebtedness for borrowed money, or any
capitalized lease obligation, in excess of $100,000 or under which it has
imposed a Security Interest on any of its assets, tangible or intangible, other
than the Bank Guarantee and the Security Agreement;
(iv) any
written agreement concerning confidentiality or noncompetition;
(v) any
agreement with a Seller Entity or another Affiliate of the Company;
(vi) any
profit sharing, stock option, stock purchase, stock appreciation, deferred
compensation, severance, or other material plan or arrangement for the benefit
of its current or former directors, officers, and employees;
(viii) any
agreement for the employment of any individual on a full-time, part-time,
consulting, or other basis providing annual compensation in excess of $100,000
or providing severance benefits;
(ix) any
agreement under which it has advanced or loaned any amount to any of its
directors, officers, and employees outside the Ordinary Course of
Business;
(x) any
agreement under which the consequences of a default or termination would
reasonably be expected to have a Material Adverse Effect; or
(xi) any
other
agreement (or group of related agreements) the performance of which involves
consideration in excess of $100,000 in
the
aggregate.
22
(n) Seller
Entity Liabilities.
The
Company is a guarantor under the Credit Facility and has pledged its assets
as
collateral for the Credit Facility under the Security Agreement, both of which
as to the Company will be satisfied at or prior to Closing as contemplated
by
Section 7.1 of this Agreement. Except as set forth in the immediately preceding
sentence or in Section
4(n) of the Disclosure Schedule,
the
Company is not subject to any Seller Entity Liabilities.
(o) Tangible
Assets.
The
Company owns or leases all buildings, machinery, equipment, and other tangible
assets reasonably necessary for the conduct of its business as presently
conducted.
(p) Litigation.
Section
4(p) of the Disclosure Schedule
sets
forth each instance in which the
Company
is subject to any outstanding injunction, judgment, order, decree, ruling,
or
charge. Except as set forth in Section
4(p) of the Disclosure Schedule,
there
are no actions or suits, or any administrative, arbitration or other proceedings
pending, or, to the Knowledge of the Seller Entities, threatened, against
the
Company,
or any of its properties, assets and business operations, as of the date hereof,
by or before any court, governmental or regulatory authority or by any third
party.
(q) Employees.
(i) Except
as
provided in Section
4(q)(i) of the Disclosure Schedule,
there
is no charge,
action, complaint, or proceeding pending, or to the Knowledge of the Seller
Entities, threatened, against the
Company
relating to the alleged violation of any applicable state or federal labor
or
employment law or regulation, including any charge or complaint filed by any
employee or labor organization with the National Labor Relations Board, the
Equal Employment Opportunities Commission, or any other governmental
agency.
(ii) There
is
no pending strike,
slow-down, picketing, or work stoppage by employees of the Company, nor is
there
any pending lockout by the
Company
of any its employees.
(iii) There
is
no pending organizing activity or petition for certification by or on behalf
of
any labor organization with respect to employees of the
Company.
(r) Employee
Benefits.
(i) Attached
hereto in Section
4(r)(i) of the Disclosure Schedule
is a
true and complete list of each βemployee benefit plan,β as defined in Section
3(3) of ERISA, each bonus, incentive, profit sharing, deferred compensation,
excess benefit, supplemental retirement, change-in-control, employment contract,
stock purchase, stock ownership, stock option, stock appreciation, supplemental
unemployment, vacation, sick-day, severance and other material employee benefit
or fringe benefit plan, program or arrangement that provides benefits or
compensation in respect of any employee or former employee of the
Company
or the beneficiaries or the dependents of any such employee or former employee
(hereinafter individually, an βEmployeeβ
and
collectively, the βEmployeesβ)
or
under which any Employee is or may become eligible to participate or derive
a
benefit and that is or has been maintained or established by the
Company,
(collectively, the βEmployee
Benefit Plansβ).
(ii) A
copy of
each Employee Benefit Plan listed in Section
4(r)(i) of the Disclosure Schedule,
the
summary plan descriptions and in the case of an unwritten
23
Employee
Benefit Plan, a written description thereof, the most recent determination
letter received from the Internal Revenue Service, the most recent annual report
(IRS Form 5500), and all related trust agreements, insurance contracts, and
other funding arrangements which implement each such Employee Benefit Plan
has
been furnished or made available to the Buyer.
(iii) Each
Employee Benefit Plan that is intended to be a tax-qualified deferred
compensation plan under Section 401(a) of the Code has either received a
determination letter from the Internal Revenue Service to the effect that it
meets the requirements of said Code Section and that its related trust is exempt
from taxation under Section 501(a) of the Code, or is an adopter of a βprototype
planβ and an opinion letter has been issued to the prototype sponsor of the plan
on which the Company is entitled to rely.
(iv) Except
as
set forth in Section
4(r)(iv) of the Disclosure Schedule,
each of
the Employee Benefit Plans listed in Section
4(r)(i) of the Disclosure Schedule
(A)
complies in all material respects with the requirements of all applicable laws,
including, without limitation, ERISA and the Code, and (B) has at all times
been
maintained and operated in compliance in all material respects with its terms
and the requirements of all applicable laws, including without limitation ERISA
and the Code. The Company is not obligated to create, modify or terminate any
Employee Benefit Plan listed in Schedule
4(r)(i) of the Disclosure Schedule,
and to
the Knowledge of the Seller Entities, no condition or circumstance exists that
would prevent the amendment or termination of any Employee Benefit Plan listed
in Section
4(r)(i) of the Disclosure Schedule.
(v) Neither
Seller Entity nor the Company has incurred any liability to the Pension Benefit
Guaranty Corporation (other than contributions to the plan and premiums to
the
Pension Benefit Guaranty Corporation, which in either event are not in default)
or any withdrawal liability within the meaning of Section 4201 of ERISA, or
any
other liability pursuant to Title I or IV of ERISA or the penalty, excise tax
or
joint and several liability provisions of the Code relating to employee benefit
plans, in any such case relating to any Employee Benefit Plan.
(i) Except
as
disclosed in Section
4(s) of the Disclosure Schedule,
the
Company has complied in all material respects with all Environmental, Health,
and Safety Requirements.
(ii) To
the
Knowledge of the Seller Entities, none of the following exists at any property
or facility operated by the Company: (A) underground storage tanks, (B) friable
asbestos or friable-asbestos-containing material, (C) materials or equipment
containing polychlorinated biphenyls, or (D) landfills, surface impoundments,
or
disposal areas.
(iii) To
the
Knowledge of the Seller Entities, the Company has not treated, stored, disposed
of, transported, handled, or released any substance the treatment, storage,
disposal, transport, handling or release of which is governed or otherwise
regulated by any Environmental, Safety or Health Requirement, including without
limitation any Hazardous Substance.
(iv) To
the
Knowledge of the Seller Entities, the Company does not own any property or
facility contaminated by any substance referred to in Paragraph 4(s)(iii) above,
24
such
as
to give rise to Adverse Consequences, including any liability for response
costs, corrective action costs, personal injury, property damage, natural
resources damages or attorney fees, pursuant to CERCLA or any other
Environmental, Health, and Safety Requirements.
(t) Notes
and Accounts Receivable.
All
notes and accounts receivable of the Company are reflected properly on its
books
and records. All accounts receivable reflected on the balance sheet at the
Most
Recent Fiscal Month End or on such books have been generated in the Ordinary
Course of Business and reflect bona fide obligations for the payment of goods
or
services provided by the Company.
(u) Powers
of Attorney.
There
are no outstanding powers of attorney executed on behalf of the
Company.
(v) Insurance.
The
Company has been covered during the past three (3) years by insurance in scope
and amount customary and reasonable for the businesses in which it has engaged
during the aforementioned period. The Seller has delivered or made available
to
the Buyer complete and correct copies of all such policies together with all
riders and amendments thereto. Such policies are in full force and effect,
and
all premiums due thereon have been paid. The Company has complied in all
material respects with the terms and provisions of such policies. Section
4(v) of the Disclosure Schedule
describes any self-insurance arrangements affecting the Company.
(w) Intercompany
Liabilities.
The
Seller Entities have caused the Company to cancel, settle or otherwise repay
all
of its liabilities and obligations owed to the Seller or the Parent and their
Affiliates, and the Buyer shall not have any responsibility for those
liabilities.
(x) Disclosure.
The
representations and warranties of the Seller Entities contained in this
Agreement including the Disclosure Schedule, do not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
herein or necessary in order to make the statements and information contained
herein, in light of the circumstances in which they were made, not
misleading.
(y) Disclaimer
of Other Representations and Warranties.
Except
as expressly set forth in Section 3(a) and this Section 4, neither the Seller
Entities nor any of their respective Affiliates or Representatives make any
representation or warranty, express or implied, at law or in equity, with
respect to any
of
its or their respective assets, liabilities or operations or the Company,
including, without limitation, representations and warranties of merchantability
or fitness for any particular purpose, title, or non-infringement, and any
such
other representations or warranties are hereby expressly
disclaimed.
6. POST-CLOSING
COVENANTS.
The
Parties agree as follows with respect to the period following the Closing.
(a) General.
In case
at any time after the Closing any further action is necessary or desirable
to
carry out the purposes of this Agreement, each of the Parties will take such
further action (including the execution and delivery of such further instruments
and documents) as any other Party may reasonably request, all at the sole cost
and expense of the requesting Party (unless the requesting Party is entitled
to
indemnification therefor under Section 8 below). The Seller Entities acknowledge
and agree that from and after the Closing, the Buyer will be entitled to
possession of all documents, books, records, agreements, and financial data
of
any sort relating
25
(b) Litigation
Support.
In the
event and for so long as any Party actively is contesting or defending against
any action, suit, proceeding, hearing, investigation, charge, complaint, claim
or demand in connection with (i) any transaction contemplated under this
Agreement or (ii) any fact, situation, circumstance, status, condition,
activity, practice, plan, occurrence, event, incident, action, failure to act
or
transaction on or prior to the Closing Date involving the Company, each of
the
other Parties will cooperate with such Party, its Affiliates and their counsel
in the contest or defense, make available their personnel and provide such
testimony and access to their books and records as shall be reasonably necessary
in connection with the contest or defense, all at the sole cost and expense
of
the contesting or defending Party (unless the contesting or defending Party
is
entitled to indemnification therefor under Section 8 below).
(c) Transition.
The
Seller Entities will refer all customer inquiries relating to the Company to
the
Buyer from and after the Closing.
(i) Except
as
set forth below in this Section 6(d), the Buyer will cause the Company to
continue to employ the employees of the Company as of the Closing Date (the
βTransferred
Employeesβ),
with
the understanding that such employment shall be βat willβ for all employees
other
than those with employment agreements set forth in Section
4(m)(vii) of the Disclosure Schedule.
As of
the Closing Date, the Buyer shall include each Transferred Employee in a benefit
package providing benefits that are in the aggregate substantially similar
to
those provided to such employees immediately prior to the Closing Date. The
Buyer shall treat all service credited to each such Transferred Employee with
the Seller and its Affiliates as if such service had been rendered to, and
paid
by, the Buyer for all purposes under the Buyerβs benefit plans, arrangements,
and policies. The
Buyer
shall assume responsibility for the vacation time and sick leave benefits due
to
the Transferred Employees as of the Closing Date.
(ii) As
provided in Section 6(j), the Seller shall be liable for the expense of all
workersβ compensation claims that arise out of any injury sustained by an
employee of the Company prior to the Closing Date and in connection with which
a
timely claim is made at any time after the Closing Date. The Buyer or the
Company shall be liable for the expense of all other workersβ compensation
claims.
(iii) The
Seller and the Company shall, subject to the consummation of the transactions
contemplated by this Agreement, take whatever action is reasonably necessary
or
appropriate to terminate as of the Closing Date (except as otherwise set forth
in this Agreement or the Transition Services Agreement), the participation
of
the Company with respect to the Transferred Employees in all Employee Benefit
Plans of the Seller Entities,
with
the Company agreeing to compensate the Seller as soon as administratively
feasible for any costs to continue or transition such Employee Benefit Plans
if
any should occur after receipt of appropriate accounting by the
Seller.
(iv) Effective
as of the Closing Date, the Transferred Employees shall no longer make
contributions or receive matching contributions in the Sellerβs 401(k) Plan (the
βSeller
401(k) Planβ),
and
Seller shall have taken all such action prior to the Closing Date as may be
reasonably required to achieve this result. Each Transferred Employee shall,
as
of the Closing Date, become fully vested in his or her account balance under
the
Sellerβs 401(k) Plan. Provided
26
that
the
Sellerβs 401(k) plan is qualified under all relevant
provisions of the Code and ERISA,
as
applicable, the Buyer and the Seller shall, to the extent permissible under
applicable laws, take whatever actions are reasonably necessary or appropriate
to effect a trust-to-trust transfer of the accounts of Transferred Employees
in
the Sellerβs 401(k) Plan, into a tax-qualified defined contribution
plan
designated by the Buyer to
accept
the transferred accounts, and the Buyer shall take whatever actions are
reasonably necessary or appropriate in order for such plan to accept the
transferred accounts including any outstanding loan balances and related
promissory notes. The Buyer and the Seller shall cooperate fully to effect
such
transfers.
(v) Buyer
shall make commercially reasonable efforts to arrange for the waiver of any
restrictions on coverage for pre-existing conditions, actively at work
requirements, waiting periods, and requirements for evidence of insurability
under the Buyer Welfare Plans for Transferred Employees, and to arrange for
Transferred Employees to receive credit under the Buyer Welfare Plans for
co-payments, deductibles, and out-of-pocket maximums to the extent satisfied
by
the Transferred Employees during the plan year in which the Closing Date occurs.
As soon as practicable after the Closing Date, the Seller shall deliver to
the
Buyer a list of the Transferred Employees who had credited service under an
Employee Welfare Benefit Plan of the Seller, together with each such Transferred
Employeeβs service, co-payment, deductible and out-of-pocket payment amounts
under such plan.
(e) Confidentiality.
Except
to the extent reasonably necessary to consummate the transactions contemplated
by this Agreement, the Parties will treat and hold as such all of the
Confidential Information of the other Parties, refrain from using any such
Confidential Information except in connection with this Agreement, and deliver
promptly to the Buyer or the Seller Entities, as the case may be, or destroy
(and certify the destruction in writing), at the request and option of the
Buyer
or the Seller Entities, as applicable, all tangible embodiments (and all notes,
summaries and copies) of such Confidential Information which are in its
possession. In the event that any Party is requested or required (by oral
question or request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar process) to
disclose any Confidential Information of another Party, that Party will notify
the applicable Party promptly of the request or requirement so that the
applicable Party may seek an appropriate protective order or waive compliance
with the provisions of this Section 6(e). If, in the absence of a protective
order or the receipt of a waiver hereunder, any Party is, on the advice of
counsel, compelled to disclose any Confidential Information to any tribunal,
that Party may disclose the Confidential Information to the tribunal;
provided,
however,
that
the disclosing Party shall use its reasonable best efforts to obtain, at the
reasonable request of the applicable Party, an order or other assurance that
confidential treatment will be accorded to such portion of the Confidential
Information required to be disclosed as the applicable Party shall
designate.
(f) Covenant
Not to Compete.
As a
material and valuable inducement for the Buyer to enter into this Agreement,
pay
and deliver the Purchase Price to the Seller, and consummate the transactions
provided for herein, and in order to protect the goodwill acquired by the Buyer
pursuant to this Agreement, for a period of five years from the date
hereof,
the
Seller Entities will not engage directly or indirectly in any
business that
the
Company
conducts as of the Closing Date in the State of Florida; provided,
however,
that
nothing herein shall be construed to restrict or limit an Affiliate of the
Seller Entities from engaging in any such business at any time such Affiliate
is
no longer an Affiliate of the Seller or the Parent. The Buyer shall be entitled
to an injunction if the Seller violates this covenant as well as any appropriate
monetary damages. Without limiting the generality of the foregoing, as
liquidated damages and not as a penalty, the Seller Entities forfeit any unpaid
amounts in respect of the Earn Out if they violate this covenant. If the final
judgment of a court of competent jurisdiction declares that any term or
provision of this Section
27
6(f)
is
invalid or unenforceable, the Parties agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration, or area of 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 shall be enforceable as so modified after the expiration of
the
time within which the judgment may be appealed.
(g) Access
to Information.
For a
period of four (4) years after the Closing Date, upon reasonable notice, the
Parties agree to furnish or cause to be furnished to each other and their
respective Representatives access, during normal business hours, to such
information (including records pertinent to the Company) and assistance relating
to the Company as is reasonably necessary for financial reporting and accounting
matters, the valuation of any claim for indemnification under Section 8 hereof,
the preparation and filing of any Tax Returns, reports or forms or the defense
of any Tax claim or assessment; provided,
however,
that
such access does not unreasonably disrupt the normal operations of the Party
or
Parties furnishing cooperation; provided
further,
however,
that
the Party requesting cooperation shall pay the reasonable out-of-pocket costs
incurred by the Party or Parties furnishing cooperation.
(h) Nonassignable
Contracts and Permits.
To the
extent that any contract or permit (including any consent, approval or
authorization of any governmental authority) for which assignment to the Buyer
is provided for in this Agreement is not assignable without the consent of
another Person, including an applicable governmental authority, this Agreement
shall not constitute an assignment or an attempted assignment thereof if such
assignment or attempted assignment would constitute a breach thereof. The Seller
Entities and the Buyer shall continue to use their commercially reasonable
efforts to obtain the consent of such other Person to the assignment of any
such
contract or permit to the Buyer in all cases in which such consent is or may
be
required for such assignment. If such consent shall not be obtained, the Seller
Entities and the Buyer shall cooperate with each other in any reasonable
arrangement designed to provide the Buyer with the benefits under any such
contract or permit to the extent lawful and the Buyer shall be obligated to
perform the obligation with respect thereto, any other provision of this
Agreement to the contrary notwithstanding.
(i) Surety
Bonds.
The
Buyer and the Company shall be responsible for payment to CNA Surety or
reimbursement to the Seller Entities with respect to the obligations of each
of
the Seller Entities and each of their respective Affiliates under all surety
bonds outstanding in respect of the Company as of the Closing Date
(βBondsβ)
to the
extent such obligations are (i) solely related to or result entirely from events
that arise subsequent to Closing rather than in whole or in part as a
consequence of any matter that occurred prior to Closing, or (ii) attributable
to the actions of the Buyer or its agents, or (iii) related to payment of
premiums assessed by CNA Surety in connection with the completion of the
Companyβs bonded work subsequent to Closing, but only if such additional
premiums are solely related to or result entirely from events that arise
subsequent to Closing rather than in whole or in part as a consequence of any
matter that occurred prior to Closing. The Seller Entities shall be responsible
for payments to CNA Surety in all other cases.
(j) Certain
Liabilities.
The
Seller and the Buyer shall be responsible and liable for certain liabilities,
as
follows:
(i) The
Seller shall be liable for the expense of all workersβ compensation claims that
arise out of any injury sustained by an employee of the Company prior to the
Closing Date and in connection with which a timely claim is made at any time
after the
28
(ii) The
Seller shall be liable for all insurance deductibles in respect of any insured
claims relating to the Company that arise out of any injury or occurrence prior
to the Closing Date and in connection with which a timely claim is made at
any
time after the Closing Date. The Buyer or the Company shall be liable for the
expense of all other insurance deductibles.
(iii) The
Seller shall be liable for all environmental, health, and safety conditions
affecting the Company or its property and all environmental, health, and safety
violations and that arise out of any event or occurrence prior to the Closing
Date and in connection with which a timely claim is made at any time after
the
Closing Date. The Buyer or the Company shall be liable for the expense of all
environmental, health, and safety conditions and violations.
(iv) The
Seller shall be solely liable for all Seller Entity Liabilities.
(a) Conditions
to Obligation of the Buyer.
The
obligation of the Buyer to consummate the transactions to be performed by it
in
connection with the Closing is subject to satisfaction of the following
conditions:
(i) the
representations and warranties set forth in Section 3(a) and Section 4 above
shall be true and correct at and as of the Closing Date (except for
representations and warranties that expressly speak only as of a specific date
which need only be true and correct as of such date) except for such failures
of
representations and warranties to be true and correct (without giving effect
to
any materiality qualification or standard contained in any such representations
and warranties) which would not reasonably be expected to have, individually
or
in the aggregate, a Material Adverse Affect;
(ii) the
Seller Entities shall have performed and complied in all material respects
with
all of the covenants of the Seller Entities hereunder that are required to
be
performed or complied with prior to the Closing;
(iii) the
Seller Entities shall have delivered to the Buyer a certificate to the effect
that each of the conditions specified above in Sections 7(a)(i) and (ii) is
satisfied in all respects;
(iv) no
action, suit, or proceeding (other than any action, suit or proceeding to which
Section 5(b) refers or relates) shall be pending before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would (A) prevent or materially
delay
consummation of any of the transactions contemplated by this Agreement, (B)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, (C) materially and adversely affect the right of the
Buyer to own the Company Shares and to control the Company, or (D) materially
and adversely affect the right of the
Company
to own its assets and to operate its businesses (and no such injunction,
judgment, order, decree, ruling, or charge shall be in effect);
(v) the
Parties and the Company shall have received all of the authorizations, consents,
and approvals of third parties as set forth in Section
7(a)(v) of the Disclosure Letter
29
(collectively,
the βRequisite
Consentsβ);
provided,
however,
that
the foregoing condition to the obligation of the Buyer shall not apply to any
failure to obtain any such authorization, consent or approval that arises from
the Buyerβs breach of any representation, warranty or covenant hereunder or the
Buyerβs withdrawal of its application for any such authorization, consent or
approval;
(vi)
the
Seller
shall have delivered to the Buyer on or before the Closing Date a non-foreign
person affidavit as required by Section 1445 of the Code;
(vii) the
Buyer
will have received (A) UCC, judgment lien and tax lien searches with respect
to
the Company, the results of which indicate no liens on the assets of the Company
other than those acceptable to the Buyer in its reasonable discretion, as set
forth on Section 7(a)(vii)(A)
of the Disclosure Schedule,
or as
will be terminated promptly upon Closing, and (B) written assurance that the
Credit Facility, Security Agreement and the Bank Guarantee will be terminated
as
to the Company promptly upon Closing and that all other Seller Entity
Liabilities have been satisfied;
(viii) the
Buyer
shall have received the current updated corporate record book, including without
limitation, bylaws, stock transfer ledger, minutes, resolutions, consents,
and
all other corporate documents of the
Company;
(ix) the
Stock
Pledge and Security Agreement shall have been executed by the Seller;
and
(x) all
actions to be taken by the Seller Entities in connection with the consummation
of the transactions contemplated hereby and all certificates, opinions,
instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to
the
Buyer.
The
Buyer
may waive any condition specified in this Section 7(a) if it executes and
delivers a writing so stating at or prior to the Closing.
(b) Conditions
to Obligation of the Seller.
The
obligation of the Seller Entities to consummate the transactions to be performed
by them in connection with the Closing is subject to satisfaction of the
following conditions:
(i) the
representations and warranties set forth in Section 3(b) above shall be true
and
correct in all material respects at and as of the Closing Date;
(ii) the
Buyer
shall have performed and complied in all material respects with all of the
covenants of the Buyer hereunder that are required to be performed or complied
with prior to the Closing;
(iii) the
Buyer
shall have delivered to the Seller Entities a certificate to the effect that
each of the conditions specified above in Sections 7(b)(i) and (ii) is satisfied
in all respects;
(iv) no
action, suit, or proceeding (other than any action, suit or proceeding to which
Section 5(b) refers or relates) shall be pending before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would (A) prevent or materially
delay
consummation of any of the transactions contemplated by this Agreement or (B)
cause any of the transactions contemplated by this Agreement to be rescinded
following
30
consummation
(and no such injunction, judgment, order, decree, ruling, or charge shall be
in
effect);
(v) the
Parties and the Company shall have received all of the Requisite
Consents;
(vi) the
Stock
Pledge and Security Agreement shall have been executed by the Buyer;
(vii) the
Seller Entities shall have received executed copies of the Affidavits;
and
(viii) all
actions to be taken by the Buyer in connection with consummation of the
transactions contemplated hereby and all certificates, opinions, instruments,
and other documents required to effect the transactions contemplated hereby
will
be reasonably satisfactory in form and substance to the Seller
Entities.
The
Seller Entities may waive any condition specified in this Section 7(b) if they
execute and deliver a writing so stating at or prior to the
Closing.
(a) Survival.
Unless
otherwise specifically provided herein, all of the covenants, representations
and warranties of the Seller Entities contained in this Agreement shall survive
the Closing and continue in full force and effect for a period of eighteen
(18)
months thereafter; provided,
however,
that
the representations and warranties contained in Sections 4(a), 4(b), 4(d),
4(e),
4(j), 4(r) and 4(s) and the covenants in Section 6(j) shall continue in full
force and effect until sixty (60) days after the expiration of the applicable
statute of limitation with respect to such matters. The covenants,
representations and warranties of the Buyer contained in this Agreement shall
survive the Closing and continue in full force and effect for a period of
eighteen (18) months thereafter except that the covenants in Section 6(j) shall
survive in full force and effect until sixty (60) days after the expiration
of
the applicable statute of limitation with respect to such matters. This Section
8 shall survive so long as any covenant, representation, warranty or
indemnification obligation of any Party survives hereunder.
(i) Subject
to the limitations contained in this Section 8, and except for any payment
or
indemnification obligations of the Seller under Section 2(b)(iv), which are
subject exclusively to the terms thereunder and excluded from this Section
8,
after Closing, the Seller Entities hereby jointly and severally agree to
indemnify the Buyer and its officers and directors, shareholders and Affiliates
against, and hold them harmless from, any loss, liability, claim, damage or
expense (including
reasonable legal fees and expenses) other than punitive damages, lost profit,
or
consequential, special or incidental damages (a βLossβ)
suffered or incurred by any such indemnified party caused by, resulting from
or
arising out of (A) any breach of any representation or warranty of the Seller
Entities contained in this Agreement, (B) any breach of any covenant of the
Seller Entities contained in this Agreement which by its terms requires
performance after the Closing Date,
(C) any
Income Taxes of the
Company
attributable to taxable periods ending prior to or on the Closing Date,
including liabilities of the
Company
under consolidated, combined or unitary income or franchise Tax Returns and
liabilities related to the Tax Returns
of the
Seller Entities, but excluding any Taxes for which there is an adequate accrual
or reserve on the Most Recent Financial Statements or any
Taxes
attributable to transactions not
31
in
the
Ordinary Course of Business occurring after the Closing which are effectuated
or
initiated by the Buyer
or the
Company, (D) Taxes related to the Overlap Period to the extent allocable to
the
period ending on the Closing Date as set forth in Section 9(c), (E) any product
sold or any services performed by the
Company
prior to the Closing Date, (F), any Third Party Claim relating to wages or
other
compensation of any current or former Employees of the
Company,
any Employee Benefit Plan or any Environmental,
Safety or Health Requirement,
in each
case arising from events that occurred prior to the Closing Date, and (G) any
act of fraud, intentional tort or willful misconduct by any Seller Entity or
the
Company
prior to the Closing.
(ii) The
Buyer
acknowledges and agrees that neither the Seller Entities nor any of their
Affiliates shall have any liability under any provision of this Agreement for
any Loss to the extent that such Loss relates to actions taken by or omitted
to
be taken by the Buyer or the
Company
after the Closing Date or such Loss arises in the conduct of the business of
the
Company
by the Buyer or the
Company
after the Closing Date.
(c) Indemnification
Provisions for Benefit of the Seller Entities and their
Affiliates.
Subject
to the limitations contained in this Section 8, after the Closing, the Buyer
shall, and shall cause the Company to, indemnify the Parent, the Seller and
their respective officers, directors, shareholders and Affiliates against,
and
hold them harmless from, any Loss suffered or incurred by any such indemnified
party caused by, resulting from, arising out of, or relating to (i) any breach
of any
representation or warranty of the Buyer contained in this Agreement,
(ii) any breach of any covenant of the Buyer contained in this Agreement which
by its terms requires performance after the Closing Date, (iii) any
claim, proceeding or suit which relates to actions taken by the Buyer or
the
Company
at any time after the Closing with regard to the employment of the
Company's employees; (iv) the operation of the business of the Company and
the
ownership of the assets of the Company following the Closing Date; and (v)
any
Tax attributable to (A) the Taxable periods that begin after the Closing Date,
(B) the portion of any Tax attributable to the Overlap Period to the extent
allocable to the period commencing after the Closing Date as set forth in
Section 9(c) and (C) any Tax periods that end on or before the Closing Date
if
such Tax is attributable to transactions
not in the Ordinary Course of Business occurring after the Closing Date which
are effectuated or initiated by the Buyer or the
Company.
(d) Limitations.
(i) The
Seller Entities shall not be liable under Section 8 for Losses hereunder unless
the aggregate of all Losses for which the Seller Entities would, but for this
Section 8(d), be liable on a cumulative basis is an amount equal to or in excess
of $50,000, and in such event, indemnification shall be made by the Seller
Entities for only the amount of such Losses in excess of $50,000.
(ii) Absent
fraud or knowing and intentional material misrepresentations, the aggregate
amount of Losses for which the Seller Entities shall be liable pursuant to
Section 8(b) above shall not exceed an amount equal to $1,500,000.
(iii) From
and
after the Closing, no claim for indemnity shall be made by either the Buyer,
on
the one hand, or the Seller
Entities, on the other hand, if such claim is based on or related to an event
or
facts disclosed to such Party in writing prior to Closing
or of which the Buyer or any Seller Entity, as the case may be, otherwise had
Knowledge prior to Closing.
(iv) The
limitations in this Section 8(d) shall not apply to (A) the accounts receivable
adjustment contemplated by Section 2(b)(iv), (B) the Partiesβ respective Taxes,
or (C) the matters set forth in Section 6(j) of this Agreement, all of which
shall be payable from the first
32
dollar
and without limit; provided,
however,
that
the adjustment referenced in Section 2(b)(iv) shall be subject to the Adjustment
Cap. Neither shall these limitations apply to any claim of a Party against
another Party based on the actual fraud of such other Party, which also shall
be
payable from the first dollar and without limit.
(e) Losses
Net of Insurance, Etc.
The
amount of any Loss for which indemnification is provided under this Section
8
shall be net of (i) in the case of Section 8(b), any accruals or reserves
on the balance sheet of the Company for the Most Recent Fiscal Month End, (ii)
any
amounts
recovered by the Indemnified
Party pursuant to any indemnification by or indemnification agreement with
any
third party, (iii) any insurance proceeds or other cash receipts or sources
of
reimbursement received
as an offset against such Loss
(and no
right of subrogation shall accrue to any insurer or third party indemnitor
hereunder) (each such source named in clauses (i), (ii) and (iii), a
βCollateral
Sourceβ),
and
(iv) the fees, costs and expenses of defending or pursuing any claim against
a
Collateral Source. If the amount to be netted hereunder from any payment
required under
Sections 8(b) or 8(c) is determined after payment by the indemnifying party
of
any amount otherwise required to be paid to an Indemnified Party pursuant to
this Section 8, the Indemnified Party shall repay to the indemnifying party,
promptly after such determination, any amount that the indemnifying party
would
not
have had to pay pursuant to this Section 8 had such determination been made
at
the time of such payment, along with the fees, costs and expenses, if any,
of
pursuing such claim. Unless
prohibited by law, the Parties agree that any indemnification payment made
hereunder shall be treated as an adjustment to the Purchase Price.
(f) Termination
of Indemnification.
The
obligations to indemnify
and hold
harmless a Person pursuant to Section 8(b) and Section 8(c), shall terminate
when the applicable representation, warranty or covenant terminates pursuant
to
Section 8(a); provided,
however,
that as
to clauses (b) and (c) above, such obligations to indemnify and hold harmless
shall not terminate with respect to any item as to which the Person to be
indemnified shall have, before the expiration of the applicable period,
previously made a claim by delivering a notice
(stating in reasonable detail the basis of such claim) to the Party providing
the indemnification;
and
provided,
further,
that
any such claim shall be deemed to have been withdrawn and waived one year after
being made, unless (A) court proceedings shall have commenced with respect
to
such claim within such one year period, or (B) such claim shall have been waived
or satisfied within such one year period.
(g) Procedures
Relating to Indemnification.
A Party
seeking indemnification pursuant to Section 8(b) or Section 8(c), (an
βIndemnified
Partyβ)
shall
give prompt notice to the Party from whom such indemnification is sought (the
βIndemnifying
Partyβ)
of the
assertion of any claim or assessment, or the commencement of any action, suit,
audit or proceeding, by a third party in respect of which indemnity may be
sought hereunder (a βThird
Party Claimβ)
and
will give the Indemnifying Party such information with respect thereto as the
Indemnifying Party may reasonably request; provided,
however,
that no
failure to give such notice shall relieve the Indemnifying Party of any
liability hereunder (except to the extent the Indemnifying Party has suffered
actual prejudice thereby). Thereafter, the Indemnified Party shall deliver
to
the Indemnifying Party, within ten (10) business days after the Indemnified
Party's receipt thereof, copies of all notices and documents (including court
papers) received by the Indemnified Party relating to the Third Party Claim.
The
Indemnifying Party shall have the right, exercisable by written notice (the
βNoticeβ)
to the
Indemnified Party within thirty (30) days of receipt of notice from the
Indemnified Party of the commencement of or assertion of any Third Party Claim,
to assume and control the defense of such Third Party Claim, using counsel
selected by the Indemnifying Party and reasonably acceptable to the Indemnified
Party. Should the Indemnifying Party so elect to assume the defense of a Third
Party Claim, the Indemnifying Party will not be
33
liable
to
the Indemnified Party for legal expenses subsequently incurred by the
Indemnified Party in connection with the defense thereof. Regardless of whether
the Indemnifying Party elects to assume the defense of any such Third Party
Claim, (a) the Indemnified Party shall not admit any liability with respect
to,
or settle, compromise or discharge, such Third Party Claim without the
Indemnifying Party's prior written consent, which shall not be unreasonably
withheld, delayed or conditioned and (b) the Indemnifying Party will not admit
any liability, consent to the entry of any judgment or enter into any settlement
or compromise with respect to such Third Party Claim, without the prior written
consent of the Indemnified Party, which shall not be unreasonably withheld,
delayed or conditioned, unless such settlement or judgment involves only the
payment of money damages by the Indemnifying Party and does not involve an
injunction or other equitable relief that may affect an Indemnified Party and
includes an unconditional release of the Indemnified Party.
The
Indemnifying Party or the Indemnified Party, as the case maybe, shall in any
event have the right to participate, at its own expense, in the defense of
any
Third Party Claim which the other is defending. Whether or not the Indemnifying
Party chooses to defend or prosecute any claim involving a third party, all
the
Parties hereto shall cooperate in the defense or prosecution thereof and shall
furnish such records, information and testimony, and attend such conferences,
discovery proceedings, hearings, trials and appeals as may be reasonably
requested in connection therewith. Such cooperation shall include reasonable
access during normal business hours afforded to the Indemnifying Party to,
and
reasonable retention by the Indemnified Party of, records and information which
are reasonably relevant to such Third Party Claim, and making employees
available on a mutually convenient basis to provide additional information
and
explanation of any material provided hereunder, and the Indemnifying Party
shall
reimburse the Indemnified Party for all its reasonable out-of-pocket expenses
in
connection therewith.
(h) Exclusive
Remedy.
Each
of
the Parties hereto agrees that its sole and exclusive remedy after the Closing
with respect to any and all claims relating to this Agreement, the Company,
the
events giving rise to this Agreement and the transactions provided for herein
or
contemplated hereby, shall be pursuant to the indemnification provisions
contained in this Section 8. Notwithstanding
the foregoing, the limitations set forth in this Section 8(h) shall not apply
to
any claim of a Party against another Party based on the actual fraud of such
other Party.
(i) Collateral
Sources.
Indemnification for any claims under this Section 8 shall not be available
to
any Indemnified Party unless such Indemnified Party uses commercially reasonable
efforts to seek recovery from any Collateral Source for such claim before making
any claim for indemnification by the Indemnifying Party. Any Indemnifying Party
may, in its sole discretion, require any Indemnified Party to grant an
assignment of the right of such Indemnified Party to assert a claim against
any
Collateral Source if the Indemnifying Party has first fully satisfied the claim
by the Indemnified Party. In the event of such assignment, the Indemnifying
Party will pursue such claim at its own expense.
(j) Mitigation.
Notwithstanding
any other provision of this Agreement to the contrary, any Indemnified Party
shall use commercially reasonable efforts to mitigate all Losses, relating
to a
claim under these indemnification provisions, including availing itself of
any
defenses, limitations, rights of contribution, claims against third Persons
and
other rights at law or equity. The Indemnified Partyβs commercially reasonable
efforts shall include the reasonable expenditure of money to mitigate or
otherwise reduce or eliminate any Loss for which indemnification would otherwise
be due, and the Indemnifying Party shall, to the extent that an Indemnified
Partyβs Loss exceeds the amounts described in Section 8(d)(i), reimburse the
Indemnified Party for its reasonable expenditures (except for any portion of
the
wages, salary, benefits, overhead or other costs attributable to the Indemnified
Party and its officers, directors, employees, agents) in undertaking the
mitigation and shall, to such extent, take such expenses into account in
calculating the aggregate amount of the liability of the Seller Entities for
the
34
Buyerβs
indemnifiable Losses or the Buyerβs liability for the indemnifiable Losses of
the Seller Entities, as the case may be.
9. TAX
MATTERS.
The
following provisions shall govern the allocation of responsibility as between
the Buyer and the Seller Entities for certain tax matters following the Closing
Date:
(a) Consolidated
Return.
The
Seller Entities shall cause the
Company
to be included in the consolidated Income Tax Returns of the Seller Entities
for
all periods ending on or prior to the Closing Date for which the
Company
is required to be so included and the Seller Entities shall cause to be prepared
and timely filed any other federal, state, foreign or local Income Tax Return
required or permitted to be filed by the
Company
for all periods ending on or prior to the Closing Date. Any such Income Tax
Returns that include periods ending on or before the Closing Date shall, insofar
as they relate to the
Company,
be on a basis consistent with the last previous such Tax Returns filed with
respect to the
Company,
unless the Buyer or the Seller Entities conclude that there is no reasonable
basis for such position under applicable law. Neither the Seller Entities nor
the
Company
(prior to the Closing Date) shall file or cause to be filed any amended Tax
Return or claims for refund with respect to the
Company
without the prior written consent of the Buyer, which consent shall not be
unreasonably withheld, conditioned or delayed. Neither the Buyer nor
the
Company
(after the Closing Date) shall file or cause to be filed any amended Tax Return
or claims for refund with respect to any period ending on or before the Closing
Date without the prior written consent of the Seller Entities, which consent
shall not be unreasonably withheld, conditioned or delayed.
(b) Tax
Periods Ending on or Before the Closing Date.
The
Seller shall cause the Company to prepare or cause to be prepared and file
or
cause to be filed all Tax Returns for the
Company
for all periods ending on or prior to the Closing Date which are required to
be
filed after the Closing Date. The Seller shall provide the Buyer and the Seller
Entities with a draft of each such Tax Return described in the preceding
sentence at least thirty (30) days prior to the due date for filing such Tax
Return. The Seller Entities agree that the liability for any Tax incurred by
the
Company for any period ending on or before the Closing Date is the liability
of
and is for the account of the Seller Entities.
(c) Tax
Periods Beginning Before and Ending After the Closing Date.
The
Buyer shall prepare or cause to be prepared and file or cause to be filed any
Tax Returns of the
Company
(other than income Tax Returns for which a consolidated Tax Return is to be
submitted) with respect to for Tax periods which begin before the Closing Date
and end after the Closing Date (the βOverlap
Periodβ),
and
the Buyer shall timely pay, or cause to be paid, all Taxes shown as due on
any
such Tax Returns. The Buyer shall provide the Seller Entities with a draft
of
each such Overlap Period Tax Return at least thirty (30) days prior to the
due
date for filing such Tax Return. At least fifteen (15) days prior to the due
date for the filing of such Tax Return, the Seller Entities shall notify the
Buyer of the existence of any reasonable objection the Seller Entities may
have
to any items set forth on such draft Tax Return. If after consulting in good
faith the Seller Entities and the Buyer are unable to resolve such objections,
such objections shall be resolved by treating items on such returns in a manner
consistent with the past practices of the Company with respect to such items
unless otherwise required by law. The Seller Entities shall pay to the Buyer
within thirty (30) days after the date on which Taxes are paid with respect
to
such periods an amount equal to the portion of such Taxes which relates to
the
portion of such taxable period ending on the Closing Date to the extent such
Taxes are not reserved on the balance sheet of the Company for the Most Recent
Fiscal Month End. For purposes of this Section 9, in the case of any Taxes
that
are imposed on a periodic basis and are payable for an Overlap Period, the
portion of such Tax which relates to the portion of such taxable period ending
on the Closing Date shall (i) in the case of any Taxes other than Income Taxes
or sales and use
35
Taxes,
be
deemed to be the amount of such Tax for the entire taxable period multiplied
by
a fraction the numerator of which is the number of days in the taxable period
ending on the Closing Date and the denominator of which is the number of days
in
the entire taxable period, and (ii) in the case of any Tax based upon or related
to Income Tax or sales and use Tax, be deemed equal to the amount which would
be
payable if the relevant taxable period ended on the Closing Date. Any credits
relating to a taxable period that begins before and ends after the Closing
Date
shall be taken into account as though the relevant taxable period ended on
the
Closing Date. All determinations necessary to give effect to the foregoing
allocations shall be made in a manner consistent with prior practice of the
Company.
(d) Refunds
and Tax Benefits.
Any Tax
refunds that are received by the Buyer or the
Company,
and any amounts credited against Tax to which the Buyer or the
Company
become entitled, that relate to Tax periods or portions thereof ending on or
before the Closing Date shall be for the account of the Seller Entities, and
the
Buyer shall pay over to the Seller Entities any such refund or the amount of
any
such credit within thirty (30) days after receipt or entitlement thereto. In
addition, to the extent that a claim for refund or a proceeding results in
a
payment or credit against Tax by a Taxing Authority to the Buyer or the
Company
of any amount accrued on the balance sheet of the Company for the Most Recent
Fiscal Month End, the Buyer shall pay such amount to the Seller Entities within
thirty (30) days after receipt or entitlement thereto.
(i) The
Buyer
and the Seller Entities shall cooperate fully, as and to the extent reasonably
requested by the other Parties, in connection with the filing of Tax Returns
pursuant to this Section 9 and any audit, litigation or other proceeding with
respect to Taxes. Such cooperation shall include the retention and (upon the
other Party's request) the provision of records and information which are
reasonably relevant to any such audit, litigation or other proceeding and making
employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. The Buyer and
the Seller Entities agree (A) to retain all books and records with respect
to
Tax matters pertinent to the Company relating to any taxable period beginning
before the Closing Date until the expiration of the statute of limitations
(and,
to the extent notified by the Buyer or the Seller Entities, any extensions
thereof) of the respective taxable periods, and to abide by all record retention
agreements entered into with any Taxing Authority, and (B) to give the other
Parties reasonable written notice prior to transferring, destroying or
discarding any such books and records and, if another Party so requests, the
Buyer or the Seller Entities, as the case may be, shall allow the other party
to
take possession of such books and records.
(ii) The
Buyer
and the Seller Entities further agree, upon request, to use commercially
reasonable efforts to obtain any certificate or other document from any Taxing
Authority or any other Person as may be necessary to mitigate, reduce or
eliminate any Tax that could be imposed (including, but not limited to, with
respect to the transactions contemplated hereby).
(iii) The
Buyer
and the Seller Entities further agree, upon request, to provide the other party
with all information that either party may be required to report pursuant to
Section 6043 of the Code and all Treasury Department Regulations promulgated
thereunder.
(f) Tax
Sharing Agreements.
All tax
sharing agreements or similar agreements with respect to or involving
the
Company
shall be terminated as of the Closing Date and, after the Closing Date,
the
Company
shall not be bound thereby or have any liability thereunder.
36
(g) Transfer
Taxes.
All
transfer, documentary, sales, use, stamp, registration and other such Taxes
and
fees (including any penalties and interest) incurred in connection with the
consummation of the transactions contemplated by this Agreement (including
any
state gains tax, transfer tax and any similar tax imposed in any state or
subdivision), shall be paid by the Buyer when due, and the Buyer will, at its
own expense, file all necessary Tax Returns and other documentation with respect
to all such transfer, documentary, sales, use, stamp, registration and other
Taxes and fees, and, if required by applicable law, the Buyer will, and will
cause its Affiliates to, join in the execution of any such Tax Returns and
other
documentation.
(h) Representation.
(i) The
Seller Entities shall have the right to represent the interests of the
Company
in any Tax audit or administrative or court proceeding relating to Tax Returns
for any periods or portions thereof ending on or prior to the Closing Date.
Following the Closing, in the event of an audit of any Tax Return of the Seller
Entities or with respect to which either of the Seller Entities has any
liability, the Buyer shall promptly notify the Seller Entities of such audit
and
the Buyer shall execute, or cause the Company to execute, powers of attorney
under applicable laws authorizing the designated representative of the Seller
Entities to represent the
Company
with respect thereto. The Buyer shall make available or shall cause the
Company
to make available to the Seller Entities, at the expense of the Seller Entities,
any and all books and records of the
Company
and other documents requested by the Seller Entities and shall make available
employees of the
Company
reasonably necessary to enable the Seller Entities to defend any audit or other
proceeding with respect to any such Tax Returns.
(ii) The
Seller Entities shall not enter into any settlement of or otherwise compromise
any Tax matter that materially affects or may materially affect the Tax
liability of the Buyer or the
Company
for any period ending after the Closing Date, including the portion of the
Overlap Period that is after the Closing Date, without the prior written consent
of the Buyer, which consent shall not be unreasonably withheld, conditioned
or
delayed. The Seller Entities shall use commercially reasonable efforts to keep
the Buyer fully and timely informed with respect to the commencement, status
and
nature of any Tax matter. The Seller Entities shall allow the Buyer, at its
sole
expense, to make comments to the representative of the Seller Entities,
regarding the conduct of or positions taken in any such proceeding, and consider
such comments in good faith.
(iii) Except
as
otherwise provided above, the Buyer shall have the sole right to control any
audit or examination by any Taxing Authority, initiate any claim for refund
or
amend any Tax Return, and contest, resolve and defend against any assessment
for
additional Taxes, notice of Tax deficiency or other adjustment of Taxes of,
or
relating to, the income, assets or operations of the
Company
for all taxable periods ending after the Closing Date; provided,
however,
that
the Buyer shall not, and shall cause its Affiliates (including the Company)
not
to, enter into any settlement of any contest or otherwise compromise any issue
with respect to the portion of the Overlap Period ending on or prior to the
Closing Date and shall not amend any Tax Return with respect to any period
ending on or prior to the Closing Date without the prior written consent of
the
Seller Entities, which consent shall not be unreasonably withheld, conditioned
or delayed.
(i) Confidentiality.
Any
information obtained under this Section 9 shall be kept confidential in
accordance with Section 6(f), except as may be otherwise necessary in connection
with filing any Tax Return (or amended Tax Return) or refund claim, determining
any Tax liability or right to a refund, conducting or defending any audit or
other proceeding with respect to Taxes or otherwise effectuating the terms
of
this Agreement.
37
(i)
At
the sole election of the Buyer, to be exercised within ninety (90) days after
the Closing Date, the Seller Entities and Buyer will jointly complete and make
an election under Section 338(h)(10) of the Code (with respect to the Company)
on Form 8023 or in such other manner as may be required by rule or regulation
of
the Internal Revenue Service, and will jointly make an election in the manner
required under any analogous provisions of state or local law as the Buyer
will
designate or as will be required, concerning the transactions contemplated
by
this Agreement (collectively and specifically, the βSection
338(h)(10) Electionβ).
The
Buyer will, with the assistance and cooperation of the Seller Entities, prepare
all such Section 338(h)(10) forms required as attachments to Form 8023 (and
all
forms under analogous provisions of state or local law) in accordance with
applicable Tax laws, and Buyer will deliver such forms and related documents
to
the Seller Entities at least sixty (60) days prior to the due date of filing.
The Seller Entities will deliver to the Buyer at least forty five (45) days
prior to the due date of filing copies of such completed and fully executed
forms as are required to be filed under Section 338(h)(10) of the Code (and
analogous provisions of state and local law). The Buyer will timely file such
forms with the appropriate Tax authorities. The Buyer and Seller Entities will
use commercially reasonable efforts to agree, as soon as practicable after
Closing but in no event later than one hundred twenty (120) days following
the
Closing Date (subject to the dispute resolution mechanism described in clause
(ii) below), on the computation of the modified aggregate deemed sale price
(βMADSPβ)
(as
defined under U.S. Department of Treasury Regulations).
(ii)
The
Seller Entities and the Buyer agree that the Buyer will perform or cause to
be
performed an initial valuation of assets and allocation of the Purchase Price
for purposes of Section 338 of the Code at the sole cost and expense of the
Buyer. The Buyer will provide the Seller Entities with drafts of such valuation
of assets and allocation of MADSP (which will be prepared on a basis consistent
with this Section 9(j)) within seventy-five (75) days after the Closing Date.
The Seller Entities will have forty five (45) days to provide the Buyer with
any
objections to such drafts. If the Seller Entities object to the computation
or
allocation by the Buyer of such amounts, and the Buyer and Seller Entities
are
unable to reach agreement on the computation or allocation within thirty (30)
business days after notification by the Seller Entities of its objection, the
Buyer and the Seller Entities will jointly engage an Independent Accountant
to
resolve the disagreement (such resolution to be final and binding upon the
Parties) within ten (10) days thereafter. Any fee payable to the Independent
Accountant in connection with this Section 9(j) will be shared equally by the
Seller Entities and the Buyer. The valuation and allocations determined pursuant
to this Section 9(j) will be used for purposes of all relevant Tax Returns,
reports and filings.
(iii)
In
the event the Buyer decides to make a Section 338(h)(10) Election with respect
to the purchase of the Company Shares, then the Buyer hereby agrees to indemnify
and hold the Seller harmless from any incremental tax liability imposed upon
the
Seller as a result of such election. The amount of the indemnity (the
β338
Indemnity Amountβ)
shall
be equal to the amount that the Purchase Price must be increased to result
in
the Seller receiving the same after-Tax cash benefit (prior to any reduction
for
a consolidated return net operating loss) as would result if the Section
338(h)(10) Election was not made. Buyer shall pay the 338 Indemnity Amount
within thirty (30) days of receipt of notice by Seller of the calculation of
the
338 Indemnity Amount.
38
10. TERMINATION.
(a) Termination
of Agreement.
Certain
of the Parties may terminate this Agreement as provided below:
(i) the
Buyer
on the one hand and the Seller Entities on the other may terminate this
Agreement by mutual written consent at any time prior to the
Closing;
(ii) the
Buyer
may terminate this Agreement by giving written notice to the Seller Entities
at
any time prior to the Closing: (A) in the event a Seller Entity has breached
any
representation, warranty or covenant contained in this Agreement if such breach
would reasonably be expected to have a Material Adverse Effect, the Buyer has
notified the Seller Entities of the breach, and the breach has continued without
cure for a period of ten (10) days after the notice of breach; (B) if the
Closing shall not have occurred on or before the date that is sixty (60) days
following the date hereof; or (C) by reason of the failure of any condition
precedent under Section 7(a) hereof (unless the failure results from the Buyer
itself breaching any material representation, warranty or covenant contained
in
this Agreement); provided,
however,
that
notwithstanding any language to the contrary contained in this Agreement, if
any
such breach described above by a Seller Entity of any representation, warranty
or covenant can be cured by the payment of money, any Seller Entity shall have
the option, but not the obligation, to cure such breach by making payment to
the
Person entitled to payment (e.g., a governmental authority). Upon any election
by a Seller Entity in accordance with the foregoing sentence, the Buyer shall
not be entitled to terminate this Agreement on account of the applicable breach;
provided further,
that in
no event shall any of the Seller Entities be required to expend any monies
in
connection with the Buyerβs breach of any material representation, warranty or
covenant under this Agreement or with respect to the Buyerβs compliance or
noncompliance with any applicable law (including rules, regulations, codes,
plans, injunctions, judgments, orders, decrees, rulings, and charges thereunder)
of federal, state and local governments (and all agencies thereof) whether
arising before or after the Closing;
and
(iii) the
Seller Entities may terminate this Agreement by giving written notice to the
Buyer at any time prior to the Closing (A) in the event the Buyer has breached
any material representation, warranty or covenant contained in this Agreement
in
any material respect, a Seller Entity has notified the Buyer of the breach,
and
the breach has continued without cure for a period of ten (10) days after the
notice of breach; (B) if the Closing shall not have occurred on or before the
date that is sixty (60) days following the date hereof; or (C) by reason of
the
failure of any condition precedent under Section 7(b) hereof (unless the failure
results from a Seller Entity itself breaching any material representation,
warranty, or covenant contained in this Agreement).
(b) Effect
of Termination.
If any
Party terminates this Agreement pursuant to Section 10(a) above, all rights
and
obligations of the Parties hereunder shall terminate without any liability
of
any Party to any other Party (except for any liability of any Party then in
breach).
39
11. MISCELLANEOUS.
(a) Press
Releases and Public Announcements.
No
Party shall issue any press release or make any public announcement relating
to
the subject matter of this Agreement, prior to the Closing, without the prior
written approval of the Buyer and the Seller Entities; provided,
however,
that
any Party may make any public disclosure it believes in good faith is required
by applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party will use
commercially reasonable efforts to advise the other Parties prior to making
the
disclosure).
(b) No
Third-Party Beneficiaries.
Except
as provided by Sections 8(b) and 8(c), this Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(c) Entire
Agreement.
This
Agreement (including the documents referred to herein) constitutes the entire
agreement among the Parties and supersedes any prior understandings, agreements,
or representations by or among the Parties, written or oral, to the extent
they
related in any way to the subject matter hereof.
(d) Succession
and Assignment.
This
Agreement shall be binding upon and inure to the benefit of the Parties named
herein and their respective successors and permitted assigns. No Party may
assign either this Agreement or any of his or its rights, interests, or
obligations hereunder without the prior written approval of the Buyer and the
Seller Entities.
(e) Counterparts.
This
Agreement may be executed and delivered (including by electronic mail or
facsimile transmission) in one or more counterparts, each of which shall be
deemed an original but all of which together will constitute one and the same
instrument.
(f) Headings.
The
section headings contained in this Agreement are inserted for convenience only
and shall not affect in any way the meaning or interpretation of this
Agreement.
(g) Notices.
All
notices, requests, demands, claims, and other communications hereunder will
be
in writing. Any notices or payments required to be delivered to the Seller
Entities after the Closing shall be delivered to the Parent and any consent
or
approval required to be sought of the Seller Entities after the Closing shall
be
sought of and given by the Parent. Any notice, request, demand, claim, or other
communication hereunder shall be deemed duly given if (and then two business
days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set
forth
below:
If
to the Parent or the Seller:
|
Copy
to
(which shall not constitute notice):
|
UIL
Holdings Corporation
|
Xxxxxx
and Xxxx LLP
|
000
Xxxxxx Xxxxxx
|
000
Xxxxxxxx Xxxxxx
|
Xxx
Xxxxx, XX 00000
|
Xxxxxxxx,
XX 00000
|
Attn:
Chief Financial Officer
|
Attn:
Xxxxxxx X. Xxxxxxx, Esq.
|
40
If
to the Buyer:
|
Copy
to (which shall not constitute notice):
|
TEI
Acquisition Corporation
000
Xxxxx Xxxxxxx Xxxxxx, Xxxxx X
Xxxxxxxxx,
XX 00000
Attn:
B. Xxxxxxx Xxxxxxx
President
|
Holland
& Knight LLP
000
Xxxxx Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx,
XX 00000
Attn:
Xxxxxxxx X. Xxxxx, Xx., Esq.
|
Any
Party
may send any notice, request, demand, claim, or other communication hereunder
to
the intended recipient at the address set forth above 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 shall be deemed to have been duly given unless
and
until it actually is received by the intended recipient. Any Party may change
the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
(h) Governing
Law.
This
Agreement shall be governed by and construed in accordance with the domestic
laws of the State of New York without giving effect to any choice or conflict
of
law provision or rule (whether of the State of New York or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of New York.
(i) Venue.
EACH OF
THE PARTIES HERETO (A) CONSENTS TO SUBMIT ITSELF TO THE EXCLUSIVE PERSONAL
JURISDICTION OF ANY FEDERAL OR STATE COURT LOCATED IN AND FOR NEW YORK, NEW
YORK
IN THE EVENT ANY DISPUTE ARISES OUT OF THIS AGREEMENT, (B) AGREES THAT IT SHALL
NOT ATTEMPT TO DENY OR DEFEAT SUCH PERSONAL JURISDICTION BY MOTION OR OTHER
REQUEST FOR LEAVE FROM ANY SUCH COURT AND (C) AGREES THAT IT SHALL NOT BRING
ANY
ACTION RELATING TO THIS AGREEMENT IN ANY COURT OTHER THAN A FEDERAL OR STATE
COURT SITTING IN AND FOR NEW YORK, NEW YORK.
(j) Waiver
of Jury Trial.
EACH
PARTY TO THIS AGREEMENT WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, SUIT
OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(k) Amendments
and Waivers.
No
amendment of any provision of this Agreement shall be valid unless the same
shall be in writing and signed by the Buyer and the Seller Entities. No waiver
by any Party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to extend to
any
prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
(l) Severability.
Any
term or provision of this Agreement that is invalid or unenforceable in any
situation in any jurisdiction shall 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.
41
(m) Expenses.
Each of
the Parties will bear his or its own costs and expenses (including legal fees
and expenses) incurred in connection with this Agreement and the transactions
contemplated hereby. Without limiting the generality of the foregoing, the
Buyer
hereby agrees to bear any and all documentary stamp taxes or similar taxes
in
connection with this Agreement and the transactions contemplated
hereby.
(n) Construction.
The
Parties have participated jointly in the negotiation and drafting of this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the Parties
and no presumption or burden of proof shall arise favoring or disfavoring any
Party by virtue of the authorship of any of the provisions of this Agreement.
Any reference to any federal, state, local, or foreign statute or law shall
be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise. The word βincludingβ shall mean βincluding
without limitationβ.
(o) Incorporation
of Exhibits and Schedules.
The
Exhibits, Annexes, and Schedules identified in this Agreement are incorporated
herein by reference and made a part hereof.
[Signature
page follows.]
42
IN
WITNESS WHEREOF, the Parties hereto have executed this Agreement on the date
first above written.
TEI
ACQUISITION CORPORATION.
|
By: /s/
B. Xxxxxxx Xxxxxxx
|
|
B.
Xxxxxxx Xxxxxxx, President
|
UIL
HOLDINGS CORPORATION
|
By: /s/
Xxxxxxx X. Xxxxxxxx
|
|
Xxxxxxx
X. Xxxxxxxx, Chief Finanical
Officer
|
XCELECOM,
INC.
|
By: /s/
Xxxx X. Xxxxxx
|
|
Xxxx
X. Xxxxxx, President
|
\14446\26\122544.9
43
Exhibit
A
Note
{See
attached}
1
Exhibit
B
Affidavits
{See
attached}
1
Exhibit
C
Stock
Pledge and Security Agreement
{See
attached}
1
Annex
A
Buyer
Disclosure Letter
{See
attached}
2
Annex
B
Disclosure
Schedule
{See
attached}
#
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