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ASSET PURCHASE AGREEMENT
DATED AS OF APRIL 27, 2005
BY AND BETWEEN
CONTINUEDLEARNING, LLC
AND
CREATIVE SOCIO-MEDICS CORP.
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TABLE OF CONTENTS
Page
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ARTICLE 1 DEFINITIONS........................................................1
SECTION 1.1. Certain Definitions.................................1
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SECTION 1.2. Index of Other Defined Terms........................5
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ARTICLE 2 TRANSFER OF ASSETS................................................6
SECTION 2.1. Transfer of Assets by Seller........................6
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SECTION 2.2. Excluded Assets.....................................7
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SECTION 2.3. Assumption of Liabilities...........................8
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SECTION 2.4. Excluded Liabilities................................8
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SECTION 2.5. Assignment of Contracts and Rights..................9
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SECTION 2.6. Closing............................................10
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SECTION 2.7. Purchase Price Allocation..........................11
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ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER.........................12
SECTION 3.1. Organization and Qualification.....................12
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SECTION 3.2. Authority Relative to this Agreement...............12
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SECTION 3.3. Subsidiaries.......................................13
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SECTION 3.4. Financial Statements...............................13
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SECTION 3.5. Consents and Approvals; No Violations.............13
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SECTION 3.6. Litigation.........................................14
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SECTION 3.7. Compliance with Applicable Law.....................14
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SECTION 3.8. Labor Matters......................................14
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SECTION 3.9. Intellectual Property and Information Technology...15
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SECTION 3.10. Brokers.............................................15
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SECTION 3.11. Material Contracts..................................15
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SECTION 3.12. Title to Assets and Continued Operation.............17
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SECTION 3.13. Insurance...........................................17
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SECTION 3.14. Equipment...........................................17
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SECTION 3.15. Absence of Changes..................................17
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SECTION 3.16. Product Warranties, Defects and Liabilities.........18
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SECTION 3.17. Affiliate Transactions..............................19
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SECTION 3.18. Customers and Suppliers.............................19
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SECTION 3.19. Illegal Payments....................................19
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SECTION 3.20. Books and Records...................................19
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SECTION 3.21 Real Property.......................................20
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SECTION 3.22 Environmental Compliance............................20
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SECTION 3.23. Taxes...............................................21
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SECTION 3.24 Investment Representations..........................21
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SECTION 3.25. Disclosure..........................................23
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ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER...........................23
SECTION 4.1. Organization.......................................23
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SECTION 4.2. Authority Relative to this Agreement...............24
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SECTION 4.3. Consents and Approvals: No Violations.............24
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SECTION 4.4. Litigation.........................................24
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SECTION 4.5. Brokers............................................24
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SECTION 4.6. Disclosure.........................................25
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ARTICLE 5 COVENANTS.........................................................25
SECTION 5.1. Additional Agreements; Reasonable Best Efforts.....25
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SECTION 5.2. Public Announcements...............................25
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SECTION 5.3. Employee Benefits..................................25
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SECTION 5.4. Expenses...........................................26
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SECTION 5.5. Certain Other Covenants............................27
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SECTION 5.6. Investment in Business.............................27
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SECTION 5.7 Additional Payments................................27
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ARTICLE 6 TAX MATTERS......................................................28
SECTION 6.1. Taxes..............................................28
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SECTION 6.2. Cooperation........................................28
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SECTION 6.3. Allocation of Taxes................................28
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ARTICLE 7 SURVIVAL OF REPS & WARRANTIES; INDEMNIFICATION....................29
SECTION 7.1. Survival of Representations and Warranties.........29
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SECTION 7.2. Survival of Covenants and Agreements...............29
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SECTION 7.3. Indemnification by Seller..........................29
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SECTION 7.4. Indemnification by Buyer...........................30
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SECTION 7.5. Procedure, Notice of Claims........................30
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SECTION 7.6. Procedure - Third Party Claims.....................31
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SECTION 7.7. Remedies...........................................32
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SECTION 7.8. Certain Limitations................................32
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ARTICLE 8 MISCELLANEOUS....................................................33
SECTION 8.1. Entire Agreement; Assignment; Amendments and
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Waivers............................................33
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SECTION 8.2. Validity...........................................34
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SECTION 8.3. Notices............................................34
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SECTION 8.4. Governing Law, Forum Selection, Jurisdiction.......35
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SECTION 8.5. WAIVER OF JURY TRIAL...............................35
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SECTION 8.6. Descriptive Headings...............................35
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SECTION 8.7. Parties in Interest................................36
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SECTION 8.8. Personal Liability.................................36
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SECTION 8.9. Specific Performance...............................36
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SECTION 8.10. Disclosure Generally................................36
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SECTION 8.11. Counterparts........................................36
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TABLE OF CONTENTS
TO
SELLER DISCLOSURE SCHEDULE
Schedule 2.1(a) Equipment
Schedule 2.1(b) Assumed Contracts
Schedule 2.7 Price Allocation
Schedule 3.1 Jurisdictions of Good Standing Schedule
3.4(a) Financial Statements
Schedule 3.9(a) Intellectual Property
Schedule 3.9(c) Information Technology
Schedule 3.11 Material Contracts
Schedule 3.16(i) Standard Terms of Product Warranties
Schedule 3.18(a) Customers and Suppliers
Schedule 3.18(b) Exclusive Agreements
Schedule 3.21 Leased Real Property
Schedule 3.23 Taxes
Schedule 5.3 Transferred Employees
Schedule 5.8 Liabilities to be Paid After Closing
iii
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, dated as of April 27, 2005 (this
"Agreement"), by and between CONTINUEDLEARNING LLC, a Florida limited liability
company ("Seller"), and CREATIVE SOCIO-MEDICS CORP., a Delaware corporation
("Buyer").
RECITALS
WHEREAS, Seller is engaged in the business of producing, selling and
implementing Internet-based products and solutions that fulfill the unique
training requirements of behavioral healthcare companies, behavioral healthcare
professionals, and provider organizations (the "Business");
WHEREAS, Buyer is a wholly-owned subsidiary of NETSMART TECHNOLOGIES,
INC. ("Parent");
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, substantially all of the assets of the Seller related to the
Business (other than the Excluded Assets, as defined below), which constitutes
all of the assets used in the operation of the Business;
WHEREAS, Seller desires to sell such assets in consideration of Buyer's
obligations hereunder, including Buyer's agreement to assume certain of the
liabilities of Seller relating to the Business (other than the Excluded
Liabilities, as defined below), all on the terms set forth herein.
AGREEMENT
NOW THEREFORE in consideration of the premises and the representations,
warranties, covenants and agreements herein contained and intending to be
legally bound hereby, Seller and Buyer hereby agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. Certain Definitions.
The following terms, as used herein, have the following meanings:
"Affiliate" means, in respect of any Person, a Person that, directly or
indirectly, through one or more intermediaries controls, is controlled by or is
under common control with the first-mentioned Person.
"Applicable Law" means, with respect to any Person, any domestic or
foreign, federal, state or local statute, law, ordinance, policy, guidance,
rule, administrative interpretation, regulation, order, writ, injunction,
1
directive, judgment, decree or other requirement of any Governmental Authority
applicable to such Person or any of its Affiliates or any of their respective
properties, assets, officers, directors, employees, consultants or agents (in
connection with such officer's, director's, employee's, consultant's or agent's
activities on behalf of such Person or any of its Affiliates).
"Balance Sheet" means the balance sheet of Seller dated December 31,
2004.
"Balance Sheet Date" means December 31, 2004.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means information not generally available to
the public, including, without limitation, all computer software and database
information, personnel information, financial information, customer lists,
supplier lists, trade secrets, patented proprietary information, forms,
information regarding operations, systems, services, know how, computer and any
other processed or collated data, computer programs, pricing, marketing and
advertising data, methods, forms, systems, services, designs, marketing ideas,
products or processes (whether or not capable of being trademarked, copyrighted
or patented).
"Contracts" means all contracts, agreements, options, leases, licenses,
sales and accepted purchase orders, commitments and other instruments of any
kind, whether written or oral, which relate to the Business and to which Seller
is a party or is otherwise bound by on the Closing Date, including the Material
Contracts.
"Damages" means all demands, claims, actions or causes of action,
assessments, losses, damages, costs, expenses, liabilities, judgments, awards,
fines, sanctions, penalties, charges and amounts paid in settlement, including
reasonable costs, fees and expenses of attorneys, accountants, consultants and
other agents or independent contractors incurred in investigating, preparing for
and defending any thereof.
"Environmental Law" means any applicable federal, state, local and
foreign law, statute, ordinance, regulation, rule, judicial or administrative
order or decree, permit, license, approval, authorization or similar
requirement of each and every federal, and pertinent state, local and
foreign governmental agency or other Governmental Authority, pertaining to
the protection of human health and safety or the environment including,
without limitation, the Comprehensive Environmental Response Compensation
and Liability Act (CERCLA), 42 U.S.C. 9601 et seq., the Resource Conservation
and Recovery Act (RCRA), 42 U.S.C. 6901 et seq., the Toxic Substances Control
Act (TSCA), 15 U.S.C. 2601 et seq., the Water Pollution Control Act (FWPCA),
33 U.S.C. 1251 et seq., and the Occupational Safety and Health Act (OSHA), 42
U.S.C. 655.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Agent" means Kramer, Coleman, Wactlar & Xxxxxxxxx, P.C.
"Escrow Agreement" means the Escrow Agreement, dated as of the date
hereof, by and among Seller, Buyer and the Escrow Agent pursuant to which the
Buyer has recourse for its indemnification claims against Seller.
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"GAAP" means generally accepted accounting principles in the United
States as in effect from time to time and applied consistently throughout the
periods involved.
"Governmental Authority" means any foreign, domestic, federal,
territorial, state or local governmental authority, quasi-governmental
authority, instrumentality, court, government or self-regulatory organization,
commission, tribunal or organization or any regulatory, administrative or other
agency, or any political or other subdivision, department or branch of any of
the foregoing.
"Hazardous Discharge" means any releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
disposing or dumping of any Hazardous Substance which violates an Environmental
Law.
"Hazardous Substance" means any material defined as a "hazardous
substance" under Section 101 of the Comprehensive Environmental Response
Compensation and Liability Act, as amended, and any petroleum products.
"Indebtedness" of any Person means all obligations of such Person (a)
for borrowed money, (b) evidenced by notes, bonds, debentures or similar
instruments or (c) in the nature of guarantees of the obligations described in
clauses (a) and (b) above of any other Person.
"Information Technology" means all computer hardware, software,
networks, microprocessors, firmware and other information technology and
communications equipment used in the operation of the information technology
systems of the Business.
"Intellectual Property" means any patent, patent application (or
renewal) and docketed invention, trademark, trade name, trademark or trade name
registration or application (or renewal), copyright or copyright registration or
application (or renewal) for copyright registration, servicemark, brand xxxx or
brand name or any pending application (or renewal) related thereto, or any trade
secret, proprietary know-how, programs or processes or any similar rights, and
each license or licensing agreement for any of the foregoing.
"Knowledge of Seller" means the actual knowledge of A. Xxxxxx Xxxxxx
and shall be deemed to include a representation that such individual has made
all usual and reasonable inquiries and all inquiries that would be reasonable in
light of such individuals' knowledge.
"Liability" means, with respect to any Person, any liability or
obligation of such Person of any kind, character or description, whether known
or unknown, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined, determinable or otherwise.
"Lease" means the lease between Seller and Palais Royale dated April 1,
2005.
"Lien" means, with respect to any asset, any mortgage, title defect or
objection, lien, pledge, charge, security interest, hypothecation, restriction,
encumbrance or charge of any kind in respect of such asset.
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"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including, without limitation, with
respect to quantity, quality and frequency).
"Permitted Liens" means (i) Liens for Taxes or governmental
assessments, charges or claims the payment of which is not yet due, or for Taxes
the validity of which are being contested in good faith by appropriate
proceedings and for which adequate reserves are maintained on the Financial
Statements; (ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other similar Persons and other Liens
imposed by Applicable Law incurred in the ordinary course of business for sums
not yet delinquent or being contested in good faith and for which adequate
reserves are maintained on the Financial Statements; (iii) Liens relating to
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security or to
secure the performance of leases, trade contracts or other similar agreements;
and (iv) Liens securing executory obligations under any lease that constitutes
an "operating lease" under GAAP.
"Person" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization or other
legal entity.
"Pre-Closing Environmental Liabilities" shall mean any losses in
respect of any Liabilities for violation of an Environmental Law to the extent
(i) arising out of any breach of any representation or warranty of Seller set
forth in Section 3.23 hereof or (ii) resulting from the operation of the
Business prior to the Closing Date.
"Related Agreements" means the Escrow Agreement, Non-Competition
Agreements, Guaranty, Xxxx of Sale and Assumption Agreement and the Registration
Rights Agreement.
"Release" means any release, spill, emission, leaking, pumping,
pouring, dumping, emptying, injection, deposit, disposal, discharge, dispersal,
leaching, or migration on or into the indoor or outdoor environment or in, on,
under, into or out of any property, including any property currently or at any
time previously owned, leased or operated by the Seller.
"Remedial Action" means those response actions, including any
investigation, testing or monitoring activities required by Environmental Law or
by any Governmental Authority to clean up, remove, contain, treat, investigate
or xxxxx any Hazardous Substance on or in connection with any property
(including, without limitation, actions to address Releases of Hazardous
Substances to the environment as of the Closing Date, such as, for example,
measures to address vapor intrusion from sub-surface contamination into indoor
air).
"Seller Disclosure Schedule" means the disclosure schedule with respect
to this Agreement concurrently delivered by Seller to Buyer.
"Subsidiary" means, with respect to any Person, (i) any corporation as
to which more than 10% of the outstanding stock having ordinary voting rights or
power (and excluding stock having voting rights only upon the occurrence of a
contingency unless and until such contingency occurs and such rights may be
exercised) is owned or controlled, directly or indirectly, by such Person and/or
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by one or more of such Person's Subsidiaries and (ii) any partnership, joint
venture or other similar relationship between such Person (or any Subsidiary
thereof) and any other Person (whether pursuant to a written agreement or
otherwise).
"Tax" means all taxes imposed of any nature including federal, state,
local or foreign net income tax, alternative or add-on minimum tax, profits or
excess profits tax, franchise tax, gross income, adjusted gross income or gross
receipts tax, employment related tax (including employee withholding or employer
payroll tax, FICA or FUTA), real or personal property tax or ad valorem tax,
sales or use tax, excise tax, stamp tax or duty, any withholding or back up
withholding tax, value added tax, severance tax, prohibited transaction tax,
premiums tax, environmental tax, intangibles tax or occupation tax, together
with any interest or any penalty, addition to tax or additional amount imposed
by any Governmental Authority (domestic or foreign) responsible for the
imposition of any such tax.
"Tax Return" means all returns, reports, forms or other information
required to be filed with respect to any Tax.
SECTION 1.2. Index of Other Defined Terms. In addition to those terms
defined above, the following terms shall have the respective meanings given
thereto in the sections indicated below:
Defined Term Section
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"Agreement" Preamble
"Assumed Contracts" 2.1(b)
"Assumed Liabilities" 2.3
"Assumed Warranties" 2.3(b)
"Business" Recitals
"Buyer" Preamble
"Buyer Indemnified Parties" 7.3
"Buyer Material Adverse Effect" 4.1
"Claim Notice" 7.5
"Closing" 2.6(a)
"Closing Date" 2.6(a)
"COBRA" 5.3(d)
"Dispute Notice" 7.5(b)
"Dispute Settlement" 7.5(b)
"Equipment" 2.1(a)
"Excluded Assets" 2.2
"Excluded Liabilities" 2.4
"Financial Statements" 3.4(a)
"Guaranty" 2.6(c)(iv)
"Indemnified Party" 7.5
"Indemnifying Party" 7.5
"Leased Real Property" 3.23
"Loss" or "Losses" 7.3
"Material Contracts" 3.11(a)
"Negotiation Period" 7.6(a)
"Non-Competition Agreements" 2.6(c)(iii)
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"Parent" Recitals
"Post-Closing Tax Period" 6.3
"Pre-Closing Tax Period" 6.3
"Price Allocation" 2.7(a)
"Purchase Price" 2.6(b)
"Real Property" 3.23
"Registration Rights Agreement" 2.6(c)(v)
"Receivables" 2.2(b)
"Securities Act" 2.7(c)
"Seller" Preamble
"Seller Indemnified Party" 7.4
"Seller Material Adverse Effect" 3.1
"Shares" 2.6(b)(ii)
"Transferred Assets" 2.1
"Transferred Employees" 5.3(a)
ARTICLE 2
TRANSFER OF ASSETS
SECTION 2.1. Transfer of Assets by Seller.
Upon the terms and subject to the conditions of this Agreement and in
reliance upon the representations, warranties and agreements herein set forth,
Buyer agrees to purchase from Seller and Seller agrees to sell or cause to be
sold to Buyer at the Closing, free and clear of all Liens, other than Permitted
Liens, all the assets, properties, rights, licenses, permits, contracts, causes
of action, claims and operations relating to or used in connection with the
Business (except for the Excluded Assets), wherever located, whether tangible or
intangible, real, personal or mixed, that are owned by, leased by or in the
possession or control of Seller or any Affiliate of Seller (the collective
assets, properties, rights, licenses, permits, contracts, causes of action,
claims, operations and businesses to be transferred to Buyer by Seller pursuant
hereto are referred to collectively herein as the "Transferred Assets"). Without
limiting the generality of the foregoing, the Transferred Assets shall include
all of Seller's right, title and interest in and to the following:
(a) all machinery, equipment, furniture, office equipment, computer
equipment (including all hardware, software and software codes and other
Information Technology), communications equipment, vehicles, spare and
replacement parts and other tangible property (and interests in any of the
foregoing) of Seller as described in Section 2.1(a) of the Seller Disclosure
Schedule (collectively, the "Equipment"), together with all warranties and
licenses issued to Seller in connection with the Equipment, and any claims,
credits and rights of recovery with respect to the Equipment;
(b) all of the Contracts to which Seller is a party (and Seller's
rights thereunder) that are (i) described in Section 2.1(b) of the Seller
Disclosure Schedule, (ii) not in default and as to which no claim of default
exists on the Closing Date, and (iii) enforceable by Buyer without the consent
of a third party (or for which a consent is obtained on or prior to the Closing
Date) (collectively, the "Assumed Contracts");
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(c) all prepaid charges and expenses of Seller, including any such
charges and expenses with respect to leases and rentals;
(d) all rights of Seller to insurance proceeds with respect to claims
for Damages to the Transferred Assets, unless such proceeds reimburse Seller for
the previously completed repair or restoration of such Transferred Assets;
(e) all of Seller's rights, claims, credits, causes of action or rights
of set-off against third parties relating to, or arising in connection with, the
Business or the Transferred Assets (other than those relating exclusively to
Excluded Liabilities), whether liquidated or unliquidated, fixed or contingent,
including claims pursuant to all warranties, representations and guarantees made
by suppliers, manufacturers, contractors and other third parties in connection
with products or services purchased by or furnished to Seller;
(f) except as set forth in Section 2.2(e), all records, files and
papers of the Seller related to the Business (which the Seller acknowledges
constitutes all records, files and papers related to the business), whether in
hard copy or computer format, including invoices, sales and promotional
literature, manuals and data, sales and purchase correspondence, and
documentation developed or used for accounting, marketing, engineering,
manufacturing or any other purpose related primarily to the conduct of the
Business at any time prior to the Closing, including all creative materials,
advertising and promotional materials and all other printed or written
materials;
(g) all lists and records pertaining to present, former and prospective
customers, and suppliers of the Business;
(h) all intangible assets of an intellectual property nature; all
copyrights and registrations thereof; all patents, inventions, shop rights,
know-how, trade secrets and Confidential Information; and all applications for
any of the foregoing; together with all rights to use all of the foregoing
forever and all other rights in, to, and under the foregoing in all countries;
all discoveries, improvements, processes, formulae (secret or otherwise), data,
confidential information, engineering, technical and shop drawings,
specifications and ideas, whether patentable or not, all licenses and other
similar agreements, and all drawings, records, books or other indicia, however
evidenced, of the foregoing; and
(i) all goodwill associated with the Business or the Transferred
Assets.
SECTION 2.2. Excluded Assets.
Notwithstanding anything herein to the contrary, Seller will retain and
not transfer, convey, assign or deliver to Buyer, and neither Buyer nor any of
Buyer's Affiliates will acquire any right, title or interest in or to any of the
following assets (collectively, the "Excluded Assets"):
(a) all cash and cash equivalents;
(b) all accounts receivable, together with any unpaid interest or fees
accrued thereon or other amounts due with respect thereto, of Seller existing on
the Closing Date and any security or collateral therefor, including recoverable
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advances and deposits (collectively, the "Receivables");
(c) all rights to causes of action, lawsuits, claims and demands of
any nature available to or being pursued by Seller with respect to the Excluded
Assets or the Excluded Liabilities;
(d) Seller's rights under this Agreement; and
(e) Seller's organizational records, minute book and accounting and tax
records relating to periods prior to the Closing.
SECTION 2.3. Assumption of Liabilities.
Upon the terms and subject to the conditions of this Agreement and in
reliance upon the representations, warranties and agreements herein set forth,
Buyer agrees, effective at the time of Closing, to assume, perform and discharge
all of the following Liabilities with respect to the Business and the
Transferred Assets (collectively, the "Assumed Liabilities"):
(a) all executory obligations of Seller under, or arising out of, the
Assumed Contracts, including obligations arising after the Closing Date under
the Lease;
(b) all obligations of Seller with respect to product warranties and
service contracts related to the Assumed Contracts arising after the Closing
Date (collectively, the "Assumed Warranties"); and
(c) all Liabilities of the Business or relating to the Transferred
Assets (other than Excluded Liabilities) to the extent resulting from events or
conditions occurring, or arising on or after, the Closing Date.
SECTION 2.4. Excluded Liabilities.
Except for the Assumed Liabilities, Buyer does not assume, agree to
perform or discharge, indemnify Seller against, or otherwise have any
responsibility for any Liabilities of Seller, whether fixed or contingent, and
whether arising prior to, on or after the Closing Date (the "Excluded
Liabilities"), including, without limitation, any of the following Liabilities:
(a) any Indebtedness other than to the extent arising following the
Closing Date under Assumed Contracts that constitute Transferred Assets;
(b) any Liability for Taxes relating to the Business or the Transferred
Assets attributable to any period prior to the Closing Date including any
Liability of the Seller for such periods for the unpaid taxes of any Person as a
transferee or successor, by contract or otherwise;
(c) any Liability of the Seller to indemnify any Person by reason of
the fact that such Person was a director, officer, employee or agent of the
Seller;
(d) any Liability of the Seller to any stockholder or Affiliate of the
Seller or such stockholder other than pursuant to any Assumed Contract;
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(e) any Liability pertaining to Seller or its business and arising out
of or resulting from non-compliance prior to the Closing with any Applicable
Law;
(f) any Liability of Seller for making payments or providing payments
or benefits of any kind to any current or former employees, including, without
limitation, (A) any Liability to provide any such employees COBRA coverage, (B)
any Liability in respect of medical and other benefits for existing and future
retirees and (C) any Liability in respect of work related employee injuries or
workmen's compensation claims;
(g) any Liability of Seller with respect to any severance obligations
owed to employees of Seller resulting from any termination initiated by Seller
on or before the Closing Date or in connection with the consummation of the
transactions contemplated hereby;
(h) expenses incurred by the Seller in connection with the transactions
contemplated herein, including, without limitation, fees and expenses of
Seller's counsel and accountants;
(i) any obligation or liability of the Seller to the Buyer created by
this Agreement;
(j) any Pre-Closing Environmental Liability;
(k) any Liability, whether presently existing or hereafter arising,
which is attributable solely to an Excluded Asset;
(l) any Liability arising from Seller's failure to comply with the bulk
transfer laws of any applicable jurisdiction with respect to the consummation of
the transactions contemplated hereby;
(m) any Liability for uncleared checks of Seller or the bank accounts
of Seller;
(n) any Liability relating to any litigation of Seller; and
(o) any Liability payable to Conundrum Communications, Inc., affiliates
of Conundrum Communications, Inc., Xxxxx Xxxxx, Xxx Xxxxxxx or Xxxx Xxxxxx.
To the extent, if any, that any Liability might be partly an Assumed
Liability and partly an Excluded Liability, the apportionment of such Liability
shall be determined pursuant to applicable accounting principles. Nothing set
forth in the foregoing sentence shall be deemed to affect, amend, modify,
supplement or otherwise change the definitions of Assumed Liabilities and
Excluded Liabilities.
SECTION 2.5. Assignment of Contracts and Rights.
With respect to any Contract as to which the terms thereof require the
consent of a third party for the assignment of such Contract to Buyer and such
consent has not been obtained on or before the Closing Date:
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(a) promptly after the date hereof, to the extent requested by Buyer,
Seller will use its best efforts to obtain the written consent of the other
parties to any such Contract for the assignment of such Contract to Buyer; and
(b) Seller and Buyer shall cooperate in an arrangement reasonably
satisfactory to Buyer and Seller under which Buyer will obtain, to the extent
practicable, the claims, rights and benefits and assume the corresponding
obligations thereunder in accordance with this Agreement, including
subcontracting, sub-licensing or sub-leasing to Buyer, or under which Seller
would enforce for the benefit of Buyer, with Buyer assuming Seller's
obligations, any and all claims, rights and benefits of Seller against a third
party thereto. Seller will promptly pay to Buyer all monies received by Seller
under any such Contract or any claim, right or benefit arising thereunder until
the transfer thereof to Buyer pursuant to this Section 2.5. Upon the receipt of
the written consent pursuant to Section 2.5(a), such contract will become an
"Assumed Contract" hereunder.
SECTION 2.6. Closing.
(a) The closing (the "Closing") of the transactions contemplated by
this Agreement shall take place at the offices of Kramer, Coleman, Wactlar &
Xxxxxxxxx, 000 Xxxxxxx Xxxxxxxxxx, Xxxxxxx, Xxx Xxxx, xx the date of this
Agreement (the "Closing Date").
(b) In consideration of the sale, transfer, conveyance, and assignment
of the Transferred Assets by Seller to Buyer at the Closing, and in reliance
upon the representations and warranties of Seller made herein, Buyer agrees to
assume the Assumed Liabilities in accordance with Section 2.3 and to take the
following actions:
(i) Make a cash payment to Seller at Closing in the amount of
$200,000 and deposit $40,000 with the Escrow Agent pursuant to
the Escrow Agreement; and
(ii) Cause Parent to issue within 30 days after Closing 20,000
shares of its common stock (the "Shares") to Seller. The
issuance of the Shares shall not be registered under any state
or federal securities laws.
The payments and deliveries contained in Sections 2.6(b) are
collectively referred to as the "Purchase Price".
(c) At the Closing, and simultaneously with the execution and delivery
of this Agreement, the Seller shall deliver, or cause to be delivered, to the
Buyer the following:
(i) A copy of resolutions duly adopted by Seller and the
members of Seller, authorizing the execution, delivery and
performance of this Agreement and the Related Agreements to
which Seller is a party, and a certificate of the secretary of
Seller, dated the Closing Date, to the effect that such
resolutions were duly adopted and are in full force and effect
as of the Closing Date;
(ii) The Escrow Agreement duly executed by Seller;
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(iii) Non-competition Agreements (the "Non-Competition
Agreements") in form and substance satisfactory to Buyer duly
executed by each of Seller and A. Xxxxxx Xxxxxx;
(iv) A guaranty (the "Guaranty") in form and substance
satisfactory to Buyer duly executed by A. Xxxxxx Xxxxxx
whereby she guarantees the representations and warranties,
liabilities and obligations of Seller under this Agreement and
the Related Agreements to which Seller is a party;
(v) A registration rights agreement (the "Registration Rights
Agreement") related to the Shares;
(vi) A duly executed Xxxx of Sale and Assumption Agreement in
form and substance satisfactory to Buyer, and any other
instruments of transfer necessary to transfer ownership to
Buyer of the Transferred Assets; and
(vii) Instruments that shall be effective to transfer to Buyer
all of Seller's right, title and interest in and to the
Intellectual Property of Seller included in the Transferred
Assets in form suitable for filing with the necessary
Governmental Authorities.
(c) At the Closing, and simultaneously with the execution and delivery
of this Agreement, the Buyer shall deliver, or cause to be delivered, to the
Seller the following:
(i) A copy of resolutions duly adopted by Buyer, authorizing
the execution, delivery and performance of this Agreement and
the Related Agreements to which Buyer is a party, and a
certificate of the secretary of Buyer, dated the Closing Date,
to the effect that such resolutions were duly adopted and are
in full force and effect as of the Closing Date;
(ii) A copy of resolutions duly adopted by Parent authorizing
the issuance of the Shares to Seller and the execution,
delivery and performance of this Agreement and the Related
Agreements, and a certificate of the secretary of Parent,
dated the Closing Date, to the effect that such resolutions
were duly adopted and are in full force and effect as of the
Closing Date;
(iii) A duly executed copy of the Escrow Agreement;
(iv) A duly executed copy of the Non-Competition Agreements;
(v) A duly executed copy of the Registration Rights Agreement;
and
(vi) A duly executed copy of the Xxxx of Sale and Assumption
Agreement.
SECTION 2.7. Purchase Price Allocation.
(a) For all Tax purposes, the Purchase Price, increased by the portion
of the Assumed Liabilities that is treated as consideration for the Transferred
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Assets for federal income tax purposes, shall be allocated to the Transferred
Assets in accordance with Section 1060 of the Code and the Treasury regulations
promulgated thereunder ("Price Allocation"). The Price Allocation shall be as
set forth on Schedule 2.7 hereto, and each party hereto shall adopt and utilize
the Price Allocation for purposes of all Tax Returns filed by them and shall not
voluntarily take any position inconsistent with the foregoing in connection with
any examination of any Tax Return, any refund claim, any litigation proceeding
or otherwise, except that Buyer's cost for the Transferred Assets may differ
from the amount so allocated to the extent necessary to reflect Buyer's
capitalized acquisition costs other than the amount realized by Seller. In the
event that the Price Allocation is disputed by any taxing authority, the party
receiving notice of the dispute shall promptly notify the other parties hereto
of such dispute and the parties hereto shall cooperate in good faith in
responding to such dispute in order to preserve the effectiveness of the Price
Allocation.
(b) Each party agrees to timely file an IRS Form 8594 reflecting the
Price Allocation for the taxable year that includes the Closing Date and to make
any timely filings required by applicable state or local laws.
(c) Any indemnification payment treated as an adjustment to the
Purchase Price of the Transferred Assets shall be treated as an adjustment to
the Purchase Price paid for the Transferred Assets for tax purposes. Such
adjustment shall be reflected as an adjustment to the price allocated to a
specific asset, if any, giving rise to the adjustment. If any such adjustment
does not relate to a specific asset, such adjustment shall be allocated among
the Transferred Assets in accordance with the Price Allocation method provided
in Section 2.7(a) above.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer:
SECTION 3.1. Organization and Qualification.
Seller is a limited liability company duly organized, validly existing
and in good standing under the laws of the State of Florida and has all
corporate power and authority to own, lease and operate the Transferred Assets
and to carry on the Business as now being conducted. Seller is duly qualified or
licensed and in good standing in each jurisdiction listed in Section 3.1 of the
Disclosure Schedule, which is each jurisdiction where the nature of the
activities conducted by Business or the character of the property or assets
owned, leased or operated by the Business makes such qualification or licensing
necessary, except in jurisdictions where the failure to be so duly qualified or
licensed and in good standing has not had and would not have a Seller Material
Adverse Effect. The term "Seller Material Adverse Effect" means any
circumstance, change or effect that, individually or when taken together with
all other such circumstances, changes or effects, is materially adverse to the
Business or the Transferred Assets taken as a whole.
SECTION 3.2. Authority Relative to this Agreement.
The execution, delivery and performance by Seller of this Agreement and
the consummation by Seller of the transactions contemplated hereby are within
Seller's corporate powers and have been duly authorized by all requisite action
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on the part of Seller and its members. This Agreement and each Related Document
to which Seller is a party has been duly and validly executed and delivered by
Seller and each constitutes a legal, valid and binding agreement of Seller
enforceable against Seller in accordance with its respective terms.
SECTION 3.3. Subsidiaries.
Seller has no Subsidiaries. The Seller owns no interest, directly or
indirectly, and has no commitment to purchase any interest, direct or indirect,
in any other corporation, partnership or enterprise.
SECTION 3.4. Financial Statements.
(a) Copies of (i) the Balance Sheet and (ii) the unaudited income
statements for the Seller for the year ended December 31, 2004 have been
provided to Buyer and are set forth in Section 3.4(a) of the Seller Disclosure
Schedule (together with the Balance Sheet, the "Financial Statements").
(b) The Financial Statements, including any notes thereto, are
complete, true and correct in all material respects, have been prepared
consistent with past practice and present fairly the financial position and
results of operations of the Seller as of the date thereof and for the periods
then ended.
(c) Other than to the extent disclosed or reserved for in the Balance
Sheet, or otherwise disclosed in the Schedules to this Agreement, the Seller has
no Liabilities, commitments or obligations of any nature whatsoever (whether
accrued, absolute, contingent, known, unknown, asserted, unasserted or
otherwise, and whether due or to become due) except Liabilities, commitments and
obligations incurred in the ordinary course of the business since the Balance
Sheet Date which do not exceed in the aggregate $ 5,000.
(d) The books of account and other financial records of Seller are
complete and accurate in all material respects and have been properly maintained
in all material respects in accordance with Applicable Law.
SECTION 3.5. Consents and Approvals; No Violations.
(a) No filing with or notice to and no permit, authorization, consent
or approval of any Governmental Authority is necessary for the execution and
delivery by Seller of this Agreement or any Related Agreement or the
consummation by Seller of the transactions contemplated hereby or thereby.
(b) Neither the execution, delivery and performance of this Agreement
or any Related Agreement by Seller nor the consummation by Seller of the
transactions contemplated hereby or thereby will (i) conflict with or result in
any breach of any provision of the Certificate of Formation or Operating
Agreement of Seller, (ii) result in a violation or breach of or constitute (with
or without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration or Lien) under any
of the terms, conditions or provisions of any Contract relating to the Business
or the Transferred Assets to which Seller is a party or by which Seller or any
of the Transferred Assets may be bound or (iii) violate any Applicable Law
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binding on or applicable to Seller or any of the Transferred Assets except, in
the case of (ii) or (iii), for violations, breaches or defaults which would not
have a Seller Material Adverse Effect or an adverse effect on the ability of
Seller to enter into and perform its obligations under this Agreement or any of
the Related Agreements.
SECTION 3.6. Litigation.
There is no suit, claim, action, proceeding or investigation pending
or, to the Knowledge of Seller, threatened by or against Seller with respect to
the Business or against any the Transferred Assets before any Governmental
Authority, in each case, (i) that individually or in the aggregate, could (A)
have a Seller Material Adverse Effect, (B) prevent, hinder or delay the
execution and performance of this Agreement or any Related Agreement or the
consummation of the transactions contemplated hereby or thereby or (C) result in
this Agreement or any Related Agreement being declared unlawful or cause the
rescission of any of the transactions contemplated hereby or thereby or (ii) in
which the amount of damages asserted exceeds $5,000.
SECTION 3.7. Compliance with Applicable Law.
Seller holds all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Authorities necessary for the lawful conduct of
the Business in the same manner and extent to which it is currently conducted,
except for failures to hold such permits, licenses, variances, exemptions,
orders and approvals which would not, individually or in the aggregate, have a
Seller Material Adverse Effect. Seller has not been charged with or received
notice of any violation of any Applicable Law relating to it, or the operation
of the Business, nor, to the Knowledge of Seller, is there any threatened claim
of such violation (including any investigation) or any basis therefor. The
Business has been conducted in compliance with all Applicable Laws.
SECTION 3.8. Labor Matters.
(a) There are no pending or, to the Knowledge of the Seller, threatened
charges, complaints, petitions or grievances before any Governmental Authority
relating to or predicated upon a violation of Applicable Law regarding
employment, employment practices or terms and conditions of employment,
including charges of unfair labor practices, unlawful discharge, discrimination,
harassment or hostile work environment with respect to any of the employees of
the Business, nor to the Knowledge of Seller, is there any basis for any such
charges, complaints, petitions or grievances. Seller is not a party to any
collective bargaining agreement or other labor union contract applicable to
persons employed by Seller with respect to the Business. To the Knowledge of
Seller, no activities or proceedings of any labor union to organize any
employees of the Business have occurred. No strikes, slowdowns, work stoppages,
or lockouts have occurred nor, to the Knowledge of Seller, have there been any
threats thereof.
(b) No key employee, or group of employees or any executive of the
Business (A) has given notice of his or her intention to resign prior to the
Closing Date or within 12 months after the Closing Date or, to the Knowledge of
Seller, is intending to do so; or (B) would become entitled to any rights
(including as to compensation) as a result of the entry into, or the
consummation of, the transactions contemplated by this Agreement or any Related
Agreement.
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SECTION 3.9. Intellectual Property and Information Technology.
(a) All Intellectual Property currently used in the conduct of the
Business is either owned by or validly licensed to Seller and is listed in
Section 3.9(a) of the Seller Disclosure Schedule.
(b) To the Knowledge of Seller, the conduct of the Business as now
conducted does not infringe any Intellectual Property of others.
(c) All Information Technology used by Seller in the conduct of the
Business and all material agreements or arrangements relating to the maintenance
and support, security, disaster recovery management and utilization (including
facilities management and computer bureau services agreements) of the
Information Technology owned or used by Seller in the conduct of the Business
are described in Section 3.9(c) of the Seller Disclosure Schedule.
(d) All Information Technology currently used by or required to carry
on the Business and fulfill the Assumed Contracts and commitments is either
owned by or validly leased or licensed to Seller.
(e) The Information Technology owned or used by Seller in the conduct
of the Business has the capacity and performance necessary to fulfill the
requirements it currently performs.
SECTION 3.10. Brokers.
No broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Seller.
SECTION 3.11. Material Contracts.
(a) Section 3.11 of the Seller Disclosure Schedule lists all Contracts
described in clauses (i) through (xiii) below that relate to the Business to
which the Seller is a party or pursuant to which the Transferred Assets are
otherwise bound and which have not, as of the date hereof, been terminated or
fully performed ("Material Contracts"). A true, correct and complete copy of
each such Material Contract has been made available to Buyer.
(i) any Contracts providing for a commitment of employment or
consultation services;
(ii) any Contracts with any Person containing any provision or
covenant prohibiting or materially limiting the ability of
Seller to engage in any business activity or compete with any
Person;
(iii) any Contracts pursuant to which any Lien (other than
Permitted Liens) has been imposed on any Transferred Assets;
15
(iv) any Contracts (other than this Agreement) providing for
(i) the future disposition or acquisition of any of the
Transferred Assets, and (ii) any merger or other business
combination involving the Business;
(v) any Contract the terms of which include express provisions
regarding confidentiality;
(vi) any Contract for the lease of personal property or
Equipment constituting a Transferred Asset to or from any
Person which provides for lease payments in excess of $5,000
per year;
(vii) any Contract that limits or contains restrictions on the
ability of Seller to incur or suffer to exist any Lien, to
purchase or sell any assets, to change the lines of business
in which it participates or engages or to engage in any merger
or other business combination;
(viii) any other Contracts that (A) involve the payment,
pursuant to the terms of any such Contract, (1) by Seller of
more than $5,000 annually or (2) to Seller of more than
$10,000 annually and (B) cannot be terminated within ninety
(90) days after giving notice of termination without resulting
in any material cost or penalty to Seller;
(ix) any Contract concerning the issuance of a permit,
franchise or license which is material to the Business
requiring an annual payment of $5,000 or more in fees,
royalties or otherwise by Seller;
(x) any Contract the particulars of which are required to be
furnished to any competition or regulatory authority and any
undertaking that has been given or order made pursuant to any
competition legislation or in response to any request for
information or statement of objection from any Governmental
Authority;
(xi) any bid, tender, proposal or offer which, if accepted,
will result in Seller becoming a party to any agreement or
arrangement in which the aggregate payments to be received or
paid by Seller would exceed $10,000;
(xii) any Contract not otherwise described in any of clauses
(i) through (xi) above under which the consequences of a
default or termination could reasonably be expected to have
Seller Material Adverse Effect; and
(xiii) any material amendment to any of the Contracts
described in this Section 3.11.
(b) Each Material Contract is legal, valid, binding and enforceable by
and against Seller in accordance with its terms, except to the extent such
enforceability may be limited by applicable bankruptcy or other laws affecting
creditors' rights, or by general equity principles, and is in full force and
effect on the date hereof. Such Material Contracts are fully performable by
Seller in accordance with their terms. Seller has performed all obligations
required to be performed by it to date under each such Material Contract, and is
16
not in default under any such Material Contract. No event has occurred which,
with due notice or lapse of time or both, would constitute a default under any
such Material Contract. To the Knowledge of Seller, no other party to any such
Material Contract is in default of any Material Contract and no event has
occurred which, with due notice or lapse of time or both, would constitute such
a default, and otherwise there are no grounds for the termination or
cancellation of such Material Contract by Seller.
SECTION 3.12. Title to Assets and Continued Operation.
(a) Upon consummation of the transactions contemplated by this
Agreement, Seller will have sold, assigned, transferred and conveyed to Buyer,
and Buyer will have acquired from Seller, good and marketable title to all of
the Transferred Assets owned by Seller, free and clear of all Liens.
(b) All of the property, assets, and rights included in the Transferred
Assets are sufficient for Buyer to continue to operate the Business in the same
manner as it is conducted currently and to perform the services of the Business,
including in accordance with all of the requirements of the Assumed Contracts in
effect on the Closing Date.
(c) Maintenance contracts are in force for each Transferred Asset which
it is normal to have maintained by independent or specialist contractors and for
each asset which the Seller is obliged to maintain or repair under a leasing or
similar agreement. Those assets have been regularly maintained in accordance
with safety regulations required to be observed in relation to them and the
provisions of any applicable agreement.
SECTION 3.13. Insurance.
As of immediately prior to the Closing, the assets, properties and
operations of Seller are insured under various policies of insurance. To the
Knowledge of Seller, there currently is no basis for an insurance claim by
Seller under any of such policies.
SECTION 3.14. Equipment.
The Equipment is in good operating condition, ordinary wear and tear
excepted.
SECTION 3.15. Absence of Changes
Since the Balance Sheet Date, the Business has been conducted in the
ordinary course consistent with past practices and there has not been:
(a) any sale, lease, transfer, or assignment of any of the tangible or
intangible assets, other than sales of services for a fair consideration in the
ordinary course of the Business;
(b) any Contract entered into other than in the ordinary course of the
Business;
(c) any acceleration, termination, modification, or cancellation of any
Material Contract or other Contract;
17
(d) any Lien other than a Permitted Lien created or imposed upon any of
the Transferred Assets;
(e) any cancellation, compromise, waiver, or release of any right or
claim (or series of related rights and claims) included as Transferred Assets;
(f) any material damage, destruction, or loss (whether or not covered
by insurance) to the property of the Business, including the Transferred Assets;
(g) any modification or change in the employment terms for any
Transferred Employee;
(h) any payment of any amount to any Person outside the ordinary course
of the Business with respect to any Liability (excluding any costs and expenses
incurred or which may be incurred in connection with this Agreement and the
transactions contemplated hereby) which would constitute an Assumed Liability if
in existence as of the Closing;
(i) any change by Seller in its accounting principles, methods or
practices or in the manner it keeps its books and records or any change by
Seller of current practices with regard to sales, expenses, assets and
liabilities;
(j) any change in the practices of pricing or discounting for sales of
products or services, ordering supplies, delivering products or services,
accepting returns or honoring warranties, invoicing customers and collecting
debts;
(k) any deliveries or performance of services by Seller in connection
with any backlog of orders other than in the ordinary course or as otherwise
provided under the terms of any Assumed Contract with respect to such backlog;
(l) any threat or notification, orally or in writing, by one or more of
the distributors, customers or suppliers who, individually or in the aggregate,
are material to the Business of an intention to terminate or materially alter
their respective business relationships or any Assumed Contract, nor has any
such termination or material alteration of such relationships or any Assumed
Contract occurred;
(m) any declaration or payment of any dividend or liquidating or other
distribution in respect of the equity interests of the Seller or any direct or
indirect redemption, purchase, or other acquisition or agreement to acquire any
equity interests or other securities of the Seller.
(n) any Contract by Seller with respect to any of the foregoing.
SECTION 3.16. Product Warranties, Defects and Liabilities.
-------------------------------------------
There exists no pending or, to the Knowledge of Seller, threatened
action, suit, inquiry, proceeding or investigation by or before any Governmental
Authority relating to any product alleged to have been distributed or sold by
the Seller to others, and alleged to have been defective or improperly designed
or in breach of any express or implied product warranty and there exists no
latent defect in the design or manufacture of any of the products of the
18
Business. There exists no pending or, to the Knowledge of Seller, threatened
product liability or warranty claims relating to the Business, except to the
extent reserved for on the face of the Balance Sheet, and to Knowledge of
Seller, there is no reasonable basis for any such suit, inquiry, action,
proceeding, investigation or claim. Section 3.16(i) of the Seller Disclosure
Schedule includes copies of the standard terms and conditions of sale of the
products and services of the Business (containing applicable guaranty, warranty,
and indemnity provisions). There are no express product or service warranties
relating to the Business, except as may be set forth in the Assumed Contracts,
and there are no implied product or service warranties relating to the Business.
SECTION 3.17. Affiliate Transactions.
----------------------
Seller is not a party to, or bound by, any Contract with any of its
Affiliates, other than on arms-length terms which are no less favorable to
Seller than those which could be obtained with a third party which is not an
Affiliate and no Affiliate of Seller owns or otherwise has any rights to or
interests in any asset, tangible or intangible, which is a Transferred Asset.
SECTION 3.18. Customers and Suppliers
(a) Section 3.18(a) of the Seller Disclosure Schedule sets forth a
complete and accurate list (with dollar volumes included) of (i) the ten largest
customers (by dollar volume) of the products or services of the Seller during
the twelve (12) month period ended December 31, 2004; and (ii) the ten largest
suppliers (by dollar volume) of materials or services to the Seller during the
twelve (12) month period ended December 31, 2004.
(b) Except as described in Section 3.18(b) of the Seller Disclosure
Schedule, there are no Contracts to which the Seller is a party under the terms
of which (i) Seller is obligated to purchase any product or services from, or
sell any product or services to, any other Person on an exclusive basis with
respect to any geographic area or group of potential customers; or (ii) any
other Person may be similarly obligated to Seller.
SECTION 3.19. Illegal Payments.
----------------
Neither Seller nor any of its directors, officers, employees or agents,
has (a) directly or indirectly given or agreed to give any illegal gift,
contribution, payment or similar benefit to any supplier, customer, governmental
official or employee or other person to assist in connection with any actual or
proposed transaction or made or agreed to make any illegal contribution, or
reimbursed any illegal political gift or contribution made by any other person,
to any candidate for federal, state, local or foreign public office (i) which
violates any Applicable Law, including but not limited to, the Foreign Corrupt
Practices Act of 1977, as amended, or might subject the Buyer or its Affiliates
to any Damages or penalties in any civil, criminal or governmental litigation or
proceeding or (ii) the non-continuation of which has had or might have a Seller
Material Adverse Effect or (b) established or maintained any unrecorded fund or
asset or made any false entries on any books or records for any purpose.
SECTION 3.20. Books and Records
The books and all corporate (including minute books and stock records
books) and financial records of the Business are complete and correct in all
material respects and have been maintained in accordance with sound business
19
practices and Applicable Law and other requirements and no notice has been
received or allegation made that a register or book is incorrect or should be
rectified.
SECTION 3.21 Real Property
Seller does not own any real property. Section 3.21 of the Seller
Disclosure Schedules contains a list of all real property leased by Seller
("Leased Real Property").
(a) Seller has delivered to Buyer correct and complete copies of the
leases and subleases listed in Section 3.21 of the Seller Disclosure Schedule
(as amended to date) which leases and subleases have not been amended or
modified since the amendments furnished. With respect to each lease and sublease
listed in Section 3.21 of the Seller Disclosure Schedule:
(i) Seller enjoys quiet possession under all such leases or
subleases;
(ii) the lease or sublease will continue to be legal, valid,
binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions
contemplated hereby;
(iii) all of the terms and conditions of each lease or
sublease have been observed or performed in all material
respects and, 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 or both, would constitute a breach or
default or permit termination, modification, or acceleration
hereunder;
(iv) Seller has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in any
of the identified leaseholds or subleaseholds;
(v) all facilities leased or subleased thereunder have
received all material approvals of Governmental Authorities
required in connection with the operation thereof and have
been operated and maintained by Seller in all material
respects in accordance with Applicable Law; and
(vi) all facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the
operation of said facilities.
(b) Except as would not, individually or in the aggregate, have a
Seller Material Adverse Effect, there are no structural, electrical, mechanical,
plumbing, roof, paving or other defects in any improvements located on the
Leased Real Property.
(c) All of the Leased Real Property is occupied solely by Seller and is
being used exclusively for, and in connection with, the Business. None of the
Leased Real Property is subject to any agreement, arrangement or understanding
for its use by any Person other than Seller.
SECTION 3.22 Environmental Compliance.
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(i) All of the Leased Real Property is currently, and all real
property previously, owned or leased or operated by the Seller
was when so owned, leased or operated by Seller, in compliance
with all Environmental Laws;
(ii) There has been no Release or Hazardous Discharge into, on,
from or under any of the Leased Real Property or any real
property formerly owned, leased or operated by the Seller;
(iii) There are no pending or, to the Knowledge of the Seller,
threatened environmental actions against the Seller or against
any of the owners or operators of any facilities that received
solid waste or Hazardous Substances generated by the Seller in
connection with the operation of the Business;
(iv) None of the assets and properties which have been or are
now owned, leased or operated by the Seller, have been used by
the Seller for the generation, storage, manufacture, use,
transportation, disposal or treatment of Hazardous Substances,
except in compliance with Environmental Laws;
(v) The Seller currently maintains all environmental permits
necessary for the operation of the Business and the Seller has
been and is in compliance with such environmental permits, and
there are no legal proceedings pending nor threatened to
revoke such environmental permits;
(vi) The Seller is not subject to any outstanding order or a
party to any agreement with any Governmental Authority with
respect to Environmental Laws or Remedial Action;
(vii) There are no claims, actions or proceedings by any
employee of the Seller pending or to the Knowledge of the
Seller threatened, based on alleged injury to such employee's
health caused by exposure to any Hazardous Substance; and
(viii) Neither this Agreement nor the consummation of the
transactions contemplated by this Agreement will impose any
obligations for site investigation or cleanup, or to notify or
obtain the consent of any Governmental Authority or third
parties under any Environmental Laws (including any so-called
"transaction-triggered" or "responsible property transfer"
laws and regulations).
SECTION 3.23. Taxes.
-----
Except as set forth in Section 3.23 of the Seller Disclosure Schedule,
Seller has duly filed all Tax Returns required to be filed and paid all Taxes
and other charges due, or claimed to be due, from Seller. There are no Liens for
Taxes upon any of the Transferred Assets and there are no claims asserted for
Taxes or assessments against Seller with respect to the Transferred Assets.
SECTION 3.24 Investment Representations.
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(a) Investment Intent. Seller is acquiring all of the Shares for
Seller's own account, for investment only and not with a view to, or for sale in
connection with, a distribution thereof or any part thereof, within the meaning
of the Securities Act of 1933 (the "Securities Act") or any applicable state
securities or blue-sky laws;
(b) Investor Status. The undersigned is an accredited investor as such
term is defined under Rule 501 of Regulation D promulgated pursuant to the
Securities Act ("Regulation D");
(c) Intent to Transfer. Seller is not a party to or subject to or bound
by any contract, undertaking, agreement or arrangement with any person to sell,
transfer or pledge the Shares or any part thereof to any person, and has no
present intention to enter into such a contract, undertaking, agreement or
arrangement;
(d) Offering Exempt from Registration; Buyer's Reliance.
(i) Buyer has advised the Seller that the Shares have not
been registered under the Securities Act or under the
laws of any state on the basis that the issuance
thereof is exempt from such registration;
(ii) Buyer's reliance on the availability of such exemption
is, in part, based upon the accuracy and truthfulness
of Seller's representations contained herein;
(iii) As a result of such lack of registration, none of the
Shares may be resold or otherwise transferred or
disposed of without registration pursuant to or an
exemption therefrom available under the Securities Act
and such state securities laws; and
(iv) In furtherance of the provisions of this paragraph
(d), all of the certificates representing the Shares
shall bear a restrictive legend substantially in the
following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE SHARES HAVE BEEN ACQUIRED
FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY
NOT BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF THESE
SHARES TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT."
(e) Sophistication of the Seller. Seller has evaluated the merits and
risks of acquiring the Shares and has such knowledge and experience in financial
and business matters that Seller is capable of evaluating the merits and risks
of such purchase, is aware of and has considered the financial risks and
22
financial hazards of acquiring Shares, and is able to bear the economic risk of
acquiring the Shares, including the possibility of a complete loss with respect
thereto;
(f) Access to Information. Seller has had access to such information
regarding the business and finances of Buyer, including the filings of the
Company with the SEC, the receipt and careful reading of which is hereby
acknowledged by the undersigned, and has been provided the opportunity to
discuss with the Buyer's management the business, affairs and financial
condition of the Buyer and such other matters with respect to Buyer as would
concern a reasonable person considering the transactions contemplated by the
Agreement and/or concerned with the operations of the Buyer including, without
limitation, pursuant to a meeting and/or discussions with management of the
Buyer; and
(g) No Guarantees. It never has been represented, guaranteed or
warranted to Seller by Buyer, or any of its officers, directors, agents,
representatives or employees, or any other person, expressly or by implication,
that:
(i) Any gain will be realized by Seller from its investment in
the Shares; or
(ii) That the past performance or experience on the part of
Buyer, its predecessors or of any other person, will
in any way indicate any future results of Buyer.
SECTION 3.25. Disclosure.
----------
The representations and warranties contained in this Article 3
(including the Seller Disclosure Schedule and any other schedules and exhibits
required to be delivered by Seller to Buyer pursuant to this Agreement) and any
certificate furnished or to be furnished by Seller to Buyer pursuant to this
Agreement do not contain and will not contain any untrue statement of a material
fact or omit to state any material fact necessary, in light of the circumstances
in which they were made, in order to make such representations and warranties
not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
SECTION 4.1. Organization.
(a) Buyer is duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation and has all requisite power
and authority to own, lease and operate its properties and to carry on its
businesses as now being conducted. Buyer is duly qualified or licensed and in
good standing to do business in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except in such jurisdictions where
the failure to be so duly qualified or licensed and in good standing would not
have a Buyer Material Adverse Effect (as defined below). The term "Buyer
23
Material Adverse Effect" means any circumstance, change or effect that,
individually or when taken together with all other such circumstances, changes
or effects, is materially adverse to the business, operations or financial
condition of Buyer and Parent taken as a whole or would materially impair the
ability of Buyer to consummate the transactions contemplated hereby.
SECTION 4.2. Authority Relative to this Agreement.
Buyer has all necessary corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
board of directors of Buyer and no other corporate proceedings on the part of
Buyer are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Buyer and constitutes a valid, legal and binding
agreement of Buyer enforceable against Buyer in accordance with its terms.
SECTION 4.3. Consents and Approvals: No Violations.
(a) No filing with or notice to, and no permit, authorization, consent
or approval of, any Governmental Authority is necessary for the execution and
delivery by Buyer of this Agreement or the consummation by Buyer of the
transactions contemplated hereby, except where the failure to obtain such
permits, authorizations, consents or approvals or to make such filings or give
such notice would not have a Buyer Material Adverse Effect.
(b) Neither the execution, delivery and performance of this Agreement
by Buyer nor the consummation by Buyer of the transactions contemplated hereby
will (i) conflict with or result in any breach of any provision of the
Certificate of Incorporation or Bylaws of Buyer, (ii) result in a violation or
breach of or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, amendment, cancellation or
acceleration or Lien) under any of the terms conditions or provisions of any
Contract to which Buyer is a party or by which Buyer or any of its properties or
assets may be bound or (iii) violate any Applicable Law binding on or applicable
to Buyer or any of its properties or assets except, in the case of (ii) or
(iii), for violations, breaches or defaults which would not have a Buyer
Material Adverse Effect.
SECTION 4.4. Litigation.
There are no judicial or administrative actions, proceedings or
investigations pending or, to Buyer's knowledge, threatened that question the
validity of this Agreement or any Related Agreements or any action to be taken
by Buyer in connection with this Agreement or any such Related Agreements or
that if adversely determined, would have a Buyer Material Adverse Effect.
SECTION 4.5. Brokers.
Except for a consultant retained by Buyer, no broker, finder or
investment banker is entitled to any brokerage, finders or other fee or
commission from Buyer in connection with the transactions contemplated by this
24
Agreement based upon arrangements made by or on behalf of Buyer or any of its
Affiliates.
SECTION 4.6. Disclosure.
----------
The representations and warranties contained in this Article 4
(including any schedules and exhibits required to be delivered by Buyer to
Seller pursuant to this Agreement) and any certificate furnished or to be
furnished by Buyer to Seller pursuant to this Agreement do not contain and will
not contain any untrue statement of a material fact or omit to state any
material fact necessary, in light of the circumstances in which they were made,
in order to make such representations and warranties not misleading.
ARTICLE 5
COVENANTS
SECTION 5.1. Additional Agreements; Reasonable Best Efforts.
Subject to the terms and conditions herein provided, each of the
parties hereto agrees to use its commercially reasonable best efforts to take or
cause to be taken all action and to do or cause to be done all things reasonably
necessary, proper or advisable under Applicable Law to consummate and make
effective the transactions contemplated by this Agreement and the Related
Agreements, including, without limitation, (a) contesting any legal proceeding
challenging the transactions contemplated hereby or thereby, and (b) executing
any additional instruments necessary to consummate the transactions contemplated
hereby and thereby. If at any time after the Closing Date any further action is
necessary to carry out the purposes of this Agreement or any Related Agreement,
the proper officers and directors of each party hereto shall take all such
necessary action.
SECTION 5.2. Public Announcements.
The parties shall consult with each other before issuing any press
releases or otherwise making any public statements with respect to this
Agreement or the transactions contemplated hereby, and none of the parties shall
issue any press release or make any public statement prior to obtaining the
other parties' written approval, which approval shall not be unreasonably
withheld, except that no such approval shall be necessary to the extent
disclosure may be required by Applicable Law or Nasdaq rule applicable to Parent
or any listing agreement of Parent.
SECTION 5.3. Employee Benefits.
(a) Offer of Employment. The parties hereto intend that there shall be
continuity of employment with respect to the employees of the Business listed on
Schedule 5.3. Buyer shall offer employment at will, commencing on the Closing
Date, to such employees (collectively, the "Transferred Employees"), and such
offer employment to the Transferred Employees will be on substantially the same
terms in the aggregate (including salary, fringe benefits, job responsibility
and location but excluding employee stock ownership, stock option and incentive
plans) as those provided to similar employees by Buyer (or its Affiliates)
immediately prior to Closing to the extent permitted under Applicable Law and by
the terms of Buyers benefit plans.
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(b) Welfare Plans - Claims Incurred; Pre-Existing Conditions.
(i) Notwithstanding any provision of this Agreement to the
contrary, Seller shall retain responsibility for and continue
to provide for payments with respect to all medical, life
insurance, disability and other welfare plan expenses and
benefits for each Transferred Employee with respect to claims
incurred by such Transferred Employees or their covered
dependents prior to the Closing Date. Notwithstanding any
provision of this Agreement to the contrary, expenses and
benefits with respect to claims incurred by Transferred
Employees or their covered dependents on or after the Closing
Date shall be the responsibility of Buyer. For purposes of
this paragraph, a claim is deemed incurred when the services
that are the subject of the claim are performed; in the case
of life insurance, when the death occurs, in the case of
long-term disability benefits, when the disability occurs and,
in the case of a hospital stay, when the employee first enters
the hospital.
(ii) With respect to any welfare benefit plans (as defined in
Section 3(1) of ERISA) maintained by Buyer for the benefit of
Transferred Employees on and after the Closing Date, Buyer
shall, to the extent permitted under Buyer's plans, (A) use
commercially reasonable efforts to cause there to be waived
any pre-existing condition limitations (other than those
limitations existing under Seller's welfare benefit plans) and
(B) give effect, in determining any deductible and maximum
out-of-pocket limitations, to claims incurred and amounts paid
by, and amounts reimbursed to, such employees with respect to
similar plans maintained by Seller (and its Affiliates) for
their benefit immediately prior to the Closing Date.
(c) Service Credit. Buyer will use commercially reasonable efforts to
provide, for the purposes of eligibility and vesting (but not for benefit
accrual) each Transferred Employee hired by Buyer with credit for all service
with Buyer and its Affiliates to the extent possible under each employee benefit
plan, program, or arrangement of Buyer or its Affiliates in which such employee
is eligible to participate to the extent that the Transferred Employees are not
paid in respect of such benefits due to their termination by Seller and re-hire
by Buyer in accordance with the terms hereof; provided, however, that in no
event shall any employee be entitled to any credit to the extent that it would
result in a duplication of benefits with respect to the same period of service.
(d) COBRA Matters. For purposes of continuation coverage required by
Section 4980B of the Code and Sections 601 through 608 of ERISA ("COBRA"), the
Transferred Employees shall be considered to have undergone a termination of
employment with Seller. It is the understanding and intention of Seller and
Buyer that the health coverage to be afforded the Transferred Employees pursuant
to Section 5.3(b)(ii) shall be coverage that, pursuant to ERISA, terminates any
continuation coverage rights the Transferred Employees might otherwise have
under COBRA as a result of termination of employment with Seller.
SECTION 5.4. Expenses.
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Each of Buyer and Seller shall bear its own expenses incurred in
connection with this Agreement and the transactions contemplated hereby and in
connection with all obligations required to be performed by such party under
this Agreement
SECTION 5.5. Certain Other Covenants
If, following the Closing, it is necessary that Buyer or Seller obtain
additional information relating to the Business prior to the Closing Date in
order to properly prepare documents or reports required to be filed with
Governmental Authorities or financial statements or other business purpose, and
such information is within the other party's possession, Buyer or Seller, as
applicable, will (at the requesting party's sole reasonable cost and expense)
furnish or cause its representatives to furnish such information to the other
party. Such information shall include, without limitation, the accounting and
tax records of Seller and all agreements between Seller and any Person relating
to the Business.
SECTION 5.6. Investment in Business.
----------------------
Buyer agrees to invest approximately $200,000 into the Business over
the twelve-month period commencing on the Closing Date.
SECTION 5.7 Additional Payments.
Buyer shall pay to Seller an amount in cash of up to $250,000 thirteen
months from Closing if the Business retains $480,000 in recurring revenue during
the twelve month period commencing on the Closing Date and ending on the first
anniversary thereof (the "Measurement Period"). For revenue from a customer to
be considered "recurring," such revenue must have been received during the
Measurement Period and there must be a reasonable expectation that such amount
of revenue from such customer will be received during the twelve month period
commencing on the day after the Measurement Period (i.e. the revenue from a
one-time purchase by a customer during the Measurement Period will not
constitute recurring revenue). Such payment shall be reduced proportionately if
such recurring revenue falls below $480,000. At the time of such payment, Buyer
shall provide to Seller a detailed schedule of the amount of recurring revenue
retained by the Business and setting forth the calculation of the payment
amount. If Seller does not object in writing to such schedule within ten days
after receipt thereof, the schedule shall be final and binding upon all parties.
In the event that Seller provides written notice of objection within such ten
days, the parties shall attempt in good faith for a period of thirty days to
resolve any such dispute. In the event that the parties are unable to resolve
such dispute during such period, either party may commence an action against the
other in accordance with the provisions of Section 8.4, in addition to any other
rights or remedies such party may have.
SECTION 5.8. Certain Payments.
----------------
Seller shall, within five days after the Closing Date, satisfy in full
the liabilities related to the Business listed on Schedule 5.8 and shall deliver
to Buyer within ten days after the Closing Date evidence of such satisfaction.
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ARTICLE 6
TAX MATTERS
SECTION 6.1. Taxes.
Seller shall pay all transfer Taxes resulting from the transactions
contemplated by this Agreement, of which Seller believes there are none.
SECTION 6.2. Cooperation.
Buyer and Seller shall reasonably cooperate, and shall cause their
respective Affiliates, officers, employees, agents, auditors and representatives
reasonably to cooperate, in preparing and filing all returns, reports and forms
relating to Taxes, including maintaining and making available to each other all
records necessary in connection with Taxes and in resolving all disputes and
audits with respect to all Taxable periods relating to Taxes. Each of Buyer and
Seller recognizes that Buyer and Seller may need access, from time to time,
after the Closing Date, to certain accounting and Tax records and information
held by Seller or Buyer, respectively, to the extent such records and
information pertain to events occurring prior to the Closing Date; therefore,
Seller and Buyer each agrees, (a) to properly retain and maintain such records
until such time as Buyer and Seller agree in writing that such retention and
maintenance is no longer necessary and (b) to allow the other party and its
agents and representatives, at times and dates mutually acceptable to the
parties, to inspect, review and make copies of such records as such party or its
representatives may deem necessary or appropriate from time to time, such
activities to be conducted during normal business hours and at the expense of
the requesting party.
SECTION 6.3. Allocation of Taxes.
All real and personal property taxes and similar ad valorem obligations
levied with respect to the Transferred Assets for a taxable period that includes
(but does not end on) the Closing Date shall be apportioned between Seller and
Buyer as of the Closing Date based on the number of days of such taxable period
included in the period on and prior to the Closing Date ("Pre-Closing Tax
Period") and the number of days of such taxable period included in the period
commencing after the Closing Date (the "Post-Closing Tax Period"). Seller shall
be liable for the proportionate amount of such Taxes that is attributable to the
Pre-Closing Tax Period, and Buyer shall be liable for the proportionate amount
of such Taxes that is attributable to the Post-Closing Tax Period. Within a
reasonable period after the Closing, Seller and Buyer shall present a statement
to the other setting forth the amount of reimbursement to which each is entitled
under this Section 6.3, together with such supporting evidence as is reasonably
necessary to calculate the proration amount. The proration amount shall be paid
by the party owing it to the other within ten (10) days after delivery of such
statement. Thereafter, Seller shall notify Buyer upon receipt of any xxxx for
personal property taxes relating to the Transferred Assets, part or all of which
are attributable to the Post-Closing Tax Period, and shall promptly deliver such
xxxx to Buyer, and Buyer shall pay the same to the appropriate taxing authority,
provided that if such xxxx covers any part of the Pre-Closing Tax Period, Seller
shall also remit to Buyer prior to the due date of assessment payment for the
proportionate amount of such xxxx that is attributable to the Pre-Closing Tax
Period. In the event that Seller or Buyer shall thereafter make a payment for
28
which it is entitled to reimbursement under this Section 6.3, the other party
shall make such reimbursement promptly, but in no event later than thirty (30)
days after the presentation of a statement setting forth the amount of
reimbursement to which the presenting party is entitled along with such
supporting evidence as is reasonably necessary to calculate the amount of
reimbursement. Any payment required under this Section 6.3 and not made within
ten (10) days after delivery of the statement shall bear interest at the rate
per annum determined, from time to time, under the provisions of Section
6621(a)(2) of the Code for each day until paid.
ARTICLE 7
SURVIVAL OF REPRESENTATIONS & WARRANTIES; INDEMNIFICATION
SECTION 7.1. Survival of Representations and Warranties.
Except as expressly provided in this Agreement, all representations and
warranties made hereunder or pursuant hereto or in connection with the
transactions contemplated hereby shall not terminate, but shall survive the
Closing and continue in effect until two (2) years following the Closing Date;
provided, however, that representations and warranties under Section 3.12 (as to
title) shall remain in effect indefinitely and under Section 3.22
(Environmental) and Section 3.23 (Taxes) shall remain in effect until six (6)
years following the Closing Date; and further provided, that any such
representation or warranty as to which a claim shall have been asserted during
such survival period shall continue in effect until such time as such claim
shall have been resolved or settled.
SECTION 7.2. Survival of Covenants and Agreements.
------------------------------------
Except as expressly provided in this Agreement, all covenants and
agreements made hereunder or pursuant hereto or in connection with the
transactions contemplated hereby shall not terminate but shall survive the
Closing.
SECTION 7.3. Indemnification by Seller.
-------------------------
Seller shall indemnify and hold harmless Buyer and its Affiliates and
their respective officers, directors, successors and assigns (the "Buyer
Indemnified Parties") from and against any claims, Liabilities, losses, damages,
actions, suits, proceedings, claims, demands, judgments, costs and expenses,
including reasonable attorney's fees (any one such item being herein called a
"Loss" and all such items being herein collectively called "Losses") which are
caused by or arise out of:
(a) any breach or default in the performance by Seller of any covenant
or agreement of Seller contained herein or in any certificate delivered pursuant
hereto at the Closing;
(b) any breach of warranty or representation made by Seller contained
in Article 3 of this Agreement or in any certificate delivered pursuant hereto
at the Closing;
(c) Pre-Closing Environmental Liabilities; or
29
(d) any Excluded Liabilities.
Such indemnification shall be made (A) by Buyer's recourse to and
payment from the Escrow Fund held pursuant to the Escrow Agreement, (B) by the
withholding by Buyer of any amount owing to Seller hereunder, and/or (C) by
delivery of cash to Buyer by Seller or A. Xxxxxx Xxxxxx to the extent that Buyer
is not fully indemnified by recourse under (A) or (B) above.
SECTION 7.4. Indemnification by Buyer.
------------------------
Buyer agrees to indemnify and hold harmless Seller and its Affiliates
and their respective officers, directors, successors and assigns ("Seller
Indemnified Parties") from and against any Losses which are caused by or arise
out of:
(a) any breach or default in the performance by Buyer of any covenant
or agreement contained herein or in any certificate delivered pursuant hereto or
thereto or at the Closing;
(b) any breach of warranty or representation made by Buyer contained in
Article 4 or in any certificate delivered pursuant hereto at the Closing;
(c) the Assumed Liabilities; or
(d) Buyer's conduct of the Business or the operation
and use of the Transferred Assets, in each case from and after the Closing.
SECTION 7.5. Procedure; Notice of Claims.
(a) Any indemnified party (the "Indemnified Party") seeking
indemnification hereunder shall, within the relevant limitation period provided
for in Section 7.1 above, give to the party obligated to provide indemnification
to such Indemnified Party (the "Indemnifying Party") a notice (a "Claim Notice")
describing in reasonable detail the facts giving rise to any claims for
indemnification hereunder and shall include in such Claim Notice (if then known)
the amount or the method of computation of the amount of such claim, and a
reference to the provision of this Agreement or any agreement, certificate or
instrument executed pursuant hereto or in connection herewith upon which such
claim is based; provided, that a Claim Notice in respect of any action at law or
suit in equity by or against a third Person as to which indemnification will be
sought shall be given promptly after the action or suit is commenced; and
provided further, that failure to give such notice promptly shall not relieve
the Indemnifying Party of its obligations hereunder except to the extent it
shall have been prejudiced by such failure.
(b) The Indemnifying Party shall have twenty (20) days after the giving
of any Claim Notice pursuant hereto to (i) agree to the amount or method of
determination set forth in the Claim Notice and to pay such amount to such
Indemnified Party in immediately available funds (the "Dispute Settlement") or
(ii) to provide such Indemnified Party with written notice that it disagrees
(and the reasons therefor) with the amount or method of determination set forth
in the Claim Notice (the "Dispute Notice"). Within a thirty (30) day period
after the giving of the Dispute Notice or if no such notice is given, the
expiration of the twenty (20) day period set forth above without a Dispute
Settlement, a representative of each Indemnifying Party and such Indemnified
30
Party shall negotiate in a bona fide attempt to resolve the matter without
judicial intervention (the "Negotiation Period"). If, upon the expiration of the
Negotiation Period, all of the Indemnified Party's claims in the Claim Notice
are not resolved, the Indemnified Party may commence at any time thereafter such
legal action or proceedings as it deems appropriate to enforce the
indemnification obligation of the Indemnifying Party pursuant to this Article 7.
SECTION 7.6. Procedure - Third Party Claims.
(a) Promptly after receipt by an Indemnified Party of notice of the
commencement of any proceeding against it by a third Person ("Third Party
Claim"), such Indemnified Party will, if a claim for indemnification is to be
made against an Indemnifying Party, provide to the Indemnifying Party written
notice of the commencement of such claim (together with copies of any legal
papers served) but the failure to promptly notify the Indemnifying Party will
not relieve the Indemnifying Party of any liability that it may have to any
Indemnified Party, except to the extent that the Indemnifying Party demonstrates
that the defense of such action is prejudiced (or made more expensive) by the
Indemnified Party's failure to give such notice.
(b) If any proceeding referred to in Section 7.6(a) is brought against
an Indemnified Party and it gives notice to the Indemnifying Party of the
commencement of such proceeding, the Indemnifying Party will be entitled to
participate in such proceeding and, to the extent that it wishes (unless (i) the
Indemnifying Party is also a party to such proceeding and the Indemnified Party
upon the advice of counsel reasonably determines in good faith that a conflict
or potential conflict exists such that joint representation would be
inappropriate under applicable standards of professional conduct, or (ii) the
Indemnifying Party fails to provide reasonable assurance to the Indemnified
Party of its financial capacity to defend such proceeding and provide
indemnification with respect to such proceeding), to assume the defense of such
proceeding with counsel reasonably satisfactory to the Indemnified Party and,
after notice from the Indemnifying Party to the Indemnified Party of its
election to assume the defense of such proceeding, the Indemnifying Party will
not, as long as it diligently conducts such defense, be liable to the
Indemnified Party under this Article 7 for any fees of other counsel or any
other expenses with respect to the defense of such proceeding, in each case
subsequently incurred by the Indemnified Party in connection with the defense of
such proceeding, other than reasonable costs of investigation. If the
Indemnifying Party assumes the defense of a Third Party Claim and subsequently
determines that the Third Party Claim is not subject to indemnification by the
Indemnifying Party hereunder, the Indemnifying Party shall give prompt notice of
such fact to the Indemnified Party, after which the Indemnified Party shall have
the right to reassume control of the defense of such claim; provided, that the
failure by the Indemnifying Party to promptly notify the Indemnified Party of
any such determination shall not result in any liability to the Indemnifying
Party except to the extent that the Indemnified Party demonstrates that the
defense of such action has been prejudiced (or made more expensive) by the
Indemnifying Party's failure to give such notice. If the Indemnifying Party
assumes the defense of a Third Party Claim and subsequently determines that such
claim is not subject to indemnification by the Indemnifying Party hereunder, the
Indemnifying Party shall have the right, following its delivery of the notice
contemplated by the immediately preceding sentence, to withdraw from such
defense, and such withdrawal shall not result in any liability to the
Indemnifying Party except to the extent that the Indemnified Party demonstrates
that the defense of such action has been prejudiced by the timing of the
Indemnifying Party's withdrawal. If the Indemnifying Party assumes the defense
31
of a proceeding, (x) no compromise or settlement of such claims may be effected
by the Indemnifying Party without the Indemnified Party's consent (which consent
will not be unreasonably withheld, delayed or conditioned) unless (A) there is
no finding or admission of any violation of law or any violation of the rights
of any Person and no effect on any other claims that may be made against the
Indemnified Party, and (B) the sole relief provided is monetary damages that are
paid in full by the Indemnifying Party; and (y) the Indemnified Party will have
no liability with respect to any compromise or settlement of such claims
effected without its consent as may be required pursuant to clause (x) above. If
notice is given to an Indemnifying Party of the commencement of any proceeding
and within twenty (20) days after the Indemnified Party's notice is given, the
Indemnifying Party does not give notice to the Indemnified Party of its election
to assume the defense of such proceeding, the Indemnifying Party will be bound
by any determination made in such proceeding or any compromise or settlement
effected by the Indemnified Party to which the Indemnifying Party consents,
which consent may not be unreasonably withheld, delayed or conditioned.
(c) Notwithstanding the foregoing, if the exclusive remedy sought under
a Third Party Claim is for injunctive relief for which an Indemnified Party may
be liable, the Indemnified Party may, by notice to the Indemnifying Party,
assume the exclusive right to defend, compromise, or settle such proceeding, but
the Indemnifying Party, although still liable for the payment of all reasonable
legal fees, costs and expenses incurred in connection therewith, will not be
bound by any determination of a proceeding so defended or any compromise or
settlement effected without its consent which may not be unreasonably withheld,
delayed or conditioned. In addition, if a Third Party Claim seeks both
injunctive or other non-monetary relief and monetary damages, the Indemnified
Party may, by notice to the Indemnifying Party, participate in the defense of
such proceeding at its own cost.
(d) Notwithstanding anything to the contrary contained herein, the
Indemnifying Party shall not be obligated to pay the fees and expenses of more
than one counsel for the Indemnified Parties whenever the Indemnifying Party is
required hereunder to pay the fees and expenses of counsel for the Indemnified
Parties.
SECTION 7.7. Remedies.
--------
Except as otherwise specifically provided in this Agreement, the Escrow
or the Guaranty, the sole and exclusive remedy of the parties hereunder shall be
restricted to the indemnification rights set forth in this Article 7, provided,
however, that no party hereto shall be deemed to have waived any rights, claims,
causes of action or remedies if and to the extent such rights, claims, causes of
action or remedies may not be waived under Applicable Law or actual fraud is
proven on the part of a party by another party hereto.
SECTION 7.8. Certain Limitations.
(a) Notwithstanding any other provision in this Agreement to the
contrary, the parties to this Agreement shall only be liable to indemnify each
other for compensatory damages, and, accordingly, in the absence of actual
fraud, neither party shall be entitled to recover from the other special,
indirect, punitive or consequential damages pursuant to this Article 7 unless
32
and then only to the extent that the same are components of a Third Person Claim
for which an Indemnified Party is seeking indemnification hereunder.
(b) The amount of any Losses recoverable by way of indemnification
pursuant to Article 7 shall be calculated net of the insurance proceeds and any
collection-related expenses actually received by the Indemnified Party from a
third party insurer with respect thereto or any indemnification or contribution
from any third Person. To the extent of any indemnification payment made by an
Indemnifying Party hereunder, the Indemnifying Party shall succeed to all
corresponding claims that the Indemnified Party may have and otherwise shall be
subrogated to the rights of the Indemnified Party against its insurers and any
other person or security in respect of such claims, and the Indemnified Party
shall reasonably cooperate with the Indemnifying Party in seeking recovery under
such claims. The Indemnifying Party shall be entitled to receive (or retain) any
and all recoveries resulting from the exercise of any rights to which it has
been subrogated (the "Subrogated Rights"), other than any amounts in excess of
the sum of (i) the corresponding Losses actually paid by the Indemnifying Party
to the Indemnified Party, (ii) the fees and expenses actually paid by the
Indemnifying Party to any third parties in connection with the investigation or
defense of the matters giving rise to such corresponding Losses, and (iii) the
fees and expenses actually paid by the Indemnifying Party to any third parties
in connection with the investigation or prosecution of the Subrogated Rights.
The failure of the Indemnified Party to notify timely any applicable insurance
carrier or potential third party indemnitor of such claim which results in
actual prejudice to the Indemnifying Party shall constitute a defense by the
Indemnifying Party to, or off-set against, any claim for indemnification by any
Indemnified Party hereunder.
(c) It is agreed that for the purpose of making a claim for
indemnification, the expiration of any one survival period, as set forth in
Section 7.1, of certain representations and warranties shall not affect the
ability to make any claim for indemnification hereunder under any other
representations and warranties still surviving.
ARTICLE 8
MISCELLANEOUS
SECTION 8.1. Entire Agreement; Assignment; Amendments and Waivers.
(a) This Agreement (including the Seller Disclosure Schedule), and the
Related Agreements constitute the entire agreement between the parties hereto
with respect to the subject matter hereof and thereof and supersede all other
prior agreements and understandings both written and oral between the parties
with respect to the subject matter hereof and thereof. No representation,
warranty, promise, inducement or statement of intention has been made by any
party that is not embodied in this Agreement or such other documents, and none
of the parties shall be bound by, or be liable for, any alleged representation,
warranty, promise, inducement or statement of intention not embodied herein or
therein.
(b) This Agreement may not be assigned by operation of law or otherwise
without the written consent of the other party; provided, however, that Buyer
may assign all of its rights and obligations under this Agreement to any
Affiliate.
33
(c) This Agreement may not be amended or modified, and any of the
terms, covenants, representations, warranties, or conditions hereof may not be
waived, except by a written instrument executed by all of the parties hereto, or
in the case of a waiver, by the party waiving compliance. Any waiver by any
party of any condition, or of the breach of any provision, term, covenant,
representation, or warranty contained in this Agreement, in any one or more
instances, shall not be deemed to be nor construed as further or continuing
waiver of any such condition, or of the breach of any other provision, term,
covenant, representation, or warranty of this Agreement.
SECTION 8.2. Validity.
If any provision of this Agreement or the application thereof to any
person or circumstance is held invalid or unenforceable, then the remainder of
this Agreement and the application of such provision to other persons or
circumstances shall not be affected thereby and to such end the provisions of
this Agreement are agreed to be severable.
SECTION 8.3. Notices.
All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in person, by facsimile or by
registered or certified mail (postage prepaid, return receipt requested) to each
other party as follows:
if to Buyer: Creative Socio-Medics Corp.
0000 Xxxxxxx Xxxxxxx
Xxxxx Xxxxx, Xxx Xxxx 00000
Telecopier:
Attention: Xxxxx Xxxxxx, CEO
with a copy to: Kramer, Coleman, Wactlar & Xxxxxxxxx, P.C.
000 Xxxxxxx Xxxxxxxxxx
Xxxxxxx, Xxxx, XX 00000
Telecopier: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxxx, Esq. or
Xxxxx X. Xxxxx, Esq.
if to Seller to: ContinuedLearning LLC
000 0xx Xxxxxx Xxxxx
Xxxxx 000
Xx. Xxxxxxxxxx, XX 00000
Telecopier:
Attention: A. Xxxxxx Xxxxxx
with a copy to: Xxxxx Xxxxx
0000 Xxxxxxxx Xxxx
Xxxxx 000
Xxxxxxxxxx, XX 00000
34
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
SECTION 8.4. Governing Law, Forum Selection, Jurisdiction.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York without regard or giving effect to the
principles of conflicts of law thereof.
(b) Each party agrees that any action, proceeding or claim it commences
against the other party pursuant to this Agreement or any Related Agreement
shall be brought in the United States District Court for the Southern District
of New York, in New York, New York (or if subject matter jurisdiction is lacking
in such court, the jurisdiction of the New York Supreme Court for the County of
New York). Each party irrevocably and unconditionally commits to the in personam
jurisdiction of such Court and waives, to the fullest extent permitted by law,
any objections which it may now or hereafter have to the laying of the venue of
any such suit, action or proceeding brought in such court, any claim that any
such suit, action or proceeding brought in such court has been brought in an
inconvenient forum and the right to object, with respect to any such suit,
action or proceeding brought in such court, that such court does not have
jurisdiction over the person of such party. In any suit, action or proceeding,
each party waives, to the fullest extent it may effectively do so, personal
service of any summons, complaint or other process and agrees that the service
thereof may be made by certified or registered mail, addressed to such party at
its address set forth in Section 8.3 hereof. Each party agrees that a final
non-appealable judgment in any such suit, action or proceeding brought in such a
court shall be conclusive and binding.
SECTION 8.5. WAIVER OF JURY TRIAL.
--------------------
TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED,
EACH OF THE PARTIES HERETO HEREBY WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT
(WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN
RESPECT OF ANY ISSUE OR ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR
ANY RELATED AGREEMENT OR THE SUBJECT MATTER HEREOF, OR THEREOF OR IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE TRANSACTIONS CONTEMPLATED HEREBY,
IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING. ANY PARTY HERETO MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 8.5 WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO
TRIAL BY JURY.
SECTION 8.6. Descriptive Headings.
The descriptive headings herein are inserted for convenience of
reference only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
35
SECTION 8.7. Parties in Interest.
This Agreement shall be binding upon and inure solely to the benefit of
each party hereto and its successors and permitted assigns and nothing in this
Agreement express or implied is intended to or shall confer upon any other
person any rights, benefits or remedies of any nature whatsoever under or by
reason of this Agreement.
SECTION 8.8. Personal Liability.
Except as may be provided in the Guaranty, this Agreement shall not
create or be deemed to create or permit any personal liability or obligation on
the part of any direct or indirect stockholder of Seller or Buyer or any
officer, director, employee, agent, representative or investor of any party
hereto, except in the event of actual fraud by such Person.
SECTION 8.9. Specific Performance.
The parties hereby acknowledge and agree that the failure of any party
to perform its agreements and covenants hereunder, including its failure to take
all actions as are necessary on its part to the consummation of the transactions
contemplated hereby, will cause irreparable injury to the other parties, for
which damages, even if available, will not be an adequate remedy. Accordingly,
each party hereby consents to the issuance of injunctive relief by any court of
competent jurisdiction to compel performance of such party's obligations and to
the granting by any court of the remedy of specific performance of its
obligations hereunder (without the requirement of posting a bond).
SECTION 8.10. Disclosure Generally.
If and to the extent any information required to be furnished in any
section of the Seller Disclosure Schedule is contained in this Agreement or
disclosed in any section of the Seller Disclosure Schedule, such information
shall be deemed to be included in any other section of the Seller Disclosure
Schedule to the extent that such disclosure is specifically identified in such
other section. The inclusion of any information in any section of the Seller
Disclosure Schedule shall not be deemed to be an admission or acknowledgement by
Seller, in and of itself, that such information is material to or outside the
ordinary course of the business of Seller.
SECTION 8.11. Counterparts
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which shall constitute one
and the same agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
duly executed on its behalf as of the day and year first above written.
36
CONTINUEDLEARNING LLC
By: /s/ A. Xxxxxx Xxxxxx
---------------------
Name: A. Xxxxxx Xxxxxx
Title: Managing Member
CREATIVE SOCIO-MEDICS CORP.
By: /s/ Xxxxx X. Xxxxxx
--------------------
Name: Xxxxx Xxxxxx
Title: Chairman
37
SCHEDULE 2.1 (a)
Equipment
Equipment List
Monitors
Westinhouse 19in Flat W19cm0445100731
NEC Multisync Monitor 19" 975BK 2702818YA
Nec Multisync Monitor 19" 975BK 2600149YA
Viewsonic A90F 19" Monitor 32L02115870
Viewsonic A90F 19" Monitor 32L021753795
Samtron 17" Monitor An17HMBTA09950P
KDS Multisync 17" 1746AAA29142735
SERVERS
TapeBackup Server no serial
PIII Staging Server no serial
Desktops
HP Pavilion 8766C U513295169
Etower - used for File system qft9cl0002482
HP Pavillion 7920 MX13469606
Gateway ATXAEG 2813254
Gateway ATXAEG 000000000
Telephone and Voicemail ne96053409
Printers
Hp Officejet 135 sg25i411hrc7297a
Minolta Magicolor 2400 Laser 8321006002
VIEWSONIC Projector PJ501 vPROj25ok8-1w
Software Licenses Owned Copies Comments
MSDN Developer Subscription 1needs to be updated
Office2003 5
WinXP Pro 5
Swiftchart Generator 1Server version
Adobe 7.0 Professional 1
PhotoPaint 2
Flash 2
Articulate 1
DOMAIN(s) -
xxx.xxxxxxxxxxxxxxxxx.xxx
38
SCHEDULE 2.1 (b)
Assumed Contracts
1. All agreements to provide services to the following customers:
CLL Contracts by Company: by Renewals (63 items)
------------------------------------------------
Company Renewal amount Term renewal date
------- -------------- ---- ------------
* Open Minds $24,000.00 36 months 03/01/05
Smoky Mountain Center $3,500.00 12 months 03/10/05
Sacred Heart Rehabilitation $5,500.00 12 months 03/22/05
* Meridian Behavioral Healthcare $26,000.00 12 months 04/01/05
ProtoCall $4,500.00 12 months 04/10/05
FamilyLinks $6,000.00 12 months 04/11/05
Denali Family Services $7,500.00 12 months 05/03/05
Life Management Center $5,000.00 12 months 06/16/05
Community Counseling $7,500.00 12 months 06/18/05
Ctrs of Chicago (C4
Grand Prairie Services $5,000.00 12 months 06/28/05
* Thresholds $17,000.00 12 months 06/29/05
* Community Services Group $15,000.00 12 months 06/30/05
Heritage Behavioral Health $7,500.00 12 months 07/01/05
Xxxxxxx Professional $6,000.00 12 months 07/01/05
Services, Inc.
City of Alexandria - MHMRS $7,500.00 12 months 07/01/05
Cape Counseling $6,000.00 12 months 07/07/05
Southeast, Inc. $7,500.00 12 months 07/19/05
Peak Wellness Center $7,500.00 12 months 08/19/05
Southlake Center for $5,000.00 12 months 09/15/05
Mental Health
Tri-City Comprehensive CMHC, Inc. $5,000.00 12 months 09/24/05
Geminus $6,000.00 12 months 10/05/05
Chesterfield CSB $7,500.00 12 months 10/31/05
* Oaklawn Psychiatric Center, Inc. $11,000.00 12 months 01/01/06
Shiawassee County CMH $6,000.00 12 months 01/11/06
* Grafton, Inc. $18,500.00 12 months 01/30/06
* PALMS / JWB $60,000.00 12 months 02/11/06
PALMS - JWB - Operation PAR Under JWB Contract 12 months 02/11/06
PALMS - JWB - CASA Under JWB Contract 12 months 02/14/06
PALMS - JWB - Coordinated Under JWB Contract 12 months 02/14/06
Child Care
PALMS - JWB - Family Under JWB Contract 12 months 02/14/06
Service Center
PALMS - CBH / CSC - Child Under JWB Contract 12 months 02/14/06
Board Hillsborough Primary
PALMS - JWB - PEMHS Under JWB Contract 12 months 02/14/06
39
Company Renewal amount Term renewal date
------- -------------- ---- ------------
PALMS - JAX / CSC - Under JWB Contract 12 months 02/14/06
Jacksonville Primary
PALMS - SLM / CSC - St. Under JWB Contract 12 months 02/14/06
Lucie/Xxxxxx Primary
PALMS - JWB - YWCA of Under JWB Contract 12 months 02/14/06
Tampa Bay
PALMS- JWB - The Under JWB Contract 12 months 02/14/06
Children's Home
PALMS - JWB - Sarasota Under JWB Contract 12 months 02/14/06
Family YMCA
PALMS - JWB - Xxxxx Under JWB Contract 12 months 02/14/06
Centers for Behavioral
Health Care
PALMS - JWB - Family Under JWB Contract 12 months 02/14/06
Resources
Bay-Arenac Community $5,500.00 12 months 02/20/06
Mental Health
The Chrysalis Center $7,000.00 12 months 03/22/06
Spectrum of Supportive $2,050.00 12 months 04/01/06
Services
Southwest Counseling Center, Inc. $6,000.00 12 months 04/29/06
PeA - Center for Human Under Mass Contract 36 months 11/01/07
Development
PeA - United Cerebral Under Mass Contract 36 months 11/01/07
Palsy of Metro Boston
PeA - Amego, Inc. Under Mass Contract 36 months 11/01/07
PeA - Project Cope Under Mass Contract 12 months 11/01/07
PeA - Xxxxxxx River ARC Under Mass Contract 36 months 11/01/07
PeA - CMARC Under Mass Contract 36 months 11/01/07
PeA - Community Care Under Mass Contract 36 months 11/01/07
Services
PeA - Pine Street Inn Under Mass Contract 36 months 11/01/07
PeA - Seven Hills Under Mass Contract 36 months 11/01/07
Foundation
PeA - NFI Massachusetts Under Mass Contract 36 months 11/01/07
PeA - Riverside Industries Under Mass Contract 36 months 11/01/07
PeA - St. Mary's Women & Under Mass Contract 36 months 11/01/07
Children
PeA - The Key Program Under Mass Contract 36 months 11/01/07
PeA - Tapestry Health Under Mass Contract 36 months 11/01/07
* Mass. Council of Human $150,000.00 36 months 11/01/07
Service Providers
PeA - Center for Living Under Mass Contract 36 months 11/01/07
& Working, Inc.
PeA - The Children's Under Mass Contract 36 months 11/01/07
Study Home
PeA - Community Resources Under Mass Contract 36 months 11/01/07
for Justice
PeA - Greater Xxxx Under Mass Contract 36 months 11/01/07
Mental Health &
Retardation Association
PeA - Servicenet Under Mass Contract 36 months 11/01/07
40
2. Agreement with Hurricane Electric for server hosting dated April 5,
2004.
3. Agreement with T-Mobile for cellular telephone service having a
remaining term of approximately 30 months. Such agreement includes
cellular service for employee mobile telephones.
4. Lease agreement as disclosed in Schedule 3.21.
5. Standard month to month agreements for required office services,
including, but not limited to local, long distance, incoming and
outgoing telephone service, telephone answering service, copier
maintenance, postage dispensing and other such cancelable services.
41
SCHEDULE 2.7
Price Allocation
Category Amount
-------- ------
Equipment and Office Supplies $17,000.00
Third Party Software Licenses
Intellectual Property/Customer List 388,000.00(1)
Noncompetition Agreement 25,000.00
Total $430,000.00
----------
(1) Assumes the value of the common stock is $9.00 per share. The actual amount
shall be determined post-closing.
42
SCHEDULE 3.1
Jurisdiction Of Good Standing
Seller is authorized to conduct business in the State of Florida.
----------------
43
SCHEDULE 3.4(a)
Financial Statements
Attached hereto as Exhibits 3.4(a) are copies of the financial statements of the
Seller as of and for the period ending December 31, 2004.
44
SCHEDULE 3.4 (c)
LIABILITIES
Liabilities not disclosed on the Balance Sheet of Seller.
---------------------------------------------------------
1. The obligation to provide services to the customers of the Seller from the
date of this Agreement through the date of the renewal, if any, of the customer
contract. See Disclosure Schedule 2.1(b).
45
SCHEDULE 3.9(a)
Intellectual Property
See Schedule 2.1(a)
ContinuedLearning Management Systems Software
46
SCHEDULE 3.9(c)
Information Technology
And Related Agreements
1. Agreement with Hurricane Electric for server hosting dated April 5, 2004.
2. See Schedule 2.1(a).
47
SCHEDULE 3.11
Material Contracts
1. See Schedule 3.18(b)
2. See subsection 1 of Schedule 2.1(b)
3. See Schedule 3.21
4. See below contracts.
Contracts where CLL has a financial liability.
----------------------------------------------
Document Name Description Renewal Renewal Document
------------- ----------- ------- ------- --------
Date Price
---- -----
Association Agreements (4 items)
--------------------------------
* MHCA Royalty 5% royalty on first year MHCA.pdf
sales to membership
* Pennsylvania Providers 5% royalty 4/30/2005 PCPA.pdf
* OHIO COUNCIL 3%Royalty on sales to 03/18/2006 CL_Contract_2-24-05.doc
membership
* New Jersey Council 3% Royalty on sales to 4/30/2005 pending
membership
CE Approvals (6 items)
----------------------
NAADAC Approval Additions Therapists 5/31/2005 100.00 NAADAC.pdf
NCCBH Approval Counselors 04/31/2005 $100.00 NBCC.pdf
* American Psychological Application document 05/1/2005 $1000.00 APAApplication.doc
Association 2005 - approved
March 18, 2005
OHIO Board Counselors, SW, Marriage 02/01/2006 250.00 ohio sw board.pdf
and Family Therapists
California Board Counselors and Social Workers 2/01/2006 250.00
* Florida Dept Health Nursing, Social Work, 3/31/2005 500.00
Counselors
Content Licenses (3 items)
--------------------------
* MINKOFF Dual Diagnosis content 12/31/2005 ~$2500.00 MINKOFF.pdf
* USF agreement Clinical content - we have 01/01/2006 $7,500.00 USF.pdf
and exclusive to resell
this content.
* XXXXXXX CORPORATION This is the content 03/01/2005 $10,000.00 xxxxxxx.pdf
licensing agreement for
the GTSLEARNING content
for softskills and
technology courses.
* BLR (Business and Legal This is a new content 4/15/2005 $21,000.00
Reports) licensing agreement for
HR and safety and HIPAA
training content. $10,500
payable with contract
$10,500 payable in six months.
Data Center Contracts (1 item)
------------------------------
data center contract Hurricane Electric is Signed 500.00 datacenter.pdf
month-to-month - 4/05/2004
48
Document Name Description Renewal Renewal Document
------------- ----------- ------- ------- --------
Date Price
---- -----
Reseller Contracts (1 item)
---------------------------
CMHC Contract This was signed in 2001 05/08/2005 cancelled CMHC.pdf
and was assigned to
ContinuedLearning in
2003 - cancelled by CLL in
April, 2005
Monthly expenses
----------------
TMobile Cellular for employees Monthly 250.00
Sprint Long Dist Long distance phone Monthly 300.00
Verizon Local phone Monthly 250.00
Palais Royale Rent and parking Monthly 3000.00
Waterboy Office water Monthly 50.00
MAP Answering Service Monthly 240.00
Brighthouse Internet Cable Monthly ~250.00
Intranets Our database intranet Monthly 95.00
for customer project
management
Constant Contact Email list manager Monthly 50.00
Progress Energy Electric Monthly 150.00 Varies
49
SCHEDULE 3.16 (i)
Standards Terms and Conditions of Sale
See Below Standard Agreement
STANDARD LICENSE CONTRACT (FOR A LIST OF OUR WARRANTIES)
LICENSE AGREEMENT
This is a license agreement (the "Agreement") between ContinuedLearning, LLC
("CLL") located at XX Xxx 00000, 000 0xx Xxxxxx Xxxxx, Xxxxx 000, Xx.
Xxxxxxxxxx, XX 00000 and the undersigned individual user or healthcare provider
("Licensee") who uses the ContinuedLearning Training Products. This Agreement
gives Licensee the right to use the ContinuedLearning Training Products by
installing, registering and using the ContinuedLearning Training Products from
ContinuedLearning's web sites, to access and to use the online storage facility
for electronic training records (the "Online Data Storage") and any related
content (the "Content") and services made available by ContinuedLearning
(collectively, the "Training Products"). The license CLL granted to Licensee is
conditioned on Licensee agreeing to and abiding by all the terms and conditions
in this Agreement. Each subsequent installation of or order placed by Licensee
for the Training Products or Technical Data will also be subject to these terms
and conditions.
1. DEFINITIONS
As used herein, the terms set forth below shall have the following
respective meanings:
1.1. "CLL " shall mean ContinuedLearning, LLC, a Florida
corporation.
1.2. "Licensee" shall mean the entity or individual, either on the
individual's behalf or on behalf of the entity that individual
represents, who installs the Training Products or otherwise
agrees to be bound by the terms and conditions contained in
this Agreement. Further, each individual representing an
entity represents and warrants that he/she has the authority
to bind the entity to the terms and conditions of this
Agreement.
1.3. "Distributor" shall mean any representative designated by CLL
as a distributor of CLL products. During any period when no
Distributor is appointed in Licensee's territory,
"Distributor" will mean "CLL" or its other designee.
1.4. "Training Products" shall mean the software and/or other
training products delivered by CLL or Distributor to Licensee
and may include software licensed from third parties, together
with other software and/or other products subsequently
delivered to Licensee by CLL or Distributor and all updates
and upgrades of the same provided to Licensee by CLL or
Distributor, all as described on the Order Acknowledgment form
delivered by Licensee to CLL.
1.5. "Technical Data" shall mean the published user manuals
included with the Training Products, and any other materials
provided to Licensee by CLL or Distributor to supplement the
published user manuals.
1.6. "Named User" shall mean an individual employed by Licensee who
is authorized to use the Training Products.
1.7. "Concurrent User" shall mean an individual employed by
Licensee who is authorized to use the Training Products
concurrently with other employees of Licensee as part of a
group of users.
1.8. "Named Developer" shall mean an individual employed by
Licensee who is authorized to use and to develop the Training
Products in accordance with Section 5 of this Agreement.
1.9. "Processor" shall mean microprocessors, which may execute the
Training Products in a server Computer. The number of
Processor licenses for the Training Products must equal the
number of microprocessors, which may execute the Training
Products contained in the server Computer. Use of the
Training Products via Processor(s) is limited to deployment
only.
1.10. "Computer" shall mean a stand-alone server Computer containing
one or more microprocessors. Use of the Training Products on
any Computer is limited to deployment only. Some Training
Products are licensed by the "Server" which, for the purposes
of this Agreement, means a Computer. "Concurrent Device"
shall mean any input devices used for accessing Computer(s)
that host the Training Products. The number of Concurrent
Devices shall be the maximum number of input devices that can
access Computer(s) at any one time. Use of the Training
Products via a Concurrent Device is limited to deployment
only. Some Training Products are licensed by the "Client"
which, for the purposes of this Agreement, means a Concurrent
Device.
2. LICENSE GRANT, AUDIT RIGHTS
2.1. CLL grants to Licensee, and Licensee accepts from CLL, a
non-exclusive license, without right to sublicense, to use the
Training Products and Technical Data; provided, however, that
such use of the Training Products and Technical Data shall be
limited to use by the type, edition and number of users or in
the manner for which payment has been made.
2.2. Licensee shall not allow the unauthorized use of the Training
Products and Technical Data and will first notify CLL and pay
any additional charges pursuant to CLL 's then current price
list for any additional use.
2.3. Licensee shall keep accurate records of all activity with
respect to use of the Training Products by Licensee,
including, without limitation, all editions of the Training
Products used, the number of users accessing the Training
Products, the number of Processors, and the number of
Concurrent Devices accessing Computer(s). Licensee shall
provide CLL with summaries of such records upon request. At
any time during the term of this Agreement, CLL shall
50
have the right to audit Licensee's records in order to verify
that Licensee is limiting use the Training Products in
accordance with this Agreement. If any audit reveals that
Licensee is not limiting use of the Training Products in
accordance with this Agreement, Licensee shall pay CLL any
underpaid license fees at CLL 's then current rates within
thirty days of notification of such underpayment.
2.4. EVALUATION, TESTING, PARTNER AND EDUCATION LICENSE GRANTS
CLL may grant Licensee a temporary right to use certain
Training Products for evaluation and testing purposes only and
not for commercial use. Upon completion of any evaluation
period, Licensee shall immediately cease use of the evaluation
Training Products and return the evaluation Training Products
and all related evaluation materials to CLL. CLL may grant
Licensee a temporary right to use the Training Products for
non-profit, noncommercial, academic uses, including classroom
and laboratory uses, and not including, (a) administrative
uses for the provision of services or information to third
parties for compensation for any kind, or (b) projects funded
by grants ("Educational Purpose"). Any such Educational
Purpose license granted to Licensee is limited to a one-year
license from the date of shipment to Licensee. One-year
renewal of such license occurs when Licensee pays any renewal
fee to CLL or its Distributor. Except as otherwise provided in
this section, the remaining terms and conditions of this
Agreement apply.
3. OWNERSHIP - Title to and ownership of the Training Products, including
all copies thereof, and all rights therein including trade secrets,
trademarks, patents, and copyrights, shall remain with CLL - USA or
its licensors. No title or ownership of the Training Products or any
part or modification thereof is transferred to Licensee.
4. PROPRIETARY NOTICES
4.1. Licensee shall not remove or alter CLL's or any third party's
ownership, trademark, copyright, or other proprietary notices
on the Training Products or Technical Data.
4.2. Where applicable, the Training Products and Technical Data
shall be marked with an appropriate legend under the Federal
Acquisition Regulations (FAR) or other similar regulations.
5. USE RESTRICTIONS
5.1. Licensee shall not modify, adapt, translate, reverse
engineer, decompile, or disassemble the Training Products.
Licensee agrees not to develop derivative works, which are
intended to be functionally equivalent substitutes for the
Training Products or any part thereof unless permission is
granted by CLL.
5.2. Notwithstanding the foregoing, Licensee may, through Named
Developers only, modify the Training Products to the extent
necessary in connection with Licensee's creation of
applications for the Training Products, provided that such
permitted modifications shall be for Licensee's internal use
only, and Licensee shall not sell, distribute or otherwise
provide access to such modifications to any third party. Such
permitted modifications shall be deemed to be part of the
Training Products, which may be used by Licensee only in
accordance with this Agreement. CLL shall be the sole owner
of any modifications to the Training Products. Licensee
acknowledges that no computer software is error free. The
Training Products were not designed for use with applications
for which errors, bugs or malfunctions in the Training
Products could cause personal injury or death, property or
environmental damage, or economic loss, including without
limitation use in hazardous environments requiring fail-safe
performance, including without limitation the operation of
nuclear facilities, aircraft navigation or communication
systems, air traffic control, direct life support machines,
or weapons systems, and Licensee will not use the Training
Products for any such applications. Licensee shall be solely
responsible for taking all precautions, such as data backup,
testing and error detection procedures, which are necessary
in order to insure that errors in the Training Products and
the applications using the Training Products do not cause
adverse consequences.
6. COPY RESTRICTIONS
6.1. Licensee shall not copy Training Products or Technical Data
except as required for use of the Training Products or
Technical Data as provided in this Agreement, and for
archival storage to assure against loss. Licensee must
reproduce and include all copyright notices and other
proprietary notices on each copy. In no event shall Licensee
provide copies of, or access to, the Training Products or
Technical Data to any third party.
7. KEY FILES
7.1. Licensee acknowledges that the Training Products licensed
hereunder may contain Key Files, which are a form of
disabling code. For the purpose of this paragraph, "disabling
code" means computer code which interferes with the normal
operation of the Training Products in order to (a) prevent
unauthorized use of the Training Products or (b) provide
limited use of the Training Products if the Training Products
are issued for evaluation, testing, partner or educational
purposes. At the request of Licensee, CLL will provide
reasonable advice and assistance to Licensee with respect to
any Key File in order to ensure that the existence of such
code does not interfere with Licensee's authorized use of the
Training Products.
8. CONFIDENTIALITY
8.1. The Training Products and Technical Data constitute highly
valuable property of CLL and contain trade secrets and
confidential information owned by CLL. Licensee shall observe
complete confidentiality with respect to the Training
Products, Technical Data and all performance data. Licensee
also understands and acknowledges that it will receive
confidential information from CLL in connection with this
Agreement related to the Training Products, which is marked
as "confidential" by CLL. Licensee shall not disclose such
information to any third party, except for its employees
with a need for access to the information, or use the
information for any purpose not contemplated or permitted
under this Agreement. Licensee shall take reasonable steps to
insure that its employees who receive the information
understand and acknowledge the obligations of
confidentiality. The obligations of confidentiality imposed
upon Licensee under this Agreement shall survive the
termination or cancellation of this Agreement. If an
employee, former employee or any other person affiliated with
Licensee breaches the obligations of confidentiality provided
for in this section, Licensee agrees to give CLL reasonable
assistance in enforcing its rights against such person.
8.2. Notwithstanding the foregoing, Licensee shall have no
obligation to hold any information in confidence to the
extent that Licensee can show by documentary evidence that
such information: (a) is already known to Licensee at the
time it is obtained by Licensee from CLL, free from any
obligations to hold such information in confidence; (b)
is or becomes publicly known through no wrongful act of
Licensee; (c) is rightfully received from a third party
without restriction and without breach of any obligation to
CLL or its suppliers; or (d) is independently developed by
Licensee without use of any confidential information of CLL
or its suppliers.
9. PAYMENT
9.1. If Training Products are ordered through a Distributor,
Licensee shall pay Distributor for the Training Products in\
accordance with the payment and delivery terms established by
Distributor. Otherwise, full payment is due to CLL per the
terms set in Schedule I, attached here. Amounts are payable
in U.S. Dollars or a currency previously agreed to
between the parties, by check, money order, or by electronic
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funds transfer payable to CLL as instructed. All taxes,
duties and fees, if any, are to be paid by Licensee, except
for taxes on the income or revenue of CLL. CLL reserves the
right to modify the credit terms applicable to this Agreement
at any time.
10. TERM AND TERMINATION
10.1. The term of this Agreement shall commence upon installation
of the Training Products or written execution of this
Agreement, whichever occurs first. And is twelve months. At
thirty days prior to the end of the agreement, customer shall
have the right to terminate the agreement or renegotiate the
pricing and courses selected.
10.2. Either party may, by written notice, terminate this Agreement
at the renewal date with 30 days written notice.
10.3. Either party may, by written notice, terminate this Agreement
if the other party fails to remedy any default under this
Agreement within 30 days of receipt of written notice
specifying such default; provided, however, that failure to
make timely payment is not subject to this cure requirement.
10.4. Upon termination of this Agreement for any reason, all
licenses granted hereunder shall terminate, and Licensee
shall immediately cease use of and shall return to CLL all
copies of the Training Products and Technical Data.
11. DELIVERY (also to mean website setup and deployment)
11.1. CLL shall deliver Training Products or Technical Data ordered
by Licensee as soon as practical after CLL 's acceptance of
Licensee's order, but no later than 30 days after order
unless otherwise agreed to in writing by CLL and Licensee.
11.2. If Distributor is appointed in the territory, Distributor
shall deliver Training Products to Licensee as soon as
practical after order is placed.
12. SUPPORT
12.1. Maintenance and support for the Training Products must be
purchased separately from CLL or Distributor.
13. WARRANTY; LIMITATION OF LIABILITY
13.1. CLL warrants that the Training Products will perform
reasonably in accordance with the specifications published in
the Technical. CLL does not warrant that the Training
Products will meet Licensee's requirements or that its
operation will be uninterrupted or error free.
13.2. During the warranty period, CLL shall attempt to diagnose,
verify and correct errors or defects in the Training Products
that are identified in writing by notice to CLL, and any
corrections for errors or defects may, at CLL 's election, be
delivered directly to Licensee by means of a patch,
workaround or similar fix or be incorporated in subsequent
updates delivered to Licensee provided that Licensee has
purchased maintenance and support services.
13.3. CLL 's warranty obligations shall not apply with respect to
problems caused by modification to the Training Products by
Licensee or if Licensee has not purchased maintenance and
support services from CLL or Distributor. Nothing in this
section will relieve Licensee of its obligation to pay any
appropriate maintenance and support fees.
13.4. CLL 's liability to the Licensee for all damages, costs,
claims, or demands incurred or suffered by or awarded against
Licensee arising directly or indirectly out of the
performance or any breach of this license shall in no event
exceed the total amount paid to CLL under this Agreement.
13.5. THE WARRANTY CONTAINED IN THIS SECTION IS IN LIEU OF ALL
OTHER WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING BUT NOT
LIMITED TO, ANY WARRANTY OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE. CLL SHALL NOT BE RESPONSIBLE TO LICENSEE
OR TO ANY THIRD PARTY FOR ANY INDIRECT, SPECIAL, INCIDENTAL
OR CONSEQUENTIAL DAMAGES, WHETHER IN CONTRACT OR TORT, DUE TO
ANY FORESEEN OR UNFORESEEN CAUSE FROM LICENSEE'S OR ANY THIRD
PARTY'S USE OR THE PERFORMANCE OF THE TRAINING PRODUCTS UNDER
THIS AGREEMENT.
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14. PRE-RELEASE SOFTWARE
14.1. CLL may provide Licensee with pre-release versions of its
software. All pre-release versions provided will be
considered Training Products for the purposes of this
Agreement and be subject to the terms and conditions of the
applicable CLL Beta Program.
15. INDEMNITY BY CLL
15.1. CLL agrees to indemnify Licensee, as limited by this
paragraph, with respect to any suit, claim or proceeding
brought against Licensee alleging that the Training Products
constitutes an infringement of any valid United States
copyright. CLL agrees to defend Licensee against any such
claims and to pay litigation costs, reasonable attorney's
fees, and damages awarded by a court of competent
jurisdiction if, and only if, Licensee promptly gives notice
to CLL of any such suit, claim or proceeding and cooperates
with CLL in the defense or settlement of such suit, claim or
proceeding; and provided that CLL shall have sole control
thereof.
15.2. If a claim or allegation is made, or in either party's
judgment is likely to arise, Licensee agrees that CLL may, at
CLL 's option, (i) procure for Licensee the right to continue
using the portion of the Training Products enjoined from use;
(ii) replace or modify the Training Products so that
Licensee's use is not subject to any such injunction; or
(iii) accept return of the infringing Training Products
to CLL, and in the event of such return, refund the license
fee paid for such Training Products. CLL shall have no
further liability or obligations arising from or copyrights
under this Agreement.
15.3. The indemnity obligations under this Section 16 shall not
apply to claims to the extent that they arise from any
modification or alteration of the Training Products by any
party other than CLL.
16. INDEMNITY BY LICENSEE
16.1. Licensee acknowledges that CLL has no knowledge of, or
control over, the use of the Training Products by Licensee.
Licensee agrees to defend, indemnify and hold CLL harmless
with respect to any suit, claim or proceeding brought against
CLL alleging that use by, or under authority of, Licensee of
the Training Products caused personal injury, property
damage, or economic loss.
17. GENERAL
17.1. This Agreement and the other documents referred to in this
Agreement constitute the entire agreement between the parties
and supersedes all prior or contemporaneous agreements or
representations, written or oral, concerning the subject
matter of this Agreement. This Agreement may be amended only
by a written instrument stating an intention to modify this
Agreement and signed by duly authorized representatives of
the parties to be bound.
17.2. Failure by either party at any time to require performance by
the other party or to claim a breach of any term or condition
of this Agreement shall not be construed as affecting any
subsequent breach or the right to require performance with
respect thereto or to claim a breach with respect thereto.
17.3. Licensee may not assign this Agreement without the prior
written permission of CLL.
17.4. If any provision in this Agreement may be held to be invalid
or unenforceable in any jurisdiction in which this Agreement
is being performed, the meaning of such provision shall be
construed so as to render it enforceable to the extent
feasible. If no feasible interpretation would save such
provision, it shall be severed from this Agreement and the
remainder shall remain in full force and effect. However, in
the event such provision is considered an essential element
of this Agreement, the parties shall promptly negotiate
alternative, reasonable equivalent, enforceable terms.
17.5. For all Agreements between CLL and a Licensee, the rights and
obligations of the parties and all interpretations and
performance of this Agreement shall be governed in all
respects by the laws of the State of Florida without regard
to rules concerning the conflict of laws. For all Agreements
between other CLL entities and a Licensee, the provisions of
the 1980 UN Convention on Contracts for the International
Sale of Goods shall apply to this Agreement.
17.6. Section headings are inserted for convenience only and shall
not be used in any way to construe the terms of this
Agreement.
17.7. In the event that suit or other action is instituted to
interpret or enforce this Agreement, the prevailing party
shall be entitled to recover its attorney fees, including
those incurred on appeal, as determined by the court.
17.8. Licensee warrants that it is not domiciled in, a citizen,
national or resident of, and is not under the control of the
government of Cuba, Iran, Libya, North Korea, Syria, Sudan,
nor any other country or any distributee to which the United
States has prohibited export.
17.9. All notices permitted or required by this Agreement will be
delivered in a manner in which a receipt is obtained,
including confirmed facsimile, to the headquarters office of
the CLL entity from which Licensee licensed the product and
to Licensee at the location to which the Training Products
were delivered.
17.10. This provision applies for any Training Products acquired
directly or indirectly on behalf of a unit or agency of the
United States Government, whether that unit or agency be
civilian or part of the Department of Defense. The Training
Products (i) have been developed exclusively at private
expense, are existing computer software and no part of them
were developed with government funds; (ii) are the commercial
property and trade secret of CLL under copyright, patent,
trade secret or other applicable state and federal laws;
(iii) are submitted with "restricted rights" in accordance
with Commercial Software- Restricted Rights clause at
52.227-19 of the Federal Acquisition Regulations,
except that the government agency shall not have the right to
disclose the Training Products to support service Contractors
or their subcontractors without CLL 's prior written consent;
(iv) in all respects are proprietary data of CLL; and (v) are
unpublished and all rights are reserved under the copyright
laws of the United States and applicable international
conventions.
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SCHEDULE 3.18 (a)
Ten Largest Customers and Vendors
1. See the customers listed on Schedule 2.1(b) marked with an asterisk.
2. See the vendors listed on Schedule 3.11 marked with an asterisk.
54
SCHEDULE 3.18 (b)
Exclusive Contracts
Agreement with Massachusetts Council of Human Service Providers
requires said customer to have exclusive rights to resell Seller product to
human service organizations located within the State of Massachusetts through
November 2007.
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SCHEDULE 3.21
Real Property Leases
Lease dated April 1, 2005 between ContinuedLearning, LLC, as tenant and
Palais Royale as Landlord for office space located at 000 0xx Xxxxxx Xxxxx,
Xxxxx 000, Xx. Xxxxxxxxxx, XX 00000, for a term of three years.
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SCHEDULE 3.23
Tax Matters
Unpaid taxes are no more than $1,000. Seller shall discharge this liability.
57
SCHEDULE 5.3
Transferred Employees
A. Xxxxxx Xxxxxx
Xxxxxx Xxxxxxxxxxxx
Xxxxxxx Xxxxxxx
Xxxxxxx Xxxxxxx
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SCHEDULE 5.8
Liabilities to be Paid After Closing By Seller
Amount
------
1. Payroll taxes $15,000
2. Attorneys Fees $15,000
3. Monthly operating expenses through Less than $5,000
closing for the current month.
4. Accounts payable to Open Minds which
is subject to offset by account
receivable retained by Seller.
This obligation will not be paid by Seller
until collection or other resolution of
the account receivable due Seller.
