EXHIBIT 2.2
EXECUTION COPY
ASSET PURCHASE AGREEMENT
BY AND AMONG
RETURN ON INVESTMENT CORPORATION,
TECTONIC SOLUTIONS, INC.,
XXXXXXXXXX.XXX, INC.
AND
THE SHAREHOLDERS OF
XXXXXXXXXX.XXX, INC
OCTOBER 29, 2003
TABLE OF CONTENTS
-----------------
PAGE
----
SECTION 1. PURCHASE AND SALE................................................1
1.1 Agreement to Purchase and Sell........................................1
1.2 Included Assets.......................................................1
1.3 Excluded Assets.......................................................2
1.4 Assumption of Assumed Liabilities.....................................2
1.5 Excluded Liabilities..................................................3
1.6 Nonassignable Contracts...............................................4
SECTION 2. CLOSING MATTERS; PURCHASE PRICE..................................5
2.1 Closing...............................................................5
2.2 Purchase Price........................................................5
2.3 Tax Treatment.........................................................6
2.4 Receivables...........................................................6
2.5 Outstanding Payables..................................................6
2.6 Further Assurances....................................................6
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SHAREHOLDERS...6
3.1 Organization; Books and Records.......................................6
3.2 Authorization, Execution and Enforceability...........................7
3.3 Absence of Restrictions and Conflicts.................................7
3.4 Share Ownership; No Interest in Other Entities........................8
3.5 Ownership of Assets and Related Matters...............................8
3.6 Financial Statements..................................................9
3.7 Real Property; Other Assets...........................................9
3.8 Absence of Certain Changes...........................................10
3.9 Legal Proceedings....................................................10
3.10 Licenses, Permits and Compliance with Law............................10
3.11 Contracts and Commitments............................................10
3.12 Tax Returns; Taxes...................................................11
3.13 Insurance............................................................12
3.14 Intellectual Property................................................12
3.15 Transactions with Affiliates.........................................13
3.16 Customer and Supplier Relations......................................14
3.17 Brokers, Finders and Investment Bankers..............................14
3.18 Disclosure...........................................................14
3.19 Investment Representations...........................................14
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.................15
4.1 Organization and Standing............................................15
4.2 Authority, Execution and Enforceability..............................16
4.3 Absence of Restrictions and Conflicts................................16
4.4 Parent Shares........................................................16
4.5 Note.................................................................17
4.6 SEC Filings; Purchaser Financial Statements..........................17
4.7 Purchaser Capitalization.............................................17
4.8 Parent Capitalization................................................17
4.9 Litigation...........................................................17
4.10 No Material Adverse Change...........................................18
4.11 Brokers' and Finders' Fees...........................................18
4.12 Brokers' and Finders' Fees...........................................18
4.13 Disclosure...........................................................18
SECTION 5. COVENANTS OF THE COMPANY AND THE SHAREHOLDERS...................18
5.1 Conduct of Business of the Company...................................18
5.2 No Solicitation......................................................20
5.3 Distribution of Parent Shares and Notes..............................20
5.4 Use of Name..........................................................21
5.5 Public Announcements.................................................21
5.6 Access to Information, Confidentiality...............................21
5.7 Transactions in Parent Common Stock..................................21
SECTION 6. OTHER COVENANTS.................................................21
6.1 Employment Matters...................................................21
SECTION 7. CONDITIONS TO CLOSING...........................................23
7.1 Conditions to Each Party's Obligations to Consummate the
Acquisition..........................................................23
7.2 Conditions to the Company's and the Shareholders' Obligations to
Consummate the Acquisition...........................................23
7.3 Conditions to the Purchaser's and the Parent's Obligations to
Consummate the Acquisition...........................................25
SECTION 8. TERMINATION.....................................................26
8.1 Termination..........................................................26
8.2 Effect of Termination................................................27
8.3 Amendment............................................................27
8.4 Extension; Waiver....................................................27
8.5 Procedure for Termination, Amendment, Extension or Waiver............27
SECTION 9. INDEMNIFICATION.................................................27
9.1 Indemnification Obligations of the Shareholders......................27
9.2 Indemnification Obligations of the Parent and the Purchaser..........28
9.3 Indemnification Procedure............................................28
9.4 Claims Period........................................................30
9.5 Limitations..........................................................30
9.6 Payments by the Shareholders.........................................31
SECTION 10. MISCELLANEOUS.................................................31
10.1 Notices..............................................................31
10.2 Interpretation.......................................................32
10.3 Entire Agreement; Third-Party Beneficiaries..........................32
10.4 Governing Law........................................................33
10.5 Assignment...........................................................33
10.6 Severability.........................................................33
10.7 Counterparts.........................................................33
10.8 Costs and Expenses...................................................33
ii
SCHEDULES
---------
Schedule 1.2(a)............. Tangible Assets
Schedule 1.2(c)............. Intellectual Property
Schedule 1.3(a)............. Excluded Assets
Schedule 1.5(c)............. Excluded Contracts and Agreements
Schedule 2.3................ Allocation
Schedule 3.1................ List of Locations where Qualified as a Foreign
Corporation
Schedule 3.3................ Exceptions to Absence of Conflicts
Schedule 3.4(b)............. Company Owned Equity
Schedule 3.6................ Company Financial Statements
Schedule 3.7................ Real Property Leases
Schedule 3.8................ Absence of Certain Changes
Schedule 3.9................ Legal Proceedings
Schedule 3.10............... Licenses
Schedule 3.11............... Contracts and Commitments
Schedule 3.12............... Taxes
Schedule 3.13............... Insurance
Schedule 3.14(a)............ Owned Intellectual Property
Schedule 3.14(b)............ Licensed Intellectual Property
Schedule 3.14(c)............ Intellectual Property Disputes
Schedule 3.15............... Transactions with Affiliates
Schedule 3.16............... Customer and Supplier Relations
EXHIBITS
--------
Exhibit A.................. Form of Note
Exhibit B.................. Form of Investor Representation Letter
Exhibit C.................. Xxxx of Sale and Assignment and Assumption
Agreement
Exhibit D.................. Form of Non-Competition Agreement
Exhibit E.................. Legal Opinion of Xxxxxx Xxxxxxx Xxxxxxxx PC
Exhibit F.................. Form of Intellectual Property Assignment
iii
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (this "AGREEMENT"), dated as of October 29,
2003, by and among Tectonic Solutions, Inc., a Georgia corporation (the
"PURCHASER") and Return On Investment Corporation, a Delaware corporation and
the sole shareholder of the Purchaser (the "PARENT"), XxxxXxxxxx.xxx, Inc., an
Indiana corporation (the "COMPANY"), Xxxx Xxxxxxx, an individual resident of the
state of Georgia ("XXXXXXX") and Xxxx Xxxxx, an individual resident of the state
of Indiana ("WHITE" and together with Xxxxxxx, being hereinafter referred to,
individually, as a "SHAREHOLDER" and, collectively, as the "SHAREHOLDERS.")
W I T N E S S E T H:
--------------------
WHEREAS, the Company is engaged in the business of providing and
maintaining an Internet based online directory that contains commercial
construction product manufacturers and their local supply chain of product reps,
and distributors as well as profiling architects, engineers and contractors who
are currently working in the construction market (the "BUSINESS");
WHEREAS, the parties desire to enter into this Agreement pursuant to which
the Company proposes to sell to the Purchaser, and the Purchaser proposes to
purchase from the Company (the "ACQUISITION"), substantially all of the assets
used or held for use by the Company in the Business, and the Purchaser proposes
to assume certain of the liabilities and obligations of the Company relating to
the Business; and
WHEREAS, the parties desire to make certain representations, warranties and
agreements in connection with the Acquisition;
WHEREAS, the parties intend for the transaction contemplated by this
Agreement to constitute a tax-free reorganization under Section 368 of the
Internal Revenue Code.
NOW, THEREFORE, in consideration of the premises and the mutual promises
and agreements contained herein, the parties hereto, intending to be legally
bound, hereby agree as follows:
SECTION 1. PURCHASE AND SALE.
1.1 AGREEMENT TO PURCHASE AND SELL. Subject to the terms and conditions of
this Agreement, the Company hereby agrees to sell, convey, assign, transfer and
deliver to the Purchaser, and the Purchaser hereby agrees to purchase and
acquire from the Company, all right, title and interest of the Company in and to
all of the Assets (as hereinafter defined), free and clear of all Liens (as
hereinafter defined), other than the Permitted Liens (as hereinafter defined).
1.2 INCLUDED ASSETS. Except as otherwise expressly set forth in Section 1.3
hereof, the term "ASSETS" shall mean and shall include the following property
and assets of the Company:
(a) all the equipment, servers, computer hardware, machinery, office
equipment, furniture, fixtures and similar tangible property employed by the
Company in the conduct of the Business, and including, but not limited to those
items listed on SCHEDULE 1.2(A);
(b) all right, title and interest of the Company in the Contracts (as
hereinafter defined);
(c) all goodwill, patents, patent applications, copyrights, copyright
applications, domain names, methods, know-how, software, source code, technical
documentation, processes, procedures, inventions, trade secrets, trademarks,
trade names, service marks, service names, registered user names, technology,
research records, data, designs, plans, drawings, manufacturing know-how and
formulas, whether patentable or unpatentable, and other intellectual or
proprietary rights or property of the Company (and all rights thereto and
applications therefore), including the intellectual property listed on SCHEDULE
1.2(C);
(d) all customer lists used by the Company;
(e) the name "SpecSource," "XxxxXxxxxx.xxx," and all variations
thereof;
(f) all cash and accounts receivable of the Company;
(g) all claims, rights and causes of action of the Company against or
with respect to third parties related to the Business and all of Company's
rights, if any, to inventory and equipment loaned to the Company or which the
Company has on consignment; and
(h) all other assets of Company employed in the conduct of the
Business, whether real, personal, tangible, intangible or mixed and whether or
not reflected in the Company Financial Statements or in the books or records of
the Company, including all books, records and files (including, to the extent
permitted by law or if authorized by the effected employees, all personnel
files), rights under executory contracts and purchase and sale orders to be
assumed by Purchaser hereunder (including all written contracts, orders and
arrangements between Company and third parties existing at the Closing Date for
the supply of goods and services for use in the Business), any prepaid expenses
to the extent properly assignable to Purchaser and relating to periods
subsequent to the Closing Date, permits and licenses to the extent transferable
under law and all agreements for the lease of equipment, vehicles and office
furniture.
1.3 EXCLUDED ASSETS. Notwithstanding anything to the contrary set forth
herein, the term "Assets" shall not mean or include the following assets,
properties and rights of the Company (collectively, the "EXCLUDED ASSETS"):
(a) the assets listed on SCHEDULE 1.3(A); and
(b) the corporate charter, bylaws, foreign qualifications,
arrangements with registered agents, taxpayer identification numbers, minute
books, stock registers and related records of the Company.
1.4 ASSUMPTION OF ASSUMED LIABILITIES. Except as expressly provided in this
Section 1.4, the Purchaser shall not assume any claims, liabilities or
obligations of the Company. As the sole exception to the foregoing, the
Purchaser shall, and Parent shall cause Purchaser to, assume and timely
discharge or perform the following liabilities and obligations of the Company
(collectively, the "ASSUMED LIABILITIES"):
2
(a) the obligations and liabilities of the Company under each
Contract;
(b) except to the extent excluded in Section 1.5 below, all other
liabilities of the Company incurred in the ordinary course of business in
connection with the Business;
(c) all liabilities set forth on the September 30, 2003 balance sheet
of the Company and all liabilities set forth on the Company's payable ledger
dated October 29, 2003, in each case, to the extent not paid prior to Closing,
other than those listed on SCHEDULE 1.5(C);
(d) all liabilities and obligations of the Company for refunds of
payments received by the Company (at any time) for advertising or other
services;
(e) all liabilities and obligations arising on account of the
operation of the Business and/or the use of the Assets after the Closing;
(f) Liens on and/or against Assets for taxes not yet due and payable,
rights of lessors under leases, statutory Liens for mechanics, materialmen,
warehousemen, carriers and other Liens arising by operation of law for sums not
yet due and payable, rights of licensors and such other Liens as do not detract
from the value or materially interfere with the present use of the property
affected thereby (the "PERMITTED LIENS");
(g) all liabilities and obligations of the Company associated with
advertising contracts in effect on the Closing Date; and
(h) any and all bonus payments due or payable to employees of the
Company whether or not such bonuses are earned to date.
1.5 EXCLUDED LIABILITIES. Notwithstanding anything to the contrary set
forth herein, the Assumed Liabilities shall not include, and in no event shall
the Purchaser assume, agree to pay, discharge or perform or incur any liability
or obligation of the Company under this Agreement which is not expressly
included as an Assumed Liability in accordance with Section 1.4 hereof (all
obligations and liabilities of the Company, other than the Assumed Liabilities,
are hereinafter referred to as the "EXCLUDED Liabilities"). Except as set forth
in Section 1.4, the Excluded Liabilities shall include, but not be limited to,
the following:
(a) claims, obligations and liabilities of the Company (including
claims for compensatory or punitive damages), known or unknown, direct or
indirect, including all costs and expenses relating thereto, that arise out of
any Proceeding (as hereinafter defined) pending on the Closing Date or arising
out of matters or events occurring on or prior to the Closing Date;
(b) obligations and liabilities of the Company for (i) Taxes with
respect to any period, (ii) for unpaid Taxes of any Person (other than the
Company) under Treasury Regulations Section 1.1502-6 (or any similar provisions
of state, local or foreign law), as a transferee of or successor to the Company,
by contract or otherwise or (iii) obligations or liabilities of the Company for
federal, state, county, local, foreign or other income, sales, use or transfer
taxes or assessments (including interest and penalties thereon, if any) of any
kind whatsoever arising from, based upon or related to the sale, transfer or
delivery of the Assets pursuant to this Agreement;
3
(c) obligations and liabilities of the Company under the contracts and
agreements listed in SCHEDULE 1.5(C) attached hereto;
(d) any contingent liabilities of the Company of any kind arising or
existing on or prior to the Closing Date, including, but not limited to, claims,
proceedings or causes of action which are currently or hereafter become the
subject of claims, assertions, litigation or arbitration, including, but not
limited to those relating to penalties for late deliveries, quality defaults or
product liability procedures;
(e) sponsorship, debts, obligations or liabilities of the Company
under any pension, profit sharing, savings, retirement, health, medical, life,
disability, dental, deferred compensation, stock option, bonus, incentive,
severance pay, group insurance or other similar employee plans or arrangements,
or under any policies, handbooks, or custom or practice, collective bargaining
agreement, or any employment agreements, whether express or implied, applicable
to any of the Company's employees at any time;
(f) any liability or obligation of the Company arising out of any
wrongful or unlawful violation or infringement of any Intellectual Property of
any person or entity occurring on or prior to the Closing Date;
(g) any obligations or liabilities, if any, of the Company to any
Shareholders in respect of money loaned by the Shareholders to the Company; and
(h) any liabilities or obligations of the Company arising out of or
relating to the Excluded Assets.
1.6 NONASSIGNABLE CONTRACTS.
(a) To the extent that assignment hereunder by the Company to the
Purchaser of any Contract is not permitted or is not permitted without the
consent of a third party and, such consent has not been obtained as of the
Closing Date, this Agreement shall not be deemed to constitute an undertaking to
assign the same if such consent is not given or if such an undertaking otherwise
would constitute a breach of or cause a loss of benefits thereunder. The Company
shall use reasonable efforts at Purchaser's expense to obtain as expeditiously
as possible any and all such third-party consents.
(b) If and to the extent that the Company is unable to obtain any
required third party consent contemplated by Section 1.6(a), the Company shall
continue to be bound by any such Contract (the "NON-ASSIGNED CONTRACT"). In such
event, to the maximum extent permitted by law or the terms of the Non-Assigned
Contract, (i) the Company shall use commercially reasonable efforts to make the
benefit of such Non-Assigned Contract available to the Purchaser, and (ii) the
assignment provisions of this Agreement shall operate to the extent permitted by
law or the applicable Non-Assigned Contract to create a subcontract, sublease or
sublicense with the Purchaser to perform each relevant Non-Assigned Contract at
a price equal to the monies, rights and other consideration receivable or
payable by the Company with respect to the performance by or enjoyment of the
Purchaser under such subcontract, sublease or sublicense. To the extent such
benefit is made available, and/or such subcontract, sublease or sublicense is
created, (1) the Purchaser shall pay, perform and discharge fully and timely all
obligations of the Company
4
under any such Non-Assigned Contract from and after the Closing Date, (2) the
Company shall, without further consideration therefor, pay and remit to the
Purchaser promptly any monies, rights and other consideration received in
respect of such Non-Assigned Contract performance, and (3) the Company shall
exercise or exploit its rights and options under all such Non-Assigned Contracts
only as directed by the Purchaser and at the Purchaser's expense.
(c) If, after the Closing, any third party consent contemplated by
Section 1.6(b) shall be obtained or any such Non-Assigned Contract shall
otherwise be assignable, the Company shall promptly assign all of its rights and
obligations thereunder or in connection therewith to the Purchaser without
payment of further consideration therefor, and the Purchaser shall confirm its
assumption of such rights and obligations as of the date thereof.
SECTION 2. CLOSING MATTERS; PURCHASE PRICE.
2.1 CLOSING. The consummation of the transactions contemplated by this
Agreement (the "CLOSING") shall be held on the second business day following the
satisfaction (or waiver by the party so entitled) of all the conditions set
forth in Section 7, at the offices of Powell, Goldstein, Xxxxxx & Xxxxxx LLP,
000 Xxxxxxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxx, Xxxxxxx 00000 or at such other place
and time agreed to by the parties. The date and time at which the Closing
actually occurs is referred to herein as the "CLOSING DATE".
2.2 PURCHASE PRICE. On the terms and subject to the conditions set forth in
this Agreement, the purchase price (the "PURCHASE PRICE") for the Assets, in
addition to the Purchaser's assumption of the Assumed Liabilities, shall be:
(a) ONE MILLION FOUR HUNDRED FIFTY THOUSAND (1,450,000) shares of
Parent common stock, par value $0.01 per share, as adjusted pursuant to Section
2.2(c) below and subject to any stock splits, stock dividends or other
recapitalization transactions which affect the issued and outstanding shares of
Parent common stock on a pro rata basis prior to the Closing (the "PARENT
SHARES");
(b) FIVE HUNDRED THIRTY THREE THOUSAND FIVE HUNDRED DOLLARS
($533,500), as adjusted pursuant to Section 2.2(c) below, represented by a
promissory note payable by the Parent in the form attached hereto as EXHIBIT A,
and subject to the terms and conditions contained therein (the "NOTE", or as
subsequently subdivided, the "NOTES," and together with the Parent Shares, the
"PARENT SECURITIES");
(c) ADJUSTMENTS. For purposes of valuing the Parent Shares issued in
the Acquisition, each share shall be valued at the average trading price of the
Parent's common stock as reported on the Over-the-Counter Bulletin Board or any
subsequent market (the "OTCBB") for the sixty trading days ending on the trading
day before the date hereof. In the event that the closing price on the OTCBB on
the day before Closing is less than $1.57, the number of Parent Shares shall be
increased (based solely for purposes of this adjustment on the closing price on
the day before Closing) and the principal value of the Note shall be reduced by
an amount equal to the value of the increase in the number of Parent Shares by
such amounts as are needed to satisfy the requirements of a "C" reorganization
under Section 368 of the Code. Notwithstanding the
5
foregoing, in the event that adjustments would cause the Purchaser to be
obligated to issue in excess of 2,000,000 shares of its common stock, the Parent
Shares issued shall be 2,000,000 and the principal value of the Note shall be
decreased consistent with the foregoing sentence.
2.3 TAX TREATMENT. The Purchaser and the Company shall (i) timely file all
forms and Tax Returns (as hereinafter defined) required to be filed in
connection with the Acquisition and, if possible, take no position, and cause
its affiliates to take no position, inconsistent with the treatment of the
Acquisition as a tax-free reorganization on any applicable Tax Return or in any
audit or proceeding before any Tax Authority (as hereinafter defined).
2.4 RECEIVABLES. After the Closing Date, the Company will deliver to the
Purchaser any cash or other property it may receive with respect to receivables
originated by the Company prior to the Closing Date
2.5 OUTSTANDING PAYABLES. The Purchaser shall pay and discharge, as and
when due in the ordinary course of business consistent with past practice, any
outstanding balances relating to the Assets as of the Closing Date and all the
other Assumed Liabilities.
2.6 FURTHER ASSURANCES. Each party hereto shall on the date hereof and from
time to time thereafter at any other party's reasonable request and without
further consideration execute and deliver to such other party such instruments,
certificates and documents required to effect the Acquisition in addition to
those delivered pursuant to this Section 2 as shall be reasonably requested to
consummate more effectively the transactions contemplated by this Agreement.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SHAREHOLDERS.
The Company and Shareholders, jointly and severally, represent and warrant
to the Parent and the Purchaser that the statements contained in this Section 3
are true, correct and complete as of the date hereof, and will be true, correct
and complete as of the Closing Date (unless specifically made as of another
date), except as specified to the contrary in the corresponding paragraph of the
Disclosure Schedule prepared by the Company accompanying this Agreement (the
"COMPANY DISCLOSURE SCHEDULE") which is made a part hereof. The Company
Disclosure Schedule will be arranged in paragraphs corresponding to the lettered
and numbered paragraphs contained in this Section 3.
3.1 ORGANIZATION; BOOKS AND RECORDS.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Indiana and has all requisite
corporate power and authority to carry on the Business as now being conducted,
and to enter into and perform its obligations under this Agreement and the
Company Ancillary Documents. The Company is duly qualified to transact business
and is in good standing as a foreign corporation in each jurisdiction where the
character of the Business or the ownership, leasing or holding of the Assets
requires such qualification, except where the failure to be so qualified or in
good standing could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect (as hereinafter defined) on the Company.
SCHEDULE 3.1 contains a correct and complete list, as of the date hereof, of the
jurisdictions in which the Company is qualified to do business as a foreign
corporation. A "MATERIAL ADVERSE EFFECT" means, with respect to any party, any
result,
6
occurrence, change, event, effect or circumstance that individually or in the
aggregate with any such other result, occurrence, change, effect, event or
circumstance is or is reasonably likely to be materially adverse to the assets,
liabilities, financial condition, results of operations, business, or prospects
of such party, taken as a whole, or materially adverse to the ability of such
party to perform its respective obligations under this Agreement and consummate
the transactions contemplated hereby. In no event shall any of the following
constitute a Material Adverse Effect: (i) a change in the trading prices of the
Purchaser's equity securities between the date of this Agreement and the Closing
Date, in and of itself; (ii) effects, changes, events, circumstances or
conditions generally affecting the business application integration industry in
which the Purchaser and the Company operate or arising from changes in general
business or economic conditions, and not specifically relating to the Purchaser
or Company, as the case may be; (iii) effects, changes, events, circumstances or
conditions directly attributable to (A) out-of-pocket fees and expenses
(including, without limitation, legal, accounting, investigatory, investment
banking, and other fees and expenses) incurred in connection with the
transactions contemplated by the Agreement or (B) the payment by the Purchaser
or Company of all amounts due to any officers or employees of Company under
employment contracts, non-competition agreements, employee benefit plans or
severance arrangements as specified in the Disclosure Schedule; (iv) any
effects, changes, events, circumstances or conditions resulting from any change
in law or GAAP, which affect generally entities such as the Purchaser and
Company; and (v) any effects, changes, events, circumstances or conditions
resulting from compliance by the Purchaser or Company with the express terms of
this Agreement or action taken with the prior informed written consent of the
other party.
(b) The Company has provided to the Purchaser a true and complete copy
of its articles of incorporation and its by-laws, each as amended to date. The
minute books of the Company are true and complete.
3.2 AUTHORIZATION, EXECUTION AND ENFORCEABILITY. The Company's execution,
delivery and performance of this Agreement and the Company Ancillary Documents
and its consummation of the transactions contemplated by this Agreement and the
Company Ancillary Documents have been duly authorized by all necessary corporate
action on the part of the Company. This Agreement and each other certificate,
agreement, document or instrument to be executed and delivered by the Company or
any Shareholder at the Closing (the "COMPANY ANCILLARY DOCUMENTS") have been, or
will be, duly executed and delivered by the Company and/or Shareholders (as the
case may be), and constitutes, or will constitute, the valid and legally binding
agreements of the Company and/or Shareholders (as the case may be), enforceable
against the Company and/or Shareholders (as the case may be) in accordance with
their respective terms, except to the extent enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other
similar laws of general applicability relating to or affecting the enforcement
of creditors' rights and by the effect of general principles of equity
(regardless of whether enforceability is considered in a proceeding in equity or
at law).
3.3 ABSENCE OF RESTRICTIONS AND CONFLICTS. Except as disclosed in SCHEDULE
3.3, the Company's execution, delivery and performance of this Agreement and the
Company Ancillary Documents, its consummation of the transactions contemplated
by this Agreement and the Company Ancillary Documents and its fulfillment of and
compliance with the terms and conditions of this Agreement and the Company
Ancillary Documents do not and will not (as the
7
case may be), (a) conflict with or result in any breach of any term or provision
of the charter documents or by-laws of the Company, (b) with or without the
passing of time or the giving of notice or both, violate or conflict with,
constitute a breach of or default (or give rise to any right of termination,
amendment or cancellation) under, result in the loss of any benefit under or
permit the acceleration of any obligation under, any Contract or result in the
creation of any Lien on any of the Assets pursuant to, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease, license,
contract, agreement or other obligation to which the Company is a party or by
which any of its properties or assets may be bound, which breach, default or
result would have a Material Adverse Effect on the Company, (c) violate any
judgment, decree or order of any Governmental Authority (as hereinafter defined)
to which the Company is a party or by which the Company or any of its properties
is bound, or (d) violate any statute, law, rule or regulation applicable to the
Company which violation would have a Material Adverse Effect on the Company. No
consent, approval, order or authorization of, or registration, declaration or
filing with, any court, arbitrator, governmental agency or public or regulatory
unit, agency, body or authority (a "GOVERNMENTAL AUTHORITY") with respect to the
Company or any Shareholder is required in connection with the execution,
delivery or performance of this Agreement or the Company Ancillary Documents by
the Company or any Shareholder or the consummation of the transactions
contemplated by this Agreement or Company Ancillary Documents by the Company or
any Shareholder, except for any such failure as would not have a Material
Adverse Effect on the Company.
3.4 SHARE OWNERSHIP; NO INTEREST IN OTHER ENTITIES.
(a) Shareholders own 100% of the outstanding capital stock of the
Company.
(b) Except as disclosed on SCHEDULE 3.4(B), the Company does not own,
any direct or indirect equity interest (by stock ownership, partnership
interest, limited liability company interest, joint venture interest or
otherwise) in any other corporation, partnership, limited liability company,
joint venture, firm, association or business enterprise.
3.5 OWNERSHIP OF ASSETS AND RELATED MATTERS.
(a) NO THIRD PARTY OPTIONS. There are no existing agreements, options,
commitments or rights with, of or to any person (other than the Purchaser
pursuant to this Agreement) to acquire any assets, properties or rights included
in the Assets or any interest therein.
(b) OWNERSHIP; SUFFICIENCY OF ASSETS. The Company has, and will
transfer, assign or sublicense to the Purchaser pursuant to this Agreement, good
and valid, legal and beneficial title to the Assets, free and clear of all
mortgages, liens, pledges, security interests, charges, easements, leases,
subleases, licenses and other occupancy arrangements, covenants, rights of way,
options, claims, restrictions, or encumbrances of any kind (collectively,
"LIENS") other than the Assumed Liabilities. The Assets constitute all the
assets and properties necessary to permit the Purchaser to conduct the Business
immediately after the date hereof in the same manner as the Company has
conducted the Business immediately prior to the date hereof.
8
(c) CONDITION OF CERTAIN ASSETS. The equipment and other tangible
property included in the Assets are in good operating condition and good state
of repair, subject to ordinary wear and tear.
3.6 FINANCIAL STATEMENTS. The Company has delivered to the Purchaser the
following:
(a) the unaudited balance sheets of the Company at December 31, 2001,
and December 31, 2000, and the unaudited statements of income, retained earnings
and cash flows of the Company for the periods then ended;
(b) the unaudited balance sheets of the Company at December 31, 2002,
and the unaudited statements of income for the periods then ended (together with
(a), the "FINANCIAL STATEMENTS"); and
(c) the unaudited balance sheet of the Company at September 30, 2003,
and the unaudited statement of income of the Company for the period then ended
(collectively, the "INTERIM FINANCIAL STATEMENTS").
The Financial Statements and the Interim Financial Statements are
hereinafter referred to, collectively, as the "COMPANY FINANCIAL Statements."
The Company Financial Statements are attached hereto as SCHEDULE 3.6. The
Financial Statements have been prepared from, and are in accordance with, the
books and records of the Company. Such books and records have been maintained on
a basis consistent with the past practice of the Company. Since September 30,
2003, there has been no change in any of the accounting (and tax accounting)
policies, practices or procedures of the Company.
3.7 REAL PROPERTY; OTHER ASSETS.
(a) The Company does not own, and has never owned, any real property.
(b) The Company has good and marketable title to or a valid leasehold
interest in each tangible asset reflected in the latest balance sheet of the
Company (other than any such other asset disposed of or consumed in the ordinary
course of business) free and clear of all Liens except Permitted Liens.
(c) SCHEDULE 3.7 sets forth a true and complete list, and the Company
has heretofore delivered to the Purchaser or its representatives true, correct
and complete copies of all leases, subleases and other agreements (the "REAL
PROPERTY LEASES") under which the Company uses or occupies or has the right to
use or occupy, now or in the future, real property or facilities (the "LEASED
REAL PROPERTY"), including all modifications, amendments and supplements
thereto. Except where the failure could not reasonably be expected to have,
individually, a Material Adverse Effect on the Company or except as set forth on
SCHEDULE 3.7: (A) the Company has a valid and subsisting leasehold interest in
each parcel of Leased Real Property free and clear of all Liens and each Real
Property Lease is in full force and effect in all material respects; (B) all
rent and other sums and charges payable by the Company as tenant thereunder are
current in all respects; (C) no termination event or condition or uncured
default on the part of the Company or, to the Company's knowledge, the landlord,
exists under any Real Property Lease; (D) to the Company's knowledge, the
Company is the sole undisputed lessee of
9
each Leased Real Property, is in actual possession thereof and is entitled to
quiet enjoyment thereof in accordance with the terms of the applicable Real
Property Lease; and (E) no consent or approval from the lessor under the Real
Property Leases is required for the consummation by the Company of the
transactions contemplated hereby.
(d) To the Company's knowledge, the Company's current use of the
Leased Real Property and the improvements and buildings located thereon in
connection with the operation of the Business is in compliance in all material
respects and substantially conforms with all applicable zoning and building
regulation requirements.
3.8 ABSENCE OF CERTAIN CHANGES. Except as set forth on SCHEDULE 3.8, since
September 30, 2003, the Company has in all material respects (a) extended credit
to customers, collected accounts receivable and paid accounts payable and
similar obligations of the Business, (b) conducted the Business in the ordinary
course on a basis consistent with past practice, and (c) used its commercially
reasonable efforts to preserve the business, customers and suppliers of the
Business.
3.9 LEGAL PROCEEDINGS. Except as set forth in SCHEDULE 3.9, there are no
suits, actions, claims, proceedings or investigations ("PROCEEDINGS") pending
or, to the knowledge of the Company, threatened against, relating to or
involving the Business, the Company or any of the Company's officers or
directors (acting in their capacity as such) before any Governmental Authority
nor, to the knowledge of the Company, is there any valid basis for any such
Proceeding, nor is there any judgment, decree, injunction, citation, or material
order of any Governmental Authority outstanding against the Company.
3.10 LICENSES, PERMITS AND COMPLIANCE WITH LAW. SCHEDULE 3.10 is a true and
complete list of all material licenses, permits, franchises, certificates,
approvals, exemptions, classifications, registrations and other similar
documents and authorizations, and applications therefor (collectively, the
"LICENSES") held by the Company and issued by, or submitted by the Company to,
any Governmental Authority. The Company owns or possesses all of the Licenses
which are necessary to enable it to carry on the Business as presently
conducted. All Licenses are valid, binding, and in full force and effect. The
execution, delivery, and performance of this Agreement and the consummation of
the transactions contemplated hereby will not adversely affect any License. The
Company has taken all necessary action to maintain each License. No notice has
been received by the Company that any License is being revoked or cancelled
(other than expiration upon the end of any term). The Company is (and has been
at all times during the past two (2) years) in material compliance with all
applicable laws (including, without limitation, applicable laws relating to
safety and health of employees), ordinances, regulations and orders of all
Governmental Authorities.
3.11 CONTRACTS AND COMMITMENTS. To the Company's knowledge, except as set
forth on SCHEDULE 3.11, there are no Contracts (other than any Contract that
relates solely to an Excluded Asset and any Contract for the sale of assets or
services in the ordinary course of business), including, without limitation: (A)
contracts with any current officer, director or employee of the Company; (B)
contracts pursuant to which the Company licenses other persons to use any of the
Owned Intellectual Property or has agreed to support, maintain, upgrade,
enhance, modify, port, or consult with respect to any of the Owned Intellectual
Property, or
10
pursuant to which other persons license the Company to use the Owned
Intellectual Property; (C) contracts (1) for the sale of any of the assets of
the Company, (2) for the grant to any person of any preferential rights to
purchase any of its assets or (3) for the sale or transfer of any equity of the
Company; (D) contracts by which the Company has agreed to design, develop,
author or create any new custom, or customized software for any third party; (E)
contracts which restrict the Company from competing in any line of business or
with any person in any geographical area or which restrict any other person from
competing with the Company in any line of business or in any geographical area;
(F) contracts which restrict the Company from disclosing any information
concerning or obtained from any other person or which restrict any other person
from disclosing any information concerning or obtained from the Company; (G)
indentures, credit agreements, security agreements, mortgages, guarantees,
promissory notes and other contracts relating to the borrowing of money or
Indebtedness; and (H) all other agreements, contracts or instruments entered
into outside of the ordinary course of business or which are material to the
Company. Except as set forth on SCHEDULE 3.11, all of the Contracts are in full
force and effect as to the Company and are the legal, valid and binding
obligation of the Company, enforceable against it in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally
and subject, as to enforceability, to general principles of equity (regardless
of whether enforcement is sought in a proceeding at law or in equity). The
Company is not in breach or default (with or without notice or lapse of time, or
both) in any material respect under any Contract nor, to the knowledge of the
Company, is any other party to any Contract in breach or default (with or
without notice or lapse of time, or both) thereunder in any material respect.
For purposes of this Agreement, "CONTRACTS" means any agreement, written or
oral, to which the Company is bound relating to the Business.
3.12 TAX RETURNS; TAXES. Except as set forth on SCHEDULE 3.12:
(a) The Company has filed all Tax Returns that it was required to file
and all such Tax Returns were correct and complete in all material respects. All
Taxes owed by the Company which are due and payable as of the date hereof have
been paid.
(b) There has been no issue raised or adjustment proposed (and none is
pending) by any Tax Authority with respect to Taxes attributable to the Assets
or the Company. There are no encumbrances for Taxes upon any of the Assets
except for liens for Taxes not yet due. There is no pending Tax audit or
examination, nor any action, suit, investigation, claim or deficiency asserted
with respect to the Assets or the Company.
(c) All amounts required to be withheld or collected for Taxes for
payments made to employees, independent contractors, creditors, stockholders or
other third parties or others of the Company have been withheld or collected and
have been or will be remitted to the appropriate Tax Authority when due.
(d) None of the Assets is "tax-exempt use property" within the meaning
of Section 168(h) of the Code or tax-exempt bond financed property within the
meaning of Section 168(g)(5) of the Code.
11
(e) For purposes of this Agreement, (i) the term "TAX" or "TAXES"
includes all taxes, charges, fees, levies or other assessments imposed by any
Federal, state, local or foreign Tax Authority, including, without limitation,
all income, gross receipts, gains, profits, windfall profits, gift, severance,
ad valorem, social security, unemployment, disability, premium, recapture,
credit, excise, property, sales, use, occupation, service, service use, leasing,
leasing use, value added, transfer, payroll, employment, withholdings,
estimated, license, stamp, franchise or similar taxes (including any interest
imposed thereon or penalties, additions or fines attributable thereto or
attributable to any failure to comply with any requirement regarding Tax Returns
and any interest in respect of such penalties, additions or fines); (ii) "TAX
RETURN" shall mean any report, return, documents, declaration or other
information or filing required to be supplied to any Tax Authority or
jurisdiction with respect to Taxes including, without limitation, any supporting
schedules or attachments and any amendments thereto; and (iii) "TAX AUTHORITY"
shall mean any Governmental Authority responsible for the assessment,
determination, collection or imposition of any Tax (including the IRS).
3.13 INSURANCE. SCHEDULE 3.13 sets forth a correct and complete list of
current insurance policies and coverages carried by or for the benefit of the
Company. All such policies are in full force and effect and all premiums due and
payable in respect thereof have been paid. Since the respective dates of such
policies, no notice of cancellation or non-renewal with respect to any such
policy has been received by the Company. SCHEDULE 3.13 sets forth a list of all
pending claims with respect to all such policies.
3.14 INTELLECTUAL PROPERTY.
(a) OWNED INTELLECTUAL PROPERTY. SCHEDULE 3.14(A) lists all patents,
patent applications, material computer software, material source code,
tradenames, trademarks, service marks, trade dress, design marks, or slogans,
including any federal and state registration, as well as any common law marks,
domain names, proprietary customer lists, logos, or registered copyrights that
are owned by the Company and used in the operation of the Business (such listed
property together with all items of intellectual property owned by the Company
are referred to herein as the "OWNED INTELLECTUAL PROPERTY"). Except as
disclosed on SCHEDULE 3.14(A), (i) the Company possesses all right, title, and
interest in and to all Owned Intellectual Property, free and clear of any Lien
and has taken commercially reasonable steps to maintain all such right, title,
and interest, (ii) the ownership and uses, as the case may be, by the Company of
any Owned Intellectual Property does not infringe any rights of any third party,
(iii) such Owned Intellectual Property is not subject to any outstanding
injunction, judgment, order, decree, or ruling, (iv) no claim or action is
pending or, to the knowledge of the Company, threatened which challenges the
legality, validity, enforceability, use or ownership of such Owned Intellectual
Property, (v) there is no license or other contractual obligation under which
the Company is a licensor with respect to any such Owned Intellectual Property,
(vi) to the knowledge of the Company, no activity of any third party infringes
upon or misappropriates the rights of the Company with respect to any such Owned
Intellectual Property, (vii) to the knowledge of the Company, all authorized
third-party uses are being exercised within the limitations set forth in the
respective agreements, (viii) the Company has not, in connection with any
indebtedness incurred by the Company, granted to any third party any intent to
use trademark applications, and (ix) to the extent that any Owned Intellectual
Property has been developed or created by a third party for the Company, the
Company has a written agreement with such third party with respect thereto and
the Company
12
thereby has obtained ownership of and is the exclusive owner of such Owned
Intellectual Property.
(b) LICENSED INTELLECTUAL PROPERTY. SCHEDULE 3.14(B) lists all
intellectual property used by the Business but not owned by the Company and
lists each material license or other contractual obligation under which any such
intellectual property is used by the Company (collectively, the "INTELLECTUAL
PROPERTY LICENSES"). Additionally, except as set forth on SCHEDULE 3.14(B) (i)
to the knowledge of the Company, the use by the Company of the intellectual
property underlying the Intellectual Property Licenses does not infringe any
rights of any third party, (ii) each Intellectual Property License is valid and
enforceable in accordance with its respective terms with respect to the Company
and each other party thereto and in full force and effect, (iii) the Company or,
to the knowledge of the Company, any other party to an Intellectual Property
License, is not in breach or default thereof, (iv) to the knowledge of the
Company, the intellectual property underlying each Intellectual Property License
is not subject to any outstanding injunction, judgment, order, decree, or
ruling, (v) to the knowledge of the Company, no activity of any third party
infringes upon the rights of the Company with respect to any of the Intellectual
Property Licenses, nor infringes upon the rights of the licensors of the
respective Intellectual Property Licenses, (vi) the Company has paid all license
fees and the like payable with respect to the Intellectual Property Licenses to
the extent such payment was due, and (vii) the Company has a sufficient number
of seat licenses to cover the Company's current use of all intellectual property
not owned by the Company.
(c) INTELLECTUAL PROPERTY DISPUTES. Except as set forth on SCHEDULE
3.14(c), there is no domestic or foreign lawsuit pending, and there is no
demand, proceeding, claim, assertion, or dispute made or, to the knowledge of
the Company, threatened by any third party which could have the effect of
diminishing any right, interest, or title of the Company to the Owned
Intellectual Property. With respect to the items disclosed on SCHEDULED 3.14(C),
the Company has taken, is taking, and will take reasonable actions necessary to
protect its right, title, and interest to all Owned Intellectual Property.
3.15 TRANSACTIONS WITH AFFILIATES. Except as set forth on SCHEDULE 3.15 or
as expressly contemplated by this Agreement, no officer or director of the
Company, or any person with whom any such officer or director has any direct
relation by blood, marriage, or adoption, or any entity in which any such person
owns any beneficial interest (other than a publicly held corporation whose stock
is traded on a national securities exchange or in the over-the-counter market
and less than five percent (5%) of the stock of which is beneficially owned by
all such Persons in the aggregate) or any Affiliate of any of the foregoing, or
any current or former Affiliate of the Company has any interest in any contract,
arrangement, or understanding with, or relating to, the Business, the Assets or
the Assumed Liabilities. For purposes of this Agreement, "AFFILIATE" of any
specified Person means any other person directly or indirectly Controlling or
Controlled by or under direct or indirect common Control with such specified
Person. For purposes of this definition, "CONTROL," when used with respect to
any specified Person, means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "CONTROLLING" and
"CONTROLLED" have meanings correlative to the foregoing. In addition, for
purposes of this definition, "PERSON" means any individual, corporation,
partnership, joint venture, trust, unincorporated organization or Governmental
Authority.
13
3.16 CUSTOMER AND SUPPLIER RELATIONS. SCHEDULE 3.16 contains a complete and
accurate list, as of the date hereof, of the names and addresses of the current
customers ("CUSTOMERS") and the trade vendors of the Business ("SUPPLIERS").
Except as set forth in SCHEDULE 3.16, no Customer (or former customer) which
provided more than $1,000 in advertising revenues during the last twelve months
has canceled, terminated or made any threat to the Company to cancel or
otherwise terminate its contract or to decrease its usage of the Company's
services or products. The Company has not received any notice or has no
knowledge to the effect that any current Customer or Supplier may terminate or
materially alter its business relations with the Company, either as a result of
the transactions contemplated by this Agreement or otherwise.
3.17 BROKERS, FINDERS AND INVESTMENT BANKERS. The Company has not employed
any broker, finder, investment banker or other intermediary or incurred any
liability for any investment banking fees, financial advisory fees, brokerage
fees, finders' fees or other similar fees in connection with the transactions
contemplated herein.
3.18 DISCLOSURE. No representation, warranty or covenant made by the
Company or Shareholders in this Agreement (including the schedules hereto)
contains an untrue statement of a material fact or omits to state a material
fact required to be stated herein or necessary to make the statements contained
herein not misleading.
3.19 INVESTMENT REPRESENTATIONS.
(a) The Company is acquiring the Parent Securities for its own
account, and not for any other Person, for investment only and with no intention
of distributing or reselling (and the Company will not distribute or resell)
such Parent Securities or any part thereof or interest therein in any
transaction that would violate the registration requirements of the securities
laws of the United States, or any state or non-U.S. jurisdiction, without
prejudice, however, to the rights of the Company at all times to sell or
otherwise dispose of all or any part of its Parent Securities under an effective
registration statement or applicable exemption from registration under the
Securities Act and any applicable state securities law (including, without
limitation, as contemplated by the Liquidation (as defined below)). The Company
has no contract, undertaking, agreement or arrangement with any Person to sell,
transfer or pledge to such Person its Parent Securities, any interest therein,
or any part thereof, and the Company has no present plans to enter into any such
contract, undertaking, agreement or arrangement, except as contemplated by the
Liquidation.
(b) The Company is either (i) an accredited investor as that term is
defined in Rule 501 under the Securities Act, or (ii) has, either alone or with
its purchaser representative or representatives as that term is defined in Rule
501 under the Securities Act, such knowledge and experience in financial and
business matters that the Company is capable of evaluating the merits and risks
of an investment in Parent Securities.
(c) The Company understands that the Parent Securities have not yet
been registered under the Securities Act. The Company is fully aware of the
restrictions on sale, transferability and assignment of Parent Securities as set
forth in the certificates representing the Parent Securities referred to in
Section 3.19(d) below, and that the Company must bear the
14
economic risk of the Company's investment for an indefinite period of time. The
Company understands and agrees that Parent may refuse to permit the sale,
transfer or assignment of any Parent Securities, other than the transfer upon
the Liquidation under Section 5.3, unless it receives an opinion of counsel or
other evidence satisfactory to it that such sale, transfer or assignment is made
in compliance with the registration requirements of the Securities Act and any
applicable state securities laws. The Company has no need for any liquidity in
its investment for an indefinite period of time, and is able to bear the
economic risk of losing its entire investment.
(d) The Company agrees that, so long as required by law, certificates
evidencing the Parent Securities and any securities issued in exchange for or in
respect thereof shall bear a legend to the following effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH STATE
SECURITIES LAWS."
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser and the Parent, jointly and severally, represent and warrant
to the Company and Shareholders that the statements contained in this Section 4
are true, correct and complete as of the date hereof, and will be true, correct
and complete as of the Closing Date (unless specifically made as of another
date), except as specified to the contrary in the corresponding paragraph of the
Disclosure Schedule prepared by the Purchaser accompanying this Agreement (the
"PURCHASER DISCLOSURE SCHEDULE") which is made a part hereof. The Purchaser
Disclosure Schedule will be arranged in paragraphs corresponding to the lettered
and numbered paragraphs contained in this Section 4.
4.1 ORGANIZATION AND STANDING. The Purchaser and the Parent are
corporations duly organized, validly existing and in good standing under the
laws of their state of incorporation and each has the requisite corporate power
and authority to carry on its business as now being conducted and to enter into
and perform their obligations under this Agreement and the Purchaser Ancillary
Documents. The Purchaser is duly qualified or licensed to do business and is in
good standing as a foreign corporation in each jurisdiction in which the nature
of its business or the ownership, leasing or holding of its properties makes
such qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Purchaser.
15
4.2 AUTHORITY, EXECUTION AND ENFORCEABILITY. The Purchaser's and Parent's
execution, delivery and performance of this Agreement and the Purchaser
Ancillary Documents and their consummation of the transactions contemplated by
this Agreement and the Purchaser Ancillary Documents have been duly authorized
by all necessary corporate action on the part of the Purchaser and the Parent.
This Agreement and each other certificate, agreement, document or instrument to
be executed and delivered by the Purchaser or the Parent at the Closing (the
"PURCHASER ANCILLARY DOCUMENTS") have been, or will be, duly executed and
delivered by the Purchaser and/or the Parent (as the case may be), and
constitutes, or will constitute, the valid and legally binding agreements of the
Purchaser and/or Parent (as the case may be), enforceable against the Purchaser
and/or the Parent (as the case may be) in accordance with their respective
terms, except to the extent enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other similar
laws of general applicability relating to or affecting the enforcement of
creditors' rights and by the effect of general principles of equity (regardless
of whether enforceability is considered in a proceeding in equity or at law).
4.3 ABSENCE OF RESTRICTIONS AND CONFLICTS. The execution, delivery and
performance of this Agreement and the Purchaser Ancillary Documents, the
consummation of the transactions contemplated by this Agreement and the
Purchaser Ancillary Documents and the fulfillment of and compliance with the
terms and conditions of this Agreement and the Purchaser Ancillary Documents do
not and will not (as the case may be), (a) conflict with or result in any breach
of any term or provision of the charter documents or by-laws of the Purchaser or
the Parent, (b) with or without the passing of time or the giving of notice or
both, violate or conflict with, constitute a breach of or default (or give rise
to any right of termination, amendment or cancellation) under, result in the
loss of any benefit under or permit the acceleration of any obligation under,
any material contract or result in the creation of any Lien on any of its assets
pursuant to, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, license, contract, agreement or other obligation to
which the Purchaser or the Parent is a party or by which any of their properties
or assets may be bound, which breach, default or result would have a Material
Adverse Effect on the Purchaser or the Parent, (c) violate any judgment, decree
or order of any Governmental Authority (as hereinafter defined) to which the
Purchaser or the Parent is a party or by which the Purchaser, the Parent or any
of their properties is bound, or (d) violate any statute, law, rule or
regulation applicable to the Purchaser or to Parent which violation would have a
Material Adverse Effect on the Purchaser or the Parent. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
Governmental Authority with respect to the Purchaser or the Parent is required
in connection with the execution, delivery or performance of this Agreement or
the Purchaser Ancillary Documents by the Purchaser or the Parent or the
consummation of the transactions contemplated by this Agreement or Purchaser
Ancillary Documents by the Purchaser or the Parent, except for any such failure
as would not have a Material Adverse Effect on the Purchaser or the Parent.
4.4 PARENT SHARES. The Parent Shares to be issued in payment of the
Purchase Price will, when issued and delivered in accordance with this
Agreement, be duly authorized, validly issued, fully paid, non-assessable and
not subject to any pre-emptive rights; provided, however, the Parent Shares to
be issued hereunder may be subject to restrictions on transfer under applicable
federal and state securities laws.
16
4.5 NOTES. The Note and Other Note, when issued in partial payment of the
Purchase Price and/or in consideration of the Non-Competition Agreement, will
each represent a valid debt obligation of the Parent.
4.6 SEC FILINGS; PURCHASER FINANCIAL STATEMENTS.
(a) Parent has filed all required forms, reports, registration
statements and documents with the SEC since January 1, 2000. All such required
forms, reports and documents (including those that the Parent may file
subsequent to the date hereof until the Closing) are referred to herein as the
"PARENT SEC REPORTS"; provided, that any Parent SEC Report shall be deemed to
include all amendments to such report through the date hereof. As of their
respective filing dates (or if amended or superseded by a filing prior to the
date of this Agreement, then on the date of such filing), the Parent SEC Reports
(A) complied in all material respects with the requirements of the Securities
Act, or the Securities Exchange Act of 1934, as amended, as the case may be, and
the rules and regulations of the SEC thereunder applicable to such Parent SEC
Reports and (B) did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
(b) The consolidated financial statements of the Parent (including, in
each case, the notes thereto), included in the Parent SEC Reports (the "PARENT
FINANCIAL STATEMENTS"), including each Parent SEC Report filed after the date
hereof until the Closing, (A) complied as to form in all material respects with
the applicable rules and regulations of the SEC with respect thereto; (B) was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods indicated (other than the provision of notes to the financial statements
for quarterly periods); and (C) fairly presented the consolidated financial
position of the Parent and its subsidiaries at the respective dates thereof and
the consolidated results of Parent's operations and cash flows for the periods
indicated (subject, in the case of unaudited financial statements, to audit
adjustments). There has been no change in the Parent's accounting policies
except as described in the notes to the Parent Financial Statements.
4.7 PURCHASER CAPITALIZATION. The authorized capital stock of the Purchaser
as of the date of this Agreement consists of 1,000 shares of Common Stock, $0.01
par value per share, of which 1,000 shares are issued and outstanding and held
by Parent.
4.8 PARENT CAPITALIZATION. The authorized capital stock of the Parent as of
the date of this Agreement consists of 25,000,000 shares of Common Stock, $0.01
par value per share, of which 11,323,494 shares are issued and outstanding
(subject to the changes prior to the Closing Date contemplated by the Purchaser
Disclosure Schedule) and 500,000 shares of preferred stock, none of which are
issued and outstanding.
4.9 LITIGATION. Except as disclosed in the Parent SEC Reports, there are no
Proceedings pending or, to the Parent's or the Purchaser's knowledge, threatened
against the Purchaser, relating to or involving the Parent, either of their
officers or directors (acting in their capacity as such) before any Governmental
Authority nor, to the knowledge of the Purchaser or the Parent, is there any
valid basis for any such Proceeding, nor is there any judgment, decree,
17
injunction, citation, or material order of any Governmental Authority
outstanding against the Purchaser or the Parent.
4.10 NO MATERIAL ADVERSE CHANGE. Since the date of the balance sheet
included in the Parent's most recently filed Parent SEC Report, there has not
occurred any material adverse change in the financial condition, liabilities,
assets, business or results of operations of Parent. For purposes of this
section, changes in economic conditions or changes in the industry and markets
in which the Parent competes shall not constitute a material adverse change,
whether occurring at any time or from time to time.
4.11 BROKERS' AND FINDERS' FEES. Neither the Purchaser nor the Parent has
incurred, nor will they incur, directly or indirectly, any liability for
brokerage or finders' fees or agent's commissions or any similar charges in
connection with this Agreement or any transaction contemplated hereby.
4.12 LICENSES, PERMITS AND COMPLIANCE WITH LAWS. Each of Parent and the
Purchaser owns or possesses all of the Licenses which are necessary to enable it
to carry on its business as presently conducted. All such Licenses are valid,
binding, and in full force and effect. The execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby
will not adversely affect any such License, The Purchaser and/or Parent has
taken all necessary action to maintain each such License. No notice has been
received by the Purchaser or Parent that any such License is being revoked or
cancelled (other than upon expiration upon the end of any term). Each of the
Purchaser and Parent is (and has been at all times during the past two (2)
years) in material compliance with all applicable laws (including, without
limitation, applicable laws relating to safety and health of employees),
ordinances, regulations and orders of all Governmental Authorities.
4.13 DISCLOSURE. No representation or warranty of the Purchaser or the
Parent in this Agreement and no statement in any Purchaser Disclosure Schedule,
when read together with the Parent SEC Reports, omits to state a material fact
necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
SECTION 5. COVENANTS OF THE COMPANY AND THE SHAREHOLDERS.
Unless the Purchaser otherwise agrees in writing and except as otherwise
contemplated by this Agreement, the Company and the Shareholders covenant and
agree with Purchaser and Parent that from the date hereof until the Closing or
other termination of this agreement as follows:
5.1 CONDUCT OF BUSINESS OF THE COMPANY. Except as expressly provided for
herein, the Company shall act and carry on its business only in the ordinary
course of business and, to the extent consistent therewith, use reasonable best
efforts to preserve intact its current business organizations, keep available
the services of its current key officers and employees and preserve the goodwill
of those engaged in material business relationships with the Company, and to
that end, without limiting the generality of the foregoing, the Company shall
not, without the prior written consent of the Purchaser:
18
(a) (i) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, securities or other property) in respect of, any
of its outstanding capital stock, (ii) split, combine or reclassify any of its
outstanding capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
outstanding capital stock, or (iii) purchase, redeem or otherwise acquire any
shares of its outstanding capital stock or any rights, warrants or options to
acquire any such shares;
(b) issue, sell, grant, pledge or otherwise encumber any shares of its
capital stock, any other voting securities or any securities convertible into or
exchangeable for, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible or exchangeable securities;
(c) amend its articles of incorporation, bylaws or other comparable
charter or organizational documents;
(d) directly or indirectly acquire, make any investment in, or make
any capital contributions to, any person other than in the ordinary course of
business;
(e) directly or indirectly sell, pledge or otherwise dispose of or
encumber any of its properties or assets that are material to its business,
except for sales, pledges or other dispositions or encumbrances in the ordinary
course of business;
(f) (i) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person, other than indebtedness owing to or
guarantees of indebtedness owing to the Company, or (ii) make any loans or
advances to any other person, other than to the Company and other than routine
travel advances to employees or customer trade credit, except, in the case of
clause (i), for borrowings under existing credit facilities described in the
Company Disclosure Schedule in the ordinary course of business;
(g) grant or agree to grant to any officer, employee or consultant any
increase in wages or bonus, severance, profit sharing, retirement, deferred
compensation, insurance or other compensation or benefits, or establish any new
compensation or benefit plans or arrangements, except normal, regularly
scheduled increases in respect of non-officer employees;
(h) enter into or amend any employment, consulting, severance or
similar agreement with any individual, except with respect to new hires of
nonofficer employees in the ordinary course of business;
(i) adopt or enter into a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization, share
exchange or other material reorganization or any agreement involving any sale,
lease, exchange, mortgage, pledge, transfer or other disposition of all or any
significant portions of the assets of the Company, in a single transaction or
series of related transactions which could reasonably be expected to interfere
with the completion of the Acquisition;
(j) make any tax election or settle or compromise any income tax
liability of the Company involving on an individual basis more than $10,000;
19
(k) make any change in any method of accounting or accounting practice
or policy, except as required by any changes in GAAP;
(l) enter into any agreement, understanding or commitment that
restrains, limits or impedes the Company's right to compete with or conduct any
business or line of business, except for any such agreement, understanding or
commitment entered into in the ordinary course of business;
(m) plan, announce, implement or effect any reduction in force,
lay-off, early retirement program, severance program or other program or effort
concerning the termination of employment of employees of the Company;
(n) except as previously approved by the Board of Directors of the
Company prior to the date hereof and as identified to the Purchaser prior to the
date hereof, authorize or commit to make capital expenditures in excess of
$10,000; or
(o) authorize any of, or commit or agree to take any of, the foregoing
actions in respect of which it is restricted by the provisions of this Section
5.1.
5.2 NO SOLICITATION. The Company shall, and shall cause its affiliates,
officers, directors, employees, agents and representatives (including without
limitation any investment banker, financial advisor, attorney or accountant
retained by the Company) to discontinue any solicitation efforts, discussions or
negotiations with respect to any Acquisition Proposal (as hereinafter defined)
with any person or entity other than the Purchaser or Parent. The Company shall
not, and shall not authorize or permit any of its affiliates, officers,
directors, employees, agents or representatives (including without limitations
any investment banker, financial advisor, attorney or accountant retained by the
Company or any of its subsidiaries or affiliates) to, directly or indirectly,
initiate, solicit or encourage (including by way of furnishing information or
assistance), or take any action to facilitate, any inquiries, any expression of
interest or the making of any proposal that constitutes, or may reasonably be
expected to lead to, an Acquisition Proposal, or enter into or maintain or
continue discussions or negotiate with any person in furtherance of such
inquiries or to obtain an Acquisition Proposal or agree to or endorse any
Acquisition Proposal. For purposes of this Agreement, "ACQUISITION PROPOSAL"
means an inquiry, offer, proposal or other indication of interest (other than
the Acquisition) regarding any of the following matters involving the Company:
(a) any merger, consolidation, share exchange, tender or exchange offer,
recapitalization, business combination or other similar transaction; (b) any
acquisitions of voting stock or other securities issued by the Company; (c) any
sale, lease, exchange, mortgage, pledge, transfer or other disposition of all or
any substantial portion of the assets of the Company, taken as a whole, in a
single transaction or series of related transactions; or (d) any proposal, plan
or intention to do any of the foregoing or any agreement in principle or other
agreement to engage in any of the foregoing.
5.3 DISTRIBUTION OF PARENT SHARES AND NOTES. As soon as practicable after
the Closing, the Company shall distribute the Parent Securities received by it
to its then shareholders or a liquidating trust in a liquidation and dissolution
of the Company in compliance with Indiana corporate law (the "LIQUIDATION").
Notwithstanding the foregoing, in no event shall the Company undertake the
Liquidation in such a manner that the creditors of the Company receive
20
Parent Securities. In connection with the Liquidation, the Company further
covenants not to distribute any Parent Securities to a shareholder (or any other
authorized recipient) without first delivering an investor representation letter
in the form attached hereto as EXHIBIT B_ (an "INVESTOR REPRESENTATION LETTER")
to the Parent executed by any potential recipient of Parent Securities.
5.4 USE OF NAME. Immediately following the Closing Date, the Company shall
not use any corporate, trade, or service name including the words and marks
"SpecSource" or "XxxxXxxxxx.xxx" or any confusingly similar words, other than in
connection with the Liquidation.
5.5 PUBLIC ANNOUNCEMENTS. The Company shall consult with the Purchaser
before issuing, and provide the Purchaser the opportunity to review and comment
upon, any press release, SEC filing or other public statements with respect to
the transactions contemplated hereby, including the Acquisition, and shall not
issue any such press release or make any such public statement prior to such
consultation, except as may be required by applicable law, regulation or by
court process.
5.6 ACCESS TO INFORMATION, CONFIDENTIALITY. Upon reasonable notice, the
Company shall afford to the Purchaser and to the Purchaser's officers,
employees, counsel, financial advisors and other representatives reasonable
access during normal business hours during the period prior to the Closing to
all its properties, books, contracts, commitments, Tax Returns, personnel (with
the prior consent of the Company) and records and, during such period, the
Company shall furnish as promptly as practicable to the Purchaser such
information concerning its business, properties, financial condition, operations
and personnel as the Purchaser may from time to time reasonably request,
provided, however, that the Company shall not be required to disrupt its
business operations with respect to the provision of such information. Any such
investigation by the Purchaser shall not affect the representations or
warranties contained in this Agreement. Except as required by law and prior to
the Closing: (a) the Purchaser and Parent will hold, and will cause its
directors, officers, employees, accountants, counsel, financial advisors and
other representatives and affiliates to hold, any non-public information
obtained from the Company in confidence to the extent required by, and in
accordance with the provisions of, the letter agreement between the Purchaser
and the Company with respect to confidentiality and other matters, and (b) the
Purchaser agrees that it will not use any such non-public information to,
directly or indirectly, divert or attempt to divert any business, customer,
supplier or employee of the Company
5.7 TRANSACTIONS IN PARENT COMMON STOCK. Until the Closing, the Company and
White shall not, and shall not cause or direct any other Person to, effect any
transactions of any type with respect to the Parent's common stock, unless such
transaction is pursuant to or contemplated by this Agreement, is directly with
the Parent or is expressly consented to in writing by the Parent.
21
SECTION 6. OTHER COVENANTS.
6.1 EMPLOYMENT MATTERS.
(a) Except as provided otherwise in a written agreement, Parent and
Purchaser shall be under no obligation to employ or continue to employ any
individual for any period. It is understood and agreed among the parties that
Purchaser will offer employment effective as of the close of business on the
Closing Date to all employees of the Company (the "EMPLOYEES") in connection
with the purchase of the Assets, subject to the satisfaction of the conditions
set forth in the Purchaser's offer letters, including without limitation, the
Purchaser's completion of background checks and other pre-employment procedures
with respect to such employees and such employees' execution of the relevant
documents relative to such employees' respective positions with the Purchaser.
The Purchaser's employment of the Employees shall be on an "at-will" basis and
on such other terms and conditions of employment as the Purchaser shall offer in
its sole discretion. Those Employees who accept Purchaser's offer of employment
and who commence working with the Purchaser shall be referred to hereinafter as
the "TRANSFERRED EMPLOYEES." Purchaser shall provide each Transferred Employee
with wages, salaries, health, disability, retirement, dental, vacation and life
insurance benefits comparable to or better than that provided by the Company,
Purchaser shall recognize Transferred Employees' service with the Company for
purposes of seniority, eligibility, vesting and levels of benefits under
Purchaser's compensation and benefit plans and policies. Transferred Employees
and their covered dependents who participated under the Company's medical and
dental benefit plans immediately prior to the Closing Date shall be immediately
eligible to participate under Purchaser's medical and dental plans.
(b) With respect to each Transferred Employee, effective as of the
Closing Date, the Company hereby waives and releases each such individual from
any and all contractual, common law or other restrictions enforceable by the
Company on the employment, activities or other conduct of such individuals after
their termination of employment with the Company (other than the obligation not
to disclose confidential information of the Company and its Affiliates).
(c) The Company shall be solely responsible for any and all
liabilities in respect of employees and other personnel of the Business,
including the Transferred Employees, and their beneficiaries and dependents,
relating to or arising out of or in connection with (i) the employment or the
actual or constructive termination of employment of any employee of the Business
by the Company (including, without limitation, in connection with the
consummation of the transactions contemplated by this Agreement), (ii) the
participation in or accrual of benefits or compensation under, or the failure to
participate in or to accrue compensation under, any plan or plans and (iii)
accrued but unpaid salaries, wages, bonuses, incentive compensation, vacation or
sick pay or other compensation or payroll items (including, without limitation,
deferred compensation). The Company shall be solely responsible for meeting and
the Purchaser and the Parent shall have no liability in respect of those
obligations, if any, under Part 6 of Subtitle B of Title I of ERISA and Section
4980B of the Code in respect of each of Seller's employees who incur a
"qualifying event" on or before the Closing Date or as a result of the
transactions contemplated hereby.
(d) All retirement, severance, deferred compensation, incentive, stock
option, vacation, bonus, unemployment, partnership or other payments,
distributions or benefits payable to or accrued in favor of directors, officers,
employees, independent contractors, agents, representatives or other personnel
of the Company on or prior to the Closing Date, whether or not pursuant to any
plans and whether or
22
not such directors, officers, employees, independent contractors, agents,
representatives or other personnel become employees, personnel, partners or
principals of the Purchaser, shall be Excluded Liabilities and remain the sole
obligations of the Company. The Purchaser and the Parent shall have no
obligation to pay any retirement, severance, deferred compensation, incentive,
stock option, vacation, bonus, unemployment, partnership or other payments,
distributions or benefits that the Employees or any other Person may have
accrued up to and including the Closing Date as a director, officer, employee,
independent contractor, agent, representative or other personnel of the Company
or otherwise.
(e) The Company agrees to provide coverage to qualified beneficiaries
who are already receiving health and/or dental coverage on the Closing Date
under Section 4980B of the Code (hereinafter "COBRA") to the extent required
under COBRA. The Company agrees to offer health and/or dental coverage to the
extent required under COBRA to individuals whose qualifying event occurs before
or on the Closing Date. The Purchaser agrees to offer health and/or dental
coverage as required under COBRA to Transferred Employees whose qualifying event
occurs after the Closing Date to the extent required under COBRA.
SECTION 7. CONDITIONS TO CLOSING.
7.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS TO CONSUMMATE THE ACQUISITION.
The respective obligations of each party to consummate the transactions
contemplated by this Agreement shall be subject to fulfillment at or prior to
the Closing Date of the following conditions:
(a) NO ACTION OR PROCEEDING. No claim, action, suit or other
proceeding shall be pending or threatened by any public authority or person
before any court, agency or administrative body which would have the effect of
making illegal, materially delaying or otherwise restraining or prohibiting the
transactions contemplated hereby or allowing any material damages to be
recovered or other material relief to be obtained as a result of the
transactions contemplated hereby or as a result of any agreement entered into in
connection with, or as a condition precedent to, the consummation of the
transactions contemplated hereby.
(b) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Acquisition shall be in effect, provided, however, that the
party invoking this condition shall have complied with its obligations under
this Agreement.
7.2 CONDITIONS TO THE COMPANY'S AND THE SHAREHOLDERS' OBLIGATIONS TO
CONSUMMATE THE ACQUISITION. The obligations of the Company and the Shareholders
to consummate the transactions contemplated by this Agreement shall be subject
to fulfillment at or prior to the Closing Date of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. Representations and warranties of
the Purchaser and the Parent contained in this Agreement (other than
representations and warranties expressly made as of a certain date, which shall
be accurate as of such date) shall have been accurate in all respects as of the
date of this Agreement and shall be accurate in all respects as of
23
the Closing Date as if made on and as of the Closing Date, except for any such
failure which, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on the Purchaser or the Parent, and
the Company and the Shareholders shall have received a certificate signed on
behalf of the Purchaser and the Parent by an authorized officer to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE PURCHASER AND THE PARENT. The
Purchaser and the Parent shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior to
the Closing Date, and the Company and the Shareholders shall have received a
certificate signed on behalf of the Purchaser and the Parent by an authorized
officer to such effect.
(c) NO MATERIAL ADVERSE CHANGE. Since the date of this Agreement, the
Purchaser and the Parent, taken as a whole, shall not have experienced any
change, event or occurrence that has had or could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Purchaser or the Parent.
(d) DELIVERY OF CERTIFICATE. The Company shall have received a stock
certificate representing the Parent Shares registered in the Company's name.
(e) OTHER NOTE. White shall have received the Note registered in his
name as contemplated by the Non-Competition Agreement (the "OTHER NOTE").
(f) DELIVERY OF NOTE. The Company shall have received the Note
registered in the Company's name.
(g) XXXX OF SALE AND ASSIGNMENT AND ASSUMPTION AGREEMENT. The Company
shall have receive the Xxxx of Sale and Assignment and Assumption Agreement in
the form attached hereto as EXHIBIT C, duly executed by Purchaser.
(h) CONSENTS. All consents, authorizations, orders and approvals of
(or filings or registrations with) any Governmental Entity or any other Person
required to be obtained or made in connection with the execution, delivery and
performance of this Agreement shall have been obtained or made.
(i) SHAREHOLDER APPROVAL. The Acquisition shall have been approved
unanimously by all of the Shareholders.
(j) ADDITIONAL CLOSING DOCUMENTS. The Purchaser and Parent shall have
furnished to the Company and the Shareholders such additional certificates and
other documents as the Company and/or either of the Shareholders may have
reasonably requested as to any of the conditions set forth in this Section 7.2.
(k) CAPITALIZATION. The Parent shall have no more than 13,000,000
shares of common stock issued and outstanding (taking into account any stock
splits or other recapitalization transactions effecting all stockholders on a
pro rata basis).
24
7.3 CONDITIONS TO THE PURCHASER'S AND THE PARENT'S OBLIGATIONS TO
CONSUMMATE THE ACQUISITION. The obligations of the Purchaser and the Parent to
consummate the transactions contemplated by this Agreement shall be subject to
fulfillment at or prior to the Closing Date of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. Representations and warranties of
the Company and the Shareholders contained in this Agreement (other than
representations and warranties expressly made as of a certain date, which shall
be accurate as of such date) shall have been accurate in all respects as of the
date of this Agreement and shall be accurate in all respects as of the Closing
Date as if made on and as of the Closing Date, except for any such failure
which, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect on the Company, and the Purchaser shall have
received a certificate signed on behalf of the Company by an authorized officer
to such effect with respect to the Company.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY AND THE SHAREHOLDERS.
The Company and the Shareholders shall have performed in all material respects
all obligations required to be performed by them under this Agreement at or
prior to the Closing Date, and the Purchaser shall have received a certificate
signed on behalf of the Company by an authorized officer to such effect with
respect to the Company.
(c) NO MATERIAL ADVERSE CHANGE. Since the date of this Agreement, the
Company shall not have experienced any change, event or occurrence that has had
or could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company or the Business.
(d) XXXX OF SALE AND ASSIGNMENT AND ASSUMPTION AGREEMENT. The
Purchaser shall have received the Xxxx of Sale and Assignment and Assumption
Agreement, duly executed by the Company.
(e) NON-COMPETITION AGREEMENT. The Purchaser shall have received an
agreement not to compete with the Purchaser and the Parent from White in
substantially the form attached hereto as EXHIBIT D (the "NON-COMPETITION
AGREEMENT").
(f) CONSENTS. All consents, authorizations, orders and approvals of
(or filings or registrations with) any Governmental Entity or any other Person
required to be obtained or made in connection with the execution, delivery and
performance of this Agreement shall have been obtained or made.
(g) LEGAL OPINION. The Purchaser shall have received the legal opinion
of Xxxxxx Xxxxxxx Xxxxxxxx, PC, counsel to the Company, with respect to the
matters listed on EXHIBIT E attached hereto.
(h) SHAREHOLDER APPROVAL. The Acquisition shall have been approved
unanimously by all of the Shareholders.
(i) INVESTOR REPRESENTATION LETTER. Parent and Purchaser shall have
received an Investor Representation Letter from the Company and the
Shareholders.
25
(j) INTELLECTUAL PROPERTY ASSIGNMENT AGREEMENT. The Company shall have
executed and delivered an Intellectual Property Assignment Agreement in favor of
the Purchaser in substantially the form attached hereto as EXHIBIT F.
(k) ADDITIONAL CLOSING DOCUMENTS. The Company and the Shareholders
shall have furnished to the Purchaser such additional certificates and other
documents as the Purchaser may have reasonably requested as to any of the
conditions set forth in this Section 7.3.
SECTION 8. TERMINATION.
8.1 TERMINATION. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing, in any
one of the following circumstances:
(a) By mutual written consent duly authorized by each Shareholder and
the Boards of Directors of the Purchaser and the Company;
(b) By any party, if the Closing Date shall not have occurred on or
before January 15, 2004, otherwise than as a result of any material breach of
any provision of this Agreement by the party seeking to effect such termination;
(c) By any party, if any federal or state court of competent
jurisdiction or other Governmental Entity shall have issued an order, decree or
ruling, or taken any other action permanently restraining, enjoining or
otherwise prohibiting the Acquisition and such order, decree, ruling or other
action shall have become final and non-appealable, provided that neither party
may terminate this Agreement pursuant to this Section 8.1(c) unless such party
has used its reasonable best efforts to remove such order, decree, ruling or
injunction;
(d) By the Purchaser if any of the Company's representations and
warranties contained in this Agreement shall have been materially inaccurate as
of the date of this Agreement or shall have become materially inaccurate as of
the Closing Date as if made on such date, or if any of the Company's covenants
and agreements contained in this Agreement shall have been breached in any
material respect, provided, however, that the Purchaser may not terminate this
Agreement under this Section 8.1(d) on account of an inaccuracy in the Company's
representations and warranties that is curable by the Company or on account of a
breach of a covenant or agreement by the Company that is curable by the Company
unless the Company fails to cure such inaccuracy or breach within ten (10) days
after receiving written notice from the Purchaser of such inaccuracy or breach;
or
(e) By the Company if any of the Purchaser's representations and
warranties contained in this Agreement shall have been materially inaccurate as
of the date of this Agreement or shall have become materially inaccurate as of
the Closing Date as if made on such date, or if any of the Purchaser's covenants
and agreements contained in this Agreement shall have been breached in any
material respect, provided, however, that the Company may not terminate this
Agreement under this Section 8.1(e) on account of an inaccuracy in the
Purchaser's representations and warranties that is curable by the Purchaser or
on account of a breach of covenant or agreement by the Purchaser that is curable
by the Purchaser unless the
26
Purchaser fails to cure such inaccuracy or breach within ten (10) days after
receiving written notice from the Company of such inaccuracy or breach.
8.2 EFFECT OF TERMINATION. In the event of the termination and abandonment
of this Agreement pursuant to Section 8.1 hereof, this Agreement shall (except
for the provisions of Section 3.17, Section 4.11, Section 5.5, the last sentence
of Section 5.6, this Section 8.2 and Section 9, which shall survive the
termination of this Agreement) forthwith become void and cease to have any force
or effect, without any liability on the part of any party hereto or any of its
affiliates; provided, however, that nothing in this Section 8.2 shall relieve
any party to this Agreement of liability for any willful or intentional breach
of this Agreement.
8.3 AMENDMENT. At any time prior to the Closing Date, the parties hereto
may modify or amend this Agreement by written agreement executed and delivered
by the parties.
8.4 EXTENSION; WAIVER. At any time prior to the Closing, the parties may
(a) extend the time for the performance of any of the obligations or other acts
of the other parties, (b) waive any inaccuracies in the representations and
warranties of the other parties contained in this Agreement or in any document
delivered pursuant to this Agreement, or (c) subject to Section 8.3, waive
compliance with any of the agreements or conditions of the other parties
contained in this Agreement. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in a written instrument
executed and delivered by such party. The failure of any party to this Agreement
to assert any of its rights under this Agreement or otherwise shall not
constitute a waiver of such rights.
8.5 PROCEDURE FOR TERMINATION, AMENDMENT, EXTENSION OR WAIVER. A
termination of this Agreement pursuant to Section 8.1, an amendment of this
Agreement pursuant to Section 8.3 or an extension or waiver pursuant to Section
8.4 shall, in order to be effective, require in the case of the Purchaser or the
Company, action by its Board of Directors or the duly authorized designee of its
Board of Directors.
SECTION 9. INDEMNIFICATION.
9.1 INDEMNIFICATION OBLIGATIONS OF THE SHAREHOLDERS. Subject to the
restrictions and limitations set forth in this Section 9, the Shareholders
shall, jointly and severally (in the proportions set forth in Section 9.6),
indemnify, defend and hold harmless the Purchaser, the Parent and their
respective officers, directors, employees, and affiliates, and each of the
heirs, executors, successors and assigns of any of the foregoing (collectively,
the "PURCHASER INDEMNIFIED PARTIES") from, against and in respect of any and all
claims, liabilities, obligations, losses, costs, expenses, and damages whenever
arising or incurred (including, without limitation, amounts paid in settlement,
costs of investigation and reasonable attorneys' fees and expenses), whether or
not involving a third-party claim, arising out of or relating to:
(a) any liability or obligation of the Company of any nature
whatsoever (including, but not limited to, the Excluded Liabilities), except the
Assumed Liabilities;
(b) any breach or inaccuracy of any representation or warranty made by
the Company or Shareholders in Section 3 of this Agreement;
27
(c) any breach of any covenant, agreement or undertaking made by the
Company and Shareholders in this Agreement; and
(d) any non-compliance by the parties hereto with any applicable bulk
sales laws.
The claims, liabilities, obligations, losses, costs, expenses, and damages of
the Purchaser Indemnified Parties described in this Section 9.1 as to which the
Purchaser Indemnified Parties are entitled to indemnification are hereinafter
collectively referred to as "PURCHASER LOSSES."
9.2 INDEMNIFICATION OBLIGATIONS OF THE PARENT AND THE PURCHASER. Subject to
the restrictions and limitations set forth in this Section 9, the Parent and the
Purchaser, jointly and severally, shall indemnify and hold harmless the Company
and Shareholders and their respective officers, directors, employees, and
affiliates and each of the heirs, executors, successors and assigns of any of
the foregoing (collectively, the "COMPANY INDEMNIFIED PARTIES") from, against
and in respect of any and all claims, liabilities, obligations, losses, costs,
expenses, and damages whenever arising or incurred (including, without
limitation, amounts paid in settlement, costs of investigation and reasonable
attorneys' fees and expenses), whether or not involving a third-party claim,
arising out of or relating to:
(a) any of the Assumed Liabilities;
(b) any breach or inaccuracy of any representation or warranty made by
the Purchaser in Section 4 of this Agreement; and
(c) any breach of any covenant, agreement or undertaking made by the
Purchaser in this Agreement.
The claims, liabilities, obligations, losses, costs, expenses, and damages of
the Company Indemnified Parties described in this Section 9.2 as to which the
Company Indemnified Parties are entitled to indemnification are hereinafter
collectively referred to as "COMPANY LOSSES."
9.3 INDEMNIFICATION PROCEDURE.
(a) Promptly after receipt by a Purchaser Indemnified Party or a
Company Indemnified Party (hereinafter collectively referred to as an
"INDEMNIFIED PARTY") of notice by a third party of any complaint or the
commencement of any action or proceeding with respect to which such Indemnified
Party may be entitled to receive payment from the other party for any Purchaser
Losses or Company Losses (as the case may be), such Indemnified Party shall,
within ten (10) days, notify the Company and Shareholders or the Purchaser and
Parent, as the appropriate indemnifying parties (the "INDEMNIFYING PARTY"), of
such complaint or of the commencement of such action or proceeding; PROVIDED,
HOWEVER, that the failure to so notify the Indemnifying Party shall not relieve
the Indemnifying Party from liability for such claim arising otherwise than
under this Agreement and such failure to so notify the Indemnifying Party shall
relieve the Indemnifying Party from liability under this Agreement with respect
to such claim only if, and only to the extent that, such failure to notify the
Indemnifying Party results in material prejudice to the Indemnifying Party with
respect to material rights and defenses
28
otherwise available to the Indemnifying Party with respect to such claim. The
Indemnifying Party shall have the right, upon written notice delivered to the
Indemnified Party within twenty (20) days thereafter, to assume the defense of
such action or proceeding, including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of the fees and
disbursements of such counsel. In the event, however, that the Indemnifying
Party declines or fails to assume the defense of the action or proceeding or to
employ counsel reasonably satisfactory to the Indemnified Party, in either case
within such 20-day period, then such Indemnified Party may employ counsel to
represent or defend it in any such action or proceeding and the Indemnifying
Party shall pay the reasonable fees and disbursements of such counsel as
incurred; PROVIDED, HOWEVER, that the Indemnifying Party shall not be required
to pay the fees and disbursements of more than one counsel for all Indemnified
Parties in any jurisdiction in any single action or proceeding. In any action or
proceeding with respect to which indemnification is being sought hereunder, the
Indemnified Party or the Indemnifying Party, whichever is not assuming the
defense of such action, shall have the right to participate in such litigation
and to retain its own counsel at such party's own expense. The Indemnifying
Party or the Indemnified Party, as the case may be, shall at all times use
reasonable efforts to keep the Indemnifying Party or the Indemnified Party, as
the case may be, reasonably apprised of the status of the defense of any action
the defense of which it is maintaining, and to cooperate in good faith with each
other with respect to the defense of any such action.
(b) No Indemnified Party may settle or compromise any claim or consent
to the entry of any judgment with respect to which indemnification is being
sought hereunder without the prior written consent of the Indemnifying Party,
unless such settlement, compromise or consent includes an unconditional release
of the Indemnifying Party from all liability arising out of such claim. An
Indemnifying Party may not, without the prior written consent of the Indemnified
Party, settle or compromise any claim or consent to the entry of any judgment
with respect to which indemnification is being sought hereunder unless: (i) the
Indemnifying Party shall pay or cause to be paid all amounts arising out of such
settlement or judgment concurrently with the effectiveness thereof; (ii) the
terms or effect of the settlement shall not encumber any of the assets of any
Indemnified Party or any affiliate thereof, or contain or result in any
restriction, interference or condition that would apply to such Indemnified
Party or its affiliates or to the conduct of any of their respective businesses;
and (iii) the Indemnifying Party shall obtain, as a condition of such
settlement, a complete unconditional release of each Indemnified Party.
(c) In the event an Indemnified Party shall claim a right to payment
pursuant to this Agreement, such Indemnified Party shall send written notice of
such claim to the appropriate Indemnifying Party. Such notice shall specify the
basis for such claim. As promptly as possible after the Indemnified Party has
given such notice, such Indemnified Party and the appropriate Indemnifying Party
shall establish the merits and amount of such claim and, within five business
days of the final determination of the merits and amount of such claim, the
Indemnifying Party shall pay to the Indemnified Party immediately available
funds, or as otherwise provided in this Agreement, in an amount equal to such
claim as determined hereunder.
(d) Each Indemnified Party shall, in good faith, attempt to mitigate
its Purchaser Losses or Company Losses, as the case may be.
29
9.4 CLAIMS PERIOD. For purposes of this Agreement, a "CLAIMS PERIOD" shall
be the period during which a claim for indemnification may be asserted under
this Agreement by an Indemnified Party, which period (a) shall begin on the
Closing Date and (b) shall terminate (or not terminate) as follows:
(i) with respect to Purchaser Losses arising under Section 9.1(b), the
Claims Period shall terminate one year following the date hereof;
(ii) with respect to Purchaser Losses arising under Section 9.1(a),
Section 9.1(c) or Section 9.1(d), the Claims Period shall not terminate;
(iii) with respect to Company Losses arising under Section 9.2(b), the
Claims Period shall terminate one year following the date hereof;
(iv) with respect to Company Losses arising under Section 9.2(a) or
Section 9.2(c), the Claims Period shall not terminate.
Notwithstanding the foregoing, if prior to the close of business on the
last day of the applicable Claims Period, an Indemnifying Party shall have been
properly notified of a claim for indemnity hereunder and such claim shall not
have been finally resolved or disposed of at such date, such claim shall
continue to survive and shall remain a basis for indemnity hereunder until such
claim is finally resolved or disposed of in accordance with the terms hereof.
9.5 LIMITATIONS.
(a) The Shareholders shall not be obligated to indemnify the Purchaser
Indemnified Parties in respect of Purchaser Losses except to the extent the
cumulative amount of all Purchaser Losses exceeds $25,000, which excess
cumulative amount shall be recoverable in accordance with, and subject to, the
other limitations and the other terms hereof. Furthermore, the maximum amount
that the Shareholders collectively shall be obligated to indemnify the Purchaser
Indemnified Parties in respect of Purchaser Losses other then those arising from
Excluded Liabilities shall be $1,000,000 and provided further that, in no event
shall the Shareholders collectively be obligated to indemnify the Purchaser
Indemnified Parties in respect of all Purchaser Losses in excess of the Purchase
Price. Notwithstanding the foregoing, Purchaser Losses arising under or pursuant
to any matter constituting fraud by the Company or Shareholders shall not be
subject to the foregoing threshold or limitation amounts and there shall be no
threshold or limitation amounts with respect to such Purchaser Losses.
(b) The Purchaser and the Parent shall not be obligated to indemnify
the Company Indemnified Parties in respect of Company Losses except to the
extent the cumulative amount of all Company Losses exceeds $25,000, which excess
cumulative amount shall be recoverable in accordance with, and subject to, the
other limitations and the other terms hereof. Furthermore, the maximum amount
that the Purchaser and the Parent collectively shall be obligated to indemnify
the Company Indemnified Parties in respect of Company Losses other than those
arising from Assumed Liabilities shall be $1,000,000 and provided further that,
in no event shall Purchaser or Parent collectively be obligated to indemnify the
Company Indemnified Parties in respect of all Company Losses in excess of the
Purchase Price. Notwithstanding the foregoing, Company Losses arising under or
pursuant to any matter constituting fraud by the
30
Company or Shareholders shall not be subject to the foregoing threshold or
limitation amounts and there shall be no threshold or limitation amounts with
respect to such Purchaser Losses.
9.6 PAYMENTS BY THE SHAREHOLDERS. In the event it is finally determined in
accordance with Section 9.3 that the Purchaser Indemnified Parties are entitled
to receive payment from the Shareholders in respect of any Purchaser Loss, the
amount recovered by the Purchaser Indemnified Parties with respect to such
Purchaser Loss shall be paid 80% by Xxxxxxx and 20% by White. Such payment shall
be made in cash, or, if the Shareholder so elects by either (a) delivering one
or more certificates representing at least the appropriate number of Parent
Shares to the Parent, or (b) delivering the Note (or any subdivision thereof) to
the Parent, for cancellation and reissue as provided below. In the case of
either (a) or (b), the Parent shall promptly issue, or cause to be issued, to
each Shareholder a new certificate representing the number of shares of Parent
common stock or a new note on the same terms as the Note for the revised
principal amount, if any, that the Parent is not entitled to retain pursuant to
the provisions of this Article 9. For purposes of valuing the Parent Shares for
purposes of satisfying Purchaser Losses under this Section 9.6, the Parent
Shares delivered to Parent shall be valued based on the average closing price of
the Purchaser's common stock on the OTCBB for the sixty trading days ended on
the trading day before the date such Parent Shares are delivered to Parent in
satisfaction of the Purchaser Losses.
SECTION 10. MISCELLANEOUS.
10.1 NOTICES. All notices, communications and deliveries hereunder shall be
made in writing signed by the party making the same, shall specify the Section
hereunder pursuant to which it is given or being made, and shall be delivered
personally or sent by registered or certified mail or by any express mail or
courier delivery service (with postage and other fees prepaid) as follows:
To the Purchaser or the Parent:
Return On Investment Corporation
0000 Xxxxxxx Xxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxx 00000
Attn: Xxxxxxx Xxxx
Telecopy: (000) 000-0000
with a copy to:
Powell, Goldstein, Xxxxxx & Xxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxx Xxxxxxxx, Esq.
Telecopy: (000) 000-0000
31
To Company:
XxxxXxxxxx.xxx, Inc.
0000 Xxxx 00xx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxx Xxxxx
Telecopy: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx, PC
Xxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxx, Esq.
Telecopy: (000) 000-0000
To Xxxxxxx:
Xxxx Xxxxxxx
0000 Xxxxxxx Xxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxx 00000
Telecopy: (000) 000-0000
To White:
Xxxx Xxxxx
XX Xxx 0000
Xxxxxxxxxxxx, XX 00000
or to such other representative or at such other address of a party as such
party hereto may furnish to the other parties in writing. Such notice shall be
effective upon the date of delivery or refusal of delivery, if sent by personal
delivery, registered, certified or express mail or courier delivery.
10.2 INTERPRETATION. When a reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for convenience of reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation".
10.3 ENTIRE AGREEMENT; THIRD-PARTY BENEFICIARIES. This Agreement
constitutes the entire agreement, and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement. This Agreement is not
32
intended to confer upon any person (including without limitation any employees
or former employees of Company), other than the parties hereto, any rights or
remedies.
10.4 GOVERNING LAW. This Agreement shall be governed and construed as to
both substantive and procedural matters in accordance with the laws of the State
of Georgia, regardless of the laws that might otherwise govern under principles
of conflict of laws applicable thereto. In the event either party hereto shall
institute a legal action as a result of a default in the other party's
performance under this Agreement, any such action shall be brought exclusively
in the state courts of the State of Georgia, in Xxxx County, which shall retain
exclusive jurisdiction with respect to the interpretation, performance, and
enforcement of this Agreement.
10.5 ASSIGNMENT. Neither this Agreement nor any of the rights, interests or
obligations under this Agreement may be assigned or delegated, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties, and any such assignment without such prior
written consent shall be null and void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
10.6 SEVERABILITY. Whenever possible, each provision or portion of any
provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability shall not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
10.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same instrument and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties and may be executed by facsimile
signature which shall be binding on the parties.
10.8 COSTS AND EXPENSES. The Company will bear all costs and expenses
(including, without limitation, any brokers or finders fees and any attorneys
and accountants fees) incurred by the Company and the Shareholders in connection
with the transactions contemplated by this Agreement, and the Purchaser and the
Parent will bear all such costs and expenses incurred by the Purchaser or the
Parent in connection herewith.
[SIGNATURE PAGES FOLLOW]
33
IN WITNESS WHEREOF, the Purchaser, the Parent, the Company and the
Shareholders have caused this Agreement to be signed by their respective
officers thereunto duly authorized, all as of the date first written above.
PURCHASER COMPANY
TECTONIC SOLUTIONS, INC. XXXXXXXXXX.XXX, INC.
By: _____________________________ By: ___________________________
Name: _____________________________ Name: ___________________________
Title: _____________________________ Title: ___________________________
PARENT SHAREHOLDERS
RETURN ON INVESTMENT CORPORATION
By: _____________________________ ______________________________(Seal)
Xxxx Xxxxxxx
Name: _____________________________
Title: _____________________________ ______________________________(Seal)
Xxxx Xxxxx
