STOCK PURCHASE AGREEMENT
between
INFORTE CORP.,
as Buyer,
and
XX. XXXXX X. XXXXXX,
as Shareholder,
for
all of the issued and outstanding
capital stock of
GTS CONSULTING, INC.
July 15, 2005
TABLE OF CONTENTS
STOCK PURCHASE AGREEMENT......................................................1
1. THE TRANSACTION............................................................1
1.1. Sale and Purchase of Shares.......................................1
1.2. Designated Buyers.................................................1
2. PURCHASE PRICE; PAYMENT....................................................1
2.1. Purchase Price....................................................1
2.2. Closing Payment...................................................2
2.3. Contingent Payment................................................2
2.4. Form of First Installment Payment, Second Installment Payment,
and Contingent Payment (collectively, the "Follow-on Payments")..3
2.5. Change of Control.................................................4
2.6. Death of Shareholder
2.7. Security
3. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER..............................4
3.1. Corporate.........................................................4
3.2. Capitalization....................................................5
3.3. Authority.........................................................5
3.4. No Violation......................................................5
3.5. Financial Matters.................................................6
3.6. Tax Matters.......................................................6
3.7. Receivables.......................................................7
3.8. Absence of Certain Changes........................................7
3.9. Absence of Undisclosed Liabilities................................8
3.10. No Litigation..................................................8
3.11. Compliance With Laws and Orders................................8
3.12. Title to and Condition of Properties...........................9
3.13. Insurance......................................................9
3.14. Contracts and Commitments.....................................10
3.15. No Default....................................................11
3.16. Labor Matters.................................................11
3.17. Employee Benefit Plans........................................12
3.18. Employees; Compensation.......................................13
3.19. Trade Rights..................................................13
3.20. Customers.....................................................14
3.21. Service Warranty and Liability................................14
3.22. Certain Relationships to the Company..........................14
3.23. Bank Accounts.................................................14
3.24. No Brokers or Finders.........................................14
3.25. Investment Intent.............................................15
3.26. Disclosure....................................................16
4. REPRESENTATIONS AND WARRANTIES OF BUYER...................................16
4.1. Corporate........................................................16
4.2. Authority........................................................16
4.3. No Brokers or Finders............................................16
5. COVENANTS.................................................................16
5.1. Preservation of Business Relationships and Conduct of Business...16
5.2. Other Pre-Closing Actions of Shareholder and the Company.........17
5.3. Noncompetition...................................................17
5.4. Confidential Information.........................................18
5.5. Tax Matters......................................................18
5.6. Continuation of Best Efforts.....................................19
5.7. Further Assurances...............................................19
6. INDEMNIFICATION...........................................................20
6.1. By Shareholder...................................................20
6.2. By Buyer.........................................................20
6.3. Indemnification of Third Party Claims............................20
6.4. Payment..........................................................21
6.5. Limitations on Indemnification...................................21
6.6. No Waiver........................................................22
6.7. Set Off..........................................................23
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER..............................23
7.1. Representations True.............................................23
7.2. Performance of Obligations.......................................23
7.3. Receipt of Documents by Buyer....................................23
7.4. No Litigation....................................................23
7.5. No Company Material Adverse Change...............................24
7.6. Consents
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF SHAREHOLDER........................24
8.1. Representations True.............................................24
8.2. Performance of Obligations.......................................24
8.3. Receipt of Documents by Shareholder..............................24
8.4. No Litigation....................................................24
8.5 Consents
9. CLOSING...................................................................25
9.1. Closing Date; Location...........................................25
9.2. Documents to be Delivered by the Company and Shareholder.........25
9.3. Documents to be Delivered by Buyer...............................26
10. TERMINATION OF AGREEMENT.................................................26
10.1. Termination...................................................26
10.2. Effect of Termination.........................................27
11. MISCELLANEOUS............................................................27
11.1. Disclosure Schedule...........................................27
11.2. Publicity.....................................................28
11.3. Assignment....................................................28
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11.4. Parties in Interest...........................................28
11.5. Law Governing Agreement; Consent to Jurisdiction..............28
11.6. Severability..................................................28
11.7. Amendment and Modification....................................29
11.8. Waiver........................................................29
11.9. Notice........................................................29
11.10. Expenses......................................................30
11.11. Equitable Relief..............................................31
11.12. Interpretive Provisions.......................................31
11.13. Entire Agreement..............................................31
11.14. Counterparts..................................................31
11.15. Section Headings; Table of Contents...........................31
11.16. No Strict Construction........................................32
11.17. Definitions...................................................32
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and effective
as of July 15, 2005 between Inforte Corp., a Delaware corporation ("Buyer"), and
Xx. Xxxxx X. Xxxxxx ("Shareholder").
WHEREAS, Shareholder owns all of the issued and outstanding capital
stock of GTS Consulting, Inc., a Georgia corporation (the "Company"), which is
engaged in the business of database marketing, data mining and decision support
services, including the development of marketing models, transaction analysis,
direct marketing, database management, database hosting, and other activities
related to the creation of marketing strategies (the "Business") at its
facilities located at Roswell, Georgia (collectively, the "Facilities")
WHEREAS, Buyer desires to purchase from Shareholder, and Shareholder
desires to sell to Buyer, all of the outstanding capital stock of the Company,
upon the terms and subject to the conditions set forth in this Agreement; and
WHEREAS, capitalized terms used but not otherwise defined herein shall
have the respective meanings set forth in Section 11.17.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants, agreements and conditions set forth in
this Agreement, and intending to be legally bound, the Parties agree as follows:
1. THE TRANSACTION
1.1. Sale and Purchase of Shares. Upon the terms and subject
to the conditions set forth in this Agreement, Shareholder shall sell, convey,
assign, transfer and deliver to Buyer, and Buyer shall purchase and acquire from
the Shareholder, all of the issued and outstanding shares of the common stock of
the Company, no par value, representing all of the issued and outstanding
capital stock of the Company (the "Shares").
1.2. Designated Buyers. Buyer may, upon notice to
Shareholder, assign its rights and obligations, in whole or in part, under this
Agreement to one or more of its wholly-owned Affiliates for the purpose of
carrying out the transactions contemplated hereby; provided, however, that Buyer
shall be and remain jointly and severally liable to Shareholder for all
obligations of Buyer and any such Affiliate(s) under this Agreement and the
other documents and instruments to be executed and delivered by Buyer or any
such Affiliate(s) pursuant hereto.
2. PURCHASE PRICE; PAYMENT
2.1. Purchase Price. The purchase price (the "Purchase
Price") for the Shares shall be (a) an amount in cash equal to Two Million One
Hundred Twenty-One Thousand Dollars ($2,121,000.00) (the "Initial Payment");
plus (b) an amount equal to Five Hundred Thousand Dollars ($500,000.00) ("First
Installment Payment") payable on the first anniversary of the Closing Date,
(c) an amount equal to Five Hundred Thousand Dollars ($500,000.00) ("Second
Installment Payment") payable on the second anniversary of the Closing Date, and
(d) an additional amount not to exceed, in the aggregate, One Million Dollars
($1,000,000.00) (the "Contingent Payment") on the terms described in Section 2.3
below.
2.2. Closing Payment. At the Closing, Buyer shall deliver to
Shareholder an amount equal to the Initial Payment, made by wire transfer of
immediately available funds to an account that Shareholder, at least forty-eight
(48) hours prior to the time for payment specified hereunder, has designated.
2.3. Contingent Payment.
(a) Calculation of Contingent Payment. The Contingent
Payment shall be calculated as follows:
(i) Five Hundred Thousand Dollars ($500,000.00), but
only in the event that the Net Revenue of the Company
attributable to the Business from "*" (""*" Revenue") during the
Revenue Measurement Period is equal to or greater than Six
Hundred Eighty Eight Thousand Dollars ($688,000.00) (the ""*"
Revenue Hurdle");
(ii) an additional Five Hundred Thousand Dollars
($500,000.00), but only in the event that (1) the condition of
Section 2.3(a)(i) is satisfied, and (2) the Net Revenue of the
Company attributable to the Business from "*" (""*" Revenue")
for the Revenue Measurement Period is equal to or greater than
Four Hundred Ninety-Two Thousand Eight Hundred Dollars
($492,800.00) (the ""*" Revenue Hurdle"); and
(iii) notwithstanding the foregoing, the "*" Revenue
Hurdle and the "*" Revenue Hurdle shall be deemed satisfied if
total Net Revenues of the Company attributable to the Business
during the Revenue Measurement Period exceed One Million Two
Hundred Thousand Dollars ($1,200,000.00).
(b) Contingent Payment Schedule. The portion of the
Contingent Payment described in Section 2.3(a)(i) above shall be paid,
if earned, on the third anniversary date of the Closing Date. The
portion of the Contingent Payment described in Section 2.3(a)(ii) above
shall be paid, if earned, on the fourth anniversary date of the Closing
Date.
(c) Calculation of Net Revenue.
(i) The "*" Revenue and "*" Revenue shall be
calculated in a manner consistent with Buyer's practices for
timing of revenue and the characterization of revenue.
(ii) Subject to the other provisions of this Section
2.3, for purposes of this Section 2.3, the "*" Revenue and "*"
Revenue for the Revenue Measurement Period shall be initially
calculated by Buyer and reviewed by Buyer's independent public
accountants. Buyer shall make available to the Shareholder such
information and documentation, including books, records,
contracts, audit workpapers, operating and financial reports and
other documents and instruments and Buyer's personnel (including
its internal and independent accounting personnel) for all
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purposes reasonably related to the review and evaluation by
Shareholder of the Preliminary Contingent Payment Statement (as
defined below).
(iii) The initial determination of "*" Revenue and "*"
Revenue shall be made by Buyer on or before thirty (30) days
following the expiration of the Revenue Measurement Period and a
statement (the "Preliminary Contingent Payment Statement")
regarding the same, including supporting information regarding
the calculation of the "*" Revenue and "*" Revenue, will be
delivered to Shareholder on or before such date. If, within
fifteen (15) days after delivery of the Preliminary Contingent
Payment Statement, Shareholder shall determine that there is an
inaccuracy in the Preliminary Contingent Payment Statement,
Shareholder shall deliver to Buyer a written notice ("Dispute
Notice") setting forth such alleged inaccuracy (the "Disputed
Matters"). Buyer and Shareholder shall endeavor in good faith to
resolve the Disputed Matters by mutual agreement. If, within
fifteen (15) days after Shareholder delivers the Dispute Notice
to Buyer (the "Negotiation Period"), all Disputed Matters are
resolved to the mutual satisfaction of Buyer and Shareholder,
the Preliminary Contingent Payment Statement shall be revised to
reflect such understanding and such revised Preliminary
Contingent Payment Statement shall be the "Contingent Payment
Statement" for purposes of this Agreement. If Buyer and
Shareholder are unable to reach a mutually satisfactory
resolution of any Disputed Matter within the Negotiation Period,
Buyer and Shareholder shall promptly submit any Disputed Matters
to the Independent Accountant. Such submission may include any
additional statements or supporting materials furnished on a
timely basis by Buyer or Shareholder. The decision of the
Independent Accountant shall be binding on the Parties, the
Preliminary Contingent Payment Statement shall be revised to
reflect such decision and such revised Preliminary Contingent
Payment Statement shall be the "Contingent Payment Statement"
for purposes of this Agreement. If the Contingent Payment
Statement reflects that Shareholder would be entitled to a
Contingent Payment greater than the Contingent Payment based on
the Preliminary Contingent Payment Statement, all fees of and
costs incurred by the Independent Accountant shall be borne by
Buyer. If the Contingent Payment Statement reflects that
Shareholder would not be entitled to a greater Contingent
Payment, all fees of and costs incurred by the Independent
Accountant shall be borne by Shareholder. In the event that
Shareholder does not deliver a Dispute Notice within fifteen
(15) days after the delivery of the Preliminary Contingent
Payment Statement, the Preliminary Contingent Payment Statement
shall be the "Contingent Payment Statement" for purposes of this
Agreement.
2.4. Form of First Installment Payment, Second Installment
Payment, and Contingent Payment (collectively, the "Follow-on Payments").
(a) Composition of Follow-on Payments. Each Follow-on Payment
shall consist of (i) cash in an amount equal to eighty percent (80%) of
such Follow-on Payment and (ii) that number of shares of Buyer common
stock equal to twenty percent (20%) of such Follow-on Payment
("Restricted Shares"). For purposes of determining the number of
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Restricted Shares payable for each Follow-on Payment, the price of the
Buyer common stock will be the closing price on the second business day
preceding the day on which the Follow-on Payment is scheduled to be
made; provided, however, that in the event that Buyer's stock price
falls below Three Dollars ($3.00)] per share, Buyer may in its sole
discretion elect to pay all or any part of the Restricted Shares
portion of the Follow-on Payment as a cash payment.
(b) Restriction on Share Transfers. Shareholder shall be
prohibited from Transferring Restricted Shares until the second
anniversary of the receipt of such Restricted Shares.
(c) Applicability of Securities Act. The distribution of
shares to Shareholder as part of each Follow-on Payment will not be
registered pursuant to the Securities Act of 1933, as amended (the
"Securities Act"). Such Restricted Shares will be "restricted
securities" as defined by 17 C.F.R. ss. 230.144 promulgated under the
Securities Act. Thus, in addition to the Transfer restriction provided
in the foregoing Section 2.4(b), the Transfer of Restricted Shares will
be subject to rules described in 17 C.F.R. ss. 230.144. By executing
this Agreement, Shareholder acknowledges that he is knowledgeable of
the various transfer restrictions which may be imposed by the
Securities Act and agrees to hold Buyer and any of its directors,
officers, employees, and shareholders harmless with regard to any loss
or perceived loss suffered by Shareholder as a result of the
application of the Securities Act to his Restricted Shares.
2.5. Change of Control. In the event that a Change of Control
Event occurs prior to the expiration of the Revenue Measurement Period, then the
conditions of Sections 2.3(a)(i) and (ii) shall immediately be deemed satisfied.
The Contingent Payment schedule described in Section 2.3(b) shall not be
affected by a Change of Control Event.
2.6 Restructure of the Company. In the event that, prior to
the expiration of the Revenue Measurement Period, the Company (i) shall no
longer be a direct or indirect wholly owned subsidiary of Buyer or (ii) is the
subject of a corporate restructuring by way of merger or otherwise, such that
the Company shall no longer be a separate legal entity, then the conditions of
Sections 2.3(a)(i) and (ii) shall immediately be deemed satisfied. The
Contingent Payment schedule described in Section 2.3(b) shall not be affected by
such deemed satisfaction.
2.7 Death of Shareholder. In the event Shareholder dies
prior to the expiration of the Revenue Measurement Period, then the conditions
of Sections 2.3(a)(i) and (ii) shall immediately be deemed satisfied. The
Contingent Payment schedule described in Section 2.3(b) shall not be affected by
the death of Shareholder.
2.8 Security.
(a) In the event that (i) Buyer fails to maintain the Buyer
Net Working Capital at or above Fifteen Million Dollars
($15,000,000.00) (the "Buyer Net Working Capital Threshold"), provided
that the Buyer Net Working Capital Threshold shall be reduced to Ten
Million Dollars ($10,000,000.00) if, after the first anniversary date
of the Closing Date, the Contingent Payment has not been earned, or,
after the second anniversary date of the Closing Date, the First
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Installment Payment and the Second Installment Payment have been paid
or otherwise satisfied, or (ii) a Buyer Material Adverse Event has
occurred and is continuing, then Buyer promptly shall deposit cash to
secure payment of the Follow-on Payments in an escrow account with a
financial institution reasonably satisfactory to Shareholder, on terms
and conditions mutually reasonably satisfactory to Buyer, Shareholder
and escrow agent, in an amount equal to eighty percent (80%) of the sum
of (i) the then unpaid amount of the First Installment Payment and the
Second Installment Payment, if any, plus, (ii) the then earned and
unpaid Contingent Payment, if any.
It is the intention of Buyer and Shareholder that the escrow account,
if established, will give Shareholder, to the extent permitted by law a
first priority security interest or the equivalent thereof, in the
escrow account funds. Buyer shall take all action reasonably requested
to allow for, to the extent permitted by law, a first priority security
interest, or the equivalent thereof, in favor of Shareholder in the
escrow account funds
(b) A "Buyer Material Adverse Event" shall mean either of
the following:
(i) Other than such litigation as is disclosed in
Buyer's most current Quarterly Report on Form 10-Q filed with
the SEC on May 13, 2005, Buyer is the defendant in a lawsuit or
arbitration proceeding, for which
(A) The amount of damages claimed against
Buyer is greater than the amount of the Buyer Net
Working Capital at the time of the initiation of such
lawsuit or arbitration proceeding minus the Buyer Net
Working Capital Threshold (the "Litigation Dollar
Threshold"), and
(B) One year has passed since the initiation
of such lawsuit or arbitration proceeding or, if prior
to the one-year anniversary of the initiation of such
lawsuit or arbitration proceeding, Buyer has filed a
motion for summary judgment or a motion to dismiss all
or a portion of the claims asserted in such lawsuit or
arbitration proceeding (but only if claims not subject
to such motion or motions are, by themselves, for an
aggregate amount less than the Litigation Dollar
Threshold), until a ruling denying such motion for
summary judgment or motion to dismiss has occurred; or
(ii) Buyer has been indicted of a criminal offense
material to Buyer's business.
(c) If Buyer Net Working Capital falls and remains below
Twenty Million Dollars ($20,000,000.00), then, subject to Shareholder
executing such confidentiality agreement as Buyer reasonably deems
appropriate, Buyer shall provide Shareholder with a monthly statement
of the Buyer Net Working Capital.
3. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER
Shareholder makes the following representations and warranties to
Buyer, each of which is true and correct on the date hereof and shall survive
the consummation of the transactions contemplated hereby.
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3.1. Corporate. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Georgia.
the Company is duly licensed or qualified to do business as a foreign
corporation, and is in good standing, in each jurisdiction in which the
character of the properties owned or leased by it, or the nature of its
business, makes such licensing or qualification necessary. Schedule 3.1 lists
each jurisdiction in which the Company is so licensed or qualified. The Company
does not own, directly or indirectly, any capital stock or other equity or
ownership interest of any corporation, limited liability company, partnership or
other entity. The Company has not engaged in any business other than the
Business. Shareholder has made available to Buyer true, correct and complete
copies of the following, to the extent they exist: Company's charter, bylaws,
stock records and minute books, including minutes or consents reflecting all
actions taken by the directors and shareholders of the Company.
3.2. Capitalization. The authorized capital stock of the
Company consists of all shares of no par value common stock, 100 of which shares
are presently issued and outstanding and constitute the Shares. All of the
Shares have been duly authorized and validly issued in compliance with all
applicable laws, and are fully paid and nonassessable. There are no outstanding
options, warrants, convertible or exchangeable securities or other rights,
agreements, arrangements or commitments obligating Shareholder or the Company,
directly or indirectly, to issue, sell, purchase, acquire or otherwise transfer
or deliver any shares of capital stock of or other equity interest in the
Company, or any agreement, document, instrument or obligation convertible or
exchangeable therefore. There are no agreements, arrangements or commitments of
any character (contingent or otherwise) pursuant to which any Person is or may
be entitled to receive any payment based on the revenues or earnings, or
calculated in accordance therewith, of the Company. There are no voting trusts,
proxies or other agreements or understandings to which Shareholder or the
Company is a party or by which Shareholder or the Company is bound with respect
to the voting of any equity capital of the Company. Shareholder is the sole
record and beneficial owner of the Shares, and owns the Shares free and clear of
any Lien.
3.3. Authority. Shareholder has all requisite power and
authority to execute, deliver and perform his obligations under this Agreement
and each other agreement, certificate and instrument to be executed by him in
connection with or pursuant to this Agreement (collectively, the "Shareholder
Documents"). This Agreement has been, and by the Closing each other Shareholder
Document will be, duly executed and delivered by the Shareholder. This Agreement
constitutes, and when executed and delivered the other Shareholder Documents
will constitute, valid and binding agreements of Shareholder, enforceable in
accordance with their respective terms.
3.4. No Violation. Neither the execution and delivery of this
Agreement or the other documents and instruments to be executed and delivered by
Shareholder pursuant hereto nor the consummation by Shareholder of the
transactions contemplated hereby and thereby (a) will violate any applicable Law
or Order, (b) will require any consent, approval or other action by or notice to
any Governmental Entity or (c) will violate or conflict with, or constitute a
default (or an event that, with notice or lapse of time, or both, would
constitute a default) under, or will result in the termination of, or accelerate
the performance required by, or result in the creation of any Lien upon the
6
Shares or any assets of the Company under any term or provision of the charter,
bylaws or similar organizational documents of the Company or any Contract or
restriction of any kind or character to which the Company or Shareholder is a
party or by which the Company, Shareholder or the Shares may be bound or
affected.
3.5. Financial Matters. Included as Schedule 3.5 are true,
correct and complete copies of financial statements of the Company consisting of
(i) the financial statements (including a statement of assets, liabilities and
stockholders' equity--income tax basis and the related statements of revenues
and expenses--income tax basis of the Business for each of the fiscal years
ended December 31, 2002, 2003 and 2004 (including notes contained therein or
annexed thereto), and (ii) a statement of assets, liabilities and stockholders'
equity - income tax basis as of July 9, 2005 (including notes contained therein
or annexed thereto) (the "Recent Balance Sheet"), and the related unaudited
statements of revenues and expenses - income tax basis for the fiscal year to
date period then ended. All of such financial statements are prepared in
accordance with GAAP except as otherwise described in Schedule 3.5 applied on a
consistent basis and have been prepared from and are consistent with the books
and records of the Company and fairly present, in all material respects, the
assets, liabilities, and stockholders' equity of the Company and its revenues
and expenses as of the dates and for the periods indicated.
3.6. Tax Matters.
(a) S Corporation. For all periods from the date of its
formation up to and including the Closing Date, the Company (and any
predecessor of the Company) has had in effect a valid election under
Code ss. 1362 to be an S corporation within the meaning of Code ss.
1361(a). Except as set forth on Schedule 3.6(a), the Company does not
own, and has not owned at any time during the ten (10) year period
preceding the Closing Date, the stock of any corporation that is a
"qualified subchapter S subsidiary" within the meaning of Code ss.
1361(b)(3)(B), with respect to the Company. Neither the Company nor any
qualified subchapter S subsidiary of the Company has, in the ten (10)
year period preceding the Closing Date, (i) acquired assets from
another corporation in a transaction in which the Company's (or such
subsidiary's) tax basis for the acquired assets was determined, in
whole or in part, by reference to the tax basis of the acquired assets
(or any other property) in the hands of the transferor for federal
income tax purposes or (ii) acquired from any other person the stock of
any corporation that is or was (during such ten (10) year period) a
qualified subchapter S subsidiary of the Company.
(b) Provision For Taxes; Tax Returns. (i) All Tax Returns
required to be filed with respect to the Company or relating to the
Business or the assets thereof on or before the date hereof have been
timely filed; (ii) all such Tax Returns, when filed, were true, correct
and complete; (iii) all Taxes (whether or not reflected on such Tax
Returns) required to be paid with respect to the Company or relating to
the Business or the assets thereof have been paid; (iv) all Taxes
imposed on the Company or relating to the Business or assets of the
Company for any taxable period (or a portion thereof) ending on or
prior to the date hereof which are not yet due and payable have been
properly reserved for on the books and records of the Company; and (v)
all Taxes required to be withheld by the Company have been duly and
timely withheld, and such withheld Taxes have been either duly and
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timely paid to the proper governmental authorities or properly set
aside in accounts for such purpose and, to the extent due on or prior
to the Closing Date, will be duly and timely paid to the proper
governmental authorities. Except for the extension identified on
Exhibit 3.6(b), an extension of time within which to file any Tax
Return which has not been filed has not been requested or granted.
(c) Tax Audits. No Tax Returns relating to the Business
required to be filed by or on behalf of the Company or Shareholder,
including, without limitation, any federal and state income and
franchise Tax Returns, have been audited by the IRS or any other taxing
authorities, and neither Shareholder nor the Company has received any
(i) notice of underpayment of Taxes or other deficiency relating to the
Business that has not been paid or (ii) objection to any Tax Return
filed by or on behalf of Shareholder or the Company relating to the
Business. There are no outstanding agreements or waivers extending the
statutory period of limitations applicable to any Tax Return required
to be filed by or on behalf of Shareholder or the Company relating to
the Business.
(d) Liens. There are no liens for Taxes (other than for
current Taxes not yet due and payable) upon the assets of the Company.
(e) Other. Neither Shareholder nor the Company has (i)
applied for any Tax ruling relating to the Business, (ii) been a party
to a closing agreement with any Taxing authority relating to the
Business, (iii) made any payments, or been a party to any Contract
(including this Agreement), that under any circumstances could obligate
it to make payments that are not deductible because of Code ss. 280G,
(iv) been a party to any Tax allocation or Tax sharing Contract or (v)
been a member of an affiliated group of corporations that filed a
consolidated Tax Return. The Company is not a "United States real
property holding company" within the meaning of Code ss. 897.
3.7. Receivables. All accounts receivable of the Company (a)
arose out of arm's length transactions actually made in the ordinary course of
the Business, (b) are valid and legally binding obligations of the parties
obligated to pay such amounts, (c) are collectible in the ordinary course of the
Business without the necessity of commencing litigation and (d) are subject to
no counterclaim or setoff. Schedule 3.7 contains an aged schedule of accounts
receivable as of the date that is two (2) days prior to the Closing Date.
3.8. Absence of Certain Changes. Except as and to the extent
set forth in Schedule 3.8, since December 31, 2004, there has not been:
(a) No Company Material Adverse Change. Any material adverse
change in the assets, liabilities, business, operations, results of
operations, condition (financial or otherwise) or prospects of the
Company or the Business ("Company Material Adverse Change"). Without
limiting the generality of the foregoing sentence, Company Material
Adverse Change shall include, but not be limited to, (i) the
termination of, or material reduction in, the "*" customer relationship
or (ii) a greater than 20% reduction in the Projected Revenues or net
income to be generated after the Closing. "Projected Revenues" means
Net Revenues of One Million Five Hundred Thousand ($1,500,000.00)
projected for the Revenue Measurement Period.
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(b) No Damage. Any material loss, damage or destruction,
whether covered by insurance or not, relating to or affecting the
Business.
(c) No Increase in Compensation. Any increase in the
compensation, salaries, commissions, wages, bonuses or benefits payable
or to become payable to any employees or agents of the Company.
(d) Credit. Any grant of credit by the Company to any
customer of the Business on terms or in amounts more favorable than
those that have been extended to such customer in the past, any other
change made by the Company in the terms of any credit heretofore
extended in connection with the Business or any other change of the
Company's policies or practices with respect to the granting of credit
in connection with the Business.
(e) No Distributions. Any distribution of the Company assets
to Shareholder or any other Person other than distributions that were
made in the ordinary course of the Business consistent with past
practice to provide cash to Shareholder to satisfy current Tax
liabilities.
(f) No Unusual Events. Any other event or condition not in
the ordinary course of the Company's operation of the Business,
including (i) any sale, lease, grant or other disposition of any
material properties or assets, (ii) any entering into, amendment or
early termination of any material Contract relating to or affecting the
Business or (iii) any release or waiver of any material claims or
rights relating to or affecting the Business.
3.9. Absence of Undisclosed Liabilities. Except as and to the
extent specifically set forth on the Recent Balance Sheet, or in Schedule 3.9,
to the knowledge of Shareholder, the Company does not have any liabilities
relating to or affecting the Business, other than: (a) commercial liabilities
incurred since the date of the Recent Balance Sheet in the ordinary course of
the Business consistent with past practice, none of which has had or is
reasonably likely to have a material adverse effect on the assets, liabilities,
business, operations, results of operations, condition (financial or otherwise)
or prospects of the Company or the Business; or (b) liabilities disclosed in
this Agreement or in the Disclosure Schedule.
3.10. No Litigation. Except as set forth in Schedule 3.10,
there are currently no pending or, to the knowledge of Shareholder, threatened
lawsuits, administrative proceedings or reviews, or formal or informal
complaints or investigations (collectively, "Litigation") by any Person against
or relating to Shareholder, the Company or any director, employee or agent (in
their capacities as such) of the Company or to which the Shares or any of the
assets of the Company is subject, and no basis therefor. Neither the Company nor
Shareholder, as relates to the Company, the Business or the Shares, is subject
to or bound by any currently existing judgment, order, writ, injunction or
decree. No lawsuit or administrative proceeding has been commenced against the
Company or, as Shareholder as relates to the Business, during the last five
years.
3.11. Compliance With Laws and Orders.
(a) Laws and Orders. The Company is and has been in
compliance in all material respects with all applicable Laws and
Orders. Neither Shareholder nor the Company has received notice of any
9
violation or alleged violation of any Laws or Orders with respect to
the Business. All reports related to the Business required to be filed
by or on behalf of the Company with any Governmental Entity have been
filed and, when filed, were true, correct and complete.
(b) Licenses and Permits. The Company has all material
licenses, permits, approvals, certifications, consents and listings of
all Governmental Entities and all certification organizations required,
and all exemptions from requirements to obtain or apply for any of the
foregoing, for the conduct of the Business and the operation of the
Facilities. All such licenses, permits, approvals, certifications,
consents and listings are set forth in Schedule 3.11(b), and are in
full force and effect. Except as set forth in Schedule 3.11(b), the
Company (including its operations, practices, properties and assets) is
and has been in compliance with all such licenses, permits, approvals,
certifications, consents and listings.
(c) Environmental Matters. Without limiting the generality
of the foregoing provisions of this Section 3.11, the Company in
respect of the operations, practices, properties and assets of the
Business is and has been in compliance in all material respects with
all Environmental Laws.
3.12. Title to and Condition of Properties.
(a) Set forth in Schedule 3.12(a) is a complete list
(including the street address, where applicable) of: (i) all real
property leased by the Company (the "Leased Real Property"); (ii) each
vehicle owned or leased by the Company; and (iii) each other asset
owned or leased by the Company with a book value of $5,000 or more
(each a "Material Asset" and collectively, the "Material Assets"). The
Material Assets constitute all of the assets required in order to
conduct the Business as currently conducted by the Company.
(b) The Company has good and marketable title to all of the
assets it purports to own, and owns all of such assets free and clear
of any Liabilities and Liens, other than: (i) statutory Liens securing
current Taxes and other obligations that are not yet delinquent; and
(ii) Liens described in Schedule 3.12(b). The Company holds a valid
leasehold interest in all of the leased assets of the Company.
(c) The Company owns no real property.
(d) The assets of the Company, including any assets held
under leases or licenses, are in good condition and repair, ordinary
wear and tear excepted, are in good working order and have been
properly and regularly maintained and are sufficient to carry on the
Business as conducted during the preceding twelve (12) months.
3.13. Insurance. Schedule 3.13 sets forth a true, correct and
complete list and description of all policies of insurance currently in effect
with respect to the Business (collectively, "Business Insurance Policies"). All
general liability policies maintained by or for the benefit of the Company
relating to the operations of the Business (collectively, "Liability Policies")
have been "occurrence" policies and not "claims made" policies. All Business
10
Insurance Policies and Liability Policies are valid, outstanding and enforceable
policies. To Shareholder's knowledge, none of the insurance carriers providing
coverage under any of the Business Insurance Policies or Liability Policies has
declared bankruptcy or provided notice of insolvency to the Company or
Shareholder. The Company has duly and timely made all claims that it has been
entitled to make under all such policies. To Shareholder's knowledge, no
Business Insurance Policy (nor any previous policy) or Liability Policy provides
for or is subject to any currently enforceable retroactive rate or premium
adjustment, loss sharing arrangement or other actual or contingent Liability
arising wholly or partially out of events arising prior to the Closing. There is
no claim by the Company pending under any Business Insurance Policy or
Liability Policy as to which coverage has been questioned, denied or disputed by
the underwriters of such policies, and to Shareholder's knowledge, there is no
basis for denial of any pending claim under any Business Insurance Policy or
Liability Policy.
3.14. Contracts and Commitments. Except as set forth in
Schedule 3.14:
(a) Real Property Leases. The Company has no oral or written
contracts, purchase orders, sales orders, licenses, leases and other
agreements, arrangements and understandings (collectively, "Contracts")
for the lease or occupancy of Leased Real Property.
(b) Personal Property Leases. The Company has no Contracts
for the lease or use of personal property used, held for use or
acquired or developed for use primarily in the Business (collectively,
"Personal Property Leases") involving any remaining consideration,
termination charge or other expenditure in excess of One Thousand
Dollars ($1,000.00) or involving performance over a period of more than
twelve (12) months.
(c) Customer Contracts. The Company has no Contracts in
respect of the Business that aggregate in excess of One Thousand
Dollars ($1,000.00) to or from any customer or client of the Company.
The Company has no Contracts with any customer or client except those
made in the ordinary course of the Business at arm's length.
(d) Supplier/Vendor Contracts. The Company has no Contracts
in respect of the Business that aggregate in excess of One Thousand
Dollars ($1,000.00) to or from any supplier or vendor of the Company.
The Company has no Contracts with any supplier or vendor except those
made in the ordinary course of the Business at arm's length.
(e) Contracts for Services. The Company has no Contract in
respect of the Business with any officer, employee, agent, consultant
or other third party performing similar functions that is not
cancelable by the Company on notice of not longer than thirty (30)
calendar days without liability, penalty or premium of any nature or
kind whatsoever.
(f) Powers of Attorney. The Company has not given a power of
attorney that is currently in effect in connection with or affecting
the Company or the Business.
11
(g) Collective Bargaining Agreements. The Company has no
Contract with any collective bargaining groups representing or
purporting to represent employees who perform services primarily for
the benefit of the Business.
(h) Loan Agreements. The Company has no loan Contract,
promissory note, letter of credit or other evidence of indebtedness, as
a signatory, guarantor or otherwise, in respect of the Business.
(i) Guarantees. The Company has not guaranteed the payment
or performance of any person or entity, agreed to indemnify any person
or entity (except under Contracts entered into by the Company in the
ordinary course of the Business) or to act as a surety, or otherwise
agreed to be contingently or secondarily liable for the obligations of
any person or entity in connection with or affecting the Company or the
Business.
(j) Governmental Contracts. The Company has no Contract with
any Governmental Entity in connection with or affecting the Business.
(k) Agreements Relating to Trade Rights. The Company has no
consulting, development, joint development or similar Contract relating
to any of the Business Trade Rights, nor does the Company have any
Contract requiring the Company to assign its interest in any Business
Trade Rights.
(l) Restrictive Agreements. The Company is not subject to
any Contract or obligation prohibiting or restricting the Company from
competing in any business or geographical area, or soliciting customers
or employees, or therwise restricting it from carrying on any business
anywhere in the world.
(m) Other Material Contracts. The Company has no other
Contract of any nature in connection with or affecting the Business and
involving consideration or other expenditure in excess of One Thousand
Dollars ($1,000.00), or involving performance over a period of more
than twelve (12) months, or that is otherwise individually material to
the operations of the Business.
3.15. No Default. No event or omission has occurred that,
currently or through the passage of time or the giving of notice, constitutes or
would constitute a material default by the Company under any Contract relating
to or affecting the Business or cause the acceleration of any of the Company's
obligations thereunder or result in the creation of any Lien on any of the
Company's assets. To Shareholder's knowledge, no event or omission has occurred
that, currently or through the passage of time or the giving of notice, would
constitute a default by such third party under any such Contract, or give rise
to an automatic termination, or the right of discretionary termination thereof.
Each Contract listed on Schedule 3.14 is in full force and effect and is a valid
and binding agreement enforceable against the Company and, to Shareholder's
knowledge, the other party or parties thereto in accordance with its terms.
3.16. Labor Matters. The Company has not experienced any labor
disputes, any union organization attempts or any work stoppages due to labor
disagreements in connection with or affecting the Business. There is no labor
strike, dispute, request for representation, slowdown or stoppage actually
pending or threatened against or affecting the Company that involves or relates
12
to the Business nor any secondary boycott with respect to any products or
services of the Business. No question concerning representation has been raised
or is threatened relating to the employees of the Company who perform services
primarily for the benefit of the Business.
3.17. Employee Benefit Plans.
(a) Disclosure. Schedule 3.17(a) sets forth a true, correct
and complete list of all plans, programs, Contracts, policies and
practices providing benefits to any current or former employee,
director or independent contractor who performs or performed services
primarily for the benefit of the Business, or a beneficiary or
dependent thereof, sponsored or maintained by the Company or any ERISA
Affiliate, to which the Company or any ERISA Affiliate has contributed,
contributes or is obligated to contribute, or under which the Company
or any ERISA Affiliate had or has any Liability, including any pension,
thrift, savings, profit sharing, retirement, bonus, incentive, health,
dental, death, accident, disability, stock purchase, stock option,
stock appreciation, stock bonus, executive or deferred compensation,
hospitalization, "parachute," severance, vacation, sick leave, fringe
or welfare benefits, any employment or consulting Contracts, "golden
parachutes," collective bargaining agreements, "employee benefit plans"
(as defined in Section 3(3) of ERISA), employee manuals, and written or
binding oral statements of policies, practices or understandings
relating to employment (collectively, the "Employee Plan/Agreement").
No Employee Plan/Agreement is a plan subject to Title IV of ERISA or a
"multiemployer plan" (as defined in Section 4001 of ERISA), and neither
the Company nor any ERISA Affiliate has ever contributed nor been
obligated to contribute to any such plan or multiemployer plan. The
Company has provided true, correct and complete copies of each Employee
Plan/Agreement to Buyer.
(b) Payments and Compliance. With respect to each Employee
Plan/Agreement, (i) all payments due from the Employee Plan/Agreement
(or from the Company with respect to each such Employee Plan/Agreement)
have been made; (ii) the Employee Plan/Agreement conforms to all
applicable Laws and Orders; (iii) all reports and information relating
to the Employee Plan/Agreement required to be filed with any
Governmental Entity or provided to participants or their beneficiaries
have been timely filed or disclosed and, when filed or disclosed, were
true, correct and complete; (iv) there have been no "prohibited
transactions" (within the meaning of Sections 406 and 407 of ERISA or
Code ss. 4975) for which a statutory or administrative exemption does
not exist with respect to any Employee Plan/Agreement; (v) each
Employee Plan/Agreement that is intended to qualify under Code ss. 401
has received a favorable determination letter from the IRS with respect
to such qualification, its related trust has been determined to be
exempt from taxation under Code ss. 501(a), and nothing has occurred
since the date of such letter that has or is reasonably likely to
adversely affect such qualification or exemption; (vi) there are no
Litigation pending (other than routine Litigation for benefits) or, to
Shareholder's knowledge, threatened with respect to the Employee
Plan/Agreement or against the assets of the Employee Plan/Agreement;
and (vii) the Employee Plan/Agreement is not a plan that is established
and maintained outside the United States primarily for the benefit of
individuals substantially all of whom are nonresident aliens.
13
(c) Post-Retirement Benefits. No Employee Plan/Agreement
provides benefits, including death or medical benefits (whether or not
insured), with respect to current or former employees, directors or
independent contractors of the Company beyond their retirement or other
termination of service.
(d) No Triggering of Obligations or Other Binding
Commitments. The consummation of the transactions contemplated hereby
will not (i) entitle any current or former employee, director or
independent contractor to severance pay, unemployment compensation or
any other payment, except as expressly provided in this Agreement, (ii)
accelerate the time of payment or vesting or increase the amount of
compensation due to any current or former employee, director or
independent contractor or (iii) result in any prohibited transaction
described in Section 406 of ERISA or Code ss. 4975 for which an
exemption is not available. Company has no announced plan legally
binding commitment to create any additional Employee Plans/Agreements
or to amend or modify any existing Employee Plan/Agreement.
3.18. Employees; Compensation. Schedule 3.18 contains a true,
correct and complete list of (a) all employees of the Company, (b) each such
employee's title, duties and location of employment, (c) each such employee's
employment status (i.e., whether employee is actively employed or not actively
at work due to illness, short-term disability, sick leave, authorized leave or
absence, layoff for lack of work or service in the Armed Forces of the United
States, or for any other reason) and (d) each such employee's annual rate of
compensation, including bonuses and incentives. Schedule 3.18 also contains a
true, correct and complete list by location in the United States of the number
of former employees of the Company whose employment was terminated within the
eighteen (18) month period preceding the date hereof. Schedule 3.18 also
contains a true, correct and complete list of qualified beneficiaries eligible
for COBRA continuation coverage benefits under any Employee Plan/Agreement that
is a "group health plan" (as defined in Code ss. 5000(b)(1) or Section 607(1) of
ERISA).
3.19. Trade Rights. Schedule 3.19 contains a true, correct and
complete list of all Business Trade Rights (to the extent susceptible to
listing). No registrations or applications relating to Business Trade Rights
have been made or filed. To Shareholder's knowledge, the Company is not
infringing and has not infringed any Trade Rights of another in the operations
of the Business. To Shareholder's knowledge, no person or entity is infringing
or has infringed any of the Business Trade Rights. Except as set forth in
Schedule 3.19, no person or entity other than the Company has any right to use
any of the Business Trade Rights, and in its conduct of the Business, the
Company does not pay any royalties or other consideration for the right to use
any Trade Rights of others. All material Trade Rights that are used by the
Company in the operations of the Business are valid, enforceable and in good
standing, and there are no equitable defenses to enforcement based on any act or
omission of the Company. To conduct the Business, the Company does not require
any Trade Rights that it does not already have. The Company has maintained the
confidentiality of all Business Trade Rights to the extent necessary to maintain
all proprietary rights therein. The consummation of the transactions
contemplated hereby will not alter or impair any of the Business Trade Rights.
3.20. Customers. Schedule 3.20 contains a true, correct and
complete list of all customers of the Business for each of the two (2) most
recent fiscal years showing the total dollar amount of net sales to each such
14
customer during each such year and whether such customer is an Affiliate or a
third party. Shareholder has no knowledge of any facts indicating, nor any other
reason to believe, that any of the customers described in Schedule 3.20 will not
continue to be customers of the Business after the Closing at substantially the
same level of purchases as heretofore.
3.21. Service Warranty and Liability. Schedule 3.21(a)
contains a true, correct and complete copy of the Company's standard warranty or
warranties for sales of Products/Services, and except as expressly set forth
therein, there are no warranties, deviations from standard warranties or
commitments or obligations with respect to the re-performance of Services under
which the Company could have any Liability. Schedule 3.21(b) sets forth the
aggregate annual cost to the Business of performing warranty obligations for
each of the previous three (3) fiscal years and the current fiscal year through
June 30, 2005. Schedule 3.21(b) also contains a description of all pending
warranty claims. Since December 31, 2001, the Company has not made voluntary
concessions or payments not charged to warranty expense as an accommodation to
customers that have claimed that a Product/Service is defective.
3.22. Certain Relationships to the Company. No Affiliate of
Shareholder or the Company has any direct or indirect interest in or other
business relationship or arrangement with (a) any person or entity that does
business with the Company or (b) any property, asset or right that is used by
the Company. All obligations of any Affiliate of Shareholder or the Company to
the Company, and all obligations of the Company to any Affiliate of Shareholder
or the Company, in each case that relate to or affect the Business, are
described in Schedule 3.22.
3.23. Bank Accounts. Schedule 3.23 sets forth all bank
accounts of the Business, including the name of each bank, savings and loan or
other financial institution in which the Company has any account or safe deposit
box, the type and number of each such account or safe deposit box and the names
of all persons authorized to draw thereon or have access thereto.
3.24. No Brokers or Finders. Neither Shareholder nor the
Company retained, employed or used any broker or finder in connection with the
transactions provided for herein or the negotiation thereof.
3.25. Investment Intent.
(a) Shareholder acknowledges that he has been offered the
opportunity to obtain information, to verify the accuracy of the
information received and to evaluate the merits and risks of investment
in the Restricted Shares and to ask questions and receive satisfactory
answers from Buyer concerning the terms and conditions of such
investment. Shareholder has such knowledge and experience in financial
and business matters that he is capable of evaluating the merits and
risks of an investment in the Restricted Shares. In making the decision
to acquire Restricted Shares, Shareholder has relied solely upon
independent investigations made by him and Shareholder is not relying
upon any statements or instruments made by any Person other than Buyer
and Buyer's representatives in making his decision to acquire
Restricted Shares. Shareholder is able to bear the complete loss of his
investment in Restricted Shares.
15
(b) Shareholder represents and warrants that he is an
"accredited investor" within the meaning of 17 C.F.R. ss. 230.501
promulgated under the Securities Act. In making this representation and
warranty Shareholder hereby confirms that at least one of the following
statements is true:
(i) As of the Closing Date, Shareholder's individual
net worth, or his joint net worth with his spouse, exceeds One
Million Dollars ($1,000,000.00); or
(ii) As of the Closing Date, Shareholder had an
individual income in excess of Two Hundred Thousand Dollars
($200,000.00) in each of the two most recent years or
Shareholder's joint income with his spouse exceeded Three
Hundred Thousand Dollars ($300,000.00) in each of the two most
recent years, and Shareholder has a reasonable expectation of
reaching the same income level in the current year.
(c) Shareholder understands that the Restricted Shares have
not been and are not being registered either with the SEC or with any
Governmental Entity charged with regulating the offer and sale of
securities under the securities laws of his state of residence, and are
being offered and sold pursuant to the exemption from registration
under Section 4(2) of the Securities Act, and limited exemptions
provided by the "Blue Sky" laws of his state of residence, and that no
United States governmental agency has recommended or endorsed the
Restricted Shares or made any finding or determination relating to the
fairness for investment in the Restricted Shares.
(d) Shareholder is acquiring the Restricted Shares solely
for his own account, for investment purposes and not with a view to, or
with any intention of resale, distribution or other disposition in
violation of the Securities Act or any other applicable Laws.
(e) Shareholder understands and agrees that because the
offer and sale of the Restricted Shares have not been registered under
United States federal or state securities laws, the Restricted Shares
may not at any time be sold or otherwise disposed of by Shareholder
unless the Restricted Shares are registered under the Securities Act or
there is applicable to such sale or other disposition an exemption from
registration under the Securities Act and applicable state securities
laws. Shareholder further understands that Buyer has no obligation or
present intention to register the Restricted Shares.
(f) Shareholder is a bona fide resident of the state set
forth in his address for notice set forth in Section 12.9 below.
3.26. Disclosure. No representation or warranty by Shareholder
in this Agreement, nor any statement, certificate, schedule or exhibit hereto
furnished or to be furnished by or on behalf of Shareholder pursuant to this
Agreement, to Shareholder's knowledge, contains or shall contain any untrue
statement of material fact or, to Shareholder's knowledge, omits or shall omit a
material fact necessary to make the statements contained therein not misleading.
16
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer makes the following representations and warranties to
Shareholder, each of which is true and correct on the date hereof and shall the
survive the consummation of the transactions contemplated hereby.
4.1. Corporate. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
4.2. Authority. The execution and delivery of this Agreement
and the other documents and instruments to be executed and delivered by Buyer
pursuant hereto and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by Buyer. This Agreement constitutes, and when
executed and delivered, the other documents and instruments to be executed and
delivered by Buyer pursuant hereto will constitute, valid and binding agreements
of Buyer, as the case may be, enforceable in accordance with their respective
terms.
4.3. No Brokers or Finders. Buyer has not retained, employed
or used any broker or finder in connection with the transactions provided for
herein or in connection with the negotiation thereof.
5. COVENANTS
5.1. Preservation of Business Relationships and Conduct of
Business. Shareholder covenants and agrees that, pending the Closing, unless
Buyer shall otherwise agree in writing, (i) the Company shall conduct its
business in the ordinary and usual course in all material respects consistent
with past practice; (ii) Shareholder and the Company shall, except as mutually
agreed, use commercially reasonable best efforts to preserve and maintain for
the benefit of Buyer the good will of the Company's business and the goodwill
and relationship of the Company with each of its customers, suppliers and
employees; (iii) the Company shall use commercially reasonable best efforts to
maintain its current work force; and (iv) the Company will not amend or
terminate any Employee Benefit Plan or any trust established thereunder.
5.2. Other Pre-Closing Actions of Shareholder and the
Company. Shareholder covenants and agrees that, pending the Closing, (i) neither
Shareholder nor the Company shall take any action that is inconsistent with the
satisfaction of any condition set forth in Article 7; (ii) Shareholder shall
furnish Buyer, as promptly as practicable, with such documents and information
relating to the Company as Buyer from time to time reasonably may request; (iii)
Shareholder shall provide Buyer with such access to the Company as Buyer from
time to time reasonably may request during normal business hours to conduct one
or more inspections thereof; provided, however, that such inspections shall not
unreasonably interfere with the Company's conduct of its business and that Buyer
shall be accompanied by Shareholder's designated representative; (iv) the
Company shall pay and perform all of its debts, obligations and liabilities as
and when they become due in the ordinary course; (v) the Company shall not issue
or sell any shares of capital stock or other securities convertible into or
exchangeable for such securities, including options, warrants to purchase or
rights to subscribe for any shares of capital stock, except for shares of common
stock issuable upon exercise of Options; (vi) the Company shall not declare or
pay any dividends or make any distributions to Shareholder or otherwise make any
payment, or commit to make any payment, to Shareholder or any Affiliate of
Shareholder, except for (A) compensation to Shareholder, as an employee of the
17
Company, in the ordinary and usual course of business consistent with past
practice or (B) distributions to Shareholder necessary to pay applicable state
and federal income tax attributable to the 2005 operations of the Business
occurring prior to the Closing, provided that, prior to such distribution, the
Company shall notify Buyer of its intent to make such distribution, providing
Buyer with all information necessary to confirm the appropriate amount of such
consideration and a right to object thereto, and (vii) Shareholder shall use his
commercially reasonable best efforts to obtain any consents, which shall be
reasonably satisfactory in form and substance to Buyer, of all persons or
entities whose consents are necessary to consummate the transactions
contemplated by this Agreement.
5.3. Noncompetition. As an inducement to Buyer to execute and
deliver this Agreement and to consummate the transactions contemplated hereby,
and to preserve the goodwill associated with the Business, Shareholder agrees
that, for a period of three (3) years after the Closing Date, Shareholder will
not, directly or indirectly:
(a) engage in, continue in or carry on any business that
competes in any aspect of the Business, including owning or controlling
any financial interest in any Competitor;
(b) consult with, advise or assist in any way, whether or
not for consideration, any Competitor in any aspect of the Business,
including endorsing the products or services of any such Competitor,
soliciting customers or otherwise serving as an intermediary for any
such Competitor or loaning money or rendering any other form of
financial assistance to any such Competitor; or
(c) solicit, induce or otherwise offer employment or
engagement as an independent contractor to, or engage in discussions
regarding employment or engagement as an independent contractor with,
any person who is or was an employee, commissioned salesperson or
consultant of, or who performed similar services for, the Business, or
assist any third party with respect to any of the foregoing, unless
such person has been separated from his or her employment or other
relationship with Buyer and each of its Affiliates for a period of six
(6) consecutive months;
provided, however, that the foregoing shall not prohibit the ownership of not
more than one percent (1%) of the securities of any publicly-traded entity. The
geographic scope of this covenant not to compete shall extend throughout the
United States, Canada, Mexico and those European countries listed on Exhibit
5.3. Buyer may sell, assign or otherwise transfer this covenant not to compete,
in whole or in part, to any person or entity that purchases all or any portion
of the Business or the Shares. Recognizing the specialized nature of the
Business, Shareholder acknowledges and agrees that the restrictions of this
covenant not to compete are reasonable.
5.4. Confidential Information. Shareholder shall maintain all
Confidential Information in strict confidence and secrecy, and shall not,
directly or indirectly, (a) use any Confidential Information for any purpose,
(b) disclose any Confidential Information to any person or entity other than
Buyer, (c) keep or make copies of any documents, records or property of any
nature whatsoever containing any Confidential Information or (d) assist any
other person or entity in engaging in any of the foregoing, except to the extent
necessary to comply with the express terms of any written agreement between
Shareholder and Buyer and except to the extent explicitly requested in writing
18
by Buyer. Notwithstanding the foregoing, Shareholder may disclose Confidential
Information at such times, in such manner and to the extent such disclosure is
required by applicable law, provided that Shareholder, (i) provides Buyer with
prior written notice thereof, (ii) limits such disclosure to what is strictly
required and (iii) attempts to preserve the confidentiality of any Confidential
Information so disclosed. Nothing in this Agreement reduces any obligation of
Shareholder to comply with applicable Laws or Orders relating to trade secrets,
confidential information and unfair competition. If, at any time after the
Closing, Shareholder discovers that he is in possession of any records
containing any Confidential Information, then he shall immediately deliver such
records to Buyer. Shareholder shall not assert a waiver or loss of confidential
or privileged status of the information based upon such possession or discovery.
5.5. Tax Matters.
(a) Shareholder shall join with Buyer in making an election
under Code ss. 338(h)(10) and Treasury Regulation xx.xx.
1.338(h)(10)-1(a) and (d)(1)(iii), and any corresponding elections
permitted under state or local Law, with respect to the purchase and
sale of the Shares hereunder (the "Section 338(h)(10) Election"). In
particular, and not by way of limitation, promptly following the
Closing Date, Buyer and Shareholder shall jointly execute necessary
copies of IRS Form 8023 and all attachments required to be filed
therewith pursuant to applicable Treasury regulations. Shareholder
shall (i) include any income, gain, loss, deduction or other Tax item
resulting from the Section 338(h)(10) Election on his individual tax
return as required by applicable Law and (ii) shall indemnify, defend
and hold harmless Buyer from, against and with respect to, and shall
pay and reimburse Buyer for any liability for Taxes imposed by the
State of Georgia on income as a result of the deemed sale resulting
from the Section 338(h)(10) Election.
(b) The allocation of purchase price among the assets of the
Company shall be made in accordance with Code ss. 338 and ss.1060 and
any comparable provisions of state or local Law, as appropriate.
Shareholder and Buyer shall mutually agree on the determination of such
purchase price allocations promptly following the Closing and shall
report, act, and file Tax Returns in all respects and for all purposes
consistent with such determination. Buyer and Shareholder hereby agree
to timely file IRS Form 8594 based on the allocations so determined.
(c) Shareholder shall have the right and obligation to
timely prepare and file, or cause to be timely prepared and filed, when
due any Tax Return of the Company that is required to include the
operations, ownership, assets, or activities of the Company for Tax
periods ending on or before the Closing Date. In any case where a Tax
Return is required to be filed by the Company on or before the Closing
Date, Shareholder shall cause the Company to prepare and file such Tax
Return on or before the due date thereof (unless an extension is
granted) and shall pay, or cause the Company to pay, all Taxes
(including estimated Taxes) due on such Tax Return (or due with respect
to a Tax Return for which an extension has been granted) or which are
otherwise required to be paid at any time prior to or during such
period. Buyer shall have the right and obligation to timely prepare and
file, or cause to be timely prepared and filed, when due, all Tax
19
Returns of the Company that are required to include the operations,
ownership, assets, or activities of the Company for any Tax periods
ending after the Closing Date.
(d) Buyer and Shareholder shall, at their own cost and
expense, cooperate fully, as and to the extent reasonably requested by
the other party, in connection with the filing of tax returns pursuant
to this Section and any audit, litigation or other proceeding with
respect to Taxes. Buyer, the Company, Shareholder, and their respective
Affiliates shall preserve all information, returns, books, record and
documents relating to any liabilities for Taxes with respect to a
taxable period until the later of the expiration of all applicable
statutes of limitation and extensions thereof, or the conclusion of all
litigation with respect to Taxes for such period.
5.6. Continuation of Best Efforts. Shareholder covenants and
agrees that following the Closing Date, Shareholder shall (i) use commercially
reasonable best efforts to preserve and maintain for the benefit of Buyer the
goodwill of the Company's business and the goodwill and relationship of the
Company with each of its customers, suppliers and employees and (ii) take all
reasonable steps to ensure the smooth and expedient integration of the Business
into Buyer's managerial and operational structure. Furthermore, Shareholder
shall not willfully take any action, or omit to take any action, that would
reasonably be expected to be detrimental to the Business.
5.7. Further Assurances. From time to time after the date of
this Agreement, upon request of any Party and without further consideration,
each Party shall execute and deliver to the requesting Party such documents and
take such action as may be reasonably requested by the requesting Party to
consummate more effectively the intent and purpose of the Parties under this
Agreement and the transactions contemplated by this Agreement. Without limiting
the generality of the foregoing, Buyer shall not subordinate any payment to
Shareholder due by Buyer under this Agreement in right or priority of payment to
any other unsecured creditor of Buyer.
6. INDEMNIFICATION
6.1. By Shareholder. Upon the terms and subject to the
conditions set forth in this Article 6, Shareholder shall indemnify, defend and
hold harmless Buyer, the Company and their Affiliates, shareholders, directors,
officers, employees, agents and other representatives (collectively, the "Buyer
Indemnified Parties"), from and against all Claims asserted against, resulting
to, imposed upon or incurred by any Buyer Indemnified Party, directly or
indirectly, by reason of, arising out of or resulting from: (a) any inaccuracy
or breach of any representation or warranty of Shareholder contained in or made
pursuant to this Agreement; (b) any breach of any covenant of Shareholder
contained in or made pursuant to this Agreement; or (c) any other Claim arising
with respect to the conduct of the Business prior to the Effective Time
(including any indebtedness for borrowed money), other than accrued expenses,
accounts payable and such other ongoing obligations incurred in the ordinary
course of business and consistent with past practice, and other than any
Liability disclosed to Buyer in this Agreement or the Disclosure Schedule.
20
6.2. By Buyer. Upon the terms and subject to the conditions
set forth in this Article 6, Buyer shall indemnify, defend and hold harmless
Shareholder and his agents and other representatives (collectively, the
"Shareholder Indemnified Parties"), from and against all Claims asserted
against, resulting to, imposed upon or incurred by any Shareholder Indemnified
Party, directly or indirectly, by reason of or resulting from (a) any inaccuracy
or breach of any representation or warranty of Buyer contained in or made
pursuant to this Agreement; (b) any breach of any covenant of Buyer contained in
this Agreement; or (c) any Claim arising with respect to the conduct of the
Business following the Effective Time.
6.3. Indemnification of Third Party Claims. The following
provisions shall apply to any Claim subject to indemnification that is
Litigation filed or instituted by, or the making of any claim or demand by, any
third party, including any Governmental Entity (a "Third Party Claim"):
(a) Notice and Defense. The Party or Parties seeking to be
indemnified (collectively, the "Indemnified Party") shall give the
Party or Parties from whom indemnification is sought (collectively, the
"Indemnifying Party") prompt written notice (and in any event written
notice delivered within sixty (60) calendar days after the receipt of
service or other notice of the commencement of any suit, action or
arbitration proceeding) of the Third Party Claim. The Indemnifying
Party may undertake and control the defense and/or settlement of the
Third Party Claim, by representatives chosen by it, if the Indemnifying
Party admits that it has an indemnification obligation hereunder with
respect to the Third Party Claim, in which case such assumption shall
constitute the Indemnifying Party's undertaking to pay directly all
costs, expenses, damages, judgments, awards, penalties and assessments
incurred in connection therewith. With the prior written consent of the
Indemnified Party, the Indemnifying Party may undertake the defense of
the Third Party Claim without admitting that it has an indemnification
obligation hereunder. Failure to give notice of the Third Party Claim
shall not affect the Indemnifying Party's duties or obligations under
this Article 6, except to the extent the Indemnifying Party is
prejudiced thereby. So long as the Indemnifying Party is defending the
Third Party Claim actively and in good faith, the Indemnified Party
shall not settle the Third Party Claim.
(b) Failure to Defend. If the Indemnifying Party, within a
reasonable time after notice of the Third Party Claim, fails to defend
the Third Party Claim actively and in good faith, then the Indemnified
Party shall (upon further notice) have the right to undertake the
defense, compromise or settlement of the Third Party Claim or consent
to the entry of a judgment with respect to the Third Party Claim, on
behalf of and for the account and risk of the Indemnifying Party, and
the Indemnifying Party shall thereafter have no right to challenge the
Indemnified Party's defense, compromise, settlement or consent to
judgment.
21
(c) Indemnified Party's Rights. Notwithstanding anything to
the contrary in this Article 6, (i) if there is a reasonable
probability that the Third Party Claim may materially and adversely
affect the Indemnified Party other than as a result of money damages or
other money payments, then the Indemnified Party shall have the right
to defend, compromise or settle the Third Party Claim or consent to the
entry of judgment with respect to the Third Party Claim, and (ii) the
Indemnifying Party shall not, without the written prior consent of the
Indemnified Party, settle or compromise the Third Party Claim, or
consent to the entry of judgment with respect to the Third Party, that
does not include as an unconditional term thereof the giving by the
claimant or the plaintiff to the Indemnified Party of a release from
all Liability in respect of the Third Party Claim.
6.4. Payment. The Indemnifying Party shall promptly pay the
Indemnified Party any amount due under this Article 6. Upon judgment,
determination, settlement or compromise of any Third Party Claim, the
Indemnifying Party shall pay promptly on behalf of the Indemnified Party, and/or
to the Indemnified Party in reimbursement of any amount theretofore required to
be paid by it, the amount so determined by judgment, determination, settlement
or compromise and all other Claims of the Indemnified Party with respect
thereto, unless in the case of a judgment an appeal is made from the judgment.
If the Indemnifying Party desires to appeal from an adverse judgment, then the
Indemnifying Party shall post and pay the cost of the security or bond to stay
execution of the judgment pending appeal. Upon the payment in full by the
Indemnifying Party of such amounts, the Indemnifying Party shall succeed to the
rights of such Indemnified Party, to the extent not waived in settlement,
against the person or entity that made the Third Party Claim.
6.5. Limitations on Indemnification. Except for any willful
or knowing breach or misrepresentation, as to which claims may be brought
without limitation as to time or amount:
(a) Time Limitation. No claim or action shall be brought
under this Article 6 for breach of a representation, warranty, or
covenant after the lapse of two (2) years after the Closing Date.
Regardless of the foregoing, however, or any other provision of this
Agreement:
There shall be no time limitation on any claim or
action brought for (A) breach of any representation or
warranty made in or pursuant to Sections 3.2 or 3.12(b), or
(B) breach of any covenant contained in Sections 5.3, 5.4 or
5.6, and Shareholder hereby waives all applicable statutory
limitation periods with respect thereto.
(i) Any claim or action brought for breach of any
representation or warranty made in or pursuant to Sections 3.6
or 3.17 may be brought at any time until the date that is thirty
(30) calendar days after the underlying obligation is barred by
the applicable period of limitation under federal and state Laws
relating thereto (as such period may be extended by waiver).
(ii) If any act, omission, disclosure or failure to
disclose shall form the basis for a claim or action for breach
of more than one representation or warranty, and such claims
have different periods of survival hereunder, then the
termination of the survival period of one claim or action shall
22
not affect a Party's right to make a claim or action based on
the breach of representation or warranty still surviving.
(iii) Neither Buyer's nor Shareholder's right to
indemnification hereunder based on breaches of the other party's
representations, warranties, covenants, and obligations will be
adversely affected by any investigation conducted or any
knowledge acquired (or capable of being acquired) at any time,
whether before or after the execution and delivery of this
Agreement or the Closing. The waiver of any condition based on
the accuracy of any representation and warranty, or on the
performance of or compliance with any covenant or obligation,
will not affect the right to indemnification hereunder based on
such representations, warranties, covenants, and obligations.
(b) Amount. The aggregate amount of all Claims for which
Buyer Indemnified Parties shall be entitled to recover from Shareholder
for breach of a representation, warranty or covenant under Section
6.1(a) and (b) shall not exceed Two Million One Hundred Twenty-One
Thousand Dollars ($2,121,000.00). The aggregate amount of all Claims
for which Shareholder Indemnified Parties shall be entitled to recover
from Buyer for breach of a representation, warranty or covenant under
Section 6.2(a) and (b) shall not exceed the amount of the Purchase
Price.
6.6. No Waiver. The consummation of the transactions
contemplated hereby shall not constitute a waiver by any Party of its rights to
indemnification hereunder, regardless of whether the Indemnified Party has
knowledge of the basis of the Claim at or prior to the Closing.
6.7. Set Off. Buyer may, in addition to any other rights and
remedies that may be available to it under this Article 6, set off all or any
portion of such amounts against any amounts due and owing from Buyer or the
Company to Shareholder. Any amounts so set off shall be deemed to have been paid
to Shareholder as of the date on which written demand for payment of the amount
in question was given to Shareholder.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligation of Buyer to effect the transactions contemplated by this
Agreement are subject to the satisfaction or waiver, at or prior to the Closing,
of each of the following conditions:
7.1. Representations True. The representations and warranties
of Shareholder contained in this Agreement shall be true and accurate on and as
of the Closing Date to the same extent and with the same force and effect as if
made on such date (other than those representations and warranties that address
matters only as of a particular date or only with respect to a specific period
of time, which need be true and accurate only as of such date or with respect to
such period, and except as affected by the transactions contemplated under this
Agreement).
7.2. Performance of Obligations. Shareholder shall have
performed the obligations under this Agreement required to be performed by
Shareholder on or before the Closing Date.
23
7.3. Receipt of Documents by Buyer. Buyer has received the
documents required by Section 9.2.
7.4. No Litigation. ..No suit, action, or other proceeding is
threatened or pending before any court or other Governmental Entity in which it
will be or it is sought to restrain or prohibit or to obtain damages or relief
in connection with this Agreement or the consummation of this Agreement, and no
court or Governmental Entity of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any statute, Laws, ordinance, judgment,
decree, injunction or other order that is in effect and permanently enjoins or
otherwise prohibits consummation of the transactions contemplated by this
Agreement.
7.5 No Company Material Adverse Change. No Company Material
Adverse Change shall have occurred since December 31, 2004.
7.6. Consents. Shareholder and the Company shall have
obtained in form and substance satisfactory to Buyer the consents set forth in
Schedule 7.6 (the "Required Consents").
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF SHAREHOLDER
The obligation of Shareholder to effect the transaction contemplated by
this Agreement are subject to the satisfaction or waiver, at or prior to the
Closing, of each of the following conditions:
8.1. Representations True. The representations and warranties
of Buyer contained in this Agreement are true and accurate on and as of the
Closing Date to the same extent and with the same force and effect as if made on
such date (other than those representations and warranties that address matters
only as of a particular date or only with respect to a specific period of time,
which need be true and accurate only as of such date or with respect to such
period, and except as affected by the transactions contemplated under this
Agreement).
8.2. Performance of Obligations. Buyer shall have performed
the obligations under this Agreement required to be performed by it on or before
the Closing Date.
8.3. Receipt of Documents by Shareholder. Buyer has received
the documents required by Section 9.3.
8.4. No Litigation. No suit, action, or other proceeding is
threatened or pending before any court or Governmental Entity in which it will
be or it is sought to restrain or prohibit or to obtain material damages or
relief in connection with this Agreement or the consummation of this Agreement,
and no court or Governmental Entity of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any statute, Laws, ordinance,
judgment, decree, injunction or other order that is in effect and permanently
enjoins or otherwise prohibits consummation of the transactions contemplated by
this Agreement.
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8.5. Consents. Shareholder and the Company shall have
obtained the Required Consents.
9. CLOSING
9.1. Closing Date; Location. The consummation of the
transactions contemplated hereby (the "Closing") shall take place at the Chicago
offices of Xxxxx & Xxxxxxx LLP, at 10:00 a.m., local time, on the third business
day after the date on which all conditions to closing contained in this
Agreement are satisfied or waived by the party or parties entitled to the
benefit of such conditions, or at such other place or time, or on such other
date, as the parties may agree in writing. The actual time and date of the
Closing is referred to as the "Closing Date." If the Closing occurs, then the
Closing shall be deemed to be effective as of the Effective Time.
9.2. Documents to be Delivered by the Company and
Shareholder. At the Closing, Shareholder shall deliver to Buyer the following
documents, in each case duly executed or otherwise in proper form:
(a) Shareholder Employment Agreement. An Employment
Agreement by and between the Company and Shareholder, in the form
attached hereto as Exhibit 9.2(a) (the "Xxxxxx Employment Agreement"),
duly executed by Shareholder.
(b) Share Certificates. The certificate(s) representing the
Shares, duly endorsed for transfer or accompanied by stock powers duly
executed in blank, and any other documents that are necessary to
transfer to Buyer good title to the Shares.
(c) Certified Charter. A copy of the charter of the Company,
certified by the Secretary of State of the State of Georgia.
(d) Certified Bylaws or Similar Organizational Documents. A
copy of the bylaws and similar organizational documents of the Company,
certified by the secretary thereof.
(e) Certificate of Existence. A Certificate of Existence for
the Company, issued by the Georgia Secretary of State.;
(f) Lien Releases. Such pay-off letters, mortgage releases,
UCC termination statements and similar releases and documents as Buyer
reasonably determines are necessary to release or terminate any Liens
affecting the Business, in form and substance reasonably satisfactory
to Buyer.
(g) Consents to Assignment. Such consents to assignment,
waivers and similar instruments as Buyer reasonably determines are
necessary to permit the assignment of any Contracts of the Company
under which the transfer of the Shares would constitute an assignment
requiring the consent of the contracting party or a termination of such
Contract, in form and substance reasonably satisfactory to Buyer,
including, without limitation, the Required Consents.
25
(h) 338(h)(10) Election. Properly executed Internal Revenue
Service Forms 8023, and any other federal, state or foreign forms,
elections or statements necessary to make a valid Section 338(h)(10)
Election.
(i) Release. A Release by Shareholder in favor of the
Company, in the form attached hereto as Exhibit 9.2(i), duly executed
by Shareholder.
(j) Resignations. Resignations, in form and substance
reasonably satisfactory to Buyer, executed by the directors and
officers of the Company.
(k) Books and Records. All of the original books, records,
ledgers, disks, proprietary information and other date and all other
written or electronic depositories of information of and relating to
the Company.
(l) Termination of Employee Pension Plan. A termination
agreement, in a form agreeable to Buyer, for each Employee Plan/
Agreement, which shall include a statement that the Company has no
liability under such Employee Plan/Agreement, and that the beneficiary
of such plan releases the Company from any unknown or unforeseen
liability with respect to such Employee Plan/Agreement, whether now
existing or hereafter arising.
(m) Other Documents. All other documents, instruments or
writings required to be delivered to Buyer at or prior to the Closing
pursuant to this Agreement or otherwise necessary to effect the intent
hereof and such other certificates of authority and documents as Buyer
may reasonably request.
9.3. Documents to be Delivered by Buyer. At the Closing,
Buyer shall deliver to the Company, the Initial Payment; and the following
documents, in each case duly executed or otherwise in proper form:
(a) Xxxxxx Employment Agreement. The Xxxxxx Employment
Agreement, duly executed by Buyer.
(b) Incumbency Certificate. Incumbency certificates relating
to each person executing any document executed and delivered to
Shareholder pursuant to the terms hereof, in form and substance
reasonably satisfactory to Shareholder.
(c) Certified Resolutions. A copy of the resolutions of the
Board of Directors of Buyer authorizing and approving this Agreement
and the other documents and instruments to be executed and delivered by
Buyer pursuant hereto and the consummation of the transactions
contemplated hereby and thereby.
(d) Other Documents. All other documents, instruments or
writings required to be delivered to Shareholder at or prior to the
Closing pursuant to this Agreement or otherwise necessary to effect the
intent hereof and such other certificates of authority and documents as
Shareholder may reasonably request.
26
10. TERMINATION OF AGREEMENT
10.1. Termination. Notwithstanding anything contained in this
Agreement to the contrary, this Agreement may be terminated and abandoned at any
time prior to the execution of this Agreement by all Parties hereto:
(a) by the mutual written consent of Shareholder and Buyer;
(b) by either Shareholder or Buyer if the Closing shall not
have occurred on or before August 31, 2005; provided, however, that the
right to terminate this Agreement pursuant to this Section 10.1(b)
shall not be available to any Party whose failure to perform any of its
obligations under this Agreement results in the failure of the
transaction contemplated herein to be consummated by such time;
(c) by either Shareholder or Buyer if (i) a statute, rule,
regulation or executive order shall have been enacted, entered or
promulgated prohibiting the consummation of the Agreement substantially
on the terms contemplated hereby or (ii) (A) an order, decree, ruling
or injunction shall have been entered permanently restraining,
enjoining or otherwise prohibiting the consummation of the Transaction
substantially on the terms contemplated hereby and such order, decree,
ruling or injunction shall have become final and non-appealable and (B)
the Party seeking to terminate this Agreement pursuant to this Section
10.1(c)(ii) shall have used commercially reasonable efforts to remove
such order, decree, ruling or injunction; or
(d) by either Shareholder or Buyer if there shall have been
a material breach by the other of any of its or his representations,
warranties, covenants or agreements contained in this Agreement, which,
if not cured, would cause the conditions set forth in Articles 7 or 8,
as the case may be, not to be satisfied, and such breach shall not have
been cured within thirty (30) days after notice thereof shall have been
received by the Party alleged to be in breach.
(e) By Shareholder or Buyer, if the Required Consents have
not been obtained by August 31. 2005.
10.2. Effect of Termination. In the event of termination of
this Agreement by Shareholder or Buyer, as provided in Section 10.1, this
Agreement shall forthwith terminate and there shall be no liability hereunder on
Shareholder or Buyer or their respective officers or directors (except as set
forth in this Section 10.2, which shall survive the termination) and all rights
and obligations of each Party hereof shall cease; provided, however, that
nothing contained in this Section 10.2 shall relieve any Party from liability
for any willful breach of its representations, warranties, covenants or
agreements set forth in this Agreement.
27
11. MISCELLANEOUS
11.1. Disclosure Schedule. Shareholder has prepared the
schedules attached to this Agreement (individually, a "Schedule" and
collectively, the "Disclosure Schedule") and delivered them to Buyer on the date
hereof. No representation or warranty shall be qualified or otherwise affected
by any fact or item disclosed on any Schedule unless such representation or
warranty is expressly qualified by reference to a Schedule, and any fact or item
disclosed on any Schedule shall be deemed disclosed on all other Schedules to
which such fact or item may reasonably apply so long as such disclosure is in
sufficient detail to enable a reasonable person to identify the other article or
section of this Agreement to which such information is responsive. The
Disclosure Schedule shall not vary, change or alter the language of the
representations and warranties contained in this Agreement, and to the extent
the language in the Disclosure Schedule does not conform in every respect to the
language of such representations and warranties, such language shall be
disregarded and be of no force or effect.
11.2. Publicity. Each Party agrees to keep the terms of this
Agreement confidential, except to the extent required by applicable Law or Order
or for financial reporting purposes and except that the Parties may disclose
such terms to their respective accountants and other representatives as
necessary in connection with the ordinary conduct of their respective
businesses. Notwithstanding the foregoing, the Company and Shareholder
acknowledge that as a public company registered with Securities and Exchange
Commission, Buyer is subject to federal and state securities laws and
regulations that may create a legal obligation to disclose certain information
that is Confidential Information under this Agreement. Disclosure of
Confidential Information, including the existence and terms of this Agreement,
pursuant to securities laws will not constitute a breach of this Agreement.
11.3. Assignment. Except to the extent otherwise expressly set
forth in this Agreement, including Section 1.2 and Section 5.3, none of the
Parties may assign, transfer or otherwise encumber this Agreement or its rights
or obligations hereunder, in whole or in part, whether voluntarily or by
operation of Law, without the prior written consent of the other Party or
Parties, and any attempted assignment without such consent shall be void and
without legal effect.
11.4. Parties in Interest. This Agreement shall be binding
upon, inure to the benefit of and be enforceable by the Parties and their
respective heirs, personal representatives, permitted successors and permitted
assigns. Nothing contained in this Agreement shall be deemed to confer
upon any person any right relating in any way to employment or terms of
employment with the Company, Buyer or any of their respective Affiliates.
11.5. Law Governing Agreement; Consent to Jurisdiction. This
Agreement shall be construed and interpreted according to the laws of the State
of Illinois, excluding any choice of law rules that may direct the application
of the laws of another jurisdiction. Each Party stipulates that any Dispute
shall be commenced and prosecuted in its entirety in, and consents to the
exclusive jurisdiction and proper venue of, either the Xxxx County Circuit Court
for the State of Illinois or the United States District Court for the Northern
District of Illinois, and each Party consents to personal and subject matter
jurisdiction and venue in such courts and waives and relinquishes all right to
attack the suitability or convenience of such venue or forum by reason of their
present or future domiciles, or by any other reason. The Parties acknowledge
that all directions issued by the forum court, including all injunctions and
other decrees, will be binding and enforceable in all jurisdictions and
countries. Each Party waives any right to trial by jury with respect to any
Dispute.
11.6. Severability. If the Tribunal or any court of competent
jurisdiction determines that the provisions of this Agreement, including the
provisions set forth in Section 5.3 and Section 5.4, are illegal or excessively
broad as to duration, geographical scope or activity, then such provisions shall
28
be construed so that the remaining provisions of this Agreement shall not be
affected, but shall remain in full force and effect, and any such illegal or
overly broad provisions shall be deemed, without further action on the part of
any person or entity, to be modified, amended and/or limited, but only to the
extent necessary to render the same valid and enforceable in the applicable
jurisdiction.
11.7. Amendment and Modification. The Parties may amend,
modify and supplement this Agreement in such manner as may be agreed upon by
them in writing; provided, however, that Buyer may, in its discretion, require
the execution of any such amendment, modification or supplement by Shareholder.
11.8. Waiver. No waiver by any Party of any of the provisions
hereof shall be effective unless expressly set forth in writing and executed by
the Party so waiving. Except as provided in the preceding sentence, no action
taken pursuant to this Agreement shall be deemed to constitute a waiver by the
Party taking such action of compliance with any representations, warranties,
covenants or agreements contained herein and in any documents delivered or to be
delivered pursuant hereto and in connection with the Closing hereunder. The
waiver by any Party of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any subsequent breach.
11.9. Notice. All notices, requests, demands and other
communications under this Agreement shall be given in writing and shall be
personally delivered; sent by telecopier or facsimile transmission; or sent to
the applicable Parties at their respective addresses indicated in this Section
11.9 by registered or certified U.S. mail, return receipt requested and postage
prepaid; or by private overnight mail courier service, as follows:
(i) If to Shareholder, to:
GTS Consulting, Inc.
000 Xxxxxxx Xxxx Xxxxx, Xxxxx X
Xxxxxxx, XX 00000
Attention: Xx. Xxxxx X. Xxxxxx
Facsimile: 000-000-0000
(with a copy to)
Xxxxxxx & Associates, Attorneys-at-Law, L.L.C.
0000 Xxxx Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx, 00000
Attention: Xx. Xxxxxx X. Xxxxx
Facsimile: (000) 000-0000
(ii) If to Buyer, to:
Inforte Corp.
000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xx. Xxxx Xxxxx
Facsimile: 000-000-0000
29
(with a copy to)
Xxxxx & Xxxxxxx LLP
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xx. Xxxxx X. Xxxxx
Facsimile: 000-000-0000
or to such other person or address as any Party shall have specified by notice
in writing to the other Parties. If personally delivered, such communication
shall be deemed delivered upon actual receipt; if sent by facsimile
transmission, such communication shall be deemed delivered the day of the
transmission, or if the transmission is not made on a business day, the first
business day after transmission (and sender shall bear the burden of proof of
delivery); if sent by overnight courier pursuant to this paragraph, such
communication shall be deemed delivered upon receipt; and if sent by U.S. mail
pursuant to this paragraph, such communication shall be deemed delivered as of
the date of delivery indicated on the receipt issued by the relevant postal
service or, if the addressee fails or refuses to accept delivery, as of the date
of such failure or refusal.
11.10. Expenses.
(a) Professional Fees. Shareholder shall be liable for, and
shall indemnify, defend, and hold Buyer harmless from and against all
fees and expenses of the Company's and/or Shareholder's legal,
accounting, investment banking and other professional counsel in
connection with the transaction contemplated hereby ("Shareholder's
Professional Fees"); provided, however, that (i) Buyer shall pay the
cost of an audit of the Company if such audit is deemed necessary by
Buyer and (ii) Shareholder shall have no obligation to pay Buyer, or to
indemnify, defend, and hold Buyer harmless from and against, one-half
of Shareholder's Professional Fees up to a total of Fifteen Thousand
Dollars ($15,000) (i.e., one-half of up to $15,000, or up to $7,500).
(b) Brokerage. Buyer shall be solely responsible for the
payment and discharge of all claims for brokerage commissions or
finder's fees arising as a result of the retention, employment or other
use of any broker or finder by Buyer and any of its shareholders,
directors, officers, employees or agents in connection with the
transactions provided for herein or the negotiation thereof.
Shareholder shall be solely responsible for the payment and discharge
of all claims for brokerage commissions or finder's fees arising as a
result of the retention, employment or other use of any broker or
finder by Shareholder or the Company in connection with the
transactions provided for herein or the negotiation thereof.
(c) Transfer Taxes. Shareholder shall pay all Taxes
applicable to, imposed upon or arising out of the sale or transfer of
the Shares to Buyer and the other transactions contemplated hereby.
(d) Bulk Sales. To the extent applicable, Buyer hereby
waives compliance with the provisions of the Georgia Uniform Commercial
Code Bulk Sales laws.
30
(e) Other. Except to the extent otherwise expressly set
forth in this Agreement, each Party shall bear its own expenses and the
expenses of its counsel and other agents in connection with the
transactions contemplated hereby.
11.11. Equitable Relief. Shareholder agrees that (a) any breach
of the obligation to consummate the transactions contemplated hereby on the
Closing Date or any breach by Shareholder of the provisions of Section 5.3 or
Section 5.4 will result in irreparable injury to Buyer for which a remedy at law
would be inadequate, and (b) in addition to any relief at law that may be
available to Buyer for such breach and regardless of any other provision
contained in this Agreement, Buyer shall be entitled to injunctive and other
equitable relief as a court may grant. This Section 11.11 shall not be
construed to limit Buyer's right to obtain equitable relief for other breaches
of this Agreement under general equitable standards.
11.12. Interpretive Provisions. The term "knowledge" when used
in the phrases "to Shareholder's knowledge" or "Shareholder has no knowledge" or
words of similar import shall mean, and shall be limited to, the actual and
imputed knowledge of Shareholder, assuming that such person has made a
reasonable inquiry and investigation. The terms "including" and "include" shall
mean "including without limitation" and "include without limitation,"
respectively.
11.13. Entire Agreement. This Agreement (including the exhibits
and schedules attached hereto) supersedes all prior agreements among the Parties
with respect to its subject matter (including the Letter of Intent, dated April
24, 2005), among the Parties and constitutes (together with the other documents
and instruments to be executed and delivered pursuant hereto) a complete and
exclusive statement of the terms of the agreement among the Parties with respect
to its subject matter. There have been and are no agreements, representations or
warranties among the Parties other than those set forth or provided for in this
Agreement.
11.14. Counterparts. This Agreement may be executed by
facsimile signature pages and in one or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
11.15. Section Headings; Table of Contents. The Section
headings contained in this Agreement and the Table of Contents to this Agreement
are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
11.16. No Strict Construction. Notwithstanding the fact that
this Agreement has been drafted or prepared by one of the Parties, each of the
Parties confirms that both it and its counsel have reviewed, negotiated and
adopted this Agreement as the joint agreement and understanding of the Parties.
The language used in this Agreement shall be deemed to be the language chosen by
the Parties to express their mutual intent, and no rule of strict construction
shall be applied against any Party.
11.17. Definitions. For purposes of this Agreement, the
following capitalized terms used but not otherwise defined in this Agreement
shall have the meanings ascribed to them as set forth below:
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(a) "Affiliate" has the meaning ascribed to such term in
Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as
amended, by the Securities and Exchange Commission, as in effect on the
date
hereof.
(b) ""*"" means "*".
(c) "Business Trade Rights" means Trade Rights controlled by
the Company relating to the Business.
(d) "Buyer Net Working Capital" means the current assets
(but including investment grade marketable securities having a maturity
of two or fewer years) less current liabilities of Buyer, on a
consolidated basis, calculated in accordance with GAAP.
(e) "Claim" means and includes (i) all Liabilities; (ii) all
losses, damages, judgments, awards, penalties and settlements; (iii)
all demands, claims, suits, actions, causes of action, proceedings and
assessments, whether or not ultimately determined to be valid; and (iv)
all costs and expenses (including prejudgment interest in any litigated
or arbitrated matter and other interest), court costs and fees and
expenses of attorneys, consultants and expert witnesses) of
investigating, defending or asserting any of the foregoing or of
enforcing this Agreement.
(f) "Change of Control Event" means the consummation of a
transaction, whether in a single transaction or in a series of related
transactions that are consummated contemporaneously (or consummated
pursuant to contemporaneous agreements), with any other Person or group
of related Persons on an arm's-length basis pursuant to which such
Person or group (i) acquires (whether by merger, purchase of equity
interests, recapitalization, reorganization, redemption of equity
interests or otherwise) more than 50% of the voting power of Buyer or
(ii) acquires assets constituting all or substantially all of the
assets of Buyer; provided, however, that. in no event shall a "Change
of Control Event" be deemed to include any transaction effected for the
purpose of (i) changing, directly or indirectly, the form of
organization or the organizational structure of Buyer or any of its
Affiliates or (ii) contributing assets or equity to entities controlled
by or under common control with Buyer.
(g) "COBRA" means the Consolidated Omnibus Budget
Reconciliation Act, as amended.
(h) "Code" means the Internal Revenue Code of 1986, as
amended, and the regulations thereunder.
(i) "Company Material Adverse Change" shall have the meaning
ascribed to the term in Section 3.8(a).
(j) "Competitor" means any person or entity that now or
hereafter engages in or attempts to engage in any aspect of the
Business.
(k) "Confidential Information" means all ideas, information,
knowledge and discoveries, whether or not patentable, trademarkable or
copyrightable, that are not generally known in the trade or industry
and about which the Company or any Shareholder has knowledge as a
32
result of its, his or her participation in, or direct or indirect
beneficial ownership of, the Business, including product
specifications, manufacturing procedures, methods, equipment,
compositions, technology, patents, know-how, inventions, improvements,
designs, business plans, marketing plans, cost and pricing information,
internal memoranda, formula, development programs, sales methods,
customer, supplier, sales representative, distributor and licensee
lists, mailing lists, customer usages and requirements, computer
programs, information constituting "trade secrets" under applicable Law
and other confidential technical or business information and data.
Notwithstanding the foregoing, the term "Confidential Information"
shall not include any information that now or hereafter is in the
public domain by means other than disclosure after the date hereof by
Shareholder.
(l) "Contract" shall have the meaning ascribed to that term
in Section 3.14(a).
(m) "Effective Time" means the close of business on the
business day immediately prior to the Closing Date.
(n) ""*"" means "*".
(o) "Environmental Laws" means all Laws (including common
law) relating to pollution, protection of the environment or human
health, occupational safety and health or sanitation, including Laws
relating to emissions, spills, discharges, generation, storage, leaks,
injection, leaching, seepage, releases or threatened releases of Waste
into the environment (including ambient air, surface water, ground
water, land surface or subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Waste, together with any regulation,
code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder.
(p) "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended.
(q) "ERISA Affiliate" means any entity that is a member of a
controlled group of corporations (as defined in Code ss. 414(b)) of
which the Company is a member, an unincorporated trade or business
under common control with the Company (as determined under Code ss.
414(c)), or a member of an "affiliated service group" (within the
meaning of Code ss. 414(m) of the Code) of which the Company is a
member.
(r) "GAAP" means generally accepted accounting principles
consistently applied.
(s) "Governmental Entities" means any court, arbitrator,
department, commission, board, bureau, agency, authority,
instrumentality or other body, whether federal, state, municipal,
county, local, foreign or other.
(t) "Independent Accountant" means any qualified, impartial,
and disinterested certified financial accountant approved by both Buyer
and Shareholder.
33
(u) "IRS" means the Internal Revenue Service.
(v) "Laws" means any federal, state, municipal, county,
local, foreign or other statute, law, ordinance, rule or regulation.
(w) "Liability" or "Liabilities" means any direct or
indirect indebtedness, guaranty, endorsement, claim, loss, damage,
deficiency, cost, expense, obligation or responsibility, fixed or
unfixed, known or unknown, asserted or unasserted, liquidated or
unliquidated, secured or unsecured.
(x) "Lien" means any mortgage, lien (statutory or
otherwise), security interest, claim or other encumbrance of any nature
whatsoever.
(y) "Net Revenue" means the gross revenue of the Company
generated in accordance with the Company's customary business practices
(meaning, for example, that the Company shall not recognize revenue at
billing rates that the Company does not reasonably believe are
collectible or perform services for a client that the Company would
ordinarily consider too great a credit risk), as calculated in
accordance with GAAP in accordance with Buyer's past practices, less
the amount of reimbursable project-related expenses incurred by the
Company during such period (provided, that with respect to projects in
which rates are quoted to a client inclusive of project-related
expenses, the basis for the Net Revenue calculation shall be the total
project hours performed multiplied by the rate per hour, less the
amount of expenses actually incurred which would customarily be
reimburseable if the project were not being billed on an inclusive
basis).
(z) "Orders" means any order, writ, injunction, judgment,
plan or decree of any Governmental Entity.
(aa) "Party" or "Parties" means Buyer, the Company and/or
Shareholder, as the case may be.
(bb) "Person" means any individual, corporation, governmental
agency or authority, limited liability company, partnership, trust,
unincorporated association, or other entity.
(cc) "Products/Services" means all products or services
currently or at any time previously sold by the Company, or by any
predecessor of the Company, or that have borne a trademark of the
Company, as part of, in or through the operations of the Business.
(dd) "Revenue Measurement Period" means the twelve (12)-month
period commencing on the Closing Date.
(ee) "Required Consents" has the meaning ascribed to that
term in Section 7.6.
(ff) "SEC" means the U.S. Securities and Exchange Commission.
(gg) "Securities Act" means the Securities Act of 1933, as
amended.
34
(hh) "Shareholder Professional Fees" has the meaning ascribed
to that term in Section 11.10(a).
(ii) "Taxes" means any federal, state, county, local,
territorial, provincial, or foreign income, net income, gross receipts,
single business, unincorporated business, license, payroll, employment,
excise, severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Code ss. 59A), customs duties,
capital stock, franchise, profits, gains, withholding, social security
(or similar), payroll, unemployment, disability, workers compensation,
real property, personal property, ad valorem, replacement, sales, use,
transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest,
penalty, or addition, whether or not disputed and whether or not
disputed and whether imposed by Law, Order, Contract or otherwise.
(jj) "Tax Return" means any return, declaration, report,
estimate, claim for refund or information return or statement relating
to, or required to be filed in connection with, any Taxes, including
any schedule, form, attachment or amendment.
(kk) "Trade Rights" means rights in the following: (i) all
trademark rights, business identifiers, trade dress, service marks,
trade names and brand names; (ii) all copyrights and all other rights
associated therewith and the underlying works of authorship; (iii) all
patents and all proprietary rights associated therewith; (iv) all
contracts or agreements granting any right, title, license or privilege
under the intellectual property rights of any third party; (v) all
inventions, mask works and mask work registrations, know how,
discoveries, improvements, designs, computer source codes, programs and
other software (including all machine readable code, printed listings
of code, documentation and related property and information), trade
secrets, websites, domain names, shop and royalty rights, employee
covenants and agreements respecting intellectual property and non
competition and all other types of intellectual property; and (vi) all
registrations of any of the foregoing, all applications therefor, all
goodwill associated with any of the foregoing and all claims for
infringement or breach thereof.
(ll) "Transfer" means any sale, gift, bequest, assignment,
distribution, conveyance, pledge, hypothecation, encumberance, or other
transfer or disposition, whether voluntary or involuntary by operation
of Law or otherwise, and whether inter vivos or testamentary.
(mm) "Waste" means emissions, discharges, generation,
storage, handling, use, transport, disposal, spills, releases or
threatened releases of (i) any petroleum, hazardous or toxic
petroleum-derived substance or petroleum product, flammable or
explosive material, radioactive materials, asbestos in any form that is
or could become friable, urea formaldehyde foam insulation, foundry
sand or polychlorinated biphenyls (PCBs); (ii) any chemical or other
material or substance that is now regulated, classified or defined as
or included in the definition of "hazardous substance," "hazardous
waste," "hazardous material," "extremely hazardous substance,"
"restricted hazardous waste," "toxic substance," "toxic pollutant,"
"pollutant" or "contaminant" under any Environmental Law, or any
similar denomination intended to classify substance by reason of
toxicity, carcinogenicity, ignitability, corrosivity or reactivity
35
under any Environmental Law; or (iii) any other chemical or other
material, waste or substance, exposure to which is now prohibited,
limited or regulated by or under any Environmental Law.
[The next page is the signature page.]
36
IN WITNESS WHEREOF, the undersigned have caused their duly authorized
officers to execute and deliver this Stock Purchase Agreement as of the day and
year first written above.
BUYER
INFORTE CORP.
By: /s/ Xxxx Xxxxx
-----------------------------------
Name: Xxxx Xxxxx
Title: Chief Financial Officer
SHAREHOLDER
/s/ Xx. Xxxxx X. Xxxxxx
----------------------------------------
Xx. Xxxxx X. Xxxxxx
* Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separately with the
SEC pursuant to Rule 24b-2.
37
