ASSET PURCHASE AGREEMENT
AMONG
RCM TECHNOLOGIES, INC.,
NUSOFT SOLUTIONS, INC.,
AND
THE SHAREHOLDERS OF NUSOFT SOLUTIONS, INC.
TABLE OF CONTENTS
1. DEFINITIONS..................................................................................................1
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2. PURCHASE AND SALE OF ASSETS..................................................................................3
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2.1. Assets To Be Purchased.................................................................................3
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2.2. Excluded Assets........................................................................................4
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2.3. Transition Period......................................................................................5
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3. PURCHASE PRICE; PAYMENT......................................................................................5
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3.1. Purchase Price.........................................................................................5
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3.2. Inspection of Records..................................................................................6
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3.3. Buyer's Stock..........................................................................................6
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3.4. Related Agreements.....................................................................................6
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3.5. Allocation of Purchase Price...........................................................................6
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3.6. Extension of Time for Deferred Payments................................................................6
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4. ASSUMPTION OF OBLIGATIONS AND LIABILITIES....................................................................7
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4.1. Liabilities and Obligations Assumed....................................................................7
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4.2. Excluded Liabilities and Obligations...................................................................7
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5. REPRESENTATIONS AND WARRANTIES OF SELLER AND SELLER'S SHAREHOLDERS...........................................7
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5.1. Capitalization; Seller's Shareholders..................................................................7
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5.2. Financial Statements...................................................................................8
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5.3. Due Organization.......................................................................................8
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5.4. Due Authorization......................................................................................8
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5.5. Material Adverse Effects...............................................................................9
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5.6. Litigation............................................................................................10
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5.7. Compliance; Governmental Authorizations; Permits and Licenses.........................................11
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5.8. Taxes.................................................................................................11
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5.9. Agreements............................................................................................12
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5.10. Title to Property and Related Matters.................................................................12
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5.11. Intellectual Property.................................................................................13
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5.12. Brokerage Fees........................................................................................13
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5.13. Consents Required.....................................................................................13
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5.14. Employees; Employee Benefit Plans.....................................................................13
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5.15. Environmental Matters.................................................................................16
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5.16. Insurance.............................................................................................16
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5.17. Customers.............................................................................................17
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5.18. Approval..............................................................................................18
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5.19. Contractors...........................................................................................18
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5.20. Change in Business....................................................................................18
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5.21. Full Disclosure.......................................................................................19
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5.22. Related Party Transactions............................................................................18
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5.23. Improper Payments.....................................................................................19
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5.24. Sufficiency of Purchased Assets.......................................................................19
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5.25. Computer Software.....................................................................................20
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6. REPRESENTATIONS AND WARRANTIES OF BUYER.....................................................................20
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6.1. Due Organization of Buyer.............................................................................20
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6.2. Due Authorization.....................................................................................20
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6.3. Brokerage Fees........................................................................................20
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6.4. Approval..............................................................................................20
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6.5. No Approvals Required.................................................................................20
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7. COVENANTS OF THE PARTIES....................................................................................21
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7.1. Nondisclosure.........................................................................................21
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7.2. Confidentiality.......................................................................................21
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7.3. Prohibition on Trading in Buyer Stock.................................................................22
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7.4. Expenses..............................................................................................22
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7.5. Parties' Access to Records After Closing..............................................................22
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7.6. Prorations............................................................................................22
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7.7. Bulk Sales and Transfer Taxes.........................................................................23
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7.8. Further Assurances; Post Closing Assistance...........................................................23
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7.9. Bonuses...............................................................................................24
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7.10. Accounts Receivable...................................................................................24
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7.11. Dissolution...........................................................................................24
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8. THE CLOSING.................................................................................................25
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8.1. Time and Place........................................................................................25
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8.2. Deliveries by Seller..................................................................................25
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8.3. Deliveries by Buyer...................................................................................26
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9. INDEMNIFICATION.............................................................................................26
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9.1. Seller and Seller's Shareholders......................................................................26
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9.2. Buyer.................................................................................................27
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9.3. Methods of Asserting Claims for Indemnification.......................................................27
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9.4. Right of Set Off......................................................................................28
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9.5. Separate Obligations..................................................................................28
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10. EXCLUSIVE JURISDICTION......................................................................................29
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11. NOTICES.....................................................................................................29
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11.1. If to Buyer, to: RCM Technologies, Inc...............................................................29
12. MISCELLANEOUS...............................................................................................30
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12.1. Nature of Representations and Warranties..............................................................30
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12.2. Survival of Representations...........................................................................30
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12.3. Entire Agreement......................................................................................30
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12.4. Amendment.............................................................................................30
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12.5. Assignment............................................................................................30
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12.6. Choice of Law.........................................................................................31
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12.7. Headings..............................................................................................31
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12.8. Construction..........................................................................................31
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12.9. Effect of Waiver......................................................................................31
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12.10. Severability..........................................................................................31
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12.11. Binding Nature........................................................................................31
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12.12. No Third-Party Beneficiaries..........................................................................31
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12.13. Counterparts..........................................................................................31
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12.14. Facsimile Signature...................................................................................31
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12.15. Rules of Construction.................................................................................31
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LIST OF SCHEDULES
2.1(a) Fixed Assets
2.1(b) Intellectual Property
2.2 Excluded Assets
4.1 Assumed Liabilities
5.2(a)(i) Financial Statements
5.2(a)(ii) Interim Financial Statements
5.2(a)(iii) Closing Income Statement
5.2(a)(iv) Closing Balance Sheet
5.3 Due Organization and Certificates of Authority
5.5 Material Adverse Effect
5.6 Litigation
5.7 Licenses
5.8 Taxes
5.9 Contracts
5.10 Title to Property and Related Matters
5.13 Consents
5.14(a) Employees and Contractors
5.14(b) Employee Benefit Plans
5.14(c) Employee contracts
5.14(h) Workers' Compensation Claims
5.16 Insurance
5.17 Customers
5.21 Related Party Transactions
5.22 Lease(s)
LIST OF EXHIBITS
Exhibit "A" Form of Employment, Non-competition, and Non-solicitation
Agreement for Xxxx Xxxxxxx
Exhibit "B" Form of Employment, Non-competition, and Non-solicitation
Agreement for Xxxxx Xxxxxx
Exhibit "C" Form of Confirmation of Employment Agreement
Exhibit "D" Form of Opinion Letter of Seller's Counsel
-33-
PHLDMS1 3933888v.7
PHLDMS1 3933888v.7
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT is made and entered into this
19th day of March, 2008 by and among RCM TECHNOLOGIES, INC., a Nevada
corporation ("Buyer"), NUSOFT SOLUTIONS, INC., a Michigan corporation
("Seller"), and the shareholders of Seller identified in Section 1, below
("Seller's Shareholders").
RECITALS
WHEREAS, Seller is engaged in the business of providing
information technology solutions and services and related products ( the
"Business").
WHEREAS, Seller desires to sell and Buyer desires to purchase
certain of the assets of Seller utilized in connection with the Business, as
more particularly described herein.
WHEREAS, Each of the board of directors of Buyer and Seller
have approved this Agreement by duly adopted resolutions.
WHEREAS, Seller's Shareholders own all of the issued and
outstanding capital stock of Seller, and are entering into this Agreement in
order to induce Buyer to consummate the transactions described herein.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound hereby, the parties agree as follows:
1. DEFINITIONS.
For purposes of this Agreement, the terms set forth below shall have
the following meanings:
"Baseline NOI" means, for each of the respective Earn-out Periods, Net
Operating Income equal to the following:
(i) For the First Earn-out Period, $2,300,000;
(ii) For the Second Earn-out Period, the greater of
(a) actual NOI for the First Earn-out Period or (b)
$2,600,000; or (iii) For the Third Earn-out Period,
the greatest of (a) actual NOI for the First Earn-out
Period, (b) actual NOI for the Second Earn-out
Period, or (c) $2,900,000.
"Code" means the Internal Revenue Code of 1986, as amended.
"Closing" means the transaction of the events set forth in Section 8
hereof.
"Closing Date" means the day on which the Closing is held as set forth
in Section 8 hereof.
"Closing Balance Sheet" means the unaudited balance sheet of Seller as
of the Effective Date prepared in accordance with GAAP, containing all accruals,
including but not limited to all payroll accruals (including 100% of accruals
for all bonuses awarded by Seller or earned by any of Seller's employees or
Contractors (as defined below) but not paid by Seller on or before the Closing
Date).
"Closing Income Statement" means the unaudited reconciliation of the
income statement from the Financial Statements as set forth on Schedule
5.2(a)(iii).
"Closing Net Operating Income" means gross revenue of the Business
(billed services at invoice value reduced by customer discounts, returns and
allowances) minus cost of sales and all operating expenses directly attributable
to the Business, reflecting all appropriate balance sheet accruals and
deferrals, and prepared in accordance with GAAP, but before interest and federal
and state taxes as set forth on Schedule 5.2(a)(iii).
"Deferred Consideration Payments" has the meaning ascribed to it in
Section 3.1(c) hereof.
"Earn-out Growth Payments" has the meaning ascribed to it in Section
3.1(d) hereof.
"Earn-out Periods" means, collectively, the First Earn-out Period, the
Second Earn-out Period, and the Third Earn-out Period.
"Effective Date" means March 1, 2008.
"Excess NOI" means, for each of the Earn-out Periods, the amount of Net
Operating Income that exceeds the Baseline NOI for each respective period. In
the event that the amount of Net Operating Income does not exceed the Baseline
NOI, the Excess NOI shall be deemed to equal zero (0).
"Financial Statements" mean the reviewed financial statements of Seller
for the fiscal years ended December 31, 2005, December 31, 2006, and December
31, 2007 prepared in accordance with GAAP.
"First Earn-out Period" means the first full 12 months beginning on the
first day of Seller's fiscal month of May, 2008.
"GAAP" means United States generally accepted accounting principles,
consistently applied.
"Income Statement" means a statement, for any period after the Closing
Date, which sets forth the Net Operating Income.
"Interim Financial Statements" mean the monthly unaudited financial
statements of Seller for the interim period from January 1, 2008 through the
last day of the last full month prior to the Closing Date prepared in accordance
with GAAP.
"Liens" means any encumbrances, security interests, pledges, claims,
charges, restrictions, licenses, adverse or equitable claims or rights
whatsoever held by a third party and, with respect to real property, includes
but is not limited to, mortgages, easements, rights-of-way, restrictions,
covenants, conditions, and options.
"NASDAQ" means the National Association of Securities Dealers
Automated Quotation system.
"Net Operating Income or "NOI" means, subsequent to the Effective Date,
determined in full accordance with GAAP except as otherwise noted herein, with
respect to the Business, net revenue (billed services and/or sold products at
invoice value reduced by customer discounts, returns and allowances) actually
collected minus cost of sales, all operating expenses directly attributable to
the Business including but not limited to general and administrative expenses,
legal fees and interest expenses on accounts receivables outstanding more than
60 days old but excluding (a) RCM Corporate Fees; (b) amortization of goodwill
from this transaction; (c) costs incurred by Buyer for the transactions
described in this Agreement including but not limited to accounting fees, legal
fees and commissions; and (d) Federal and State income taxes.
"RCM Corporate Fees" means all costs incurred by Buyer not directly
related to the ongoing business conducted by Seller such as legal, accounting,
SEC filing fees and executive salaries, and overall general and administrative
expenses of Buyer for corporate operations not directly related to the Business.
"SEC" means the United States Securities and Exchange Commission.
"Second Earn-out Period" means the first full 12 months after the First
Earn-out Period.
"Seller's Shareholders" means, collectively, Xxxx Xxxxxxx and Xxxxx
Xxxxxx.
"Third Earn-out Period" means the first full 12 months after the Second
Earn-out Period.
Other capitalized terms used in this Agreement shall have the meanings
ascribed to them in the Sections where such terms are initially used.
2. PURCHASE AND SALE OF ASSETS.
2.1. Assets To Be Purchased. Upon the terms and subject to the conditions set
forth in this Agreement, Seller shall sell, transfer, convey and assign to
Buyer, free and clear of all Liens (except for Liens related to Assumed
Liabilities (as defined below)), and Buyer shall purchase and acquire from
Seller, at the Closing, all right, title and interest in, to and under all of
the assets, properties, rights and businesses of Seller other than the Excluded
Assets (as defined below), whether or not specifically referred to in this
Agreement, including the following assets of Seller (collectively, the
"Purchased Assets"):
(a) all of Seller's right, title and interest in and to all equipment, fixtures,
furniture, computer equipment and all other tangible personal property used by
Seller in the conduct of the Business (collectively, the "Fixed Assets"), a
true, complete and correct list of which is set forth on Schedule 2.1(a);
(b) all of Seller's right, title and interest in and to the following items: (A)
all of Seller's common law, state, federal and foreign trademarks, service
marks, trade names, trade logos and trade styles, (B) all of Seller's common law
and statutory copyrights and registrations, (C) all of Seller's federal and
foreign patents and pending patent applications, (D) all of Seller's permits,
licenses, and governmental authorizations used in connection with the Business,
including software licenses for the use of pre-packaged software (collectively,
"Licenses"), (E) all of Seller's inventions that have been reduced to practice
and are being used in the Business, (F) all of Seller's computer software source
codes and object codes, programs, text files, stored procedures, and source
trees used in connection with the Business, (G) all of the technical and
business confidential or proprietary information of Seller, including
discoveries reduced to practice, know-how, databases, methodologies and other
business or technical confidential information that are used by Seller or in
connection with or relating to the Business or that provide Seller with a
commercial advantage over any or all of its competitors, (H) all of Seller's
promotional, sales and advertising material, artwork, films, layouts,
catalogues, brochures, descriptions of products or services and package designs
relating to the Business, (I) all of Seller's client lists, customer lists and
supplier lists, (J) all of Seller's telephone and facsimile numbers, (K) all
domain names used in connection with the Business, including
"xxxxxxxxxxxxxxx.xxx" and all of Seller's rights to content of the websites
found at such domain names, and (L) all goodwill relating to any of the
foregoing, (collectively, the "Intellectual Property"), a true, complete and
correct list of the Intellectual Property which has been registered under any
foreign, federal or state law is set forth on Schedule 2.1(b);
(c) true, complete and correct originals or photocopies of all books and
records, including all employee lists, all databases, accounts and ledgers and
all other instruments and documents relating to the Business and the Purchased
Assets being acquired by Buyer pursuant to this Agreement but excluding its
corporate minutes and stock ledgers;
(d) except as described in Section 4.2, all of Seller's leases and rental
agreements, all contracts, including contracts with customers of the Business,
employees of the Business, purchase orders, agreements and other instruments to
which Seller is a party or by which Seller or its assets may be bound, a true,
complete and correct list of which is set forth on Schedule 5.9 (collectively
the "Contracts");
(e) all rights of Seller under or pursuant to all warranties, representations
and guaranties made by suppliers or vendors in connection with products or
services furnished to Seller, or otherwise pertaining to the Business or
affecting the Purchased Assets;
(f) to the extent permitted by applicable law, all of Seller's goodwill in
connection with the Business, including all rights of Seller under any covenants
not-to-compete, confidentiality or non-solicitation agreements running to the
benefit of Seller; and
(g) all assets, properties, rights and claims of Seller of any kind or nature
(other than Excluded Assets) that are not otherwise described above.
2.2. Excluded Assets. Notwithstanding anything contained in this Agreement to
the contrary, the assets of Seller set forth on Schedule 2.2 are excluded from
the Purchased Assets and are not being purchased and sold hereunder (the
"Excluded Assets").
2.3. Transition Period. The parties agree that, to the extent permissible under
GAAP, from and after the Closing, they shall endeavor to treat the Closing for
accounting purposes as having occurred on the Effective Date and except as
otherwise set forth herein, Buyer shall maintain the economic benefits and
obligations of the operation of the Purchased Assets during the period from the
Effective Date through immediately prior to the Closing (the "Transition
Period").
3. PURCHASE PRICE; PAYMENT.
3.1. Purchase Price. Subject to the terms and conditions of this Agreement,
Buyer shall pay and deliver to Seller or to such third parties as Seller directs
the consideration described in and determined in accordance with the terms of
Sections 3.1(a), (b), (c), (d), (e) and (f) below, as the full, complete and
total consideration for the Purchased Assets (the "Purchase Price"):
(a) on the Closing Date, the delivery of the sum of $1,964,520.18, by wire
transfer of immediately available funds, to Huntington Bank to be applied by
Huntington Bank to repay Seller's indebtedness to Huntingdon Bank.
(b) one week after the Closing Date, 700,000 shares of Buyer's common stock (the
"Stock") subject to the terms of Section 3.3, below.
(c) one week after the Closing Date, the sum of $2,535,479.82 by wire transfer
of immediately available funds to a bank account designated by Seller.
(d) within one hundred twenty (120) days after the end of each of the Earn-out
Periods, deferred consideration payments equal to: (i) for the First Earn-out
Period, the sum of $800,000; (ii) for the Second Earn-out Period, the sum of
$800,000; and (iii) for the Third Earn-out Period, the sum of $800,000
(collectively, the "Deferred Consideration Payments"); provided, however, that
if (x) the amount of Net Operating Income for the First Earn-out Period is less
than $2,300,000, or (y) the amount of Net Operating Income for the Second
Earn-out Period is less than $2,600,000, or (z) the amount of Net Operating
Income for the Third Earn-out Period is less than $2,900,000, then the amount of
the Deferred Consideration Payment for the corresponding Earn-out Period shall
be zero (0). The parties expressly acknowledge that, depending upon the amount
of Net Operating Income for any of the Earn-out Periods, the amount of the
Deferred Consideration Payment for any given Earn-out Period may be zero (0) and
Seller shall not be entitled to receive any Deferred Consideration Payment.
(e) within one hundred twenty (120) days after the end of each of the Earn-out
Periods, deferred consideration payments equal to the sum of the Excess NOI (if
any) for such Earn-out Period multiplied by fifty percent (50%) (the "Earn-out
Growth Payments"). The parties expressly acknowledge that if there is no Excess
NOI for any Earn-out Period, then no Earn-out Growth Payment shall be earned or
payable for that Earn-out Period.
(f) within one hundred twenty (120) days after the end of the First Earn-out
period and Second Earn-out Period, deferred consideration payments, at Buyer's
sole election in the form of either (i) the sum of $1,000,000 in cash, or (ii)
subject to the terms of Section 3.3, below, the greater of (A) 150,000 shares of
the Stock or (B) that number of shares of Stock obtained by dividing the sum of
$1,000,000 by the average of the closing price of the Stock trading on the
NASDAQ system for the twenty (20) days on which securities were traded on the
NASDAQ immediately prior to the anniversary of the Closing Date; provided,
however, that if the amount of Net Operating Income is less than $2,200,000 for
the First Earn-out Period, than no deferred consideration payment for that First
Earn-out Period shall be earned or payable and if the amount of Net Operating
Income is less than $2,200,000 for the Second Earn-out Period, than no deferred
consideration payment for that Second Earn-out Period shall be earned or
payable.
3.2. Inspection of Records. In any year in which an installment of the Deferred
Consideration Payment or Earn-out Growth Payment is due, Seller and its
authorized representatives, during normal business hours and at Seller's sole
cost and expense, shall have the right to audit, abstract and copy the relevant
financial records of Buyer to verify the calculation of any such payments. Buyer
shall cooperate with Seller and its agents in providing access to financial
information regarding Seller, including accountants' work papers.
3.3. Buyer's Stock. At the direction of Seller, the Stock may be issued to
Seller, or its assigns. The certificates evidencing the Stock shall include
legends which indicate that (i) the Stock is subject to the terms of Rule 144
promulgated under the Securities Act of 1933; (ii) 66.6% of the shares of the
Stock may not be sold to any third party by any means for at least one (1) year
after the date on which the Stock is issued; and (iii) 33.4% of the shares of
the Stock may not be sold to any third party by any means for two (2) years
after the date on which the Stock is issued.
3.4. Related Agreements. Concurrently with the execution of this Agreement, Xxxx
Xxxxxxx shall execute and deliver the Employment, Non-competition, and
Non-solicitation Agreement in the form as set forth in Exhibit "A" attached
hereto, Xxxxx Xxxxxx shall execute and deliver the Employment, Non-competition,
and Non-solicitation Agreement with in the form as set forth in Exhibit "B"
attached hereto. Buyer would not enter into the transactions contemplated hereby
but for the covenants set forth in these agreements.
3.5. Allocation of Purchase Price. Within ninety (90) days after the Closing,
the parties shall, in good faith and in accordance with Section 1060 of the
Code, jointly determine the allocation of the Purchase Price among the Purchased
Assets. Seller and Buyer agree that the allocation may be amended or modified by
mutual written agreement prior to the filing of the applicable tax returns of
Buyer or Seller. Seller and Buyer shall use such allocation in all relevant tax
returns.
3.6. Extension of Time for Deferred Payments. If Buyer has not actually received
and collected all of the revenue used in the calculation of the Net Operating
Income before the date on which a Deferred Consideration Payment or Earn-out
Growth Payment becomes due and payable under the terms of Section 3.1, above,
then the date on which such payment is due may be extended by Buyer until all
such amounts are actually received or until Buyer reasonably determines that
such amounts will be received promptly.
3.7 Work-in-Progress and Prepaid Expenses. Notwithstanding any terms in
this Agreement to the contrary, Seller shall transfer and convey to Buyer and
Buyer shall assume the Work-in-Progress and Unearned Revenues as set forth on
Column "C" of the Closing Balance Sheet, including the specific detail for
Work-In-Progress and Unearned Revenue. Buyer shall cause the Work-in-Progress to
be billed in the normal course of the Business consistent with past practices
and, to the extent that the amount of the Work-in-Progress actually collected
from the customers exceeds the amount of the Unearned Revenue, Buyer shall pay
such amount to Seller.
4. ASSUMPTION OF OBLIGATIONS AND LIABILITIES.
4.1. Liabilities and Obligations Assumed. Buyer shall not assume any of the
liabilities of Seller except those specifically set forth on Schedule 4.1 (the
"Assumed Liabilities").
4.2. Excluded Liabilities and Obligations. Except for the Assumed Liabilities as
provided in Section 4.1, Buyer is not assuming any debt, liability or obligation
of Seller and Seller shall retain all debts, liabilities and obligations of
Seller, whether relating to the Business, the Purchased Assets or otherwise,
including the following:
(a) all liabilities and obligations of Seller with respect to any claim, demand,
cause of action, suit, proceeding, judgment, loss, liability, or damage against
Seller;
(b) any other debt, liability or obligation of Seller;
(c) all liabilities and obligations to all employees of Seller accrued since its
inception, including accruals reflecting all earned but unpaid vacations,
holidays and bonuses as shown in the Closing Date Balance Sheet;
(d) Seller's insurance policies except those insurance policies constituting an
employee benefit, including but not limited to, Seller's healthcare insurance
plan; and
(e) all income taxes, payroll taxes, statutory federal, state and local taxes
and any taxes which may become due as a result of the transactions contemplated
by this Agreement other than personal property taxes not yet due and payable.
5. REPRESENTATIONS AND WARRANTIES OF SELLER AND SELLER'S SHAREHOLDERS. Seller
and Seller's Shareholders, jointly and severally, as a material inducement to
Buyer to enter into this Agreement and consummate the transactions contemplated
hereby, make the following representations and warranties to Buyer, which
representations and warranties are true and correct in all respects on this
date:
5.1. Capitalization; Seller's Shareholders.
(a) The authorized equity securities of Seller consist of 50,000 shares of
common stock, no par value, of which 120 shares are issued and outstanding.
Seller's Shareholders are, and will be on the Closing Date, the sole owners, of
record and beneficially, of all of the issued and outstanding capital stock of
Seller, free and clear of all Liens, claims or rights of other parties (whether
under option agreements, shareholder agreements or otherwise) to Seller's
capital stock.
(b) True, complete and correct copies of the organizational documents and all
minutes of Seller have heretofore been delivered to Buyer, as such documents or
instruments are presently in effect and have not been amended or modified and
the financial records reflect all payroll accruals including but not limited to
all bonuses, vacations, holidays and other compensation.
5.2. Financial Statements.
(a) A true, complete and correct copy of the Financial Statements is attached as
Schedule 5.2(a)(i). A true, complete and correct copy of the Interim Financial
Statements is attached as Schedule 5.2(a)(ii). A true, complete and correct copy
of the Closing Income Statement is attached as Schedule 5.2(a)(iii). A true,
complete and correct copy of the Closing Balance Sheet is attached as Schedule
5.2(a)(iv). The Financial Statements present, and the Interim Financial
Statements, the Closing Income Statement, and the Closing Balance Sheet present
or, as applicable, will present fairly in accordance with GAAP the assets,
liabilities and results of operations of Seller as of the dates and for the
periods indicated. The Financial Statements reflect all liabilities, contingent
or otherwise, of Seller as of the date thereof. Any liabilities incurred
subsequent to the dates thereof and consequently not reflected therein were
incurred in the ordinary course of business and do not in the aggregate have,
nor could they reasonably be expected in the future to have, any material
adverse effect on the Purchased Assets, on Seller or on the Business,
properties, prospects, operations, earnings, assets, liabilities or condition
(financial or otherwise) (individually or collectively, a "Material Adverse
Effect"). The contingency, tax and other reserves reflected on the Financial
Statements, Interim Financial Statements and Closing Balance Sheet are adequate,
appropriate and reasonable. The Closing Balance Sheet attached as Schedule
5.2(a)(iv), expressly including any footnotes, accurately reflects the amounts
of Closing Net Operating Income, Work-in-Progress and Deferred Revenue as of the
dates and for the periods indicated.
(b) All financial books and records and business records of Seller are in all
material respects true, complete and correct and have been maintained in
accordance with good business and accounting practices.
5.3. Due Organization. Seller is a corporation duly organized, validly existing
and in good standing under the laws of the State of Michigan and is qualified to
do business and in good standing in each state (a true, complete and correct
list of which is set forth on Schedule 5.3) where the properties owned, leased
or operated, or the business conducted, by it require such qualification except
where failure to so qualify would not result in a Material Adverse Effect.
Seller has the corporate power and authority to own its properties and assets
and to carry on the Business as now presently conducted.
5.4. Due Authorization. This Agreement has been duly authorized, executed and
delivered by Seller and has been executed and delivered by each of Seller's
Shareholders and constitutes a legal, valid and binding agreement of each of
Seller and Seller's Shareholders, enforceable in accordance with its terms,
except as such enforcement may be limited by applicable bankruptcy, insolvency,
moratorium and other similar laws relating to, limiting or affecting the
enforcement of creditors' rights generally or by the application of equitable
principles. Except as set forth on Schedule 5.4, neither the execution and
delivery of this Agreement by Seller and Seller's Shareholders, nor the
consummation of the transactions contemplated hereby by Seller and Seller's
Shareholders, nor compliance by Seller and Seller's Shareholders with any of the
provisions hereof, will violate in any material respect any order, writ,
injunction or decree of any court or governmental authority, or violate or
conflict with in any material respect or constitute a default under (or give
rise to any right of termination, cancellation or acceleration under), any
provisions of Seller's organizational documents, the terms or conditions or
provisions of any note, bond, lease, mortgage or agreement of any kind to which
either Seller or Seller's Shareholders is a party or by which Seller or Seller's
Shareholders or any of their respective properties may be bound, or violate in
any material respect any statute, law, rule or regulation applicable to Seller
or Seller's Shareholders.
5.5. Material Adverse Effects. Except as specifically stated in Schedule 5.5 or
as set forth in the Interim Financial Statements, from December 31, 2006 to the
date of this Agreement, the Business of Seller has been operated in the ordinary
course consistent with past practice and there has not been:
(a) any Material Adverse Effect;
(b) any other event or condition of any character that it is reasonable to
expect will, individually or in the aggregate with other events or conditions,
result in a Material Adverse Effect;
(c) any damage, destruction or loss that has not been repaired or replaced
(whether or not covered by insurance) affecting the Purchased Assets or
otherwise affecting Seller or the Business, its properties, prospects,
operations, earnings, assets, liabilities or condition (financial or otherwise)
excluding those that in the aggregate have not resulted in and could not
reasonably be expected to result in a Material Adverse Effect;
(d) any cancellation of any debts (except immaterial cancellations in the
ordinary course of business) or any waiver of any material rights of value to
Seller;
(e) any cancellation, termination, modification, change, waiver or material
breach of any existing contract of which Seller is a party that has resulted or
could reasonably be expected to result in a Material Adverse Effect, or the
entering into of any material contract not reflected in the Schedules annexed
hereto, or the termination or to Seller's knowledge, threatened termination of
any customer's relationship with Seller;
(f) any transfer, lapse or grant of any rights in the Intellectual Property or
any disposition or disclosure to any person of any trade secrets relating to the
Business that has resulted or could reasonably be expected to result in a
Material Adverse Effect;
(g) the entering into, creation or allowance of any new Lien on any Purchased
Assets other than those arising in the ordinary course of business and
immaterial in the aggregate;
(h) any increase or any change in any assumptions underlying or methods of
calculating any bad debt, contingency, tax or other reserves or any change in
its accounting practices, methods or assumptions (including changes in estimates
or valuation methods);
(i) any lease or sublease of real property by Seller or the exercise of any
purchase options or rights of first refusal contained in any lease or sublease
to which Seller is a party, or the termination, surrender, cancellation or
assignment of any of Seller's properties demised under any leases, or any part
thereof, except those that are immaterial in the ordinary course of business
consistent with past practice;
(j) the incurring by Seller of any indebtedness for borrowed money, the entering
into of any commitment to borrow money or making any loans or agreements to lend
money to third parties, or the agreement to guaranty any obligations of third
parties (other than in connection with the negotiation and collection of
immaterial negotiable instruments in the ordinary course of business);
(k) the writing up or writing down of the value of any of Seller's assets on its
financial statements or any sale, exchange or disposal of any of Seller's assets
or rights, other than the sale of its services, inventory, equipment or other
property in the ordinary course of business consistent with past practice;
(l) declared, set aside or paid any cash or non-cash dividends or declared, set
aside or made any cash or non-cash distributions of any kind to its
shareholders, or made any direct or indirect redemption, retirement, purchase or
other acquisition of any shares of its capital stock;
(m) any resignation or termination of any key employee of Seller, or receipt by
Seller of notice from any key employee of Seller of his or her intention to
resign; or
(n) any (i) grant of an increase in compensation payable or compensation to
become payable to any of Seller's directors, officers, employees or Contractors,
(ii) establishment of new benefits to Seller's directors, officers, employees or
Contractors, (iii) increase to existing benefits to Seller's directors,
officers, employees or Contractors, or (iv) modification to any collective
bargaining agreement to which Seller may be bound.
5.6. Litigation. Except as set forth on Schedule 5.6, there are no actions,
suits, claims, investigations or legal, administrative or arbitration
proceedings pending or to the knowledge of Seller threatened against Seller,
whether at law or in equity, before or by any federal, state, municipal, local,
foreign or other court or governmental department, commission, board, bureau,
agency or instrumentality, nor, the knowledge of Seller, are there any
circumstances that could reasonably be expected to result in any such action,
suit, claim, investigation or proceeding. Neither Seller nor Seller's
Shareholders are in violation of or default under, nor are any of Seller,
Seller's Shareholders or the Purchased Assets subject to, any judgment, order,
writ, injunction or decree of any federal, state, local or foreign governmental
or regulatory entity (or any department, agency, authority or political
subdivision thereof) or court or arbitrator addressed to it or to which it is a
party that could reasonably be expected to result in a Material Adverse Effect.
Set forth on Schedule 5.6 is a true, complete and correct description of the
settlement of any proceedings of the nature described in this Section 5.6 since
January 1, 2006, together with a description of the amount and nature of each
settlement.
5.7. Compliance; Governmental Authorizations; Permits and Licenses. Neither
Seller nor Seller's Shareholders have failed to file any report or return
required by any government or governmental agency except where the failure to
file has not and could not reasonably be expected to result in a Material
Adverse Effect. Seller and Seller's Shareholders have complied in all material
respects with all federal, state, local or foreign laws, ordinances, regulations
and orders applicable to the Business. Except as set forth on Schedule 5.7, (i)
the Licenses described on Schedule 5.7 constitute all of the Licenses required
by or appropriate for and utilized in the ownership and operation of the
Business as it is currently being conducted, all of which are owned or held
legally and beneficially by Seller; (ii) all of the Licenses are in full force
and effect; (iii) Seller has not received any notice to the effect that
additional Licenses are required by or appropriate for Seller; (iv) except as
set forth in Schedule 5.7, no consent, waiver, approval, license or
authorization of or designation, declaration or filing with any governmental
agency or any third party is required in connection with the execution and
delivery of this Agreement or any instrument contemplated hereby or the
consummation of the transactions contemplated hereby, including the transfer of
the Licenses to Buyer; and (v) no modification, suspension or cancellation of a
License, or any proceeding relating thereto, is pending or, to the knowledge of
Seller or Seller's Shareholders, threatened with respect to a License. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not result in a revocation or suspension
of, or require the amendment of, any License.
5.8. Taxes.
(a) Except as disclosed on Schedule 5.8, all (i) federal, state, local or
foreign tax returns (collectively, the "Returns") required to be filed with
respect to the properties, assets, operations, income and net worth of Seller
have been timely filed or appropriate extensions have been obtained and such
Returns are true, correct and complete; (ii) such Returns have been prepared in
accordance with all applicable laws and requirements, and accurately reflect
taxable income (or other measure of tax) of Seller, and (iii) taxes and
governmental charges, including, without limitation, any interest and penalties
(collectively "Taxes") due pursuant to such Returns or in connection with
Seller's operations have been paid or adequate provision therefor has been made
on the Financial Statements. Except as disclosed on Schedule 5.8, there are no
outstanding agreements or waivers extending the statutory period of limitation
concerning any Tax liability of Seller, no examination of any Return of Seller
is currently in progress and no governmental authority has, within the last
three (3) years, notified Seller or Seller's Shareholders of any Tax claim,
investigation or proceeding or conducted any audit. All monies required to be
collected or withheld by Seller for income Taxes, social security or other
payroll Taxes have been collected or withheld, and either paid to the
appropriate governmental agencies, set aside in accounts for such purpose, or
accrued, reserved against and entered upon the books of Seller and Seller is not
liable for any Taxes or penalties for failure to comply with any of the
foregoing.
(b) To the knowledge of Seller, there exist no grounds for the assertion or
assessment of any additional Taxes against Seller or its assets. No claim has
been made by a taxing authority in any jurisdiction where Seller does not file
tax returns with Seller is or may be subject to taxation by that jurisdiction.
(c) True, correct and complete copies of all federal or state income tax
Returns, Tax examination reports and statements of deficiencies assessed
against, or agreed to by, Seller with respect to the last two years have been
delivered to Buyer.
(d) The Company has not ever (i) joined in or been required to join in filing a
consolidated or combined federal, state or local income Return, (ii) been the
subject of a Tax ruling that has continuing effect, (iii) been the subject of a
closing agreement with any taxing authority that has continuing effect, or (iv)
granted a power of attorney with respect to any Tax matters that has continuing
effect.
(e) The Company is not a party to any tax-sharing agreement.
(f) The Company is not "foreign person" within the meaning of Section 1445 of
the Internal Revenue Code and the regulations promulgated thereunder.
(g) The Company does not own any interest in any entity characterized as a
partnership for federal income tax purposes.
5.9. Agreements. Except for insurance policies (a true, complete and correct
list of which is set forth on Schedule 5.16), and lease agreements (a true,
complete and correct list of which is set forth on Schedule 5.22), Schedule 5.9
contains a true, complete and correct list of all Contracts. True, complete and
correct copies of all written Contracts, and a memorandum describing the
material terms of each and every oral Contract, have been delivered to Buyer
prior to the date hereof. No event has occurred that (whether with or without
notice or lapse of time or both) would constitute a default by Seller under any
of the Contracts. To the knowledge of Seller, except as set forth on Schedule
5.9, there has been no default by any other party to any of the Contracts.
Except as set forth on Schedule 5.9, no Contract that requires the performance
of services by Seller is presently expected to result in a loss to Seller upon
completion or performance thereof. No Contract contains any covenant limiting or
restricting the freedom of Seller to engage in any business or compete with any
person. Seller has complied in all material respects with all material
provisions of all Contracts.
5.10. Title to Property and Related Matters. Seller has, and at the time of the
Closing will have, good and indefeasible title to all of the Purchased Assets,
free and clear of any Liens except those set forth on Schedule 5.10. Except as
set forth in Schedule 5.10 and except for matters that may arise in the ordinary
course of business, the Fixed Assets of Seller are in good operating condition
and repair, reasonable wear and tear excepted, and all are owned, maintained and
used in material conformity with all applicable federal, state and local laws,
regulations and ordinances. There is no condition that materially interferes
with the use of the Purchased Assets in the ordinary course of Business. Except
for Excluded Assets, all assets constituting, used principally in connection
with, and necessary or appropriate to the conduct of, the Business as currently
operated are owned or leased by Seller and are being conveyed to Buyer
hereunder. None of Seller's tangible personal property is subject to any
contract for its sale to any party other than in the ordinary course of business
consistent with past practice, and none of Seller's tangible personal property
is subject to any contract for its use by any party.
5.11. Intellectual Property. Except as set forth on Schedule 2.1(b), there are
no registered trademarks, copyrights or patents owned by or licensed to Seller.
All Intellectual Property is free and clear of all Liens and not subject to any
License granted by Seller to any third party. Seller has adequate and sufficient
rights, registered or unregistered, to use the Intellectual Property as
currently used in the Business, free and clear of competing rights or interests
of others that would preclude or otherwise impair such use by Seller. Seller has
not received any notice or claim from any person that the trademarks or service
marks of Seller used in the Business as currently conducted infringe any
trademark, trade name, copyright or patent of any third party.
5.12. Brokerage Fees. Seller has not incurred, and will not incur, any liability
for brokerage or finder's fees or similar charges in connection with the
transactions contemplated by this Agreement other than to Xxxxx Xxxxxxxx
Corporate Finance, LLC.
5.13. Consents Required. Except as set forth on Schedule 5.13, no approval,
authorization, consent, order or other action of, or filing with, any person,
firm or corporation or any court, administrative agency or other governmental
authority is required in connection with the execution and delivery by Seller or
Seller's Shareholders of this Agreement or the consummation by Seller or
Seller's Shareholders of the transactions described herein.
5.14. Employees; Employee Benefit Plans.
(a) Schedule 5.14(a) sets forth the number and names of the directors, officers
and employees of Seller as of February 29, 2008, the total compensation paid to
each of the directors, officers and employees of Seller during the periods
January 1, 2006 to December 31, 2006 and January 1, 2007 to December 31, 2007,
the accrued total compensation, including figures for each of salary and bonuses
paid for the fiscal year ending December 31, 2008 but excluding any bonuses
earned for each of the directors, officers and employees of Seller for the
fiscal year ending December 31, 2008.
(b) Except as disclosed on Schedule 5.14(b), Seller does not have any "employee
benefit plans" (as such term is defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") (the "Benefit
Plans"). Schedule 5.14(b) identifies all programs, including, without
limitation, any pension plans, health and welfare plans, life, disability,
medical, dental or hospitalization insurance plans, sick-leave, vacation accrual
or holiday plans, bonus, savings, profit-sharing or other similar benefit plans,
deferred compensation, stock option, stock ownership and stock purchase plans
covering employees or former employees of Seller. The Company does not sponsor
or contribute to, nor has it ever sponsored or been required to contribute to,
any "multiemployer plan" as such term is defined in Section 3(37) of ERISA. As
applicable with respect to each Benefit Plan, Seller has delivered to Buyer true
and complete copies of (i) each Benefit Plan, including all amendments thereto,
and in the case of an unwritten Benefit Plan, a written description thereof,
(ii) all trust documents, investment management contracts, custodial agreements
and insurance contracts relating thereto, (iii) the current summary plan
description and each summary of material modifications thereof, (iv) the two (2)
most recent annual reports (Form 5500 and all schedules thereto) filed with the
Internal Revenue Service, (v) the most recent Internal Revenue Service
Determination Letter and each currently pending application to the Internal
Revenue Service for a Determination Letter, (vi) the two (2) most recent summary
annual reports, actuarial reports, financial statements and trustee reports, and
(vii) all records, notices and filings concerning (x) Internal Revenue Service
or Department of Labor audits or investigations, (y) "prohibited transactions"
within the meaning of Section 406 of ERISA or Section 4975 of the Internal
Revenue Code and (z) "reportable events" within the meaning of Section 4043 of
ERISA. The Benefit Plans are and have been maintained and administered in
compliance with the requirements of ERISA and, where applicable, Paragraph 401
of the Code. There are no accumulated funding deficiencies as defined in
Paragraph 302 of ERISA or Paragraph 412 of the Code, whether or not waived, with
respect to the Benefit Plans. There is not now, nor has there been any
prohibited transaction (as defined in Paragraph 406 of ERISA or Paragraphs 503
or 4975 of the Code) involving the Benefit Plans. There are no pending or, to
the knowledge of Seller or Seller's Shareholders, threatened investigations or
audits by governmental agencies or any claims by or on behalf of the Benefit
Plans or by any employee of Seller alleging a breach or breaches of such plans,
or fiduciary duties thereunder, violations of other applicable federal or state
law with respect to the Benefit Plans or arising out of events relating to the
employment of the employees of Seller, which could result in a monetary
liability, or any material non-monetary liability, on the part of Seller under
ERISA or any other law, nor, to the knowledge of Seller or Seller's
Shareholders, is there any basis for such a claim.
(c) Seller and each of the employees listed on Schedule 5.14(a) are parties to a
Contract (described on Schedule 5.9) which sets forth certain terms under which
each employee is employed by Seller and Seller does not have any other written
contracts, or any oral contracts, including any employment, management, agency
or consulting contracts, with respect to any of its current or retired
employees.
(d) Seller is not a party to any collective bargaining agreement and there are
no union organizational activities or efforts to effect a representation
election pending or threatened.
(e) Except as disclosed on Schedule 5.14(e), Seller has complied in all material
respects with all applicable laws relating to the employment of labor, including
the provisions thereof relating to benefits required to be provided under Part
VI of Subtitle B of Title I of ERISA or Section 4980B(f) of the Code
(collectively, "COBRA"), wages, hours, working conditions, employee benefit
plans and the payment of withholding and social security taxes.
(f) No present or former employee of Seller has, or upon termination of their
employment with Seller as contemplated under the terms of Section 7.12 of this
Agreement, will have any claim against Seller (whether under federal or state
law, any employment agreement, or otherwise) on account of or for (a) overtime
pay, other than overtime pay for the current payroll period, (b) wages or salary
for any period other than the current payroll period, (c) vacation, time off or
pay in lieu of vacation or time off, other than that earned in respect of the
current fiscal year, (d) any violation of any statute, ordinance or regulation
relating to minimum wages or maximum hours of work, or (e) for any severance pay
or compensation.
(g) Neither Seller nor any agent, representative or employee of Seller has
committed any unfair labor practice as defined in the National Labor Relations
Act of 1947, as amended, and there is not now pending or to the knowledge of
Seller, threatened any charge or complaint against Seller by the National Labor
Relations Board or any representative thereof.
(h) Except as set forth on Schedule 5.14(h), Seller has not had any worker's
compensation claims asserted against it during the three (3) years preceding the
date hereof.
(i) Except as otherwise disclosed on Schedule 5.14(i):
(i) the Benefit Plans which are "employee pension benefit plans" within the
meaning of Section 3(2) of ERISA and which are intended to meet the
qualification requirements of Section 401(a) of the Code (each a "Pension Plan")
now meet, and at all times since their inception have met the requirements for
such qualification, and the related trusts are now, and at all times since their
inception have been, exempt from taxation under Section 501(a) of the Code.
(ii) All Pension Plans have received determination letters from the IRS to the
effect that such Pension Plans are qualified and the related trusts are exempt
from federal income taxes and no determination letter with respect to any
Pension Plan has been revoked nor, to the knowledge of Seller or Seller's
Shareholders, is there any reason for such revocation, nor has any Pension Plan
been amended since the date of its most recent determination letter in any
respect which would adversely affect its qualification.
(iii) No Benefit Plan is now or at any time have been subject to Part 3,
Subtitle B of Title I of ERISA or Title IV of ERISA. All contributions to, and
payments from, any Benefit Plan which may have been required in accordance with
the terms of such Benefit Plan or any related document have been timely made.
All such contributions to, and payments from, any Benefit Plan, except those to
be made from a trust, qualified under Section 401(a) of the Code, for any period
ending before the Closing Date that are not yet, but will be, required, shall be
paid on or before the Closing Date.
(iv) Neither Seller, nor to the knowledge of Seller and Seller's Shareholders,
any fiduciary, trustee or administrator of any Benefit Plan, has engaged in or,
in connection with the transactions contemplated by this Agreement, will engage
in any transaction with respect to any Benefit Plan which would subject any such
Benefit Plan, Seller, Seller's Shareholders, or Buyer to a tax, penalty or
liability for a "prohibited transaction" under Section 406 of ERISA or Section
4975 of the Code. None of the assets of any Benefit Plan is invested in any
property constituting "employer real property" or an "employer security", within
the meaning of Section 407 of ERISA.
(v) All insurance premiums with respect to any insurance policy related to a
Benefit Plan for any period up to and including the Closing Date shall have been
paid on or before the Closing Date, and, with respect to any such insurance
policy or premium payment obligation, neither Seller nor Buyer shall be subject
to a retroactive rate adjustment, loss sharing arrangement or other actual or
contingent liability.
(vi) With respect to each Benefit Plan that is a "group health plan" within the
meaning of Section 607 of ERISA and that is subject to Section 4980B of the
Code, Seller complies in all respects with the continuation coverage
requirements of the Code and ERISA.
(vii) No Benefit Plan provides benefits, including, without limitation, death or
medical benefits, beyond termination of service or retirement other than (A)
coverage mandated by law or (B) death or retirement benefits under a Benefit
Plan qualified under Section 401(a) of the Code. The Company has not made a
written or oral representation to any current or former employee promising or
guaranteeing any employer paid continuation of medical, dental, life or
disability coverage for any period of time beyond retirement or termination of
employment.
(viii) The Company's execution of, and performance of the transactions
contemplated by this Agreement, will not constitute an event under any Benefit
Plan that will result in any payment (whether as severance pay or otherwise),
acceleration, vesting or increase in benefits with respect to any employee. No
Benefit Plan provides for "parachute payments" within the meaning of Section
280G of the Code.
5.15. Environmental Matters. Neither Seller nor Seller's Shareholders have
received any notification that Seller has not complied with or presently is not
in compliance with any and all laws, rules and regulations relating to
environmental protection and conservation, including the Comprehensive
Environmental Response, Compensation and Liability Act and the Superfund
Amendments and Reauthorization Act of 1986, as amended and all applicable state
laws pertaining to the environment ("Environmental Requirements"). Seller has
not in the past and does not presently use, possess, generate, treat,
manufacture, process, handle, store, recycle, transport or dispose of hazardous
or toxic materials, substances, wastes, pollutants or contaminants (including
petroleum, petroleum products, poly-chlorinated biphenyls), radio-active
materials, asbestos or asbestos-containing materials in quantities or in a
manner which requires any environmental permit or in a manner which has caused,
causes or threatens to cause a release. There are no circumstances which may
interfere with or prevent continued compliance, or which may give rise to any
liability, or otherwise form the basis of any claim, or investigation under
Environmental Requirements, relating to the operation of the Business. For the
purpose of this Section, "hazardous substances" or "hazardous materials" shall
include (1) hazardous substances as defined in the Comprehensive Environmental
Response, Compensation and Liability Act, as amended, and regulations
thereunder, and (2) any substance for which state or local laws require the
clean-up, removal or other special handling of such materials or imposing
liability based upon improper handling thereof. Seller has not received any
notice that any of the Premises (as defined below) is listed, or proposed for
listing, on any list maintained by any governmental agency of sites requiring
remediation. Except for any liability arising exclusively from Seller's
respective occupancy of the Premises, Seller has not retained or assumed, by
contract, law or otherwise, any liability or responsibility for any
environmental claims or conditions.
5.16. Insurance.
(a) Schedule 5.16 contains a true, complete and correct list of all policies of
liability, errors and omissions, environmental, crime, fidelity, life, fire,
workers' compensation, health, director and officer liability and all other
forms of insurance currently in effect and owned or held by Seller, and
identifies for each such policy the underwriter, policy number, coverage type,
premium, expiration date and deductible. Seller maintains all insurance coverage
required by applicable law and such other insurance coverage, in such amounts,
as it considers commercially reasonable and appropriate with respect to the
Business and the Purchased Assets. All such insurance policies are outstanding
and in full force and effect and all premiums required to be paid with respect
to such policies have been paid through the Closing. Such policies adequately
insure Seller against liability (including products liability, errors and
omissions and/or breach of warranty claims) and against risks of fire, theft,
casualty and vandalism, in each case with respect to the Purchased Assets.
(b) With respect to each insurance policy required to be listed on Schedule
5.16:
(i) Seller has not received any notice from any issuers of such policies that
any such policies have been terminated, cancelled or are void, and Seller has
not submitted any claim for coverage under any such policy that has been denied
on the basis that Seller did not have a valid and binding insurance policy;
(ii) neither Seller nor any other party to any such policy is in breach or
default (including with respect to the payment of premiums or the giving of
notices) and to the knowledge of Seller no event has occurred that, with notice
or the lapse of time, or both, would constitute such a breach or default, or
permit termination, modification or acceleration, under the policy;
(iii) neither Seller nor Buyer shall be subject to a loss sharing arrangement or
other actual or contingent liability; and
(iv) no party to the policy has repudiated any provision thereof.
(c) All such insurance policies are on an "occurrence," as opposed to a "claims
made," basis.
(d) All such insurance policies are sufficient for compliance with all
requirements of law and the Contracts.
5.17. Customers.
(a) Set forth on Schedule 5.17 is a true, complete and correct list of all
customers of Seller, including the location of such customers and the total
revenue received from each such customer for the periods (i) January 1, 2006 to
December 31, 2006 and (ii) January 1, 2007 to December 31, 2007. No customer of
Seller has terminated or, to Seller's knowledge, threatened to terminate its
relationship with Seller. The relationships between Seller and all of its
customers are on a sound, commercial basis other than as disclosed on Schedule
5.5 and Seller has received no notice that the relationships with such customers
will not continue without material change following the Closing. There are no
commitments, special arrangements, promotional agreements, advertising programs
or similar arrangements with any customers of Seller.
(b) Seller does not receive a material portion of its revenues from customers
pursuant to or as a result of (i) any program or policy, whether sponsored by
any private entity or any governmental authority, designed to award contracts to
businesses based on the race, ethnicity or gender of its owners and/or
operators, including business set aside programs or affirmative action programs
or (ii) any familial relationship by or among any of Seller's Shareholders,
Seller's officers, directors, agents, employees or Contractors and any officers,
directors, agents employees of any of Seller's customers. All of Seller's
revenues arise from transactions with parties who are not affiliates of Seller
and resulted from agreements to provide services which were negotiated at
arm's-length.
(c) Set forth on Schedule 5.17 is a complete list of all of Seller's existing
contracts with customers of Seller which are open with respect to fulfillment of
their terms by Seller as of the Closing Date (the "Work in Progress"), including
the name of the respective customer, the start date of the contract, the total
value of the project from inception through its anticipated completion, the
total amount billed to date, the total amount earned but unbilled to date, the
work which remains to be performed, and the anticipated completion date, if any,
or, if a contract has no fixed completion date, the total amount billed to date
and the monthly future revenues with respect to such contract. The contracts
related to the Work in Progress are bona fide contracts of Seller consistent
with Seller's and industry practice. Seller has not been advised in writing or
orally that any customer intends to cancel or change the material terms of any
of the Work in Progress.
5.18. Approval. The board of directors of Seller has approved the execution of
this Agreement and the transactions contemplated hereby.
5.19. Contractors. With respect to contractors, consultants and other
independent personnel providing services to Seller or Seller's customers (the
"Contractors"), Seller has evaluated and classified the Contractors as
independent contractors in accordance with Internal Revenue Service regulations.
5.20. Change in Business. Neither Seller nor Seller's Shareholders has been
informed (i) by any Contractors or personnel currently operating or employed in
the Business that such Contractor or personnel will not continue to provide
their services to the Business on substantially the same terms as at present or
(ii) the business relations currently maintained by Seller with customers,
suppliers and others will not similarly be maintained.
5.21. Related Party Transactions. Except as set forth on Schedule 5.21, neither
any director, officer, employee or Contractor of Seller nor any member of any
such person's immediate family is presently a party to any transaction with
Seller, including any contract, agreement or other arrangement (i) providing for
the furnishing of services by, (ii) providing for the rental of real or personal
property from, or (iii) otherwise requiring payments (other than for services as
officers, directors or employees of Seller) to any such person, or to any
corporation, partnership, trust or other entity in which any such person has a
substantial interest as a shareholder, officer, director, trustee or partner.
Seller is not indebted, directly or indirectly, to any director, officer,
employee or Contractor of Seller for any liability or obligation, whether
arising by reason of ownership, or other written agreement or understanding or
otherwise (other than for services as officers, directors or employees of
Seller) and other than as disclosed on Schedule 5.21.
5.22. Leases. Schedule 5.22 sets forth a complete list, and a brief description
of all of the Seller's leased real property (the "Premises"). The Premises are
used by Seller in the conduct of and as part of the Business. Seller does not
regularly employ any real property in connection with the conduct of the
Business. The Company has a valid leasehold interest in the Premises, free and
clear of all leasehold mortgages, liens, encumbrances, subleases, security
interests, pledges, claims, charges, easements, licenses, rights-of-way,
covenants, conditions, restrictions, options and adverse or equitable claims or
rights whatsoever, except for liens, if any, for property Taxes not yet due.
5.23. Full Disclosure. None of the representations and warranties made by Seller
or Seller's Shareholders contained in this Agreement, including all Schedules
annexed hereto, nor in any statement, document, certificate, schedule, list,
memorandum or other writing (collectively, "Statements") furnished or to be
furnished by Seller or Seller's Shareholders pursuant hereto, is or will be
materially incorrect or incomplete, or contains or will contain an untrue
statement of a material fact, and none of such representations, warranties and
Statements omits or will omit to state a material fact necessary in order to
make the statements contained herein or therein not materially misleading. There
is no material fact known to Seller or Seller's Shareholders that Seller or
Seller's Shareholders have not disclosed in this Agreement or in a Schedule
annexed hereto that has resulted in a Material Adverse Effect or could
reasonably be expected to result in a Material Adverse Effect.
5.24. Improper Payments. Except for non-cash gifts or transfers made in the
ordinary course of business, neither Seller nor any officer, director, employee
of Seller having management authority over any project or who may derive bonus
or commission income from any project or agent of Seller, has at any time made
gifts, gratuities, or payments in any other form, whether in cash, goods or
services, to any persons or entities whatsoever, in payment for, or intended to
encourage, or which resulted in or may have resulted in or had the effect of
obtaining, encouraging or continuing the referral of persons or entities as
customers of any Seller's business, or obtaining, encouraging or extending any
contractual relationship, written or oral, for any of the same; nor has Seller
or any officer, director, employee of Seller having management authority over
any project or who may derive bonus or commission income from any project or
agent of Seller (i) entered into any arrangement, written or oral, under or
pursuant to which bribes, kickbacks, rebates, payoffs or other forms of illegal
or improper payments or remuneration have been or will be made, provided for or
suffered, either directly, or indirectly through agents, brokers, distributors,
dealers or other intermediaries, to any person or entity or (ii) made any
illegal or improper contribution of monies, services or property to any
political party, candidate or elected official for any purpose.
5.25. Sufficiency of Purchased Assets. The Purchased Assets comprise all of the
business, properties, assets and goodwill employed by Seller in connection with
the Business other than the Excluded Assets, and the Purchased Assets are all of
the business, properties, assets and goodwill that are reasonably necessary for
the conduct of the business of Seller as conducted by Seller on or prior to the
date of this Agreement.
5.26. Computer Software. Seller has not received any notice that Seller is not
authorized to use, has or is infringing or has misappropriated any third party's
commercial software rights.
6. REPRESENTATIONS AND WARRANTIES OF BUYER. As a material inducement to Seller
and Seller's Shareholders to enter into this Agreement and consummate the
transactions contemplated hereby, Buyer does hereby make the following
representations and warranties to Seller and Seller's Shareholders, which
representations and warranties are true and correct in all respects at this
date:
6.1. Due Organization of Buyer. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada and is
qualified to do business and is in good standing in each state where the
properties owned, leased or operated, or the business conducted, by it require
such qualification except where failure to so qualify would not result in a
material adverse effect on Buyer or its business, properties, prospects,
operations, earnings, assets, liabilities or condition (financial or otherwise).
Buyer has the corporate power and authority to own its property and assets and
to carry on its business as now presently conducted.
6.2. Due Authorization. This Agreement has been duly authorized, executed, and
delivered by Buyer, and constitutes a legal, valid, and binding obligation of
Buyer, enforceable in accordance with its terms except as such enforcement may
be limited by applicable bankruptcy, insolvency, moratorium, and other similar
laws relating to, limiting or affecting the enforcement of creditors' rights
generally or by the application of equitable principles. Neither the execution
and delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, nor compliance by Buyer with any of the provisions hereof,
will violate in any material respect any order, writ, injunction or decree of
any court or governmental authority, or violate or conflict with in any material
respect or constitute a default under (or give rise to any right of termination,
cancellation or acceleration under), any provisions of Buyer's Certificate of
Incorporation or Bylaws, the terms or conditions or provisions of any note,
bond, lease, mortgage or agreement of any kind to which Buyer is a party or by
which Buyer or its properties may be bound, or violate in any material respect
any statute, law, rule or regulation applicable to Buyer.
6.3. Brokerage Fees. Buyer has not incurred, and will not incur, any liability
for brokerage or finder's fees or similar charges in connection with the
transactions contemplated by this Agreement.
6.4. Approval. The board of directors of Buyer has unanimously approved the
execution of this Agreement and the transactions contemplated hereby.
6.5. No Approvals Required. No approval, authorization, consent, order or other
action of, or filing with, any person, firm or corporation or any court,
administrative agency or other governmental authority is required in connection
with the execution and delivery by Buyer of this Agreement or the consummation
by it of the transactions contemplated hereby, except to the extent that the
parties may be required to file reports in accordance with relevant regulations
under federal and state securities laws.
7. COVENANTS OF THE PARTIES.
7.1. Nondisclosure. Neither Buyer, Seller nor Seller's Shareholders shall
disclose to the public or to any third party the existence of this Agreement or
the transactions contemplated hereby or any other material non-public
information concerning or relating to the other parties hereto, other than with
the express prior written consent of the other parties hereto, except pursuant
to the terms of Section 7.12 below, as may be required by applicable securities
laws as they pertain to public companies, law or court order or to enforce the
rights of such disclosing party under this Agreement, in which event the
contents of any proposed disclosure shall be discussed with the other party
before release; provided, however, that notwithstanding anything to the contrary
contained in this Agreement, any party hereto may disclose this Agreement to any
of its directors, officers, employees, stockholders, affiliates, agents and
representatives who need to know such information for the sole purpose of
evaluating the transactions contemplated by this Agreement, to any party whose
consent is required in connection with this Agreement, or any regulatory body
where such disclosure is required under federal or state law.
7.2. Confidentiality.
(a) Confidentiality of Buyer-Related Information. With respect to information
concerning Buyer that is made available to Seller and Seller's Shareholders in
connection with this Agreement, Seller and Seller's Shareholders agree that each
shall hold such information in strict confidence, shall not use such information
except for the sole purpose of evaluating the transactions contemplated by this
Agreement and shall not disseminate or disclose any of such information other
than to representatives who need to know such information for the sole purpose
of evaluating the transactions to be undertaken pursuant to this Agreement (each
of whom shall be informed in writing by Seller or Seller's Shareholders of the
confidential nature of such information and directed by Seller or Seller's
Shareholders to treat such information confidentially). The above limitations on
use, dissemination and disclosure shall not apply to information that (i) is
learned by Seller or Seller's Shareholders from a third party entitled to
disclose it; (ii) became known publicly other than through Seller or Seller's
Shareholders or any party who received the same through Seller or Seller's
Shareholders; (iii) is required by law or court order to be disclosed by Seller
or Seller's Shareholders (after notice and opportunity to oppose such
disclosure); or (iv) is disclosed with the express prior written consent thereto
of Buyer. Seller and Seller's Shareholders shall undertake all necessary steps
to ensure that the secrecy and confidentiality of such information will be
maintained in accordance with the provisions of this subparagraph (a).
(b) Confidentiality of Seller-Related Information. With respect to information
concerning Seller that is made available to Buyer in connection with this
Agreement, Buyer agrees that it shall hold such information in strict
confidence, shall not use such information except for the sole purpose of
evaluating the transactions contemplated by this Agreement and shall not
disseminate or disclose any of such information other than to its directors,
officers, employees, shareholders, affiliates, agents and representatives who
need to know such information for the sole purpose of evaluating the
transactions to be undertaken pursuant to this Agreement (each of whom shall be
informed in writing by Buyer of the confidential nature of such information and
directed by Buyer to treat such information confidentially). The above
limitations on use, dissemination and disclosure shall not apply to information
that (i) is learned by Buyer from a third party entitled to disclose it; (ii)
became known publicly other than through Buyer or any party who received the
same through Buyer; (iii) is required by law or court order to be disclosed by
Buyer (after notice and opportunity to oppose such disclosure); or (iv) is
disclosed with the express prior written consent thereto of Seller. Buyer shall
undertake all necessary steps to ensure that the secrecy and confidentiality of
such information will be maintained in accordance with the provisions of this
subparagraph (b).
7.3. Prohibition on Trading in Buyer Stock. Seller and Seller's Shareholders
acknowledge that the United States securities laws prohibit any person who has
received material non-public information concerning the matters which are the
subject matter of this Agreement or concerning Buyer generally from purchasing
or selling the securities of Buyer, or from communicating such information to
any person under circumstances in which it is reasonably foreseeable that such
person is likely to purchase or sell securities of Buyer. Accordingly, Seller
and Seller's Shareholders each instruct and direct their respective officers and
employees not to purchase or sell any securities of Buyer, or communicate such
material non-public information to any other person under circumstances in which
it is reasonably foreseeable that such person is likely to purchase or sell
securities of Buyer, until no earlier than 72 hours following the filing of a
Current Report on Form 8-K with the SEC announcing the Closing pursuant to this
Agreement.
7.4. Expenses. Each party shall bear its own expenses in connection with the
transactions contemplated by this Agreement.
7.5. Parties' Access to Records After Closing. Seller and Seller's Shareholders
acknowledge that all customer lists, records and other information pertaining to
Seller, the Business or its customers that are included in the Purchased Assets
are proprietary, confidential information and that on and after the Closing, all
such lists, records and information shall be the property of Buyer. Each of the
parties agrees to preserve until December 31, 2011, all records in its
possession relating to any of the assets, liabilities or business of Seller for
all time periods hereof ended on or prior to the Closing Date, or to the
transactions contemplated herein. In the event that either party needs access to
such records in the possession of the other party relating to any of the assets,
liabilities or business of Seller or to the transactions contemplated herein for
the purpose of preparing income tax returns or for complying with any audit
request, subpoena or other investigative demand by any governmental authority or
for any civil litigation or any other legitimate purpose not injurious to the
other party, each party will allow representatives of the other party reasonable
access to such records during normal business hours at such party's place of
business for the sole purpose of obtaining information for use as aforesaid and
will permit such other party to make extracts and copies thereof as may be
necessary or convenient and, if required for such purpose, to have access to and
copies of original documents (at the requesting party's expense).
7.6. Prorations.
(a) With respect to those charges (including, without limitation, lease
payments, real estate taxes, personal property taxes, water and sewer rents, if
any, utility charges, telephone bills, and similar items) which relate to a
period both prior to and subsequent to the Effective Date, any invoices or
statements received by either party which cover such period (expressly including
any bills for Michigan personal property tax previously received and paid by
Seller) shall, within fifteen days after the Closing Date, be prorated by Buyer
in good faith between Buyer and Seller according to the number of working or
calendar days, as applicable, in the period covered by such invoice or statement
during which Buyer and Seller, respectively, operated the Business and each
shall pay its allocable share thereof, either directly or by way of
reimbursement if the other party shall have paid the same, upon receipt of an
invoice therefor or evidence of such payments, as applicable.
(b) With respect to the pre-paid expenses as set forth on Column "C" of the
Closing Balance Sheet, within fifteen days after the Closing Date, Buyer shall
determine, in its discretion, whether the pre-paid expenses can be utilized by
and provide a benefit to Buyer after the Closing Date and, to the extent that
such pre-paid expenses can be so utilized, such pre-paid expenses shall be
identified by Buyer as "Approved Pre-paid Expenses" and Buyer shall deliver
written notice setting forth in reasonable detail the Approved Pre-paid Expenses
together with payment for such Approved Pre-paid Expenses to Seller by wire
transfer of immediately available funds.
(c) At the Closing, Seller and Buyer shall adjust as necessary for any and all
wages and payroll taxes (i) either paid by Seller for periods subsequent to the
Closing Date for the benefit of Buyer and/or those employees of Seller who are
employed by Buyer subsequent to the Closing Date or (ii) incurred by Seller and
paid by Buyer and relating to periods prior to the Closing Date, and shall
adjust for other employment-related expenses with respect to such employees.
7.7. Bulk Sales and Transfer Taxes.
(a) Buyer hereby waives compliance by Seller or Seller's Shareholders with the
requirements of any and all applicable laws relating to bulk sales and
transfers; and as consideration for such waiver, Seller and Seller's
Shareholders jointly and severally agree to indemnify Buyer for any loss
resulting from any claim by any creditor of Seller under any such law.
(b) All transfer taxes of any kind, including state and local sales taxes, if
any, and any and all recording and/or filing fees arising from or in connection
with the transactions contemplated hereunder, shall be paid by Seller.
7.8. Further Assurances; Post Closing Assistance. At the Closing, and from time
to time thereafter, Seller and Seller's Shareholders shall, at the request of
Buyer, take all action necessary to put Buyer in actual possession and operating
control of the Purchased Assets, and shall execute and deliver to Buyer such
further instruments of assignment, consent, transfer and conveyance, and take
such other actions, as Buyer or counsel for Buyer may reasonably request, in
order more effectively to transfer and convey the Purchased Assets and the
Business to Buyer. Seller shall, at the request of Buyer, cooperate with Buyer
in sending a notice to Seller's customers and suppliers to assist Buyer in
continuing to enjoy good relationships with such customers and suppliers.
Without limiting the foregoing, with respect to any Contract for which a consent
or assignment is required but not obtained, Seller and Seller's Shareholders
shall, at the request of Buyer and at their own expense, cooperate with Buyer in
any reasonable arrangement designed to provide for Buyer the benefits and
obligations of or under any such Contract, including enforcement for the benefit
of Buyer of any and all rights of Seller against a third party thereto arising
out of the breach or cancellation thereof by such third party.
7.9. Bonuses. Notwithstanding any other provision of this Agreement, Seller
acknowledges and agrees that 100% of all bonuses for employees of Seller
relating to fiscal year 2007 shall be paid and/or accrued as of or prior to the
Effective Date, and under no circumstances shall Buyer be responsible for paying
any such bonuses.
7.10. Accounts Receivable. The parties acknowledge that Seller will retain and
not transfer and sell to Buyer all of Seller's accounts receivable related to
services provided before the Closing Date and that after the Closing Date Buyer
expects to provide services to the same customers serviced by Seller. If either
party receives any payment related to services actually performed by the other
party, the receiving party shall, within three (3) business days, deliver such
payment to the other party. If a dispute arises between the parties as to the
appropriate recipient of a payment from a customer, the parties shall consult
with the customer as to the services and/or invoice for which the customer
intended to pay and the parties shall abide by such customer's determination and
immediately thereafter transfer an amount equal to any such payment to the
appropriate party as identified by the customer. In no event shall either party
disparage the other party to any customer in connection with the collection of
any accounts receivable. Buyer will assist the Seller in the collection of
accounts receivables arising from the operation of the Business before the
Closing Date and, upon the request of the Seller, Buyer will use reasonable
efforts consistent with Buyer's customary practices to collect such accounts
receivable from the customer; provided, however, that Buyer shall have no
obligation to commence any legal proceeding on behalf of Seller or incur any
incremental increase in costs in connection with Buyer's efforts to collect such
accounts receivable.
7.11. Dissolution. Promptly after the Closing Date, Seller's Shareholders shall
take all actions necessary to effect the dissolution of Seller under and in
accordance with applicable state law. Upon request of Buyer, Seller's
Shareholders shall promptly provide Buyer with copies of any and all documents
prepared to effect dissolution of Seller.
7.12. Seller's Employees. Immediately upon Closing, Seller's Shareholders shall
terminate the employment of all of Seller's employees and shall, together with
and in consultation with Buyer, notify Seller's employees that the transaction
contemplated under the terms of this Agreement has occurred. After such notice
is provided, Buyer will extend offers of employment to certain of Seller's
employees (as determined by Buyer in its sole discretion) on an "at-will" basis
and, as a condition to employment with Buyer, will request that each of Seller's
employees offered employment execute and deliver the Confirmation of Employment
Agreement in the form as set forth in Exhibit "C" attached hereto. Seller shall
be solely responsible to pay any severance pay to which Seller's employees may
be entitled upon their termination and Buyer shall have no obligation to pay any
severance or accrue or acknowledge any "service time" or seniority for any of
Seller's employees which Buyer elects to hire. Buyer shall have no obligation to
pay severance to any of Seller's employees hired by Buyer and terminated by
Buyer within one year after the Closing Date.
8. THE CLOSING.
8.1. Time and Place. The closing of the transactions contemplated by this
Agreement (the "Closing") has occurred on March 19, 2008 (the "Closing Date") by
an exchange of signature pages by fax and/or electronic mail and the delivery of
original documents and instruments by reputable overnight courier.
8.2. Deliveries by Seller. At the Closing and against the deliveries to be made
by Buyer pursuant to Section 8.3, Seller has delivered the following to Buyer:
(a) a certified copy of resolutions of the board of directors of Seller
authorizing the making, execution and delivery of this Agreement and each of the
agreements and instruments executed in connection herewith or delivered pursuant
hereto and the consummation of the transactions contemplated hereby, together
with an incumbency certificate, each of which shall be certified as true,
complete and correct as of the Closing Date by the Secretary of Seller;
(b) a xxxx of sale in form and substance reasonably satisfactory to Buyer
pursuant to which Seller transfers and conveys to Buyer all of Seller's right,
title and interest in and to the tangible Purchased Assets;
(c) an assignment and assumption agreement in form and substance reasonably
satisfactory to Buyer pursuant to which Seller transfers and assigns to Buyer
all of Seller's right, title and interest in and to the intangible Purchased
Assets and Buyer assumes from Seller the Assumed Liabilities;
(d) executed consents to assignment from each of the parties to each of the
Contracts other than Seller to the extent a consent to the assignment of such
Contract by Seller to Buyer is required by the terms of such Contract or is
otherwise required by law;
(e) a good standing certificate with respect to Seller issued by the Secretary
of State of the State of Michigan within one (1) week prior to the Closing Date;
(f) good standing certificates with respect to Seller issued by the Secretary of
State of each state set forth on Schedule 5.3 within one (1) week prior to the
Closing Date;
(g) if any of the Purchased Assets are encumbered by any Lien, a release of all
such Liens in form and substance acceptable to Buyer other than an Assumed
Liability;
(h) the Employment, Non-competition, and Non-solicitation Agreement with Xxxx
Xxxxxxx in the form as set forth in Exhibit "A" attached hereto;
(i) the Employment, Non-competition, and Non-solicitation Agreement with Xxxxx
Xxxxxx in the form as set forth in Exhibit "B" attached hereto;
(j) the opinion of Xxxxxxx Xxxxx Xxxxxxx & Xxxxxxxxx, P.C., counsel to Seller,
in form and substance reasonably satisfactory to Buyer as set forth in Exhibit
"D" attached hereto;
(k) original copies of such consents, approvals, licenses, permits,
authorizations, qualifications and orders of governmental authorities as are
necessary for the consummation of the transactions contemplated by this
Agreement;
(l) original copy of an amendment of Seller's Certificate of Incorporation
which, upon filing in the office of the Secretary of State of Michigan, will
effectively change Seller's corporate name to a name which does not include the
words "NuSoft" or "NuSoft Solutions"; and
(m) such other documents as are reasonably requested by Buyer in connection with
the consummation of the transactions contemplated hereto.
8.3. Deliveries by Buyer. Against the deliveries to be made by Seller pursuant
to Section 8.2,
(a) At the Closing, Buyer has delivered or will deliver to Seller the following:
(i) the portion of the Purchase Price to be paid at Closing to Huntington Bank;
(ii) a certified copy of resolutions of the board of directors of Buyer
authorizing the making, execution and delivery of this Agreement and each of the
agreements and instruments executed in connection herewith or delivered pursuant
hereto and the consummation of the transactions contemplated hereby;
(iii) fully executed counterparts to any of the instruments to be delivered by
Seller pursuant to Section 8.2 that require execution by Buyer; and
(iv) such other documents as are reasonably requested by Seller in connection
with the consummation of the transactions contemplated hereby.
(b) One week after the Closing Date, Buyer shall issue the portion of the
Purchase Price as set forth in Section 3.1(c) below, and will issue the Stock as
set forth in Section 3.1(b), below.
9. INDEMNIFICATION.
9.1. Seller and Seller's Shareholders. Seller and Seller's Shareholders, jointly
and severally, shall indemnify, defend and hold harmless Buyer and its
stockholders, directors, officers, employees, agents and control persons
("Buyer's Indemnitees") from and against any and all demands, claims, actions or
causes of action, judgments, assessments, losses, liabilities, damages or
penalties and reasonable attorneys' fees and related disbursements
(collectively, "Claims") incurred by any of Buyer's Indemnitees that arise out
of or result from (i) a misrepresentation, breach of warranty, or breach or
non-fulfillment of any covenant of Seller or Seller's Shareholders contained
herein or in the Schedules annexed hereto or in any other Statements furnished
or to be furnished by Seller or Seller's Shareholders pursuant hereto or in
connection with the transactions contemplated hereby or thereby, whether
asserted by Buyer in its own right or asserted against Buyer by any third-party,
unless Buyer had written notice of such misrepresentation or breach and agreed,
in writing, to waive the same, (ii) any claims of third-parties arising out of
or relating to the ownership or operation of the Purchased Assets or the
Business by Seller prior to the Closing, (iii) any liabilities of Seller that
are not assumed by Buyer pursuant to Section 4.1, whether accrued, absolute,
contingent or otherwise, or (iv) the conduct of Seller's business (other than
the Business acquired by Buyer) after the Closing Date.
9.2. Buyer. Buyer shall indemnify, defend and hold harmless Seller and Seller's
Shareholders from and against any and all Claims incurred by Seller and/or
Seller's Shareholders that arise out of or result from (i) a misrepresentation,
breach of warranty or breach or non-fulfillment of any covenant of Buyer
contained herein or in the Schedules annexed hereto; (ii) any claims of
third-parties arising out of or relating to the ownership or operation of the
Purchased Assets or the Business by Buyer after the Closing Date, or (iii) any
of the Assumed Liabilities.
9.3. Methods of Asserting Claims for Indemnification. All claims for
indemnification under this Agreement shall be asserted as follows:
(a) Third Party Claims. (i) In the event that any Claim for which a party (the
"Indemnitee") would be entitled to indemnification under this Agreement is
asserted against or sought to be collected from the Indemnitee by a third party,
the Indemnitee shall promptly notify the other party (the "Indemnitor") of such
Claim, specifying the nature thereof, the applicable provision in this Agreement
or other instrument under which the Claim arises, and the amount or the
estimated amount thereof (the "Claim Notice"). The Indemnitor shall have thirty
(30) days (or, if shorter, a period to a date not less than ten (10) days prior
to when a responsive pleading or other document is required to be filed but in
no event less than ten (10) days from delivery of the Claim Notice) (the "Notice
Period") to notify the Indemnitee (i) whether or not it disputes liability
hereunder with respect to such Claim and (ii) whether or not it desires to
control the defense and settlement of such Claim employing counsel of its
choice, the fees and expenses of which shall be at the Indemnitor's sole cost
and expense, which such counsel must be reasonably satisfactory to the
Indemnitee. Notwithstanding the foregoing, the Indemnitee shall have the sole
right to control the defense and settlement of a Claim employing counsel of its
choice in its sole discretion if (i) the Indemnitor has disputed liability
hereunder with respect to such Claim, (ii) the Indemnitor has not elected to
control the defense and settlement of such Claim or (iii) the Indemnitee shall
have been advised by its counsel that such Claim, if successful, would be
reasonably likely to result in the imposition of injunctive or other equitable
relief against the Indemnitee and, in each such case, all costs and expenses of
such proceedings, including the fees and expenses of counsel, and the amount of
any settlement or judgment in connection with such Claim, shall be at the
Indemnitor's sole cost and expense if it shall thereafter be found that such
Claim was subject to indemnification by the Indemnitor hereunder.
(ii).....If the Indemnitor elects to defend the Claim by
appropriate proceedings, such proceedings shall be promptly settled or
prosecuted to a final conclusion in such a manner as to minimize any risk of
additional damage to the Indemnitee and all costs and expenses of such
proceedings, including the fees and expenses of counsel, and the amount of any
settlement or judgment, shall be paid by the Indemnitor; provided, however, that
(x) the Indemnitor shall not, without the written consent of the Indemnitee,
settle or compromise any Claim or consent to the entry of any judgment unless
(A) there is no finding or admission of any violation of law by or on behalf of
the Indemnitee, (B) the sole relief provided is monetary damages that are paid
in full by the Indemnitor, (C) the settlement or compromise includes the giving
by the claimants/plaintiffs to the Indemnitee of an unconditional release from
all liabilities in respect of such Claim and (D) the settlement or compromise
does not impose injunctive or other equitable relief upon the Indemnitee, and
(y) the Indemnitee shall have no liability with respect to any settlement or
compromise of any Claim effected without its consent. If the Indemnitee desires
to employ counsel separate from the counsel employed by the Indemnitor to
participate in any defense or settlement of a Claim that the Indemnitor has
elected to defend, it may do so at its sole cost and expense; provided, however,
that such counsel for the Indemnitee shall be at the Indemnitor's sole cost and
expense if the Indemnitee shall have been advised by such counsel that under
applicable standards of professional conduct it is reasonably likely to
constitute a conflict of interest for the Indemnitor's counsel to represent both
the Indemnitor and the Indemnitee.
(b) Non-Third Party Claims. In the event that the Indemnitee shall have a Claim
for indemnification hereunder that does not involve a Claim being asserted
against it or sought to be collected by a third party, the Indemnitee shall
promptly send a Claim Notice with respect to such Claim to the Indemnitor. If
the Indemnitor does not notify the Indemnitee within the Notice Period that it
disputes such Claim, the Indemnitor shall pay the amount thereof to the
Indemnitee. If the Indemnitor delivers written notice within thirty (30) days
after receipt of the Claim Notice that Indemnitor disputes such Claim, the
Indemnitor and Indemnitee will attempt, in good faith, to negotiate a resolution
of such dispute, and, if not resolved within the Notice Period, such dispute
shall be resolved subject to the terms of Section 10 of this Agreement.
(c) Cooperation of Parties. If either party chooses to defend or participate in
the defense of any liability, it shall have the right to receive from the other
party, subject to any restriction of applicable law or that may be necessary to
preserve the privilege of attorney-client communications, any books, records or
other documents within such other party's control that are necessary or
appropriate for such defense.
9.4. Right of Set Off. The amount of any Claims as to which Buyer is entitled to
indemnification hereunder may be set off by Buyer against any payments due from
Buyer to Seller after the Closing Date expressly including the Deferred
Consideration Payment(s) or the Earn-out Growth Payment(s); provided, that, the
sum set forth in Section 3.1(c), shall not be subject to set-off and;
9.5. Separate Obligations. The rights of Buyer and Seller hereunder are
independent of and in addition to such rights and remedies of an equitable
nature as either of them may have (other than actions or proceedings seeking
monetary damages) for any misrepresentation, breach of warranty or failure to
fulfill any agreement or covenant hereunder on the part of any of Seller,
Seller's Shareholders or Buyer, including the right to seek either specific
performance or rescission and restitution, none of which rights shall be
affected or diminished hereby.
9.6. Limitations on Indemnity.
(a) Notwithstanding anything to the contrary provided elsewhere in this
Agreement, the obligations of Seller and Seller's Shareholders under this
Agreement to indemnify Buyer's Indemnitees with respect to any Claims pursuant
to Section 9.1 shall be of no force and forever barred unless the Buyer's
Indemnitees have given the Seller and Seller's Shareholders notice of such claim
prior to May 1, 2010, provided that there shall be no time limit for Claims (i)
arising from the Seller's or Seller Shareholders' intentionally and knowingly
making any untrue statement of a material fact or to failing to state a material
fact necessary in order to make the statements made, in the light of the
circumstances under which they were made, not misleading, (ii) arising from
Seller's or Seller Shareholders' wanton misconduct, (iii) described in Section
9.1(ii) of this Agreement, and (iv) made for a breach of the representations and
warranties contained in Sections 5.1 (Capitalization; Seller's Shareholders),
5.3 (Due Organization), 5.4 (Due Authorization), 5.8 (Taxes), 5.10 (Title to
Property and Related Matters), 5.12 (Brokerage Fees), 5.13 (Consents Required),
5.14 (Employees; Employee Benefit Plans), 5.18 (Approval), 5.19 (Contractors),
5.22 (Related Party Transactions), 5.23 (Improper Payments), other than the
statute of limitations applicable thereto.
(b) No Claim for indemnification pursuant to Section 9 may be made
unless and until the Buyer's Indemnitees have incurred, sustained or suffered
Damages in respect of which the Seller and Seller's Shareholders would be liable
under this Section 9 in excess of Twenty Thousand ($20,000) Dollars in the
aggregate (the "Threshold Amount"), at which time and thereafter only such
amount in excess of the Threshold Amount may be claimed and recovered as
provided in this Agreement.
10. EXCLUSIVE JURISDICTION. Any party bringing a legal action or proceeding
against any other party arising out of or relating to this Agreement shall bring
the legal action or proceeding in the United States District Court for the
Eastern District of Pennsylvania or in any court of the Commonwealth of
Pennsylvania sitting in Philadelphia, Pennsylvania. Each party to this Agreement
submits to the exclusive jurisdiction of such courts and their respective
appellate courts for the purposes of all legal actions and proceedings arising
out of or relating to this Agreement. Each party further waives any objection to
the laying of venue for such suit, action or proceeding in such courts, and any
claim that any action or proceeding brought in any such court has been brought
in an inconvenient forum.
11. NOTICES. All notices or
other communications
required or permitted
hereunder shall be in
writing and shall be deemed
to have been duly given if
delivered in person or sent
by overnight delivery,
confirmed telecopy or
prepaid first class
registered or certified
mail, return receipt
requested, to the following
addresses or telecopy
numbers, or such other
addresses or telecopy
numbers as are given to the
other parties to this
Agreement in the manner set
forth herein:
11.1. If to Buyer, to: RCM Technologies, Inc.
0000 XxXxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attn: Xxxx Xxxxx
Telecopy No.: (000) 000-0000
With a copy to: White and Xxxxxxxx LLP
0000 Xxx Xxxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000
Attn: Xxxx Xxxxxxxx, Esquire
Telecopy No.: (000) 000-0000
If to Seller to: NuSoft Solutions, Inc.
]
[ ]
Attn: Xxxx Xxxxxxx
Telecopy No.: [ ]
With a simultaneous Xxxxxxx Xxxxx Xxxxxxx & Xxxxxxxxx, P.C.
constitute notice) to: 00000 Xxxxxxxxx Xxxx, Xxx. 000
Xxxxxxx Xxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx, Esq.
Telecopy No.: 248-258-8927
Any such notices shall be effective when delivered in person or sent
by confirmed telecopy, one business day after being sent by overnight delivery
or three (3) business days after being sent by registered or certified mail. Any
of the foregoing addresses may be changed by giving notice of such change in the
foregoing manner, except that notices for changes of address shall be effective
only upon receipt.
12. MISCELLANEOUS.
12.1. Nature of Representations and Warranties. Subject to the provisions of
Section 12.2, all of the parties hereto are executing and carrying out the
provisions of this Agreement in reliance on the representations, warranties,
covenants and agreements contained in this Agreement, and any investigation that
they might have made or any other representations, warranties, covenants,
agreements, promises or information, written or oral, made by the other party or
parties or any other person shall not be deemed a waiver of any breach of any
such representation, warranty, covenant or agreement.
12.2. Survival of Representations. All covenants, agreements, representations
and warranties made herein shall survive the Closing Date. All covenants and
agreements by or on behalf of the parties hereto that are contained or
incorporated in this Agreement shall bind and inure to the benefit of the
successors and assigns of all parties hereto.
12.3. Entire Agreement. This Agreement constitutes the entire agreement between
the parties hereto with respect to the subject matter hereof. It supersedes all
prior negotiations, letters and understandings relating to the subject matter
hereof; provided, however, that the confidentiality and non-disclosure agreement
between the parties shall remain in full force and effect until the Closing has
actually occurred.
12.4. Amendment. This Agreement may not be amended, supplemented or modified in
whole or in part except by an instrument in writing signed by the party or
parties against whom enforcement of any such amendment, supplement or
modification is sought.
12.5. Assignment. This Agreement may not be assigned by any party hereto, nor
may any provision hereof be waived, without the prior written consent of the
other parties.
12.6. Choice of Law. This Agreement shall be interpreted, construed and enforced
in accordance with the laws of the Commonwealth of Pennsylvania, without regard
to the conflicts of law principles thereof.
12.7. Headings. The section and subsection headings in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
12.8. Construction. The parties hereto and their respective legal counsel
participated in the preparation of this Agreement, therefore, this Agreement
shall be construed neither against nor in favor of any of the parties hereto,
but rather in accordance with the fair meaning thereof.
12.9. Effect of Waiver. The failure of any party at any time or times to require
performance of any provision of this Agreement will in no manner affect the
right to enforce the same. The waiver by any party of any breach of any
provision of this Agreement will not be construed to be a waiver by any such
party of any succeeding breach of that provision or a waiver by such party of
any breach of any other provision.
12.10. Severability. The invalidity, illegality or unenforceability of any
provision or provisions of this Agreement will not affect any other provision of
this Agreement, which will remain in full force and effect, nor will the
invalidity, illegality or unenforceability of a portion of any provision of this
Agreement affect the balance of such provision. In the event that any one or
more of the provisions contained in this Agreement or any portion thereof shall
for any reason be held to be invalid, illegal or unenforceable in any respect,
this Agreement shall be reformed, construed and enforced as if such invalid,
illegal or unenforceable provision had never been contained herein.
12.11. Binding Nature. This Agreement will be binding upon and will inure to the
benefit of any successor or successors of the parties hereto.
12.12. No Third-Party Beneficiaries. No person shall be deemed to possess any
third-party beneficiary right pursuant to this Agreement. It is the intent of
the parties hereto that no direct benefit to any third party is intended or
implied by the execution of this Agreement.
12.13. Counterparts. This Agreement may be executed in one or more counterparts,
each of which will be deemed an original and all of which together will
constitute one and the same instrument.
12.14. Facsimile Signature. This Agreement may be executed and accepted by
facsimile signature and any such signature shall be of the same force and effect
as an original signature.
12.15. Rules of Construction. Unless the context of this Agreement clearly
requires otherwise, references to the plural include the singular, references to
the singular include the plural, the term "including" is not limiting, and the
term "or" has, except where otherwise indicated, the inclusive meaning
represented by the phrase "and/or." The words "hereof," "herein," "hereby,"
"hereunder" and similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. Section,
subsection, clause, schedule and exhibit references are to this Agreement unless
otherwise specified. Any reference to this Agreement shall include all
alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, and supplements thereto and thereof, as applicable.
[Signature Page to Asset Purchase Agreement]
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
BUYER:
RCM TECHNOLOGIES, INC.
By: .........
------------------------
Name: .........
----------------------
Title: .........
---------------------
SELLER:
NUSOFT SOLUTIONS, INC.
By: .........
------------------------
Name: .........
----------------------
Title: .........
---------------------
SELLER'S SHAREHOLDERS:
.........
Xxxx Xxxxxxx
.........
Xxxxx Xxxxxx
