MEMBERSHIP INTEREST PURCHASE AGREEMENT by and among TECHTEAM GOVERNMENT SOLUTIONS, INC., NEWVECTORS HOLDING LLC, ALTARUM INSTITUTE and ALTARUM SUPPORTING ORGANIZATION, INC. DATED AS OF MAY 23, 2007
EXHIBIT
2.01
by and among
TECHTEAM GOVERNMENT SOLUTIONS, INC.,
NEWVECTORS HOLDING LLC,
ALTARUM INSTITUTE
and
ALTARUM SUPPORTING ORGANIZATION, INC.
DATED AS OF MAY 23, 2007
1
TABLE OF CONTENTS
1. DEFINITIONS |
1 | |||
2. SALE AND TRANSFER OF INTERESTS; CLOSING |
7 | |||
2.1 Interests |
7 | |||
2.2 Purchase Price |
7 | |||
2.3 Closing |
7 | |||
2.4 Closing Obligations |
7 | |||
2.5 Estimated Purchase Price And Post Closing Adjustment |
9 | |||
3. REPRESENTATIONS AND WARRANTIES OF SELLER GROUP |
10 | |||
3.1 Organization and Good Standing |
10 | |||
3.2 Authority; No Conflict |
10 | |||
3.3 Capitalization |
11 | |||
3.4 Financial Statements |
11 | |||
3.5 Books and Records |
12 | |||
3.6 Title to Properties; Encumbrances |
12 | |||
3.7 Condition and Sufficiency of Assets |
12 | |||
3.8 Accounts Receivable |
12 | |||
3.9 No Undisclosed Liabilities |
13 | |||
3.10 Taxes |
13 | |||
3.11 No Material Adverse Change |
13 | |||
3.12 Employee Benefits |
14 | |||
3.13 Compliance with Legal Requirements; Governmental Authorizations |
16 | |||
3.14 Legal Proceedings; Orders |
18 | |||
3.15 Absence of Certain Changes and Events |
19 | |||
3.16 Contracts; No Defaults |
19 | |||
3.17 Insurance |
22 | |||
3.18 Employees |
23 | |||
3.19 Labor Relations; Compliance |
23 | |||
3.20 Intellectual Property |
23 | |||
3.21 Certain Payments |
24 | |||
3.22 Relationships with Related Persons |
24 | |||
3.23 Brokers or Finders |
25 | |||
4. REPRESENTATIONS AND WARRANTIES OF BUYER |
25 | |||
4.1 Organization and Good Standing |
25 | |||
4.2 Authority; No Conflict |
25 | |||
4.3 Investment Intent |
26 | |||
4.4 Certain Proceedings |
26 | |||
4.5 Brokers or Finders |
26 | |||
4.6 Solvency |
26 | |||
4.7 No Knowledge of Misrepresentations or Omissions |
26 | |||
5. COVENANTS OF SELLER GROUP |
26 | |||
5.1 Access and Investigation |
26 | |||
5.2 Operation of the Business of the Company |
27 | |||
5.3 Negative Covenant |
27 | |||
5.4 Notification; Disclosure Schedule Supplements |
27 | |||
5.5 No Negotiation |
27 | |||
5.6 ECSS Receivable |
28 | |||
5.7 Confidentiality |
28 | |||
5.8 Noncompete |
28 | |||
5.9 Non Solicitation |
28 |
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5.10 Seller Group Release |
28 | |||
6. COVENANTS OF BUYER |
29 | |||
6.1 Approvals of Governmental Bodies |
29 | |||
6.2 No Additional Representations; Disclaimer |
29 | |||
6.3 Notification |
30 | |||
6.4 Books And Records |
30 | |||
6.5 Cooperation With Respect to Taxes. |
30 | |||
6.6 Non Solicitation |
30 | |||
6.7 Survival |
30 | |||
7. CONDITIONS PRECEDENT TO BUYER’S OBLIGATION TO CLOSE |
31 | |||
7.1 Accuracy of Representations |
31 | |||
7.2 Company’s and Seller Group’s Performance |
31 | |||
7.3 Consents |
31 | |||
7.4 No Proceedings |
31 | |||
7.5 No Claim Regarding Interest Ownership or Sale Proceeds |
31 | |||
7.6 No Prohibition |
31 | |||
7.7 Additional Documents |
31 | |||
8. CONDITIONS PRECEDENT TO SELLER’S OBLIGATION TO CLOSE |
32 | |||
8.1 Accuracy of Representations |
32 | |||
8.2 Buyer’s Performance |
32 | |||
8.3 Consents |
32 | |||
8.4 No Proceedings |
32 | |||
8.5 No Injunction |
33 | |||
8.6 No Prohibition |
33 | |||
8.7 Additional Documents |
33 | |||
8.8 Termination of Seller Group Guarantee. |
33 | |||
9. TERMINATION |
33 | |||
9.1 Termination Events |
33 | |||
9.2 Effect of Termination |
34 | |||
10. INDEMNIFICATION; REMEDIES |
34 | |||
10.1 Survival |
34 | |||
10.2 Indemnification and Payment of Damages By Seller |
34 | |||
10.3 Indemnification and Payment of Damages by Buyer |
34 | |||
10.4 Time Limitations; Failure to Close |
34 | |||
10.5 Limitations On Amount—Seller |
35 | |||
10.6 Limitations On Amount—Buyer |
35 | |||
10.7 Procedure For Indemnification—Buyer Indemnification Claims and Seller Indemnification Claims |
35 | |||
10.8 Procedure for Indemnification—Third Party Claims |
36 | |||
10.9 Notification of Escrow |
36 | |||
10.10 Exclusive Remedy; Determination of Damages |
37 | |||
10.11 Insurance |
37 | |||
10.12 Mitigation |
37 | |||
10.13 DCA Audit Indemnification by Altarum |
37 | |||
11. GENERAL PROVISIONS |
38 | |||
11.1 Sellers Representative |
38 | |||
11.2 Expenses |
39 | |||
11.3 Public Announcements |
39 | |||
11.4 Confidentiality |
39 | |||
11.5 Notices |
39 | |||
11.6 Jurisdiction; Service of Process |
40 |
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11.7 Further Assurances |
40 | |||
11.8 Waiver. |
40 | |||
11.9 Entire Agreement and Modification |
41 | |||
11.10 Assignments, Successors, and no Third Party Rights. |
41 | |||
11.11 Severability. |
41 | |||
11.12 Section Headings, Construction |
41 | |||
11.13 Governing Law |
41 | |||
11.14 Counterparts; Facsimile Signature |
41 |
4
EXHIBITS
Exhibit 2.4(a)(ii)
|
Schedule of Amounts, Timing and Responsibility for Retention Payments | |
Exhibit 2.4(a)(iii)
|
Form of Subcontract | |
Exhibit 2.4(a)(v)(1) and (2)
|
Forms of Lease Amendments | |
Exhibit 2.4(a)(vi)
|
Form of Computer Sublease | |
Exhibit 4.2
|
Buyer’s Consent |
5
THIS MEMBERSHIP INTEREST PURCHASE AGREEMENT (this “Agreement”) is made as of May 23,
2007, by TechTeam Government Solutions, Inc., a Virginia corporation (“Buyer”),
NewVectors Holding LLC, a Michigan limited liability company (“Seller”),
Altarum Institute, a Michigan nonprofit corporation and tax-exempt public charity
(“Altarum”), and Altarum Supporting Organization, Inc., a Michigan nonprofit
corporation and tax-exempt public charity (“ASO”, and together with Altarum and Seller, the
“Seller Group”).
RECITALS
Seller desires to sell, and Buyer desires to purchase, all of the issued and outstanding
membership interests (the “Interests”) of NewVectors LLC, a Michigan limited liability
company (the “Company”), for the consideration and on the terms set forth in this
Agreement.
AGREEMENT
Buyer and each member of the Seller Group, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following capitalized terms not defined above shall have
the following meanings:
“Accounts Receivable” – is defined in Section 3.8.
“Applicable Contract” – is defined in Section 3.16(a).
“Audited Balance Sheet” – is defined in Section 3.4.
“Audited Financial Statements” – is defined in Section 3.4.
“Best Efforts” – means the efforts that a prudent Person desirous of achieving a
result would use in similar circumstances to ensure that such result is achieved as expeditiously
as is commercially reasonable and practicable; provided, however, that an obligation to use Best
Efforts under this Agreement does not require such Person to take actions that would result in a
materially adverse change in the financial condition, prospects or benefits of or to such Person.
“Breach” – means a breach of a representation, warranty, covenant, obligation, or
other provision of this Agreement or any instrument delivered pursuant to this Agreement that will
be deemed to have occurred if there is or has been any inaccuracy in or breach of, or any failure
to perform or comply with, such representation, warranty, covenant, obligation, or other provision.
“Business Day” – means any day other than a Saturday, Sunday, United States Federal
holiday or day on which banks in Detroit, Michigan are required or permitted by law to be closed.
“Buyer’s Advisors” – is defined in Section 5.1(a).
“Buyer’s Closing Documents” – is defined in Section 2.4(b)(iii).
“Buyer Indemnification Claim” – is defined in Section 10.4(a).
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“Buyer Indemnified Persons” – is defined in Section 10.2.
“Buyer Material Adverse Effect” – means a material adverse change in the business,
operations, properties, assets, or financial condition of the Buyer other than as a result of: (a)
changes generally adversely affecting the United States economy as a whole; (b) any legal or
regulatory event, change, condition, fact or effect affecting the federal information technology
support services industry as a whole; (c) the performance by the Buyer of its obligations under
this Agreement; (d) the announcement or pendency of the Contemplated Transactions; or (e) war, the
outbreak of hostilities or acts of terrorism.
“Claim” – is defined in Section 10.7.
“Closing” – is defined in Section 2.3.
“Closing Date” – means the date and time as of which the Closing actually takes place.
“Closing Statement” – is defined in Section 2.5(b).
“Company” – is defined in the Recitals of this Agreement.
“Company Material Adverse Effect” – means a material adverse change in the business,
operations, properties, assets, or financial condition of the Company other than as a result of:
(a) changes generally adversely affecting the United States economy as a whole; (b) any legal or
regulatory event, change, condition, fact or effect affecting the federal information technology
support services industry as a whole; (c) the performance by the Company or any member of the
Seller Group of its obligations under this Agreement; (d) the announcement or pendency of the
Contemplated Transactions; or (e) war, the outbreak of hostilities or acts of terrorism.
“Company Operating Agreement” – means that certain Operating Agreement of the Company,
dated as of April 1, 2006, between the Company and Seller.
“Computer Sublease Amendment” – is defined in Section 2.4(a)(vi).
“Confidential Information” – means information proprietary to the Company that has
commercial value in Company’s business, including, without limitation, information about software
programs and subroutines, source and object code, algorithms, trade secrets, designs, technology,
know-how, processes, data, ideas, techniques, inventions (whether or not patentable or
copyrightable), works of authorship, formulas, business and product development plans, customer
lists, terms of compensation and performance levels of Company officers and employees, Company
customers and other proprietary information concerning Company’s actual or anticipated business,
research or development, or which is received in confidence by or for Company from any other person
or entity; provided, however, that Confidential Information shall not include any information
relating to the Company that (a) is generally available to the public or otherwise in the public
domain, (b) subsequent to the Closing becomes generally available to the public without fault on
the part of any member of the Seller Group, or (c) otherwise becomes known to any member of the
Seller Group on a non-confidential basis from another source not bound by a confidentiality
agreement with the Company.
“Consent” – means any approval, consent, ratification, waiver, or other authorization
(including any Governmental Authorization).
“Contemplated Transactions” – means all of the transactions contemplated by this
Agreement, including:
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(a) the sale of the Interests by Seller to Buyer;
(b) the execution, delivery, and performance of the Retention Agreement Amendments and
the Escrow Agreement; and
(c) the performance by Buyer and Seller of their respective covenants and obligations
under this Agreement.
“Contract” – means any agreement, contract, obligation, promise or undertaking
(whether written or oral and whether express or implied) that is legally binding, including,
without limitation, any Applicable Contract.
“Controlling Party” – is defined in Section 10.8(b).
“Current Assets” – means any amounts showing as current assets of the Company under
such heading on the Estimated Closing Statement, but excluding cash, cash equivalents and all ECSS
receivables.
“Current Liabilities” – means any amounts shown as current liabilities of the Company
under such heading on the Estimated Closing Statement, but excluding any portion thereof that
constitutes (a) debt included in current liabilities, regardless of maturity, and (b) any direct
expenses accrued by the Company for the ECSS Receivable.
“Damages” – means the amount of any loss, liability, claim and expense, including,
without limitation, costs of investigation and defense and reasonable attorneys’ fees, but
excluding (a) for purposes of Article 10 hereof, any such loss, liability, claim or expense
relating to diminution in the value of the Company, and (b) any exemplary, punitive, special or
incidental damages.
“Disclosure Schedule” – means the schedule qualifying the representations, warranties
and covenants of the Seller Group in this Agreement, to be delivered by Seller to Buyer, as the
same may be updated or supplemented by a Disclosure Schedule Supplement.
“Disclosure Schedule Supplement” – is defined in Section 5.4(b).
“ECSS” – means the Airforce Expeditionary Combat Services Support project for which
Computer Sciences Corporation is the prime contractor and the Company is a subcontractor under a
letter subcontract.
“ECSS Receivable” – means any amount billed or unbilled for work in respect of ECSS
prior to April 1, 2007.
“Encumbrance” – means any charge, claim, equitable interest, lien, option, pledge,
security interest, right of first refusal, or restriction of any kind, including any restriction on
use, voting, transfer, receipt of income, or exercise of any other attribute of ownership.
“Enterprise Solutions Business” – means the business of the Company, whether conducted
by the Company or by a member of the Seller Group prior to its transfer to the Company, which
business was commonly referred to as the “Enterprise Solutions Division” of Altarum prior to its
transfer to the Company.
3
“ERISA” – means the Employee Retirement Income Security Act of 1974, as amended, or
any successor law, and regulations and rules issued pursuant to that Act or any successor law.
“Escrow Agent” – is defined in Section 2.4(c).
“Escrow Agreement” – is defined in Section 2.4(c).
“ESD Contract” – means any Contract that is effective as of the date hereof and
between any member of the Seller Group and any other Person related to the line of activity of the
Seller Group commonly referred to as the “Enterprise Solutions Division.”
“Estimated Closing Statement” – is defined in Section 2.5(a).
“Estimated Purchase Price” – is defined in Section 2.5(a).
“Final Purchase Price” – is defined in Section 2.5(b).
“Financial Statements” – is defined in Section 3.4.
“GAAP” – means generally accepted United States accounting principles, consistently
applied.
“Governmental Authorization” – means any approval, consent, license, permit, waiver,
or other authorization issued, granted, given, or otherwise made available by or under the
authority of any Governmental Body or pursuant to any Legal Requirement.
“Governmental Body” – means any:
(a) nation, state, county, city, town, village, district, or other jurisdiction of any
nature;
(b) federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature (including any
governmental agency, branch, department, official, or entity and any court or other
tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative, executive, judicial,
legislative, police, regulatory, or taxing authority or power of any nature.
“Indemnification Cap” – is defined in Section 10.5.
“Indemnification Deductible” – is defined in Section 10.5.
“Indemnitor” – is defined in Section 10.7(a).
“Indemnitee” – is defined in Section 10.7(a).
“Independent Auditor” – is defined in Section 2.5(b).
“Intellectual Property Assets” – is defined in Section 3.20(a).
4
“Interests” – is defined in the Recitals of this Agreement.
“Interim Balance Sheet” – is defined in Section 3.4.
“Interim Financial Statements” – is defined in Section 3.4
“IRC” – means the Internal Revenue Code of 1986, as amended, or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code of 1986, as amended.
“IRS” – means the United States Internal Revenue Service or any successor agency, and,
to the extent relevant, the United States Department of the Treasury.
“Key Employees” – means the individuals listed on Schedule 1 of this Agreement.
“Knowledge” – means (a) in the case of the Seller Group, (1) the actual knowledge, or
the knowledge that such person would have after reasonable inquiry, of Xxxxxxxxx X. Xxx, Xxxx X.
Xxxxx, W. Xxxxx Xxxxxxx and Xxxxxxx X. Xxxxxx, (2) only with respect to the representations and
warranties contained in Section 3.9 and 3.16, the actual knowledge, after reasonable inquiry, of
Xxxxx Xxxxxxxxx, and (3) only with respect to the representations and warranties contained in
Section 3.12, the actual knowledge, after reasonable inquiry, of Xxxxxxxx X. Xxxxxxxx; and (b) in
the case of the Buyer, the actual knowledge of Xxxxxx X. Xxxxx, Xxxxxx Xxxxxxxx or Xxxxxxx X.
Xxxxx.
“Lease Amendments” – is defined in Section 2.4(a)(v).
“Legal Requirement” – means any administrative order, constitution, law, ordinance,
principle of common law, regulation, statute, or treaty of any Governmental Body.
“Net Working Capital” – means the Company’s Current Assets, minus the
Company’s Current Liabilities, in each case as determined as of the close of business on day before
the Closing Date.
“Net Working Capital Target” – means $1,450,000.
“Non-controlling Party” – is defined in Section 10.8(b).
“Novation” – is defined in Section 6.1(b).
“Novation Documentation” – is defined in Section 6.1(b).
“Objection Notice” – is defined in Section 2.5(b).
“Order” – means any award, decision, injunction, judgment, order, ruling, subpoena, or
verdict entered, issued, made, or rendered by any court, administrative agency, or other
Governmental Body or by any arbitrator that has been given authority to do so by any Person under a
contact enforceable against such Person.
“Ordinary Course of Business” – an action taken by a Person that is taken in the
ordinary course of such Person’s business, consistent with the past practices of such Person.
“Organizational Documents” – means: (a) for a corporation, the articles or certificate
of incorporation and the bylaws; (b) for a limited liability company, the articles of organization
and operating agreement; (c) any charter or similar document adopted or filed in connection with
the creation, formation, or organization of a Person; and (d) any amendment to any of the
foregoing.
5
“Permitted Encumbrance” means: (a) Encumbrances for Taxes, assessments and other
charges not yet due and payable or for Taxes, assessments and other charges that the Company is
contesting in good faith through appropriate proceedings and for which a proper reserve has been
established on the books of the Company; (b) liens of landlords, carriers, warehousemen, workmen,
repairmen, mechanics, and materialmen liens arising in the Ordinary Course of Business; and (c) in
the case of any leased real property, the rights of any lessor of such property.
“Person” – means any individual, corporation (including any non-profit corporation),
general or limited partnership, limited liability company, joint venture, estate, trust,
association, organization, labor union, or other entity or Governmental Body.
“Proceeding” – means any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative or investigative) commenced, brought,
conducted, or heard by or before, or otherwise involving, any Governmental Body or arbitrator.
“Purchase Price” – is defined in Section 2.2.
“Related Person” – means (a) with respect to any Person that is not an individual, (i)
any Person that directly or indirectly controls, is controlled by or is under common control with
such Person, (ii) any Person that owns a greater than 50% equity interest in such Person, and (iii)
each Person that serves as a director, officer, general partner, executor or trustee of such
Person, and (b) with respect to any Person that is an individual, (i) any member of such Person’s
immediate family, or (ii) the parents or grandchildren of such Person.
“Representative” – means with respect to a particular Person, any director, officer,
employee, agent, consultant, advisor, or other representative of such Person, including legal
counsel, accountants and financial advisors.
“Required Tax Return” – is defined in Section 3.10(a).
“Retention Agreements” – means those Retention Agreements between the Company and each
Key Employee.
“Retention Agreement Amendments” – means those certain amendments to the Retention
Agreements required by Section 2.4(b)(ii).
“Securities Act” – means the Securities Act of 1933, as amended, or any successor law,
and regulations and rules issued pursuant to that Act or any successor law.
“Seller Group” – is defined in the first paragraph of this Agreement.
“Seller Indemnification Claim” – is defined in Section 10.4(b).
“Seller Indemnified Persons” – is defined in Section 10.3.
“Seller’s Closing Documents” – is defined in Section 2.4(a)(vii).
“Sellers Representative” – is defined in Section 11.1(a).
“Subcontract” – is defined in Section 2.4(a)(iii).
6
“Tax” – means any federal, state, local or foreign income, gross receipts, franchise,
profits, withholding, social security, unemployment, disability, real property, ad valorem,
personal property, stamp, excise, occupation, sales, use, transfer, value added, alternative
minimum, estimated or other tax, assessment, duty, fee, levy or other governmental charge,
including any interest, penalty or addition thereto.
“Tax Return” – means any return (including any information return), report, statement,
schedule, notice, form, or other document or information filed with or submitted to, or required to
be filed with or submitted to, any Governmental Body with respect to any Tax.
“Third Party Action” – is defined in Section 10.8(a).
“Threatened” – means a claim, Proceeding, dispute, action, or other matter as to which
any demand or statement has been made in writing or any notice has been given in writing that would
lead a prudent Person to conclude that such a claim, Proceeding, dispute, action, or other matter
is reasonably likely to be asserted, commenced, taken, or otherwise pursued.
“Transition Services Agreement” – is defined in Section 2.4(a)(iv).
2. SALE AND TRANSFER OF INTERESTS; CLOSING
2.1 Interests. Subject to the terms and conditions of this Agreement, at the Closing,
Seller will sell and transfer the Interests to Buyer, and Buyer will purchase the Interests from
Seller.
2.2 Purchase Price. The purchase price for the Interests will be $40,750,000, as
adjusted by the difference between Net Working Capital and the Net Working Capital Target (the
“Purchase Price”).
2.3 Closing. The purchase and sale (the “Closing”) provided for in this
Agreement will take place at the offices of Xxxxxxxx Xxxxxx Xxxxxxxx and Xxxx LLP, 000 Xxxxx Xxxxx
Xxxxxx, Xxx Xxxxx, Xxxxxxxx, 00000, at 10:00 a.m. (local time) on the first to occur of (a) May 31,
2007, and (b) the third Business Day after the satisfaction or waiver of the last of the Closing
conditions contained in Articles 7 and 8 of this Agreement (unless another date, time or place is
mutually agreed to by Buyer and Seller); provided, however, that after the satisfaction or waiver
of the last of the Closing conditions contained in Articles 7 and 8 of this Agreement, Buyer may,
at its option, exercisable by giving the Seller Group not less than two (2) days prior written
notice, extend the Closing Date to a date that is on or before June 15, 2007; provided, further,
that Buyer shall, at Closing and together with the payment due under Section 2.4(b)(i), pay Seller
a fee of $7,500 for each day beyond June 7, 2007 that the Closing does not occur.
2.4 Closing Obligations. At the Closing:
(a) Seller will deliver to Buyer:
(i) duly executed assignments of membership interest, or other instruments of
conveyance, transferring the Interests to Buyer;
(ii) Retention Agreement Amendments executed by the Company and each Key
Employee to provide for payments to the Key Employees in the amounts, at the times
and in accordance with the responsibilities therefor as between the Company and
Buyer as shown on Exhibit 2.4(a)(ii).
7
(iii) a subcontract between Seller and the Company, in the form of Exhibit
2.4(a)(iii) (the “Subcontract”), executed by Seller;
(iv) a transition services agreement between Seller and the Company providing
for the performance by Altarum of contract administration services for Contracts
between the Company and the United States Government and subdivisions thereof for
(A) no charge in respect of such Contracts as are in effect as of the Closing Date
and until such time as such Contracts expire or are terminated, and (B) for such
Contracts that the Company may enter into after the Closing Date and for which the
Company or Buyer requests such services by written notice to Altarum, in each case
for a fee payable to Altarum equal to two percent (2%) of the xxxxxxxx in respect of
each such Contract, which services the Company or Buyer may terminate at any time
upon not less than ten (10) days’ notice to Altarum (the “Transition Services
Agreement”), executed by Seller;
(v) an amendment to the leases for the Company’s space in Ann Arbor, Michigan
and Alexandria, Virginia substantially in the form of Exhibit 2.4(a)(v)(1)
and (2), executed by Altarum, as landlord, and the Company, as tenant (the
“Lease Amendments”);
(vi) an amendment to the Equipment Lease Agreement substantially in the form of
Exhibit 2.4(a)(vi), executed by Altarum and the Company (the “Computer
Sublease Amendment”; together with the documents referred to in subsections (i)
through (v) above, the “Seller’s Closing Documents”); and
(vii) a certificate executed by each member of the Seller Group representing
and warranting to Buyer that each of Seller’s representations and warranties in this
Agreement was accurate in all material respects as of the date of this Agreement and
is accurate in all material respects as of the Closing Date as if made on the
Closing Date, giving full effect to any Disclosure Schedule Supplement.
(b) Buyer will deliver to Seller:
(i) the Estimated Purchase Price minus the Escrow Amount, in
immediately available funds or by wire transfer to an account or accounts specified
by Seller in accordance with written instructions therefor provided by Seller to
Buyer prior to the Closing;
(ii) a certificate executed by Buyer to the effect that each of Buyer’s
representations and warranties in this Agreement was accurate in all material
respects as of the date of this Agreement and is accurate in all material respects
as of the Closing Date as if made on the Closing Date; and
(iii) the Employment Agreements, the Transition Services Agreement, the
Subcontract, the Lease Amendment and the Computer Sublease Amendment, all executed
by the Company (collectively, the “Buyer’s Closing Documents”).
(c) Buyer and Seller will enter into an escrow agreement (the “Escrow
Agreement”) mutually acceptable to Buyer, the Seller Group and LaSalle Bank Midwest,
N.A., as escrow agent (the “Escrow Agent”), and Buyer shall transfer $4,000,000 to
the Escrow Agent in immediately available funds, to be administered as provided in the
Escrow Agreement.
8
2.5 Estimated Purchase Price And Post-Closing Adjustment.
(a) Estimated Closing Statement. On the date two (2) Business Days prior to
the Closing Date, Seller shall deliver to Buyer a statement (the “Estimated Closing
Statement”) setting forth Seller’s good faith calculation of its estimate, as of the
Closing Date, of the Purchase Price with any interim adjustments as a result of the changes
in the Company’s Net Working Capital position from the Net Working Capital Target (the
“Estimated Purchase Price”).
(b) Final Determination of Net Working Capital. No later than thirty (30) days
after the Closing Date, Seller shall deliver to Buyer a statement setting forth Seller’s
final calculation of the Purchase Price, including its calculation of Net Working Capital as
of the Closing Date, prepared in accordance with this Agreement (the “Closing
Statement”). If Buyer has any objections to the Closing Statement, Buyer shall deliver
to Seller a notice (the “Objection Notice”) specifically setting forth the basis for
any such objections and Buyer’s proposed resolution thereof. If Buyer fails to deliver the
Objection Notice within thirty (30) days after delivery of the Closing Statement, then Buyer
shall be deemed to have accepted the Closing Statement and to have irrevocably waived any
further right to object thereto. If Buyer shall have timely delivered the Objection Notice,
Buyer and Seller shall negotiate in good faith to resolve the objection specified therein;
provided, however, that if they do not reach a final resolution within thirty (30) days
after the delivery of the Objection Notice, Buyer and Seller shall submit each matter set
forth in the Objection Notice that remains unresolved to Xxxxxx & Xxxxx (the
“Independent Auditor”) for resolution. The Independent Auditor shall resolve any
such remaining matter within thirty (30) days following the date of engagement of the
Independent Auditor and shall deliver a written determination to Buyer and Seller prior to
the expiration of such thirty (30) day period. The Independent Auditor’s resolution of such
matters shall be final and binding upon the parties; provided, however, that no such
determination with respect to any single item subject to an unresolved dispute or objection
shall be any more favorable to any party than is set forth in the calculation reflected in
the Closing Statement or proposed in the Objection Notice (or, in either case, as otherwise
agreed in writing by Buyer and Seller during the 30-day negotiation period). The costs and
expenses of the Independent Auditor shall be paid in equal amounts by Seller and Buyer.
The Purchase Price, as finally determined pursuant to this Section 2.5(a) is hereinafter
referred to as the “Final Purchase Price.”
(c) Post-Closing Adjustment. If the Final Purchase Price is greater than the
Estimated Purchase Price, Buyer shall promptly (but in any event within five (5) Business
Days of the final determination thereof) pay to Seller the amount of such difference by wire
transfer of immediately available funds to an account or accounts designed by Seller to
Buyer. If, instead, the Final Purchase Price is less than the Estimated Purchase Price,
Seller shall promptly (but in any event within five (5) Business Days of the final
determination thereof) pay to Buyer the amount of such difference by wire transfer of
immediately available funds to an account designated by Buyer to Seller.
(d) Cooperation. Following the Closing, (i) Buyer shall, and shall cause the
Company and its Representatives to reasonably cooperate with Seller relating to the
preparation of the Closing Statement and the review of the Objection Notice, and to provide
any information reasonably requested by Seller and its accountants in connection therewith,
and (ii) Seller shall, and shall cause its Representatives to reasonably cooperate with
Buyer relating to the review of the Estimated Closing Statement, review of the Closing
Statement and the preparation of the Objection Notice and to provide any information
reasonably requested by Buyer and its accountants in connection therewith.
9
3. REPRESENTATIONS AND WARRANTIES OF SELLER GROUP
Each member of the Seller Group hereby jointly and severally makes the representations and
warranties contained in this Article 3 to Buyer. The inclusion of information in the Disclosure
Schedule shall not be construed as an admission that such information is material to any member of
the Seller Group, the Company or Buyer; has resulted in or would result in a Company Material
Adverse Effect; or is outside the Ordinary Course of Business. In addition, matters reflected in
the Disclosure Schedule are not necessarily limited to matters required by this Agreement to be
reflected in the Disclosure Schedule. Such additional matters are set forth for informational
purposes only and in no event shall any disclosure of such additional matters be deemed or
interpreted to broaden or otherwise amend any of the covenants or representations and warranties in
this Agreement. Notwithstanding the location of any disclosure set forth in the Disclosure
Schedule, each of the disclosures, and those in any supplement thereto, shall apply to each of the
representations and warranties made by the Seller Group in this Article 3 to which such disclosure
could reasonably be expected to apply.
3.1 Organization and Good Standing.
(a) Part 3.1 of the Disclosure Schedule contains a complete and accurate list
of the Company’s name, its jurisdiction of organization, other jurisdictions in which it is
qualified to do business, and its ownership (including the identity of each Interest holder
and the percentage of Interests held by each). The Company is a limited liability company
presently existing in good standing under the laws of the State of Michigan, with the
requisite limited liability company power and authority to conduct its business as presently
conducted, to own or use the properties and assets that it purports to own or use, and to
perform all of its obligations under the Applicable Contracts. The Company is duly
qualified to do business as a foreign limited liability company and is in good standing
under the laws of each state or other jurisdiction in which either the ownership or use of
the properties owned or used by it, or the nature of the activities conducted by it,
requires such qualification.
(b) The Company has made available to Buyer copies of the Organizational Documents of
the Company, as currently in effect.
3.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and binding obligation of each member
of the Seller Group, enforceable against such member of the Seller Group in accordance with
its terms, except as may be limited by bankruptcy, insolvency or other laws affecting
creditors’ rights generally and general principles of equity. Upon the execution and
delivery by each member of the Seller Group of the Seller’s Closing Documents to which it is
a party, such Seller’s Closing Documents will constitute the legal, valid, and binding
obligations of such member of the Seller Group, enforceable against such member of the
Seller Group in accordance with their respective terms, except as may be limited by
bankruptcy, insolvency or other laws affecting creditors’ rights generally and general
principles of equity. Each member of the Seller Group has the requisite power and authority
to execute and deliver this Agreement and the Seller’s Closing Documents to which it is a
party and to perform its obligations under this Agreement and the Seller’s Closing Documents
to which it is a party. The execution and delivery by each member of the Seller Group of
this Agreement and the Seller’s Closing Documents to which it is a party, and the
consummation of the Contemplated Transactions, have been duly authorized by all requisite
company or corporate action on the part of such member of the Seller Group, and no other
proceedings on the part of the governing body of such member of the Seller Group or any of
its respective members or shareholders, as applicable, are necessary to authorize
10
the execution, delivery and performance of this Agreement and the Seller Closing
Documents to which it is a party, or the consummation of the Contemplated Transactions.
(b) Except as set forth in Part 3.2 of the Disclosure Schedule, neither the
execution and delivery of this Agreement by Seller, nor the consummation or performance by
Seller of any of the Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time):
(i) contravene, conflict with, or result in a violation of (A) any provision of
the Organizational Documents of the Company or Seller, or (B) any resolution adopted
by the members of the Company or the board of managers or members of Seller;
(ii) contravene, conflict with, or result in a violation of, or give any
Governmental Body or other Person the right to challenge any of the Contemplated
Transactions, or to exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which the Company or Seller or any substantial portion
of the assets owned or used by the Company or Seller may be subject;
(iii) contravene, conflict with, or result in a violation of any of the terms
or requirements of, or give any Governmental Body the right to revoke, withdraw,
suspend, cancel, terminate, or modify, any Governmental Authorization that is held
by the Company or that otherwise relates to the business of, or any substantial
portion of the assets owned or used by, the Company;
(iv) contravene, conflict with, or result in a violation or breach of any
provision of, or give any Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Applicable Contract; or
(v) result in the imposition or creation of any Encumbrance upon or with
respect to any asset material to the Company.
(c) Except as set forth in Part 3.2 of the Disclosure Schedule, neither the
Seller Group nor the Company is or will be required to give any notice to or obtain any
Consent from any Person in connection with the execution and delivery of this Agreement or
the consummation or performance of any of the Contemplated Transactions.
3.3 Capitalization. The equity securities of the Company consist solely of the
Interests, all of which are owned of record and beneficially by Seller, free and clear of all
Encumbrances. No legend or other reference to any purported Encumbrance appears upon any
certificate or other documentary evidence representing the Interests. Other than this Agreement
and the Company Operating Agreement, there are no Contracts relating to the issuance, sale, or
transfer of the Interests or other securities of the Company. The Interests were issued in
compliance with the Securities Act and other applicable Legal Requirements.
3.4 Financial Statements. The Company has made available to Buyer: (a) an audited
balance sheet of the Company as at September 30, 2006 (the “Audited Balance Sheet”), and
the related audited statements of income, changes in partners’ equity, and cash flows for the six
(6) month period then ended, together with the report thereon of Ernst & Young, LLP, independent
certified public accountants (the “Audited Financial Statements”), and (b) an unaudited
balance sheet of the Company as at March 31, 2007 (the “Interim Balance Sheet”) and the
related unaudited statements of income and cash
11
flows for the six (6) months then ended (the “Interim Financial Statements”; together
with the Audited Financial Statements, the “Financial Statements”). The Financial
Statements fairly present in all material respects the financial condition and the results of
operations, changes in partners’ equity and cash flows of the Company as at the respective dates of
and for the periods referred to in the Financial Statements. Except as set forth in Part
3.4 of the Disclosure Schedule, the Financial Statements have been prepared in accordance with
GAAP; provided, however, that the Interim Financial Statements do not include any footnotes or
statement of partners’ equity and are subject to normal recurring year-end adjustments (which will
not be materially adverse). No financial statements of any Person other than the Company are
required by GAAP to be included in the Financial Statements.
3.5 Books and Records. The books and records of the Company, all of which have been
made available to Buyer, are complete and correct in all material respects, have been maintained in
accordance with sound business practices and, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the material assets of the Company. The minute books of the
Company contain accurate and complete records of all formal meetings held of, and actions taken by,
the Interest holder, the board of managers, and committees of the board of managers of the Company,
all taken pursuant to the Company Operating Agreement, and no formal meeting of any such Interest
holder, board of managers, or committee has been held for which minutes have not been prepared and
are not contained in such minute books. At the Closing, all of such books and records will be in
the possession of the Company.
3.6 Title to Properties; Encumbrances. The Company owns good and marketable title to,
or a valid leasehold interest in, the property and assets shown on the Interim Balance Sheet or
acquired after the date thereof, other than property or assets disposed of in the Ordinary Course
of Business following the date of the Interim Balance Sheet. Except as described in Part
3.6 of the Disclosure Schedule, all material properties and assets reflected in the Interim
Balance Sheet (other than property or assets disposed of in the Ordinary Course of Business
following the date of the Interim Balance Sheet) are free and clear of all Encumbrances. The
Company does not own any fee interest in any real property.
3.7 Condition and Sufficiency of Assets. The assets material to the operation of the
Company are in good operating condition and repair, normal wear and tear excepted, and are adequate
for the purposes for which they are being used. None of such assets are in need of maintenance or
repairs except for ordinary, routine maintenance and repairs that are not material in nature or
cost. The assets of the Company are sufficient for the conduct of the Company’ business as
currently conducted. Except as described in Part 3.7 of the Disclosure Schedule, the
Company owns or leases all of the assets that are sufficient to conduct its business as it is
currently being conducted, free and clear of any interest of any other Person in such assets, other
than Permitted Encumbrances.
3.8 Accounts Receivable. All accounts receivable of the Company that are reflected on
the Balance Sheet or the Interim Balance Sheet or on the accounting records of the Company as of
the Closing Date (collectively, the “Accounts Receivable”) represented or represent valid
obligations arising from sales actually made or services actually performed in the Ordinary Course
of Business of the Company. Unless paid prior to the Closing Date, to the Knowledge of Seller, the
Accounts Receivable are collectible in full within one hundred eighty (180) days after the date
when first due, net of the respective reserves shown on the Balance Sheet or the Interim Balance
Sheet or on the accounting records of the Company as of the Closing Date, which reserves are, to
the Knowledge of Seller, adequate and calculated consistent with past practice of the Company.
There is no contest, claim, or right of set-off pending or, to the Knowledge of Seller, Threatened,
with respect to the amount or validity of any of the Accounts Receivable, other than reductions in
the Ordinary Course of Business. Part 3.8 of the Disclosure Schedule contains an accurate
and complete list of the accounts receivable of the Company at March 31, 2007.
12
3.9 No Undisclosed Liabilities. Except as set forth in Parts 3.10 and
3.13 of the Disclosure Schedule, to the Knowledge of Seller, the Company has no liabilities
or obligations of any nature (whether known or unknown and whether absolute, accrued, contingent,
or otherwise) except for (a) liabilities or obligations reflected or reserved against in the
Balance Sheet and the Interim Balance Sheet, (b) current liabilities incurred in the Ordinary
Course of Business since the respective dates thereof, and (c) liabilities or obligations to
perform, after the date hereof, any Applicable Contract.
3.10 Taxes.
(a) Since April 1, 2006, the Company has filed or caused to be filed all Tax Returns
that it was required to file on or before the Closing Date pursuant to applicable Legal
Requirements (the “Required Tax Returns”). The Company has made available to Buyer
copies of the Required Tax Returns. The Company has paid, or made provision for the payment
of, all Taxes that it has been required to pay pursuant to the Required Tax Returns, or
pursuant to any assessment received by Seller or the Company, except such Taxes, if any, (a)
as are listed in Part 3.10 of the Disclosure Schedule, and (b) Taxes accrued on the
Closing Statement.
(b) Part 3.10 of the Disclosure Schedule contains a complete and accurate list
of the Required Tax Returns that are or have been the subject of an audit and of which the
Company has received written notice, including a reasonably detailed description of the
nature and outcome of each audit. All deficiencies proposed as a result of such audits have
been paid, reserved against, settled, or, as described in Part 3.10 of the
Disclosure Schedule, are being contested in good faith by appropriate proceedings. Part
3.10 of the Disclosure Schedule describes all adjustments to the United States federal
income Tax Returns filed by the Company for all taxable years since 2006, and the resulting
deficiencies proposed by the IRS. Except as described in Part 3.10 of the
Disclosure Schedule, neither the Seller Group nor the Company has given or has been
requested to give waivers or extensions (or is or would be subject to a waiver or extension
given by any other Person) of any statute of limitations relating to the payment of Taxes of
the Company or for which the Company or the Seller Group may be liable based upon the
operations of the Company.
(c) The Company has not received written notice of any currently proposed Tax
assessment against the Company except as disclosed in the Balance Sheet, the Interim Balance
Sheet or in Part 3.10 of the Disclosure Schedule. No consent to the application of
Section 341(f)(2) of the IRC has been filed with respect to any property or assets held,
acquired, or to be acquired by the Company. All Taxes that the Company is or was required
by Legal Requirements to withhold or collect have been duly withheld or collected and, to
the extent required, have been paid to the proper Governmental Body.
(d) All Tax Returns filed by (or that include on a consolidated basis) the Company are
true, correct, and complete in all material respects. There is no written tax sharing
agreement that will require any payment by the Company after the date of this Agreement.
(e) The Company has not elected, nor will it elect on or before the Closing Date, to be
taxed as a corporation under the IRC.
3.11 No Material Adverse Change. Since the date of the Interim Balance Sheet, there
has not been any Company Material Adverse Effect, and no event has occurred or circumstance exists
that would reasonably be expected to result in a Company Material Adverse Effect.
13
3.12 Employee Benefits.
(a) As used in this Section 3.12, the following terms have the meanings set forth
below.
(i) “Company Other Benefit Obligation” means an Other Benefit
Obligation owed, adopted, or followed by the Company.
(ii) “Company Plan” means all Plans of which the Company is or was a
Plan Sponsor, or to which the Company otherwise contributes or has contributed, or
in which the Company otherwise participates or has participated.
(iii) “ERISA Affiliate” means, with respect to the Company, any other
person that, together with the Company, is treated as a single employer under IRC §
414.
(iv) “Multi-Employer Plan” has the meaning given in ERISA § 3(37)(A).
(v) “Other Benefit Obligations” means all obligations, arrangements, or
customary practices, whether or not legally enforceable, to provide benefits, other
than salary, as compensation for services rendered, to present or former directors,
employees, or agents, other than obligations, arrangements, and practices that are
Plans. Other Benefit Obligations include consulting agreements under which the
compensation paid does not depend upon the amount of service rendered, sabbatical
policies, severance payment policies, and fringe benefits within the meaning of IRC
§ 132.
(vi) “PBGC” means the Pension Benefit Guaranty Corporation, or any
successor thereto.
(vii) “Plan” has the meaning given in ERISA § 3(3).
(viii) “Plan Sponsor” has the meaning given in ERISA § 3(16)(B).
(ix) “Qualified Plan” means any Plan that meets or purports to meet the
requirements of IRC § 401(a).
(x) “VEBA” means a voluntary employees’ beneficiary association under
IRC § 501(c)(9).
(b) Part 3.12(b) of the Disclosure Schedule contains a complete and accurate
list of all Company Plans and Company Other Benefit Obligations, and identifies as such all
Company Plans that are Qualified Plans.
(c) The Company has made available to Buyer, or will make available to Buyer within ten
days of the date of this Agreement:
(i) a summary of each Company Plan;
(ii) all Company personnel, payroll, and employment manuals and policies;
(iii) all notifications to employees of the Company of their rights under ERISA
§ 601 et seq. and IRC § 4980B;
14
(iv) the Form 5500 filed in each of the most recent plan year for each Company
Plan, including all schedules thereto; and
(v) all notices that were given by the IRS or the Department of Labor to the
Company.
(d) Except as set forth in Part 3.12(d) of the Disclosure Schedule:
(i) The Company has materially performed all of its obligations under all
Company Plans and Company Other Benefit Obligations. The Company has made
appropriate entries in its financial records and statements for all of its
obligations and liabilities under such Company Plans, and Company Other Benefit
Obligations that have accrued but are not due.
(ii) No statement, either written or oral, has been made by the Company to any
Person with regard to any Company Plan or Company Other Benefit Obligation that was
not in accordance with the Company Plan or Company Other Benefit Obligation and that
could have an adverse economic consequence to the Company or to Buyer.
(iii) The Company, with respect to all Company Plans and Company Other Benefit
Obligations is, and each Company Plan, Company Other Benefit Obligation is, in
material compliance with ERISA, the IRC, and other applicable Laws including the
provisions of such Laws expressly mentioned in this Section 3.12.
(iv) To the Knowledge of Seller, no transaction prohibited by ERISA § 406 and
no “prohibited transaction” under IRC § 4975(c) have occurred with respect to any
Company Plan.
(v) Neither the Company nor any ERISA Affiliate sponsors, maintains,
contributes to, has any obligation to contribute to, or has any liability or
potential liability under or with respect to, any Multi-Employer Plan, or any Plan
subject to IRS §§412 or 4971, ERISA § 302 or Title IV of ERISA, or otherwise has any
liability or potential liability under Title IV of ERISA. There is no lien pursuant
to ERISA § 4068 or IRS § 412(n) in favor of, or enforceable by, the PBGC or any
other entity with respect to any of the assets or property of the Company.
(vi) Neither of the Company nor any ERISA Affiliate sponsors, maintains,
contributes to, has any obligation to contribute to, or has any liability or
potential liability under or with respect to, any VEBA.
(vii) All filings required by ERISA and the IRC as to each Company Plan have
been timely filed, and all notices and disclosures to participants required by
either ERISA or the IRC have been timely provided.
(viii) All Company contributions and payments made or accrued with respect to
all Company Plans and Company Other Benefit Obligations are deductible under IRC §
162 or § 404. No amount, or any asset of any Company Plan is subject to tax as
unrelated business taxable income.
15
(ix) Except as may be required by any Legal Requirement, each Company Plan can
be terminated within thirty days, without payment of any additional contribution or
amount and without the vesting or acceleration of any benefits promised by such
Plan.
(x) Since the date of the Interim Balance Sheet, there has been no
establishment or amendment of any Company Plan or Company Other Benefit Obligation.
(xi) No event has occurred or circumstance exists that could result in a
material increase in premium costs of Company Plans and Company Other Benefit
Obligations that are insured, or a material increase in benefit costs of such
Company Plans and Company Other Benefit Obligations that are self-insured.
(xii) Other than claims for benefits submitted by participants or
beneficiaries, no claim against, or legal proceeding involving, any Company Plan or
Company Other Benefit Obligation, is pending or, to the Knowledge of Seller, is
Threatened.
(xiii) Each Company Plan that is a Qualified Plan is qualified in form and
operation under IRC § 401(a); each trust for each such Company Plan is exempt from
federal income tax under IRC § 501(a). No event has occurred or circumstance exists
that will or could reasonably give rise to disqualification or loss of tax-exempt
status of any such Plan or trust.
(xiv) Except to the extent required under ERISA § 601 et seq. and IRC § 4980B,
neither Seller nor the Company provides health or welfare benefits for any retired
or former employee or is obligated to provide health or welfare benefits to any
active employee following such employee’s retirement or other termination of
service.
(xv) Seller and Company have complied with the provisions of ERISA § 601 et
seq. and IRC § 4980B.
(xvi) No payment that is owed or may become due to any director, officer,
employee, or agent of the Company will be non-deductible to the Company or subject
to tax under IRC § 280G or § 4999; nor will the Company be required to “gross up” or
otherwise compensate any such person because of the imposition of any excise tax on
a payment to such person.
3.13 Compliance with Legal Requirements; Governmental Authorizations.
(a) Except as set forth in Part 3.13 of the Disclosure Schedule:
(i) to the Knowledge of Seller, the Company and the Seller Group are, and at
all times during the three year period preceding the date hereof have been, in
compliance with each Legal Requirement that is or was directly applicable to the
conduct or operation of the Enterprise Solutions Business or the ownership or use of
any assets used in the Enterprise Solutions Business;
(ii) to the Knowledge of Seller, no event has occurred or circumstance exists
that (with or without notice or lapse of time) would reasonably be expected to
constitute, or result in, a violation by the Company or the Seller Group of any
material Legal Requirement directly applicable to the conduct or operation of the
Enterprise Solutions
16
Business or the ownership or use of any assets used in the Enterprise Solutions
Business; and
(iii) neither the Company nor any member of the Seller Group has received any
written notice or other communication from any Governmental Body regarding any
actual, alleged, possible, or potential violation by the Company, or the Enterprise
Solutions Business during the three year period prior to the date of this Agreement,
of, or failure to comply with, any Legal Requirement.
(b) Part 3.13(b) of the Disclosure Schedule contains a complete and accurate
list of each Governmental Authorization that is held by the Company or that otherwise
relates to the business of, or to any of the assets owned or used by, the Company. Each
Governmental Authorization listed or required to be listed in Part 3.13(b) of the
Disclosure Schedule is valid and in full force and effect. Except as set forth in Part
3.13(b) of the Disclosure Schedule:
(i) to the Knowledge of Seller, the Company is, and at all times since April 1,
2006 has been, in compliance in all material respects with all of the terms and
requirements of each Governmental Authorization identified or required to be
identified in Part 3.13(b) of the Disclosure Schedule;
(ii) to the Knowledge of Seller, no event has occurred or circumstance exists
that would reasonably be expected to (with or without notice or lapse of time) (A)
constitute or result directly or indirectly in a violation of or a failure to comply
with any material term or requirement of any Governmental Authorization listed or
required to be listed in 3.13(b) of the Disclosure Schedule, or (B) result
directly or indirectly in the revocation, withdrawal, suspension, cancellation, or
termination of, or any material modification to, any Governmental Authorization
listed or required to be listed in Part 3.13(b) of the Disclosure Schedule;
(iii) neither the Company nor any member of the Seller Group has received any
written notice or other written communication from any Governmental Body regarding
(A) any actual, alleged, possible, or potential violation by the Company of, or
failure by the Company to comply with any term or requirement of any Governmental
Authorization listed or required to be listed in Part 3.13(b) of the
Disclosure Schedule, or (B) any actual, proposed, possible, or potential revocation,
withdrawal, suspension, cancellation, termination of, or material modification to
any Governmental Authorization;
(iv) all applications required to have been filed by the Company for the
renewal of the Governmental Authorizations listed or required to be listed in
Part 3.13(b) of the Disclosure Schedule have been duly filed on a timely
basis with the appropriate Governmental Bodies, and all other filings required to
have been made by the Company with respect to such Governmental Authorizations have
been duly made on a timely basis with the appropriate Governmental Bodies; and
(v) the Governmental Authorizations listed in Part 3.13(b) of the
Disclosure Schedule collectively constitute all of the Governmental Authorizations
reasonably necessary to permit the Company to lawfully conduct and operate in the
Ordinary Course of Business.
17
3.14 Legal Proceedings; Orders.
(a) Except as set forth in Part 3.14 of the Disclosure Schedule, there is no
pending Proceeding:
(i) that has been commenced by or against the Company; or
(ii) that challenges, or that would reasonably be expected to have the effect
of preventing, delaying, making illegal, or otherwise materially interfering with,
any of the Contemplated Transactions.
To the Knowledge of Seller, (1) no such Proceeding has been Threatened, and (2) no event has
occurred or circumstance exists that would reasonably be expected to give rise to or serve
as a basis for the commencement of any such Proceeding. The Company has made available to
Buyer copies of all pleadings, correspondence, and other documents relating to each
Proceeding listed in Part 3.14 of the Disclosure Schedule.
(b) Except as set forth in Part 3.14 of the Disclosure Schedule:
(i) there is no Order to which the Company, or any of the assets material to
the operation of the Company, is subject;
(ii) neither the Company nor the Seller Group is subject to any Order that
relates to the business of, or any of the assets material to the operation of, the
Company; and
(iii) to the Knowledge of Seller, no officer of the Company or Key Employee is
subject to any Order that prohibits such officer or Key Employee from engaging in or
continuing any conduct, activity, or practice relating to the business of the
Company.
(c) Except as set forth in Part 3.14 of the Disclosure Schedule:
(i) to the Knowledge of Seller, the Company is, and at all times since April 1,
2006 has been, in compliance in all material respects with all of the terms and
requirements of each Order to which the Company, or any of the assets material to
the operation of the Company, is or has been subject;
(ii) to the Knowledge of Seller, no event has occurred or circumstance exists
that would reasonably be expected to constitute or result in (with or without notice
or lapse of time) a violation of or failure to comply with any material term or
requirement of any Order to which the Company, or any of the assets owned or used by
the Company, is subject; and
(iii) Neither the Seller Group nor the Company has received any written notice
or other written communication from any Governmental Body or any other Person
regarding any actual, alleged, possible, or potential violation of, or failure by
the Company to comply with, any term or requirement of any Order to which the
Company, or any of the assets material to the operation of the Company, is or has
been subject.
18
3.15 Absence of Certain Changes and Events. Except as set forth in Part 3.15
of the Disclosure Schedule, since the date of the Interim Balance Sheet, the Company has conducted
its business only in the Ordinary Course of Business and there has not been any:
(a) change in the ownership of any of the Interests; grant of any membership interest
option or right to purchase membership interests of the Company; issuance of any security
convertible into a membership interest of the Company; grant of any registration rights;
purchase, redemption, retirement, or other acquisition by the Company of any the Interests
or of any such membership interests; or declaration or payment of any dividend or other
distribution or payment in respect of the Interests;
(b) amendment to the Organizational Documents of the Company;
(c) other than in the Ordinary Course of Business, payment or increase by the Company
of any bonuses, salaries, or other compensation to any officer of the Company or Key
Employee or entry into any employment, severance Contract with any officer of the Company or
Key Employee;
(d) other than in the Ordinary Course of Business, adoption of, or increase in the
payments to or benefits under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or with any employees of
the Company;
(e) material damage to or destruction or loss of any asset or property of the Company,
whether or not covered by insurance;
(f) other than in the Ordinary Course of Business, entry into, termination of, or
receipt of written notice of termination of (i) any license, distributorship, dealer, sales
representative, joint venture, or credit agreement, or (ii) any Applicable Contract or
transaction involving a total remaining commitment by or to the Company of at least $50,000;
(g) sale (other than sales of inventory in the Ordinary Course of Business), lease, or
other disposition of any material asset or property of the Company or mortgage, pledge, or
imposition of any lien or other encumbrance on any material asset or property of the
Company, including the sale, lease, or other disposition of any of the Intellectual Property
Assets;
(h) cancellation or waiver of any claims or rights with a value to the Company in
excess of $50,000;
(i) material change in the accounting methods used by the Company; or
(j) written agreement by the Company to do any of the foregoing.
3.16 Contracts; No Defaults.
(a) Part 3.16(a) of the Disclosure Schedule contains a complete and accurate
list, and the Company has made available to Buyer true and complete copies, of:
(i) each Contract that is currently in effect and involves performance of
services or delivery of goods or materials by the Company of an amount or value in
excess of $50,000;
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(ii) each Contract that is currently in effect and involves performance of
services or delivery of goods or materials to the Company of an amount or value in
excess of $50,000;
(iii) each Contract that is currently in effect and that was not entered into
in the Ordinary Course of Business and that involves expenditures or receipts by the
Company in excess of $50,000;
(iv) each lease, rental or occupancy agreement, license, installment and
conditional sale agreement, and any other Contract affecting the ownership of,
leasing of, title to or any leasehold or other interest in, any real or personal
property (except personal property leases and installment and conditional sales
agreements having a value per item or aggregate payments of less than $50,000 and
with terms of less than one year);
(v) each licensing agreement or other Contract with respect to patents,
trademarks, copyrights, or other intellectual property, including agreements with
current employees, consultants, or contractors regarding the appropriation or the
non-disclosure of any of the Intellectual Property Assets other than the Company’s
form employee agreement;
(vi) each collective bargaining agreement and other Contract to or with any
labor union or other employee representative of a group of employees;
(vii) each joint venture, partnership, and other Contract (however named)
involving a sharing of profits, losses, costs, or liabilities by the Company with
any other Person, other than the Company Operating Agreement;
(viii) each Contract containing covenants that in any way purport to restrict
the business activity of the Company or limit the freedom of the Company to engage
in any line of business or to compete with any Person;
(ix) each Contract providing for payments to or by any Person based on sales,
purchases, or profits, other than direct payments for goods;
(x) each unconditional power of attorney granted by the Company and that is
currently effective and outstanding;
(xi) each Contract for capital expenditures in excess of $50,000, other than in
the Ordinary Course of Business;
(xii) each written warranty or guaranty extended by the Company other than in
the Ordinary Course of Business;
(xiii) each ESD Contract; and
(xiv) each written amendment, supplement, and modification in respect of any of
the foregoing.
Each of the foregoing Contracts is referred to in this Agreement as an
“Applicable Contract”.
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(b) Except as set forth in Part 3.16(b) of the Disclosure Schedule:
(i) no member of the Seller Group (and no Related Person of either the Company
or the Seller Group) has or may acquire any rights under, and no member of the
Seller Group has or may become subject to any obligation or liability under, any
Contract; and
(ii) to the Knowledge of Seller, no officer of the Company or Key Employee is
bound by any Contract that purports to limit the ability of such Person to (A)
engage in or continue any conduct, activity, or practice relating to the business of
the Company, or (B) assign to the Company or to any other Person any rights to any
invention, improvement, or discovery other than the Company’s form employee
agreement.
(c) To the Knowledge of Seller and except as set forth in Part 3.16(c) of the
Disclosure Schedule, each Applicable Contract identified or required to be identified in
Part 3.16(a) of the Disclosure Schedule is in full force and effect and is valid and
enforceable in accordance with its terms except as may be limited by bankruptcy, insolvency
or other laws affecting creditors’ rights generally and by general principles of equity.
(d) Except as set forth in Part 3.16(d) of the Disclosure Schedule:
(i) with respect to each Applicable Contract, to the Knowledge of the Seller,
the Company is, and at all times since the date of inception of such Applicable
Contract has been, in compliance in all material respects with all applicable terms
and requirements of such Applicable Contract;
(ii) to the Knowledge of Seller, each other Person that has any obligation or
liability under any Applicable Contract under which the Company has any rights is in
compliance in all material respects with all applicable terms and requirements of
such Applicable Contract;
(iii) to the Knowledge of Seller, no event has occurred or circumstance exists
that (with or without notice or lapse of time) would reasonably be expected to give
the Company or other Person the right to declare a default or exercise any remedy
under, or to accelerate the maturity or performance of, or to cancel, terminate, or
modify, any Applicable Contract;
(iv) neither the Company nor any member of the Seller Group has given or
received from any other Person any written notice or other written communication
regarding any actual, alleged, possible, or potential material violation or breach
of, or default under, any Applicable Contract;
(v) the Company has no outstanding Contracts with Seller, any Related Party of
Seller or any officer, employee, agent, consultant, advisor, salesman, sales
representative, distributor or dealer providing for the payment of any bonus or
commission based on sales or earnings;
(vi) other than the Retention Agreements, the Company has no employment
agreement, or any other agreement that contains any severance or termination pay
liabilities or obligations;
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(vii) the Company has no outstanding agreement to acquire any debt obligations
of others;
(viii) the Company has no outstanding loan to any Person, except reimbursement
of employee travel and other expenses reimbursable in accordance with Company policy
and incurred in the Ordinary Course of Business of the Company;
(ix) the Company has no outstanding obligations or liabilities (whether
absolute, accrued, contingent or otherwise), as guarantor, surety, co-signer,
endorser, co-maker or otherwise in respect of the obligation of any Person,
corporation, partnership, joint venture, association, organization or other entity;
and
(x) the Company has no commitment or obligation to continue to utilize the
services of, or otherwise to do business with, any licensor, vendor, supplier or
licensee of the Company that is not terminable on thirty (30) days or less notice.
3.17 Insurance.
(a) Except as set forth on Part 3.17 of the Disclosure Schedule, all insurance
policies to which the Company is a party or that provide coverage to the Company:
(i) taken together, provide reasonably adequate insurance coverage for the
assets and the operations of the Company for all risks normally insured against by a
Person carrying on the same business as the Company;
(ii) are sufficient for compliance in all material respects with all Legal
Requirements and Contracts to which the Company is a party or by which it is bound;
and
(iii) do not provide for any retrospective premium adjustment or other
experienced-based liability on the part of the Company.
(b) Neither the Company nor any member of the Seller Group has received (i) any written
refusal of coverage or any written notice that a defense will be afforded with reservation
of rights by any insurer, or (ii) any written notice of cancellation or any other written
indication that any insurance policy is no longer in full force or effect or will not be
renewed or that the issuer of any policy is not willing or able to perform its obligations
thereunder.
(c) The Company has paid all amounts due, and has otherwise performed all of its
material obligations under each policy to which the Company is a party or that provides
coverage to the Company.
(d) The Company has given notice to the insurer of all claims in excess of $5,000 that
may be insured thereby.
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3.18 Employees.
(a) Part 3.18 of the Disclosure Schedule contains a complete and accurate list
of the following information for each manager or employee of the Company, including each
employee on leave of absence or layoff status: name; job title; current base compensation
and any change in compensation since October 1, 2006; and vacation accrued.
(b) To the Knowledge of the Seller and except as set forth in Part 3.18 of the
Disclosure Schedule, no Key Employee is a party to, or is otherwise bound by any
confidentiality, non-compete or proprietary rights agreement in favor of a third party.
(c) To the Knowledge of Seller, no officer of the Company or Key Employee intends to
terminate his employment with the Company.
(d) Part 3.18 of the Disclosure Schedule also contains a complete and accurate
list of the following information for each retired manager or employee of the Company, or
their dependents, receiving benefits or scheduled to receive benefits in the future: name,
pension benefit, pension option election, retiree medical insurance coverage, retiree life
insurance coverage, and other benefits.
3.19 Labor Relations; Compliance. Since April 1, 2006, the Company has not been a
party to any collective bargaining agreement. Since April 1, 2006, there has not been, there is
not presently pending or existing, and there is not, to the Knowledge of Seller, Threatened, (a)
any strike, slowdown, picketing, work stoppage, or employee grievance process, (b) any Proceeding
against or affecting the Company relating to the alleged violation of any Legal Requirement
pertaining to labor relations or employment matters (including, without limitation, any charge or
complaint filed by an employee or union with the National Labor Relations Board, the Equal
Employment Opportunity Commission or any comparable Governmental Body), organizational activity or
other labor or employment dispute against or affecting any of the Company, or (c) any application
for certification of a collective bargaining agent. To the Knowledge of Seller, no event has
occurred or circumstance exists that could provide the basis for any work stoppage or other labor
dispute. There is no lockout of any employees by the Company, and no such action is contemplated
by the Company. The Company has complied in all material respects with all Legal Requirements
relating to employment, equal employment opportunity, nondiscrimination, immigration, wages, hours,
benefits, collective bargaining, the payment of social security and similar taxes, occupational
safety and health, and plant closing.
3.20 Intellectual Property.
(a) The term “Intellectual Property Assets” includes:
(i) the name “NewVectors”, all fictional business names, trading names,
registered and unregistered trademarks, service marks, and applications used or
reserved solely for use by the Company (collectively, “Marks”);
(ii) all patents and patent applications of the Company, and all inventions and
discoveries that may be patentable by the Company and are the subject of a written
invention disclosure to the Company (collectively, “Patents”);
(iii) all copyrights registered in the name of the Company (collectively,
“Copyrights”);
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(iv) all rights of the Company in mask works (collectively, “Rights in Mask
Works”); and
(v) all trade secrets, know-how and software and other processes and methods
that are proprietary to the Company and maintained as confidential (collectively,
“Trade Secrets”); and
(vi) any licenses by the Company from any third party of any patents,
trademarks, copyrights and software, excluding, however, commercially available “off
the shelf” software.
(b) Part 3.20(b) of the Disclosure Schedule contains a list of the Intellectual
Property Assets.
(c) The Intellectual Property Assets, together with all unregistered copyrights, are
all those required to operate the business of the Company as currently conducted. The
Company either owns or has the right to use the Intellectual Property Assets, free and clear
of all liens, security interests, charges, encumbrances, equities, and other adverse claims,
and, except as described in Part 3.20(b) of the Disclosure Schedule, has the right
to use without payment to a third party all of the Intellectual Property Assets.
(d) Except as set forth in Part 3.20(d) of the Disclosure Schedule, the Company
has received no written notice of any infringement by the Company with respect to the
Intellectual Property Assets or any written notice of (i) interference, reissue,
reexamination, or opposition proceeding with respect to any of the Patents that have been
applied for or issued or any challenge to the validity of any issued Patent, (ii) challenge
to the use by the Company of, or any competing application with respect to, any Xxxx, (iii)
challenge to claim upon any Mask Work, or (iv) challenge to the Company’s rights to, or
misappropriation of, a Trade Secret. To the Knowledge of Seller, none of the Intellectual
Property Assets are being infringed, misused or misappropriated by any Person.
(e) Except as set forth in Part 3.20(c) of the Disclosure Schedule, all current
employees of the Company have executed written Contracts with the Company that assign to the
Company all rights to any inventions, improvements, discoveries, or information relating to
the business of the Company created or reduced to practice within the scope of their
employment.
3.21 Certain Payments. To the Knowledge of Seller, since April 1, 2006, no officer of
the Company or Key Employee has directly or indirectly and in violation of any Legal Requirement
made any contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other payment
to any Person, private or public, regardless of form, whether in money, property, or services (a)
to obtain favorable treatment in securing business for the Company, (b) to pay for favorable
treatment for business secured by the Company, or (c) to obtain special concessions or for special
concessions already obtained, for or in respect of the Company.
3.22 Relationships with Related Persons. Other than as set forth in Part 3.22
of the Disclosure Schedule, neither the Company, any member of the Seller Group nor any other
Related Person of the Company has any interest in any property (whether real, personal, or mixed
and whether tangible or intangible) used in the Company’s business. None of the Company, any
member of the Seller Group or any other Related Person of the Company owns an equity interest or
any other financial or profit interest in a Person that has had business dealings or a material
financial interest in any transaction with the Company other than business dealings or transactions
conducted in the Ordinary Course of Business with
24
the Company on an arms-length basis. Except as set forth in Part 3.22 of the
Disclosure Schedule, no Seller or any Related Person of the Company is a party to any Contract
with, or has any claim or right against, the Company.
3.23 Brokers or Finders. Other than with respect to Xxxxxxxx Xxxxx Xxxxxx & Xxxxx
Capital, Seller and its agents have incurred no obligation or liability, contingent or otherwise,
for brokerage or finders’ fees or agents’ commissions or other similar payment in connection with
the Contemplated Transactions.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1 Organization and Good Standing. Buyer is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Virginia.
4.2 Authority; No Conflict.
(a) This Agreement constitutes the legal, valid, and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms, except as may be limited by
bankruptcy, insolvency or other laws affecting creditors’ rights generally and general
principles of equity. Upon the execution and delivery by Buyer of the Buyer’s Closing
Documents, the Buyer’s Closing Documents will constitute the legal, valid, and binding
obligations of Buyer, enforceable against Buyer in accordance with their respective terms,
except as may be limited by bankruptcy, insolvency or other laws affecting creditors’ rights
generally and general principles of equity. Buyer has the requisite power, and authority to
execute and deliver this Agreement and the Buyer’s Closing Documents and to perform its
obligations under this Agreement and the Buyer’s Closing Documents.
(b) The execution and delivery of this Agreement and the Buyer’s Closing Documents, and
the consummation of the Contemplated Transactions, have been duly authorized by all
requisite corporate action on the part of Buyer, and no other proceedings on the part of
Buyer’s board or directors or stockholders are necessary to authorize the execution,
delivery and performance of this Agreement and Buyer Closing Documents, or the consummation
of the Contemplated Transactions.
(c) Neither the execution and delivery of this Agreement by Buyer nor the consummation
or performance of any of the Contemplated Transactions by Buyer will give any Person the
right to prevent, delay, or otherwise interfere with any of the Contemplated Transactions
pursuant to:
(i) any provision of Buyer’s Organizational Documents;
(ii) any resolution adopted by the board of directors or the stockholders of
Buyer;
(iii) any Legal Requirement or Order to which Buyer or its assets may be
subject; or
(iv) any Contract to which Buyer is a party or by which Buyer may be bound.
25
Except as set forth in Schedule 4.2, Buyer is not and will not be required to obtain any Consent
from any Person in connection with the execution and delivery of this Agreement or the consummation
or performance of any of the Contemplated Transactions.
4.3 Investment Intent. Buyer is acquiring the Interests for its own account, for
investment purposes only, and not with a view to their distribution within the meaning of Section
2(11) of the Securities Act. Buyer understands that the Interests have not been registered under
the Securities Act and cannot be sold, transferred, offered for sale, pledged, hypothecated or
otherwise disposed of, and Buyer will not sell, transfer, offer for sale, pledge, hypothecate or
otherwise dispose of any of the Interests without registration under the Securities Act and any
applicable state securities laws, except pursuant to an exemption from such registration under such
act and laws.
4.4 Certain Proceedings. There is no pending Proceeding that has been commenced
against Buyer that challenges, or may have the effect of preventing, delaying, making illegal, or
otherwise interfering with, any of the Contemplated Transactions, or that would otherwise
reasonably be expected to result in a Buyer Material Adverse Effect.
4.5 Brokers or Finders. Buyer and its officers and agents have incurred no obligation
or liability, contingent or otherwise, for brokerage or finders’ fees or agents’ commissions or
other similar payment in connection with this Agreement.
4.6 Solvency. Except as a result of a breach by a member of the Seller Group of a
representation, warranty or covenant contained in this Agreement, immediately after giving effect
to Contemplated Transactions, Buyer will be able to pay its debts as they become due and its assets
will exceed its liabilities. No transfer of property is being made and no obligation is being
incurred in connection with the Contemplated Transactions with the intent to hinder, delay or
defraud either present or future creditors of Buyer or the Company.
4.7 No Knowledge of Misrepresentations or Omissions. Buyer has no Knowledge that the
representations and warranties of the Seller Group in this Agreement are not true and correct in
all material respects and Buyer has no knowledge of any material errors in, or material omissions
from the Disclosure Schedule.
5. COVENANTS OF SELLER GROUP
5.1 Access and Investigation. Between the date of this Agreement and the Closing
Date, the Seller Group will, and will cause the Company to, upon reasonable prior notice:
(a) afford Buyer and its Representatives and prospective lenders and their
Representatives (collectively, “Buyer’s Advisors”) reasonable access during normal
business hours to the Company’s personnel, properties, contracts, books and records, and
other documents and data reasonably requested by Buyer; provided, however, that the
foregoing right of access shall not be exercised in such manner as to unreasonably interfere
with the normal operations and business of the Company or any member of the Seller Group;
provided further that all requests for access shall be directed to Xxxxx X. Lawyer or such
other person as Seller may designate from time to time. Buyer and Buyer’s Advisors are not
authorized to and shall not contact any customers, suppliers or employees of the Company
prior to the Closing without the prior written consent of Seller, which consent shall not be
unreasonably withheld or delayed so long as Seller participates in any such contact; and
26
(b) furnish Buyer and Buyer’s Advisors with copies of all such contracts, books and
records, and other existing documents and data relating to the Company as Buyer may
reasonably request, and furnish Buyer and Buyer’s Advisors with such additional financial,
operating, and other data and information relating to the Company as Buyer may reasonably
request;
provided, however, that Buyer shall be and shall cause Buyer’s Advisors to become subject to
the obligations of confidentiality set forth in Section 11.4 in connection with such
activities.
5.2 Operation of the Business of the Company. Except as set forth in Part 5.2
of the Disclosure Schedule or as otherwise agreed to in writing between Seller and Buyer, between
the date of this Agreement and the Closing Date, the Seller Group will cause the Company to:
(a) conduct the business of the Company only in the Ordinary Course of Business;
(b) use its Best Efforts to preserve intact the current business organization of the
Company, keep available the services of the current officers, managers, employees, and
agents of the Company, and maintain the relations with suppliers, customers, landlords,
creditors, employees, agents, and others having significant business relationships with the
Company.
5.3 Negative Covenant. Except as otherwise expressly permitted by this Agreement,
between the date of this Agreement and the Closing Date, the Seller Group will not and will cause
the Company not to, take any affirmative action, or fail to take any reasonable action within their
or its control, as a result of which any of the changes or events listed in Section 3.15 is likely
to occur.
5.4 Notification; Disclosure Schedule Supplements.
(a) Between the date of this Agreement and the Closing Date, Seller will promptly
notify Buyer in writing if Seller Group becomes aware of any fact or condition that causes
or constitutes a Breach of any of Seller Group’s representations and warranties as of the
date of this Agreement, or if Seller Group becomes aware of the occurrence of any fact or
condition that would (except as expressly contemplated by this Agreement) cause or
constitute a Breach of any such representation or warranty had such representation or
warranty been made as of the time of occurrence or discovery of such fact or condition.
During the same period, the Seller Group will promptly notify Buyer of the occurrence of any
Breach of any covenant of the Seller Group in this Article 5 or of the occurrence of any
event that may make the satisfaction of the conditions in Article 7 impossible or unlikely.
(b) Prior to the Closing, the Seller Group shall have the right to supplement, modify
or update the Disclosure Schedule to reflect changes and developments after the date hereof.
Any such supplements, modifications and updates (each a “Disclosure Schedule
Supplement”) shall be subject to Buyer’s rights under Section 9.1(a)(i)(B) and shall
have the effect of modifying the representations and warranties made by the Seller Group.
5.5 No Negotiation. Unless and until this Agreement is terminated pursuant to Article
9, the Seller Group will not and will cause the Company not to, directly or indirectly solicit or
engage in any discussions or negotiations with any Person (other than Buyer) relating to any
transaction involving the sale of the business or assets (other than in the Ordinary Course of
Business) of the Company, or any of the membership interests or Interests of the Company, or any
merger, consolidation, business combination, or similar transaction involving the Company.
27
5.6 ECSS Receivable. If the ECSS Receivable is not fully collected by the Company on
or before the Closing Date, Buyer shall pay or cause the ECSS Receivable (less any direct expenses
accrued by the Company attributable to the ECSS Receivable) to be paid to Seller within five (5)
Business Days after receipt of payment of all or any portion of the ECSS Receivable.
5.7 Confidentiality. Each member of the Seller Group agrees it shall not use for
itself or disclose to any third party any Confidential Information, except to the extent such use
or disclosure is required by law or order of any court or governmental authority, in which event
such member of the Seller Group shall, to the extent practicable, inform Buyer in advance of any
such required disclosure so that Buyer may seek an appropriate protective order or other protection
in respect of such required disclosure and shall limit such disclosure to the extent reasonably
possible while still complying with such requirements.
5.8 Noncompete. In consideration of the transactions contemplated by this Agreement,
during the period beginning on the Closing Date and ending on the fourth (4th)
anniversary of the Closing Date (the “Noncompete Period”), each member of the Seller Group
shall not and shall cause each of its Affiliates not to, compete with the Company’s Enterprise
Solutions Business anywhere in the world; provided, however, that the foregoing shall not prevent
any member of the Seller Group from (a) owning less than 5% of the equity securities of a
publicly-held entity that is listed on any national securities exchange or that are traded in any
the over-the-counter market, or (b) directly or indirectly, owning all or any portion of, managing,
controlling or otherwise engaging in any business that provides health care and health care related
research, analysis and consulting services. Each member of the Seller Group agrees that this
covenant is reasonable with respect to its duration, geographical area and scope; provided,
however, that if, at the time of any enforcement of the covenant contained in this Section, a court
holds that the restrictions stated in this covenant are unreasonable under circumstances then
existing, Buyer and each member of Seller Group agree that the Non-Compete Period or geographic or
other scope of this covenant reasonable under such circumstances shall be substituted therefor.
The Parties hereto agree that money damages would not be an adequate remedy for any breach of this
covenant and, therefore, in the event of a breach or threatened breach of any provisions of this
Section that is continuing, Buyer may, in addition to other rights and remedies existing in their
favor, seek injunctive relief in order to enforce, or prevent any violations of, the provisions
hereof (without posting a bond or other security). In addition, in the event that a court of
competent jurisdiction determines that there has been a breach by any member of the Seller Group of
this Section, the Noncompete Period as it relates solely to such breaching member shall be tolled
until such breach has been cured.
5.9 Non-Solicitation. During the Noncompete Period, no member of the Seller Group
shall (and shall cause its respective Affiliates to not) directly or indirectly through another
entity (i) induce or attempt to induce any officer or employee to or for the Company or Buyer to
leave the employ of the Company, Buyer, or its Affiliates, (ii) hire or employ any person who was
an officer, director or employee of the Company, Buyer or any of its Affiliates at any time during
the six month period immediately prior to the date hereof, or (iii) induce or attempt to induce any
customer, supplier, licensee, licensor of the Company, Buyer or any of its Affiliates to cease
doing business with the Company, Buyer or any of its Affiliates; provided, however, that the
covenant contained in this Section shall not prevent any member of the Seller Group from placing a
general advertisement for employment and hiring any person answering such advertisement.
5.10 Seller Group Release. Except for claims arising under this Agreement and the
transaction documents referred to herein, and Claims related to the fraud or criminal misconduct of
any Person, effective as of the Closing, each member of the Seller Group hereby releases and
forever discharges Buyer, the Company, and each of their respective officers, directors, employees
and Affiliates from any and all claims, demands, proceedings, causes of action, orders,
obligations, contracts,
28
agreements, debts and liabilities whatsoever, whether known or unknown, suspected or
unsuspected, both at law and in equity, for any act or omission relating to the Company and prior
to the Closing Date that such member of the Seller Group now has, have ever had or may hereafter
have against the Company.
6. COVENANTS OF BUYER
6.1 Approvals of Governmental Bodies.
(a) As promptly as practicable after the date of this Agreement, Buyer will, and will
cause each of its Related Persons to, make all filings required by Legal Requirements to be
made by them to consummate the Contemplated Transactions. Between the date of this
Agreement and the Closing Date, Buyer will, and will cause each Related Person to, cooperate
with the Seller Group with respect to all filings that the Seller Group is required by Legal
Requirements to make in connection with the Contemplated Transactions, and cooperate with
the Seller Group in obtaining all consents identified in Part 3.2 of the Disclosure
Schedule; provided, however, that this Agreement will not require Buyer to dispose of or
make any change in any portion of its business or to incur any other material financial
burden to obtain a Governmental Authorization.
(b) As soon as practicable after Closing, Seller shall deliver to Buyer such written
documentation (including financial information) prepared and executed by Seller, in form and
substance reasonably satisfactory to and requested by Buyer, to permit Buyer to seek any
consents, filing, agreements, novations (required under 48 C.F.R. Subpart 42.12 or
otherwise) or other documents (the “Novation Documentation”), required by any
Governmental Body necessary to make effective the novations or assignments of those
contracts identified in Part 6.1 of the Disclosure Schedule for which such
documentation is required (the “Novation”). Upon receipt of any Novation
Documentation, Buyer shall promptly submit such Novation Documentation to the appropriate
person and/or Governmental Body for approval. For each contract identified in Part
6.1 of the Disclosure Schedule, Buyer and Seller will cooperate in a mutually agreeable
arrangement under which Buyer shall obtain substantially the same economic benefits that
would be obtained had the Novation of such contract occurred as contemplated herein and
Buyer shall assume the obligations under such contract in accordance with this Agreement.
Such arrangement may include, without limitation, any subcontracting, sublicensing or
subleasing to Buyer with Buyer assuming Altarum’s obligations and any and all rights of
Altarum against any third party thereto.
6.2 No Additional Representations; Disclaimer.
(a) Buyer acknowledges that neither the Company nor any member of the Seller Group, nor
any other Person acting on behalf of any member of the Seller Group or any of their Related
Parties (i) has made any representation or warranty, express or implied, including any
implied representation or warranty as to the condition, merchantability, suitability or
fitness for a particular purpose of any of the assets owned by the Company or used in its
business, or (ii) has made any representation or warranty, express or implied, as to the
accuracy or completeness of any information regarding the Company or its business, in each
case except as expressly set forth in this Agreement or as and to the extent required by
this Agreement to be set forth in the Disclosure Schedule. Buyer further agrees that
neither any member of the Seller Group nor any other Person will have or be subject to any
liability to Buyer or any other Person resulting from the distribution to Buyer, or Buyer’s
use of, any such information, including any information, document or material made available
to Buyer or any Related Party of Buyer in certain “data rooms,” management presentations or
any other form in expectation of the transactions contemplated by this Agreement.
29
(b) In connection with Buyer’s investigation of the Company, Buyer has received from or
on behalf of the Seller Group certain projections, including projected statements of
operating revenues and income from operations of the Company for the fiscal year ending
September 30, 2009, and for subsequent fiscal years and certain business plan information
for such fiscal year and succeeding fiscal years. Buyer acknowledges that there are
uncertainties inherent in attempting to make such estimates, projections and other forecasts
and plans, that Buyer is familiar with such uncertainties, that Buyer is taking full
responsibility for making its own evaluation of the adequacy and accuracy of all estimates,
projections and other forecasts and plans so furnished to it (including the reasonableness
of the assumptions underlying such estimates, projections and forecasts), and that Buyer
shall have no claim against any member of the Seller Group with respect thereto.
Accordingly, no member of the Seller Group makes any representations or warranties
whatsoever with respect to such estimates, projections and other forecasts and plans
(including the reasonableness of the assumptions underlying such estimates, projections and
forecasts).
6.3 Notification. Between the date of this Agreement and the Closing Date, Buyer will
promptly notify Seller in writing if Buyer becomes aware of any fact or condition that causes or
constitutes a Breach of any representation and warranty as of the date of this Agreement, or if
Buyer becomes aware of the occurrence after the date of this Agreement of any fact or condition
that would (except as expressly contemplated by this Agreement) cause or constitute a Breach of any
such representation or warranty had such representation or warranty been made as of the time of
occurrence or discovery of such fact or condition. During the same period, Buyer will promptly
notify Seller of the occurrence of any Breach of any covenant of Buyer in this Article 6 or of the
occurrence of any event that may make the satisfaction of the conditions in Article 8 impossible or
unlikely.
6.4 Books And Records. No later than the Closing, the Company shall provide the
Seller with copies of all material books and records of the Company relating to periods prior to
the Closing Date; provided, however, that Seller or its agents shall be allowed to retain copies of
such books and records for archival purposes and provided further, however, that the Buyer shall
itself, and shall cause the Company after the Closing, to cooperate with any member of the Seller
Group by providing any material books and records of the Company, or any portions thereof, relating
to periods prior to the Closing Date upon the reasonable request of any such Member of the Seller
Group in connection with any audit, investigation, supbeona or dispute resolution proceeding.
6.5 Cooperation With Respect to Taxes. After the Closing, the parties shall cooperate
fully, as and to the extent reasonably requested by each party and at the requesting party’s
expense, in connection with any audit, litigation or other Proceeding with respect to Taxes.
6.6 Non-Solicitation. During the Noncompete Period, Buyer shall not (and shall cause
its respective Affiliates to not) directly or indirectly through another entity (i) induce or
attempt to induce any officer, manager or employee to or for any member of the Seller Group to
leave the employ of such member of the Seller Group or its Affiliates, (ii) hire or employ any
person who was an officer, director or employee of any member of the Seller Group or any of its
Affiliates at any time during the six month period immediately prior to the date hereof, or (iii)
induce or attempt to induce any customer, supplier, licensee, licensor of or to any member of the
Seller Group or any of its Affiliates to cease doing business with any member of the Seller or any
of its Affiliates ; provided, however, that the covenant contained in this Section shall not
prevent the Buyer from placing a general advertisement for employment and hiring any person
answering such advertisement.
6.7 Survival. The obligations of Buyer in this Article 6 that by their terms survive
the Closing, shall survive the Closing.
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7. CONDITIONS PRECEDENT TO BUYER’S OBLIGATION TO CLOSE
Buyer’s obligation to purchase the Interests and to take the other actions required to be
taken by Buyer at the Closing is subject to the satisfaction, at or prior to the Closing, of each
of the following conditions (any of which may be waived by Buyer, in whole or in part; provided
that if any condition is waived, Buyer will not be entitled to recover for any Damages incurred by
Buyer as they relate to the existence of such condition):
7.1 Accuracy of Representations. All of the Seller Group’s representations and
warranties in this Agreement (considered collectively), and each of such representations and
warranties (considered individually), must have been true and accurate in all material respects as
of the date of this Agreement, and must be accurate in all material respects as of the Closing Date
(except that those representations and warranties that are qualified by materiality shall have been
true and accurate in all respects on such dates) as if made on the Closing Date (unless such
representation and warranty relate to an earlier date), except for inaccuracies of representations
and warranties the circumstances giving rise to which, individually or in the aggregate, do not
constitute and could not reasonably be expected to constitute a Company Material Adverse Effect.
7.2 Company’s and Seller Group’s Performance. All of the covenants and obligations
that the Seller Group is required to perform or to comply with pursuant to this Agreement at or
prior to the Closing (considered collectively), and each of these covenants and obligations
(considered individually), must have been duly performed and complied with by the Seller Group.
7.3 Consents. The Company shall have obtained each of the Consents identified in
Part 3.2 of the Disclosure Schedule and each such Consent shall be in full force and
effect.
7.4 No Proceedings. Since the date of this Agreement, there must not have been
commenced or Threatened against Buyer, or against any Person affiliated with Buyer, any Proceeding
(a) involving any challenge to, or seeking damages or other relief in connection with, any of the
Contemplated Transactions, or (b) that could reasonably be expected to have the effect of
preventing, materially delaying, making illegal, or otherwise materially interfering with any of
the Contemplated Transactions.
7.5 No Claim Regarding Interest Ownership or Sale Proceeds. Other than by the Seller
Group, there must not have been made or Threatened by any Person any claim asserting that such
Person (a) is the holder or the beneficial owner of, or has the right to acquire or to obtain
beneficial ownership of, any of the Interests, or any other voting, equity, or ownership interest
in, any of the Company, or (b) is entitled to all or any portion of the Purchase Price payable for
the Interests.
7.6 No Prohibition. Neither the consummation nor the performance of any of the
Contemplated Transactions will, directly or indirectly (with or without notice or lapse of time),
contravene, or conflict with, or result in a violation of, or cause Buyer or any Person affiliated
with Buyer to suffer any material adverse consequence under, (a) any applicable Legal Requirement
or Order, or (b) any Legal Requirement or Order that has been published, introduced, or otherwise
proposed by or before any Governmental Body.
7.7 Additional Documents. Each of the following documents must have been delivered to
Buyer:
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(a) copies of the documents required to be executed and delivered by any member of the
Seller Group under Section 2.4 of this Agreement, duly executed and delivered by such member
of the Seller Group;
(b) if required under the terms of each real property lease, estoppel certificates
executed on behalf of the Company and Altarum, dated as of the Closing Date;
(c) a certificate of a manager or officer of Seller dated as of the Closing Date,
certifying that the conditions contained in Sections 8.1 through 8.7 have been satisfied;
(d) a certificate from the Seller dated as of the Closing Date, attaching and
certifying the Organizational Documents of the Company and a resolution of the members of
the Company authorizing the Contemplated Transactions to be attached thereto, as well as the
incumbency and signatures of the persons signing this Agreement and the Seller’s Closing
Documents; and
(e) a copy of the certificate of good standing for the Company issued within three (3)
business days prior to the Closing by the Michigan Department of Labor and Economic Growth.
8. CONDITIONS PRECEDENT TO SELLER’S OBLIGATION TO CLOSE.
Seller’s obligation to sell the Interests and to take the other actions required to be taken
by Seller at the Closing is subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by Seller, in whole or in part; provided that if
any condition is waived, Buyer will not be entitled to recover for any Damages incurred by Buyer as
they relate to the existence of such condition):
8.1 Accuracy of Representations. All of the Buyer’s representations and warranties in
this Agreement (considered collectively), and each of such representations and warranties
(considered individually), must have been true and accurate in all material respects as of the date
of this Agreement, and must be accurate in all material respects as of the Closing Date (except
that those representations and warranties that are qualified by materiality shall have been true
and accurate in all respects on such dates) as if made on the Closing Date (unless such
representation and warranty relate to an earlier date), except for inaccuracies of representations
and warranties the circumstances giving rise to which, individually or in the aggregate, do not
constitute and could not reasonably be expected to constitute a Buyer Material Adverse Effect.
8.2 Buyer’s Performance. All of the covenants and obligations that Buyer is required
to perform or to comply with pursuant to this Agreement at or prior to the Closing (considered
collectively), and each of these covenants and obligations (considered individually), must have
been performed and complied with.
8.3 Consents. The Company shall have obtained each of the Consents identified in
Part 3.2 of the Disclosure Schedule and each such Consent shall be in full force and
effect.
8.4 No Proceedings. Since the date of this Agreement, there must not have been
commenced or Threatened against any member of the Seller Group, or against any Person affiliated
with any member of the Seller Group, any Proceeding (a) involving any challenge to, or seeking
damages or other relief in connection with, any of the Contemplated Transactions, or (b) that would
reasonably be expected to have the effect of preventing, materially delaying, making illegal, or
otherwise materially interfering with any of the Contemplated Transactions.
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8.5 No Injunction. There must not be in effect any Legal Requirement or any
injunction or other Order that (a) prohibits the sale of the Interests by Seller to Buyer, and (b)
has been adopted or issued, or has otherwise become effective, since the date of this Agreement.
8.6 No Prohibition. Neither the consummation nor the performance of any of the
Contemplated Transactions will, directly or indirectly (with or without notice or lapse of time),
materially contravene, or conflict with, or result in a material violation of, or cause any member
of the Seller Group or any Person affiliated with any member of the Seller Group to suffer any
material adverse consequence under, (a) any applicable Legal Requirement or Order, or (b) any Legal
Requirement or Order that has been published, introduced, or otherwise proposed by or before any
Governmental Body.
8.7 Additional Documents. Each of the following documents must have been delivered to
Seller:
(a) a certificate of Buyer certifying that the conditions contained in Sections 7.1
through 7.7 have been satisfied;
(b) a certificate from the Secretary of Buyer, dated as of the Closing Date, attaching
and certifying the incumbency and signatures of the persons signing this Agreement and the
Buyer’s Closing Documents; and
(c) a certificate executed by each of Xxxxxxxxx X. Xxx, Xxxx X. Xxxxx, W. Xxxxx
Xxxxxxx and Xxxxxxx X. Xxxxxx certifying that the representations and warranties contained
in Article 3 are true, correct and complete in all respects to the best of their knowledge.
8.8 Termination of Seller Group Guarantee. All financial and performance guarantees
by the Company of the obligations of the Seller Group granted in favor of any Person shall have
been terminated, rendered null and void and of no further force and effect.
9. TERMINATION
9.1 Termination Events. This Agreement may be terminated as follows:
(a) Buyer may terminate this Agreement by giving written notice to Seller at any time
prior to the Closing (i) in the event that the Seller Group (A) has Breached any
representation, warranty, or covenant contained in this Agreement, or (B) delivers a
Disclosure Schedule Supplement, which in either case individually, or in the aggregate,
would cause any Damage to Buyer or the Company in excess of $500,000 (as determined in good
faith by Buyer) or would cause a condition precedent within Article 7 not to be satisfied,
and which in either case is not cured within five (5) Business Days after written notice of
such breach from Buyer to Seller, or (ii) if the Closing shall not have occurred on or
before June 15, 2007, by reason of the failure of any condition precedent under Article 7
(unless the failure results primarily from Buyer breaching any representation, warranty, or
covenant contained in this Agreement);
(b) The Seller may terminate this Agreement by giving written notice to Buyer at any
time prior to the Closing (i) in the event that Buyer has Breached any representation,
warranty, or covenant contained in this Agreement, which individually, or in the aggregate,
would reasonably be expected to result in a Buyer Material Adverse Effect, which in either
such case is not cured within five (5) Business Days after written notice of such breach
from the Company to Buyer, or (ii) if the Closing shall not have occurred on or before June
15, 2007, by reason of the failure of any condition precedent under Article 8 (unless the
failure results
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primarily from any of the Company or any member of the Seller Group breaching any
representation, warranty, or covenant contained in this Agreement); or
(c) by mutual written consent of Buyer and Seller.
9.2 Effect of Termination. If either Buyer or the Company terminates this Agreement
pursuant to Section 9.1, all rights and obligations of the parties hereunder shall terminate
without any liability of any party to any other party (except for any liability of any party then
in Breach); provided however, Sections 11.2 and 11.4 shall survive the termination of this
Agreement.
10. INDEMNIFICATION; REMEDIES
10.1 Survival. All representations, warranties, covenants, and obligations in this
Agreement, the Disclosure Schedule and any other certificate or document delivered pursuant to this
Agreement will survive the Closing for the periods set forth in Section 10.4.
10.2 Indemnification and Payment of Damages By Seller. Subject to Sections 10.1, 10.4
and 10.7, each member of the Seller Group hereby jointly and severally indemnifies Buyer, the
Company and each of their respective officers, directors, employees and agents (collectively, the
“Buyer Indemnified Persons”) for, and will pay to the Buyer Indemnified Persons, any
Damages arising, directly or indirectly, from or in connection with (a) any Breach of any
representation or warranty made by any member of the Seller Group in Article 3 above, or (b) any
Breach by any member of the Seller Group of any covenant of such Seller Group member in this
Agreement.
10.3 Indemnification and Payment of Damages by Buyer. Buyer will indemnify Seller,
each member of the Seller Group and each of their respective officers, directors, members of the
board of managers, employees and agents (collectively, the “Seller Indemnified Persons”),
and will pay to the Seller Indemnified Person the amount of any Damages arising, directly or
indirectly, from or in connection with (a) any Breach of any representation or warranty made by
Buyer in Article 4, (b) any Breach by Buyer of any covenant in this Agreement, and (c) any Breach
by the Company after the Closing of any covenant contained in this Agreement.
10.4 Time Limitations; Failure to Close.
(a) If the Closing occurs, the Seller Group will have no liability (for indemnification
or otherwise) with respect to Damages related to any representation or warranty, or covenant
or obligation to be performed and complied with prior to the Closing Date, other than those
in Sections 3.2(a), 3.3, 3.10, 3.20, and 3.23, unless on or before the first anniversary of
the Closing Date, Buyer notifies Seller in writing of a claim for Damages, specifying the
factual basis of that claim in reasonable detail to the extent then known by Buyer (a
“Buyer Indemnification Claim”). A Buyer Indemnification Claim with respect to
Section 3.2, 3.3, 3.10 and 3.23 must be made on or before the date that is thirty (30) days
after the expiration of the statute of limitations with respect to such claim, and a Buyer
Indemnification Claim with respect to Section 3.20 of this Agreement must be made on or
before the date that is five (5) years from the date of this Agreement. A Buyer
Indemnification Claim as a result of fraud may be made at any time.
(b) If the Closing occurs, Buyer will have no liability (for indemnification or
otherwise) with respect to Damages related to any representation or warranty, or covenant or
obligation to be performed and complied with prior to the Closing Date, unless on or before
one year after the Closing Date, Seller notifies Buyer in writing of a claim for Damages,
specifying the factual basis of that claim in reasonable detail to the extent then known by
Seller (a “Seller
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Indemnification Claim”). A Seller Indemnification Claim as a result of fraud
may be made at any time.
(c) If the Closing does not occur, neither Buyer nor any member of the Seller Group
shall have any liability for indemnification under this Article 10.
10.5 Limitations On Amount—Seller. The Seller Group will have no liability (for
indemnification or otherwise) with respect to the matters described Section 10.2 (other than for
Damages under Sections 3.2(a), 3.3, 3.10, 3.20, and 3.23) until the total of all Damages with
respect to such matters exceeds $500,000 (the “Indemnification Deductible”) and then only
for the amount by which such Damages exceed the Indemnification Deductible, up to an absolute
maximum of $10,000,000 (the “Indemnification Cap”). The Seller Group shall be liable to
Buyer for Damages under Sections 3.2(a), 3.3, 3.10, 3.20 and 3.23 on a dollar-for-dollar basis
without regard to the Indemnification Deductible or the Indemnification Cap, but subject to an
absolute Damages limit equal to the Purchase Price. However, this Section 10.5 shall not be
construed to limit Altarum’s obligation of indemnity under Section 10.13 or to apply to any
intentional Breach or fraud by the Seller Group of any covenant or obligation under this Agreement.
10.6 Limitations On Amount—Buyer. Buyer will have no liability (for indemnification
or otherwise) with respect to the matters described in Section 10.3 until the total of all Damages
with respect to such matters exceeds the Indemnification Deductible, and then only for the amount
by which such Damages exceed the Indemnification Deductible, up to a maximum of the Indemnification
Cap. However, this Section 10.6 shall not apply to (a) any intentional Breach or fraud by Buyer,
or (b) any intentional Breach by the Company after the Closing of any covenant or obligation that
survives the Closing.
10.7 Procedure For Indemnification—Buyer Indemnification Claims and Seller Indemnification
Claims.
(a) If any Buyer Indemnified Person or Seller Indemnified Person shall claim to have
suffered Damages for which indemnification is available under this Article 10 (each a
“Claim”), such Buyer Indemnified Person or Seller Indemnified Person, as the case
may be (without distinction, the “Indemnitee”), shall notify the Persons responsible
to indemnify the Indemnitee (collectively, the “Indemnitor”) in writing of such
Claim, which notice shall describe the nature of such Claim, the facts and circumstances
that give rise to such Claim and the Indemnitee’s best estimate of the amount of such Claim.
In the case of a Claim by a Buyer Indemnified Person with respect to the Seller Group’s
indemnification obligations set forth in Section 10.2, a copy of such written notice shall
also be provided by such Buyer Indemnified Person to the Escrow Agent under the terms of the
Escrow Agreement. If within thirty (30) days after the Indemnitee provides such a written
notice of Claim, the Indemnitor has not objected to such Claim in writing to the Indemnitee,
such Claim shall be conclusively presumed and considered to have been assented to and
approved by the Indemnitor.
(b) If within the thirty (30) day period described in the foregoing subsection (a), the
Indemnitee (and the Escrow Agent in the case of a Claim by a Buyer Indemnified Person) shall
have received a written objection to such Claim from the Indemnitor, the Indemnitor and the
Indemnitee shall use good faith efforts during the thirty (30)-day period following the
Indemnitee’s receipt of such notice to resolve the Claim. If they are unable to resolve the
Claim within such thirty (30)-day period, the Indemnitor and the Indemnitee shall discuss in
good faith the submission of the Claim to binding arbitration and the parameters for any
such arbitration proceeding. If the Indemnitor and the Indemnitee can agree upon such
parameters, they shall do
35
so in writing and such Claim shall be resolved by binding arbitration in accordance
with such parameters. If they cannot so agree, any such Claim shall be resolved by a court
of competent jurisdiction in accordance with Section 11.6.
10.8 Procedure for Indemnification—Third Party Claims.
(a) Promptly and within twenty (20) days after receipt by an Indemnitee of notice of
the commencement of any Proceeding against it by any Person (other than a Buyer Indemnified
Person and Seller Indemnified Person) for Damages for which indemnification is provided
under Section 10.2 or 10.3 of this Agreement (each, a “Third Party Action”), an
Indemnitee shall give written notice to the Indemnitor of the commencement of such Third
Party Action, including a reasonably detailed description of the facts constituting the
basis for such Third Party Action and the amount of the claimed Damages. The failure to so
timely notify the Indemnitor shall not relieve the Indemnitor of any liability that it may
have to any Indemnitee, except to the extent that the Indemnitor demonstrates that the
defense of such action is prejudiced by the Indemnitee’s failure to timely give such notice.
(b) Within twenty (20) days after delivery of such notification, the Indemnitor may,
upon written notice thereof to the Indemnitee, assume control of the defense of such Third
Party Action with counsel reasonably satisfactory to the Indemnitee; provided that the
Indemnitor may only assume control of such defense if: (i) the Third Party Action does not
involve criminal liability or seek equitable relief against the Indemnitee, (ii) Indemnitor
acknowledges in writing to the Indemnitee that any damages, fines, costs or other
liabilities that may be assessed against the Indemnitee in connection with such Third Party
Action constitute Damages for which the Indemnitee shall be indemnified pursuant to this
Article 10, and (iii) the amount of the claim arising out of such Third Party Action is less
than or equal to the amount of Damages for which the Indemnitor is liable under this Article
10. If the Indemnitor does not timely assume control of the defense of a Third Party
Action, the Indemnitee shall control such defense. The Indemnitor or Indemnitee controlling
such defense (the “Controlling Party”) shall keep the other Party (the
“Non-controlling Party”) advised of the status of such Third Party Action and the
defense thereof. The Non-controlling Party shall, at the sole cost and expense of the
Controlling Party: (1) furnish the Controlling Party with such information as may be
reasonably requested by the Controlling Party with respect to such Third Party Action
(including copies of any summons, complaint or other pleading which may have been served on
the Non-controlling Party and any written claim, demand, invoice, billing or other document
evidencing or asserting the same) and (2) otherwise cooperate with and assist the
Controlling Party in the defense of such Third Party Action. The fees and expenses of
counsel to the Indemnitee with respect to a Third Party Action shall be considered Damages
for purposes of this Agreement only if the Indemnitee is the Controlling Party pursuant to
the terms of this sub-section (b).
(c) The Controlling Party shall not agree to any settlement of, or the entry of any
judgment arising from, any Third Party Action without the prior written consent of the
Non-controlling Party (which shall not be unreasonably withheld, conditioned or delayed);
provided, however, that the Controlling Party shall have no obligation to obtain any such
consent if the settlement involves only the payment of money by the Controlling Party and
does not result in the admission of any wrongdoing or continuing restriction of any kind
upon the Non-controlling Party.
10.9 Notification of Escrow. If the Indemnitee is a Buyer Indemnified Person, the
Indemnitor and the Indemnitee shall promptly deliver to the Escrow Agent, a written notice of the
36
Resolved Claim or an Approved Claim executed by both parties instructing the Escrow Agent as
to the distribution of any portion of the Escrow Amount to such Buyer Indemnified Person.
10.10 Exclusive Remedy; Determination of Damages.
(a) Except for rights, claims and causes of action it may have relating to fraud, the
Parties acknowledge and agree that, from and after the Closing, their sole and exclusive
remedy with respect to any and all Claims relating to the subject matter of this Agreement
shall be pursuant to the indemnification provisions set forth in this Article 10.
(b) The amount of any and all Damages under this Article 10 shall be determined net of
(i) the net present value of any Tax benefits realized by any Indemnitee arising from the
deductibility of any such Damages and (ii) any amounts recovered or recoverable by
Indemnitee under indemnities or other reimbursement arrangements with respect to such
Damages. Buyer and Seller hereby waive, to the extent permitted under its applicable
insurance policies, any subrogation rights that its insurer may have with respect to any
indemnifiable Damages.
(c) Any indemnity payment under this Agreement shall be treated as an adjustment to the
Purchase Price for Tax purposes.
(d) Claims by the Buyer Indemnified Persons against the Seller Group with respect to
the matters referred to in Section 10.2 shall be satisfied first by proceeding against the
Escrow Amount, and only when the Escrow Amount is exhausted, by proceeding directly against
the Seller Group.
10.11 Insurance. The amount of any Damages payable under this Article 10 to any
Indemnitee shall be reduced by any amounts actually recovered by such Indemnitee under applicable
insurance policies. If any Indemnitee receives any amounts under applicable insurance policies
subsequent to satisfaction of any indemnification obligation out of the Escrow Amount or by payment
of money, such Indemnitee shall promptly (a) return such amount to the Escrow Agent for deposit
pursuant to the Escrow Agreement or, if the Escrow Agreement has expired or terminated, pay such
amount to the Indemnitor(s) against whom such amount was charged by reason of the related claim of
indemnification, or (b) reimburse the Indemnitor that made such payment.
10.12 Mitigation. The Parties agree that when they become aware of any Claim giving
rise to an indemnification obligation hereunder, they shall cooperate and take all reasonable
measures to mitigate the consequences of the Breach (if any) giving rise to the Claim, including
taking steps to prevent any contingent liability from becoming an actual liability. No Indemnitee
shall be entitled to indemnification for any Damages that result from (a) the failure by the
Indemnitee to take such actions; (b) the unlawful conduct of such party; or (c) the Breach or
default by such party of any representation, warranty, covenant, obligation or agreement under this
Agreement.
10.13 DCA Audit Indemnification by Altarum. In connection with rates billed by
Altarum for services performed during the period from October 1, 2005 through the Closing under
Applicable Contracts where the ultimate customer is the U.S. Government, Altarum agrees to retain
any and all liabilities, and shall indemnify Buyer up to an absolute maximum of the Purchase Price,
for any refunds or credits due to the U. S. Government as a result of Altarum’s Defense Contract
Management Agency’s (DCMA) Administrative Contracting Officer’s (ACO) final determination, in
accordance with FAR 42.705, of Altarum’s approved billing rates for such period. Altarum shall
make any payment due in respect of such obligation of indemnity within fifteen (15) days after
receipt from Buyer of a copy of the
37
audit report, together with a calculation prepared by Buyer demonstrating any such overcharge,
stating the amount thereof and the specific overcharges cited in the audit report.
11. GENERAL PROVISIONS
11.1 Sellers Representative.
(a) Appointment of Sellers Representative. By execution and delivery of this
Agreement, each member of the Seller Group, for itself and its successors and assigns,
irrevocably constitutes and appoints Altarum as its true and lawful agent and
attorney-in-fact with full power of substitution to act in the name, place and stead of the
Seller Group with respect to all matters contemplated by the terms and provisions of this
Agreement (in Altarum’s capacity as Sellers Representative, “Sellers
Representative”). Each member of the Seller Group acknowledges that the appointment of
Sellers Representative herein is coupled with an interest and may not be revoked. Sellers
Representative accepts its appointment and authorization to act as attorney-in-fact and
agent of the Seller Group. Buyer, its officers, directors, employees, agents and affiliates
shall be able to rely exclusively, without inquiry, on the instructions, decisions and
actions of Seller Representative on behalf of the Seller with respect to any and all matters
in connection with this Agreement.
(b) Authority of Sellers Representative. In furtherance of the appointment of
Sellers Representative, each member of the Seller Group, fully and without restriction: (i)
agrees to be bound by all actions, decisions and instructions of Sellers Representative
taken, made or given pursuant to the authority granted to Seller Representative pursuant to
this Section 11.1 and (ii) authorizes Sellers Representative to (A) give and receive notices
and communications on behalf of the Seller Group, (B) dispute or refrain from disputing any
claim made by Buyer under this Agreement or the Seller Closing Documents, (C) negotiate and
compromise any dispute which may arise under this Agreement or the Seller Closing Documents,
(D) exercise or refrain from exercising any remedies available to the Seller Group under
this Agreement, (E) execute any releases or other documents with respect to any such dispute
or remedy, (F) waive any condition contained in this Agreement, (G) give instructions and do
such other things and refrain from doing such other things as Sellers Representative, in its
sole discretion, deems necessary or appropriate to carry out the provisions of this
Agreement and the Seller Closing Documents, (H) receive all amounts payable by Buyer to
Seller hereunder on behalf of the Seller Group and, subject to clauses (I), (J) and (K)
below, pay to each member of the Seller Group their pro rata share of such amounts, (I) pay
out of the funds coming into the hands of Sellers Representative from Buyer, all fees and
expenses of the Seller Group incurred in connection with the transactions contemplated by
this Agreement, including, without limitation, the fees and expenses of counsel,
accountants, brokers and other professional advisors retained by or on behalf of the Seller
Group or any of them, in connection with such transactions, (J) retain such counsel,
accountants and other professional advisors as Seller Representative reasonably deems
necessary to assist it in the performance of its duties hereunder and pay the fees, costs
and expenses thereof out of the funds coming into the hands of Sellers Representative, (K)
retain out of the funds coming into the hands of the Sellers Representative from Buyer such
amounts as Sellers Representative, in its sole discretion, deems appropriate to be held as
reserves for expected or potential future expenses or liabilities of the Seller Group
hereunder and pay such amounts to such parties as it deems appropriate, and (L) to authorize
the disbursement of funds from the Escrow Account. Notwithstanding anything in this
Agreement to the contrary, the Sellers Representative shall not have the right to waive any
rights or remedies one member of the Seller Group has or may have against any other member
of the Seller Group or against Sellers Representative, under this Agreement or otherwise.
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(c) No Liability. Sellers Representative shall have no liability whatsoever to
any Person (including Buyer and any member of the Seller Group) relating to its service
hereunder. Each member of the Seller Group jointly and severally agrees to indemnify Sellers
Representative and hold it harmless against any loss, expense or other liability arising out
of or in connection with its duties as Sellers Representative under this Agreement,
including the reasonable costs and expenses incurred by Sellers Representative in defending
against any claim or liability in connection herewith, except to the extent arising directly
from the gross negligence or willful misconduct of Sellers Representative.
(d) Substitution of Sellers Representative. If Sellers Representative is
unable or unwilling to act as Sellers Representative, the members holding a majority of the
Interests as of the date hereof may appoint a substitute Sellers Representative. The
members holding a majority of the Interests as of the date hereof will notify Buyer and
Escrow Agent promptly in writing of any change in Sellers Representative. Until Buyer and
the Escrow Agent receive the foregoing written notice, each will be entitled to assume that
the Person previously acting as the Sellers Representative is still the duly authorized
Sellers Representative.
11.2 Expenses. Except as otherwise expressly provided in this Agreement, each party
to this Agreement will bear its respective expenses incurred in connection with the preparation,
execution, and performance of this Agreement and the Contemplated Transactions, including all fees
and expenses of agents, representatives, counsel, and accountants.
11.3 Public Announcements. Following the execution of this Agreement, any public
announcement or similar publicity with respect to this Agreement or the Contemplated Transactions
will be issued, if at all, at such time and in such manner as Buyer and Seller shall mutually
determine. Unless consented to by Buyer and Seller in advance or required by Legal Requirements,
prior to the Closing Buyer and Seller Group shall (and shall cause the Company to), keep this
Agreement strictly confidential and may not make any disclosure of this Agreement to any Person.
Seller and Buyer will consult with each other concerning the means by which the Company’ employees,
customers, and suppliers and others having dealings with the Company will be informed of the
Contemplated Transactions, and, following the Closing, Buyer will have the right to be present for
any such communication.
11.4 Confidentiality. Between the date of this Agreement and the Closing Date, Buyer
and the Seller Group will maintain in confidence, and will cause the directors, managers, officers,
employees, agents, and advisors of Buyer and the Company to maintain in confidence, any written,
oral, or other information obtained in confidence from another party or the Company in connection
with this Agreement or the Contemplated Transactions, unless (a) such information is already known
to such party or to others not bound by a duty of confidentiality or such information becomes
publicly available through no fault of such party, (b) the use of such information is necessary in
making any filing or obtaining any consent or approval required for the consummation of the
Contemplated Transactions or as mandated by any Legal Requirement, or (c) the furnishing or use of
such information is required in connection with legal proceedings. If the Contemplated
Transactions are not consummated, each party will return or destroy as much of such written
information as the other party may reasonably request.
11.5 Notices. All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand
(with written confirmation of receipt), (b) sent by telecopier (with written confirmation of
receipt), provided that a copy is mailed by certified or registered mail, return receipt requested,
or (c) when received by the addressee, if sent by a nationally recognized overnight delivery
service (receipt requested), in each case to the appropriate addresses and telecopier numbers set
forth below (or to such other addresses and telecopier numbers as a party may designate by notice
to the other parties):
39
If to Buyer:
TechTeam Government Solutions, Inc.
0000 Xxxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000, U.S.
Attention: Xxxxxx X. Xxxxx
Main: 800.275.1177
000.000.0000
Fax: 000.000.0000
TechTeam Government Solutions, Inc.
0000 Xxxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000, U.S.
Attention: Xxxxxx X. Xxxxx
Main: 800.275.1177
000.000.0000
Fax: 000.000.0000
with a copy (that does not constitute notice) to
TechTeam Global Inc.
00000 Xxxx 00 Xxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Fax: 000.000.0000
00000 Xxxx 00 Xxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Fax: 000.000.0000
If to Altarum or ASO:
0000 Xxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Attention: Xxxx X. Xxxxx
Fax: (000) 000-0000
0000 Xxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Attention: Xxxx X. Xxxxx
Fax: (000) 000-0000
with a copy (that does not constitute notice) to
Xxxxxxxx Xxxxxx Xxxxxxxx and Xxxx LLP
000 Xxxxx Xxxxx Xxxxxx, Xxxxxx Xxxxx
Xxx Xxxxx, XX 00000-0000
Attention: Xxxxx Xxxxxxxxx
Fax:: (000) 000-0000
000 Xxxxx Xxxxx Xxxxxx, Xxxxxx Xxxxx
Xxx Xxxxx, XX 00000-0000
Attention: Xxxxx Xxxxxxxxx
Fax:: (000) 000-0000
11.6 Jurisdiction; Service of Process. Any action or proceeding seeking to enforce
any provision of, or based on any right arising out of, this Agreement may be brought against any
of the parties in the courts of the State of Michigan, County of Oakland, or, if it has or can
acquire jurisdiction, in the United States District Court for the Eastern District of Michigan, and
each of the parties consents to the jurisdiction of such courts (and of the appropriate appellate
courts) in any such action or proceeding and waives any objection to venue laid therein. Process
in any action or proceeding referred to in the preceding sentence may be served on any party
anywhere in the world.
11.7 Further Assurances. The parties agree (a) to furnish upon request to each other
such further information, (b) to execute and deliver to each other such other documents, and (c) to
do such other acts and things, all as the other party may reasonably request for the purpose of
carrying out the intent of this Agreement and the documents referred to in this Agreement.
11.8 Waiver. The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither the failure nor any delay by any party in exercising any right,
power, or privilege under this Agreement or the documents referred to in this Agreement will
operate as a waiver of such right, power, or privilege, and no single or partial exercise of any
such right, power, or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this Agreement or the documents
referred to in this Agreement can be discharged by one party, in whole or in part, by a waiver or
renunciation of the claim or right unless in writing signed by the other
40
party; (b) no waiver that may be given by a party will be applicable except in the specific
instance for which it is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party or of the right of the party giving such notice or demand to
take further action without notice or demand as provided in this Agreement or the documents
referred to in this Agreement.
11.9 Entire Agreement and Modification. This Agreement supersedes all prior
agreements between the parties with respect to its subject matter (including, without limitation,
the Letter of Intent between Buyer and Seller dated April 11, 2007) and constitutes (along with the
documents referred to in this Agreement) a complete and exclusive statement of the terms of the
agreement between the parties with respect to its subject matter. This Agreement may not be
amended except by a written agreement executed by the party to be charged with the amendment.
11.10 Assignments, Successors, and no Third-Party Rights. No party may assign any of
its rights under this Agreement without the prior consent of the other parties, except that Buyer
may assign any of its rights under this Agreement to any Related Person of Buyer. Subject to the
preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the parties. Nothing expressed or referred to
in this Agreement will be construed to give any Person other than the parties to this Agreement any
legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision
of this Agreement. This Agreement and all of its provisions and conditions are for the sole and
exclusive benefit of the parties to this Agreement and their successors and assigns.
11.11 Severability. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or unenforceable
only in part or degree will remain in full force and effect to the extent not held invalid or
unenforceable.
11.12 Section Headings, Construction. The headings of Sections in this Agreement are
provided for convenience only and will not affect its construction or interpretation. All
references to “Article”, “Articles”, “Section” or “Sections” of this Agreement refer to the
corresponding Article, Articles, Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances require. Unless
otherwise expressly provided, the word “including” does not limit the preceding words or terms.
11.13 Governing Law. This Agreement shall be governed by the laws of the State of
Michigan, without regard to its conflicts of laws principles.
11.14 Counterparts; Facsimile Signature. This Agreement may be executed in one or
more counterparts and by facsimile signature, each of which will be deemed to be an original copy
of this Agreement and all of which, when taken together, will be deemed to constitute one and the
same agreement, and such facsimile signatures shall be deemed to be original signatures.
[SIGNATURES ON FOLLOWING PAGE]
41
The parties have executed and delivered this Membership Interest Purchase Agreement as of the
date first written above.
TechTeam Government Solutions, Inc. | NewVectors Holding, LLC | |||||||
By:
|
/s/ Xxxxxx X. Xxxxx, Xx.
|
By: | ALTARUM SUPPORTING ORGANIZATION, INC. Its: Authorized Member | |||||
Its: President |
By: | /s/ Xxxx X. Xxxxx
|
|||||
Its: Treasurer |
Altarum Institute | Altarum Supporting Organization, Inc. | |||||||
By:
|
/s/ Xxxx X. Xxxxx
|
By: | /s/ Xxxx X. Xxxxx
|
|||||
Its: Executive Vice President and Chief Financial Officer | Its: Treasurer |