ASSET PURCHASE AGREEMENT BY AND AMONG ZANETT COMMERCIAL SOLUTIONS, INC. PS GOLIVE LLC and MICHAEL JOHNSON Dated as of November 25, 2008
Execution
Copy
BY
AND
AMONG
ZANETT
COMMERCIAL SOLUTIONS, INC.
PS
GOLIVE
LLC
and
XXXXXXX
XXXXXXX
Dated
as
of November 25, 2008
This
ASSET PURCHASE AGREEMENT (this “Agreement”)
is
made and entered into this 25th day of November, 2008 by and among ZANETT
COMMERCIAL SOLUTIONS, INC., a Delaware corporation (“Buyer”),
a
wholly-owned subsidiary of Zanett, Inc. (“Zanett”),
PS
GOLIVE
LLC,
a
Florida limited liability company (“Seller”),
and
XXXXXXX
XXXXXXX,
an
individual residing in the state of Florida and owner of all of the outstanding
equity interests of Seller (the “Owner”).
WHEREAS,
Seller is an Oracle Partner and authorized Oracle software reseller engaged
in
the business of, among other things, providing upper end services for PeopleSoft
Enterprise products and business processes.
WHEREAS,
the parties hereto desire to provide for the sale of substantially all of the
assets of Seller to Buyer, and for certain other matters, all on the terms
and
subject to the conditions set forth in this Agreement.
NOW,
THEREFORE, in consideration of the premises and the mutual representations,
warranties, covenants and agreements contained herein, the parties hereto,
intending to be legally bound, agree as follows:
ARTICLE
I.
DEFINITIONS
AND CONSTRUCTION
1.1 Definitions.
“Actual
Net Working Capital”
shall
mean (i) Current Assets including cash, minus (ii) Current Liabilities, in
each
case as of the Closing Date, all as recorded on the Closing Financial
Statements.
“Adjusted
Income”
shall
mean for any period, earnings of Seller and its subsidiaries before deductions
for Taxes, depreciation and amortization subject to the provisions,
qualifications and other provisions of this Agreement, in accordance with GAAP
as applied on a basis consistent with Seller’s past practices. In determining
such Adjusted Income:
(i) Adjusted
Income shall not include any gains, losses or profits realized from the sale
of
any assets other than in the ordinary course of business;
(ii) No
deduction shall be made for any management fees, general overhead expenses
or
other intercompany charges, of whatever kind or nature, charged by Buyer or
any
of its Affiliates to Seller; and
(iii) No
deduction shall be made for legal or accounting fees and expenses arising out
of, or payments made pursuant to this Agreement or any agreement contemplated
hereby.
“Adjusted
Income Target”
shall
mean (i) for the first One-Year Performance Period, $990,000, (ii) for the
second One-Year Performance Period, $1,158,000 and (iii) for the third One-Year
Performance Period, $1,284,000.
“Affiliate”
shall
mean, as to any Person, any other Person controlled by, under the control of,
or
under common control with, such Person. As used in this definition, “control”
shall mean possession, directly or indirectly, of the power to direct or cause
the direction of management or policies (whether through ownership of securities
or partnership or other ownership interests, by contract or
otherwise).
“American
Express Debt”
shall
mean all amounts due under Seller’s American Express Cash Rebate Card and
American Express Blue Cash for Business Credit Card (collectively the
“American
Express Debt”).
“Authority”
means
the United States of America or any other nation, any state, or other political
subdivision thereof, or any entity, agency, or authority (foreign, federal,
state, or local) exercising executive, legislative, judicial, regulatory, or
administrative functions of government.
“Authorizations”
means
any federal, foreign, state, local, regulatory and other governmental consents,
licenses, certificates permits, franchises, approvals, notifications, numbers,
identifiers, grants, and other authorizations issued, granted, given, or
otherwise made available by or under the authority of any Authority or pursuant
to any Law.
“Benefit
Plans”
shall
mean any profit sharing, group insurance, medical, dental and/or
hospitalization, stock option, pension, retirement, bonus, deferred
compensation, stock bonus or stock purchase plan, or collective bargaining
agreements, contracts or other arrangements under which pensions, deferred
compensation or other retirement benefits are being paid or may become payable
by a party, or any other employee welfare or benefit agreements, plans or
arrangements, as defined in Section 3(3) of ERISA, any plan created in
accordance with Section 125 of the Code, or any nonqualified employee benefit
plans or deferred compensation, bonus, stock or incentive plans, or other
employee benefit or fringe benefit programs, established for the benefit of
a
party’s former or current officers, directors or employees, including each trust
or other agreement with any custodian or any trustee for funds held under any
such agreement plan or agreement.
“Books
and Records”
shall
mean (i) the minute books of Seller containing the minutes of all meetings
and
written consents of the members and board of managers (or similar governing
body) and (ii) all other books and records of Seller prior to the Closing Date,
including customer lists, reports, plans, projections and advertising and
marketing materials and financial and accounting books and records.
“Business”
shall
mean the business currently carried on by Seller, including, without limitation,
acting as an Oracle Partner and an authorized Oracle software reseller providing
upper end servers for People Soft Enterprise products and business
processes.
“Business
Day”
shall
mean any day other than a Saturday, Sunday or legal holiday in the State of
New
York or Florida.
“Closing”
shall
mean the purchase of the assets by Buyer as set forth herein.
“Closing
Balance Sheet”
shall
mean the balance sheet of Seller included in the Closing Financial
Statements.
“Closing
Date”
shall
mean the date on which the Closing is completed.
“Code”
shall
mean the Internal Revenue Code of 1986, as amended.
“Competitors”
shall
mean those entities other than Seller engaged in the Business.
“Current
Assets”
shall
mean, in respect of any period, (i) all assets expected to be converted into
cash or otherwise realized in the twelve months following the balance sheet
date
and recorded as current assets in Seller’s Financial Statements and the Closing
Financial Statements in accordance with GAAP, as applied on a basis consistent
with Seller’s past practices, including, but not limited to, cash and cash
equivalents, accounts receivable, notes receivable, interest receivable, prepaid
expenses, and current assets and any provisions recorded thereon and (ii) those
items identified as “Current Assets” on Schedule
1.1.
“Current
Liabilities”
shall
mean, in respect of any period, (i) all liabilities expected to be settled
in
the twelve months following the balance sheet date and recorded as current
liabilities in Seller’s Financial Statements and the Closing Financial
Statements in accordance with GAAP, as applied on a basis consistent with
Seller’s past practices, including, but not limited to, accounts payable,
accrued expenses, accrued payroll liabilities, interest payable, deferred
revenue and the current portion of any debt obligations, and (ii) those items
identified as “Current Liabilities” on Schedule
1.1.
“Deposit”
shall
have the meaning given to it in the Letter of Intent dated September 22, 2008
by
and between Zanett and Seller.
“Effective
Date”
shall
mean 11:59 P.M. on the Closing Date.
“Encumbrance”
shall
mean a mortgage, charge, pledge, lien, option, restriction, claim, right of
first refusal, right of preemption, third party right or interest or other
encumbrance or security interest of any kind or similar right or any other
matter affecting title.
“Environmental
Laws”
means
all federal, state and local, provincial and foreign, civil and criminal laws,
regulations, rules, ordinances, codes, decrees, judgments, directives or
judicial or administrative orders, agreements or settlements relating to
pollution or protection of the environment, natural resources or human health
and safety, including, without limitation, laws relating to releases or
threatened releases of Hazardous Substances (including, without limitation,
releases or threatened releases to ambient air, surface water, groundwater,
land, surface and subsurface strata) or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, release, transport, disposal
or handling of Hazardous Substances. “Environmental Laws” include, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act (42 U.S.C. §§ 9601 et seq.), the Hazardous Materials Transportation Law (49
U.S.C. §§ 5101 et seq.), the Resource Conservation and Recovery Act (42 U.S.C.
§§ 6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C. §§ 1251 et
seq.), the Clean Air Act (42 U.S.C. §§ 7401 et seq.), the Toxic Substances
Control Act (15 U.S.C. §§ 2601 et seq.), the Oil Pollution Act (33 U.S.C. §§
2701 et seq.), the Emergency Planning and Community Right-to-Know Act (42 U.S.C.
§§ 11001 et seq.), the Occupational Safety and Health Act (29 U.S.C. §§ 651 et
seq.), each as amended to date and all other state laws similar to any of the
above.
“Environmental
Liabilities”
means
all liabilities of Seller that (i) arise under or relate to violations of
Environmental Laws or arise in connection with or related to any matter
disclosed or required to be disclosed on Schedule
4.19
and (ii)
are attributable to actions or omissions occurring or conditions existing on
or
prior to the Closing Date.
“ERISA”
shall
mean the Employee Retirement Income Security Act of 1974, as
amended.
“Exchange
Act”
shall
mean the Securities Exchange Act of 1934, as amended, together with all rules
and regulations promulgated thereunder.
“Financial
Statements”
shall
mean Seller’s audited balance sheets as of December 31, 2005, 2006 and 2007 and
related statements of income, statements of changes in shareholder’s equity and
statements of cash flows for such years and Seller’s unaudited balance sheet as
of September 30, 2008 and the related statements of income, statements of
changes in shareholder’s equity and statements of cash flows for the nine months
then ended
“GAAP”
shall
mean, at any particular time, accounting principles generally accepted in the
United States of America, consistently applied on a going concern
basis.
“Hazardous
Substances”
means:
(i) all Materials or Substances (whether or not wastes, contaminants or
pollutants) that are or become regulated by any of the Environmental Laws,
(ii)
all Materials or Substances that are or become defined or described by any
of
the Environmental Laws as “hazardous” or “toxic” or a “pollutant,”
“contaminant,” “hazardous substance,” “hazardous waste,” “extremely hazardous
waste,” “acutely hazardous waste” or “acute hazardous waste,” and (iii)
petroleum, including crude oil or any fraction thereof, asbestos, including
asbestos containing materials, and polychlorinated biphenyls.
“Inventory”
means,
all assets of Seller, wherever located, which are finished goods or work in
process of the Business, and raw materials, spare parts and all other materials
and supplies held by Seller that were acquired for use or consumption by Seller
in the production of finished goods for the Business, including all rights
related to consignment inventory.
“Key
Employees”
shall
mean Xxxxxxx Xxxxxxx, Xxxxxx Xxxxx, Xxxx Xxxxxxx, Xxxx Xxxxxxx, Xxxx Xxxxxxxx,
Xxxxx Xxxxxx, Xxxx Xxxxxxxx, Xxxxxx Xxxxxxx, XxXxx Xxxx, Xxxxxxxx Xxxxxxxxx,
Xxxxxxx Xxxx, and Xxxxxxx Xxxxxx.
“Law”
means
any law (including principles of common law), statute, regulation, rule, permit,
license, certificate, judgment, order, award, or other decision or requirement
of any arbitrator, court, government or governmental agency, instrumentality,
or
other Authority (domestic or foreign).
“Liens”
means
any mortgage, pledge, security interest, encumbrance, lien, or charge of any
kind, including any conditional sale or other title retention agreement, any
lease in the nature thereof, and the filing of or agreement to give any
financing statement under the Uniform Commercial Code of any jurisdiction and
including any lien or charge arising by statute or other laws, which secures
the
payment of a debt (including any Tax) or the performance of an
obligation.
“Materials
or Substances”
shall
mean all elements, compounds, substances, matrices or mixtures that are
hazardous, toxic, ignitable, reactive or corrosive.
“Membership
Unit”
shall
mean the limited liability company interest of Seller.
“One-Year
Performance Period”
shall
mean each of the three successive annual periods commencing on December 1,
2008
and ending on November 30, 2011.
“Performance
Period”
shall
mean each of the One-Year Performance Periods.
“Person”
shall
mean an individual, company, partnership, limited liability company, limited
liability partnership, joint venture, trust or unincorporated organization,
joint stock corporation or other similar organization, government or any
political subdivision thereof, or any other legal entity.
“Receivables”
shall
mean the accounts receivable, trade receivables, notes receivable and other
receivables arising out of or related to Seller’s operations, in each case
determined in accordance with GAAP.
“Related
Agreements”
shall
mean all instruments, agreements and other documents executed and delivered
or
to be executed and delivered pursuant to this Agreement including without
limitation the Xxxx of Sale, the Confidentiality, Non-Competition, and
Non-Solicitation Agreements, and the Lock-up Agreement.
“Related
Party”
means
any officer, director, stockholder, member, or Affiliate of either Seller or
Owner or any individual related by blood or marriage to any such Person.
“Reserves”
shall
mean those reserves for bad debts, contractual adjustments and disallowances,
self-insured risks, risk management and unspecified uninsured liabilities,
established and maintained by Seller and reflected in the Financial
Statements.
“Revenue”
shall
mean gross revenue, calculated in accordance with GAAP, as applied on a basis
consistent with Seller’s past practices.
“Revenue
Target”
means
(i) for the first One-Year Performance Period, $3,400,000, (ii) for the second
One-Year Performance Period, $3,900,000 and (iii) for the third One-Year
Performance Period, $4,300,000.
“Schedules”
shall
mean the disclosure schedules delivered by Seller to Buyer pursuant to this
Agreement.
“Target
Net Working Capital”
shall
mean $0.
“Taxes”
shall
mean all taxes, assessments, charges, duties, fees, levies or other governmental
charges, including but not limited to, all federal, state, local, foreign,
or
other income, profits, unitary, business, franchise, capital stock, real
property, personal property, intangible taxes, withholding, FICA, Medicare,
unemployment compensation, disability, transfer, sales, use, excise and other
taxes, assessments, charges, duties, fees, or levies of any kind whatsoever
(whether or not requiring the filing of Tax Returns) and all deficiency
assessments, additions to tax, penalties and interest.
“Tax
Returns”
shall
mean any return, amended return or other report (including but not limited
to
elections, declarations, disclosures, schedules, estimates and information
returns) required to be filed with any Tax authority or other governmental
authority.
“Wachovia
Bank”
shall
mean Wachovia Bank, National Association.
“Wachovia
Debt”
shall
mean that certain Promissory Note for a line of credit in the amount of $300,000
between Seller and Wachovia Bank dated April 25, 2008.
“Zanett
Stock”
shall
mean the common stock of Zanett, $0.001 par value per share.
1.2 Location
of Certain Defined Terms. The following terms used in this Agreement are defined
in the Section indicated.
|
Additional
Contingent Payment
|
3.2(b
|
)
|
||
|
Additional
Contingent Payment Cap
|
3.2(b
|
)
|
||
|
Adjustment
Payment
|
3.4(c
|
)
|
||
|
Advance
Amount
|
3.5
|
|||
|
Assumed
Liabilities
|
2.4
|
|||
|
Audit
|
8.7
|
|||
|
Balance
Sheet
|
4.4(e
|
)
|
||
|
Balance
Sheet Date
|
4.5(e
|
)
|
||
|
Buyer
Indemnified Parties
|
7.2(a
|
)
|
||
|
Buyout
Payment
|
3.2(c
|
)
|
||
|
Claim
|
4.9
|
|||
|
Closing
|
2.7
|
|||
|
Closing
Date
|
2.7
|
|||
|
Closing
Financial Statements
|
3.5(a
|
)
|
||
|
Confidential
Information
|
8.2
|
|||
|
Consent
|
2.2
|
|||
|
Consideration
|
3.1
|
|||
|
Contingent
Payment
|
3.2(a
|
)
|
||
|
Contract
|
2.1(c
|
)
|
||
|
Damages
|
7.2(a
|
)
|
||
|
Debt
Repayment
|
8.5(a
|
)
|
||
|
Default
|
4.10(i
|
)
|
||
|
Disputed
Amounts
|
8.6
|
|||
|
Excluded
Assets
|
2.3
|
|||
|
Excluded
Liabilities
|
2.5
|
|||
|
Indemnifying
Party
|
7.3
|
|||
|
Indemnified
Party
|
7.3
|
|||
|
Independent
Accounting Firm
|
8.7
|
|||
|
Intellectual
Property
|
4.15(a
|
)
|
||
|
IRCA
|
4.12(f
|
)
|
||
|
IRS
|
4.1(d
|
)
|
||
|
Lock
Up Agreement
|
9.2(m
|
)
|
||
|
Performance
Period Financial Statements
|
8.6
|
|||
|
Performance
Period Requirements
|
3.2(a
|
)
|
||
|
Permitted
Encumbrances
|
4.5(f
|
)
|
||
|
Pre-Closing
Receivables
|
8.5(a
|
)
|
||
|
Purchased
Assets
|
2.1
|
|||
|
Seller
Indemnified Parties
|
7.2(b
|
)
|
1.3 Construction.
(a) The
headings and captions used herein are intended for convenience of reference
only, and shall not modify or affect in any manner the meaning or interpretation
of any of the provisions of this Agreement.
(b) As
used
herein, the singular shall include the plural, the masculine and feminine
genders shall include the neuter, and the neuter gender shall include the
masculine and feminine, unless the context otherwise requires.
(c) The
words
“hereof,” “herein” and “hereunder”, and words of similar import, when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement.
(d) All
references herein to Sections, Schedules or Exhibits shall be deemed to refer
to
Sections of and Schedules or Exhibits to this Agreement, unless specified to
the
contrary. All Exhibits and Schedules to this Agreement are integral parts of
this Agreement as if fully set forth herein.
(e) The
words
“include,” “includes” and “including” when used herein shall be deemed in each
case to be followed by the words “without limitation.”
(f) “To
the
knowledge of Seller,” “to the best knowledge, information and belief of Seller”
or any similar phrase shall be deemed to mean that (i) a Seller Responsible
Person (as defined below) is actually aware of a particular fact or matter
or
(ii) a prudent individual in such Seller Responsible Person’s capacity could
reasonably be expected to discover or otherwise become aware of that fact or
matter in the ordinary course of performing his functions on behalf of Seller
or
in the ordinary course of conducting a reasonable investigation regarding the
accuracy of any representation or warranty contained in this Agreement. For
purposes of this definition, the term Seller Responsible Person consists of
all
directors and executive officers of Seller, including Owner.
(g) “Material
adverse change” or “material adverse effect” means, with respect to a specified
party, any change or effect, as the case may be, that has, or is reasonably
likely to have, individually or in the aggregate, a material adverse impact
on
the assets, business, prospects or condition (financial or otherwise) of such
party and its subsidiaries taken as a whole.
(h) As
all
parties participated in negotiating and drafting this Agreement, no rule of
construction shall apply to this Agreement which construes ambiguous language
in
favor of or against any party by reason of that party’s role in drafting this
Agreement.
ARTICLE
II.
THE
SALE AND TRANSFER OF ASSETS
2.1 Purchase
and Sale of
Assets.
Subject
to the terms and conditions of, and on the basis of and in reliance upon, the
covenants, agreements, and representations and warranties set forth in this
Agreement, at the Closing, Seller shall sell, assign, transfer, and convey
to
Buyer, free and clear of any Liens other than Permitted Encumbrances, and Buyer
shall purchase from Seller, all of Seller’s right, title, and interest in and to
all assets, properties, goodwill, rights, and claims of every kind and
description, personal and mixed, tangible and intangible, known and unknown,
actual and contingent, and wherever situated, which are owned, leased, licensed,
held, or used by Seller in the Business (excluding only the Excluded Assets)
(the “Purchased
Assets”).
The
transfer of the Purchased Assets shall not include the assumption of any
liability by Buyer whatsoever unless Buyer expressly assumes such liability
pursuant to Section
2.4.
Without
limiting the foregoing, the Purchased Assets shall include the following assets
relating to the Business as they exist on the Closing Date and to the extent
of
Seller’s right, title, and interest therein, except to the extent they are
Excluded Assets:
(a) all
Inventory;
(b) all
tangible personal property, including all furniture, equipment, computers and
peripherals (including installed software), supplies, packaging, office
materials, tools, parts, fixtures, machinery, and the tangible property listed
on Schedule
2.1(b);
(c) all
rights in, to, and under each purchase order (including open purchase orders
for
inventory), policy sheet, sales agreement, equipment lease, distribution
agreement, licensing agreement, franchise, guaranty, release, instrument,
contract, agreement, commitment, and arrangement (in every case, oral or
written) to which Seller is a party or by which the Business or the Purchased
Assets are otherwise bound (each, a “Contract”),
including those Contracts listed on Schedule
2.1(c);
(d) all
Intellectual Property used primarily in the Business;
(e) all
Authorizations, including those Authorizations listed on Schedule
2.1(e)
that are
not identified as non-transferable;
(f) with
respect to the Business, all books and records (including such books and records
as are contained in computerized storage media), including all Inventory,
purchasing, accounting, sales, export, import, manufacturing, and shipping
records, all customer, supplier, and vendor lists, files, records, literature,
and correspondence, all advertising, marketing, and public relations materials,
and, subject to applicable Law, copies of all personnel records of
Seller;
(g) all
unperformed commitments or obligations owing to Seller which pertain to the
Business or any of the Purchased Assets, (except those relating exclusively
to
Excluded Liabilities);
(h) all
other
tangible and intangible rights and property of Seller, including the telephone
and telecopy numbers of Seller which are held, or used in, or necessary to,
the
operation of the Business;
(i) all
insurance benefits, including rights and proceeds, arising from or relating
to
the Purchased Assets or the Assumed Liabilities prior to the Effective
Date;
(j) all
claims of Seller against third parties relating to the Purchased Assets or
the
Business, whether xxxxxx or inchoate, known or unknown, contingent or
non-contingent, including all causes of action, rights of action, contract
rights, and warranty and product liability claims against third parties (except
those relating exclusively to Excluded Liabilities);
(k) all
rights of Seller in and to any and all security deposits in respect of any
Purchased Asset; and
(l) all
of
the goodwill associated with the Business as a going concern.
2.2 Nonassignability.
Notwithstanding anything in this Agreement to the contrary, if any Contract
or
Authorization included in the Purchased Assets may not be transferred without
the consent, approval, or waiver (“Consent”)
of a
third party (including any Authority), such transfer or attempted transfer
would
constitute a breach thereof or a violation of any Law and such Consent is listed
in Schedule
4.2(b),
nothing
in this Agreement or any Related Agreement shall constitute a transfer or
attempted transfer thereof. To the extent that any Consent is not obtained
by
the Effective Date, Seller (a) shall cooperate with Buyer at its request in
endeavoring to obtain such Consent promptly with Buyer and Seller each paying
their own costs in connection therewith and (b) if any such Consent is
unobtainable, shall cooperate with Buyer in any arrangement (provided that
such
arrangement is not a breach or violation of such Contract or Authorization)
designed to provide for Buyer the benefits under the applicable Contract or
Authorization (provided that such arrangement is not a breach or violation
of
such Contract or Authorization) as if such Contract and Authorization had been
duly assigned to Buyer, including enforcement for the benefit of Buyer of any
and all rights of Seller against any other party thereto. Buyer shall be
responsible only for the liabilities or obligations arising out of the Contracts
and Authorizations to the extent they are assigned or transferred to Buyer
pursuant to the terms of this Agreement or Buyer is provided the benefits,
claims, and rights under such Contracts and Authorizations.
2.3 Excluded Assets.
Notwithstanding anything to the contrary in this Agreement, the following
specified rights, properties, and assets of Seller shall not be included in
the
Purchased Assets (the “Excluded
Assets”):
(a) cash
and
cash equivalents and marketable securities;
(b) all
Receivables (other than any Pre-Closing Receivables transferred to Buyer
pursuant to Section
8.5(b));
(c) seals,
minute books, and Books and Records relating to the membership interests of
Seller, bank accounts and taxpayer identification numbers;
(d) those
assets specifically listed on Schedule
2.3(i);
(e) all
casualty, liability, or other policies of insurance of Seller (except to extent
set forth in Sections
2.1(i)
and
2.1
(j))
and all
claims and rights of Seller with respect to refunds related to such policies
solely (and only to the extent) due to overpayments made by Seller prior to
the
Effective Date;
(f) all
Benefit Plans of Seller and all assets owned or held by any such Benefit
Plans;
(g) all
claims and rights of Seller to any Tax refunds, Tax credits, or other Tax
benefits; and
(h) Seller’s
rights under this Agreement.
2.4 Assumed
Liabilities.
Subject
to the terms and conditions of, and on the basis of and in reliance upon the
covenants, agreements, and representations and warranties set forth in this
Agreement, at the Effective Date, Buyer shall assume and agree to discharge
the
liabilities and obligations of Seller to be performed or discharged after
Closing pursuant to the Contracts included in the Purchased Assets (other than
any liability or obligation for a breach or default that occurred prior to
Closing or to pay money that accrued prior to the Effective Date) and listed
on
Schedule
2.4(a) Seller
(collectively, the “Assumed
Liabilities”).
2.5 Excluded
Liabilities.
Except
for the Assumed Liabilities, Buyer shall not assume, or in any way be liable
or
responsible for, any direct or indirect liabilities, obligations, or debts
of
Seller or the Business of any type or nature, fixed or unfixed, known or
unknown, accrued or unaccrued, asserted or unasserted, xxxxxx or inchoate,
liquidated or unliquidated, secured or unsecured, contingent or otherwise
(collectively, the “Excluded
Liabilities”),
including the liabilities listed below, that are based on acts or omissions
of
Seller or any Affiliate of Seller occurring on, before or after the Effective
Date. Seller shall retain all Excluded Liabilities and agrees to pay or
discharge when due all of the Excluded Liabilities. Without limiting the
foregoing, the Excluded Liabilities shall include all of the
following:
(a) any
obligation or liability relating to or arising out of the Excluded
Assets;
(b) any
obligation or liability relating to or arising out of the Wachovia
Debt;
(c) any
product warranty or product liability, negligence, or other claim of any nature
in respect of products or services sold, manufactured, installed, or provided
by
or for Seller prior to the Effective Date;
(d) any
obligation or liability for Taxes that have been or may be incurred as a result
of Seller’s operation of the Business or ownership of the Purchased Assets on or
before the Effective Date, including (i) any liability for deferred Taxes of
any
nature; and (ii) any Taxes of any Person for which Seller is liable, arising
out
of any tax sharing agreement as a transferee or successor, or by reason of
membership in any affiliated group of corporations;
(e) any
Environmental Liabilities arising or related to the operation of Seller and
the
Business, or arising or relating to the acts or omissions of any Person or
Authority, or from any conditions, whether known or unknown, naturally occurring
or otherwise, or any events, facts, or circumstances whatsoever, in each case
first occurring before the Effective Date;
(f) any
obligation or liability arising under any Contract that (i) is not transferred
to Buyer as part of the Purchased Assets or (ii) relates to any breach or
default (or an event which might, with the passing of time or the giving of
notice or both, constitute a default) under any Contract or to any goods or
services provided or to be provided by Seller under any such Contract arising
out of or relating to periods prior to the Effective Date;
(g) any
obligation or liability of Seller to indemnify its officers, directors,
employees, or agents;
(h) any
obligation or liability of the Business to any Affiliate or Related
Party;
(i) any
obligation or liability relating to any Benefit Plan, pension or retirement
benefits (including any 401(k) plan) and health care or other employee benefits
or employee stock option plans for employees or former employees;
(j) any
obligation or liability under any employment, severance, retention, termination,
or similar agreement with any employee of Seller or any of its
Affiliates;
(k) any
obligation or liability arising out of or related to any employee of Seller,
including employee grievances, arising out of or relating to periods prior
to
the Effective Date;
(l) any
obligation or liability of Seller to distribute to its member or otherwise
to
apply all or any part of the consideration received under this
Agreement;
(m) any
obligation or liability of Seller to the extent that Seller has the right to
be
indemnified by an insurer or other third party under the policies in force
immediately preceding the Effective Date;
(n) any
obligation or liability of Seller arising out of existing or pending claims,
actions, suits, proceedings (arbitration or otherwise), litigations or
investigations arising out of, or relating to, an occurrence or event happening
before the Effective Date, whether or not set forth in the Disclosure
Schedule;
(o) any
obligation or liability arising out of any “bulk sale” type of Law or successor
liability protection Law, including any Law regarding notice of the transactions
contemplated hereby to be given to any Tax Authority or imposing Damages on
Buyer or Buyer Parent or Liens on the Purchased Assets if such notice is not
given;
(p) any
obligation or liability arising under the WARN Act or any similar Law, to the
extent caused by any action of Seller before the Effective Date;
(q) any
obligation or liability (including any fees, expenses, or other payments) of
Seller or Owner to any brokers, financial advisors, or comparable other Persons
retained or employed by any of them in connection with the Agreement or the
transactions contemplated hereunder;
(r) any
obligation or liability of Seller for infringement associated with the use
of
any trademarks prior to the Effective Date; and
(s) all
capital lease obligations of Seller and other outstanding debt of Seller, except
as set forth on Schedule 2.5(r).
2.6 Certain
Taxes.
Seller
and Owner shall be responsible for the payment of all Taxes imposed on Seller
or
Xxxxxxx that are payable or arise as a result of this Agreement or any related
Agreements; provided,
however,
that
Seller and Buyer shall share equally any transfer Taxes that are payable or
arise as a result of the transactions contemplated by this Agreement.
2.7 Closing.
Subject
to the terms and conditions hereof, the closing of the transactions contemplated
by this Agreement (the “Closing”)
will
take place on the first business day after the satisfaction or waiver of the
conditions set forth in Article IX (other than any such conditions that by
their
terms cannot be satisfied until the Closing Date, which conditions shall be
required to be so satisfied or waived on the Closing Date), unless another
time
or date is agreed to by the parties hereto (the actual time and date of the
Closing, the “Closing
Date”).
The
Closing shall be held at the offices of Drinker Xxxxxx & Xxxxx LLP, One
Xxxxx Square, 00xx
xxx
Xxxxxx Xxxxxxx, Xxxxxxxxxxxx, XX 00000-0000 fax: (000) 000-0000, or at such
other place as the parties hereto may agree.
2.8 Deliveries
at the Closing
At the
Closing, in addition to the other actions contemplated elsewhere
herein:
(a) Owner
shall deliver, or shall cause to be delivered, to Buyer the
following:
(i) a
certificate, dated as of the Closing Date and duly executed by such Owner,
to
the effect set forth in Section 9.2(a)
and
9.2(b)
hereof;
(ii) a
certificate from such Owner substantially in the form set forth in Treasury
Regulation Section 1.1445-2(b); and
(iii) such
other documents and instruments as Buyer may reasonably request to effectuate
or
evidence the transactions contemplated by this Agreement.
(b) Seller
shall deliver to Buyer the following:
(i) a
certificate of an authorized officer of Seller, provided pursuant to the
requirements of Treasury Regulation Sections 1.1445-2(c)(3) and 1.897-2(h);
(ii) a
certificate, dated as of the Closing Date and duly executed by an authorized
officer of Seller, to the effect set forth in Section 9.2(a)
and
9.2(b)
hereof;
(iii) a
certificate from the Secretary of State of Florida as to Seller’s formation,
valid existence and good standing as a domestic limited liability company in
the
State of Florida, together with a certificate of good standing from the
Secretary of State or other appropriate governmental official of each
jurisdiction in which Seller is qualified to conduct its business as a foreign
entity, all dated no more than five days prior to the Closing Date;
(iv) the
third
party consents and documents evidencing the termination of the agreements,
in
each case as specified in Schedule
2.7(b);
(v) an
assignment, xxxx of sale, and assumption agreement in the form of Exhibit
A
(the
“Xxxx
of Sale”)
executed by Seller;
(vi) an
intellectual property assignment in the form of Exhibit
B
(the
“Intellectual
Property Assignment”)
executed by Seller;
(vii) a
certificate of the secretary of Seller in form and substance satisfactory to
Buyer, dated as of the Closing Date, attaching (A) the certificate of formation
of Seller and all amendments thereto, certified as of a recent date by the
Secretary of State of the State of Florida, (B) the operating agreement of
Seller, (C) incumbency, authority, and specimen signatures of each of the
officers of Seller executing this Agreement and any other Related Agreement
executed on behalf of Seller and certifying the authenticity of such signatures
and (D) the resolutions duly adopted by the board of managers (or similar
governing body) of Seller and by the sole member of Seller, authorizing and
approving the execution, delivery, and performance of this Agreement and the
consummation of the transactions contemplated hereunder;
(viii) copies
of
executed payoff letters for all outstanding indebtedness of Seller, if any
(other than the Wachovia Debt), along with duly executed releases or
terminations of financing statements, or other evidence satisfactory to Buyer
that all Liens on any Purchased Asset (other than Permitted Encumbrances) have
been released and terminated; and
(ix) such
other documents and instruments as Buyer may reasonably request to effectuate
or
evidence the transactions contemplated by this Agreement.
(c) Buyer
shall deliver, or shall cause to be delivered, to Seller the
following:
(i) a
certificate, dated as of the Closing Date and duly executed by an authorized
representative of Buyer, as applicable, to the effect set forth in Sections
9.3(a),
and
9.3(b)
hereof;
(ii) the
Xxxx
of Sale executed by Buyer;
(iii) the
Intellectual Property Assignment executed by Buyer; and
(iv) such
other documents and instruments as Seller may reasonably request to effectuate
or evidence the transactions contemplated by this Agreement.
ARTICLE
III.
CONSIDERATION
3.1 Consideration.
(a) The
“Consideration”
for
the
Purchased Assets, shall be up to $1,200,000 (plus the Additional Contingent
Payment), subject to Section
3.2(c)
and
adjustment as set forth in this Article III, payable to Seller as
follows:
(i) in
respect of each of the One-Year Performance Periods, an amount of cash or Zanett
Stock with a value (as described below) of up to $400,000, payable to the Seller
after the Closing in accordance with Section
3.2(a)
(each
such payment, a “Contingent
Payment”);
and
(ii) such
additional amount as Buyer may pay to the Seller after the Closing in accordance
with Section
3.2(b)
(such
additional payment, the “Additional
Contingent Payment”).
Buyer
shall pay each Contingent Payment in cash, shares of Zanett Stock or a
combination of both, as Buyer shall determine in its sole discretion; provided,
however, that not less than 50% of any Contingent Payment shall be paid in
cash.
In respect of any portion of a Contingent Payment paid with Zanett Stock, the
value of such Zanett Stock shall be calculated based on the average price for
Zanett Stock as
reported on NASDAQ (or such other national securities exchange or automated
quotation system on which the Zanett Stock is listed or quoted) for the three
(3) consecutive trading days ending on the trading day immediately prior to
the
last day of the corresponding One-Year Performance Period.
In
connection
with all stock issuances hereunder, Zanett shall not be required to issue any
fractional shares. All fractional shares shall be rounded up to the nearest
whole number of shares of Zanett Stock.
3.2 Payment
of Consideration.
(a) Contingent
Payment.
In
respect of each Performance Period, upon complete satisfaction of the
Performance Period Requirements set forth below, Buyer shall pay to Seller
the
applicable Contingent Payment. The Contingent Payment shall be determined as
follows:
(i) If
the
Performance Multiple (defined below) for the Performance Period is less than
one, the Contingent Payment shall be equal to the product of the Performance
Multiple and the maximum Contingent Payment payable for the Performance Period;
and
(ii) If
the
Performance Multiple for the Performance Period is equal to or greater than
one,
the Contingent Payment shall be equal to the maximum Contingent Payment payable
for the Performance Period.
In
respect of each Performance Period, the applicable Performance Multiple shall
be
calculated as follows:
PM
=
((AI/AIT) + (R/RT))/2
Where
|
=
|
the
Performance Multiple;
|
|
|
AI
|
=
|
the
Adjusted Income for the Performance Period;
|
|
AIT
|
=
|
the
Adjusted Income Target for the Performance Period;
|
|
R
|
=
|
the
Revenue for the Performance Period; and
|
|
RT
|
=
|
the
Revenue Target for the Performance
Period.
|
With
respect to each Performance Period, the requirements set forth in paragraphs
1-4
below (the “Performance
Period Requirements”)
must
be satisfied as a condition precedent to Buyer’s obligation to pay the
applicable Contingent Payment to the Owners for such Performance
Period:
1. The
Adjusted Income of Buyer for the Performance Period must be equal to or exceed
eighty-five percent (85%) of that Performance Period’s Adjusted Income Target;
and
2. The
Revenue of Buyer for the Performance Period must be equal to or exceed
eighty-five percent (85%) of that Performance Period’s Revenue Target;
and
3. During
the Performance Period, Owner’s employment shall not have been terminated by
Buyer, Seller or an Affiliate of Seller as applicable, and Owner shall not
have
terminated his employment with Buyer, Seller or an Affiliate of Seller as
applicable; and
4. Each
Key
Employee shall be in compliance with all non-competition sections of any
employment agreement or non-competition agreement to which he is a party
(including the Confidentiality, Non-Competition, and Non-Solicitation Agreement
referenced in Section
9.2(j)
hereof).
For purposes of this Section
3.2(a),
any
attempt by an Owner to have the above referenced agreements to which he is
a
party deemed void or unenforceable by a court of law or equity shall be deemed
to be a violation of the Performance Period Requirements with respect to such
Owner.
(b) Additional
Contingent Payment.
In the
event that the Performance Multiple for each Performance Period is greater
than
one, following the completion of the third Performance Period and upon complete
satisfaction of the Performance Period Requirements for each Performance Period,
in addition to the payments called for by Section
3.2(a),
Buyer
shall pay Owner an amount equal to the sum of the maximum Contingent Payment
payable for each Performance Period multiplied by the difference between the
Performance Multiple for the applicable Performance Period and one; provided
that the
aggregate amount of the Contingent Payments and the Additional Contingent
Payment payable for all Performance Periods, shall not exceed, in the aggregate,
$1,500,000 (the “Additional
Contingent Payment Cap”).
Buyer
shall pay the Additional Contingent Payment in cash, shares of Zanett Stock
or a
combination of both, as Buyer shall determine in its sole discretion; provided,
however, that not less than 50% of the Additional Contingent Payment shall
be
paid in cash.
(c) Buyout
Payment.
Notwithstanding Section 3.1 or Section 3.2(a) and (b), Buyer shall have the
option of paying the Buyout Payment, as defined below, prior to the one year
anniversary of the Closing Date. If Buyer shall elect to make the Buyout
Payment, such Buyout Payment shall be deemed to be the “Consideration” for
purposes of this Agreement, and Buyer shall have no further obligation to make
any Contingent Payment or the Additional Contingent Payment to Seller. The
Buyout Payment shall be calculated as follows:
(i) If
Buyer
elects to pay the Buyout Payment on or prior to the six month anniversary of
the
Closing Date, the Buyout Payment shall be a lump sum cash payment of
$750,000.
(ii) If
Buyer
elects to pay the Buyout Payment after the six month anniversary of the Closing
Date, but on or prior to the one year anniversary of the Closing Date, the
Buyout Payment shall be a lump sum cash payment of $1,000,000.
3.3 Accounting
Procedures of the Company. Unless
otherwise agreed to in writing by the parties, all financial statements for
the
Business for all times from and after the Closing shall be prepared separately
in accordance with GAAP applied on a basis consistent with Seller’s past
practices in a manner such that Adjusted Income, Revenue, any Contingent
Payment, Additional Contingent Payment, and all matters relating to the
calculation of Adjusted Income, Revenue and any Contingent Payment, Additional
Contingent Payment (including the determination with respect to capitalization
or expense of various items and related depreciation or amortization periods,
reserve methods for accounts receivable and inventory, and the treatment of
other unusual or extraordinary items) shall be determined in accordance with
Seller’s past practices. The parties agree that any changes in GAAP accounting
rules from and after the date hereof shall not affect the calculation of any
contingent payment. The parties shall use the GAAP rules, regulations and
standards in effect as of the date hereof as a basis for calculation of all
contingent payments.
3.4 Determination
of Working Capital Adjustment.
(a) As
promptly as practicable after the Closing Date, but in no way more than ninety
(90) days after the Closing Date, Buyer shall prepare, or cause to be prepared
at its sole expense, and deliver to Owner balance sheets for Seller as of the
Closing Date, and related statements of income, statements of change in
Membership Unit holders’ equity and statements of cash flows, each prepared in
accordance with GAAP, as applied on a basis consistent with Seller’s past
practices (“Closing
Financial Statements”)
to
determine the Actual Net Working Capital of Seller.
(b) In
connection with the delivery of the Closing Financial Statements, Buyer shall
deliver a calculation of Actual Net Working Capital and a notice (the
“Buyer’s
Notice of Adjustment”)
setting forth its proposed adjustment, if any, of the Consideration contemplated
hereby. Upon
reasonable notice from Owner, Buyer will make available to Seller and its
representatives all books, records, personnel, including auditors work papers,
used in connection with the Actual Net Working Capital
determination.
(c) The
Consideration shall be decreased by any difference between the Target Net
Working Capital and the Actual Net Working Capital (the “Adjustment
Payment”).
The
amount of any Contingent Payment or Additional Contingent Payment payable to
Seller shall be reduced, on a dollar-for-dollar basis, by an amount equal to
the
Adjustment Payment until the aggregate amount of such reductions equals the
Adjustment Payment. If Buyer elects to make the Buyout Payment pursuant to
Section
3.2(c),
such
Buyout Payment will be reduced, on a dollar-for-dollar basis, by an amount
equal
to the Adjustment Payment.
3.5 Advance
Amount Adjustment
The
Consideration shall be further decreased by an amount equal to the sum of (i)
the Deposit and (ii) the American Express Debt paid by Buyer pursuant to Section
8.6 (such sum, the “Advance
Amount”).
The
amount of any Contingent Payment or Additional Contingent Payment payable to
Seller shall be reduced, on a dollar-for-dollar basis by an amount equal to
the
Advance Amount until the aggregate amount of reductions equals the Advance
Amount. If Buyer elects to make the Buyout Payment pursuant to Section
3.2(c),
such
Buyout Payment will be reduced, on a dollar-for-dollar basis, by an amount
equal
to the Advance Amount.
ARTICLE
IV.
REPRESENTATIONS
AND WARRANTIES REGARDING SELLER
As
a
material inducement for Buyer to enter into this Agreement and to consummate
the
transactions contemplated hereby, Seller and the Owner hereby jointly and
severally make the following representations and warranties as of the date
hereof, each of which is relied upon by Buyer regardless of any investigation
made or information obtained by or on behalf of Buyer.
4.1 Organization;
Qualification; Corporate Records.
(a) Seller
is
a limited liability company duly organized, validly existing and in good
standing under the laws of the State of Florida and has the power to own all
of
its property and assets, to incur all of its liabilities and to carry on its
Business as now being conducted.
(b) Seller
is
duly qualified to do business and in good standing in each jurisdiction in
which
the nature or conduct of the Business or the character or location of its
properties makes such qualification necessary, except where any such failure
would not have a material adverse effect on Seller. Schedule
4.1(b)
lists
each jurisdiction in which Seller is authorized to do business.
(c) The
names
of the managers and officers of Seller, together with the offices they hold,
are
set forth on Schedule
4.1(c).
Seller
has delivered to Buyer true and complete copies of (i) the certificate of
formation of Seller, together with all amendments thereto and (ii) the operating
agreement of Seller, together with all amendments thereto, as currently in
effect.
(d) Except
as
set forth on Schedule
4.1(d),
since
January 1, 2008, Seller has not (i) made or permitted any change in the
authorized, issued, or treasury shares of its equity securities, or (ii) taken
any action which, if taken after the date of this Agreement, would require
the
prior written consent of Buyer pursuant to this Agreement. There is no liability
for accumulated but unpaid distributions of cash or other property with respect
to any equity interest in Seller.
(e) Except
as
set forth on Schedule
4.1(e)
Seller
has not made any distributions to any holders of Membership Units or
participated in or effected any issuance, exchange or retirement of Membership
Units, or otherwise changed the equity interests of holders of Membership Units
within the one year immediately preceding the date of this
Agreement.
(f) Except
as
set forth on Schedule
4.1(f),
Seller
has not conducted business under any name other than its own. Schedule
4.1(f)
includes
a list of all of Seller’s fictitious name registrations.
(g) Subject
to the satisfaction of the conditions precedent set forth herein, Seller has
the
power to execute, deliver and perform this Agreement and the Related Agreements
to which Seller is a party, and, subject to the satisfaction of the conditions
precedent set forth herein, has taken all action required by its certificate
of
formation, operating agreement or otherwise, to authorize the execution,
delivery and performance of this Agreement and the Related Agreements. The
execution and delivery of this Agreement has been approved by the members and
operating manager of Seller. This Agreement is a valid obligation of Seller,
legally binding upon it and enforceable in accordance with its
terms.
(h) All
books
and financial records included in the Books and Records of Seller are complete
and correct in all material respects and have been maintained in accordance
with
good business practice. True and complete copies of all minutes, resolutions,
Membership Unit certificates and transfer ledgers of Seller are contained in
the
minute books and transfer ledgers that have been delivered to Buyer for
inspection.
4.2 No
Violations of Laws or Agreements, Consents or Defaults.
(a) The
execution and delivery of this Agreement by Seller and the consummation by
Seller of the transactions contemplated by this Agreement and the Related
Agreements will not result in any breach or violation of any of the terms or
provisions of, or constitute a default under, (i) the certificate of formation,
limited liability company agreement or other operating agreement of Seller
or
(ii) any statute, order, decree, proceeding, rule, or regulation of any court
or
governmental agency or body, United States or foreign, having jurisdiction
over
Seller, any assets of Seller.
(b) Except
as
set forth in Schedule
4.2(b),
the
delivery by Seller of this Agreement, the Related Agreements and the
consummation by Seller of the transactions contemplated hereby and thereby
will
not result in a breach or violation of the term of, or constitute a default
under, or require notice to any third party under, any agreement, instrument,
or
commitment to which Seller is party, by which Seller is bound, or to which
any
of Seller’s assets are subject (including, without limitation, any agreement,
instrument or commitment related to or arising from the Wachovia Debt), and
no
consent or approval is required from any third party for the transactions
contemplated by this Agreement and the Related Agreements other than such
consents or approvals that the failure to receive which are not reasonably
expected to have a material adverse effect on the transactions contemplated
by
this Agreement or the Related Agreements, the Business, or the assets of Seller,
including the Purchased Assets .
(c) Seller
is
not in default under, or in violation of any provision of, its certificate
of
formation, operating agreement, any promissory note, indenture or any evidence
of indebtedness or security thereto, lease, purchase contract or other
commitment, or any other agreement that is material to the business of
Seller.
4.3 No
Subsidiaries.
Seller
does not own any interest in and does not control, directly or indirectly,
any
other corporation, association or business organization. Seller is not a party
to any joint venture or partnership.
4.4 Financial
Information.
(a) Attached
hereto as Schedule
4.4(a)
are true
and complete copies of the Financial Statements. The Financial Statements
(except as may be disclosed therein), fairly present the financial position
and
the results of operations of Seller as of the dates and for the periods
indicated. The Financial Statements provide for all bad and doubtful debts,
material liabilities (actual, contingent, deferred or otherwise) and material
financial commitments existing as of the respective dates
thereof.
(b) Except
for obligations incurred in the ordinary course of business since December
31,
2007 or as set forth on Schedule
4.4(b),
(i)
there are no liabilities or obligations of Seller whether known or unknown,
asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated
or unliquidated, due or to become due, required in accordance with GAAP or
otherwise to be reserved against or disclosed in the Financial Statements,
which
are not so reserved or disclosed, (ii) to the knowledge of Seller, there is
not
any past or present fact, situation, circumstance, condition or other basis
for
any present or future action, suit or proceeding, hearing, charge, complaint,
claim or demand against Seller giving rise to any such liability or obligation
and (iii) Seller has no liability or obligation, singularly or in the aggregate,
whether accrued, absolute, contingent or otherwise, as of the respective dates
of the Financial Statements not required to be reflected or disclosed in the
Financial Statements.
(c) Except
as
disclosed on Schedule
4.4(c),
the
Financial Statements do not reflect any income or expense that was unusual
in
nature, nonrecurring, extraordinary, or otherwise not in the ordinary course
of
Seller’s Business, consistent with past practices.
(d) All
tangible assets used by Seller in the Business are reflected in the Financial
Statements except those sold, transferred or otherwise disposed of, or purchased
or otherwise acquired, in the ordinary course of business.
4.5 Absence
of Certain Changes.
Since
December 31, 2007, except as set forth on Schedule
4.5,
and
except for transactions contemplated by this Agreement, Seller has conducted
the
Business only in the ordinary course and consistent with past practice, and
has
not:
(a) suffered
any material adverse change;
(b) incurred
any liabilities or obligations (absolute, accrued, contingent or otherwise)
except current liabilities incurred and liabilities under contracts entered
into
in the ordinary course of business and consistent with past practice (including
obligations or liabilities arising from one transaction or a series of related
or similar transactions, and all periodic installments or payments under any
lease or other agreement providing for periodic installments or payments, as
a
single obligation or liability), or increased, or experienced any change in
any
assumptions underlying or methods of calculating any bad debt, contingency
or
other reserves;
(c) declared,
set aside or paid any dividend or distribution in respect of any Membership
Units or other equity interest of Seller or redeemed, purchased or otherwise
acquired any Seller equity interest;
(d) issued,
delivered, or sold, or authorized the issuance, delivery or sale of, any
securities or any option or rights with respect thereto, or modification or
amendment of any right of any holder of outstanding securities with respect
thereto;
(e) paid,
discharged or satisfied any claims, liabilities or obligations (absolute,
accrued, contingent, known or unknown, or otherwise) other than the payment,
discharge or satisfaction in the ordinary course of business and consistent
with
past practice of liabilities and obligations reflected or reserved against
in
the balance sheet dated as of (the “Balance
Sheet Date”)
included in the Financial Statements (the “Balance
Sheet”)
or
incurred in the ordinary course of business and consistent with past practice
since the Balance Sheet Date;
(f) permitted
or allowed any of the assets or properties of Seller to be subjected to any
Encumbrance, restriction or charge of any kind, except for (a) Encumbrances
related to Taxes not yet due and payable, (b) Encumbrances for landlord’s
warehouseman’s, mechanic’s, materialmen’s and other similar liens for sums not
overdue, (c) pledges or deposits to secure obligations under workmen’s
compensation laws or similar legislation, and (d) those Encumbrances listed
on
Schedule
4.5(f)
(collectively, “Permitted
Encumbrances”);
(g) written
down the value of any inventory or written off as uncollectible any notes or
accounts receivable;
(h) canceled
any debts, or waived any claims or rights of substantial value;
(i) sold,
transferred or otherwise disposed of any of its properties or assets, except
in
the ordinary course of business and consistent with past practice;
(j) disposed
of or permitted to lapse any rights to the use of any patent, trademark, trade
name or copyright, or disposed of or disclosed to any Person other than an
Affiliate any invention, discovery, know-how, trade secret, formula, process
or
other intellectual property not theretofore a matter of public knowledge that
is
material to the Business;
(k) granted
any general increase in the compensation of employees of Seller (including
any
such increase pursuant to any bonus, pension, profit sharing or other plan
or
commitment) or any increase in the compensation payable or to become payable
to
any employee of Seller in excess of merit increases consistent with past
practice, and no such increase is customary on a periodic basis or required
by
agreement or understanding;
(l) made
any
capital expenditure or commitment for capital expenditures other than those
capital expenditures or commitments that have been paid in full;
(m) made
any
change in any method of accounting or accounting practice or failed to maintain
the books and records of Seller in the ordinary course of business and
consistent with past practice;
(n) failed
to
maintain any of its properties or equipment in good operating condition and
repair, subject to ordinary wear and tear;
(o) failed
to
maintain in full force and effect all existing policies of insurance at least
at
such levels as were in effect prior to such date or canceled any such insurance
or, to its knowledge, taken or failed to take any action that would enable
the
insurers under such policies to avoid liability for claims arising out of
occurrences prior to the Closing;
(p) entered
into any transaction or made or entered into any material contract or
commitment, or terminated or amended any material contract or commitment, except
in the ordinary course of business and consistent with past practice, and not
in
excess of current requirements;
(q) taken
any
action that could reasonably be expected to have a material adverse effect
on
the business organization of Seller or Seller’s current relationships with its
customers, employees, suppliers, distributors, advertisers, subscribers or
others having business relationships with Seller; or
(r) agreed
in
writing or otherwise to take any action with respect to any of the matters
described in this Section
4.5.
4.6 Licenses;
Regulatory Approvals.
Seller
holds all Authorizations required or necessary to be applied for or obtained
in
connection with the Business as presently conducted by Seller, except where
the
failure to obtain such Authorizations would not have a material adverse effect.
All such Authorizations are listed on Schedule
4.6.
Except
as set forth on Schedule
4.6,
all
such Authorizations relating to the Business, operations and facilities of
Seller are in full force and effect and will remain in full force and effect
following the consummation of the transactions contemplated hereby. Any and
all
past litigation concerning such Authorizations, and all claims and causes of
action raised therein, have been finally adjudicated, and, in the case of such
litigation finally adjudicated since the Balance Sheet Date such adjudication
has not had a material adverse effect on Seller. Except as set forth on
Schedule
4.6,
no such
Authorization has been revoked, conditioned (except as may be customary) or
restricted, and no action (equitable, legislative or administrative),
arbitration or other process is pending, or to the knowledge of Seller,
threatened, which in any way challenges the validity of, or seeks to revoke,
condition or restrict any such Authorization.
4.7 Regulatory
Matters.
(a) Except
as
may be disclosed in Schedule
4.7(a),
(i)
Seller is not the subject of any outstanding, nor, to the knowledge of Seller,
any threatened, investigation, audit, review or other examination of Seller
by
any Authority with respect to Seller or the Business, and (ii) Seller is not
subject to, nor has Seller received any notice or advice that it may become
subject to, any order, agreement, memorandum of understanding or other
regulatory enforcement action or proceeding with any Authority with respect
to
Seller or the Business.
(b) To
the
knowledge of Seller, there is no proposed or pending change in any law or
regulation affecting the Business which would have a material adverse effect
on
Seller.
4.8 Tax
Matters.
(a) Seller
has timely prepared and filed in accordance with applicable laws, rules and
regulations all federal, state and local income, franchise, excise, sales,
use,
real and personal property and other Tax Returns, information statements and
reports, required to be filed by it, or Seller has prepared and filed
appropriate requests for extensions to file such Tax Returns and all such
requests have been granted and have not expired in accordance with applicable
Tax laws, rules and regulations. Complete and correct copies of all Tax Returns
of Seller for the last three (3) years have been delivered to Buyer and are
listed on Schedule
4.8(a).
(b) All
such
Tax Returns correctly and completely reflect the information required to be
presented therein in all respects. Seller has not paid any penalty, surcharge,
fine or interest in connection with any alleged underpayment of
Taxes.
(c) Except
as
disclosed on Schedule
4.8(c)
(which
lists good faith tax disputes), Seller has paid all Taxes that have become
due
and payable to (or claimed to be due and payable by) the appropriate Tax
Authorities. Seller has made full provision or reserve in the Financial
Statements for all Taxes for which Seller is or may be accountable on or before
the dates thereof, including distributions made on or before such dates or
provided for in such Financial Statements, and adequate provision has been
made
in such Financial Statements for deferred Tax for which Seller is or may be
accountable on or before the dates thereof in accordance with GAAP and in the
aggregate do not materially fail to provide for potential Tax liabilities.
All
estimated Tax payments of Seller that have become due and payable prior to
the
date of this Agreement have been paid. No claim has ever been made by an
Authority in a jurisdiction where Seller does not file Tax Returns that it
is or
may be subject to taxation by that jurisdiction. There are no liens for Taxes
(other than Taxes not yet due and payable) upon any of the assets of
Seller.
(d) Seller
has properly withheld all Taxes from the salaries, wages or other compensation
paid to officers, employees or other persons, and has paid such Tax to the
appropriate Tax Authorities.
(e) No
event,
transaction, act or omission has occurred which could result in Seller becoming
liable for any Tax which is primarily or directly chargeable against or
attributable to a Person other than Seller or which is charged by reference
to
the income or gains of another Person. In the event that Seller has been part
of
a consolidated group of taxpayers, Seller is not liable for any Tax obligations
of the other members of the group.
(f) To
Seller’s knowledge, no Tax Return (or item in a Tax Return) is currently under
audit by any Tax Authority, and there are no agreements for the waiver of any
statute of limitations in respect of any Taxes or for the extension of time
for
the assessment or payment of any Tax. Seller is not, and does not expect to
be,
involved in any dispute in relation to any Tax matters, and to Seller’s
knowledge no Tax Authority has investigated or indicated that it intends to
investigate Seller’s Tax matters. Seller is not aware of any facts which may
constitute the basis for the proposal of any Tax deficiencies for any unexamined
year.
(g) Seller
is
not a party to any agreement, contract, arrangement or plan that could result,
separately or in the aggregate, in the payment of (i) any “excess parachute
payment” within the meaning of Code §280G (or any corresponding provision of
state, local or foreign Tax law) or (ii) any amount that would not be fully
deductible as a result of Code 162(m) (or any corresponding provision of
state, local or foreign Tax law). Seller is not a party to or bound by any
Tax
allocation or sharing agreement (other than Seller’s limited liability company
agreement). Seller (i) has at all times been classified as a partnership, and
not as a corporation, for federal income tax purposes and (ii) has no liability
for the Taxes of any Person under Reg. §1.1502-6 (or any similar provision
of state, local, or foreign law), as a transferee or successor, by contract,
or
otherwise.
(h) Seller
has not entered into any transaction or course of conduct (other than
legitimate, good faith Tax planning) designed in whole or in part to evade
Taxes
contrary to applicable Tax Law.
4.9 Litigation
Claims.
(a) There
is
no action, suit, claim, investigation or proceeding, whether at law or in equity
(a “Claim”),
pending or, to the knowledge of Seller, threatened that questions the validity
of this Agreement or the Related Agreements or any action taken or to be taken
by Seller or Seller in connection with the consummation of the transactions
contemplated hereby or thereby or which seeks to prohibit, enjoin or otherwise
challenge any of the transactions contemplated hereby or thereby.
(b) Schedule
4.9(b) sets
forth an accurate and complete list, and a brief description (setting forth
the
names of the parties involved, the court or other governmental or mediating
entity involved, the relief sought and the substantive allegations and the
status thereof), of each Claim pending or, to the knowledge of Seller,
threatened against or affecting Seller. None of the pending or threatened Claims
set forth on Schedule
4.9(b),
if
adversely determined, would individually or in the aggregate, result in a
material adverse effect on Seller. To the knowledge of Seller, no event has
occurred and no circumstance, matter or set of facts exist which would
constitute a valid basis for the assertion by any third party of any Claim,
other than those listed on Schedule
4.9(b).
Except
as set forth in Schedule
4.9(b),
there
is no outstanding or, to the knowledge of Seller, threatened judgment,
injunction, order or consent or similar decree or agreement (including, without
limitation, any consent or similar decree or agreement with any governmental
entity) against, affecting or naming Seller.
(c) Except
as
disclosed in Schedule
4.9(c),
there
is no Claim (whether based on statute, negligence, breach of warranty, strict
liability or any other theory) pending, or to the knowledge of Seller,
threatened, relating directly or indirectly to any product manufactured or
sold,
or any services performed, by Seller.
4.10 Properties,
Contracts; Leases and Other Agreements; Bank Accounts.
(a) Seller
does not own any real property.
(b) All
leasehold interests for real property and any material personal property used
by
Seller in the Business are held pursuant to lease agreements which are valid
and
enforceable in accordance with their terms, the agreements for which are listed
on Schedule
4.10(b).
All
such properties comply in all material respects with all applicable private
agreements, zoning requirements and other governmental laws and regulations
relating thereto and there are no condemnation proceedings pending or threatened
with respect to such properties. Seller has not assigned or subleased its
interests under such leases or the assets covered thereby. Each such lease
has
been duly and validly executed, is in full force and effect and constitutes
the
valid and binding agreement of the parties thereto. Any additional business
offices maintained by Seller during the past two (2) years are also listed
by
location on Schedule
4.10(b).
(c) Except
as
set forth on Schedule
4.10(c),
and
excluding trade accounts payable incurred in the ordinary course of business
and
payable to Persons other than Affiliates of Seller, Seller does not have any
liabilities for borrowed funds, extensions of credit or other advances that
are
subject to repayment whether pursuant to a written agreement, oral understanding
or course of conduct, and whether reflected on the Financial Statements as
indebtedness, accounts payable or otherwise, and any such liability set forth
on
Schedule
4.10(c) may
be
prepaid at any time without premium or penalty.
(d) Except
as
set forth in Schedule
4.10(d),
Seller
is not a party to any agreements, contracts or commitments relating to the
acquisition of the assets or capital stock of any other business
enterprise.
(e) Except
as
set forth in Schedule
4.10(e),
Seller
is not a party to any agreements, loans, contracts, leases, guarantees, letters
of credit, lines of credit or commitments of Seller not referred to elsewhere
in
this Agreement which:
(i) involve
potential payments by Seller or incurring by Seller of costs or obligations,
of
more than $5,000 in the aggregate;
(ii) involve
payments based on profits of Seller;
(iii) relate
to
the future purchase of goods or services in excess of the requirements of the
Business at current levels or for normal operating purposes;
(iv) include
powers of attorney or grants of agency by Seller;
(v) cannot
be
canceled by Seller without penalty or premium on no more than thirty (30) days’
notice;
(vi) were
not
made in the ordinary course of business; or
(vii) otherwise
materially affect the Business or financial condition of Seller.
(f) Except
as
set forth in Schedule
4.10(f),
no
contracts material to the Business or financial condition of Seller are
terminable or are subject to modification by reason of the consummation of
the
transactions contemplated by this Agreement and the Related Agreements, and
Seller has not received notice of any potential termination or modification
of
such contracts.
(g) Except
as
set forth in Schedule
4.10(g),
neither
Seller, nor any other party, is in default, technical or otherwise, of any
real
estate lease, equipment lease, loan or credit agreement, or any other contract
or agreement to which Seller is a party, and no event or condition has occurred
or exists which, with the passage of time, giving of notice or both, would
cause
Seller, or, to the knowledge of Seller, any other party, to be in default
thereunder.
(h) Set
forth
on Schedule
4.10(h)
is an
accurate and complete list showing the name and address of each bank, securities
broker, mutual fund, investment company, investment adviser or other financial
institution or similar Person with which Seller has an account, including the
account or box number and the names of all persons and entities authorized
to
draw thereon or have access thereto.
(i) All
material Contracts to which Seller is a party, including, without limitation,
any contract or agreement disclosed on Schedules
4.10(b), 4.10(d) and 4.10(e) (i)
are
valid and enforceable in accordance with their respective terms; (ii) no Default
(as defined below) exists under any Contract either by Seller or, to the
knowledge of Seller, by any other party thereto; (iii) Seller is not aware
of
the assertion by any third party of any claim of Default or breach under any
of
the Contracts; and (iv) Seller has no knowledge of any present intention on
the
part of any significant customer or supplier or other business partner of Seller
to either (A) terminate or significantly change its existing business
relationship with Seller either now or in the foreseeable future, or (B) fail
to
renew or extend its existing business relationship with Seller at the end of
the
term of any existing contractual arrangement such entity may have with Seller.
For purposes of this Agreement, the term “Default”
means,
with respect to any Contract, (x) any breach of or default under such Contract,
or (y) any event, other than the normal passage of time, which would (either
with or without notice or lapse of time or both) give rise to any right of
full
or partial termination, cancellation or acceleration of any obligation with
respect to such Contract.
(j) Set
forth
on Schedule
4.10(j)
is an
accurate and complete list showing all Contracts to which Seller is a party
or
by which it is bound.
(k) Set
forth
on Schedule
4.10(k)
is an
accurate and complete list showing (i) each vehicle, item of machinery,
equipment, tools, and other tangible asset (other than real property) of Seller
used in the Business and the location thereof and (ii) each vehicle, item of
machinery, equipment, tools, and other tangible asset (other than real property)
leased to or by Seller with respect to the Business under agreement, together
with the location of such asset, the identities of the lessor and lessee, the
annual rental, and the unexpired term of the lease.
(l) Except
as
set forth on Schedule
4.10(k)
and
those which are no longer in effect, Seller has not granted any right of first
refusal or similar right in favor of any third party with respect to any
material portion of its properties or assets or entered into any non-competition
agreement or similar agreement restricting its ability to engage in any business
in any location.
4.11 Employee
Matters; Benefit Plans; ERISA.
(a) Except
as
may be disclosed in Schedule
4.11(a),
Seller
has not entered into any collective bargaining agreement with any labor
organization with respect to any group of employees of Seller and, to the
knowledge of Seller, there is no present effort nor existing proposal to attempt
to unionize any group of employees of Seller.
(b) Except
as
may be disclosed in Schedule
4.11(b):
(i) Seller
is
and has been in material compliance with all applicable laws relating to
employment and employment practices, terms and conditions of employment and
wages and hours, including, without limitation, any such laws respecting
employment discrimination and occupational safety and health requirements,
and
Seller is not engaged in any unfair labor practices;
(ii) There
is
no unfair labor practice complaint against Seller pending or, to the knowledge
of Seller, threatened before the National Labor Relations Board;
(iii) There
is
no labor dispute, strike, slowdown or stoppage pending or, to the knowledge
of
Seller, threatened against or directly relating to Seller; and
(iv) Seller
has not experienced any work stoppage or other material labor difficulty during
the past year.
(c) Except
as
described and attached to Schedule
4.11(c),
Seller
is not a party to any agreement for the employment, retention or engagement
or
severance of any officer, employee, agent, advisor or consultant.
(d) Schedule
4.11(d)
contains
a correct and complete list of all Benefit Plans maintained by Seller or to
which Seller or any ERISA Affiliate (as defined below) contributes. Seller
has
delivered or made available to Buyer, with respect to all such Benefit Plans,
complete and correct copies of the following: all plan documents, handbooks,
manuals, collective bargaining agreements and similar documents governing
employment policies, practices and procedures; the most recent summary plan
descriptions and any subsequent summaries of material modifications and all
other material employee communications discussing any employee benefit; Forms
series 5500 as filed with the IRS for the three most recent plan years
(including all attachments thereto); the most recent report of the enrolled
actuary for any plans requiring actuarial valuation; all trust agreements with
respect to the Benefit Plans; plan contracts with service providers or insurers
providing benefits for participants or liability insurance for fiduciaries
and
other parties in interest or bonding; the most recent annual audit and
accounting of plan assets for all funded plans; and the most recent Internal
Revenue Service (“IRS”)
determination letter or opinion letter for all plans qualified under Section
401(a) of the Code.
(e) Neither
Seller nor any ERISA Affiliate participates in or maintains or has ever
maintained or been obligated to contribute to a multi-employer plan (as defined
in Section 3(37) of ERISA), and neither Seller nor any ERISA Affiliate has
withdrawal liability with respect to any multi-employer plan.
(f) Neither
Seller nor any ERISA Affiliate maintains or has ever maintained or been
obligated to contribute to an employee pension benefit plan (as defined in
Section 3(2) of ERISA) subject to Title IV of ERISA.
(g) Seller
has made full payment of all amounts it is required, under applicable law or
the
terms of each Benefit Plan, to have contributed thereto before the Closing
Date
for all periods through and including the close of the last plan year ending
prior to the Closing Date, or proper accruals for such contributions have been
made and are reflected on its balance sheet and books and records. Seller will
pay such contributions to the Benefit Plans for the current plan year prior
to
the Closing Date, or, if any such contributions will not be due prior to the
Closing Date, has made adequate provision for reserves therefor. All such
contributions are fully deductible by Seller for purposes of Seller’s federal
income taxes, and Seller has no actual or potential liability for the 10 percent
tax imposed by section 4972 of the Code.
(h) All
Taxes, penalties, interest charges and other financial obligations to federal,
state and local governments and to participants or beneficiaries under the
Benefit Plans with respect to any period ending on or before the Closing Date
have been or will be met in full on or before the Closing Date.
(i) All
reports, returns, notices and similar documents with respect to the Benefit
Plans required to be filed with any governmental agency or distributed to any
Benefit Plan participant or beneficiary have been duly and timely filed or
distributed.
(j) Each
Benefit Plan required to be listed on Schedule
4.11(d)
that is
intended to be qualified under Section 401 of the Code is (and from its
establishment has been) the subject of a favorable determination letter or
opinion letter issued by the IRS, and no such determination letter or opinion
letter has been revoked nor, to Seller’s knowledge, has revocation been
threatened, nor has any Benefit Plan been amended since the date of its most
recent determination letter or application therefor in any respect which would
adversely affect its qualification or materially increase its cost, and no
Benefit Plan has been amended in a manner that would require security to be
provided in accordance with Section 401(a)(29) of the Code. Each trust
maintained under any such Benefit Plan is (and from its establishment has been)
exempt from federal income tax under Section 501 of the Code.
(k) Each
Benefit Plan required to be listed on Schedule
4.11(d)
complies, in both form and operation, with the applicable requirements of ERISA,
the Code and other applicable law. There are no pending investigations by any
governmental agency involving such Benefit Plans, no termination proceedings
involving the Benefit Plans, and, to Seller’s knowledge, no threatened or
pending claims (except for routine claims for benefits), suits or proceedings
against any Benefit Plan or asserting any rights or claims to benefits under
any
Benefit Plan which could give rise to any liability nor, to Seller’s knowledge,
are there any facts which could give rise to any liability in the event of
any
such investigation, claim, suit or proceeding.
(l) Neither
Seller nor any “party in interest” (as defined in section 3(14) of ERISA) or
“disqualified person” (as defined in section 4975(e)(2) of the Code) with
respect to any Benefit Plan has engaged in a “prohibited transaction” (as
defined in Section 4975 of the Code or Section 406 of ERISA) for which a
statutory, administrative, or regulatory exemption is not available. No Benefit
Plan has been (or will be as a result of the transactions contemplated hereby)
completely or partially terminated or has been (or will be as a result of the
transactions contemplated hereby) subject to a “reportable event” (as defined in
section 4043 of ERISA) or to any event requiring disclosure under section
4062(e) or 4063(a) of ERISA.
(m) Seller
is
in full compliance with the continuation coverage requirements of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and the
health insurance obligations (sometimes referred to as “HIPAA”) imposed by
section 9801 of the Code and Part 7 of Subtitle B of Title I of
ERISA.
(n) Other
than the group health plan continuation coverage requirements required by
applicable law (as described in subsection (m) above), the cost of which is
fully paid by the former employee or his or her dependent, Seller does not
maintain retiree life or retiree health plans providing for continuing coverage
for any employee or any beneficiary of an employee after the employee’s
termination of employment.
(o) Except
as
set forth on Schedule
4.11(o),
Seller
is not a party to any oral or written agreement with any director, executive,
officer or other key employee, the benefits of which are contingent or the
terms
of which are materially altered or permit termination, upon the occurrence
of a
transaction of the nature contemplated by this Agreement and the Related
Agreements, or agreement or plan, including any stock option plan, stock
appreciation rights plan, restricted stock plan or stock purchase plan, any
of
the benefits of which will be increased, or the vesting of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement and
the
Related Agreements or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement and the Related Agreements.
4.12 Personnel.
(a) Schedule
4.12(a)
contains
a true and complete list of the following information for all
persons employed by Seller,
including each employee on leave of absence or layoff status:
(i) Name
(ii) Job
title
(iii) Department
(if applicable)
(iv) Location
of Employment
(v) Indicate
Billable/Non Billable
(vi) Hourly
Rate
(vii) Annual
Salary (Current)
(viii) Gross
Salary 2007 and Year to Date 2008
(ix) Bonus
paid 2007 and Year to Date 2008
(x) Hire
date
(xi) Vacation
accrued
(xii) Service
credited for purposes of vesting and eligibility to participate under any
pension, retirement, profit-sharing, option, cash bonus, ownership
plan
(xiii) Severance
pay
(xiv) Any
assignment of inventions or similar agreement
(xv) Social
Security Number
(xvi) Copies
of
performance reports
(xvii) All
disciplinary records
(b) Schedule
4.12(b)
contains
a correct and complete description of Seller’s performance measurement and
compensation policies and procedures as they relate to employees in effect
as of
the Closing Date and for the year prior to the Closing Date.
(c) Schedule
4.12(c)
lists
all Persons who are currently performing services for Seller who are classified
as “consultants” or “independent contractors” the compensation of each such
Person and whether Seller is party to an agreement with such Person (whether
or
not in writing). Any such agreements are listed on Schedule
4.12(c)
and have
been delivered (or, in the case of agreements that are not in writing, a summary
thereof has been delivered) to Buyer. All Persons engaged by Seller as
independent contractors, rather than employees, have been properly classified
as
such and have been engaged in accordance with all applicable Laws.
(d) Except
as
disclosed in Schedule
4.12(d),
(i) none of the employees of Seller has notified or otherwise indicated to
Seller that he or she intends to terminate his or her employment with Seller,
or
not to continue employment after the Closing, (ii) Seller does not have a
present intention to terminate the employment of any employee, (iii) to the
knowledge of Seller, no employee of Seller has since January 1, 2008 received
an
offer of an employment from any other Person, (iv) to the knowledge of
Seller, no employee of Seller is a party to or is bound by any employment
contract, patent disclosure agreement, noncompetition agreement or other
restrictive covenant or other contract with any Person that would be likely
to
affect in any way (A) the performance by such employee of any of his or her
duties or responsibilities as a employee or (B) the business or operations
of Seller, (v) to the knowledge of Seller, no employee of Seller is in violation
of any term of any employment contract, patent disclosure agreement,
noncompetition agreement, or any other restrictive covenant with or to a former
employer relating to the right of any such employee to be employed by Seller,
and (vi) Seller is not and never has been engaged in any dispute or
litigation with an employee or former employee.
(e) Seller
is
in compliance, and has complied, in all material respects with all applicable
laws respecting employment and employment practices, terms and conditions of
employment and wages and hours. Seller is not liable for the payment of material
Taxes, fines, penalties or other amounts, however designated, for failure to
comply with any of the foregoing laws. Seller is not engaged, and to the
knowledge of Seller has never engaged, in any unfair labor practice of any
nature. The employees of Seller have been, and currently are, properly
classified under the Fair Labor Standards Act of 1938, as amended, and under
any
applicable state law. Except as set forth on Schedule
4.12(e),
Seller
has not failed to pay any of its employees, consultants or contractors for
any
wages (including overtime), salaries, commissions, bonuses, benefits or other
direct compensation for any services performed by them to the date hereof or
amounts required to be reimbursed to such individuals.
(f) Seller,
and, to the knowledge of Seller, each of its employees, is in compliance with
all applicable visa and work permit requirements, and no visa or work permit
held by an employee of Seller will expire during the six-month period following
the date of this Agreement. Schedule
4.12(f)
sets
forth (i) a true and complete list of all current employees of Seller, if any,
who are employed in the United States, but are not citizens of the United States
or who are not permanent residents of the United States, together with a listing
of each such employee’s visa status and visa expiration date, and (ii) each
employee regarding whom Seller has received a notice challenging or otherwise
relating to such employee’s authorization to work in the United States. Seller
has not received any written notice of any inspection or investigation relating
to any alleged noncompliance with or violation of the Immigration Reform and
Control Act of 1986, as amended, and all regulations promulgated thereunder
(collectively, “IRCA”), nor has it been warned, fined or otherwise penalized by
reason of any failure to comply with IRCA.
4.13 Ownership
Sufficiency and Condition of Properties.
(a) Seller
owns and has good and valid title to each and all of the Purchased Assets,
free
and clear of any Lien, other than Permitted Encumbrances.
(b) There
are
no agreements affecting the right of Seller to convey the Purchased Assets
to
Buyer or any other right of Seller with respect to the Purchased Assets, and
Seller has the absolute right, authority, power, and capacity to sell, assign,
and transfer the Purchased Assets to Buyer free and clear of any Encumbrance,
other than Permitted Encumbrances.
(c) Upon
execution and delivery to Buyer of the Xxxx of Sale and the Intellectual
Property Assignment, Buyer will acquire good and valid title to the Purchased
Assets, free and clear of any Encumbrances other than Permitted
Encumbrances.
(d) The
Purchased Assets constitute all of the rights, properties, and assets necessary
for Buyer to operate the Business in the same manner operated by Seller prior
to
Closing. The Purchased Assets and the Excluded Assets constitute all of the
assets of Seller.
(e) Except
for inventory that is excess, damaged or obsolete, for which Seller has
established in the aggregate an adequate reserve in the Balance Sheet in
accordance with GAAP, the inventory reflected in the Balance Sheet, if any,
and
not disposed of or reserved since such date is of good and merchantable quality,
of a quantity and quality saleable in the ordinary course of the Business,
in
accordance with past practices and is adequate as of the date hereof for the
Business as conducted as of such date.
4.14 Product
and Service Warranties.
Except
as set forth on Schedule
4.14,
each
product or service delivered or licensed by Seller has been in conformity in
all
material respects with all applicable federal, state, local or foreign laws
and
regulations, contractual commitments and all express and implied warranties,
and, to the knowledge of Seller, Seller has no liability for replacement or
repair thereof or other damages in connection therewith, except for liabilities
incurred in the ordinary course of business, and no product or service delivered
or licensed by Seller is subject to any guaranty, warranty, or other
indemnity.
4.15 Intellectual
Property.
(a) Except
as
set forth on Schedule
4.15(a),
Seller
owns, free and clear of all Encumbrances of every nature, kind and description,
except for Permitted Encumbrances, and has good and merchantable title to,
or
holds adequate licenses or otherwise possesses all rights necessary to use,
all
patents, trademarks, service marks, trade names, copyrights (including any
applications for any of the foregoing), domain names (including
xxx.xxxxxxxx.xxx), all other names embodying business or product goodwill (or
both), inventions, discoveries and improvements, processes, know-how, trade
secrets, scientific, technical, engineering and marketing data, computer
programs, software, including all object and source codes, programming tools
and
all other techniques used or necessary for the conduct of the Business as now
conducted (collectively, the “Intellectual
Property”).
(b) Schedule
4.15(b)
contains
an accurate and complete list of (i) all such patents, trademarks, trade names,
service marks, assumed names and copyrights, and all applications therefor,
and,
with respect to registered items, contains a list of all jurisdictions in which
such items are registered and all registration numbers, (ii) all licenses,
permits and other agreements relating thereto, and (iii) all agreements relating
to any of such Intellectual Property that Seller is licensed or authorized
to
use by others. The patents, trademarks, service marks and copyrights, licenses,
permits and other agreements constituting a part of such Intellectual Property
and solely owned by Seller, if any, are valid, subsisting and enforceable,
and
are duly recorded in the name of Seller.
(c) All
software, other than generally available software such as Microsoft Office,
and
other standard “off-the-shelf” software, and generally available system
development tools, that is either marketed to customers of Seller as a program
or as part of a service to support the Business is owned by Seller or Seller
has
the right to use, modify, copy, sell, distribute, sublicense and make derivative
works free and clear of any limitations or Encumbrance, except for Permitted
Encumbrances and as may be set forth in any license agreement listed in
Schedule
4.15(c).
To the
extent third party software is marketed to customers of Seller together with
the
Intellectual Property solely owned by Seller, the third party rights have been
identified in Schedule
4.15(c),
all
necessary licenses have been obtained and no royalties or payments are due
from
Seller to third parties except as identified on Schedule
4.15(c).
(d) Except
as
set forth on Schedule
4.15(d),
to the
knowledge of Seller, Seller has the sole and exclusive right to use the patents,
service marks and copyrights listed in Schedule
4.15(b)
and the
trademarks and trade names listed in Schedule
4.15(b),
in each
case, in all jurisdictions in which the Business is conducted or in which any
products of the Business are distributed, and the consummation of the
transactions contemplated hereby will not alter or impair any such
rights.
(e) No
claims
have been asserted by any Person challenging or questioning the ownership,
validity, enforceability or use by Seller of any of the Intellectual Property
and, to the knowledge of Seller, there is no valid basis for any such claim,
and, to the knowledge of Seller, the use or other exploitation of the
Intellectual Property by Seller does not infringe on or dilute the rights of
any
Person; and, to the knowledge of Seller, no Person is infringing on the rights
of Seller with respect to any of the Intellectual Property.
(f) Seller
has taken all reasonable security measures to protect the secrecy,
confidentiality and value of the Intellectual Property of Seller, including
computer programs, trade secrets and other confidential information. Except
as
disclosed in Schedule
4.15(f),
no
Person has any marketing rights to the Intellectual Property of Seller. To
the
knowledge of Seller, no Person listed in such schedule is in breach or default
under its obligations.
(g) Seller
has made available to Buyer all documents in Seller’s custody, possession or
control with respect to any invention, discovery, process, design, computer
program or other know-how or trade secret included in the Intellectual Property,
which documents shall be accurate in all material respects and reasonably
sufficient in detail and content to identify and explain such invention,
discovery, process, design, computer program or other know-how or trade secret
and to facilitate its full and proper use.
4.16 Insurance.
Schedule
4.16
lists
all policies of insurance owned or held by Seller or insuring its assets. All
current premiums and any other obligations under such insurance have been paid,
and all such policies are valid and enforceable and in full force and effect
on
the date hereof. Seller has not received any notice of cancellation or of
premium increase under any such policies within the last ninety (90)
days.
4.17 Relationships.
(a) Other
than general economic conditions, Seller has no knowledge of any present or
future conditions or state of facts or circumstances which would materially
adversely affect Seller after the Closing Date.
(b) Schedule
4.17(b)
lists
the 10 largest customers of Seller as a percentage of revenues for fiscal year
2007, as well as year-to-date 2008. Seller’s relationships with its customers,
clients and vendors are satisfactory, and Seller has no knowledge of any facts
or circumstances, including a change of control in the ownership of Seller,
that
might materially alter, negate, impair or in any way materially adversely affect
the continuity of any such relationships and the Business.
(c) Except
as
disclosed in Schedule
4.17(c),
Seller
has no knowledge of and has not received notice of any complaints, claims or
threats, plans or intentions to discontinue commercial relations or transactions
from any customer of Seller, any purchaser of goods or services from Seller,
any
employee or independent contractor significant to the conduct or operation
of
Seller or any party to any agreement to which Seller is a party.
(d) Seller
has no knowledge of any present or future condition or state of facts or
circumstances, including a change of control in the ownership of Seller (except
as contemplated by this Agreement), that would materially prevent the Business
of Seller from being carried on after the Closing Date in essentially the same
manner as it is presently being carried on.
4.18 Compliance
With Laws.
(a) Except
as
set forth in Schedule
4.18(a),
the
operations and activities of Seller has previously and continues to comply
with
all applicable Laws as in effect on or before the date of this Agreement,
including without limitation, all rules and regulations of the Occupational
Safety and Health Administration. The conduct of the Business of Seller as
presently conducted does not conflict with the rights of any other Person or
violate or, with or without the giving of notice or the passage of time, or
both, will not violate, conflict with or result in a default, right to
accelerate or loss of rights under, any terms or provisions of its certificate
of formation or operating agreement as presently in effect or, to the knowledge
of Seller, any Encumbrance, lease, license, agreement, Laws or understanding
to
which Seller is a party or by which it may be bound or affected. Seller has
received no notice or communication from any Person asserting a failure to
comply with any Laws, nor has Seller received any notice that any authority
or
third party intends to seek enforcement against Seller to compel compliance
with
any such Laws.
(b) (i)
Seller has not made, and, to the knowledge of Seller, no officer, director,
employee, agent or other representative of any of them acting on behalf thereof
has made, directly or indirectly, with respect to the business of Seller, any
illegal bribes, kickbacks or other illegal payments of a similar nature, or
illegal political contributions with corporate funds not recorded in the
corporate records of Seller, illegal payments from Seller funds to governmental
officials, or illegal payments from corporate funds to obtain or retain business
either within the United States, the Philippines or elsewhere, and (ii) neither
Seller nor, to the knowledge of Seller, any officer, employee or agent of Seller
acting on its behalf, nor any other Person acting on its behalf has, directly
or
indirectly, within the past three (3) years given or agreed to give any gift
or
similar benefit to any customer, supplier, governmental employee or other Person
who is or may be in a position to help or hinder Seller (or assist Seller in
connection with any actual or proposed transaction) which (A) might subject
Seller to any damage or penalty in any civil, criminal or governmental
litigation or proceeding, (B) if not given in the past might have had
a
material
adverse
effect to
Seller,
or (C) if not continued in the future, might result in a material adverse effect
to Seller.
4.19 Environmental
Matters.
(a) Seller
has not obtained and is not required to obtain, any permits, licenses or other
authorizations under any applicable Environmental Laws.
(b) Except
as
set forth on Schedule
4.19,
Seller
is, to its knowledge, in material compliance with all limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in the Environmental Laws. Except as set forth on
Schedule
4.19,
since
Seller’s formation, no written notice, demand, request for information,
citation, summons or complaint has been received or order has been issued,
no
complaint has been filed, no suit or action has been instituted, no penalty
has
been assessed and no investigation or review is pending or, to the knowledge
of
Seller, threatened by any governmental entity or other Person with respect
to
any (i) alleged violation by Seller of any Environmental Law or liability
thereunder, (ii) alleged failure by Seller to have any permit, certificate,
license, approval, registration or authorization required under any
Environmental Law, (iii) release of Hazardous Substances by or on behalf of
Seller, or (iv) any Environmental Liabilities attributed to
Seller.
(c) Except
as
set forth on Schedule
4.19,
there
are no Environmental Liabilities that have had, or could reasonably be expected
to have individually, or in the aggregate, a material adverse effect with
respect to Seller.
(d) Except
as
set forth on Schedule
4.19,
to the
knowledge of Seller, no state of facts exists as to environmental matters or
Hazardous Substances that involves the reasonable likelihood of a material
capital expenditure by Seller or a material fine or penalty imposed on or
attributable to Seller, or that may otherwise have a material adverse effect
with respect to Seller or does or could interfere with or prevent compliance
with any Environmental Laws or give rise to any common law or other legal
liability.
(e) No
Hazardous Substances have been manufactured, treated, stored, transported or
disposed of by Seller, or otherwise deposited by Seller, in or on or are present
beneath properties currently or formerly owned, leased or used by Seller in
violation of, or which may be required to be investigated or remediated under,
any applicable Environmental Laws.
(f) There
has
been no disposal, escape, seepage, leakage, spillage, discharge, emission,
release or threatened release of any Hazardous Substance as a result of the
actions or omissions of Seller (i) on, from or affecting any properties owned,
leased or used by Seller, or (ii) for which Seller is, is alleged or may be
held
to be, responsible as a result of conduct occurring or conditions existing
at or
before Closing.
4.20 Records.
The
books of account of Seller are sufficient, in all material respects, to prepare
the Financial Statements in accordance with GAAP. The Books and Records of
Seller accurately and fairly reflect, in all material respects, Seller’s income,
expenses, assets and liabilities. Seller maintains internal accounting controls
which provide reasonable assurance that: (i) transactions are recorded as
necessary to permit preparation of financial statements in conformity with
GAAP
and (ii) all intercompany transactions, charges and expenses (x) are at fair
arms length value and (y) are accurately reflected in all Financial
Statements.
4.21 Receivables.
Schedule
4.21
sets
forth a true and complete list of all Receivables and the aging thereof as
of
September 30, 2008. All Receivables represent sales actually made or services
actually performed in the ordinary course of business with no additional
services required to entitle Seller to collect such Receivables, and have been
fully collected or are fully collectible as of the Closing Date or are fully
reserved against in the Balance Sheet.
4.22 Related
Party Transactions.
Except
as set forth on Schedule
4.22,
there
have been no transactions or contractual relationships during the two (2) fiscal
years ended December 31, 2007 or between December 31, 2007 and the date hereof,
and no agreement or understanding to enter into or consummate any transactions
or contractual relationships between Seller on the one hand and any Related
Party directly or indirectly, on the other hand. All such transactions have
been
on terms and conditions no less favorable to Seller than could have been
obtained from any independent party after arms-length negotiations.
4.23 Vote
Required.
The
affirmative vote of the holders of a majority of the outstanding Membership
Interests is the only vote of the holders of any class or series of Seller
equity interests necessary to approve this Agreement and the transactions
contemplated hereby.
4.24 Brokers.
No
Person will have, as a result of the transactions contemplated by this
Agreement, any valid right to, interest in or claim upon Buyer or Seller for
any
commission, fee or other compensation as a finder or broker because or any
act
or omission by Seller or Seller.
4.25 Disclosure.
No
representation or warranty by Seller contained in this Agreement, and no
representation or warranty contained in any document, list (including, without
limitation, the Schedules), certificate or other communication furnished or
to
be furnished by or on behalf of Seller to Buyer or any of its representatives
in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact, or omits or will omit to state any
material fact necessary, in light of the circumstances under which it was or
will be made, in order to make the statements herein or therein not
misleading.
The
financial projections relating to Seller delivered to Buyer by Seller have
been
prepared in good faith based on assumptions that management of Seller are
reasonable, and neither the Owner nor Seller is aware of any fact or information
that would lead them or it to believe that such projections are materially
incorrect or misleading in any material respect.
4.26 Securities
Matters.
Seller
understands that none of the shares of Zanett Stock included in the
Consideration (including the shares of Zanett Stock underlying any option grants
pursuant to Section
3.2(b))
has
been registered under the Securities Act, on the grounds that the issuance
thereof in connection with the transactions contemplated by this Agreement
and
the Related Agreements is exempt from registration pursuant to Section 4(2)
of
the Securities Act and/or Regulation D promulgated under the Securities Act
(“Regulation
D”),
and
that the reliance of Buyer on such exemptions is predicated in part on the
representations, warranties, covenants and acknowledgements set forth in this
Section
4.26.
(a) The
Zanett Stock will be acquired by Seller for its own account, not as a nominee
or
agent, for investment and without a view to resale or other distribution within
the meaning of the Securities Act, and Seller will not distribute or transfer
any of the Zanett Stock in violation of the Securities Act.
(b) Seller:
(i) acknowledges that the Zanett Stock to be issued as part of the Consideration
is not registered under the Securities Act and must be held indefinitely by
Seller unless the Zanett Stock is subsequently registered under the Securities
Act or an exemption from registration is available, (ii) is aware that any
routine sales of the Zanett Stock made under Rule 144 of the Securities and
Exchange Commission under the Securities Act may be made only in limited amounts
and in accordance with the terms and conditions of that Rule and that in such
cases where the Rule is not applicable, registration or compliance with some
other registration exemption will be required, (iii) is aware that Rule 144
is
not now and for a period of at least one year following the Closing Date hereof
will not be, available for use by the Seller for resale of the Zanett Stock,
and
(iv) is aware that Buyer is not obligated to register any sale, transfer or
other disposition of the Zanett Stock.
(c) Seller
is
an
“accredited investor” (as such term is defined in Rule 501(a) of Regulation D)
and has
such
knowledge and experience in financial and business matters that it is fully
capable of evaluating the risks and merits of its investment in the Zanett
Stock.
(d) Seller
acknowledges and agrees that the certificates representing the Zanett Stock
issuable as Consideration will contain a restrictive legend noting the
restrictions on transfer described in this Section and under federal and
applicable state securities laws, and that appropriate “stop-transfer”
instructions will be given to Zanett’s stock transfer agent.
ARTICLE
V.
REPRESENTATIONS
AND WARRANTIES OF Owner
As
a
material inducement for Buyer to enter into this Agreement and to consummate
the
transactions contemplated hereby, Owner hereby
makes the following representations and warranties as of the date hereof, each
of which is relied upon by Buyer regardless of any investigation made or
information obtained by or on behalf of Buyer:
5.1 Power
and Authority; Ownership.
(a) Owner
is
an
adult individual with full power and authority to own his properties, to manage
his fiscal affairs and to enter into this Agreement and each of the Related
Agreements to which he is a party and to agree to the transactions contemplated
hereby and thereby and to perform all of his obligations hereunder and
thereunder. Owner is not subject
to any legal disability which would prevent him from performing under this
Agreement or any Related Agreement, and no order has been entered appointing
a
receiver for Owner or
any of
his assets. There is no claim, action, suit or proceeding (including, without
limitation, current investigations by governmental agencies) pending against
Owner seeking to enjoin the execution and delivery of this Agreement, the
Related Agreements or consummation of the transactions contemplated hereby
or
thereby.
(b) This
Agreement and each of the Related Agreements to which Owner
is
a
party constitute the legal, valid and binding obligations of him, enforceable
against him, in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or
hereafter in effect relating to creditors’ rights and remedies generally and
subject, as to enforceability, to general principles of equity (regardless
of
whether enforceability is considered in a proceeding at law or in
equity).
(c) Owner
owns
all of
the issued and outstanding equity interests of Seller. Owner has good and
marketable title to all of the outstanding Membership Units, free and clear
of
all Encumbrances and restrictions, legal or equitable, of every kind. Owner
has
full and unrestricted legal right, power, and authority to sell, assign, and
transfer the Membership Units held by him without obtaining the consent or
approval of any other person, entity, or governmental authority.
5.2 No
Violations of Laws or Agreements, Consents or Defaults.
(a) The
execution and delivery of this Agreement by Owner and the consummation by Owner
of the transactions contemplated by this Agreement and the Related Agreements
will not result in any breach or violation of any of the terms or provisions
of,
or constitute a default under any statute, order, decree, proceeding, rule,
or
regulation of any court or governmental agency or body, United States or
foreign, having jurisdiction over Owner, or any assets of Owner.
(b) Except
as
set forth in Schedule 5.2(b), the delivery by the Owner of this Agreement,
the
Related Agreements and the consummation by Owner of the transactions
contemplated hereby and thereby will not result in a breach or violation of
the
term of, or constitute a default under, or require notice to any third party
under, any agreement, instrument, or commitment to which he is party, by which
he is bound, or to which any of his assets are subject, and no consent or
approval is required from any third party for the transactions contemplated
by
this Agreement and the Related Agreements other than such consents or approvals
that the failure to receive which would not reasonably be expected to have
a
material adverse effect on the transactions contemplated by this Agreement
or
the Related Agreements, the Business, or the assets of Seller.
5.3 Brokers.
No
Person will have, as a result of the transactions contemplated by this
Agreement, any valid right to, interest in or claim upon Buyer or Seller for
any
commission, fee or other compensation as a finder or broker because or any
act
or omission by Owner.
ARTICLE
VI.
REPRESENTATIONS
AND WARRANTIES OF Buyer
As
a
material inducement for Seller and Owner to enter into this Agreement and to
consummate the transactions contemplated hereby, Buyer hereby
makes
the
following representations and warranties as of the date hereof, each of which
is
relied upon by Seller and the Owner regardless of any investigation made or
information obtained by Seller and the Owner:
6.1 Organization,
Existence and Capital Stock.
(a) Buyer
is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware.
(b) All
of
the shares of Zanett Stock issued in connection with the transactions
contemplated by this Agreement will be, when issued in accordance with this
Agreement, duly authorized, validly issued, fully paid, nonassessable, and
free
of all preemptive rights.
The
shares of Zanett Stock issued to Seller in connection with the transactions
contemplated by this Agreement will be issued in the name of Seller, with Seller
as record holders of such shares, and Seller shall have good and marketable
title to such shares of Zanett Stock, free of any liens and Encumbrances, other
than those created by or through Seller
pursuant
to the Lock Up Agreement or otherwise.
6.2 Power
and Authority.
Subject
to the satisfaction of the conditions precedent set forth herein, Buyer has
the
corporate power to execute, deliver and perform this Agreement and the Related
Agreements and to consummate the transactions contemplated hereby, and, subject
to the satisfaction of the conditions precedent set forth herein, has taken
all
action required by law, its certificate of incorporation, its by-laws or
otherwise, to authorize the execution and delivery of this Agreement and such
related documents. This Agreement is a valid obligation Buyer and is legally
binding on Buyer in accordance with its terms.
6.3 No
Violations of Laws.
(a) The
execution and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement and the Related Agreements will
not
result in any breach or violation of any of the terms or provisions of, or
constitute a default under, (i) the certificate of incorporation or by-laws
of
Buyer or (ii) any statute, order, decree, proceeding, rule, or regulation of
any
court or governmental agency or body, United States or foreign, having
jurisdiction Buyer or any of its assets.
(b) The
delivery by Buyer of this Agreement, the Related Agreements and the consummation
by Buyer of the transactions contemplated hereby and thereby will not result
in
a material breach or violation of the term of, or constitute a material default
under, any agreement, instrument, or commitment to which Buyer is a party,
by
which is bound, or to which any of Buyer’s assets are subject, and no consent or
approval is required from any third party for the transactions contemplated
by
this Agreement and the Related Agreements other than such consents, or
approvals, that are not reasonably expected to have a material adverse effect
on
the transactions contemplated by this Agreement or the Related
Agreements.
(c) Buyer,
is
not in material default under, or in violation of any provision of, its
certificate of incorporation or bylaws, any promissory note, indenture or any
evidence of indebtedness or security thereto, lease, purchase contract or other
commitment, or any other agreement that is material to the business of
Buyer.
6.4 Brokers.
No
Person will have, as a result of the transactions contemplated by this
Agreement, any valid right to, interest in or claim upon Buyer for any
commission, fee or other compensation as a finder or broker because or any
act
or omission by Buyer or its Affiliates.
6.5 Litigation
Claims. There
is
no Claim pending or, to the knowledge of Buyer, threatened that questions the
validity of this Agreement or the Related Agreements or any action taken or
to
be taken by Buyer in connection with the consummation of the transactions
contemplated hereby or thereby or which seeks to prohibit, enjoin or otherwise
challenge any of the transactions contemplated hereby or
thereby.
ARTICLE
VII.
SURVIVAL
OF REPRESENTATIONS; INDEMNIFICATION
7.1 Survival
of Representations.
All
representations and warranties made by any party to this Agreement or pursuant
hereto, as modified by any Schedule, exhibit, certificate or other document
executed and delivered pursuant hereto, shall survive the Closing and any
investigation made by or on behalf of any party hereto for a period of 24 months
following the Closing Date; provided, however, that the representations and
warranties contained in Section
4.1
(Organization; Qualification; Corporate Records), Section
6.1
(Organization, Existence and Capital Stock), and Section
5.1
(Power
and Authority; Ownership) shall survive closing indefinitely and the
representations and warranties contained in, Section
4.8
(Tax
Matters), 4.11
(Employee Matters; Benefit Plans; ERISA) and 4.19
(Environmental Matters) shall survive the Closing and any investigations made
by
or on behalf of the relevant party until 60 days following the expiration of
the
applicable statute of limitations. All representations and warranties contained
herein or in any schedule, exhibit, certificate or other document executed
and
delivered pursuant hereto shall be deemed representations and warranties for
purposes of Sections
9.2(a),
9.3(a)
and this
Section
7.1.
Notwithstanding the foregoing, the covenants and agreements of Buyer, Seller
and
Owner made herein shall survive the Closing and shall continue in full force
and
effect indefinitely. The right to indemnification or other remedy based upon
such representations and warranties shall not be affected by any investigation
conducted with respect to, or any knowledge acquired at any time, whether before
or after execution and delivery of this Agreement or the Closing Date, with
respect to the accuracy or inaccuracy of any such representation or
warranty.
Each of
Buyer, Seller and Owner shall notify the other parties in writing of the
discovery of any inaccuracy in any representation or warranty of any party
hereto.
7.2 Indemnification.
(a) Subject
to the terms and conditions of this Article VII, following the Closing, Seller
and Owner shall jointly and severally, indemnify, defend and hold harmless
Buyer
(and its respective officers, directors, employees, Affiliates, successors
or
assigns other than the Owner) (collectively, the “Buyer
Indemnified Parties”),
from
and against all Claims, assessments, losses, damages, liabilities, deficiencies,
judgments, settlements, costs and expenses, including interest, penalties and
reasonable attorneys’ fees and expenses incurred in enforcing this
indemnification or in any litigation between the parties or with third parties
(collectively, “Damages”)
asserted against, resulting to, imposed upon, suffered or incurred by a Buyer
Indemnified Party, directly or indirectly, by reason of or resulting from (i)
any failure of Seller or Owner to duly perform or observe any covenant or
agreement to be performed or observed by any of them, pursuant to this Agreement
or any Related Agreement and/or (ii) a breach of any representation, warranty,
covenant or agreement of Seller or Owner contained in or made pursuant to this
Agreement or any of the Related Agreements.
(b) Subject
to the terms and conditions of this Article VII, Buyer shall indemnify, defend
and hold harmless Seller and Owner (and Seller and Owner’s respective heirs,
representatives and assigns) (collectively, the “Seller
Indemnified Parties”)
at any
time after consummation of the Closing, from and against all Damages asserted
against, resulting to, imposed upon or incurred by Seller Indemnified Parties,
directly or indirectly, by reason of or resulting from: (i) the assertion
against Owner or Seller of any claim for payment or performance of any
obligation, debt, or liability in connection with Buyer’s operation of the
Business from and after the Closing, (ii) any failure of Buyer to duly perform
or observe any covenant or agreement to be performed or observed by it, prior
to
the Closing, pursuant to this Agreement or any Related Agreement; or (iii)
a
breach of any representation, warranty, covenant or agreement of Buyer contained
in or made pursuant to this Agreement or any Related Agreement.
(c) Buyer’s
maximum liability to the Seller Indemnified Parties under this Section
7.2
shall
not exceed the Consideration received by the Seller hereunder.
(d) No
Indemnifying Party shall be liable to or obligated to indemnify any Indemnified
Party hereunder for any punitive or exemplary damages, or any consequential,
special or multiple damages, except to the extent such damages have been
recovered by a third person (including a Governmental Authority) and are the
subject of a third party claim for which indemnification is available under
this
Article VII.
(e) Except
as
expressly provided in this Agreement, the remedies provided herein shall be
cumulative and shall not preclude assertion by any party hereto of any other
rights or the seeking of any other remedies against any other party
hereto.
7.3 Conditions
of Indemnification.
The
obligations and liabilities of Buyer, on the one hand, and Seller and Owner,
on
the other hand, as indemnifying parties (each, an “Indemnifying
Party”)
to
indemnify Seller Indemnified Parties or Buyer Indemnified Parties, as applicable
(each, an “Indemnified
Party”),
under
Section 7.2 with respect to Claims made by third parties shall be subject to
the
following terms and conditions:
The
Indemnified Party shall give written notice to the Indemnifying Party of any
Damages with respect to which it seeks indemnification promptly after the
discovery by such party of any matters giving rise to such Claim for
indemnification; provided, however, that the failure of any Indemnified Party
to
give notice as provided herein shall not relieve the Indemnifying Party of
its
obligations under Section
7.2
unless
it shall have been prejudiced by the omission to provide such notice. In case
any Claim is brought against an Indemnified Party, the Indemnifying Party shall
be entitled to participate in the defense thereof and, to the extent that it
may
wish, to assume the defense thereof, with counsel reasonably satisfactory to
the
Indemnified Party, and after notice from the Indemnifying Party of its election
so to assume the defense thereof, the Indemnifying Party will not be liable
to
the Indemnified Party under Section
7.2
for any
legal or other expense subsequently incurred by the Indemnified Party in
connection with the defense thereof; provided, however, that (i) if the
Indemnifying Party shall elect not to assume the defense of such claim or action
or (ii) if the Indemnified Party reasonably determines that there may be a
conflict between the positions of the Indemnifying Party and the Indemnified
Party in defending such Claim, then separate counsel shall be entitled to
participate in and conduct such defense, and the Indemnifying Party shall be
liable for any reasonable legal or other expenses incurred by the Indemnified
Party in connection with such defense (but not more than one counsel). The
Indemnifying Party shall not be liable for any settlement of any Claim effected
without its written consent, which consent shall not be unreasonably withheld.
The Indemnifying Party shall not, without the Indemnified Party’s prior written
consent, which consent shall not be unreasonably withheld, settle or compromise
any Claim to which the Indemnified Party is a party or consent to entry of
any
judgment in respect thereof. The Indemnifying Party further agrees that it
will
not, without the Indemnified Party’s prior written consent, settle or compromise
any claim or consent to entry of any judgment in respect thereof in any pending
or threatened Claim in respect of which indemnification may be sought hereunder
(whether or not the Indemnified Party is an actual or potential party to such
Claim) unless such settlement or compromise includes an unconditional release
of
the Indemnified Party from all liability arising out of such Claim.
ARTICLE
VIII.
COVENANTS.
8.1 Public
Disclosures.
Buyer,
Seller and Owner will consult with each other before issuing any press release
or otherwise making any public statement with respect to the transactions
contemplated by this Agreement, and shall not issue any such press release
or
make any such public statement prior to such consultation except as may be
required by applicable law or requirements of any national securities exchange
or automated quotation system on which the Zanett Stock is listed or quoted.
The
parties shall issue a joint press release, mutually acceptable to Seller and
Buyer, promptly upon execution and delivery of this Agreement.
8.2 Confidentiality.
Buyer,
Seller and Owner shall hold, and shall use their best efforts to cause their
respective auditors, attorneys, financial advisors, bankers and other
consultants and advisors to hold in strict confidence, unless compelled to
disclose by judicial or administrative process or by other requirements of
law,
all documents and information concerning the other party furnished to it by
the
other party or its representatives in connection with the transactions
contemplated by this Agreement, including, without limitation, the terms and
conditions of the Agreement (except to the extent that such information shall
be
shown to have been (a) already known by the party to which it was furnished,
(b)
in the public domain through no fault of such party or (c) later lawfully
acquired from other sources by the party to which it was furnished)
(“Confidential
Information”),
and
each party shall not release or disclose such Confidential Information to any
other Person, except its auditors, attorneys, financial advisors, bankers and
other consultants and advisors in connection with the transactions contemplated
by this Agreement.
8.3 Affirmative
Covenants of Seller.
Prior
to the Closing, unless Buyer agrees otherwise in writing:
(a) Seller
will maintain its existence as a limited liability company and will conduct
the
Business and its operations in the usual and ordinary course of business in
accordance with past custom and practice, including, without limitation,
maintaining adequate working capital balances, collecting accounts receivable,
paying accounts payable, making repair and maintenance capital expenditures
and
managing cash accounts generally, all in the usual and ordinary course of
business and in compliance in all material respects with all Laws,
authorizations, contracts and agreements (including those identified in the
Schedules).
(b) Seller
will carry on the Business in substantially the same manner as presently
conducted and keep its business organizations and properties intact, including
its present business operations, physical facilities, working conditions and
employees and its present relationships with employees, lessors, licensors,
suppliers and customers and others having business relations with it.
(c) Seller
shall maintain its Books and Records in accordance with past practice, and
use
best efforts to maintain in full force all licenses, certificates and other
regulatory approvals required or necessary to be applied for or obtained in
connection with the Business (except where the failure to maintain such
licenses, certificates or other regulatory approvals would not have a material
adverse effect) and all insurance policies and binders.
(d) Seller
shall promptly advise Buyer in writing of the threat or commencement against
Seller or Owner of any dispute, action, claim, investigation or proceeding
by,
against or affecting Seller or any of its operations, assets or prospects,
or
which questions or may affect the validity of this Agreement or the Related
Agreements or any action taken or to be taken by Seller or Owner in connection
with the consummation of the transactions contemplated hereby or thereby or
which seeks to prohibit, enjoin or otherwise challenge any of the transactions
contemplated hereby or thereby.
(e) Seller
shall pay any and all amounts owed to any holder of Membership Units and shall
collect any and all amounts owed to Seller by any holder of Membership Units.
There shall be no receivables or payables to or from Owner on the Closing
Balance Sheet, other than reasonable reimbursable business expenses incurred
in
the ordinary course within 30 days prior to the date of the Closing Balance
Sheet.
(f) Seller
shall promptly advise Buyer in writing of any event or the existence of any
fact
which makes untrue, or will make untrue as of the Closing, any representation
or
warranty of Seller or Seller set forth in this Agreement or the Related
Agreements (including but not limited to any acquisitions, sale of license
of
any material portion of its assets, or amendments to any material distribution,
licensing, or other material agreements).
(g) Seller
shall cooperate with Buyer to obtain prior to Closing, searches (the
“Searches”),
in
all appropriate jurisdictions, for state and federal tax liens, judgment liens,
Uniform Commercial Code financing statements and pending litigation against
Seller or its assets; provided that, such Searches shall be performed by a
nationally recognized company satisfactory to Buyer, and Seller shall be
responsible for the cost thereof.
8.4 Negative
Covenants of Seller.
Prior
to the Closing, unless Buyer agrees otherwise in writing:
(a) Seller
will not take any action or permit to occur any event within Seller’s reasonable
control which, if taken or occurring prior to the date hereof would require
any
disclosure in the Schedules, or would breach any covenant of Seller or Owner,
or
cause any representation or warranty of Seller or Owner to be untrue as of
the
Closing.
(b) Seller
will not (i) make or permit any change in its authorized, issued or treasury
securities of its equity securities, (ii) grant any option or right to purchase
Seller’s securities, (iii) issue or make any commitment to issue any security,
including any security convertible into Membership Units, (iv) grant any
registration rights, (v) purchase, redeem, retire or make any other acquisition
of any securities, or (vi) declare, set aside or pay any dividends, redeem
or
make any other distributions on or with regard to its equity.
(c) Seller
will not amend its certificate of formation or operating agreement.
(d) Seller
will not fail to pay or discharge when due any liability or obligation of
Seller.
(e) Seller
will not (i) make any payments to officers, directors, partners, managers,
trustees or beneficiaries other then in the ordinary course of business and
in
accordance with past custom and practice or (ii) make any loans or enter into
any transactions or contracts with any holder of Membership Units or an
Affiliate of any holder of Membership Units, other than in the ordinary course
of business and as contemplated by this Agreement.
(f) Seller
will not, except as specifically contemplated by this Agreement, (i) enter
into
any material contract, agreement or transaction, (including but not limited
to
any acquisitions, sale of license of any material portion of its assets, or
amendments to any material distribution, licensing, or other material
agreements), (ii) change, accelerate or alter the payment terms of any existing
material Contracts, or (iii) incur
any
additional debt, other
than in the ordinary course of business in accordance with past custom and
practice.
(g) Seller
will not hire any employees, change any employee’s compensation, pay any bonus
or enter into any severance arrangements, or accelerate the vesting of any
restricted stock or stock options.
(h)
Seller
shall deliver to Buyer all Tax clearance certificates necessary for Buyer to
avoid any potential successor liability for the Taxes of Seller, dated as of
the
Closing or the most recent practical date before the Closing.
8.5 Payment
of Wachovia Debt.
(a) Prior
to
and following the Closing, Seller shall use its best efforts to collect
Receivables for
sales
made or services
performed prior to the Closing Date (“Pre-Closing
Receivables”)
in a
manner consistent
with its past business practice and without discounting payment of such
Pre-Closing Receivables.
Seller
shall immediately apply all Pre-Closing Receivables collected to repay the
Wachovia Debt in full (the “Debt
Repayment”).
Within 2 business days of the Debt Repayment, Seller shall or shall cause
Wachovia Bank to have all Encumbrances affecting the Purchased Assets released
and discharged and shall provide to Buyer evidence reasonably satisfactory
to
Buyer (including, without limitation, a UCC-3 termination statement) that such
Encumbrances have been released and discharged of record.
(b)
Following
the Debt Repayment, Seller shall take all necessary action to promptly transfer
the remaining Pre-Closing Receivables to Buyer.
Any
Pre-Closing Receivables transferred to Buyer pursuant to this Section
8.5(b)
shall be
deemed a Purchased Asset for purposes of this Agreement..
8.6 Payment
of American Express Debt.
Prior
to or promptly following the Closing, Buyer shall pay the American Express
Debt
on behalf of the Seller.
8.7 Performance
Period Financial Statements; Annual Reports.
Within
90 days after the end of each Performance Period, Buyer shall deliver to Owner
an income statement for such Performance Period and a balance sheet as of the
end of such Performance Period. These financial statements (“Performance
Period Financial Statements”)
shall
(i) be prepared from monthly financial statements prepared by Buyer in
accordance with GAAP as
applied on a basis consistent with Seller’s past practices
and (ii)
set forth the Adjusted Income and Revenue of Buyer for such Performance Period
(including the figures used and calculations made to determine the Adjusted
Income and Revenue).
8.8 Accounting
Disputes.
Notwithstanding anything to the contrary in this Agreement, if Seller has any
dispute relating to the determination of Actual Net Working Capital or the
amount of Adjusted Income or Revenue for any purpose hereunder, then Seller
will
notify Buyer, in writing, of each disputed amount (collectively, the
“Disputed
Amounts”),
specifying the grounds for such dispute, within 15 Business Days after delivery
of the Closing Financial Statements, the Performance Period Financial Statements
or other notice containing such determination, as the case may be. If Buyer
and
Seller cannot resolve any such dispute within 10 Business Days after delivery
of
such notice, then such dispute will be resolved by an independent accounting
firm mutually acceptable to Buyer and Seller (the “Independent
Accounting Firm”).
If
Buyer and Seller do not agree upon a mutually acceptable Independent Accounting
Firm within the 10 Business Day period after delivery of the notice, Buyer
and
Seller will each select an independent accounting firm, and the Independent
Accounting Firm will be selected by the firms chosen by Buyer and Seller. The
determination of the Independent Accounting Firm (i) will be made as promptly
as
practicable, (ii) will be prepared in accordance with GAAP and this Agreement,
and (iii) will be final and binding on the parties, absent manifest error,
which
error may only be corrected by such Independent Accounting Firm. Any expenses
relating to the engagement of the Independent Accounting Firm will be allocated
evenly between Buyer and the Seller, provided, however, that if the
determination of the Independent Accounting Firm results in a restatement of
more than 10% of the Actual Net Working Capital, Adjusted Income or Revenue
claimed by Seller, then the Buyer shall pay all expenses related to the
engagement of the Independent Accounting Firm; provided further, however, that
if the determination of the Independent Accounting Firm results in a restatement
of less than 10% of the Actual Net Working Capital, Adjusted Income or Revenue
claimed by Buyer, then the Seller shall pay all expenses related to the
engagement of the Independent Accounting Firm.
8.9 Audit;
Cooperation.
Following the Closing, Owner and Seller shall cooperate with Buyer in connection
with Buyer’s preparation of financial statements, and, if necessary, an audit
(the “Audit”)
of the
financial performance of Seller, for all periods required in connection with
Buyer’s reporting obligations under the United States securities laws. Such
cooperation shall include, but not be limited to, providing full access to
the
Books and Records, any work papers generated in connection therewith, Seller
personnel, Seller’s outside auditors and assisting Buyer in obtaining any
required consent of such outside auditors in connection with Buyer’s reporting
obligations under the United Stated securities laws. From
and
after the Closing Date and until the end of the final One-Year Performance
Period, Buyer shall permit Seller
and its
counsel, accountants, engineers, consultants and other authorized
representatives to have full and complete access to all documents, books,
contracts and records relating to the Business (but not to Zanett or Buyer
generally) and to make copies thereof during normal business hours in order
to
permit Seller to conduct investigations and reviews relative to this Agreement.
Seller
and its
representatives shall conduct such investigations and reviews in such manner
as
shall not interfere with or disrupt the conduct of business of Zanett or Buyer.
8.10 Acknowledgment
Regarding Reorganizations and Similar Transactions.
Seller
and Owner hereby acknowledge and agree that, notwithstanding anything to the
contrary set forth herein, Buyer shall be entitled to consummate any sale,
merger, reorganization, consolidation or other similar transaction involving
Seller, in each case to a Person that is an Affiliate of Buyer or Zanett,
without requiring any consent of Seller, and the consummation of such
transaction shall not be deemed to violate any provision of this Agreement;
provided, however, that such sale, merger, reorganization, consolidation or
other similar transaction shall not release Buyer from its obligations
hereunder.
ARTICLE
IX.
CONDITIONS
TO CLOSING.
9.1 Mutual
Conditions.
The
respective obligations of each party to effect the transactions contemplated
by
this Agreement at the Closing shall be subject to the satisfaction, at or prior
to the Closing Date, of the following conditions (any of which may be waived
in
writing by Buyer, Owner and Seller).
(a) None
of
Buyer, Owner or Seller nor any of their respective subsidiaries shall be subject
to any order, decree or injunction by a court of competent jurisdiction which
(i) prevents or materially delays the consummation of the transactions
contemplated by this Agreement or (ii) would impose any material limitation
on
the ability of Buyer effectively to exercise full rights of ownership of any
material portion of the assets or Business of Seller, taken as a
whole.
(b) No
statute, rule or regulation, shall have been enacted by the government (or
any
governmental agency) of the United States or any state, municipality or other
political subdivision thereof that makes the consummation of the transactions
contemplated by this Agreement illegal.
(c) Buyer,
Owner and Seller shall have received all consents, approvals and authorizations
of third parties (including governmental approvals) that are required of such
third parties prior to the consummation of the transactions contemplated by
this
Agreement, in form and substance acceptable to Buyer or Seller, as the case
may
be, except where the failure to obtain such consent, approval or authorization
would not have a material adverse effect on the Business of Seller.
9.2 Conditions
to the Obligations of Buyer.
The
obligations of Buyer under this Agreement are subject to the satisfaction,
at or
before the Closing, of each of the following conditions (any of which may be
waived in writing by Buyer):
(a) The
representations and warranties of Seller and Owner contained herein that are
qualified as to materiality shall be true in all respects on and as of the
Closing Date (except for the representations and warranties made as of a
specific date which shall be true in all material respects as of such date)
with
the same force and effect as though made on and as of such date, and each of
the
representations and warranties of Seller and Owner contained herein that are
not
so qualified shall be true in all material respects as of such
dates.
(b) Seller
and the Owner shall have performed and complied in all material respects with
all covenants, agreements, obligations and conditions required by this Agreement
to be performed or complied with by them at or prior to the
Closing.
(c) There
shall not be threatened, instituted or pending any suit, action, investigation,
inquiry or other proceeding by or before any court or governmental or other
regulatory or administrative agency or commission requesting or looking toward
an order, judgment or decree that (a) restrains or prohibits the consummation
of
the transactions contemplated hereby, (b) could reasonably be expected to have
a
material adverse effect on Buyer’s ability to exercise control over or manage
Seller after the Closing or (c) could reasonably be expected to have a material
adverse effect on the Business of Seller.
(d) On
the
Closing Date, there shall be no effective injunction, writ, preliminary
restraining order or other order issued by a court of competent jurisdiction
restraining or prohibiting the consummation of the transactions contemplated
hereby.
(e) Buyer
shall have received an opinion of Jones, Foster, Xxxxxxxx & Xxxxxx, P.A.,
counsel to Seller, dated the Closing Date, in form and substance reasonably
satisfactory to Buyer.
(f) Buyer
shall have received from Seller at least 2 business days prior to Closing,
payoff
letters from American Express Company providing for the payoff amount as of
Closing, of the American Express Debt.
(g) Buyer
shall have received reasonable evidence that all indebtedness of Seller has
been
paid in full other than the Wachovia Debt.
(h) Buyer
shall have received satisfactory evidence that all debt owed by Seller to Xxxx
Xxxxxxx has been assigned as personal debt of Owner.
(i) Buyer
shall have received the Searches in accordance with Section 8.3(g). Seller
shall
have had all Encumbrances, other than Permitted Encumberances, affecting Seller
or its assets released and discharged (whether or not such Encumbrances are
reflected in the Searches or the Schedules). Buyer shall have received evidence
reasonably satisfactory to it (including, without limitation, UCC-3 termination
statements) that such Encumbrances have been released and discharged of
record.
(j) Buyer
shall have received a consent from Wachovia Bank consenting to the transactions
contemplated by this agreement, in a form acceptable to Buyer in its sole
discretion.
(k) Each
Key
Employee shall have entered into a confidentiality, non-competition, and
non-solicitation agreement (the “Confidentiality,
Non-Competition, and Non-Solicitation Agreement”),
substantially in the form of Exhibit
C.
(l) Each
Key
Employee shall have accepted Buyer’s offer of employment with Buyer pursuant to
an offer letter, in a form acceptable to Buyer in its sole
discretion.
(m) Seller
and Owner shall have entered into a lock-up agreement with Zanett (the
“Lock-up
Agreement”),
substantially in the form of Exhibit
D.
(n) The
lease
agreement between Seller, Xxxx Xxxxxxx and Owner for the property located at
000
XX Xxxxxxx Xxx, Xxxxx 000, Xxxxx Xxxx Xxxxx, Xxxxxxx, shall have been assigned
to Buyer.
(o) Zanett’s
Executive Committee and Buyer’s Board of Directors shall have approved the
Agreement and the transactions contemplated hereby.
(p) Zanett’s
lender, LaSalle Bank National Association, shall have approved the Agreement
and
the transactions contemplated hereby, including the assumption of the Wachovia
Debt by Buyer.
(q) There
shall have been no material adverse change to the Business from the date hereof
to the Closing.
9.3 Conditions
to the Obligations of Seller and the Owner.
The
obligations of Seller and the Owner under this Agreement at the Closing are
subject to the satisfaction, at or before the Closing, of each of the following
conditions (any of which may be waived in writing by Seller and the
Owner):
(a) The
representations and warranties of Buyer contained herein that are qualified
as
to materiality shall be true in all respects on and as of the Closing Date
(except for the representations and warranties made as of a specific date which
shall be true in all material respects as of such date) with the same force
and
effect as though made on and as of such date, and each of the representations
and warranties of Buyer contained herein that are not so qualified shall be
true
in all material respects as of such dates.
(b) Buyer
shall have performed and complied in all material respects with all covenants,
agreements, obligations and conditions required by this Agreement to be so
performed or complied with by Buyer at or prior to the Closing.
(c) There
shall not be threatened, instituted or pending any suit, action, investigation,
inquiry or other proceeding by or before any court or governmental or other
regulatory or administrative agency or commission requesting or looking toward
an order, judgment or decree that (a) restrains or prohibits the consummation
of
the transactions contemplated hereby or (b) could reasonably be expected to
have
a material adverse effect on the business of Buyer or Seller (following the
Closing).
(d) On
the
Closing Date, there shall be no effective injunction, writ, preliminary
restraining order or other order issued by a court of competent jurisdiction
restraining or prohibiting the consummation of the transactions contemplated
hereby.
ARTICLE
X.
MISCELLANEOUS
10.1 Notices.
Any
communications required or desired to be given hereunder shall be deemed to
have
been properly given if sent by hand delivery or by facsimile and overnight
courier or overnight courier to the parties hereto at the following addresses,
or at such other address as either party may advise the other in writing from
time to time:
If
to
Buyer:
Zanett
Commercial Solutions, Inc.
c/o
Zanett, Inc.
000
Xxxxxxx Xxxxxx
00xx
Xxxxx
Xxx
Xxxx,
XX 00000
Attention:
President
Facsimile:
(000) 000-0000
with
a
copy to (which shall not constitute notice):
Drinker
Xxxxxx & Xxxxx LLP
One
Xxxxx
Square
00xx
xxx
Xxxxxx Xxxxxxx
Xxxxxxxxxxxx,
XX 00000
Attention:
Xxxxxxx X. Xxxxxxx, Esq.
Facsimile:
(000) 000-0000
If
to
Seller:
PS
GoLive
LLC
000
XX
Xxxxxxx Xxx, Xxxxx 000
Xxxxx
Xxxx Xxxxx, XX 00000
with
a
copy to (which shall not constitute notice):
Jones,
Foster, Xxxxxxxx & Xxxxxx, P.A.
000
Xxxxxxx Xxxxx, Xxxxx 0000
Xxxx
Xxxx
Xxxxx, XX 00000
Attention:
Xxxx X. Xxxxxxx, Esq.
Facsimile:
(000) 000-0000
If
to
Owner:
Xxxxxxx
Xxxxxxx
000
Xxxxxxxxx Xxxx
Xxxx
Xxxxx Xxxxxxx, XX 00000
All
such
communications shall be deemed to have been delivered on the date of hand
delivery or facsimile or on the next Business Day following the deposit of
such
communications with the overnight courier.
10.2 Further
Assurances.
Each
party hereby agrees to perform any further acts and to execute and deliver
any
documents which may be reasonably necessary to carry out the provisions of
this
Agreement.
10.3 Governing
Law.
This
Agreement shall be interpreted, construed and enforced in accordance with the
laws of the State of New York, applied without giving effect to any conflicts
of
law principles.
10.4 Right
of Setoff.
Notwithstanding any provision hereof to the contrary, Buyer shall be entitled
to
set-off (i) any amounts due to Buyer from Owner hereunder, whether by reason
of
overpayment of the Consideration or, indemnification under Article VII, or
otherwise, against (ii) amounts due from Buyer to Seller or Owner hereunder.
Any
set-off shall be applied against amounts payable to the Seller or Owner in
the
chronological order all amounts of every kind payable to Seller or Owner are
due
until the set-off is complete. Notwithstanding any provision hereof to the
contrary, upon making a claim for indemnification under Article VII, Buyer
may
withhold from amounts otherwise due hereunder an amount equal to Buyer’s
reasonable estimate of the amount of such claim until such time as the actual
amount of Buyer’s indemnification claim, and right of set-off hereunder, is
determined. Claims for indemnification for which Buyer exercises its right
of
set-off hereunder shall be promptly submitted to binding arbitration in New
York
in accordance with the rules and regulations of the American Arbitration
Association. The arbitrators will be selected by the American Arbitration
Association. The determination of the arbitrator(s) will be conclusive and
binding upon the parties, and any determination by the arbitrator(s) of any
award may be filed with the clerk of a court of competent jurisdiction as a
final adjudication of the claim involved, or application may be made to such
court for judicial acceptance of the award and an order of enforcement. Each
party will bear its own expenses with respect to such arbitration. Any amount
withheld by Buyer pursuant to the set-off right under this Section
10.4
that the
arbitrator(s) determines was in excess of the amount that Seller or Owner was
liable for under the indemnification claim brought to such arbitration shall
be
returned forthwith to Seller or Owner. The arbitrator may award reasonable
attorneys’ fees and costs to the prevailing party.
10.5 Consent
to Jurisdiction.
Each of
the parties hereto (a) consents to submit itself to the personal jurisdiction
of
any Federal court located in the State of New York in the event any dispute
arises out of this Agreement or any of the transactions contemplated by this
Agreement, (b) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court, and
(c)
agrees that it will not bring any action relating to this Agreement or any
of
the transactions contemplated by this Agreement in any court other than a
Federal court sitting in the State of New York.
10.6 Integration
of Exhibits and Schedules.
All
Exhibits and Schedules to this Agreement are integral parts of this Agreement
as
if fully set forth herein.
10.7 Entire
Agreement.
This
Agreement, the Related Agreements, including all Exhibits and Schedules attached
hereto and thereto contain the entire agreement of the parties and supersede
any
and all prior or contemporaneous agreements between the parties, written or
oral, with respect to the transactions contemplated hereby. Such agreement
may
not be changed or terminated orally, but may only be changed by an agreement
in
writing signed by the party or parties against whom enforcement of any waiver,
change, modification, extension, discharge or termination is
sought.
10.8 Expenses.
Except
as set forth on Schedule 4.4(b) or as expressly provided otherwise, each party
hereto will bear its own costs and expenses (including fees and expenses of
auditors, attorneys, financial advisors, bankers, brokers and other consultants
and advisors) incurred in connection with this Agreement, the Related Agreements
and the transactions contemplated hereby and thereby.
10.9 Counterparts.
This
Agreement may be executed in several counterparts, each of which, when so
executed, shall be deemed to be an original, and such counterparts shall
together constitute and be one and the same instrument.
10.10 Binding
Effect.
This
Agreement shall be binding on, and shall inure to the benefit of, the parties
hereto, and their respective successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement. No party may
assign any right or obligation hereunder without the prior written consent
of
the other parties.
10.11 Termination
Events.
By
notice given prior to or at the Closing, subject to Section 11.2, this Agreement
may be terminated as follows:
(a) by
Buyer
if a material breach of any provision of this Agreement has been committed
by
Seller or Owner, such breach has not been cured within 10 days following receipt
by Seller of notice of such breach, and such breach has not been waived by
Buyer;
(b) by
Seller
if a material breach of any provision of this Agreement has been committed
by
Buyer such breach has not been cured within 10 days following receipt by Buyer
of notice of such breach, and such breach has not been waived by
Seller;
(c) by
either
Buyer or Seller if the transactions contemplated hereby have not been
consummated by December 15, 2008; provided, however, that the right to terminate
this Agreement under this Section 10.11(c) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the cause
of or resulted in the failure of such transaction to occur on or before such
date; or
(d) by
mutual
consent of Buyer, Seller, and the Owner.
10.12 Effect
Of Termination.
Each
party’s right of termination under Section
10.11
is in
addition to any other rights it may have under this Agreement or otherwise,
and
the exercise of such right of termination will not be an election of remedies.
If this Agreement is terminated pursuant to Section
10.11,
all
obligations of the parties under this Agreement will terminate, except that
the
obligations of the parties in this Article X will survive; provided, however,
that if this Agreement is terminated because of a breach of this Agreement
by
the non-terminating party or because one or more of the conditions to the
terminating party’s obligations under this Agreement is not satisfied as a
result of the party’s failure to comply with its obligations under this
Agreement, the terminating party’s right to pursue all legal remedies will
survive such termination unimpaired.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, Buyer, Seller and the Owner have caused this Asset Purchase
Agreement to be executed by their respective duly authorized officers, all
as of
the day and year first above written.
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By:
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/s/
Xxxxxxx Xxxxxxxx
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Name:
Xxxxxxx Xxxxxxxx
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Title:
President
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PS
GOLIVE LLC
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By:
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/s/
Xxxxxxx Xxxxxxx
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Name:
Xxxxxxx Xxxxxxx
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Title:
Sole Member
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Xxxxxxx
Xxxxxxx
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The
following schedules to the agreement have been omitted. The registrant will
furnish a supplementary copy of any omitted schedule to the Securities and
Exchange Commission upon request.
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Schedule
1.1
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Current
Assets and Current Liabilities
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Schedule
2.1(b)
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Seller’s
Tangible Property
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Schedule
2.1(c)
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Seller’s
Contracts
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Schedule
2.1(e)
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Seller’s
Authorizations
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Schedule
2.2(b)
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Consents
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Schedule
2.3(i)
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Excluded
Assets
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Schedule
2.4(a)
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Assumed
Liabilities
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Schedule
2.4(b)
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Assumed
Liabilities
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Schedule
2.5(r)
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Excluded
Capital Lease Obligations
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Schedule
2.7(b)
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Third
Party Consents
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Schedule
4.1(b)
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Jurisdiction
in which Seller is Authorized to Do Business
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Schedule
4.1(c)
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Seller’s
Managers and Officers
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Schedule
4.1(d)
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Change
in Shares; Action Requiring Written Consent of Buyer
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Schedule
4.1(e)
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Changes
to Equity Interests of Holders of Seller’s Membership
Units
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Schedule
4.1(f)
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Seller’s
Fictitious Name Registration
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Schedule
4.2(b)
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Violation
or Breach of Agreements; Consents Required
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Schedule
4.4(a)
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Financial
Statements
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Schedule
4.4(b)
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Liabilities
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Schedule
4.4(c)
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Unusual,
Nonrecurring, Extraordinary or Not in Ordinary Course Income or
Expense
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Schedule
4.5
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Occurrence
of Certain Change
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Schedule
4.5(f)
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Permitted
Encumbrances
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Schedule
4.6
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Seller’s
Authorizations
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Schedule
4.7(a)
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Regulatory
Matters
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Schedule
4.8(a)
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Tax
Returns
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Schedule
4.8(c)
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Tax
Disputes
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Schedule
4.9(b)
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Claims
Against Seller
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Schedule
4.9(c)
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Legal
Claims Against Seller Relating to Seller’s Products or
Services
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Schedule
4.10(b)
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Leases
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Schedule
4.10(c)
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Loans,
Extension of Credit and Advances
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Schedule
4.10(d)
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Acquisition
of Assets or Capital Stock of Another Business
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Schedule
4.10(e)
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Other
Agreements
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Schedule
4.10(f)
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Material
Contracts Effected by APA or Related Agreements
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Schedule
4.10(g)
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Agreements
Subject to Potential Default
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Schedule
4.10(h)
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Bank,
Brokerage, Mutual Fund, Investment Company, Investment Advisor
and other
Financial Institution Accounts
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Schedule
4.10(j)
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Contracts
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Schedule
4.10(k)
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Owned
Leased Vehicles, Machinery, Equipment, Tools and other Tangible
Assets
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Schedule
4.11(a)
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Collective
Bargaining Agreements or Efforts
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Schedule
4.11(b)
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Employment
Compliance and Employee Relations
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Schedule
4.11(c)
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Employee
Agreements
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Schedule
4.11(d)
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Employee
Benefit Plan
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Schedule
4.11(o)
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Change
of Control Agreements
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Schedule
4.12(a)
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Employee
Information
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Schedule
4.12(b)
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Employee
Valuation Methods
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Schedule
4.12(c)
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Consultants
and Independent Contractors
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Schedule
4.12(d)
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Employee
Termination
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Schedule
4.12(e)
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Employee
Compensation Dispute
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Schedule
4.12(f)
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Non-Resident
Employees
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|
Schedule
4.14
|
Product
and Service Warranties
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|
Schedule
4.15(a)
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Encumbrances
on Intellectual Property
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|
Schedule
4.15(b)
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Intellectual
Property
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|
Schedule
4.15(c)
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Software
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|
Schedule
4.15(d)
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Non-Exclusive
Intellectual Property
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|
Schedule
4.15(f)
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Intellectual
Property Marketing Rights
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Schedule
4.16
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Insurance
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Schedule
4.17(b)
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Top
Ten Customers
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Schedule
4.17(c)
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Threats
of Customer Discontinuance
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Schedule
4.18(a)
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Legality
of the Business and Operations of Seller
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Schedule
4.19
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Environmental
Liabilities
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Schedule
4.21
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Receivables
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Schedule
5.2(b)
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Breach
of Agreements
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