Exhibit 10.02
Execution Copy
ASSET PURCHASE AGREEMENT
BY AND AMONG
XTRASOURCE, INC.,
AS SELLER,
XTRASOURCE ACQUISITION, INC.,
AS BUYER,
AND
SENTO CORPORATION,
AS PARENT OF BUYER
DATED AS OF NOVEMBER 5, 2004
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS.......................................................1
Section 1.1 Terms Defined in this Section..........................1
Section 1.2 Terms Defined Elsewhere in this Agreement..............6
Section 1.3 Terms Generally........................................7
ARTICLE 2 PURCHASE AND SALE OF ASSETS.......................................7
Section 2.1 Agreement to Sell and Buy..............................7
Section 2.2 Excluded Assets........................................8
Section 2.3 Purchase Price.........................................8
Section 2.4 Assumption of Liabilities and Obligations..............8
Section 2.5 Contingent Earnout.....................................9
Section 2.6 Working Capital Deficit...............................12
Section 2.7 Line of Credit........................................12
Section 2.8 Allocation of Purchase Price..........................12
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER.........................13
Section 3.1 Organization, Standing and Authority..................13
Section 3.2 Authorization and Binding Obligation..................13
Section 3.3 Absence of Conflicting Agreements.....................13
Section 3.4 Financial Statements..................................14
Section 3.5 Absence of Material Adverse Change and
Certain Changes.....................................14
Section 3.6 Title to Assets; Liens................................15
Section 3.7 Licenses..............................................16
Section 3.8 Tangible Personal Property............................16
Section 3.9 Contracts.............................................16
Section 3.10 Intellectual Property Rights..........................16
Section 3.11 Employees and Compensation............................18
Section 3.12 Taxes.................................................20
Section 3.13 Compliance with Laws..................................20
Section 3.14 Claims and Legal Actions..............................20
Section 3.15 Insurance and Bonds...................................21
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TABLE OF CONTENTS
(continued)
Page
Section 3.16 Transactions with Affiliates..........................21
Section 3.17 Brokers...............................................21
Section 3.18 No Subsidiaries.......................................21
Section 3.19 Operating Difficulties................................23
Section 3.20 Disclosure............................................24
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER..........................24
Section 4.1 Organization, Standing and Authority..................24
Section 4.2 Authorization and Binding Obligation..................24
Section 4.3 Absence of Conflicting Agreements.....................24
Section 4.4 Claims and Legal Actions..............................25
ARTICLE 5 OPERATIONS OF THE BUSINESS PRIOR TO CLOSING......................25
Section 5.1 Generally.............................................25
Section 5.2 Contracts, Commitments and Conduct of Business........25
Section 5.3 Disposition of Assets.................................26
Section 5.4 Encumbrances..........................................26
Section 5.5 Governmental Permits..................................26
Section 5.6 Access to Information.................................26
Section 5.7 Maintenance of Assets.................................26
Section 5.8 Insurance and Bonds...................................26
Section 5.9 Compliance with Contracts and Laws....................27
Section 5.10 Changes to Employee Compensation and Benefits.........27
Section 5.11 Advice of Changes.....................................27
ARTICLE 6 SPECIAL COVENANTS AND AGREEMENTS.................................27
Section 6.1 Third-Party Consents..................................27
Section 6.2 Risk of Loss..........................................28
Section 6.3 Confidentiality; Public Announcements.................28
Section 6.4 Cooperation...........................................28
Section 6.5 Books and Records.....................................28
Section 6.6 Employee Transition...................................29
Section 6.7 Delivery of Financial Information.....................31
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TABLE OF CONTENTS
(continued)
Page
Section 6.8 Additional Post-Closing Covenants.....................31
ARTICLE 7 CLOSING CONDITIONS...............................................32
Section 7.1 Conditions to Obligations of Buyer....................32
Section 7.2 Conditions to Obligations of Seller...................34
ARTICLE 8 CLOSING AND CLOSING DELIVERIES...................................35
Section 8.1 Closing...............................................35
Section 8.2 Deliveries by Seller..................................35
Section 8.3 Deliveries by Buyer...................................36
ARTICLE 9 TERMINATION......................................................37
Section 9.1 Termination by Agreement..............................37
Section 9.2 Termination by Seller.................................37
Section 9.3 Termination by Buyer..................................37
Section 9.4 Rights on Termination.................................38
Section 9.5 Specific Performance..................................38
ARTICLE 10 SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.........................................38
Section 10.1 Survival of Representations and Warranties............38
Section 10.2 Indemnification of Buyer by Seller....................39
Section 10.3 Indemnification of Seller by Buyer....................40
Section 10.4 Defense of Claims.....................................40
Section 10.5 Payments..............................................41
ARTICLE 11 MISCELLANEOUS...................................................42
Section 11.1 Fees and Expenses.....................................42
Section 11.2 Notices...............................................42
Section 11.3 Assignments; Benefit and Binding Effect...............43
Section 11.4 Further Assurances....................................43
Section 11.5 Arbitration/Mediation.................................43
Section 11.6 Governing Law.........................................43
Section 11.7 Consent to Jurisdiction...............................43
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TABLE OF CONTENTS
(continued)
Page
Section 11.8 Headings..............................................44
Section 11.9 Business Day..........................................44
Section 11.10 Entire Agreement......................................44
Section 11.11 Waiver of Compliance; Consents........................45
Section 11.12 Severability..........................................45
Section 11.13 Exhibits and Schedules; Disclosure....................45
Section 11.14 Parties in Interest...................................45
Section 11.15 Counterparts..........................................46
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TABLE OF EXHIBITS
Exhibit Description
Exhibit A Employment Agreement
Exhibit B Form of Opinion of Seller's Counsel
Exhibit C Form of Line of Credit
TABLE OF SCHEDULES
Schedule Description
Schedule 2.2 Excluded Assets
Schedule 2.3 Balance Sheet Liabilities
Schedule 2.5(b)(ii) Adjustments to Assumed Liability Offset
Schedule 2.8 Allocation of Purchase Price
Schedule 3.1 Qualification
Schedule 3.3 Consents
Schedule 3.4 Financial Statements
Schedule 3.5 Certain Changes
Schedule 3.6 Liens
Schedule 3.7 Licenses
Schedule 3.8 Tangible Personal Property
Schedule 3.9 Contracts
Schedule 3.10(a) Intellectual Property Rights: Patents
Schedule 3.10(b) Intellectual Property Rights: Contracts
Schedule 3.10(c) Intellectual Property Rights: Exceptions
Schedule 3.11 Employees and Compensation
Schedule 3.12 Taxes
Schedule 3.13 Compliance with Laws
Schedule 3.14 Claims and Legal Actions
Schedule 3.15 Insurance and Bonds
Schedule 3.16 Transactions with Affiliates
Schedule 5.10 Changes to Employee Compensation and Benefits
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement, dated as of November 5, 2004 (together
with all Schedules and Exhibits hereto, this "Agreement"), is by and among
Xtrasource, Inc., a Delaware corporation (the "Seller" as further defined
hereinafter), Xtrasource Acquisition, Inc. (the "Buyer"), a Delaware corporation
and wholly owned subsidiary of Sento Corporation, a Utah corporation (the
"Parent").
WHEREAS, the Seller desires to sell and the Buyer desires to purchase
all of the Seller's title to, interest in and rights to and under all of the
Seller's assets relating to the Seller's business of being a call center
provider with facilities in the United States, the Netherlands and France and
offering integrated customer solutions including help desk, technical assistance
and live web chat;
WHEREAS, each party is willing to enter into this Agreement and to
abide by the terms and conditions contained herein;
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements herein set forth, the Buyer and the Seller
agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1. Terms Defined in this Section
The following terms, as used in this Agreement, shall have the meanings
set forth in this Section 1.1:
"Accounts Receivable" means any and all accounts receivable arising
from the operation of the Business that have been accrued, recorded or earned by
Seller for the sale of products or the provision of services with respect to any
period.
"Affiliate" means, with respect to any Person, any other Person
controlling, controlled by, or under common control with such Person. For
purposes of the immediately preceding sentence, the term "control" (including,
with correlative meanings, the terms "controlling," "controlled by" and "under
common control with"), as used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through ownership of voting
securities, by contract or otherwise.
"Assets" means the assets to be sold, transferred, or otherwise
conveyed to Buyer under this Agreement, as specified in Section 2.1.
"Assumed Contracts" means (a) all Contracts listed on Schedule 3.9,
other than Contracts designated on Schedule 3.9 as not being Assumed Contracts.
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"Business" means the Assets relating to the Seller's business of being
a call center provider and offering integrated customer solutions including help
desk, technical assistance and live web chat from its call center location in
Raleigh, North Carolina as well as the operations of its two wholly-owned
European subsidiaries Xtrasource, SAS ("SAS") with operations in Metz, France
and Xtrasource, BV ("BV") with operations in Enschede, Netherlands. For purposes
of calculating the Contingent Earnout in Section 2.6 hereof, the term "Business"
shall be limited to:
(i) sales to existing customers of Seller, SAS and BV, regardless
of where serviced;
(ii) sales to future customers of Buyer that are secured by Seller,
SAS or BV;
(iii) sales to future customers of Buyer or Parent that are secured
through the efforts of the sales force of Buyer, including ▇▇▇
and ▇▇▇▇ ▇▇▇▇▇, regardless of where serviced;
and specifically excluding:
(i) sales to existing customers and future customers (other than
those secured through the efforts of the sales force of Buyer,
including ▇▇▇ and ▇▇▇▇ ▇▇▇▇▇) of Parent at Parent's call
center locations, and
(ii) sales to existing customers and future customers (other than
those secured through the efforts of the sales force of Buyer,
including ▇▇▇ and ▇▇▇▇ ▇▇▇▇▇) of Parent that are transferred
from Parent's call center locations to Seller's call center
locations (as such are operated by Buyer after Closing).
The parties agree that during the period of the Contingent
Earnout and for purposes only of calculating the Contingent Earnout,
all sales for the Business in Europe that are secured by persons who
are subsequently added to the sales force of either Buyer, Seller, or
Parent and whose principal geographic sales territory is Europe shall
be for the account of the Business and sales generated by these persons
shall be deemed to be sales of the Business; provided, however, that
sales for the Business in Europe that are secured by Parent's U.S.
based sales force whose principal geographic territory is other than
Europe but who nonetheless may have incidental sales in Europe shall
not be for the account of the Business and shall not be deemed to be
sales of the Business.
"Business Day" means any day other than a Saturday or Sunday or a day
on which banking institutions in the State of Utah are required or authorized to
be closed.
"Closing" means the consummation of the purchase and sale of the Assets
in accordance with the provisions of Article 8.
"Closing Date" means the date on which the Closing occurs.
"Code" means the Internal Revenue Code of 1986, as amended, and any
Treasury Regulations promulgated thereunder, or any subsequent legislative
enactment thereof, as in effect from time to time.
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"Compensation Arrangement" means any plan or compensation arrangement
other than an Employee Plan, whether written or unwritten, that provides to
employees, former employees, officers, directors, independent contractors, or
stockholders of Seller any compensation or other benefits, whether deferred or
not, in excess of base salary or wages, including any bonus or incentive plan,
stock rights plan, deferred compensation arrangement, life insurance, stock
purchase plan, severance pay plan, change of control arrangements, and any other
employee fringe benefit plan.
"Competing Business" means any business or Person that engages in the
business of being a call center provider and offering integrated customer
solutions including help desk, technical assistance and live web chat and
further including service intervention.
"Consents" means the consents, permits, approvals or waivers of
Governmental Authorities and other Persons necessary to consummate the
transactions contemplated by this Agreement in compliance with applicable law
and existing contractual obligations.
"Contracts" means all leases, non-governmental licenses, employment
agreements and other contracts, agreements, memoranda of understanding, letters
of intent and commitments (including any amendments and other modifications
thereto and waivers and consents thereunder), whether written or oral, to which
Seller is a party or which are binding upon Seller and which relate to the
Assets or the Business, and (a) which are in effect on the date of this
Agreement or (b) which are entered into by Seller between the date of this
Agreement and the Closing Date as permitted by this Agreement.
"Effective Date" means October 1, 2004.
"Employee Plan" means any retirement or welfare plan or arrangement or
any other employee benefit plan as defined in ERISA Section 3(3) that Seller or
any ERISA Affiliate sponsors or maintains or by which Seller or any ERISA
Affiliate is bound or to which Seller or any ERISA Affiliate contributes or is
required to contribute.
"Environmental Laws" means any federal, state or local law, ordinance
or regulation pertaining to the protection of human health or safety or the
environment including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. ▇▇.▇▇. 9601, et seq., the
Emergency Planning and Community Right-to-Know Act, 42 U.S.C. ▇▇.▇▇. 11001., et
seq., and the Resource Conservation and Recovery Act, 42 U.S.C. ▇▇.▇▇. 6901, et
seq., each as currently in effect or any similar law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means each entity that is treated as a single
employer with Seller under Code Section 414(b), (c), (m), (n), or (o).
"GAAP" means generally accepted accounting principles as in effect
from time to time in the United States of America, consistently applied.
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"Governmental Authority" means the United States of America, any state
or local government, commonwealth, territory, or possession of the United States
of America and any political subdivision thereof, and any agency, authority, or
instrumentality of any of the foregoing, including any court, tribunal,
department, bureau, commission or board.
"Governmental Permits" means all licenses, permits and other
authorizations issued by any federal, state or local Governmental Authority and
held by Seller in connection with the conduct of the Business.
"Intellectual Property" means all transferable patents, trademarks,
service marks, trade names, trade dress, copyrights (or pending applications for
any patent, trademark, service ▇▇▇▇ or copyright), inventions, software, source
code, object code, data, processes, know-how, technology, technical information,
marketing materials, logos, designs, trade secrets, web sites (including htMl
code), customer and vendor lists, goodwill, the name Xtrasource and all such
names as are affixed to any product marketed by Seller, or other intangible
assets, intellectual property or proprietary rights and all documentation, media
or other tangible embodiment of or relating to any of the foregoing and all
proprietary rights therein whether owned by Seller or by its Affiliate.
"Judgment" means any judgment, writ, order, injunction, award or decree
of any court, judge, justice, or magistrate, including any bankruptcy court or
judge, and any order of or by any Governmental Authority.
"Liability" means any and all debts, liabilities, obligations and
commitments, whether known or unknown, asserted or unasserted, fixed, absolute
or contingent, matured or unmatured, accrued or unaccrued, liquidated or
unliquidated, due or to become due, whenever or however arising (including,
without limitation, whether arising out of any Contract or tort based on
negligence, strict liability or otherwise) and whether or not the same would be
required by GAAP to be reflected as a liability in financial statements or
disclosed in the notes thereto.
"Lien" means any lien, mortgage, deed of trust, hypothecation, pledge,
easement, right-of-way, building or use restriction, exception, reservation,
security interest, or similar third-party right or any other encumbrance of
whatever nature.
"Losses" means any demands, claims, complaints, actions, suits,
proceedings, investigations, arbitrations, assessments, fines, penalties,
judgments, losses, damages, liabilities, obligations, and reasonable costs and
expenses, including interest, penalties, investigative costs and expenses, and
reasonable attorneys' fees and disbursements.
"Material Adverse Effect" means a material adverse effect on, or any
effect that results in a material adverse change in (a) the business, condition
(financial or otherwise), operations, results of operations, assets, liabilities
or prospects of the Business or the Assets, (b) the ability of Seller to
consummate the transactions contemplated by this Agreement, or (c) the ability
to operate the Business after Closing in accordance with financial projections
prepared by Seller prior to Closing.
"Multiemployer Plan" means a plan, as defined in ERISA Section 3(37),
to which Seller or any ERISA Affiliate has contributed, is contributing, or is
required to contribute.
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"Multiple Employer Plan" means a plan, as defined in ERISA Section
4063(a), that Seller or any ERISA Affiliate sponsors or maintains or to which
Seller or any ERISA Affiliate contributed, is contributing, or is required to
contribute.
"Permitted Liens" means (a) Liens for Taxes not yet due and payable;
(b) landlord's Liens; (c) Liens for property Taxes not delinquent; (d) statutory
Liens that were created in the ordinary course of business in respect of
obligations not yet overdue; (e) restrictions or rights required to be granted
to Governmental Authorities or otherwise imposed by Governmental Authorities
under applicable law; (f) zoning, building, or similar restrictions relating to
or affecting property; (g) leasehold interests in real property owned by others
and operating leases for personal property owned by others; (h) Liens or
encumbrances on the Real Property that do not, individually or in the aggregate,
adversely affect the continual use and enjoyment, occupancy, value or
marketability thereof in the operation of the Assets and the Business; (i) the
Assumed Liabilities and (j) outstanding senior secured loans from SummitBridge
to Seller (as such will be assigned to Parent simultaneously with the Closing).
"Person" means any association, corporation, general or limited
partnership, Governmental Authority, joint venture, limited liability company,
natural person, trust or unincorporated entity of any kind.
"Real Property" means all real property, and all buildings and other
improvements thereon, used in connection with the Business.
"Required Consent" means each Consent listed on Schedule 3.3 designated
as a "Required Consent."
"Seller" shall mean Xtrasource, Inc. a Delaware corporation and, as the
context requires (and specifically for covenants, representations and
warranties, definitions (including specifically, but not limited to the
definitions of Accounts Receivable and Contracts) and contractual assignments
the context does require and shall include) its wholly-owned subsidiaries SAS
and BV.
"SummitBridge Global Investments, LLC" ("SummitBridge"), shall mean the
Seller's senior secured lender.
"Tangible Personal Property" means all machinery, equipment, tools,
vehicles, furniture, office equipment, inventory, spare parts, leasehold
improvements, computer hardware and software and other tangible personal
property that is used primarily in connection with the conduct of the Business,
including the items listed on Schedule 3.8.
"Taxes" means all taxes, charges, fees, imposts, levies or other
assessments by any taxing authority, including all net income, gross receipts,
capital, sales, use, ad valorem, value added, transfer, franchise, profits,
inventory, capital stock, license, withholding, payroll, employment, social
security, unemployment, excise, severance, stamp, occupation, property and
estimated taxes, customs duties, fees, assessments and charges of any kind
whatsoever, and all interest, penalties, fines or additions to tax imposed by
any taxing authority which relate in any way to the assessment or collection of
any taxes or the filing of any Tax Return, and shall include any transferee or
successor liability in respect of Taxes (whether by contract or otherwise).
5
"Tax Return" shall mean any return (including any consolidated,
combined or unitary return in which Seller is, or was, included or includable),
declaration, report, claim for refund, separate election or information return
or statement relating to Taxes, including any schedule or attachment thereto,
and including any amendment thereof.
"Third Party Licenses" means all licenses and other agreements with
third parties relating to any Assets that Seller is licensed or otherwise
authorized by such third parties to use, market, distribute or incorporate into
products marketed and/or distributed by Seller.
"Third Party Technology" means all Intellectual Property and products
owned by third parties and licensed to Seller pursuant to Third Party Licenses.
Section 1.2. Terms Defined Elsewhere in this Agreement
For purposes of this Agreement, the following terms have the meanings
set forth in the sections indicated:
Term Section
---- -------
Assumed Liabilities Section 2.5
Balance Sheet Liabilities Section 2.3
Base Purchase Price Section 2.3
Business Employee or Consultant Section 3.11(a)
Buyer Preamble
Buyer Parties Section 10.2(a)
BV Section 1.1 definition of "Business"
EBITDA Section 2.5(b)
Excluded Assets Section 2.2
Financial Statements Section 3.4
Hired Employees Section 6.6(d)
Indemnified Party Section 10.4
Indemnifying Party Section 10.4
Parent Preamble
SAS Section 1.1 definition of "Business"
Seller Preamble
Survival Date Section 10.2(b)
Works Council Section 7.1(n)
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Section 1.3. Terms Generally
The definitions in Section 1.1 and elsewhere in this Agreement shall
apply equally to both the singular and plural forms of the terms defined.
Whenever the context requires, any pronoun includes the corresponding masculine,
feminine, and neuter forms. The words "include," "includes" and "including" are
not limiting.
ARTICLE 2
PURCHASE AND SALE OF ASSETS
Section 2.1. Agreement to Sell and Buy
Subject to the terms and conditions set forth in this Agreement and in
reliance upon the representations and warranties contained herein, Seller hereby
agrees to sell, transfer, assign, convey and deliver to Buyer on the Closing
Date, and Buyer agrees to purchase on the Closing Date but deemed to have
occurred as of the Effective Date, all of Seller's right, title and interest in
and to all assets, properties and rights (whether tangible or intangible, real,
personal or mixed, fixed, contingent or otherwise, wherever located) owned or
held by Seller and used in connection with the ownership and conduct of the
Business, free and clear of all Liens, except for Permitted Liens, including,
without limitation, the following:
(a) the Tangible Personal Property;
(b) all the Assumed Contracts, including, without limitation,
all rights to receive payment for products sold or services rendered, and to
receive goods and services pursuant to Assumed Contracts and to assert claims
and to take other actions in respect of breaches, defaults and other violations
thereunder;
(c) the Intellectual Property;
(d) any interest in Real Property and any leasehold interests
or other similar assets;
(e) all cash and cash equivalents of Seller as of the Closing
Date;
(f) the Governmental Permits;
(g) all Accounts Receivable, and all other loans and notes
receivable (whether current or not), advances, performances and surety bonds and
letters of credit or other similar instruments in favor of Seller as of the
Closing Date;
(h) all shares of stock of SAS and BV;
(i) all choses in action of Seller relating to the Business or
any of the Assets;
(j) all credits, deposits, advance payments and prepaid
expenses relating to the Business, including those held by third parties under
Assumed Contracts; and
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(k) all books and records relating primarily to the Business,
except for such books and records which are specifically set forth on Schedule
2.2.
Seller and Buyer agree that regardless of the date of the Closing Date,
the results of operations of the Business shall be for the benefit or detriment
of Buyer as of and after the Effective Date.
Section 2.2. Excluded Assets.
The Seller shall retain such assets that are specifically set forth on
Schedule 2.2, if any (such excluded items, collectively, the "Excluded Assets").
Section 2.3. Purchase Price
The purchase price to be paid by the Buyer to Seller at Closing for the
Assets shall be $0 (the "Base Purchase Price") plus the amount of Contingent
Earnout, if any, determined by and payable in accordance with Section 2.6. In
addition, the Buyer shall assume at the Closing, pursuant to Section 2.5, those
financial statement liabilities and obligations of Seller that are listed on
Schedule 2.3 but only up to the amounts that are so listed (the "Balance Sheet
Liabilities").
Section 2.4 Assumption of Liabilities and Obligations
Schedule 2.3 sets forth a list of the Balance Sheet Liabilities that
Buyer has agreed to assume. As of the Closing, Buyer shall assume and undertake
to pay, discharge and perform the following obligations, duties and liabilities:
(a) any obligation or liability of Seller arising out of or related to the
ownership and operation of the Business and the Assets (including the
Governmental Permits and the Assumed Contracts) to the extent that the
obligations and liabilities arise after the Effective Date; and (b) any
liability or obligation to any former employee of Seller who has been hired by
Buyer, attributable to any period of time after the Effective Date or as
provided in Section 6.6; and (c) one half of all amounts owed to
PricewaterhouseCoopers for service provided to prepare the Stub Audit as
described in section 7.1(p) (with the remaining one half borne and paid by
Seller) (all of the foregoing, together with the Balance Sheet Liabilities and
other liabilities or obligations expressly assumed by Buyer hereunder, including
the Assumed Contracts, are referred to herein collectively as the "Assumed
Liabilities"). Buyer shall not be required to assume, and does not assume, any
obligations or Liabilities of Seller not specifically described in this Section
2.4, including but not limited to:
(a) any related party or shareholder indebtedness;
(b) any Liability of Seller resulting from, arising out of, relating
to, in the nature of, or caused by any breach of contract, breach of warranty,
tort, infringement, or violation of law, specifically including any liabilities
resulting to Seller from any currently pending litigation;
(c) any Liability of Seller relating to the operation, closing and sale
of assets of the previous Brazilian operations of Seller; and
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(d) any Liability that exceeds the amounts listed on Schedule 2.3
Balance Sheet Liabilities.
Section 2.5. Contingent Earnout
The period between the Effective Date and September 30, 2009 shall be
referred to as the "Contingent Earnout Period." During the Contingent Earnout
Period, Buyer shall pay to Seller additional amounts for the acquired Assets,
not to exceed in the aggregate $6,500,000 (the "Contingent Earnout") as follows:
(a) Earnings. Subject to the limitation set forth in subsection 2.5(b),
Buyer shall pay Seller, within 45 days after Seller's fiscal quarters ending
June, September and December and 60 days(1) after March 31 of each of the years
2005, 2006, 2007, 2008 and 2009, an amount equal to the result of the
calculation below:
Earnings of the Business during the respective fiscal quarter
x .30
Provided that the aggregate amounts payable with respect to
all periods shall not exceed $6,500,000 and provided further
that losses for any fiscal quarter shall be offset by Earnings
in a subsequent quarter and such Earnings used to offset
against prior quarter losses shall not be included as
"Earnings" for the calculations set forth above.
For purposes of this subsection 2.5(a), the term "Earnings" with respect to any
quarter shall mean the operating income of the Business before interest, taxes,
depreciation and amortization determined in accordance with generally accepted
accounting principles ("EBITDA"). The calculation of Earnings will include
overhead allocations to the Business for services and/or fees paid or provided
by the Parent on behalf of the Business including, but not limited to, (i)
professional fees, such as tax and legal, (ii) audit fees, the allocation of
which shall be limited to the lesser of actual audit fees attributable to the
Business or an amount equal to 0.5% of gross revenue of the Business and (ii)
management fees equal to 0.5% of gross revenue of the Business for Business
related services provided to the Business by Parent officers, employees and not
otherwise part of the Earnings Calculation. All income and expense items
directly or indirectly allocable to the Business shall be included in
determining the amount of Earnings, excluding any revenue derived from any lease
for non-business purposes of any portion of the property on which the Business
is located. For purposes of the Earnout Calculation, the Earnings will not
include the following amounts of income and expense provided by the Business to
the Parent or relating to Parent operations in the Seller's facilities: (i)
direct overhead allocations including, but not limited to, employee wages
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1 Provided that if the payment is not made by the dates set forth in this
paragraph, Buyer shall pay interest thereon from the 1st day after the payment
due date until paid at the lower of (i) the annual interest rate paid by Buyer
to its lender pursuant to its secured credit facility then in effect, or (ii) 5
% per annum; provided, however, that interest shall only accrue and be paid on
undisputed amounts owning. and not on any disputed amounts during the
continuance of the dispute.
9
(including insurance, workers compensation, payroll taxes, payroll processing
and health care), equipment depreciation, internet charges and telephone expense
(which will be calculated based on the number of employees) for non-Business
revenues, (ii) indirect overhead allocations charged to Parent by Seller's
Business for Parent operations located at Seller's facilities including, but not
limited to utilities, property taxes, common area maintenance charges, and rent
(which will be calculated by determining the number of square feet being used by
the Parent for Parent operations as distinguished from the Business as a
percentage of the total square feet of the facility), (iii) salary allocations
for the Raleigh, North Carolina call center Director of Call Center, Manager of
Call Center Administration and training staff (during the time when such
positions exist), as to the BV, the BV Director of Call Center operations, the
BV Call Center Manager, the BV HR Administrator, the BV Director of Project
Management and Training and the BV IT Administrator, and as to SAS the SAS Call
Center Manager, (all of the foregoing during the time when such positions exist)
calculated by taking the total Parent revenue generated from operations at a
call center and dividing by the total revenue attributable to that call center
multiplied by the total salaries for the positions described in this subsection
(provided, however, that the portion of the salaries not excluded from the
Contingent Earnout by the foregoing calculation shall be included as an item of
expense that is allocated to the Business); and (iv) any amounts paid as
installments of the Contingent Earnout. For purposes of the Earnout Calculation,
the Earnings will include the amounts of income and expense calculated as
provided by the immediately preceding sentence relative to Business to the
Buyer, or relating to Buyer's post-closing operations, in the Parent's
facilities including the (iii) salary allocation for Parent's management
personnel that are not directly allocated, including, but not limited to the
Parent's Director of Call Center operations, the Parent's Call Center Manager,
the Parent's HR Administrator, the Parent's Director of Project Management and
Training, the Parent's Client Relations Manager and the Parent's IT
Administrator. For purposes of this subsection 2.6(b), the term "Earnings" shall
also include the earnings of SAS and BV, after subtracting these from all
expenses (including dividend taxes, currency exchanges, etc.) associated with
repatriating all such earnings into the United States and into U.S. dollars.
Buyer shall conduct the Business and maintain its books and records in such a
manner as to permit computation of "Earnings" in accordance with the foregoing
provisions during the Contingent Earnout Period and shall afford Seller with
reasonable access, at Seller's expense, to these books and records.
(b) Adjustments to Contingent Earnout Payments.
(i) Employment.
If ▇▇▇ ▇▇▇▇▇ shall not have been continuously
employed by Buyer from the Closing through the last day of the employment term
under his Employment Agreement by reason of termination pursuant to subsections
5(a) or 5(d)(3) of ▇▇. ▇▇▇▇▇'▇ employment agreement, the installment of the
Contingent Earnout payable for such period, if any, shall be reduced by 25%,
being that percentage amount which is attributable to ▇▇. ▇▇▇▇▇ by reason of his
percentage of share ownership in Seller.
(ii) Assumed Liabilities. The amount of the Contingent Earnout
payable shall be reduced by an amount equal to the then remaining Balance Sheet
Liabilities (as adjusted by items described on Schedule 2.5(b)(ii)) and by the
10
amount of any liability that is not an Assumed Liability for which Buyer has
made payment or for which claim has been made against Buyer for payment.
(iii) Other Reductions. The amount of the Contingent Earnout
payable shall be reduced by the following amounts: (a) $525,000 which is the
negotiated amount agreed by the Parties to be used for the Contingent Earnout
calculation relative to the senior secured debt held by Summit Bridge that will
be assigned to Parent--notwithstanding that the amount of such outstanding debt
remains at approximately $2.7 million (and after the payment to Parent of the
$525,000, the Contingent Earnout owing, if any, shall be paid by Buyer, and may
be distributed to shareholders of Seller notwithstanding the continued existence
or status of Seller's or Buyer's indebtedness to Parent w/respect to the debt
previously held by Summit Bridge), (b) the amounts paid by Buyer in fees, duties
and costs to transfer title to it of the Assets (including the shares of SAS and
BV), (c) an amount equal to any working capital deficiency as described in
Section 2.6, if any, and (d) any Drawdowns on the Line of Credit as described in
Section 2.7, if any.
(c) Offset. In addition to any other legal remedies available to it,
the Buyer shall have the right to offset against and not pay to Seller such
Contingent Earnout payments with respect to any amounts owing to Buyer from
Seller, as a result of the indemnification obligations set forth in Article 10
or otherwise; provided, however, that prior to exercise of the offset right,
Seller shall have thirty (30) days, after Buyer sends notice, to cure the
failure or breach that gives rise to such offset right. If not cured in such
time period, Buyer shall exercise the offset right.
(d) Prepay. Buyer reserves the right at any time to prepay in full the
entire amounts that may over time become due under the Contingent Earnout
formula (and thereby satisfy in full all then current and future obligations
relating to such Contingent Earnout) by paying an amount equal to the result of
the following calculation--($6,500,000 minus the aggregate amount of all prior
Contingent Earnout payments) multiplied by .9.
(e) Books and Records. Buyer shall provide Seller access and the right
to copy any books and records related to calculation of the Contingent Earnout
payments. The party that prepared the calculation on which the payment of any
Contingent Earnout Payment is based shall provide a copy thereof to the other
parties.
(f) Subsequent Negotiation. Parent and Seller agree to cause their
representatives to meet and negotiate in good faith changes as appropriate to
the Contingent Earnout formula and calculation, or changes as appropriate in
senior management of Buyer, to attempt to reasonably approximate the use and
management of the assets of the Business in relation to the calculation and
payment of the Contingent Earnout as such assets are utilized and managed and as
such Contingent Earnout Payments are calculated and paid subsequent to the time
of Closing, upon the occurrence of either of the following events: (i) ▇▇▇ ▇▇▇▇▇
is no longer employed by Buyer (or in the event ▇▇. ▇▇▇▇▇ remains employed by
Buyer but has assumed significant and time-consuming responsibilities at
Parent), or (ii) Parent has made a significant change in the operations of Buyer
such as a merger, sale of stock, reorganization of the business operations of
Buyer or sale of assets not in the ordinary course of business; provided however
that Seller has no veto power or approval right relative to such transaction but
shall have the right to negotiate with Parent as set forth above.
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Section 2.6 Working Capital Deficit.
Seller and Buyer intend that Buyer will endeavor to collect all of the
current assets ("Current Assets") of Seller (i.e., Cash, Accounts
Receivable--(net of costs to repatriate such funds into the United States),
deposits, other assets and pre-payments) and will utilize the Current Assets for
continuing operations of Buyer and to pay, as cash flow allows, the Balance
Sheet Liabilities that are assumed by Buyer and the amount of any liability of
Seller that is not an Assumed Liability for which Buyer has nevertheless made
payment or for which claim has been made against Buyer for payment (together
referred to as "Seller's Pre-Closing Liabilities"). Seller and Buyer also intend
that Buyer will, by negotiation, seek to reduce the amount of the Balance Sheet
Liabilities and settle the same for such reduced amounts (with the difference
between the Balance Sheet Liabilities and the amounts paid in full settlement
thereof being referred to herein as "Savings"). Upon payment, release and waiver
or other complete resolution of all of Seller's Pre-Closing Liabilities as set
forth above, Buyer shall perform a calculation as follows: Cash Proceeds of the
Current Assets minus Seller's Pre-Closing Liabilities as paid by Buyer. If the
difference of these amounts is a negative number, the amount such shall be
referred to as the "Working Capital Deficit", and the Contingent Earnout
payments described in section 2.5(a) will be reduced by the amount of the
Working Capital Deficit. If the difference is a positive number, Buyer shall
retain therefrom an amount equal to fifty percent (50%) of the Savings, and the
remaining amounts, if any, shall be paid to Seller as a "Working Capital
Payment" which is and shall be separate from and shall not affect the amount of
the Contingent Earnout Payments described in Section 2.5. Notwithstanding that
the amount of the outstanding SummitBridge debt is now and shall for some period
after Closing remain at approximately $2.7M (even after assignment to Parent),
solely for purposes of determining the amount of Seller's Pre-Closing
Liabilities paid by Seller, the amount of the SummitBridge debt shall be deemed
to be $525,000.
Section 2.7 Line of Credit.
Subsequent to the Closing, Buyer has agreed to make available to Seller
commencing on the Closing date and ending on or before the earlier of the
prepayment identified in Section 2.5(d) or June 30, 2007, a line of credit of
$200,000 ("Line of Credit") to be used solely for paying any liabilities and
expenses associated with the closing of Xtrasource do Brazil (the Seller's
Brazilian subsidiary) or the ordinary course expenses of the sale and winding up
and liquidation of the Seller for tax return preparation, legal expenses, office
supplies, etc.. Any amounts drawn on the Line of Credit ("Drawdowns") will be
subject to the terms and conditions contained in the form of agreement attached
hereto as Exhibit C and incorporated by this reference. The amount of any
Drawdowns will be deducted from the Contingent Earnout payments described in
section 2.5(a).
Section 2.8 Allocation of Purchase Price.
The purchase price shall be allocated among the assets according to
Schedule 2.8. All parties agree to prepare all financial reports of the
transactions contemplated herein, including, without limitation, all state and
federal tax returns, in accordance with the allocation of the Purchase Price set
forth in Schedule 2.8 and hereby agree to indemnify each other against any loss
12
which such other party may incur by reason of the indemnifying party's failure
to comply with this Section 2.6; upon request, each party agrees to provide to
the other photocopies of any forms filed with any taxing authority in which the
results of this transaction are reported.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
Section 3.1 Organization, Standing and Authority
Xtrasource, Inc. is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. Seller has all
requisite power and authority (a) to own, lease and use the Assets as now owned,
leased and used by Seller, (b) to conduct the Business as now conducted by
Seller and (c) to execute and deliver this Agreement and the documents
contemplated hereby and to perform and comply with all of the agreements and
covenants to be performed and complied with by Seller hereunder and thereunder
and the consummation by Seller of the transaction contemplated hereby and
thereby. Seller is duly qualified or licensed and in good standing to do
business in each jurisdiction set forth on Schedule 3.1, which constitute all
such jurisdictions in which the Assets owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary, except in such jurisdictions where the failure to be so duly
qualified or licensed and in good standing would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect.
Section 3.2 Authorization and Binding Obligation
The execution, delivery and performance by Seller of this Agreement and
the documents contemplated hereby and consummation by Seller of the transaction
contemplated hereby have been duly authorized by all necessary actions on the
part of Seller. This Agreement has been duly executed and delivered by Seller,
and this Agreement constitutes, and when executed and delivered the documents
contemplated hereby will constitute, the legal, valid and binding obligations of
Seller, enforceable against Seller in accordance with their respective terms,
except as the enforceability of this Agreement and the documents contemplated
hereby may be affected by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and by the application of general equitable
principles.
Section 3.3 Absence of Conflicting Agreements
Subject to obtaining the Consents listed on Schedule 3.3 or as
otherwise disclosed on Schedule 3.3, the execution, delivery and performance by
Seller of this Agreement and the documents contemplated hereby (with or without
the giving of notice, the lapse of time, or both): (a) do not require the
consent of, notice to or filing with any Governmental Authority or any third
party; (b) will not conflict with any provision of the Certificate of
Incorporation or Bylaws of Seller; (c) to Seller's best knowledge, will not
conflict with, result in a breach of or constitute a default under any provision
of law or any Judgment (d) will not conflict with, constitute grounds for
termination of, result in a breach of, constitute a default under, or accelerate
or permit the acceleration of any performance required by the terms of, any
13
agreement, instrument, license or permit to which Seller is a party or by which
Seller or any of the Assets may be bound; and (e) will not result in or create
any Lien upon any of the Assets.
Section 3.4 Financial Statements
Schedule 3.4 consists of the following financial statements of Seller
(collectively the "Financial Statements"): (a) unaudited balance sheets and
income statements of Seller as of and for the fiscal year ended December 31,
2003 and for the nine months ended September 30, 2004, as adjusted; and (b)
audited balance sheets and income statements of each of SAS and BV as of and for
the fiscal year ended December 31, 2003 and for the nine months ended September
30, 2004, as adjusted. Schedule 3.4 also sets forth: (i) the aggregate amount of
the Balance Sheet Liabilities (not including the Excluded Liabilities) as of the
Effective Date; and (ii) a list of the Accounts Receivable. The Financial
Statements (including the notes thereto) were prepared on a consistent basis
throughout the periods covered thereby and present fairly in all material
respects the financial condition of Seller as of such dates and the results of
operations of Seller for such periods.
Section 3.5 Absence of Material Adverse Change and Certain Changes
Except as disclosed on Schedule 3.5, from and after October 1, 2004,
Seller has caused the Business to be conducted only in the ordinary course of
business consistent with past practices and Seller (with respect to the
Business) has not:
(a) made any expenditures, for working capital or otherwise,
except in accordance with the ordinary course of business, consistent with past
practices;
(b) made any distributions in the nature of a dividend or any
payment in connection with the redemption or repurchase of any shares of its
capital stock, or paid down any debt or liability with cash or an Asset of the
Business;
(c) suffered any damage, destruction or casualty loss
(whether or not covered by insurance) in excess of $5,000;
(d) made any capital expenditure or series of capital
expenditures in excess of $5,000 in the aggregate, except for the software
development costs listed in Schedule 3.5;
(e) except in accordance with the ordinary course of business
consistent with past practices, made any change in the rate of compensation,
wages, salaries, commission, bonus or other direct or indirect remuneration
payable or to become payable to any of its directors, officers, employees or
agents, or agreed or promised (orally or otherwise) to pay, conditionally or
otherwise, any bonus, extra compensation, pension, retirement, allowance,
severance or vacation pay or other employee benefit to any of such directors,
officers, employees or agents;
(f) entered into any employment agreement with or for the
benefit of any Person referred to in subparagraph (e) above;
(g) sold, assigned, leased or transferred any of its Assets,
other than in the ordinary course of business consistent with past practices;
14
(h) amended, renegotiated, waived material provisions of or
terminated (other than by completion thereof) any Contract or Lease other than
in the ordinary course of business consistent with past practices;
(i) incurred, assumed, created or guaranteed any Liability
other than in the ordinary course of business consistent with past practices or
made, incurred, assumed, created or guaranteed any loan (other than in the
ordinary course of business consistent with past practice and other than the
making of employee advances for travel and entertainment in the ordinary course
of business consistent with past practices);
(j) subjected any of its properties to any Lien, other than
Permitted Liens;
(k) waived or released any rights or claims of material value
which relate to or could affect the Business, including rights or claims under
any Contract or Intellectual Property, or waived or released any right or claim
against any Affiliate of Seller;
(l) changed or modified any of the Business's credit,
collection or payment policies, procedures or practices, including acceleration
of collections of receivables, failure to make or delay in making collections of
receivables (whether or not past due), acceleration of payment of payables or
other Liabilities or failure to pay or delay in payment of payables or other
Liabilities;
(m) granted any license or sublicense of any rights under or
with respect to any Intellectual Property other than in the ordinary course of
business consistent with past practice;
(n) acquired or agreed to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, joint venture, association
or other business organization or division, operating unit or product line
thereof;
(o) caused or permitted, by any act or failure to act, any
Governmental Permit to expire (other than upon expiration of the current term of
any such Governmental Permit) or to be revoked, suspended or modified, or take
any action that would cause any Governmental Authority to institute proceedings
for the suspension, revocation or adverse modification of any Governmental
Permit; or
(p) entered into any agreement or commitment (other than this
Agreement) to take any of the types of action described in subclauses (a)
through (o) of this Section 3.5.
Section 3.6 Title to Assets; Liens
Except as disclosed on Schedule 3.6, Seller has good, valid and
marketable title to the Assets, free and clear of all Liens, except for
Permitted Liens. The delivery to Buyer of the bills of sale and other
instruments of assignment, conveyance and transfer pursuant to this Agreement
will transfer to Buyer good, valid and marketable title to the Assets, free and
clear of all Liens, except for Permitted Liens. Except as disclosed on Schedule
3.6, no person has an option to purchase, right of first refusal, or other
similar right with respect to any Assets.
15
Section 3.7 Licenses
Except as disclosed on Schedule 3.7, Seller has all Governmental
Permits that are necessary for the operation of the Business and the Assets in a
manner consistent with past practice and in compliance with all Laws applicable
to such operation, except for Governmental Permits the absence of which would
not have, individually or in the aggregate, a Material Adverse Effect. All such
Governmental Permits relating to the Business have, to the best of Seller's
knowledge, been duly and validly granted in compliance with all applicable laws
and regulations, are in good standing and in full force and effect, and have not
been suspended, revoked or rescinded. The Seller is, to the best of Seller's
knowledge, in compliance in all material respects with all terms and conditions
of all laws and regulations applicable to its businesses. The Seller has not
received any notice or citation from any Governmental Authority with respect to
any breach or violation of any Governmental Permit, and, to the best of the
Seller's knowledge, no such notice or citation is threatened.
Section 3.8 Tangible Personal Property
Schedule 3.8 lists all material items of Tangible Personal Property
(including the type and quantity of such property and the name of the lessor
with respect to any such property which is leased). The Tangible Personal
Property, taken as a whole, is in good operating condition and repair, subject
to ordinary wear and tear, consistent with its current use. All such tangible
personal property, and the use and state of maintenance thereof, are, to the
best of Seller's knowledge, in compliance in all material respects with
applicable statutes, ordinances, rulings, rules and regulations of any
Governmental Authority.
Section 3.9 Contracts
Schedule 3.9 is a true and complete list of all material Contracts.
Seller has delivered to Buyer true and complete copies of all Assumed Contracts
listed on Schedule 3.9. All Assumed Contracts were entered into in the ordinary
course of the business of Seller consistent with past practice. None of the
Assumed Contracts requires any payments or the performance of any obligations
that could reasonably be expected to have a Material Adverse Effect. All of the
Assumed Contracts are validly existing, in full force and effect, and binding
and enforceable against the other parties thereto (subject to bankruptcy,
insolvency or similar laws affecting creditors' rights generally and to the
application of general equitable principles). Except as set forth on Schedule
3.9, no material default exists under any Assumed Contract. Seller has not
received any notice that any party to any Assumed Contract intends to terminate
such Assumed Contract or amend the terms thereof without the consent of Seller.
Except for the need to obtain the Consents described on Schedule 3.3, Seller has
full legal power and authority to assign its rights under all Assumed Contracts
to Buyer in accordance with this Agreement, and such assignment will not affect
the validity, enforceability or continuation of any such Assumed Contract.
Section 3.10 Intellectual Property Rights
(a) Set forth on Schedule 3.10(a) are all patents, patent
applications, patent or invention disclosures awaiting filing, mask work and
16
copyright applications and registrations, and trademarks and trademark
applications and registrations which constitute Intellectual Property.
(b) Set forth on Schedule 3.10(b) are all Contracts relating
to the distribution or license of, or royalty payments with respect to,
Intellectual Property used in the conduct of the Business, whether as licensor
or licensee and whether on an exclusive or non-exclusive basis.
(c) Except as set forth on Schedule 3.10(c):
(i) Seller owns or, in the case of Third Party
Technology set forth on Schedule 3.10(a), has a right to use all of the
Intellectual Property, free from any Liens and free from any requirement of any
past, present or future payments (other than maintenance and similar payments),
charges or fees or conditions, rights or restrictions;
(ii) no Intellectual Property or any service rendered
by Seller in respect of the Business, or any product, process or material used
in the Business, infringes upon any rights owned or held by any other Person;
(iii) there is neither pending nor (to the knowledge
of Seller) threatened any claim, litigation or proceeding against Seller
contesting the rights of Seller to any Intellectual Property or the ownership,
enforceability or validity of the Intellectual Property owned by Seller or use
by Seller of any Intellectual Property used in the Business;
(iv) no Intellectual Property is subject to any
outstanding Judgment, ruling, order, writ, decree, stipulation, injunction or
determination by or with any Governmental Authority, nor is there any pending,
or to the best knowledge of Seller, threatened proceeding relating thereto;
(v) to the best of Seller's knowledge, there is no
infringement or misappropriation of the Intellectual Property owned by Seller by
any Person;
(vi) there are no agreements or licenses between
Seller, on the one hand, and any other Person, on the other hand, which may have
been terminated or expired prior to the date hereof and under which Seller has
granted rights or licenses in the Intellectual Property to such other Persons or
granted an option to acquire such rights or licenses, which rights or licenses
or the option to acquire the same survived such termination or expiration;
(vii) Seller has not sold, assigned, conveyed,
transferred or delivered to any third party, and no Person has any licenses
under or other rights to use, any of the Intellectual Property used in the
conduct of the Business;
(viii) Seller has not covenanted or agreed with any
Person not to ▇▇▇ or otherwise enforce any legal rights with respect to
Intellectual Property; and
(d) Seller has taken reasonable steps (including measures to
protect secrecy and confidentiality) to protect its right, title and interest in
and to the Intellectual Property. All employees, agents, consultants and other
representatives of Seller who have access to confidential or proprietary
information of Seller included in the Intellectual Property have a legal
17
obligation of confidentiality to Seller with respect to such information. All
employees of the Seller and all employees of Affiliates of Seller related to the
Business have duly executed and delivered agreements with Seller pertaining to
the assignment, without additional consideration, to Seller of all inventions,
discoveries and ideas, whether or not patented or patentable, conceived or
reduced to practice during the course of their employment by Seller or their
Affiliates.
(e) The Intellectual Property, together with the Intellectual
Property rights under Third Party Technology and arising from the Contracts that
constitute Assets, constitute all Intellectual Property rights necessary to
conduct the Business in the manner as currently conducted.
Section 3.11 Employees and Compensation
(a) Schedule 3.11 contains a true, accurate and complete list
of the names, present titles and current annual compensation for all employees
and independent contractors of Seller, SAS and BV who provide substantial
services to the Business as of the date of this Agreement (each a "Business
Employee or Consultant"). Seller does not have any written or oral contracts of
employment with any Business Employee or Consultant, other than oral agreements
of employment terminable at will without penalty and those listed on Schedule
3.9.
(b) Each Employee Plan and Compensation Arrangement is listed
and described in Schedule 3.9. Seller has furnished to Buyer complete and
accurate copies of any written Employee Plans and Compensation Arrangements (or
related insurance policies), complete descriptions or copies of any unwritten
Employee Plans or Compensation Arrangements, and all employee handbooks or
similar documents describing such Employee Plans and Compensation Arrangements.
Except as disclosed in Schedule 3.9, neither Seller nor any ERISA Affiliate
currently or within the last seven years (a) is or has sponsored, maintained or
contributed to any Employee Plan or Compensation Arrangement (including any
bonus, cash or deferred compensation, 401(k), severance, medical, pension,
profit sharing or thrift, stock option, employee stock ownership, life or group
insurance, death benefit, vacation, sick leave, disability or trust agreement or
arrangement), (b) is or has contributed to, or been required to contribute to,
any Multiemployer Plan or Multiple Employer Plan, (c) has incurred, or
reasonably expects to incur, any "withdrawal liability," as defined under
Section 4201 et seq. of ERISA. Neither the Seller nor any ERISA Affiliate has
terminated within the last five years an employee pension benefit plan, as
defined under Section 3(2) of ERISA, which was subject to Title IV of ERISA.
Neither the Seller nor any ERISA Affiliate has ever engaged in a transaction to
evade liability, as described under Section 4069 of ERISA. Neither Seller nor
any ERISA Affiliate is a party to and does not have in effect or to become
effective after the date of this Agreement any plan, arrangement or other scheme
which will become an Employee Plan or Compensation Arrangement.
(c) All of the current Employee Plans or Compensation
Arrangements listed and described on Schedule 3.9 are fully insured.
(d) Each Employee Plan and Compensation Arrangement has, to
the best of Seller's knowledge, been administered in compliance with its terms
18
and in material compliance with the provisions of ERISA, the Code, the Age
Discrimination in Employment Act, the National Labor Relations Act, Title VII of
the Civil Rights Act of 1964 and any other applicable federal or state laws.
(e) Seller is not aware of the existence of any governmental
inspection, investigation, audit, or examination of any Employee Plan or
Compensation Arrangement or of any facts that would lead it to believe that any
such governmental inspection, investigation, audit, or examination is pending or
threatened. There exists no action, suit, or claim (other than routine claims
for benefits) with respect to any Employee Plan or Compensation Arrangement
pending or, to the knowledge of Seller, threatened against any such plan or
arrangement, and Seller is not aware of any facts that could give rise to any
such action, suit, or claim.
(f) Except as described in Schedule 3.9, neither Seller nor
any ERISA Affiliate sponsors, maintains, or contributes to any Employee Plan or
Compensation Arrangement that provides medical or death benefit coverage to
former employees of Seller, except to the extent required by Code Section 4980B
("COBRA").
(g) With respect to each Employee Plan and, to the extent
applicable, each Compensation Arrangement, all contributions, premiums,
payments, or liabilities accrued, in whole or in part, under each Employee Plan
or Compensation Arrangement or with respect thereto as of the Closing will be
paid by Seller, on or prior to Closing. Each Employee Plan or Compensation
Arrangement that provides severance or severance like benefits may be terminated
by Seller without any penalty and without any liability to pay severance
benefits in connection with any terminations of employment that occur after the
date such Employee Plan or Compensation Arrangement is terminated. Each Employee
Plan or Compensation Arrangement that is a "group health plan," as defined under
ERISA Section 601 et seq. and COBRA and has provided "continuation coverage" to
each "covered employee" and "qualified beneficiary" entitled thereto (with each
term defined a under COBRA).
(h) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i) result in any
material payment (including severance or unemployment compensation) becoming due
to any director or employee of Seller or any ERISA Affiliate or (ii) materially
increase any benefits otherwise payable under any Employee Plan.
(i) Seller has complied in all material respects with all
applicable laws and regulations relating to the employment of labor, including
those related to wages, hours, collective bargaining, discrimination,
occupational safety and the payment of Social Security or similar
payroll-related taxes. Seller is not a party to or subject to any collective
bargaining agreements with respect to the Business. To Seller's knowledge, no
controversies, disputes or proceedings are pending or, to Seller's knowledge,
threatened between it and any Business Employee or Consultant (singly or
collectively) directly or indirectly by any Business Employee or Consultant or
any agent or representative thereof (including without limitation any union
claiming to represent any Business Employee or Consultant). No labor union or
19
other collective bargaining unit represents or claims to represent any Business
Employee or Consultant. There are currently, and during the past five years
there have been no actual or threatened strikes, work slowdowns, job actions,
picketing, corporate campaigns or any other labor dispute, controversy or
proceeding involving or relating to any Business Employee or Consultant or the
Business. Seller is not a party to any agreement of any nature, oral or written,
express or implied, which would require Buyer to employ any person after the
Closing Date. There are, to the best of Seller's knowledge, no pending or
threatened disputes or investigations regarding the misclassification of
employees as independent contractors. Seller has not received any request for
recognition from any union seeking to represent any Business Employee or
Consultant. None of the Business Employees or Consultants are now, or in the
past five years have been involved in or subject to any union organizing
activity and to the knowledge of Sellers no such activity is threatened.
(j) Since January 1, 2004, Seller has not made any material
increase in the size of the workforce of the business.
Section 3.12 Taxes
Except as disclosed on Schedule 3.12, there are no legal,
administrative or tax proceedings pursuant to which Seller is or could be made
liable for any taxes, penalties, interest or other charges, the liability of
which could extend to Buyer as transferee of the Business or the Assets, and, to
the best of Seller's knowledge, no event has occurred that could impose on Buyer
any transferee liability for any taxes, penalties or interest due or to become
due from Seller.
Section 3.13 Compliance with Laws
Except as disclosed on Schedule 3.13, neither Seller nor the ownership
of the Assets as they are currently owned by Seller or the operation of the
Business as it is currently operated by Seller, is in violation of (a) any
applicable Judgment relating to the Business, the Assets or the Assumed
Liabilities or (b) any provision of law or any other requirement of any
Governmental Authority applicable to the Business, the Assets or the Assumed
Liabilities (including applicable Environmental Laws), in each case, except for
such violations as would not reasonably be expected to have a Material Adverse
Effect, taken as a whole. The Seller has not received any citation, directive or
notice of any proceedings, claims or other actions from any Governmental
Authority arising out of the ownership or occupation of the properties or
premises of the Seller or the conduct of its operations or relating to the
Assets, the Business or the Assumed Liabilities, nor is it aware of any basis
therefor and to the best knowledge of Seller, no such proceedings are
threatened. To the Seller's knowledge, no material expenditure on behalf of the
Seller will be required in order to comply with any Environmental Law.
Section 3.14 Claims and Legal Actions
Except as set forth on Schedule 3.14, as of the date of this Agreement,
to Seller's knowledge (a) there is no Judgment, action, suit, claim, demand,
arbitration, investigation or other proceeding, administrative or judicial,
pending, threatened against or relating to Seller or to which any of its Assets
is subject with respect to its ownership or operation of the Business or
otherwise relating to the Assets or Assumed Liabilities, and (b) no Judgment has
been issued against or relating to any of the foregoing. None of Seller or any
Affiliates thereof is party to or engaged in or, to the best knowledge of
Seller, threatened with any action which relates to or affects the Business (or
the operation thereof), the Assets, the Assumed Liabilities, this Agreement or
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the transactions contemplated hereby, and, to the knowledge of Seller, no event
has occurred and no condition exists which could reasonably be expected to
result in any such action. Seller is not in default under or with respect to any
Judgment, ruling, order, writ, decree, stipulation, injunction or determination
of the type described in Section 3.14.
Section 3.15 Insurance and Bonds
Schedule 3.15 is a true and complete list of all insurance policies of
Seller that insure any part of the Assets or the Business and all performance,
surety or other bonds maintained by Seller with respect to the Assets or the
Business. All of such policies and bonds are in full force and effect.
Section 3.16 Transactions with Affiliates
Except as disclosed on Schedule 3.16, Seller has not been involved in
any business arrangement or relationship relating to the Business with any
Affiliate of Seller, and no Affiliate of Seller owns any property or right,
tangible or intangible, that is used in the Business.
Section 3.17 Brokers
Neither Seller nor any Person acting on Seller's behalf has retained
any broker, finder or agent or incurred any liability for any finders' or
brokers' fees or commissions in connection with the transaction contemplated by
this Agreement.
Section 3.18 Subsidiaries
As of the date hereof, no Person is a subsidiary of the Seller other
than SAS and BV the stock of which Buyer is acquiring, and Xtrasource do Brazil
which Buyer is not acquiring and which is an Excluded Asset.
(1) As to SAS, Seller represents and warrants as follows:
(a) SAS has been duly and validly incorporated in France. The SAS
corporate form, registered office, corporate purpose, share capital and share
capital allocation are described in Schedule 3.18.
(b) The shares of stock of SAS were validly subscribed and issued and
fully paid in. They represent 100% of the SAS' capital and voting rights and are
not the subject of any repurchase, amortization or redemption.
As of the date hereof, such shares of stock are, or will be on the
Closing Date, fully and validly owned by Seller.
Such shares of stock are free of all sureties, liens, pledges (except
as set forth in Section 8.2(l)), preemptive rights, options to sell or other
rights in favor of third parties.
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With the exception of such shares of stock, there are no securities
(titres) giving directly or indirectly access to the SAS' share capital nor any
undertaking or agreement the purpose of which is to issue or allocate any such
securities.
Except as provided in Schedule 3.18, there are no shareholders'
agreements relating to SAS.
(c) SAS is up-to-date with the payment of all Taxes and social security
contributions and each has fulfilled its obligations in relation thereto. The
reserves appearing in the Financial Statements are, or will be, sufficient to
pay all Taxes and social security contributions due or that may become due with
respect to any periods prior to September 30, 2004 and until the Closing Date,
included. SAS has fulfilled all filing obligations with respect to all Taxes and
social security contributions in accordance with French laws. Each has submitted
the corresponding returns in the form and within the time limits required and
such returns are complete and accurate.
SAS is not the subject of any audit or verification proceedings in
relation to any Taxes and social security contributions, nor has received any
request for information. No reassessment in relation to Taxes and social
security contributions have been notified by an authority or a competent entity
since January 1, 2000.
Except as set forth in Schedule 3.18, SAS has not benefited from any
fiscal advantage or favorable Tax regime in exchange for existing undertakings
or obligations by which it is still bound. SAS is not bound by any obligation
nor shall incur any additional Tax burden as a result of the obtaining of any
fiscal advantages, carry forward or postponement of taxation, or of any
favorable Tax regime.
(d) Schedule 3.18 sets forth the collective bargaining agreements,
company agreements, profit sharing, incentive, retirement, and saving schemes or
plans, exceptional agreements (accords atypiques) and, more generally,
collective agreements or practices (usages) that are applicable to SAS or its
employees. Schedule 3.18 contains a copy of all agreements of SAS in relation to
working time reduction.
Indefinite terms model employment contracts as used by SAS are attached
hereto as Schedule 3.18. No employment contract currently in force with SAS
grants any employee individual advantages in excess of those arising from the
applicable collective status or the model agreements referred to above, in
particular in relation to severance pay and severance notice.
(e) All Accounts Receivable of SAS reflected on the Financial
Statements are and on the Closing Date will be valid and genuine, shall have
arisen solely out of bona fide performance of services and other business
transactions in the ordinary course of business consistent with past practice,
and are not subject to any valid defenses, set-offs or counterclaims. The
allowances for collection losses on the Financial Statements have been
determined in accordance with the French GAAP, respectively, on a basis
consistent with the presentations in the Financial Statements.
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(2) As to BV, Seller represents and warrants as follows:
Regarding the BV Shares:
a. the Shares have validly been acquired by the Seller, the blocking
provisions laid down in the Company's articles of incorporation have
been, or upon the execution of the notarial transfer deed at Closing
will have been, complied with and the Seller has the legal authority to
sell and transfer the Shares;
b. the Seller's right on the Shares is unconditional and not subject to
any restriction, dissolution or nullification whatsoever;
c. the Shares are not encumbered with any attachment;
d. the Shares are not encumbered with any pledge or usufruct (except as
noted in Section 8.2(l));
e. the Shares are fully paid-up;
f. no depositary receipts in respect to the Shares have been issued;
g. the Shares comprise one hundred percent (100%) of the Company's issued
share capital;
h. no persons exist who have any options, claims or other rights
outstanding to acquire any issued or unissued shares in the Company's
share capital;
i. no persons exist who may claim dividends, or any other distributions
from the Company;
Regarding existence of BV:
a. the Company has been duly incorporated under the laws of the
Netherlands, by a deed executed on the 31st day of May, nineteen
hundred and ninety-nine, before ▇▇▇▇ ▇▇▇▇▇▇, civil law notary
officiating at Rotterdam. The requisite ministerial statement of
no-objection was obtained on the 18th day of May, nineteen hundred and
ninety-nine with Ministry of Justice number B.V. 1074392
b. the Company's articles of incorporation have never been amended.
Regarding Insolvency and dissolution of BV:
a. no resolution has been proposed or passed (and no meeting has been
convened and no written resolution has been circulated with a view to
passing any resolution) for winding up or for the presentation of a
petition for winding up or for a compromise or composition or
arrangement with creditors or any class of them;
b. no procedure has been commenced by the Chamber of Commerce and Industry
or any other person with a view to dissolution under Section 19a of
Book 2 Dutch Civil Code;
c. no declaration of bankruptcy has been applied for or is pending and no
action or request is pending in relation thereto;
d. no application has been made for the suspension of payments as meant in
article 213 of The Netherlands Insolvency Act (failissementswet);
No matters or circumstances exist which might give rise to any of the events
referred to in paragraphs (i) up to and including (iv).
Section 3.19 Operating Difficulties
Seller represents that it has been operating at a loss and has had
difficulty meeting its payroll and other current obligations and has significant
past due accounts payable.
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Section 3.20 Disclosure
Neither this Agreement (including without limitation the Schedules
hereto), nor the Financial Statements, nor any certificate furnished by or on
behalf of the Sellers, contains or will contain any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein and therein not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Parent and Buyer each represent and warrant to Seller as follows:
Section 4.1 Organization, Standing and Authority
Parent and Buyer are corporations duly organized, validly existing and
in good standing under the laws of the states of Utah and Delaware,
respectively, and are duly qualified to conduct business as a foreign
corporation in each jurisdiction where the nature of their business or the
ownership or character of their properties require such qualification except in
such jurisdictions where the failure to be so duly qualified and in good
standing has not had and would not reasonably be expected to have, individually
or in the aggregate, a material adverse effect on their business. Each of Parent
and Buyer has all necessary corporate power and authority to own, lease and use
its properties and assets, to engage in the business or businesses in which it
is engaged, and to execute and deliver this Agreement and the documents
contemplated hereby, and to perform and comply with all of the agreements and
covenants to be performed and complied with by Parent and Buyer hereunder and
thereunder and the consummation by Parent and Buyer of the transaction
contemplated hereby and thereby.
Section 4.2 Authorization and Binding Obligation
The execution, delivery and performance by Parent and Buyer of this
Agreement and the documents contemplated hereby have been duly authorized by all
necessary corporate actions on the parts of Parent and Buyer. This Agreement has
been duly executed and delivered by Parent and Buyer, and this Agreement
constitutes, and when executed and delivered the documents contemplated hereby
will constitute, the legal, valid and binding obligations of Parent and Buyer,
enforceable against Parent and Buyer in accordance with their respective terms,
except as the enforceability of this Agreement and the documents contemplated
hereby may be affected by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and by the application of general equitable
principles.
Section 4.3 Absence of Conflicting Agreements
Subject to obtaining lender approval (Section 7.1(h)) and any Consents
required to be disclosed by Seller on Schedule 3.3 (and acting on reliance of
Seller's representations set forth in Article 3), the execution, delivery and
performance by Parent and Buyer of this Agreement and the documents contemplated
hereby (with or without the giving of notice, the lapse of time, or both): (a)
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do not require the consent of, notice to or filing with any Governmental
Authority or any third party; (b) will not conflict with any provision of
Parent's or Buyer's Certificate of Incorporation or Bylaws; (c) to Parent's and
Buyer's best knowledge, will not conflict with, result in a breach of or
constitute a default under, any provision of law or Judgment; and (d) will not
conflict with, constitute grounds for termination of, result in a breach of,
constitute a default under, or accelerate or permit the acceleration of any
performance required by the terms of, any agreement, instrument, license or
permit to which Parent or Buyer is a party or by which Parent or Buyer may be
bound.
Section 4.4 Claims and Legal Actions
To Parent's or Buyer's knowledge, there is no Judgment, action, suit,
claim, demand, arbitration, investigation or other proceeding, administrative or
judicial, pending or threatened, against or relating to Parent or Buyer or its
assets or any Judgment against or relating to the foregoing, in any such case
which would reasonably be expected to impair Parent's or Buyer's ability to
acquire or operate the Assets and the Business or hinder or delay the
consummation of the transactions contemplated by this Agreement.
ARTICLE 5
OPERATIONS OF THE BUSINESS PRIOR TO CLOSING
Section 5.1 Generally
Seller agrees that, between the date of this Agreement and the Closing
Date, Seller shall operate the Business in the ordinary course of business
consistent with past practices and in compliance with the other covenants in
this Agreement. From the date hereof through the Closing Date, Seller will use
commercially reasonable efforts to retain the services of its respective
officers, employees and agents related to the Business and to maintain
satisfactory relationships with respect to the Business' suppliers, distributors
and customers and others having business relations with the Business.
Section 5.2 Contracts, Commitments and Conduct of Business
Seller shall not, without Buyer's consent, (a) enter into or perform
any transactions with affiliates, or enter into transactions other than on an
arm's length basis, (b) other than in the normal or ordinary course, increase
any compensation or benefit arrangement for any employee or officer, (c) pay any
dividends, or (d) utilize the Assets (except for accruals recorded on the
financial statements previously provided by the Company) in a settlement or
resolution of any Liabilities, (e) renew or extend the term of, terminate, waive
provisions of, modify or amend in any material respect any Governmental Permit,
Assumed Contract or Assumed Liability, (f) enter into any contract that will be
binding on Buyer after Closing, other than contracts entered into in the
ordinary course of business that do not pertain to the employment of any
employees or retention of independent contractors (except those contracts
terminable at will without penalty) and do not involve consideration, in the
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aggregate, in excess of $5,000, measured at Closing, or (g) terminate, suspend
or abrogate any Governmental Permit or Assumed Contract, other than upon the
expiration of its current term.
Section 5.3 Disposition of Assets
Seller shall not sell or otherwise dispose of any of the Assets other
than in the ordinary course of business.
Section 5.4 Encumbrances
Seller shall not create, assume or permit to exist any Lien upon the
Assets, except for Permitted Liens and Liens that are disclosed on Schedule 3.6.
Section 5.5 Governmental Permits
Seller shall not cause or permit, by any act or failure to act, any
Governmental Permit to expire (other than upon the expiration of the current
term of any such Governmental Permit) or to be revoked, suspended or modified,
or take any action that would cause any Governmental Authority to institute
proceedings for the suspension, revocation or adverse modification of any
Governmental Permit.
Section 5.6 Access to Information
Prior to the Closing Date, Seller shall, upon reasonable advance
notice, give Buyer and its counsel, accountants, engineers and other authorized
representatives full access during normal business hours to the Assets and to
all other properties, equipment, books, records, Contracts and documents
relating to the Business and the Assets including without limitation all
personnel records of the Business Employees or Consultants, for the purpose of
audit and inspection; provided, however, that Buyer's access may not interfere
unreasonably with the normal operations of the Business. Prior to the Closing
Date, Seller will, upon reasonable advance notice, furnish or cause to be
furnished to Buyer and its counsel, accountants, engineers and other authorized
representatives all information with respect to the affairs of the Business and
the Assets and the Assumed Liabilities that Buyer may reasonably request from
time to time including, but not limited to, financial and operating data and
access to employees and customers of Seller.
Section 5.7 Maintenance of Assets
Seller shall maintain all of the Assets in good condition (ordinary
wear and tear excepted), use, operate and maintain all of the Assets in a
reasonable manner consistent with their use as of the date of this Agreement,
and maintain inventories consistent with past practices.
Section 5.8 Insurance and Bonds
Seller shall at all times prior to and through the Closing maintain the
insurance policies (or comparable replacement policies) described in Section
3.15 in amounts not less than those in effect on the date of this Agreement.
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Section 5.9 Compliance with Contracts and Laws
Seller shall comply in all material respects with the Assumed Contracts
and Assumed Liabilities. Seller shall comply with all laws applicable or
relating to its ownership and operation of the Business, except where such
failure to comply would not reasonably be expected to have a Material Adverse
Effect, taken as a whole.
Section 5.10 Changes to Employee Compensation and Benefits
Except as described on Schedule 5.10, Seller shall not cause or permit
(a) any change in the existing wages, commissions, salary or compensation rates
payable to any Business Employees or Consultants (other than as required by law
or regularly scheduled bonuses and increases in wages, commissions, salary or
compensation in the ordinary course of business consistent with past practice,
which increases in wages, commissions, salaries or compensation shall not exceed
three percent (3%) in the aggregate), (b) any change in any Employee Plan or
Compensation Arrangement existing on the date of this Agreement or the
establishment of any new Employee Plan or Compensation Arrangement (other than
as required by law), (c) make any material increase in the size of the workforce
of the Business, (d) voluntarily recognize any union as the collective
bargaining representative of any of the Business Employees or Consultants or (e)
enter into any collective bargaining agreement relating to any of the Business
Employees or Consultants.
Section 5.11 Advice of Changes
Seller shall give prompt notice to the Buyer upon becoming aware of (a)
the occurrence, or failure to occur, of any event which would be likely to cause
any representation or warranty of the Seller contained in this Agreement to be
untrue or inaccurate in any material respect and (b) any failure on its part to
comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement on or
prior to the Closing Date. The Seller will use its reasonable best efforts to
prevent or promptly remedy any matter which is or would be the subject of any
such notice. No notice pursuant to this Section 5.11 will affect any
representations or warranties, covenants, agreements, obligations or conditions
set forth herein.
ARTICLE 6
SPECIAL COVENANTS AND AGREEMENTS
Section 6.1 Third-Party Consents
Seller shall use reasonable best efforts (at Seller's expense), and
Buyer shall cooperate (it being understood that such cooperation will not
include any requirement to pay any consideration or offer or grant any financial
consideration) with Seller in all reasonable respects to obtain all Consents and
Governmental Permits required for the transfer to Buyer of all of the Assets.
Seller will not agree to any materially adverse change in any Assumed Contract
as a condition to obtaining any such Consent without Buyer's consent, which
shall not be unreasonably withheld. Any instrument evidencing any Consent shall
27
be reasonably acceptable to the Buyer. If a Required Consent or Governmental
Permit to the assignment of any Assumed Contract is not obtained and Buyer, in
its discretion, waives any requirement under this Agreement that such Consent or
Governmental Permit be obtained as a condition to Closing and the requirement
that such Assumed Contract be assigned to Buyer at the Closing, Seller shall use
its best efforts to keep such Assumed Contract in effect and to give Buyer the
benefit of such Assumed Contract to the same extent as if it had been assigned,
and Buyer shall perform Seller's obligations under the Assumed Contract relating
to the benefit obtained by Buyer. From and after the Closing, Seller will
continue to use its reasonable best efforts (at Seller's expense) to obtain all
Consents and Governmental Permits that were not obtained prior to Closing.
Nothing in this Agreement shall be construed as an attempt to assign any Assumed
Contract or Governmental Permit that is by its terms nonassignable without the
consent of the other party or as a waiver by Buyer of any requirement under this
Agreement that consent to the assignment of such Assumed Contract or
Governmental Permit be obtained prior to Closing.
Section 6.2 Risk of Loss
The risk of any loss, damage, impairment, confiscation or condemnation
of any of the Assets from any cause whatsoever shall be borne by Seller at all
times prior to and including the Closing Date and, thereafter, shall be borne by
Buyer.
Section 6.3 Confidentiality; Public Announcements
Except for such disclosure to attorneys, accountants and financial
advisors as may be necessary for the consummation of the transactions
contemplated by this Agreement, and except as and to the extent required by law,
each party will keep confidential any confidential information obtained from the
other party in connection with the transactions contemplated by this Agreement.
Any press releases or other publicity relating to the transaction contemplated
by this Agreement shall be subject to prior review and coordination between
Seller and Buyer, subject to their respective disclosure obligations under
applicable law.
Section 6.4 Cooperation
Each of Buyer and Seller shall use its reasonable best efforts to cause
to be fulfilled the conditions to the respective obligations of the other party
set forth in this Agreement, and Buyer and Seller shall execute and deliver such
other documents and instruments and will take, or cause to be taken, all such
reasonable actions as may be necessary and desirable to the implementation and
consummation of the transactions contemplated by this Agreement, and otherwise
use reasonable best efforts to consummate the transactions contemplated hereby
and to fulfill their obligations under this Agreement. Neither Seller nor Buyer
shall take any action that is inconsistent with its obligations under this
Agreement or that could hinder or delay the consummation of the transactions
contemplated by this Agreement.
Section 6.5 Books and Records
Seller shall provide Buyer access and the right to copy any books and
records relating to the Assets, but not included in the Assets. Buyer shall
provide Seller reasonable access and the right to copy any books and records
relating to the Assets that are included in the Assets.
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Section 6.6 Employee Transition
(a) Except as otherwise provided in this Section 6.6(a), for a
period of two years from and after the Closing Date, without the prior written
consent of Buyer, Seller will not, and will cause its Affiliates not to,
solicit, hire or retain as an employee, independent contractor or consultant any
employee engaged in the Business on the date hereof or on the Closing Date and
will not during such period, induce or attempt to induce any such employee to
terminate his or her employment with Buyer by resignation, retirement or
otherwise.
(b) Following Closing, SAS and BV will continue to employee
all employees that were so employed immediately prior to Closing. As to the
Business Employees of Seller in the United States, Buyer shall extend offers of
employment to each for at least a short-term transition period during which
Buyer will allow each Business Employee to take a reasonable amount of paid time
to interview for positions with other employers. Buyer shall not be obligated to
offer to employ or to employ any Business Employee or Consultant beyond the
short-term transition period.
(c) Except as expressly permitted by Section 6.6(b), prior to
Closing, Buyer may not meet with or otherwise contact any employees of the
Business or solicit, attempt to hire, hire or employ in any capacity any person
who was an employee of the Business at any time during the period from the date
of this Agreement through the Closing. If this Agreement is terminated prior to
Closing, Buyer agrees that, for a period of 12 months after the termination of
this Agreement, it will not solicit, attempt to hire, hire or employ in any
capacity, induce or attempt to induce any such employee to terminate his or her
employment with Seller, any person who was an employee of the Business at any
time during the preceding 12 months.
(d) Seller will retain and Buyer shall not assume any
liability or obligation to or in connection with any Business Employee or
Consultant or any other employee or former employee of the Seller, other than,
with respect to the time period after the Closing Date, those Business Employees
or Consultants who are hired by Buyer (the "Hired Employees"). Without limiting
the generality of the foregoing, Seller shall remain solely responsible for and
shall, at or prior to Closing, pay or satisfy any obligations and liabilities,
including those pursuant to the Code, ERISA, the Worker Adjustment and
Retraining Violation Act and any and all federal, state and local discrimination
laws, with respect to any Business Employee or Consultant and all other
employees and former employees of Seller and their respective beneficiaries and
dependants (other than obligations or liabilities with respect to the Hired
Employees which are created after Closing), relating to or arising in connection
with, during the course of, or as a result of (1) the employment or the actual
or constructive termination of employment of any such employee by Seller
(including in connection with the consummation of the transactions contemplated
by this Agreement); (2) the participation in or accrual of benefits or
compensation under, or the failure to participate in or to accrue compensation
or benefits under any Employee Plan or Compensation Arrangement; (3) accrued but
unpaid salaries, commissions, wages, bonuses, incentive compensation, vacation
or sick pay, or other compensation or payroll items (including deferred
compensation and severance pay); and (4) the provisions of health continuation
coverage for such employees required by Part 6 of Title 1 of ERISA and Section
4980B of the Code.
29
(e) On the Closing Date, Seller shall terminate the employment
of all Business Employees or Consultants (other than those of SAS and BV) being
hired by Buyer or otherwise not continuing in the employ of Seller after
Closing.
(f) With respect to all group health plans, Seller shall
maintain current group plans and shall retain full responsibility and liability
for compliance with the continuation health care coverage requirements of Code
Section 4980B and ERISA Sections 601 through 608 (the "Continuation Coverage
Requirements") for all Qualifying Events within the meaning of Section
4980B(f)(3) of the Code and Section 603 of ERISA. On or after the Closing Date,
Seller shall continue to comply with the Continuation Coverage Requirements with
respect to all Qualifying Events affecting any current or former employees or
former employee of the Seller and any qualifying beneficiary of such employee or
former employee which Qualifying Events occurred prior to the Closing Date.
Seller shall hold Buyer and any entity required to be combined with Buyer
(within the meaning of Sections 414(b), (c), (m) or (o) of the Code) harmless
from and fully indemnify them against any costs, expenses, losses, damages and
liabilities incurred or suffered by them directly or indirectly, including, but
not limited to, reasonable attorneys' fees and expenses, which relate to
continuation coverage and arise as a result of any action or omission by Seller
or because Buyer is deemed to be a successor employer to Seller. Buyer shall
offer no inducement to any employee to elect continuation coverage with respect
to any group health plan of Seller.
(g) Buyer shall offer health plan coverage on terms and
conditions determined by the Buyer to all of the Hired Employees; provided,
however, that at no time to the extent to cause any violation of
non-discrimination of the Internal Revenue Code. For purposes of providing such
coverage, Buyer shall waive all preexisting condition limitations for all such
employees of Seller covered by the Seller's health care plan as of the Closing
Date (other than preexisting conditions which were excluded by Seller's health
care plan) and shall provide such health care coverage effective as of the
Closing Date without the application of any eligibility period for coverage. In
addition, Buyer shall credit all employee payments toward deductible and
co-payment obligation limits under Seller's health care plans for the plan year
which includes the Closing Date as if such payments had been made for similar
purposes under Buyer's health care plans during the plan year which includes the
Closing Date, with respect to employees of Seller who become Hired Employees.
(h) Seller shall retain, pay, perform and indemnify and hold
Buyer harmless from and against all liabilities under any employee benefit plans
which are employee welfare benefit plans (within the meaning of ERISA) for all
claims incurred through the Closing Date, whether or not such claims are
submitted for payment or reimbursement on or before the Closing Date. For the
purposes hereof, the term "incident" means and includes, without limitation,
death, accident, disease, injury, unemployment, dental care, illness and
disability.
(i) This Section 6.6 shall operate exclusively for the benefit
of the parties to this Agreement and not for the benefit of any other person or
entity, including any Business Employee or Consultant or any other employee or
former employee who performs or performed services in connection with the
operation of the Business.
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Section 6.7 Delivery of Financial Information
Seller shall furnish to Buyer within 30 days after the end of each
calendar month ending between the date of this Agreement and the Closing Date a
report of income and expense for the month just ended for the Business and such
other financial information (including information on payables and receivables)
as Buyer may reasonably request. The reports delivered by Seller to Buyer
pursuant to this Section 6.7 shall be prepared from the books and records of
Seller with respect to the Business in accordance with Seller's prior practice
and GAAP (other than footnotes and year-end adjustments), consistently applied,
shall accurately reflect the books, records and accounts of the Business, shall
be complete and correct in all material respects, and shall present fairly the
results of operations of the Business for the periods then ended. Promptly after
the preparation thereof, Seller shall deliver to Buyer copies of any other
financial statements and other operational data regularly prepared by Seller for
its internal use.
Section 6.8 Additional Post-Closing Covenants
(a) General. If at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other party
reasonably may request, all at the sole cost and expense of the requesting party
(unless the requesting party is entitled to indemnification therefor under
Article 10).
(b) Transition. Seller shall not take any action that is
designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier or other business associate of Seller from maintaining the
same business relationships with Buyer after the Closing as it maintained with
the Seller prior to the Closing. Seller will refer all customer inquiries
relating to the Business to the Buyer from and after the Closing.
(c) Covenant Not to Compete. For a period of two years from
and after the Closing Date, neither Seller nor any of its Affiliates will engage
directly or indirectly in the Competing Business; provided, however, that no
owner of less than one percent (1%) of the outstanding stock of any
publicly-traded corporation shall be deemed to engage solely by reason thereof
in the Business. If the final judgment of a court of competent jurisdiction
declares that any terms or provision of this Section 6.8(c) is invalid or
unenforceable, the parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or enforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
(d) Patent/Trademark Procurement. Buyer shall have the
exclusive right (but not the obligation) to seek and obtain patent and trademark
protection for the Intellectual Property and any improvements thereto, both in
the United States and in any foreign jurisdiction. All decisions concerning the
process of seeking and obtaining such patent and trademark protection shall be
within the sole and absolute discretion of Buyer, including but not limited to
decisions concerning those jurisdictions in which such protection shall be
31
sought and the identity of legal counsel and other professionals who will be
retained to assist Buyer in seeking such protection.
Buyer will use commercially reasonable efforts to prosecute
and obtain issuance of the pending U.S. and PCT Patent Applications and pending
Trademark Applications identified in Section 3.10 of this Agreement.
(e) IP Litigation Matters. Seller and Buyer will promptly
notify each other of any apparent infringement of Intellectual Property that
comes to their attention during the pendency of this Agreement. Buyer shall have
the option, at its sole discretion, cost and expense, to bring suit to enjoin
such infringement and to recover damages therefor.
In any action brought by Buyer pursuant to the foregoing
paragraph, Buyer shall select and control counsel for the prosecution of such
suit. Seller shall (a) have the right to receive, from time to time, full and
complete information from Buyer concerning the status of such suit, and (b)
cooperate fully with Buyer and provide whatever assistance is reasonably
requested by Buyer in connection with such suit, including the preparation and
signing of such documents.
If any action concerning ownership, validity or enforceability
of Intellectual Property is brought against Buyer, either as a declaratory
judgment action or by way of counterclaim, Seller agrees to cooperate fully with
Buyer and provide whatever assistance is reasonably requested by Buyer in
connection with such action, including the preparation and signing of documents.
ARTICLE 7
CLOSING CONDITIONS
Section 7.1 Conditions to Obligations of Buyer
All obligations of Buyer at the Closing are subject, at Buyer's option,
to the fulfillment or waiver prior to or at the Closing of each of the following
conditions:
(a) Representations and Warranties. All representations and
warranties of Seller contained in this Agreement shall be true in all material
respects at and as of the Closing Date as though made at and as of that time.
(b) Covenants. Seller shall have fully performed and complied
with in all material respects all agreements and covenants required by this
Agreement to be performed or complied with by it prior to or at the Closing.
(c) Consents. Each of the Required Consents shall have been
obtained and delivered to Buyer without the imposition of any condition that
would have a material adverse effect on the terms of any of the Assumed
Contracts or Governmental Permits to which any Required Consent relates, and
each such Required Consent shall be in form and substance reasonably
satisfactory to Buyer and in full force and effect.
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(d) Deliveries. Seller shall have made all the deliveries to
Buyer set forth in Section 8.2 and shall have made deliveries to Buyer of such
other documents, certificates and instruments and taken or caused to be taken
such other actions reasonably requested by Buyer to evidence compliance with the
conditions set forth in this Section 7.1.
(e) Legal Proceedings. No action or proceeding by or before
any Governmental Authority shall be pending that might reasonably be expected to
restrain, prohibit or invalidate the transactions contemplated by this Agreement
or otherwise prohibit Buyer's ownership or operation of all or any portion of
the Business, other than an action or proceeding instituted by either party to
this Agreement or their respective Affiliates.
(f) Judgment. There shall not be in effect any Judgment that
would prevent or make unlawful the Closing.
(g) Material Adverse Changes. There shall not have occurred
(or reasonably be expected to occur) any event, change or development which has
had or could reasonably expected to have a Material Adverse Effect.
(h) Lender Approval. The Buyer shall have obtained approval of
Parent's lender, on terms and conditions satisfactory to it, for all of the
financing it needs in order to consummate the transaction contemplated hereby
and to fund the working capital requirements of the acquired Assets after the
Closing.
(i) Acquisition of Senior Secured Loan. The Parent shall have
obtained, simultaneously with the execution of this Agreement and on terms and
conditions satisfactory to it, an assignment of all loan documents and security
therefor from SummitBridge.
(j) Approvals. Buyer and Seller shall have obtained board of
director and shareholder approvals approving the execution of this Agreement and
all closing documents and the consummation of the transactions contemplated
thereby.
(k) Pre-Closing Operations. Seller certifies that from October
1, 2004 through Closing, Seller did not, without the written consent of Buyer
(i) enter into or perform any transactions with affiliates, or into transactions
other than on an arm's-length basis, (ii) increase any compensation or benefit
arrangement for any employee or officer, (iii) pay any dividends, purchase any
stock, or make any other distributions to shareholders or other interested
parties, or (iv) violate the provisions of Article 5 of this Agreement.
(l) Due Diligence. Buyer shall have completed, to its sole
satisfaction, all due diligence relating to Seller without discovery of any fact
or information that would cause Buyer, in its sole discretion, to determine not
to proceed with the transaction.
(m) Intellectual Property Assignment Agreement. The form of an
Intellectual Property Assignment Agreement shall have been agreed to in form and
substance reasonably satisfactory to Buyer.
(n) Schedules. Delivery of completed schedules to this
Agreement that are satisfactory to Buyer in its sole discretion.
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(o) Works Council Approval. The Works Council (or equivalent
body) of each of SAS and BV shall have given written approval of the
transactions and actions contemplated by this Agreement and the requirements of
the Netherlands SER Merger Code have been complied with.
(p) Stub Audit. Pricewaterhouse Coopers shall have completed a
stub period audit (for the period January 1, 2004 through September 30, 2004)
for the operations of SAS and BV and the results thereof shall be acceptable to
Buyer in its sole discretion.
(q) Fairness Opinion. Buyer shall have received a fairness
opinion from a reputable financial advisory firm that the transaction is fair
from a financial point of view to the Parent and its shareholders in a form that
shall be acceptable to Buyer in its sole discretion.
Section 7.2 Conditions to Obligations of Seller
All obligations of Seller at the Closing are subject, at Seller's
option, to the fulfillment or waiver prior to or at the Closing of each of the
following conditions:
(a) Representations and Warranties. All representations and
warranties of Buyer contained in this Agreement shall be true in all material
respects at and as of the Closing Date as though made at and as of that time.
(b) Covenants. Buyer shall have performed and complied with in
all material respects all agreements and covenants required by this Agreement to
be performed or complied with by it prior to or at the Closing.
(c) Deliveries. Buyer shall have made or stand willing to make
all the deliveries set forth in Section 8.3 and shall have made or stand willing
to make deliveries to Seller of such other documents, certificates and
instruments and taken or stand willing to take such other actions reasonably
requested by Seller to evidence compliance with the conditions set forth in this
Section 7.2.
(d) Legal Proceedings. No action or proceeding by or before
any Governmental Authority shall be pending that might reasonably be expected to
restrain, prohibit or invalidate the transactions contemplated by this
Agreement, other than an action or proceeding instituted by either party to this
Agreement or their respective Affiliates.
(e) Judgment. There shall not be in effect any Judgment that
would prevent or make unlawful the Closing.
(f) Approval of the shareholders of Seller.
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ARTICLE 8
CLOSING AND CLOSING DELIVERIES
Section 8.1 Closing
(a) Closing Date. Except as otherwise agreed to by Buyer and
Seller, the Closing shall take place at 11:00 a.m. on November 30, 2004 if the
conditions specified in Sections 7.1 and 7.2 have been satisfied on or before
such date.
(b) Closing Place. The Closing shall be held at the offices of
the Buyer, or any other place that is agreed upon by Buyer and Seller.
Section 8.2 Deliveries by Seller
Prior to or at the Closing, Seller shall deliver to Buyer the
following, in form and substance reasonably satisfactory to Buyer and its
counsel:
(a) Transfer Documents. Duly executed bills of sale,
assignments and other transfer documents including a French "ordre de mouvement"
(share transfer form) and a short form share transfer agreement for French tax
registration purposes and a deed executed before a civil law notary in the
Netherlands which shall be sufficient to vest good title to the Assets in the
name of Buyer, free and clear of all Liens except for Permitted Liens.
(b) Consents. An executed instrument evidencing all Consents
received by Seller.
(c) Certificate Concerning Representations and Covenants. A
certificate, dated as of the Closing Date, executed on behalf of Seller by an
authorized officer, certifying that, except as disclosed in such certificate,
(1) all representations and warranties of Seller contained in this Agreement are
true in all material respects at and as of the Closing Date as though made at
and as of that time, and (2) that Seller has in all material respects performed
and complied with all of its covenants and agreements set forth in this
Agreement to be performed and complied with by it on or prior to the Closing.
(d) Governmental Permits, Assumed Contracts, Business Records,
Etc. Copies or, if available, originals of all Governmental Permits, Assumed
Contracts, and all files and records included in the Assets.
(e) Lien Searches. Lien, Tax, and judgment searches in each
state and county in which any of the Assets are located and releases and
terminations of all Liens on the Assets that are not Permitted Liens.
(f) Tax Letter of Good Standing. Tax Letter of Good Standing
or similar documents issued by the taxing authorities in the states of North
Carolina and Ohio, and from the appropriate authorities in the Netherlands and
France relative to the operations of BV and SAS certifying that the Seller has
paid all Taxes that are due and payable as of a date as close as practicable to
the Closing Date.
35
(g) Opinion of Seller's Counsel. An opinion of Seller's legal
counsel, addressed to Buyer, dated as of the Closing Date, in form and substance
reasonably acceptable to Seller and Buyer.
(h) Employment Agreements. Seller shall cause to be executed
and delivered to Buyer an employment agreement in the form of Exhibit A attached
hereto (which shall include provisions concerning confidentiality and
restrictions on competition) with ▇▇▇ ▇▇▇▇▇ and such other key employees and on
similar forms as shall be reasonably agreed upon between Buyer and Seller prior
to Closing.
(i) Releases. Evidence reasonably satisfactory to Buyer of the
release of any Liens (other than Permitted Liens) from the Assets transferred to
Buyer at Closing.
(j) Seller's Change of Name. Evidence reasonably satisfactory
to Buyer that Seller has changed its name such that the word "Xtrasource" is no
longer part of the name of Seller.
(k) Intellectual Property Documents. Seller shall have each
executed and caused to be delivered to Buyer the following:
(i) Assignment of Patent Rights
(ii) Assignment of Trademark Rights
(l) Pledges of Common Stock. Seller shall execute and deliver
to Parent pledges of Common Stock of SAS and BV under the loan documents and
obligations to SummitBridge as such are then assigned to Parent.
Section 8.3 Deliveries by Buyer
Prior to or at the Closing, Buyer shall deliver to Seller the
following, in form and substance reasonably satisfactory to Seller and its
counsel:
(a) Assumption Agreements. Appropriate assumption agreements
pursuant to which Buyer shall assume and undertake to perform those obligations
and liabilities required to be assumed by Buyer pursuant to Section 2.5.
(b) Certificate Concerning Representations and Covenants. A
certificate, dated as of the Closing Date, executed on behalf of Buyer by an
authorized officer, certifying that, except as disclosed in such certificate,
(1) all representations and warranties of Buyer contained in this Agreement are
true in all material respects at and as of the Closing Date as though made at
and as of that time, and (2) that Buyer has in all material respects performed
and complied with all of its covenants and agreements set forth in this
Agreement to be performed and complied with at or prior to the Closing.
(c) Employment Agreements. Buyer shall cause to be executed
and delivered to Seller employment agreements in the form of Exhibit A attached
hereto (which shall include provisions concerning confidentiality and
restrictions on competition) with ▇▇▇ ▇▇▇▇▇ and such other key employees and on
36
similar forms as shall be reasonably agreed upon between Buyer and Seller prior
to Closing.
(d) Line of Credit. Buyer shall cause to be executed and
delivered to Seller a line of credit agreement in the form of Exhibit C attached
hereto.
ARTICLE 9
TERMINATION
Section 9.1 Termination by Agreement
This Agreement may be terminated at any time prior to the Closing by a
written agreement between Buyer and Seller.
Section 9.2 Termination by Seller
This Agreement may be terminated by Seller prior to the Closing, by
delivering written notice to Buyer of its election to terminate this Agreement,
under any of the following circumstances (unless any of such circumstances
occurred as a result of the failure of Seller to act in good faith or as a
result of any breach by Seller of its representations, warranties, covenants or
agreements in this Agreement):
(a) If there shall be any law that makes consummation of the
transactions contemplated by this Agreement illegal or otherwise prohibited or
if any court of competent jurisdiction or other Governmental Authority shall
have issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated by this Agreement, and such order, decree, ruling or
other action shall not be subject to appeal or shall have become final and
unappealable;
(b) If on the date on which the Closing is required to take
place pursuant to Section 8.1(a) any of the conditions precedent to the
obligations of Seller set forth in this Agreement has not been satisfied or
waived in writing by Seller; or
(c) If the Closing shall not have occurred on or before
November 30, 2004.
Section 9.3 Termination by Buyer
This Agreement may be terminated by Buyer prior to the Closing, by
delivering written notice to Seller of its election to terminate this Agreement,
under any of the following circumstances:
(a) If there shall be any law that makes consummation of the
transactions contemplated by this Agreement illegal or otherwise prohibited or
if any court of competent jurisdiction or other Governmental Authority shall
have issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated by this Agreement, and such order, decree, ruling or
other action shall not be subject to appeal or shall have become final and
unappealable;
37
(b) If on the date on which the Closing is required to take
place pursuant to Section 8.1(a) any of the conditions precedent to the
obligations of Buyer set forth in this Agreement has not been satisfied or
waived in writing by Buyer; or
(c) If the Closing shall not have occurred on or before
November 30, 2004.
Section 9.4 Rights on Termination
Upon termination of this Agreement pursuant to this Article 9,
(a) The transactions contemplated by this Agreement shall be
terminated and abandoned without further action by Buyer or Seller.
(b) Each party shall return to the other party all documents
and other material received from the other party and relating to the
transactions contemplated by this Agreement, whether received from the other
party before or after the execution of this Agreement.
(c) All confidential information received by either party to
this Agreement with respect to the business of the other party or any of its
Affiliates shall be treated in accordance with Section 6.3.
(d) The provisions of Section 6.3 shall continue in effect.
(e) Neither party to this Agreement shall have any further
obligation or liability to the other party, except as provided in this Section
9.4.
(f) Notwithstanding anything to the contrary contained in this
Section 9.4, nothing herein shall relieve either party for liability for any
breach of this Agreement.
Section 9.5 Specific Performance
The parties recognize that if Seller breaches this Agreement prior to
Closing and refuses to perform under the provisions of this Agreement, monetary
damages would not be adequate to compensate Buyer for its injury. Therefore, in
lieu of exercising any right to terminate this Agreement pursuant to Section
9.3, Buyer shall be entitled to obtain, as its exclusive remedy for any damages
suffered by Buyer by reason of Seller's breach of this Agreement prior to
Closing, specific performance of the terms of this Agreement. If any action for
specific performance is brought by Buyer in accordance with this Section 9.5 to
enforce this Agreement, Seller shall waive the defense that there is an adequate
remedy at law.
ARTICLE 10
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
Section 10.1 Survival of Representations and Warranties
Subject to the limitations contained in this Article 10, all
representations, warranties, covenants and agreements contained herein or made
38
in writing by any party in connection herewith shall survive the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby, regardless of any investigation made by any party or on its behalf, the
knowledge of any such party's officers, directors, partners, members, employees
or agents, or the acceptance of any certificate or opinion. Neither the Buyer or
Seller has actual knowledge that representations, warranties, covenants and
agreements of the other party are incorrect in any material respect.
Section 10.2 Indemnification of Buyer by Seller
(a) Obligation. Seller agrees to indemnify the Buyer and each
of its officers, directors, stockholders, employees, agents, members,
representatives, affiliates, successors and assigns (collectively, the "Buyer
Parties") and hold each of them harmless from and against and pay on behalf of
or reimburse such Buyer Parties in respect of the entirety of any Losses which
the Buyer Parties may suffer, sustain or become subject to, as a result of,
arising out of, relating to or in connection with:
(i) subject to Section 10.2(b) below, the breach of
any representation or warranty made by the Seller in Article 3 of this Agreement
or in any certificate delivered with respect thereto by the Seller;
(ii) the breach of any representation, warranty
(other than representations or warranties set forth in Articles 3), covenant or
agreement made by the Seller contained in this Agreement or any of the other
agreements contemplated hereby, any Exhibit or Schedule hereto or thereto or any
certificate delivered by the Seller to the Buyer with respect thereto;
(iii) any claims of any brokers or finders claiming
by, through or under the Seller with respect to the transactions contemplated
hereby;
(iv) any liability of the Seller for Taxes
attributable to taxable periods (or portions thereof) ending on or prior to the
Closing Date;
(v) any Liability of the Seller not assumed by Buyer;
and
(vi) any facts, events, circumstances, conditions or
status arising or existing prior to the Closing (including, without limitation,
any release or disposal of hazardous substances, wastes, pollutants or
contaminants) and relating to the Seller; provided that for purposes of this
clause (vi), "Seller" shall be deemed to include any predecessors to the Seller
and any Person with respect to which the Seller is a successor-in-interest,
including, without limitation, by operation of law, merger, liquidation,
consolidation, assignment, assumption or otherwise.
In the event Buyer seeks or obtains a judgment against Seller with
respect to the indemnification provided herein, Buyer agrees that it will not
execute (nor otherwise assert any pre- or post-judgment rights or claims)
against Seller's right to receive Contingent Earnout payments; provided,
however, that the foregoing provisions shall not limit Buyer's offset rights as
set forth in Section 2.6(b).
39
(b) Survival Date. The Seller will not be liable with respect
to any claim for the breach or inaccuracy of any representation or warranty
pursuant to Section 10.2(a)(i) unless written notice of a claim thereof is
delivered to the Seller prior to the Survival Date. For purposes of this
Agreement, the term "Survival Date" shall mean September 30, 2009. The Parties
agree that so long as written notice is given on or prior to the Survival Date
with respect to such claim, the representations and warranties with respect to
such breach shall continue to survive until such matter is resolved, and the
Seller shall be required to indemnify the Buyer Parties for all Losses which the
Buyer Parties may incur in respect of the matters which are the subject of such
claim, regardless of when incurred.
Section 10.3 Indemnification of Seller by Buyer
The Buyer agrees to indemnify and hold Seller harmless against any Loss
which the Seller may suffer, sustain or become subject to, as the result of,
arising out of, relating to or in connection with (i) the breach by the Buyer of
any representation, warranty, covenant or agreement made by the Buyer contained
in this Agreement or any of the other agreements contemplated hereby or any
certificate delivered by the Buyer with respect thereto, (ii) any claims of any
brokers or finders claiming by, through or under the Buyer, or (iii) the
operation of the business by the Buyer after the Closing, provided, however,
that the Seller shall remain responsible for all actions taken prior to Closing
with respect to work-in-progress which is completed by the Seller after the
Closing.
Section 10.4 Defense of Claims
If a party hereto seeks indemnification under this Article 10, such
party (the "Indemnified Party") shall give written notice to the other party
(the "Indemnifying Party") after receiving written notice of any action,
lawsuit, proceeding, investigation or other claim against it (if by a third
party) or discovering the liability, obligation or facts giving rise to such
claim for indemnification, describing the claim, the amount thereof (if known
and quantifiable), and the basis thereof; provided that the failure to so notify
the Indemnifying Party shall not relieve the Indemnifying Party of its or his
obligations hereunder except to the extent such failure shall have prejudiced
the Indemnifying Party. In that regard, if any action, lawsuit, proceeding,
investigation or other claim shall be brought or asserted by any third party
which, if adversely determined, would entitle the Indemnified Party to indemnity
pursuant to this Article 10, the Indemnified Party shall promptly notify the
Indemnifying Party of the same in writing, specifying in detail the basis of
such claim and the facts pertaining thereto and the Indemnifying Party shall be
entitled to participate in the defense of such action, lawsuit, proceeding,
investigation or other claim giving rise to the Indemnified Party's claim for
indemnification at its expense, and at its option (subject to the limitations
set forth below) shall be entitled to appoint lead counsel of such defense with
reputable counsel reasonably acceptable to the Indemnified Party; provided that,
as a condition precedent to the Indemnifying Party's right to assume control of
such defense, it must first:
(a) enter into an agreement with the Indemnified Party (in
form and substance reasonably satisfactory to the Indemnified Party) pursuant to
which the Indemnifying Party agrees to be fully responsible for all Losses
relating to such claims and that it will provide full indemnification to the
Indemnified Party for all Losses relating to such claim; and
40
(b) furnish the Indemnified Party with reasonable evidence
that the Indemnifying Party is and will be able to satisfy any such liability;
and, provided, further, that the Indemnifying Party shall not have the right to
assume control of such defense and shall pay the fees and expenses of counsel
retained by the Indemnified Party, if the claim which the Indemnifying Party
seeks to assume control (i) seeks non-monetary relief, (ii) involves criminal or
quasi-criminal allegations, (iii) involves a claim to which the Indemnified
Party reasonably believes an adverse determination would be detrimental to or
injure the Indemnified Party's reputation or future business prospects, or (iv)
involves a claim which, upon petition by the Indemnified Party, the appropriate
court rules that the Indemnifying Party failed or is failing to vigorously
prosecute or defend.
If the Indemnifying Party is permitted to assume and control the
defense and elects to do so, the Indemnified Party shall have the right to
employ counsel separate from counsel employed by the Indemnifying Party in any
such action and to participate in the defense thereof, but the fees and expenses
of such counsel employed by the Indemnified Party shall be at the expense of the
Indemnified Party unless (i) the employment thereof has been specifically
authorized by the Indemnifying Party in writing, or (ii) the Indemnified Party
has been advised by legal counsel that a reasonable likelihood exists of a
conflict of interest between the Indemnifying Party and the Indemnified Party.
If the Indemnifying Party shall control the defense of any such claim,
the Indemnifying Party shall obtain the prior written consent of the Indemnified
Party (which shall not be unreasonably withheld) before entering into any
settlement of a claim or ceasing to defend such claim, if (i) pursuant to or as
a result of such settlement or cessation, injunction or other equitable relief
will be imposed against the Indemnified Party, (ii) if such settlement does not
expressly unconditionally release the Indemnified Party from all liabilities and
obligations with respect to such claim, without prejudice or (iii) such
settlement would have an adverse impact on the liability of the Seller for Taxes
for any taxable period (or portion thereof) beginning after the Closing Date.
Section 10.5 Payments
Any indemnification pursuant to this Article 10 shall be effected by
wire transfer of immediately available funds to an account designated by the
Seller or the Buyer, as the case may be, within three days after the
determination thereof. Any such indemnification payments shall include interest
at the lesser of (i) eight percent (8%) and (ii) the maximum rate permitted by
applicable usury laws, from the date any such Loss is suffered or sustained to
the date of payment. Interest on such unpaid amount shall be compounded monthly,
computed on the basis of a 365-day year and shall be payable on demand.
41
ARTICLE 11
MISCELLANEOUS
Section 11.1 Fees and Expenses
All filing fees, transfer taxes, sales taxes, document stamps or other
charges levied by any Governmental Authority in connection with the transactions
contemplated by this Agreement shall be paid by Seller. Except as otherwise
provided in this Agreement, each party shall pay its own expenses incurred in
connection with the authorization, preparation, execution and performance of
this Agreement, including all fees and expenses of counsel, accountants, agents,
and representatives.
Section 11.2 Notices
All notices, demands and requests required or permitted to be given
under the provisions of this Agreement shall be (a) in writing, (b) delivered by
personal delivery, sent by commercial delivery service or registered or
certified mail, return receipt requested, or transmitted by facsimile, (c)
deemed to have been given on the earliest of the date of receipt or the next
business day (in the case of a national overnight courier service that promises
next business day delivery) and (d) addressed as follows:
If to Seller: Xtrasource, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇
President
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇, ▇▇▇▇▇ & West LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Facsimile: 216-592-5009
If to Buyer: Xtrasource Acquisition, Inc.
c/o Sento Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Chief Financial Officer
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
42
With a copy to: ▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇, L.L.C.
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ (300 South)
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile: 801-531-7091
or to any other or additional persons and addresses as the parties may from time
to time designate in a writing delivered in accordance with this Section 11.2.
Section 11.3 Assignments; Benefit and Binding Effect
This Agreement may not be assigned, by operation of law or otherwise,
by any party hereto without the prior written consent of the other parties and
any purported assignment made without the consent of the other parties shall be
void except that Buyer may (without obtaining any consent) assign its rights,
interests or obligations under this Agreement, in whole or in part, to any
direct or indirect subsidiary. Subject to the foregoing, all of the terms and
provisions of this Agreement shall be binding upon and inure to the benefit of
and be enforceable by the successors and assigns of the Seller and Buyer.
Section 11.4 Further Assurances
The parties shall take any actions and execute any other documents that may be
necessary or desirable to the implementation and consummation of this Agreement,
including, in the case of Seller, any additional bills of sale or other transfer
documents that, in the reasonable opinion of Buyer, may be necessary to ensure,
complete and evidence the full and effective transfer of the Assets to Buyer
pursuant to this Agreement.
Section 11.5 Arbitration/Mediation
As to any dispute between Buyer and Seller relating to the Contingent
Earnout payment, prior to commencing litigation in connection therewith the
Parties agree to first work together in good faith to resolve the dispute and,
failing that, to select a mutually acceptable independent accounting firm to act
as a non-binding mediator to assist in resolving the dispute.
Section 11.6 Governing Law.
THIS AGREEMENT SHALL BE GOVERNED, CONSTRUED, and ENFORCED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF UTAH (WITHOUT REGARD TO THE CHOICE OF LAW
PROVISIONS THEREOF).
Section 11.7 Consent to Jurisdiction.
EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY AND UNCONDITIONALLY
SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE EXCLUSIVE JURISDICTION OF THE
UNITED STATES DISTRICT COURTS IN UTAH OR THE DISTRICT COURTS OF THE STATE OF
UTAH IN CONNECTION WITH ANY SUIT, ACTION OR PROCEEDING DIRECTLY OR INDIRECTLY
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ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY. NO PARTY TO THIS AGREEMENT MAY MOVE TO (I) TRANSFER ANY
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH UTAH COURT OR FEDERAL COURT TO
ANOTHER JURISDICTION, (II) CONSOLIDATE ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN SUCH UTAH COURT OR FEDERAL COURT WITH A SUIT, ACTION OR PROCEEDING IN
ANOTHER JURISDICTION OR (III) DISMISS ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN SUCH UTAH COURT OR FEDERAL COURT FOR THE PURPOSE OF BRINGING THE SAME
IN ANOTHER JURISDICTION. EACH PARTY TO THIS AGREEMENT AGREES THAT A FINAL
JUDGMENT IN ANY SUCH SUIT, ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN ANY OTHER JURISDICTION BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW. EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO
SO, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN
ANY COURT OR ANY FEDERAL COURT IN UTAH. EACH PARTY TO THIS AGREEMENT HEREBY
CONSENTS TO THE SERVICE OF PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY
NOTICE IN THE MANNER SPECIFIED IN SECTION 11.2.
Section 11.8 Headings
The headings in this Agreement are included for ease of reference only
and shall not control or affect the meaning or construction of the provisions of
this Agreement.
Section 11.9 Business Day
If the last day permitted for the giving of any notice or the
performance of any act required or permitted under this Agreement falls on a day
which is not a Business Day, the time for the giving of such notice or the
performance of such act will be extended to the next succeeding Business Day.
Section 11.10 Entire Agreement
This Agreement, the Schedules and Exhibits to this Agreement, and all
instruments, certificates and other documents to be delivered by the parties
pursuant to this Agreement, collectively, represent the entire understanding and
agreement between Buyer and Seller with respect to the subject matter hereof.
This Agreement supersedes all prior negotiations between the parties and cannot
be amended, supplemented or changed, except by an agreement in writing that
makes specific reference to this Agreement and which is signed by the party
against which enforcement of any such amendment, supplement or modification is
sought. The parties acknowledge that a short form transfer agreement has been
executed for the sole purpose of the registration of the French part of the
transaction with the French authorities. In case of discrepancy between this
short form share transfer agreement and this Agreement, the terms and conditions
of the latter shall prevail.
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Section 11.11 Waiver of Compliance; Consents
Except as otherwise provided in this Agreement, any failure of either
of the parties to comply with any obligation, representation, warranty,
covenant, agreement or condition herein may be waived by the party entitled to
the benefits thereof only by a written instrument signed by the party granting
such waiver. No failure or delay on the part of either Buyer or Seller in
exercising any right, power or privilege hereunder will operate as a waiver
thereof, nor will any waiver on the part of either buyer or Seller of any right,
power or privilege hereunder operate as a waiver of any other right, power or
privilege hereunder and any such waiver or failure to insist upon strict
compliance with such obligation, representation, warranty, covenant, agreement
or condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure. Whenever this Agreement requires or permits consent
by or on behalf of any party to this Agreement, such consent shall be given in
writing in a manner consistent with the requirements for a waiver of compliance
as set forth in this Section 11.9.
Section 11.12 Severability
If any provision of this Agreement or the application thereof to any
Person or circumstance is determined by a court of competent jurisdiction to be
invalid, void or unenforceable, the remaining provisions hereof, or the
application of such provision to Persons or circumstances other than those as to
which it has been held invalid or unenforceable, shall remain in full force and
effect and shall in no way be affected, impaired or invalidated thereby. If the
economic or legal substance of the transactions contemplated hereby is affected
in any manner adverse to any party as a result thereof, the parties shall
negotiate in good faith in an effort to agree upon a suitable and equitable
substitute provision to effect the original intent of the parties.
Section 11.13 Exhibits and Schedules; Disclosure
All Exhibits and Schedules attached hereto are hereby incorporated in
and made a part of this Agreement as if set forth in full herein. Capitalized
terms used in the Schedules hereto but not otherwise defined therein shall have
the respective meanings assigned to such terms in this Agreement. Disclosure of
any item in any section of or on any Schedule to this Agreement shall not
constitute disclosure of such item in any other section of or on any other
Schedule to this Agreement, whether or not the existence of the item or its
contents should be or is relevant to any other section of or Schedule to this
Agreement, unless an explicit cross-reference thereto appears in such other
section or Schedule.
Section 11.14 Parties in Interest
This Agreement is binding upon and is for the benefit of the parties
hereto and their respective successors and permitted assigns. This Agreement is
not made for the benefit of any Person not a party hereto, and no Person other
than the parties hereto or their respective successors and permitted assigns
will acquire or have any benefit, right, remedy or claim under or by reason of
this Agreement.
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Section 11.15 Counterparts
This Agreement may be executed in any number of counterparts by
original or facsimile signature, each of which shall be deemed to be an
original, but all of which together shall constitute one and the same
instrument.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have duly executed this Asset Purchase
Agreement as of the day and year first above written.
Seller:
XTRASOURCE, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President & CEO
Buyer:
XTRASOURCE ACQUISITION, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Secretary / Treasurer
Parent:
SENTO CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇'▇▇▇▇
Title: President & CEO
47
