STOCK PURCHASE AGREEMENT By and Between RADIANT LOGISTICS, INC. a Delaware corporation (“Purchaser”) and ROBERT F. FRIEDMAN (“Shareholder”) September 5, 2008
By
and Between
a
Delaware corporation
(“Purchaser”)
and
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
(“Shareholder”)
September
5, 2008
TABLE
OF CONTENTS
|
ARTICLE
I SALE AND TRANSFER OF SHARES
|
1
|
|
|
1.1
|
Sale
and Purchase of the Shares
|
1
|
|
1.2
|
Base
Purchase Price
|
1
|
|
1.3
|
Tier-2
Earn-Out Payment
|
3
|
|
1.4
|
Intentionally
Deleted
|
4
|
|
1.5
|
Integration
Payment
|
4
|
|
1.6
|
Purchase
Price Adjustments
|
4
|
|
1.7
|
Acceleration
of Certain Payments due to Shareholder
|
5
|
|
1.8
|
Objections;
Dispute Resolution
|
6
|
|
ARTICLE
II CLOSING
|
8
|
|
|
2.1
|
Closing
Date
|
8
|
|
2.2
|
Closing
Transactions
|
8
|
|
ARTICLE
III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
SHAREHOLDER
|
10
|
|
|
3.1
|
Organization,
Qualification and Status
|
10
|
|
3.2
|
Corporate
Instruments and Records
|
11
|
|
3.3
|
Capitalization
|
12
|
|
3.4
|
Ownership
of Shares
|
12
|
|
3.5
|
Subsidiaries
|
12
|
|
3.6
|
Authority
|
13
|
|
3.7
|
No
Violation
|
14
|
|
3.8
|
Financial
Statements
|
14
|
|
3.9
|
Absence
of Undisclosed and Contingent Liabilities
|
15
|
|
3.10
|
No
Adverse Changes
|
15
|
|
3.11
|
Guarantees
|
17
|
|
3.12
|
Tax
Matters
|
17
|
|
3.13
|
Litigation
|
19
|
|
3.14
|
Real
Property
|
19
|
|
3.15
|
Owned
Tangible Personal Property
|
20
|
|
3.16
|
Condition
of Buildings and Tangible Personal Property
|
20
|
|
3.17
|
Material
Contracts
|
20
|
|
3.18
|
Relationship
with Related Persons
|
22
|
|
3.19
|
Banking
Matters
|
22
|
|
3.20
|
Labor
and Employment Matters
|
22
|
|
3.21
|
Termination
of Business Relationships
|
24
|
|
3.22
|
Customers
|
24
|
|
3.23
|
Product
and Service Warranties
|
24
|
|
3.24
|
Insurance
|
24
|
|
3.25
|
Compliance
with Laws
|
24
|
|
3.26
|
Licenses
and Permits
|
25
|
|
3.27
|
Environmental
Matters
|
25
|
|
3.28
|
Intellectual
Property Matters
|
25
|
|
3.29
|
Absence
of Certain Business Practices
|
26
|
|
3.30
|
Brokers
or Finders
|
26
|
|
3.31
|
Disclosure
|
26
|
-
i -
|
ARTICLE
IV REPRESENTATIONS AND WARRANTIES OF PURCHASER
|
26
|
|
|
4.1
|
Organization
and Qualification
|
27
|
|
4.2
|
Corporate
Instruments and Records
|
27
|
|
4.3
|
Authorization;
Valid and Binding Obligation
|
27
|
|
4.4
|
Litigation;
Orders
|
27
|
|
4.5
|
No
Violations
|
28
|
|
4.6
|
Investment
Intent
|
28
|
|
4.7
|
Purchaser
SEC Reports
|
28
|
|
4.8
|
Brokers
or Finders
|
29
|
|
ARTICLE
V INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND
CERTAIN
COVENANTS
|
29
|
|
|
5.1
|
Indemnification.
|
29
|
|
5.2
|
Baskets,
Caps and Other Limits
|
30
|
|
5.3
|
Expiration
of Representations, Warranties and Covenants
|
31
|
|
5.4
|
Methods
of Asserting Claims for Indemnification
|
31
|
|
5.5
|
Potential
Set-Off Under Existing Promissory Note
|
32
|
|
5.6
|
No
Right of Contribution
|
32
|
|
ARTICLE
VI ADDITIONAL AGREEMENTS OF THE PARTIES
|
33
|
|
|
6.1
|
Prohibition
on Trading in Purchaser Stock
|
33
|
|
6.2
|
Confidentiality
|
33
|
|
6.3
|
Non
Competition
|
34
|
|
6.4
|
Non
Solicitation
|
34
|
|
6.5
|
Injunctive
Relief
|
34
|
|
6.6
|
Further
Acts and Assurances
|
35
|
|
6.7
|
Public
Announcements
|
35
|
|
6.8
|
Tax
Matters
|
36
|
|
6.9
|
Arbitration
|
38
|
|
6.10
|
Effective
Date of Financial Calculations
|
39
|
|
6.11
|
Inactive
Companies
|
40
|
|
ARTICLE
VII MISCELLANEOUS
|
40
|
|
|
7.1
|
Definitions
|
40
|
|
7.2
|
Cumulative
Remedies; Waiver
|
50
|
|
7.3
|
Notices
|
50
|
|
7.4
|
Entire
Agreement; Assignment
|
51
|
|
7.5
|
Binding
Effect; Benefit
|
51
|
|
7.6
|
Headings
|
52
|
|
7.7
|
Counterparts
|
52
|
|
7.8
|
Governing
Law
|
52
|
|
7.9
|
Severability
|
52
|
|
7.10
|
Expenses
|
52
|
|
7.11
|
Amendment
and Modification
|
52
|
|
7.12
|
Release
and Discharge
|
52
|
|
7.13
|
Time
of Essence
|
53
|
|
7.14
|
Construction
|
53
|
-
ii -
|
Exhibits
|
|
|
A
|
Investor
Representation Letter
|
|
B
|
▇▇▇▇▇▇▇▇
Employment Agreement
|
|
C
|
Shareholder’s
Schedules
|
|
Shareholder
Schedules
|
|
|
1.2(b)(iii)
|
Gross
Profit Contribution Reductions
|
|
1.5
|
Integration
Milestones
|
|
1.5(ii)
|
Employee
Matters
|
|
1.6(c)
|
Accounting
Adjustments
|
|
2.2
(b)(i)
|
Wire
Instructions for Shareholder
|
|
3.1
|
Jurisdictions
|
|
3.2
|
Articles/Bylaws
|
|
3.5
|
Subsidiaries
|
|
3.8
|
Financial
Statements
|
|
3.10
|
Permitted
Transactions
|
|
3.11(b)
|
Guarantees
|
|
3.13
|
Litigation
|
|
3.14
|
Leases
|
|
3.15
|
Tangible
Personal Property
|
|
3.17
|
Material
Contracts
|
|
3.19
|
Banking
Matters
|
|
3.24
|
Insurance
Coverages
|
|
3.28
|
Intellectual
Property
|
|
5.5
|
Promissory
Note
|
|
7.1
|
Working
Capital
|
THIS
STOCK PURCHASE AGREEMENT (the “Agreement”), made and entered into this 5th day
of September, 2008 by and between Radiant Logistics, Inc., a Delaware
corporation (“Purchaser”), and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ (the “Shareholder”), the sole
shareholder of Adcom Express, Inc., a Minnesota corporation (the “Company”).
Unless otherwise specified, defined terms used herein shall have the meanings
set forth in Section 7.1 of this Agreement. The Purchaser, and the Shareholder
are each referred to individually herein as a “Party,” and collectively as the
“Parties.”
WITNESSETH:
WHEREAS,
the Shareholder owns beneficially and of record one hundred percent (100%)
of
the issued and outstanding capital stock of the Company, consisting of 2,500
shares of common stock, $0 par value (the “Shares”);
WHEREAS,
the Shareholder desires to sell, and the Purchaser desires to purchase, all
of
the Shares for the consideration and on the terms set forth herein;
and
NOW,
THEREFORE, for and in consideration of the premises and the mutual covenants
and
agreements set forth in this Agreement and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
and
intending to be legally bound hereby, the Parties hereto agree as
follows:
ARTICLE
I
SALE
AND TRANSFER OF SHARES
1.1 Sale
and Purchase of the Shares.
In
reliance upon the representations, warranties, covenants and additional
agreements contained in this Agreement, as of the date of the closing of the
transactions described in this Agreement (the “Closing”), the Purchaser agrees
to purchase the Shares from the Shareholder, and the Shareholder agrees to
sell,
transfer, convey, assign and deliver the Shares to the Purchaser, subject to
and
on the terms and conditions set forth in this Agreement, such sale, transfer,
conveyance, assignment and delivery of the Shares causing the entire right,
title and interest in and to the Shares to be transferred beneficially and
of
record to Purchaser, free and clear of any Encumbrances or Rights of any kind
or
nature whatsoever; and at such time the Shares will be fully paid and
non-assessable. At the Closing, the Shareholder will deliver to the Purchaser
certificates evidencing the Shares duly endorsed in blank or with stock powers
duly executed by the Shareholder. In consideration thereof, the Purchaser shall
pay and deliver to the Shareholder the purchase price for the Shares set forth
in and in accordance with Sections 1.2 through 1.6 hereafter.
1.2 Base
Purchase Price.
(a) The
base
purchase price for the Shares (the "Base Purchase Price") shall be that amount
set forth in Sections 1.2(b)(i) and (b)(ii) below.
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1 -
(b) The
Purchaser shall pay the Base Purchase Price to the Shareholder as
follows:
(i) $4,750,000
shall be paid to the Shareholder in cash at Closing (the “Initial Closing Cash
Payment”) and $250,000 shall be paid to Shareholder in cash (the “Subsequent
Closing Cash Payment”) following the Closing in accordance with and subject to
adjustment pursuant to Section 1.6.
(ii) Subject
to the terms of Section 1.2(b)(iii) below, the Purchaser shall pay to the
Shareholder up to an additional $2,800,000 which shall be payable in four (4)
installments (collectively, the “Tier-1 Earn-Out Payments” and individually, a
“Tier-1 Earn-Out Payment”) covering the following four (4) earn-out periods
(each an “Earn-Out Period” and collectively, the “Earn-Out Periods”) from
September 1, 2008 through June 30, 2012, as follows: (A) the “2009 Earn-Out
Payment” covering the period from September 1, 2008 through June 30, 2009 (the
“2009 Earn-Out Period”); (B) the “2010 Earn-Out Payment” covering the period
from July 1, 2009 through June 30, 2010 (the “2010 Earn-Out Period”); (C) the
“2011 Earn-Out Payment” covering the period from July 1, 2010 through June 30,
2011 (the “2011 Earn-Out Period”); and (D) the “2012 Earn-Out Payment” covering
the period from July 1, 2011 through June 30, 2012 (the “2012 Earn-Out Period”).
Each of the Tier-1 Earn-Out Payments shall be in an amount up to
$700,000.
(iii) Payment
of each Tier-1 Earn-Out Payment shall be based on the Company having achieved
the Gross Profit Contributions for each respective Earn-Out Period, as follows
(each, a “Base Targeted Amount”): $3,600,000 in
Gross
Profit Contributions for the 2009 Earn-Out Period; $4,320,000 in Gross Profit
Contributions for the 2010 Earn-Out Period; $4,320,000 in Gross Profit
Contributions for the 2011 Earn-Out Period; and $4,320,000 in Gross Profit
Contributions for the 2012 Earn-Out Period. To the extent the Company’s actual
Gross Profit Contributions during any Earn-Out Period are less than the Base
Targeted Amount for the same period (such deficit referred to as the “Shortfall
Amount”), the Tier-1 Earn-Out Payment for that Earn-Out Period shall be reduced
by forty-five percent (45%) of the Shortfall Amount.
(1) If,
during an Earn-Out Period, any historically-operated Company station is combined
into one financial reporting unit with a station of Purchaser or any Affiliate
of Purchaser, the Gross Profit Contributions of the then-combined Company
station will be determined by including (A) one hundred percent (100%) of the
Gross Profit Contributions of the customers historically serviced by such
Company station prior to any such combination, plus (B) a Proportionate Share
of
any Gross Profit Contributions arising from new customers serviced by the
combined operations. For purposes of this paragraph, the “Proportionate Share of
Gross Profit Contributions” shall equal the Gross Profit Contributions of the
Company station being combined for the most recent full 12 month period
preceding the combination, divided by the total Gross Profit Contributions
of
the combined operations on a pro forma basis for
the
most recent full 12 month period preceding the combination.
(2) In
order
to protect the Shareholder from temporary fluctuations in the Company’s Gross
Profit Contributions in any Earn-Out Period, a period-to-period analysis shall
be made so that the cumulative Shortfall Amount incurred in any prior Earn-Out
Period(s) can be recovered in a subsequent Earn-Out Period to the extent the
Gross
-
2 -
Profit
Contributions for such Earn-Out Period is in excess of the Base Targeted Amounts
for the same period (such amount being the “Overage”). In any Earn-Out Period in
which there is an Overage, the Purchaser shall pay to the Shareholder an amount
equal to forty-five percent (45%) of the lesser of the Overage or the cumulative
Shortfall Amount for any prior Earn-Out Period(s). The balance of any remaining
cumulative Shortfall Amount can be recovered against any future Overage. A
cumulative Overage from any prior Earn-Out Period(s) can be applied to a
Shortfall Amount in any subsequent Earn-Out Period. In any Earn-Out Period
in
which a Shortfall Amount is incurred and there is a cumulative Overage from
any
prior Earn-Out Period, the Purchaser shall pay to the Shareholder an amount
equal to forty-five percent (45%) of the lesser of the Shortfall Amount or
the
cumulative Overage.
(iv) The
Tier-1 Earn-Out Payments shall be payable on October 1 of 2009, 2010, 2011,
and
2012 (the “Tier-1 Earn-Out Payment Dates”), and shall be payable fifty percent
(50%) in cash and fifty percent (50%) in newly issued shares of common stock
of
Purchaser (the “Purchaser Shares”). The Purchaser Shares issued in connection
with the Tier-1 Earn-Out Payment will be valued at the Weighted Average Price
of
Purchaser’s common stock on the principal exchange or over-the-counter market on
which the Purchaser’s shares trade, for the thirty (30) trading days prior to
the Tier-1 Earn-Out Payment Date. In the event Purchaser’s shares are not traded
on a public exchange or an over-the-counter market for the thirty (30) days
prior to the Tier-1 Earn-Out Payment Date, such Tier-1 Earn-Out Payment shall
be
payable one hundred percent (100%) in cash.
(v) The
Purchaser Shares shall be delivered to the Shareholder not later than ten (10)
business days after the Tier-1 Earn-Out Payment Dates against delivery by the
Shareholder to the Purchaser of an Investment Representation letter in
substantially the form attached hereto as Exhibit “A”
executed by Shareholder together any and all such other documents, agreements,
consents, and approvals governmental or otherwise, as may be reasonably
requested by the Purchaser in connection with compliance with the provisions
of
the Securities Act or any state securities laws.
1.3 Tier-2
Earn-Out Payment.
(a) In
addition to the Base Purchase Price, the Purchaser shall pay to the Shareholder
in cash an amount equal to 20% of the amount by which the cumulative Gross
Profit Contributions of the Company from September 1, 2008 through June 30,
2012
exceed $16,560,000 (the
“Tier-2 Earn-Out Payment”); provided,
however,
that
the first $500,000 of the Tier-2 Earn-Out Payment earned by the Shareholder
(the
“Tier-2 Holdback Amount”) is not payable to the Shareholder until October 1,
2012, unless earlier accelerated as provided for in Section 1.7, and
provided further
that
once the Tier-2 Holdback Amount is satisfied, fifty percent (50%) of any
additional amounts due to the Shareholder as a Tier-2 Earn-Out Payment shall
be
payable to the Shareholder on October 1, 2012 (the “Additional Tier-2 Holdback
Amounts”), unless earlier accelerated as provided for in Section 1.7, and the
remaining fifty percent (50%) of such payment shall be paid to the Shareholder
on the next-occurring Tier-1 Earn-Out Payment Date.
(b) Notwithstanding
the foregoing, the maximum amount of the Tier-2 Earn-Out Payment shall be
$2,000,000.
-
3 -
1.4 Intentionally
Deleted.
1.5 Integration
Payment.
(a) In
addition to the Base Purchase Price, the Purchaser shall pay to the Shareholder
an “Integration Payment” as follows:
(i) $1,250,000.00
shall be paid to the Purchaser within 90 days after all of the integration
milestones identified on Schedule 1.5 are achieved, but in no event later than
the eighteen (18) month anniversary of the Closing (the “Integration Payment
Date”).
(ii) The
Integration Payment shall be payable fifty percent (50%) in cash and fifty
percent (50%) in Purchaser Shares, with the cash component thereof subject
to
reduction by the amount of the costs identified on Schedule 1.5(ii).
(iii) Purchaser
Shares issued in connection with the Integration Payment will be valued at
the
Weighted Average Price of Purchaser’s common stock on the principal exchange or
over-the-counter market on which the Purchaser’s shares trade, for the thirty
(30) trading days prior to the Integration Payment Date. In the event
Purchaser’s shares are not traded on a public exchange or an over-the-counter
market for the thirty (30) days prior to the Integration Payment Date, such
Integration Payment shall be payable one hundred percent (100%) in
cash.
(iv) The
Purchaser Shares shall be delivered to the Shareholder not later than ten (10)
business days after the Integration Payment Date against delivery by the
Shareholder to the Purchaser of an Investment Representation letter in
substantially the form attached hereto as Exhibit “A”.
1.6 Purchase
Price Adjustments.
(a) The
Base
Purchase Price has been agreed to by the Parties on the assumption that the
Company shall have no Bank Indebtedness as of the Closing Date. To the extent
the Company shall have outstanding Bank Indebtedness as of the Closing Date,
the
cash portion of the Base Purchase Price payable at Closing shall be reduced
by
the amount of such Bank Indebtedness.
(b) Promptly
following the Closing Date (but in any event within ninety (90) days after
the
Closing Date), the Company shall cause an accounting firm selected by the
Shareholder to prepare and deliver to the Shareholder a pro-forma balance sheet
of the Company as of August 31, 2008, adjusted to account for the occurrence
of
the Permitted Transactions (the “Closing Balance Sheet”). The Closing Balance
Sheet shall include an identification of the Working Capital of the Company
as
of the Closing Date.
(c) Subject
to Section 1.6(d) below, in the event that the Working Capital set forth in
the
Closing Balance Sheet is less than $555,000, subject to increase by the amounts
identified within Schedule 1.6(c), (as so adjusted, the “Minimum Working Capital
Amount”) (such deficiency hereafter referred to as the “Deficit Working Capital
Amount”), the Purchaser shall deduct and set-off against the Subsequent Closing
Cash Payment due to the Shareholder an
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4 -
amount
equal to the Deficit Working Capital Amount and shall pay such net amount to
Shareholder in immediately available funds within ten (10) business days after
the end of the Response Period or, in the event the Shareholder has delivered
to
the Purchaser a timely Objection Notice under Section 1.8, within ten (10)
business days after the final determination of the Independent Accountants
pursuant to Section 1.8(d).
(d) In
the
event that the Deficit Working Capital Amount exceeds the Subsequent Closing
Cash Payment, no Subsequent Closing Cash Payment shall be due to the
Shareholder, and the full amount of such excess shall be paid by Shareholder
to
Purchaser in immediately available funds within ten (10) business days after
the
end of the Response Period or, in the event the Shareholder has delivered to
the
Purchaser a timely Objection Notice under Section 1.8, within ten (10) business
days after the final determination of the Independent Accountants pursuant
to
Section 1.8(d).
(e) In
the
event that the Company’s Working Capital set forth in the Closing Balance Sheet
is greater than the Minimum Working Capital Amount (such excess hereafter
referred to as the “Excess Working Capital Amount”), the Subsequent Closing Cash
Payment shall be equal to the Subsequent Closing Cash Payment and the Excess
Working Capital Amount and shall be paid by Purchaser to Shareholder in
immediately available funds within ten (10) business days of the Response Period
or, in the event the Shareholder has delivered to the Purchaser a timely
Objection Notice under Section 1.8, within five (10) business days after the
final determination of the Independent Accountants pursuant to Section
1.8(d).
(f) The
Closing Balance Sheet shall be determined in accordance with Section 1.6(b)
derived from the balance sheet of the Company as of the close of business on
August 31, 2008 in accordance with GAAP applied on a basis consistent with
the
historical practices of the Company and the Financial Statements.
1.7 Acceleration
of Certain Payments due to Shareholder.
(a) Right
to Accelerate Integration Payment.
Effective in conjunction with and immediately upon consummation of a Corporate
Transaction, the Integration Payment, if not yet paid, shall automatically
become due and payable in cash upon closing of such Corporate
Transaction.
(b) Contingent
Right to Accelerate Tier-One Earn-Out Payments.
If the
cumulative Gross Profit Contributions for the period beginning on September
1,
2008 and ending on the last day of the Earn-Out Period immediately preceding
a
Corporate Transaction are greater than or equal to seventy-five percent (75%)
of
the cumulative Base Targeted Amounts for such period (the “Acceleration
Threshold”), then effective with and immediately upon the consummation of a
Corporate Transaction, the balance of any unpaid Tier-1 Earn-Out Payments for
any Earn-Out Period, shall upon the written election of the Shareholder, become
due and payable in cash upon closing of such Corporate Transaction.
(c) Right
to Receive Pro-rated Portion of Tier-1 Earn-Out Payments.
If the
Acceleration Threshold is not satisfied, then the balance of the Tier-1 Earn-Out
Payments shall, upon the written election of the Shareholder, become due and
payable in cash upon the closing of
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5 -
such
Corporate Transaction and shall be payable as follows: For the Earn-Out Period
within which the Corporate Transaction occurs, the Tier-1 Earn-Out Payment
shall
be determined based on the Gross Profit Contributions of the Company through
the
date of closing of the Corporate Transaction, projected on an annualized basis
through the remainder of the current Earn-Out Period. For the remaining Earn-Out
Periods following the Earn-Out Period within which the Corporate Transaction
occurred, the Tier-1 Earn-Out Payments shall be equal to the product of: (A)
the
maximum amount of Tier-1 Earn-Out Payments due to the Shareholder for such
remaining Earn-Out Periods assuming all Base Targeted Amounts were met
(excluding for this purpose the Earn-Out Period within which the Corporate
Transaction occurred); and (B) a fraction the numerator of which is the amount
of all Tier-1 Earn-Out Payments paid to Shareholder hereunder with respect
to
each prior Earn-Out Period including the Earn-Out Period within which the
Corporate Transaction occurred (the “Prior Periods”) and the denominator of
which is the maximum amount of Tier-1 Earn-Out Payments payable with respect
to
such Prior Periods assuming all Base Targeted Amounts were met.
(d) Right
to Accelerate Tier-2 Earn-Out Payments.
Effective with and immediately upon the consummation of a Corporate Transaction,
any portion of the Tier-2 Earn-Out Payment earned by the Shareholder but not
previously paid by the Purchaser, including the Tier-2 Holdback Amount and
any
Additional Tier-2 Holdback Amounts, shall upon the written election of the
Shareholder, become due and payable in cash upon closing of such Corporate
Transaction.
(e) Binding
Obligations of Successors.
Purchaser agrees that it will make appropriate provisions to ensure that any
Tier-1 Earn-Out Payments and Tier-2 Earn-Out Payments unpaid as of the closing
of a Corporate Transaction shall become binding obligations of any successor
entity of Company, and prior to the closing of any Corporate Transaction,
Purchaser shall provide the Shareholder with written evidence of the
same.
(f) Notice
of Corporate Transaction.
The
Purchaser shall provide the Shareholder written notice of any impending
Corporate Transaction not less than thirty (30) days prior to the anticipated
closing date of such Corporate Transaction.
(g) Notice
of Acceleration.
In
order to be effective, the Shareholder shall deliver written notice to Purchaser
of his intent to exercise his acceleration rights under this Section 1.7 no
later than twenty (20) days after notice has been provided by Purchaser of
the
Corporate Transaction.
1.8 Objections;
Dispute Resolution.
(a) Not
later
than five (5) business days after, each Tier-1 and Tier-2 Earn-Out Payment
Date,
the Integration Payment Date, and delivery of the Closing Balance Sheet under
Section 1.6, as the case may be, the Purchaser shall prepare and deliver to
the
Shareholder, along with the Tier-1 or Tier-2 Earn-Out Payment, Integration
Payment, or the determination of the Subsequent Closing Cash Payment, as the
case may be, a certificate (the “Earn-Out Certificate”) signed by a senior
executive of the Purchaser setting forth the amount and method of calculating
the amounts paid.
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6 -
(b) If
the
Shareholder concludes that any matter reported in an Earn-Out Certificate is
not
accurate, the Shareholder shall, within ten (10) days after his receipt of
such
certificate (the “Response Period”), deliver to the Purchaser a written
statement (the “Objection Notice”) setting forth in reasonable detail the nature
of the objections to each of any discrepancies believed to exist. If no
Objection Notice is given within the Response Period for a particular Earn
Out
Certificate, then the calculations set forth in such Earn-Out Certificate shall
be controlling for all purposes of this Agreement.
(c) If
an
Objection Notice is timely given within the Response Period, the Purchaser
and
the Shareholder shall use good faith efforts to jointly resolve any objections
and discrepancies set forth in such Objection Notice within thirty (30) days
of
the receipt by the Purchaser of such Objection Notice, which resolution, if
achieved, shall be fully and completely binding upon all Parties to this
Agreement and not subject to further review, appeal, or dispute.
(d) If
the
Purchaser and the Shareholder are unable to resolve the objections and
discrepancies set forth in such Objection Notice to their mutual satisfaction
within such thirty (30) day period, then the matter shall be submitted to an
accounting firm mutually acceptable to the Purchaser and the Shareholder (the
“Independent Accountants”). In submitting such matter to the Independent
Accountants, the Purchaser, and the Shareholder shall concurrently deliver,
at
their own expense, to the Independent Accountants and the other Party such
documents and information as the Independent Accountants may request. Each
Party
may also deliver to the Independent Accountants such other information and
documents as it deems relevant, with copies of such submission and all such
documents and information being concurrently delivered to the other Party.
Neither Party shall have or conduct any communication, either written or oral,
with the Independent Accountants without the other Party either being present
or
receiving a concurrent copy of any written communication. The Independent
Accountants may conduct a conference concerning the objections and disagreements
between the Purchaser and the Shareholder, at which conference each Party shall
have the right to (i) present its documents, materials and other evidence
(previously provided to the Independent Accountants and the other Party), and
(ii) have present its or their advisors, accountants and/or counsel. The
Independent Accountants shall promptly (but not to exceed seventy-five (75)
days
from the date of engagement of the Independent Accountants) render a decision,
acting as an expert and not an arbitrator, on the issues presented, and such
decision shall be final and binding on all of the Parties to this Agreement.
In
the event the Independent Accountants require a payment to be made by one Party
to the other Party, such payment shall be due and payable within thirty (30)
days from the date the decision is rendered. Each of the Parties shall agree
to
indemnify and hold harmless the Independent Accountants, and to execute whatever
documents or agreements are necessary to effectuate the foregoing.
(e) The
Shareholder, on the one hand, and Purchaser, on the other hand, shall each
pay
fifty percent (50%) of all costs, fees and expenses to engage the Independent
Accountants.
(f) In
connection with its review of all matters arising under the Earn-Out
Certificate, the Purchaser shall provide the Shareholder and their
representatives complete access to the books, records, personnel and facilities
of or pertaining to the Company.
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7 -
ARTICLE
II
CLOSING
2.1 Closing
Date.
The
Closing shall take place at the offices of the Company, or at such other
location agreed to by the Parties simultaneously with the execution and delivery
of this Agreement. The date of the Closing is hereinafter referred to as the
"Closing Date."
2.2 Closing
Transactions.
At
the
Closing, the following transactions shall occur, all of such transactions being
deemed to occur simultaneously:
(a) The
Shareholder shall deliver or cause to be delivered to the Purchaser, or if
specified to such other person, the following:
(i) Certificates
representing all of the Shares duly endorsed by the Shareholder in blank or
accompanied by assignments separate from certificate duly endorsed in blank,
and
such other duly executed transfer documents as are required to perfect the
transfer;
(ii) A
certificate of the Shareholder to the effect that the Company and the
Shareholder have performed all obligations required to be performed by them
under this Agreement prior the Closing Date;
(iii) The
employment agreement by and between the Company and Shareholder (the "▇▇▇▇▇▇▇▇
Employment Agreement"), in substantially the form attached hereto as Exhibit
B
executed by the Shareholder;
(iv) A
certificate of existence/authorization from the office of the Minnesota
Secretary of State dated within fifteen (15) days of the Closing Date to the
effect that the Company is in good standing under the laws of such
state;
(v) Financial
statements of the Company for its two most recently completed fiscal years
ended
September 30, 2007 and September 30, 2006, audited by an SEC-registered
independent accountant, and financial statements of the Company for the
nine-month interim periods ended June 30, 2008 and June 30, 2007, reviewed
by an
SEC-registered independent accountant (collectively, the “Financial
Statements”), that contain no material qualifications and identify no material
exceptions to generally accepted accounting principles in form and substance
required under the rules and regulations of the SEC;
(vi) All
approvals, consents, permits and waivers of Governmental Authorities and any
other Person necessary for the consummation of the transactions contemplated
by
this Agreement and the Ancillary Agreements and no such approval, consent,
permit or waiver of any Governmental Authority or such other third party shall
contain any term or condition that Purchaser in its reasonable discretion
determines to be unduly burdensome. The Company must notify the Federal Maritime
Commission of the change in ownership following the closing;
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8 -
(vii) An
incumbency certificate signed by the President of the Company dated at or about
the Closing Date;
(viii) Copies
of
the Company’s articles of incorporation and by laws certified by the Secretary
of the Company dated at or about the Closing Date;
(ix) Certified
resolutions of the board of directors of the Company retaining ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ as President of the Company, together with the resignation of ▇▇▇▇▇▇
▇.
▇▇▇▇▇▇▇▇ from all other officer positions of the Company;
(x) Certificates
or Articles of Merger related to the mergers of FNA Corporation (“FNA”) and BFW
Logistics, Inc. (“BFW”) with and into the Company (the “Permitted Mergers”) as
filed with the offices of the Minnesota and Delaware Secretaries of
State;
(xi) An
opinion of the Company’s counsel in form and substance satisfactory to
Purchaser;
(xii) A
non-foreign person affidavit as required by Section 1445 of the Code from the
Shareholder, if applicable;
(xiii) Uniform
Commercial Code searches of filings made pursuant to Article 9 thereof in all
jurisdictions where any assets of the Company are located, in form, scope and
substance reasonably satisfactory to Purchaser and its counsel, shall not
disclose any Encumbrances against any of such assets disclosed thereby except
Encumbrances that are disclosed in Financial Statements, this Agreement, or
are
otherwise released or terminated by the Company prior to or at the time of
Closing;
(xiv) Court
docket (or similar searches) and judgment searches in scope reasonably
acceptable to the Purchaser’s counsel;
(xv) Either
(i) evidence satisfactory to the Purchaser that all outstanding Bank
Indebtedness has been repaid in full or (ii) written request to Purchaser to
apply that portion of the Base Purchase Price to be paid at the Closing to
the
repayment in full of all outstanding Bank Indebtedness; and
(xvi) Such
other documents, agreements, consents, and approvals governmental or otherwise,
as are required under this Agreement or as may be reasonably requested by the
Purchaser in connection with compliance with the provisions hereunder and
consummation of the transactions contemplated herein.
(b) Purchaser
will deliver or cause to be delivered to the Shareholder the
following:
(i) The
Initial Closing Cash Payment required to be paid at the Closing under Section
1.2(b)(i) by wire transfer of immediately available funds to the bank account
of
Shareholder set forth on Schedule 2.2(b)(i);
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9 -
(ii) A
certificate of good standing of the Secretary of the State of Delaware dated
within fifteen (15) days of the Closing Date, to the effect that Purchaser
is in
good standing under the laws of Delaware;
(iii) Certified
resolutions of the Purchaser’s board of directors, dated at or about the Closing
Date, authorizing the transactions contemplated under this
Agreement;
(iv) An
incumbency certificate signed by all of the officers of the Purchaser, dated
at
or about the Closing Date;
(v) The
▇▇▇▇▇▇▇▇ Employment Agreement executed by the Company;
(vi) An
opinion of the Purchaser’s counsel, in form and substance satisfactory to the
Shareholder;
(vii) All
consents, authorizations, orders or approvals required in order to execute
and
deliver this Agreement and the Ancillary Agreements and to perform its
obligations hereunder and thereunder; and
(viii) Such
additional documents, agreements, consents, and approvals governmental or
otherwise, as are required under this Agreement or as may be reasonably
requested by the Shareholder in connection with compliance with the provisions
hereunder and consummation of the transactions contemplated herein.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDER
As
a
material inducement to Purchaser to execute this Agreement and the Ancillary
Agreements and consummate the transactions contemplated hereby and thereby,
the
Shareholder, hereby represents to the Purchaser that each of the following
representations and warranties are true and correct as of the Closing Date,
except as otherwise set forth in written disclosure schedules (the
“Shareholder’s Schedules”) delivered to Purchaser pursuant to this Article III,
a copy of which is attached to this Agreement as Exhibit C. The Shareholder’s
Schedules are numbered to correspond to the various sections of this Article
III
setting forth certain exceptions to the representations and warranties contained
in this Article III and certain other information required by this Agreement;
provided,
however,
that
any information disclosed in any section of the Shareholder’s Schedules shall be
deemed to be disclosed and incorporated in any other part of the Shareholder’s
Schedules, and shall modify and except the representations and warranties
applicable thereto, where such incorporation is reasonable under the
circumstances.
3.1 Organization,
Qualification and Status.
(a) The
Company is duly incorporated and organized, validly existing and authorized
under the laws of the State of Minnesota. The Company has full corporate power
and authority to own, lease and use its properties and to carry on the Business
as presently conducted. The Company is duly qualified or licensed to do business
and in good standing as a foreign corporation in each of the jurisdictions
in
which the nature of the Business or the character of the
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10 -
properties
and assets which it owns or leases makes such qualification or licensing
necessary. Each jurisdiction in which the Company is qualified or licensed
to do
business as a foreign corporation is set forth in Section 3.1 of the
Shareholder’s Schedules, except where such failure to be so qualified, licensed
or in good standing, individually or in the aggregate, has not and would not
have a Material Adverse Effect on the Company.
(b) The
Company has not, during the six (6) year period immediately preceding the date
hereof, changed its name, been the surviving entity of a merger, consolidation
or other reorganization, or acquired all or substantially all of the assets
of
any Person. Section 3.1(b) of the Shareholder’s Schedules sets forth all
fictitious names under which the Company or such predecessors have conducted
business.
(c) On
or
before the Closing Date, FNA Corporation, a Delaware corporation, and BFW
Logistics, Inc., a Minnesota corporation (collectively, the “Related Companies”
and individually a “Related Company”), have been merged with and into the
Company such that as of the Closing Date, the former assets, liabilities and
operations of the Related Companies are then included within the Company. Both
of the forgoing mergers were duly and validly approved and authorized by all
necessary board, shareholder and other corporate action required by the
certificate or articles of incorporation and bylaws of each Related Company
and
of the Company and all applicable corporation laws, were completed in accordance
with all applicable corporation laws and all filings with all Governmental
Authorities necessary to effect both mergers have been made. Neither of the
mergers: (i) conflicted with or resulted in a breach of any of the terms,
conditions or provisions of the articles of incorporation or bylaws of any
Related Company; (ii) violated, conflicted with or resulted in a breach of
or
default under any of the terms, conditions or provisions of any Instrument
to
which any Related Company was a party; (iii) accelerated or gave to others
any interests or rights, including rights of acceleration, termination,
modification or cancellation, under any Instrument to which any Related Company
was a party; (iv) resulted in the creation of any Encumbrance on the assets,
capital stock or properties of any Related Company; (v) to the Knowledge of
the
Shareholder, conflicted with, violated or resulted in a breach of or constituted
a default under, any Applicable Law to which the Company, any Related Company
or
any of their respective assets or properties is or were subject; (vi) except
as
already obtained or filed, required the Company or any Related Company to
give notice to, or obtain an authorization, approval, order, license, franchise,
declaration or consent of, or make a filing with, any Governmental Authority
or
any other Person; or (vii) affected the validity, enforceability or
effectiveness of any Permit.
(d) Each
of
RF Transportation, Inc., a Minnesota corporation; Adcom Express of Colorado,
Inc., a Colorado corporation; Adcom Express of Atlanta, Inc., a Georgia
corporation; and TR & MM, Inc., a Minnesota Corporation, Adcom Worldwide
(Canada) NC, an Alberta Unlimited Liability Company (collectively, the “Inactive
Companies”) has prior to the Closing Date ceased business operations and has no
Liabilities.
3.2 Corporate
Instruments and Records.
The
copies of the articles of incorporation and bylaws of the Company, attached
hereto at Schedule 3.2, certified by the Secretary of the Company and heretofore
furnished to Purchaser, are true, correct and complete and each include all
amendments to the date hereof. The minute
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11 -
books
of
the Company, as made available to the Purchaser, contain a true, complete and
correct record of all corporate action taken on or prior to the date hereof
at
the meetings of its shareholders and directors and committees thereof. The
stock
certificate books and ledgers of the Company, as made available to the Purchaser
for inspection, are true, correct and complete, and accurately reflect, at
the
date hereof, the ownership of the outstanding capital stock of the Company
by
the Shareholder.
3.3 Capitalization.
The
authorized capital stock of the Company consists of 2,500 shares of common
stock, $0 par value, of which 2,500 shares are issued and outstanding and
constitute the Shares. All of the Shares are held beneficially and of record
by
the Shareholder, and no shares are held in the treasury of the Company. All
of
the Shares are validly issued, fully paid and non-assessable and entitled to
vote at shareholder meetings, and none of the Shares has been issued in
violation of any preemptive rights of shareholders or transferred in violation
of any transfer restrictions relating thereto. None of the Shares is subject
to
any preemptive or other right created by statute, the Company’s articles of
incorporation or bylaws, by contract, or otherwise. There are no authorized
or
outstanding options, warrants, convertible securities, subscription rights,
puts, calls, unsatisfied preemptive rights or other rights of any nature to
purchase or otherwise receive, or to require the Company to purchase, redeem
or
acquire, any shares of the capital stock or other securities of the Company
and
there is no outstanding security of any kind convertible into such capital
stock. None of the shares of capital stock or other securities of the Company
was issued in violation of the Securities Act, state securities laws, or any
other legal requirement.
3.4 Ownership
of Shares.
The
Shareholder owns and holds, beneficially and of record, the entire right, title,
and interest in and to the Shares, free and clear of all Rights and
Encumbrances. The Shareholder has full power and authority to vote the Shares
owned by him and to approve the transactions contemplated by this Agreement.
Shareholder has the full power and authority to vote, transfer and dispose
of
the Shares, free and clear of any Right or Encumbrance other than restrictions
under the Securities Act and applicable state securities laws. At the Closing,
the Purchaser will acquire good title to the Shares, free and clear of all
Rights and Encumbrances. Other than the transactions contemplated by this
Agreement, there is no outstanding vote, plan, pending proposal, or other right
of any Person to acquire, or to cause the redemption of, the Shares or to effect
the merger or consolidation of the Company with or into any other
Person.
3.5 Subsidiaries.
(a) Schedule
3.5 attached hereto sets forth:
(i) The
name
and percentage ownership by the Company of each corporation, partnership, joint
venture or other entity in which the Company has, directly or indirectly, an
equity interest representing fifty percent (50%) or more of the capital stock
thereof or other equity interests therein (individually, a “Subsidiary” and,
collectively, the “Subsidiaries”);
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12 -
(ii) The
name
and percentage ownership of each corporation, partnership, joint venture or
other entity in which the Shareholder has, directly or indirectly, an equity
interest representing fifty percent (50%) or more of the capital stock thereof
or other equity interests therein (individually, an “Affiliated Entity” and
collectively, the “Affiliated Entities”), which has or at any time in the past
five (5) years has had a relationship with the Company or any of the
Subsidiaries;
(iii) The
jurisdiction of incorporation, capitalization and ownership of each Subsidiary
and Affiliated Entity;
(iv) The
names
and the officers and directors of each Subsidiary and Affiliated Entity;
and
(v) The
jurisdictions in which each Subsidiary and Affiliated Entity is qualified or
holds licenses to do business as a foreign corporation.
(b) Except
as
set forth in Schedule 3.5, the Company owns of record and beneficially all
of
the outstanding shares of capital stock of each of the Subsidiaries free and
clear of all Encumbrances.
(c) Except
as
set forth in Schedule 3.5, each of the Subsidiaries and Affiliated Entities
is a
corporation or other entity duly organized and validly existing and in good
standing under the laws of the state of its incorporation and has all requisite
power and authority to own its properties and carry on its business as now
being
conducted. Each of the Subsidiaries and Affiliated Entities is duly qualified
to
do business and in good standing in all jurisdictions in which its ownership
of
property or the character of its business requires such qualification. Certified
copies of the charter, bylaws and other governing instruments of the
Subsidiaries and Affiliated Entities, each as amended to date, have been
previously delivered to the Buyer, are complete and correct, and no amendments
have been made thereto or have been authorized since the date of such delivery.
The Company does not own any capital stock of or other equity interest in any
corporation, partnership or other entity, other than the Subsidiaries. The
shares of capital stock of each Subsidiary as set forth in Schedule 3.5 have
been duly and validly issued and are fully paid and non-assessable.
(d) Except
as
set forth in Schedule 3.5, none of the Subsidiaries holds shares of its capital
stock in its treasury, and there are not, and on the Closing Date there will
not
be, outstanding any (i) options, warrants or other rights with respect to the
capital stock of any of the Subsidiaries, (ii) any securities convertible into
or exchangeable for shares of such stock, or (iii) any other commitments of
any
kind for the issuance of additional shares of capital stock or options, warrants
or other securities of any of them.
3.6 Authority.
The
Shareholder has the full capacity, power and authority to enter into this
Agreement and the Ancillary Agreements to which the Shareholder is a party
and
to consummate the transactions contemplated hereby and thereby and to comply
with the terms, conditions and provisions hereof and hereof. This Agreement
and
the Ancillary Agreements to which the Shareholder is a Party has been duly
authorized, executed and delivered by the Shareholder and
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13 -
are
the
legal, valid and binding obligations of the Shareholder, enforceable against
the
Shareholder in accordance with its terms. No notices to, declaration, filing
or
registration with, approvals or consents of, or assignments by, any Persons
(including Governmental Authorities) are necessary to be made or obtained by
the
Company or the Shareholder in connection with the execution, delivery or
performance by the Company or the Shareholder of this Agreement.
3.7 No
Violation.
(a) The
Company is not in default under or in violation of any provision of its articles
of incorporation or bylaws, and except as set forth in the Shareholder
Schedules, neither the execution and delivery of this Agreement or the Ancillary
Agreements by the Company or the Shareholder, nor the consummation of the
transactions contemplated hereby or thereby, nor compliance with the terms
thereof, will conflict with or result in a breach of any of the terms,
conditions or provisions of the articles of incorporation or bylaws of the
Company;
(b) To
the
Knowledge of the Shareholder, the Company is not in material default or material
breach of any written agreement, indenture, contract, lease, sublease, license,
sublicense, franchise, loan agreement, note, or restriction to which it is
a
party or by which it is bound or to which it or its assets are subject
(individually, an “Instrument” and collectively, the “Instruments”). Except as
set forth in the Shareholder’s Schedules, neither the execution and delivery of
this Agreement or the Ancillary Agreements by the Company and the Shareholder,
nor the consummation of the transactions contemplated hereby or thereby, nor
compliance with the terms hereof or thereof, will: (i) violate, conflict with
or
result in a breach of or default under any of the terms, conditions or
provisions of any Instrument; (ii) accelerate or give to others any interests
or
rights, including rights of acceleration, termination, modification or
cancellation, under any Instrument; (iii) result in the creation of any
Encumbrance on the assets, capital stock or properties of the Company; (iv)
to
the Knowledge of the Shareholder, conflict with, violate or result in a breach
of or constitute a default under, any Applicable Law to which the Company or
any
of its assets or properties is subject; (v) require the Company to give notice
to, or obtain an authorization, approval, order, license, franchise, declaration
or consent of, or make a filing with, any Governmental Authority or any other
Person; or (vi) affect the validity, enforceability or effectiveness of any
Permit.
3.8 Financial
Statements.
(a) Schedule
3.8 hereto contains true, correct and complete copies of the Financial
Statements. The Financial Statements have been prepared in conformity with
GAAP
applied on a consistent basis, and present fairly the financial position and
results of operations and cash flows of the Company at the dates and for the
periods covered by such Financial Statements. There have been no material
changes in the financial condition, assets, Liabilities, or results of
operations of the Company from June 30, 2008 to the date hereof, except changes
in the Ordinary Course of Business, none of which, either individually or in
the
aggregate, has been materially adverse.
(b) Each
of
the accounts receivable of the Company included within the Financial Statements
constitutes a valid claim and is collectible in the full amount thereof against
the debtor charged therewith on the books of the Company within 90 days of
the
date of
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14 -
invoicing
thereof (except for the amount of the allowance for doubtful accounts reflected
on the most recent balance sheet included in the Financial Statements). No
account debtor has any valid set-off, deduction or defense with respect thereto,
and no account debtor has asserted any such set-off, deduction or defense.
(c) The
Company maintains a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed with management’s
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in accordance with GAAP and to maintain
accountability for assets, (iii) access to assets is permitted only in
accordance with management’s authorization, and (iv) the recorded accountability
for assets is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(d) The
Company has not engaged in any transaction, maintained any bank account, or
used
any corporate funds except for the transactions, bank accounts or funds which
have been and are reflected in the Company’s books and records.
3.9 Absence
of Undisclosed and Contingent Liabilities.
Except
as
set forth in the Shareholder’s Schedules, neither the Company nor any Subsidiary
has any Liabilities except (i) Liabilities which are reflected and properly
reserved against in the Financial Statements to the extent such Liabilities
are
required to be reflected thereon in accordance with GAAP, (ii) Liabilities
incurred in the Ordinary Course of Business since June 30, 2008, and (iii)
Liabilities arising under the Material Contracts set forth in the Shareholder’s
Schedules or which are not required to be disclosed on such Shareholder’s
Schedules and which have arisen in the Ordinary Course of Business.
3.10 No
Adverse Changes.
Since
June 30, 2008, except as set forth in the Shareholder’s Schedules and except for
any transactions and agreements required in connection with the Permitted
Mergers and except for those transactions and agreements set forth in the
Shareholder’s Schedules (the “Permitted Transactions”), neither the Company nor
any Subsidiary has failed to operate in the Ordinary Course of Business and
has
not:
(a) Sold,
leased, assigned or otherwise transferred any material properties or assets,
or
disposed of or permitted to lapse any rights in any Permit or Intellectual
Property owned or used by it other than in the Ordinary Course of Business,
or
organized any new business entity or acquired any equity securities, assets,
properties, or business of any Person or any equity or ownership interest in
any
business or merged with or into or consolidated with any other
Person;
(b) Suffered,
sustained or incurred any material loss or waived or released any material
right
or claim, whether or not in the Ordinary Course of Business;
(c) Suffered,
sustained or incurred any material damage, destruction or casualty loss to
any
material properties or assets, whether or not covered by insurance;
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15 -
(d) Engaged
in any transaction not in the Ordinary Course of Business;
(e) Made
any
capital expenditure in excess of $25,000 individually or $100,000 in the
aggregate;
(f) Subjected
any of its properties or assets to any Encumbrance, whether or not in the
Ordinary Course of Business;
(g) Issued
any note, bond or other debt security or created, incurred or assumed any
indebtedness for borrowed money or capitalized lease obligation, or otherwise
incurred any material Liability, except current Liabilities incurred in the
Ordinary Course of Business;
(h) Discharged
or satisfied any Encumbrance, or paid any material Liability, other than current
Liabilities shown on the most recent balance sheet included in the Financial
Statements, and current Liabilities incurred in the Ordinary Course of Business
since June 30, 2008;
(i) Declared,
set aside or paid a dividend or made any other distribution with respect to
any
class or series of capital stock of the Company, or directly or indirectly
redeemed, purchased or otherwise acquired any shares of any class or series
of
the Company’s capital stock;
(j) Increased
the salary, wage or other compensation or level of benefits payable or to become
payable by the Company to any of its employees, officers, or directors,
including, without limitation, granting, paying or accruing any bonus other
than
holiday bonuses in the Ordinary Course of Business, incentive compensation,
service award, or other similar benefit, other than any wage increases or raises
to non-officer or non-director employees in the Ordinary Course of
Business;
(k) Loaned
money to any Person or guaranteed any loan to or Liability of any Person,
whether or not in the Ordinary Course of Business;
(l) Except
as
described in the Shareholder’s Schedules, amended or terminated any Material
Contract, except in the Ordinary Course of Business;
(m) Suffered,
sustained or incurred any Material Adverse Change;
(n) Incurred
any termination of any material customer account or group of accounts or
received notice from any customer, supplier, vendor, Governmental Authority
or
any other Person which could give rise to or result in a Material Adverse Effect
on the Company;
(o) Delayed,
postponed, or failed to pay any Liability outside of the Ordinary Course of
Business;
(p) Entered
into any employment contract or collective bargaining agreement, written or
oral, or modified the terms of any existing such contract or agreement or
adopted, amended, modified or terminated any benefit plan for the benefit of
any
of the Companies’ directors, officers or employees;
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16 -
(q) Made
any
change or amendment in its articles of incorporation, bylaws, or other governing
instruments;
(r) Issued
or
sold any securities; acquired, directly or indirectly, by redemption or
otherwise, any securities; reclassified, split up or otherwise changed any
such
equity security; or granted or entered into any options, warrants, calls or
commitments of any kind with respect thereto;
(s) Incurred
any Liability other than in the Ordinary Course of Business;
(t) Disposed
of, or permitted to lapse, any Intellectual Property rights or disclosed any
trade secret, process or know-how to any Person not an employee;
(u) Entered
into any contract other than in the Ordinary Course of Business;
and/or
(v) Entered
into any contract to do any of the foregoing.
3.11 Guarantees.
(a) Except
as
set forth in the Shareholder’s Schedules, the Company has not guaranteed, become
surety or contingent obligor for or assumed any obligation, debt or dividend
of
any Person. No assets of the Company or any Subsidiary are or have been pledged,
hypothecated, delivered for safekeeping, subjected to a security interest or
otherwise provided in any way as security for payment or performance of any
obligation of a Person other than the Company.
(b) Section
3.11(b) of the Shareholder’s Schedules identifies all Liabilities of the Company
for which the Shareholder has provided or been caused to incur personal
guarantees thereof.
3.12 Tax
Matters.
(a) The
Shareholder has previously provided the Purchaser with true and correct copies
of the income Tax Returns which the Company has filed for the taxable periods
ended on or after September 30, 2005.
(b) Except
as
set forth on Shareholder’s Schedules:
(i) The
Company (A) has filed or caused to be filed all Tax Returns (or extensions
thereof) which it is or has been required to file on or prior to the date
hereof, by any jurisdiction to which it is or has been subject, and all such
Tax
Returns correctly and completely reflect all liability of the Company for any
Taxes; (B) has timely paid all Taxes due and owing for all periods prior to
the
date hereof; (C) has made or caused to be made all withholdings of Taxes
required to be made by it, and such withholdings have either been paid to the
appropriate governmental agency or set aside in appropriate accounts for such
purpose; and (D) has established adequate reserves and/or accruals for, in
its
financial books and records and related Financial Statements, all unpaid Taxes
and all current Taxes not yet due and payable.
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17 -
(ii) There
are
no Tax deficiencies proposed or Threatened against the Company, nor are there
any agreements, waivers, or other arrangements providing for extension of time
with respect to the assessment or collection of any Tax against the Company.
There are no audits, actions, suits, proceedings, investigations or claims
now
pending against the Company with respect to any Tax, or any matter under
discussion between the Company and any Governmental Authority relating to any
Taxes.
(iii) The
Company is not and has never been a member of an affiliated group of
corporations (within the meaning of Section 1504 of the Code).
(iv) The
Company is not a party to, is not bound by, and does not have any obligation
under any tax sharing, tax indemnity, or similar agreement.
(v) The
Company has prepared all Tax Returns on the accrual method of accounting. The
Company has not made and will not make a change in method of accounting for
a
taxable year beginning on or before the Closing Date, which would require it
to
include any adjustment under Section 481(a) of the Internal Revenue Code in
taxable income for any taxable year beginning on or after the Closing
Date.
(vi) Except
as
set forth in the Shareholder’s Schedules, the Shareholder is not a foreign
person so that Section 897 and 6039C of the Internal Revenue Code are not
applicable to the transactions provided for hereunder.
(vii) The
Shareholder’s Schedules identify all audits of the Company’s Tax Returns,
including a reasonably detailed description of the nature and outcome of each
audit. The Company has not given or been requested to give waivers or extensions
of any statute of limitations relating to the payment of Taxes.
(viii) The
Company, since October 1, 1989 has been a validly electing “S Corporation”
as that term is defined in Sections 1361 and 1362 of the Code, and has been
a
validly electing and qualifying “S” Corporation for state law purposes. The
Company has never revoked or terminated any such federal or similar state
election, nor has it taken any action which would disqualify the Company from
its S Corporation status for federal and state purposes. In accordance with
the
Section 338(h)(10) election, the Company’s final “S Corporation” return shall
report any gain or loss from the deemed sale under Section 338.
(ix) FNA,
for
a period of at least 10 years has been filing as an “S Corporation” as that
term is defined in Sections 1361 and 1362 of the Code,. FNA has never taken
any
action which would disqualify FNA from its S Corporation status for federal
and
state purposes. In accordance with the Section 338(h)(10) election, FNA’s final
“S Corporation” return shall report any gain or loss from the deemed sale under
Section 338.
(x) BFW,
since February 1, 2008 has been a validly electing “S Corporation” as that
term is defined in Sections 1361 and 1362 of the Code, and has been a validly
electing and qualifying “S” Corporation for state law purposes. BFW has never
revoked or terminated any such federal or similar state election, nor has it
taken any action which would disqualify BFW from its S Corporation status for
federal and state purposes. In accordance with
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18 -
the
Section 338(h)(10) election, BFW’s final “S Corporation” return shall report any
gain or loss from the deemed sale under Section 338.
(xi) Except
as
set forth in the Shareholder’s Schedules, the Company has not in the past ten
(10) years, (A) acquired assets from another corporation in a transaction in
which the Company’s Tax basis for the acquired assets was determined, in whole
or in part, by reference to the Tax basis of the acquired assets (or any other
property) in the hands of the transferor, or (B) acquired the stock of any
corporation which is a “qualified subchapter S subsidiary”.
(xii) The
Company has not filed a consent under Section 341(g) of the Code concerning
collapsible corporations. The Company is not a party to any agreement, contract,
arrangement or plan that has resulted or would result, separately or in the
aggregate, in the payment of (A) any “excess parachute payment” within the
meaning of Section 280G of the Code (or any corresponding provision of state,
local or foreign Tax law) or (B) any amount that will not be fully deductible
as
a result of Section 162(m) of the Code (or any corresponding provision of state,
local or foreign Tax law. The Company has not been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(1)(A)(ii) of the Code. The
Company has disclosed on its federal income Tax Returns all positions taken
therein that could give rise to a substantial understatement of federal income
Tax within the meaning of Section 6662 and 6662(A) of the Code.
3.13 Litigation.
Except
as
set forth in Schedule 3.13, there are no Proceedings, claims or demands pending
or Threatened (i) against or involving the Company or any of its officers or
directors (in their capacity as such), (ii) which seek to enjoin or obtain
damages in respect of the transactions contemplated by this Agreement, or (iii)
which would prevent the Company from consummating the transactions contemplated
by this Agreement. To the Knowledge of the Shareholder, there are no state
of
facts existing which is reasonably likely to give rise to any such action,
suit,
proceeding, claim, demand or investigation. There are no Proceedings pending
or
Threatened against or involving the Company by or before any Governmental
Authority, or to the Knowledge of the Shareholder, state of facts existing
which
is reasonably likely to give rise to any such Proceedings. The Company is not
in
violation of any Injunction.
3.14 Real
Property.
The
Company has the right to use all real property necessary for the conduct of
the
Business as presently conducted. Schedule 3.14 identifies all such real
property. Except as set forth in the Shareholder’s Schedules, the Company is not
a party to any leases of real property. The Company is the lessee under the
real
estate leases described on Schedule 3.17. True, correct and complete copies
of
said leases and any amendments, extensions and renewals thereof have heretofore
been delivered by the Company to the Purchaser. The Company enjoys quiet and
undisturbed possession under each of said leases. The Company’s interest in each
of such leases is free and clear of any Encumbrances, is not subject to any
deeds of trust, assignments, subleases or rights of any third parties created
by
the Company, other than the lessor thereof. To
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19 -
the
Knowledge of the Shareholder, said leases are valid and binding and in full
force and effect, and the Company is not in default thereunder as to the payment
of rent or otherwise, and the consummation of the transactions contemplated
by
this Agreement will not constitute an event of default under any of said leases
and the continuation, validity and effectiveness of such leases will not be
adversely affected by the transactions contemplated by this Agreement.
3.15 Owned
Tangible Personal Property.
The
Company owns or has the right to use all personal property necessary for the
conduct of the Business as presently conducted. The Shareholder’s Schedules set
forth a list of the items of tangible personal property owned by the Company
where the replacement value of each item individually exceeds $10,000 (the
“Tangible Personal Property”). Except as set forth on Schedule 3.15 hereto and
except for property disposed of in the Ordinary Course of Business of the
Company, the Company has all right, title and interest in, and good title to,
the Tangible Personal Property free and clear of any Encumbrance. With respect
to each item of Tangible Personal Property, (i) there are no leases, subleases,
licenses, options, rights, or concessions or other agreements, written or oral,
granting to any party or parties the right of use of any portion of such item
of
Tangible Personal Property, (ii) there are no outstanding options or rights
of
first refusal in favor of any other party to purchase any such item of Tangible
Personal Property or portion thereof or interest therein, and (iii) there are
no
parties other than the Company which are in possession of or are using such
Tangible Personal Property. Copies of all leases and licenses relating to the
Tangible Personal Property have heretofore been delivered by the Company to
Purchaser.
3.16 Condition
of Buildings and Tangible Personal Property.
All
of
the premises occupied and the items of Tangible Personal Property are in such
operating condition and repair as are necessary for the conduct of the Business
and, to the Knowledge of the Shareholder, comply in all material respects with
Applicable Laws, including but not limited to zoning, building and fire codes.
Each item of Tangible Personal Property is adequately covered by one of the
insurance policies described in Section 3.24 hereto.
3.17 Material
Contracts.
(a) Section
3.17 of the Shareholder’s Schedules contains a list of all of the material
contracts of the Company which shall consist of all agreements, leases,
licenses, or contracts to which the Company is a party, under which the Company
may become subject to any obligation or liability, or by which the Company
or
any of its assets may become bound (collectively, the “Material Contracts”) that
satisfy any of the following:
(i) each
agreement or contract that involves performance of services or delivery of
goods
or materials by the Company in an amount or for a value in excess of
$25,000;
(ii) each
agreement or contract that was not entered into in the Ordinary Course of
Business;
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20 -
(iii) each
lease, rental or occupancy agreement, license, installment and conditional
sale
agreement, and other agreement or contract affecting the ownership of, leasing
of, title to, use of, or any leasehold or other interest in, any real or
personal property (except personal property leases and installment and
conditional sales agreements having a value per item or aggregate payments
of
less than $25,000 and with terms of less than one year);
(iv) each
licensing agreement or other agreement or contract with respect to technology,
operating or accounting systems, patents, trademarks, copyrights, or other
Intellectual Property (regardless of whether the Company is the licensee or
licensor thereunder), including agreements with current or former employees,
consultants, or contractors regarding the appropriation or the nondisclosure
of
any Intellectual Property assets of the Company;
(v) each
collective bargaining agreement or other agreement or contract with any labor
union or other employee representative of a group of employees;
(vi) each
joint venture, partnership, and other agreement or contract (however named)
involving a sharing of profits, losses, costs, or liabilities by the Company
with any other Person;
(vii) each
agreement, contract or understanding containing covenants that in any way
purport to restrict the Business activity of the Company;
(viii) each
agreement or contract providing for payments to or by any Person based on sales,
purchases, or profits, other than direct payments for goods or
services;
(ix) each
agreement or contract for capital expenditures in excess of
$25,000;
(x) each
written warranty, guaranty, and or other similar undertaking with respect to
contractual performance extended by the Company other than in the Ordinary
Course of Business;
(xi) each
employment contract, consulting contract, or severance agreement, including
contracts (A) to employ or terminate officers or other personnel and other
contracts with present or former officers or directors of the Company or (B)
that will result in the payment by, or the creation of, any Liability of the
Company, the Shareholder, or the Purchaser to pay any severance, termination,
“golden parachute,” or other similar payments to any present or former personnel
following termination of employment or otherwise as a result of the consummation
of the transactions contemplated by this Agreement;
(xii) each
agreement or contract with a Related Person;
(xiii) any
other
agreement or contract expected to have a Material Adverse Effect on the Business
or the Company; and
(xiv) each
material amendment, supplement, and modification (whether oral or written)
in
respect of any of the foregoing.
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21 -
(b) Accurate
and complete copies of each Material Contract listed in Section 3.17 of the
Shareholder’s Schedules have been made available to the Purchaser, at
Purchaser’s request, prior to the date hereof. Except as set forth in the
Shareholder’s Schedules, to the Knowledge of the Shareholder, all of the
Material Contracts are valid, binding and enforceable against the respective
parties thereto in accordance with their respective terms. Neither the Company
nor, to the Knowledge of the Shareholder, any other party is in default or
in
arrears under the terms of any Material Contract, and to the Knowledge of the
Shareholder, no condition exists or event has occurred which, with the giving
of
notice or lapse of time or both, would constitute a default thereunder. The
Shareholder has no reason to believe that the products or services called for
by
any executory Material Contract cannot be supplied in accordance with the terms
of such Material Contract, and the Shareholder has no reason to believe that
any
unfinished Material Contract will, upon performance by the Company, result
in a
loss by the Company. The Company has not committed any act, and there has been
no omission, which may result in, and there has been no occurrence which may
give rise to, Liability for breach of warranty (whether or not covered by
insurance) on the part of the Company with respect to services rendered or
products sold by the Company.
3.18 Relationship
with Related Persons.
The
Shareholder, directors, officers, and employees of the Company, and their
Related Persons do not have any interest in any of the properties or assets
of
or used by the Company and do not own, of record or as a beneficial owner,
an
equity interest or any other financial or profit interest in any Person that
(i)
has had business dealings or a material financial interest in any transaction
with the Company, or (ii) has engaged or is engaged in competition with the
Company with respect to any line of products or services of the Company in
any
market presently served by the Company (a “Competing Business”) (except for the
ownership of less than three percent (3%) of the outstanding capital stock
of
any Competing Business that is publicly traded on any recognized exchange or
in
the over the counter market). Except as set forth in the Shareholder’s
Schedules, neither the Shareholder, nor any director or officer of the Company
and none of their Related Persons is a party to any contract with, or has any
claim against, the Company. All money owed by the Company to the Shareholder,
or
its directors or officers, or their Related Persons, (other than for salary
and
bonuses) are for bona fide debts and are set forth in the Shareholder’s
Schedules.
3.19 Banking
Matters.
Section
3.19 of the Shareholder’s Schedules contains a true, complete and correct list
of the names of all banks and other financial institutions (with account
numbers) in which the Company has an account or safe deposit box, and of all
brokerage firms and other entities and persons holding funds or investments
of
the Company, and the names of all persons authorized to draw thereon or make
withdrawals therefrom.
3.20 Labor
and Employment Matters.
(a) The
Shareholder’s Schedules contain a complete list of all written employment
arrangements, pension, retirement, profit sharing and bonus plans, and deferred
compensation, health, welfare, severance management, and other similar plans
for
the benefit of
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22 -
any
employees of the Company, including employee plans subject to the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”). Except for the
Company’s 401(k) plan, the Company at present is not, and during the five (5)
year period preceding the Closing Date will not have been, a sponsor of, party
to or obligated to contribute to any employee benefit plan (as defined in § 3(3)
of ERISA). The Company at present is not, and during the five (5) year period
preceding the Closing Date will not have been, a party to any collective
bargaining agreement. The Company has never been a member of a “controlled group
of corporations” within the meaning of Section 414(b) or (c) of the Code and has
never maintained a defined benefit pension plan or contributed to a
multiemployer plan as defined in Section 3(37) of ERISA. True, correct and
complete copies of each Employee Benefit Plan have heretofore been delivered
by
the Company to the Purchaser.
(b) With
respect to each Employee Benefit Plan:
(i) there
is
no litigation, disputed claim (other than routine claims for benefits),
governmental proceeding, inquiry or investigation pending or Threatened with
respect to each such plan, its related trust, or any fiduciary, administrator
or
sponsor of such plan; and
(ii) each
such
plan has been established, maintained, funded and administered in all material
respects in accordance with its governing documents, and any applicable
provisions of ERISA, the Code and other Applicable Laws.
(c) All
directors, officers, and employees of the Company, together with the current
salaries, job descriptions, and locations of such directors, officers and
employees are set forth in the Shareholder’s Schedules.
(d) Except
as
set forth in the Shareholder’s Schedules and as required under COBRA, the
Company is not obligated to and does not (directly or indirectly) provide death
benefits or health care coverage to any former employees or
retirees.
(e) The
Company has complied with all Applicable Laws respecting employment practices,
terms and conditions of employment, wages and hours, equal employment
opportunity, and the payment of social security and similar taxes. The Company
is not engaged in any unfair labor practice. The Company has complied with
all
applicable provisions of the Immigration Reform and Control Act of
1986.
(f) Except
as
set forth in the Shareholder’s Schedules, the Company has not entered into any
severance or similar arrangement in respect of any present or former employee
that will result in an obligation (absolute or contingent) of the Company to
make any payment to any present or former employee following termination of
employment or upon consummation of the transactions contemplated by this
Agreement.
(g) As
of the
Closing Date, no executive officer, Key Employee or group of employees shall
have ceased to be employed by the Company or expressed an intention to terminate
his or her employment with the Company.
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23 -
3.21 Termination
of Business Relationships.
No
supplier of the Company which cannot be replaced on commercially reasonable
terms has, to the Knowledge of the Shareholder, evidenced to the Company or
the
Shareholder any intention to cancel or terminate its business relationship
with
the Company. No Key Employee of the Company has notified the Company or the
Shareholder of his or her intent or desire to terminate employment with the
Company.
3.22 Customers.
The
Shareholder has previously delivered to the Purchaser a true and correct list
of
the ten largest end-customers of the Company’s stations based on the percentage
of revenue represented by those customers for fiscal years 2007 and 2006 and
for
the interim period ended June 30, 2008.
3.23 Product
and Service Warranties.
Except
as
set forth in the Shareholder’s Schedules, there are no Liabilities of or claims
against the Company, and no Liabilities or claims are Threatened against the
Company, with respect to any product liability (or similar claim) or product
or
service warranty (or similar claim) claim that relates to any product or service
provided by the Company and involves an amount in excess of $25,000 individually
or $100,000 in the aggregate with all other claims.
3.24 Insurance.
Schedule
3.24 of the Shareholder’s Schedules identifies all of the Company’s insurance
policies. The Company maintains insurance covering its assets, business,
equipment, properties, operations and employees. All of such policies are in
full force and effect and all premiums payable have been paid in full and the
Company is in compliance in all material respects with the terms and conditions
of such policies. The Company has not received any notice from any issuer of
such policies of its intention to cancel or refusal to renew any policy issued
by it or of its intention to renew any such policy based on a material increase
in premium rates other than in the Ordinary Course of Business. None of such
policies are subject to cancellation by virtue of this Agreement or the
consummation of the other transactions contemplated herein. There is no claim
by
the Company pending under any of such policies as to which coverage has been
questioned or denied.
3.25 Compliance
with Laws.
To
the
Knowledge of the Shareholder, the Company has complied in all material respects
with all Applicable Laws applicable to it and its business, assets, properties
and operations and no claim of the violation of any such Applicable Law has
been
asserted prior to the date hereof. Neither the Company nor the Shareholder
has
received any notice to the effect that, or has been otherwise advised that,
the
Company is not in compliance with any Applicable Laws. Neither the Company
nor
the Shareholder has any reason to anticipate that any existing circumstances
are
likely to result in any material violation of any Applicable Law.
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24 -
3.26 Licenses
and Permits.
The
Company has secured all Permits necessary for the conduct of the Business,
except for those Permits, the absence of which, either alone or in the
aggregate, would not have a Material Adverse Effect upon the Business or the
Company. With respect to each Permit, (a) such Permit is in full force and
effect, (b) the Company (or other designated permittee or licensee thereunder)
is in compliance in all material respects with the terms, provisions and
conditions thereof, (c) there are no outstanding violations, notices of
noncompliance therewith, judgments, consent decrees, orders or judicial or
administrative action(s) or Proceeding(s) affecting such Permit, and (d) no
condition exists, no event has occurred which (whether with or without notice,
lapse of time or the occurrence of any other event) and neither this Agreement
nor the transactions contemplated hereby would permit the suspension or
revocation of such Permit other than by expiration of the term set forth
therein.
3.27 Environmental
Matters.
Except
as
set forth in the Shareholder’s Schedules, to the Knowledge of the Shareholder
(i) the Company is currently in compliance with all applicable
Environmental Laws, and has obtained all permits and other authorizations from,
and submitted all forms, fees, registrations, reports and similar filings to,
the appropriate Person or Governmental Authority required to operate its
facilities in compliance with applicable Environmental Laws; (ii) the Company
has not violated any applicable Environmental Law; (iii) there is no present
requirement of any applicable Environmental Law which is due to be imposed
upon
the Company which will increase its cost of complying with the Environmental
Laws; (iv) all on-site generation, treatment, processing, storage and disposal
of Hazardous Materials by the Company has been done in compliance with currently
applicable Environmental Laws; (v) all off-site transportation, treatment,
processing, storage and disposal of Waste and Hazardous Materials generated
by
the Company has been done in compliance with currently applicable Environmental
Laws; (vi) the Company has not released, spilled, leaked or otherwise discharged
into the environment any Regulated Substance except as expressly authorized
by
Environmental Laws; and (vii) the Company has not used or otherwise managed
any
Regulated Substance except in strict compliance with all Environmental Laws.
3.28 Intellectual
Property Matters.
The
corporate name of the Company and the trade names and service marks listed
on
Schedule 3.28 of the Shareholder’s Schedules are the only material names and
service marks which are used by the Company in the operation of the Business.
The Intellectual Property owned or licensed to the Company constitutes all
of
the Intellectual Property necessary for the operation of the Business as now
being conducted. Except as set forth in the Shareholder’s Schedules, there are
no outstanding licenses or consents granting third parties the right to use
the
Intellectual Property owned by the Company. The Company has received no notice
of any adversely held patent, invention, trademark, copyright, service ▇▇▇▇
or
trade name, or trade secret of any Person, or any claims of any other Person
relating to any of the Intellectual Property owned by the Company and material
to the Business. To the Knowledge of the Shareholder, there is no presently
known Threatened infringement of any such Intellectual Property. The sale or
use
of any products or services now or heretofore provided by the
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25 -
Company
did not and does not infringe (nor has any claim been made that any such action
infringes) any third party’s registered copyrights, patents or trademarks or
tradenames. The Company’s ownership or right to use any of the Intellectual
Property material to the Business will not cease by reason of the execution,
delivery, or performance of this Agreement.
3.29 Absence
of Certain Business Practices.
Except
for customer or prospective customer entertainment occurring in the Ordinary
Course of Business, to the Knowledge of the Shareholder neither the Company
nor
any Person authorized to act on its behalf, has within the past six (6) years
given or agreed to give any gift or similar benefit to any customer, supplier,
governmental employee or other Person who is or may be in a position to help
or
hinder the Business (or assist the Company in connection with any actual or
proposed transaction) which (i) would subject the Company to any damage or
penalty in any civil, criminal or governmental litigation or Proceeding, (ii)
if
not given in the past, would have had a Material Adverse Effect on the Business
or the Company, or (iii) if not continued in the future, would adversely affect
the financial condition, Business or operations of the Company or which might
subject the Company to suit or penalty in any private or governmental litigation
or Proceedings.
3.30 Brokers
or Finders.
Except
as
set forth in the Shareholder’s Schedules, neither the Company nor the
Shareholder has incurred any Liability for brokerage or finders’ fees or agents
commissions or similar payments in connection with this Agreement.
3.31 Disclosure
The
information concerning the Company set forth in this Agreement, the Exhibits
and
Schedules attached hereto and any document, statement or certificate furnished
or to be furnished to the Purchaser pursuant hereto does not and will not
contain any untrue statement of a material fact or omit to state a material
fact
required to be stated herein or therein or necessary to make the statements
and
facts contained herein or therein, in light of the circumstances in which they
are made, not false an misleading. The Shareholder has disclosed to the
Purchaser all material facts pertaining to the transactions contemplated by
this
Agreement and the Exhibits hereto. Copies of all documents heretofore or
hereafter delivered or made available to the Purchaser pursuant to this
Agreement were or will be complete and accurate copies of such
documents.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF PURCHASER
As
a
material inducement to the Shareholder to execute this Agreement and the
Ancillary Agreements and to consummate the transactions contemplated hereby
and
thereby, Purchaser hereby represents and warrants to the Shareholder that each
of the following representations and warranties are true and correct as of
the
Closing Date, except as either set forth in the reports filed by Purchaser
with
the SEC, or as otherwise set forth in written disclosure schedules (the
“Purchaser’s Schedules”) delivered to Shareholder pursuant to this Article IV, a
copy of which is attached to this Agreement as Exhibit D. The Purchaser’s
Schedules are numbered to correspond
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26 -
to
the
various sections of this Article IV setting forth certain exceptions to the
representations and warranties contained in this Article IV and certain other
information required by this Agreement; provided,
however,
that
any information disclosed in any section of the Purchaser’s Schedules shall be
deemed to be disclosed and incorporated in any other part of the Purchaser’s
Schedules, and shall modify and except the representations and warranties
applicable thereto, where such incorporation is reasonable under the
circumstances.
4.1 Organization
and Qualification.
The
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. The Purchaser has the corporate power
and authority to carry on its business as presently conducted and as currently
anticipated to be conducted. Purchaser is duly qualified or licensed to do
business and in good standing as a foreign corporation in each of the
jurisdictions in which the nature of its business or the character of the
properties and assets which it owns or leases makes such qualification or
licensing necessary.
4.2 Corporate
Instruments and Records.
The
copies of the Purchaser’s certificate of incorporation and bylaws, each
certified by the Secretary of the Purchaser and heretofore furnished to the
Shareholder, are true, correct and complete and each include all amendments
to
the date hereof.
4.3 Authorization;
Valid and Binding Obligation.
The
Purchaser has all the unrestricted and absolute right, power and authority
to
execute and deliver this Agreement and the Ancillary Agreements, and to
consummate the transactions contemplated hereby and thereby. The execution
and
delivery of this Agreement and the Ancillary Agreements to which the Purchaser
is or will be a party and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of the Purchaser. This Agreement and the Ancillary Agreements to
which the Purchaser is a party have been or will be when executed and delivered
by the Purchaser duly executed and delivered by the Purchaser, and constitute,
or will constitute when executed and delivered by the Purchaser the valid and
binding obligations of the Purchaser enforceable against the Purchaser, in
accordance with its terms, except as such enforceability may be limited by
(i)
bankruptcy, insolvency, moratorium or other similar legal requirements affecting
or relating to creditors’ rights generally, and (ii) general principles of
equity. No notices to, declaration, filing or registration with, approvals
or
consents of, or assignments by, any Persons (including Governmental Authorities)
are necessary to be made or obtained by the Purchaser in connection with the
execution, delivery or performance by the Purchaser of this Agreement or the
Ancillary Agreements.
4.4 Litigation;
Orders.
Except
as
set forth within its SEC Reports, (i) there are no Proceedings, claims or
demands pending or Threatened against or involving the Purchaser or state of
facts existing which could give rise to any such action, suit, proceeding,
claim, demand or investigation that would otherwise be required to be disclosed
in such SEC Reports pursuant to the rules and regulations of the SEC; and (ii)
there are no Proceedings pending or Threatened against or
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27 -
involving
the Purchaser by or before any Governmental Authority, department, commission,
bureau, instrumentality or agency (including but not limited to any Governmental
Authority concerned with control of foreign exchange, energy, environmental
protection or pollution control, franchising or other distribution arrangements,
antitrust or trade regulation, civil rights, labor or discrimination, wages
and
hours, safety or health, zoning or land use), or state of facts existing which
could give rise to any such proceedings; and the Purchaser is not in violation
of any Injunction of any Governmental Authority. There is no order, writ,
Injunction, judgment or decree to which Purchaser or any of its assets owned
or
used by it, is subject.
4.5 No
Violations.
The
Purchaser is not in default under or in violation of any provision of (a) its
certificate of incorporation or bylaws, or (b) any Instrument to which it is
a
Party or by which its assets are subject. Neither the execution and delivery
of
the this Agreement or the Ancillary Agreements by the Purchaser, nor the
consummation of the transactions contemplated hereby or thereby, nor compliance
with the terms thereof, will (i) conflict with or result in a breach of any
of
the terms, conditions or provisions of the certificate of incorporation or
bylaws of the Purchaser, (ii) violate, conflict with or result in a breach
of or default under any of the terms, conditions or provisions of any
Instrument, (iii) accelerate or give to others any interests or rights,
including rights of acceleration, termination, modification or cancellation,
under any Instrument or in or with respect to the business or assets of the
Purchaser, (iv) result in the creation of any Encumbrance on the assets, capital
stock or properties of the Purchaser, (v) conflict with, violate or result
in a
breach of or constitute a default under any Applicable Law to which the
Purchaser is subject, (vi) require the Purchaser to give notice to, or obtain
an
authorization, approval, order, license, franchise, declaration or consent
of,
or make a filing with, any Governmental Authority or other Person.
4.6 Investment
Intent.
The
Purchaser is acquiring the Shares for its own account and not with a view to
the
distribution thereof within the meaning of Section 2(a)(11) of the Securities
Act. The Purchaser acknowledges and agrees that the Shares have not been
registered under the Securities Act or under the securities laws of any
jurisdiction.
4.7 Purchaser
SEC Reports.
(a) The
Purchaser has made available to the Shareholder accurate and complete copies
(excluding copies of exhibits) of each report, registration statement and
definitive proxy statement filed by the Purchaser with the SEC since October
2005 (the “SEC Reports”) which availability will be deemed satisfied if the SEC
Reports are available in final form on the SEC’s website. As of the time it was
filed with the SEC (or, if amended or superseded by a filing prior to the date
of this Agreement, then on the date of such filing): (i) each of the SEC
Reports complied in all material respects with the applicable requirements
of
the Securities Act or the Exchange Act (as the case may be); and (ii) none
of
the SEC Reports contained any untrue statement of a material fact or omitted
to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which
they
were made, not misleading.
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28 -
(b) The
consolidated financial statements contained in the SEC Reports:
(i) complied as to form in all material respects with the published rules
and regulations of the SEC applicable thereto; (ii) were prepared in accordance
with GAAP applied on a consistent basis throughout the periods covered, except
as may be indicated in the notes to such consolidated financial statements
and
(in the case of unaudited statements) as permitted by Form 10-Q of the SEC;
and
(iii) fairly present in all material respects the consolidated financial
position of the Purchaser as of the respective dates thereof and the
consolidated results of operations of the Purchaser for the periods covered
thereby, except that the unaudited interim financial statements were or when
filed are subject to normal and recurring year-end adjustments which were not
or
are not expected to be material in amount.
4.8 Brokers
or Finders.
The
Purchaser has not incurred any obligations or liability, contingent or
otherwise, for brokerage or finders’ fees or agents’ commissions or other
similar payments in connection with this Agreement or the transactions
contemplated hereby.
ARTICLE
V
INDEMNIFICATION;
SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND CERTAIN
COVENANTS
5.1 Indemnification.
(a) The
Shareholder shall defend and hold harmless Purchaser from and against any and
all demands, claims, actions or causes of action, judgments, assessments,
losses, liabilities, damages or penalties and reasonable attorneys' fees and
related disbursements (collectively, "Claims") incurred by the Purchaser which
arise out of or result from a breach of any representation or warranty of the
Shareholder contained in this Agreement, or breach of any covenant or agreement
of the Shareholder contained in this Agreement or any of the Ancillary
Agreements, or in the Schedules annexed hereto or thereto, or in any deed,
exhibit, closing certificate, schedule or any ancillary certificates or other
documents or instruments furnished by the Shareholder pursuant hereto or thereto
or in connection with the transactions contemplated hereby or
thereby.
(b) The
Purchaser shall indemnify, defend and hold harmless the Shareholder from and
against any and all Claims incurred by the Shareholder which arise out of or
result from breach of any representation or warranty of the Purchaser or a
breach of any covenant or agreement of the Purchaser contained herein or any
of
the Ancillary Agreements or in the Schedules annexed hereto or thereto or in
any
deed, exhibit, closing certificate, schedule or any ancillary certificates
or
other documents or instruments furnished by the Purchaser pursuant hereto or
in
connection with the transactions contemplated hereby or thereby.
(c) The
right
to indemnification, payment of damages or other remedy based on any
representations, warranties, covenants and obligations contained in this
Agreement will not be affected by and will survive any investigation conducted
with respect to, or any knowledge acquired (or capable of being acquired) at
any
time, whether before or after the
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29 -
Closing
Date, with respect to the accuracy or inaccuracy of or compliance with, any
such
representation, warranty, covenant or obligation.
5.2 Baskets,
Caps and Other Limits
(a) In
respect of the Purchaser’s assertion of any Claim under Section 5.1(a) that is
not a Basket B Claim (a “Basket A Claim”), the Purchaser shall not be entitled
to indemnification until the aggregate amount of all such Basket A Claims
exceeds $50,000 (the “Purchaser’s Threshold Amount”) whereupon the Purchaser
shall, subject to the limitations set forth in Section 5.2(a)(i)-(iii) below,
be
entitled to indemnification for the full amount of such Basket A Claims
including the Purchaser’s Threshold Amount and may assert any subsequent Basket
A Claim without regard to the Purchaser’s Threshold Amount.
(i) The
aggregate liability of the Shareholder for any Basket A Claims shall not exceed
the Indemnification Limitation Amount.
(ii) No
Basket
A Claim may be asserted by the Purchaser after October 1, 2010.
(iii)
To
the
extent a Claim exceeds the Indemnification amount, the unsatisfied amount may
be
carried over (such unsatisfied amount, the “Indemnification Carry-Over”), and
collected as an offset against subsequent payments of the Total Purchase Price;
provided, however, such offset shall not exceed the Indemnification Limitation
Amount at the time of the offset.
(b) In
respect of the Purchaser’s assertion of a Basket B Claim under Section 5.1(a),
the Purchaser shall be entitled to indemnification for the full amount of such
Claim. A “Basket B Claim” shall be any Claim (i) for a breach of representations
or warranties in Sections 3.1, 3.2, 3.3, 3.4, 3.6, 3.7(a), 3.12 and 3.27; (ii)
for fraud; (iii) resulting from matters 1 through 6 and 7(p) set forth on
Schedule 3.13; and (iv) incurred by the Company as a consequence of it not
having been qualified prior to the Closing Date to do business as a foreign
corporation in states in which the Company conducted business prior to the
Closing Date. A Basket B Claim may be made at any time subject to the applicable
statute of limitations.
(c) In
respect of the Shareholder’s assertion of a Claim under Section 5.1(b), the
Shareholder shall not be entitled to indemnification until the aggregate amount
for which indemnification is sought exceeds $50,000 (the “Shareholder’s
Threshold Amount”), whereupon the Shareholder shall, subject to the limitations
set forth below, be entitled to indemnification for the full amount of such
Claims including the Shareholder’s Threshold Amount and may assert any
subsequent claim without regard to the Shareholder’s Threshold Amount. No Claim
under Section 5.1(b) for a breach of a representation or warranty by the
Purchaser may be asserted after October 1, 2010 except in respect of the
representations and warranties in Sections 4.1, 4.2, 4.3, 4.5, and for fraud,
all of which may be asserted at any time subject to the statute of limitation.
The aggregate liability of the Purchaser for any Claim under Section 5.1(b)
shall not exceed the Indemnification Limitation Amount.
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30 -
5.3 Expiration
of Representations, Warranties and Covenants.
The
representations and warranties contained herein shall survive the Closing and
shall thereupon terminate on October 1, 2010, except for the representations
set
forth in Sections 3.1, 3.2, 3.3, 3.4, 3.6, 3.7(a), 3.12, 3.27, 4.1, 4.2, 4.3,
and 4.5, and Claims made for fraud, all of which shall survive indefinitely.
All
covenants and agreements contained herein which by their terms contemplate
actions following the Closing shall survive the Closing and remain in full
force
and effect in accordance with their terms.
5.4 Methods
of Asserting Claims for Indemnification.
All
Claims for indemnification under this Agreement shall be asserted as
follows:
(a) Third
Party Claims. In the event that any Claim for which a Party (the "Indemnitee")
would be entitled to indemnification under this Agreement is asserted against
or
sought to be collected from the Indemnitee by a third party, the Indemnitee
shall promptly notify the other Party (the "Indemnitor") of such Claim,
specifying the nature thereof, the applicable provision in this Agreement or
other instrument under which the Claim arises, and the amount or the estimated
amount thereof (the "Claim Notice"). The Indemnitor shall have thirty (30)
days
(or, if shorter, a period to a date not less than ten (10) days prior to when
a
responsive pleading or other document is required to be filed but in no event
less than ten (10) days from delivery or mailing of the Claim Notice) to notify
the Indemnitee (a) whether or not it disputes the Claim and (b) if liability
hereunder is not disputed, whether or not it desires to defend the Indemnitee.
If the Indemnitor elects to defend by appropriate proceedings, such proceedings
shall be promptly defended by Indemnitor; and all costs and expenses of such
proceedings and the amount of any judgment shall be paid by the
Indemnitor.
The
Indemnitee shall have the right to participate in, but not control, any such
defense or settlement, at its sole cost and expense. If the Indemnitor has
disputed the Claim, as provided above, and has not provided the Indemnitee
with
timely notice of its election to defend the Indemnitee pursuant to this Section
5.4(a), the Indemnitee shall have the right to control the defense or settlement
of such Claim, in its sole discretion, and shall be reimbursed by the Indemnitor
for its reasonable costs and expenses of such defense. Neither Indemnitee nor
Indemnitor shall be otherwise liable for any settlement of any Claim without
the
prior written consent of the other Party.
(b) Non-Third
Party Claims. In the event that the Indemnitee has a Claim for indemnification
hereunder which does not involve a Claim being asserted against it or sought
to
be collected by a third party, the Indemnitee shall promptly send a Claim Notice
with respect to such Claim to the Indemnitor. If the Indemnitor does not satisfy
the Claim within thirty (30) days of the date of the Claim Notice, then such
Claim shall be submitted to arbitration pursuant to Section 6.9 hereof.
(c) Right
of
Set-Off. In the event a Claim arises pursuant to Section 5.1(a), in addition
to
any other rights Purchaser may have with respect to such Claim, Purchaser shall
have the right to apply the amount of the Claim against any Tier-One Earn-Out
Payment, Tier-Two Earn-Out Payment, Integration Payment, or Subsequent Closing
Cash Payment required to be
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31 -
made
by
Purchaser under this Agreement; provided,
however,
that
prior to asserting its rights under this Section 5.4(c), Purchaser shall have
delivered a Claim Notice to the Shareholder in accordance with Section 5.4(a)
or
(b), as applicable, which shall set forth the amount of the Claim. In the event
that the Shareholder notifies the Purchaser within the time period set forth
in
Section 5.4(a) or (b), as applicable, that he disputes the Claim and the Claim
has not been settled or resolved prior to the time payment from the Purchaser
is
due the Claim shall be submitted to arbitration pursuant to Section 6.9 hereof,
and Purchaser’s obligation, in that event, shall be to pay any amount still in
dispute and any undisputed amount due to the Shareholder that is not subject
to
a Claim Notice.
(d) All
Claims for indemnification hereunder shall be settled by Shareholder as
follows:
(i) one
hundred percent (100%) in cash (by payment or set-off as permitted herein)
if
the Claim arises prior to the date any Purchaser Shares are issued to
Shareholder as a component of the Total Purchase Price; and
(ii) if
the
Claim arises after the date any Purchaser Shares are issued to Shareholder
as a
component of the Total Purchase Price, Claims shall be settled by Shareholder
in
a combination of cash (by payment or set-off, as permitted herein) and by
surrender to the Purchaser for retirement of Purchaser Shares, in the same
proportion as cash and Purchaser Shares constitute the pro rata components
of
the Total Purchase Price paid to Shareholder as of the date of such Claim.
For
the purpose of determining the pro rata component of the Total Purchase Price
attributable to the Purchaser Shares, and for the purposes of determining the
valuation of such Shares for the payment of Claims, the Purchaser Shares to
be
retired shall be valued at the fixed valuation attributable to such shares
under
the Agreement as of the original date of issuance to the Shareholder, and shall
not be subject to fluctuation.
5.5 Potential
Set-Off Under Existing Promissory Note.
Should
the Purchaser incur any Claims relating to the settlement or defense of the
litigation indentified in Item 5 of Schedule 3.13, the Shareholder agrees to
offer the Purchaser the alternative of settling such Claims through a reduction
of the principal amount of that Promissory Note described in Schedule 5.5,
provided that Plaintiff is willing to accept such a reduction in lieu of direct
Claim payments by the Purchaser.
5.6 No
Right of Contribution.
After
the
Closing, the Shareholder shall not have any right of contribution against the
Company for any breach of representation, warranty, covenant or agreement of
the
Company under this Agreement.
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32 -
ARTICLE
VI
ADDITIONAL
AGREEMENTS OF THE PARTIES
6.1 Prohibition
on Trading in Purchaser Stock.
The
Shareholder acknowledges that the United States securities laws prohibit any
person who has received material non-public information concerning the matters
which are the subject matter of this Agreement from purchasing or selling the
securities of Purchaser, or from communicating such information to any person
under circumstances in which it is reasonably foreseeable that such person
is
likely to purchase or sell securities of Purchaser. Accordingly, the Shareholder
agrees that he will not purchase or sell any securities of Purchaser, or
communicate such information to any other person under circumstances in which
it
is reasonably foreseeable that such person is likely to purchase or sell
securities of Purchaser, until no earlier than Seventy-Two (72) hours following
the filing of a Current Report on Form 8-K with the SEC announcing the Closing
pursuant to this Agreement.
6.2 Confidentiality.
(a) With
respect to Confidential Information concerning Purchaser and its Affiliates
that
is made available to the Shareholder pursuant to the provisions of this
Agreement, the Shareholder agrees that he shall hold such Confidential
Information in strict confidence, shall not use such Confidential Information
except for the sole purpose of evaluating, and performing the Shareholder’s
obligations and exercising the Shareholder’s rights under, this Agreement, and
shall not disseminate or disclose any of such Confidential Information other
than to their respective agents and representatives who need to know such
information for the sole purpose of evaluating, or performing such Shareholder’s
obligations or exercising such Shareholder’s rights under, this Agreement and
the related transactions (each of whom shall be informed by the Shareholder
of
the confidential nature of the Confidential Information and directed by such
party to treat the Confidential Information confidentially). The above
limitations on use, dissemination and disclosure shall not apply to Confidential
Information that (i) is learned by the Shareholder from a third party under
no
obligation of confidentiality; (ii) becomes known publicly other than through
any act or omission of the Shareholder or any party who received the same
through the Shareholder provided,
however,
that
the Shareholder and the Company have no knowledge that the disclosing party
was
subject to an obligation of confidentiality; (iii) is required by Applicable
Law
to be disclosed by the Shareholder; (iv) is independently developed by the
Shareholder without the use of any Confidential Information received from the
Purchaser or its Affiliates; or (v) is disclosed with the express prior written
consent thereto of Purchaser. The Shareholder agrees to undertake all necessary
steps to ensure that the secrecy and confidentiality of the Confidential
Information will be maintained in accordance with the provisions of this
subsection (a).
(b) Notwithstanding
anything contained in this Section to the contrary, in the event Shareholder
is
required by court order or subpoena to disclose Confidential Information which
is subject to the confidentiality obligations hereunder, prior to such
disclosure, the disclosing Party shall: (i) promptly notify the Purchaser and,
if having received a court order or subpoena, deliver a copy of the same to
the
Purchaser; (ii) cooperate with the Purchaser at the expense of the Purchaser
in
obtaining a protective or similar order with respect to such
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33 -
information;
and (iii) provide only such of the Confidential Information of the Purchaser
as
the Shareholder is advised by its counsel. Without limiting the general nature
of Section 7.4, Section 6.2 shall replace and supersede in all respects the
terms of Section 13 of that certain Letter of Intent dated as of May 23, 2008
from Purchaser to Shareholder.
6.3 Non
Competition.
The
Shareholder covenants and agrees with the Purchaser that during the period
commencing on the Closing Date and terminating October 1, 2012 (the "Noncompete
Term"), he will not, without the prior written consent of the Purchaser, which
may be withheld or given in its sole discretion, directly or indirectly, or
individually or collectively within the United States of America, engage in
any
activity or act in any manner, including but not limited to, as an individual,
owner, sole proprietor, founder, associate, promoter, partner, joint venturer,
shareholder (other than as the record or beneficial owner of less than five
percent (5%) of the outstanding shares of a publicly traded corporation),
officer, director, trustee, manager, employer, employee, licensor, licensee,
principal, agent, salesman, broker, representative, consultant, advisor,
investor or otherwise for the purpose of establishing, operating, assisting
or
managing any business or entity that is engaged in activities that are
competitive with the business of the Company. For the purposes hereof, the
“business of the Company” shall be determined to be the business the Company is
engaged in on the earlier of (i) the end of the Noncompete Term; or (ii) the
date that Shareholder is no longer employed by the Company.
6.4 Non
Solicitation.
The
Shareholder covenants and agrees with the Purchaser that during the Noncompete
Term, he will not, without the prior written consent of Purchaser, which may
be
withheld or given in its sole discretion, act in any manner, including but
not
limited to, as an individual, owner, sole proprietor, founder, associate,
promoter, partner, joint venturer, shareholder (other than as the record or
beneficial owner of less than five percent (5%) of the outstanding shares of
a
publicly traded corporation), officer, director, trustee, manager, employer,
employee, licensor, licensee, principal, agent, salesman, broker,
representative, consultant, advisor, investor or otherwise, directly or
indirectly, to: (i) solicit, counsel or attempt to induce any person who is
then
in the employ of the Company, or who is then providing services as a consultant
or agent of the Company, to leave the employ of or cease providing services,
as
applicable, to the Company, or employ or attempt to employ any such person
or
persons who at any time during the preceding one (1) year was in the employ
of,
or provided services to, the Company; or (ii) solicit, bid for or perform for
any of the then current customers of the Company (defined as a customer who
has
done business with the Company within a year) any services of the type the
Company performed for such customer at any time during the preceding one (1)
year period.
6.5 Injunctive
Relief.
The
Parties agree that the remedy of damages at law for the breach by any of them
of
any of the covenants, obligations or other provisions contained in this
Agreement, including those in Sections 6.1 (Prohibition on Trading), 6.2
(Confidentiality), 6.3 (Non Competition ), and 6.4 (Non Solicitation) is an
inadequate remedy. In recognition of the irreparable harm that a violation
of
such covenants would cause the Party or Parties whom such covenants,
obligations
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34 -
or
other
provisions benefit, the Parties agree that in addition to any other remedies
or
relief that may be available to them, such injured Party shall be entitled
to
(a) a decree or order of specific performance or mandamus to enforce the
observance and performance of such covenant, obligation or other provision,
and
(b) an injunction against and restraining an actual or threatened breach,
violation or violations. The Parties agree that both damages and specific
performance shall be proper modes of relief and are not to be considered
alternative remedies.
6.6 Further
Acts and Assurances.
The
Parties agree that, at any time and from time to time, on and after the Closing
Date, upon the reasonable request of any other Party, they will do or cause
to
be done all such further acts and things and execute, acknowledge and deliver,
or cause to be executed, acknowledged and delivered any and all papers,
documents, instruments, agreements, assignments, transfers, assurances and
conveyances as may be necessary or desirable to carry out and give effect to
the
provisions and intent of this Agreement and the Ancillary Agreements. In
addition, from and after the Closing Date, the Purchaser will afford to the
Shareholder and their attorneys, accountants and other representatives, access,
during normal business hours, to such personnel, books and records relating
to
Purchaser as may reasonably be required in connection with the preparation
of
financial information or the filing of Tax Returns and will cooperate in all
reasonable respects in connection with claims and proceedings asserted by or
against third parties, relating to or arising from the transactions contemplated
hereby.
6.7 Public
Announcements.
(a) Neither
the Shareholder nor the Purchaser, shall disclose to the public or to any third
party the existence of this Agreement or the transactions contemplated hereby
or
any other material nonpublic information (as construed pursuant to Regulation
FD
under the Securities Act) concerning or relating to any Party hereto, other
than
with the express prior written consent of the Party regarding whom such
disclosure would be made; provided, however, that disclosure may be made (a)
to
the minimum extent as may be required by law or court order, or (b) to enforce
the rights of such disclosing Party under this Agreement; provided further,
however, that notwithstanding anything to the contrary contained in this
Agreement, any Party hereto may disclose this Agreement to any of its directors,
officers, employees, shareholders, affiliates, agents and representative who
need to know such information for the sole purpose of evaluating, or performing
its obligations or exercising its rights under this Agreement.
(b) Notwithstanding
anything contained in this Section to the contrary, in the event a Party is
required by court order or subpoena to disclose material nonpublic information
of another Party, prior to such disclosure, the disclosing Party shall: (i)
promptly notify the non-disclosing Party and, if having received a court order
or subpoena, deliver a copy of the same to the non-disclosing Party; (ii)
cooperate with the non-disclosing Party at the expense of the non-disclosing
Party in obtaining a protective or similar order with respect to such
information; and (iii) provide only such of the Confidential Information of
the non-disclosing Party as the disclosing Party is advised by its counsel
is
necessary to strictly comply with such court order or subpoena.
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35 -
(c) The
Purchaser shall have the right to make such public disclosures of this Agreement
and the transactions contemplated hereby as it determines in good faith are
required under applicable federal securities laws, in which event the contents
of any such disclosure shall be submitted to the Shareholder for review and
approval no later than two (2) business days prior to the proposed
disclosure.
(d) The
Parties anticipate issuing a mutually acceptable joint press release announcing
the consummation of the transactions provided for herein.
6.8 Tax
Matters.
(a) At
the
Purchaser’s option (“338 Option”), the Company and the Shareholder will join
with the Purchaser in making an election under Section 338(h)(10) of the Code
in
connection with the purchase of the Shares hereunder (and any corresponding
elections under state tax law) (collectively, a “Section 338(h)(10) Election”).
Prior to making a Section 338(h)(10) Election, Purchaser shall deliver to
Shareholder a completed and final version of IRS Form 8883. Within 21 days
of
receiving such IRS Form 8883, Shareholder shall prepare and deliver to Purchaser
a written statement (the “Tax Statement”) setting forth the amount of Tax that
has been or would be incurred by Shareholder as a result of the sale of the
Shares hereunder absent the making of a Section 338(h)(10) Election (the “Base
Tax Amount”) and the amount of Tax (including Tax on Tax or any applicable
interest or penalties) that would result from the making of a Section 338(h)(10)
Election at the time such election is to be made (the “Adjusted Tax Amount”).
(b) Following
its receipt of the Tax Statement, the Purchaser shall either accept or reject
the Shareholder’s calculation of the Base Tax Amount and the Adjusted Tax
Amount. If the Purchaser disputes either the Base Tax Amount or the Adjusted
Tax
Amount, the Parties shall use good faith efforts to jointly resolve any
objections and discrepancies, and if resolved, shall be fully and completely
binding upon the Parties and not subject to further review, appeal, or dispute.
If the Purchaser and the Shareholder are unable to resolve any objections or
discrepancies claimed by the Purchaser, then the Parties shall follow the
dispute resolution procedures described in Section 6.8(e) below.
(c) Absent
a
dispute regarding the Base Tax Amount or the Adjusted Tax Amount, the Purchaser
shall notify the Shareholder within 30 days of its receipt of the Tax Statement
whether it will make a Section 338(h)(10) Election. If the Purchaser makes
such
an election, the Purchaser shall within 21 days of the Purchaser filing IRS
Form
8023, pay to the Shareholder an amount equal to the difference between the
Adjusted Tax Amount and the Base Tax Amount.
(d) If
Purchaser exercises the 338 Option, then the Shareholder and the Purchaser
shall
jointly make an election on a timely basis with respect to the Company under
Section 338(h)(10) of the Code on Form 8023 or in such other manner as may
be
required by rule or regulation of the Internal Revenue Service, and shall
jointly make an election in the manner required under any analogous provision
of
state or local law as the Shareholder shall designate or as shall be required,
concerning the transactions contemplated by this Agreement. The Purchaser shall,
with the assistance and cooperation of the Shareholder, prepare all such
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36 -
Section
338(h)(10) forms required as attachments to Form 8023 (and all forms under
analogous provisions of state or local law) in accordance with applicable tax
laws and shall on such Form 8023 allocate the Base Purchase Price in a manner
consistent with Section 338 of the Code, and consistent with IRS Form 8883
previously provided by Purchaser to Shareholder.
(e) If
the
Purchaser and the Shareholder are unable to resolve any objections or
discrepancies claimed by the Purchaser, then the matter shall be submitted
to
Independent Accountants. In submitting such matter to Independent Accountants,
the Purchaser and the Shareholder shall concurrently deliver, at their own
expense, to the Independent Accountants and the other Party such documents
and
information as the Independent Accountants may request. Each Party may also
deliver to the Independent Accountants such other information and documents
as
it deems relevant, with copies of such submission and all such documents and
information being concurrently delivered to the other Party. Neither Party
shall
have or conduct any communication, either written or oral, with the Independent
Accountants without the other Party either being present or receiving a
concurrent copy of any written communication. The Independent Accountants may
conduct a conference concerning the objections and disagreements between the
Purchaser and the Shareholder, at which conference each Party shall have the
right to (i) present its documents, materials and other evidence (previously
provided to the Independent Accountants and the other Party), and (ii) have
present its or their advisors, accountants and/or counsel. The Independent
Accountants shall promptly render a decision, acting as an expert and not an
arbitrator, on the issues presented, and such decision shall be final and
binding on all of the Parties to this Agreement. Each of the Parties shall
agree
to indemnify and hold harmless the Independent Accountants, and to execute
whatever documents or agreements are necessary to effectuate the
foregoing.
(f) The
Shareholder, on the one hand, and Purchaser, on the other hand, shall each
pay
fifty percent (50%) of all costs, fees and expenses to engage the Independent
Accountants.
(g) Intentionally
omitted.
(h) The
Shareholder will timely and properly file or cause to be filed all Tax Returns
of the Company which are due or which will become due for periods ending through
the Closing Date, all such Tax Returns to be true and correct and complete
in
all material respects, and the Shareholder will pay or cause to be paid in
full
when due all Taxes, if any, shown to be due on such returns; in that regard,
the
Company shall provide Shareholder with such reasonable access to the books
and
records of the Company as is necessary to complete and file such Tax Returns.
Shareholder shall present for the Purchaser’s review and the Purchaser shall be
entitled to review all final federal and state S-corporation returns which
shall
include gains, if any, resulting from the Section 338(h)(10) election to be
filed by the Parties hereto, thirty (30) days prior to the filing of any such
return. In addition, the Shareholder agrees that any and all costs of preparing
such Tax Return shall be borne exclusively by the Shareholder.
(i) With
respect to any other Tax Returns for any taxable period that includes but does
not end on the Closing Date (the “Straddle Tax Returns”), the Purchaser and
Shareholder shall prepare a schedule (the “Apportionment Schedule”) apportioning
the taxable income or loss and all other items of the Company allocable to
(i)
the period up to and including
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37 -
the
Closing Date and (ii) the period after the Closing Date, by an interim closing
of the books as of the end of the day on the Closing Date. The Shareholder
agrees that he will be responsible for all Taxes covered by the Apportionment
Schedule for periods prior to the Closing.
(j) All
transfer, documentary, stamp, registration, sales and use, registration, stamp
and similar Taxes and fees (including all penalties and interest) imposed in
connection with the sale of the Shares or any other transaction that occurs
pursuant to this Agreement shall be borne solely by the
Shareholder.
(k) After
the
Closing Date, the Shareholder, on the one hand, and the Purchaser, and the
Company on the other, shall (i) provide, or cause to be provided, to each
other’s respective subsidiaries, officers, employees, representatives and
affiliates, such assistance as may reasonably be requested by any of them in
connection with the preparation of any Tax Return, including any Straddle Tax
Returns or associated Apportionment Schedule, or any audit of the Company in
respect of which the Shareholder, on the one hand, or the Purchaser or the
Company, on the other, as the case may be, are responsible pursuant to this
Section 6.8, and (ii) retain, or cause to be retained, for so long as any such
taxable years or audits shall remain open for adjustments, any records or
information which may be relevant to any such Tax Returns or audits. The
assistance provided for in this Section 6.8(k) shall include without limitation
each of the Shareholder, the Purchaser, and the Company (x) making their agents
and employees and the agents and employees of their respective subsidiaries
and
affiliates available to each other on a mutually convenient basis to provide
such assistance as might reasonably be expected to be of use in connection
with
any such Tax Returns or audits and (y) providing, or causing to be provided,
such information as might reasonably be expected to be of use in connection
with
any such Tax Returns or audits, including without limitation records, returns,
schedules, documents, work papers, opinions, letters or memoranda, or other
relevant materials relating thereto.
(l) The
Shareholder, the Purchaser, and the Company shall promptly inform, keep
regularly apprised of the progress with respect to, and notify the other Party
in writing not later than (i) five (5) business days after receipt of any notice
of any audit or (ii) ten (10) business days prior to the settlement or final
determination of any audit for which it was responsible pursuant to this Section
6.8 which could affect the Tax liability of such other Party for any taxable
year.
(m) The
Purchaser acknowledges that the Company paid an amount equal to $82,468 in
prepaid income tax, which amount will be subject to a refund request submitted
to the Internal Revenue Service following the Closing. Within 15 days of the
Company’s receipt of such refund, the Purchaser shall cause the Company to pay
the full amount of the refund to the Shareholder.
6.9 Arbitration.
(a) Except
with respect to disputes relating to any Earn-Out Certificate or the Subsequent
Closing Cash Payment which are to be handled exclusively under Section 1.8,
any
other claim, dispute, or controversy of whatever nature arising out of or
relating to this Agreement or the Ancillary Agreements, including, without
limitation, any action or claim based on tort, contract, or statute, or
concerning the interpretation, effect, termination, validity,
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38 -
performance
and/or breach of this Agreement (“Dispute”), shall, unless a specific dispute
resolution provision exists in an Ancillary Agreement, which controls in the
event of a dispute relating to that specific Ancillary Agreement, be resolved
by
final and binding arbitration before one or more arbitrators (“Arbitrators”)
selected from and administered by AAA (the “Administrator”) in accordance with
its then existing arbitration rules or procedures regarding commercial or
business disputes. The arbitration hearing shall be held in Minneapolis,
Minnesota.
(b) Depositions
may be taken and full discovery may be obtained in any arbitration commenced
under this provision.
(c) The
Arbitrators shall, within fifteen (15) calendar days after the conclusion of
the
Arbitration hearing, issue a written award and statement of decision describing
the essential findings and conclusions on which the award is based, including
the calculation of any damages awarded. The Arbitrators shall be authorized
to
award compensatory damages, but shall NOT be authorized (i) to award
non-economic damages, such as for emotional distress or pain and suffering,
(ii)
to award punitive damages, or (iii) to reform, modify or materially change
this
Agreement or any Ancillary Agreement; provided,
however,
that
the damage limitations described in parts (i) and (ii) of this sentence will
not
apply if such damages are statutorily imposed. The Arbitrators also shall be
authorized to grant any temporary, preliminary or permanent equitable remedy
or
relief they deem just and equitable and within the scope of this Agreement
or
any Ancillary Agreement, including, without limitation, an injunction or order
for specific performance.
(d) Each
Party shall bear its own attorney’s fees, costs, and disbursements arising out
of the arbitration, and shall pay an equal share of the fees and costs of the
Administrator and the Arbitrators; provided,
however,
the
Arbitrators shall be authorized to determine whether a Party is the prevailing
Party, and if so, to award to that prevailing Party reimbursement for its
reasonable attorneys’ fees, costs and disbursements (including, for example,
expert witness fees and expenses, photocopy charges, travel expenses, etc.),
and/or the fees and costs of the Administrator and the Arbitrators. Each Party
shall fully perform and satisfy the arbitration award within fifteen (15) days
of the service of the award.
(e) By
agreeing to this binding arbitration provision, the Parties understand that
they
are waiving certain rights and protections which may otherwise be available
if a
Dispute between the Parties were determined by litigation in court, including,
without limitation, the right to seek or obtain certain types of damages
precluded by this Section 6.9, the right to a jury trial, certain rights of
appeal, and a right to invoke formal rules of procedure and
evidence.
6.10 Effective
Date of Financial Calculations.
(a) It
is the
intent of the parties hereto that the net financial performance and results
of
operations of the Company, FNA and BFW from September 1, 2008 through the
Closing Date (the “Pre-Close Period”) shall accrue to the benefit of the
Purchaser. Except for the Permitted Transactions, Company, FNA and BFW shall
only operate in the Ordinary Course of Business during that period and shall
not
during that period engage in any of the transactions prohibited under Section
3.10(a)-(v).
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39 -
(b) To
give
full effect to this Section, as part of the determination of the Working
Capital, the Shareholder’s responsibility to satisfy Bank Indebtedness as of the
Closing Date shall be limited to Bank Indebtedness as of August 31, 2008 with
any over/under payment to this amount as evidenced by the September 5th
settlement to be reflected as an adjustment to Working Capital.
6.11 Inactive
Companies.
Following
the Closing, the Shareholder agrees to process and secure the formal dissolution
and liquidation of the Inactive Companies. Shareholder shall bear all costs
and
expenses associated with the foregoing, including any and all fines., past
tases, and professional fees.
ARTICLE
VII
MISCELLANEOUS
7.1 Definitions.
For
purposes of this Agreement, the following terms have the meanings
specified:
“338
Option”
has the
meaning set forth in Section 6.8(a) of this Agreement.
“338(h)(10)
Tax”
has the
meaning set forth in Section 6.8(a) of this Agreement.
“2009
Earn-Out Payment”
has the
meaning set forth in Section 1.2(b)(ii) of this Agreement.
“2009
Earn-Out Period”
has the
meaning set forth in Section 1.2(b)(ii) of this Agreement.
“2010
Earn-Out Payment”
has the
meaning set forth in Section 1.2(b)(ii) of this Agreement.
“2010
Earn-Out Period”
has the
meaning set forth in Section 1.2(b)(ii) of this Agreement.
“2011
Earn-Out Payment”
has the
meaning set forth in Section 1.2(b)(ii) of this Agreement.
“2011
Earn-Out Period”
has the
meaning set forth in Section 1.2(b)(ii) of this Agreement.
“2012
Earn-Out Payment”
has the
meaning set forth in Section 1.2(b)(ii) of this Agreement.
“2012
Earn-Out Period”
has the
meaning set forth in Section 1.2(b)(ii) of this Agreement.
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40 -
“Acceleration
Threshold”
has the
meaning set forth in Section 1.7(b) of this Agreement.
“Adjusted
Tax Amount”
has the
meaning set forth in Section 6.8(a) of this Agreement.
“Administrator”
has the
meaning set forth in Section 6.9(a) of this Agreement.
“Affiliate”
of
a
Person means any other Person which, directly or indirectly, controls, is
controlled by, or is under common control with, such Person. The term “control”
(including, with correlative meaning, the terms “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 the ownership of voting
securities, by contract or otherwise.
“Affiliated
Entity”
or
“Affiliated
Entities”
has the
meaning set forth in Section 3.5(a)(ii) of this Agreement.
“Agreement”
has
the
meaning set forth in the introductory paragraphs of this Agreement.
“Ancillary
Agreements”
means
the documents, instruments and agreements to be executed and/or delivered
pursuant to this Agreement or any Ancillary Agreement including, without
limitation, the Employment Agreement and the Shareholder’s
Schedules.
“Applicable
Law”
or
“Applicable
Laws”
means
any and all laws, ordinances, constitutions, regulations, statutes, treaties,
rules, codes, licenses, certificates, franchises, permits, requirements and
Injunctions adopted, enacted, implemented, promulgated, issued or entered by
or
under the authority of any Governmental Authority having jurisdiction over
a
specified Person or any of such Person’s properties or assets.
“Apportionment
Schedule”
has the
meaning set forth in Section 6.8(b) of this Agreement.
“Arbitrators”
has
the
meaning set forth in Section 6.9(a) of this Agreement.
“Bad
Debt Expense”
shall be
calculated on a station by station basis as one hundred percent (100%) of any
accounts receivable aged beyond ninety (90) days of invoice date to the extent
such amount exceeds station security deposits available to off-set bad debt
expense. Any amounts deducted as Bad Debt Expense that are later paid shall
result in an increase to Gross Profit Contribution for the Earn-Out Period
in
which such payments were received.
“Bank
Indebtedness”
means
all outstanding bank and other loans, notes, lines of credit, debt instruments,
and other indebtedness, excluding trade payables, capital leases and other
current Liabilities.
“Base
Purchase Price”
has the
meaning set forth in Section 1.2(a) of this Agreement.
“Base
Targeted Amount”
has the
meaning set forth in Section 1.2(b)(iii) of this Agreement.
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41 -
“Business”
as
used
in this Agreement means the business of freight forwarding as carried on by
the
Company immediately prior to the Closing Date.
“Claim
Notice”
has the
meaning set forth in Section 5.4(a) of this Agreement.
“Claims”
has the
meaning set forth in Section 5.1(a) of this Agreement.
“Closing”
has the
meaning set forth in Section 1.1 of this Agreement.
“Closing
Balance Sheet”
has the
meaning set forth in Section 1.6(b) of this Agreement.
“Closing
Date”
has the
meaning set forth in Section 2.1 of this Agreement.
“Code”
means
the Internal Revenue Code of 1986, as amended, and any successor statute, and
the rules and regulations promulgated thereunder.
“Company
Locations”
shall
mean all existing stations and locations of the Company as of the Closing Date,
plus those prospective agents, stations and locations identified on
Schedule 1.2(b)(iii).
“Competing
Business”
has the
meaning set forth in Section 3.18 of this Agreement.
“Confidential
Information”
means
and includes, with respect to a Party, any and all: (a) trade secrets
concerning the business and affairs of such Party, data, know-how, compositions,
processes, designs, sketches, photographs, graphs, drawings, inventions and
ideas, past, current, and planned research and development, customer lists,
current and anticipated customer requirements, price lists, market studies,
business plans, computer software and programs (including object code and source
code), computer software and database technologies, systems, structures and
architectures (and related processes, formulae, composition, improvements,
devices, know-how, inventions, discoveries, concepts, ideas, designs, methods
and information), and any other information, however documented, that is a
trade
secret within the meaning of Applicable Law; and (b) information concerning
the
business and affairs of such Party, which includes historical financial
statements, financial projections and budgets, historical and projected sales,
capital spending budgets and plans, the names and backgrounds of key personnel
and personnel training techniques and materials, however documented, that has
been or may hereafter be provided or shown to a receiving Party by such Party
or
by the directors, officers, employees, agents, consultants, advisors, or other
representatives including legal counsel, accountants and financial advisors
of
such Party or is otherwise obtained from review of such Party’s documents or
property or discussions with such Party or its representatives, irrespective
of
the form of the communication, and also includes all notes, analyses,
compilations, studies, summaries, and other material prepared by the receiving
Party based, in whole or in part, on any information included in the
foregoing.
“Corporate
Transaction”
means
the occurrence, in a single transaction or in a series of related transactions,
of any one or more of the following events: (a) a sale or other disposition
of
all or substantially all of the assets of Purchaser or the Company to an
unrelated third party; (b) a sale by the Purchaser of newly issued
shares of common stock in a private placement transaction to an unrelated third
party that constitute (on a post-sale basis) at least eighty percent (80%)
of
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42 -
the
then
outstanding fully-diluted shares of the Purchaser's outstanding capitalization;
(c) a sale by the Purchaser of equity securities that constitute (on a post-sale
basis) at least fifty percent (50%) of the voting stock of the Company, provided
the sale results in or is accompanied by a change in management control of
the
Purchaser; (d) a merger, consolidation or similar transaction involving
Purchaser or the Company following which the Purchaser or the Company, as
applicable, is not the surviving corporation (other than a merger, consolidation
or similar transaction effected exclusively for the purpose of changing the
domicile of such entity and other than a merger, consolidation or similar
transaction in which the shareholders of the Purchaser or the Company
immediately prior to such merger hold twenty-five percent (25%) or more of
the
outstanding capital stock of such surviving corporation immediately after the
consummation of such merger); or (e) a “reverse merger” or similar transaction
in which the Purchaser or the Company is the surviving entity but in which
the
shareholders of the Purchaser or Company immediately prior to such merger or
similar transaction hold less than twenty-five percent (25%) of the outstanding
capital stock of such entity immediately after the consummation of such merger
or similar transaction.
“Deductible
Amount”
has the
meaning set forth in Section 5.2(a) of this Agreement.
“Deficit
Working Capital Amount”
has the
meaning set forth in Section 1.6(c) of this Agreement.
“Dispute”
has the
meaning set forth in Section 6.9(a) of this Agreement.
“Earn-Out
Certificate”
has the
meaning set forth in Section 1.8(a) of this Agreement.
“Earn-Out
Period”
or
“Earn-Out
Periods”
has the
meaning set forth in Section 1.2(b)(ii) of this Agreement.
“Encumbrance”
means
and includes:
(a) with
respect to any personal property, any intangible property or any property other
than real property, any security or other property interest or right, claim,
lien, pledge, option, charge, security interest, contingent or conditional
sale,
or other title claim or retention agreement or lease or use agreement in the
nature thereof, interest or other right or claim of third parties, whether
voluntarily incurred or arising by operation of law, and including any agreement
to grant or submit to any of the foregoing in the future; and
(b) with
respect to any real property (whether and including owned real estate or leased
real estate), any mortgage, lien, easement, interest, right of way, condemnation
or eminent domain proceeding, encroachment, any building, use or other form
of
restriction, encumbrance or other claim (including adverse or prescriptive)
or
right of third parties (including Governmental Authorities), any lease or
sublease, boundary dispute, and agreements with respect to any real property
including: purchase, sale, right of first refusal, option, construction,
building or property service, maintenance, property management, conditional
or
contingent sale, use or occupancy, franchise or concession, whether voluntarily
incurred or arising by operation of law, and including any agreement to grant
or
submit to any of the foregoing in the future.
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43 -
“Environmental
Laws”
means
any and all Applicable Laws (a) regulating the use, treatment, generation,
transportation, storage, control or disposal of any Hazardous Material,
including, but not limited to, the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. § 9601 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), the Hazardous
Materials Transportation Act (49 U.S.C. § 1801 et seq.), the Federal Water
Pollution Control Act (33 U.S.C. § 1251 et seq.), the Clean Water Act
(33 U.S.C. § 1251 et seq.), the Clean Air Act (42 U.S.C. § 7401 et seq.),
and the Toxic Substances Control Act (15 U.S.C. § 2601 et seq.), and/or (b)
relating to the protection, preservation or conservation of the environment
and
public or worker health and safety, all as existing, defined or interpreted
as
of the Closing Date.
“ERISA”
means
the Employee Retirement Income Security Act of 1974, as amended.
“Excess
Working Capital Amount”
has the
meaning set forth in Section 1.6(e) of this Agreement.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
“Family
Member”
with
respect to any natural Person means the following relatives of such Person
and
the entities designated: any child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law,
including adoptive relationships, any person sharing such Person’s household
(other than a tenant or employee), a trust in which these persons have more
than
fifty percent (50%) of the beneficial interest, a foundation in which these
persons control the management of assets, and any other entity in which these
persons own more than fifty percent (50%) of the voting interests.
“Financial
Statements”
has
the
meaning set forth in Section 2.2(a)(v) of this Agreement.
“▇▇▇▇▇▇▇▇
Employment Agreement”
has the
meaning set forth in Section 2.2(a)(iii) of this Agreement.
“GAAP”
means
generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board and the American Institute
of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of comparable
stature and authority within the accounting profession), or in such other
statements by such entity as may be in general use by significant segments
of
the U.S. accounting profession, which are applicable to the facts and
circumstances on the date of determination.
“Governmental
Authority”
means
any: (a) U.S. federal or state government; or (b) U.S. federal or state
governmental authority (including any governmental agency, branch, board,
commission, department, instrumentality, office or other entity, and any court
or other tribunal).
“Gross
Profit Contributions”
means
the gross transportation revenue and Net Insurance Income realized during each
such Earn-Out Period, less the aggregate cost of: (A) purchased transportation;
(B) agent commissions and/or other amounts paid to stations in the form of
agency fees, franchisee fees or other similar arrangements; (C) Bad Debt
Expenses incurred
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44 -
during
each such Earn-Out Period; and (D) the amounts set forth in Schedule
1.2(b)(iii), with respect to all Company Locations.
“Hazardous
Materials”
means
any and all (a) dangerous, toxic or hazardous pollutants, contaminants,
chemicals, wastes, materials or substances listed or identified in, or directly
or indirectly regulated by, any Applicable Laws, including Environmental Laws,
and (b) any of the following, whether or not included in the foregoing:
polychlorinated biphenyls, asbestos in any form or condition, urea formaldehyde,
petroleum, including crude oil or any fraction thereof, natural gas, natural
gas
liquids, liquefied natural gas, synthetic gas usable for fuel or mixtures
thereof, nuclear fuels or materials, chemical wastes, radioactive materials,
explosives and known carcinogens.
“Inactive
Companies”
has the
meaning set forth in Section 3.1(d) of this Agreement.
“Indemnitee”
has the
meaning set forth in Section 5.4(a) of this Agreement.
“Indemnification
Carry-Over”
has the
meaning set forth in Section 5.3(a)(iii).
“Indemnification
Limitation Amount” is
an
amount equal to Total Purchase Price divided by 2.
“Indemnitor”
has the
meaning set forth in Section 5.4(a) of this Agreement.
“Independent
Accountants”
has the
meaning set forth in Section 1.8(d) of this Agreement.
“Initial
Closing Cash Payment”
has
the
meaning set forth in Section 1.2(b)(i) of this Agreement.
“Injunction”
means
any and all writs, rulings, awards, injunctions (whether temporary, preliminary
or permanent), judgments, decrees or orders (whether executive, judicial or
otherwise) adopted, enacted, implemented, promulgated, issued or entered by
or
under the authority of any Governmental Authority.
“Instrument”
or
“Instruments”
has
the
meaning set forth in Section 3.7(b) of this Agreement.
“Integration
Payment”
has the
meaning set forth in Section 1.5(a) of this Agreement.
“Integration
Payment Date”
has the
meaning set forth in Section 1.5(a)(i) of this Agreement.
“Intellectual
Property”
means
any and all (a) inventions (whether patentable or unpatentable and whether
or
not reduced to practice), all improvements thereto, and all patents, patent
applications and patent disclosures, together with all reissuances,
continuations, continuations in part, revisions, extensions and reexaminations
thereof; (b) trademarks, service marks, trade dress, logos, trade names, assumed
names and corporate names, together with all translations, adaptations,
derivations and combinations thereof and including all goodwill
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45 -
associated
therewith, and all applications, registrations and renewals in connection
therewith; (c) copyrightable works, all copyrights and all applications,
registrations and renewals in connection therewith; (d) mask works and all
applications, registrations and renewals in connection therewith; (e) trade
secrets and confidential business information (including ideas, research and
development, know how, technology, formulas, compositions, manufacturing and
production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information and
business and marketing plans and proposals); (f) computer software (including
data and related software program documentation in computer readable and hard
copy forms); (g) other intellectual property and proprietary rights of any
kind,
nature or description, including web sites, web site domain names and other
e-commerce assets and resources of any kind or nature; and (h) copies of
tangible embodiments thereof (in whatever form or medium).
“Key
Employee”
means
any employee, consultant or advisor, whose employment or service to the Company
is material to the Business including but not limited to, all officers or
directors, all Persons who are in charge of a material function or division
within the Company, i.e., sales, marketing, transportation services,
franchisee operations, etc, and all Persons who are responsible for any material
customer accounts or relationships.
“Knowledge”
means
with respect to the Shareholder, that the Shareholder has actual knowledge
of
the relevant fact or circumstance, prior to or as of the date of this Agreement
and without any obligation of the Shareholder to undertake an independent
investigation of such fact or circumstance.
“Liability”
or
“Liabilities”
means
any and all debts, liabilities and/or obligations of any type, nature or
description (whether known or unknown, asserted or unasserted, secured or
unsecured, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated and whether due or to become due).
“Material
Adverse Effect”
or
“Material
Adverse Change”
means,
in connection with any Person, any event, change or effect that is materially
adverse, individually or in the aggregate, to the condition (financial or
otherwise), properties, assets, Liabilities, revenues, income, business,
operations, results of operations or prospects of such Person, taken as a whole.
In the case of the Company’s results of operations, a Material Adverse Change
will be deemed to have occurred if there is a decrease of more than fifteen
percent (15%) in net income or ten percent (10%) in net revenues (excluding
pass-throughs) over the corresponding prior year period.
“Material
Contracts”
has
the
meaning set forth in Section 3.17(a) of this Agreement.
“Minimum
Working Capital Amount”
has the
meaning set forth in Section 1.6(c) of this Agreement.
“Net
Insurance Income”
shall
equal the insurance premiums charged to the stations net of the underlying
cost
of the insurance premiums and further reduced by any uninsured loss and/or
marketing settlements
“Noncompete
Term”
has the
meaning set forth in Section 6.3 of this Agreement.
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46 -
“Objection
Notice”
has
the
meaning set forth in Section 1.8(b) of this Agreement.
“Ordinary
Course of Business”
means
an action taken by a Person if such action is consistent with the past practices
of such Person and is taken in the ordinary course of the normal day-to-day
operations of such Person.
“Overage”
has the
meaning set forth in Section 1.2(b)(iii)(2) of this Agreement.
“Permit”
means
any and all permits, licenses, filings, authorizations, approvals, or indicia
of
authority (and any pending applications for approval or renewal of a Permit),
to
own, construct, operate, sell, inventory, disburse or maintain any asset or
conduct any business as issued by any Governmental Authority.
“Permitted
Mergers”
has the
meaning set forth in Section 2.2(a)(x) of this Agreement.
“Permitted
Transactions”
has the
meaning set forth in Section 3.10 of this Agreement.
“Person”
means
any individual, corporation (including any non profit corporation), general,
limited or limited liability partnership, limited liability company, joint
venture, estate, trust, association, organization, or other entity or
Governmental Authority.
“Prior
Periods”
has the
meaning set forth in Section 1.7(c) of this Agreement.
“Proceeding”
means
any suit, litigation, arbitration, hearing, audit, investigation or other action
(whether civil, criminal, administrative or investigative) commenced, brought,
conducted, or heard by or before, or otherwise involving, any Governmental
Authority or arbitrator.
“Proportionate
Share of Gross Profit Contributions”
has the
meaning set forth in Section 1.2(b)(iii)(1) of this Agreement.
“Purchaser
Shares”
has the
meaning set forth in Section 1.2(b)(iv) of this Agreement.
“Purchaser’s
Schedules”
has the
meaning set forth in the introductory paragraph to Article IV.
“Regulated
Substance”
means
any substance the manufacturing, processing, sale, generation, treatment,
transportation, storage, disposal, labeling or other management or use of which
is regulated by applicable Environmental Law.
“Related
Company”
or
“Related
Companies”
has the
meaning set forth in Section 3.1(c) of this Agreement.
“Related
Person”
or
“Related
Persons”
means,
with respect to a natural Person:
(a) each
Family Member; and
(b) any
Affiliate of a Family Member.
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47 -
With
respect to any other Person:
(i) any
Affiliate of such Person; and
(ii) each
Person that serves as a director, governor, officer, manager, general partner,
executor or trustee of such Person (or in a similar capacity).
“Response
Period”
has the
meaning set forth in Section 1.8(b) of this Agreement.
“Rights”
means
any and all outstanding subscriptions, warrants, options, voting agreements,
voting trusts, proxies, or other arrangements or commitments obligating or
which
may obligate a Person to dispose of or vote any securities, including, without
limitation, the Shares.
“SEC”
means
the United States Securities and Exchange Commission.
“SEC
Reports”
has the
meaning set forth in Section 4.7(a) of this Agreement.
“Section
338(h)(10) Election”
has the
meaning set forth in Section 6.8(a) of this Agreement.
“Securities
Act”
means
the Securities Act of 1933, as amended.
“Shareholder”
means
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇.
“Shareholder’s
Schedules”
has
the
meaning set forth in the introductory paragraph to Article III.
“Shares”
has
the
meaning set forth in the introductory paragraphs of this Agreement.
“Shortfall
Amount”
has
the
meaning set forth in Section 1.2(b)(iii) of this Agreement.
“Straddle
Tax Returns”
has the
meaning set forth in Section 6.8(b) of this Agreement.
“Subsequent
Closing Cash Payment”
has the
meaning set forth in Section 1.2(b)(i) of this Agreement.
“Subsidiary”
or
“Subsidiaries”
has the
meaning set forth in Section 3.5(a)(i) of this Agreement.
“Tangible
Personal Property”
has the
meaning set forth in Section 3.15 of this Agreement.
“Tax”
or
“Taxes”
means
(i) any and all net income, gross income, gross revenue, gross receipts, net
receipts, ad valorem, franchise, profits, transfer, sales, use, social security,
Medicare, employment, unemployment, disability, license, withholding, payroll,
privilege, excise, value added, severance, stamp, occupation, property, customs,
duties, real estate and/or other taxes, assessments, levies, fees or charges
of
any kind whatsoever imposed by any
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48 -
Governmental
Authority, together with any interest or penalty relating thereto, and (ii)
any
payments under tax sharing arrangements with the Company
“Tax
Return”
or
“Tax
Returns”
means
any return, declaration, report, claim for refund or information return or
statement relating to Taxes, including, without limitation, any schedule or
attachment thereto, any amendment thereof, and any estimated report or
statement.
“Threatened”
means
that a claim, Proceeding, dispute, action, or other matter will be deemed to
have been “Threatened” if any demand or statement has been made in writing, or
any notice has been given in writing that would lead a reasonably prudent Person
to conclude that such a claim, Proceeding, dispute, action, or other matter
will, with substantial certainty, be asserted, commenced, taken or otherwise
pursued in the future; provided,
however,
that
the foregoing shall not include customer billing disputes in the Ordinary Course
of Business.
“Tier-1
Earn-Out Payment”
or
“Tier-1
Earn-Out Payments”
has the
meaning set forth in Section 1.2(b)(ii) of this Agreement.
“Tier-1
Earn-Out Payment Dates”
has the
meaning set forth in Section 1.2(b)(iv) of this Agreement.
“Tier-2
Earn-Out Payment”
or
“Tier-2
Earn-Out Payments”
has the
meaning set forth in Section 1.3(a) of this Agreement.
“Tier-2
Holdback Threshold”
has the
meaning set forth in Section 1.3(b) of this Agreement.
“Total
Purchase Price”
equals
the sum of the Base Purchase Price, the Tier-2 Earn-Out Payments, and the
Integration Payment, to the extent such payments have already been paid to
Shareholder. For the purposes hereof, “Payments” shall include all cash and
Purchaser Shares paid to the Shareholder. Purchaser Shares shall be valued
for
the purposes of this definition, at the fixed amount attributable under the
Agreement on the original date of issuance to the Shareholder and shall not
be
subject to fluctuation.
“Waste”
means
any substance defined as such by any applicable Environmental Law.
“Weighted
Average Price” means,
for any security as of any date, the dollar volume-weighted average price for
such security during the period beginning at 9:30:01 a.m., New York Time (or
such other time as the applicable market publicly announces is the official
open
of trading), and ending at 4:00:00 p.m., New York Time (or such other time
as
the applicable market publicly announces is the official close of trading)
as
reported by Bloomberg through its “Volume at Price” functions, or, if the
foregoing does not apply, the dollar volume-weighted average price of such
security in the over-the-counter market on the electronic bulletin board for
such security during the period beginning at 9:30:01 a.m., New York Time (or
such other time as such market publicly announces is the official open of
trading), and ending at 4:00:00 p.m., New York Time (or such other time as
such
market publicly announces is the official close of trading) as reported by
Bloomberg, or, if no dollar volume-weighted average price is reported for such
security by Bloomberg for such hours, the average of the highest closing bid
price and the lowest closing ask price of any of the market makers for such
security as reported in the “pink sheets”
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49 -
by
Pink
Sheets LLC (formerly the National Quotation Bureau, Inc.). If the Weighted
Average Price cannot be calculated for a security on a particular date on any
of
the foregoing bases, the Weighted Average Price of such security on such date
shall be the fair market value as mutually determined by the Purchaser and
the
Shareholder.
“Working
Capital”
means
the excess of the Company’s current assets over the Company’s current
liabilities, as reflected on, and determined in accordance with,
Schedule 7.1 attached hereto, determined in accordance with GAAP applied on
a consistent basis with the Company’s Financial Statements, without giving
effect to the consummation of the transactions contemplated by this Agreement,
and adjusted to exclude the Company’s accounts receivable aged beyond 90 days of
invoice date.
7.2 Cumulative
Remedies; Waiver.
The
rights and remedies of the Parties to this Agreement are cumulative and not
alternative. Neither the failure nor any delay by any Party in exercising any
right under this Agreement or the documents referred to in this Agreement shall
operate as a waiver of such right, and no single or partial exercise of any
such
right will preclude any other or further exercise of such right or the exercise
of any other right. Except as expressly set forth below in Section 7.11, no
claim or right arising under this Agreement can be discharged by one Party,
in
whole or in part, by a waiver or renunciation of the claim or right unless
in
writing signed by the other Party or Parties. No waiver that may be given by
a
Party shall be applicable except in the specific instance for which it is given.
No notice to or demand on one Party will be deemed to be a waiver of any
obligation of such Party or of the right of the Party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
7.3 Notices.
All
notices requests, demands, waivers and other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given, delivered and received upon delivery if
delivered personally, or on the second business day after it shall have been
deposited by certified or registered mail with postage prepaid, or sent by
telex, telegram or telecopier, to the Parties at the addresses below, or at
such
other address or facsimile number for a Party as shall be specified by like
notice to all Parties:
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50 -
|
If
to the Shareholder:
|
▇▇.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇
▇. ▇▇▇
▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
|
with
a copy to:
|
▇▇▇▇▇
▇▇▇▇▇▇, P.A.
c/o
▇▇▇▇ ▇. ▇▇▇▇, Esq. and
▇▇▇▇
▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
|
If
to the Purchaser:
|
c/▇
▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
|
with
a copy to:
|
Fox
Rothschild LLP
c/o
▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇, Esq.
Princeton
Pike Corp. Center
▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇-▇▇▇▇
|
|
and
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇, Esq.
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
7.4 Entire
Agreement; Assignment.
This
Agreement, including all Exhibits and Schedules hereto, together with the
Ancillary
Agreements, constitutes the entire agreement among the Parties with respect
to
its subject matter hereof and supersedes all prior and contemporaneous
agreements and understandings, both written and oral, among the Parties or
any
of them with respect to such subject matter and shall not be assigned by
operation of law or otherwise.
7.5 Binding
Effect; Benefit.
This
Agreement shall inure to the benefit of and be binding upon the Parties and
their respective successors and assigns. Nothing in this Agreement is intended
to confer on any Person other than the Parties to this Agreement or their
respective successors and assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
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51 -
7.6 Headings.
The
descriptive headings of the sections of this Agreement are inserted for
convenience only, do not constitute a part of this Agreement, and shall not
affect in any way the meaning or interpretation of this Agreement.
7.7 Counterparts.
This
Agreement may be executed in two or more counterparts and delivered via
facsimile, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument.
7.8 Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of Delaware, without regard to the laws that might otherwise govern under
principles of conflicts of laws applicable thereto.
7.9 Severability.
If
any
term, provision, covenant or restriction of this Agreement is held by a court
of
competent jurisdiction or other authority to be invalid, void, unenforceable
or
against its regulatory policy, the remainder of this Agreement shall remain
in
full force and effect and shall in no way be affected, impaired or
invalidated.
7.10 Expenses.
The
Purchaser and Shareholder shall each pay all of their own fees and expenses
incurred by them in connection with the transactions provided for hereunder,
(the Company’s expenses being deemed the Shareholder’s expenses), except that
the Purchaser shall reimburse the Company for third party audit fees incurred
by
the Company in connection with the preparation of the Financial
Statements.
7.11 Amendment
and Modification.
This
Agreement may not be amended, modified, altered or supplemented other than
by
means of a written instrument duly executed and delivered by Purchaser, the
Company and Shareholder.
7.12 Release
and Discharge.
BY
VIRTUE
OF HIS EXECUTION AND DELIVERY OF THIS AGREEMENT, AS OF THE CLOSING AND
THEREAFTER, THE SHAREHOLDER, FOR AND ON BEHALF OF HIS HEIRS, ASSIGNS,
BENEFICIARIES, EXECUTORS AND ADMINISTRATORS DOES HEREBY FULLY AND IRREVOCABLY
REMISE, RELEASE AND FOREVER DISCHARGE THE COMPANY, AND ITS SUBSIDIARIES,
DIRECTORS, OFFICERS, SHAREHOLDERS, AFFILIATES, EMPLOYEES, AGENTS, ATTORNEYS,
ACCOUNTANTS, SUCCESSORS AND ASSIGNS OF AND FROM ANY AND ALL
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52 -
MANNER
OF
CLAIMS, ACTIONS, CAUSES OF ACTION, GRIEVANCES, LIABILITIES, OBLIGATIONS,
PROMISES, DAMAGES, AGREEMENTS, RIGHTS, DEBTS AND EXPENSES (INCLUDING CLAIMS
FOR
ATTORNEYS' FEES AND COSTS), OF EVERY KIND, EITHER IN LAW OR IN EQUITY, WHETHER
CONTINGENT, MATURE, KNOWN OR UNKNOWN, OR SUSPECTED OR UNSUSPECTED, INCLUDING,
WITHOUT LIMITATION, ANY CLAIMS ARISING UNDER ANY FEDERAL, STATE, LOCAL OR
MUNICIPAL LAW, COMMON LAW OR STATUTE, WHETHER ARISING IN CONTRACT OR IN TORT,
AND ANY CLAIMS ARISING UNDER ANY OTHER LAWS OR REGULATIONS OF ANY NATURE
WHATSOEVER, THAT SHAREHOLDER EVER HAD, NOW HAS OR MAY HAVE, FOR OR BY REASON
OF
ANY CAUSE, MATTER OR THING WHATSOEVER, FROM THE BEGINNING OF THE WORLD TO THE
DATE HEREOF; PROVIDED,
HOWEVER,
THAT
SUCH RELEASE SHALL NOT CONSTITUTE A RELEASE OR WAIVER OF SHAREHOLDER’S CLAIMS OR
DEMANDS AGAINST THE COMPANY FOR INDEMNIFICATION OR ADVANCEMENT OF EXPENSES
IN
CONNECTION WITH ANY THIRD PARTY CLAIM (WHICH FOR THIS PURPOSE SHALL NOT INCLUDE
ANY CLAIM MADE BY THE PURCHASER) IN ACCORDANCE WITH THE COMPANY’S ARTICLES OF
INCORPORATION AND BYLAWS, OR FOR DEFENSE, SETTLEMENT OR PAYMENT RELATING TO
ANY
CLAIMS COVERED UNDER THE TERMS AND CONDITIONS OF THE COMPANY’S DIRECTORS AND
OFFICERS LIABILITY INSURANCE POLICIES, AS CURRENTLY IN EFFECT OR HEREAFTER
EXTENDED.
7.13 Time
of Essence.
Time
is
of the essence in this Agreement.
7.14 Construction.
(a) For
purposes of this Agreement, whenever the context requires, the singular number
shall include the plural, and vice versa; the masculine gender shall include
the
feminine and neuter genders; the feminine gender shall include the masculine
and
neuter genders; and the neuter gender shall include the masculine and feminine
genders.
(b) As
used
in this Agreement, the words “include” and “including” and variations thereof,
shall not be deemed to be terms of limitation, but rather shall be deemed to
be
followed by the words “without limitation.”
(c) References
to “$” in this Agreement shall refer in all cases to United States
Dollars.
(d) Capitalized
terms used in the Schedules to this Agreement shall have the same meanings
ascribed to such terms in this Agreement.
[Remainder
of Page Intentionally Left Blank]
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53 -
IN
WITNESS WHEREOF, each of the Parties has executed or caused this Agreement
to be
executed as of the date first above written.
|
______________________________________
WITNESS
(SIGNATURE)
|
By:
/s/ ▇▇▇▇ ▇.
▇▇▇▇▇
Authorized
Executive Officer
|
|
______________________________________
WITNESS
(SIGNATURE)
|
SHAREHOLDER
/s/
▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
|
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