ASSET PURCHASE AGREEMENT dated May 23, 2007 by and among World Energy Solutions, Inc., EnergyGateway, LLC and all of the Members of EnergyGateway, LLC
EXHIBIT
2.1
dated
May 23, 2007
by
and among
EnergyGateway,
LLC
and
all
of the Members of EnergyGateway, LLC
TABLE
OF CONTENTS
Page
ARTICLE
I
|
THE
ASSET PURCHASE
|
1
|
|
|
1.1
|
Purchase
and Sale of Assets
|
1
|
|
1.2
|
Assumption
of Liabilities
|
1
|
|
1.3
|
Purchase
Price
|
2
|
|
1.4
|
Escrow
|
2
|
|
1.5
|
The
Closing
|
2
|
|
1.6
|
Allocation
|
3
|
|
1.7
|
Further
Assurances
|
3
|
|
1.8
|
Withholding
|
3
|
ARTICLE
II
|
REPRESENTATIONS
AND WARRANTIES OF THE SELLER
|
4
|
|
|
2.1
|
Organization,
Qualification and Corporate Power
|
4
|
|
2.2
|
Capitalization
|
4
|
|
2.3
|
Authorization
of Transaction
|
4
|
|
2.4
|
Noncontravention
|
5
|
|
2.5
|
Subsidiaries
|
5
|
|
2.6
|
Financial
Statements
|
5
|
|
2.7
|
Absence
of Certain Changes
|
5
|
|
2.8
|
Undisclosed
Liabilities
|
6
|
|
2.9
|
Tax
Matters
|
6
|
|
2.10
|
Ownership
and Condition of Assets
|
7
|
|
2.11
|
Owned
Real Property
|
8
|
|
2.12
|
Real
Property Leases
|
8
|
|
2.13
|
Intellectual
Property
|
9
|
|
2.14
|
Contracts
|
12
|
|
2.15
|
Accounts
Receivable
|
13
|
|
2.16
|
Insurance
|
14
|
|
2.17
|
Litigation
|
14
|
|
2.18
|
Warranties
|
14
|
|
2.19
|
Employees
|
14
|
|
2.20
|
Employee
Benefits
|
15
|
|
2.21
|
Environmental
Matters
|
16
|
|
2.22
|
Legal
Compliance
|
17
|
|
2.23
|
Customers
and Suppliers
|
17
|
|
2.24
|
Permits
|
17
|
|
2.25
|
Certain
Business Relationships With Affiliates
|
17
|
–
i
–
|
2.26
|
Brokers’
Fees
|
18
|
|
2.27
|
Books
and Records
|
18
|
|
2.28
|
Disclosure
|
18
|
|
2.29
|
Projections
|
18
|
|
2.30
|
Government
Contracts
|
18
|
|
2.31
|
Securities
Representations
|
19
|
ARTICLE
III
|
REPRESENTATIONS
AND WARRANTIES OF THE BUYER
|
20
|
|
|
3.1
|
Organization
and Corporate Power
|
20
|
|
3.2
|
Authorization
of the Transaction
|
20
|
|
3.3
|
Noncontravention
|
20
|
|
3.4
|
Capitalization
|
21
|
|
3.5
|
Reports
and Financial Statements
|
21
|
|
3.6
|
Litigation
|
21
|
|
3.7
|
Financial
Resources
|
22
|
|
3.8
|
Other
Representations
|
22
|
ARTICLE
IV
|
PRE-CLOSING
COVENANTS
|
22
|
|
|
4.1
|
Closing
Efforts
|
22
|
|
4.2
|
Governmental
and Third-Party Notices and Consents
|
22
|
|
4.3
|
Exclusivity
|
23
|
|
4.4
|
Operation
of Business
|
24
|
|
4.5
|
Access
to Information
|
25
|
|
4.6
|
Notice
of Breaches
|
26
|
|
4.7
|
FIRPTA
Tax Certificate
|
26
|
ARTICLE
V
|
CONDITIONS
TO CLOSING
|
26
|
|
|
5.1
|
Conditions
to Obligations of the Buyer
|
26
|
|
5.2
|
Conditions
to Obligations of the Seller
|
28
|
ARTICLE
VI
|
POST-CLOSING
COVENANTS
|
29
|
|
|
6.1
|
Proprietary
Information
|
29
|
|
6.2
|
Solicitation
and Hiring
|
29
|
|
6.3
|
Non-Competition
|
29
|
|
6.4
|
Tax
Matters
|
30
|
|
6.5
|
Sharing
of Data
|
31
|
|
6.6
|
Use
of Name
|
32
|
|
6.7
|
Cooperation
in Litigation
|
32
|
|
6.8
|
Collection
of Accounts Receivable
|
32
|
|
6.9
|
Employees
|
32
|
|
6.10
|
Enforcement
of Insurance Claims
|
33
|
|
6.11
|
Registration
and Listing of Shares
|
33
|
–
ii
–
|
6.12
|
Incidental
Registration
|
36
|
|
6.13
|
Registration
Statement Indemnification
|
38
|
|
6.14
|
Maintenance
of Corporate Existence; Distribution of Shares
|
38
|
ARTICLE
VII
|
INDEMNIFICATION
|
38
|
|
|
7.1
|
Indemnification
by the Seller
|
39
|
|
7.2
|
Indemnification
by the Buyer
|
39
|
|
7.3
|
Indemnification
Claims
|
40
|
|
7.4
|
Survival
of Representations and Warranties
|
43
|
|
7.5
|
Treatment
of Indemnity Payments
|
43
|
|
7.6
|
Limitations
|
43
|
ARTICLE
VIII
|
TERMINATION
|
45
|
|
|
8.1
|
Termination
of Agreement
|
45
|
|
8.2
|
Effect
of Termination
|
45
|
ARTICLE
IX
|
DEFINITIONS
|
45
|
|
ARTICLE
X
|
MISCELLANEOUS
|
58
|
|
|
10.1
|
Press
Releases and Announcements
|
58
|
|
10.2
|
No
Third Party Beneficiaries
|
58
|
|
10.3
|
Entire
Agreement
|
59
|
|
10.4
|
Succession
and Assignment
|
59
|
|
10.5
|
Counterparts
and Facsimile Signature
|
59
|
|
10.6
|
Headings
|
59
|
|
10.7
|
Notices
|
59
|
|
10.8
|
Governing
Law
|
60
|
|
10.9
|
Amendments
and Waivers
|
60
|
|
10.10
|
Severability
|
60
|
|
10.11
|
Expenses
|
61
|
|
10.12
|
Submission
to Jurisdiction
|
61
|
|
10.13
|
Specific
Performance
|
61
|
|
10.14
|
Construction
|
61
|
Exhibits
|
Exhibit
A -
|
Escrow
Agreement
|
|
Exhibit
B -
|
Xxxx
of Sale
|
|
Exhibit
C -
|
Instrument
of Assumption
|
|
Exhibit
D -
|
Opinion
of Seller's counsel
|
|
Exhibit
E -
|
Opinion
of Buyer's counsel
|
–
iii
–
Schedules
|
Schedule
1.1(b) -
|
Specified
Excluded Assets
|
|
Schedule
1.6 -
|
Allocation
of Purchase Price
|
|
Schedule
6.9 -
|
Employees
To Be Offered Employment By Buyer
|
Disclosure
Schedule
–
iv
–
This
Asset Purchase Agreement is entered into as of May 23, 2007 by and among World
Energy Solutions, Inc., a Delaware corporation (the “Buyer”),
EnergyGateway, LLC, an Ohio limited liability company (the “Seller”) and
the members of Seller (the “Members”).
This
Agreement contemplates a transaction in which the Buyer will purchase
substantially all of the assets and assume certain of the liabilities of the
Seller.
Contemporaneously
with the execution and delivery of this Agreement, certain employees of the
Seller have entered into employment agreements with the Buyer, to become
effective upon the Closing (the “Employment Agreements”).
Capitalized
terms used in this Agreement shall have the meanings ascribed to them in Article
IX.
In
consideration of the representations, warranties and covenants herein contained,
the Parties agree as follows.
ARTICLE
I
THE
ASSET PURCHASE
1.1 Purchase
and Sale of Assets.
(a) Upon
and
subject to the terms and conditions of this Agreement, the Buyer shall purchase
from the Seller, and the Seller shall sell, transfer, convey, assign and deliver
to the Buyer, at the Closing, for the consideration specified below in this
Article I, all right, title and interest in, to and under the Acquired
Assets.
(b) Notwithstanding
the provisions of Section 1.1(a), the Acquired Assets shall not include the
Excluded Assets.
1.2 Assumption
of Liabilities.
(a) Upon
and
subject to the terms and conditions of this Agreement, the Buyer shall assume
and become responsible for, from and after the Closing, the Assumed
Liabilities.
(b) Notwithstanding
the terms of Section 1.2(a) or any other provision of this Agreement to the
contrary, the Buyer shall not assume or become responsible for, and the Seller
shall remain liable for, the Retained Liabilities.
(c) Immediately
prior to the Closing, Seller shall pay and satisfy in full all types of
liabilities of Seller including those shown on the Most Recent Balance Sheet,
provided that the amounts paid shall be the amounts of such liabilities as
of
the date of payment.
–
1
–
1.3 Purchase
Price. The Purchase Price to be paid by the Buyer for the
Acquired Assets shall be (a) $5,000,000 less the Net Working Capital Difference,
if any, in cash (the “Cash Consideration”), and (b) 5,375,000 shares (the
“Shares”) of Buyer Common Stock.
1.4 Escrow. At
the Closing, the Buyer shall deliver to the Escrow Agent a stock certificate
registered in the name of the Escrow Agent or its nominee representing the
Escrow Fund for the purpose of securing the indemnification obligations of
the
Seller and the Members set forth in this Agreement. The Escrow Fund
shall be held by the Escrow Agent under the Escrow Agreement pursuant to the
terms thereof. The Escrow Fund shall be held as a trust fund and
shall not be subject to any lien, attachment, trustee process or any other
judicial process of any creditor of any party, and shall be held and disbursed
solely for the purposes of and in accordance with the terms of the Escrow
Agreement. Until the termination of the escrow in accordance with the
terms of the Escrow Agreement, the Seller shall have the right, in its sole
discretion to direct the sale for cash of all or any portion of the Escrow
Shares (if any then make-up a portion of the Escrow Fund) in one or more
transactions provided that (i) the price per share for the sale of the Escrow
Shares is not less than the average closing price of Buyer Common Stock for
the
five (5) trading days immediately preceding the Closing, (ii) the proceeds
from
any such sale(s) shall be held in escrow by the Escrow Agent pursuant to the
terms of the Escrow Agreement, and (iii) Seller may not direct any such sale
during any blackout period under any xxxxxxx xxxxxxx policy or blackout policy
of Buyer, and the Buyer shall promptly execute any and all required joint
instructions to the Escrow Agent to facilitate any and all such sales of the
Escrow Shares. Further, Seller shall have the sole discretion to
direct the investment of amounts held in the Escrow Fund pursuant to the
investment options specified in, and in accordance with the restrictions of,
the
Escrow Agreement, and Buyer agrees to promptly execute any and all joint
instructions to the Escrow Agent to facilitate any and all such
investments.
1.5 The
Closing.
(a) The
Closing shall take place at the offices of WilmerHale in Waltham, Massachusetts
commencing at 9:00 a.m. local time on the Closing Date, or at such other
place as the parties may mutually agree. All transactions at the
Closing shall be deemed to take place simultaneously, and no transaction shall
be deemed to have been completed and no documents or certificates shall be
deemed to have been delivered until all other transactions are completed and
all
other documents and certificates are delivered.
(b) At
the
Closing:
(i) the
Seller shall deliver to the Buyer the various certificates, instruments and
documents referred to in Section 5.1;
(ii) the
Buyer
shall deliver to the Seller the various certificates, instruments and documents
referred to in Section 5.2;
(iii) the
Seller shall execute and deliver to the Buyer a xxxx of sale in substantially
the form attached hereto as Exhibit B and such other instruments of
conveyance as the Buyer may reasonably request in order to effect the sale,
transfer, conveyance and assignment to the Buyer of valid ownership of the
Acquired Assets;
–
2
–
(iv) the
Buyer
shall execute and deliver to the Seller an instrument of assumption in
substantially the form attached hereto as Exhibit C and such other
instruments as the Seller may reasonably request in order to effect the
assumption by the Buyer of the Assumed Liabilities;
(v) the
Buyer
shall pay to the Seller, payable by wire transfer or other delivery of
immediately available U.S. funds to an account designated by the Seller, the
Cash Consideration;
(vi) the
Buyer
shall deliver to the Seller a stock certificate registered in the name of the
Seller representing a number of shares of Buyer Common Stock as is equal to
the
number of Shares minus the number of Escrow Shares;
(vii) the
Buyer, the Seller and the Escrow Agent shall execute and deliver the Escrow
Agreement and the Buyer shall deposit a stock certificate representing the
Escrow Shares with the Escrow Agent in accordance with Section 1.4;
(viii) the
Seller shall deliver to the Buyer, or otherwise put the Buyer in possession
and
control of, all of the Acquired Assets of a tangible nature; and
(ix) the
Buyer
and the Seller shall execute and deliver to each other a cross-receipt
evidencing the transactions referred to above.
1.6 Allocation. The
Buyer and the Seller agree to allocate the Purchase Price (and all other
capitalizable costs) among the Acquired Assets and the non-solicitation and
non-competition covenants set forth in Sections 6.2 and 6.3 for all purposes
(including financial accounting and tax purposes) in accordance with the
allocation schedule attached hereto as Schedule 1.6. Seller and Buyer
agree to use the allocations determined pursuant to this Section 1.6 for all
tax
purposes, including without limitation, those matters subject to Section 1060
of
the Code, and the Treasury regulations promulgated thereunder. Buyer
and Seller shall prepare and submit to the other for review their IRS Forms
8594
within ninety (90) days after Closing. Each party shall have thirty
(30) days to complete its review.
1.7 Further
Assurances. At any time and from time to time after the Closing,
at the request of the Buyer and without further consideration, the Seller shall
execute and deliver such other instruments of sale, transfer, conveyance and
assignment and take such actions as the Buyer may reasonably request to more
effectively transfer, convey and assign to the Buyer, and to confirm the Buyer’s
rights to, title in and ownership of, the Acquired Assets and to place the
Buyer
in actual possession and operating control thereof.
1.8 Withholding. Notwithstanding
any other provision of this Agreement, each of the Buyer and the Escrow Agent
shall be entitled to deduct and withhold from the payments to be made pursuant
to this Agreement and/or the Escrow Agreement such amounts as it reasonably
determines after consultation with its Tax advisors that it is required to
deduct and withhold with respect to the making of such payments under the Code
or any other applicable provision of law and to collect Forms W-8 or W-9, as
applicable, or similar information from the Seller, the Members and any other
recipients of payments hereunder or thereunder. To the extent that
–
3
–
amounts
are so withheld by the Buyer, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the recipient in respect
of
which such deduction and withholding was made by the Buyer or Escrow
Agent.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF THE SELLER
The
Seller represents and warrants to the Buyer that, except as set forth in the
Disclosure Schedule, the statements contained in this Article II are true
and correct as of the date of this Agreement and will be true and correct as
of
the Closing as though made as of the Closing, except to the extent such
representations and warranties are specifically made as of a particular date
(in
which case such representations and warranties will be true and correct as
of
such date). The Disclosure Schedule shall be arranged in sections and
subsections corresponding to the numbered and lettered sections and subsections
contained in this Article II. Disclosures in any section or
subsection of the Disclosure Schedule shall qualify such other sections or
subsections of the Disclosure Schedule to the extent it is reasonably apparent
from the content of such disclosure that such disclosure is relevant to such
other sections or subsections.
2.1 Organization,
Qualification and Corporate Power. The Seller is a limited
liability company validly existing and in good standing under the laws of the
State of Ohio. The Seller is duly qualified to conduct business and
is in good standing under the laws of each jurisdiction listed in Section 2.1
of
the Disclosure Schedule, which jurisdictions constitute the only jurisdictions
in which the nature of the Seller's business or the ownership or leasing of
its
properties requires such qualification. The Seller has all requisite
power and authority to carry on the business in which it is engaged and to
own
and use the properties owned and used by it. The Seller has furnished
to the Buyer complete and accurate copies of its operating
agreement. The Seller is not in default under or in violation of any
provision of its operating agreement. The operating agreement
provided to the Buyer is the only instrument setting forth (i) the rights,
preferences and privileges of the Members with respect to the Seller and/or
among the Members, and (ii) matters relating to the operation and governance
of
the Seller.
2.2 Capitalization. Section 2.2
of the Disclosure Schedule sets forth a complete and accurate list, as of the
date of this Agreement, of (i) all Members, indicating the number of units
of the Seller held by each Member and (ii) all outstanding options,
warrants or other instruments giving any party the right to acquire any units
or
membership interests of the Seller There are no outstanding
agreements or commitments to which the Seller is a party or which are binding
upon the Seller for the redemption of any of its units. The Seller
has only one class of units outstanding. There are no outstanding
options, warrants or similar rights relating to the Seller or its
equity.
2.3 Authorization
of Transaction. The Seller has all requisite power and authority
to execute and deliver this Agreement and the Ancillary Agreements and to
perform its obligations hereunder and thereunder. The performance by
the Seller of this Agreement and the Ancillary Agreements and the consummation
by the Seller of the transactions contemplated hereby and thereby have been
duly
and validly authorized by all necessary actions on the part of the
Seller.
–
4
–
This
Agreement has been duly and validly executed and delivered by the Seller and
constitutes, and each of the Ancillary Agreements, upon its execution and
delivery by the Seller, will constitute, a valid and binding obligation of
the
Seller, enforceable against the Seller in accordance with its terms, except
as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, arrangement or other similar laws from time to time in effect and
except as to the remedy of specific performance which may not be available
under
the laws of various jurisdictions.
2.4 Noncontravention. Neither
the execution and delivery by the Seller of this Agreement or the Ancillary
Agreements, nor the consummation by the Seller of the transactions contemplated
hereby or thereby, will (a) conflict with or violate any provision of the
operating agreement of the Seller, (b) require on the part of the Seller
any notice to or filing with, or any permit, authorization, consent or approval
of, any Governmental Entity, (c) conflict with, result in a breach of,
constitute (with or without due notice or lapse of time or both) a default
under, result in the acceleration of obligations under, create in any party
the
right to terminate, modify or cancel, or require any notice, consent or waiver
under, any contract or instrument to which the Seller is a party or by which
the
Seller is bound or to which any of its assets is subject, except with respect
to
contracts that are not customer contracts listed on Section 2.4 of the
Disclosure Schedules, for any such conflict, breach, default, acceleration,
or
right to terminate, modify or cancel, or failure to notify or obtain consent
or
waiver that would not have a Seller Material Adverse Effect, (d) result in
the imposition of any Security Interest upon any asset or assets of the Seller
or (e) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Seller or any of its properties or
assets.
2.5 Subsidiaries. The
Seller has no Subsidiaries. The Seller does not control directly or
indirectly or have any direct or indirect equity participation or similar
interest in any corporation, partnership, limited liability company, joint
venture, trust or other business association or entity.
2.6 Financial
Statements. The Seller has provided to the Buyer the Financial
Statements. The Financial Statements (i) were prepared on a
consistent basis throughout the periods covered thereby (except as may be
indicated in the notes to such financial statements) and, in the case of the
balance sheet and statement of income, changes in members’ equity and cash flows
of the Seller as of the end of and for the year ended December 31, 2006, in
accordance with GAAP, and (ii) fairly present the financial position of the
Seller as of the dates thereof and the results of its operations and cash flows
for the periods indicated, consistent with the books and records of the Seller,
except that the unaudited interim financial statements are subject to normal
and
recurring year-end adjustments which will not be material in amount or effect
and do not include footnotes. The revenue recognized by the Seller in
accordance with GAAP for the quarter ended March 31, 2007 is at least
$730,000.
2.7 Absence
of Certain Changes. Except as set forth in Section 2.7 of
the Disclosure Schedules, since the Most Recent Balance Sheet Date,
(a) there has occurred no event or development which, individually or in
the aggregate, has had, or could reasonably be expected to have in the future,
a
Seller Material Adverse Effect, and (b) the Seller has not taken any of
the actions set forth in paragraphs (a) through (n) of
Section 4.4.
–
5
–
2.8 Undisclosed
Liabilities. The Seller has no knowledge of any liability
(whether known or unknown, whether absolute or contingent, whether liquidated
or
unliquidated and whether due or to become due), except for (a) liabilities
shown on the Most Recent Balance Sheet, (b) contractual and other liabilities
incurred in the Ordinary Course of Business which are not required by GAAP
to be
reflected on a balance sheet and which are not material, and (c) liabilities
which have arisen since the Most Recent Balance Sheet Date in the Ordinary
Course of Business and which are listed on Schedule 2.8.
2.9 Tax
Matters.
(a) The
Seller has properly filed on a timely basis all material Tax Returns that it
is
and was required to file, and all such Tax Returns were true, correct and
complete in all material respects. The Seller has properly paid on a
timely basis all material Taxes, whether or not shown on its Tax Returns, that
were due and payable. All material Taxes that the Seller is or was
required by law to withhold or collect have been withheld or collected and,
to
the extent required, have been properly paid on a timely basis to the
appropriate Governmental Entity. The Seller has complied with all
information reporting and back-up withholding requirements in all material
respects, including maintenance of the required records with respect thereto,
in
connection with amounts paid to any employee, independent contractor, creditor
or other third party.
(b) The
unpaid Taxes of the Seller for periods through the date of the Most Recent
Balance Sheet Date do not materially exceed the accruals and reserves for Taxes
(excluding accruals and reserves for deferred Taxes established to reflect
timing differences between book and Tax income) set forth on the Most Recent
Balance Sheet. All Taxes attributable to the period from and after
the Most Recent Balance Sheet Date and continuing through the Closing Date
are,
or will be, attributable to the conduct by the Seller of its operations in
the
Ordinary Course of Business.
(c) No
examination or audit of any Tax Return of the Seller by any Governmental Entity
is currently in progress or, to the knowledge of the Seller, threatened or
contemplated. Section 2.9(c) of the Disclosure Schedule sets forth
each jurisdiction (other than United States federal) in which the Seller files,
or is required to file or has been required to file a material Tax Return or
is
or has been liable for material Taxes on a “nexus” basis. The Seller
has not been informed by any jurisdiction that the jurisdiction believes that
the Seller was required to file any Tax Return that was not filed.
(d) The
Seller is, and has been since its inception, a limited liability company validly
classified and treated as a partnership for federal income tax purposes and
has
been validly treated in a similar manner for purposes of the income Tax laws
of
all states in which it has been subject to taxation.
(e) Except
as
set forth in Section 2.9(e) of the Disclosure Schedules, the Seller has
delivered or made available to the Buyer (i) complete and correct copies of
all
Tax Returns of the Seller relating to Taxes for all Taxable periods for which
the applicable statute of limitations has not yet expired and (ii) complete
and
correct copies of all private letter rulings, revenue agent reports, information
document requests, notices of assessment, notices of proposed
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6
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deficiencies,
deficiency notices, protests, petitions, closing agreements, settlement
agreements, pending ruling requests and any similar documents submitted by,
received by or agreed to by or on behalf of the Seller relating to Taxes for
all
Taxable periods for which the applicable statute of limitations has not yet
expired.
(f) The
Seller has not (i) waived any statute of limitations with respect to Taxes
or
agreed to extend the period for assessment or collection of any Taxes, (ii)
requested any extension of time within which to file any Tax Return, which
Tax
Return has not yet been filed, or (iii) executed or filed any power of attorney
relating to Taxes with any Governmental Entity.
(g) The
Seller is not a party to any litigation regarding Taxes.
(h) There
are
no Security Interests with respect to Taxes upon any of the Acquired Assets,
other than with respect to Taxes not yet due and payable. To the
Seller’s and Members’ knowledge, there is no basis for the assertion of any
claim relating or attributable to Taxes, which, if adversely determined, would
result in any Security Interest on the Acquired Assets, or would reasonably
be
expected to have, individually or in the aggregate, a Seller Material Adverse
Effect.
(i) None
of
the Acquired Assets (i) is property that is required to be treated as being
owned by any other person pursuant to the provisions of former Section 168(f)(8)
of the Internal Revenue Code of 1954, or (ii) is “tax exempt use property”
within the meaning of Section 168(h) of the Code.
(j) The
Seller has maintained complete and accurate records, including all applicable
exemption, resale or other certificates, of (i) all sales to purchasers claiming
to be exempt from sale and use Taxes based on the exempt status of the
purchaser, and (ii) all other sales for which sales Tax or use Tax was not
collected by the Seller and as to which the seller is required to receive and
retain resale certificates or other certificates relating to the exempt nature
of the sale or use or non-applicability of the sale and use Taxes.
(k) The
Seller is not bound by any Tax indemnity, Tax sharing or Tax allocation
agreement.
(l) The
Seller is not a “foreign person” within the meaning of Section 1445 of the
Code.
2.10 Ownership
and Condition of Assets.
(a) The
Seller is the true and lawful owner, and has good title to, all of the Acquired
Assets, free and clear of all Security Interests. Upon execution and
delivery by the Seller to the Buyer of the instruments of conveyance referred
to
in Section 1.5(b)(iii), the Buyer will become the true and lawful owner of,
and
will receive good title to, the Acquired Assets, free and clear of all Security
Interests, except for Security Interests created by Buyer.
(b) The
Acquired Assets are sufficient for the conduct of the Seller’s business as
presently conducted and as presently proposed to be conducted and constitute
all
assets used
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7
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by
the
Seller in such business. Each tangible Acquired Asset is free from
material defects, has been maintained in accordance with normal industry
practice, is in good operating condition and repair (subject to normal wear
and
tear) and is suitable for the purposes for which it presently is
used.
(c) Section
2.10(c) of the Disclosure Schedule lists individually (i) all Acquired
Assets which are fixed assets (within the meaning of GAAP) having a book value
greater than $1,000, indicating the cost, accumulated book depreciation (if
any)
and the net book value of each such fixed asset as of the Most Recent Balance
Sheet Date, (ii) all other Acquired Assets of a tangible nature (other than
inventories) whose book value exceeds $5,000; and (iii) all Acquired Assets
that
are Assigned Contracts and specifically identifying all customer
contracts.
(d) Each
item
of equipment, motor vehicle and other asset that is being transferred to the
Buyer as part of the Acquired Assets and that the Seller has possession of
pursuant to a lease agreement or other contractual arrangement is in such
condition that, if returned to its lessor or owner under the applicable lease
or
contract on the Closing Date, the obligations of the Seller to such lessor
or
owner would have been discharged in full.
2.11 Owned
Real Property. The Seller does not own, and has never owned, any
real property.
2.12 Real
Property Leases. Section 2.12 of the Disclosure Schedule
lists all Leases and lists the term of such Lease, any extension and expansion
options, and the rent payable thereunder. The Seller has delivered to
the Buyer complete and accurate copies of the Leases. With respect to
each Lease and except as set forth in Section 2.12 of the Disclosure
Schedule:
(a) such
Lease is legal, valid, binding, enforceable and in full force and
effect;
(b) such
Lease is assignable by the Seller to the Buyer without the consent or approval
of any party and such Lease will continue to be legal, valid, binding,
enforceable and in full force and effect immediately following the Closing
in
accordance with the terms thereof as in effect immediately prior to the
Closing;
(c) neither
the Seller nor, to the knowledge of the Seller, any other party, is in breach
or
violation of, or default under, any such Lease, and no event has occurred,
is
pending or, to the knowledge of the Seller, is threatened, which, after the
giving of notice, with lapse of time, or otherwise, would constitute a material
breach or default by the Seller or, to the knowledge of the Seller, any other
party under such Lease;
(d) the
Seller is not a party to any dispute, oral agreement or forbearance program
as
to such Lease, and to Seller’s knowledge no other person is party to such
dispute, oral agreement or forbearance program relating to or affecting the
Lease;
(e) the
Seller has not assigned, transferred, conveyed, mortgaged, deeded in trust
or
encumbered any interest in the leasehold or subleasehold;
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(f) to
the
knowledge of the Seller, all facilities leased or subleased thereunder are
supplied with utilities and other services adequate for the operation of said
facilities; and
(g) the
Seller is not aware of any Security Interest, easement, covenant or other
restriction applicable to the real property subject to such Lease which would
reasonably be expected to materially impair the current uses or the occupancy
by
the Seller of the property subject thereto.
2.13 Intellectual
Property.
(a) Seller
Registrations. There are no Seller Registrations.
(b) Prosecution
Matters. Seller has no Patent Rights.
(c) Ownership;
Sufficiency. Except as otherwise identified in Section 2.13 of
the Disclosure Schedule, each item of Seller Intellectual Property will be
owned
or available for use by the Buyer immediately following the Closing on
substantially identical terms and conditions as it was immediately prior to
the
Closing. The Seller is the sole and exclusive owner of all Seller
Owned Intellectual Property, free and clear of any Security Interests and all
joint owners of the Seller Owned Intellectual Property are listed in Section
2.13(c) of the Disclosure Schedule. Except as otherwise
identified in Section 2.13 of the Disclosure Schedule, the Seller Intellectual
Property constitutes all Intellectual Property necessary (i) to Exploit the
Customer Offerings in the manner so done currently by the Seller, (ii) to
Exploit the Internal Systems as they are currently used by the Seller, and
(iii)
otherwise to conduct the Seller’s business in all material respects in the
manner currently conducted by the Seller. Seller has not licensed the
Software included in the Customer Offerings, or any portion thereof, to any
third party. Seller has Exploited the Software solely in connection
with Seller’s internal use and makes no representation and warranty that the
Software can be made available to third parties (whether by license or
otherwise), except in the manner so done currently by the Seller.
(d) Protection
Measures. The Seller has taken reasonable measures to protect
the proprietary nature of each item of Seller Owned Intellectual Property,
and
to maintain in confidence all trade secrets and confidential information
comprising a part thereof. The Seller has complied with all
applicable contractual and legal requirements pertaining to information privacy
and security. No complaint relating to an improper use or disclosure
of, or a breach in the security of, any such information has been made or,
to
the knowledge of the Seller, threatened against the Seller. To the
knowledge of the Seller, there has been no: (i) unauthorized disclosure of
any
third party proprietary or confidential information in the possession, custody
or control of the Seller or (ii) breach of the Seller’s security procedures
wherein confidential information has been disclosed to a third
person. The Seller has actively policed the quality of all goods and
services sold, distributed or marketed under each of its Trademarks and has
enforced adequate quality control measures to ensure that no Trademarks that
it
has licensed to others shall be deemed to be abandoned.
(e) Infringement
by Seller. None of the Customer Offerings, or the Exploitation
thereof by the Seller or by any reseller, distributor, customer or user thereof,
or any other activity of the Seller, infringes or violates, or constitutes
a
misappropriation of, any Intellectual Property rights of any third
party. None of the Internal Systems, or the Seller’s past,
current or currently contemplated Exploitation thereof, or any other activity
undertaken by them in connection with the Business, infringes or violates,
or
constitutes a misappropriation of, any
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Intellectual
Property rights of any third party. The Seller has not received any
complaint, claim or notice, or threat of any of the foregoing (including any
notification that a license under any patent is or may be required), alleging
any such infringement, violation or misappropriation and any request or demand
for indemnification or defense received by the Seller from any reseller,
distributor, customer, user or any other third party; and the Seller has not
received any legal opinions, studies, market surveys and analyses relating
to
any alleged or potential infringement, violation or
misappropriation.
(f) Infringement
of Rights. To Seller’s knowledge, no person (including, without
limitation, any current or former employee or consultant of Seller) is
infringing, violating or misappropriating any of the Seller Owned Intellectual
Property or any Seller Licensed Intellectual Property.
(g) Outbound
IP Agreements. Seller has not assigned, transferred, licensed,
distributed or otherwise granted any right or access to any
person (except for access to customers necessary to Exploit the
Customer Offerings), or covenanted not to assert any right, with respect to
any
past, existing or future Seller Intellectual Property. The Seller has
not agreed to indemnify any person against any infringement, violation or
misappropriation of any Intellectual Property rights with respect to any
Customer Offerings or any third party Intellectual Property
rights. The Seller is not a member of or party to any patent pool,
industry standards body, trade association or other organization pursuant to
the
rules of which it is obligated to license any existing or future Intellectual
Property to any person.
(h) Inbound
IP Agreements. Section 2.13(h) of the Disclosure Schedule
identifies (i) each item of Seller Licensed Intellectual Property and the
license or agreement pursuant to which the Seller Exploits it (excluding
currently-available, off the shelf software programs that are part of the
Internal Systems and are licensed by the Seller pursuant to “shrink wrap”
licenses, the total fees associated with which are less than
$2,500). There is no agreement, contract, assignment or other
instrument pursuant to which the Seller has obtained any joint or sole ownership
interest in or to any item of Seller Owned Intellectual Property. No
third party inventions, methods, services, materials, processes or Software
are
included in or required to Exploit the Customer Offerings or Internal Systems
in
the manner so done currently by Seller. None of the Customer
Offerings or Internal Systems includes “shareware,” “freeware” or other Software
or other material that was obtained by the Seller from third parties other
than
pursuant to the license agreements listed in Section 2.13(h) of the Disclosure
Schedule.
(i) Source
Code. The Seller has not licensed, distributed or disclosed, and
knows of no distribution or disclosure by others (including its employees and
contractors) of, the Seller Source Code to any person, and the Seller has taken
all reasonable physical and electronic security measures to prevent disclosure
of such Seller Source Code. No event has occurred, and no
circumstance or condition exists, that (with or without notice or lapse of
time,
or both) will, or would reasonably be expected to, nor will the consummation
of
the transactions contemplated
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10
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hereby,
result in the disclosure or release of such Seller Source Code by the Seller,
or
escrow agent(s) or any other person to any third party.
(j) Authorship. All
of the Software and Documentation comprising, incorporated in or bundled with
the Customer Offerings or Internal Systems have been designed, authored, tested
and debugged by regular employees of the Seller within the scope of their
employment or by independent contractors of the Seller who have executed valid
and binding agreements expressly assigning all right, title and interest in
such
copyrightable materials to the Seller, waiving their non-assignable rights
(including moral rights) in favor of the Seller and its permitted assigns and
licensees, and have no residual claim to such materials.
(k) Open
Source Code. Section 2.13(k) of the Disclosure Schedule lists
all Open Source Materials that the Seller has either incorporated into the
Customer Offering or Internal Systems, and/or those Customer Offerings and/or
Internal Systems (or portions thereof) that are derivative works of Open Source
Materials. Except as identified in Section 2.13(k) of the Disclosure
Schedules, the Seller has not (i) incorporated Open Source Materials into,
or
combined Open Source Materials with, the Customer Offerings; or
(ii) used Open Source Materials that create, or purport to create,
obligations for the Seller with respect to the Customer Offerings or grant,
or
purport to grant, to any third party, any rights or immunities under
Intellectual Property rights (including, but not limited to, using any Open
Source Materials that require, as a condition of Exploitation of such Open
Source Materials, that other Software incorporated into, derived from or
distributed with such Open Source Materials be (x) disclosed or distributed
in
source code form, (y) licensed for the purpose of making derivative works,
or
(z) redistributable at no charge or minimal charge). Seller has no
distributed Open Source Materials in conjunction with any other software
developed or distributed by the Seller.
(l) Employee
and Contractor Assignments. Each employee of the Seller and each
independent contractor of the Seller has executed a valid and binding written
agreement expressly assigning to the Seller all right, title and interest in
any
inventions and works of authorship, whether or not patentable, invented,
created, developed, conceived and/or reduced to practice in connection with
such
employee's employment or such independent contractor's work for the Seller,
and
all Intellectual Property rights therein.
(m) Quality. The
Customer Offerings and the Internal Systems are free from significant defects
in
design, workmanship and materials and conform in all material respects to the
written Documentation and specifications therefor. The Customer
Offerings and the Internal Systems do not contain any disabling device, virus,
worm, back door, Trojan horse or other disruptive or malicious code that may
or
are intended to impair their intended performance or otherwise permit
unauthorized access to, hamper, delete or damage any computer system, software,
network or data. The Seller has not received any warranty claims,
contractual terminations or requests for settlement or refund due to the failure
of the Customer Offerings to meet their specifications or otherwise to satisfy
end user needs or for harm or damage to any third party.
(n) Support
and Funding. The Seller has neither sought, applied for nor
received any support, funding, resources or assistance from any federal, state,
local or foreign
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11
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governmental
or quasi-governmental agency or funding source in connection with the
Exploitation of the Customer Offerings, the Internal Systems or any facilities
or equipment used in connection therewith.
2.14 Contracts.
(a) Section 2.14
of the Disclosure Schedule lists the following agreements (written or oral)
to
which the Seller is a party as of the date of this Agreement (other than this
Agreement and the Ancillary Agreements):
(i) any
agreement (or group of related agreements) for the lease of personal property
from or to third parties providing for lease payments in excess of $5,000 per
annum or having a remaining term longer than three months;
(ii) any
agreement (or group of related agreements) for the purchase or sale of products
or for the furnishing or receipt of services (A) which calls for performance
over a period of more than one year, (B) which involves more than the sum of
$5,000, or (C) in which the Seller has granted manufacturing rights, “most
favored nation” pricing provisions or marketing or distribution rights relating
to any products or territory or has agreed to purchase a minimum quantity of
goods or services or has agreed to purchase goods or services exclusively from
a
certain party;
(iii) any
agreement concerning the establishment or operation of a partnership, joint
venture or limited liability company;
(iv) any
agreement (or group of related agreements) under which it has created, incurred,
assumed or guaranteed (or may create, incur, assume or guarantee) indebtedness
(including capitalized lease obligations) involving more than $5,000 or under
which it has imposed (or may impose) a Security Interest on any of its assets,
tangible or intangible;
(v) any
agreement for the disposition of any significant portion of the assets or
business of the Seller (other than sales of products in the Ordinary Course
of
Business) or any agreement for the acquisition of the assets or business of
any
other entity (other than purchases of inventory or components in the Ordinary
Course of Business);
(vi) any
agreement concerning exclusivity or confidentiality;
(vii) any
employment or consulting agreement;
(viii) any
agreement involving any current or former officer, manager or Member or an
Affiliate thereof;
(ix) any
agreement under which the consequences of a default or termination would
reasonably be expected to have a Seller Material Adverse Effect;
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(x) any
agreement which contains any provisions requiring the Seller to indemnify any
other party (excluding indemnities contained in agreements for the purchase,
sale or license of products entered into in the Ordinary Course of
Business);
(xi) any
agreement that could reasonably be expected to have the effect of prohibiting
or
impairing the conduct of the business of the Seller or of the Buyer or any
of
its subsidiaries as currently conducted and as currently proposed to be
conducted;
(xii) any
agreement under which the Seller is restricted from selling, licensing or
otherwise distributing any of its technology or products, or providing services
to, customers or potential customers or any class of customers, in any
geographic area, during any period of time or any segment of the market or
line
of business;
(xiii) any
agreement which would entitle any third party to receive a license or any other
right to intellectual property of the Buyer or any of the Buyer’s Affiliates
following the Closing; and
(xiv) any
other
agreement (or group of related agreements) either involving more than $10,000
or
not entered into in the Ordinary Course of Business.
(b) The
Seller has delivered to the Buyer a complete and accurate copy of each agreement
listed in Section 2.13 or Section 2.14 of the Disclosure
Schedule. With respect to each agreement so listed and except as
disclosed in Section 2.14 of the Disclosure Schedules: (i) the
agreement is legal, valid, binding and enforceable and in full force and effect;
(ii) for those agreements to which the Seller is a party, the agreement is
assignable by the Seller to the Buyer without the consent or approval of any
party and will continue to be legal, valid, binding and enforceable and in
full
force and effect immediately following the Closing in accordance with the terms
thereof as in effect immediately prior to the Closing; and (iii) neither the
Seller nor, to the knowledge of the Seller, any other party, is in breach or
violation of, or default under, any such agreement, and no event has occurred,
is pending or, to the knowledge of the Seller, is threatened, which, after
the
giving of notice, with lapse of time, or otherwise, would constitute a breach
or
default by the Seller or, to the knowledge of the Seller, any other party under
such agreement.
2.15 Accounts
Receivable. All accounts receivable of the Seller reflected on
the Most Recent Balance Sheet (other than those paid since such date) are valid
receivables subject to no setoffs or counterclaims and are current and
collectible (within 90 days after the date on which it first became due and
payable), net of the applicable reserve for bad debts on the Most Recent Balance
Sheet. A complete and accurate list of the accounts receivable
reflected on the Most Recent Balance Sheet, showing the aging thereof, is
included in Section 2.15 of the Disclosure Schedule. All accounts
receivable of the Seller that have arisen since the Most Recent Balance Sheet
Date are valid receivables subject to no setoffs or counterclaims and are
current and collectible (within 90 days after the date on which it first became
due and payable), net of a reserve for bad debts in an amount proportionate
to
the reserve shown on the Most Recent Balance Sheet. The Seller has
not received any written notice from an account debtor stating that any account
receivable in an amount in excess of $5,000 is subject to any contest, claim
or
setoff by such account debtor.
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13
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2.16 Insurance. Section 2.16
of the Disclosure Schedule lists each insurance policy (including fire, theft,
casualty, comprehensive general liability, workers compensation, business
interruption, environmental, product liability, errors and omissions,
professional liability, and automobile insurance policies and bond and surety
arrangements) to which the Seller is a party, all of which are in full force
and
effect. There is no material claim pending under any such policy as
to which coverage has been questioned, denied or disputed by the underwriter
of
such policy. All premiums due and payable under all such policies
have been paid, the Seller may not be liable for retroactive premiums or similar
payments, and the Seller is otherwise in compliance in all material respects
with the terms of such policies. The Seller has no knowledge of any
threatened termination of, or premium increase with respect to, any such
policy. Upon payment of amounts required to obtain tail coverage on
Seller’s professional liability (errors and omissions) insurance policy, such
policy will be in full force and effect immediately following the Closing in
accordance with the terms thereof as in effect immediately prior to the
Closing.
2.17 Litigation. Except
as set forth in Section 2.17 of the Disclosure Schedule, there is no Legal
Proceeding which is pending or has been threatened in writing against the
Seller. There are no judgments, orders or decrees outstanding against
the Seller.
2.18 Warranties. No
service or product delivered, made, sold, leased or licensed by the Seller
is
subject to any guaranty, warranty, right of return, right of credit or other
indemnity.
2.19 Employees.
(a) Section
2.19 of the Disclosure Schedule contains a list of all employees of the Seller,
their position with Seller and their annual rate of
compensation. Except as set forth on Section 2.19 of the Disclosure
Schedule, each current employee of the Seller and each past employee of the
Seller since 2001 has entered into a confidentiality and assignment of
inventions agreement with the Seller, a copy or form of which has previously
been delivered to the Buyer. Section 2.19 of the Disclosure Schedule
contains a list of all employees of the Seller who are a party to a
non-competition agreement with the Seller; copies of such agreements have
previously been delivered to the Buyer. Each such agreement
referenced in the two preceding sentences to which the Seller is a party is
assignable by the Seller to the Buyer without the consent or approval of any
party and will continue to be legal, valid, binding and enforceable and in
full
force and effect immediately following the Closing in accordance with the terms
thereof as in effect immediately prior to the Closing. Section 2.19
of the Disclosure Schedule contains a list of all employees of the Seller who
are not citizens of the United States. To the knowledge of the
Seller, no key employee or group of employees has any plans to terminate
employment with the Seller (other than for the purpose of accepting employment
with the Buyer following the Closing) or not to accept employment with the
Buyer. The Seller is in compliance with all applicable laws relating
to the hiring and employment of employees.
(b) The
Seller is not a party to or bound by any collective bargaining agreement, nor
has it experienced any strikes, grievances, claims of unfair labor practices
or
other collective bargaining disputes. The Seller has no knowledge of
any organizational effort made or threatened, either currently or within the
past two years, by or on behalf of any labor union with respect to employees
of
the Seller.
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2.20 Employee
Benefits.
(a) Section
2.20(a) of the Disclosure Schedule contains a complete and accurate list of
all
Seller Plans. Complete and accurate copies of (i) all Seller
Plans which have been reduced to writing, (ii) written summaries of all
unwritten Seller Plans, (iii) all related trust agreements, insurance
contracts and summary plan descriptions, and (iv) all annual reports filed
on IRS Form 5500, 5500C or 5500R and (for all funded plans) all plan financial
statements for the last five plan years for each Seller Plan, have been
delivered to the Buyer.
(b) Each
Seller Plan being assumed by Buyer under this Agreement has been administered
in
all material respects in accordance with its terms and each of the Seller and
the ERISA Affiliates has in all material respects met its obligations with
respect to each such Seller Plan and has made all required contributions
thereto. The Seller, each ERISA Affiliate and each such Seller Plan
are in compliance in all material respects with the currently applicable
provisions of ERISA and the Code and the regulations thereunder (including
Section 4980B of the Code, Subtitle K, Chapter 100 of the Code and Sections
601
through 608 and Section 701 et seq. of ERISA). All filings and
reports as to each Seller Plan being assumed by Buyer under this Agreement
required to have been submitted to the Internal Revenue Service or to the United
States Department of Labor have been duly submitted. No Seller Plan
being assumed by Buyer under this Agreement has assets that include securities
issued by the Seller or any ERISA Affiliate.
(c) There
are
no Legal Proceedings (except claims for benefits payable in the normal operation
of the Seller Plans being assumed by Buyer under this Agreement and proceedings
with respect to qualified domestic relations orders) against or involving any
Seller Plan or asserting any rights or claims to benefits under any Seller
Plan
that could give rise to any material liability.
(d) Neither
the Seller nor any ERISA Affiliate has ever maintained an Employee Benefit
Plan
subject to Section 412 of the Code or Title IV of ERISA.
(e) At
no
time has the Seller or any ERISA Affiliate been obligated to contribute to
any
“multiemployer plan” (as defined in Section 4001(a)(3) of ERISA).
(f) There
are
no unfunded obligations under any Seller Plan being assumed by Buyer providing
benefits after termination of employment to any employee of the Seller (or
to
any beneficiary of any such employee), including but not limited to retiree
health coverage and deferred compensation, but excluding continuation of health
coverage required to be continued under Section 4980B of the Code or other
applicable law and insurance conversion privileges under state law.
(g) No
act or
omission has occurred and no condition exists with respect to any Seller Plan
that would subject the Buyer or any Affiliate of Buyer to (i) any material
fine,
penalty, tax or liability of any kind imposed under ERISA or the Code or (ii)
any contractual indemnification or contribution obligation protecting any
fiduciary, insurer or service provider with respect to any Seller
Plan.
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15
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(h) No
Seller
Plan is funded by, associated with or related to a “voluntary employee’s
beneficiary association” within the meaning of Section 501(c)(9) of the
Code.
(i) Each
Seller Plan being assumed by Buyer is amendable and terminable unilaterally
by
the Seller at any time without liability or expense to the Seller or such Seller
Plan as a result thereof (other than for benefits accrued through the date
of
termination or amendment and reasonable administrative expenses related thereto)
and no Seller Plan, plan documentation or agreement, summary plan description
or
other written communication distributed generally to employees by its terms
prohibits the Seller from amending or terminating any such Seller
Plan.
(j) Section
2.20 of the Disclosure Schedule discloses each: (i) agreement with any
Member, manager, executive officer or other key employee of the Seller
(A) the benefits of which are contingent, or the terms of which are
altered, upon the occurrence of a transaction involving the Seller of the nature
of any of the transactions contemplated by this Agreement, (B) providing
any term of employment or compensation guarantee or (C) providing severance
benefits or other benefits after the termination of employment of such manager,
executive officer or key employee; (ii) agreement, plan or arrangement
under which any person may receive payments from the Seller that may be subject
to the tax imposed by Section 4999 of the Code or included in the determination
of such person’s “parachute payment” under Section 280G of the Code; and
(iii) agreement or plan binding the Seller, including any stock option
plan, stock appreciation right plan, restricted stock plan, stock purchase
plan,
severance benefit plan or Seller Plan, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by
the
occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any
of
the transactions contemplated by this Agreement.
(k) Section
2.20 of the Disclosure Schedule sets forth the policy of the Seller with respect
to accrued vacation, accrued sick time and earned time off and the amount of
such liabilities as of April 30, 2007.
(l) No
insurance policy that provides medical or dental benefits under a Seller Plan
provides for any retrospective premium increases.
(m) No
Seller
Plan that provides medical or dental benefits is providing to any individual
any
continuation coverage mandated by Section 4980B of the Code (or any similar
law).
2.21 Environmental
Matters.
(a) To
its
knowledge, the Seller has complied with all applicable Environmental Laws except
where failure to do so would not have a Seller Material Adverse
Effect. There is no pending or, to the knowledge of the Seller,
threatened civil or criminal litigation, written notice of violation, formal
administrative proceeding, or investigation, inquiry or information request
by
any Governmental Entity, relating to any Environmental Law involving the
Seller.
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(b) To
its
knowledge, the Seller does not have any liabilities or obligations arising
from
the release of any Materials of Environmental Concern into the
environment.
(c) The
Seller is not a party to or bound by any court order, administrative order,
consent order or other agreement with any Governmental Entity entered into
in
connection with any legal obligation or liability arising under any
Environmental Law.
(d) The
Seller does not have possession of, or access to, or knowledge of, any documents
(whether in hard copy or electronic form) that contain any environmental
reports, investigations and audits relating to premises currently or previously
owned or operated by the Seller (whether conducted by or on behalf of the Seller
or a third party, and whether done at the initiative of the Seller or directed
by a Governmental Entity or other third party).
(e) The
Seller is not aware of any material environmental liability of any solid or
hazardous waste transporter or treatment, storage or disposal facility that
has
been used by the Seller.
2.22 Legal
Compliance. Except as set forth in Section 2.22 of the Disclosure
Schedule, the Seller is currently conducting, and has at all times since June
30, 2002 conducted, its business in material compliance with each applicable
law
(including rules and regulations thereunder) of any federal, state, local or
foreign government, or any Governmental Entity, and Seller has had valid Permits
to conduct such business with respect to each jurisdiction (and at such times)
for which it has been required to have such Permits except where the lack of
any
such Permit would not have a Seller Material Adverse Effect. The
Seller has not received any notice or communication from any Governmental Entity
alleging noncompliance with any applicable law, rule or regulation.
2.23 Customers
and Suppliers. Section 2.23 of the Disclosure Schedule sets forth
a list of (a) each customer or supplier arrangement that accounted for more
than
1% of the revenues of the Seller during the last full fiscal year or the interim
period through the Most Recent Balance Sheet Date and the amount of revenues
accounted for by such customer or supplier arrangement during each such period
and (b) each other supplier of services or goods that is a critical or sole
supplier of any significant aspect of Seller’s business. No person
identified in the foregoing sentence has provided written or verbal notice
to
Seller within the past year that it will stop, or materially reduce its activity
below historic levels in connection with any contract or arrangement on which
Seller currently derives revenue.
2.24 Permits. Section
2.24 of the Disclosure Schedule sets forth a list of all Permits issued to
or
held by the Seller. Such listed Permits are the only Permits that are
required for the Seller to conduct its business as presently conducted or as
proposed to be conducted. Each such Permit is in full force and
effect; the Seller is in material compliance with the terms of each such Permit;
and, to the knowledge of the Seller, no suspension or cancellation of such
Permit is threatened.
2.25 Certain
Business Relationships With Affiliates. No Affiliate of the
Seller (a) owns any property or right, tangible or intangible, which is
used in the business of the Seller, (b) has any claim or cause of action
against the Seller, or (c) owes any money to, or is owed any
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money
by,
the Seller. Section 2.25 of the Disclosure Schedule describes any
transactions or relationships between the Seller and any Affiliate thereof
which
occurred or have existed since the beginning of the time period covered by the
Financial Statements.
2.26 Brokers’
Fees. The Seller does not have any liability or obligation to pay
any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
2.27 Books
and Records. The minute books and other similar records of the
Seller contain complete and accurate records of all actions taken at any
meetings of the Seller’s Members, managers or any committee thereof and of all
written consents executed in lieu of the holding of any such
meeting. The books and records of the Seller accurately reflect, in
all material respects, the assets, liabilities, business, financial condition
and results of operations of the Seller. Section 2.27 of the
Disclosure Schedule contains a list of all bank accounts and safe deposit boxes
of the Seller and the names of persons having signature authority with respect
thereto or access thereto.
2.28 Disclosure. No
representation or warranty by the Seller contained in this Agreement, and no
statement contained in the Disclosure Schedule or any other document,
certificate or other instrument delivered or to be delivered by or on behalf
of
the Seller pursuant to this Agreement, contains or will contain any untrue
statement of a material fact or omits or will omit to state any material fact
necessary, in light of the circumstances under which it was or will be made,
in
order to make the statements herein or therein not misleading.
2.29 Projections. The
projections included in Section 2.29 of the Disclosure Schedule were prepared
by
the Seller in good faith using the best information available to management
of
the Seller and represent Seller management’s good faith estimates of the future
performance of the Seller for the periods referred to therein. The
Buyer acknowledges that the projections are estimates and Seller makes no
representation or warranty as to actual future performance.
2.30 Government
Contracts.
(a) The
Seller has not been suspended or debarred from bidding on contracts or
subcontracts with any Governmental Entity; and to Seller’s knowledge no such
suspension or debarment has been threatened or initiated; and the consummation
of the transactions contemplated by this Agreement will not result in any such
suspension or debarment of the Seller or the Buyer (assuming that no such
suspension or debarment will result solely from the identity of the
Buyer). The Seller has not been or is not now being audited or
investigated by the United States Government Accounting Office, the United
States Department of Defense or any of its agencies, the Defense Contract Audit
Agency, the contracting or auditing function of any Governmental Entity with
which it is contracting, the United States Department of Justice, the Inspector
General of the United States, or any prime contractor with a Governmental
Entity; nor, to the knowledge of the Seller, has any such audit or investigation
been threatened. To the knowledge of the Seller, there is no valid
basis for (i) the suspension or debarment of the Seller from bidding on
contracts or subcontracts with any Governmental Entity or (ii) any claim
(including any claim for return of funds to the Government) pursuant to an
audit
or investigation by any of the entities named in the foregoing
sentence. The Seller has no agreements, contracts or commitments
which require it to obtain or maintain a security clearance with any
Governmental Entity.
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(b) To
the
knowledge of the Seller, no basis exists for any of the following with respect
to any of its contracts or subcontracts with any Governmental
Entity: (i) a Termination for Default (as provided in 48 C.F.R. Ch.1
§52.249-8, 52.249-9 or similar sections), (ii) a Termination for Convenience
(as
provided in 48 C.F.R. Ch.1 §52.241-1, 52.249-2 or similar sections), or a Stop
Work Order (as provided in 48 C.F.R. Ch.1 §52.212-13 or similar sections); and
the Seller has no reason to believe that funding may not be provided under
any
contract or subcontract with any Governmental Entity in the upcoming federal
fiscal year.
2.31 Securities
Representations.
(a) Seller
is
an “accredited investor” as defined in Rule 501(a) under the Securities
Act. Seller has not been organized, reorganized or recapitalized
specifically for the purpose of acquiring the Shares.
(b) The
Seller is acquiring the Shares for its own account for investment only, and
not
with a view to, or for sale in connection with, any distribution of the Shares
in violation of the Securities Act, or any rule or regulation under the
Securities Act.
(c) The
Seller has had adequate opportunity to obtain from representatives of the Buyer
such information about the Buyer as is necessary for the undersigned to evaluate
the merits and risks of its acquisition of the Shares.
(d) The
Seller has sufficient expertise in business and financial matters to be able
to
evaluate the risks involved in the acquisition of the Shares and to make an
informed investment decision with respect to such acquisition.
(e) The
Seller understands that the Shares have not been registered under the Securities
Act and are “restricted securities” within the meaning of Rule 144 under the
Securities Act; and the Shares cannot be sold, transferred or otherwise disposed
of unless they are subsequently registered under the Securities Act or an
exemption from registration is then available.
(f) A
legend
substantially in the following form will be placed on the certificate(s)
representing the Shares:
“THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION TO
THE
EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED.”
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The
Seller understands the Shares are subject to a statutory holding period of
four
months and one day under Canadian securities laws and certificates representing
the Shares shall bear a legend substantially in the following form:
“UNLESS
PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT
TRADE THE SECURITY BEFORE [INSERT DATE THAT IS FOUR MONTHS AND ONE DAY AFTER
THE
CLOSING DATE]”
“THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE LISTED ON THE TORONTO STOCK
EXCHANGE; HOWEVER, THE SAID SECURITIES CANNOT BE TRADED THROUGH THE FACILITIES
OF SUCH EXCHANGE SINCE THEY ARE NOT FREELY TRANSFERABLE, AND CONSEQUENTLY ANY
CERTIFICATE REPRESENTING SUCH SECURITIES IS NOT “GOOD DELIVERY” IN SETTLEMENT OF
TRANSACTIONS ON THE TORONTO STOCK EXCHANGE.”
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF THE BUYER
The
Buyer
represents and warrants to the Seller that the statements contained in this
Article III are true and correct as of the date of this Agreement and will
be
true and correct as of the Closing as though made as of the
Closing.
3.1 Organization
and Corporate Power. The Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware. The Buyer has all requisite corporate power and authority
to carry on the business in which it is engaged and to own and use the
properties owned and used by it.
3.2 Authorization
of the Transaction. The Buyer has all requisite power and
authority to execute and deliver this Agreement and the Ancillary Agreements
and
to perform its obligations hereunder and thereunder. The execution
and delivery by the Buyer of this Agreement and the Ancillary Agreements and
the
performance by the Buyer of this Agreement and the Ancillary Agreements and
the
consummation by the Buyer of the transactions contemplated hereby and thereby
have been duly and validly authorized by all necessary action on the part of
the
Buyer. This Agreement has been duly and validly executed and
delivered by the Buyer and constitutes, and each of the Ancillary Agreements,
upon its execution and delivery by Buyer will constitute, a valid and binding
obligation of the Buyer, enforceable against it in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium, arrangement or other similar laws from time to
time
in effect.
3.3 Noncontravention. Neither
the execution and delivery by the Buyer of this Agreement or the Ancillary
Agreements, nor the consummation by the Buyer of the transactions contemplated
hereby or thereby, will (a) conflict with or violate any provision of the
Certificate of Incorporation or by-laws of the Buyer, (b) require on the
part of the Buyer any notice to or filing with, or permit, authorization,
consent or approval of, any Governmental Entity (it being
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understood
that the Toronto Stock Exchange shall not be deemed a Governmental Entity),
(c) conflict with, result in breach of, constitute (with or without due
notice or lapse of time or both) a default under, result in the acceleration
of
obligations under, create in any party any right to terminate, modify or cancel,
or require any notice, consent or waiver under, any contract or instrument
to
which the Buyer is a party or by which it is bound or to which any of its assets
is subject, or (d) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to the Buyer or any of its properties or
assets.
3.4 Capitalization. The
authorized capital stock of the Buyer consists of (a) 150,000,000 shares of
Buyer Common Stock, of which 76,511,741 shares were issued and outstanding,
and
options, warrants or other rights to acquire 9,006,343 shares of Buyer Common
Stock were outstanding, in each case, as of May 18, 2007, and (b) 5,000,000
shares of Preferred Xxxxx, x.0000 par value per share, of which no shares are
issued or outstanding. The rights and privileges of each class of the Buyer’s
capital stock are set forth in the Buyer’s Certificate of Incorporation, a copy
of which has been made available to Seller. All of the issued and
outstanding shares of Buyer Common Stock have been duly authorized and validly
issued and are fully paid and nonassessable. The Shares will be, when
issued on the terms and conditions of this Agreement, duly authorized, validly
issued, fully paid and nonassessable and not subject to or issued in violation
of any purchase option, call option, right of first refusal, preemptive right,
subscription right or any similar right under any provision of the Buyer’s
Certificate of Incorporation or By-laws or any agreement to which the Buyer
is a
party or is otherwise bound.
3.5 Reports
and Financial Statements. The Buyer has previously furnished or
made available to the Seller complete and accurate copies, as amended or
supplemented, of the Buyer Reports. The Buyer Reports constitute all
of the documents required to be filed by the Buyer under Section 13 or
subsections (a) or (c) of Section 14 of the Exchange Act with the SEC from
November 8, 2006 through the date of this Agreement. The Buyer
Reports complied in all material respects with the requirements of the Exchange
Act and the rules and regulations thereunder when filed. As of their
respective dates, the Buyer Reports did not contain any untrue statement of
a
material fact or omit to state a material fact required to be stated therein
or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited financial
statements and unaudited interim financial statements of the Buyer included
in
the Buyer Reports (i) complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations
of
the SEC with respect thereto when filed, (ii) were prepared in accordance
with GAAP applied on a consistent basis throughout the periods covered thereby
(except as may be indicated therein or in the notes thereto, and in the case
of
quarterly financial statements, as permitted by Form 10-Q under the
Exchange Act), and (iii) fairly present the consolidated financial
condition, results of operations and cash flows of the Buyer as of the
respective dates thereof and for the periods referred to therein.
3.6 Litigation. Except
as may be disclosed in the Buyer Reports, as of the date of this Agreement,
there is no Legal Proceeding which is pending or, to the Buyer’s knowledge,
threatened against the Buyer or any subsidiary of the Buyer which, if determined
adversely to the Buyer or such subsidiary, could have, individually or in the
aggregate, a material adverse effect on the business, assets, liabilities,
capitalization, prospects, condition (financial or other), or results of
operations of the Seller.
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3.7 Financial
Resources.»
The
Buyer has sufficient cash to pay the Cash Consideration.
3.8 Other
Representations.»
(a) Buyer
is
a reporting issuer under the securities laws of all of the provinces of Canada,
is not in default of any requirement of such securities laws, is not included
on
a list of defaulting reporting issuers maintained by the Canadian securities
regulators and will be, at the time of Closing, a reporting issuer under the
securities laws of each of the Canadian provinces;
(b) No
order,
ruling or determination having the effect of suspending or ceasing the trading
in any securities of Buyer has been issued by any regulatory authority
(including the Toronto Stock Exchange) and is continuing in effect and no
proceedings for that purpose have been instituted or, to the knowledge of the
Buyer, are pending, contemplated or threatened by any regulatory
authority;
(c) Buyer
is
in compliance with its timely and continuous disclosure obligations under United
States and Canadian Securities Laws and the rules and regulations of the Toronto
Stock Exchange except where failure to do so would not result in (i)
disqualifying Buyer from using a Form S-1 under Securities and Exchange
Commission rules, (ii) prevent or terminate the listing of Buyer Common Stock
on
the Toronto Stock Exchange or any national securities exchange on which Buyer
Common Stock is listed, or (iii) would not have a Buyer Material Adverse Effect;
and
(d) The
Buyer
Common Stock is listed and posted for trading on the Toronto Stock
Exchange.
ARTICLE
IV
PRE-CLOSING
COVENANTS
4.1 Closing
Efforts. Each of the Parties shall use its Reasonable Best
Efforts to take all actions and to do all things necessary, proper or advisable
to consummate the transactions contemplated by this Agreement, including using
its Reasonable Best Efforts to cause (i) its representations and warranties
to remain true and correct in all material respects through the Closing Date
and
(ii) the conditions to the obligations of the other Party to consummate the
transactions contemplated by this Agreement to be satisfied.
4.2 Governmental
and Third-Party Notices and Consents.
(a) Each
Party shall use its Reasonable Best Efforts to obtain, at its expense, all
waivers, permits, consents, approvals or other authorizations from Governmental
Entities, and to effect all registrations, filings and notices with or to
Governmental Entities, as may be required for such Party to consummate the
transactions contemplated by this Agreement and to
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otherwise
comply with all applicable laws and regulations in connection with the
consummation of the transactions contemplated by this Agreement.
(b) The
Seller shall use its Reasonable Best Efforts to obtain, at its expense, all
such
waivers, consents or approvals from third parties, and to give all such notices
to third parties, as listed or are required to be listed in the Disclosure
Schedule. The Buyer shall reasonably cooperate with the Seller in
Seller’s efforts to obtain such waivers, consents and approvals.
(c) If
(i) any of the Assigned Contracts or other assets or rights constituting
Acquired Assets may not be assigned and transferred by the Seller to the Buyer
(as a result of either the provisions thereof or applicable law) without the
consent or approval of a third party, (ii) the Seller, after using its
Reasonable Best Efforts, is unable to obtain such consent or approval prior
to
the Closing and (iii) the Closing occurs nevertheless, then (A) such
Assigned Contracts and/or other assets or rights shall not be assigned and
transferred by the Seller to the Buyer at the Closing and the Buyer shall not
assume the Seller’s future liabilities or future obligations with respect
thereto at the Closing until such approval or consent is obtained and assignment
occurs, at which time Buyer will assume all such liabilities and obligations
following the date of such approval or consent, (B) the Seller shall continue
to
use its Reasonable Best Efforts for a reasonable period of time after the
Closing, and in any case not less than nine (9) months, to obtain the necessary
consent or approval as soon as practicable after the Closing, (C) upon the
obtaining of such consent or approval, the Buyer and the Seller shall execute
such further instruments of conveyance (in substantially the form executed
at
the Closing) as may be necessary to assign and transfer such Assigned Contracts
and/or other assets or rights (and the associated liabilities and obligations
of
the Seller) to the Buyer, and (D) from and after the Closing until the
assignment or termination (at the end of any fixed term thereof or by the Buyer
after nine (9) months from the date hereof) of each such Assigned Contract
pursuant to clause (C) above, the Buyer shall perform and fulfill, on a
subcontractor basis, the obligations of the Seller or the applicable Subsidiary
to be performed under such Assigned Contract, and the Seller or such Subsidiary
shall promptly remit to the Buyer all payments received by it under such
Assigned Contract for services performed during such period.
4.3 Exclusivity.
(a) Neither
the Seller nor the Members shall, directly or indirectly, (i) initiate,
solicit, encourage or otherwise facilitate any inquiry, proposal, offer or
discussion with any party (other than the Buyer) concerning any merger,
reorganization, consolidation, recapitalization, business combination,
liquidation, dissolution, membership interest exchange, sale of membership
interests, sale of material assets or similar business transaction involving
the
Seller, (ii) furnish any non-public information concerning the business,
properties or assets of the Seller to any party (other than the Buyer),
(iii) engage in discussions or negotiations with any party (other than the
Buyer) concerning any such transaction, (iv) vote any membership interests
of
Seller in favor of any such transaction with any party (other than the Buyer),
or (v) enter into any agreement with any party (other than the Buyer) concerning
any such transaction.
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(b) The
Seller and each Member shall immediately notify any party with which discussions
or negotiations of the nature described in paragraph (a) above were pending
that the Seller or the Member, as applicable, is terminating such discussions
or
negotiations. If the Seller or a Member receives any inquiry,
proposal or offer of the nature described in paragraph (a) above, the
Seller or Member, as applicable, shall, within one business day after such
receipt, notify the Buyer of such inquiry, proposal or offer, including the
identity of the other party and the terms of such inquiry, proposal or
offer.
4.4 Operation
of Business. Except as contemplated by this Agreement, during the
period from the date of this Agreement to the Closing, the Seller shall conduct
its operations in the Ordinary Course of Business and in material compliance
with all applicable laws and regulations and, to the extent consistent
therewith, use its Reasonable Best Efforts to preserve intact its current
business organization, keep its physical assets in good working condition,
keep
available the services of its current officers and employees and preserve its
relationships with customers, suppliers and others having business dealings
with
it to the end that its goodwill and ongoing business shall not be impaired
in
any material respect. Without limiting the generality of the
foregoing, prior to the Closing, the Seller shall not, without the written
consent of the Buyer:
(a) issue
or
sell any membership interests or other securities of the Seller or any options,
warrants or other rights to acquire any such membership interests or other
securities (except pursuant to the conversion or exercise of options, warrants
or other convertible securities outstanding on the date hereof);
(b) declare,
set aside or pay any dividend or other distribution (whether in cash, stock
or
property or any combination thereof) in respect of its membership interests,
other than any quarterly distributions by Seller to its Members for the payment
of Taxes consistent with past practice;
(c) create,
incur or assume any indebtedness (including obligations in respect of capital
leases); assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any other
person or entity; or make any loans, advances or capital contributions to,
or
investments in, any other person or entity;
(d) enter
into, adopt or amend any Employee Benefit Plan or any employment or severance
agreement or arrangement of the type described in Section 2.20(k) or
(except for normal increases in the Ordinary Course of Business for employees
who are not Affiliates) increase in any manner the compensation or fringe
benefits of, or materially modify the employment terms of, its managers,
officers or employees, generally or individually, or pay any bonus or other
benefit to its managers, officers or employees (except for existing payment
obligations listed in Section 2.20 of the Disclosure Schedule) or hire any
new officers or (except in the Ordinary Course of Business) any new
employees;
(e) acquire,
sell, lease, license or dispose of any assets or property, other than purchases
and sales of assets in the Ordinary Course of Business;
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(f) mortgage
or pledge any of its property or assets or subject any such property or assets
to any Security Interest;
(g) discharge
or satisfy any Security Interest or pay any obligation or liability other than
in the Ordinary Course of Business;
(h) amend
its
operating agreement or other organizational documents in a manner that could
have an adverse effect on the transactions contemplated by this
Agreement;
(i) change
its accounting methods, principles or practices, except insofar as may be
required by law or regulatory accounting requirements or make any new elections,
or changes to any current elections, with respect to Taxes that affect the
Acquired Assets;
(j) enter
into, amend, terminate, take or omit to take any action that would constitute
a
violation of or default under, or waive any rights under, any contract or
agreement of a nature listed or required to be listed in Section 2.12, Section
2.13 or Section 2.14 of the Disclosure Schedule;
(k) make
or
commit to make any capital expenditure in excess of $5,000 per item or $10,000
in the aggregate;
(l) institute
or settle any Legal Proceeding;
(m) take
any
action or fail to take any action permitted by this Agreement with the knowledge
that such action or failure to take action would result in (i) any of the
representations and warranties of the Seller set forth in this Agreement not
being true and correct at the Closing or (ii) any of the conditions to the
Closing set forth in Article V not being satisfied; or
(n) agree
in
writing or otherwise to take any of the foregoing actions.
4.5 Access
to Information.
(a) The
Seller shall permit representatives of the Buyer to have full access (at all
reasonable times, and in a manner so as not to interfere with the normal
business operations of the Seller) to all premises, properties, financial,
tax
and accounting records (including the work papers of the Seller's independent
accountants), contracts, other records and documents, and personnel, of or
pertaining to the Seller, and contacts at Seller’s principal suppliers and
customers, for the purpose of performing such inspections and tests as the
Buyer
deems necessary or appropriate.
(b) If
the
Closing has not occurred by May 31, 2007, within 15 days after the end of each
month ending prior to the Closing, beginning with May 31, 2007, the Seller
shall
furnish to the Buyer an unaudited income statement for such month and a balance
sheet as of the end of such month, prepared on a basis consistent with the
Financial Statements. Such financial statements shall present fairly
the financial condition and results of operations of the Seller as of
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25
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the
dates
thereof and for the periods covered thereby, and shall be consistent with the
books and records of the Seller.
4.6 Notice
of Breaches.
(a) From
the
date of this Agreement until the Closing, the Seller shall promptly deliver
to
the Buyer supplemental information concerning events or circumstances occurring
subsequent to the date hereof which would render any representation, warranty
or
statement in this Agreement or the Disclosure Schedule inaccurate or incomplete
at any time after the date of this Agreement until the Closing. No
such supplemental information shall be deemed to avoid or cure any
misrepresentation or breach of warranty or constitute an amendment of any
representation, warranty or statement in this Agreement or the Disclosure
Schedule.
(b) From
the
date of this Agreement until the Closing, the Buyer shall promptly deliver
to
the Seller supplemental information concerning events or circumstances occurring
subsequent to the date hereof which would render any representation or warranty
in this Agreement inaccurate or incomplete at any time after the date of this
Agreement until the Closing. No such supplemental information shall
be deemed to avoid or cure any misrepresentation or breach of warranty or
constitute an amendment of any representation or warranty in this
Agreement.
4.7 FIRPTA
Tax Certificate. Within 10 days prior to the Closing, the Seller
shall deliver or cause to be delivered to the Buyer a certification that the
Seller is not a foreign person within the meaning of Section 1445 of the
Code, in accordance with the Treasury Regulations under Section 1445
of the Code.
ARTICLE
V
CONDITIONS
TO CLOSING
5.1 Conditions
to Obligations of the Buyer. The obligation of the Buyer to
consummate the transactions contemplated by this Agreement to be consummated
at
the Closing is subject to the satisfaction of the following additional
conditions:
(a) the
Seller shall have obtained at its own expense (and shall have provided copies
thereof to the Buyer) all of the waivers, permits, consents, approvals or other
authorizations, and effected all of the registrations, filings and notices,
referred to in Section 4.2 which are required on the part of the
Seller;
(b) the
representations and warranties of the Seller set forth in the first sentence
of
Section 2.1 and in Sections 2.2 and 2.3 and any representations and
warranties of the Seller set forth in this Agreement that are qualified as
to
materiality shall be true and correct in all respects, and all other
representations and warranties of the Seller set forth in this Agreement shall
be true and correct in all material respects, in each case as of the date of
this Agreement and as of the Closing as though made as of the Closing, except
to
the extent such representations and warranties are specifically made as of
a
particular date (in which case such representations and warranties shall be
true
and correct as of such date);
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(c) the
Seller shall have performed or complied with its agreements and covenants
required to be performed or complied with under this Agreement as of or prior
to
the Closing;
(d) no
Legal
Proceeding shall be pending or threatened; and no judgment, order, decree,
stipulation or injunction shall be in effect that would (i) prevent
consummation of the transactions contemplated by this Agreement, (ii) cause
the transactions contemplated by this Agreement to be rescinded following
consummation or (iii) affect adversely the right of the Buyer to own,
operate or control any of the Acquired Assets, or to conduct the business of
the
Seller as currently conducted, following the Closing;
(e) the
Seller shall have delivered to the Buyer the Seller Certificate;
(f) the
Seller shall have delivered to the Buyer an updated list of the Acquired Assets,
as of the day prior to the Closing Date;
(g) the
Seller shall have delivered to the Buyer documents evidencing the release or
termination of all Security Interests on the Acquired Assets, and copies of
filed UCC termination statements with respect to all UCC financing statements
evidencing Security Interests;
(h) the
Buyer
shall have received an opinion from counsel to the Seller in substantially
the
form attached hereto as Exhibit D, addressed to the Buyer and dated
as of the Closing Date;
(i) the
Seller shall have delivered the Net Working Capital Balance Certificate and
the
amount of the Closing Net Working Capital shall be no less than
$435,000;
(j) each
of
the Key Employees shall not have taken any action which would be prohibited
thereby in any material respect if such Person’s Employment Agreement were in
effect at the time of such action and the Seller shall have no knowledge of
any
such Key Employee’s intention not to accept employment by Buyer following the
Closing;
(k) the
Buyer
shall have entered into a sublease or assignment of the Lease reasonably
satisfactory to Seller, or Buyer shall have entered into a new lease with the
landlord of the property underlying the Lease;
(l) no
Seller
Material Adverse Effect shall have occurred;
(m) the
Buyer
shall be reasonably satisfied that the issuance and sale of the Shares are
exempt from the registration requirements of the Securities Act;
(n) Seller
shall have received all necessary consents to the assignment of customer
contracts representing at least 98% of Seller’s 2006 revenue (all as set forth
in Section 2.10(c) of the Disclosure Schedule) (which consent may be conditioned
on the Closing);
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(o) The
Buyer
and its attorneys, accountants, lenders and other representatives and agents
shall have satisfactorily completed their due diligence investigation of the
Seller and the Business; and
(p) the
Buyer
shall have received such other certificates and instruments (including
certificates of good standing of the Seller in its jurisdiction of organization
and the various foreign jurisdictions in which it is qualified, certified
charter documents, certificates as to the incumbency of officers and the
adoption of authorizing resolutions) as it shall reasonably request in
connection with the Closing.
5.2 Conditions
to Obligations of the Seller. The obligation of the Seller to
consummate the transactions contemplated by this Agreement to be consummated
at
the Closing is subject to the satisfaction of the following additional
conditions:
(a) the
representations and warranties of the Buyer set forth in the first sentence
of
Section 3.1 and in Section 3.2 and any representations and warranties of
the Buyer set forth in this Agreement that are qualified as to materiality
shall
be true and correct in all respects, and all other representations and
warranties of the Buyer set forth in this Agreement shall be true and correct
in
all material respects, in each case as of the date of this Agreement and as
of
the Closing as though made as of the Closing, except to the extent such
representations and warranties are specifically made as of a particular date
(in
which case such representations and warranties shall be true and correct as
of
such date);
(b) the
Buyer
shall have performed or complied with its agreements and covenants required
to
be performed or complied with under this Agreement as of or prior to the
Closing;
(c) no
Legal
Proceeding shall be pending or threatened wherein an unfavorable judgment,
order, decree, stipulation or injunction would (i) prevent consummation of
the transactions contemplated by this Agreement or (ii) cause the
transactions contemplated by this Agreement to be rescinded following
consummation, and no such judgment, order, decree, stipulation or injunction
shall be in effect;
(d) the
Buyer
shall have delivered to the Seller the Buyer Certificate;
(e) the
Buyer
shall have entered into a sublease or assignment of the Lease reasonably
satisfactory to Seller, or Buyer shall have entered into a new lease with the
landlord of the property underlying the Lease;
(f) no
Buyer
Material Adverse Effect shall have occurred;
(g) the
Seller shall have received such other certificates and instruments (including
certificates of good standing of the Buyer in its jurisdiction of organization,
certificates as to the incumbency of officers and the adoption of authorizing
resolutions) as it shall reasonably request in connection with the
Closing;
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(h) the
Seller shall be reasonably satisfied that the issuance and sale of the Shares,
and any subsequent transfers of the Shares to the Members, are exempt from
the
registration requirements of the Securities Act and are exempt from
the prospectus and registration requirements of applicable Canadian securities
laws, and comply with the rules of the Toronto Stock Exchange;
(i) The
Seller shall have received copies of correspondence indicating that the Shares
have been conditionally approved for listing on the Toronto Stock Exchange
on
the Closing Date subject to compliance with standard Toronto Stock Exchange
conditions; and
(j) The
Seller shall have received an opinion from counsel to the Buyer in substantially
the form attached hereto as Exhibit E, addressed to the Seller and
dated as of the Closing Date.
ARTICLE
VI
POST-CLOSING
COVENANTS
6.1 Proprietary
Information. From and after the Closing, neither the Seller nor
the Members shall disclose or make use of (except to pursue its rights, under
this Agreement or the Ancillary Agreements), and shall use their best efforts
to
cause all of their Affiliates not to disclose or make use of, any knowledge,
information or documents of a confidential nature or not generally known to
the
public with respect to Acquired Assets, the Seller’s business or the Buyer or
its business (including the financial information, technical information or
data
relating to the Seller’s products and names of customers of the Seller), as well
as filings and testimony (if any) presented in the course of any arbitration
of
a Dispute pursuant to Section 7.3 and the arbitral award and the Arbitrator’s
reasons therefor relating to the same), except to the extent that such
knowledge, information or documents shall have become public knowledge other
than through improper disclosure by the Seller or an Affiliate; provided that
this Section shall not restrict any Key Employee from performing his job
function with and for the benefit of Buyer after the Closing.
6.2 Solicitation
and Hiring. During the applicable Restricted Period, neither the
Seller nor any Member shall, either directly or indirectly (including through
an
Affiliate), (a) solicit, hire or attempt to induce any Restricted Employee
to
terminate his employment with the Buyer or any subsidiary of the Buyer; provided
that the restrictions on the Member (as such) set forth in this sentence shall
not apply to any Member who is a Key Employee and whose employment is terminated
by the Company without Cause (as defined in the Key Employee’s Employment
Agreement) or who terminates his employment with the Company for Good Reason
(as
defined in the Key Employee’s Employment Agreement).
6.3 Non-Competition.
(a) During
the applicable Restricted Period, neither the Seller nor any Member shall,
either directly or indirectly as a owner, partner, officer, employee, director,
investor, lender, consultant, independent contractor or otherwise (except as
the
holder of not more than 1% of the combined voting power of the outstanding
stock
of a publicly held
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company,
and excluding Seller’s ownership interest in Buyer), (i) provide any
service or design, develop, manufacture, market, sell or license any product
anywhere in the world which is competitive with any service provided or product
designed, developed (or under development), manufactured, sold or licensed
by
the Seller as of the Closing Date or (ii) engage anywhere in the world in
any business competitive with the business of the Seller as conducted as of
the
Closing Date, including without limitation, the on-line green credits
marketplace; provided that this sentence shall not apply to any Member who
is a
Key Employee and whose employment is terminated by the Company without Cause
(as
defined in the Key Employee’s Employment Agreement) or who terminates his
employment with the Company for Good Reason (as defined in the Key Employee’s
Employment Agreement).
(b) Each
of
the Seller and the Members agree that the duration and geographic scope of
the
non-competition provision set forth in this Section 6.3 are
reasonable. In the event that any court determines that the duration
or the geographic scope, or both, are unreasonable and that such provision
is to
that extent unenforceable, the Parties agree that the provision shall remain
in
full force and effect for the greatest time period and in the greatest area
that
would not render it unenforceable. The Parties intend that this
non-competition provision shall be deemed to be a series of separate covenants,
one for each and every county of each and every state of the United States
of
America and each and every political subdivision of each and every country
outside the United States of America where this provision is intended to be
effective.
(c) After
the
Closing Date, the Seller shall, and shall use its best efforts to cause its
Affiliates to, refer all inquiries regarding the business, products and services
of the Seller to the Buyer.
(d) Notwithstanding
the foregoing, in the event of a Buyer Sale or the event that Buyer voluntarily
or involuntarily is adjudicated bankrupt, all restrictions on, and obligations
of, the Seller under this Section 6.3 shall terminate immediately upon the
occurrence of such event.
6.4 Tax
Matters.
(a) All
transfer, sales, use, value added, stamp, registration documentary, excise,
real
property transfer or gains, and similar Taxes related to the sale of the
Acquired Assets contemplated by this Agreement shall be paid by 50% by the
Buyer
and 50% by the Seller.
(b) All
Tax
liabilities (other than Income Taxes) attributable to the Business through
the
Closing Date shall be borne by Buyer to the extent that such liabilities are,
in
the aggregate, included for purposes of calculating the Closing Net Working
Capital (collectively, the “Reserved Taxes”). Tax liabilities (other
than Income Taxes) attributable to the Business through the Closing Date in
excess of the Reserved Taxes shall be borne by the Seller.
(c) All
Taxes
attributable to the Business subsequent to the Closing shall be the
responsibility of the Buyer.
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(d) All
real
property taxes, personal property taxes, and similar ad valorem obligations
levied with respect to the Acquired Assets, and all rents, utilities and other
charges against the Seller with respect to the Acquired Assets, for a taxable
period that includes (but does not end on) the Closing Date shall be apportioned
between the Buyer and the Seller as of the Closing Date based upon (i) the
number of days of such taxable period included in any tax period (or portion
thereof) ending on or before the close of business on the Closing Date (the
“Pre-Closing Tax Period”) and (ii) the number of days of such taxable period
included in any tax period (or portion thereof) beginning after the Closing
Date
(the “Post-Closing Tax Period”). The Seller shall be liable for all
such Taxes relating to the Pre-Closing Tax Period, and the Buyer shall be liable
for all such Taxes relating to the Post-Closing Tax Period.
(e) If
either
party pays any Taxes to be borne by the other party under this Section 6.4,
the other party shall promptly reimburse such paying party for the Taxes
paid. If, in preparing Tax returns or payments after the Closing, it
appears to the Buyer that the Seller will be asked to pay additional Taxes,
the
Buyer shall so notify the Seller, and provide the Seller a reasonable
opportunity to review and comment upon any related Tax Returns prior to filing
them and paying the Tax. If either party receives any refunds or
credits which are the property of the other party under this Section 6.4, such
party shall promptly pay the amount of such refunds or credits to the other
party.
(f) The
Buyer
shall make available to the Seller and its representatives all records and
materials reasonably required by the Seller to prepare, pursue or contest any
Tax matters related to taxable periods (or portions thereof) ending on or before
the Closing Date and shall provide reasonable cooperation to the Seller in
such
case. The Seller shall make available to the Buyer and its
representatives all records and materials reasonably required by the Buyer
to
prepare, pursue or contest any Tax matters arising after the Closing which
have
factual reference to the Pre-Closing Tax Period and shall provide reasonable
cooperation to the Buyer in such case.
6.5 Sharing
of Data.
(a) The
Seller shall have the right for a period of seven years following the Closing
Date to have reasonable access to such books, records and accounts, including
financial and tax information, correspondence, production records, employment
records and other records that are transferred to the Buyer pursuant to the
terms of this Agreement for the limited purposes of concluding its involvement
in the business conducted by the Seller prior to the Closing Date and for
complying with its obligations under applicable securities, tax, environmental,
employment or other laws and regulations. The Buyer shall have the
right for a period of seven years following the Closing Date to have reasonable
access to those books, records and accounts, including financial and accounting
records (including the work papers of the Seller's independent accountants),
tax
records, correspondence, production records, employment records and other
records that are retained by the Seller pursuant to the terms of this Agreement
to the extent that any of the foregoing is needed by the Buyer for the purpose
of conducting the business of the Seller after the Closing and complying with
its obligations under applicable securities, tax, environmental, employment
or
other laws and regulations. Neither the Buyer nor the Seller shall
destroy any such books, records or accounts retained by it without first
providing the other Party with the opportunity to obtain or copy such books,
records, or accounts at such other Party's expense.
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(b) Promptly
upon request by the Buyer made at any time following the Closing Date, the
Seller shall authorize the release to the Buyer of all files pertaining to
the
Seller, the Acquired Assets or the business or operations of the Seller held
by
any federal, state, county or local authorities, agencies or
instrumentalities.
6.6 Use
of
Name. The Seller shall not use, and shall not permit any
Affiliate to use, the name “Energy Gateway” or any name reasonably similar
thereto after the Closing Date, except as approved by the Buyer in connection
with obtaining any approval or consent relating to an Assigned Contract as
contemplated by Section 4.2(c), which approval is hereby granted by Buyer for
a
period of nine (9) months from the date hereof, subject to the reasonable
approval of Buyer over the manner of use. Within two weeks of the
Closing, Seller shall have amended its operating agreement and governing
documents to change its name to something not similar to “Energy
Gateway.”
6.7 Cooperation
in Litigation. From and after the Closing Date, each Party shall
fully cooperate with the other in the defense or prosecution of any litigation
or proceeding already instituted or which may be instituted hereafter against
or
by such other Party relating to or arising out of the conduct of the business
of
the Seller or the Buyer prior to or after the Closing Date (other than
litigation among the Parties and/or their Affiliates arising out the
transactions contemplated by this Agreement). The Party requesting
such cooperation shall pay the reasonable out-of-pocket expenses incurred in
providing such cooperation (including legal fees and disbursements) by the
Party
providing such cooperation and by its officers, directors, managers, employees
and agents, and shall reimburse such Party or its officers, directors, managers,
employees and agents, at a reasonable rate, for their time spent in such
cooperation in excess of twenty-five hours in the aggregate on such
matter.
6.8 Collection
of Accounts Receivable. The Seller agrees that it shall forward
promptly to the Buyer any monies, checks or instruments received by the Seller
after the Closing Date with respect to the accounts receivable purchased by
the
Buyer from the Seller pursuant to this Agreement. The Seller shall
provide to the Buyer such reasonable assistance as the Buyer may request with
respect to the collection of any such accounts receivable, provided the Buyer
pays the reasonable out-of-pocket expenses of the Seller and its officers,
managers and employees incurred in providing such assistance. The
Seller hereby grants to the Buyer a power of attorney to endorse and cash any
checks or instruments payable or endorsed to the Seller or its order which
are
received by the Buyer and which relate to accounts receivable purchased by
the
Buyer from the Seller. If, and to the extent that, Buyer is unable to
collect on any accounts receivable acquired from the Seller hereunder and Buyer
obtains indemnification from Seller under this Agreement for such accounts,
Buyer shall assign such accounts to the Seller and Seller shall be entitled
to
collect such accounts for its own account and, if Seller collects such account,
it shall have no obligation to remit such amount collected to the
Buyer.
6.9 Employees.
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(a) Effective
as of the Closing, the Seller shall terminate the employment of each of its
employees designated on Schedule 6.9 attached hereto (which may be updated
prior
to the Closing by the mutual agreement of the Buyer and the
Seller). The Buyer shall be permitted to offer employment to each
such employee, terminable at the will of the Buyer except as may be set forth
in
any employment agreement with a Key Employee. The Seller hereby
consents to the hiring of any such employees by the Buyer and waives, with
respect to the employment by the Buyer of such employees, any claims or rights
the Seller may have against the Buyer or any such employee under any
non-competition, confidentiality or employment agreement.
(b) Buyer
and
Seller shall cooperate to substitute Buyer for Seller as the contract holder
on
all insurance contracts providing medical or dental benefits for employees
of
Seller and their beneficiaries.
(c) Nothing
in this Agreement shall prevent Buyer from amending or terminating any plan
maintained by Buyer under which a former employee of Seller is a
participant.
6.10 Enforcement
of Insurance Claims. The Seller hereby assigns to the Buyer the
right to pursue and enforce, and hereby irrevocably appoints the Buyer as its
true and lawful attorney-in-fact with full power in the name of and on behalf
of
the Seller for the purpose of pursuing and enforcing, any and all rights of
the
Seller under any insurance policies of the Seller which are not assigned to
the
Buyer pursuant to this Agreement with respect to any occurrence, claim or loss
(including any product liability claim) which is the subject of an indemnity
obligation by the Seller to the Buyer under Article VII; provided that the
Buyer
may not exercise such right or power unless the Seller fails to promptly and
expeditiously pursue and enforce its rights under its insurance policies with
respect to such occurrence, claim or loss. The power of attorney
conferred upon the Buyer by the Seller pursuant to this Section 6.10 is an
agency coupled with an interest and all authority conferred hereby shall be
irrevocable, and shall not be terminated by the dissolution or the liquidation
of the Seller or any other act of the Seller.
6.11 Registration
and Listing of Shares.
(a) The
Buyer
shall use its Reasonable Best Efforts to (i) file with the SEC the Seller
Registration Statement and (ii) cause all Registrable Shares to be listed on
each securities exchange or automated quotation system on which similar
securities issued by the Buyer are then listed, each promptly following the
date
on which the Buyer meets the registrant requirements to use Form S-3
(notwithstanding the fact that, at such time, the Buyer may be required to
use
Form S-1 to register such Registrable Shares). The Buyer shall use
its Reasonable Best Efforts to cause the Seller Registration Statement to be
declared effective by the SEC as soon as practicable. The Buyer shall
use Reasonable Best Efforts to cause the Seller Registration Statement to remain
effective until the date that is one year after the effective date of such
Seller Registration Statement or such earlier time as all of the Registrable
Shares covered by the Seller Registration Statement have been sold pursuant
thereto.
(b) The
Buyer
may, by written notice to the Seller, (i) delay the filing or effectiveness
of the Seller Registration Statement or (ii) suspend the Seller
Registration Statement after effectiveness and require that the Seller
immediately cease sales of shares
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pursuant
to the Seller Registration Statement, in the event that (A) the Buyer files
a
registration statement (other than a registration statement on Form S-8 or
its
successor form) with the SEC for a public offering of its securities or (B)
the
Buyer is engaged in any activity or transaction or preparations or negotiations
for any activity or transaction that the Buyer desires to keep confidential
for
business reasons, if the Buyer determines in good faith that the public
disclosure requirements imposed on the Buyer under the Securities Act in
connection with the Seller Registration Statement would require disclosure
of
such activity, transaction, preparations or negotiations. The Buyer
may suspend or delay pursuant to (i) or (ii) of this subsection (b) only once
during any 365 day period, and any time during which the Seller Registration
Statement is suspended under (ii) shall not be included in the amount of time
Buyer is required to maintain the effectiveness of the Seller Registration
Statement under (a) above.
(c) If
the
Buyer delays or suspends the Seller Registration Statement or requires the
Seller to cease sales of shares pursuant to paragraph (b) above, the Buyer
shall, as promptly as practicable following the termination of the circumstance
which entitled the Buyer to do so, take such actions as may be necessary to
file
or reinstate the effectiveness of the Seller Registration Statement and/or
give
written notice to the Seller authorizing it to resume sales pursuant to the
Seller Registration Statement. If as a result thereof the Prospectus
included in the Seller Registration Statement has been amended to comply with
the requirements of the Securities Act, the Buyer shall enclose such revised
Prospectus with the notice to Seller given pursuant to this paragraph (c),
and
the Seller shall make no offers or sales of Registrable Shares pursuant to
the
Seller Registration Statement other than by means of such revised
Prospectus.
(d) In
connection with the filing by the Buyer of the Seller Registration Statement,
the Buyer shall (i) promptly notify Seller of the effectiveness of the Seller
Registration Statement, and (ii) furnish to the Seller a copy of the Prospectus,
including a preliminary Prospectus, in conformity with the requirements of
the
Securities Act.
(e) The
Buyer
shall use its Reasonable Best Efforts to register or qualify the Registrable
Shares covered by the Seller Registration Statement under the securities laws
of
each state of the United States in which the Seller reasonably intends to make
sales; provided, however, that the Buyer shall not be required in
connection with this paragraph (e) to qualify as a foreign corporation or
execute a general consent to service of process in any
jurisdiction.
(f) If
the
Buyer has delivered preliminary or final Prospectuses to the Seller and after
having done so the Prospectus is amended or supplemented to comply with the
requirements of the Securities Act, the Buyer shall promptly notify the Seller
and, if requested by the Buyer, the Seller shall immediately cease making offers
or sales of shares under the Seller Registration Statement and return all
Prospectuses to the Buyer. The Buyer shall promptly provide the
Seller with revised or supplemented Prospectuses and, following receipt of
the
revised or supplemented Prospectuses, the Seller shall be free to resume making
offers and sales under the Seller Registration Statement.
(g) The
Buyer
shall pay all Registration Expenses incurred by it in complying with its
obligations under this Section 6.11.
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(h) The
Buyer
shall not be required to include any Registrable Shares in the Seller
Registration Statement unless:
(i) the
Seller furnishes to the Buyer in writing such information regarding such Seller
and the proposed sale of Registrable Shares by such Seller as the Buyer may
reasonably request in writing in connection with the Seller Registration
Statement or as shall be required in connection therewith by the SEC or any
state securities law authorities;
(ii) Seller
shall have provided to the Buyer its written agreement:
(A) to
indemnify the Buyer and each of its directors and officers against, and hold
the
Buyer and each of its directors and officers harmless from, any losses, claims,
damages, expenses or liabilities (including reasonable attorneys fees) to which
the Buyer or such directors and officers may become subject by reason of any
statement or omission in the Seller Registration Statement made in reliance
upon, or in conformity with, a written statement by such Seller furnished
pursuant to this Section 6.11; and
(B) to
report to the Buyer sales made pursuant to the Seller Registration
Statement.
(i) Seller
may not assign any of its rights under this Section 6.11 except in connection
with the transfer of some or all of his, her or its Shares to its members
pursuant to a pro rata distribution of its Registrable Shares, provided
each such transferee agrees in a written instrument delivered to the Buyer
to be
bound by the provisions of this Section 6.11. For purposes of this
Section 6.11, any references to “Seller” shall include any Member to whom such
rights are transferred pursuant to this paragraph (i), provided that, in such
case, any notices required of the Buyer hereunder may still be made to the
Seller, or a single party designated in writing by the Seller.
(j) Buyer’s
obligations to register the Shares under this Section 6.11 shall terminate
upon
the earlier of (a) the date on which Seller (or its permitted assigns under
the
foregoing subsection) holds no Registrable Shares, or (b) after a Buyer Sale
as
a result of which (i) the Buyer Common Stock is no longer listed on the Toronto
Stock Exchange or a national securities exchange, or (ii) the Registrable Shares
then held by Seller (or its permitted assignees) are (x) cancelled in exchange
for consideration on terms applicable to all stockholders of the Buyer equally,
(y) tendered in any tender offer for shares of the Buyer, or (z) not tendered
in
a tender offer in which the Board of Directors of the Buyer has recommended
that
the stockholders of Buyer tender their shares.
(k) The
Buyer
shall use Reasonable Best Efforts to obtain final approval for the listing
of
the Shares on the Toronto Stock Exchange within the time period required by
the
correspondence from the Toronto Stock Exchange granting conditional approval
for
the listing of the Shares.
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(l) For
the
avoidance of doubt the Seller and Buyer agree that the obligations of the Buyer
under this Section 6.11 shall apply to any and all Registrable Shares that
are
Escrow Shares and are registered in the name of the Escrow Agent.
(m) Buyer
shall have no obligation or liability under this Section 6.11 if Seller refuses
or is unable to provide a management representation letter in the form requested
by the Buyer’s auditors stating that Seller’s financial statements have been
prepared in accordance with GAAP.
6.12 Incidental
Registration.
(a) Whenever
the Buyer proposes to file a Registration Statement covering shares of Buyer
Common Stock (other than a Registration Statement covering shares to be sold
solely for the account of Other Holders, which shares were acquired pursuant
to
either (i) an acquisition of a company of which they were formerly stockholders,
(ii) a "private placement" under the Securities Act or (iii) Rule 144A under
the
Securities Act) at any time and from time to time, it will, prior to such
filing, give written notice to the Seller of its intention to do
so. Upon the written request of the Seller given within 20 days after
the Buyer provides such notice (which request shall state the intended method
of
disposition of such Registrable Shares), the Buyer shall use its Reasonable
Best
Efforts to cause all Registrable Shares which the Buyer has been requested
by
the Seller to register to be registered under the Securities Act to the extent
necessary to permit their sale or other disposition in accordance with the
intended methods of distribution specified in the request of the Seller;
provided that the Buyer shall have the right to postpone or withdraw any
registration effected pursuant to this Section 6.12 without obligation to
the Seller.
(b) If
the
registration for which the Buyer gives notice pursuant to paragraph (a) is
a
registered public offering involving an underwriting, the Buyer shall so advise
the Seller as a part of the written notice given pursuant to paragraph
(a). In such event, (i) the right of the Seller to include its
Registrable Shares in such registration pursuant to this Section 6.12 shall
be
conditioned upon the Seller’s participation in such underwriting on the terms
set forth herein and (ii) the Seller including Registrable Shares in such
registration shall enter into an underwriting agreement upon customary terms
with the underwriter or underwriters selected for the underwriting by the
Buyer. If the Seller disapproves of the terms of the underwriting,
Seller may elect, by written notice to the Buyer, to withdraw its shares from
such Registration Statement and underwriting. If the managing
underwriter advises the Buyer in writing that marketing factors require a
limitation on the number of shares to be underwritten, the shares held by
holders of securities of the Buyer other than the Seller and Other Holders
shall
be excluded from such Registration Statement and underwriting to the extent
deemed advisable by the managing underwriter, and, if a further reduction of
the
number of shares is required, the number of shares that may be included in
such
Registration Statement and underwriting shall be allocated among the Seller
and
Other Holders requesting registration in proportion, as nearly as practicable,
to the respective number of shares of Buyer Common Stock having registration
rights held by them on the date the Buyer gives the notice specified in
paragraph (a). If the Seller or Other Holder would thus be entitled
to include more shares than such holder requested to be registered,
the
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excess
shall be allocated among the Seller and other requesting Other Holders pro
rata
in the manner described in the preceding sentence.
(c) If
the
Buyer has delivered a Prospectus to the Seller and after having done so the
Prospectus is amended to comply with the requirements of the Securities Act,
the
Buyer shall promptly notify the Seller and, if requested, the Seller shall
immediately cease making offers of Registrable Shares and return all
Prospectuses to the Buyer. The Buyer shall promptly provide the
Seller with revised Prospectuses and, following receipt of the revised
Prospectuses, the Seller shall be free to resume making offers of the
Registrable Shares.
(d) In
the
event that, in the judgment of the Buyer, it is advisable to suspend use of
a
Prospectus included in a Registration Statement due to pending material
developments or other events that have not yet been publicly disclosed and
as to
which the Buyer believes public disclosure would be detrimental to the Buyer,
the Buyer shall notify the Seller to such effect, and, upon receipt of such
notice, the Seller shall immediately discontinue any sales of Registrable Shares
pursuant to such Registration Statement until the Seller has received copies
of
a supplemented or amended Prospectus or until the Seller is advised in writing
by the Buyer that the then current Prospectus may be used and has received
copies of any additional or supplemental filings that are incorporated or deemed
incorporated by reference in such Prospectus. Notwithstanding
anything to the contrary herein, the Buyer shall not exercise its rights under
this paragraph (d) to suspend sales of Registrable Shares for a period in excess
of 30 days consecutively or 60 days in any 365-day period.
(e) The
Buyer
will pay all Registration Expenses for all registrations under this Section
6.12.
(f) Seller
shall furnish to the Buyer such information regarding Seller and the
distribution proposed by Seller as the Buyer may reasonably request in writing
and as shall be required in connection with any registration, qualification
or
compliance referred to in this Section 6.12.
(g) Seller
shall treat any written notice from the Buyer regarding the Buyer's plans to
file a Registration Statement confidentially and shall not disclose such
information to any person other than as necessary to exercise its rights under
this Section 6.12.
(h) Seller
may not assign any of its rights under this Section 6.12 except in connection
with the transfer of some or all of its Registrable Shares to its members
pursuant to a pro rata distribution of its Registrable Shares, provided
each such transferee agrees in a written instrument delivered to the Buyer
to be
bound by the provisions of this Section 6.12.
(i) All
of
the Buyer's obligations to register Registrable Shares under this Section 6.12
shall terminate upon the earlier of (a) the date on which Seller (or its
permitted assigns under the foregoing subsection) holds no Registrable Shares,
or (b) after a Buyer Sale as a result of which (i) Buyer Common Stock is no
longer listed on the Toronto Stock Exchange or a national securities exchange,
or (ii) the Registrable Shares then held by Seller (or its permitted assignees)
are (x) cancelled in exchange for consideration on terms applicable to all
stockholders of the Buyer equally, (y) tendered in any tender offer for shares
of the Buyer, or (z) not tendered
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in
a
tender offer in which the Board of Directors of the Buyer has recommended that
the stockholders of Buyer tender their shares.
(j) The
Buyer
shall use Reasonable Best Efforts to obtain final approval for the listing
of
the Shares on the Toronto Stock Exchange within the time period required by
the
correspondence from the Toronto Stock Exchange granting conditional approval
for
the listing of the Shares.
(k) For
the
avoidance of doubt the Seller and Buyer agree that the obligations of the Buyer
under this Section 6.12 shall apply to any and all Registrable Shares that
are
Escrow Shares and are registered in the name of the Escrow Agent.
6.13 Registration
Statement Indemnification.
(a) The
Buyer
agrees to indemnify and hold harmless the Seller against any losses, claims,
damages, expenses or liabilities to which Seller may become subject by reason
of
any untrue statement of a material fact contained in a Registration Statement
in
which Registrable Shares are included pursuant to Section 6.11 or Section 6.12
or any omission to state therein a fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as
such
losses, claims, damages, expenses or liabilities arise out of or are based
upon
information furnished to the Buyer by or on behalf of the Seller for use in
such
Registration Statement. The Buyer shall have the right to assume the
defense and settlement of any claim or suit for which the Buyer may be
responsible for indemnification under this Section 6.13.
(b) The
Seller (and any Member holding Registrable Shares) agrees to indemnify and
hold
harmless the Buyer (including its directors, officers and any underwriter)
against any losses, claims, damages, expenses or liabilities to which Buyer
(including its directors, officers and any underwriter) may become subject
by
reason of any untrue statement of a material fact contained in a Registration
Statement in which Registrable Shares are included pursuant to Section 6.11
or
Section 6.12 or any omission to state therein a fact required to be stated
therein or necessary to make the statements therein not misleading, if and
to
the extent that the statement or omission was made in reliance upon and in
conformity with information furnished in writing to the Buyer by such person
specifically for use in connection with such Registration
Statement.
6.14 Maintenance
of Corporate Existence; Distribution of Shares. For a period of
at least one year following the Closing Date, the Seller shall not distribute
the Shares or dissolve, or adopt any resolutions or a plan therefore; provided
that nothing herein shall prevent Seller from selling such Shares pursuant
to an
effective registration statement under the Securities Act and distributing
the
proceeds thereof to a Member or Members.
ARTICLE
VII
INDEMNIFICATION
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7.1 Indemnification
by the Seller. The Members, severally and not jointly, and the
Seller, shall indemnify the Buyer (and its officers, directors and affiliates)
in respect of, and hold the Buyer (and its officers, directors and affiliates)
harmless against, Damages incurred or suffered by the Buyer or any Affiliate
thereof resulting from, relating to or constituting:
(a) any
breach, as of the date of this Agreement or as of the Closing Date, of any
representation or warranty of the Seller or Members contained in this Agreement,
any Ancillary Agreement or any other agreement or instrument furnished by the
Seller or the Members to the Buyer pursuant to this Agreement;
(b) any
failure to perform any covenant or agreement of the Seller or the Members
contained in this Agreement, any Ancillary Agreement or any agreement or
instrument furnished by the Seller to the Buyer pursuant to this Agreement;
it
being agreed and understood that if Seller fails to obtain as of Closing one
or
more consents to the assignment of customer contracts and provides notice to
the
Buyer of such failure (in writing) and Buyer elects to effect the Closing
notwithstanding the absence of such consents, then, so long as Seller is not
in
violation of Section 4.2, Seller shall not be liable following the Closing
for
the failure to obtain the consent to assignment of such customer
contracts.
(c) any
Retained Liabilities;
(d) any
error, inaccuracy or omission in the Net Working Capital Balance Certificate,
and for which the Buyer submits a Claim Notice within 120 days of the Closing
Date, which error, after being corrected, would result in the Seller having
had
Closing Net Working Capital of less than $435,000; or
(e) the
failure of the Buyer and the Seller, in connection with the sale of the Acquired
Assets by the Seller to the Buyer pursuant to this Agreement, to comply with,
and obtain for the Buyer the benefits afforded by compliance with, any
applicable bulk transfers laws.
7.2 Indemnification
by the Buyer. The Buyer shall indemnify the Seller (and its
officers, directors and affiliates) in respect of, and hold Seller (and its
officers, directors and affiliates) harmless against, any and all Damages
incurred or suffered by the Seller resulting from, relating to or
constituting:
(a) any
breach, as of the date of this Agreement or as of the Closing Date, of any
representation or warranty of the Buyer contained in this Agreement, any
Ancillary Agreement or any other agreement or instrument furnished by the Buyer
to the Seller pursuant to this Agreement;
(b) any
failure to perform any covenant or agreement of the Buyer contained in this
Agreement, any Ancillary Agreement or any other agreement or instrument
furnished by the Buyer to the Seller pursuant to this Agreement; or
(c) any
Assumed Liabilities.
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7.3 Indemnification
Claims.
(a) An
Indemnified Party shall give written notification to the Indemnifying Party
of
the commencement of any Third Party Action. Such notification shall
be given within 20 days after receipt by the Indemnified Party of notice of
such
Third Party Action, and shall describe in reasonable detail (to the extent
known
by the Indemnified Party) the facts constituting the basis for such Third Party
Action and the amount of the claimed damages; provided, however, that no delay
or failure on the part of the Indemnified Party in so notifying the Indemnifying
Party shall relieve the Indemnifying Party of any liability or obligation
hereunder except to the extent of any damage or liability caused by or arising
out of such failure. Within 20 days after delivery of such
notification, the Indemnifying Party may, upon written notice thereof to the
Indemnified Party, assume control of the defense of such Third Party Action
with
counsel reasonably satisfactory to the Indemnified Party; provided that
(i) the Indemnifying Party may only assume control of such defense if
(A) it acknowledges in writing to the Indemnified Party that any Damages
that may be assessed against the Indemnified Party in connection with such
Third
Party Action constitute Damages for which the Indemnified Party shall be
indemnified pursuant to this Article VII and (B) the amount of damages
claimed is less than or equal to the amount of Damages for which the
Indemnifying Party is liable under this Article VII and (ii) the
Indemnifying Party may not assume control of the defense of Third Party Action
involving criminal liability or in which equitable relief is sought against
the
Indemnified Party. If the Indemnifying Party does not, or is not
permitted under the terms hereof to, so assume control of the defense of a
Third
Party Action, the Indemnified Party shall control such defense. The
Non-controlling Party may participate in such defense at its own
expense. The Controlling Party shall keep the Non-controlling Party
advised of the status of such Third Party Action and the defense thereof and
shall consider in good faith recommendations made by the Non-controlling Party
with respect thereto. The Non-controlling Party shall furnish the
Controlling Party with such information as it may have with respect to such
Third Party Action (including copies of any summons, complaint or other pleading
which may have been served on such party and any written claim, demand, invoice,
billing or other document evidencing or asserting the same) and shall otherwise
cooperate with and assist the Controlling Party in the defense of such Third
Party Action. Notwithstanding any other provision of this Agreement,
the reasonable fees and expenses of counsel to the Indemnified Party with
respect to a Third Party Action shall be considered Damages for purposes of
this
Agreement if (i) the Indemnified Party controls the defense of such Third Party
Action pursuant to the terms of this Section 7.3(a) or (ii) the Indemnifying
Party assumes control of such defense and the Indemnified Party reasonably
concludes that the Indemnifying Party and the Indemnified Party have conflicting
interests or different defenses available with respect to such Third Party
Action. The Indemnifying Party shall not agree to any settlement of,
or the entry of any judgment arising from, any Third Party Action without the
prior written consent of the Indemnified Party, which shall not be unreasonably
withheld, conditioned or delayed. If the Indemnified Party withholds
its consent to any such settlement or entry of judgment which settlement or
entry of judgment relates to cash Damages only, then the liability of the
Indemnifying Party to the Indemnified Party with respect to the matter which
would have been concluded or settled shall be limited to the amount for which
such matters could have been concluded or settled but for the fact the
Indemnified Party withheld its consent. The Indemnified Party shall
not agree to any settlement of, or the entry of
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any
judgment arising from, any such Third Party Action without the prior written
consent of the Indemnifying Party, which shall not be unreasonably withheld,
conditioned or delayed.
(b) In
order
to seek indemnification under this Article VII, an Indemnified Party shall
deliver a Claim Notice to the Indemnifying Party. If the Indemnified
Party is the Buyer, the Indemnifying Party shall deliver a copy of the Claim
Notice to both the Seller and the Escrow Agent.
(c) Within
20
days after delivery of a Claim Notice, the Indemnifying Party shall deliver
to
the Indemnified Party a Response, in which the Indemnifying Party
shall: (i) agree that the Indemnified Party is entitled to
receive all of the Claimed Amount (in which case the Response shall be
accompanied by a payment by the Indemnifying Party to the Indemnified Party
of
the Claimed Amount, by check or by wire transfer; provided that if the
Indemnified Party is the Buyer, the Indemnifying Party and the Indemnified
Party
shall deliver to the Escrow Agent, within three days following the delivery
of
the Response, a written notice executed by both parties instructing the Escrow
Agent to disburse to the Buyer an amount from the Escrow Fund equal to the
Claimed Amount), (ii) agree that the Indemnified Party is entitled to
receive the Agreed Amount (in which case the Response shall be accompanied
by a
payment by the Indemnifying Party to the Indemnified Party of the Agreed Amount,
by check or by wire transfer; provided that if the Indemnified Party is the
Buyer, the Indemnifying Party and the Indemnified Party shall deliver to the
Escrow Agent, within three days following the delivery of the Response, a
written notice executed by both parties instructing the Escrow Agent to disburse
to the Buyer from the Escrow Fund an amount equal to the Agreed Amount) or
(iii) dispute that the Indemnified Party is entitled to receive any of the
Claimed Amount.
(d) During
the 30-day period following the delivery of a Response that reflects a Dispute,
the Indemnifying Party and the Indemnified Party shall use good faith efforts
to
resolve the Dispute. If the Dispute is not resolved within such
30-day period, the Indemnifying Party and the Indemnified Party shall discuss
in
good faith the submission of the Dispute to binding arbitration, and if the
Indemnifying Party and the Indemnified Party agree in writing to submit the
Dispute to such arbitration, then the provisions of Section 7.3(e) shall become
effective with respect to such Dispute. The provisions of this
Section 7.3(d) shall not obligate the Indemnifying Party and the
Indemnified Party to submit to arbitration or any other alternative dispute
resolution procedure with respect to any Dispute, and in the absence of an
agreement by the Indemnifying Party and the Indemnified Party to arbitrate
any
Dispute, such Dispute shall be resolved in a state or federal court sitting
in
the Commonwealth of Massachusetts, in accordance with Section
10.12. If the Indemnified Party is the Buyer, the Indemnifying Party
and the Indemnified Party shall deliver to the Escrow Agent, promptly following
the resolution of the Dispute (whether by mutual agreement, arbitration,
judicial decision or otherwise), a written notice executed by both parties
instructing the Escrow Agent as to what (if any) portion of the Escrow Fund
shall be disbursed to the Buyer (which notice shall be consistent with the
terms
of the resolution of the Dispute).
(e) If,
as
set forth in Section 7.3(d), the Indemnified Party and the Indemnifying
Party agree to submit any Dispute to binding arbitration, the arbitration shall
be
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conducted
by the Arbitrator in accordance with the Commercial Rules in effect from time
to
time and the following provisions:
(i) In
the
event of any conflict between the Commercial Rules in effect from time to time
and the provisions of this Agreement, the provisions of this Agreement shall
prevail and be controlling.
(ii) The
parties shall commence the arbitration by jointly filing a written submission
with the office of the AAA having responsibility for matters to be arbitrated
in
Boston, Massachusetts, in accordance with Commercial Rule 5 (or any successor
provision).
(iii) No
depositions or other discovery shall be conducted in connection with the
arbitration.
(iv) Not
later
than 30 days after the conclusion of the arbitration hearing, the Arbitrator
shall prepare and distribute to the parties a writing setting forth the arbitral
award and the Arbitrator’s reasons therefor. Any award rendered by
the Arbitrator shall be final, conclusive and binding upon the parties, and
judgment thereon may be entered and enforced in any court of competent
jurisdiction (subject to Section 10.12), provided that the Arbitrator shall
have
no power or authority to grant injunctive relief, specific performance or other
equitable relief.
(v) The
Arbitrator shall have no power or authority, under the Commercial Rules or
otherwise, to (x) modify or disregard any provision of this Agreement,
including the provisions of this Section 7.3(e), or (y) address or resolve
any issue not submitted by the parties.
(vi) In
connection with any arbitration proceeding pursuant to this Agreement, each
party shall bear its own costs and expenses, except that the fees and costs
of
the AAA and the Arbitrator, the costs and expenses of obtaining the facility
where the arbitration hearing is held, and such other costs and expenses as
the
Arbitrator may determine to be directly related to the conduct of the
arbitration and appropriately borne jointly by the parties (which shall not
include any party’s attorneys’ fees or costs, witness fees (if any), costs of
investigation and similar expenses) shall be shared equally by the Indemnified
Party and the Indemnifying Party.
(f) Notwithstanding
the other provisions of this Section 7.3, if a third party asserts (other
than by means of a lawsuit) that an Indemnified Party is liable to such third
party for a monetary or other obligation which may constitute or result in
Damages for which such Indemnified Party may be entitled to indemnification
pursuant to this Article VII, and such Indemnified Party reasonably
determines that it has a valid business reason to fulfill such obligation,
then
(i) such Indemnified Party shall be entitled to satisfy such obligation,
without prior notice to or consent from the Indemnifying Party, and
(ii) such Indemnified Party may subsequently make a claim for
indemnification in accordance with the provisions of this Article VII, and
shall be reimbursed, in accordance with the provisions of this Article VII,
for any such Damages for which it is entitled to indemnification pursuant to
this Article VII (subject to the right of the Indemnifying Party to dispute
the Indemnified Party’s entitlement to indemnification, or the amount for which
it is entitled to indemnification, under the terms of this
Article VII).
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(g) Any
amounts to be disbursed by the Escrow Agent hereunder shall first be satisfied
against the Value of the Escrow Shares and second against any other assets
held
in the Escrow Fund.
7.4 Survival
of Representations and Warranties. All representations and
warranties that are covered by the indemnification agreements in Section 7.1(a)
and Section 7.2(a) shall (a) survive the Closing and (b) shall expire
on the date that is eighteen (18) months following the Closing Date, except
that
(i) the representations and warranties set forth in Sections 2.1, 2.2, 2.3,
3.1 and 3.2 shall survive the Closing without limitation and (ii) the
representations and warranties set forth in Sections 2.9, 2.20 and 2.21
shall survive until 30 days following expiration of all statutes of
limitation applicable to the matters referred to therein. If an
Indemnified Party delivers to an Indemnifying Party, before expiration of a
representation or warranty, either a Claim Notice based upon a breach of such
representation or warranty, or an Expected Claim Notice based upon a breach
of
such representation or warranty, then the applicable representation or warranty
shall survive until, but only for purposes of, the resolution of the matter
covered by such notice. If the legal proceeding or written claim with
respect to which an Expected Claim Notice has been given is definitively
withdrawn or resolved in favor of the Indemnified Party, the Indemnified Party
shall promptly so notify the Indemnifying Party; and if the Indemnified Party
has delivered a copy of the Expected Claim Notice to the Escrow Agent and Escrow
Funds have been retained in escrow after the Termination Date (as defined in
the
Escrow Agreement) with respect to such Expected Claim Notice, the Indemnifying
Party and the Indemnified Party shall promptly deliver to the Escrow Agent
a
written notice executed by both parties instructing the Escrow Agent to disburse
such retained Escrow Fund in accordance with such withdrawal or resolution
and
the terms of the Escrow Agreement. The rights to indemnification set
forth in this Article VII shall not be affected by (i) any investigation
conducted by or on behalf of an Indemnified Party or any knowledge acquired
(or
capable of being acquired) by an Indemnified Party, whether before or after
the
date of this Agreement or the Closing Date (including through supplemental
information provided pursuant to by Section 4.6), with respect to the inaccuracy
or noncompliance with any representation, warranty, covenant or obligation
which
is the subject of indemnification hereunder or (ii) any waiver by an Indemnified
Party of any closing condition relating to the accuracy of any representations
and warranties or the performance of or compliance with agreements and
covenants.
7.5 Treatment
of Indemnity Payments. Any payments made to an Indemnified Party
pursuant to this Article VII or pursuant to the Escrow Agreement shall be
treated as an adjustment to the Purchase Price for tax purposes.
7.6 Limitations.
(a) For
purposes solely of this Article VII, all representations and warranties of
the Parties (other than Sections 2.7 and 2.28) shall be construed as if the
term “material” and any reference to “Material Adverse Effect” (and variations
thereof) were omitted from such representations and warranties.
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(b) The
Parties agree that their exclusive remedy at law for a breach of this Agreement
by any other Party shall be this Article VII.
(c) Notwithstanding
any other provisions of this Agreement, the Buyer agrees that the Seller’s and
the Members’ obligations under Section 7.1(a) shall be limited solely to the
Escrow Fund held by the Escrow Agent, and any indemnification payments under
Section 7.1(a) shall be limited to the Escrow Fund (based on the Value of the
Escrow Shares plus any other cash or property then held in the Escrow Fund)
in
satisfaction of such indemnification claim; provided that the limitations set
forth in this sentence shall not apply to a claim pursuant to
Section 7.1(a) relating to a breach of the representations and warranties
set forth in Sections 2.1, 2.3, 2.9, 2.20 or 2.21.
(d) Notwithstanding
any other provisions of this Agreement, the Seller agrees that the Buyer’s
obligations under Section 7.2(a) shall be limited solely to an amount equal
to
the value of the Escrow Shares based on the closing price of the Buyer’s Common
Stock on, and calculated as of, the date of Closing; provided that the
limitations set forth in this sentence shall not apply to a claim pursuant
to
Section 7.2 relating to a breach of the representations and warranties set
forth in Sections 3.1 or 3.2.
(e) The
Seller and the Members shall have no liability (for indemnification or
otherwise) with respect to claims under Section 7.1(a) until the total of all
Damages with respect to such matters exceeds the greater of (i) $50,000 and
(ii)
the Excess Net Working Capital, at which point the Seller and the Members shall
be liable for any and all Damages. However, the restrictions of this
paragraph will not apply to any claim pursuant to Section 7.1(a) relating
to a breach of the representations and warranties set forth in
Sections 2.1, 2.3, 2.6 (last sentence only), 2.9, 2.20 or
2.21.
(f) The
Buyer
shall have no liability (for indemnification or otherwise) with respect to
claims under Section 7.2(a) until the total of all Damages with respect to
such
matters exceeds $50,000, at which point the Buyer shall be liable for any and
all Damages. However, the restrictions of this paragraph will not
apply to any claim pursuant to Section 7.2(a) relating to a breach of the
representations and warranties set forth in Sections 3.1 or
3.2.
(g) No
Member
shall have any personal liability or indemnification obligation under this
Article VII for (i) any breach or violation of Section 6.1, 6.2 or 6.3 by a
person other than the Member (provided that this Section 7.6(g) does not limit
the availability of the Escrow Fund to the Buyer for breaches or violations
of
such section(s)), and (ii) an amount (including such Member’s pro rata share of
the Escrow Fund) greater than the product of (x) (A) $5,000,000 plus (B) the
Value of the 5,375,000 Shares as of the Closing Date or, if less, as of the
date
payment for indemnification is made, times (y) such Member’s
ownership percentage of Seller as of the date of Closing. Buyer must
first seek to satisfy any claim by the Buyer against a given Member under this
Article VII against any of the Shares (at the Value thereof) then held by such
Member (or, if such Shares have not been distributed to such Member by the
Seller, by such Member’s (and only such Member’s) pro-rata portion of the total
number of Shares issued to the Seller on the Closing Date, based on such
Member’s ownership percentage of Seller as of the date of Closing less any
Shares that have been sold by the Seller at the direction of such Member),
and
with respect to matters exceeding such Value, Buyer may seek cash to satisfy
such claim (subject to the aggregate limitation set forth in clause (ii)
above).
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ARTICLE
VIII
TERMINATION
8.1 Termination
of Agreement. The Parties may terminate this Agreement prior to
the Closing, as provided below:
(a) the
Parties may terminate this Agreement by mutual written consent;
(b) the
Buyer
may terminate this Agreement by giving written notice to the Seller in the
event
the Seller or any Member is in breach of any representation, warranty or
covenant contained in this Agreement, and such breach (i) individually
or in combination with any other such breach, would cause the conditions set
forth in clauses (b) or (c) of Section 5.1 not to be satisfied and (ii) is
not
cured within 20 days following delivery by the Buyer to the Seller of written
notice of such breach;
(c) the
Seller may terminate this Agreement by giving written notice to the Buyer in
the
event the Buyer is in breach of any representation, warranty or covenant
contained in this Agreement, and such breach (i) individually or in
combination with any other such breach, would cause the conditions set forth
in
clauses (a) or (b) of Section 5.2 not to be satisfied and (ii) is not cured
within 20 days following delivery by the Seller to the Buyer of written notice
of such breach;
(d) the
Buyer
may terminate this Agreement by giving written notice to the Seller if the
Closing shall not have occurred on or before July 30, 2007 by reason of the
failure of any condition precedent under Section 5.1 (unless the failure
results primarily from a breach by the Buyer of any representation, warranty
or
covenant contained in this Agreement); or
(e) the
Seller may terminate this Agreement by giving written notice to the Buyer if
the
Closing shall not have occurred on or before July 30, 2007 by reason of the
failure of any condition precedent under Section 5.2 (unless the failure
results primarily from a breach by the Seller or a Member of any representation,
warranty or covenant contained in this Agreement).
8.2 Effect
of Termination. If either Party terminates this Agreement
pursuant to Section 8.1, all obligations of the Parties hereunder shall
terminate without any liability of either Party to the other Party (except
for
any liability of a Party for breaches of this Agreement).
ARTICLE
IX
DEFINITIONS
For
purposes of this Agreement, each of the following terms shall have the meaning
set forth below.
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“AAA”
shall mean the American Arbitration Association.
“Acquired
Assets” shall mean all of the assets, properties and rights of the Seller
existing as of the Closing, including:
(a) all
cash,
short-term investments, deposits, bank accounts and other similar
assets;
(b) all
trade
and other accounts receivable and notes and loans receivable that are payable
to
the Seller, and all rights to unbilled amounts for products delivered or
services provided, together with any security held by the Seller for the payment
thereof;
(c) all
computers, machinery, equipment, tools and tooling, furniture, fixtures,
supplies, leasehold improvements, motor vehicles and other tangible personal
property;
(d) all
leaseholds and subleaseholds in real property, and easements, rights-of-way
and
other appurtenants thereto;
(e) all
Intellectual Property;
(f) all
rights under Assigned Contracts;
(g) all
claims, prepayments, deposits, refunds, causes of action, chooses in action,
rights of recovery, rights of setoff and rights of recoupment;
(h) all
books, records, accounts, ledgers, files, documents, correspondence, lists
(including customer and prospect lists), employment records, manufacturing
and
procedural manuals, Intellectual Property records, sales and promotional
materials, studies, reports and other printed or written materials;
and
(i) all
rights of the Seller in and with respect to the assets associated with its
medical and dental Employee Benefit Plans.
“Affiliate”
shall mean any affiliate, as defined in Rule 12b-2 under the Exchange
Act.
“Agreed
Amount” shall mean an amount agreed upon by the Indemnifying Party and the
Indemnified Party.
“Ancillary
Agreements” shall mean the Escrow Agreement, the xxxx of sale and other
instruments of conveyance referred to in Section 1.5(b)(iii), and the
instrument of assumption and other instruments referred to in
Section 1.5(b)(iv).
“Arbitrator”
shall mean a single arbitrator selected by the Buyer and the Seller in
accordance with the Commercial Rules.
“Assigned
Contracts” shall mean the customer contracts, supplier contracts and vendor
contracts listed on Section 2.14 of the Disclosure Schedule (except for those
vendor contracts
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that
are
specifically indicated as excluded), and the Lease described in Section 2.12
of
the Disclosure Schedules.
“Assumed
Liabilities” shall mean (a) all obligations of the Seller arising after the
Closing under the Assigned Contracts, other than any liabilities for any breach,
act or omission by the Seller prior to the Closing under any Assigned Contract,
(b) vacation accrued by employees, customer retention bonus and non-owner
discretionary profit sharing plan, in each case based on a bi-weekly accrual
from January 1, 2007 to the Closing Date as accepted by Buyer and as reflected
in Net Working Capital as of the Closing, and (c) any liability for Taxes in
accordance with Sections 6.4(a), (b), (c) and (d).
“Business” means
the Seller’s business of online energy purchasing services.
“Buyer”
shall have the meaning set forth in the first paragraph of this
Agreement.
“Buyer
Certificate” shall mean a certificate to the effect that each of the
conditions specified in clauses (a) through (c) (insofar as clause (c)
relates to Legal Proceedings involving the Buyer) of Section 5.2 is
satisfied in all respects.
“Buyer
Common Stock” shall mean the common stock, $0.0001 par value per share, of
the Buyer.
“Buyer
Material Adverse Effect” shall mean any material adverse change, event,
circumstance or development with respect to, or material adverse effect on,
the
business, assets, liabilities, capitalization, prospects, condition (financial
or other), or results of operations of the Buyer. For the avoidance of doubt,
the parties agree that the terms “material”, “materially” or “materiality” as
used in this Agreement with an initial lower case “m” shall have their
respective customary and ordinary meanings, without regard to the meaning
ascribed to Buyer Material Adverse Effect.
“Buyer
Reports” shall mean (a) the Buyer’s Annual Report on Form 10-K for
the fiscal year ended December 31, 2006, as filed with SEC, and (b) all
other reports filed by the Buyer under Section 13 or subsections (a) or (c)
of Section 14 of the Exchange Act with the SEC since November 8,
2006.
“Buyer
Sale” means: (a) a merger or consolidation in which (i) the Buyer is a
constituent party, or (ii) a subsidiary of Buyer is a constituent party and
the
Buyer issues shares of its capital stock pursuant to such merger or
consolidation, except in the case of either clause (i) or (ii) any such merger
or consolidation involving the Buyer or a subsidiary of the Buyer in which
the
shares of capital stock of the Buyer outstanding immediately prior to such
merger or consolidation continue to represent, or are converted into or
exchanged for shares of capital stock which represent, immediately following
such merger or consolidation, more than 75% by voting power of the capital
stock
of (A) the surviving or resulting corporation or (B) if the surviving or
resulting corporation is a wholly owned subsidiary of another corporation
immediately following such merger or consolidation, the parent corporation
of
such surviving or resulting corporation; (b) the sale, lease, transfer,
exclusive license or other disposition, in a single transaction or series of
related transactions, by the Buyer or a subsidiary of Buyer of all or
substantially all the assets
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47
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of
the
Buyer and the subsidiaries of Buyer taken as a whole (except where such sale,
lease, transfer, exclusive license or other disposition is to a wholly owned
subsidiary of Buyer); or (c) the sale or transfer, in a single transaction
or
series of related transactions, by the stockholders of the Buyer of more than
50% by voting power of the then-outstanding capital stock of the Buyer to any
person or entity or group of affiliated persons or entities.
“Cash
Consideration” has the meaning set forth in Section 1.3 of this
Agreement.
“CERCLA”
shall mean the federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.
“Claim
Notice” shall mean written notification which contains (i) a description of
the Damages incurred or reasonably expected to be incurred by the Indemnified
Party and the Claimed Amount of such Damages, to the extent then known, (ii)
a
statement that the Indemnified Party is entitled to indemnification under
Article VII for such Damages and a reasonable explanation of the basis therefor,
and (iii) a demand for payment in the amount of such Damages.
“Claimed
Amount” shall mean the amount of any Damages incurred or reasonably expected
to be incurred by the Indemnified Party.
“Closing”
shall mean the closing of the transactions contemplated by this
Agreement.
“Closing
Date” shall mean the date two business days after the satisfaction or waiver
of all of the conditions to the obligations of the Parties to consummate the
transactions contemplated hereby (excluding the delivery at the Closing of
any
of the documents set forth in Article V), or such other date as may be mutually
agreeable to the Parties.
“Closing
Net Working Capital” shall mean the Net Working Capital shown on the Net
Working Capital Balance Certificate.
“Code”
shall mean the Internal Revenue Code of 1986, as amended.
“Commercial
Rules” shall mean the Commercial Arbitration Rules of the AAA.
“Controlling
Party” shall mean the party controlling the defense of any Third Party
Action.
“Customer
Offerings” shall mean (a) the services that the Seller (i) currently
provides or makes available to third parties, or (ii) has provided or made
available to third parties within the previous four years, or (iii) currently
plans to provide or make available to third parties in the future and (b) the
products (including Software and Documentation) that the Seller (i) currently
develops, manufactures, markets, distributes, makes available, sells or licenses
to or for third parties, or (ii) has developed, manufactured, marketed,
distributed, made available, sold or licensed to or for third parties within
the
previous four years, or (iii) currently plans to develop, manufacture, market,
distribute, make available, sell or license to or for third parties in the
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future.
A
true and complete list of all Customer Offerings is set forth in Section 2.13(c)
of the Disclosure Schedule.
“Damages”
shall mean any and all debts, obligations and other liabilities (whether
absolute, accrued, contingent, fixed or otherwise, or whether known or unknown,
or due or to become due or otherwise), diminution in value, monetary damages,
fines, fees, penalties, interest obligations, deficiencies, losses and expenses
(including amounts paid in settlement, interest, court costs, costs of
investigators, reasonable fees and expenses of attorneys, accountants, financial
advisors and other experts, and other expenses of litigation), other than those
costs and expenses of arbitration of a Dispute which are to be shared equally
by
the Indemnified Party and the Indemnifying Party as set forth in Section
7.3(e)(vi).
“Disclosure
Schedule” shall mean the disclosure schedule provided by the Seller to the
Buyer on the date hereof and accepted in writing by the Buyer.
“Dispute”
shall mean the dispute resulting if the Indemnifying Party in a Response
disputes its liability for all or part of the Claimed Amount.
“Documentation”
shall mean printed, visual or electronic materials, reports, white papers,
documentation, specifications, designs, flow charts, code listings,
instructions, user manuals, frequently asked questions, release notes, recall
notices, error logs, diagnostic reports, marketing materials, packaging,
labeling, service manuals and other information describing the use, operation,
installation, configuration, features, functionality, pricing, marketing or
correction of a product, whether or not provided to end user.
“Employee
Benefit Plan” shall mean any “employee pension benefit plan” (as defined in
Section 3(2) of ERISA), any “employee welfare benefit plan” (as defined in
Section 3(1) of ERISA), and any other written or oral plan, agreement or
arrangement involving direct or indirect compensation, including insurance
coverage, severance benefits, disability benefits, deferred compensation,
bonuses, stock options, stock purchase, phantom stock, stock appreciation or
other forms of incentive compensation or post-retirement
compensation.
“Employment
Agreements” shall have the meaning set forth in the recitals.
“Environmental
Law” shall mean any federal, state or local law, statute, rule, order,
directive, judgment, Permit or regulation or the common law relating to the
environment, occupational health and safety, or exposure of persons or property
to Materials of Environmental Concern, including any statute, regulation,
administrative decision or order pertaining to: (i) the
presence of or the treatment, storage, disposal, generation, transportation,
handling, distribution, manufacture, processing, use, import, export, labeling,
recycling, registration, investigation or remediation of Materials of
Environmental Concern or documentation related to the foregoing; (ii) air,
water and noise pollution; (iii) groundwater and soil contamination;
(iv) the release, threatened release, or accidental release into the
environment, the workplace or other areas of Materials of Environmental Concern,
including emissions, discharges, injections, spills, escapes or dumping of
Materials of Environmental Concern; (v) transfer of interests in or control
of
real property which may be contaminated; (vi) community or worker right-to-know
disclosures with respect to Materials of Environmental Concern; (vii) the
protection of wild life, marine life and
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wetlands,
and endangered and threatened species; (viii) storage tanks, vessels,
containers, abandoned or discarded barrels and other closed receptacles; and
(ix) health and safety of employees and other persons. As used
above, the term “release” shall have the meaning set forth in
CERCLA.
“ERISA”
shall mean the Employee Retirement Income Security Act of 1974, as
amended.
“ERISA
Affiliate” shall mean any entity which is, or at any applicable time was, a
member of (1) a controlled group of corporations (as defined in Section
414(b) of the Code), (2) a group of trades or businesses under common
control (as defined in Section 414(c) of the Code), or (3) an affiliated
service group (as defined under Section 414(m) of the Code or the regulations
under Section 414(o) of the Code), any of which includes or included the
Seller.
“Escrow
Agent” shall mean U.S. Bank National Association.
“Escrow
Agreement” shall mean an escrow agreement in substantially the form attached
hereto as Exhibit A.
“Escrow
Fund” shall mean the Escrow Shares or any cash, securities or property
received with respect to, in exchange for, or upon the sale of such
shares.
“Escrow
Shares” shall mean 2,175,000 of the Shares.
"Exchange
Act" means the Securities Exchange Act of 1934, as amended, or any successor
federal statute, and the rules and regulations of the SEC issued under such
Act,
as they each may, from time to time, be in effect.
“Excess
Net Working Capital” means the amount, if any, by which Closing Net Working
Capital exceeds $435,000.
“Excluded
Assets” shall mean the following assets of the Seller:
(a) the
corporate charter and governing documents, qualifications to conduct business
as
a foreign limited liability company or entity, arrangements with registered
agents relating to foreign qualifications, taxpayer and other identification
numbers, seals, minute books, membership interest or security transfer books
and
other documents relating to the organization and existence of the Seller as
a
limited liability company;
(b) all
rights relating to refunds, recovery or recoupment of Taxes; and
(c) any
of
the rights of the Seller under this Agreement or under the Ancillary
Agreements;
(d) prepayments
by Seller on insurance policies not assumed; and
(e) any
item
identified on Schedule 1.1(b).
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“Expected
Claim Notice” shall mean a notice that, as a result of a legal proceeding
instituted by or written claim made by a third party, an Indemnified Party
reasonably expects to incur Damages for which it is entitled to indemnification
under Article VII.
“Exploit”
shall mean develop, design, test, modify, make, use, sell, have made, used
and
sold, import, reproduce, market, distribute, commercialize, support, maintain,
correct and create derivative works of.
“Financial
Statements” shall mean:
(a) the
unaudited balance sheets and statements of income, changes in members’ equity
and cash flows of the Seller as of the end of and for each of the years ended
December 31, 2004, December 31, 2005 and December 31, 2006; and
(b) the
Most
Recent Balance Sheet and the unaudited statements of income, changes in members’
equity and cash flows for the three months ended as of the Most Recent Balance
Sheet Date.
“GAAP”
shall mean United States generally accepted accounting principles.
“Governmental
Entity” shall mean any court, arbitrational tribunal, administrative agency
or commission or other governmental or regulatory authority or
agency.
“Income
Taxes” means any and all income taxes (together with any and all interest,
penalties, and additional amounts imposed with respect thereto) imposed by
any
government or taxing authority.
“Indemnified
Party” shall mean a party entitled, or seeking to assert rights, to
indemnification under Article VII of this Agreement.
“Indemnifying
Party” shall mean the party from whom indemnification is sought by the
Indemnified Party.
“Intellectual
Property” shall mean the following subsisting throughout the
world:
(a) Patent
Rights;
(b) Trademarks
and all goodwill in the Trademarks;
(c) copyrights,
designs, data and database rights and registrations and applications for
registration thereof, including moral rights of authors;
(d) mask
works and registrations and applications for registration thereof and any other
rights in semiconductor topologies under the laws of any
jurisdiction;
(e) inventions,
invention disclosures, statutory invention registrations, trade secrets and
confidential business information, know-how, manufacturing and product processes
and techniques, research and development information, financial, marketing
and
business data,
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51
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pricing
and cost information, business and marketing plans and customer and supplier
lists and information, whether patentable or nonpatentable, whether
copyrightable or noncopyrightable and whether or not reduced to practice;
and
(f) other
proprietary rights relating to any of the foregoing (including remedies against
infringement thereof and rights of protection of interest therein under the
laws
of all jurisdictions).
“Intellectual
Property Registrations” means Patent Rights, registered Trademarks,
registered copyrights and designs, mask work registrations and applications
for
each of the foregoing.
“Internal
Systems” shall mean the Software and Documentation and the computer,
communications and network systems (both desktop and enterprise-wide),
laboratory equipment, reagents, materials and test, calibration and measurement
apparatus used by the Seller in its business or operations or to develop,
manufacture, fabricate, assemble, provide, distribute, support, maintain or
test
the Customer Offerings, whether located on the premises of the Seller or hosted
at a third party site. All Internal Systems that are material to the
business of the Seller are listed and described in Section 2.13(c) of the
Disclosure Schedule.
“Key
Employees” means Xxxxx Xxxxxxxx, Xxx Xxxx, Xxxx Xxxxxxxx, Xxxx Xxxxxxxx and
any other employee designated as such by the Buyer at Closing.
“Lease”
shall mean any lease or sublease pursuant to which the Seller leases or
subleases from another party any real property.
“Lease
Agreement” means that certain Lease, dated October 6, 2004, between Seller
and Rennob, Inc.
“Legal
Proceeding” shall mean any action, suit, proceeding, claim, arbitration or
investigation before any Governmental Entity or before any
arbitrator.
“Limited
Liability Company Act” means Chapter 1705 of the Ohio Revised
Code.
“Materials
of Environmental Concern” shall mean any: pollutants,
contaminants or hazardous substances (as such terms are defined under CERCLA),
pesticides (as such term is defined under the Federal Insecticide, Fungicide
and
Rodenticide Act), solid wastes and hazardous wastes (as such terms are defined
under the Resource Conservation and Recovery Act), chemicals, other hazardous,
radioactive or toxic materials, oil, petroleum and petroleum products (and
fractions thereof), or any other material (or article containing such material)
listed or subject to regulation under any law, statute, rule, regulation, order,
Permit, or directive due to its potential, directly or indirectly, to harm
the
environment or the health of humans or other living beings.
“Member”
shall mean a member of the Seller.
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“Most
Recent Balance Sheet” shall mean the unaudited balance sheet of the Seller
as of the Most Recent Balance Sheet Date.
“Most
Recent Balance Sheet Date” shall mean March 31, 2007.
“Net
Working Capital” shall mean the amount equal to the current assets of the
Seller minus the current liabilities of the Seller, each as determined in
accordance with GAAP.
“Net
Working Capital Balance Certificate” shall mean a certificate from the
Seller’s chief executive officer and chief financial officer which sets forth
the total amount of Net Working Capital of the Seller as of the Closing
Date.
“Net
Working Capital Difference” means the amount, if any, by which Closing Net
Working Capital (as adjusted for Retained Liabilities and Excluded Assets)
is
less than $435,000 (it being understood that no adjustment will be made if
Closing Net Working Capital is greater than $435,000).
“Non-controlling
Party” shall mean the party not controlling the defense of any Third Party
Action.
“Open
Source Materials” means all Software, Documentation or other material that
is distributed as “free software”, “open source software” or under a similar
licensing or distribution model, including, but not limited to, the GNU General
Public License (GPL), GNU Lesser General Public License (LGPL), Mozilla Public
License (MPL), or any other license described by the Open Source Initiative
as
set forth on xxx.xxxxxxxxxx.xxx.
“Ordinary
Course of Business” shall mean the ordinary course of business consistent
with past custom and practice (including with respect to frequency and
amount).
"Other
Holders" means holders of securities of the Buyer (other than Members) who
are entitled, by contract with the Buyer, to have securities included in a
Registration Statement.
“Parties”
shall mean the Buyer, the Seller and the Members, where
applicable. References which contrast “Party” to the other “Party”
shall mean the Buyer on the one hand and the Seller and the Members,
collectively, on the other hand.
“Patent
Rights” shall mean all patents, patent applications, utility models, design
registrations and certificates of invention and other governmental grants for
the protection of inventions or industrial designs (including all related
continuations, continuations-in-part, divisionals, reissues and
reexaminations).
“Permits”
shall mean all permits, licenses, registrations, certificates, orders,
approvals, franchises, variances and similar rights issued by or obtained from
any Governmental Entity (including those issued or required under Environmental
Laws and those relating to the occupancy or use of owned or leased real
property).
“Post-Closing
Tax Period” has the meaning set forth in Section 6.4(d) of this
Agreement.
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“Pre-Closing
Tax Period” has the meaning set forth in Section 6.4(d) of this
Agreement.
"Prospectus"
means the prospectus included in any Registration Statement, as amended or
supplemented by an amendment or prospectus supplement, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
“Purchase
Price” shall mean the purchase price to be paid by the Buyer for the
Acquired Assets.
“Reasonable
Best Efforts” shall mean best efforts, to the extent commercially
reasonable.
“Registrable
Shares” means (a) the Shares (including, without limitation, any of the
Shares that are Escrow Shares) and (b) any other shares of Buyer Common
Stock issued in respect of such Shares (because of stock splits, stock
dividends, reclassifications, recapitalizations or similar events);
provided, however, that shares of Buyer Common Stock which are
Registrable Shares shall cease to be Registrable Shares (i) upon any sale
pursuant to a Registration Statement or Rule 144 under the Securities Act
or (ii) upon any sale in any manner to a person or entity which is not
entitled, pursuant to Section 6.11, to the rights under such section, or (iii)
at such time as they become eligible for sale pursuant to Rule 144(k) under
the
Securities Act.
"Registration
Expenses" means all expenses incurred by the Buyer in complying with the
provisions of Section 6.11 and Section 6.12, including, without limitation,
all
registration and filing fees, exchange listing fees, printing expenses, fees
and
expenses of counsel for the Buyer, state Blue Sky fees and expenses, and the
expense of any special audits incident to or required by any such registration,
but excluding underwriting discounts, selling commissions and the fees and
expenses of Seller’s counsel.
"Registration
Statement" means a registration statement filed by the Buyer with the SEC
for a public offering and sale of securities of the Buyer (other than a
registration statement on Form S-8 or Form S-4, or their successors, or any
other form for a similar limited purpose, or any registration statement covering
only securities proposed to be issued in exchange for securities or assets
of
another corporation).
“Reserved
Taxes” shall have the meaning set forth in Section 6.4(b) of this
Agreement.
“Response”
shall mean a written response containing the information provided for in Section
7.3(c).
“Restricted
Employee” shall mean any person who either (i) was an employee of the
Buyer on either the date of this Agreement or the Closing Date or (ii) was
an employee of the Seller on either the date of this Agreement or the Closing
Date; provided, however, that Restricted Employee shall not include any person
included in (i) and (ii) in the preceding clause whose employment is
terminated by Buyer, in the good faith determination of the Board of Directors
of Buyer, not for cause or not for a material failure to perform.
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“Restricted
Period” shall mean from the date of this Agreement until (i) twelve months
following his termination of employment with the Buyer with respect to Xxxx
Xxxxxxxx and Xxxx Xxxxxxxx, (ii) eighteen months following his termination
of
employment with the Buyer with respect to Xxx Xxxx, (iii) twenty-four months
following his termination of employment with the Buyer with respect to Xxxxx
Xxxxxxxx, and (iv) five years following the date of this Agreement with respect
to the Seller and all other Members of Seller not specifically identified in
the
foregoing clauses (i), (ii) or (iii).
“Retained
Liabilities” shall mean any and all liabilities or obligations (whether
known or unknown, absolute or contingent, liquidated or unliquidated, due or
to
become due and accrued or unaccrued, and whether claims with respect thereto
are
asserted before or after the Closing) of the Seller which are not Assumed
Liabilities. The Retained Liabilities shall include, without
limitation, all liabilities and obligations of the Seller:
(a) for
income, transfer, sales, use or other Taxes imposed upon the Seller and/or
the
Members arising in connection with the consummation of the transactions
contemplated by this Agreement (including any income Taxes arising as a result
of the transfer by the Seller to the Buyer of the Acquired Assets), except
to
the extent provided in Section 6.4;
(b) for
costs
and expenses incurred in connection with this Agreement or the consummation
of
the transactions contemplated by this Agreement;
(c) under
this Agreement or the Ancillary Agreements;
(d) except
to
the extent provided in Section 6.4, for (i) any Taxes imposed upon the Seller
and/or the Members, including deferred Taxes or Taxes measured by income of
the
Seller and/or the Members earned prior to the Closing, (ii) any liabilities
for
federal or state income tax and FICA taxes of employees of the Seller and/or
the
Members which the Seller and/or the Members are legally obligated to withhold,
(iii) any liabilities of the Seller and/or the Members for employer FICA and
unemployment taxes incurred, and (iv) any liabilities of the Seller and/or
the
Members for sales, use or excise taxes or customs and duties;
(e) under
any
agreements, contracts, leases or licenses which are listed on Schedule
1.1(b);
(f) arising
prior to the Closing under the Assigned Contracts, and all liabilities for
any
breach, act or omission by the Seller prior to the Closing under any Assigned
Contract;
(g) arising
out of events, conduct or conditions existing or occurring prior to the Closing
that constitute a violation of or non-compliance with any law, rule or
regulation (including Environmental Laws), any judgment, decree or order of
any
Governmental Entity, or any Permit or that give rise to liabilities or
obligations with respect to Materials of Environmental Concern;
(h) to
pay
severance benefits to any employee of the Seller whose employment is terminated
(or treated as terminated) in connection with the consummation of the
transactions contemplated by this Agreement, and all liabilities resulting
from
the termination of
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employment
of employees of the Seller prior to the Closing that arose under any federal
or
state law or under any Employee Benefit Plan established or maintained by the
Seller;
(i) to
indemnify any person or entity by reason of the fact that such person or entity
was a manager, officer, employee, or agent of the Seller or was serving at
the
request of the Seller as a partner, trustee, director, officer, employee, or
agent of another entity (whether such indemnification is for judgments, damages,
penalties, fines, costs, amounts paid in settlement, losses, expenses, or
otherwise and whether such indemnification is pursuant to any statute, charter
document, bylaw, agreement, or otherwise);
(j) injury
to
or death of persons or damage to or destruction of property occurring prior
to
the Closing (including any workers compensation claim);
(k) for
medical, dental and disability (both long-term and short-term) benefits, whether
insured or self-insured, owed to employees or former employees of the Seller
based upon (A) exposure to conditions in existence prior to the Closing or
(B)
disabilities existing prior to the Closing (including any such disabilities
which may have been aggravated following the Closing);
(l) for
benefits under any Seller Plan; and
(m) for
any
retrospective premium increases under any Seller Plan assumed by Buyer that
relates to periods before and including the Closing.
“SEC”
means the Securities and Exchange Commission, or any other federal agency at
the
time administering the Securities Act.
"Securities
Act" means the Securities Act of 1933, as amended, or any successor federal
statute, and the rules and regulations of the SEC issued under such Act, as
they
each may, from time to time, be in effect.
“Security
Interest” shall mean any mortgage, pledge, security interest, encumbrance,
charge or other lien (whether arising by contract or by operation of law),
other
than (i) mechanic’s, materialmen’s, and similar liens, (ii) liens
arising under worker’s compensation, unemployment insurance, social security,
retirement, and similar legislation, (iii) liens on goods in transit incurred
pursuant to documentary letters of credit, in each case arising in the Ordinary
Course of Business of the Seller and not material to the Seller, and (iv) liens
for Taxes which are not yet due and payable.
“Seller”
shall have the meaning set forth in the first paragraph of this
Agreement.
“Seller
Certificate” shall mean a certificate to the effect that each of the
conditions specified in Section 5.1 is satisfied in all
respects.
“Seller
Intellectual Property” shall mean shall the Seller Owned Intellectual
Property and the Seller Licensed Intellectual Property.
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“Seller
Licensed Intellectual Property” shall mean all Intellectual Property that is
licensed to the Seller by any third party.
“Seller
Material Adverse Effect” shall mean any material adverse change, event,
circumstance or development with respect to, or material adverse effect on,
(i)
the business, assets, liabilities, capitalization, prospects, condition
(financial or other), or results of operations of the Seller, or (ii) the
ability of the Buyer to operate the business of the Seller immediately after
the
Closing. For the avoidance of doubt, the parties agree that the terms
“material”, “materially” or “materiality” as used in this Agreement with an
initial lower case “m” shall have their respective customary and ordinary
meanings, without regard to the meaning ascribed to Seller Material Adverse
Effect.
“Seller
Owned Intellectual Property” shall mean all Intellectual Property owned or
purported to be owned by the Seller, in whole or in part.
“Seller
Plan” shall mean any Employee Benefit Plan maintained, or contributed to, by
the Seller, or any ERISA Affiliate.
“Seller
Registrations” shall mean Intellectual Property Registrations that are
registered or filed in the name of the Seller, alone or jointly with
others.
“Seller
Registration Statement” shall mean a registration statement on Form S-3 (or
Form S-1 if the resale to the public of the Registrable Shares does not satisfy
the transaction requirements for use of Form S-3) covering the resale
to the public of the Registrable Shares.
"Seller
Source Code” shall mean the source code for any Software included in the
Customer Offerings or Internal Systems or other confidential information
constituting, embodied in or pertaining to such Software.
“Shares”
has the meaning set forth in Section 1.3 of this Agreement.
“Software”
shall mean computer software code, applications, utilities, development tools,
diagnostics, databases and embedded systems, whether in source code, interpreted
code or object code form.
“Subsidiary”
shall mean any corporation, partnership, trust, limited liability company or
other non-corporate business enterprise in which the Seller holds stock or
other
ownership interests representing (a) more than 50% of the voting power of all
outstanding stock or ownership interests of such entity or (b) the right to
receive more than 50% of the net assets of such entity available for
distribution to the holders of outstanding stock or ownership interests upon
a
liquidation or dissolution of such entity.
“Taxes”
(including with correlative meaning “Tax” and “Taxable”) means (x)
any and all taxes, and any and all other charges, fees, levies, duties,
deficiencies, customs or other similar assessments or liabilities in the nature
of a tax, including without limitation any income, gross receipts, ad valorem,
net worth, premium, value-added, alternative or add-on minimum, excise,
severance, stamp, occupation, windfall profits, real property, personal
property, assets, sales, use,
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capital
stock, capital gains, documentary, recapture, transfer, transfer gains,
estimated, withholding, employment, unemployment insurance, unemployment
compensation, social security, business license, business organization,
environmental, workers compensation, payroll, profits, license, lease, service,
service use, gains, franchise and other taxes imposed by any federal, state,
local, or foreign Governmental Entity, (y) any interest, fines, penalties,
assessments, or additions resulting from, attributable to, or incurred in
connection with any items described in this paragraph or any contest or dispute
thereof, and (z) any items described in this paragraph that are attributable
to
another person but that the Seller is liable to pay by law, by contract, or
otherwise.
“Tax
Returns” means any and all reports, returns, declarations, statements,
forms, or other information required to be supplied to a Governmental Entity
or
to any individual or entity in connection with Taxes and any associated
schedules, attachments, work papers or other information provided in connection
with such items, including any amendments, thereof.
“Third
Party Action” shall mean any suit or proceeding by a person or entity other
than Buyer or Seller or their affiliates for which indemnification may be sought
by Buyer or Seller under Article VII.
“Trademarks”
shall mean all registered trademarks and service marks, logos, Internet domain
names, corporate names and doing business designations and all registrations
and
applications for registration of the foregoing, common law trademarks and
service marks and trade dress.
“Value”
means, with respect to the Shares or the Escrow Shares, the average closing
price of Buyer Common Stock on the Toronto Stock Exchange (or such other
exchange, if any, on which such shares are then trading) for the 30-days on
which the Common Stock of the Buyer is traded immediately prior to the day
any
portion of the Shares or the Escrow Shares are disbursed in satisfaction of
a
claim, or if such shares are not then publicly traded, the value as of such
date
as determined by the Board of Directors of the Buyer in good faith.
ARTICLE
X
MISCELLANEOUS
10.1 Press
Releases and Announcements. No Party shall issue any press
release or public announcement relating to the subject matter of this Agreement
without the prior written approval of the other Parties; provided, however,
that
Buyer may make any public disclosure it believes in good faith is required
by
applicable law, regulation or stock market rule (in which case the Buyer shall
use Reasonable Best Efforts to advise the Seller and provide it with a copy
of
the proposed disclosure prior to making the disclosure).
10.2 No
Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns.
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10.3 Entire
Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the Parties and supersedes
any
prior understandings, agreements, or representations by or between the Parties,
written or oral, with respect to the subject matter hereof, including, without
limitation, that certain letter of intent dated April 2, 2007; provided that
the
Confidentiality Agreement dated on or about March 28, 2007 between the Buyer
and
the Seller shall remain in effect in accordance with its terms.
10.4 Succession
and Assignment. This Agreement shall be binding upon and inure to
the benefit of the Parties named herein and their respective successors and
permitted assigns. Neither Party may assign either this Agreement or any of
its
rights, interests, or obligations hereunder without the prior written approval
of the other Parties; provided that the Buyer may assign some or all of its
rights, interests and/or obligations hereunder to one or more Affiliates of
the
Buyer; and provided further, that the Seller may assign its rights under
Sections 6.11 and 6.12 to its Members as set forth in such sections. Any
attempted assignment in contravention of this provision shall be
void.
10.5 Counterparts
and Facsimile Signature. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. This Agreement
may be executed by facsimile signature or electronic delivery.
10.6 Headings. The
section headings contained in this Agreement are inserted for convenience only
and shall not affect in any way the meaning or interpretation of this
Agreement.
10.7 Notices. All
notices, requests, demands, claims, and other communications hereunder shall
be
in writing. Any notice, request, demand, claim, or other
communication hereunder shall be deemed duly delivered four business days after
it is sent by registered or certified mail, return receipt requested, postage
prepaid, or one business day after it is sent for next business day delivery
via
a reputable nationwide overnight courier service, in each case to the intended
recipient as set forth below:
|
If
to the Seller or a Member:
EnergyGateway,
LLC
0000
Xxxxxxxxx Xxxxxx, Xxx. 000
Xxxxxx,
XX 00000
Attn: President
|
Copy
to:
Vorys,
Xxxxx, Xxxxxxx and Xxxxx LLP
Suite
2000, Atrium Two
000
Xxxx Xxxxxx Xxxxxx
Xxxxxxxxxx,
XX 00000
Attn: Xxxxx
X. Xxxxxxxxxxxx, Esq.
NCT
Ventures, LLC
X.X.
Xxx 0000
Xxxxxxxxxxx,
XX 00000
Attn:
Xxxxxxx X. Xxxxxxxx
|
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–
|
If
to the Buyer:
000
Xxxx Xxxxxx
Xxxxxxxxx,
XX 00000
Attn: President
|
Copy
to:
WilmerHale
0000
Xxxxxx Xxxxxx, Xxx. 0000
Xxxxxxx,
XX 00000
Attn:
Xxxxxxx X. Xxxxx, Esq.
Xxxx
X. Xxxxx, Esq.
|
Either
Party may give any notice, request, demand, claim, or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail), but
no
such notice, request, demand, claim, or other communication shall be deemed
to
have been duly given unless and until it actually is received by the party
for
whom it is intended. A Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Parties notice in the manner herein set
forth.
10.8 Governing
Law. This Agreement (including the validity and applicability of
the arbitration provisions of this Agreement, the conduct of any arbitration
of
a Dispute, the enforcement of any arbitral award made hereunder and any other
questions of arbitration law or procedure arising hereunder) shall be governed
by and construed in accordance with the internal laws of the Commonwealth of
Massachusetts, without giving effect to any choice or conflict of law provision
or rule (whether of the Commonwealth of Massachusetts or any other jurisdiction)
that would cause the application of laws of any jurisdictions other
than those of the Commonwealth of Massachusetts.
10.9 Amendments
and Waivers. The Buyer and the Seller may mutually amend any
provision of this Agreement at any time prior to the Closing. No
amendment of any provision of this Agreement shall be valid unless the same
shall be in writing and signed. No waiver by a Party of any right or
remedy hereunder shall be valid unless the same shall be in writing and signed
by the Party giving such waiver. No waiver by a Party with respect to
any default, misrepresentation, or breach of warranty or covenant hereunder
shall be deemed to extend to any prior or subsequent default, misrepresentation,
or breach of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.
10.10 Severability. Any
term or provision of this Agreement that is invalid or unenforceable in any
situation in any jurisdiction shall not affect the validity or enforceability
of
the remaining terms and provisions hereof or the validity or enforceability
of
the offending term or provision in any other situation or in any other
jurisdiction. If the final judgment of a court of competent
jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to limit the term or
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid
or
unenforceable term or provision, and this Agreement shall be enforceable as
so
modified.
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60
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10.11 Expenses. Except
as set forth in Article VII and the Escrow Agreement, each Party shall bear
its
own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated
hereby.
10.12 Submission
to Jurisdiction. Each Party (a) submits to the jurisdiction
of any state or federal court sitting in the Commonwealth of Massachusetts
in
any action or proceeding arising out of or relating to this Agreement or the
Ancillary Agreements (including any action or proceeding for the enforcement
of
any arbitral award made in connection with any arbitration of a Dispute
hereunder), (b) agrees that all claims in respect of such action or
proceeding may be heard and determined in any such court, (c) waives any
claim of inconvenient forum or other challenge to venue in such court, (d)
agrees not to bring any action or proceeding arising out of or relating to
this
Agreement or the Ancillary Agreements in any other court and (e) waives any
right it may have to a trial by jury with respect to any action or proceeding
arising out of or relating to this Agreement or the Ancillary Agreements;
provided in each case that, solely with respect to any arbitration of a Dispute,
the Arbitrator shall resolve all threshold issues relating to the validity
and
applicability of the arbitration provisions of this Agreement, contract
validity, applicability of statutes of limitations and issue preclusion, and
such threshold issues shall not be heard or determined by such
court. Each Party agrees to accept service of any summons, complaint
or other initial pleading made in the manner provided for the giving of notices
in Section 10.7, provided that nothing in this Section 10.12 shall
affect the right of a Party to serve such summons, complaint or other initial
pleading in any other manner permitted by law.
10.13 Specific
Performance. Each Party acknowledges and agrees that the other
Party would be damaged irreparably in the event any of the provisions of this
Agreement (including Sections 6.1, 6.2 and 6.3) are not performed in accordance
with their specific terms or otherwise are breached. Accordingly,
each Party agrees that the other Party shall be entitled to an injunction or
other equitable relief to prevent breaches of the provisions of this Agreement
and to enforce specifically this Agreement and the terms and provisions hereof
in addition to any other remedy to which it may be entitled, at law or in
equity. Notwithstanding the foregoing, the Parties agree that if a Dispute
is
submitted to arbitration in accordance with Section 7.3(d) and Section 7.3(e),
then the foregoing provisions of this Section 10.13 shall not apply to such
Dispute, and the provisions of Section 7.3(d) and Section 7.3(e) shall govern
availability of injunctive relief, specific performance or other equitable
relief with respect to such Dispute.
10.14 Construction.
(a) The
language used in this Agreement shall be deemed to be the language chosen by
the
Parties to express their mutual intent, and no rule of strict construction
shall
be applied against a Party.
(b) Any
reference to any federal, state, local, or foreign statute or law shall be
deemed also to refer to all rules and regulations promulgated thereunder, unless
the context requires otherwise.
(c) Any
reference herein to "including" shall be interpreted as "including without
limitation".
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61
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(d) Any
reference to any Article, Section or paragraph shall be deemed to refer to
an
Article, Section or paragraph of this Agreement, unless the context clearly
indicates otherwise.
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62
–
IN
WITNESS WHEREOF, the Parties have executed this Agreement as of the date first
above written.
| BUYER: | SELLER: | |||
| WORLD ENERGY SOLUTIONS, INC. | ENERGYGATEWAY, LLC | |||
|
By:
/s/ Xxxxxx X. Xxxxx
|
By:
/s/
Xxxxx Xxxxxxxx
|
|||
|
Name:
Xxxxxx
X.
Xxxxx
|
Name:
Xxxxx
Xxxxxxxx
|
|||
|
Title:
COO
|
Title:
CEO
|
| MEMBERS: | ||||
| NCT Ventures, LLC | ||||
|
By:
/s/
Xxxxxxx Xxxxxxxx
|
||||
|
Its: Member
|
|
/s/
X.X.
Xxxxxxx
|
||||
|
X.X.
Xxxxxxx
|
|
/s/
Xxxxx
Xxxxxxxx
|
||||
|
Xxxxx
Xxxxxxxx
|
|
/s/
Xxx
Xxxx
|
||||
|
Xxx
Xxxx
|
|
/s/
Xxxx
Xxxxxxxx
|
||||
|
Xxxx
Xxxxxxxx
|
|
/s/
Xxxx
Xxxxxxxx
|
||||
|
Xxxx
Xxxxxxxx
|
–
63
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