ASSET PURCHASE AGREEMENT by and among MEDIWARE INFORMATION SYSTEMS, INC., INTEGRATED MARKETING SOLUTIONS, LLC, TODD COLLINS and SCOTT CECCORULLI
EXHIBIT
10.1
EXECUTION
COPY
by
and
among
MEDIWARE
INFORMATION SYSTEMS, INC.,
INTEGRATED
MARKETING SOLUTIONS, LLC,
T.J.C.
INVESTMENTS, INC.,
S.M.C.,
INC.,
XXXX
XXXXXXX
and
XXXXX
XXXXXXXXXX
Dated:
October 16, 2007
ARTICLE
I SALE AND PURCHASE OF ASSETS
|
1
|
|
1.1.
|
Agreement
to Purchase and Sell
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1
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1.2.
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Purchased
Assets
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2
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1.3.
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Excluded
Assets
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3
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1.4.
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Name
Following the Closing
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3
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1.5.
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Certain
Consents to Assignment
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3
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ARTICLE
II PURCHASE PRICE; ALLOCATION
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3
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2.1.
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Calculation
of Purchase Price
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3
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2.2.
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Determination
of Estimated Initial Purchase Price
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4
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2.3.
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Determination
of Initial Purchase Price.
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4
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2.4.
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Incremental
Revenue Payment.
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5
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2.5.
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Escrow
Amount
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7
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2.6.
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Allocation
of Purchase Price
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7
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ARTICLE
III ASSUMPTION OF LIABILITIES
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8
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3.1.
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Liabilities
to be Assumed by Buyer
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8
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3.2.
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Liabilities
of Seller Not Assumed
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8
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ARTICLE
IV CLOSING
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8
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4.1.
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Closing
Date
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8
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4.2.
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Payment
of Estimated Initial Purchase Price
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8
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4.3.
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Buyer’s
Additional Deliveries
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9
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4.4.
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Seller’s
Deliveries
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9
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4.5.
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Further
Assurances
|
10
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ARTICLE
V REPRESENTATIONS AND WARRANTIES OF SELLER, THE MEMBERS AND THE
PRINCIPALS
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11
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5.1.
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Organization
of Seller
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11
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5.2.
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Authorization,
Execution and Enforceability
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11
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5.3.
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Absence
of Restrictions and Conflicts
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11
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5.4.
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Interests
in Other Entities
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12
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5.5.
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Ownership
of Assets and Related Matters.
|
12
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5.6.
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Financial
Statements; Undisclosed Liabilities
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13
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5.7.
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Operations
Since Balance Sheet Date
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13
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5.8.
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Legal
Proceedings
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13
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5.9.
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Licenses,
Permits and Compliance with Law
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14
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5.10.
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Assumed
Contracts
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14
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5.11.
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Taxes
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14
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5.12.
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Employees
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14
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5.13.
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Employee
Benefit Plans
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15
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5.14.
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Labor
Relations
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16
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5.15.
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Insurance
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16
|
5.16.
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Intellectual
Property.
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16
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5.17.
|
Code
Quality.
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22
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5.18.
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Transactions
with Affiliates
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22
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5.19.
|
Customer
Relations
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23
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5.20.
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Nondisclosed
Payments; Ethical Practices
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23
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5.21.
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Brokers,
Finders and Investment Bankers
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23
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5.22.
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Disclosure
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23
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ARTICLE
VI REPRESENTATIONS AND WARRANTIES OF BUYER
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24
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6.1.
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Organization,
Power and Good Standing
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24
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6.2.
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Authority
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24
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6.3.
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No
Violation
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24
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6.4.
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Disclosure
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24
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6.5.
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Seller
Customers
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24
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ARTICLE
VII ACTION PRIOR TO THE CLOSING DATE
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25
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7.1.
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Access
to Information
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25
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7.2.
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Preserve
Accuracy of Representations and Warranties; Notification of Certain
Matters.
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25
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7.3.
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Consents
of Third Parties
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26
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7.4.
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Merger
of the Subsidiary
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26
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7.5.
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Operations
Prior to the Closing Date
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26
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7.6.
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Non-Solicitation
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26
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ARTICLE
VIII INDEMNIFICATION
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26
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8.1.
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Indemnification
of Buyer
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26
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8.2.
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Indemnification
of Seller
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27
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8.3.
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Method
of Asserting Claims
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28
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8.4.
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Nature
and Survival of Representations
|
29
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8.5.
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Injunctive
and Other Relief
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29
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ARTICLE
IX CONFIDENTIAL INFORMATION; NON-COMPETITION
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29
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9.1.
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Definitions
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29
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9.2.
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Trade
Secrets and Confidential Information.
|
30
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9.3.
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Noncompetition.
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30
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9.4.
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Severability
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31
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ARTICLE
X ADDITIONAL COVENANTS AND AGREEMENTS
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31
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10.1.
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Employee
Matters
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31
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10.2.
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Public
Announcements
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31
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10.3.
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Access
to Properties and Records.
|
31
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10.4.
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Payment
of Debts
|
32
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10.5.
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Right
of Offset
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32
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ARTICLE
XI CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
|
32
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|
11.1.
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No
Misrepresentation or Breach of Covenants and Warranties
|
33
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11.2.
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No
Changes or Destruction of Property
|
33
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11.3.
|
No
Restraint or Litigation
|
33
|
11.4.
|
Necessary
Consents
|
33
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ARTICLE
XII CONDITIONS PRECEDENT TO OBLIGATIONS OF
SELLER
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33
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|
12.1.
|
No
Misrepresentation or Breach of Covenants and Warranties
|
33
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12.2.
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No
Restraint or Litigation
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33
|
ARTICLE
XXXX XXXXXXXXXXX
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00
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13.1.
|
Termination
|
34
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13.2.
|
Notice
of Termination
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34
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13.3.
|
Effect
of Termination.
|
34
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ARTICLE
XIV GENERAL PROVISIONS
|
34
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14.1.
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Waiver
of Terms
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35
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14.2.
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Amendment
of Agreement
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35
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14.3.
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Payment
of Expenses
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35
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14.4.
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Contents
of Agreement, Parties in Interest, Assignment
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35
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14.5.
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Notices
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35
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14.6.
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Severability
|
36
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14.7.
|
Schedules
and Exhibits
|
36
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14.8.
|
Counterparts
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36
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14.9.
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Headings
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36
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14.10.
|
Governing
Law; Jurisdiction
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36
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14.11.
|
Waiver
of Jury Trial
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36
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14.12.
|
Dispute
Resolution.
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37
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SCHEDULES
Schedule
|
Title
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1.3(e)
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Excluded
Assets
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2.3(g)
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Pro-Rated
Expenses
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2.4
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Additional
Products and Services
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5.3
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Restrictions
and Conflicts
|
5.5(a)
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Real
Property Leases
|
5.5(b)
|
Personal
Property Leases
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5.5(e)
|
Receivables
|
5.6
|
Financial
Statements; Undisclosed Liabilities
|
5.7
|
Operations
Since Balance Sheet Date
|
5.8
|
Legal
Proceedings
|
5.9
|
Permits
|
5.10
|
Assumed
Contracts
|
5.12
|
Seller
Personnel
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5.13
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Employee
Benefit Plans
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5.14
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Labor
Relations
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5.15
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Insurance
|
5.16(e)
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Owned
Intellectual Property
|
5.16(k)
|
Licenses
of Intellectual Property by Seller
|
5.16(l)
|
Licenses
of Intellectual Property to Seller
|
5.17(a)
|
Open
Source Software
|
5.18
|
Transactions
with Affiliates
|
5.19
|
Customer
Relations
|
10.1
|
Employee
List
|
EXHIBITS
Exhibit
|
Title
|
A
|
Escrow
Agreement
|
B
|
Form
of Xxxx of Sale
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C
|
Form
of General Assignment
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D
|
Form
of Assignment and Assumption Agreement
|
E-1
|
Form
of Xxxxxxx Employment Agreement
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E-2
|
Form
of Ceccorulli Employment Agreement
|
F
|
Form
of Legal Opinion
|
ASSET
PURCHASE AGREEMENT, dated October 16, 2007, by and among Mediware Information
Systems, Inc., a New York corporation (“Buyer”); Integrated Marketing
Solutions, LLC, a Maryland limited liability company (“Seller”); T.J.C.
Investments, Inc., a Maryland corporation (“TJC”); S.M.C. Inc., a
Maryland corporation (“SMC”, and together with TJC, each, a
“Member” and, collectively, the “Members”); Xxxx Xxxxxxx
(“Xxxxxxx”) and Xxxxx Xxxxxxxxxx (“Ceccorulli”, and together with
Xxxxxxx, each, a “Principal” and, collectively, the
“Principals”).
R
E C I T A L S
A. Seller
is engaged in the business of blood center recruitment, operational software
and
related services (the “Business”), operating from its primary business
location at 000 Xxxxx Xxxxxx, 0xx Xxxxx,
Xxxxxxxxx,
Xxxxxxxx, and from its business location at 0000 Xxxxxxx Xxxxxxx, Xxxxx 000,
Xxxxxxxxxxxx, Xxxxxxx;
B. The
Members own beneficially and of record over 89% of the issued and outstanding
membership interests of Seller;
X. Xxxxxxx
owns beneficially and of record 100% of the issued and outstanding shares
of
TJC;
X. Xxxxxxxxxx
and his spouse (“Xxx. Xxxxxxxxxx”) collectively own beneficially and of
record 100% of the issued and outstanding shares of SMC; and
E. Seller
desires to sell to Buyer, and Buyer desires to purchase from Seller, on a
going
concern basis, substantially all of the assets, properties and business of
Seller related to the Business, all on the terms and subject to the conditions
set forth herein.
NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency
of
which are hereby acknowledged and in consideration of the foregoing recitals
and
the mutual covenants, warranties, representations and conditions contained
in
this Agreement, it is hereby agreed as follows:
ARTICLE
I
SALE
AND PURCHASE OF ASSETS
1.1. Agreement
to Purchase and Sell. Subject to the terms and
conditions of this Agreement, on the Closing Date (as defined in
Section 4.1), Seller shall sell, convey, assign, transfer and
deliver to Buyer, and Buyer shall purchase and acquire from Seller, all of
the
assets, properties, rights and business as a going concern as of the Closing
Date, of whatever kind or nature and wherever situated or located and whether
reflected on Seller’s books and records or previously written-off or otherwise
not shown on Seller’s books and records, of Seller (other than the Excluded
Assets (as defined in Section 1.3)). All of said
assets, properties, rights and business (other than the Excluded Assets)
are
collectively referred to in this Agreement as the “Purchased
Assets”. All of the Purchased Assets shall be sold to Buyer free
and clear of any Liens (as defined in
Section 5.5(d)).
1.2. Purchased
Assets. The Purchased Assets shall include the following
items:
(a) all
furniture, fixtures, equipment (including office equipment), machinery, parts,
computer hardware, automobiles and trucks, inventory, supplies, parts and
all
other tangible personal property of Seller (“Tangible
Assets”);
(b) all
leasehold interests and leasehold improvements created by all leases, including
capitalized leases, of personal property under which Seller is a lessee or
lessor;
(c) all
trade accounts receivable, notes receivable, negotiable instruments and chattel
paper;
(d) all
deposits and rights with respect thereto in connection with the Business
and all
rebates due from vendors;
(e) subject
to Section 1.5, all contracts, claims and rights (and
benefits arising therefrom) relating to or arising out of the Business, and
all
rights against suppliers under warranties covering any of the Tangible
Assets;
(f) all
sales orders and sales contracts, purchase orders and purchase contracts,
quotations and bids generated by the operation of the Business;
(g) all
Intellectual Property (as defined in
Section 5.16);
(h) subject
to Section 1.5, all license agreements, distribution
agreements, sales representative agreements, service agreements, supply
agreements, franchise agreements, computer software agreements and technical
service agreements;
(i) all
customer lists, customer records and information relating to the
Business;
(j) all
books and records relating to the Business, including blueprints, drawings
and
other technical papers, payroll, employee benefit, accounts receivable and
payable, inventory, maintenance and asset history records, ledgers and books
of
original entry, all insurance records and Permit files;
(k) all
rights in connection with prepaid expenses, advances and credits with respect
to
the Purchased Assets;
(l) all
sales and promotional materials, catalogues and advertising literature relating
to the Business;
(m) all
transferable Permits (as defined in Section 5.9);
and
(n) all
lock boxes relating to the Business to which Seller’s account debtors remit
payments.
2
1.3. Excluded
Assets. Notwithstanding anything to the contrary set
forth herein, the term “Purchased Assets” shall not mean or include the
following assets, properties and rights of Seller (collectively, the
“Excluded Assets”):
(a) all
cash on hand and in banks and cash equivalents;
(b) any
Permit that is not transferable to Buyer;
(c) the
organizational documents, minute books and other books and records related
to
the formation of Seller or the Subsidiary (as defined in Section
5.4);
(d) any
rights relating to, or proceeds from the sale of the book authored by Xxxxxxx,
tentatively titled “Blood 101”; and
(e) such
other assets as may be listed on Schedule 1.3(e)
hereto.
1.4. Name
Following the Closing. Immediately following the
Closing, Seller shall amend its Articles of Organization so as to change
its
name to “IMSLITE” or such other name which is not, in the judgment of Buyer
acting reasonably, confusingly similar to the name “Integrated Marketing
Solutions”, and none of Seller, the Members, the Principals or any of their
respective affiliates, successors or assigns shall thereafter use such name
or
other names acquired by Buyer hereunder or names confusingly similar
thereto.
1.5. Certain
Consents to Assignment. To the extent that the
assignment of any right or agreement the benefit of which is to be acquired
by
Buyer pursuant to this Agreement shall require the consent of any other party,
and Buyer shall have waived the obtaining of such consent prior to the Closing,
this Agreement shall not constitute a contract to assign or assume the same
until such consent is obtained. If any such consent is not obtained,
(a) this Agreement shall not constitute or be deemed to be a contract to
assign
or assume the same if an attempted assignment without such consent, approval
or
waiver would constitute a breach of such right or agreement or create in
any
party thereto the right or power to cancel or terminate such right or agreement,
(b) Seller, the Members and the Principals will cooperate with Buyer in any
reasonable arrangement requested by Buyer designed to provide to Buyer the
benefit, monetary or otherwise, of Seller’s rights under such right or
agreement, including enforcement of any and all rights of Seller against
the
other party thereto arising out of a breach or cancellation thereof by such
other party; provided that Buyer agrees to indemnify Seller, the Members
and the
Principals against all costs (including attorneys fees) and damages arising
out
of such arrangement subject to any rights Buyer may have arising out of any
breach by Seller, Members and/or Principals of any representation and warranty
contained in Article IV relating to such right or agreement, and (c) with
respect to any Real Property Lease set forth on
Schedule 5.5(a) for which Buyer has waived the obtaining of a
required consent, Buyer shall indemnify and hold harmless Seller, the Members
and the Principals against any and all costs and damages, associated with
their
respective continuing obligations under any such Real Property
Lease.
ARTICLE
II
PURCHASE
PRICE; ALLOCATION
2.1. Calculation
of Purchase Price. The purchase price (the “Purchase
Price”) for the Purchased Assets shall be an amount equal
to:
3
(a) $5,275,000,
plus (or minus) the amount (if any) by which the Closing Working Capital
(as
determined in accordance with Section 2.3) is greater than (or
less than) $233,329 (as adjusted, the “Initial Purchase Price”),
plus,
(b) an
Incremental Revenue Payment (as defined in Section 2.4) of up
to $575,000, payable in accordance with
Section 2.4.
2.2. Determination
of Estimated Initial Purchase Price. At
least two business days prior to the Closing Date, Seller shall deliver to
Buyer
a certificate executed on behalf of Seller by the President of Seller, dated
the
date of its delivery, stating that there has been conducted under the
supervision of such officer a review of all relevant information and data
then
available and setting forth Seller’s best good faith estimate of the Initial
Purchase Price (the “Estimated Initial Purchase Price”), including an
estimate of the Closing Working Capital (as defined in Section
2.3(a)) that such officer anticipates based upon the most recent
available financial statements will be reflected on the Closing Statement
prepared in accordance with Section 2.3. Such Estimated
Initial Purchase Price shall be subject to approval by Buyer.
2.3. Determination
of Initial Purchase Price.
(a) Within
30 days following the Closing Date, Buyer shall prepare and deliver to Seller
a
statement (the “Preliminary Closing Statement”) setting forth (i) the
Working Capital (as defined below) as of the Closing Date (the “Closing
Working Capital”) and (ii) the Initial Purchase Price.
(b) Seller
may review such statement and, within 10 days after the date of such receipt,
may deliver to Buyer a certificate setting forth its objections to those
items
and amounts reflected in the Preliminary Closing Statement, together with
a
summary of the reasons therefor and calculations which, in its view, are
necessary to eliminate such objections. Any items and amounts not
identified and properly objected to by Seller in such certificate of objection
shall be deemed to have been agreed to by Seller. If Seller fails to
deliver such certificate of objection within such 10 day period, the Preliminary
Closing Statement shall be deemed to have been accepted and agreed to by
Seller
in the form in which it was delivered by Buyer and shall be final and binding
upon the parties as the “Closing Statement” for purposes of this
Agreement, and the determination of the Closing Working Capital and the Initial
Purchase Price set forth therein shall be final and binding as the “Closing
Working Capital” and the “Initial Purchase Price” for purposes of
this Agreement.
(c) If
Seller duly delivers a certificate of objection pursuant to
Section 2.3(b), Buyer and Seller shall use their reasonable
efforts to resolve by written agreement (the “Agreed Working Capital
Adjustments”), no later than 10 days following Buyer’s receipt of such
certificate, the disputed items or amounts identified in such
certificate. If Buyer and Seller reach agreement in writing on such
disputed items or amounts, the Preliminary Closing Statement as adjusted
by the
Agreed Working Capital Adjustments shall be final and binding as the “Closing
Statement” for purposes of this Agreement, and the determination of the
Closing Working Capital and the Initial Purchase Price set forth therein
shall
be final and binding as the “Closing Working Capital” and the “Initial
Purchase Price” for purposes of this Agreement.
(d) If
any objections raised by Seller are not resolved by Agreed Working Capital
Adjustments within the 10 day period referred to in
Section 2.3(c), then Buyer and Seller shall promptly submit
the objections that are then unresolved to an accounting firm which is
reasonably acceptable to Buyer and Seller and which has no material relationship
with Buyer, Seller or their respective Affiliates or other material conflict
(the “Accounting Firm”) and the Accounting Firm shall be directed by
Buyer and Seller to resolve the unresolved objections (based solely on the
presentations by Buyer and by Seller as to whether any disputed items or
amounts
had been determined in a manner consistent with GAAP and its consideration
of
only those items or amounts in the Preliminary Closing Statement as to which
Seller has objected) as promptly as practicable and to deliver written notice
to
each of Buyer and Seller setting forth its resolution of the disputed items
or
amounts. The Preliminary Closing Statement, after giving effect to
any Agreed Working Capital Adjustments and to the resolution of disputed
matters
by the Accounting Firm, shall be final and binding as the “Closing
Statement” for purposes of this Agreement, and the determination of the
Closing Working Capital and the Initial Purchase Price set forth therein
shall
be final and binding as the “Closing Working Capital” and the “Initial
Purchase Price” for purposes of this Agreement.
4
(e) The
parties hereto shall make available to Buyer, Seller and, if applicable,
the
Accounting Firm, such books, records and other information (including work
papers) as any of the foregoing may reasonably request to prepare or review
the
Preliminary Closing Statement or any matters submitted to the Accounting
Firm. The fees and expenses of the Accounting Firm hereunder shall be
paid 50% by Buyer and 50% by Seller.
(f) If
the Estimated Initial Purchase Price is greater than the Initial Purchase
Price,
Seller, the Members and the Principals shall, within 10 business days after
the
Closing Statement is finalized pursuant to this Section 2.3,
make payment by wire transfer to Buyer in immediately available funds of
the
amount of such difference, together with interest at a rate of 7% per annum
from
the Closing Date to the date of such payment. If the Estimated
Initial Purchase Price is less than the Initial Purchase Price, Buyer shall,
within 10 business days after the Closing Statement is finalized pursuant
to
this Section 2.3, make payment by wire transfer to Seller in
immediately available funds of the amount of such difference, together with
interest at a rate of 7% per annum from the Closing Date to the date of such
payment.
(g) For
purposes of this Agreement, “Working Capital” means, as of any date of
determination, the excess of the total current assets of Seller included
in the
Purchased Assets as of such date over the total current liabilities of Seller
included in the Assumed Liabilities, determined in accordance with GAAP on
a
basis consistent with the methodologies, practices and principles used in
the
preparation of the Financial Statements (except as otherwise provided in
this
definition and without regard to any purchase accounting adjustments arising
out
of the transactions contemplated hereby). In determining the amount
of such total current assets and total current liabilities hereunder, (i)
all
accounting entries shall be taken into account regardless of their amount
and
all known errors and omissions corrected; (ii) all proper adjustments shall
be
made; (iii) the value of accounts receivable shall (A) be reduced by the
amount
of a customary reserve for uncollectible accounts and (B) exclude any accounts
receivable from any Affiliates (as defined in Section 5.18)
of any of Seller, the Members or the Principals; (iv) deferred tax assets
shall
be excluded from the determination of total current assets; (v) accrued expenses
shall exclude amounts owed to the Members, the Principals or any Affiliates
of
the Members or the Principals; and (vi) the items set forth in Schedule
2.3(g) shall be pro-rated as of the Closing Date.
2.4. Incremental
Revenue Payment.
(a) As
promptly as practicable following the completion of the Buyer’s annual audit for
the fiscal year ended June 30, 2008, but in no event later than September
30,
2008, Buyer shall prepare and deliver to Seller a report (the “Preliminary
Revenue Report”) setting forth the amount of revenues recognized by
Buyer, in accordance with Buyer’s revenue recognition policies which are in
accordance with the provisions of the American Institute of Certified Public
Accountants Statement of Position (“SOP”) 97-2, "Software Revenue
Recognition" as amended by SOP No. 98-4, SOP 98-9 and clarified by Staff
Accounting Bulletin (“SAB”) 101, SAB No. 104 and Emerging
Issues Task Force 00-21 applied in each case in a manner consistent with
GAAP,
during the period beginning July 1, 2007, and ending on June 30, 2008 (the
“Period”) with respect to sales of (i) the products and services sold by
the Business as of the Closing Date and (ii) the products or services described
on Schedule 2.4 hereto. Buyer shall provide, as
reasonably requested by Seller from time to time during the Period, but no
more
frequently than once per calendar quarter, progress reports setting forth
the
amount of revenues recognized by Buyer as of the date of the
request.
5
(b) Seller
may review such report and, within 10 days after the date of such receipt,
may
deliver to Buyer a certificate setting forth its objections to those items
and
amounts reflected in the Preliminary Revenue Report, together with a summary
of
the reasons therefor and calculations which, in its view, are necessary to
eliminate such objections. Any items and amounts not identified and
properly objected to by Seller in such certificate of objection shall be
deemed
to have been agreed to by Seller. If Seller fails to deliver such
certificate of objection within such 10 day period, the Preliminary Revenue
Report shall be deemed to have been accepted and agreed to by Seller in the
form
in which it was delivered by Buyer and shall be final and binding upon the
parties, and the determination of the amount of revenue set forth therein
shall
be final and binding as the “Revenue Report” for purposes of this
Agreement.
(c) If
Seller duly delivers a certificate of objection pursuant to
Section 2.4(b), Buyer and Seller shall use their
reasonable efforts to resolve by written agreement (the “Agreed
Adjustments”), no later than 10 days following Buyer’s receipt of such
certificate, the disputed items or amounts identified in such
certificate. If Buyer and Seller reach agreement in writing on such
disputed items or amounts, the Preliminary Revenue Report as adjusted by
the
Agreed Adjustments shall be final and binding as the “Revenue Report” for
purposes of this Agreement.
(d) If
any objections raised by Seller are not resolved by Agreed Adjustments within
the 10 day period referred to in Section 2.4(c), then
Buyer and Seller shall promptly submit the objections that are then unresolved
to the Accounting Firm (as defined in Section 2.3(d)) and the
Accounting Firm shall be directed by Buyer and Seller to resolve the unresolved
objections (based solely on the presentations by Buyer and by Seller as to
whether any disputed items or amounts had been determined in a manner consistent
with GAAP and its consideration of only those items or amounts in the
Preliminary Revenue Report as to which Seller has objected) as promptly as
practicable and to deliver written notice to each of Buyer and Seller setting
forth its resolution of the disputed items or amounts. The
Preliminary Revenue Report, after giving effect to any Agreed Adjustments
and to
the resolution of disputed matters by the Accounting Firm, shall be final
and
binding as the “Revenue Report” for purposes of this
Agreement.
(e) The
parties hereto shall make available to Buyer, Seller and, if applicable,
the
Accounting Firm, such books, records and other information (including work
papers) as any of the foregoing may reasonably request to prepare or review
the
Preliminary Revenue Report or any matters submitted to the Accounting
Firm. The fees and expenses of the Accounting Firm hereunder shall be
paid 50% by Buyer and 50% by Seller.
6
(f) Promptly
(but not later than 10 days) after the Revenue Report is finalized pursuant
to
this Section 2.4, Buyer shall pay to Seller an amount equal
to:
(i) $300,000,
if the revenue reflected in the Revenue Report is greater than $3,100,000,
but
less than $3,250,000;
(ii) $368,750,
if the revenue reflected in the Revenue Report is greater than $3,250,000,
but
less than $3,500,000;
(iii) $437,500,
if the revenue reflected in the Revenue Report is greater than $3,500,000,
but
less than $3,750,000;
(iv) $506,250,
if the revenue reflected in the Revenue Report is greater than $3,750,000,
but
less than $4,000,000; or
(v) $575,000,
if the revenue reflected in the Revenue Report is equal to or greater than
$4,000,000.
Any
payment required to be made by Buyer to Seller pursuant to this
Section 2.4(f) shall be referred to herein as the
“Incremental Revenue Payment.” Notwithstanding the foregoing,
if Buyer terminates either Principal with no Cause (as defined in the Employment
Agreements) prior to June 30, 2007, Buyer shall pay to Seller, in accordance
with this Section 2.4, $575,000 (as the Incremental Revenue Payment) whether
or
not the $4,000,000 revenue target is achieved.
2.5. Escrow
Amount. Concurrently with the execution of this
Agreement, Buyer shall pay $200,000 (the “Escrow Amount”) in cash by wire
transfer of immediately available funds to Gordon, Feinblatt, Rothman,
Hoffberger, & Xxxxxxxxx, LLC (the “Escrow Agent”) to be held pursuant
to the terms of the Escrow Agreement attached hereto as Exhibit A, to be
executed as of the date hereof. The Escrow Amount shall be held in
accordance with the terms of the Escrow Agreement for the satisfaction of
any
claim relating to termination of this Agreement by Seller in accordance with
Section 13.1(d); provided, however, that concurrently with
the Closing, Buyer and Seller shall jointly instruct the Escrow Agent to
distribute to Seller the Escrow Amount as a portion of the Initial Purchase
Price.
2.6. Allocation
of Purchase Price. The Purchase Price shall be allocated
approximately 97% among the Purchased Assets and 3% to the covenants described
in Article IX, subject to a final analysis by Buyer’s
independent valuation expert. The parties agree that the allocations
set forth in this Section 2.6 shall be used by them and
respected for all purposes including, without limitation, income tax purposes,
if in conformance with the rules and regulations of the Internal Revenue
Code of
1986, as amended (the “Code”), and that the parties shall follow such
allocations for all reporting purposes including, without limitation, Form
8594
to be filed pursuant to the Code. Notwithstanding the foregoing, if
Buyer shall determine, following consultation with its independent valuation
expert, that more than 4% of the Purchase Price shall be allocated to the
covenants described in Article IX, Buyer shall reimburse each of Seller,
the Members and the Principals for any taxes such party incurs in excess
of
those it would have paid had 4% of the Purchase Price been allocated to the
covenants described in Article IX.
7
ARTICLE
III
ASSUMPTION
OF LIABILITIES
3.1. Liabilities
to be Assumed by Buyer. At the Closing, Buyer shall
assume and agree to perform and discharge when and as due the following
liabilities and obligations, as the same may exist at or accrue following
the
Closing Date, and no others (the “Assumed Liabilities”):
(a) all
liabilities of Seller with respect to the Business to the extent such
liabilities are reflected on the Balance Sheet (as defined in
Section 5.6);
(b) all
liabilities of Seller with respect to the Business arising in the ordinary
course of the Business since the Balance Sheet Date (as defined in Section
5.6) to the extent such liabilities are included as part of the Closing
Working Capital (as defined in Section 2.3); and
(c) all
liabilities and obligations of Seller to be paid or performed after the Closing
Date arising in the ordinary course of the Business pursuant to any of the
Assumed Contracts, except (i) to the extent such liabilities and obligations,
but for a breach or default by Seller, would have been paid, performed or
otherwise discharged on or prior to the Closing Date or (ii) to the extent
the
same arise out of Seller’s, Members’ or Principals’ breach of contract, breach
of warranty, tort, infringement or violation of law.
3.2. Liabilities
of Seller Not Assumed. Except as specifically provided
in Section 3.1 hereof, Buyer shall not assume, or in any way
become liable for, any liabilities or obligations of Seller, the Members,
the
Principals or the Business of any kind or nature, whether accrued, absolute,
contingent or otherwise, or whether due or to become due, or otherwise, whether
known or unknown, arising out of events, transactions or facts which shall
have
occurred, arisen or existed on or prior to the Closing Date (the “Excluded
Liabilities”), which liabilities and obligations, if ever in existence,
shall continue to be liabilities and obligations of Seller, the Members or
the
Principals, as the case may be.
ARTICLE
IV
CLOSING
4.1. Closing
Date. The consummation of the transactions contemplated
by this Agreement (the “Closing”) shall take place at the offices of
Barack Xxxxxxxxxx Xxxxxxxxxx & Xxxxxxxxx LLP, 000 Xxxx Xxxxxxx Xxxxxx, Xxxxx
0000, Xxxxxxx, Xxxxxxxx or at such other place as is mutually agreeable to
Buyer
and Seller, at 10:00 a.m. local time on October 31, 2007, or such other date
and
time as is mutually agreeable to Buyer and Seller (the “Closing
Date”). The Closing shall be deemed to have become effective as
of the close of business on the Closing Date.
4.2. Payment
of Estimated Initial Purchase Price. At the
Closing,
(a) Buyer
shall pay to Seller the Estimated Initial Purchase Price (as defined in
Section 2.2), net of the Escrow Amount, by wire transfer of
immediately available funds to a bank account in the United States specified
by
Seller in writing to Buyer at least two business days prior to the Closing;
and
8
(b) Buyer
and Seller shall jointly instruct the Escrow Agent to distribute to Seller
the
Escrow Amount as a portion of the Initial Purchase Price.
4.3. Buyer’s
Additional Deliveries. Subject to fulfillment or waiver
of the conditions set forth in Article XI, at the Closing, Buyer shall
deliver to Seller all of the following:
(a) a
certificate of the secretary or an assistant secretary of Buyer, dated the
Closing Date, in form and substance reasonably satisfactory to Seller, as
to:
(i) the resolutions of the board of directors of Buyer authorizing the
execution, delivery and performance of this Agreement and the transactions
contemplated hereby; and (ii) the incumbency and signature of the officer(s)
of
Buyer executing this Agreement;
(b) the
certificate of Buyer contemplated by Section 12.1, duly
executed by an authorized officer of Buyer;
(c) Employment
Agreements in the form attached hereto as Exhibits E1 and E2
with respect to Xxxxxxx and Ceccorulli, duly executed by Buyer; and
(d) the
Assignment and Assumption Agreement (as defined in
Section 4.4(i)) duly executed by Buyer.
4.4. Seller’s
Deliveries. Subject to fulfillment or waiver of the
conditions set forth in Article XII, at the Closing, Seller shall deliver
to Buyer all of the following:
(a) a
copy of the Articles of Organization of Seller certified as of a recent date
by
the Secretary of State of the State of Maryland;
(b) a
certificate of good standing of Seller issued as of a recent date by the
Secretary of State of the State of Maryland;
(c) a
certificate of good standing of Seller issued as of a recent date by the
Secretary of State of the State of Florida;
(d) a
certificate of the President of Seller, dated the Closing Date, in form and
substance reasonably satisfactory to Buyer, as to: (i) no amendments to the
Articles of Organization of Seller since a specified date; (ii) the Limited
Liability Company Agreement of Seller; (iii) the resolutions of the Members
of
Seller authorizing the execution, delivery and performance of this Agreement
and
the transactions contemplated hereby; and (iv) incumbency and signature of
the
officer of Seller executing this Agreement;
(e) the
certificates of Seller, the Members and the Principals contemplated by
Sections 11.1 and 11.2, duly executed by Seller, each
Member and each Principal;
(f) a
Certificate of Merger, accepted and certified by the Department of Assessments
and Taxation of the State of Maryland, reflecting the merger of the Subsidiary
with and into Seller, as contemplated by
Section 7.4;
(g) the
Xxxx of Sale, in the form attached hereto as Exhibit B (the “Xxxx of
Sale”) duly executed by Seller;
9
(h) the
General Assignment, in the form attached hereto as Exhibit C (the
“General Assignment”) duly executed by Seller;
(i) the
Assignment and Assumption Agreement, in the form attached hereto as Exhibit
D (the “Assignment and Assumption Agreement”) duly executed by
Seller;
(j) all
consents, waivers or approvals obtained by Seller with respect to the Purchased
Assets or the consummation of the transactions contemplated by this
Agreement;
(k) Employment
Agreements in the form attached hereto as Exhibits E1 and E2,
duly executed by Xxxxxxx and Xxxxxxxxxx;
(l) certificates
of title or origin (or like documents) with respect to any equipment included
in
the Purchased Assets for which a certificate of title or origin is required in
order to transfer title;
(m) assignments,
in recordable form, with respect to each of the Copyrights, Patents, and
trademarks included in the Purchased Assets, duly executed by Seller and
in form
and substance reasonably satisfactory to Buyer;
(n) evidence,
in form and substance reasonably satisfactory to Buyer, of the release of
all
Liens on the Purchased Assets;
(o) an
opinion of Seller’s legal counsel, dated the Closing Date, in the form of
Exhibit F hereto;
(p) tax
clearance certificates from the State of Maryland and the State of Florida,
as
applicable, which show that Buyer is not required to withhold any portion
of the
Purchase Price to satisfy any unpaid tax liabilities of Seller; and
(q) such
other bills of sale, assignments and other instruments of transfer or conveyance
as Buyer may reasonably request or as may be otherwise necessary to evidence
and
effect the sale, assignment, transfer, conveyance and delivery of the Purchased
Assets to Buyer.
4.5. Further
Assurances. If at any time after the Closing Date Buyer
shall consider or be advised that any further deeds, assignments or assurances
in law or any other acts are necessary, desirable or proper to (a) vest,
perfect
or confirm, of record or otherwise, in Buyer, the title to the Purchased
Assets,
or (b) otherwise carry out the purposes of this Agreement, Seller, the Members
and the Principals agree that they shall execute and deliver all such deeds,
assignments and assurances in law and do all acts reasonably necessary,
desirable or proper to vest, perfect and confirm title to such Purchased
Assets
in Buyer, and otherwise to carry out the purposes of this Agreement and the
transactions contemplated by this Agreement and the expense of the foregoing
shall be borne as provided in Section 14.3
hereof. In addition, from and after the Closing Date, Seller will
promptly deliver or cause to be delivered to Buyer all payments received
by or
on account of Seller to which Buyer is entitled hereunder, and Buyer will
promptly deliver or cause to be delivered to Seller all payments received
by or
on account of Buyer to which Seller is entitled hereunder, in either case
within
30 days of receipt by the party not entitled thereto.
10
ARTICLE
V
REPRESENTATIONS
AND WARRANTIES OF SELLER, THE MEMBERS AND THE
PRINCIPALS
Seller,
each of the Members and each of the Principals, jointly and severally, represent
and warrant to Buyer as follows:
5.1. Organization
of Seller. Seller is a limited liability company duly
organized, validly existing and in good standing under the laws of the State
of
Maryland, with full power and authority to enter into this Agreement and
to
perform its obligations hereunder. Seller is duly qualified to
transact business as a foreign corporation and is in good standing in Florida,
which is the only other jurisdiction in which the ownership or leasing of
the
Purchased Assets or the conduct of the Business requires such
qualification. Seller has full corporate power and authority to own
or lease and to operate and use the Purchased Assets and to carry on the
Business as now conducted.
5.2. Authorization,
Execution and Enforceability. This Agreement and each
other certificate, agreement, document or instrument to be executed and
delivered by Seller, either of the Members or either of the Principals in
connection with the transactions contemplated by this Agreement (collectively,
the “Seller Ancillary Documents”) have been duly executed and delivered
by Seller, each such Member and each such Principal and constitute the valid
and
legally binding agreements of Seller, each Member and each Principal, as
the
case may be, enforceable against Seller, each Member and each Principal in
accordance with their respective terms. The execution, delivery and
performance of this Agreement and the Seller Ancillary Documents and the
consummation of the transactions contemplated by this Agreement and the Seller
Ancillary Documents have been duly authorized by all necessary corporate
action
on the part of Seller.
5.3. Absence
of Restrictions and Conflicts. Except as disclosed in
Schedule 5.3, the execution, delivery and performance of
this
Agreement and the Seller Ancillary Documents, the consummation of the
transactions contemplated by this Agreement and the Seller Ancillary Documents
and the fulfillment of and compliance with the terms and conditions of this
Agreement and the Seller Ancillary Documents do not, (a) conflict with or
result
in any breach of any term or provision of the formation documents of Seller,
(b)
with or without the passing of time or the giving of notice or both, violate
or
conflict with, constitute a breach of or default (or give rise to any right
of
termination, amendment or cancellation) under, result in the loss of any
benefit
under or permit the acceleration of any obligation under, any Assumed Contract
or result in the creation of any Lien on any of the Purchased Assets pursuant
to, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract, agreement or other obligation to which
Seller, either Member or either Principal is a party or by which any of their
properties or assets may be bound, or (c) violate any judgment, decree or
order
of any Governmental Authority (as defined below) to which Seller is a party
or
by which Seller, either Member, either Principal or any of their respective
properties is bound or any statute, law, rule or regulation applicable to
Seller, either Member or either Principal. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
court, arbitrator, governmental agency or public or regulatory unit, agency,
body or authority of the United States, any foreign country or any domestic
or
foreign state, county, city or other political subdivision thereof (each
a
“Governmental Authority”) with respect to Seller, either Member or either
Principal is required in connection with the execution, delivery or performance
of this Agreement or the Seller Ancillary Documents by Seller, either Member
or
either Principal, or the consummation of the transactions contemplated by
this
Agreement or the Seller Ancillary Documents by Seller or such Member or
Principal.
11
5.4. Interests
in Other Entities. As of the date hereof, except for
Seller’s interest in Fulfillment Services International, LLC (the
“Subsidiary”), consisting of all of the membership interests of the
Subsidiary, Seller does not own, directly or indirectly, any equity interest
(by
stock ownership, partnership interest, limited liability company interest,
joint
venture interest or otherwise) in any other corporation, partnership, limited
liability company, joint venture, firm, association or business
enterprise. As of the Closing Date, and following the merger
described in Section 7.4 between Seller and the Subsidiary,
Seller will not own, and the Purchased Assets do not include, any equity
interest (by stock ownership, partnership interest, limited liability company
interest, joint venture interest or otherwise) in any other corporation,
partnership, limited liability company, joint venture, firm, association
or
business enterprise.
5.5. Ownership
of Assets and Related Matters.
(a) Real
Property. The Purchased Assets do not include and Seller does not
own, any real property. Schedule 5.5(a)
sets forth a list and brief description of each lease or similar agreement
(showing the parties thereto, annual rental, expiration date, renewal and
purchase options, if any, the improvements thereon, the uses being made thereof,
and the location and the legal description of the real property covered by
such
lease or other agreement) (“Real Property Leases”) under which Seller is
lessee of, or holds or operates, any real property owned by any third party
(the
“Leased Real Property”). Except as set forth in such Schedule,
Seller has the right to quiet enjoyment of all the Leased Real Property for
the
full term of the lease or similar agreement (and any renewal option related
thereto) relating thereto, and the leasehold or other interest of Seller
in the
Leased Real Property is not subject or subordinate to any
Liens. Neither the whole nor any part of any real property leased,
used or occupied by Seller is subject to any pending suit for condemnation
or
other taking by any Governmental Authority, and, to the knowledge of Seller,
no
such condemnation or other taking is threatened or contemplated.
(b) Personal
Property Leases. Schedule 5.5(b) sets
forth a correct and complete list of all leases and agreements of Seller
granting Seller possession of or rights to personal property (the “Personal
Property Leases”). Seller has heretofore delivered to Buyer
correct and complete copies of all the Personal Property
Leases. Except as otherwise noted on
Schedule 5.5(b), all of the Personal Property Leases
are valid and enforceable in all respects in accordance with their respective
terms with respect to Seller and, to the knowledge of Seller, any other party
thereto. Except as otherwise noted in
Schedule 5.5(b), there is not, with respect to the
Personal Property Leases, any existing default, or event of default, or event
which with or without due notice or lapse of time or both would constitute
a
default or an event of default, on the part of Seller or, to the knowledge
of
Seller, any other party thereto. Seller has peaceful and undisturbed
physical possession of all equipment and other assets that are covered by
the
Personal Property Leases.
(c) No
Third Party Options. There are no existing agreements, options,
commitments or rights with, of or to any Person (other than Buyer pursuant
to
this Agreement) to acquire any assets, properties or rights included in the
Purchased Assets or any interest therein.
12
(d) Ownership;
Sufficiency of Assets. Seller has, and transfers to Buyer on the
Closing Date, good and valid, legal and beneficial title to the Purchased
Assets, free and clear of all mortgages, liens, pledges, security interests,
charges, easements, leases, subleases, licenses and other occupancy
arrangements, covenants, rights of way, options, claims, restrictions, or
encumbrances of any kind other than the Assumed Liabilities (collectively,
“Liens”). The Purchased Assets constitute all the assets and
properties (i) used by Seller, (ii) that would be necessary to permit Seller
to
continue to conduct the operations of the Business in accordance with the
past
practices of Seller, and (iii) to the knowledge of Seller, necessary to permit
Buyer to conduct the operations of the Business in accordance with the past
practices of Seller.
(e) Accounts
Receivable. Seller has delivered to Buyer a schedule of Seller’s
accounts receivable as of September 1, 2007 (the “Receivables”) showing
the amount of each receivable and an aging of amounts due thereunder, which
schedule is true and complete as of that date. Except as set forth in
Schedule 5.5(e), to the knowledge of Seller, the debtors to
which the Receivables relate are not in or subject to a bankruptcy or insolvency
proceeding, and none of the Receivables have been made subject to an assignment
for the benefit of creditors. All of the Receivables (i) arose from
bona fide transactions in the ordinary course of business, (ii) have been
executed on terms consistent with Seller’s past practice and (iii) are valid,
existing and collectible within 90 days from the Closing
Date without resort to legal proceedings or collection agencies,
(iv) represent monies due for services rendered in the ordinary course of
business and (v) are not subject to any refunds or adjustments or any defenses,
rights of set-off, assignment, restrictions, security interests or other
encumbrances. Except as set forth in
Schedule 5.5(e), all of the Receivables are current, and
there are no disputes regarding the collectibility of any such
Receivables. None of the Receivables have been factored, pledged,
turned over for collection or assigned to any Person.
5.6. Financial
Statements; Undisclosed Liabilities. Schedule
5.6 contains the unaudited balance sheet of Seller
and the Subsidiary
(the “Balance Sheet”) as of August 31, 2007 (the “Balance Sheet
Date”) and the related statement of income for the 12 months then
ended. Except as set forth therein, such balance sheet and statement
of income (collectively, the “Financial Statements”) present fairly the
financial position and results of operations of the Seller and the Subsidiary
as
of the Balance Sheet Date and for the period covered thereby. Neither
Seller nor the Subsidiary has any liabilities or obligations (direct or
indirect, contingent or absolute, matured or unmatured) of any nature
whatsoever, whether arising out of contract, tort, statute or otherwise,
other
than those (a) reflected, reserved against or given effect to in the Balance
Sheet, (b) that have arisen after August 31, 2007 in the ordinary course
of the
Business and consistent with past practices (none of which would be expected
to
have a material adverse effect on the financial condition, operations, or
results of operations of the Business, taken as a whole), or (c) set forth
in
Schedule 5.6.
5.7. Operations
Since Balance Sheet Date. Except as set forth in
Schedule 5.7, since the Balance Sheet Date, Seller has conducted
the Business only in the ordinary course and in conformity with past practice
and there has been (a) no damage, destruction, loss or claim, whether or
not
covered by insurance, or condemnation or other taking adversely affecting
any of
the Purchased Assets; and (b) no material adverse effect on the financial
condition, operations, or results of operations of the Business, taken as
a
whole.
5.8. Legal
Proceedings. Except as set forth in Schedule
5.8, there are no suits, actions, claims, proceedings
or
investigations (collectively, “Proceedings”) pending or, to the knowledge
of Seller, threatened against, relating to or involving Seller, the Business,
or
any of Seller’s officers or directors (acting in their capacity as such) before
any Governmental Authority nor, to the knowledge of Seller, is there any
basis
for any such Proceeding. There is no judgment, decree, injunction,
citation, settlement agreement, rule or order of any Governmental Authority
outstanding against Seller.
13
5.9. Licenses,
Permits and Compliance with
Law. Schedule 5.9 is a true and
complete list of all notifications, licenses, permits (including environmental,
construction and operation permits), franchises, certificates, approvals,
exemptions, classifications, registrations and other similar documents and
authorizations, and applications therefor held by Seller and issued by, or
submitted by Seller to, any Governmental Authority (collectively, the
“Permits”). Seller owns or possesses all of the Permits
necessary to carry on the Business and as proposed to be
conducted. Except as set forth in Schedule 5.9,
each of the Permits is valid, subsisting and in full force and effect and
may be
assigned and transferred to Buyer in accordance with this Agreement and will
continue in full force and effect thereafter, in each case without (a) the
occurrence of any breach, default or forfeiture of rights thereunder, or
(b) the
consent, approval, or act of, or the making of any filing with, any Governmental
Authority. The execution, delivery, and performance of this Agreement
and the consummation of the transactions contemplated hereby will not adversely
affect any Permit. Seller has taken all necessary action to maintain
each Permit. No loss or expiration of any Permit is threatened,
pending, or reasonably foreseeable (other than expiration upon the end of
any
term). Except as set forth in Schedule 5.9, Seller
is (and has been at all times during the past five years) in compliance with
all
applicable laws (including applicable laws relating to privacy, zoning,
environmental matters and the safety and health of employees), ordinances,
regulations and orders of all Governmental Authorities.
5.10. Assumed
Contracts. Schedule 5.10 sets forth,
as of the Closing Date, (a) a complete and correct list, organized by type
of
agreement, of all contracts (including Real Property Leases and Personal
Property Leases) to which Seller is a party and which currently are outstanding
and (b) a complete and correct list of all consents or notices required to
be
obtained or given under the contracts listed on Schedule 5.10
in connection with this Agreement. Complete and correct copies of all
Assumed Contracts (as defined below) have been delivered to
Buyer. The Assumed Contracts are in full force and effect and are
valid and enforceable in accordance with their respective terms with respect
to
Seller and, to the knowledge of Seller, each other party
thereto. Except as set forth in Schedule 5.10,
there is not, with respect to the Assumed Contracts, any existing default,
or
event of default, or event which with or without due notice or lapse of time
or
both would constitute a default or event of default, on the part of Seller
or,
to the knowledge of Seller, any other party thereto. As used in this
Agreement, the term “Assumed Contracts” shall mean all contracts listed
in Schedule 5.10 (unless otherwise indicated
thereon).
5.11. Taxes. Either
Seller, the Members or the Principals have filed, or have caused to be filed,
when due or within proper extensions of time, all federal, state, and local
tax
returns and reports required to be filed with respect to the Business. Seller,
each of the Members and each of the Principals have paid, or have caused
to be
paid, when due or within proper extensions of time, all federal, state and
local
taxes due with respect to the income, employment, sales, operations, or
properties of Seller.
5.12. Employees. Schedule
5.12 contains a true and complete list of all of Seller Personnel
(as
defined in Section 5.13(a)) as of the date hereof who have
performed services attributable to the Business, specifying their annual
salary,
hourly wages, scheduled hours to work per week, position, status, length
of
service, location of employment, consulting or other independent contractor
fees
and the allocation of amounts paid and other benefits provided to each of
them,
respectively, together with an appropriate notation next to the name of any
such
employee on such list who is subject to any written employment agreement
or any
other written term sheet or other document describing the terms and/or
conditions of employment of such employee or of the rendering of services
by
such independent contractor. Seller has received no claim from any
Governmental Authority to the effect that it has improperly classified as
an
independent contractor any Person named on
Schedule 5.12. Seller has made no verbal
commitments to any such officers, employees or former employees, consultants
or
independent contractors with respect to compensation, promotion, retention,
termination, severance or similar matters in connection with the transactions
contemplated by this Agreement or otherwise. Except as indicated on
Schedule 5.12, all employees of Seller are actively at work on the
date hereof.
14
5.13. Employee
Benefit Plans. Except as set forth in Schedule
5.13:
(a) There
are no deferred compensation, incentive compensation, equity compensation
plans,
“welfare” plans, funds or programs (within the meaning of Section 3(1) of
the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”)), “pension” plans, funds or programs (within the meaning of
Section 3(2) of ERISA), other employee benefit plans, funds, programs,
agreements or arrangements, in any case, that are sponsored, maintained or
contributed to or required to be contributed to by Seller or by any trade
or
business, whether or not incorporated (an “ERISA Affiliate”), that
together with Seller would be deemed a “single employer” within the meaning of
Section 4001(b) of ERISA, or to which Seller or an ERISA Affiliate is party,
whether written or oral, for the benefit of any employee (whether full-time,
part-time or otherwise) or former employee of Seller (individually, a
“Benefit Plan,” and collectively, the “Benefit Plans”) that would
in any way require or bind Buyer to make any payments to any employee or
contractor, or former employee or contractor, of Seller (collectively,
“Seller Personnel”) in connection with Buyer’s hiring of or engaging any
such Seller Personnel under any circumstances.
(b) There
are no employment, termination, retention, change in control or severance
agreements to which Seller or an ERISA Affiliate is a party, whether written
or
oral, for the benefit of any employee or former employee of Seller
(individually, an “Employment Contract,” and collectively, the
“Employment Contracts”) that would in any way require or bind Buyer to
make any payments to any Seller Personnel in connection with Buyer’s hiring of
or engaging any such Seller Personnel under any circumstances.
(c) No
liability under Title IV or Section 302 of ERISA has been incurred by Seller
or
an ERISA Affiliate that has not been satisfied in full, and no condition
exists
that presents a risk to Buyer or any ERISA Affiliate of incurring any such
liability that would in any way require or bind Buyer to make any payments
to
any Seller Personnel in connection with Buyer’s hiring of or engaging any such
Seller Personnel under any circumstances.
(d) No
Benefit Plan is a “multiemployer pension plan,” as defined in Section 3(37) of
ERISA, nor is any Benefit Plan a plan described in Section 4063(a) of ERISA
that
would in any way require or bind Buyer to make any payments to any Seller
Personnel in connection with Buyer’s hiring of or engaging any such Seller
Personnel under any circumstances.
(e) The
consummation of the transactions contemplated by this Agreement will not
(i)
entitle any current or former employee or officer of Seller to severance
pay,
unemployment compensation or any other payment, or (ii) accelerate the time
of
payment or vesting, or increase the amount of compensation due any such employee
or officer.
15
(f) There
are no Benefit Plans or Employment Contracts that provide medical, surgical,
hospitalization, death or similar benefits (whether or not insured) for
employees or former employees of Seller for periods extending beyond their
retirement or other termination of service, other than (i) coverage mandated
by
applicable law, (ii) death benefits under any “pension plan,” or (iii) benefits
the full cost of which is borne by the current or former employee (or his
beneficiary).
5.14. Labor
Relations. Except as set forth in Schedule
5.14, Seller has engaged in no unfair labor practice
within the
meaning of the National Labor Relations Act or state law equivalent, and
there
exists no pending or, to the knowledge of Seller, threatened unfair labor
practice charges or race, color, religion, sex, national origin, age or
disability discrimination charges against Seller before any board, department,
commission or agency.
5.15. Insurance. Schedule
5.15 sets forth a correct and complete list of current insurance
policies and coverages carried by or for the benefit of Seller. All
such policies are in full force and effect and all premiums due and payable
in
respect thereof have been paid. Since the respective dates of such
policies, no notice of cancellation or non-renewal with respect to any such
policy has been received by Seller. Schedule 5.15 sets
forth a list of all pending claims with respect to all such
policies.
5.16. Intellectual
Property.
(a) Definition
of Intellectual Property. The term “Intellectual Property”
means:
(i) all
business names, trade names, registered and unregistered trademarks (including
common law marks), trade dress, service marks, and Internet domain names,
URLs,
and IP addresses (including all goodwill therein, and all U.S. federal, state
and foreign registrations with respect to any of the foregoing, and applications
for registration of any of the foregoing) (collectively,
“Marks”);
(ii) all
patents (including all reissues, divisions, continuations, continuations
in
part, and extensions thereof), design rights, patent applications, and file
histories (collectively, “Patents”);
(iii) all
copyrights, whether or not registered, in both published and unpublished
works
(including all U.S. and foreign registrations and applications for registration
of the foregoing) and moral rights thereof (collectively,
“Copyrights”);
(iv) all
software (in all forms and in all media) of any computing device, including
(A) any and all software implementations of algorithms, models and
methodologies, (B) software under development, (C) software that has been
sunset or no longer being supported or enhanced, (D) the computer software
supporting any Internet site(s), (E) software used to develop other
software or internet sites, and (F) software for internal operations
(collectively, “Software”);
(v) all
data, compilations of data and databases (in all forms and in all media),
and
all database rights therein (collectively, “Data
Rights”);
16
(vi) all
descriptions, flow-charts, work product, programmers’ notes, schematics,
specifications, project plans, listing, scripts, software tools, release
notes,
logic diagrams, pseudocode, project reports, lists of third party software,
assembly, linking and compilation instructions, end user documentation, IT
personnel documentation, training materials, manuals, system documentation
and
similar information suitable and sufficient to enable a person possessing
reasonable skill and expertise in computer software and information technology
to design, plan, organize, develop, install, build, load, operate, support,
maintain, modify, improve, correct errors to, enhance, and distribute the
Software and any databases containing Data (as defined in
Section 5.16(n)) (collectively,
“Documentation”); and
(vii) all
other know-how, Trade Secrets (as defined in Section 9.1(f)),
Confidential Information (as defined in Section 9.1(a)),
customer lists, technical documentation, technical information, data,
technology, research records, inventions, plans, ideas, drawings, schematics,
compilations, devices, formulas, designs, discoveries, prototypes, methods,
techniques, processes, procedures, programs, or codes, whether tangible or
intangible.
(b) Ownership
and Use of Intellectual Property. Seller owns, or has the right
to use pursuant to licenses, sublicenses, agreements, or permissions, all
Intellectual Property used by the Business and as presently proposed to be
conducted. The consummation of the transactions provided for under
this Agreement will not result in the loss or impairment of any such
Intellectual Property. Each item of Intellectual Property used by the
Business will be owned or available for use by Buyer on identical terms and
conditions immediately subsequent to the Closing Date. Seller has
taken all necessary and desirable actions to maintain and protect each item
of
Intellectual Property used by the Business. Buyer acknowledges that
Seller has not made any filing for the protection of Intellectual
Property.
(c) Infringement
of Third Party Intellectual Property Rights. Seller has not
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of third
parties. Seller has not received any charge, complaint, claim,
demand, or notice alleging any such interference, infringement,
misappropriation, or violation (including any claim that Seller must license
or
refrain from using any Intellectual Property rights of any third
party). The continued operation of the Business as conducted on the
Closing Date will not interfere with, infringe upon, misappropriate, or
otherwise come into conflict with, any Intellectual Property rights of third
parties.
(d) Infringement
of Seller Intellectual Property Rights. No third party (including
any present or former employee, consultant, or shareholder) has interfered
with,
infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of Seller.
(e) Owned
Intellectual Property. Schedule 5.16(e)
identifies each Xxxx, Patent and Copyright that Seller has with respect to
any
of its Intellectual Property used by the Business. Seller has
delivered to Buyer correct and complete copies of all registrations or
applications for such Marks, Patents and Copyrights (as amended to date)
and has
made available to Buyer correct and complete copies of all other written
documentation evidencing ownership and prosecution (if applicable) of each
such
item. Schedule 5.16(e) also identifies all Software
owned by Seller or used by the Business (whether or not the Copyright therein
has been registered). With respect to each item of Intellectual
Property required to be identified in Schedule 5.16(e):
17
(i) Seller
possesses all right, title, and interest in and to the item, free and clear
of
any and all Liens.
(ii) The
item is not subject to any outstanding injunction, judgment, order, decree,
ruling, or charge.
(iii) No
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
or
demand is pending or threatened which challenges the legality, validity,
enforceability, use, or ownership of the item.
(iv) Seller
is under no obligation to grant any right, license or permission to use,
or with
respect to, any of the Intellectual Property other than as set forth on
Schedule 5.16(k).
(v) No
(A) government funding; (B) facilities of a university, college, other
educational institution or research center; or (C) funding from any Person
(other than funds received in consideration for Seller’s capital stock or
ownership interests or from Customers (as defined in
Section 5.19)) was used in the development of the
item. No current or former employee, consultant or independent
contractor of Seller, who was involved in, or who contributed to, the creation
or development of the item, has performed services for the government,
university, college or other educational institution or research center during
a
period of time during which such employee, consultant or independent contractor
was also performing services for Seller.
(f) Patents. With
respect to the Patents required to be disclosed on
Schedule 5.16(e):
(i) Each
issued Patent is in compliance with all applicable requirements (including
the
payment of filing, examination and maintenance fees and proofs of working
or
use), and, except with respect to each application for a Patent that has
not yet
been issued, is valid, subsisting, enforceable and in full force and
effect.
(ii) No
Patent has been or is now involved in any interference, reissue, reexamination
or opposition proceeding, there is no potentially interfering patent or patent
application of any third party; there are no inventorship disputes with respect
to the Patents concerning any named or unnamed inventors; and the validity
and
scope of the rights under the Patents and Seller’s rights and title thereto or
rights therein have not been questioned in any prior litigation, are not
being
questioned in any pending litigation, and are not the subject of any threatened
or proposed litigation (and Seller has not received notice of any such
threatened or proposed litigation).
(g) Marks. With
respect to the Marks required to be disclosed on Schedule
5.16(e):
(i) No
Marks have been registered with the United States Patent and Trademark
Office.
(ii) No
Xxxx has been or is now involved in any opposition, invalidation, or
cancellation proceeding and no such action or proceeding is threatened with
respect to any of the Marks.
18
(h) Copyrights. Seller
is the owner of each Copyright required to be disclosed in
Schedule 5.16(e). The Copyrights are valid,
subsisting and in full force and effect, and are not subject to any maintenance
fees or taxes or actions falling due within one year after the date
hereof. There has been no challenge to the validity of any of the
Copyrights, and to the best of Seller’s knowledge, there is no basis for any
such challenge. None of the Copyrights have been registered with the Library
of
Congress.
(i) Software. All
Software owned, used or licensed by Seller performs properly and in conformity
with the specifications set forth in its documentation. Such Software
operates without malfunctions or design failures, and is free from any defects,
errors or “bugs” (in each case, with the exception of such de minimus
malfunctions, design failures, defects, errors or “bugs” that do not adversely
affect the use of such Software). With respect to the Software
required to be identified on Schedule 5.16(e):
(i) Such
Software was either (A) developed by employees of Seller within the scope
of
their employment or (B) developed by independent contractors or consultants
who
have assigned all of their rights in and to the Software to Seller pursuant
to
written agreements.
(ii) Seller
does not have any obligation to provide maintenance or support services with
respect to any such Software to any third party.
(iii) Seller
has not entered into any source code escrow or similar arrangement under
which a
third party does, or could in the future upon the occurrence of certain events,
have the right to obtain the source code for any such Software.
(iv) The
Documentation and source code for such Software is complete and
accurate. The source code and Documentation relating to such Software
(A) has at all times been maintained in strict confidence, (B) has
been disclosed only to employees who have a need to know in connection with
the
performance of their duties to Seller, and who have executed appropriate
nondisclosure agreements as contemplated in
Section 5.16(j)(ii) hereof, and (C) has not been
disclosed to any third party not under an obligation to maintain the
confidential nature of such information.
(j) Trade
Secrets.
(i) Seller
has taken all reasonable precautions to protect the secrecy, confidentiality,
and value of its Trade Secrets.
(ii) Seller
has obtained or entered into written agreements with its respective Seller
Personnel and with third parties in connection with the disclosure to, or
use or
appropriation by, Seller Personnel and third parties, of Trade Secrets owned
by
Seller, restricting the use, disclosure or appropriation of such Trade Secrets,
and Seller does not know of any situation involving such Seller Personnel
or
third party use, disclosure or appropriation of any such Trade Secrets in
which
the lack of such written agreement is likely to adversely affect the right
of
Seller to protect the Trade Secret from unauthorized use or disclosure under
applicable law. True, correct and complete copies of such agreements
have been delivered to Buyer.
(k) Licenses
of Intellectual Property by
Seller. Schedule 5.16(k) identifies and
includes a brief summary of each license, agreement, or other permission
that
Seller has granted to any third party with respect to any of its Intellectual
Property. Seller has delivered to Buyer a true, correct and complete
copy of each such license, agreement, or permission (as amended to
date). With respect to each license, agreement, or permission
required to be identified in
Schedule 5.16(k):
19
(i) The
license, sublicense, agreement, or permission is legal, valid, binding,
enforceable, and in full force and effect.
(ii) The
license, sublicense, agreement, or permission will continue to be legal,
valid,
binding, enforceable, and in full force and effect on identical terms following
the consummation of the transactions contemplated by this
Agreement.
(iii) No
party to the license, sublicense, agreement, or permission is in breach or
default, and no event has occurred which with notice or lapse of time or
both
would constitute a breach or default or permit termination, modification,
or
acceleration under the license, sublicense, agreement, or
permission.
(iv) No
party to the license, sublicense, agreement, or permission has repudiated
any
provision thereof.
(l) Licenses
of Intellectual Property to
Seller. Schedule 5.16(l) identifies each item
of Intellectual Property that any third party owns and that Seller uses pursuant
to licenses, sublicenses, agreements, or permissions. Seller has
delivered to Buyer true, correct and complete copies of all such licenses,
sublicenses, agreements, and permissions (as amended to date), excluding
shrink
wrap licenses associated with off the shelf software
products. Schedule 5.16(l) includes a summary of
any license fee, royalty or other payment obligations of Seller under the
applicable license, sublicense, agreement, or permission. With
respect to each item of Intellectual Property required to be identified in
Schedule 5.16(l):
(i) The
license, sublicense, agreement, or permission covering the item is legal,
valid,
binding, enforceable, and in full force and effect.
(ii) To
the best of Seller’s knowledge, the license, sublicense, agreement, or
permission will continue to be legal, valid, binding, enforceable, and in
full
force and effect on identical terms following the consummation of the
transactions contemplated by this Agreement.
(iii) Seller
is not in breach or default of the license, sublicense, agreement, or
permission and no event has occurred which with notice or lapse of time or
both
would constitute a breach or default by Seller or permit termination,
modification, or acceleration under the license, sublicense, agreement, or
permission.
(iv) To
the best of Seller’s knowledge, no party to the license, sublicense or
permission is in breach or default, and no event has occurred which with
notice
or lapse of time or both would constitute a breach or default by Seller or
permit termination, modification, or acceleration under the license, sublicense,
agreement, or permission.
(v) No
party to the license, sublicense, agreement, or permission has repudiated
any
provision thereof.
20
(vi) With
respect to each sublicense, to the knowledge of Seller, the representations
and
warranties set forth in Section 5.16(k)(i)
through (iv) are true and correct with respect to the underlying
license.
(vii) To
the knowledge of Seller, the underlying item of Intellectual Property is
not
subject to any outstanding injunction, judgment, order, decree, ruling, or
charge.
(viii) To
the knowledge of Seller, no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or threatened that challenges
the
legality, validity, or enforceability of the underlying item of Intellectual
Property.
(ix) Seller
has granted no sublicense or similar right with respect to the license,
sublicense, agreement, or permission.
(m) Royalties
and other Payment Obligations. Seller is not obligated to make
any payments by way of any royalties, fees or otherwise to any owner, licensor
or other claimant to any intellectual property rights for the ownership,
transfer or use thereof other than as expressly required under any license,
sublicense, agreement, or permission disclosed on
Schedule 5.16(l).
(n) Data. The
Data Rights and information used by Seller in providing products or services,
in
keeping track of the financial and business relationships between Seller
and
Customers and in managing the business of the Business (collectively, the
“Data”) (i) does not violate the privacy rights of any Person,
(ii) does not infringe upon, misappropriate, conflict with or violate the
Intellectual Property rights of any Person, (iii) was collected and acquired
in
accordance with all applicable laws and agreements, and (iv) when used by
Seller, in the manner in which the Data was used prior to the date hereof,
does
not violate any applicable law or agreement. Seller has taken all
commercially reasonable steps to maintain the confidentiality and proprietary
nature of the Data.
(o) Agreements
with Employees. All former and current employees of Seller who
have worked in or provided any services to the Business have executed written
agreements assigning to Seller all rights to any inventions, improvements,
works
of authorship, discoveries, inventions, or information of
Seller. True, correct and complete copies of such agreements have
been delivered to Buyer. No employee of Seller who has worked in or
provided any services to the Business has entered into any agreement that
restricts or limits in any way the scope or type of work in which the employee
may be engaged or requires the employee to transfer, assign or disclose
information concerning his work to anyone other than Seller.
21
5.17. Code
Quality.
(a) Software. Except
as set forth on Schedule 5.17(a) (such Schedule to set forth
(i) the name of each such Software, (ii) how such Software is or was used
by
Seller, (iii) whether such Software has been modified by or on behalf of
Seller,
(iv) whether such Software has been delivered by Seller to third parties
and, if so, the identity of such third parties, (v) where such Software was
obtained, and (vi) a copy or true and correct reference to the license under
which such Software is licensed to Seller), none of the Software marketed
by
Seller contains, comprises, incorporates, or combines, and is not derived
from
or based on, any Open Source Software. For the purposes of this
Agreement, “Open Source Software” means (1) any Software that contains,
or is derived in any manner (in whole or in part) from, any software that
is
distributed as free software, open source software (e.g. Linux) or similar
licensing or distribution models; and/or (2) any Software that requires as
a
condition of use, modification and/or distribution that such Software or
other
Software incorporated into, derived from or distributed with such Software:
(A)
be disclosed or distributed in source code form; (B) be licensed for the
purpose
of making derivative works; or (C) be redistributable at no
charge. Open Source Software includes Software licensed or
distributed under any of the following licenses or distribution models, or
licenses or distribution models similar to any of the following: GNU's General
Public License (GPL), GNU's Lesser/Library General Public License (LGPL),
the
Artistic License (e.g., PERL), the Berkeley license (BSD), the Mozilla Public
License, the Netscape Public License, the Sun Community Source License (SCSL),
the Sun Industry Source License (SISL), and the Apache Software
license. Buyer acknowledges that the programming language for
Seller’s Software is PHP, an open source programming language. A copy
of the PHP license provided by Seller is attached to Schedule
5.17(a).
(b) Disabling
Devices. The Owned Software, and to the knowledge of Seller the
Software described in Sections 5.16(k) and 5.16(l),
does not contain any virus, Trojan horse, worm, time bomb, drop dead device,
or
other software routines (collectively, “Virus”) designed (i) to
permit unauthorized access by third parties, Seller or Buyer, or (ii) to
disable, delete, repossess, modify, damage, erase, or otherwise interfere
with
or adversely affect the use and operation of such Software and/or any data,
hardware or other Software. Prior to each delivery of each version,
revision, release, bug fix or other modification of Software to its Customers,
Seller has used industry standard anti-virus software to determine if such
Software contains any Viruses.
(c) Building
the Software. Seller possesses and has separately stored the
source code and Documentation of each and every version and release of the
Software currently licensed to or used by Customers sufficient to allow each
such version and release to be assembled, linked and compiled into the actual
machine readable version and release used by each such Customer.
5.18. Transactions
with Affiliates. Except as set forth on
Schedule 5.18 or as expressly contemplated by this Agreement,
no officer, director or Member of Seller, or any Person with whom any such
officer, director or Member has any direct or indirect relation by blood,
marriage, or adoption, or any entity in which any such Person owns any
beneficial interest (other than a publicly held corporation whose stock is
traded on a national securities exchange and less than five percent (5%)
of the
stock of which is beneficially owned by all such Persons in the aggregate)
or
any Affiliate of any of the foregoing, or any current or former Affiliate
of
Seller has any interest in any contract, arrangement, or understanding with,
or
relating to, the Business, the Purchased Assets or the Assumed
Liabilities. For purposes of this Agreement, “Affiliate” of
any specified Person means any other Person directly or indirectly Controlling
or Controlled by or under direct or indirect common Control with such specified
Person. For purposes of this definition, “Control,”
“Controlling,” and “Controlled,” when used with respect to any
specified Person, means the power to direct the management and policies of
such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise. In addition, for purposes of
this definition, “Person” means any individual, corporation, limited
liability company, partnership, joint venture, trust, unincorporated
organization, Governmental Authority or similar entity.
22
5.19. Customer
Relations. Schedule 5.19 contains a
complete and accurate list, as of the date hereof, of the names and addresses
of
all of the customers of the Business (collectively, the
“Customers”). Seller maintains good relations with each of its
Customers, and, to the knowledge of Seller, no event has occurred that would
constitute a default, or event of default, or event which with or without
due
notice or lapse of time or both would constitute a default or event of default
or would materially and adversely affect Seller’s relations with any such
Customer. Except as set forth in Schedule 5.19, no
Customer (or former customer) during the last 12 months has asserted a default,
canceled, terminated or made any threat to assert a default, cancel or otherwise
terminate its contract or, in the case of Customers (or former customers),
to
decrease its usage of Seller’s services or products. Seller has
received no notice and has no knowledge to the effect that any current Customer
may terminate or materially alter its business relations with Seller, as
a
result of the past actions or inactions by Seller, as a result of the
transactions contemplated by this Agreement or otherwise.
5.20. Nondisclosed
Payments; Ethical Practices. Neither Seller nor the
officers, directors or members of Seller, nor anyone acting on behalf of
any of
them, has made or received any payments not correctly categorized and fully
disclosed in Seller’s books and records in connection with or in any way
relating to or affecting Seller or the Business. Neither Seller nor
any representative thereof has offered or given, and Seller has no knowledge
of
any Person that has offered or given on its behalf, anything of value
to: (a) any official of a Governmental Authority, any political party
or official thereof, or any candidate for political office; (b) any Customer
or
member of any Governmental Authority; or (c) any other Person, in any such
case
while knowing or having reason to know that all or a portion of such money
or
thing of value may be offered, given or promised, directly or indirectly,
to any
Customer, member of any Governmental Authority or candidate for political
office
for the purpose of the following: (x) influencing any action or decision
of such
Person, in such Person’s official capacity, including a decision to fail to
perform such Person’s official function; (y) inducing such Person to use such
Person’s influence with any Governmental Authority or instrumentality thereof to
affect or influence any act or decision of such Governmental Authority or
instrumentality to assist Seller in obtaining or retaining business for,
or
with, or directing business to, any Person; or (z) where such payment would
constitute a bribe, kickback or illegal or improper payment to assist Seller
in
obtaining or retaining business for, or with, or directing business to, any
Person.
5.21. Brokers,
Finders and Investment Bankers. Neither Seller nor any
Member nor any Principal has employed any broker, finder, investment banker
or
other intermediary or incurred any liability for any investment banking fees,
financial advisory fees, brokerage fees, finders’ fees or other similar fees in
connection with the transactions contemplated herein.
5.22. Disclosure. No
representation, warranty or covenant made by Seller, any Member or any Principal
in this Agreement (including the schedules hereto) contains an untrue statement
of a material fact or omits to state a material fact required to be stated
herein or necessary to make the statements contained herein, in light of
the
circumstances in which they were made, not misleading.
23
For
purposes of this Agreement, “knowledge of Seller,” “Seller’s
knowledge” and any similar terms mean the actual knowledge (after reasonable
inquiry) of either of Xxxxxxx or Ceccorulli. For purposes of the
representations and warranties set forth in Sections 5.3,
5.5, 5.7, 5.8, 5.9, 5.10, 5.11,
5.12,
5.13,
5.14,
5.15,
5.16,
5.20,
and 5.21, “Seller” shall mean Seller, the Subsidiary, and any
direct or indirect subsidiary of Seller or the Subsidiary at any
time.
ARTICLE
VI
REPRESENTATIONS
AND WARRANTIES OF BUYER
Buyer
represents and warrants to Seller as follows:
6.1. Organization,
Power and Good Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State
of
New York, and has all requisite power and authority to own or hold under
lease
its properties and assets and to carry on its business as now
conducted.
6.2. Authority. Buyer
has all necessary power and authority to make, execute and deliver this
Agreement and all other agreements and documents to be executed and delivered
pursuant hereto, and Buyer has taken all necessary actions required to be
taken
to authorize it to execute and deliver this Agreement and such other agreements,
and to perform all of its obligations, undertakings and agreements to be
observed and performed by it hereunder and thereunder,
respectively. This Agreement has been duly executed and delivered by
Buyer, and constitutes the valid and binding agreement of Buyer enforceable
in
accordance with its terms.
6.3. No
Violation. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby (a)
will
constitute a violation of, or be in conflict with, or result in a cancellation
of, or constitute a default under, or create (or cause the acceleration of
the
maturity of) any debt, obligation or liability affecting, or result in the
creation or imposition of any security interest, lien, or other encumbrance
upon, any of the assets owned or used by Buyer under: (i) any term or provision
of the Certificate of Incorporation or By-Laws (or other organic document)
of
Buyer; (ii) any judgment, decree, order, regulation or rule of any court
or
Governmental Authority applicable to Buyer; (iii) any statute or law applicable
to Buyer; or (iv) any contract, agreement, indenture, lease or other commitment
to which Buyer is a party or by which Buyer is bound; or (b) will cause any
material change in the rights or obligations of any party under any such
contract, agreement, indenture, lease or commitment.
6.4. Disclosure. No
representation or warranty of Buyer made hereunder or in any certificate,
statement or other document delivered by or on behalf of Buyer hereunder
contains any untrue statement of material fact or omits to state a material
fact
necessary in order to make the statements contained herein or therein not
misleading.
6.5. Seller
Customers. As of the date hereof, to Buyer’s knowledge,
Buyer does not have a business relationship with any of Seller’s Customers (as
defined in Section 5.19) where such relationship is likely to cause a
termination of any of an Assumed Contract by such Customer.
24
For
purposes of this Agreement, “Buyer’s knowledge” and any similar terms
mean the actual knowledge (after reasonable inquiry) of any of the executive
officers of Buyer.
ARTICLE
VII
ACTION
PRIOR TO THE CLOSING DATE
The
respective parties hereto covenant and agree to take the following actions
between the date hereof and the Closing Date:
7.1. Access
to Information. Seller shall afford the officers,
employees and authorized representatives of Buyer (including independent
public
accountants and attorneys) reasonable access during normal business hours
to the
offices, properties, employees and business and financial records (including
computer files, retrieval programs and similar documentation) and shall furnish
to Buyer or its authorized representatives such additional information
concerning the Purchased Assets, the Business and the operations of Seller
as
shall be reasonably requested, including all such information as shall be
necessary to enable Buyer or its representatives to verify the accuracy of
the
representations and warranties contained in this Agreement, to verify that
the
covenants of Seller contained in this Agreement have been complied with and
to
determine whether the conditions set forth in Article XI have been
satisfied. Buyer agrees that such investigation shall be conducted in
such a manner as not to interfere unreasonably with the operations of
Seller. No investigation made by Buyer or its representatives
hereunder shall affect the representations and warranties of Seller, the
Members
and the Principals hereunder.
7.2. Preserve
Accuracy of Representations and Warranties; Notification of Certain
Matters.
(a) Each
party hereto shall refrain from taking any action which would render any
representation or warranty contained in Article V or VI inaccurate
as of the Closing Date. Each party shall promptly notify the other of
any action, suit or proceeding that shall be instituted or threatened against
such party to restrain, prohibit or otherwise challenge the legality of any
transaction contemplated by this Agreement.
(b) Seller
will notify Buyer of (i) any material adverse change in the condition of
the
Purchased Assets or the Business, (ii) any lawsuit, claim, proceeding or
investigation that is threatened, brought, asserted or commenced against
Seller,
(iii) any notice or other communication from any third Person alleging that
the
consent of such third Person is or may be required in connection with the
transactions contemplated by this Agreement, and (iv) any material default
under
any Assumed Contract or event which, with notice or lapse of time or both,
would
become such a default on or prior to the Closing Date and of which Seller
has
knowledge.
7.3. Consents
of Third Parties. Seller will act diligently and
reasonably in attempting to obtain, before the Closing Date, the consent,
approval or waiver, in form and substance reasonably satisfactory to Buyer,
from
any party to any Assumed Contract required to be obtained to assign or transfer
any such Agreements to Buyer or to otherwise satisfy the condition set forth
in
Section 11.4. In connection with the foregoing,
Seller shall deliver to each party to any Assumed Contract, within one business
day following the date hereof, a notice of assignment sufficient to effect
the
assignment of the Assumed Contract to Buyer following the expiration of any
applicable notice period. Neither Seller nor Buyer shall have any
obligation to offer or pay any consideration in order to obtain any such
consents or approvals. Seller shall not make any agreement or
understanding affecting the Purchased Assets or the Business as a condition
for
obtaining any such consents or waivers except with the prior written consent
of
Buyer. During the period prior to the Closing Date, Buyer shall act
diligently and reasonably to cooperate with Seller in attempting to obtain
the
consents, approvals and waivers contemplated by this
Section 7.3.
25
7.4. Merger
of the Subsidiary. Seller shall take all actions
necessary, and shall cause the Subsidiary to take all actions necessary,
to
cause the Subsidiary to be merged with and into Seller.
7.5. Operations
Prior to the Closing Date. Seller shall operate and
carry on the Business only in the ordinary course and substantially as presently
operated. Consistent with the foregoing, Seller shall keep and
maintain the Purchased Assets in good operating condition and repair and
shall
use its best efforts consistent with good business practice to maintain the
business organization of Seller intact and to preserve the goodwill of the
suppliers, contractors, licensors, employees, customers, distributors and
others
having business relations with Seller. In connection therewith,
Seller shall not attempt to persuade any employee or agent of Seller to
terminate his or her relationship with Seller or not to commence employment
with
Buyer after the Closing.
7.6. Non-Solicitation. During
the period commencing on the date hereof and continuing until the termination
of
this Agreement, none of Seller nor any of the Members or the Principals (the
“Restricted Parties”) will provide or permit their respective
representatives (a) to provide any information with respect to Seller or
the
Business to any Person who has identified itself as a prospective purchaser
of
Seller or a prospective purchaser or licensor of any of Seller’s assets (other
than in the conduct of Seller’s Business in the ordinary course); (b) to solicit
or discuss any transaction relating to any sale, license (other than in the
ordinary conduct of Seller’s Business in the ordinary course) or change in
control of any of the capital stock, Business or assets of Seller, any merger
of
Seller with or into any other entity, any corporate reorganization relating
to
any or all of Seller or its assets or indebtedness or any other significant
corporate transaction involving Seller. Seller and each of the
Members and Principals further agrees to notify Buyer promptly if any third
party makes any proposal, offer, inquiry or contact with respect to any of
the
foregoing.
ARTICLE
VIII
INDEMNIFICATION
8.1. Indemnification
of Buyer. Seller, the Members and the Principals covenant and
agree with Buyer that they jointly and severally shall reimburse, defend,
indemnify and hold harmless Buyer, its affiliates and their respective officers,
directors, agents, employees and stockholders (collectively, the “Buyer
Indemnified Parties”) from and against any liability, loss, damage or
expense (including, but not limited to, reasonable attorneys’ and accountants’
fees and expenses), whether or not resulting from third party claims, suffered
by any of the Buyer Indemnified Parties, which exists, arises out of or results
from:
(i) any
untruth, inaccuracy, breach or omission of, from or in, the representations
and
warranties made to Buyer herein or in any agreement or certificate provided
in
connection with this Agreement, or any nonfulfillment of any covenant or
agreement of Seller, the Members or the Principals under this Agreement or
any
of the Exhibits hereto;
26
(ii) any
liability or obligation of Seller, the Members or the Principals that is
not an
Assumed Liability;
(iii) any
claim by any third party that the transactions contemplated by this Agreement
interfere with, or otherwise violate any right of such third party;
(iv) any
fees, expenses or other payments incurred or owed by Seller, the Members
or the
Principals to any attorneys, accountants, brokers or comparable third parties
retained or employed by it in connection with closing the transactions
contemplated by this Agreement;
(v) any
failure to comply with any applicable statutory provisions relating to bulk
sales and transfers or tax clearances, if applicable;
(vi) any
claim made by any third party alleging facts which, if true, would entitle
any
of the Buyer Indemnified Parties to indemnification pursuant to this
Section 8.1; or
(vii) any
and all actions, suits, claims, proceedings, investigations, audits, demands,
assessments, fines, judgments, costs and other expenses (including, without
limitation, reasonable audit and legal fees) incurred by any of the Buyer
Indemnified Parties resulting from the circumstances described in
Sections 8.1(i) through (vi)
above;
provided,
however, that Seller, the Members and the Principals shall be required to
indemnify and hold harmless under Sections 8.1(i), (ii), (iv),
(v), (vi) and (vii) with respect to any liability, loss, damage or expense
incurred by Buyer Indemnified Parties only if the aggregate amount of any
liability, loss, damage or expense suffered by Buyer Indemnified Parties
exceeds
$50,000, but if in excess of $50,000, then for the entire amount of such
liabilities, losses, damages or expenses without deduction.
8.2. Indemnification
of Seller. Buyer covenants and agrees with Seller that
Buyer shall reimburse, defend, indemnify and hold harmless Seller, its
affiliates, officers, directors, agents, employees including the Principals
(collectively, the “Seller Indemnified Parties”) from and against any
liability, loss, damage or expense (including, but not limited to, reasonable
attorneys’ and accountants’ fees and expenses), whether or not resulting from
third party claims, suffered by any of the Seller Indemnified Parties, which
exists, arises out of or results from:
(i) any
untruth, inaccuracy, breach or omission of, from or in, the representations
and
warranties made to Seller herein, or any nonfulfillment of any covenant or
agreement of Buyer under this Agreement or any of the Exhibits
hereto;
(ii) any
Assumed Liability;
(iii) any
claim against any Seller Indemnified Party by any third party relating to
a
breach by Buyer of a contractual obligation owed to such third party by
Buyer;
27
(iv) any
fees, expenses or other payments incurred or owed by Buyer to any attorneys,
accountants, brokers or comparable third parties retained or employed by
it in
connection with closing the transactions contemplated by this
Agreement;
(v) any
claim made by any third party alleging facts which, if true, would entitle
any
of the Seller Indemnified Parties to indemnification pursuant to this
Section 8.2; or
(vi) any
and all actions, suits, claims, proceedings, investigations, audits, demands,
assessments, fines, judgments, costs and other expenses (including, without
limitation, reasonable audit and legal fees) incurred by any of the Seller
Indemnified Parties resulting from the circumstances described in
Sections 8.2(i) through (v) above;
provided,
however, that Buyer shall be required to indemnify and hold harmless
under Section 8.2 with respect to any liability, loss, damage or
expense incurred by Seller Indemnified Parties only if the aggregate amount
of
any liability, loss, damage or expense suffered by Seller Indemnified Parties
exceeds $50,000, but if in excess of $50,000, then for the entire amount
of such
liabilities, losses, damages or expenses without deduction.
8.3. Method
of Asserting Claims. Subject to the time periods set forth in
Section 8.4 hereof, the party seeking indemnity
(“Indemnitee”) will give prompt written notice to the party or parties
providing indemnity (“Indemnitor”) of any Claim (as defined below) which
it discovers or of which it receives notice after the Closing and which might
give rise to a Claim by it against Indemnitor under this
Article VII, stating the nature, basis and (to the extent known)
amount thereof. Copies of any papers received in connection with a
Claim shall be forwarded to Indemnitor together with the notice of the
Claim. In case of any Claim or suit by a third party or by any
governmental body, or any legal administrative or arbitration proceeding
with
respect to which Indemnitor may have liability under the indemnity agreement
contained in this Article VII, Indemnitor shall be entitled to
participate therein, and, to the extent desired by Indemnitor, to assume
the
defense thereof, and after notice from Indemnitor to Indemnitee of the election
to so assume the defense thereof, Indemnitor will not be liable to Indemnitee
for any legal or other expenses subsequently incurred by Indemnitee in
connection with the defense thereof, other than reasonable costs of
investigation, unless Indemnitor does not actually assume the defense thereof
following notice of such election. Indemnitee and Indemnitor will
render to each other such assistance as may reasonably be required of each
other
in order to ensure proper and adequate defense of any such suit, claim or
proceeding. Indemnitee will not make any settlement of any Claim
which might give rise to liability of an Indemnitor under the indemnity
agreement contained in this Article VIII without the prior written
consent of Indemnitor, which consent shall not be unreasonably
withheld. If Indemnitor shall desire and be able to effect a
bonafide compromise or settlement of any such suit, claim or
proceeding at its expense and such settlement includes as an unconditional
term
thereof the giving by the claimant or the plaintiff to the Indemnitee of
a
release from all liability in respect of such suit, claim or proceeding and
does
not provide any form of relief from the Indemnitee other than the payment
of
money damages or other money payment, and Indemnitee shall unreasonably refuse
to consent to such compromise or settlement, then the Indemnitor’s liability
under this Article VII with respect to such suit, claim or proceeding
shall be limited to the amount so offered in compromise or settlement together
with all legal and other expenses which may have been incurred prior to the
date
on which Indemnitee has refused to consent to such compromise or
settlement. For purposes hereof, the term “Claim” shall mean
any claim for which any of the Buyer Indemnified Parties or the Seller
Indemnified Parties may be entitled to indemnification pursuant to
Sections 8.1 or 8.2 above.
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8.4. Nature
and Survival of Representations. All statements made by or on
behalf of Seller, any Member or any Principal contained herein or in any
of the
schedules or exhibits delivered on behalf of Seller, the Members or the
Principals to Buyer hereunder shall be deemed to constitute representations
and
warranties of Seller, the Members and the Principals, regardless of (a) any
investigation made by or on behalf of Buyer and (b) who prepared such
document. The representations and warranties made by the parties
pursuant to Articles V and VI of this Agreement shall survive the
Closing until the 18-month anniversary of the Closing Date, except that the
representations and warranties made relating to taxes shall survive until
30
days after the expiration of the statute of limitations applicable to any
such
tax, and Indemnitee may present Claims pursuant to
Section 8.3 until such dates.
8.5. Injunctive
and Other Relief. Notwithstanding any other provision
contained in this Article VIII, each party hereto specifically
acknowledges that any breach or attempted breach by any
other party of any provision of Article IX of this Agreement would result
in irreparable injury to the non-breaching party or parties for which there
is
no adequate remedy at law. In the event of a breach of any of the
terms and provisions of Article IX, each non-breaching party shall be
entitled, in addition to and not in lieu of money damages, to an order (without
posting bond) in any suit brought for that purpose to enjoin such other party
from violating any of the terms and provisions of such
Article. Pending the hearing and the decision on the application for
such order, the damaged party shall be entitled to a temporary restraining
order
(without posting bond). The remedies provided under this
Section 8.5 shall be without prejudice to any other remedy or
remedies available to the injured party under this Agreement or
otherwise.
ARTICLE
IX
CONFIDENTIAL
INFORMATION; NON-COMPETITION
9.1. Definitions. For
purposes of this Article IX, the following terms shall have the meanings
set forth below:
(a) “Confidential
Information” means any data or information of Seller, other than Trade
Secrets, which is valuable to Seller and not generally known to competitors,
including general business information, industry information, analyses, and
other information of a proprietary nature that was developed or compiled
by
Seller;
(b) “Restricted
Activities” means the development, sale, purchase, license, or distribution
of any software products or systems that are a competitive replacement for
the
Software marketed by the Business, or assisting any third party to engage
in
such activities;
(c) “Restricted
Entities” means Seller, the Members, the Principals, Xxx. Xxxxxxxxxx, and
their respective Affiliates.
(d) “Restricted
Period” means the period beginning on the Closing Date and ending on the
second anniversary of the Closing Date;
29
(e) “Territory”
means the United States of America, such area being where Customers and actively
sought prospective customers of Seller are located; and
(f) “Trade
Secrets” means information of Seller, without regard to form, including, but
not limited to, technical or nontechnical data, formulas, patterns,
compilations, programs, devices, methods, techniques, drawings, processes,
financial data, financial plans, product plans, or a list of actual or potential
customers or suppliers which is not commonly known by or available to the
public
and which information: (i) derives economic value, actual or potential,
from not being generally known to, and not being readily ascertainable by
proper
means by, other Persons who can obtain economic value from its disclosure
or
use; and (ii) is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.
9.2. Trade
Secrets and Confidential Information.
(a) Trade
Secrets. Seller and each of the Members and Principals agree not
to, and agree to cause all of their respective Affiliates not to, use or
disclose any Trade Secrets for so long as the pertinent information remains
Trade Secret information (and, in any event, throughout the Restricted Period),
regardless of whether the Trade Secrets are in written or tangible form,
without
the prior written consent of Buyer. Nothing in this Agreement shall
diminish the rights of Buyer regarding the protection of Trade Secrets and
other
Intellectual Property pursuant to applicable law.
(b) Confidential
Information. Seller, the Members and the Principals each agree
that such Persons will hold in confidence all Confidential Information, and
none
of such Persons will disclose, publish, or make use of Confidential Information
without the prior written consent of Buyer.
9.3. Noncompetition.
(a) Acknowledgment. Seller,
the Members and the Principals each acknowledge that Seller conducts the
Restricted Activities throughout the Territory and that to protect adequately
the interest of Buyer in the Business and the Purchased Assets, it is essential
that any noncompetition covenant with respect thereto cover all Restricted
Activities and the entire Territory for the duration of the Restricted
Period.
(b) Noncompetition
Covenant. Seller, the Members and the Principals each agree that
none of the Restricted Entities will, during the Restricted Period, directly
or
by assisting others, conduct Restricted Activities in the Territory or otherwise
engage in, have an equity or profit interest in, or render services (of an
executive, marketing, manufacturing, research and development, administrative,
financial, or consulting nature) to any business that conducts any of Restricted
Activities in the Territory. Notwithstanding anything in this
Agreement to the contrary, such persons may collectively acquire up to two
percent (2%) of any company whose common stock is publicly traded on a national
securities exchange.
(c) Nonsolicitation. Seller,
the Members and the Principals hereby jointly and severally agree that none
of
the Restricted Entities will, during the Restricted Period, directly or by
assisting others:
(i) solicit
or attempt to solicit, any business from any of Seller’s Customers existing as
of the Closing Date or during the one-year period prior to the Closing Date,
including actively sought prospective customers, for purposes of providing
products or services that are a competitive replacement for any product or
service provided or marketed by Seller; or
30
(ii) hire,
recruit, or solicit or attempt to hire, recruit, or solicit, on behalf of
Seller
or on behalf of any other Person, any employee or independent contractor
of
Buyer.
9.4. Severability. If
a judicial determination is made that any of the provisions of this Article
IX constitutes an unreasonable or otherwise unenforceable restriction
against Seller, the provisions of this Article IX shall be rendered void
only to the extent that such determination finds such provisions to be
unreasonable or otherwise unenforceable with respect to Seller. In
this regard, Seller hereby agrees that any judicial authority construing
this
Article IX shall be empowered to sever or modify any portion of the
Territory, any prohibited business activity or any time period from the coverage
of this Agreement, and to apply the provisions of this Article IX to the
remaining portion of the Territory, the remaining business activities or
the
remaining time period not so severed or modified by such judicial or arbitral
authority. Moreover, notwithstanding the fact that any provision of
this Article IX is determined not to be specifically enforceable,
Buyer shall nevertheless be entitled to recover monetary damages as a result
of
any breach of any such provision by Seller.
ARTICLE
X
ADDITIONAL
COVENANTS AND AGREEMENTS
10.1. Employee
Matters. The parties hereto acknowledge that,
(i) in addition to the Principals with whom Buyer is entering into the
Employment Agreements, Buyer will offer employment to the employees of Seller
identified on Schedule 10.1, at the salary set forth opposite each such
employee’s name on Schedule 10.1 and on such other terms and conditions
as shall be mutually agreed upon between each such employee and Buyer, and
(ii)
except with respect to the Principals with whom Buyer is entering into the
Employment Agreements, Buyer’s employment of any employee in accordance with
this Section 10.1 shall be at will and terminable at Buyer’s sole
discretion. The parties agree that all employer responsibilities,
costs, and liabilities, including those under any severance agreements or
arrangements, for any employees of Seller or other Seller Personnel, including
those terminated prior to the Closing Date, shall be and remain the exclusive
responsibility, cost, and liability of Seller. Seller shall assist
and cooperate with Buyer in all respects in connection with the employee
matters
set forth in this Section 10.1 and elsewhere in this
Agreement, including providing such information relating thereto as may be
reasonably requested by Buyer from time to time.
10.2. Public
Announcements. Buyer shall coordinate any public
announcements regarding this Agreement or the transactions contemplated by
this
Agreement to the financial community, government agencies, employees, or
the
general public. Neither Seller nor any Member nor any Principal shall
make any such public announcement without the written consent of Buyer, except
as required by applicable law, Government Authority or the rules of any
applicable securities exchange. Buyer shall consult with Seller in
good faith before issuing any such public announcement.
10.3. Access
to Properties and Records.
31
(a) For
a period of seven years after the Closing Date, Buyer will afford and cause
to
be afforded to Seller, the Members and the Principals access to all of the
pre-Closing books and records of Buyer to the extent that such access may
reasonably be required by Seller, the Members or the Principals in connection
with preparation of tax returns or financial statements or in connection
with a
legal dispute or judicial proceeding covering periods prior to the Closing
Date. Such access shall be afforded by Buyer upon receipt of
reasonable advance notice and during normal business hours. Seller,
the Members and the Principals shall be solely responsible for any costs
or
expenses incurred by any of them pursuant to this
Section 10.3(a). If Buyer shall desire to
destroy any such books and records prior to the expiration of such seven-year
period, Buyer shall, prior to such destruction, give each of Seller, the
Members
and the Principals a reasonable opportunity, at their respective expense,
to
segregate, remove and store the books and records to be destroyed, or any
of
them, as determined by Seller, the Members and the Principals.
(b) For
a period of three years after the Closing Date, Seller, the Members and the
Principals will afford and cause to be afforded to Buyer (i) such access
during
normal business hours, upon reasonable prior notice, to such books and records
of Seller as Buyer may reasonably request in connection with matters relating
to
Seller for periods ending on or prior to the Closing Date; and (ii) such
assistance in locating and copying such books and records as Buyer may
reasonably request. If Seller, the Members or the Principals shall
desire to destroy any such books and records prior to the expiration of such
three-year period, such party shall, prior to such destruction, give Buyer
a
reasonable opportunity, at its expense, to segregate, remove and store the
books
and records to be destroyed, or any of them, as determined by
Buyer.
10.4. Payment
of Debts. Commencing as of the Closing Date, the Members
and the Principals shall cause Seller to pay as and when due all of Seller’s
debts and obligations existing as of the Closing Date that are not assumed
by
Buyer hereunder; provided, however, that the foregoing shall not prevent
Seller,
the Members or the Principals from contesting in good faith any such debts
or
obligations.
10.5.
Right of Offset. Buyer shall be entitled to
offset any Claims or any portion of any Claim that has not been paid by Seller,
the Members or the Principals, against any amounts owing to Seller, the Members
or the Principals pursuant to any oral or written agreement to which such
entity
or person may be a party, including any Incremental Revenue Payment required
to
be made pursuant to Section 2.4. If the amounts
offset by Buyer hereunder exceed the obligations remaining due to Buyer,
Seller,
the Members and the Principals shall remain fully liable for such excess
amounts, and no exercise of any right of offset hereunder by Buyer shall
reduce,
eliminate, impair or otherwise affect such liability of Seller, the Members
or
the Principals, except that the amount of any such liability shall be reduced
to
the extent of any offsets hereunder.
ARTICLE
XI
CONDITIONS
PRECEDENT TO OBLIGATIONS OF BUYER
The
obligations of Buyer under this Agreement shall, at the option of Buyer,
be
subject to the satisfaction, on or prior to the Closing Date, of the following
conditions:
32
11.1. No
Misrepresentation or Breach of Covenants and
Warranties. There shall have been no material breach by
Seller in the performance of any of its covenants and agreements herein;
each of
the representations and warranties of Seller contained or referred to herein
shall be true and correct on the Closing Date as though made on the Closing
Date, except for changes therein specifically permitted by this Agreement
or
resulting from any transaction expressly consented to in writing by Buyer;
and
there shall have been delivered to Buyer a certificate to such effect, dated
the
Closing Date, signed (i) on behalf of Seller by an authorized officer of
Seller,
(ii) by each Member and (iii) by each Principal.
11.2.
No Changes or Destruction of
Property. Between the date hereof and the Closing Date,
there shall have been (a) no material adverse change in the Purchased Assets,
the Business of Seller or the operations, liabilities, profits, prospects
or
condition (financial or otherwise) of Seller; (b) no material adverse federal
or
state legislative or regulatory change affecting the business of Seller or
the
Business; and (c) no material damage to the Purchased Assets by fire, flood,
casualty, act of God or the public enemy or other cause, regardless of insurance
coverage for such damage; and there shall have been delivered to Buyer a
certificate to such effect, dated the Closing Date and signed (i) on behalf
of
Seller by an authorized officer of Seller, (ii) by each Member and (iii)
by each
Principal.
11.3. No
Restraint or Litigation. No action, suit, investigation
or proceeding shall have been instituted or threatened to restrain or prohibit
or otherwise challenge the legality or validity of the transactions contemplated
hereby.
11.4.
Necessary Consents. Seller shall have
received all necessary consents to the transactions contemplated hereby from
the
other parties to all contracts, leases, agreements and permits to which Seller
is a party or by which Seller or any of the Purchased Assets is affected
or are
otherwise necessary to prevent a material adverse change in the Purchased
Assets, Seller, or in the Business. Each of the Assumed Contracts
shall have been legally assigned to Buyer pursuant to its terms.
ARTICLE
XII
CONDITIONS
PRECEDENT TO OBLIGATIONS OF SELLER
The
obligations of Seller under this Agreement shall, at the option of Seller,
be
subject to the satisfaction, on or prior to the Closing Date, of the following
conditions:
12.1. No
Misrepresentation or Breach of Covenants and
Warranties. There shall have been no material breach by
Buyer in the performance of any of its covenants and agreements herein; each
of
the representations and warranties of Buyer contained or referred to in this
Agreement shall be true and correct on the Closing Date as though made on
the
Closing Date, except for changes therein specifically permitted by this
Agreement or resulting from any transaction expressly consented to in writing
by
Seller or any transaction contemplated by this Agreement; and there shall
have
been delivered to Seller a certificate to such effect, dated the Closing
Date
and signed on behalf of Buyer by an authorized officer of Buyer.
12.2. No
Restraint or Litigation. No action, suit, investigation
or proceeding shall have been instituted or threatened to restrain or prohibit
or otherwise challenge the legality or validity of the transactions contemplated
hereby.
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ARTICLE
XIII
TERMINATION
13.1. Termination. Anything
contained in this Agreement to the contrary notwithstanding, this Agreement
may
be terminated at any time prior to the Closing Date:
(a) by
the mutual consent of Buyer and Seller;
(b) by
Buyer or Seller if the Closing shall not have occurred on or before November
30,
2007 (or such later date as may be mutually agreed to by Buyer and Seller);
provided, however, that the right to terminate this Agreement under this
Section 13.1(b) shall not be available to any Person
whose failure to comply with its obligations under this Agreement has been
the
cause of or resulted in the failure of the Closing to occur on or before
such
time;
(c) by
Buyer in the event of any material breach by Seller, any Member or any Principal
of any of their respective agreements, representations or warranties contained
herein and the failure of such party to cure such breach within three days
after
receipt of notice from Buyer requesting such breach to be cured;
(d) by
Seller in the event of any material breach by Buyer of any of Buyer’s
agreements, representations or warranties contained herein and the failure
of
Buyer to cure such breach within three days after receipt of notice from
Seller
requesting such breach to be cured;
13.2. Notice
of Termination. Any party desiring to terminate this
Agreement pursuant to Section 13.1 shall give notice of such
termination to the other parties to this Agreement.
13.3. Effect
of Termination.
(a) If
this Agreement is terminated by Seller pursuant to Section 13.1(d),
then Buyer and Seller shall jointly instruct the Escrow Agent to distribute
to
Seller the Escrow Amount as liquidated damages in accordance with the terms
of
the Escrow Agreement.
(b) If
this Agreement is terminated pursuant to any other provision of this Article
XIII:
(i) Buyer
and Seller shall jointly instruct the Escrow Agent to distribute to Buyer
the
Escrow Amount in accordance with the terms of the Escrow Agreement,
and
(ii) all
further obligations of the parties under this Agreement shall be terminated
without further liability of any party to the other, provided that nothing
herein shall relieve any party from liability for its willful breach of this
Agreement.
ARTICLE
XIV
GENERAL
PROVISIONS
34
The
parties further covenant and agree as follows:
14.1. Waiver
of Terms. Any of the terms or conditions of this
Agreement may be waived at any time by the party or parties entitled to the
benefit thereof but only by a written notice signed by the party or parties
waiving such terms or conditions.
14.2. Amendment
of Agreement. This Agreement may be amended,
supplemented or interpreted at any time only by written instrument duly executed
by each of the parties hereto.
14.3. Payment
of Expenses. Except as otherwise specifically provided in
this Agreement, the parties shall each pay its or their own expenses, including,
without limitation, the expenses of its or their own counsel, advisors and
accountants, incurred in connection with the preparation, execution and delivery
of this Agreement and the other agreements and documents referred to herein
and
the consummation of the transactions contemplated hereby and
thereby.
14.4. Contents
of Agreement, Parties in Interest, Assignment. This
Agreement and the other agreements and documents referred to herein set forth
the entire understanding of the parties with respect to the subject matter
hereof. Any previous agreements or understandings between the parties
regarding the subject matter hereof, including without limitation, that certain
letter agreement, dated August 15, 2007, by and between Buyer and Seller,
are
merged into and superseded by this Agreement. All representations,
warranties, covenants, terms and conditions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective heirs,
legal representatives, successors and permitted assigns of the parties hereto;
provided, however, that none of the rights or obligations of any of the parties
hereto may be assigned without the prior written consent of, in the case
of
assignment by Seller, the Members or the Principals, Buyer, or, in the case
of
assignment by Buyer, Seller, the Members and the Principals, which consent
shall
not unreasonably be withheld. Notwithstanding the foregoing, Buyer
may assign any of its rights or obligations to a wholly-owned subsidiary
of
Buyer without the consent of Seller, the Members and the Principals, provided
that Buyer remains liable for the performance of such assignee or assignees
and
notifies Seller, the Members and the Principals of such assignment.
14.5. Notices. All
notices, requests, demands and other communications required or permitted
to be
given hereunder shall be by hand-delivery, certified or registered mail,
return
receipt requested, telecopier (if a telecopier number is provided), or air
courier to the parties set forth below. Such notices shall be deemed
given at the time personally delivered, if delivered by hand or by courier,
at
the time received, if sent certified or registered mail, and when receipt
is
acknowledged by telecopy equipment, if telecopied.
If
to Buyer:
|
Mediware
Information Systems, Inc.
|
||
0000
Xxxxxx Xxxx, Xxxxx 000
|
|||
Xxx
Xxxxx, XX 00000
|
|||
Attn:
Senior Vice President and General Counsel
|
|||
Telecopier:
(000) 000-0000
|
|||
If
to Seller or
|
|||
any
Member or
|
|||
Principal:
|
X/X
Xxxxxxx Xxxxxxx
|
||
Xxxxxx,
Xxxxxxxxx, Xxxxxxx, Hoffberger & Xxxxxxxxx, LLC
|
|||
The
Xxxxxxx Building
|
|||
000
Xxxx Xxxxxxx Xxxxxx
|
|||
Xxxxxxxxx,
XX 00000
|
35
14.6. Severability. In
the event that any one or more of the provisions contained in this Agreement
shall be invalid, illegal or unenforceable in any respect for any reason,
the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions of this Agreement shall not be in
any
way impaired.
14.7. Schedules
and Exhibits. The schedules and exhibits referred to
herein and attached hereto are incorporated herein by reference as if fully
set
forth in the text hereof.
14.8. Counterparts.
This Agreement may be executed in one or more counterparts and by facsimile
transmission, each of which shall be considered an original instrument, but
all
of which shall be considered one and the same agreement, and shall become
binding when one or more counterparts have been signed by each of the parties
hereto and delivered to each of the parties hereto.
14.9. Headings. The
headings of the Sections and the subsections of this Agreement are inserted
for
convenience of reference only and shall not constitute a part
hereof.
14.10. Governing
Law; Jurisdiction. IN ALL RESPECTS, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS
ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND
PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING
CONFLICT OF LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF
AMERICA. BUYER, SELLER, THE MEMBERS AND THE PRINCIPALS AGREE TO
SUBMIT TO PERSONAL JURISDICTION AND TO WAIVE ANY OBJECTION AS TO VENUE IN
THE
COUNTY OF XXXX, STATE OF ILLINOIS. SERVICE OF PROCESS ON BUYER,
SELLER, THE MEMBERS OR THE PRINCIPALS IN ANY ACTION ARISING OUT OF OR RELATING
TO THIS AGREEMENT SHALL BE EFFECTIVE IF MAILED TO SUCH PARTY AT THE ADDRESS
LISTED ABOVE.
14.11. Waiver
of Jury Trial. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON, AND THE PARTIES WISH APPLICABLE STATE
AND
FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE
THAT
THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE
LAWS. THEREFORE TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF
THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT
TO
TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND
ANY
RIGHTS OR REMEDIES UNDER THIS AGREEMENT.
36
14.12.
Dispute Resolution.
(a) Dispute. Any
controversy, claim or dispute of whatever nature, whether at law or in equity,
including claims for fraud in the inducement (including issues as to
arbitrability), arising between Buyer and any of Seller, the Members and
the
Principals (each, a “Disputing Party”), under this Agreement or in
connection with the transactions contemplated hereunder, including those
arising
out of or relating to the breach, termination, enforceability, scope, validity,
or making of this Agreement, whether such claim existed prior to or arises
on or
after the Closing Date (a “Dispute”), shall be resolved by binding
arbitration, unless the Disputing Parties otherwise agree. The
agreement to arbitrate contained in this section shall continue in full force
and effect despite the expiration, rescission or termination of this
Agreement. Notwithstanding anything contained herein to the contrary,
any disputes involving Incremental Revenue Payments shall be resolved pursuant
to the provisions of Section 2.4.
(b) Arbitration;
Submission to Jurisdiction. Neither Disputing Party shall
commence an arbitration proceeding pursuant to the provisions of this Agreement
unless such Disputing Party shall first give a written notice (a “Dispute
Notice”) to the other Disputing Party setting forth the nature of the
Dispute. The Dispute shall be determined by binding arbitration in
Chicago, Illinois within 20 business days after receipt of a Dispute
Notice. The arbitration shall be conducted in accordance with the CPR
Institute for Dispute Resolution (“CPR”) Rules for Non-Administered
Arbitration (“CPR Rules”), subject to any modifications contained in this
Agreement. The Dispute shall be determined by one
arbitrator. The Disputing Parties shall agree upon the arbitrator
within 10 business days after receipt of a Dispute Notice. The
arbitrator shall be a retired state or federal judge or an attorney with
at
least 15 years of business litigation experience. The arbitrator
shall be a “neutral” arbitrator and not appointed by either Disputing
Party. If the Disputing Parties are unable to agree upon the
arbitrator within such period, the arbitrator shall be selected by CPR in
accordance with the CPR Rules. The arbitrator shall base the award on
the “four corners” of the Agreement, and only when the answer to a Dispute is
not contained therein, shall the arbitrator look to the governing law designated
herein and judicial precedent in accordance with the terms hereof to resolve
the
Dispute. Without limiting the foregoing, nothing herein contained
shall be deemed to give the arbitrator any authority, power or right to change,
modify, add to or subtract from this Agreement (except as expressly provided
herein).
(i) The
arbitrator shall have the authority to award any remedy or relief that a
court
of competent jurisdiction could order or grant, including equitable remedies,
rescission, specific performance of any obligation created under the Agreement,
the issuance of an injunction, or the imposition of sanctions for abuse or
frustration of the arbitration process. The arbitrator shall award to
the prevailing party, if any, as determined by the arbitrators, all of such
party’s reasonable expenses.
(ii) Discovery
will be limited to an exchange of directly relevant documents and answers
to
interrogatories. The arbitrator shall resolve any discovery
disputes. The arbitrator and counsel of record will have the power of
subpoena process as provided by law. The Disputing Parties knowingly
and voluntarily waive their rights to have any Dispute tried and adjudicated
by
a judge or a jury.
(iii) The
arbitration shall be governed by the substantive laws of the State of Illinois,
applicable federal laws and the CPR Rules, regardless of laws that might
otherwise govern under applicable principles of conflicts of laws
thereof. Judgment upon award rendered may be entered in any court
having jurisdiction.
37
(iv) Except
as otherwise required by law or in court proceedings to enforce this Agreement
or an award rendered hereunder or to obtain interim relief, the Disputing
Parties and the arbitrator agree to keep confidential and not disclose to
third
parties any information or documents obtained in connection with the arbitration
process, including the resolution of the Dispute. If either Disputing
Party fails to proceed with arbitration as provided in this Agreement, or
unsuccessfully seeks to stay the arbitration, or fails to comply with the
arbitration award, or is unsuccessful in vacating or modifying the award
pursuant to a petition or application for judicial review, the other Disputing
Party shall be entitled to be awarded fees and expenses (including reasonable
attorneys’ fees) paid or incurred in successfully compelling such arbitration or
defending against the attempt to stay, vacate or modify such arbitration
award
and/or successfully defending or enforcing the award.
[Remainder
of page intentionally left blank]
38
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed the day and year first above written.
INTEGRATED
MARKETING SOLUTIONS, LLC
|
||
By:
|
||
Name:
|
||
Title:
|
||
MEDIWARE
INFORMATION SYSTEMS, INC.
|
||
By:
|
||
Name:
|
||
Title:
|
||
T.J.C.
INVESTMENTS, INC.
|
||
By:
|
||
Name:
Xxxx Xxxxxxx
|
||
Title:
|
||
S.M.C.,
INC.
|
||
By:
|
||
Name:
Xxxxx Xxxxxxxxxx
|
||
Title:
|
||
XXXX
XXXXXXX
|
||
XXXXX
XXXXXXXXXX
|