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EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
AMONG
BELL MICROPRODUCTS INC.,
NEW PROSYS CORP.,
PROSYS INFORMATION SYSTEMS, INC.,
MICHELLE CLERY,
AND
BRUCE KEENAN
DATED OCTOBER 2, 2006
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TABLE OF CONTENTS
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Page
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Exhibits
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Exhibit 2.1(a)
Description of Real Property
Exhibit 2.1(b)
Description of Tangible Personal Property
Exhibit 2.1(e)
Assumed Contracts
Exhibit 2.1(f)
Governmental Authorizations
Exhibit 2.1(g)
Records
Exhibit 2.1(h)
Intellectual Property
Exhibit 2.1(j)
Assigned Claims
Exhibit 2.1(k)
Pre-paid Expenses
Exhibit 2.2
Excluded Assets
Exhibit 2.2(c)
Retained Contracts
Exhibit 2.7(a)(i)
Form of Bill of Sale
Exhibit 2.7(a)(ii)
Form of Assignment and Assumption Agreement
Exhibit 2.7(a)(iii)
Form of Assignment and Assumption of Lease
Exhibit 2.7(a)(iv)
Form of Owners' Release
Exhibit 2.7(a)(v)
Form of Employment Agreement
Exhibit 2.7(a)(vi)
Form of Escrow Agreement
Exhibit 2.7(a)(vii)
Form of Registration Rights Agreement
Exhibit 2.7(a)(xii)
Form of Opinion of Company's and Owners' Counsel
Exhibit 2.7(a)(xiii) Form
of Waiver and Termination of Shareholders' Agreement
Exhibit 2.7(b)(viii) Form
of Opinion of Buyer's Counsel
Exhibit 2.8(e)
Form of Lease
Exhibit 2.8(f)
Personal Guarantees not Released at Closing
Exhibit 2.10(a)
Contingent Payment Schedule
Exhibit 2.11
Excluded Employees
Schedules
---------
Schedule 2.1
Sample Tax True-Up Calculation
Schedule 4.2
Conflicts and Consents Required on Behalf of Buyer
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "AGREEMENT") is entered into
and
made effective as of October 2, 2006, by and between New ProSys
Corp., a Georgia
corporation ("BUYER"), Bell Microproducts Inc., a California
corporation
("PARENT"), ProSys Information Systems, Inc., a Georgia corporation
(the
"COMPANY"), Michelle Clery, an individual resident in Georgia
("CLERY"), and
Bruce Keenan, an individual resident in Georgia ("KEENAN" and,
collectively with
Clery, "OWNERS").
RECITALS
1. The Owners own all
of the issued and outstanding capital stock of
the Company.
2. The Company desires
to sell to Buyer and Buyer desires to
purchase from the Company, all of the Company's Assets other
than
the Excluded Assets, on the terms and conditions set forth
herein.
3. Immediately
following to the Closing, the Owners shall cause the
Company to distribute cash bonuses, and the Owners shall
establish a trust for the payment of additional bonuses, to the
current employees of the Company, in an aggregate amount equal
to
$5,000,000.
4. Immediately
following the Closing, the Owners shall cause the
Company to distribute the net proceeds of the Asset sale to the
Owners as a dividend.
5. Immediately
following the distribution of the dividend to the
Owners, Buyer shall purchase all of the outstanding capital
stock
of the Company owned by Keenan pursuant to that Stock Purchase
Agreement of even date
herewith between Buyer and Keenan, so that
upon the consummation of said transaction Buyer shall own 48%
and
Clery shall own 52% of the Company.
AGREEMENT
The parties, intending to be legally bound, agree as follows:
1.
DEFINITIONS; USAGE.
1.1
DEFINITIONS. For
purposes of this Agreement, the following
terms have the meanings specified or referred to in this Section
1:
"ACCOUNTANTS" -- as defined in Section 2.9(b).
"ACCOUNTS RECEIVABLE" -- means (a) all trade accounts receivable
and
other rights to payment from customers of the Company and the full
benefit of
all security for such accounts or rights to payment, including all
trade
accounts receivable representing amounts receivable in respect of
goods shipped
or products sold or services rendered to customers of the Company,
less any
reserve for bad debt, (b) all other accounts or notes receivable of
the Company
and the full benefit of all security for such accounts or notes and
(c) any
claim, remedy or other right related to any of the foregoing.
"ACTUAL NET ASSETS" -- means the total assets of the Company less
the
total liabilities of the Company, determined in accordance with
GAAP, as of the
Closing Date; provided, however, that the
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determination of Actual Net Assets shall exclude the accrual for
Employee
Bonuses to be paid by the Company pursuant to Section 2.8.
"ACTUAL WORKING CAPITAL" shall mean the current assets of the
Company
minus the current liabilities of the Company, determined in
accordance with
GAAP, as of the Closing Date; provided, however, that the
determination of
Actual Working Capital shall exclude the accrual for Employee
Bonuses to be paid
by the Company pursuant to Section 2.8.
"ADVISORY COMMITTEE" -- as defined in Section 12.6.
"ADJUSTMENT AMOUNT" -- as defined in Section 2.5.
"ANNUALIZED CONTRIBUTION" -- means the average monthly Contribution
for
all months of the Contingent Payment Period in question prior to a
Change of
Control Transaction, as applicable, multiplied by 12.
"APPURTENANCE" -- means all privileges, rights, easements,
hereditaments, and appurtenances belonging to or for the benefit of
the Land,
including all easements appurtenant to and for the benefit of any
Land (a
"Dominant Parcel") for, and as the primary means of access between
the Dominant
Parcel and a public way, or for any other use upon which lawful use
of the
Dominant Parcel for the purposes for which it is presently being
used is
dependent, and all rights existing in and to any streets, alleys,
passages and
other rights-of-way included thereon or adjacent thereto (before or
after
vacation thereof) and vaults beneath any such streets.
"ASSETS" -- as defined in Section 2.1.
"ASSUMED LIABILITIES" -- as defined in Section 2.4(a).
"BALANCE SHEET" -- balance sheet of the Company as of December
31,
2005.
"BEST EFFORTS" -- the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure
that such result
is achieved as expeditiously as possible.
"BREACH" -- a "Breach" of a representation, warranty, covenant,
obligation, or other provision of this Agreement or any instrument
delivered
pursuant to this Agreement will be deemed to have occurred if there
is or has
been (a) any inaccuracy in or breach of, or any failure to perform
or comply
with, such representation, warranty, covenant, obligation, or other
provision of
this Agreement or any instrument delivered pursuant to this
Agreement, or (b)
any occurrence or other circumstance that is or was inconsistent
with such
representation, warranty, covenant, obligation, or other provision,
and the term
"Breach" means any such inaccuracy, breach, failure, claim,
occurrence, or
circumstance.
"BUSINESS" - means the customized IT solutions business owned
and
operated by the Company.
"BUYER" -- as defined in preamble to this Agreement.
"BUYER CHANGE OF CONTROL TRANSACTION" -- (A) any merger or
consolidation of Buyer into or with another entity (other than one
in which the
holders of Buyer capital stock immediately prior to such merger or
consolidation
continue to hold at least a majority of the voting power of the
capital stock
(or other securities) of the entity surviving such transaction or
of an entity
controlling the entity surviving such transaction), (B) any sale of
all or
substantially all of Buyer's assets (other than a sale of assets of
Buyer to an
entity controlled by Buyer), and (C) any other transaction pursuant
to or as a
result of which a
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person (or group of affiliated persons) other than Parent or one or
more Parent
affiliates acquires or holds capital stock (or other securities
entitled to
voting rights) of Buyer representing a majority of the outstanding
voting power
of Buyer.
"BUYER'S CLOSING DOCUMENTS" -- as defined in Section 4.2.
"BUYER INDEMNIFIED PERSONS" -- as defined in Section 10.3
"CHANGE OF CONTROL PROCEEDS" -- as defined in Section 2.10(f).
"CHANGE OF CONTROL TRANSACTION" -- any one or more of the
following: a
Parent Change of Control Transaction, a Buyer Change of Control
Transaction or a
Company Change of Control Transaction, as applicable.
"CLOSING" -- as defined in Section 2.6.
"CLOSING DATE" -- the date and time as of which the Closing
actually
takes place.
"CLOSING FINANCIAL STATEMENTS" -- as defined in Section 2.8(b).
"CLOSING REQUIRED CONSENTS" -- are those Consents that are required
to
be delivered by the Company and the Owners at Closing as identified
in Part 3.2
of the Disclosure Letter.
"COMPANY" -- as defined in the introductory paragraph of this
Agreement.
"COMPANY CHANGE OF CONTROL TRANSACTION" -- (A) any merger or
consolidation of the Company into or with another entity (other
than one in
which the holders of Company capital stock immediately prior to
such merger or
consolidation continue to hold at least a majority of the voting
power of the
capital stock (or other securities) of the entity surviving such
transaction or
of an entity controlling the entity surviving such transaction),
(B) any sale of
all or substantially all of the Company's assets (other than a sale
of assets of
Parent to an entity controlled by Parent), and (C) any other
transaction
pursuant to or as a result of which a person (or group of
affiliated persons)
other than Parent or one or more Parent affiliates acquires or
holds capital
stock (or other securities entitled to voting rights) of the
Company
representing a majority of the outstanding voting power of the
Company.
"COMPANY CONTRACTS" -- any Contract (a) under which the Company has
or
may acquire any rights, (b) under which the Company has or may
become subject to
any obligation or liability, or (c) by which the Company or any of
the assets
owned or used by it is or may become bound, including the Material
Contracts.
"COMPANY FINANCIAL STATEMENTS" -- as defined in Section 3.4.
"COMPETING BUSINESS" -- as defined in Section 3.25.
"CONSENT" -- any approval, consent, ratification, waiver, or
other
authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS" -- all of the transactions contemplated
by
this Agreement, including:
(a) the sale of the Assets by the Company to the Buyer;
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(b) the execution, delivery, and performance of the Employment
Agreements, Owners' Releases, the Registration Rights Agreement and
the
Escrow Agreement;
(c) the performance by Buyer and Owners of their respective
covenants and obligations under this Agreement; and
(d) Buyer's acquisition and ownership of the Assets and
exercise of control over the Assets.
"CONTINGENT CONSIDERATION FINANCIAL STATEMENTS" -- as defined
in
Section 2.10(b).
"CONTINGENT CONSIDERATION PERIOD" -- means a 12-month fiscal
period
beginning on October 1, with the first such Contingent
Consideration Period
beginning on October 1, 2006.
"CONTINGENT PAYMENTS" -- as defined in Section 2.10(a).
"CONTINGENT PAYMENT DISPUTE" -- as defined in Section 2.10(b).
"CONTINGENT PAYMENT NOTICE" -- as defined in Section 2.10(b).
"CONTRACT" -- any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or
implied) that is
legally binding.
"CONTRIBUTION" shall mean the gross profit generated by Buyer and
the
Company minus all direct operating expenses of Buyer and the
Company, excluding
any interest expense incurred by Buyer related to acquisition
financing and (for
the avoidance of doubt) any Contingent Payments. Direct operating
expenses shall
include, among other things, all employment compensation paid to
Owners and all
other compensation expense, all depreciation expense, amortization
(other than
amortization of intangible Assets transferred pursuant to the
Agreement), bad
debt charges, asset write-downs and reserves, working capital
interest and all
other operating expenses incurred in the Ordinary Course of
Business.
"DAMAGES" -- as defined in Section 10.2.
"DISCLOSURE LETTER" -- the disclosure letter delivered by the
Company
and the Owners to Buyer concurrently with the execution and
delivery of this
Agreement.
"DISPUTE NOTICE" -- as defined in Section 2.10(b).
"DUE DATE" -- as defined in Section 2.10(b).
"EMPLOYEE BENEFIT PLAN" -- as defined in Section 3.13.
"EMPLOYEE BONUSES" -- as defined in Section 2.8(a).
"EMPLOYMENT AGREEMENTS" -- as defined in Section 2.7(a)(v).
"ENCUMBRANCE" -- any charge, Proceeding, community property
interest,
condition, equitable interest, lien, option, pledge, security
interest, right of
first refusal, or restriction of any kind, including any
restriction on use,
voting, transfer, receipt of income, or exercise of any other
attribute of
ownership.
"ENVIRONMENT" -- soil, land surface or subsurface strata,
surface
waters (including navigable waters, ocean waters, streams, ponds,
drainage
basins, and wetlands), groundwaters, drinking water
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supply, stream sediments, ambient air (including indoor air), plant
and animal
life, and any other environmental medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES" -- any cost,
damages,
expense, liability, obligation, or other responsibility arising
from or under
any Environmental Law or any Occupational Safety and Health
Law.
"ENVIRONMENTAL LAW" -- any Legal Requirement that requires or
relates
to:
(a) advising appropriate authorities, employees, and the
public of intended or actual releases of pollutants or
hazardous
substances or materials, violations of discharge limits, or
other
prohibitions and of the commencements of activities, such as
resource
extraction or construction, that could have significant impact on
the
Environment;
(b) preventing or reducing to acceptable levels the release of
pollutants or hazardous substances or materials into the
Environment;
(c) reducing the quantities, preventing the release, or
minimizing the hazardous characteristics of wastes that are
generated;
(d) protecting resources, species, or ecological amenities;
(e) reducing to acceptable levels the risks inherent in the
transportation of hazardous substances, pollutants, oil, or
other
potentially harmful substances;
(f) cleaning up pollutants that have been released, preventing
the threat of release, or paying the costs of such clean up or
prevention; or
(g) making responsible parties pay private parties, or groups
of them, for damages done to the Environment.
"ERISA" -- the Employee Retirement Income Security Act of 1974 or
any
successor law, and regulations and rules issued pursuant to that
Act or any
successor law.
"ESCROW AGENT" -- means US Bank National Association.
"ESCROW AGREEMENT" -- as defined in Section 2.7(a)(vi).
"ESCROWED SHARES" -- as defined in Section 2.3(b)(ii).
"EXCLUDED ASSETS" means those assets of the Company listed on
Exhibit
2.2 not being transferred to the Buyer pursuant to this
Agreement.
"EXCLUDED EMPLOYEES" -- as defined in Section 2.11.
"FACILITIES" -- any real property, leaseholds, or other
interests
currently or formerly owned or operated by the Company and any
buildings,
plants, structures, or equipment (including motor vehicles, tank
cars, and
rolling stock) currently or formerly owned or operated by the
Company.
"GAAP" -- generally accepted United States accounting
principles,
applied on a consistent basis.
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"GOVERNMENTAL AUTHORIZATION" -- any approval, consent, license,
permit,
waiver, or other authorization issued, granted, given, or otherwise
made
available by or under the authority of any Governmental Body or
pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY" -- any:
(a) nation, state, county, city, town, village, district, or
other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official,
or
entity and any court or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any
administrative, executive, judicial, legislative, police,
regulatory,
or taxing authority or power of any nature.
"HAZARDOUS ACTIVITY" -- the distribution, generation, handling,
importing, management, manufacturing, processing, production,
refinement,
Release, storage, transfer, transportation, treatment, or use
(including any
withdrawal or other use of groundwater) of Hazardous Materials in,
on, under,
about, or from the Facilities or any part thereof into the
Environment, and any
other act, business, operation, or thing that increases the danger,
or risk of
danger, or poses an unreasonable risk of harm to persons or
property on or off
the Facilities, or that may affect the value of the Facilities or
the Company.
"HAZARDOUS MATERIALS" -- any waste or other substance that is
listed,
defined, designated, or classified as, or otherwise determined to
be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or
pursuant to any
Environmental Law, including any admixture or solution thereof, and
specifically
including petroleum and all derivatives thereof or synthetic
substitutes
therefor and asbestos or asbestos-containing materials.
"IMPROVEMENTS" -- means all buildings, structures, fixtures and
improvements located on the Land or included in the Assets,
including those
under construction.
"INDEMNIFICATION CAP" -- as defined in Section 10.4
"INTELLECTUAL PROPERTY" -- as defined in Section 3.22.
"INTERIM BALANCE SHEET" -- as defined in Section 3.4.
"INTERIM BALANCE SHEET DATE" shall mean June 30, 2006.
"INVENTORY" -- means all inventories of the Company, wherever
located,
including all finished goods, work in process, raw materials, spare
parts and
all other materials and supplies to be used or consumed by the
Company in the
production of finished goods or the provision of services.
"IRC" -- the Internal Revenue Code of 1986 or any successor law,
and
regulations issued by the IRS pursuant to the Internal Revenue Code
or any
successor law.
"IRS" -- the United States Internal Revenue Service or any
successor
agency, and, to the extent relevant, the United States Department
of the
Treasury.
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"KEY EMPLOYEE" -- means Bruce Keenan, Michelle Clery, all
officers
appointed by the Board of Directors of the Company, and any other
Company
employee with projected 2006 compensation (base salary plus
commissions) greater
than $200,000.
"KNOWLEDGE" -- means the actual knowledge of any Person. The
Knowledge
of a Person who is an individual shall be without investigation and
shall not
encompass constructive, imputed or similar concepts of knowledge. A
Person
(other than an individual) will be deemed to have "KNOWLEDGE" of a
particular
fact or other matter if any individual who is serving as a
director, officer,
partner, executor, or trustee of such Person (or in any similar
capacity) has,
or at any time had, Knowledge of such fact or other matter.
"LAND" -- means all parcels and tracts of land in which the Company
has
an ownership interest.
"LEASE" -- means any agreement related to the operation of the
Business
to use or occupy real property for a specified period.
"LEGAL REQUIREMENT" -- any constitution, statute, ordinance,
principle
of common law, regulation, rule, administrative order, safe harbor
or treaty
administered, promulgated, monitored, or enforced by any
Governmental Body.
"LIABILITY" -- with respect to any Person, any liability or
obligation
of such Person of any kind, character or description, whether known
or unknown,
absolute or contingent, accrued or unaccrued, disputed or
undisputed, liquidated
or unliquidated, secured or unsecured, joint or several, due or to
become due,
vested or unvested, executory, determined, determinable or
otherwise, and
whether or not the same is required to be accrued on the financial
statements of
such Person.
"MATERIAL ADVERSE CHANGE" - means an effect that is materially
adverse
to the financial condition, assets, properties, business, prospects
or results
of operations of the Company or the Buyer, as the case may be,
taken as a whole,
but shall exclude any effect resulting from or arising out of (a)
any acts of
terrorism, war, or national or international disasters, (b) the
taking of any
action required by, or the failure to take any action prohibited
by, this
Agreement, (c) the announcement or pendency of this Agreement or
the
Contemplated Transactions, or (d) changes generally adversely
affecting the
United States economy (so long as the Company or the Buyer is
not
disproportionately affected thereby).
"MATERIAL CONTRACTS" -- as defined in Section 3.17.
"MINIMUM NET ASSETS" -- means $10,000,000.
"MINIMUM WORKING CAPITAL" shall mean $8,000,000.
"OCCUPATIONAL SAFETY AND HEALTH LAW" -- any Legal Requirement
designed
to provide safe and healthful working conditions and to reduce
occupational
safety and health hazards.
"ORDER" -- any award, decision, injunction, judgment, order,
ruling,
subpoena, or verdict entered, issued, made, or rendered by any
court,
administrative agency, or other Governmental Body or by any
arbitrator.
"ORDINARY COURSE OF BUSINESS" -- an action taken by a Person will
be
deemed to have been taken in the "Ordinary Course of Business" only
if:
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(a) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal
day-to-day
operations of such Person;
(b) such action is not required to be authorized by the board
of directors of such Person (or by any Person or group of
Persons
exercising similar authority) and is not required to be
specifically
authorized by the parent company (if any) of such Person; and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of
directors
(or by any Person or group of Persons exercising similar
authority), in
the ordinary course of the normal day-to-day operations of
other
Persons that are in the same line of business as such Person.
"ORGANIZATIONAL DOCUMENTS" -- (a) the articles or certificate
of
incorporation and the bylaws of a corporation; (b) the partnership
agreement and
any statement of partnership of a general partnership; (c) the
limited
partnership agreement and the certificate of limited partnership of
a limited
partnership; (d) any charter or similar document adopted or filed
in connection
with the creation, formation, or organization of a Person; and (e)
any amendment
to any of the foregoing.
"OWNERS" -- as defined in the preamble.
"OWNERS' CLOSING DOCUMENTS" -- as defined in Section 3.2(a).
"OWNER INDEMNIFIED PERSONS" -- as defined in Section 10.2.
"OWNERS' RELEASES" -- as defined in Section 2.7(a).
"PARENT" -- as defined in the preamble to this Agreement.
"PARENT CHANGE OF CONTROL TRANSACTION -- (A) any merger or
consolidation of Parent into or with another entity (other than one
in which the
holders of Parent capital stock immediately prior to such merger
or
consolidation continue to hold at least a majority of the voting
power of the
capital stock (or other securities) of the entity surviving such
transaction or
of an entity controlling the entity surviving such transaction),
(B) any sale of
all or substantially all of Parent's assets (other than a sale of
assets of
Parent to an entity controlled by Parent), and (C) any other
transaction
pursuant to or as a result of which a person (or group of
affiliated persons)
acquires or holds capital stock (or other securities entitled to
voting rights)
of Parent representing a majority of the outstanding voting power
of Parent.
"PARENT COMMON STOCK" -- the common stock of Bell Microproducts
Inc.,
par value $0.01 per share.
"PARENT SEC DOCUMENTS" -- as defined in Section 4.5.
"PARENT TIER-1 SUBSIDIARY" -- means TotalTec Systems, Inc or any
other
subsidiary of Parent (other than Company or Buyer) currently in
existence or
organized subsequent to the Closing Date that markets and
distributes products
and services directly to an end user.
"PERMITTED ENCUMBRANCE" -- means those Encumbrances listed on Part
3.6
of the Disclosure Letter.
"PER SHARE VALUE" - the per share value of Parent Common Stock
shall be
equal to the average of the closing sale price of Parent Common
Stock for the 30
trading days immediately preceding the date
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of determination as listed on the Nasdaq Global Market, or such
other national
public market or exchange on which the Parent Common Stock is then
registered
and sold.
"PERSON" -- any individual, corporation (including any
non-profit
corporation), general or limited partnership, limited liability
company, joint
venture, estate, trust, association, organization, labor union, or
other entity
or Governmental Body.
"PRIME RATE" -- as defined in Section 2.9(c).
"PROCEEDING" -- any action, arbitration, audit, hearing,
investigation,
litigation, or suit (whether civil, criminal, administrative,
investigative, or
informal) commenced, brought, conducted, or heard by or before, or
otherwise
involving, any Governmental Body or arbitrator.
"PURCHASE PRICE" -- as defined in Section 2.3.
"REAL PROPERTY" -- any Land owned by the Company and any
Improvements
and all Appurtenances thereto, and any Leases and Company's
leasehold interest
in any real property described therein.
"RECORD" -- information that is inscribed on a tangible medium or
that
is stored in an electronic form or other medium and is retrievable
in
perceivable form.
"RELATED PERSON" -- with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by
such individual or one or more members of such individual's
Family;
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a
Material
Interest; and
(d) any Person with respect to which such individual or one or
more members of such individual's Family serves as a director,
officer,
partner, executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly or
indirectly
under common control with such specified Person;
(b) any Person that holds a Material Interest in such
specified Person;
(c) each Person that serves as a director, officer, partner,
executor, or trustee of such specified Person (or in a similar
capacity);
(d) any Person in which such specified Person holds a Material
Interest;
(e) any Person with respect to which such specified Person
serves as a general partner or a trustee (or in a similar
capacity);
and
(f) any Related Person of any individual described in clause
(b) or (c).
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For purposes of this definition, (a) the "FAMILY" of an individual
includes (i)
the individual, (ii) the individual's spouse, (iii) any other
natural person who
is related to the individual or the individual's spouse within the
second
degree, and (iv) any other natural person who resides with such
individual, and
(b) "MATERIAL INTEREST" means direct or indirect beneficial
ownership (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934) of
voting
securities or other voting interests representing at least 10% of
the
outstanding voting power of a Person or equity securities or other
equity
interests representing at least 10% of the outstanding equity
securities or
equity interests in a Person.
"RELEASE" -- any spilling, leaking, emitting, discharging,
depositing,
escaping, leaching, dumping, or other releasing of any Hazardous
Materials into
the Environment, whether intentional or unintentional.
"REPRESENTATIVE" -- with respect to a particular Person, any
director,
officer, employee, agent, consultant, advisor, or other
representative of such
Person, including legal counsel, accountants, and financial
advisors.
"RESPONSE PERIOD" -- as defined in Section 2.10(b).
"RETAINED LIABILITIES" -- as defined in Section 2.4(b).
"RETAINED CONTRACTS" --as defined in Section 2.2(c).
"SEC" -- as defined in Section 4.5.
"SECURITIES ACT" -- the Securities Act of 1933 or any successor
law,
and regulations and rules issued pursuant to that Act or any
successor law.
"SECURITIES EXCHANGE ACT" -- the Securities Exchange Act of 1934 or
any
successor law, and regulations and rules issued pursuant to that
Act or any
successor law.
"SHARES" -- as defined in Section 3.3.
"SUBSIDIARY" -- with respect to any Person that is not an
individual
(an "ENTITY"), any corporation or other Person of which securities
or other
interests having the power to elect a majority of that
corporation's or other
Person's board of directors or similar governing body, or otherwise
having the
power to direct the business and policies of that corporation or
other Person
(other than securities or other interests having such power only
upon the
happening of a contingency that has not occurred) are held by the
Entity or one
or more of its Subsidiaries; when used without reference to a
particular Person,
"Subsidiary" means a Subsidiary of the Company.
"TANGIBLE PERSONAL PROPERTY" -- all machinery, equipment,
tools,
furniture, office equipment, computer hardware, supplies,
materials, vehicles
and other items of tangible personal property (other than
Inventories) of every
kind owned or leased by the Company (wherever located and whether
or not carried
on the Company's books), together with any express or implied
warranty by the
manufacturer or sellers or lessors of any item of component part
thereof and all
maintenance records and other documents relating thereto.
"TAX" -- any tax (including any income tax, capital gains tax,
value-added tax, sales tax, property tax, gift tax, or estate tax),
levy,
assessment, tariff, duty (including any customs duty), deficiency,
or other fee,
and any related charge or amount (including any fine, penalty,
interest, or
addition to tax), imposed, assessed, or collected by or under the
authority of
any Governmental Body or payable pursuant to any
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tax-sharing agreement or any other Contract relating to the sharing
or payment
of any such tax, levy, assessment, tariff, duty, deficiency, or
fee.
"TAX RETURN" -- any return (including any information return),
report,
statement, schedule, notice, form, or other document or information
filed with
or submitted to, or required to be filed with or submitted to, any
Governmental
Body in connection with the determination, assessment, collection,
or payment of
any Tax or in connection with the administration, implementation,
or enforcement
of or compliance with any Legal Requirement relating to any
Tax.
"THREAT OF RELEASE" -- a substantial likelihood of a Release that
may
require action in order to prevent or mitigate damage to the
Environment that
may result from such Release.
"THREATENED" -- a Proceeding, dispute, action, or other matter will
be
deemed to have been "Threatened" if any demand or statement has
been made
(orally or in writing) or any notice has been given (orally or in
writing).
"TRANSFERRED EMPLOYEE" -- as defined in Section 2.11.
1.2 USAGE.
(a) Interpretation. In this Agreement, unless a clear contrary
intention appears:
(i) the
singular number includes the plural
number and vice versa;
(ii)
reference to any gender includes each other
gender;
(iii)
reference to any agreement, document or
instrument means such agreement, document or
instrument as amended or modified and in
effect from time to time in accordance with
the terms thereof;
(iv)
reference to any Legal Requirement means
such Legal Requirement as amended, modified
codified, replaced or reenacted, in whole or
in part, and in effect from time to time,
including rules and regulations promulgated
thereunder, and reference to any section or
other provision of any Legal Requirements
means that provision of such Legal
Requirement from time to time in effect and
constituting the substantive amendment,
modification, codification, replacement or
reenactment of such section or other
provision;
(v)
"including" (and with correlative means
"include") means "including but not limited
to" and shall not limit the generality of
any description preceding such term; and
(vi)
"or" is used in the inclusive sense of
"and/or".
2. SALE
AND TRANSFER OF ASSETS; CLOSING.
2.1 ASSETS TO BE SOLD. Subject to the terms and conditions of
this
Agreement, the Company will sell, convey, assign, transfer and
deliver to Buyer,
and Buyer shall purchase and acquire from the Company, free and
clear of any
Encumbrances other than Permitted Encumbrances, all of the
Company's right,
title and interest in and to all of the Company's property and
assets, real,
personal or mixed, tangible and intangible, of every kind and
description,
wherever located, including, but not necessarily limited to, the
following (but
excluding the Excluded Assets):
(a) all
Real Property, including the Real Property described
in Exhibit 2.1(a), but excluding any Real Property rights
under any of the Retained Contracts;
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<PAGE>
(b) all Tangible Personal Property, including those items
described in Exhibit 2.1(b);
(c) all Inventory;
(d) all Accounts Receivable;
(e) all Company Contracts, including those listed on Exhibit
2.1(e), and all outstanding offers or solicitations made by or
to the Company, but excluding the Retained Contracts listed on
Exhibit 2.2(c);
(f) all Governmental Authorizations, including those listed on
Exhibit 2.1(f), and all pending applications therefore or
renewals thereof, in each case to the extent transferable to
Buyer;
(g) all data and Records related to the operations of the
Company, including client and customer lists and Records,
referral sources, research and development reports and
Records, production reports and Records, service and warranty
Records, equipment logs, operating guides and manuals,
financial and accounting Records, creative materials,
advertising and promotional materials, studies, reports,
correspondence and other similar documents and Records and,
subject to Legal Requirements, copies of all personnel Records
described on Exhibit 2.2(g);
(h) all of the intangible rights and property of the Company,
including all Intellectual Property, going concern value,
goodwill, telephone, telecopy, e-mail addresses and listings,
and all domain names, including those described on Exhibit
2.1(h);
(i) all insurance benefits, including rights and proceeds,
arising from or relating to the Assets or the Assumed
Liabilities prior to the Closing Date;
(j) all claims of the Company against third parties relating
to the Assets, whether choate or inchoate, known or unknown,
contingent or non-contingent, including all such claims listed
on Exhibit 2.1(j);
(k) all rights of the Company relating to deposits and prepaid
expenses, claims for refunds and rights to offset in respect
thereof, including all such rights described on Exhibit
2.1(k);
(l) all computer software, including Biz-X-Change and all
other information technology systems or assets owned by the
Company; and
(m) all other properties and assets of every kind, character
and description, tangible or intangible, owned by the Company
and used or held for use in connection with the Business,
whether or not similar to the items specifically set forth
above.
All of the property and assets to be transferred to Buyer hereunder
are
herein referred to collectively as the "ASSETS". At Closing, the
Owners and the
Company shall deliver to Buyer the Assets, except the vendor and
customer
contracts and the Cordova Tennessee, Franklin Tennessee and Boca
Raton Florida
lease agreements (the "LEASES") included as part of the Company
Contracts. The
Owners and the Company shall use their Best Efforts to deliver to
the Buyer on
or prior to December 31, 2006, all such vendor, customer contracts
and Leases
and related Consents required to operate the business of the
Company as it is
being conducted immediately prior to the Closing Date (other than
the business
related
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<PAGE>
to the Retained Contracts); provided, however, that the Buyer shall
have the
right to demand assignment and delivery of such vendor and customer
contracts
and Leases and related consents at any time and the Owners and the
Company shall
execute such instruments as are reasonably requested by Buyer to
effect such
assignment and delivery. Notwithstanding the foregoing or anything
to the
contrary herein, the transfer of the Assets pursuant to this
Agreement shall not
include the assumption of any Liability related to the Assets
unless the Buyer
assumes that Liability pursuant to Section 2.4.
2.2 EXCLUDED
ASSETS.
Notwithstanding anything to the contrary contained in Section 2.1
or
elsewhere in this Agreement, the assets of the Company listed on
Exhibit 2.2
(collectively, the "EXCLUDED ASSETS") are not part of the sale and
purchase
contemplated hereunder, are excluded from the Assets to be
transferred from the
Company to the Buyer and shall remain the property of the Company
after the
Closing. The Excluded Assets shall include the following:
(a) all minute books, stock Records and corporate seals of the
Company;
(b) the shares of Company capital stock held in treasury, if
any;
(c) all of the Company's Contracts listed on Exhibit 2.2(c)
(the "RETAINED Contracts");
(d) all diversity-based certifications issued to Company by
any Governmental Authority or other entity;
(e) all personnel Records and other Records that the Company
is required by law to retain in its possession; and
(f) all rights of the Company under this Agreement, the Bill
of Sale, the Assignment and Assumption Agreement, and the
Escrow Agreement.
2.3 PURCHASE
PRICE.
(a) Subject to Section 2.5, the aggregate consideration
payable or issuable in connection with Buyer's purchase of the
Assets
and the rights and benefits conferred herein, including the
covenants
of the Company and the Owners in Sections 5 and 11 herein (the
"Purchase Price") shall consist of: (i) $31,370,192 in cash payable
at
Closing as provided in Section 2.3(b)(i); (ii) shares of Parent
Common
Stock, par value $0.01 issuable as provided in Section 2.3(b)(ii);
and
(iii) the Contingent Payments contemplated in Section 2.10. Payment
of
the Purchase Price is subject to the terms of this Agreement, and
is
subject to set-off as provided in Section 2.9 and Section 10, and
all
references to the Purchase Price shall be deemed to include and
refer
to such Purchase Price as and if so reduced.
(b) The
Purchase Price payable to the Company at the
Closing shall be as follows:
(i) The Company shall be entitled to receive
$31,370,192 in cash, consisting of immediately
available funds, payable by the Buyer, net of any
expenses to be paid by the Company pursuant to
Section 12.1 hereof.
(ii) Subject to Section 2.3(c), the Company shall
additionally be entitled to receive, that number of
shares of Parent Common Stock equal to $8,173,077
divided by the Per Share Value determined as of the
Closing Date; provided, however, that, as set forth
in the Escrow Agreement, $4,807,692 of such amount of
Parent Common Stock (the "ESCROWED SHARES") shall be
deposited into an escrow account and paid or
distributed therefrom in accordance with the Escrow
Agreement.
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<PAGE>
(c) No certificate or scrip representing fractional shares of
Parent Common Stock shall be issued, and such fractional share
interests will not entitle the owner thereof to vote or to any
rights
of a stockholder of Buyer. Notwithstanding any other provision of
this
Agreement, if the Company would otherwise have been entitled to
receive
a fraction of a share of Parent Common Stock, the Company shall
receive, in lieu
thereof, cash (without interest) in an amount equal to
such fractional part of a share of Parent Common Stock multiplied
by
the Per Share Value determined as of the Closing Date.
2.4
LIABILITIES.
(a) ASSUMED LIABILITIES. On the Closing Date, and effective as
of the Closing Date, Buyer shall assume and agree to discharge all
of
the Liabilities of the Company other than the Retained Liabilities
(the
"ASSUMED LIABILITIES").
(b) RETAINED LIABILITIES. The Retained Liabilities shall
remain the sole responsibility of and shall be retained, paid,
performed and discharged, in accordance with the terms of this
Agreement, solely by the Company and the Owners. "RETAINED
LIABILITIES"
shall mean the following:
(i) any Liability under any Company Contract not
assumed by Buyer hereunder;
(ii) any Liability related to the Employee Bonuses
and the investment banking fees and professional
services fees described in Section 12.1 hereof;
(iii) any Liability of the Company under this
Agreement or any other document executed in
connection with the Contemplated Transactions; and
(iv) any Liability related to the Sarcom settlement
agreement referenced in Part 3.15 of the Disclosure
Letter.
(c) SUBSEQUENT TRANSFER OF COMPANY CONTRACTS. With regard to
each Company Contract that is to be assigned to Buyer after the
Closing, as described in Section 2.1, any Liability thereunder
shall be
deemed to be a Retained Liability until such time as said
Company
Contract is assigned to Buyer. Upon the assignment of such
Company
Contract any Liability thereunder shall be deemed to be an
Assumed
Liability of Buyer.
2.5 ALLOCATION. The Purchase Price allocation shall be determined
after
the Closing by mutual agreement of Buyer, Parent, the Company and
each Owner,
which agreement shall not be unreasonably withheld. If such
agreement cannot be
reached, the parties shall use the dispute resolution mechanism set
forth in
Section 2.9(b). Once the allocation has been determined, in any
Proceeding
related to the determination of any Tax, neither Buyer, Parent, the
Company, nor
either Owner shall contest or represent that such allocation is not
a correct
allocation.
2.6 CLOSING. The purchase and sale provided for in this Agreement
(the
"CLOSING") will take place at 11:00 a.m. (Eastern) on October 2,
2006 or at such
other time and place as the parties may agree. Subject to the
provisions of
Section 9, failure to consummate the purchase and sale provided for
in this
Agreement on the date and time and at the place determined pursuant
to this
Section 2.6 will not result in the termination of this Agreement
and will not
relieve any party of any obligation under this Agreement.
2.7 CLOSING OBLIGATIONS. In addition to any other documents to
be
delivered under other provisions of this Agreement, at the
Closing:
14
<PAGE>
(a) The Company and the Owners, as the case may be, will
deliver to Buyer the following, subject to the caveat that the
transfer, assignment and delivery of certain Company Contracts
and
other Assets shall be delayed pending receipt of Consents, as
more
particularly described in Section 2.1:
(i) a bill of sale for all of the Assets that are
Tangible Personal Property in the form of Exhibit 2.7(a)(i)
(the "BILL OF SALE") executed by the Company;
(ii) an assignment of all of the Assets that are
intangible personal property in the form of Exhibit
2.7(a)(ii), which assignment shall also contain Buyer's
undertaking and assumption of the Assumed Liabilities (the
"ASSIGNMENT AND ASSUMPTION AGREEMENT") executed by the
Company;
(iii) for each interest in Real Property identified
on Exhibit 2.1(a), a recordable warranty deed, an Assignment
and Assumption of Lease in the form of Exhibit 2.7(a)(iii) or
such other appropriate document or instrument of transfer, as
the case may require, each in form and substance satisfactory
to Buyer and its counsel and executed by the Company;
(iv) releases in the form of Exhibit 2.7(a)(iv)
executed by each Owner (collectively, "OWNERS' RELEASES");
(v) employment agreements for Michelle Clery, Bruce
Keenan, Scott Byers and Steve Perea in the form of Exhibit
2.7(a)(v), executed by the Company (as applicable) and each
such Key Employee (collectively, "EMPLOYMENT AGREEMENTS");
(vi) the escrow agreement in the form of Exhibit
2.7(a)(vi) executed by the Company and the Owners (the "ESCROW
AGREEMENT");
(vii) the registration rights agreement in the form
of Exhibit 2.7(a)(vii) executed by Owners (the "REGISTRATION
RIGHTS AGREEMENT");
(viii) a certificate executed by the Company and the
Owners, signed by each Owner in their individual capacities
and by the chief executive officer of the Company,
representing and warranting to Buyer that each of Owners' and
the Company's representations and warranties in this Agreement
was accurate in all respects as of the date of this Agreement
and is accurate in all respects as of the Closing Date as if
made on the Closing Date (giving full effect to any
supplements to the Disclosure Letter that were delivered by
Owners to Buyer prior to the Closing Date in accordance with
Section 5.5), and that all obligations and conditions required
by this Agreement have been fulfilled;
(ix) certified copies of minutes or unanimous written
consents of the Board of Directors of the Company authorizing
and approving the execution, delivery and performance of this
Agreement, and the consummation of the transactions
contemplated hereby;
(x) a copy of the By-laws of the Company certified by
the secretary of Company and a copy of the Articles of
Incorporation of the Company certified by the Secretary of
State of Georgia as of the most recent practicable date;
(xi) certificates of existence or good standing for
the Company from the State
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<PAGE>
of Georgia and each state where the Company is required to be
qualified to transact business as a foreign corporation dated
no earlier than five (5) business days prior to the Closing
Date;
(xii) an opinion of Stites & Harbison PLLC, dated the
Closing Date, in the form of Exhibit 2.7(a)(xii);
(xiii) a termination and waiver of rights, dated the
Closing Date, with respect to the Shareholder Agreement, dated
of March 12, 1998, between the Company, Clery and Keenan, such
termination and waiver of rights to be in the form of Exhibit
2.7(a)(xiii);
(xiv) the Closing Required Consents listed on Part
3.2 of the Disclosure Letter;
(xv) such other documents as the Company or its
counsel may reasonably request to carry out the purposes of
this Agreement; and
(xvi) the terminations of the leases for the premises
located at 4900 Avalon Ridge Parkway, Norcross, Georgia 30071
and 3265 Southern Court, Norcross, Georgia 30071.
(b) Parent and Buyer will deliver to the Company (or, in the
case of Section 2.7(b)(iii), the Escrow Agent):
(i) a cash payment by wire transfer in accordance
with Section 2.3(b)(i);
(ii) one or more certificates representing that
number of shares of Parent Common Stock the Company is
entitled to receive calculated in accordance with Section
2.3(b)(ii);
(iii) one or more certificates representing the
Parent Common Stock to be delivered to the Escrow Agent in
accordance with Section 2.3(b)(ii);
(iv) the Employment Agreements, executed by Buyer (as
applicable).
(v) the Escrow Agreement, executed by Parent, Buyer
and the Escrow Agent.
(vi) the Registration Rights Agreement, executed by
Parent;
(vii) the Owner Releases, executed by Buyer and any
third parties identified as parties to the agreements therein;
(vii) a certificate executed by Parent and Buyer to
the effect that, except as otherwise stated in such
certificate, each of Parent's and Buyer's representations and
warranties in this Agreement was accurate in all material
respects as of the date of this Agreement and is accurate in
all material respects as of the Closing Date as if made on the
Closing Date.
(viii) an opinion of Fredrikson & Byron, P.A., dated
the Closing Date, in the form of Exhibit 2.7(b)(viii);
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<PAGE>
2.8 POST-CLOSING OBLIGATIONS. In addition to any other obligations
to
be performed after the Closing, the parties covenant and agree as
follows:
(a) Immediately following the Closing, the Owners shall cause
the Company to distribute accrued cash bonuses to the current
employees
of the Company, in an aggregate amount of $2,669,979, including
employee withholding taxes (collectively the "EMPLOYEE Bonuses").
The
parties acknowledge and the Owners agree to establish a trust for
the
payment of additional bonuses to current Company employees in
the
amount of $2,330,021.
(b) Immediately following the Closing, the Owners shall cause
the Company to distribute the proceeds received by the Company
in
payment of the
Purchase Price, net of the amount allocated for the
Employee Bonuses and any investment banking and professional
services
fees in excess of $300,000 and any other transaction related costs,
to
the Owners as a dividend. Said distribution shall include cash,
Parent
Common Stock (including the assignment of Company's right to
receive
shares out Escrow pursuant to Section 2.9 hereof), and the
assignment
of Company's right to receive any Contingent Payments pursuant
to
Section 2.10 hereof.
(c) As soon as practicable following the Closing, but after
the completion of the actions described in Sections 2.8(a) and
(b)
above, Keenan and the Buyer shall consummate the transactions
contemplated by that certain Stock Purchase Agreement between
Keenan
and the Buyer, pursuant to which all of the capital stock of
the
Company owned by Keenan shall be conveyed to the Buyer.
(d) The Owners and the Company shall use their Best Efforts to
deliver to the Buyer on or prior to December 31, 2006, all vendor
and
customer contracts and the Leases, which are included as part of
the
Company Contracts but excluding the Retained Contracts, and the
related
Consents, required to operate the business of the Company as it
is
being conducted immediately prior to the Closing Date (other than
the
business related to the Retained Contracts); provided, however,
that
the Buyer shall have the right to demand assignment and delivery
of
such vendor and customer contracts and Leases and related consents
at
any time and the Owners and the Company shall execute such
instruments
as are reasonably requested by Buyer to effect such assignment
and
delivery.
(e) Immediately following the Closing, Buyer shall enter into
new Leases with each of Laurelwood Holdings, LLC and Laurelwood
Holdings II, LLC, in substantially the form of Exhibit 2.8(e)
attached
hereto, which Leases shall replace the Company's existing Leases
for
the Avalon Ridge Parkway and Saturn Court facilities; and
written
non-disturbance agreements in a form reasonably acceptable to the
Buyer
and Parent from any existing mortgage holders or evidence of
mortgage(s) payoff.
(f) Buyer shall use its Best Efforts to obtain, prior to
December 31, 2006, the release of Owners under the personal
guarantees
listed in Exhibit 2.8(f), and Buyer agrees that it shall not enter
into
any additional Liabilities under any Company Contract
identified
therein unless and until such releases have been obtained.
(g) Immediately following the Closing, Buyer and Company and
Clery, as applicable, shall execute the Services Agreement and
Shareholders' Agreement of even date herewith.
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<PAGE>
2.9 ADJUSTMENT
AMOUNT; ADJUSTMENT PROCEDURE.
(a) The Adjustment Amount will be equal to the sum of (i) the
difference between the Minimum Net Assets and the Actual Net Assets
of
the
Company as of the Closing Date plus (ii) the difference between
the
Minimum Working Capital and the Actual Working Capital as of
the
Closing Date; provided that the Adjustment Amount is greater than
zero.
There shall be no addition to the Adjustment Amount for a
difference
between the Minimum Net Assets and the Actual Net Assets unless
the
difference is greater than $150,000 and then only to the extent of
the
difference in excess of $150,000. The Adjustment Amount, if any,
shall
be paid by Owners to Buyer pursuant to the terms of this Section
2.9.
In the event the Actual Net Assets are greater than the Minimum
Net
Assets or the Actual Working Capital is greater than the
Minimum
Working Capital, neither the Company nor the Owners be entitled to
the
payment of an Adjustment Amount by the Buyer and the absolute
value
assigned to such difference for purposes of the calculation of
the
Adjustment Amount described above shall be zero.
(b) The Company will prepare and will cause Gifford Hillegass
& Ingwersen, LLP, the Company's certified public accountants,
to
prepare audited consolidated financial statements of the Company as
of
the Closing Date and for the period from the date of the Balance
Sheet
through the Closing Date ("CLOSING FINANCIAL STATEMENTS). The
Company
will deliver the Closing Financial Statements to Buyer within
sixty
(60) days following the Closing Date. If within thirty (30)
days
following delivery of the Closing Financial Statements, Buyer has
not
given Owners notice of its objection to the Closing Financial
Statements, then the Closing Financial Statements will be used
in
Buyer's computation of the Adjustment Amount. If Buyer gives
such
notice of objection or if Owners object to Buyer's computation of
the
Adjustment Amount, then the issues in dispute will be submitted
to
certified public accountants mutually agreed upon by Buyer and
the
Owners (the "Accountants"), for resolution. If issues in dispute
are
submitted to the Accountants for resolution, (i) each party
will
furnish to the
Accountants such workpapers and other documents and
information relating to the disputed issues as the Accountants
may
request and are available to that party or its Subsidiaries (or
its
independent public accountants), and will be afforded the
opportunity
to present to the Accountants any material relating to the
determination and to discuss the determination with the
Accountants;
(ii) the determination by the Accountants, as set forth in a
notice
delivered to both parties by the Accountants, will be binding
and
conclusive on the parties; and (iii) the fees of the Accountants
for
any determination made pursuant to this Section 2.9(b) shall be
borne
by the party raising the dispute; provided, however, that the
Company
shall pay any fees incurred relating to the preparation of the
Closing
Financial Statements out of the closing proceeds.
(c) On the tenth business day following the final
determination of the Adjustment Amount, the Adjustment Amount shall
be
paid by the Owners to Buyer pursuant to the terms of the Escrow
Agreement and this Agreement. The payment will be subject to
interest
at a
rate equal to the "prime rate," as published in the "Money
Rates"
table of The Wall Street Journal (Western Edition) (the "PRIME
RATE"),
in effect on the date of payment of the Adjustment Amount
compounded
daily beginning on the Closing Date and ending on the date of
payment.
The Adjustment Amount shall be paid first out of the Escrowed
Shares.
In determining the number of Escrowed Shares to be returned to
Buyer,
the Per Share Value shall be determined as of the date of
determination
of the Adjustment Amount. In the event that the value of the
Escrowed
Shares, as determined in accordance with the preceding sentence,
does
not satisfy the Adjustment Amount owed to Buyer from the Company,
the
Owners shall, within ten business days following the final
determination of the Adjustment Amount, make cash payments to
Buyer, in
proportion to their percentage ownership of the Company
immediately
prior to the Closing, in an aggregate amount equal to (i) the
Adjustment Amount minus (ii) the value of the Escrowed
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<PAGE>
Shares previously delivered to Buyer pursuant to the provisions of
this
Section. The obligation of Owners to make cash payments to
Buyer
pursuant to this Section 2.9(c) shall not be subject to the
limitations
of Section 10.5 of this Agreement. Cash payments to Buyer, if any,
must
be made by wire transfer to such bank account or accounts specified
by
Buyer. If Owners fail to pay Buyer the Adjustment Amount due Buyer,
if
any, when due, and such unpaid amount remains outstanding on the
date
Buyer is obligated to pay Owners any Contingent Payments, Buyer
may, in
addition to any other available remedies, off-set such unpaid
amount
against any and all such Contingent Payments. Once the
Adjustment
Amount (if any) has been paid to Buyer, the remaining Escrowed
Shares
(if any) shall be promptly distributed to Company or its
assigns.
2.10
CONTINGENT CONSIDERATION.
(a) For three consecutive Contingent Consideration Periods,
additional annual payments shall be made to Company or its assigns
on
the conditions described herein and as a result of calculations
described on Exhibit 2.10(a) attached hereto and incorporated
herein
(the "CONTINGENT PAYMENTS"). The Contingent Payments shall be made
in
cash, Parent Common Stock or a combination thereof, at Buyer's
sole
discretion; provided that for purposes of determining the number
of
shares of Parent Common Stock, if any, to be issued to Company or
its
assigns as part of the Contingent Payment, the per share value
of
Parent Common Stock shall be equal to the Per Share Value
determined as
of the Due Date following the Contingent Consideration Period for
which
any such Contingent Payment is due, without giving effect to
any
extension of any such Due Date; provided further that Buyer must
make
its election to use Parent Common Stock by giving written notice
to
Owners on or before the Due Date, and provided further that the
aggregate value of Parent Common Stock issued in connection
with
Contingent Payments shall not exceed thirty percent (30%) of
the
aggregate value of all Contingent Payments, through and including
the
current Contingent Payment; and provided further that Buyer shall
not
be entitled to use Parent Common Stock as part of a Contingent
Payment
if, on the date of issuance, (i) the Parent Common Stock is not
registered under Section 12 of the Securities Exchange Act, or
(ii)
Parent is not current in its reporting obligations under the
Securities
Exchange Act. The parties agree that 1/26th of the Contingent
Payment
shall be paid to Keenan pursuant to the Stock Purchase Agreement
with
him.
(b) Within forty (45) days following the last day of a
Contingent Consideration Period, Buyer shall provide to Owners
financial statements for the Buyer and the Company for such
Contingent
Consideration Period (the "CONTINGENT CONSIDERATION FINANCIAL
STATEMENTS"). Together with the Contingent Consideration
Financial
Statements, Buyer shall deliver to each Owner a written notice
(a
"CONTINGENT PAYMENT
NOTICE") setting forth the amount of the Contingent
Payment to be paid and reasonably specific details as to the manner
in
which the calculation of the amount due was made. If an Owner
disagrees
with the calculation provided by Buyer in the Contingent Payment
Notice
(a "CONTINGENT PAYMENT DISPUTE"), such Owner shall notify Buyer of
the
Contingent Payment Dispute in writing (the "DISPUTE NOTICE"),
specifying the nature and amount of the Contingent Payment
Dispute,
within 45 calendar days of the date of the Contingent Payment
Notice
(the "Response Period"). During the Response Period, Buyer
shall
provide Owners and their Representatives with reasonable access
to
books and records of Buyer and, if possible, to the work papers
of
Accountants reasonably requested by Owners and their
Representatives
necessary to verify the determination of the amount of such
Contingent
Payment and the compliance by Buyer with the provisions of
Exhibit
2.10(a). If Company or an assignee fails to deliver to Buyer a
Dispute
Notice within the Response Period, the calculation by Buyer shall
be
final and binding as to Company or that assignee, as applicable.
Each
annual Contingent Payment, if any, shall be due and payable by
Buyer to
Company or its assigns no later than 15 days after the expiration
of
the applicable Response Period (the "Due Date"), provided,
however,
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<PAGE>
that in the event of a Contingent Payment Dispute, only the
undisputed
amount shall be due and payable by Buyer no later than 15 days
after
the expiration of the applicable Response Period, and the Due Date
for
any disputed amount shall automatically be extended without
further
action of any of the parties hereto until 15 days following the
date
upon which such Contingent Payment Dispute is resolved pursuant
to
Section 2.10(c). Buyer shall distribute any Contingent Payment
to
Company or its assigns. In the event of a Contingent Payment
Dispute,
payments under this Section 10 will be subject to interest at a
rate
equal to the Prime Rate, in effect on the Due Date of the
Contingent
Payment compounded annually beginning on Due Date and ending on
the
date of payment.
(c) If Company or an assignee timely delivers a Dispute Notice
to Buyer, Buyer and Company or such assignee shall use the
dispute
resolution procedures of Section 12.6 of this Agreement to attempt
to
settle the dispute.
(d) The parties agree any and all decisions regarding the
conduct of Buyer's and the Company's operations from and after
the
Closing Date, including any matters directly or indirectly
affecting
the financial performance or prospects of Buyer or the Company
(including those financial measures set forth on Exhibit
2.10(a)),
shall be made in the sole and absolute discretion of the Board
of
Directors of Buyer or Company, as the case may be, without any
express
or implied obligation or liability to the parties or any other
Person,
except that Buyer and Company covenant and agree to manage
their
respective businesses and affairs in a manner the Board of
Directors of
each company believes in good faith to be in the best interests of
the
company and its shareholders, with the care an ordinarily
prudent
person in a like position would exercise under similar
circumstances.
(e) Buyer agrees that, in the event of any Parent Change of
Control Transaction that occurs following the Closing Date and
prior to
the expiration of the final Contingent Consideration Period,
Buyer
shall use Best Efforts to cause the terms of this Section 2.10 to
be
fully and equitably assumed by one or more parties to the Parent
Change
of Control Transaction. In the event such assumption is not
obtained
and Company or its assigns would reasonably be projected to earn
a
Contingent Payment pursuant to the terms of this Section 2.10
and
Exhibit 2.10(a) based on the Annualized Contribution for the
Contingent
Payment Period in which such Parent Change of Control
Transaction
occurs, Company or its assigns shall be entitled (subject to
and
consistent with the other provisions of this Section 2.10 that do
not
conflict with this Section 2.10(d)) to a Contingent Payment in
an
amount equal to fifty percent (50%) of the product of the
Annualized
Contribution for the Contingent Consideration Period in
question
multiplied by a fraction, the numerator of which is the number
of
completed months of the Contingent Consideration Period in question
as
of the closing of the Parent Change of Control Transaction and
the
denominator of which is 12. For example, if the Annualized
Contribution
for the Contingent Consideration Period in question were
$10,000,000
and the closing of the Parent Change of Control Transaction
occurred
during the seventh month of the Contingent Consideration Period
in
question, Company or its assigns would be entitled to an
aggregate
Contingent Payment of $2,500,000, which is fifty percent of
$10,000,000
multiplied by 6/12, or 1/2. Said Contingent Payment shall be
payable by
Parent or Buyer to Company or its assigns within fifteen (15)
business
days of the closing of such Parent Change of Control
Transaction.
Thereafter, Buyer's obligations under this Section 2.10 shall be
deemed
fully performed and discharged. In the event of a Parent Change
of
Control Transaction, the provisions and obligations of Section
2.10(f)
of this Agreement shall be inoperative and of no force or effect
with
respect to any subsequent Buyer Change of Control Transaction
or
Company Change of Control Transaction.
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<PAGE>
(f) The provisions of this Section 2.10(f) shall only apply
with respect to any Buyer Change of Control Transaction or
Company
Change of Control Transaction that occurs after the Closing Date,
but
before the expiration of the final Contingent Consideration Period
and
before a Parent Change of Control Transaction.
(i) Buyer agrees that, in the event of any Buyer
Change of Control Transaction that does not also constitute a
Parent
Change of Control Transaction, Buyer shall use Best Efforts to
cause
the terms of this Section 2.10 to be fully and equitably assumed by
one
or more parties to such Buyer Change of Control Transaction.
(ii) In the event of any Buyer Change of Control
Transaction in which the assumption of the provisions of this
Section
2.10 is not obtained and the proceeds received by Buyer (and/or
any
Related Persons) from such Buyer Change of Control Transaction
(the
"CHANGE OF CONTROL PROCEEDS") exceed $41,000,000 plus any
Contingent
Payment already paid or owed to Company or its assigns for any
prior
Contingent Consideration Period, Company or its assigns shall
be
entitled (subject to and consistent with the other provisions of
this
Section 2.10 that do not conflict with this Section 2.10(f)) to
payment
of the following: (i) a Contingent Payment in an amount equal to
fifty
percent (50%) of the product of the Annualized Contribution for
the
Contingent Consideration Period in which such Buyer Change of
Control
Transaction occurs, multiplied by a fraction, the numerator of
which is
the number of completed months of the Contingent Consideration
Period
in question as of the closing date of such Buyer Change of
Control
Transaction and the denominator of which is 12; and (ii) an
additional
amount equal to fifty percent (50%) of any such Change of
Control
Proceeds in excess of the sum of (A) $41,000,000, plus (B) any
Contingent Payment already paid or owed to Company or its assigns
for
any prior Contingent Consideration Period, plus (C) any
Contingent
Payment owed to Company or its assigns as described in clause
(i)
above, until the aggregate amount of such Contingent Payments and
such
Change of Control Proceeds paid to Company or its assigns
equals
$13,000,000. The Company or its assigns shall only be entitled to
any
such Change of Control Proceeds if at the time of such Buyer Change
of
Control Transaction the Company or its assigns would reasonably
be
projected to earn a Contingent Payment pursuant to the terms of
this
Section 2.10 and Exhibit 2.10(a) based on the Annualized
Contribution
for the Contingent Payment Period in which such Buyer Change of
Control
Transaction occurs. For the purpose of the foregoing calculation,
any
proceeds received by Buyer (and/or any Related Persons) from
any
Company Change of Control Transaction occurring prior to or
within
ninety (90) days of the Buyer Change of Control Transaction shall
be
included in the Change of Control Proceeds.
(iii) In the event of a Buyer Change of Control
Transaction or a Company Change of Control Transaction (but not
both in
the same transaction or both in separate transactions occurring
within
ninety (90) days of each other) that does not also constitute a
Parent
Change of Control Transaction, where such assumption of the
provisions
of this Section 2.10 is not obtained and the proceeds received by
Buyer
(and/or any Related Persons) from such Change of Control
Transaction
are less than $41,000,000 plus any Contingent Payment already paid
to
Company or its assigns, then Parent shall pay to Company or its
assigns
an amount equal to $13,000,000 less any Contingent Payments
already
paid to Company or its assigns. Such amount shall be paid in
equal
annual installments as if each such payment were a Year-One
Contingent
Payment, Year-Two Contingent Payment or Year-Three Contingent
Payment,
as
appropriate, and as such terms are defined in Exhibit 2.10(a).
(iv) In the event of a Buyer Change of Control
Transaction and a Company Change of Control Transaction occurring
as
part of the same transaction or in different transactions
occurring
within ninety (90) days of each other, upon payment of the amounts
set
forth in this Section 2.10(f), Buyer's obligations under this
Section
2.10 shall be deemed fully performed and discharged, and the
provisions
and obligations of Section 2.10(f) of this
21
<PAGE>
Agreement shall be inoperative and of no force or effect with
respect
to any subsequent Change of Control Transaction.
(g) Buyer shall give Owners written notice of any Change of
Control Transaction described herein. Such notice shall be given
as
soon as practicable and in any event no later than the effective
date
of
such Change of Control Transaction. Buyer's notice shall state
the
total consideration paid or to be paid to the Buyer and/or any
Related
Persons, shall describe any non-cash consideration included in
the
Change of Control Proceeds, and shall state Buyer's determination
of
the fair market value thereof, which valuation shall be conclusive
and
binding on Buyer, Company and Owners in the absence of a timely
challenge made in accordance with this Section 2.10(f). Company or
any
assignee may, within ten (10) days after delivery of Buyer's
notice, by
written notice to Buyer, challenge Buyer's determination of the
Change
of Control Proceeds (including the valuation of any non-cash
consideration), in which event the value of the Change of
Control
Proceeds shall be determined via the dispute resolution mechanisms
of
Section 12.6 of this Agreement. The Change of Control Proceeds
shall be
payable to Company or its assigns within fifteen (15) business days
of
the closing of such Change of Control Transaction or the date the
value
of the Change of Control Proceeds has been conclusively
determined,
whichever is later.
2.11
TRANSFERRED EMPLOYEES. From and after the Closing, the Buyer
shall
offer employment to each of the Company's employees other than
those listed on
Exhibit 2.11 (the "EXCLUDED Employees"). Each such employee that
accepts
employment with the Buyer (each a "TRANSFERRED EMPLOYEE") shall be
given full
credit for all vacation time, personal days and sick leave, if any,
accrued by
such employee as of the Closing in the Ordinary Course of Business
in amounts
and on terms consistent with past practices (and in compliance with
this
Agreement). To the extent properly accrued at the Closing, Buyer
shall pay any
accrued but unpaid compensation payable to each Transferred
Employee. Buyer
agrees to form plans with features substantially similar to the
Employee Benefit
Plans currently operated by the Company, and to take reasonable
action to permit
each Transferred Employee to participate in such plans to the same
extent each
respective Transferred Employee has el
