EXHIBIT 10.1
EXECUTION COPY
ASSET PURCHASE AGREEMENT
by
and among
MEDIWARE INFORMATION SYSTEMS, INC.,
INTEGRATED MARKETING SOLUTIONS, LLC,
T.J.C. INVESTMENTS, INC.,
S.M.C., INC.,
TODD COLLINS
and
SCOTT CECCORULLI
Dated:
October 16, 2007
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ARTICLE
I SALE AND PURCHASE OF ASSETS
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1
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1.1.
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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
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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.
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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
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5.16.
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Intellectual
Property.
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16
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5.17.
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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.
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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
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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.
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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.
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31
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10.4.
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Payment
of Debts
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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
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32
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11.1.
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No
Misrepresentation or Breach of Covenants and
Warranties
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33
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11.2.
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No
Changes or Destruction of Property
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33
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11.3.
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No
Restraint or Litigation
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33
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11.4.
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Necessary
Consents
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33
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ARTICLE
XII CONDITIONS PRECEDENT TO OBLIGATIONS OF
SELLER
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33
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12.1.
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No
Misrepresentation or Breach of Covenants and
Warranties
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33
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12.2.
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No
Restraint or Litigation
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33
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ARTICLE
XIII TERMINATION
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34
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13.1.
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Termination
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34
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13.2.
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Notice
of Termination
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34
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13.3.
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Effect
of Termination.
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34
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ARTICLE
XIV GENERAL PROVISIONS
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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
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36
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14.7.
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Schedules
and Exhibits
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36
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14.8.
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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.
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Governing
Law; Jurisdiction
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36
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14.11.
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Waiver
of Jury Trial
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36
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14.12.
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Dispute
Resolution.
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37
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SCHEDULES
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Schedule
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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
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5.5(a)
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Real
Property Leases
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5.5(b)
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Personal
Property Leases
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5.5(e)
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Receivables
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5.6
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Financial
Statements; Undisclosed Liabilities
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5.7
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Operations
Since Balance Sheet Date
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5.8
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Legal
Proceedings
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5.9
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Permits
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5.10
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Assumed
Contracts
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5.12
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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
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5.16(e)
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Owned
Intellectual Property
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5.16(k)
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Licenses
of Intellectual Property by Seller
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5.16(l)
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Licenses
of Intellectual Property to Seller
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5.17(a)
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Open
Source Software
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5.18
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Transactions
with Affiliates
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5.19
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Customer
Relations
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10.1
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Employee
List
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EXHIBITS
|
Exhibit
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Title
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A
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Escrow
Agreement
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B
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Form
of Bill of Sale
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C
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Form
of General Assignment
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D
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Form
of Assignment and Assumption Agreement
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E-1
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Form
of Collins Employment Agreement
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E-2
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Form
of Ceccorulli Employment Agreement
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F
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Form
of Legal Opinion
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ASSET PURCHASE AGREEMENT
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 ”); Todd
Collins (“ Collins ”) and Scott Ceccorulli
(“ Ceccorulli ”, and together with Collins,
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 108 Water Street, 3 rd
Floor, Baltimore, Maryland, and from its business location at
7800 Belfort Parkway, Suite 291, Jacksonville,
Florida;
B. The
Members own beneficially and of record over 89% of the issued
and outstanding membership interests of Seller;
C. Collins
owns beneficially and of record 100% of the issued and
outstanding shares of TJC;
D. Ceccorulli
and his spouse (“ Mrs. Ceccorulli ”)
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.
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 Collins, 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:
(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.
(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.
(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.
(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, & Hollander, 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 .
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
Ferrazzano Kirschbaum & Nagelberg LLP, 200 West Madison Street,
Suite 3900, Chicago, Illinois 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
(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 Collins 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
Bill of Sale, in the form attached hereto as Exhibit B (the
“ Bill of Sale ”) duly executed by
Seller;
(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 Collins and
Ceccorulli;
(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.
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.
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.
(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.
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 Pr
