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EXHIBIT 10.7
ASSET PURCHASE AGREEMENT
dated October 15, 2007
by and among
BEACON ENTERPRISE SOLUTIONS GROUP, INC.,
CETCON INCORPORATED
and
all of the Shareholders of CETCON Incorporated
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TABLE OF CONTENTS
Page
ARTICLE I THE ASSET
PURCHASE......................................1
1.1 Purchase and Sale of
Assets.................................1
1.2 Assumption of
Liabilities...................................1
1.3 Purchase
Price..............................................2
1.4
Escrow......................................................2
1.5 The
Closing.................................................2
1.6
Allocation..................................................3
1.7 Further
Assurances..........................................3
1.8
Withholding.................................................4
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE
SELLER............4
2.1 Organization, Qualification and Corporate
Power.............4
2.2
Capitalization..............................................4
2.3 Authorization of
Transaction.................................
2.4
Noncontravention............................................5
2.5
Subsidiaries................................................5
2.6 Financial
Statements........................................5
2.7 Absence of Certain
Changes..................................6
2.8 Undisclosed
Liabilities.....................................6
2.9 Tax
Matters.................................................6
2.10 Ownership and Condition of
Assets...........................8
2.11 Owned Real
Property.........................................8
2.12 Real Property
Leases........................................8
2.13 Intellectual
Property.......................................9
2.14
Contracts..................................................12
2.15 Accounts
Receivable........................................13
2.16
Insurance..................................................14
2.17
Litigation.................................................14
2.18
Warranties.................................................14
2.19
Employees..................................................14
2.20 Employee
Benefits..........................................15
2.21 Environmental
Matters......................................16
2.22 Legal
Compliance...........................................17
2.23 Customers and
Suppliers....................................17
2.24
Permits....................................................17
2.25 Certain Business Relationships With
Affiliates.............17
2.26 Brokers'
Fees..............................................18
2.27 Books and
Records..........................................18
2.28
Disclosure.................................................18
2.29
Projections................................................18
2.30 Government
Contracts.......................................18
2.31 Securities
Representations.................................19
(i)
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE
BUYER............20
3.1 Organization and Corporate
Power...........................20
3.2 Authorization of the
Transaction...........................20
3.3
Noncontravention...........................................20
3.4
Capitalization.............................................20
3.5 No Prior
Activities........................................21
3.6
Litigation.................................................21
ARTICLE IV PRE-CLOSING
COVENANTS..................................21
4.1 Closing
Efforts............................................21
4.2 Governmental and Third-Party Notices and
Consents..........21
4.3
Exclusivity................................................22
4.4 Operation of
Business......................................22
4.5 Access to
Information......................................24
4.6 Notice of
Breaches.........................................24
4.7 FIRPTA Tax
Certificate.....................................25
ARTICLE V CONDITIONS TO
CLOSING..................................25
5.1 Conditions to Obligations of the
Buyer.....................25
5.2 Conditions to Obligations of the
Seller....................27
ARTICLE VI POST-CLOSING
COVENANTS.................................28
6.1 Proprietary
Information....................................28
6.2 Solicitation and
Hiring....................................28
6.3
Non-Competition............................................28
6.4 Tax
Matters................................................29
6.5 Sharing of
Data............................................30
6.6 Use of
Name................................................30
6.7 Cooperation in
Litigation..................................30
6.8 Collection of Accounts
Receivable..........................31
6.9
Employees..................................................31
6.10 Enforcement of Insurance
Claims............................31
6.11 Maintenance of Corporate Existence;
Distribution of
Shares.....................................32
ARTICLE VII
INDEMNIFICATION........................................32
7.1 Indemnification by the
Seller..............................32
7.2 Indemnification by the
Buyer...............................33
7.3 Indemnification
Claims.....................................33
7.4 Survival of Representations and
Warranties.................36
7.5 Treatment of Indemnity
Payments............................37
7.6
Limitations................................................37
ARTICLE VIII
TERMINATION............................................38
8.1 Termination of
Agreement...................................38
8.2 Effect of
Termination......................................39
ARTICLE IX
DEFINITIONS............................................39
(ii)
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ARTICLE X
MISCELLANEOUS..........................................50
10.1 Press Releases and
Announcements...........................50
10.2 No Third Party
Beneficiaries...............................50
10.3 Entire
Agreement...........................................50
10.4 Succession and
Assignment..................................51
10.5 Counterparts and Facsimile
Signature.......................51
10.6
Headings...................................................51
10.7
Notices....................................................51
10.8 Governing
Law..............................................52
10.9 Amendments and
Waivers.....................................52
10.10
Severability...............................................52
10.11
Expenses...................................................52
10.12 Submission to
Jurisdiction.................................52
10.13 Specific
Performance.......................................53
10.14
Construction...............................................53
Exhibits
Exhibit A - Secured Promissory Note
Exhibit B - Security Agreement
Exhibit C - Bill of Sale
Exhibit D - Instrument of Assumption
Exhibit E - Opinion of Seller's counsel
Exhibit F - Escrow Agreement
Schedules
Schedule 1.1(b) -Specified Excluded Assets
Schedule 1.2(b) - Specified Retained Liabilities
Schedule 1.6 -Allocation of Purchase Price
Schedule 6.9 -Employees To Be Offered Employment By Buyer
Disclosure Schedule
(iii)
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is entered into as of October __,
2007 by
and among BEACON ENTERPRISE SOLUTIONS GROUP, INC., an Indiana
corporation (the
"Buyer"), CETCON INCORPORATED, an Ohio corporation (the
"Seller") and the
shareholders of Seller (the "Shareholders").
This Agreement contemplates a transaction in which the Buyer
will purchase
substantially all of the assets and assume certain of the
liabilities of the
Seller.
Contemporaneously with the execution and delivery of this
Agreement,
certain employees of the Seller have entered into employment
agreements with the
Buyer, to become effective upon the Closing (the "Employment
Agreements").
Capitalized terms used in this Agreement shall have the meanings
ascribed
to them in Article IX.
In consideration of the representations, warranties and
covenants herein
contained, the Parties agree as follows.
ARTICLE I
THE ASSET PURCHASE
1.1 Purchase and Sale of Assets.
(a) Upon and subject to the terms and conditions of this
Agreement,
the Buyer shall purchase from the Seller, and the Seller shall
sell, transfer,
convey, assign and deliver to the Buyer, at the Closing, for the
consideration
specified below in this Article I, all right, title and interest
in, to and
under the Acquired Assets.
(b) Notwithstanding the provisions of Section 1.1(a), the
Acquired
Assets shall not include the Excluded Assets, including without
limitation those
listed on Schedule 1.1(b).
1.2 Assumption of Liabilities.
(a) Upon and subject to the terms and conditions of this
Agreement,
the Buyer shall assume and become responsible for, from and
after the Closing,
the Assumed Liabilities.
(b) Notwithstanding the terms of Section 1.2(a) or any other
provision of this Agreement to the contrary, the Buyer shall not
assume or
become responsible for, and the Seller shall remain liable for,
the Retained
Liabilities, including without limitation those listed on
Schedule 1.2(b).
(c) Immediately prior to the Closing, Seller shall pay and
satisfy
in full all of the Retained Liabilities of Seller including
those shown on the
Most Recent Balance Sheet, provided that the amounts paid shall
be the amounts
of such liabilities as of the date of payment,
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or shall have made, in the reasonable determination of the
Buyer, adequate
provision for such Retained Liabilities.
1.3 Purchase Price. The Purchase Price to be paid by the Buyer
for the
Acquired Assets shall be (a) $700,000.00 in cash (the "Cash
Consideration"), (b)
900,000 shares (the "Shares") of Buyer Common Stock; and (c) a
Secured
Promissory Note in the principal amount of $600,000.00, with a
maturity date of
sixty (60) months from the date of Closing, and in the form
attached hereto as
Exhibit A.
1.4 Escrow. At the Closing, the Buyer shall deliver to the
Escrow Agent a
stock certificate registered in the name of the Escrow Agent or
its nominee
representing the Escrow Fund for the purpose of securing the
indemnification
obligations of the Seller and the Shareholders set forth in this
Agreement. The
Escrow Fund shall be held by the Escrow Agent under the Escrow
Agreement
pursuant to the terms thereof. The Escrow Fund shall be held as
a trust fund and
shall not be subject to any lien, attachment, trustee process or
any other
judicial process of any creditor of any party, and shall be held
and disbursed
solely for the purposes of and in accordance with the terms of
the Escrow
Agreement. Until the termination of the escrow in accordance
with the terms of
the Escrow Agreement, the Seller shall have the right, in its
sole discretion to
direct the sale for cash of all or any portion of the Escrow
Shares (if any then
make-up a portion of the Escrow Fund) in one or more
transactions provided that
(i) the price per share for the sale of the Escrow Shares is not
less than
$1.00, (ii) the proceeds from any such sale(s) shall be held in
escrow by the
Escrow Agent pursuant to the terms of the Escrow Agreement, and
(iii) Seller may
not direct any such sale during any blackout period under any
insider trading
policy or blackout policy of Buyer, and the Buyer shall promptly
execute any and
all required joint instructions to the Escrow Agent to
facilitate any and all
such sales of the Escrow Shares. Further, Seller shall have the
sole discretion
to direct the investment of amounts held in the Escrow Fund
pursuant to the
investment options specified in, and in accordance with the
restrictions of, the
Escrow Agreement, and Buyer agrees to promptly execute any and
all joint
instructions to the Escrow Agent to facilitate any and all such
investments.
1.5 The Closing.
(a) The Closing shall take place at the offices of Frost Brown
Todd
LLC in Louisville, Kentucky commencing at 9:00 a.m. local time
on the Closing
Date, or at such other place as the parties may mutually agree.
All transactions
at the Closing shall be deemed to take place simultaneously, and
no transaction
shall be deemed to have been completed and no documents or
certificates shall be
deemed to have been delivered until all other transactions are
completed and all
other documents and certificates are delivered.
(b) At the Closing:
(i) the Seller shall deliver to the Buyer the various
certificates, instruments and documents referred to in Section
5.1;
(ii) the Buyer shall deliver to the Seller the various
certificates, instruments and documents referred to in Section
5.2;
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(iii) the Buyer shall execute and deliver to the Seller the
Secured Promissory Note in substantially the form attached
hereto as Exhibit A
(iv) the Buyer and the Seller shall execute and deliver to
each other the Security Agreement in substantially the form
attached hereto as
Exhibit B;
(v) the Seller shall execute and deliver to the Buyer a bill
of sale in substantially the form attached hereto as Exhibit C
and such other
instruments of conveyance as the Buyer may reasonably request in
order to effect
the sale, transfer, conveyance and assignment to the Buyer of
valid ownership of
the Acquired Assets;
(vi) the Buyer shall execute and deliver to the Seller an
instrument of assumption in substantially the form attached
hereto as Exhibit D
and such other instruments as the Seller may reasonably request
in order to
effect the assumption by the Buyer of the Assumed
Liabilities;
(vii) the Buyer shall pay to the Seller, payable by wire
transfer or other delivery of immediately available U.S. funds
to an account
designated by the Seller, the Cash Consideration;
(viii) the Buyer shall deliver to the Seller a stock
certificate registered in the name of the Seller representing a
number of shares
of Buyer Common Stock as is equal to the number of Shares minus
the number of
Escrow Shares;
(ix) the Buyer, the Seller and the Escrow Agent shall
execute
and deliver the Escrow Agreement in substantially the form
attached hereto as
Exhibit F and the Buyer shall deposit a stock certificate
representing the
Escrow Shares with the Escrow Agent in accordance with Section
1.4;
(x) the Seller shall deliver to the Buyer, or otherwise put
the Buyer in possession and control of, all of the Acquired
Assets of a tangible
nature; and
(xi) the Buyer and the Seller shall execute and deliver to
each other a cross-receipt evidencing the transactions referred
to above.
1.6 Allocation. The Buyer and the Seller agree to allocate the
Purchase
Price (and all other capitalizable costs) among the Acquired
Assets and the
non-solicitation and non-competition covenants set forth in
Sections 6.2 and 6.3
for all purposes (including financial accounting and tax
purposes) in accordance
with the allocation schedule attached hereto as Schedule 1.6.
Seller and Buyer
agree to use the allocations determined pursuant to this Section
1.6 for all tax
purposes, including without limitation, those matters subject to
Section 1060 of
the Code, and the Treasury regulations promulgated thereunder.
Buyer and Seller
shall prepare and submit to the other for review their IRS Forms
8594 within
ninety (90) days after Closing. Each party shall have thirty
(30) days to
complete its review.
1.7 Further Assurances. At any time and from time to time after
the
Closing, at the request of the Buyer and without further
consideration, the
Seller shall execute and deliver such other instruments of sale,
transfer,
conveyance and assignment and take such actions as the
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Buyer may reasonably request to more effectively transfer,
convey and assign to
the Buyer, and to confirm the Buyer's rights to, title in and
ownership of, the
Acquired Assets and to place the Buyer in actual possession and
operating
control thereof.
1.8 Withholding. Notwithstanding any other provision of this
Agreement,
each of the Buyer and the Escrow Agent shall be entitled to
deduct and withhold
from the payments to be made pursuant to this Agreement and/or
the Escrow
Agreement such amounts as it reasonably determines after
consultation with its
Tax advisors that it is required to deduct and withhold with
respect to the
making of such payments under the Code or any other applicable
provision of law
and to collect Forms W-8 or W-9, as applicable, or similar
information from the
Seller, the Shareholders and any other recipients of payments
hereunder or
thereunder. To the extent that amounts are so withheld by the
Buyer, such
withheld amounts shall be treated for all purposes of this
Agreement as having
been paid to the recipient in respect of which such deduction
and withholding
was made by the Buyer or Escrow Agent.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Buyer that, except as
set forth
in the Disclosure Schedule, the statements contained in this
Article II are true
and correct as of the date of this Agreement and will be true
and correct as of
the Closing as though made as of the Closing, except to the
extent such
representations and warranties are specifically made as of a
particular date (in
which case such representations and warranties will be true and
correct as of
such date). The Disclosure Schedule shall be arranged in
sections and
subsections corresponding to the numbered and lettered sections
and subsections
contained in this Article II. Disclosures in any section or
subsection of the
Disclosure Schedule shall qualify such other sections or
subsections of the
Disclosure Schedule to the extent it is reasonably apparent from
the content of
such disclosure that such disclosure is relevant to such other
sections or
subsections.
2.1 Organization, Qualification and Corporate Power. The Seller
is a
corporation validly existing and in good standing under the laws
of the State of
Ohio. The Seller is duly qualified to conduct business and is in
good standing
under the laws of each jurisdiction listed in Section 2.1 of the
Disclosure
Schedule, which jurisdictions constitute the only jurisdictions
in which the
nature of the Seller's business or the ownership or leasing of
its properties
requires such qualification. The Seller has all requisite power
and authority to
carry on the business in which it is engaged and to own and use
the properties
owned and used by it. The Seller has furnished to the Buyer
complete and
accurate copies of its Articles of Incorporation and Bylaws. The
Seller is not
in default under or in violation of any provision of its
Articles of
Incorporation or Bylaws. There are no other agreements or
instruments setting
forth (i) rights, preferences and privileges of the Shareholders
with respect to
the Seller and/or among the Shareholders, or (ii) matters
relating to the
operation and governance of the Seller.
2.2 Capitalization. Section 2.2 of the Disclosure Schedule sets
forth a
complete and accurate list, as of the date of this Agreement, of
(i) all
Shareholders, indicating the number of shares of the Seller held
by each
Shareholder and (ii) all outstanding options, warrants or other
instruments
giving any party the right to acquire any shares or equity
securities of the
Seller.
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There are no outstanding agreements or commitments to which the
Seller is a
party or which are binding upon the Seller for the redemption of
any of its
equity. The Seller has only one class of shares outstanding.
There are no
outstanding options, warrants or similar rights relating to the
Seller or its
equity securities.
2.3 Authorization of Transaction. The Seller has all requisite
power and
authority to execute and deliver this Agreement and the
Ancillary Agreements and
to perform its obligations hereunder and thereunder. The
performance by the
Seller of this Agreement and the Ancillary Agreements and the
consummation by
the Seller of the transactions contemplated hereby and thereby
have been duly
and validly authorized by all necessary actions on the part of
the Seller.
This Agreement has been duly and validly executed and delivered
by the
Seller and constitutes, and each of the Ancillary Agreements,
upon its execution
and delivery by the Seller, will constitute, a valid and binding
obligation of
the Seller, enforceable against the Seller in accordance with
its terms, except
as enforceability may be limited by bankruptcy, insolvency,
reorganization,
moratorium, arrangement or other similar laws from time to time
in effect and
except as to the remedy of specific performance which may not be
available under
the laws of various jurisdictions.
2.4 Noncontravention. Neither the execution and delivery by the
Seller of
this Agreement or the Ancillary Agreements, nor the consummation
by the Seller
of the transactions contemplated hereby or thereby, will (a)
conflict with or
violate any provision of the Articles of Incorporation or Bylaws
of the Seller,
(b) require on the part of the Seller any notice to or filing
with, or any
permit, authorization, consent or approval of, any Governmental
Entity, (c)
conflict with, result in a breach of, constitute (with or
without due notice or
lapse of time or both) a default under, result in the
acceleration of
obligations under, create in any party the right to terminate,
modify or cancel,
or require any notice, consent or waiver under, any contract or
instrument to
which the Seller is a party or by which the Seller is bound or
to which any of
its assets is subject, except with respect to contracts that are
not customer
contracts listed on Section 2.4 of the Disclosure Schedules, for
any such
conflict, breach, default, acceleration, or right to terminate,
modify or
cancel, or failure to notify or obtain consent or waiver that
would not have a
Seller Material Adverse Effect, (d) result in the imposition of
any Security
Interest upon any asset or assets of the Seller or (e) violate
any order, writ,
injunction, decree, statute, rule or regulation applicable to
the Seller or any
of its properties or assets.
2.5 Subsidiaries. The Seller has no Subsidiaries. The Seller
does not
control directly or indirectly or have any direct or indirect
equity
participation or similar interest in any corporation,
partnership, limited
liability company, joint venture, trust or other business
association or entity.
2.6 Financial Statements. The Seller has provided to the Buyer
the
Financial Statements. The Financial Statements (i) were prepared
on a consistent
basis throughout the periods covered thereby (except as may be
indicated in the
notes to such financial statements) and, in the case of the
balance sheet and
statement of income, changes in shareholder's equity and cash
flows of the
Seller as of the end of and for the year ended December 31,
2006, in accordance
with reasonable accounting practices, and (ii) fairly present
the financial
position of the Seller as of the dates thereof and the results
of its operations
and cash flows for the periods
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indicated, consistent with the books and records of the Seller,
except that the
unaudited interim financial statements are subject to normal and
recurring
year-end adjustments which will not be material in amount or
effect and do not
include footnotes.
2.7 Absence of Certain Changes. Except as set forth in Section
2.7 of the
Disclosure Schedules, since the Most Recent Balance Sheet Date,
(a) there has
occurred no event or development which, individually or in the
aggregate, has
had, or could reasonably be expected to have in the future, a
Seller Material
Adverse Effect, and (b) the Seller has not taken any of the
actions set forth in
paragraphs (a) through (n) of Section 4.4.
2.8 Undisclosed Liabilities. The Seller has no knowledge of any
liability
(whether known or unknown, whether absolute or contingent,
whether liquidated or
unliquidated and whether due or to become due), except for (a)
liabilities shown
on the Most Recent Balance Sheet, (b) contractual and other
liabilities incurred
in the Ordinary Course of Business which are not required by
GAAP to be
reflected on a balance sheet and which are not material, and (c)
liabilities
which have arisen since the Most Recent Balance Sheet Date in
the Ordinary
Course of Business and which are listed on Schedule 2.8.
2.9 Tax Matters.
(a) The Seller has properly filed on a timely basis all material
Tax
Returns that it is and was required to file, and all such Tax
Returns were true,
correct and complete in all material respects. The Seller has
properly paid on a
timely basis all material Taxes, whether or not shown on its Tax
Returns, that
were due and payable. All material Taxes that the Seller is or
was required by
law to withhold or collect have been withheld or collected and,
to the extent
required, have been properly paid on a timely basis to the
appropriate
Governmental Entity. The Seller has complied with all
information reporting and
back-up withholding requirements in all material respects,
including maintenance
of the required records with respect thereto, in connection with
amounts paid to
any employee, independent contractor, creditor or other third
party.
(b) The unpaid Taxes of the Seller for periods through the date
of
the Most Recent Balance Sheet Date do not materially exceed the
accruals and
reserves for Taxes (excluding accruals and reserves for deferred
Taxes
established to reflect timing differences between book and Tax
income) set forth
on the Most Recent Balance Sheet. All Taxes attributable to the
period from and
after the Most Recent Balance Sheet Date and continuing through
the Closing Date
are, or will be, attributable to the conduct by the Seller of
its operations in
the Ordinary Course of Business.
(c) No examination or audit of any Tax Return of the Seller by
any
Governmental Entity is currently in progress or, to the
knowledge of the Seller,
threatened or contemplated. Section 2.9(c) of the Disclosure
Schedule sets forth
each jurisdiction (other than United States federal) in which
the Seller files,
or is required to file or has been required to file a material
Tax Return or is
or has been liable for material Taxes on a "nexus" basis. The
Seller has not
been informed by any jurisdiction that the jurisdiction believes
that the Seller
was required to file any Tax Return that was not filed.
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(d) The Seller is, and has been since its inception, validly
classified and treated as an "S corporation," having made a
valid election under
Section 1362 of the Internal Revenue Code and has been validly
treated in a
similar manner for purposes of the income Tax laws of all states
in which it has
been subject to taxation.
(e) Except as set forth in Section 2.9(e) of the Disclosure
Schedules, the Seller has delivered or made available to the
Buyer (i) complete
and correct copies of all Tax Returns of the Seller relating to
Taxes for all
Taxable periods for which the applicable statute of limitations
has not yet
expired and (ii) complete and correct copies of all private
letter rulings,
revenue agent reports, information document requests, notices of
assessment,
notices of proposed deficiencies, deficiency notices, protests,
petitions,
closing agreements, settlement agreements, pending ruling
requests and any
similar documents submitted by, received by or agreed to by or
on behalf of the
Seller relating to Taxes for all Taxable periods for which the
applicable
statute of limitations has not yet expired.
(f) The Seller has not (i) waived any statute of limitations
with
respect to Taxes or agreed to extend the period for assessment
or collection of
any Taxes, (ii) requested any extension of time within which to
file any Tax
Return, which Tax Return has not yet been filed, or (iii)
executed or filed any
power of attorney relating to Taxes with any Governmental
Entity.
(g) The Seller is not a party to any litigation regarding
Taxes.
(h) There are no Security Interests with respect to Taxes upon
any
of the Acquired Assets, other than with respect to Taxes not yet
due and
payable. To the Seller's and Shareholders' knowledge, there is
no basis for the
assertion of any claim relating or attributable to Taxes, which,
if adversely
determined, would result in any Security Interest on the
Acquired Assets, or
would reasonably be expected to have, individually or in the
aggregate, a Seller
Material Adverse Effect.
(i) None of the Acquired Assets (i) is property that is required
to
be treated as being owned by any other person pursuant to the
provisions of
former Section 168(f)(8) of the Internal Revenue Code of 1954,
or (ii) is "tax
exempt use property" within the meaning of Section 168(h) of the
Code.
(j) The Seller has maintained complete and accurate records,
including all applicable exemption, resale or other
certificates, of (i) all
sales to purchasers claiming to be exempt from sale and use
Taxes based on the
exempt status of the purchaser, and (ii) all other sales for
which sales Tax or
use Tax was not collected by the Seller and as to which the
seller is required
to receive and retain resale certificates or other certificates
relating to the
exempt nature of the sale or use or non-applicability of the
sale and use Taxes.
(k) The Seller is not bound by any Tax indemnity, Tax sharing or
Tax
allocation agreement.
(l) The Seller is not a "foreign person" within the meaning
of
Section 1445 of the Code.
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2.10 Ownership and Condition of Assets.
(a) The Seller is the true and lawful owner, and has good title
to,
all of the Acquired Assets, free and clear of all Security
Interests. Upon
execution and delivery by the Seller to the Buyer of the
instruments of
conveyance referred to in Section 1.5(b)(iii), the Buyer will
become the true
and lawful owner of, and will receive good title to, the
Acquired Assets, free
and clear of all Security Interests, except for Security
Interests created by
Buyer.
(b) The Acquired Assets are sufficient for the conduct of
the
Seller's business as presently conducted and as presently
proposed to be
conducted and constitute all assets used by the Seller in such
business. Each
tangible Acquired Asset is free from material defects, has been
maintained in
accordance with normal industry practice, is in good operating
condition and
repair (subject to normal wear and tear) and is suitable for the
purposes for
which it presently is used.
(c) Section 2.10(c) of the Disclosure Schedule lists
individually
(i) all Acquired Assets which are fixed assets (within the
meaning of GAAP)
having a book value greater than $1,000, indicating the cost,
accumulated book
depreciation (if any) and the net book value of each such fixed
asset as of the
Most Recent Balance Sheet Date, (ii) all other Acquired Assets
of a tangible
nature (other than inventories) whose book value exceeds $5,000;
and (iii) all
Acquired Assets that are Assigned Contracts and specifically
identifying all
customer contracts.
(d) Except as set forth on Section 2.10(d) of the Disclosure
Schedule, each item of equipment, motor vehicle and other asset
that is being
transferred to the Buyer as part of the Acquired Assets and that
the Seller has
possession of pursuant to a lease agreement or other contractual
arrangement is
in such condition that, if returned to its lessor or owner under
the applicable
lease or contract on the Closing Date, the obligations of the
Seller to such
lessor or owner would have been discharged in full.
2.11 Owned Real Property. The Seller does not own, and has never
owned,
any real property.
2.12 Real Property Leases. Section 2.12 of the Disclosure
Schedule lists
all Leases and lists the term of such Lease, any extension and
expansion
options, and the rent payable thereunder. The Seller has
delivered to the Buyer
complete and accurate copies of the Leases. With respect to each
Lease and
except as set forth in Section 2.12 of the Disclosure
Schedule:
(a) such Lease is legal, valid, binding, enforceable and in
full
force and effect;
(b) such Lease is assignable by the Seller to the Buyer without
the
consent or approval of any party and such Lease will continue to
be legal,
valid, binding, enforceable and in full force and effect
immediately following
the Closing in accordance with the terms thereof as in effect
immediately prior
to the Closing;
(c) neither the Seller nor, to the knowledge of the Seller,
any
other party, is in breach or violation of, or default under, any
such Lease, and
no event has occurred, is pending or, to the knowledge of the
Seller, is
threatened, which, after the giving of notice, with lapse of
time,
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<PAGE>
or otherwise, would constitute a material breach or default by
the Seller or, to
the knowledge of the Seller, any other party under such
Lease;
(d) the Seller is not a party to any dispute, oral agreement
or
forbearance program as to such Lease, and to Seller's knowledge
no other person
is party to such dispute, oral agreement or forbearance program
relating to or
affecting the Lease;
(e) the Seller has not assigned, transferred, conveyed,
mortgaged,
deeded in trust or encumbered any interest in the leasehold or
subleasehold;
(f) to the knowledge of the Seller, all facilities leased or
subleased thereunder are supplied with utilities and other
services adequate for
the operation of said facilities; and
(g) the Seller is not aware of any Security Interest,
easement,
covenant or other restriction applicable to the real property
subject to such
Lease which would reasonably be expected to materially impair
the current uses
or the occupancy by the Seller of the property subject
thereto.
2.13 Intellectual Property.
(a) Seller Registrations. There are no Seller Registrations.
(b) Prosecution Matters. Seller has no Patent Rights.
(c) Ownership; Sufficiency. Except as otherwise identified
in
Section 2.13 of the Disclosure Schedule, each item of Seller
Intellectual
Property will be owned or available for use by the Buyer
immediately following
the Closing on substantially identical terms and conditions as
it was
immediately prior to the Closing. The Seller is the sole and
exclusive owner of
all Seller Owned Intellectual Property, free and clear of any
Security Interests
and all joint owners of the Seller Owned Intellectual Property
are listed in
Section 2.13(c) of the Disclosure Schedule. Except as otherwise
identified in
Section 2.13 of the Disclosure Schedule, the Seller Intellectual
Property
constitutes all Intellectual Property necessary (i) to Exploit
the Customer
Offerings in the manner so done currently by the Seller, (ii) to
Exploit the
Internal Systems as they are currently used by the Seller, and
(iii) otherwise
to conduct the Seller's business in all material respects in the
manner
currently conducted by the Seller. Seller has not licensed the
Software included
in the Customer Offerings, or any portion thereof, to any third
party. Seller
has Exploited the Software solely in connection with Seller's
internal use and
makes no representation and warranty that the Software can be
made available to
third parties (whether by license or otherwise), except in the
manner so done
currently by the Seller.
(d) Protection Measures. The Seller has taken reasonable
measures to
protect the proprietary nature of each item of Seller Owned
Intellectual
Property, and to maintain in confidence all trade secrets and
confidential
information comprising a part thereof. The Seller has complied
with all
applicable contractual and legal requirements pertaining to
information privacy
and security. No complaint relating to an improper use or
disclosure of, or a
breach in the security of, any such information has been made
or, to the
knowledge of the Seller, threatened against the Seller. To the
knowledge of the
Seller, there has been no: (i) unauthorized disclosure of any
third party
proprietary or confidential information in the possession,
custody or
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<PAGE>
control of the Seller or (ii) breach of the Seller's security
procedures wherein
confidential information has been disclosed to a third person.
The Seller has
actively policed the quality of all goods and services sold,
distributed or
marketed under each of its Trademarks and has enforced adequate
quality control
measures to ensure that no Trademarks that it has licensed to
others shall be
deemed to be abandoned.
(e) Infringement by Seller. None of the Customer Offerings, or
the
Exploitation thereof by the Seller or by any reseller,
distributor, customer or
user thereof, or any other activity of the Seller, infringes or
violates, or
constitutes a misappropriation of, any Intellectual Property
rights of any third
party. None of the Internal Systems, or the Seller's past,
current or currently
contemplated Exploitation thereof, or any other activity
undertaken by them in
connection with the Business, infringes or violates, or
constitutes a
misappropriation of, any Intellectual Property rights of any
third party. The
Seller has not received any complaint, claim or notice, or
threat of any of the
foregoing (including any notification that a license under any
patent is or may
be required), alleging any such infringement, violation or
misappropriation and
any request or demand for indemnification or defense received by
the Seller from
any reseller, distributor, customer, user or any other third
party; and the
Seller has not received any legal opinions, studies, market
surveys and analyses
relating to any alleged or potential infringement, violation
or
misappropriation.
(f) Infringement of Rights. To Seller's knowledge, no person
(including, without limitation, any current or former employee
or consultant of
Seller) is infringing, violating or misappropriating any of the
Seller Owned
Intellectual Property or any Seller Licensed Intellectual
Property.
(g) Outbound IP Agreements. Seller has not assigned,
transferred,
licensed, distributed or otherwise granted any right or access
to any person
(except for access to customers necessary to Exploit the
Customer Offerings), or
covenanted not to assert any right, with respect to any past,
existing or future
Seller Intellectual Property. The Seller has not agreed to
indemnify any person
against any infringement, violation or misappropriation of any
Intellectual
Property rights with respect to any Customer Offerings or any
third party
Intellectual Property rights. The Seller is not a member of or
party to any
patent pool, industry standards body, trade association or other
organization
pursuant to the rules of which it is obligated to license any
existing or future
Intellectual Property to any person.
(h) Inbound IP Agreements. Section 2.13(h) of the Disclosure
Schedule identifies (i) each item of Seller Licensed
Intellectual Property and
the license or agreement pursuant to which the Seller Exploits
it (excluding
currently-available, off the shelf software programs that are
part of the
Internal Systems and are licensed by the Seller pursuant to
"shrink wrap"
licenses, the total fees associated with which are less than
$2,500). There is
no agreement, contract, assignment or other instrument pursuant
to which the
Seller has obtained any joint or sole ownership interest in or
to any item of
Seller Owned Intellectual Property. No third party inventions,
methods,
services, materials, processes or Software are included in or
required to
Exploit the Customer Offerings or Internal Systems in the manner
so done
currently by Seller. None of the Customer Offerings or Internal
Systems includes
"shareware," "freeware" or other Software or other material that
was obtained by
the Seller from third parties other than pursuant to the license
agreements
listed in Section 2.13(h) of the Disclosure Schedule.
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<PAGE>
(i) Source Code. The Seller has not licensed, distributed or
disclosed, and knows of no distribution or disclosure by others
(including its
employees and contractors) of, the Seller Source Code to any
person, and the
Seller has taken all reasonable physical and electronic security
measures to
prevent disclosure of such Seller Source Code. No event has
occurred, and no
circumstance or condition exists, that (with or without notice
or lapse of time,
or both) will, or would reasonably be expected to, nor will the
consummation of
the transactions contemplated hereby, result in the disclosure
or release of
such Seller Source Code by the Seller, or escrow agent(s) or any
other person to
any third party.
(j) Authorship. All of the Software and Documentation
comprising,
incorporated in or bundled with the Customer Offerings or
Internal Systems have
been designed, authored, tested and debugged by regular
employees of the Seller
within the scope of their employment or by independent
contractors of the Seller
who have executed valid and binding agreements expressly
assigning all right,
title and interest in such copyrightable materials to the
Seller, waiving their
non-assignable rights (including moral rights) in favor of the
Seller and its
permitted assigns and licensees, and have no residual claim to
such materials.
(k) Open Source Code. Section 2.13(k) of the Disclosure
Schedule
lists all Open Source Materials that the Seller has either
incorporated into the
Customer Offering or Internal Systems, and/or those Customer
Offerings and/or
Internal Systems (or portions thereof) that are derivative works
of Open Source
Materials. Except as identified in Section 2.13(k) of the
Disclosure Schedules,
the Seller has not (i) incorporated Open Source Materials into,
or combined Open
Source Materials with, the Customer Offerings; or (ii) used Open
Source
Materials that create, or purport to create, obligations for the
Seller with
respect to the Customer Offerings or grant, or purport to grant,
to any third
party, any rights or immunities under Intellectual Property
rights (including,
but not limited to, using any Open Source Materials that
require, as a condition
of Exploitation of such Open Source Materials, that other
Software incorporated
into, derived from or distributed with such Open Source
Materials be (x)
disclosed or distributed in source code form, (y) licensed for
the purpose of
making derivative works, or (z) redistributable at no charge or
minimal charge).
Seller has no distributed Open Source Materials in conjunction
with any other
software developed or distributed by the Seller.
(l) Employee and Contractor Assignments. [Intentionally
deleted.]
(m) Quality. The Customer Offerings and the Internal Systems
are
free from significant defects in design, workmanship and
materials and conform
in all material respects to the written Documentation and
specifications
therefor. The Customer Offerings and the Internal Systems do not
contain any
disabling device, virus, worm, back door, Trojan horse or other
disruptive or
malicious code that may or are intended to impair their intended
performance or
otherwise permit unauthorized access to, hamper, delete or
damage any computer
system, software, network or data. The Seller has not received
any warranty
claims, contractual terminations or requests for settlement or
refund due to the
failure of the Customer Offerings to meet their specifications
or otherwise to
satisfy end user needs or for harm or damage to any third
party.
(n) Support and Funding. The Seller has neither sought, applied
for
nor received any support, funding, resources or assistance from
any federal,
state, local or foreign
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<PAGE>
governmental or quasi-governmental agency or funding source in
connection with
the Exploitation of the Customer Offerings, the Internal Systems
or any
facilities or equipment used in connection therewith.
(o) Certifications. Section 2.13(o) of the Disclosure
Schedule
identifies all channel partner authorizations, accreditations or
similar
qualifications with third party technology providers held by the
Seller or its
employees. Except as disclosed on Section 2.13(o), all such
certifications,
accreditations and similar qualifications may be transferred or
assigned to the
Buyer without the consent of such third parties.
2.14 Contracts.
(a) Section 2.14 of the Disclosure Schedule lists the
following
agreements (written or oral) to which the Seller is a party as
of the date of
this Agreement (other than this Agreement and the Ancillary
Agreements):
(i) any agreement (or group of related agreements) for the
lease of personal property from or to third parties providing
for lease payments
in excess of $5,000 per annum or having a remaining term longer
than three
months;
(ii) any agreement (or group of related agreements) for the
purchase or sale of products or for the furnishing or receipt of
services (A)
which calls for performance over a period of more than one year,
(B) which
involves more than the sum of $5,000, or (C) in which the Seller
has granted
manufacturing rights, "most favored nation" pricing provisions
or marketing or
distribution rights relating to any products or territory or has
agreed to
purchase a minimum quantity of goods or services or has agreed
to purchase goods
or services exclusively from a certain party;
(iii) any agreement concerning the establishment or
operation
of a partnership, joint venture or limited liability
company;
(iv) any agreement (or group of related agreements) under
which it has created, incurred, assumed or guaranteed (or may
create, incur,
assume or guarantee) indebtedness (including capitalized lease
obligations)
involving more than $5,000 or under which it has imposed (or may
impose) a
Security Interest on any of its assets, tangible or
intangible;
(v) any agreement for the disposition of any significant
portion of the assets or business of the Seller (other than
sales of products in
the Ordinary Course of Business) or any agreement for the
acquisition of the
assets or business of any other entity (other than purchases of
inventory or
components in the Ordinary Course of Business);
(vi) any agreement concerning exclusivity or
confidentiality;
(vii) any employment or consulting agreement;
(viii) any agreement involving any current or former
officer,
manager or Shareholder or an Affiliate thereof;
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<PAGE>
(ix) any agreement under which the consequences of a default
or termination would reasonably be expected to have a Seller
Material Adverse
Effect;
(x) any agreement which contains any provisions requiring
the
Seller to indemnify any other party (excluding indemnities
contained in
agreements for the purchase, sale or license of products entered
into in the
Ordinary Course of Business);
(xi) any agreement that could reasonably be expected to have
the effect of prohibiting or impairing the conduct of the
business of the Seller
or of the Buyer or any of its subsidiaries as currently
conducted and as
currently proposed to be conducted;
(xii) any agreement under which the Seller is restricted
from
selling, licensing or otherwise distributing any of its
technology or products,
or providing services to, customers or potential customers or
any class of
customers, in any geographic area, during any period of time or
any segment of
the market or line of business;
(xiii) any agreement which would entitle any third party to
receive a license or any other right to intellectual property of
the Buyer or
any of the Buyer's Affiliates following the Closing; and
(xiv) any other agreement (or group of related agreements)
either involving more than $10,000 or not entered into in the
Ordinary Course of
Business.
(b) The Seller has delivered to the Buyer a complete and
accurate
copy of each agreement listed in Section 2.13 or Section 2.14 of
the Disclosure
Schedule. With respect to each agreement so listed and except as
disclosed in
Section 2.14 of the Disclosure Schedules: (i) the agreement is
legal, valid,
binding and enforceable and in full force and effect; (ii) for
those agreements
to which the Seller is a party, the agreement is assignable by
the Seller to the
Buyer without the consent or approval of any party and will
continue to be
legal, valid, binding and enforceable and in full force and
effect immediately
following the Closing in accordance with the terms thereof as in
effect
immediately prior to the Closing; and (iii) neither the Seller
nor, to the
knowledge of the Seller, any other party, is in breach or
violation of, or
default under, any such agreement, and no event has occurred, is
pending or, to
the knowledge of the Seller, is threatened, which, after the
giving of notice,
with lapse of time, or otherwise, would constitute a breach or
default by the
Seller or, to the knowledge of the Seller, any other party under
such agreement.
2.15 Accounts Receivable. All accounts receivable of the Seller
reflected
on the Most Recent Balance Sheet (other than those paid since
such date) are
valid receivables subject to no setoffs or counterclaims and are
current and
collectible (within 90 days after the date on which it first
became due and
payable), net of the applicable reserve for bad debts on the
Most Recent Balance
Sheet. A complete and accurate list of the accounts receivable
reflected on the
Most Recent Balance Sheet, showing the aging thereof, is
included in Section
2.15 of the Disclosure Schedule. All accounts receivable of the
Seller that have
arisen since the Most Recent Balance Sheet Date are valid
receivables subject to
no setoffs or counterclaims and are current and collectible
(within 90 days
after the date on which it first became due and payable), net of
a reserve for
bad debts in an amount proportionate to the reserve shown on the
Most Recent
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<PAGE>
Balance Sheet. The Seller has not received any written notice
from an account
debtor stating that any account receivable in an amount in
excess of $5,000 is
subject to any contest, claim or setoff by such account
debtor.
2.16 Insurance. Section 2.16 of the Disclosure Schedule lists
each
insurance policy (including fire, theft, casualty, comprehensive
general
liability, workers compensation, business interruption,
environmental, product
liability, errors and omissions, professional liability, and
automobile
insurance policies and bond and surety arrangements) to which
the Seller is a
party, all of which are in full force and effect. There is no
material claim
pending under any such policy as to which coverage has been
questioned, denied
or disputed by the underwriter of such policy. All premiums due
and payable
under all such policies have been paid, the Seller may not be
liable for
retroactive premiums or similar payments, and the Seller is
otherwise in
compliance in all material respects with the terms of such
policies. The Seller
has no knowledge of any threatened termination of, or premium
increase with
respect to, any such policy. Upon payment of amounts required to
obtain tail
coverage on Seller's professional liability (errors and
omissions) insurance
policy, such policy will be in full force and effect immediately
following the
Closing in accordance with the terms thereof as in effect
immediately prior to
the Closing.
2.17 Litigation. Except as set forth in Section 2.17 of the
Disclosure
Schedule, there is no Legal Proceeding which is pending or has
been threatened
in writing against the Seller. There are no judgments, orders or
decrees
outstanding against the Seller.
2.18 Warranties. No service or product delivered, made, sold,
leased or
licensed by the Seller is subject to any guaranty, warranty,
right of return,
right of credit or other indemnity.
2.19 Employees.
(a) Section 2.19 of the Disclosure Schedule contains a list of
all
employees of the Seller, their position with Seller and their
annual rate of
compensation. Except as set forth on Section 2.19 of the
Disclosure Schedule,
each current employee of the Seller and each past employee of
the Seller has
entered into a confidentiality and assignment of inventions
agreement with the
Seller, a copy or form of which has previously been delivered to
the Buyer.
Section 2.19 of the Disclosure Schedule contains a list of all
employees of the
Seller who are a party to a non-competition agreement with the
Seller; copies of
such agreements have previously been delivered to the Buyer.
Each such agreement
referenced in the two preceding sentences to which the Seller is
a party is
assignable by the Seller to the Buyer without the consent or
approval of any
party and will continue to be legal, valid, binding and
enforceable and in full
force and effect immediately following the Closing in accordance
with the terms
thereof as in effect immediately prior to the Closing. Section
2.19 of the
Disclosure Schedule contains a list of all employees of the
Seller who are not
citizens of the United States. To the knowledge of the Seller,
no key employee
or group of employees has any plans to terminate employment with
the Seller
(other than for the purpose of accepting employment with the
Buyer following the
Closing) or not to accept employment with the Buyer. The Seller
is in compliance
with all applicable laws relating to the hiring and employment
of employees.
(b) The Seller is not a party to or bound by any collective
bargaining agreement, nor has it experienced any strikes,
grievances, claims of
unfair labor practices or
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<PAGE>
other collective bargaining disputes. The Seller has no
knowledge of any
organizational effort made or threatened, either currently or
within the past
two years, by or on behalf of any labor union with respect to
employees of the
Seller.
2.20 Employee Benefits.
(a) Section 2.20(a) of the Disclosure Schedule contains a
complete
and accurate list of all Seller Plans. Complete and accurate
copies of (i) all
Seller Plans which have been reduced to writing, (ii) written
summaries of all
unwritten Seller Plans, (iii) all related trust agreements,
insurance contracts
and summary plan descriptions, and (iv) all annual reports filed
on IRS Form
5500, 5500C or 5500R and (for all funded plans) all plan
financial statements
for the last five plan years for each Seller Plan, have been
delivered to the
Buyer.
(b) Each Seller Plan being assumed by Buyer under this Agreement
has
been administered in all material respects in accordance with
its terms and each
of the Seller and the ERISA Affiliates has in all material
respects met its
obligations with respect to each such Seller Plan and has made
all required
contributions thereto. The Seller, each ERISA Affiliate and each
such Seller
Plan are in compliance in all material respects with the
currently applicable
provisions of ERISA and the Code and the regulations thereunder
(including
Section 4980B of the Code, Subtitle K, Chapter 100 of the Code
and Sections 601
through 608 and Section 701 et seq. of ERISA). All filings and
reports as to
each Seller Plan being assumed by Buyer under this Agreement
required to have
been submitted to the Internal Revenue Service or to the United
States
Department of Labor have been duly submitted. No Seller Plan
being assumed by
Buyer under this Agreement has assets that include securities
issued by the
Seller or any ERISA Affiliate.
(c) There are no Legal Proceedings (except claims for
benefits
payable in the normal operation of the Seller Plans being
assumed by Buyer under
this Agreement and proceedings with respect to qualified
domestic relations
orders) against or involving any Seller Plan or asserting any
rights or claims
to benefits under any Seller Plan that could give rise to any
material
liability.
(d) Neither the Seller nor any ERISA Affiliate has ever
maintained
an Employee Benefit Plan subject to Section 412 of the Code or
Title IV of
ERISA.
(e) At no time has the Seller or any ERISA Affiliate been
obligated
to contribute to any "multiemployer plan" (as defined in Section
4001(a)(3) of
ERISA).
(f) There are no unfunded obligations under any Seller Plan
being
assumed by Buyer providing benefits after termination of
employment to any
employee of the Seller (or to any beneficiary of any such
employee), including
but not limited to retiree health coverage and deferred
compensation, but
excluding continuation of health coverage required to be
continued under Section
4980B of the Code or other applicable law and insurance
conversion privileges
under state law.
(g) No act or omission has occurred and no condition exists
with
respect to any Seller Plan that would subject the Buyer or any
Affiliate of
Buyer to (i) any material fine, penalty, tax or liability of any
kind imposed
under ERISA or the Code or (ii) any contractual
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<PAGE>
indemnification or contribution obligation protecting any
fiduciary, insurer or
service provider with respect to any Seller Plan.
(h) No Seller Plan is funded by, associated with or related to
a
"voluntary employee's beneficiary association" within the
meaning of Section
501(c)(9) of the Code.
(i) Each Seller Plan being assumed by Buyer is amendable and
terminable unilaterally by the Seller at any time without
liability or expense
to the Seller or such Seller Plan as a result thereof (other
than for benefits
accrued through the date of termination or amendment and
reasonable
administrative expenses related thereto) and no Seller Plan,
plan documentation
or agreement, summary plan description or other written
communication
distributed generally to employees by its terms prohibits the
Seller from
amending or terminating any such Seller Plan.
(j) Section 2.20 of the Disclosure Schedule discloses each:
(i)
agreement with any Shareholder, manager, executive officer or
other key employee
of the Seller (A) the benefits of which are contingent, or the
terms of which
are altered, upon the occurrence of a transaction involving the
Seller of the
nature of any of the transactions contemplated by this
Agreement, (B) providing
any term of employment or compensation guarantee or (C)
providing severance
benefits or other benefits after the termination of employment
of such manager,
executive officer or key employee; (ii) agreement, plan or
arrangement under
which any person may receive payments from the Seller that may
be subject to the
tax imposed by Section 4999 of the Code or included in the
determination of such
person's "parachute payment" under Section 280G of the Code; and
(iii) agreement
or plan binding the Seller, including any stock option plan,
stock appreciation
right plan, restricted stock plan, stock purchase plan,
severance benefit plan
or Seller Plan, any of the benefits of which will be increased,
or the vesting
of the benefits of which will be accelerated, by the occurrence
of any of the
transactions contemplated by this Agreement or the value of any
of the benefits
of which will be calculated on the basis of any of the
transactions contemplated
by this Agreement.
(k) Section 2.20 of the Disclosure Schedule sets forth the
policy of
the Seller with respect to accrued vacation, accrued sick time
and earned time
off and the amount of such liabilities as of August 31,
2007.
(l) No insurance policy that provides medical or dental
benefits
under a Seller Plan provides for any retrospective premium
increases.
(m) No Seller Plan that provides medical or dental benefits
is
providing to any individual any continuation coverage mandated
by Section 4980B
of the Code (or any similar law).
2.21 Environmental Matters.
(a) To its knowledge, the Seller has complied with all
applicable
Environmental Laws except where failure to do so would not have
a Seller
Material Adverse Effect. There is no pending or, to the
knowledge of the Seller,
threatened civil or criminal litigation, written notice of
violation, formal
administrative proceeding, or investigation, inquiry or
information request by
any Governmental Entity, relating to any Environmental Law
involving the Seller.
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<PAGE>
(b) To its knowledge, the Seller does not have any liabilities
or
obligations arising from the release of any Materials of
Environmental Concern
into the environment.
(c) The Seller is not a party to or bound by any court
order,
administrative order, consent order or other agreement with any
Governmental
Entity entered into in connection with any legal obligation or
liability arising
under any Environmental Law.
(d) The Seller does not have possession of, or access to, or
knowledge of, any documents (whether in hard copy or electronic
form) that
contain any environmental reports, investigations and audits
relating to
premises currently or previously owned or operated by the Seller
(whether
conducted by or on behalf of the Seller or a third party, and
whether done at
the initiative of the Seller or directed by a Governmental
Entity or other third
party).
(e) The Seller is not aware of any material environmental
liability
of any solid or hazardous waste transporter or treatment,
storage or disposal
facility that has been used by the Seller.
2.22 Legal Compliance. Except as set forth in Section 2.22 of
the
Disclosure Schedule, the Seller is currently conducting, and has
at all times
conducted, its business in material compliance with each
applicable law
(including rules and regulations thereunder) of any federal,
state, local or
foreign government, or any Governmental Entity, and Seller has
had valid Permits
to conduct such business with respect to each jurisdiction (and
at such times)
for which it has been required to have such Permits except where
the lack of any
such Permit would not have a Seller Material Adverse Effect. The
Seller has not
received any notice or communication from any Governmental
Entity alleging
noncompliance with any applicable law, rule or regulation.
2.23 Customers and Suppliers. Section 2.23 of the Disclosure
Schedule sets
forth a list of (a) each customer or supplier arrangement that
accounted for
more than 1% of the revenues of the Seller during the last full
fiscal year or
the interim period through the Most Recent Balance Sheet Date
and the amount of
revenues accounted for by such customer or supplier arrangement
during each such
period and (b) each other supplier of services or goods that is
a critical or
sole supplier of any significant aspect of Seller's business. No
person
identified in the foregoing sentence has provided written or
verbal notice to
Seller within the past year that it will stop, or materially
reduce its activity
below historic levels in connection with any contract or
arrangement on which
Seller currently derives revenue.
2.24 Permits. Section 2.24 of the Disclosure Schedule sets forth
a list of
all Permits issued to or held by the Seller. Such listed Permits
are the only
Permits that are required for the Seller to conduct its business
as presently
conducted or as proposed to be conducted. Each such Permit is in
full force and
effect; the Seller is in material compliance with the terms of
each such Permit;
and, to the knowledge of the Seller, no suspension or
cancellation of such
Permit is threatened.
2.25 Certain Business Relationships With Affiliates. No
Affiliate of the
Seller (a) owns any property or right, tangible or intangible,
which is used in
the business of the Seller, (b) has any claim or cause of action
against the
Seller, or (c) owes any money to, or is owed any money by, the
Seller. Section
2.25 of the Disclosure Schedule describes any transactions
or
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relationships between the Seller and any Affiliate thereof which
occurred or
have existed since the beginning of the time period covered by
the Financial
Statements.
2.26 Brokers' Fees. The Seller does not have any liability or
obligation
to pay any fees or commissions to any broker, finder or agent
with respect to
the transactions contemplated by this Agreement, except Great
Western Business
Services, which commission will be paid by the Seller.
2.27 Books and Records. The minute books and other similar
records of the
Seller contain complete and accurate records of all actions
taken at any
meetings of the Seller's Shareholders, managers or any committee
thereof and of
all written consents executed in lieu of the holding of any such
meeting. The
books and records of the Seller accurately reflect, in all
material respects,
the assets, liabilities, business, financial condition and
results of operations
of the Seller. Section 2.27 of the Disclosure Schedule contains
a list of all
bank accounts and safe deposit boxes of the Seller and the names
of persons
having signature authority with respect thereto or access
thereto.
2.28 Disclosure. No representation or warranty by the Seller
contained in
this Agreement, and no statement contained in the Disclosure
Schedule or any
other document, certificate or other instrument delivered or to
be delivered by
or on behalf of the Seller pursuant to this Agreement, contains
or will contain
any untrue statement of a material fact or omits or will omit to
state any
material fact necessary, in light of the circumstances under
which it was or
will be made, in order to make the statements herein or therein
not misleading.
2.29 Projections. The projections included in Section 2.29 of
the
Disclosure Schedule were prepared by the Seller in good faith
using the best
information available to management of the Seller and represent
Seller
management's good faith estimates of the future performance of
the Seller for
the periods referred to therein. The Buyer acknowledges that the
projections are
estimates and Seller makes no representation or warranty as to
actual future
performance.
2.30 Government Contracts.
(a) The Seller has not been suspended or debarred from bidding
on
contracts or subcontracts with any Governmental Entity; and to
Seller's
knowledge no such suspension or debarment has been threatened or
initiated; and
the consummation of the transactions contemplated by this
Agreement will not
result in any such suspension or debarment of the Seller or the
Buyer (assuming
that no such suspension or debarment will result solely from the
identity of the
Buyer). The Seller has not been or is not now being audited or
investigated by
the United States Government Accounting Office, the United
States Department of
Defense or any of its agencies, the Defense Contract Audit
Agency, the
contracting or auditing function of any Governmental Entity with
which it is
contracting, the United States Department of Justice, the
Inspector General of
the United States, or any prime contractor with a Governmental
Entity; nor, to
the knowledge of the Seller, has any such audit or investigation
been
threatened. To the knowledge of the Seller, there is no valid
basis for (i) the
suspension or debarment of the Seller from bidding on contracts
or subcontracts
with any Governmental Entity or (ii) any claim (including any
claim for return
of funds to the Government) pursuant to an audit or
investigation by any of the
entities named in the foregoing sentence. The Seller has no
agreements,
contracts
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<PAGE>
or commitments which require it to obtain or maintain a security
clearance with
any Governmental Entity.
(b) To the knowledge of the Seller, no basis exists for any of
the
following with respect to any of its contracts or subcontracts
with any
Governmental Entity: (i) a Termination for Default (as provided
in 48 C.F.R.
Ch.1 ss.52.249-8, 52.249-9 or similar sections), (ii) a
Termination for
Convenience (as provided in 48 C.F.R. Ch.1 ss.52.241-1, 52.249-2
or similar
sections), or a Stop Work Order (as provided in 48 C.F.R. Ch.1
ss.52.212-13 or
similar sections); and the Seller has no reason to believe that
funding may not
be provided under any contract or subcontract with any
Governmental Entity in
the upcoming federal fiscal year.
2.31 Securities Representations.
(a) Seller is an "accredited investor" as defined in Rule
501(a)
under the Securities Act. Seller has not been organized,
reorganized or
recapitalized specifically for the purpose of acquiring the
Shares.
(b) The Seller is acquiring the Shares for its own account
for
investment only, and not with a view to, or for sale in
connection with, any
distribution of the Shares in violation of the Securities Act,
or any rule or
regulation under the Securities Act.
(c) The Seller has had adequate opportunity to obtain from
representatives of the Buyer such information about the Buyer as
is necessary
for the undersigned to evaluate the merits and risks of its
acquisition of the
Shares.
(d) The Seller has sufficient expertise in business and
financial
matters to be able to evaluate the risks involved in the
acquisition of the
Shares and to make an informed investment decision with respect
to such
acquisition.
(e) The Seller understands that the Shares have not been
registered
under the Securities Act and are "restricted securities" within
the meaning of
Rule 144 under the Securities Act; and the Shares cannot be
sold, transferred or
otherwise disposed of unless they are subsequently registered
under the
Securities Act or an exemption from registration is then
available.
(f) A legend substantially in the following form will be placed
on
the certificate(s) representing the Shares:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT
UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
CORPORATION TO THE
EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED."
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<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to the Seller that the
statements
contained in this Article III are true and correct as of the
date of this
Agreement and will be true and correct as of the Closing as
though made as of
the Closing.
3.1 Organization and Corporate Power. The Buyer is a corporation
duly
organized, validly existing and in good standing under the laws
of the State of
Indiana. The Buyer has all requisite corporate power and
authority to carry on
the business in which it is engaged and to own and use the
properties owned and
used by it.
3.2 Authorization of the Transaction. The Buyer has all
requisite power
and authority to execute
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