ASSET PURCHASE
AGREEMENT
by and among
S-2-S ACQUISITION
CORPORATION
and
SPORTS-2-SCHOOL,
LLC
and
BUCK SWINDLE
ASSOCIATES, INC.
AUGUST 12,
2005
ARTICLE
I PURCHASE
OF ASSETS AND RIGHTS; LIABILITIES EXCLUDED AND
ASSUMED
Section
1.1
Agreement to
Sell
Section
1.2
Purchased
Assets
Section
1.3
Excluded
Assets
Section
1.4
Assumption of
Liabilities; Satisfaction .
Section
1.5
Excluded
Liabilities .
Section
1.6
Purchase
Price .
Section
1.7
Allocation of
Purchase Price
Section
1.8
Consents
ARTICLE
II REPRESENTATIONS AND WARRANTIES OF
SELLER AND THE MEMBER
Section
2.1
Organization
Section
2.2
Ownership of
Membership Interests
Section
2.3
Subsidiaries,
etc
Section
2.4
Authority Relative to
and Validity of this Agreement
Section
2.5
No
Conflict
Section
2.6
Governmental
Consents
Section
2.7
Financial
Statements
Section
2.8
Liabilities
Section
2.9
Absence of Certain
Changes and Events
Section
2.10
Taxes and Tax
Returns.
Section
2.11
Title to
Property .
Section
2.12
Intellectual
Property .
Section
2.13
Legal Proceedings,
Claims, Investigations, etc
Section
2.14
Insurance
Section
2.15
Material
Contracts .
Section
2.16
Customers
Section
2.17
Trade Accounts
Receivable
Section
2.18
Certain
Transactions
Section
2.19
Broker
Section
2.20
Environmental
Matters.
Section
2.21
Illegal
Payments
Section
2.22
Licenses
Section
2.23
Compliance with
Law
Section
2.24
Labor
Matters
Section
2.25
Employee
Benefits .
Section
2.26
Books of Account;
Records; Bank Accounts
Section
2.27
Investments in
Competitors
Section
2.28
Employees
Section
2.29
Workers
Compensation
Section
2.30
Credit
Terms
Section
2.31
Other
ARTICLE
III REPRESENTATIONS AND WARRANTIES OF
PURCHASER
Section
3.1
Corporate
Organization
Section
3.2
Authority
Section
3.3
Capitalization
Section
3.4
Governmental
Consents
Section
3.5
No Conflicts; Absence
of Defaults; No Third Party Consent Required
Section
3.6
Legal Proceedings,
Claims, Investigations, etc
ARTICLE
IV COVENANTS OF THE PARTIES
Section
4.1
Access
Section
4.2
Conduct of
Business
Section
4.3
Preservation of
Business Prior to Closing Date
Section
4.4
Exclusivity .
Section
4.5
Reasonable
Efforts
Section
4.6
Conduct; Notification
of Certain Matters
Section
4.7
Public
Disclosure
Section
4.8
Expenses
Section
4.9
Loss
Section
4.10
Disclosure to
Employees
Section
4.11
Name
Change
Section
4.12
Bank
Accounts
Section
4.13
Taxes
.
Section
4.14
Closing Date Balance
Sheet
Section
4.15
Additional Documents
and Further Assurances
Section
4.16
Confidentiality.
Section
4.17
Product
Claims
Section
4.18
Transition of
Customers
ARTICLE
V CONDITIONS TO THE CLOSING
Section
5.1
Illegality
Section
5.2
Absence of
Litigation
Section
5.3
Consents and
Approvals
ARTICLE
VI CLOSING
CONDITIONS TO OBLIGATIONS; CLOSING DELIVERIES
Section
6.1
The
Closing .
Section
6.2
Conditions to
Obligations of Seller and the Members
Section
6.3
Conditions to
Obligations of Purchaser
Section
6.4
Deliveries by Seller
and the Member at the Closing
Section
6.5
Deliveries by
Purchaser at the Closing
ARTICLE
VII SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; INDEMNIFICATION
Section
7.1
Survival
Section
7.2
Indemnification by
Seller and the Member
Section
7.3
Indemnification by
Purchaser
Section
7.4
Limitation of
Indemnification Obligations
Section
7.5
Indemnification
Procedures .
Section
7.6
Payment; Right of
Offset
Section
7.7
Other Rights and
Remedies Not Affected
ARTICLE
VIII TERMINATION, AMENDMENT AND
WAIVER
Section
8.1
Termination
Section
8.2
Effect of
Termination
ARTICLE
IX MISCELLANEOUS
Section
9.1
Notices
Section
9.2
Specific
Performance
Section
9.3
Entire
Agreement
Section
9.4
Binding Effect,
Benefits, Assignments
Section
9.5
Applicable
Law
Section
9.6
Jurisdiction
Section
9.7
Severability
Section
9.8
No Third Party
Beneficiaries
Section
9.9
Headings
Section
9.10
Pronouns and Plurals;
Interpretation
Section
9.11
Counterparts
Section
9.12
Representation By
Counsel; Interpretation
2306398_4.DOC
ASSET PURCHASE
AGREEMENT
THIS ASSET PURCHASE
AGREEMENT (this
“Agreement”), dated as of August 12, 2005, is by and
among S-2-S Acquisition Corporation, a Delaware corporation
(together with its successors and assigns,
“Purchaser”), Sports-2-School, LLC, a Kentucky limited
liability company (“Seller”) and Buck Swindle
Associates, Inc., a Georgia corporation (the
“Member”).
W I T N E S S E T H
This Agreement describes a transaction in
which Purchaser is purchasing substantially all of the assets of
Seller used in the business of marketing and selling imprinted
sportswear (the “Business”) and assuming certain
enumerated liabilities of Seller.
IN CONSIDERATION of the premises and the
representations, warranties, covenants and agreements contained
herein, the receipt and legal sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound
hereby, agree as follows:
ARTICLE
I
PURCHASE OF ASSETS
AND RIGHTS;
LIABILITIES EXCLUDED AND ASSUMED
Section 1.1
Agreement to Sell
. At the Closing, which shall occur
on the Closing Date (both terms as defined in Section 6.1 hereof),
and in accordance with the terms and conditions of this Agreement,
Seller shall grant, sell, convey, assign and deliver to Purchaser,
all right, title and interest of Seller in and to all of the
operating assets, properties and rights of Seller set forth in
Section 1.2 hereof and the Schedules referred to therein (the
“Purchased Assets”), which shall not include the
Excluded Assets (as defined in Section 1.3 hereof), and which shall
be free and clear of all mortgages, liens, pledges, security
interests, charges, claims, restrictions and encumbrances of any
nature whatsoever (“Liens”), other than Permitted Liens
(as defined in Section 2.11 hereof).
Section 1.2
Purchased Assets
. The Purchased Assets shall
include, without limitation, the following assets:
(a)
all deposits, cash, cash equivalents,
escrow accounts, marketable securities and expense reimbursements
of the Seller as of the Closing Date;
(b)
all accounts receivable, employee
receivables, prepaid assets, prepayments (including without
limitation any prepaid insurance policy premiums and prepaid
taxes), deposits, and expense reimbursements;
(c)
all machinery, equipment, supplies,
vehicles, buildings, personal property, furniture, office
equipment, computer equipment, fax machines, telephones and
telephone systems, fixtures, furnishings, parts, spare parts and
tools used in the operation of the Business, including without
limitation those set forth in Schedule 1.2(c) ;
(d)
all contracts, agreements (including
without limitation all license agreements), insurance policies and
other agreements to which Seller is a party and that are set forth
in Schedule 1.2(d) as contracts Buyer wishes to assume
(collectively, the “Assumed Contracts”);
(e)
all patents (and applications therefore),
trademarks (and applications therefore), trade names, including any
rights Seller may have in the name “Sports-2-School,”
any similar names and any derivations thereof, service marks,
copyrights, technologies, methods, formulations, art work,
drawings, designs, data bases, computer systems, software,
operating manuals, trade secrets, know-how, franchises, licenses,
vendor numbers (including without limitation the vendor numbers set
forth in Schedule 1.2(e) (the “Vendor Numbers”),
business permits, certificates, customer lists, all information,
files, records, data, plans and recorded information related to the
foregoing and other intellectual property used in the Business (and
any applications for any of the foregoing) (collectively, the
“Purchased Proprietary Rights”);
(f)
all right, title and interest in and to
Seller’s Business, Seller’s goodwill and any other
intangible asset owned by it or used in the operation of the
Business.
(g)
the registration for the website address
(URL) www.____________________ (the “Website”)
and the underlying HTML source code for the Website and all content
related thereto.
(h)
all operating data and records of Seller
used in the Business, including information, files, records, data,
employee files, plans, contracts and recorded information, customer
lists, vendor lists, supplier lists, production records, accounting
records, property records, mailing lists, customer pricing
information, credit records, correspondence, office supplies,
budgets, documents and records similar to the foregoing, and all
other records and files with respect to the assets,
properties and rights being transferred hereunder;
(i)
all claims, refunds, warranties (express
or implied), rights of recovery and any other rights Seller may
have against its customers and vendors and under any products
liability insurance maintained by Seller;
(j)
all qualifications, registrations,
filings, privileges, franchises, immunities, licenses, permits,
authorizations and approvals of any federal, state or local
regulatory, administrative or other governmental agency or body
that are used by, or required for, the ownership and operation of
the Business;
(k)
all causes of action, judgments, claims,
demands, credits, refunds, rights of recovery, rights of set-off
and other rights of Seller of every kind and nature.
Section 1.3
Excluded Assets
. Notwithstanding the foregoing,
the Purchased Assets shall not include any of the following (the
“Excluded Assets”):
(a)
Seller’s inventory;
(b)
Seller’s notes receivable to
Gaddco, Inc. and the Member; and
(c)
The rights of Seller under this
Agreement.
Section 1.4
Assumption of Liabilities;
Satisfaction .
(a)
At the Closing, Purchaser, subject to
Section 1.4(b), shall assume and agree to pay, discharge or
perform, as appropriate, the following liabilities and obligations
of Seller (collectively, the “Assumed
Liabilities”):
(i)
Up to One Hundred Seventy-Two Thousand
Dollars ($172,000) of Seller’s indebtedness to McIntosh Bank
(the “Bank”) pursuant to that certain working capital
note by and between Bank and Seller dated ________________ (the
“Seller’s Bank Indebtedness”); and
(ii)
Seller’s performance obligations
associated with any deposits that are Purchased Assets;
and
(iii)
the Assumed Contracts set forth on
Schedule 1.2(d) .
(iv)
any amounts due Purchaser for merchandise
owed.
Notwithstanding anything in Section
1.4(a) to the contrary, the Assumed Liabilities shall not include
any indebtedness of Seller or the Member of any type, kind or
nature whatsoever, whether owed or contingent, whether real or
implied, to any member, officer, manager, employee or any other
related party or affiliate of Seller.
Section 1.5
Excluded Liabilities
.
(a)
Except as otherwise specifically provided
in Section 1.4 hereof, Purchaser shall not assume, nor shall it
agree to pay, perform or discharge any liability or obligation of
any kind or nature whatsoever of Seller (collectively, the
“Excluded Liabilities”), including, without
limitation;
(i)
any liability for interest bearing debt
(including all interest prepayment premiums or penalties and all
other liabilities associated therewith, capital lease obligations
(other than Assumed Contracts), non-operating liabilities, amounts
owed and outstanding to any Employee Benefit Plans (as defined in
Section 2.25), incentive compensation and bonuses, off-balance
sheet liabilities, payment obligations incurred in connection with
any non-competition or employment agreement or arrangement, current
and deferred Taxes, deferred revenues, deferred purchase price of
property and all obligations of Seller evidenced by bonds,
debentures, notes or similar instruments;
(ii)
any liability to pay any Taxes,
regardless of whether the liability for such Taxes exists now or in
the future, whether arising from operations, in connection with the
consummation of the transactions contemplated hereby or otherwise,
except that Purchaser shall pay all sales, use and/or transfer
taxes that arise out of the transactions contemplated
herein;
(iii)
any liability to pay the Taxes of any
other person or entity because Seller was a member of an affiliated
group under Section 1504(a) of the Internal Revenue Code of 1986,
as amended (the “IRC”);
(iv)
any liability or obligation with respect
to the Excluded Assets;
(v)
any obligation to indemnify any person by
reason of the fact that such person was a member, manager, officer,
employee or agent of Seller, or was serving at the request of
Seller as a partner, trustee, director, officer, employee or agent
of another entity;
(vi)
any liability or obligation with respect
to any Employee Benefit Plans, programs or practices, including but
not limited to Employee Benefit Plan claims, incentive
compensation, bonus accruals, vacation pay, sick pay, and medical,
vision, dental or retirement plans, programs or
practices;
(vii)
any liability for payments to employees
under the Worker Adjustment and Retraining Notification Act or the
Family and Medical Leave Act of 1993;
(viii)
any liability for offering and providing
COBRA continuation coverage to any qualified beneficiary who is
covered by an Employee Benefit Plan which is a group health plan
(where, for the purposes of this subsection the terms
“continuation coverage,” “qualified
beneficiary” and “group health plan” have the
meanings given such terms under Section 4980B of the IRC and
Section 601 et seq., of the Employee Retirement Income Security Act
of 1974, as amended (“ERISA”));
(ix)
any liability for commitments relating to
the employment, relocation or termination of any employees,
including without limitation, accrued salary or severance
pay;
(x)
any liability for costs and expenses
incurred in connection with this Agreement and the transactions
contemplated hereby;
(xi)
any liability relating to violations of
any Environmental Laws;
(xii)
any liability arising from the
infringement of the intellectual property rights of others or the
allegation of such infringement;
(xiii)
any product liability or similar claim
for injury to person or property, regardless of when made or
asserted, which arises out of or is based upon any express or
implied representation, warranty, agreement or guarantee made on or
prior to the Closing Date, or which is imposed or asserted to be
imposed by operation of law, in connection with any service
performed or product sold or leased on or prior to the Closing
Date, including without limitation any claim relating to any
product delivered in connection with the performance of such
service and any claim seeking recovery for consequential damage,
lost revenue or income; or
(xiv)
any liability, payment or performance
obligation with respect to (A) any employee, member, former member
or affiliated entity of Seller, (B) any affiliate, stockholder,
family member or relative of any one of the foregoing.
(b)
Seller and the Member, jointly and
severally, shall remain liable for, and shall discharge when due,
all of the Excluded Liabilities.
Section 1.6
Purchase Price .
(a)
The consideration for the purchase of the
Purchased Assets shall be (i) shares of common stock of Next, Inc.,
a Delaware corporation ("Next"), $.001 par value per share
(“Shares”), sufficient to arrive at a cumulative dollar
value of up to Five Hundred Thousand and No/Dollars ($500,000.00)
(the “Stock Consideration”), (ii) cash up to Six
Hundred Fifty Thousand and No/Dollars ($650,000.00) (the "Cash
Consideration"), and (iii) the assumption of the Assumed
Liabilities. The Cash Consideration and the Stock
Consideration actually paid hereunder is referred to as the
“Purchase Price.”
(b)
The Stock Consideration for the 2006
Measurement Year shall be determined as follows:
(i)
If the Sales Target for the 2006
Measurement Year equals or exceeds Three Million Dollars
($3,000,000), Purchaser shall cause to be delivered to Seller
Shares having a value equal to One Hundred Fifty Thousand Dollars
($150,000).
(ii)
If the Sales Target for the 2006
Measurement Year exceeds Two Million One Hundred Thousand Dollars
($2,100,000) but is less than Three Million Dollars ($3,000,000),
Purchaser shall cause to be delivered to Seller Shares having a
value equal to the actual amount of the Sales Target in excess of
Two Million One Hundred Thousand Dollars ($2,100,000) multiplied by
0.16667.
(iii)
If the Sales Target for the 2006
Measurement Year is less than Two Million One Hundred Thousand
Dollars ($2,100,000), no Shares shall be delivered to
Seller.
(c)
The Stock Consideration for the 2007
Measurement Year shall be determined as follows:
(i)
If the Sales Target for the 2007
Measurement Year equals or exceeds Four Million Dollars
($4,000,000), Purchaser shall cause to be delivered to Seller
Shares having a value equal to One Hundred Fifty Thousand Dollars
($150,000).
(ii)
If the Sales Target for the 2007
Measurement Year exceeds Three Million One Hundred Thousand Dollars
($3,100,000) but is less than Four Million Dollars ($4,000,000),
Purchaser shall cause to be delivered to Seller Shares having a
value equal to the actual amount of the Sales Target in excess of
Three Million One Hundred Thousand Dollars ($3,100,000) multiplied
by 0.16667.
(iii)
If the Sales Target for the 2007
Measurement Year is less than Three Million One Hundred Thousand
Dollars ($3,100,000), no Shares shall be delivered to
Seller.
(d)
The Stock Consideration for the 2008
Measurement Year shall be determined as follows:
(i)
If the Sales Target for the 2008
Measurement Year equals or exceeds Five Million Dollars
($5,000,000), Purchaser shall cause to be delivered to Seller
Shares having a value equal to Two Hundred Thousand Dollars
($200,000).
(ii)
If the Sales Target for the 2008
Measurement Year exceeds Four Million One Hundred Thousand Dollars
($4,100,000) but is less than Five Million Dollars ($5,000,000),
Purchaser shall cause to be delivered to Seller Shares having a
value equal to the actual amount of the Sales Target in excess of
Four Million One Hundred Thousand Dollars ($4,100,000) multiplied
by 0.2223.
(iii)
If the Sales Target for the 2006
Measurement Year is less than Four Million One Hundred Thousand
Dollars ($4,100,000), no Shares shall be delivered to
Seller.
(e)
For purposes of this Section 1.6, the
terms set forth below shall have the following meanings:
(i)
“2006 Measurement Year” means
the twelve (12) month period ending on November 30,
2006.
(ii)
“2007 Measurement Year” means
the twelve (12) month period ending on November 30,
2007.
(iii)
“2008 Measurement Year” means
the twelve (12) month period ending on November 30,
2008.
(iv)
“Measurement Year” means the
2006 Measurement Year, the 2007 Measurement Year or the 2008
Measurement Year, as applicable.
(v)
“Sales Target” means the
aggregate net sales of the Business, as determined by the
Company.
(f)
The per-share value of the Shares shall
be equal to the average per-share closing price during the ten-day
trading period ending the applicable Measurement Year.
(g)
The Stock Consideration, if any, shall be
paid within ninety (90) days of the last day of the applicable
Measurement Year by delivery of Share stock certificates to Seller
(or the Member upon Seller’s written request) at the address
set forth in Section 9.1 of this Agreement.
(h)
The Cash Consideration shall be paid as
follows:
(i)
Fifty Thousand Dollars ($50,000) shall be
paid on the Closing Date (the “Closing Date Cash
Consideration”) by wire transfer to an account designated by
Seller.
(ii)
If the Sales Target is in an amount up to
One Million ($1,000,000) during the period beginning on the Closing
Date and ending on the last day of the 2008 Measurement Year,
Purchaser shall pay to Seller in cash up to One Hundred Twenty
Thousand Dollars ($120,000).
(iii)
If the Sales Target is more than One
Million Dollars and less than Two Million ($2,000,000) during the
period beginning on the Closing Date and ending on the last day of
the 2008 Measurement Year, Purchaser shall pay to Seller in cash up
to an additional One Hundred Twenty Thousand Dollars
($120,000).
(iv)
If the Sales Target is more than Two
Million Dollars ($2,000,000) and less than Three Million
($3,000,000) during the period beginning on the Closing Date and
ending on the last day of the 2008 Measurement Year, Purchaser
shall pay to Seller in cash up to an additional One Hundred Twenty
Thousand Dollars ($120,000).
(v)
If the Sales Target is more than Three
Million Dollars ($3,000,000) and less than Four Million
($4,000,000) during beginning on the Closing Date and ending on the
last day of the 2008 Measurement Year, Purchaser shall pay to
Seller in cash up to an additional One Hundred Twenty Thousand
Dollars ($120,000).
(vi)
If the Sales Target is more than Four
Million Dollars ($4,000,000) and less than Five Million
($5,000,000) during the period beginning on the Closing Date and
ending on the last day of the 2008 Measurement Year, Purchaser
shall pay to Seller in cash up to an additional One Hundred Twenty
Thousand Dollars ($120,000).
(vii)
If the Sales Target on the last day of
the 2008 Measurement Year is between any two amounts set forth in
subsections (i), (ii), (iii), (iv) and (v), Purchaser shall pay to
Seller in cash an amount equal to the actual amount of the Sales
Target in excess of the lower of such two amounts multiplied by
0.12.
(viii)
With respect to the payments contemplated
by subsections (ii) through (vi), Purchaser shall be entitled to
make prorated monthly, quarterly and other interim payments of Cash
Consideration if Purchaser in its sole discretion determines that
forecasted or estimated Sales Targets are met for such periods;
provided, however, that the frequency of any such payments shall at
all times be made in the sole discretion of Purchaser.
(ix)
It is acknowledged and agreed that the
sales used to determine the Sales Target are generated by the
Member and SDJ, LLC. Accordingly, the parties agree that
Purchaser in its sole discretion shall be entitled to allocate and
pay directly the Cash Consideration referred to in subsections (ii)
through (vii) to the Member and SDJ, LLC.
(x)
The Cash Consideration shall be paid
within thirty (30) days following the date on which the Company
determines that the applicable Sales Target has been
achieved.
(i)
If Seller prior to the Closing makes any
debt payments or declares or makes any distributions to or in favor
of the Member or any party affiliated with Seller or the Member,
the Cash Consideration shall on a pro rata basis be reduced,
dollar-for-dollar, as of the Closing Date by the amount of such
debt payment or distribution.
Section 1.7
Allocation of Purchase
Price . The Purchase
Price shall be allocated among the Purchased Assets in accordance
with Schedule 1.7 to be attached hereto on the Closing Date.
Seller, Purchaser and the Member each covenant and agree that
they will not take a position on any Tax Return, before any
governmental agency charged with the collection of any Tax, or in
any judicial proceeding that is in any way inconsistent with the
terms of this Section 1.7 or Schedule 1.7 .
Section 1.8
Consents . Notwithstanding anything else contained in
this Agreement to the contrary unless waived by Purchaser in
writing, this Agreement shall not constitute an agreement to sell,
convey, assign, transfer or deliver any interest in any Assumed
Contract or any claim, right or benefit arising thereunder or
resulting therefrom if such a transfer or attempted transfer,
without the authorization, approval, consent or waiver
(collectively, an “Approval”) of a third party, would
constitute a breach or violation thereof, or adversely affect the
rights of Purchaser thereunder, or result in a material adverse
effect on the Business. In the event that Purchaser assumes any
Assumed Contract for which any such Approval is not obtained on or
prior to the Closing Date, Seller and the Member shall continue to
use commercially reasonably efforts to obtain such Approval and
cooperate with Purchaser in any reasonable and lawful arrangement
that provides Purchaser with the benefits of such Assumed Contract,
including, without limitation, the enforcement, for the benefit of
Purchaser, of any and all rights of Seller arising out the breach,
termination or cancellation of an Assumed Contract by a third
party. Any and all consent and assignment costs or charges
expressly set forth in any Assumed Contract, including, without
limitation, payments stated to be due in connection with the sale,
transfer, or other disposition of the Business by Seller, shall be
paid for by Seller.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF SELLER AND THE MEMBER
Seller and the Member, jointly and
severally, represent and warrant to Purchaser as of the date of
this Agreement and as of the Closing Date, with full knowledge that
such representations and warranties are a material consideration
and inducement to the execution of this Agreement by Purchaser and
the consummation of the transactions contemplated
hereunder:
Section 2.1
Organization . Seller is a limited liability company duly
organized, validly existing and in good standing under the laws of
the State of Kentucky. Seller has all requisite power and
authority to own, operate and lease its properties and to carry on
its business as the same is now being conducted. Seller is
duly qualified or licensed to do business as a foreign limited
liability company in the jurisdictions in which the conduct of its
business or the ownership or leasing of its properties require
Seller to be so qualified or licensed. Seller has delivered
to the Buyer complete and correct copies of its articles of
organization and operating agreement, in each case, as amended and
in effect on the date hereof. Seller is not in violation of
any of the provisions of its certificate of formation or operating
agreement.
Section 2.2
Ownership of Membership
Interests . The
respective ownership interests of the members of Seller are set
forth in Schedule 2.2 . The persons set forth in
Schedule 2.2 collectively own all of the issued and
outstanding membership interests of Seller (the “Membership
Interests”), free and clear of all liens, claims or
encumbrances of any nature. The Membership Interests have
been duly authorized, validly issued and are fully paid and
non-assessable and free of preemptive rights. There are no
subscriptions, options, warrants, calls, rights, contracts,
commitments, agreements, understandings or arrangements to sell or
issue any Membership Interests, including any right of conversion
or exchange under any outstanding security or other instrument, and
no membership interests are reserved for issuance for any
purpose.
Section 2.3
Subsidiaries, etc
. Seller does not own (directly or
indirectly) any equity interest in any corporation, partnership,
limited liability company, joint venture, affiliate, association or
other entity.
Section 2.4
Authority Relative to and Validity of
this Agreement . Seller
and the Member have all requisite power, limited liability company
or otherwise, and authority to enter into this Agreement, to
perform all of their obligations hereunder and to consummate the
transactions contemplated hereby without the approval of any third
party. The execution and delivery of this Agreement, the
performance by Seller and the Member of their respective
obligations hereunder and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all
necessary limited liability company action on the part of Seller
including, without limitation, approval of Seller’s members
and managers. There are no limited liability company, contractual,
statutory or other restrictions of any kind upon the power and
authority of Seller or the Member to execute and deliver this
Agreement and to consummate the transactions contemplated hereby
and no action, waiver or consent by any government or any agency,
bureau, board, commission, court, department, official, political
subdivision, tribunal or other instrumentality of any government,
whether federal, state or local, domestic or foreign (collectively,
a “Governmental Entity”) is necessary to make this
Agreement a valid instrument binding upon Seller and the Member in
accordance with its terms. This Agreement has been duly executed
and delivered by Seller and the Member, and constitutes the legal,
valid and binding obligations of Seller and the Member.
Section 2.5
No Conflict . The execution, delivery and performance of
this Agreement by Seller and the Member, and the consummation of
the transactions contemplated hereby (a) will not result in any
violation of, conflict with, constitute a breach, violation or
default (with or without notice or lapse of time, or both) under,
give rise to a right of termination, cancellation, forfeiture or
acceleration of any obligation or loss of any benefit under, or
result in the creation or encumbrance on any of the properties or
assets of Seller or the Member pursuant to (i) any provision of
Seller’s articles of organization or operating agreement or
(ii) any agreement, contract, understanding, note, mortgage,
indenture, lease, franchise, license, permit or other instrument to
which Seller or the Member is a party or by which their respective
properties or assets are bound, or (b) conflict with or result in
any breach or violation of any statute, judgment, decree, order,
rule or governmental regulation applicable to Seller or the Member
or their respective properties or assets.
Section 2.6
Governmental Consents
. No consent, approval, order or
authorization of, or registration, declaration of, or qualification
or filing with, any Governmental Entity is required by or with
respect to Seller or the Member in connection with the execution,
delivery and performance of this Agreement or the consummation of
the transactions contemplated hereby.
Section 2.7
Financial Statements
. Seller has delivered to Purchaser
true and complete copies of its interim financial statements (the
“Interim Financial Statements”) for the period ending
on March 31, 2005 (the “Interim Financial Statement
Date”) and its audited financial statements, including the
notes thereto, for the fiscal year ended December 31, 2004
(collectively with the Interim Financial Statements, the
“Financial Statements”), copies of which are attached
hereto as Schedule 2.7 (i) . The Financial Statements
have been prepared in conformity with generally accepted accounting
principles on an accrual basis (“GAAP”) and present
fairly the financial condition, assets and liabilities of Seller as
of the respective dates thereof and the results of operations and
cash flows for the respective periods covered, subject with respect
to the Interim Financial Statements to normal year-end adjustments
and any other adjustments described therein none of which shall be
material individually or in the aggregate. Since the Interim
Financial Statement Date and except as set forth in Schedule
2.7(ii) , Seller has not sold or otherwise disposed of or
encumbered any of the respective properties or assets reflected on
the Interim Financial Statements, or other assets owned or leased
by it, except in the ordinary course of business. Except for
trade payables and liabilities arising in the ordinary course of
business, Seller has not incurred any liability since the Interim
Financial Statement Date, whether accrued, absolute, contingent or
otherwise.
Section 2.8
Liabilities . Seller has no liability, debt or obligation
of any nature (whether liquidated, unliquidated, direct, accrued,
absolute, contingent or otherwise, and whether due or to become
due), except liabilities that (i) are set forth in Schedule
2.8 , (ii) are reflected on the Financial Statements, or (iii)
were incurred in the ordinary course of business after the Interim
Financial Statement Date.
Section 2.9
Absence of Certain Changes and
Events . Since March 31,
2005, there have not been any material adverse changes in the
condition (financial or otherwise), assets, liabilities, earnings,
properties, Business or prospects of Seller, and Seller has
not;
(a)
authorized, issued, sold or converted any
of its equity capital, or entered into any agreement with respect
thereto;
(b)
declared, set aside or made any dividend
or other distribution to its members or purchased, redeemed or
reclassified any of their equity capital or effected any stock
split, stock dividend, exchange or recapitalization or entered into
any agreement in respect of the foregoing;
(c)
incurred any damage, destruction or
similar loss, whether or not covered by insurance, adversely
affecting the Business or the Purchased Assets;
(d)
other than in the ordinary course of
business, sold, assigned, transferred or otherwise disposed of any
of its tangible or intangible assets or the Intellectual
Property;
(e)
other than in the ordinary course of
business, mortgaged, pledged, granted or suffered to exist any lien
or encumbrance on any of its assets or properties, tangible or
intangible;
(f)
other than in the ordinary course of
business, waived any rights of material value of cancelled,
discharged, satisfied or paid any debt, claim, lien, encumbrance,
liability or obligation, whether absolute, accrued, contingent or
otherwise and whether due or to become due;
(g)
other than in the ordinary course of
business, incurred any obligation or liability (absolute or
contingent, liquidated or unliquidated, choate or
inchoate);
(h)
other than in the ordinary course of
business, leased or effected any transfer of any of the assets,
properties or rights;
(i)
other than in the ordinary course of
business, entered into, made any amendment to or terminated any
agreement to which Seller is a party;
(j)
amended its organizational
instruments;
(k)
effected any change in its accounting
practices, procedures or methods;
(l)
paid, loaned or advanced any amount to or
sold, transferred or leased any properties or assets (real,
personal or mixed, tangible or intangible) to, or entered into any
agreement, arrangement or transaction of any nature with any
member, manager or officer of Seller, any “affiliate”
or “associate” of any member, manager or officer of
Seller (as such terms are defined in the rules and regulations of
the Securities and Exchange Commission promulgated under the
Securities Act of 1933, as amended), or any business or entity in
which any member, manager or officer of Seller, or any
“affiliate” or “associate” of any member,
manager or officer of Seller, has any direct or indirect interest,
except for regular compensation paid to its members or any
affiliates of its members who are also employees of
Seller;
(m)
increased the compensation payable to any
of its managers, officers or employees or become obligated to
increase any such compensation; or
(n)
entered into any other transaction other
than in the ordinary course of business and consistent with past
practices, or changed in any way its business policies or
practices.
Section 2.10
Taxes and Tax Returns.
(a)
Seller has filed or caused to be filed in
a timely manner all returns, declarations, reports, estimates,
information returns and statements with respect to Taxes
(collectively, the “Tax Returns”) required to be filed
under any United States federal, state or local or any foreign law
pertaining to Taxes and such Tax Returns are, in all material
respects, true, complete and correct. Seller has paid, within
the time and in the manner prescribed by law or, alternatively,
will pay in a timely manner on or before the Closing Date, all
Taxes required to be shown on such Tax Returns. No claim has
ever been made by an authority in a jurisdiction where Seller does
not file Tax Returns that Seller is or may be subject to taxation
by that jurisdiction. “Tax” or
“Taxes” shall mean, collectively, all taxes, charges,
fees, levies or other assessments including, without limitation,
all net income, gross income, gross receipts, sales, use, value
added, ad valorem, transfer, franchise, profits, alternative (or
add-on) minimum, license, withholding, employment, environmental,
payroll, disability, excise, estimated, severance, stamp,
occupation, property, unemployment or other taxes, customs duties,
fees, assessments or charges of any kind whatsoever, whether
computed on a consolidated, unitary, combined, separate or any
other basis, together with any interest and any penalties,
additions to tax or additional amounts imposed by any taxing
authority.
(b)
Seller has paid or accrued on its books
and records amounts that are adequate for the payment of all Taxes,
whether or not required to be shown on any Tax Return, not yet due
and payable, including Taxes for any period that ends on or before
the Closing Date and for any period that begins before the Closing
Date and ends after the Closing Date to the extent such Taxes are
attributable to the portion of any such period ending on the
Closing Date.
(c)
Seller has complied with all applicable
laws, rules and regulations relating to the payment and withholding
of Taxes and has, within the time and in the manner prescribed by
law, withheld from employees and any other third parties and paid
over to the proper governmental authorities, all amounts required
to be so withheld and paid under all applicable laws.
(d)
There are no outstanding waivers or
comparable consents regarding the application of the statute of
limitations with respect to any Taxes or Tax Returns that have been
given by Seller, and Seller is not the beneficiary of any extension
to file any Tax Return.
(e)
No federal, state, local or foreign
audits or other administrative or court proceedings are presently
pending with regard to any Taxes or Tax Returns of Seller and, to
Seller’s or Seller Members’ knowledge, no deficiencies
for any Taxes have been asserted against Seller that have not been
resolved or paid in full. There are no tax liens or similar
encumbrances with respect to any of the assets of Seller that arose
in connection with any failure (or alleged failure) to pay any Tax.
No issue is currently being asserted by the Internal Revenue
Service (the “IRS”) or other relevant taxing authority
in any audit or examination of the respective Tax Returns of
Seller. Seller has not filed, with respect to any item, a
disclosure statement pursuant to Section 6662 of the Code, or any
comparable disclosure with respect to federal, state and/or local
tax statutes.
(f)
No currently effective power of attorney
has been granted by Seller with respect to any matter relating to
Taxes that is currently in force.
(g)
At no time has Seller been included in a
consolidated, affiliated, combined, unitary or similar Tax Return
nor was any such inclusion required nor has any liability on Taxes
of any other person as a transferee, successor, by contract or
otherwise, been assessed against Seller.
Section 2.11
Title to Property
.
(a)
Seller has good and marketable title to,
or in the case of leased assets and properties, valid leasehold
interests in, all tangible real and personal assets and property
that it owns or leases or that is used in the operation of the
Business (collectively, the “Property”), free and clear
of all liens, claims and encumbrances of any nature, except those
identified in the Financial Statements (“Permitted
Liens”). Schedule 2.11(a)(i) sets forth a
complete and accurate list of all such owned or leased property
including, without limitation, (i) all inventory, machinery,
equipment, tooling, parts, furniture, supplies, office equipment,
(ii) all leases of equipment or other property used in the conduct
of the respective Businesses and (iii) all other owned or leased
property. Except as set forth in Schedule 2.11(a)(ii)
, no financing statement under the Uniform Commercial Code or any
similar law naming Seller as debtor has been filed in any
jurisdiction in respect of the Property, and neither Seller nor the
Member is a party to or bound under any agreement or legal
obligation authorizing a party to file any such financing
statement, except those financing statements that will be
terminated at Closing.
(b)
Each lease identified on Schedule
2.11(a)(i) is valid and enforceable in accordance with its
terms, in all material respects, and is in full force and effect.
Except as set forth on Schedule 2.11(b) , no consent or
approval of any landlord or other third party in connection with
any such lease is necessary for Seller or the Member to enter into
and execute this Agreement and consummate the transactions
contemplated hereby. To the best of Seller’s knowledge, no
other party to any lease is in default of its obligations
thereunder, and Seller (or any other party to any such lease) has
not at any time delivered or received any notice of default which
remains uncured under any such lease and no event has occurred
which, with the giving of notice or the passage of time, or both,
would constitute a default under any such lease.
(c)
All material items of equipment owned or
leased by Seller are in good operating condition, regularly and
properly maintained, subject to normal wear and tear.
Section 2.12
Intellectual Property
.
(a)
Seller owns, or holds legally enforceable
licenses or other legally enforceable rights to use all patents,
patent applications, trademarks, brand marks, service marks, logos,
brand names, domain names, trade names, copyrights, proprietary
software, know-how, trade secrets arising from any proprietary
processes or any similar proprietary intellectual property
(collectively, the “Intellectual Property”) that are
used in the Business as it is presently being conducted.
Seller owns or has the right to use, sell or license all
Intellectual Property and such Intellectual Property is sufficient
for the conduct the Business as it is currently being conducted.
Schedule 2.12 hereto lists, as may be applicable,
each patent, patent right, patent application, trade name
registration, trademark application and/or registration, copyright
application and/or registration, domain name, source and object
code owned or possessed by Seller. Such list specifies, as
applicable: (i) the title of the patent, trademark trade name,
service mark, copyright or application therefore; (ii) the
jurisdiction by or in which such patent, trademark, trade name,
service mark or copyright exists and has been issued or registered
or in which an application has been filed, including the
registration or application numbers; and (iii) all Licenses (copies
of which have been delivered to Purchaser). For the purposes of
this Agreement, “Licenses” collectively, means all
licenses, sub-licenses, agreements, permissions, undertakings and
understandings pursuant to which any third party is licensed or
authorized to use any Intellectual Property or pursuant to which
Seller is authorized to use any patents, trademarks, trade secrets,
service marks, trade names, copyrights, inventions, products and
processes under development, databases, drawings, designs,
proprietary know-how or information, other confidential
information, or other rights with respect thereto of any third
party.
(b)
The execution, delivery and performance
of this Agreement, and the consummation of the transactions
contemplated hereby will not constitute a breach of any License or
other instrument or agreement governing any Intellectual Property,
will not cause the forfeiture or termination or give rise to a
right of forfeiture or termination of any License or any
Intellectual Property or impair the right of Seller to use, sell or
license any License or any Intellectual Property or any portion
thereof.
(c)
Neither the manufacture, marketing,
license, sale or intended use of any product currently licensed or
sold by Seller or currently under development by Seller violates
any license or agreement between Seller and any third party
relating to such product, nor infringes upon any intellectual
property right of any other party. There are no pending or, to
Seller’s knowledge, threatened claims or litigation
contesting the respective validity and ownership by Seller or its
right to use, sell, license or dispose of any License or any
Intellectual Property, nor is there any basis for such a claim.
Seller has not received any actual notice asserting that any
License or any Intellectual Property or its proposed use, sale,
license or disposition conflicts or will conflict with the rights
of any other party, nor is there any basis for such an
assertion.
(d)
No current or prior members, officers,
employees, consultants or agents of Seller have asserted an
ownership interest in any License or any Intellectual Property as a
result of having been involved in the development of such property
while employed by or consulting to Seller or otherwise.
Section 2.13
Legal Proceedings, Claims,
Investigations, etc .
There is no legal, administrative, arbitration or other
action or proceeding or governmental investigation pending or, to
Seller’s knowledge, threatened, against Seller (or any
member, manager, officer or employee of Seller) relating to the
business or assets of Seller. Seller has not been informed
of, or has any knowledge of, any violation of or default under, any
laws, ordinances, regulations, judgments, injunctions, orders or
decrees (including without limitation, any immigration laws or
regulations) of any court, governmental department, commission,
agency, instrumentality or arbitrator applicable to Seller or its
Business. Seller is not currently subject to any judgment,
order, injunction or decree of any court, arbitration authority,
administrative agency or other Governmental Entity.
Section 2.14
Insurance . Schedule 2.14 hereto sets forth a
list and brief description of all existing insurance policies
(including health insurance), which description shall include,
without limitation, all expiration and renewal dates of such
policies, that name Seller as an insured or beneficiary or as a
loss payable payee or for which Seller or the Member has paid or is
obligated to pay all or part of the premiums. Seller is not
in default with respect to any provision contained in any insurance
policy, nor has it failed to give any notice or present any claim
under any insurance policy in a timely fashion. Copies of all such
policies have been delivered to Purchaser. All such policies
are in full force and effect on the date hereof and following the
Closing Date will continue to be in full force and effect to the
extent as may be paid for by Purchaser. All payments with respect
to such policies are current and will remain so up to the Closing
Date. As it relates to the insurance policies set forth on
Schedule 2.14 , Seller has not received written notice
(excluding notice of a premium increase or contract expiration
date) of any pending or threatened termination or retroactive
premium increase with respect thereto.
Section 2.15
Material Contracts
.
(a)
Except as listed on Schedule
2.15(a) , Seller is not a party to any of the following type of
oral or written contracts or agreements:
(i)
any agreement (or group of related
agreements) for the lease of personal property to or from any
person providing for lease payments in excess of $5,000 per
annum;
(ii)
any agreement (or group of related
agreements) for the purchase or sale of raw materials, commodities,
supplies, products or other personal property or for the furnishing
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