ASSET PURCHASE AGREEMENT

EXHIBIT 2.1

 

 

A SSET P URCHASE A GREEMENT

 

B Y AND A MONG

 

B ETTER S OLUTIONS , I NC .

(a Pennsylvania corporation),

 

W ORLD H EALTH A LTERNATIVES , I NC .

(a Florida corporation),

 

T RAVEL N URSE S OLUTIONS , I NC .

(an Ohio corporation),

 

and

 

C ERTAIN S HAREHOLDERS T HEREOF

 

 

O CTOBER 14, 2004

TABLE OF CONTENTS

 

 

i

TABLE OF CONTENTS

(continued)

 

 

ii

TABLE OF CONTENTS

(continued)

 

 

iii

TABLE OF CONTENTS

(continued)

 

 

Schedules

 

Schedule 2.1(b)(vii) – Excluded Assets

 

Disclosure Schedule

 

Schedule 4.5 – Financial Statements

Schedule 4.6 – Encumbrances

Schedule 4.7(a)(i) – Real Estate Leases

Schedule 4.8 – Personal Property

Schedule 4.9 – Non Real Estate Leases

Schedule 4.10 – Accounts Receivable

Schedule 4.13(c) – Tax Returns

Schedule 4.13(i) – Tax ID Number

Schedule 4.15(a) – Litigation

Schedule 4.15(c) – Governmental Permits

Schedule 4.16 – Contracts

Schedule 4.17 – Insurance

Schedule 4.18(a)(i) – Intellectual Property

Schedule 4.19 – Employee Relations

Schedule 4.20 – Seller Plans

Schedule 4.24 – Customers

Schedule 4.27 – Related Parties

 

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ASSET PURCHASE AGREEMENT

 

This ASSET PURCHASE AGREEMENT (this “ Agreement ”) is made as of October 14, 2004, by and among Travel Nurse Solutions, Inc., an Ohio corporation (the “ Seller ”), David N. Rentschler and Paul D. Gunnoe (together, the “ Majority Investors ” and, together with the Seller, the “ Seller Parties ”), World Health Alternatives, Inc., a Florida corporation (“ Parent ”), Better Solutions, Inc., a Pennsylvania corporation and a wholly-owned subsidiary of Parent, (the “ Buyer ,” and together with the Seller Parties, the “ Parties ”).

 

BACKGROUND

 

WHEREAS, the Majority Investors own 90% of the issued and outstanding shares of capital stock of the Seller;

 

WHEREAS, the Seller owns and operates the Business (defined below); and

 

WHEREAS, this Agreement sets forth the terms and conditions upon which the Buyer is purchasing the Purchased Assets (defined below) and assuming the Assumed Liabilities (defined below) from the Seller and the Seller is selling the Purchased Assets and transferring the Assumed Liabilities to the Buyer;

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged the Parties hereby agree as follows:

 

1.	Definitions .

 

Certain terms used in this Agreement are defined or referred to below (such terms as well as any other terms defined elsewhere in this Agreement shall be equally applicable to both the singular and plural forms of the terms defined).

 

“ Accounts Payable ” shall mean those trade accounts payable of the Seller relating to the ongoing operations of the Business or the Acquired Assets incurred in bona fide transactions in the ordinary course of business within 60 days of the Closing Date. Accounts Payable shall not include any Excluded Liabilities.

 

“ Accounts Receivable ” shall mean (i) all of the Seller’s trade accounts receivable and other rights to payment from customers of the Business and the full benefit of all security for such accounts or rights to payment, including all trade accounts receivable representing amounts receivable in respect of products sold or services rendered to customers of the Business; (ii) all other accounts or notes receivable of Sellers and the full benefit of all security for such accounts or notes; and (iii) any claim, remedy or other right related to any of the foregoing.

 

“ Accrued Expenses ” shall mean those expenses incurred in the conduct of the Business in the ordinary course prior to the Closing Date in those categories set forth on Schedule 1(a) hereto; in no event shall Accrued Expenses include amounts due, whether as a result of deferred compensation or otherwise, to the Majority Investors.

 

“ Action ” is defined in Section 11.7 .

“ Affiliates ” shall mean, with respect to a particular Party, Persons controlling, controlled by, or under common control with that Party, as well as any officers and their immediate family members, directors and their immediate family members, and majority-owned entities of that Party and of its other Affiliates. For the purposes of the foregoing, ownership, directly or indirectly, of 10% or more of the voting securities or other equity interest shall be deemed to constitute control.

 

“ Agreement ” shall mean this Agreement, the Exhibits, and the Disclosure Schedule.

 

“ Assumed Liabilities ” are defined in Section 2.5(a) .

 

“ Balance Sheet ” is defined in Section 4.5 .

 

“ Balance Sheet Date ” is defined in Section 4.5 .

 

“ Benefit Plan ” shall mean all employment, compensation, vacation, bonus, deferred compensation, incentive compensation, stock purchase, stock option, stock appreciation right, or other stock-based incentive, severance, change-in-control, or termination pay, hospitalization, or other medical, disability, life or other insurance, supplemental unemployment benefits, profit-sharing, pension or retirement plans, programs, Contracts, arrangements, or employee benefit plans of the Seller within the meaning of Section 3(3) of ERISA, sponsored, maintained, or contributed to or required to be contributed to by the Seller or any ERISA Affiliate and any related or separate Contracts, plans, trusts, programs, policies, and arrangements that provide benefits of economic value to any present or former employee of the Seller or director, or present or former beneficiary, dependent, or assignee of any such present or former employee or director.

 

“ Bill of Sale, Assignment, and Assumption Agreement ” shall mean a bill of sale, assignment, and assumption agreement by and between the Seller and the Buyer in substantially the same form as Exhibit A .

 

“ Business ” shall mean the entire business, operations (including the operations of the Seller’s Netis division), and facilities of the Seller including the goodwill appurtenant to such business and assets and the design, manufacture, and sale of the products thereof and the furnishing of services to customers therewith.

 

“ Business Day ” shall mean any day other than a Saturday, Sunday, or a day on which all banking institutions in the Commonwealth of Pennsylvania are authorized or obligated by Law or executive order to close.

 

“ Buyer ” is defined above in the Preamble.

 

“ Charter Documents ” shall mean a Person’s certificate or articles of incorporation, certificates defining the rights and preferences of securities, articles of organization, limited liability company operating agreement, general or limited partnership agreement, certificate of limited partnership, joint venture agreement, or other similar document governing the Person.

 

“ Claim Notice ” is defined in Section 11.3(a) .

 

“ Claim Response ” is defined in Section 11.3(a) .

 

“ Closing ” is defined in Section 3.1 .

 

“ Closing Balance Sheet ” is defined in Section 2.6(c)(iii) .

 

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“ Closing Certificates ” shall mean the certificates to be delivered by the Seller at the Closing under Section 3.2 and any other provisions hereof.

 

“ Closing Date ” is defined in Section 3.1 .

 

“ Closing Date Consideration ” is defined in Section 2.2(a) .

 

“ Closing Payment ” is defined in Section 2.2(a)(i) .

 

“ Code ” shall mean the Internal Revenue Code of 1986, as amended.

 

“ Component ” shall mean any software, Software Product, Custom Software, Hardware, Database, or Embedded Control.

 

“ Confidential Information ” shall mean any confidential or proprietary information or Intellectual Property of the Seller, or that of any Affiliate of the Seller that is used in the Business, including personnel information, know-how, data, Databases, advertising and marketing plans or systems, distribution and sales methods or systems, sales and profit figures, customer and client lists, customer, client, and supplier information, and any relationships with dealers, distributors, wholesalers, customers, clients, suppliers, and any other Persons who have, or have had, business dealings with the Business.

 

“ Confidentiality Agreement ” is defined in Section 4.18(a)(ii) .

 

“ Contingent Claim ” is defined in Section 11.9 .

 

“ Contract ” shall mean any written or oral contract, agreement, lease, instrument, or other document or commitment, arrangement, undertaking, practice, or authorization (including all amendments, supplements, and modifications thereto) that is binding on any Person or its property under any applicable Law.

 

“ Copyrights ” shall mean any copyrights and registrations and applications therefor, including all renewals and extensions thereof and rights corresponding thereto in both published and unpublished works throughout the world, owned, or licensed by the Seller in connection with the conduct of the Business.

 

“ Court Order ” shall mean any judgment, decree, injunction, order, or ruling of any Governmental Body that is binding on any Person or its property under applicable Law.

 

“ Crestmark Note ” shall mean that certain promissory note made by Seller in favor of Crestmark Bank, dated January 20, 2004.

 

“ Current Assets ” shall mean the following categories of current assets of the Seller that are categorized as such on the Balance Sheet or the Closing Balance Sheet prepared in conformity with GAAP: (i) Accounts Receivable, other than Excluded Receivables, and (iii) prepaid rent and expenses.

 

“ Current Liabilities ” shall mean (i) the Accounts Payable, (ii) the Accrued Expenses, in each case to the extent set forth on the Closing Balance Sheet prepared in conformity with GAAP, and (iii) the Crestmark Note.

 

“ Custom Software ” shall mean any computer software that has been developed or designed for use in the Business.

 

“ Damages ” are defined in Section 11.1 .

 

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“ Database ” shall mean any data and other information recorded, stored, transmitted, and retrieved in electronic form by a System or any Component, whether located on any Components of a System or archived in storage media of a type employed or used in conjunction with any Component or System.

 

“ Deductible Amount ” is defined in Section 11.4 .

 

“ Default ” shall mean (a) a breach, default, or violation, (b) the occurrence of an event that with or without the passage of time or the giving of notice, or both, would constitute a breach, default, or violation or cause an Encumbrance to arise, or (c) with respect to any Contract, the occurrence of an event that with or without the passage of time or the giving of notice, or both, would give rise to a right of termination, cancellation, amendment, renegotiation, or acceleration or a right to receive damages or a payment of penalties.

 

“ Designated Employees ” are defined in Section 8.1 .

 

“ Disclosure Schedule ” shall mean any of the schedules attached hereto containing information relating to the Majority Investors and the Seller pursuant to Section 4 and other provisions hereof that has been provided to the Buyer on the date hereof.

 

“ Draft Closing Balance Sheet ” is defined in Section 2.6(a) .

 

“ Earn-Out Acceleration Event ” is defined in Section 2.3(f) .

 

“ Earn-Out Consideration ” is defined in Section 2.3 .

 

“ Earn-Out Shares Issuance Date ” is defined in Section 2.3(c) .

 

“ EBITDA ” is defined in Section 2.3(a) .

 

“ EBITDA Report ” is defined in Section 2.3(e) .

 

“ Eligible Employees ” are defined in Section 8.1 .

 

“ Embedded Control ” shall mean any microprocessor, microcontroller, smart instrumentation, or other sensor, driver, monitor, robotic, or other device containing a semiconductor, memory circuit, BIOS, PROM, or other microchip.

 

“ Encumbrances ” shall mean any lien, mortgage, security interest, pledge, adverse claim, restriction on transferability, defect of title, or other claim, charge, or encumbrance of any nature whatsoever on any property or property interest, including any restriction on the use, voting, transfer, receipt of income, or other exercise of any attributes of ownership.

 

“ Environmental Condition ” is defined in Section 4.15(b) .

 

“ Environmental Law ” shall mean any and all Laws, Environmental Permits, legally binding policies and guidance documents, Court Orders, or agreements with any Governmental Body relating to the protection of health and the environment, worker health and safety, and/or governing the handling, use, generation, treatment, storage, transportation, disposal, manufacture, distribution, formulation, packaging, labeling, or Release of Hazardous Substances, including but not limited to: the Clean Air Act, 42 U.S.C. § 7401 et seq .; the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. § 9601 et seq .; the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq .; the Hazardous Materials Transportation Act 49 U.S.C. § 1801 et seq .; the Federal Insecticide, Fungicide and Rodenticide Act 7 U.S.C. § 136 et seq .; the Resource Conservation and Recovery Act of 1976, 42 U.S.C.

 

4

§ 6901 et seq .; the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq .; the Occupational Safety & Health Act of 1970, 29 U.S.C. § 651 et seq .; the Oil Pollution Act of 1990, 33 U.S.C. § 2701 et seq .; the Safe Drinking Water Act of 1974, 42 U.S.C. § 300(f) et seq .; and the state analogies thereto, all as amended or superseded prior to Closing; and any common law doctrine, including but not limited to, negligence, nuisance, trespass, personal injury, or property damage related to or arising out of the presence, Release, or exposure to a Hazardous Substance.

 

“ Environmental Liability ” shall mean any Liability relating to or arising out of an Environmental Condition.

 

“ ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as amended.

 

“ ERISA Affiliate ” shall mean any Person that, together with the Seller, is or was at any time treated as a single employer under Section 414 of the Code or Section 4001 of ERISA and any partnership of which the Seller is or has been the general partner.

 

“ Estimated Net Working Capital ” shall mean $306,549.

 

“ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Securities and Exchange Commission promulgated thereunder.

 

“ Excluded Assets ” are defined in Section 2.1(b) .

 

“ Excluded Liability ” is defined in Section 2.5(b) .

 

“ Excluded Receivables ” shall mean Accounts Receivable that are (a) more than 90 days past due as of the Closing Date or (b) due from officers or employees of the Seller.

 

“ Expiration Date ” is defined in Section 11.6 .

 

“ Financial Statements ” are defined in Section 4.5 .

 

“ First Earn-Out Period ” is defined in Section 2.3(a) .

 

“ First Period Applicable Percentage ” is defined in Section 2.3(a) .

 

“ First Period EBITDA ” is defined in Section 2.3(a) .

 

“ GAAP ” shall mean generally accepted accounting principles as employed in the United States of America applied consistently with prior periods and with the Seller’s historical accounting practices and methods, provided that standards of materiality applicable to the Business standing alone shall be employed without regard to standards of materiality used by the Seller in prior periods, and provided further, that the Seller’s historical accounting practices and methods shall not be consistently applied to the extent they are not in accordance with applicable generally accepted accounting principles.

 

“ Governmental Body ” shall mean any (a) nation, state, commonwealth, province, territory, county, municipality, district, or other jurisdiction of any nature, or any political subdivision thereof, (b) federal, state, local, municipal, foreign, or other government, or (c) governmental or quasi-governmental authority of any nature (including any governmental division, department, agency, commission, instrumentality, official, organization, contractor, regulatory body, or other entity and any court, arbitrator, or other tribunal).

 

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“ Governmental Permits ” shall mean any permits, licenses, registrations, certificates of occupancy, approvals, or other authorizations of any Governmental Body.

 

“ Hardware ” shall mean any mainframe, midrange computer, personal computer, notebook or laptop computer, server, switch, printer, modem, driver, peripheral, or any component of any of the foregoing.

 

“ Hazardous Substances ” shall mean any toxic, carcinogenic, or hazardous gaseous, liquid or solid material or waste that may or could pose a hazard to the environment or human health or safety including (a) any “hazardous substances” as defined by the federal Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §§9601 et seq., (b) any “extremely hazardous substance,” “hazardous chemical,” or “toxic chemical” as those terms are defined by the federal Emergency Planning and Community Right-to-Know Act, 42 U.S.C. §§11001 et seq., (c) any “hazardous waste,” as defined under the federal Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act, 42 U.S.C. §§6901 et seq., (d) any “pollutant,” as defined under the federal Water Pollution Control Act, 33 U.S.C. §§1251 et seq., as any of such Laws in clauses (a) through (d) as amended, (e) any petroleum, petroleum hydro carbons or petroleum products or by-products, or diesel fuel, (f) asbestos or asbestos-containing materials, lead or lead containing materials or polychlorinated biphenyls, and (g) any regulated substance or waste under any Laws or Court Orders that have been or are currently proposed to be enacted, promulgated, or issued by any federal, state, or local governmental authorities concerning protection of the environment.

 

“ Indebtedness ” shall mean, without duplication, (i) any indebtedness for borrowed money or issued in substitution for or exchange of indebtedness for borrowed money, (ii) any obligation evidenced by any note, bond, debenture, or other debt security, (iii) any obligation to pay the deferred purchase price of property or services with respect to which a Person is liable as obligor or otherwise and any installment payment non-competition agreement, (iv) any commitment by which a Person assures a creditor against loss (including contingent reimbursement obligations with respect to letters of credit), (v) any indebtedness guaranteed in any manner by a Person (including guarantees in the form of an agreement to repurchase or reimburse, but excluding the endorsement of checks or other negotiable instruments for deposit or collection), (vi) any obligations under capitalized leases with respect to which a Person is liable, contingently or otherwise, as obligor, guarantor, or otherwise, or with respect to which obligations a Person assures a creditor against loss, (vii) any indebtedness secured by an Encumbrance on a Person’s assets, (viii) any outstanding letter of credit, sight draft, bankers’ acceptances, performance bond or similar surety obligation of the Seller; provided , that any such obligation shall only be considered Indebtedness to the extent such obligation has actually been drawn (or circumstances exist which entitle the beneficiary to draw on) at or prior to the Closing Date, and (ix) any interest, principal, prepayment penalty, fees, or expenses to the extent paid in respect of those items listed in clauses (i) through (viii) of this definition.

 

“ Indemnification Cap ” is defined in Section 11.4 .

 

“ Indemnified Buyer Party ” is defined in Section 11.1 .

 

“ Indemnified Party ” is defined in Section 11.3(a) .

 

“ Indemnified Seller Party ” is defined in Section 11.2 .

 

“ Indemnitor ” is defined in Section 11.3(a) .

 

“ Independent Accounting Firm ” is defined in Section 2.3(e) .

 

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“ Intellectual Property ” shall mean any (i) Copyrights, Patents, Trademarks, and Trade Secrets, and (ii) Internet domain names, URLs, technology rights and licenses, Databases, franchises, software, formulae, inventions, invention disclosures, ideas, discoveries, innovations and rights in research and development, and commercially practiced processes and inventions, whether patentable or not in any jurisdiction throughout the world and any other intellectual property or any similar, corresponding, or equivalent right to any of the foregoing, owned or licensed by the Seller in connection with the conduct of the Business.

 

“ Inventory ” shall mean all inventory of the Business, including raw materials, supplies, packaging supplies, work in process, and finished goods.

 

“ IRS ” shall mean the U.S. Internal Revenue Service.

 

“ Key Management Change ” is defined in Section 2.3(d) .

 

“ Knowledge ,” “ to the knowledge of ,” or phrases of similar import, with respect to an individual, shall mean an individual shall be deemed to have knowledge of a particular fact or other matter if (a) that individual is actually aware of that fact or matter; or (b) a prudent individual could be expected to discover or otherwise become aware of that fact or matter in the course of conducting a reasonably comprehensive investigation regarding the accuracy of any representation or warranty contained in this Agreement. With respect to the Seller, “knowledge,” or phrases of similar import, shall mean the Seller shall be deemed to have knowledge of a particular fact or other matter if any of David Rentschler, Paul Gunnoe, Martha S. Gunnoe, Sheila King or, solely with respect to matters involving Netis, Shawn Shrader, has, or at any time had, knowledge of that fact or other matter (as set forth in (a) and (b) above), and each of these individuals will be deemed to have conducted a reasonably comprehensive investigation regarding the accuracy of the representation and warranties made by the Seller herein. With respect to the Buyer or Parent, “knowledge,” or phrases of similar import, shall mean the Buyer or Parent shall be deemed to have knowledge of a particular fact or other matter if any executive officer of the Buyer or Parent has, or at any time had, knowledge of that fact or other matter (as set forth in (a) and (b) above), and each such executive officer will be deemed to have conducted a reasonably comprehensive investigation regarding the accuracy of the representation and warranties made by the Buyer and Parent herein

 

“ Law ” shall mean any statute, law, ordinance, regulation, order, or rule of any Governmental Body, including Environmental Laws and those covering energy, safety, health, transportation, bribery, record keeping, zoning, antidiscrimination, antitrust, wage and hour, and price and wage control matters, as well as common law.

 

“ Liability ” shall mean any direct or indirect liability, indebtedness, obligation, expense, claim, loss, damage, deficiency, guaranty, or endorsement of or by any Person, absolute or contingent, accrued or unaccrued, due or to become due, liquidated or unliquidated, known or unknown.

 

“ Licenses and Permits ” are defined in Section 4.26 .

 

“ Liquidated Claim Notice ” is defined in Section 11.3(a) .

 

“ Litigation ” shall mean any lawsuit, action, arbitration, administrative proceeding, quasi-administrative proceeding, criminal prosecution, or Governmental Body’s investigation or inquiry, whether formal or informal.

 

“ Majority Investors ” are defined above in the preamble.

 

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“ Material Adverse Effect ” shall mean any state of facts, event, change or effect that, individually or aggregated with other states of facts, events, changes or effects, (a) is materially adverse to or materially impairs, (i) the value or condition of the Acquired Assets or the value, condition, business, prospects, properties or results of operations of the Business taken as a whole or (ii) the ability of any party hereto to perform its obligations under this Agreement, (b) prevents or materially delays consummation of any of the transactions contemplated by this Agreement, or (c) gives rise to any material liability that would be an Assumed Liability or materially increases any Assumed Liability.

 

“ Net Working Capital ” shall mean Current Assets less Current Liabilities. In computing Net Working Capital, any rents, prepaid items and other applicable items shall be pro rated as of the Closing Date.

 

“ Non-Assignable Contract ” is defined in Section 2.7 .

 

“ Non-Competition Period ” is defined in Section 6.2(a) .

 

“ Non-Real Estate Leases ” are defined in Section 4.9 .

 

“ Ordinary course ” or “ ordinary course of business ” shall mean, with respect to an action taken by any Person, an action that (a) is consistent in nature, scope, and magnitude with the past practices of such Person and is taken in the ordinary course of the normal, day-to-day operations of such Person, (b) does not require authorization by the board of directors or shareholders of such Person (or by any Person or group of Persons exercising similar authority) and does not require any other separate or special authorization of any nature, and (c) is similar in nature, scope, and magnitude to actions customarily taken, without any separate or special authorization, in the ordinary course of the normal, day-to-day operations of other Persons that are in the same line of business as such Person.

 

“ Outstanding Checks ” shall mean the outstanding checks issued by the Seller that are unpresented and unpaid as of the Closing.

 

“ Parent Common Stock ” shall mean shares of common stock of Parent, $0.0001 par value per share, or the shares of common stock of any successor to Parent.

 

“ Parent ” is defined above in the Preamble.

 

“ Parties ” are defined above in the Preamble.

 

“ Patents ” shall mean any patents together with any extensions, reexaminations, and reissues of such patents, patents of addition, patent applications, divisions, continuations, continuations-in-part, and any subsequent filings in any country or jurisdiction claiming priority therefrom, owned, or licensed by the Seller in connection with the conduct of the Business.

 

“ Payment Accelerations ” is defined in Section 4.29 .

 

“ PBGC ” is defined in Section 4.20(m) .

 

“ Pension Plan ” shall mean all Seller Plans that are defined benefit pension plans or that are otherwise subject to Section 412 of the Code or Title IV of ERISA

 

“ Person ” shall mean any natural person, business trust, corporation, partnership, limited liability company, joint stock company, proprietorship, association, trust, joint venture, unincorporated association, or any other legal entity of whatever nature.

 

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“ Pre-Closing Tax Period ” is defined in Section 12.1 .

 

“ Prohibited Action ” is defined in Section 11.7 .

 

“ Purchase Price ” is defined in Section 2.2 .

 

“ Purchased Assets ” are defined in Section 2.1(a) .

 

“ Qualified Plan ” is defined in Section 4.21(b) .

 

“ Real Estate Leases ” are defined in Section 4.7(a) .

 

“ Real Property ” shall mean all rights and interests in or to real property, including fee estates, leaseholds, and subleaseholds, purchase options, easements, licenses, privileges, hereditaments, appurtenances thereto, rights to access and rights of way, easements or prescriptive right, and all buildings, structures, fixtures, facilities and improvements to any real property owned by the Seller or used, useful, or held for use in the operation of the Business, together with any additions thereto or replacements thereof.

 

“ Release ” shall mean any release, spill, emission, leaching, leaking, migration, dumping, emptying, pumping, injection, deposit, disposal, discharge, dispersal, or leaching into the indoor or outdoor environment, or into or out of any property.

 

“ Released Party ” is defined in Section 6.7 .

 

“ Releasing Party ” is defined in Section 6.7 .

 

“ Resolution Period ” is defined in Section 11.3(c) .

 

“ Response Period ” is defined in Section 11.3(a) .

 

“ Restricted Business ” is defined in Section 6.2(a) .

 

“ Restricted Party ” is defined in Section 6.2(a) .

 

“ SEC Disclosure Documents ” are defined in Section 5.7 .

 

“ Second Earn-Out Period ” is defined in Section 2.3(b) .

 

“Second Period Applicable Percentage” is defined in Section 2.3(b) .

 

“ Second Period EBITDA ” is defined in Section 2.3(b) .

 

“ Securities Act ” shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Securities and Exchange Commission promulgated thereunder.

 

“ Seller ” is defined above in the Preamble.

 

“ Seller Contracts ” are defined in Section 4.16(c) .

 

“ Seller Employees ” are defined in Section 4.19 .

 

“ Seller Parties ” are defined above in the Preamble.

 

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“ Seller Plans ” are defined in Section 4.20(a) .

 

“ Seller Required Consents ” are defined in Section 4.3 .

 

“ Seller’s Report ” is defined in Section 2.6(b) .

 

“ Shareholders ” mean the Majority Investors and Shawn Shrader, Amber Siewertsen, Jeffrey S. Edison, Joanna Edge, Martha S. Gunnoe and Michael Cooley.

 

“ Shareholders’ Representative ” is defined in Section 11.10 .

 

“ System ” shall mean any combination of any software, Software Product, Custom Software, Hardware, Database, or Embedded Control.

 

“ Tax Return ” shall mean any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

 

“ Taxes ” shall mean all taxes, duties, charges, fees, levies, or other assessments of any kind imposed by any Governmental Body including income, gross receipts, value-added, excise, withholding, personal property, real estate, sale, use, ad valorem, license, lease, service, severance, stamp, documentary, intangible, transfer, payroll, employment, customs, duties, alternative, add-on minimum, estimated, and franchise taxes (including any interest, penalties, surcharges, surtaxes, or additions attributable to or imposed on or with respect to any such tax or assessment).

 

“ Trade Secrets ” shall mean any know-how, trade secrets, formulae, specifications, technical information, data, process technology, plans, drawings (including engineering and auto-cad drawings), blueprints, proprietary information, including customer lists and information, employee lists and information, computer programs and operational software, and all documentation related to any of the foregoing, owned, or licensed by the Seller in connection with the conduct of the Business, except for any such item that is generally available to the public.

 

“ Trademarks ” shall mean any registered trademarks, registered service marks, trademark, and service mark applications and unregistered trademarks and service marks, brand names, certification marks, trade names, logos, trade dress, and all goodwill associated with the foregoing throughout the world and registrations in any jurisdictions of, and applications in any jurisdiction to register, the foregoing, including any extension, modification, or renewal of any such registration or application, owned, or licensed by the Seller in connection with the conduct of the Business.

 

“ Transaction Documents ” shall mean this Agreement, the Bill of Sale, Assignment, and Assumption Agreement, the Closing Certificates, and any other agreement, certificate, or instrument required to be executed, delivered, filed, or performed pursuant hereto or thereto.

 

“ Transactions ” shall mean the purchase and sale of the Purchased Assets at the Closing and the other transactions contemplated by the Transaction Documents.

 

“ Transferred Employees ” are defined in Section 8.1 .

 

“ Unliquidated Claim ” is defined in Section 11.3(a) .

 

“ U.S. ” shall mean the United States of America.

 

“ WARN Act ” is defined in Section 4.19 .

 

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2.	Sale and Purchase .

 

2.1 Agreement to Sell and Purchase .

 

(a) At the Closing, subject to the terms and conditions of this Agreement, the Seller shall grant, sell, convey, assign, transfer, and deliver to the Buyer, and the Buyer shall purchase from the Seller, all right, title, and interest of the Seller in and to all of the assets, properties, and rights of every kind, and description, real, personal, and mixed, tangible and intangible, wherever situated constituting, used, useful, or held for use in the Business on the Closing Date other than the Excluded Assets (the “ Purchased Assets ”), free and clear of all Encumbrances, including the following:

 

(i) all Accounts Receivable, other than Excluded Receivables;

 

(ii) all Inventory;

 

(iii) all furniture, fixtures, automobiles, leasehold improvements, tooling, machinery, and equipment;

 

(iv) all customer records, including principal contacts, addresses and telephone numbers, purchasing history, demographics, payment information, and any other information;

 

(v) all records with respect to suppliers, employees, and other aspects of the Business;

 

(vi) all Patents;

 

(vii) all Trade Secrets;

 

(viii) all Copyrights;

 

(ix) all manufacturing, warehouse, and office supplies;

 

(x) all Software and Custom Software (including documentation and related object and source codes);

 

(xi) all Trademarks;

 

(xii) all rights under the Real Estate Leases and the Non-Real Estate Leases, and any easements, deposits, or other rights pertaining thereto;

 

(xiii) all rights under any Governmental Permits, to the extent assignable;

 

(xiv) all rights related to any prepaid expenses;

 

(xv) all the assets of the Seller, whether or not described in this Section 2.1 , as set forth on the Balance Sheet and those assets of the Seller whose ownership by the Seller is implied by the assumptions made in the preparation of the Balance Sheet;

 

(xvi) all rights under any insurance Contracts specified in Schedule 2.1(a)(xvi) hereto; and

 

(xvii) all rights under any Contracts except to the extent specified in Section 2.5 .

 

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(b) Notwithstanding the foregoing, the Purchased Assets shall not include any of the following (the “ Excluded Assets ”):

 

(i) the corporate seals, Charter Documents, minute books, stock books, Tax Returns and rights to Tax refunds for taxable periods ending on or prior to the Closing Date, books of account, or other records having to do with the corporate organization of the Seller;

 

(ii) cash, net of Outstanding Checks, and cash equivalents as of the Closing Date;

 

(iii) the rights that accrue or will accrue to the Seller under this Agreement;

 

(iv) the rights of the Seller under any Benefit Plan and any insurance Contract (including any rights to premium refunds not specified in Schedule 2.1(a)(xvi) hereto;

 

(v) the rights of the Seller under any Governmental Permits which are not assignable;

 

(vi) the Excluded Receivables; or

 

(vii) the Excluded Assets specified on Schedule 2.1(b)(vii) .

 

2.2 Purchase Price; Closing Date Consideration . In consideration of the grant, sale, conveyance, assignment, transfer, and delivery of the Purchased Assets to the Buyer, and in addition to the assumption by the Buyer of the Assumed Liabilities, the Buyer shall pay to the Seller the Closing Date Consideration and the Earn-Out Consideration (such sum, as adjusted pursuant to Section 2.6 , the “ Purchase Price ”).

 

(a) At Closing, the Buyer shall pay the following consideration (the “ Closing Date Consideration ”):

 

(i) the Buyer shall pay that amount of cash equal to (A) $5,315,000, plus (B) the Estimated Net Working Capital (the “ Closing Payment ”);

 

(ii) the Buyer and the Parent as co-obligors shall issue a promissory note, in the original principal amount of $750,000, substantially in the form of Exhibit B attached hereto; and

 

(iii) the Buyer shall cause Parent to issue 747,950 shares of Parent Common Stock to the Seller and the Shareholders, as set forth on Schedule 2.2(a)(iii) hereto.

 

(b) The Buyer shall pay to the Seller the Closing Payment by a wire transfer of immediately available funds, in accordance with written instructions provided by the Seller to the Buyer prior to the Closing Date.

 

2.3 Earn-Out Consideration . Buyer will pay up to $2,500,000 (the “ Earn-Out Consideration ,” as follows:

 

(a) If, for the twelve-month period commencing on the Closing Date (the “ First Earn-Out Period ”), the income from operations before interest, taxes, depreciation and amortization (the

 

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“ EBITDA”) attributable to the Business (the “ First Period EBITDA ”) is equal to or greater than $2,600,000, then Buyer shall cause Parent to issue that number of shares of Parent Common Stock having an aggregate value equal to $1,000,000. If the First Period EBITDA is less than $2,600,000 but greater than $1,950,000, the Buyer shall cause Parent to issue that number of shares of Parent Common Stock having an aggregate value equal to the product of $1,000,000 multiplied by the First Period Applicable Percentage. The “ First Period Applicable Percentage ” shall mean the percentage of $2,600,000 that the First Period EBITDA represents. By way of illustration, if the First Period EBITDA was $2,080,000, the First Period Applicable Percentage would be 80%. If the First Period EBITDA is less than $1,950,000 but greater than $0, the Buyer shall cause Parent to issue that number of shares of Parent Common Stock having an aggregate value equal to the product of $750,000 multiplied by the First Period Applicable Percentage.

 

(b) If, for the twelve-month period commencing on the first anniversary of the Closing Date (the “ Second Earn-Out Period ”), the EBITDA attributable to the Business (the “ Second Period EBITDA ”) is equal to or greater than $3,600,000, then the Buyer shall cause Parent to issue that number of shares of Parent Common Stock having an aggregate value equal to $1,500,000. If the Second Period EBITDA is less than $3,600,000 but greater than $2,700,000, the Buyer shall cause Parent to issue that number of shares of Parent Common Stock having an aggregate value equal to the product of $1,500,000 multiplied by the Second Period Applicable Percentage. The “ Second Period Applicable Percentage ” shall mean the percentage of $3,600,000 that the Second Period EBITDA represents. If the Second Period EBITDA is less than $2,700,000 but greater than $0, the Buyer shall cause Parent to issue that number of shares of Parent Common Stock having an aggregate value equal to the product of $750,000 multiplied by the Second Period Applicable Percentage.

 

(c) Any shares of Parent Common Stock to be issued as Earn-Out Consideration pursuant to this Section 2.3 shall be issued on the later of (i) a Business Day not more than 30 days after the final determination of EBITDA for the applicable Earn-Out Period, as provided in Section 2.3(e) hereof, or (ii) the date that is 60 days after the end of the applicable Earn-Out Period (each such date, an “ Earn-Out Shares Issuance Date ”). The value of the shares of Parent Common Stock issued pursuant to this Section 2.3 shall be calculated based on the average per share closing price of the Parent Common Stock over the ten trading days immediately preceding the applicable Earn-Out Shares Issuance Date, if the shares are listed on a national exchange or quoted on an automated dealer quotation system or OTC Bulletin Board. If the shares are not so listed or quoted, the value of the shares shall be determined in good faith by the board of directors of Parent based upon an independent appraisal of the value of shares of Parent Common Stock. At the sole discretion of Parent (or any successor to Parent), the Earn-Out Consideration may be paid in cash.

 

(d) The EBITDA attributable to the Business shall be determined in good faith by the Buyer, based on monthly financial statements (unaudited) that are prepared in accordance with GAAP, consistently applied. In determining the EBITDA attributable to the Business: (i) EBITDA shall be computed without regard to “extraordinary items” (as defined under GAAP) of gain or loss, (ii) EBITDA shall not include any gains, losses or profits realized from the sale of any assets other than in the ordinary course of business, (iii) no deduction shall be made for any management fees, (iv) EBITDA shall include expenses incurred by Parent or the Buyer that relate directly to the operation of the Business (including insurance, payroll processing, marketing, and website hosting costs and expenses) and (v) no deduction shall be made for Parent or Buyer’s legal or accounting fees and expenses arising out of this Agreement or the Transactions. Nothing in this Section 2.3 shall be construed to limit Parent or the Buyer’s ability to make operational and other decisions that may affect the Business; provided , however , if (x) Parent or the Buyer makes changes in the key management personnel of the Business or (y) there is a change in the key management personnel of Parent (each of (x) and (y) a “ Key Management Change ”), then the EBITDA attributable to the Business for the applicable Earn-Out Period shall be deemed to be

 

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the greater of (i) the actual EBITDA attributable to the Business for the applicable Earn-Out Period or (ii) the EBITDA determined by calculating the EBITDA attributable to the Business for the portion of the Earn-Out Period prior to the Key Management Change and multiplying such EBITDA by a fraction, the numerator of which shall be 365 days and the denominator of which shall be the number of days elapsed in the applicable Earn-Out period prior to the Key Management Change (and, if such Key Management Change occurs in the First Earn-Out Period, the calculation of EBITDA set forth in this sentence shall be used to determine whether Earn-Out Consideration is due for each of the First Earn-Out Period and the Second Earn-Out Period); provided , further , any Earn-Out Consideration that is due as a result of the calculation described in this sentence shall be paid on the date that is 60 days after the end of the applicable Earn-Out Period.

 

(e) Within 30 days after the end of the First Earn-Out Period and the Second Earn-Out Period, the Buyer shall submit to the Seller a written report (the “ EBITDA Report ”) setting forth its computation of the EBITDA attributable to the Business. Unless the Seller notifies the Buyer within 45 days after receipt of the EBITDA Report that it objects to the computation of EBITDA therein, the EBITDA Report shall be binding and conclusive for purposes of this Agreement. The Seller shall have access, during normal business hours, to the books and records of the Business used by Buyer in computing EBITDA, including Buyer’s workpapers. If the Seller notifies the Buyer in writing within 30 days after receipt of the EBITDA Report of specific, itemized and quantified objections to the EBITDA Report. If the Buyer and the Seller are unable to resolve any items that are in dispute within 15 days of the Seller’s delivery of its notice to the Buyer, the matters in dispute will be submitted for resolution to Schneider Downs & Co., Inc. or such other independent accounting firm of national reputation as may be mutually acceptable to the Seller and the Buyer (the “ Independent Accounting Firm ”). The Independent Accounting Firm shall, within 30 days of such submission, determine and issue a written report to the Seller and the Buyer upon such disputed items and such written decision shall be final and binding upon the parties. The Seller and the Buyer shall cooperate reasonably with each other and each other’s representatives to enable the Independent Accounting Firm to render a written decision as promptly as possible. The fees of the Independent Accounting Firm shall be borne by the Parties in proportion to the aggregate differences between their respective calculations of EBITDA and the EBITDA finally determined by the Independent Accounting Firm.

 

(f) Notwithstanding the foregoing provisions, in the event of (i) the filing of a petition in bankruptcy by or against Parent or the Buyer that is not dismissed within 60 days of the filing or (ii) the liquidation and dissolution of the Buyer or Parent (each of (i) and (ii), an “ Earn-Out Acceleration Event ”), then the entire amount of the Earn-Out Consideration that has not been previously paid shall be immediately due and payable; provided , however , if the Earn-Out Acceleration Event occurs during the Second Earn-Out Period, only $1,500,000 of the Earn-Out Consideration shall be due and payable. The value of the shares of Parent Common Stock issued pursuant to this Section 2.3(f) shall be calculated based on the average per share closing price of the Parent Common Stock over the 30 trading days immediately preceding the applicable Earn-Out Acceleration Event, if the shares are listed on a national exchange or quoted on an automated dealer quotation system or OTC Bulletin Board. If the shares are not so listed or quoted, the value of the shares shall be determined in good faith by the board of directors of Parent based upon an independent appraisal of the value of shares of Parent Common Stock.

 

2.4 Allocation of the Purchase Price . The portion of the Purchase Price to be allocated to the Purchased Assets shall be allocated among the Purchased Assets in accordance with the respective fair market values of the Purchased Assets pursuant to an allocation schedule prepared by the Buyer and approved by the Seller after the Closing in accordance with Section 1060 of the Code and the regulations adopted thereunder. Neither the Seller nor the Buyer will take a position on any income Tax Return, before any Governmental Body charged with the collection of any income Tax, or in any judicial proceeding that is in any way inconsistent with the terms of this Section 2.4 , and the Seller and the Buyer

 

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shall file Form 8594 with the IRS in a manner consistent with this allocation. If there is any adjustment to the Purchase Price under Section 2.3 or Section 2.6 , the allocation schedule shall be modified accordingly.

 

2.5 Assumption of Liabilities .

 

(a) At the Closing, the Buyer shall assume and agree to pay, discharge, or perform, as appropriate, when due only the Liabilities of the Seller specifically identified below in this Section 2.5(a) (the “ Assumed Liabilities ”):

 

(i) the Accounts Payable, but in each case only to the extent set forth on the Closing Balance Sheet;

 

(ii) the Accrued Expenses, but in each case only to the extent set forth on the Closing Balance Sheet;

 

(iii) the Crestmark Note, the outstanding balance of which as of the Closing Date shall be reflected on the Closing Balance Sheet;

 

(iv) any post-Closing executory obligations under those Contracts identified as assumed Contracts on Section 4.16 of the Disclosure Schedule .

 

(b) Notwithstanding paragraph (a) above or any other provision of this Agreement, the Buyer is not assuming under this Agreement or any other Transaction Document any Liability that is not specifically identified as an Assumed Liability under Section 2.5(a) (each, an “ Excluded Liability ”), including any of the following: (i) all Liabilities arising out of any Default by the Seller of any provision of any Contract, Law, or Governmental Permit; (ii) all product Liabilities, Liabilities relating to services provided, or similar claims for injury to any Person or property, regardless of when made or asserted, that arises out of or are based upon any express or implied representation, warranty, agreement, services or guarantee provided by the Seller, or alleged to have been made by the Seller, or that are imposed or asserted to be imposed by operation of Law in connection with any service performed or product sold or leased by or on behalf of the Seller on or prior to the Closing; (iii) any federal, state, or local income or other Tax payable with respect to the Business, the Purchased Assets, or other properties or operations of the Seller or any member of any affiliated group of which the Seller is a member for the Pre-Closing Tax Period; (iv) any Liabilities under or in connection with any Excluded Assets; (v) all Liabilities arising prior to the Closing Date, or as a result of the Closing, for severance, bonuses, or any other form of compensation to any employees, agents, or independent contractors of the Seller, whether or not employed by the Buyer after the Closing and whether or not arising or under any applicable Law, Benefit Plan, or other arrangement with respect thereto, except for accrued vacation and vacation pay for Transferred Employees included in Accrued Expenses; (vi) all Liabilities of the Seller arising or incurred in connection with the negotiation, preparation, and execution of this Agreement and the Transactions; (vii) all Liabilities arising out of the announcement of the Transactions; (viii) all Environmental Liabilities arising from or related to circumstances existing on or before the Closing Date; (ix) the amount of all Outstanding Checks; (x) all Liabilities to give credits or take other remedial action for defective goods or services; (xi) all Liabilities for money borrowed (other than the Crestmark Note); (xii) all Liabilities of any Seller Party or Affiliate thereof based upon an act or omission of such Person after the Closing; (xiii) all Liabilities related to or arising out of any Benefit Plan; and (xiv) any other Liabilities, regardless of when made or asserted, that are not specifically assumed hereunder.

 

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2.6 Post-Closing Purchase Price Adjustment . The Purchase Price shall be subject to adjustment on a dollar-for-dollar basis after the Closing Date as set forth below.

 

(a) Draft Closing Balance Sheet . As soon as practicable following the Closing, the Buyer shall prepare a balance sheet of the Business as of the Closing Date (the “ Draft Closing Balance Sheet ”), which shall also include a calculation of Net Working Capital. The Draft Closing Balance Sheet shall be prepared in conformity with GAAP applied on a basis consistent with that applied in the preparation of the Financial Statements with only such deviations from GAAP as are set forth in Section 4.5 of the Disclosure Schedule . The Buyer will deliver the Draft Closing Balance Sheet to the Seller not later than 60 days following the Closing Date.

 

(b) Review by the Seller . As soon as practicable following receipt of the Draft Closing Balance Sheet from the Buyer, the Seller shall review the Draft Closing Balance Sheet. As soon as practicable, but in any event within 45 days of receipt of the Draft Closing Balance Sheet, the Seller shall provide to the Buyer a written report indicating its agreement with, or specific, itemized, and quantified objections to, the Draft Closing Balance Sheet (the “ Seller’s Report ”). Failure by the Seller so to object to the Draft Closing Balance Sheet within such 45-day period shall be deemed to be the Seller’s acceptance of the Draft Closing Balance Sheet.

 

(c) Agreement on Closing Balance Sheet .

 

(i) Within 15 days of the receipt by the Buyer of the Seller’s Report, the Seller and the Buyer shall endeavor to agree on any matters in dispute. Any such agreement shall be in writing and binding upon each of the Buyer and the Seller with respect to the subject matter of any such dispute.

 

(ii) If the Buyer and the Seller are unable to agree on any remaining matters in dispute within 15 days after receipt of the Seller’s Report, then the matters in dispute will be submitted for resolution to the Independent Accounting Firm. The Independent Accounting Firm shall, within 30 days of such submission, determine and issue a written report to the Seller and the Buyer upon such disputed items (in no event enlarging upon any such disputed item beyond the calculation thereof set forth in the Seller’s Report and in no event adding any new or additional item to those set forth in the Seller’s Report) and such written decision shall be final and binding upon the Parties. The Seller and the Buyer shall cooperate reasonably with each other and each other’s representatives to enable the Independent Accounting Firm to render a written decision as promptly as possible. The fees and disbursements of the Independent Accounting Firm shall be borne by the Parties in proportion to the aggregate differences between their respective calculations of Net Working Capital as embodied in the Draft Closing Balance Sheet and the Seller’s Report, as applicable, and the Net Working Capital shown on the final Closing Balance Sheet.

 

(iii) The balance sheet incorporating the resolution of matters in dispute (if any), or, in the alternative, the Draft Closing Balance Sheet as approved in writing by the Seller (or deemed approved by the Seller), is referred to as the “ Closing Balance Sheet .” The Closing Balance Sheet shall have the legal effect of an arbitral award and shall be final, binding, and conclusive on the Parties.

 

(d) Purchase Price Adjustment . Within two Business Days after the Closing Balance Sheet is approved in writing by the Seller (or deemed approved by the Seller), the Buyer or the Seller, as the case may be as determined below, shall make the following payment by wire transfer of immediately available funds to an account designated by the Buyer or the Seller, as the case may be:

 

(i) if the Net Working Capital reflected on the Closing Balance Sheet is greater than the Estimated Net Working Capital, then the Buyer shall make a payment to the Seller in an amount equal to such excess; or

 

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(ii) if the Net Working Capital reflected on the Closing Balance Sheet is less than the Estimated Net Working Capital, then the Seller shall make a payment to the Buyer in an amount equal to such shortfall.

 

2.7 Consent of Third Parties . Nothing in this Agreement shall be construed as an attempt by the Seller to assign to the Buyer pursuant to this Agreement any Contract, permit, franchise, claim, or asset included in the Purchased Assets that is by its terms, Contract, or Law nonassignable without the consent of any other party or parties, unless such consent or approval shall have been given, or as to which all the remedies for the enforcement thereof available to the Seller would not by Contract pass to the Buyer as an incident of the assignments provided for by this Agreement (a “ Non-Assignable Contract ”). To the extent that any Seller Required Consent in respect of, or a novation of, a Non-Assignable Contract shall not have been obtained on or before the Closing Date, the Seller Parties shall continue to use reasonable efforts (which shall not include the payment of money by the Seller Parties) to obtain any such Seller Required Consent or novation after the Closing Date until such time as it shall have been obtained, and the Seller shall cooperate with the Buyer in any economically feasible arrangement to provide that the Buyer shall receive the interest of the Seller in the benefits under such Non-Assignable Contract, including performance by the Seller as agent if economically feasible, provided that the Buyer shall undertake to pay or satisfy the corresponding Liabilities under the terms of such Non-Assignable Contract to the extent that the Buyer would have been responsible therefor if such consent or approval had been obtained. This Section 2.7 shall not be deemed to constitute an agreement to exclude from the Purchased Assets any Contracts as to which a Seller Required Consent may be necessary. Except for the obligations set forth in this Section 2.7 , the Seller Parties shall have no Liability to the Buyer or Parent for failing to obtain any Seller Required Consent.

 

3.

Closing .

 

3.1 Location and Date . The closing for the Transactions (the “ Closing ”) shall be held at the offices of Morgan, Lewis & Bockius LLP in Pittsburgh, Pennsylvania, at 10:00 a.m. (local time) on October 14, 2004, unless the Parties agree in writing to another date or place. The date on which the Closing occurs is referred to herein as the “ Closing Date .”

 

3.2 Deliveries . At the Closing, subject to the terms and conditions contained herein:

 

(a) The Seller shall deliver to the Buyer:

 

(i) an executed counterpart to the Bill of Sale, Assignment, and Assumption Agreement;

 

(ii) executed releases of any Encumbrance identified on Section 4.6 of the Disclosure Schedule in forms satisfactory to the Buyer in its sole discretion; and

 

(iii) such other instruments of conveyance and transfer, in forms reasonably satisfactory to the Buyer and its counsel, as shall be necessary and effective to transfer and assign to, and vest in, the Buyer all of the Seller’s right, title, and interest in and to the Purchased Assets.

 

Simultaneously with such deliveries, all such steps will be taken by the Seller as may be required to put the Buyer in actual possession and operating control of the Purchased Assets.

 

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(b) The Buyer shall deliver to the Seller:

 

(i) the Closing Payment; and

 

(ii) an executed counterpart to the Bill of Sale, Assignment, and Assumption Agreement; and

 

(c) evidence satisfactory to Seller that the Seller’s obligations on the Crestmark Note and the guaranties of Paul Gunnoe and David Rentschler of the Crestmark Note have been terminated and released

 

(d) Counsel to the Seller, shall deliver to the Buyer a legal opinion in form and substance satisfactory to the Buyer.

 

(e) Counsel to Parent and the Buyer, shall deliver to the Seller a legal opinion in form and substance satisfactory to the Seller.

 

(f) The Seller Parties shall also deliver to the Buyer such other agreements, good standing certificates, certified resolutions, cross receipts, and such other items as may be reasonably requested by the Buyer.

 

4.	Representations and Warranties with Respect to the Seller Parties .

 

The Seller Parties, jointly and severally, hereby represent and warrant to the Buyer, as of the Closing Date, as follows, except as set forth in the Disclosure Schedule (and provided that disclosure of any item in any paragraph or section of the Disclosure Schedule shall be deemed disclosure as to all paragraphs and sections to which it is readily apparent, on the face of such disclosure, and without assuming independent knowledge of the matters disclosed therein, that such disclosure relates):

 

4.1 Corporate Status . The Seller is a corporation duly organized, validly existing, and in good standing under the Laws of the jurisdiction in which it is incorporated and is duly qualified or licensed to do business as a foreign corporation in each jurisdiction where the ownership of any asset or the conduct of its business would require it to be so qualified or licensed. The Charter Documents and code of regulations of the Seller that have been delivered to the Buyer as of the date hereof are effective under applicable Laws and are current, correct, and complete.

 

4.2 Authorization . Subject to receipt of the Seller Required Consents, the Seller has the requisite power and authority to (a) own, use and sell the Purchased Assets, (b) carry on the Business, (c) execute and deliver the Transaction Documents to which it is or will be a party, and (d) perform the Transactions. Such execution, delivery, and performance by the Seller has been duly authorized by all necessary corporate action, including unanimous approval by the Shareholders. Each Majority Investor has the requisite power and authority to (a) execute and deliver the Transaction Documents to which it is or will be a party and (b) perform the Transactions performed or to be performed by such Majority Investor. Each Transaction Document executed and delivered or to be executed and delivered at or prior to the Closing by a Seller Party has been duly executed and delivered by such Seller Party and constitutes a valid and binding obligation of such Seller Party, enforceable against such Seller Party in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, or other similar Laws affecting the rights of creditors generally.

 

4.3 Consents and Approvals . Except for any notices, filings, consents, or approvals specified in Section 4.3 of the Disclosure Schedule (collectively, the “ Seller Required Consents ”) and excluding

 

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(i) consents required under Contracts with customers other than those customers identified in Section 4.24 of the Disclosure Schedule and (ii) consents which may be required under agreements of Seller for nurse housing, neither the execution and delivery by any Seller Party of the Transaction Documents to which it is a party, nor the performance of the Transactions performed or to be performed by any Seller Party, require any notice, filing, consent, renegotiation, or approval, constitute a Default, cause any payment obligation to arise, or give any Person the right to challenge any of the Transactions under (a) any Law or Court Order to which such Seller Party is subject, (b) the Charter Documents or bylaws of such Seller Party, or (c) any Contract, Governmental Permit, or other document to which such Seller Party is a party or by which the properties or other assets of such Seller Party may be bound.

 

4.4 Stock Ownership . The Shareholders are the record and beneficial owners of all of the issued and outstanding shares of capital stock of the Seller.

 

4.5 Financial Statements . Section 4.5 of the Disclosure Schedule contains correct and complete copies of the Seller’s unaudited internally prepared monthly financial statements consisting of a balance sheet as of June 30, 2004 and August 31, 2004 and the related statements of income for the periods then ended. Section 4.5 of the Disclosure Schedule also contains correct and complete copies of the Seller’s compiled financial statements consisting of a balance sheets as of December 31, 2003 and the related statement of income for the year then ended. All such financial statements are referred to herein collectively as the “ Financial Statements .” The Financial Statements are consistent in all material respects with the books and records of the Seller, and there have not been any transactions that have not been recorded in the accounting records underlying such Financial Statements. The Financial Statements have been prepared in accordance with GAAP consistently applied and fairly present the financial condition of the Seller as of the dates thereof, and the results of its operations for the periods then ended, subject to normal recurring year-end adjustments, the absence of notes and cash flow statements. The balance sheet of the Seller as of August 31, 2004 that is included in the Financial Statements is referred to herein as the “ Balance Sheet ”, and the date thereof is referred to as the “ Balance Sheet Date .”

 

4.6 Title to Purchased Assets and Related Matters . The Seller has good and marketable title to, valid leasehold interests in, or valid licenses to use all of the Purchased Assets, free from any Encumbrances and, in the case of leased or licensed property, subject to the rights of the lessor or licensor. The use of the Purchased Assets is not subject to any Encumbrances (other than those specified in the preceding sentence). The Purchased Assets, taken as a whole, constitute all of the properties and assets relating to or used or held for use in connection with the Business during the past 12 months (except for Inventory sold, cash disposed of, Accounts Receivable collected, prepaid expenses realized, Contracts fully performed, properties or assets replaced by equivalent or superior assets, in each case in the ordinary course of business, and the Excluded Assets). Except for the Excluded Assets, there are no assets or properties used in the operation of the Business that are owned by any Person other than the Seller that will not be licensed or leased to the Buyer under valid, current license arrangements or leases, subject to receipt of all Seller Required Consents.

 

4.7 Real Property .

 

(a) Section 4.7(a)(i) of the Disclosure Schedule contains a complete and accurate description of all Real Property (including street address) and all Encumbrances thereon and lists any Contracts (the “ Real Estate Leases ”) under which any such Real Property is occupied or used by the Seller or in the operation of the Business, current and complete copies of which have been previously delivered to the Buyer. The Seller does not own any real property.

 

(b) Each Real Estate Lease is in full force and effect and has not been assigned, modified, supplemented, or amended and neither tenant nor, to the Seller’s knowledge, the landlord under

 

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any such Real Estate Lease is in Default under any such Real Estate Lease, and no circumstance or set of circumstances exists (including the Transactions) which, with the giving of notice or the passage of time, or both, would permit such landlord or tenant to terminate any such Real Estate Lease or to seek payment of a fee in connection with the Transactions.

 

(c) To the Seller’s knowledge, all structures and all structural, mechanical, and other physical systems thereof that constitute part of the Real Property, including the walls, roofs, and structural elements thereof and the heating, ventilation, air conditioning, plumbing, electrical, communications, mechanical, water, sewer, waste water, storm water, paving, and parking equipment, systems, and facilities included therein, are free of material defects, in good operating condition and repair and fit for the particular purpose for which they are used.

 

(d) The Seller’s use and operation of the Real Property comply, in all material respects, with all applicable Laws, Court Orders, Governmental Permits, or restrictions of any Governmental Body having jurisdiction over any portion of the Real Property.

 

(e) There are no leases, subleases, licenses, concessions, or other Contracts granting to any third party the right of use or occupancy of any portion of the Real Property.

 

(f) There are no outstanding options, rights of first offer, or rights of first refusal or other similar Contracts or rights to purchase the Real Property, or any portion thereof or interest therein; and

 

(g) All Real Property Taxes (and any applicable penalties and interest, if any) that are due and payable with respect to the Real Property have been paid or will be paid at or prior to Closing and adequately reserved on the books and records of the Seller.

 

4.8 Certain Personal Property . Section 4.8 of the Disclosure Schedule is a complete schedule of all fixed assets, describing all items of tangible personal property that were included in the Balance Sheet. Since the Balance Sheet Date, the Seller has not acquired any items of tangible personal property that have a carrying value in excess of $100. The Seller has provided the Buyer a depreciation schedule for all fixed assets. All personal property included in Section 4.8 of the Disclosure Schedule is usable in the ordinary course of business, and conforms in all material respects with any applicable Laws relating to its construction, use, and operation. Except for those items subject to the Non-Real Estate Leases, no Person other than the Seller owns any vehicles, equipment, or other tangible assets located on the Real Property that have been used in the Business or that are necessary for the operation of the Business. The Purchased Assets are suitable for the purposes for which such assets are currently used or are held for use, are free from known defects, and are in good working condition, subject to normal wear and tear.

 

4.9 Non-Real Estate Leases . Section 4.9 of the Disclosure Schedule lists all leases under which any assets or property used in the Business (other than Real Property) is possessed by the Seller under an existing lease (the “ Non-Real Estate Leases ”), including all vehicles, machinery, equipment, Hardware, furniture, and computers.

 

4.10 Accounts Receivable . The Accounts Receivable included in the Purchased Assets are bona fide Accounts Receivable created in the ordinary course of business. All of the Accounts Receivable included in the Purchased Assets are collectible within 90 days from the respective dates of sale, net of any reserves included in the Balance Sheet. There is no contest, claim, defense, or right of set-off, other than returns in the ordinary course of business, of any account debtor relating to the amount or validity of any Account Receivable. Section 4.10 of the Disclosure Schedule contains a complete and

 

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accurate list of all Accounts Receivable, other than Excluded Receivables, and sets forth the aging of each such Account Receivable. The Seller Parties do not know of any facts or circumstances (other than general conditions affecting the U.S. economy and not disproportionately affecting the Seller) that could reasonably be expected to result in any increase in the uncollectibility of such Accounts Receivable included in the Purchased Assets.

 

4.11 Accounts Payable . Set forth on Section 4.11 of the Disclosure Schedule is a true, correct, and complete list, as of a date not more than five Business Days prior to the date