ASSET PURCHASE AGREEMENT

 

ASSET PURCHASE AGREEMENT

 

TABLE OF CONTENTS

 

SCHEDULES

Company Disclosure Schedule

Buyer’s Disclosure Schedule

 

EXHIBITS

Appendix A – List and Description of Assets

Appendix B – List and Description of Assumed Liabilities

Appendix C – Assignment and Assumption Agreement

 

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ASSET PURCHASE AGREEMENT

 

THIS ASSET PURCHASE AGREEMENT , dated to be effective as of December 1, 2005 (this “ Agreement ”), is amongst PRECIS, INC., an Oklahoma corporation (“ Precis ”), Foresight, Inc., an Oklahoma corporation and wholly-owned subsidiary of Precis (“ Seller ”) and Benefit Marketing Solutions, LLC, an Oklahoma limited liability company (“ Buyer ”).  Collectively, Buyer, Seller and Buyer, shall be referred to as the “ Parties ” or individually the “ Party .”

 

RECITALS

 

1.  Seller desires to sell and assign and Buyer desires to purchase (the “ Asset Purchase and Sale ”), the assets listed and identified on Appendix A (the “ Subject Assets ”) utilized in the conduct of the wholesale membership benefit administration business of Seller (the “ Foresight Club Business ”) as of the date of this Agreement and assume the liabilities listed and identified on Appendix B (the “ Assumed Liabilities ”) as a portion of the purchase price of the Subject Assets.

 

2.  Each of the Board of Directors of Buyer and Seller has approved and adopted, and, through their respective duly authorized officers, each of Buyer, Buyer and Seller have executed, this Agreement.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, each Party agrees as follows:

 

ARTICLE I

 

SALE AND PURCHASE OF SUBJECT ASSETS

AND ASSUMPTION OF ASSUMED LIABILITIES

 

1.1  Sale and Purchase of Subject Assets and Assumption of Assumed Liabilities .  Subject to the terms and conditions of this Agreement, and in reliance upon the representations, warranties, covenants and agreements contained in this Agreement, at Closing (as defined in Section 1.4) Seller shall sell, assign, convey, set over, transfer and deliver to Buyer, and Buyer shall purchase, acquire and accept, all right, title and interest of Seller in the Subject Assets, as more fully described on Appendix A , free and clear of any Encumbrance (as defined in Section 5.3) other than an Assumed Liability, against receipt of the consideration paid, liabilities assumed and deliveries made at Closing by the respective Parties, as provided under, and contemplated by, this Agreement.

 

1.2  Purchase Price of Subject Assets .  The purchase price of Subject Assets (the “ Asset Purchase Price ”) shall be payable in accordance with and subject to limitations and conditions set forth in this Section 1.2 as follows:

 

1.2.1 Payments and Liability Assumptions .  Buyer shall pay and deliver to Seller the following:

 

1.2.1.1 Cash Payment .  The sum of $475,000 in immediately available funds;

 

1.2.1.3 Assumption of Liabilities .  Assumption of the Assumed Liabilities pursuant to the Assignment and Assumption Agreement attached to this Agreement as Appendix C;

 

1.3  Deliveries and Exchanges .  At Closing, the parties shall, pursuant to this Agreement, make the deliveries and payments as follows:

 

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1.3.1 Buyer’s Deliveries .  At Closing (as defined in Section 1.4), Buyer shall deliver to Seller, pursuant to and in accordance with the written instructions and directions signed or executed by Seller,

 

(i) the payment required pursuant to Section 1.2.1.1,

 

(ii) the executed Assignment and Assumption Agreement attached to this Agreement as Appendix C.

 

1.3.2 Seller’s Deliveries .  At Closing (as defined in Section 1.4), Seller shall make the following deliveries to Buyer against payment and delivery of the Asset Purchase Price:

 

(i) the executed Assignment and Assumption Agreement attached to this Agreement as Appendix C.

 

1.4  The Closing and Closing Date .  Subject to the terms and conditions of this Agreement, the transactions contemplated under this Agreement shall be closed (the “ Closing ”) at the offices of Seller in Grand Prairie, Texas, at 5:00 p.m. local time on December 8, 2005 or at other place and on such other time and date as the Parties shall agree (the “ Closing Date ”).  All transactions contemplated under this Agreement shall be deemed effective as of December 1, 2005.

 

ARTICLE II

 

REPRESENTATIONS AND WARRANTIES OF
SELLER

 

Seller and Precis each represents and warrants to Buyer that the representations, warranties, statements made in this Article II are true and correct as of the date of this Agreement and will be true and correct at Closing, except as specifically set forth in the schedules delivered by Seller to Buyer and attached to this Agreement (the “ Seller’s Disclosure Schedule ”); provided , however , any disclosure made with reference to one or more sections of Seller’s Disclosure Schedule shall be deemed disclosed with respect to each other Section of this Agreement as to which such disclosure is relevant provided that such relevance is reasonably apparent.  Disclosure of any matter in Seller’s Disclosure Schedule shall not be deemed an admission that such matter is material.  Seller and Precis each represents and warrants to Buyer as of the date of this Agreement and at Closing as follows:

 

2.1  Corporate Organization .  Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Oklahoma.  Seller has all requisite corporate power and authority to own, operate and lease its properties and assets as and where the same are owned, operated or leased and to conduct its business as it is being conducted on the date of this Agreement.

 

2.2  Authorization; Execution and Delivery .  Seller has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement.  The execution, delivery and performance of this Agreement by Seller, and the consummation by Seller of the Asset Purchase and Sale and other transactions contemplated by this Agreement have been duly authorized by all requisite corporate action on the part of Seller.  This Agreement has been duly executed and delivered by Seller, and constitutes the legal, valid and binding obligations of Seller, fully enforceable against Seller in accordance with the terms of this Agreement.

 

2.3  Governmental Approvals and Filings .  No approval, authorization, consent, license, clearance or order of, declaration or notification to, or filing or registration with, any governmental or regulatory authority is

 

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required in order (a) to permit Seller to consummate the Asset Purchase and Sale or perform its obligations under this Agreement or (b) to prevent the termination of, or Material Adverse Effect on, any governmental right, privilege, authority, franchise, license, permit or certificate (collectively “ Governmental Licenses ”) of Seller to enable Buyer to acquire, own, operate and lease the Subject Assets, or to prevent any material loss or disadvantage to the Foresight Club Business, by reason of the Asset Purchase and Sale, except as set forth in Section 2.3 of Seller’s Disclosure Schedule.

 

2.4  No Conflict .  Subject to compliance with the Governmental Licenses described in Section 2.4 of Seller’s Disclosure Schedules and obtaining the other consents and waivers that are set forth and described in Section 2.4 of Seller’s Disclosure Schedule (the “ Private Consents ”), neither the execution, delivery and performance of this Agreement by Seller, nor the consummation by Seller of the Asset Purchase and Sale and the other transactions contemplated in this Agreement, will

 

(i) conflict with, or result in a breach or violation of, any provision of the Articles or Certificate of Incorporation (or similar organizational document) or bylaws of Seller;

 

(ii) conflict with, result in a breach or violation of, give rise to a default, or result in the acceleration of performance, or permit the acceleration of performance, under (whether or not after the giving of notice or lapse of time or both) any Encumbrance, note, bond, indenture, guaranty, lease, license, agreement or other instrument, writ, injunction, order, judgment or decree to which or any of the Subject Assets are subject or constitute in whole or part;

 

(iii) give rise to a declaration or imposition of any Encumbrance upon the Subject Assets; or

 

(iv) impair the Foresight Club Business or adversely affect any Governmental License necessary to enable Buyer to carry on the Foresight Club Business as conducted by Seller immediately prior to Closing,

 

except, in the case of clauses (ii), (iii) or (iv), for any conflict, breach, violation, default, declaration, imposition or impairment that could not reasonably be expected to have a Material Adverse Effect.

 

2.5  Financial Statements; Absence of Undisclosed Liabilities; Receivables .  Seller has previously delivered to Buyer complete and correct copies of the following: the statement of income and selected balance sheet information of the Foresight Club Business at September 30, 2005 (the “ Financial Statement Date ”) and projected revenue and contribution of the Foresight Club Business through December 31, 2005 (collectively referred to as the “ Seller Financial Statements ”), all of which fairly present in all material respects the financial condition of the Foresight Club Business as the Financial Statement Date.  The statement of income representing in part Seller Financial Statements does not contain any items of special or nonrecurring revenue or income or any revenue or income not earned in the ordinary course of business, except as expressly specified in the statements of income and related notes.  Except as and to the extent reflected or reserved against on the Seller Financial Statements, and except for liabilities which will not have a Material Adverse Effect, Seller did not have, as of the Financial Statement Date, any liabilities, debts or obligations (whether absolute, accrued, contingent or otherwise) of any nature that would be required as of such date to have been included on the Seller Financial Statements, as prepared.

 

2.6 No Material Change . Since the Financial Statement Date, there has been no material adverse change or changes in the business, operations, assets (including intangible assets), condition (financial or otherwise), liabilities or results of operations of the Foresight Club Business, taken as a whole, and no event has occurred that is reasonably likely to cause any such change or changes (in the aggregate) to have a Material Adverse Effect.

 

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2.7. Absence of Changes .  Except as disclosed in Seller Financial Statements, since the Financial Statement Date, Seller has conducted the Foresight Club Business only in the ordinary course of business, and has not:

 

(i)  sold, transferred, leased to others or otherwise disposed of any of the Subject Assets;

 

(ii)  terminated or received any notice of termination of any contract, lease, license or other agreement or any Governmental License, or suffered any damage, destruction or loss (whether or not covered by insurance) that could reasonably be expected to have a Material Adverse Effect on the Foresight Club Business;

 

(iii)  entered into any transaction, contract or commitment other than in the ordinary course of business of the Foresight Club Business;

 

(iv)  changed any accounting practices, policies or procedures utilized in the preparation of the Seller Financial Statements (including procedures with respect to revenue recognition, payment of accounts payable or collection of accounts receivable); or

 

(v)  entered into any agreement or made any commitment to take any of the types of action described in subparagraphs (i) through (iv) of this Section 2.7.

 

2.8  Title to Subject Assets .  Except as set forth in Section 2.8 of Seller’s Disclosure Schedule, Seller has good and indefeasible title to the Subject Assets, free and clear of all Encumbrances, except those Encumbrances that secure the Assumed Liabilities.

 

2.9  Compliance with Laws; Legal Proceedings .

 

2.9.1 Legal Compliance .  Seller is not in violation of, or in default with respect to, any applicable law, statute, regulation, ordinance, writ, injunction, order, judgment, decree or any Governmental License, including any federal state or local law regarding or relating to trespass or violations of privacy rights, which violation or default could reasonably be expected to have a Material Adverse Effect on the Foresight Club Business following consummation of the Asset Purchase and Sale and the other transactions contemplated in this Agreement.

 

2.9.2  Legal Proceedings .  Except as set forth in Section 2.9.2 of Seller’s Disclosure Schedule, there is no order, writ, injunction, judgment or decree outstanding and no legal, administrative, arbitration or other governmental proceeding or investigation pending or, to the best of the knowledge of Seller, threatened, and there are no claims (including unasserted claims of which Seller is aware) against or relating to Seller or the Subject Assets or the Foresight Club Business.  There is no legal, administrative or other governmental proceeding or investigation pending or, to the best of the knowledge of Seller, threatened against Seller, any of its directors or officers, as such, that relates to the Asset Purchase and Sale or any of the transactions contemplated by this Agreement.  None of the items listed in Section 2.9.2 of Seller’s Disclosure Schedule could reasonably be expected to have a Material Adverse Effect on the Foresight Club Business following consummation of the Asset Purchase and Sale and the other transactions contemplated in this Agreement. Seller has not been a defendant (either originally, by counter-claim or impleading) in any legal proceedings that have either been filed in the past three (3) fiscal years or are currently pending (all as set forth in Section 2.9.2 of Seller’s Disclosure Schedule).  Except as set forth in Section 2.9.2 of Seller’s Disclosure Schedule, none of the legal proceedings set forth in Section 2.9.2 of Seller’s Disclosure Schedule has had or, to the best of the knowledge of Seller, will have a Material Adverse Effect on the Foresight Club Business following Closing.

 

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2.10  Brokers .  No broker, finder or investment advisor acted, directly or indirectly, as such for Seller in connection with the Asset Purchase and Sale or this Agreement, and no broker, finder, investment advisor or other Person is entitled to any fee or other commission, or other remuneration, in respect thereof based in any way on any action, agreement, arrangement or understanding taken or made by or on behalf of Seller.

 

2.11  Contracts; etc .  Set forth on Section 2.11 of Seller’s Disclosure Schedule is a complete and correct list of each of the agreements, leases and other instruments, both oral and written, to which Seller is a party that relates to and is associated with the conduct of the Foresight Club Business or by which any of the Subject Assets are subject or bound including without limitation the following:

 

(i)  each service or other similar type of agreement under which services are provided by any other Person to Seller in connection or association with the conduct of the Foresight Club Business and that is material to the Foresight Club Business taken as a whole;

 

(ii)  each agreement that restricts the operation of the conduct of the Foresight Club Business or the ability of Seller to solicit customers or employees;

 

(iii)  each operating lease (as lessor, lessee, sublessor or sublessee) of any real or tangible personal property or assets that relates to or is associated with the conduct of the Foresight Club Business that is material to conduct of the Foresight Club Business;

 

(iv)  each agreement under which services are provided by Seller to any material customer in the conduct of the Foresight Club Business;

 

(v)  each partnership, joint venture or similar agreement associated with or related to the conduct of the Foresight Club Business;

 

(vi) each agreement providing for accelerated or special payments as a result of consummation of the Asset Purchase and Sale and the other transactions contemplated by this Agreement.

 

A complete and correct copy of each written agreement, lease or other type of document, and a true, complete and correct summary of each oral agreement, lease or other type of document, required to be disclosed pursuant to subparagraphs (i) through (vi) of this Section 2.11 has been previously delivered to Buyer.  Furthermore, each agreement, lease or other type of document required to be disclosed pursuant to this Section 2.11 to which Seller is a party or by which Seller or the Subject Assets are bound (collectively, the “ Seller’s Contracts ”), except those Seller’s Contracts the loss of which could reasonably be expected to not have a Material Adverse Effect on the Foresight Club Business, is and will continue to be following consummation of the Asset Purchase and Sale valid, binding and in full force and effect and enforceable by Seller and Buyer following consummation of the Asset Purchase and Sale in accordance with its terms.  Seller is not (with or without the lapse of time or the giving of notice, or both) in breach of or in default under any of Seller’s Contracts, and, to the best of the knowledge of Seller, no other party to any of the Seller’s Contracts is (with or without the lapse of time or the giving of notice, or both) in breach of or in default under any of the Seller’s Contracts, where such breach or default could reasonably be expected to have a Material Adverse Effect on the conduct of the Foresight Club Business following consummation of the Asset Purchase and Sale.  Seller has neither received notice, written or oral, of or any threatened termination by any third party to any of the Seller’s Contracts nor become aware of any intention of a third party to any Seller’s Contracts not to renew or, if currently being rebid, re-award any of Seller’s Contracts.

 

2.12 Permits, Authorizations, etc .  Section 2.12 of Seller’s Disclosure Schedule sets forth all Governmental Licenses and each other material approval, authorization, consent, license, certificate, order or other permit necessary to enable Seller to own, operate and lease the Foresight Club Business and to provide

 

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services, products and otherwise conduct the Foresight Club Business as presently provided, sold and conducted (collectively, the “ Seller’s Permits ”) or required to permit the continued conduct of the Foresight Club Business by Buyer following consummation of the Asset Purchase and Sale in the manner conducted on the Closing Date (indicating in each case whether or not the consent of any Person is required for the consummation of the Asset Purchase and Sale and other transactions contemplated by this Agreement).

 

2.13  Books and Records .  All accounts, books, ledgers and official and other records prepared and kept by Seller with respect to the Foresight Club Business have been kept and completed properly in all material respects, and there are no material inaccuracies or discrepancies contained or reflected therein.  Such records of Seller are located at the offices of Seller in Grand Prairie, Texas.

 

2.14  Customers; Customer Relationships .  To the knowledge of Seller, there are no facts or circumstances that are likely to result in the loss of any of the ten largest clients or customers of Seller or a material change in the relationship of Seller with any such client or customer following consummation of the Asset Purchase and Sale and the other transactions contemplated by this Agreement.

 

2.15  Tax Returns; Tax Payments .  Seller represents that, other than as disclosed in Section 2.15 of the Seller’s Disclosure Schedule, Seller has timely filed all United States federal income Tax Returns and all other material tax returns required to be filed by it.  All such tax returns are complete and correct in all material respects (except to the extent a reserve has been established as reflected in the Seller Financial Statements).  Seller has timely paid and discharged all taxes due in connection with or with respect to the periods or transactions covered by such tax returns and has paid all other taxes as are due, except such as are being contested in good faith by appropriate proceedings (to the extent that any such proceedings are required), and there are no other taxes that would be due if asserted by a taxing authority, except with respect to which Seller is maintaining reserves unless the failure to do so could not have a Material Adverse Effect.

 

2.16  Accuracy of Representations, Warranties and Covenants .  No representation, covenant or warranty by Seller in this Agreement and, to the actual acknowledge of Seller, no written information, agreements or documents furnished to Buyer by Seller in connection with the Asset Purchase and Sale and the other transactions contemplated by this Agreement, contain or will contain any untrue statement of a material fact or omits or will omit to contain a material fact necessary in order to make the statement or information contained in this Agreement or in any such information, agreements or documents, in light of the circumstances under which statement or omission was made, not misleading.

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES OF
BUYER

 

Buyer represents and warrants to Seller that the representations, warranties, statements made in this Article III are true and correct as of the date of this Agreement and will be true and correct at Closing, except as specifically set forth in the schedules delivered by Buyer to Seller (the “ Buyer’s Disclosure Schedule ”); provided , however , that any disclosure made with reference to one or more sections of the Buyer’s Disclosure Schedule shall be deemed disclosed with respect to each other Section of this Agreement as to which such disclosure is relevant provided that such relevance is reasonably apparent.  Disclosure of any matter in the Buyer’s Disclosure Schedule shall not be deemed an admission that such matter is material.  Buyer represents and warrants to Seller, as of the date of this Agreement and at Closing , as follows:

 

3.1  Corporate Organization .  Buyer is a limited liability company duly organized, validly existing and in good standing under the laws of the state of its organization and has all requisite corporate power and authority to own, operate and lease its properties and assets as and where the same are owned, operated or leased

 

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and to conduct its business as it is now being conducted.  Buyer is in good standing and duly qualified or licensed as a foreign corporation to do business in those jurisdictions in which the location of the property and assets owned, operated or leased by Buyer or the nature of the business conducted by Buyer makes such qualification or licensing necessary, except where the failure to be so qualified or licensed could not reasonably be expected to have a Material Adverse Effect.

 

3.2  Authorization; Execution and Delivery .  Buyer has all requisite power and authority to execute, deliver and perform its obligations under this Agreement.  The execution, delivery and performance of this Agreement by Buyer and the consummation by Buyer of the transactions contemplated hereby have been duly authorized by all requisite action on the part of Buyer.  This Agreement has been duly executed and delivered by Buyer and constitutes the legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with this Agreement.

 

3.3  Governmental Approvals and Filings .  No approval, authorization, consent, license, clearance or order of, declaration or notification to, or filing or registration with, any governmental or regulatory authority is required in order (i) to permit Buyer to consummate the Asset Purchase and Sale or perform its obligations under this Agreement or (ii) to enable Buyer to own, operate and lease their properties and assets as and where such properties and assets are owned, leased or operated and to provide its services or carry on its business, or to prevent any material loss or disadvantage to Buyer’s business, by reason of the Asset Purchase and Sale, except as