Exhibit 10.33
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ASSET PURCHASE AGREEMENT
AMONG
FINANCIAL DATA SOLUTIONS, INC.,
SOUTHWEST COMMUNITY BANCORP
AND
FLOAT ACQUISITION CORP.
Closing Date: June 7, 2005
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TABLE OF CONTENTS
PAGE
1
DEFINITIONS..............................................................1
2 SALE OF ASSETS;
CLOSING..................................................4
2.1.
Sale of
Assets...................................................4
2.2.
Consideration....................................................5
2.3.
Net
Current Assets Adjustment to Purchase Price..................5
2.4.
Accounts
Receivable Adjustment to Purchase Price.................6
2.5.
Buyer's
Assumption of Liabilities................................7
2.6.
Closing..........................................................7
2.7.
Deliveries
by Seller Parties at Closing..........................7
2.8.
Deliveries
by Buyer at Closing...................................8
3 REPRESENTATIONS AND
WARRANTIES OF THE SELLER PARTIES.....................9
3.1.
Organization and
Power...........................................9
3.2.
Authorization....................................................9
3.3.
No
Conflict......................................................9
3.4.
Title to
Purchased Assets........................................9
3.5.
Condition
of Purchased Assets...................................10
3.6. Financial
Statements............................................10
3.7.
Accounts
Receivable; Credits....................................10
3.8.
Pre-Bill........................................................10
3.9.
Litigation......................................................10
3.10.
Compliance with
Law.............................................11
3.11.
Absence of
Undisclosed Liabilities..............................11
3.12.
Absence of
Certain Changes......................................11
3.13.
Contracts.......................................................12
3.14.
Intellectual
Property...........................................12
3.15.
Real
Property...................................................14
3.16.
Environmental
Matters...........................................14
3.17.
Labor;
ERISA....................................................15
3.18.
Taxes...........................................................15
3.19.
Capitalization;
Relationships with Related Persons..............16
3.20.
Brokers.........................................................16
3.21.
Insurance.......................................................16
3.22. Powers of
Attorney..............................................16
3.23.
Debt............................................................17
3.24.
Solvency........................................................17
3.25.
Statements not
Misleading.......................................17
4 REPRESENTATIONS AND
WARRANTIES OF BUYER.................................17
4.1.
Organization and Power of
Buyer.................................17
4.2.
Authorization...................................................18
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4.3.
No
Conflict.....................................................18
4.4
Brokers.........................................................18
5
COVENANTS...............................................................18
5.1.
Further
Assurances; Cooperation.................................18
5.2.
Covenants
not to Compete........................................19
5.3.
Use of
Names....................................................21
5.4.
Passage of
Title and Risk of Loss...............................21
5.5.
Transfer
of Goodwill and Business...............................22
5.6.
Expenses;
Transfer Taxes........................................22
5.7.
Taxes...........................................................22
5.8.
Employment
Matters..............................................23
5.9.
Contingent
Payment..............................................24
5.10.
Motor
Vehicles..................................................24
6
INDEMNIFICATION.........................................................24
6.1.
Indemnified
Losses..............................................24
6.2.
Indemnification by Seller
Parties...............................24
6.3.
Indemnification By
Buyer........................................25
6.4.
Third
Party Claims Against Buyer................................25
6.5 Third Party
Claims Against Seller...............................25
6.6.
Procedures; No Waiver;
Exclusivity..............................25
6.7.
Set-Off.........................................................27
6.8.
Survival........................................................27
6.9.
Limitations on Indemnification by the Seller
Parties............28
6.10.
Exclusive
Remedy................................................28
7
MISCELLANEOUS...........................................................28
7.1.
Notices.........................................................28
7.2.
Entire
Agreement................................................29
7.3.
Counterparts....................................................29
7.4.
Parties in
Interest; Assignment.................................29
7.5.
Governing
Law...................................................29
7.6.
Schedules
and Headings..........................................29
7.7.
Amendment.......................................................29
7.8.
Waiver..........................................................29
7.9.
Joint and
Several Liability.....................................30
7.10.
Facsimile
Signatures............................................30
7.11
Press
Release...................................................30
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EXHIBITS AND SCHEDULES
----------------------
Exhibit A -- Escrow
Agreement
Exhibit B -- Opinion of
Counsel to the Seller Parties
Exhibit C -- Bill of
Sale, Assignment and Conveyance
Exhibit D -- Form of
Lease Assignment
Exhibit E -- Assumption
of Liabilities
Schedule 1A --
Assumed
Liabilities
Schedule 1B --
Purchased
Assets
Schedule 2.7 -- Consents
Required for Closing
Schedule 3.3 -- Consents,
Etc.
Schedule 3.4 -- Title to
Purchased Assets
Schedule 3.6 -- Reference
Date Balance Sheet
Schedule 3.13 --
Contracts
Schedule 3.14 --
Intellectual Property
Schedule 3.15 -- Real
Property
Schedule 3.17 -- Labor;
ERISA
Schedule 3.18 -- Taxes
Schedule 3.19 --
Capitalization
Schedule 3.20 --
Brokers
Schedule 3.21 --
Insurance
Schedule 3.23 -- Debt
Schedule 5.8 -- Severance
Obligations
Schedule 5.9 -- Contingent
Payment
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ASSET PURCHASE AGREEMENT
This ASSET
PURCHASE AGREEMENT (the "Agreement") is executed as of June 7,
2005, by and among FINANCIAL DATA
SOLUTIONS, INC., a corporation incorporated
under the laws of the State of California
("Seller"), SOUTHWEST COMMUNITY
BANCORP, a corporation incorporated under
the laws of the State of California
(the "Stockholder" and together with
Seller, the "Seller Parties") and FLOAT
ACQUISITION CORP., a corporation
incorporated under the laws of the State of
Delaware ("Buyer") (collectively, the
"parties").
RECITALS
WHEREAS, Buyer
wishes to purchase from Seller, and Seller wishes to sell to
Buyer, the Purchased Assets (as defined
below) upon the terms and conditions of
this Agreement; and
WHEREAS, in
order to induce Buyer to purchase the Purchased Assets, the
Stockholder, who will receive a direct,
tangible and material benefit from the
transactions contemplated by this Agreement
by virtue of the fact that the
Stockholder is the owner of 100% of the
outstanding capital stock of Seller, is
willing to be party to this Agreement as
set forth herein.
AGREEMENT
NOW, THEREFORE,
in consideration of the premises and the mutual covenants
and agreements hereinafter set forth, the
parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
For purposes of
this Agreement, the following terms shall have the
following meanings:
"Accounts
Receivable" shall mean (a) all accounts receivable and other
rights to payment from customers of Seller
and the full benefit of all security
for such accounts or rights to payment,
including all accounts receivable
representing amounts receivable in respect
of goods shipped or products sold or
services rendered to customers of Seller,
(b) all other accounts or notes
receivable of Seller and the full benefit
of all security for such accounts or
notes, and (c) any claim, remedy or other
right related to any of the foregoing.
"Assumed
Liabilities" shall mean only the duties, liabilities or
obligations of Seller, if any, arising
after the Closing Date in connection with
the items identified on Schedule 1A, except
as otherwise noted on Schedule 1A,
and shall specifically exclude, among other
things, (i) any liabilities for
employment, income, sales, property or
other Taxes incurred or accrued by
Seller, including without limitation as a
result of this transaction; (ii) any
fees or expenses incurred by Seller in
connection with this transaction; (iii)
any debt, payables or other liabilities to
Related Persons other than salary and
other payroll related expenses that may be
specifically set forth on Schedule
1A; (iv) any liabilities related to any
employee benefit plan, including,
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without limitation, any 401(k), any profit
sharing or pension plan, whether or
not sponsored by Seller, any deferred
compensation payables, accrued bonus
payables, any stock option plan or stock
option, other accrued liabilities, and
any COBRA-related obligations; (v) any and
all liability related to Seller's
Real Property except as specifically set
forth in the Lease Assignments; (vi)
any litigation pending against Seller;
(vii) any warranty liability to Seller's
customers, including any liability arising
out of or relating to any breach by
Seller of any obligation to a customer that
occurred prior to the Closing; and
(viii) any liability or obligation
constituting or arising out of any Debt of
Seller.
"Business" shall
mean the business of item processing, remittance
processing, lockbox processing, statement
rendering and document imaging and
records management services to banks,
credit unions and other financial
institutions and intermediaries.
"Closing" shall
mean the consummation of the purchase and sale transaction
described herein.
"Closing Date"
shall mean the date on which the Closing occurs, as
specified in Section 2.6.
"Current Assets"
shall mean all Accounts Receivable, cash, inventory and
prepaid expenses (including without
limitation, pre-paid postage) of Seller and
other assets classified as current assets
in accordance with GAAP.
"Current
Liabilities" shall mean all trade accounts payable and deferred
revenue obligations (whether categorized as
deferred revenue or as customer
deposits), accrued sales commissions,
accrued costs of sales and amounts owing
to vendors and suppliers for goods and
services provided before the Closing Date
but invoiced after the Closing Date, all
amounts attributable to accrued
vacation (whether or not Seller has
historically included the same as a current
liability on its balance sheet), and other
debts, liabilities and obligations
that are classified as current liabilities
in accordance with GAAP.
"Debt", as
applied to any Person, means: (a) indebtedness or liability of
such Person for borrowed money, or with
respect to deposits or advances of any
kind, or for the deferred purchase price of
property or services; (b) all
obligations of such Person evidenced by
notes bonds, debentures or similar
instruments, (c) all obligations of such
Person under conditional sale or other
title retention agreements relating to
property or assets purchased by such
Person, (d) all obligations of such Person
for the deferred purchase price of
property or services; (e) all obligations
of such Person as lessee under capital
leases; (f) current liabilities of such
Person in respect of the present value
of unfunded vested benefits under any
employee benefit plan; (g) obligations of
such Person under letters of credit,
bankers acceptances, or comparable
arrangements; (h) obligations of such
Person arising under acceptance
facilities; (i) guaranties; endorsements
(other than for collection or deposit
in the ordinary course of business), and
other contingent obligations of such
Person to purchase, to provide funds for
payment, to supply funds to invest in
any Persons, or otherwise to assure a
creditor against loss; (j) all obligations
of such Person secured by any Lien on any
of such Person's assets or property,
whether or not the obligations have
assumed, and (k) all obligations of such
Person in respect of interest rate
protection agreements, foreign currency
exchange agreements or other interest or
exchange rate hedging arrangements.
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"Excluded
Assets" shall mean those items listed as such on Schedule 1B
hereto.
"Financial
Statements" shall have the meaning assigned to it in Section
3.6.
"GAAP" shall mean
United States generally accepted accounting principles
consistently applied.
"Governmental
Entity" shall mean any court, administrative agency,
commission, state, municipality or other
governmental authority or
instrumentality, domestic or foreign,
national or international.
"Knowledge" - an
individual will be deemed to have "Knowledge" of a fact or
other matter if:
(a) such
individual is actually aware of that fact or matter; or
(b) a prudent
individual would 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.
Seller and
Stockholder will be deemed to have "Knowledge" of a particular
fact or other matter if Frank Mercardante,
Alan Lane, Fred Mirzaian, or Peg
Caffarel has Knowledge of that fact or
other matter (as set forth in (a) and (b)
above).
"Leases" shall
mean the lease agreements described on Schedule 3.15.
"Liens" shall
mean all liabilities, claims, liens, charges, pledges,
security interests, options, restrictions
or other encumbrances of any kind.
"Material
Adverse Effect" means any circumstance, change in, or effect
on,
the Business or Seller that, individually
or in the aggregate with any other
circumstances, changes in, or effects on,
Seller or the Business: (a) is, or
could be, materially adverse to the
business, operations, assets or liabilities
(including, without limitation, contingent
liabilities), employee relationships,
customer or supplier relationships,
prospects, results of operations or the
condition (financial or otherwise) of the
Business, or (b) could materially
adversely affect the ability of Buyer to
operate or conduct the Business in the
manner in which it is currently operated or
conducted, or contemplated to be
conducted, by Seller, or (c) could impair
the ability of Seller to consummate
the transactions contemplated by this
Agreement.
"Net Current
Assets" shall mean the amount of Current Assets included in
the Purchased Assets minus the amount of
Current Liabilities included in the
Assumed Liabilities.
"Permitted
Liens" shall have the meaning assigned to it in Section 3.4.
3
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"Person" shall
be construed broadly and shall include an individual, a
partnership, a corporation, a limited
liability company, an association, a joint
stock company, a trust, a joint venture, an
unincorporated organization or a
Governmental Entity (or any department,
agency or political subdivision
thereof).
"Purchase Price"
shall mean the aggregate amount to be paid by Buyer to
Seller for the Purchased Assets and
includes the cash consideration payable
pursuant to Section 2.2(a), the Primary
Escrow Funds payable pursuant to Section
2.2(b) ) and the Contingency Escrow Funds
payable pursuant to Section 2.2(c).
"Purchased
Assets" shall mean all of Seller's property and assets, whether
real, personal or mixed, tangible and
intangible, of every kind and description,
wherever located, including without
limitation those items identified on
Schedule 1B, but excluding the Excluded
Assets.
"Records" shall
mean all books of account, general, financial and
accounting records, files, invoices,
payment authorizations, correspondence to
and from customers, suppliers and payors,
and other data and information owned
by Seller.
"Reference Date"
shall mean March 31, 2005.
"Reference Date
Balance Sheet" shall mean the unaudited balance sheet for
Seller as of the Reference Date.
"Related Person"
shall mean any officer, director, stockholder, employee or
consultant of Seller or any holder of five
percent (5%) or more of any class of
stock of Seller or any member of the
immediate family of any such officer,
director, stockholder, employee or
consultant or any entity controlled by any
such officer, director, stockholder,
employee or consultant or by a family
member of any such officer, director,
stockholder, employee or consultant.
"Taxes" (or
"Tax" where the context requires) shall mean all federal,
state, county, city, local, foreign and
other taxes (including, without
limitation, premium, excise, value added,
sales, use, occupancy, gross receipts,
franchise, ad valorem, severance, capital
levy, production, transfer,
withholding, employment, unemployment
compensation, payroll-related and property
taxes, import duties and other governmental
charges and assessments), whether or
not measured in whole or in part by net
income, including deficiencies,
interest, additions to tax or interest or
penalties with respect thereto.
ARTICLE 2
SALE OF ASSETS; CLOSING
Section 2.1.
Sale of Assets. At the Closing, Seller shall sell, assign,
transfer, convey and deliver to Buyer, free
and clear of all Liens (except
Permitted Liens), good and marketable title
to all of the Purchased Assets. It
is intended that the consummation of the
purchase and sale of the Purchased
Assets will transfer the Business to Buyer
as a going concern with all of the
assets, properties and rights used in or
required for the operation and conduct
of the Business as of the Closing Date.
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Section 2.2.
Consideration. The Purchase Price shall be $9,000,000, subject
to the adjustments set forth in this
Agreement, including without limitation in
Sections 2.3 and 2.4 hereof. Buyer shall
pay the Purchase Price by delivery in
the following manner:
(a) $7,635,000
in cash by wire transfer at Closing to Seller;
(b) $600,000
(the "Primary Escrow Funds") in cash by wire transfer at
Closing to U.S. Bank National Association
(the "Escrow Agent"), to be held under
an escrow agreement in substantially the
form of Exhibit A (the "Escrow
Agreement"). A portion of the Primary
Escrow Funds equal to the difference
between (X) $300,000 and (Y) the amount of
any Reduction in Net Current Assets
(as defined in Section 2.3 below) plus the
amount of any Pending Claim Amounts
(as defined in the Escrow Agreement) shall
be paid to Seller within [ten (10]
days after the later of (i) the final
determination of Final Net Current Assets
in accordance with Section 2.3 below and
(ii) the payment to Buyer of any
Reduction in Net Current Assets due Buyer
as a result of the determination of
Final Net Current Assets in accordance with
Section 2.3 below, and the balance
of the Primary Escrow Funds shall be paid
to Seller on the one (1) year
anniversary of the Closing Date, all in
accordance with the Escrow Agreement but
subject to the terms and conditions
described in this Agreement, including,
without limitation, in Sections 2.3, 2.4
and 6.7 hereof; and
(c) $765,000
(the "Contingency Escrow Funds") in cash by wire transfer at
Closing to the Escrow Agent, to be held
under the Escrow Agreement, said
Contingency Escrow Funds to be paid to
Seller as provided in Section 5.9, but
subject to Buyer's rights to recover the
Contingency Escrow Funds as provided in
Section 5.9 and the Escrow Agreement.
Section 2.3. Net
Current Assets Adjustment to Purchase Price.
(a) Estimated
Net Current Assets. Within sixty (60) days following the
Closing Date, Buyer will prepare, or cause
to have prepared, and deliver to
Seller a balance sheet of the Business and
a statement of the Net Current Assets
of the Business as of the Closing Date. As
prepared by Buyer, this statement of
the Net Current Assets shall be referred to
as the "Estimated Net Current
Assets." The Estimated Net Current Assets
shall be prepared in accordance with
GAAP.
(b) Objection.
The Estimated Net Current Assets shall be deemed accepted by
Seller and binding unless Seller sends
Buyer a written objection thereto within
fifteen (15) days following Seller's
receipt thereof. In the event that Seller
delivers a timely written objection as
aforesaid, and Buyer and Seller are
unable to resolve such objection within
fifteen (15) days after Buyer is
notified of Seller's objection, the matters
in dispute shall be submitted for
final and binding determination to a firm
of independent certified public
accountants of national recognition and
standing jointly selected by Buyer and
Seller (the "Accountants"). The Accountants
shall prepare their resolution
statement within forty-five (45) days of
appointment. In the event that the
parties are required to agree on the
identity of the Accountants but are unable
5
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to do so, then the firm to be used shall be
selected by lot from among the "Big
4" accounting firms having offices in the
Hartford, Connecticut area, other than
those firms which have had a material
relationship with Buyer or Seller. The
Estimated Net Current Assets proposed by
Buyer, as adjusted by agreement of
Seller and Buyer or finally determined by
the Accountants, as applicable, to
reflect the resolution of any timely
objections made thereto by Seller in
accordance with this paragraph, shall
constitute the "Final Net Current Assets"
and shall be binding on the parties hereto.
Buyer and Seller shall each pay
their own expenses of preparing and
analyzing the Estimated Net Current Assets
and resolving objections thereto. The fees
and expenses of the Accountants used
to resolve objections will be borne equally
by Buyer and Seller.
(c) Access to
Information. Solely in connection with the preparation of the
Estimated Net Current Assets and the Final
Net Current Assets:
(i) Buyer shall give Seller and its accountants reasonable access
to
the books and
records of the Business, and shall cause employees of the
Business to
cooperate with them and provide them with all information
reasonably
requested, all after receiving reasonable notice from them of
their
requirements and reaching agreement as to mutually convenient
times
for review;
and
(ii) Buyer and the Seller Parties, to the extent within their
respective
control, shall give to each other and their agents access to
the
books, financial
records, work papers and other materials and documents
used or produced
in connection with the preparation of the Estimated Net
Current Assets
and the Final Net Current Assets.
(d) Final Net
Current Assets. In the event that the Final Net Current
Assets are less than $925,000 (the
difference is referred to as a "Reduction in
Net Current Assets"), the Seller Parties
shall be jointly and severally liable
for such difference as a reduction in the
cash portion of the Purchase Price.
Buyer shall be entitled to set-off the
amount of such Reduction in Net Current
Assets from the Primary Escrow Funds in
accordance with Section 6.7 of this
Agreement, and, to the extent the Reduction
in Net Current Assets exceeds the
amount of the Primary Escrow Funds then
available under the Escrow Agreement,
the Seller Parties shall pay the difference
to Buyer within (10) days after
receipt of written demand therefor.
Section 2.4.
Accounts Receivable Adjustment to Purchase Price.
(a) Receivable
Shortfall. Buyer and the Seller Parties agree that the
Purchase Price payable to Seller shall be
reduced to the extent that the
Accounts Receivable have not been collected
by Buyer within ninety (90) days
following the Closing Date (the "Collection
Period").
(b) Adjustment
to Purchase Price. Within sixty (60) days following the end
of the Collection Period, Buyer shall
prepare and furnish to Seller a statement
setting forth the Accounts Receivable and
all payments made thereon, calculated
as of the end of the Collection Period, and
the amount, if any, owing from the
Seller Parties to Buyer pursuant to Section
2.4(a) (a "Receivable Shortfall").
The Seller Parties shall be jointly and
severally liable for the Receivable
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Shortfall. Buyer shall set-off the
Receivable Shortfall from the Primary Escrow
Funds in accordance with Section 6.7 and,
to the extent the amount of the
Receivable Shortfall exceeds the amount of
the Primary Escrow Funds then
available under the Escrow Agreement, the
Seller Parties shall pay the
difference to Buyer within (10) days after
receipt of written demand therefor.
Upon payment of the Receivable Shortfall,
at Seller's request, Buyer shall
assign to Seller those Accounts Receivable
which were uncollected at the end of
the Collection Period and Seller may
thereafter collect such re-assigned
Accounts Receivable for Seller's own
account.
(c) Collection
of Accounts Receivable. Between the Closing Date and the end
of the Collection Period, Buyer shall use
reasonable efforts consistent with its
usual and customary collection practices to
collect the Accounts Receivable,
provided that Buyer shall not be obligated
to resort to litigation.
(d) Payments in
Transit after the Closing. Any payments that are received
by Seller after the Closing Date in respect
of Accounts Receivable shall be
owned by and deemed the property of Buyer,
and Seller shall turn over to Buyer
all such amounts within ten (10) days of
receipt thereof.
Section 2.5.
Buyer's Assumption of Liabilities. On the terms and subject to
the conditions set forth in this Agreement,
and in further consideration of the
transfer of the Purchased Assets, at the
Closing Buyer shall assume only those
duties, liabilities or obligations of
Seller included in the Assumed
Liabilities.
Section 2.6.
Closing. The Closing shall take place (via facsimile,
telephone, mail and other mutually
acceptable means of communication and
delivery) simultaneously at the offices of
Buyer's counsel, Shipman & Goodwin
LLP in Hartford, Connecticut and Seller's
counsel, Horgan, Rosen, Beckham &
Coren, L.L.P in Calabasas, California on
the date hereof or at such other time
and location as the parties hereto shall
agree in writing.
Section 2.7.
Deliveries by Seller Parties at Closing. At the Closing,
Seller shall convey, transfer, assign and
deliver to Buyer all of the Purchased
Assets, including good and merchantable
title to all personal property included
therein, free and clear of all Liens
(except Permitted Liens). The Seller
Parties shall deliver to Buyer:
(a) The Escrow
Agreement fully executed by Seller and Escrow Agent;
(b) An opinion
of the Seller Parties' counsel, dated the Closing Date, to
the effect and substantially in the form of
Exhibit B to this Agreement;
(c) Evidence of
authorization to change Seller's name, and documents
sufficient to effectuate such change and to
convey to Buyer all rights in the
names Financial Data Solutions, Inc. and
FDSI;
(d) Bill of Sale
in the form of Exhibit C, and such assignments and other
instruments of transfer as may be
reasonably satisfactory to Buyer's counsel,
and with such consents to the conveyance,
transfer and assignment thereof as may
be necessary to effect the conveyance,
transfer, assignment and delivery of the
Purchased Assets and to vest in Buyer the
title specified in this Section and to
assure to Buyer the full benefit of the
Purchased Assets, including without
limitation:
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(i) the transfer of all registered Proprietary Rights of Seller
(as
such term is
defined in Section 3.14 hereof) and applications therefor; and
(ii) the consents listed on Schedule 2.7;
(e) Releases of
all Liens (other than Permitted Liens) on the Purchased
Assets;
(f) A Lease
Assignment and Assumption among Seller, Buyer and the landlord
under each Lease, with respect to each
Lease, in the form attached hereto as
Exhibit D, fully executed by Seller and
each respective landlord (the "Lease
Assignments");
(g) Good
Standing Certificate of recent date for Seller from the
Secretary
of State of the States of California;
(h) A
Secretary's Certificate with respect to Seller's Certificate of
Incorporation, By-laws, director and
stockholder resolutions and officer
incumbency, in form and substance
satisfactory to Buyer;
(i) Evidence,
satisfactory to Buyer, that Southwest Community Bank has
entered into a new customer agreement (or
an amendment to its existing customer
agreement) with Seller (to be assigned to
Buyer at Closing) pursuant to which
the term of such agreement expires no
earlier than the third anniversary of the
Closing, and pursuant to which the
termination fee payable by the Stockholder in
certain circumstances is equal to 70% of
the expected payments over the
remainder of the term of the agreement, in
form and substance satisfactory to
Buyer; and
(j) Such other
documents and instruments as Buyer or Buyer's counsel may
reasonably request to better evidence or
effectuate the transactions
contemplated hereby.
Simultaneously
with the delivery referred to in this Section, the Seller
Parties shall take or cause to be taken all
such actions as may reasonably be
required to put Buyer in actual possession
and operating control of the
Purchased Assets.
Section 2.8.
Deliveries by Buyer at Closing. At the Closing, Buyer shall
deliver to Seller:
(a) The Escrow
Agreement fully executed by Buyer;
(b) Assumption
Agreement in the form attached hereto as Exhibit E, fully
executed by Buyer, pursuant to which Buyer
assumes, as of the Closing Date, the
Assumed Liabilities;
(c) The Lease
Assignments, fully executed by Buyer;
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(d) In
accordance with Section 2.2(a) of this Agreement, Buyer shall
deliver to Seller an amount equal to
$7,635,000, constituting the cash portion
of the Purchase Price; and
(e) In
accordance with Section 2.2(b) and (c) of this Agreement, Buyer
shall deliver to the Escrow Agent the
Primary Escrow Funds and the Contingency
Escrow Funds;
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE SELLER PARTIES
The Seller
Parties hereby jointly and severally represent and warrant to
Buyer as follows:
Section 3.1.
Organization and Power. Seller is a corporation duly
organized, validly existing and in good
standing under the laws of the State of
California. The Stockholder is a
corporation duly organized, validly existing
and in good standing under the laws of the
State of California. Seller has full
power and authority to own its properties
and conduct the business presently
being conducted by it. Each Seller Party
has full legal power, authority and
capacity to execute this Agreement and to
consummate the transactions
contemplated by this Agreement.
Section 3.2.
Authorization. The execution, delivery and performance of this
Agreement by Seller Parties have been duly
authorized and approved by all
requisite action on the part of their
directors and stockholders. This Agreement
constitutes the valid and binding
obligation of each Seller Party and is
enforceable against each Seller Party in
accordance with its terms, except as
such enforceability may be limited by
bankruptcy, insolvency, reorganization,
moratorium, and other similar laws relating
to or limiting creditors' rights
generally and by equitable principles.
Section 3.3. No
Conflict. The execution and delivery of this Agreement do
not, and the consummation of the
transactions contemplated hereby and the
compliance with the terms hereof will not
(a) violate any law, judgment, order,
decree, statute, ordinance, rule or
regulation applicable to any Seller Party,
or any permit, license or approval of any
Governmental Entity, (b) conflict with
any provision of Seller's Articles of
Incorporation or By-laws or the
Stockholder's Articles of Incorporation or
By-laws, (c) result in any violation
of, and will not conflict with, or result
in a breach of any terms of, or
constitute a default under, any mortgage,
license, instrument or agreement to
which any Seller Party is a party or by
which any Seller Party or any of the
Purchased Assets is bound or create any
Lien upon any of the Purchased Assets,
or (d) except as set forth on Schedule 3.3,
require any notice to, or consent,
approval, order or authorization of, or the
registration, declaration or filing
with, any Governmental Entity or other
Person, including, without limitation,
under any Contract.
Section 3.4.
Title to Purchased Assets. Seller has good, valid and
marketable title to all of the Purchased
Assets, free and clear of all Liens,
except those Liens set forth on Schedule
3.4 ("Permitted Liens"). No other party
has any rights or claims to possession of
any of the Purchased Assets. None of
the Purchased Assets are subject to any
option, contract, arrangement or
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understanding that would restrict Seller's
ability to transfer the Purchased
Assets to Buyer as contemplated herein. The
Purchased Assets constitute all
assets, rights and properties used by
Seller to operate, or necessary to operate
the Business as operated by Seller prior to
Closing. Neither Stockholder nor any
other Related Person of Seller owns, leases
or licenses assets, properties or
other rights used in the conduct of the
Business. All employees engaged in
conducting the Business are employees of
Seller.
Section 3.5.
Condition of Purchased Assets. All of the tangible property
included in the Purchased Assets is in good
operating condition and repair,
ordinary wear and tear excepted, and in the
state of maintenance, repair and
operating condition required for the proper
operation and use thereof in the
ordinary and usual course of business by
Seller.
Section 3.6.
Financial Statements. Seller has delivered to Buyer financial
information respecting Seller (the
"Financial Statements"), as follows: (i) the
Reference Date Balance Sheet, a copy of
which is attached hereto as Schedule
3.6; (ii) an unaudited income statement of
Seller for the three (3) months ended
as of the Reference Date; (iii) an audited
balance sheet for Seller as of
December 31, 2004; and (iv) an audited
income statement for Seller for the year
ended on December 31, 2004. The Financial
Statements fairly present the
financial position and results of
operations of Seller for the periods then
ended and the financial position of Seller
at the dates thereof and were
prepared in accordance with GAAP; provided,
however, the unaudited Financial
Statements (i) are subject to normal
recurring year-end adjustments and (ii) do
not contain all footnote disclosures
required by GAAP. Seller's books of account
are and, during the period covered by the
Financial Statements were, correct and
complete in all material respects, fairly
and accurately reflect or reflected
the income, expenses, assets and
liabilities of Seller, including the nature
thereof and the transactions giving rise
thereto, and provide or provided a fair
and accurate basis for the preparation of
the Financial Statements.
Section 3.7.
Accounts Receivable; Credits. The Accounts Receivable recorded
on the books of Seller are bona fide and
good, and are collectible in the
amounts shown on the books of account of
Seller. No Account Receivable has been
released by Seller, in whole or in part, so
as to reduce its value. There are no
outstanding customer credits or allowances
(including allowances for bad debts)
which have been authorized by Seller prior
to the Closing Date. The
uncollectibility of any Accounts Receivable
resulting in an adjustment to the
Purchase Price based on a Receivable
Shortfall in accordance with Section 2.4
shall not be considered a breach of the
representation and warranty of
collectibility contained in this Section
3.7.
Section 3.8.
Pre-Bill. Seller has not pre-billed or received prepayment for
products to be sold, services to be
rendered, or expenses to be incurred
subsequent to the Closing Date, except in
the ordinary course of business and
consistent with Seller's prior practices,
with a corresponding current liability
included on the Reference Date Balance
Sheet.
Section 3.9.
Litigation. There is no suit, action or proceeding pending
against or affecting any Seller Party or
the employees of Seller relating to the
Business, the Purchased Assets, or the
transactions contemplated hereby, nor is
there any such suit, action or proceeding
threatened against any Seller Party or
any of the employees of Seller. Neither
Seller nor the Business is subject to
any order of a Governmental Entity.
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Section 3.10.
Compliance with Law. Seller has all necessary licenses,
permits and other approvals of Governmental
Entities necessary to operate the
Business as now conducted, each of which is
in good standing, and Seller has
conducted the Business and properly filed
all necessary reports in accordance
with applicable laws and regulations.
Section 3.11.
Absence of Undisclosed Liabilities. Seller does not have any
liabilities or obligations, either accrued,
contingent or otherwise, which are
not reflected in (i) the Reference Date
Balance Sheet or (ii) this Agreement or
the Schedules hereto, except as have been
incurred in the ordinary course of
business since the Reference Date.
Section 3.12.
Absence of Certain Changes. Since the Reference Date, neither
Seller nor the Business has or will have as
of the Closing:
(a) suffered any
adverse change in its financial condition, assets,
liabilities, net worth or business from
that shown on the Reference Date Balance
Sheet that, either individually or in the
aggregate, has had a Material Adverse
Effect;
(b) suffered any
damage, destruction or loss, whether or not covered by
insurance, adversely affecting its
properties or the Business;
(c) declared or
paid or agreed to declare or pay any dividends or
distributions of any cash or other assets
of any kind whatsoever;
(d) mortgaged,
pledged, hypothecated or otherwise encumbered any of its
material assets, tangible or
intangible;
(e) sold or
transferred any of its assets, property or rights, or canceled
or agreed to cancel any of its debts or
claims, except for fair value, in the
ordinary course of business;
(f) suffered any
Material Adverse Effect with respect to its relationships
with customers or employees, or with
respect to its contracts with customers;
(g) incurred any
commitment (through negotiations or otherwise) or any
liability to any labor organization, or
been involved in any labor dispute;
(h) increased
the amount of its Debt or other obligations or liabilities by
more than $75,000 in the aggregate;
(i) entered or
agreed to enter into any agreement or arrangement granting
any preferential rights to purchase a
material part of its assets, property or
rights;
(j) placed any
orders for materials, merchandise or supplies in exceptional
or unusual quantities based upon past
operating practices or accepted orders
from customers under conditions relating to
price, terms or payment, time or
delivery, or like matters materially
different from the conditions regularly and
usually specified on acceptance of orders
for similar merchandise from customers
similarly situated;
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(k) made any change in
the accounting practices or methods followed by it;
(l) engaged in
any restructuri
