Exhibit 10.1
ASSET
PURCHASE AGREEMENT
AND
PLAN OF REORGANIZATION
among:
SOL
LOGIC, INC.,
a California
corporation;
FRANK MITCHELL
,
a Shareholder of Sol Logic, Inc.;
WINK
JONES,
as the Seller
Representative;
and
IMAGEWARE SYSTEMS,
INC. ,
a Delaware
corporation
Dated as of
December 19, 2007
ASSET
PURCHASE AGREEMENT AND PLAN OF REORGANIZATION
THIS ASSET PURCHASE AGREEMENT
AND PLAN OF REORGANIZATION is made and entered into as
of December 19, 2007, by and among: SOL LOGIC, INC. , a
California corporation (the “ Seller ”); Frank Mitchell, an
individual and a shareholder of the Seller (“ Mitchell ”); Wink Jones, in his
capacity as the representative of the shareholders of the Seller;
and IMAGEWARE SYSTEMS, INC. , a Delaware corporation (the
“ Purchaser ”).
Capitalized terms used herein and not otherwise defined herein
shall have the meanings set forth in EXHIBIT A attached
hereto.
RECITALS
A.
The Seller wishes to provide for the sale of substantially all of
the assets of the Seller to the Purchaser for the consideration and
on the terms set forth in this Agreement.
B.
In connection with such sale, certain of the parties are entering
into the other agreements contemplated herein.
AGREEMENT
NOW, THEREFORE, in consideration of the
premises and the mutual representations, warranties, covenants and
undertakings contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound,
agree as follows:
1.
SALE OF ASSETS; RELATED TRANSACTIONS.
1.1
Sale of Assets. At the Closing (as defined in
Section 1.8), the Seller shall sell, assign, transfer, convey
and deliver to the Purchaser, and the Purchaser shall purchase and
acquire from the Seller, all right, title and interest of the
Seller in, and good and valid title to, the Assets, free and clear
of any Encumbrances, on the terms and subject to the conditions set
forth in this Agreement. For purposes of this Agreement,
“Assets” shall
mean and include: (a) all of the properties, rights, interests
and other tangible and intangible assets of the Seller (wherever
located and whether or not required to be reflected on a balance
sheet prepared in accordance with GAAP); and (b) any other
assets that are owned by any of the Shareholders or any other
Related Party and that are used in or needed for the conduct of, or
are useful in connection with, the business of the Seller;
provided, however, that the Assets shall not include any
Excluded Assets. Without limiting the generality of the foregoing,
the Assets shall include:
(a)
all accounts receivable, notes receivable and other receivables of
the Seller that arise after September 30, 2007;
(b)
all inventories and work-in-progress of the Seller, and all rights
to collect from customers (and to retain) all fees and other
amounts payable, or that may become payable, to the Seller with
respect to services performed for any Person by or on behalf of the
Seller at or prior to the Closing (including those identified in
Part 2.9 of the Disclosure Schedule);
(c)
all equipment, materials, prototypes, tools, supplies, furniture,
fixtures, improvements and other tangible assets of the Seller
(including the tangible assets identified in Part 2.10 of the
Disclosure Schedule);
(d)
all advertising and promotional materials possessed by the
Seller;
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(e)
all Intellectual Property and Intellectual Property Rights and
related goodwill of the Seller (including the right to use the name
“Sol Logic, Inc.”, “Unity”,
“Mediator”, “Collab ID” or “Remote
Collab ID”, and any variations thereof, the
“sollogic.com” domain name and the Intellectual
Property and Intellectual Property Rights identified in
Part 2.12 of the Disclosure Schedule);
(f)
all rights of the Seller under the Seller Contracts set forth on
Part 1.1(f) of the Disclosure Schedule;
(g)
all Governmental Authorizations held by the Seller (including the
Governmental Authorizations identified in Part 2.16 of the
Disclosure Schedule);
(h)
all claims (including claims for past infringement or
misappropriation of Intellectual Property or Intellectual Property
Rights) and causes of action of the Seller against other Persons
(regardless of whether or not such claims and causes of action have
been asserted by the Seller), and all rights of indemnity, warranty
rights, rights of contribution, rights to refunds, rights of
reimbursement and other rights of recovery possessed by the Seller
(regardless of whether such rights are currently exercisable);
(i)
all insurance benefits, including rights and proceeds, arising from
or relating to the Assets or the Assumed Liabilities prior to the
Closing, unless expended in accordance with this Agreement;
(j)
all claims of the Seller against third parties relating to any
assets sold, assigned, transferred, conveyed or delivered pursuant
to this Section 1.1, whether choate or inchoate, known or
unknown, contingent or noncontingent, including all such claims
listed in Part 1.1(k) of the Disclosure Schedule; and
(k)
all books, records, files and data of the Seller, and all goodwill,
relating to the assets identified in the second sentence of
Section 1.1 and Sections 1.1(a) through (j).
1.2
Excluded Assets. Notwithstanding anything herein to the
contrary, from and after the Closing, the Seller shall retain all
of its existing right, title and interest in and to, and there
shall be excluded from the sale, conveyance, assignment or transfer
to the Purchaser hereunder, and the Assets shall not include, only
the following assets of the Seller (collectively, the “Excluded Assets” ):
(a)
cash on hand or in banks and cash equivalents of the Seller;
and
(b)
a 2006 FJ Cruiser owned by Seller.
1.3
Assumption of Liabilities . Except as otherwise specifically
set forth in Section 1.4 and subject to the conditions set
forth herein, at the Closing, the Purchaser agrees to assume only
those Liabilities of the Seller set forth below (the “Assumed Liabilities”
):
(a)
all Liabilities under the Seller Contracts set forth on
Part 1.1(f) of the Disclosure Schedule solely to the
extent arising out of or relating to events or conditions,
occurring after the Closing, but only to the extent such
Liabilities (i) do not arise from or relate to any Breach by
the Seller of any provision of any of such Contracts, (ii) do
not arise from or relate to any event, circumstance or condition
occurring or existing at or prior to the Closing that, with notice
or lapse of time or both, would constitute or result in a Breach of
any of such Contracts, and (iii) are ascertainable (in nature
and amount) solely by reference to the express terms of such
Contracts; and
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(b)
all Liabilities with respect to the Assets to the extent relating
to the operation or conduct of the Purchaser’s business after
the Closing, but only to the extent such Liabilities do not arise
from or relate to any event, circumstance or condition occurring or
existing at or prior to the Closing.
1.4
Excluded Liabilities . Notwithstanding anything herein to
the contrary, the Purchaser shall not assume or in any way become
liable for any Liability of the Seller, of any nature whatsoever,
other than the Assumed Liabilities (all such Liabilities, the
“Excluded
Liabilities” ), and all such Excluded Liabilities
shall remain the sole responsibility of the Seller and shall be
retained, paid, performed and discharged solely by the Seller.
Without limiting the generality of the foregoing, Excluded
Liabilities shall include:
(a)
any Liability of any Person except, with respect to the Seller
only, the Assumed Liabilities;
(b)
any Liability of the Seller arising out of or relating to the
execution, delivery or performance of any of the Transactional
Agreements (including the fees and expenses of the Seller’s
legal, accounting, financial and other advisors relating to the
Transactions);
(c)
any Liability of the Seller for any fees, costs or expenses of the
type referred to in Section 6.4(a);
(d)
any Liability of the Seller arising from or relating to any action
taken or services provided by the Seller, or any failure on the
part of the Seller to take any action, at any time after the
Closing;
(e)
any Liability of the Seller arising from or relating to
(x) any services performed by the Seller for any customer, or
(y) any claim or Proceeding against the Seller;
(f)
any Liability of the Seller for the payment of any Tax, including,
but not limited to, (A) any Taxes arising as a result of the
Seller’s operation of its business or ownership of the Assets
prior to the Closing, (B) any Taxes that will arise as a
result of the sale of the Assets pursuant to this Agreement and
(C) any deferred Taxes of any nature;
(g)
any Liability of the Seller to any employee or former employee of
the Seller under or with respect to any Seller Employee Plan,
profit sharing plan or dental plan, severance pay, employment
agreement, whether or not written, between the Seller and any
Person, or any claim of an unfair labor practice, or any claim
under any state unemployment compensation or worker’s
compensation law or regulation or under any federal or state
employment discrimination law or regulation, or any claim related
to payroll, vacation, sick leave, worker’s compensation,
unemployment benefits or compensation or employee expenses
(including travel) that is based on acts or omissions of Seller
that occurred at, prior to, or after the Closing;
(h)
any Liability of the Seller to any Related Party;
(i)
any Liability under any Seller Contract set forth on
Part 1.1(f) of the Disclosure Schedule, if the Seller
shall not have obtained prior to the Closing, any Consent required
to be obtained from any Person with respect to the assignment or
transfer to the Purchaser of any rights or obligations under such
Seller Contracts; provided, however, upon obtaining such Consents,
Purchaser shall assume the Liabilities under such Seller Contracts
pursuant to Section 1.3(a) above;
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(j)
any Liability under any Seller Contract that is not set forth on
Part 1.1(f) of the Disclosure Schedule;
(k)
any Liability of the Seller that relates to any Excluded Asset;
(l)
any Liability arising out of or relating to (A) any product
produced or sold or any services performed by or on behalf of the
Seller, (B) the presence of any Hazardous Material at any site
owned, leased, occupied or controlled by the Seller on or at any
time prior to the Closing, (C) the generation, manufacture,
production, transportation, importation, use, treatment,
refinement, processing, handling, storage, discharge, release or
disposal of any Hazardous Material (whether lawfully or unlawfully)
by or on behalf of the Seller;
(m)
any Liability arising out of or relating to any employee grievance
whether or not the affected employees are hired by the Purchaser
that is based on acts or omissions of the Seller that occurred at,
prior to, or after the Closing;
(n)
any Liability to indemnify, reimburse or advance amounts to any
officer, director, employee or agent of the Seller;
(o)
any Liability to distribute to any of the Seller’s
shareholders or otherwise apply all or any part of the
consideration received hereunder;
(p)
any Liability arising out of or resulting from Seller’s
compliance or noncompliance with any Legal Requirement or Order of
any Governmental Body;
(q)
any Liability relating to any failure to comply with any bulk
transfer law, fraudulent transfer law or similar Legal Requirement
in connection with any of the Transactions;
(r)
any Liability relating to the Worker Adjustment and Retraining
Notification Act, 29 U.S.C. §2101, et seq . (
“WARN” ) or any
similar state or local Legal Requirement that may result from an
“Employment Loss,” as defined by 29 U.S.C. sect.
2101(a)(6), caused by any action of the Seller prior to the Closing
or by the Purchaser’s decision not to hire previous employees
of the Seller; and
(s)
any other Liability that is not specifically referred to in
Section 1.3.
1.5
Purchase Price.
(a)
As consideration for the sale of the Assets to the Purchaser (such
total consideration being referred to herein as the “
Purchase Price ”),
the Purchaser shall do the following :
(i)
Assume the Assumed Liabilities;
(ii)
At the Closing, issue to the Seller that number of shares of common
stock of the Purchaser (the “Common Stock” ) equal to
(I) the quotient obtained by dividing $1,527,000 by $1.633
(the “ Initial Per Share
Price ”) multiplied by (II) 50% (rounded up to
the nearest whole share) (the “Initial Shares” ).
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(iii)
On the six-month anniversary of the Closing (the “Additional Issuance Date”
), issue to the Seller that number of shares of Common Stock equal
to (I) the quotient obtained by dividing $1,502,000 by the
Additional Per Share Price, multiplied by 90% (rounded up to the
nearest whole share) (the “Additional Shares” and,
collectively with the Initial Shares, the “Issued Shares” ). The
“Additional Per Share
Price” shall be the greater of (A) the Initial
Per Share Price (as adjusted in the event that there occurs any
stock dividend, stock split, recapitalization or similar event with
respect to the Common Stock after the Closing and prior to the
Additional Issuance Date); and (B) the volume weighted average
closing price of the Common Stock over the 20 trading-day period
ending on the date immediately preceding the Additional Issuance
Date, as reported on The American Stock Exchange (“
AMEX ”) and, if the
Common Stock is not quoted on AMEX at any time during such period,
as reported on the Over-the-Counter Bulletin Board (the “
OTCBB ”) or the Pink
Sheets Electronic Quotation Service (the “ Pink Sheets ”), as applicable,
for the portion of such period that the Common Stock is listed or
quoted on the OTCBB or the Pink Sheets.
(iv)
Deposit into an escrow account (the “Escrow Account” ) to be
established as of the Closing pursuant to an escrow agreement by
and among the Seller, the Seller Representative (as defined in
Section 6.2(a)), the Purchaser and LaSalle National Bank (the
“Escrow Agent”
), in a form to be agreed upon by such parties (the “Escrow Agreement” ):
(I) at the Closing, that number of shares of Common Stock
equal to (A) the quotient obtained by dividing $1,527,000 by
the Initial Per Share Price, multiplied by (B) 50% (rounded
down to the nearest whole share) (the “Initial Escrow Shares” );
and (II) on the Additional Issuance Date, that number of
shares of Common Stock equal to (A) the quotient obtained by
dividing $1,502,000 by the Additional Per Share Price multiplied by
(B) 10% (rounded down to the nearest whole share) (the “
Additional Escrow Shares
” and, collectively with the Initial Escrow Shares, the
“ Escrow Shares
” and, together with the Issued Shares, the “
Shares ”)). The
“Indemnification Escrow
Shares” shall be comprised of 33.33% of the Initial
Escrow Shares and 33.33% of the Additional Escrow Shares. The
“Reimbursement Escrow
Shares” shall be comprised of 66.66% of the Initial
Escrow Shares and 66.66% of the Additional Escrow Shares, and shall
include the proceeds received from the sale of the Shares.
1.6
Sales Taxes. The Seller shall bear and pay, and shall
reimburse the Purchaser and the Purchaser’s affiliates for,
any sales Taxes, use Taxes, transfer Taxes, documentary charges,
recording fees or similar Taxes, charges, fees or expenses that may
become payable in connection with the sale of the Assets to the
Purchaser or in connection with any of the other Transactions. The
Seller shall cooperate with the Purchaser to file all requests for
certifications of sales and use tax due, including, without
limitation, pursuant to Section 6812 of the California Revenue
and Taxation Code.
1.7
Tax Treatment. For federal income tax purposes,
Seller and Purchaser intend for the transactions contemplated
hereby to qualify as a reorganization (a “ Reorganization ”) within the
meaning of Section 368(a) of the Code and the regulations
promulgated thereunder (the “ Treasury Regulations ”), and, by
approving resolutions authorizing this Agreement, to adopt this
Agreement as a plan of Reorganization. Neither Seller nor
Purchaser will knowingly take any action or fail to take any
action, which action or failure to act would cause the transactions
contemplated hereby to fail to qualify as a Reorganization.
Seller and Buyer will report the transaction for federal income
tax, financial reporting, and other purposes, as a
Reorganization.
1.8
Closing . The closing of the sale of the Assets to the
Purchaser (the “Closing” ) shall take
place concurrently with the execution and delivery of this
Agreement at the offices of Paul, Hastings, Janofsky &
Walker LLP in San Diego, California.
1.9
Deliveries by the Seller. At the Closing, the Seller
shall:
(a)
execute and deliver to the Purchaser such bills of sale,
endorsements, assignments, permits, third party consents, lien
releases, and such other documents as may (in the judgment of the
Purchaser or its counsel) be necessary or appropriate to sell,
assign, transfer, convey and deliver to the Purchaser good and
valid title to the Assets free and clear of any Encumbrances;
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(b)
execute and deliver to the Purchaser fully executed and
acknowledged or notarized assignment documents, in form ready for
filing or recording with the appropriate Governmental Body and
reasonably acceptable to the Purchaser, with respect to any
Registered IP held in the name of the Seller Representative or any
other employee, contractor or other agent of the Seller;
(c)
execute and deliver to the Purchaser fully executed and
acknowledged or notarized assignment documents, in form ready for
filing or recording with the appropriate Governmental Body and
reasonably acceptable to the Purchaser, with respect to any Seller
IP;
(d)
execute and deliver to the Purchaser a duly executed counterpart of
each Transactional Agreement that is to be executed by or on behalf
of the Seller at the Closing;
(e)
deliver to the Purchaser a certificate of good standing of the
Seller as of a date within three business days of the Closing
issued by the Secretary of State (or similar official) of each of
California and Arizona;
(f)
execute and deliver to the Purchaser a certified copy of:
(i) resolutions duly adopted by the Seller’s board of
directors in accordance with the Seller’s articles of
incorporation and bylaws and applicable law, authorizing and
approving this Agreement, the Escrow Agreement and the
Transactions; and (ii) an executed action by written consent
of the shareholders of the Seller, authorizing and approving this
Agreement, the Escrow Agreement and the Transactions, and
appointing the Seller Representative as the representative of the
Seller with respect to the foregoing, in accordance with the
Seller’s articles of incorporation and bylaws and applicable
law;
(g)
execute and deliver to the Purchaser such other instruments as
shall be requested by the Purchaser to vest in the Purchaser title
in and to the Assets free and clear of any Encumbrances in
accordance with the provisions hereof;
(h)
deliver to the Purchaser forbearance agreements from the holders of
promissory notes issued by Seller, in a form acceptable to
Purchaser; and
(i)
an employment agreement between the Purchaser and Mitchell (the
“ Mitchell Employment
Agreement ”).
1.10
Deliveries by the Seller Representative. At the Closing, the
Seller Representative shall execute and deliver to the Purchaser
the Escrow Agreement.
1.11
Deliveries by the Purchaser. At the Closing, the Purchaser
shall:
(a)
issue to the Seller the Initial Shares;
(b)
deposit the Initial Escrow Shares into the Escrow Account;
(c)
execute and deliver to the Seller a duly executed counterpart of
each Transactional Agreement that is to be executed by or on behalf
of the Purchaser at the Closing; and
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(d)
execute and deliver to Mitchell a counterpart to the Mitchell
Employment Agreement.
1.12
On the Additional Issuance Date, the Purchaser shall:
(a)
issue to the Seller the Additional Shares; and
(b)
deposit the Additional Escrow Shares into the Escrow Account.
1.13
The Parties acknowledge that, pursuant to this Agreement, as part
of the plan of reorganization, the Seller will sell the Liability
Payoff Shares pursuant to an effective registration statement as
soon as reasonably practicable after the Closing and shall use the
proceeds thereof solely for payment to creditors of the Seller.
2.
REPRESENTATIONS AND WARRANTIES OF THE SELLER AND MITCHELL
.
Except as set forth in the Disclosure Schedule,
the Seller and Mitchell, jointly and severally, represent and
warrant, to and for the benefit of the Purchaser Indemnitees as
follows:
2.1
Due Organization; No Subsidiaries; Etc. The Seller is a
corporation duly organized, validly existing and in good standing
under the laws of the State of California. The Seller is not
required to be qualified, authorized, registered or licensed to do
business as a foreign corporation in any jurisdiction other than
the jurisdictions listed in Part 2.1 of the Disclosure
Schedule. The Seller is in good standing as a foreign corporation
in each of the jurisdictions listed in Part 2.1 of the
Disclosure Schedule. The Seller does not have any subsidiaries, and
does not own, beneficially or otherwise, any shares or other
securities of, or any direct or indirect interest of any nature in,
any other Entity. The Seller has never conducted any business under
or otherwise used, for any purpose or in any jurisdiction, any
fictitious name, assumed name, trade name or other name, other than
“Sol Logic.”
2.2
Articles of Incorporation and Bylaws; Records. The Seller
has delivered to (or made available for inspection by) the
Purchaser accurate and complete copies of: (i) the articles of
incorporation and bylaws of the Seller, as currently in effect;
(ii) the stock records of the Seller; and (iii) the
minutes and other records of the meetings and other proceedings
(including any actions taken by written consent or otherwise
without a meeting) of the shareholders of the Seller, the board of
directors of the Seller and all committees of the board of
directors of the Seller. There have been no meetings or other
proceedings of the shareholders of the Seller, the board of
directors of the Seller or any committee of the board of directors
of the Seller that are not reflected in such minutes or other
records.
2.3
Capitalization. The shareholders listed on
Part 2.3 of the Disclosure Schedule are the sole
shareholders of the Seller. There is no:
(a) outstanding subscription, option, call, warrant or right
(whether or not currently exercisable) to acquire any shares of the
capital stock or other securities of the Seller;
(b) outstanding security, instrument or obligation that is or
may become convertible into or exchangeable for any shares of the
capital stock or other securities of the Seller; or
(c) Contract under which the Seller is or may become obligated
to sell or otherwise issue any shares of its capital stock or any
other securities. No Person other than the individuals and entities
set forth in Part 2.3 of the Disclosure Schedule has
any right to vote with respect to the sale of the Assets to the
Purchaser or any of the other Transactions.
2.4
Financial Statements. The Seller has delivered to the
Purchaser the following financial statements (collectively, the
“Financial
Statements” ): (a) the unaudited balance
sheet of the Seller as of December 31, 2006 and the unaudited
related statement of income and retained earnings and cash
flows
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for
the year then ended, together with the notes thereto; and
(b) the unaudited balance sheet of the Seller as of
October 31, 2007 (the “Interim Balance Sheet” ),
and the unaudited related statements of income and retained
earnings and cash flows for the 10 months then ended. The Financial
Statements have been prepared in accordance with the books and
records of Seller applied on a consistent basis throughout the
periods covered and present fairly in all material respects the
financial position of the Seller as of the respective dates thereof
and the results of operations and cash flows of the Seller for the
periods covered thereby (subject to normal recurring year-end audit
adjustments).
2.5
Absence of Changes. Since October 31, 2007:
(a) there has not been any adverse change in, and no event has
occurred that has had a material adverse effect on, the business,
condition, assets, liabilities, operations, financial performance,
net income or prospects of the Seller; (b) there has not been
any material loss, damage or destruction to, or any interruption in
the use of, any of the assets of the Seller (whether or not covered
by insurance); (c) the Seller has not (i) declared,
accrued, set aside or paid any dividend or made any other
distribution in respect of any shares of capital stock or other
securities, or (ii) repurchased, redeemed or otherwise
reacquired any shares of capital stock or other securities;
(d) the Seller has not purchased or otherwise acquired any
material asset from any other Person, except for supplies acquired
by the Seller in the Ordinary Course of Business; (e) the
Seller has not leased or licensed any asset from any other Person
(other than ordinary shrink wrap software); (f) the Seller has
not made any material capital expenditure; (g) the Seller has
not sold or otherwise transferred, or leased or licensed, any asset
to any other Person other than in the Ordinary Course of Business;
(h) the Seller has not written off as uncollectible, or
established any extraordinary reserve with respect to, any account
receivable or other indebtedness; (i) the Seller has not made
any loan or advance to any other Person; (j) no Contract by
which the Seller or any of the assets owned or used by the Seller
is or was bound, or under which the Seller has or had any rights or
interest, has been amended or terminated; (k) the Seller has
not incurred, assumed or otherwise become subject to any Liability,
other than accounts payable (of the type required to be reflected
as current liabilities in the “liabilities” column of a
balance sheet prepared in accordance with GAAP) incurred by the
Seller in bona fide transactions entered into in the Ordinary
Course of Business; (l) the Seller has not discharged any
Encumbrance or discharged or paid any indebtedness or other
Liability, except for accounts payable that (I) are reflected
as current liabilities in the “liabilities” column of
the Interim Balance Sheet or have been incurred by the Seller since
October 31, 2007 in bona fide transactions entered into in the
Ordinary Course of Business, and (II) have been discharged or
paid in the Ordinary Course of Business; (m) the Seller has
not forgiven any debt or otherwise released or waived any right or
claim; (n) the Seller has not changed any of its methods of
accounting or accounting practices in any respect; (o) the
Seller has not entered into any transaction or taken any other
action outside the Ordinary Course of Business; and (p) the
Seller has not agreed, committed or offered (in writing or
otherwise) to take any of the actions referred to in clauses
“(c)” through “(o)” above.
2.6
Title to Assets. The Seller owns, and has good and valid
title to, all of the Assets, including all rights of the Seller
under Seller Contracts. All of the Assets are owned by the
Seller free and clear of any Encumbrances. The Assets
constitute all of the properties, rights, interests and other
tangible and intangible assets necessary to conduct the business in
the manner in which such business is currently being conducted by
the Seller.
2.7
Receivables. As of the date hereof, there are no accounts
receivable, notes receivable or other receivables of the
Seller.
2.8
Customers; Distributors. Part 2.8 of the
Disclosure Schedule accurately identifies, and provides an accurate
and complete breakdown of the revenues received from, each customer
or other Person that (together which such customer’s or other
Person’s affiliates) accounted for (i) more than $20,000
of the gross revenues of the Seller in any of 2005 or 2006, or
(ii) more than $15,000 of the gross
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revenues of the Seller in the first 10 months
of 2007. Seller has not received any notice or other communication
(in writing or otherwise), and Seller has not received any other
information, indicating that any customer or other Person
identified or required to be identified in Part 2.8 of
the Disclosure Schedule may cease dealing with the Seller or may
otherwise reduce the volume of business transacted by such Person
with the Seller below historical levels. Seller has not
received any notice or other communication (in writing or
otherwise), or has received any other information, indicating that
any distributor of any of the Seller’s products may cease
acting as a distributor of such products or otherwise dealing with
the Seller.
2.9
Inventory. Seller has no inventory.
2.10
Equipment, Etc. Part 2.10 of the Disclosure
Schedule accurately identifies all equipment, materials,
prototypes, tools, supplies, vehicles, furniture, fixtures,
improvements and other tangible assets owned by the Seller with a
book value in excess of $5,000. Part 2.10 of the
Disclosure Schedule also accurately identifies all tangible assets
leased to the Seller. Each asset identified or required to be
identified in Part 2.10 of the Disclosure Schedule:
(i) is structurally sound, free of defects and deficiencies
and in good condition and repair (ordinary wear and tear excepted);
(ii) complies in all material respects with, and is being
operated and otherwise used in material compliance with, all
applicable Legal Requirements; and (iii) is adequate and
appropriate for the uses to which it is being put.
2.11
Real Property. The Seller does not own any real property or
any interest in real property, including any leasehold created
under a real property lease.
2.12
Intellectual Property.
(a)
Part 2.12(a) of the Disclosure Schedule accurately
identifies and describes:
(i)
in Part 2.12(a)(i) of the Disclosure Schedule,
each proprietary product or service developed, manufactured,
marketed, or sold by the Seller at any time since December 31,
2003, and any product or service currently under development by the
Seller;
(ii)
in Part 2.12(a)(ii) of the Disclosure Schedule:
(A) each item of Registered IP in which the Seller has or
purports to have an ownership interest of any nature (whether
exclusively, jointly with another Person or otherwise);
(B) the jurisdiction in which such item of Registered IP has
been registered or filed and the applicable registration or serial
number; (C) any other Person that has an ownership interest in
such item of Registered IP and the nature of such ownership
interest; and (D) each product or service identified in
Part 2.12(a)(i) of the Disclosure Schedule that
embodies, utilizes or is based upon or derived from (or, with
respect to products and services under development, that is
expected to embody, utilize or be based upon or derived from) such
item of Registered IP;
(iii)
in Part 2.12(a)(iii) of the Disclosure Schedule:
(A) all Intellectual Property Rights or Intellectual Property
licensed to the Seller (other than any non-customized software
that: (1) is so licensed solely in executable or object code
form pursuant to a nonexclusive, internal use software license;
(2) is not incorporated into, or used directly in the
development, manufacturing or distribution of, the products or
services of the Seller; and (3) is generally available on
standard terms for less than $100); (B) the corresponding
Contract or Contracts pursuant to which such Intellectual Property
Rights or Intellectual Property is licensed to the Seller; and
(C) whether the license or licenses so granted to the Seller
are exclusive or nonexclusive; and
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(iv)
in Part 2.12(a)(iv) of the Disclosure Schedule,
each Contract pursuant to which any Person has been granted any
license under, or otherwise has received or acquired any right
(whether or not currently exercisable) or interest in, any Seller
IP.
(b)
The Seller has provided to the Purchaser a complete and accurate
copy of each standard form of Seller IP Contract currently used by
the Seller, including each standard form of: (i) end
user license agreement; (ii) development agreement;
(iii) distributor or reseller agreement; (iv) employee
agreement containing any assignment or license of Intellectual
Property or Intellectual Property Rights or any confidentiality
provision; (v) consulting or independent contractor agreement
containing any assignment or license of Intellectual Property or
Intellectual Property Rights or any confidentiality provision; or
(vi) confidentiality or nondisclosure agreement.
Part 2.12(b) of the Disclosure Schedule
accurately identifies each Seller IP Contract that deviates in any
material respect from the corresponding standard form agreement
provided to the Purchaser. Except for the nonexclusive licenses and
rights granted in Contracts identified in
Part 2.12(a)(iv) of the Disclosure Schedule, the
Seller is not bound by, and no Seller IP is subject to, any
Contract containing any covenant or other provision that in any way
limits or restricts the ability of the Seller to use, exploit,
assert, or enforce any Seller IP anywhere in the world.
(c)
The Seller owns all right, title and interest to and in the Seller
IP (other than Intellectual Property Rights or Intellectual
Property exclusively licensed to the Seller, as identified in
Part 2.12(a)(iii) of the Disclosure Schedule) free and
clear of any Encumbrances (other than nonexclusive licenses granted
pursuant to the Contracts listed in Part 2.12(a)(iv) of
the Disclosure Schedule). Without limiting the generality of the
foregoing:
(i)
all documents and instruments necessary to perfect the rights of
the Seller in the Seller IP have been validly executed, delivered
and filed in a timely manner with the appropriate Governmental
Body;
(ii)
each Person who is or was an employee or independent contractor of
the Seller and who is or was involved in the creation or
development of any Seller IP has signed a valid and enforceable
agreement containing an irrevocable assignment of Intellectual
Property Rights to the Seller and confidentiality provisions
protecting the Seller IP;
(iii)
no Seller Employee has any claim, right (whether or not currently
exercisable) or interest to or in any Seller IP;
(iv)
no employee or independent contractor of the Seller is:
(A) bound by or otherwise subject to any Contract restricting
him or her from performing his or her duties for the Seller; or
(B) in breach of any Contract with any former employer or
other Person concerning Intellectual Property Rights or
confidentiality;
(v)
no funding, facilities or personnel of any Governmental Body were
used, directly or indirectly, to develop or create, in whole or in
part, any Seller IP;
(vi)
the Seller has taken reasonable steps to maintain the
confidentiality of and otherwise protect and enforce its rights in
all proprietary information held by the Seller, or purported to be
held by the Seller, as a trade secret;
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(vii)
since December 31, 2003, the Seller has never assigned or
otherwise transferred ownership of, or agreed to assign or
otherwise transfer ownership of, any Intellectual Property Right to
any other Person;
(viii)
the Seller is not now nor has ever been a member or promoter of, or
a contributor to, any industry standards body or similar
organization that could require or obligate the Seller to grant or
offer to any other Person any license or right to any Seller IP;
and
(ix)
the Seller owns or otherwise has all Intellectual Property Rights
needed to conduct the business of the Seller as currently conducted
by the Seller.
(d)
All Seller IP is valid, subsisting and enforceable. Without
limiting the generality of the foregoing:
(i)
each U.S. patent application and U.S. patent in which the Seller
has or purports to have an ownership interest was filed within one
year of the first printed publication, public use or offer for sale
of each invention described in such U.S. patent application or U.S.
patent;
(ii)
each foreign patent application and foreign patent in which the
Seller has or purports to have an ownership interest was filed, or
claims priority to a patent application filed, before the time at
which each invention described in such foreign patent application
or foreign patent was first made available to the public;
(iii)
no trademark (whether registered or unregistered) or trade name
owned, used, or applied for by the Seller conflicts or interferes
with any trademark (whether registered or unregistered) or trade
name owned, used or applied for by any other Person;
(iv)
none of the goodwill associated with or inherent in any trademark
(whether registered or unregistered) in which the Seller has or
purports to have an ownership interest has been impaired;
(v)
each item of Seller IP that is Registered IP is and at all times
has been in compliance with all Legal Requirements, and all
filings, payments and other actions required to be made or taken to
maintain such item of Seller IP in full force and effect have been
made by the applicable deadline;
(vi)
no application for a patent or for a copyright, mask work or
trademark registration or any other type of Registered IP filed by
or on behalf of the Seller has been abandoned, allowed to lapse or
rejected;
(vii)
Part 2.12(d)(vii) of the Disclosure Schedule
identifies each filing, payment, and action that must be made or
taken on or before the date that is 180 days after the date of this
Agreement in order to maintain each such item of Seller IP in full
force and effect;
(viii)
the Seller has provided to the Purchaser complete and accurate
copies of all applications, correspondence and other material
documents related to each such item of Registered IP; and
(ix)
no interference, opposition, reissue, reexamination or other
Proceeding of any nature is or has been pending or, to the best of
the Knowledge of each of the Seller and each Shareholder,
threatened, in which the scope, validity or enforceability of any
Seller IP is being, has been or could reasonably be expected to be
contested or challenged.
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(e)
Neither the execution, delivery or performance of any of the
Transactional Agreements nor the consummation of any of the
Transactions will, with or without notice or the lapse of time or
both, result in or give any other Person the right or option to
cause or declare: (i) a loss of, or Encumbrance on, any Seller
IP; (ii) a breach of any Contract listed or required to be
listed in Part 2.12(a)(iii) of the Disclosure Schedule;
(iii) the release, disclosure or delivery of any Seller IP by
or to any escrow agent or other Person; or (iv) the grant,
assignment or transfer to any other Person of any license or other
right or interest under, to or in any of the Seller IP.
(f)
To the Knowledge of the Seller, no Person has infringed,
misappropriated, or otherwise violated, and no Person is currently
infringing, misappropriating or otherwise violating, any Seller IP.
Part 2.12(f) of the Disclosure Schedule
accurately identifies (and the Seller has provided to the Purchaser
a complete and accurate copy of) each letter or other written or
electronic communication or correspondence that has been sent or
otherwise delivered by or to the Seller or any Representative of
the Seller regarding any actual, alleged or suspected infringement
or misappropriation of any Seller IP and provides a brief
description of the current status of the matter referred to in such
letter, communication or correspondence.
(g)
The Seller has never infringed (directly, contributorily, by
inducement or otherwise), misappropriated or otherwise violated any
Intellectual Property Right of any other Person. Without limiting
the generality of the foregoing:
(i)
no product, information or service ever manufactured, produced,
distributed, published, used, provided or sold by or on behalf of
the Seller, and no Intellectual Property ever owned, used or
developed by the Seller, has ever infringed, misappropriated or
otherwise violated any Intellectual Property Right of any other
Person;
(ii)
no infringement, misappropriation or similar claim or Proceeding is
pending or has been threatened against the Seller or against any
other Person who may be entitled to be indemnified, defended, held
harmless or reimbursed by the Seller with respect to such claim or
Proceeding;
(iii)
the Seller has never received any notice or other communication (in
writing or otherwise) relating to any actual, alleged or suspected
infringement, misappropriation or violation of any Intellectual
Property Right of another Person;
(iv)
the Seller is not bound by any Contract to indemnify, defend, hold
harmless or reimburse any other Person with respect to any
intellectual property infringement, misappropriation or similar
claim (other than pursuant to the standard forms of Seller IP
Contracts described in Section 2.12(b));
(v)
the Seller has never assumed, or agreed to discharge or otherwise
take responsibility for, any existing or potential liability of
another Person for infringement, misappropriation or violation of
any Intellectual Property Right; and
(vi)
no claim or Proceeding involving any Intellectual Property or
Intellectual Property Right licensed to the Seller is pending or,
to the best of the Knowledge of each of the Seller and each
Shareholder, has been threatened, except for any such claim or
Proceeding that, if adversely determined, would not adversely
affect: (A) the use or exploitation of such Intellectual
Property or Intellectual Property Right by the Seller; or
(B) the manufacturing, distribution or sale of any product or
service being developed, offered, manufactured, distributed or sold
by the Seller.
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(h)
None of the Seller Software: (i) contains any bug, defect or
error (including any bug, defect or error relating to or resulting
from the display, manipulation, processing, storage, transmission
or use of date data) that materially and adversely affects the use,
functionality or performance of such Seller Software or any product
or system containing or used in conjunction with such Seller
Software; or (ii) fails to comply with any applicable warranty
or other contractual commitment relating to the use, functionality
or performance of such software or any product or system containing
or used in conjunction with such Seller Software. The Seller has
provided to the Purchaser a complete and accurate list of all known
bugs, defects and errors in each version and component of the
Seller Software.
(i)
None of the Seller Software contains any “back door,”
“drop dead device,” “time bomb,”
“Trojan horse,” “virus,” or
“worm” (as such terms are commonly understood in the
software industry) or any other code designed or intended to have,
or capable of performing, any of the following functions:
(i) disrupting, disabling, harming or otherwise impeding in
any manner the operation of, or providing unauthorized access to, a
computer system or network or other device on which such code is
stored or installed; or (ii) damaging or destroying any data
or file without the user’s consent.
(j)
None of the Seller Software is subject to any
“copyleft” or other obligation or condition (including
any obligation or condition under any “open source”
license such as the GNU Public License, Lesser GNU Public License
or Mozilla Public License) that: (i) could or does require, or
could or does condition the use or distribution of such Seller
Software on, the disclosure, licensing or distribution of any
source code for any portion of such Seller Software; or
(ii) could or does otherwise impose any limitation,
restriction or condition on the right or ability of the Seller to
use or distribute any Seller Software.
(k)
No source code for any Seller Software has been delivered, licensed
or made available to any escrow agent or other Person who is not,
as of the date of this Agreement, an employee of the Seller. The
Seller does not has any duty or obligation (whether present,
contingent or otherwise) to deliver, license or make available the
source code for any Seller Software to any escrow agent or other
Person who is not, as of the date of this Agreement, an employee of
the Seller. No event has occurred, and no circumstance or condition
exists, that (with or without notice or lapse of time or both)
will, or could reasonably be expected to, result in the delivery,
license or disclosure of any source code for any Seller Software to
any other Person who is not, as of the date of this Agreement, an
employee of the Seller.
2.13
Contracts . Part 2.13 of the Disclosure Schedule
identifies each Seller Contract, except for any Immaterial
Contract. The Seller has delivered to the Purchaser accurate,
complete and fully executed copies of all Seller Contracts
identified in Part 2.13 of the Disclosure Schedule, including
all amendments, exhibits and schedules thereto. Each Seller
Contract is valid and in full force and effect. To the
Knowledge of Seller, no Person has violated or breached, or
declared or committed any default under, any Seller Contract. No
event has occurred, and no circumstance or condition exists, that
is reasonably likely to (with or without notice or lapse of time or
both) (A) result in a violation or breach of any of the
material provisions of any Seller Contract, (B) give any
Person the right to declare a default or exercise any remedy under
any Seller Contract, (C) give any Person the right to
accelerate the maturity or performance of any Seller Contract, or
(D) give any Person the right to cancel, terminate or modify
any Seller Contract (except pursuant to the amendment provisions
contained therein and except with respect to the termination of
Seller Contracts by their terms). The Seller has not received any
notice or other
13
communication (in writing or otherwise)
regarding any actual, alleged, possible or potential violation or
breach of, or default under, any Seller Contract. The Seller has
not waived any material right under any Seller Contract. To the
Knowledge of Seller, each Person against which the Seller has or
may acquire any rights under any Seller Contract is solvent and is
able to satisfy all of such Person’s current and future
monetary obligations and other obligations and Liabilities
thereunder. The Seller has never guaranteed or otherwise agreed to
cause, insure or become liable for, and the Seller has never
pledged any of its assets to secure, the performance or payment of
any obligation or other Liability of any other Person. The
performance of the Seller Contracts will not result in any
violation of or failure to comply with any Legal Requirement. No
Person is renegotiating, or has the right to renegotiate, any
amount paid or payable to the Seller under any Seller Contract. The
Contracts identified in Part 2.13 of the Disclosure
Schedule collectively constitute all of the Contracts necessary to
enable the Seller to conduct its business in the manner in which
such business is currently being by the Seller.
Part 2.13 of the Disclosure Schedule identifies each
proposed Contract as to which any bid, offer, written proposal,
term sheet or similar document has been submitted or received by
the Seller.
2.14
Liabilities; Major Suppliers .
(a)
The Seller has no Liabilities of a nature required to be reflected
on or reserved against in financial statements that are prepared in
accordance with GAAP, except for: (i) liabilities identified
as such in the “liabilities” columns of the Interim
Balance Sheet; (ii) accounts payable (of the type required to
be reflected as current liabilities in the
“liabilities” column of a balance sheet prepared in
accordance with GAAP) or other Liabilities incurred by the Seller
in bona fide transactions entered into in the Ordinary Course of
Business since October 31, 2007; (iii) performance
obligations under the Contracts listed in Part 2.13 of the
Disclosure Schedule; and (iv) those incurred by the Seller in
connection with the execution of this Agreement.
(b)
Part 2.14 of the Disclosure Schedule provides:
(i) an accurate and complete breakdown and aging of the
accounts payable of the Seller as of the date hereof, and
(ii) an accurate and complete breakdown of all notes payable
and other indebtedness for borrowed money of the Seller as of the
date hereof.
(c)
Part 2.14 of the Disclosure Schedule accurately
identifies, and provides an accurate and complete breakdown of the
amounts paid to, each supplier or other Person that (together which
such Person’s affiliates) received (i) more than $20,000
in the aggregate from the Seller in 2005 or 2006, or (ii) more
than $15,000 in the aggregate from the Seller in the first 10
months of 2007.
(d)
Seller has never (i) made a general assignment for the benefit
of creditors, (ii) filed, or had filed against it, any
bankruptcy petition or similar filing, (iii) suffered the
attachment or other judicial seizure of all or a substantial
portion of its assets, (iv) admitted in writing its inability
to pay its debts as they become due or (vi) taken or been the
subject of any action that may have an adverse effect on its
ability to comply with or perform any of its covenants or
obligations under any of the Transactional Agreements.
2.15
Compliance with Legal Requirements . The Seller is in
material compliance with each Legal Requirement that is applicable
to it or to the conduct of its business or the ownership or use of
any of its assets; (b) the Seller has at all times been in
material compliance with each Legal Requirement that is or was
applicable to it or to the conduct of its business or the ownership
or use of any of its assets; (c) no event has occurred, and no
condition or circumstance exists, that is reasonably likely to
(with or without notice or lapse of time or both) constitute or
result directly or indirectly in a violation by the Seller of, or a
failure on the part of the Seller to comply with, any Legal
Requirement; and (d) the Seller has not received, at any time,
any notice or other communication (in writing or otherwise) from
any
14
Governmental Body or any other Person regarding
(i) any actual, alleged, possible or potential violation of,
or failure to comply with, any Legal Requirement, or (ii) any
actual, alleged, possible or potential obligation on the part of
the Seller to undertake, or to bear all or any portion of the cost
of, any cleanup or any remedial, corrective or response action of
any nature. To Seller’s Knowledge, no Governmental Body has
proposed or is considering any Legal Requirement that, if adopted
or otherwise put into effect, (Y) may have an adverse effect
on the Assets or the Seller to comply with or perform any covenant
or obligation under any of the Transactional Agreements, or
(Z) may have the effect of preventing, delaying, making
illegal or otherwise interfering with any of the
Transactions.
2.16
Governmental Authorizations. Part 2.16 of the
Disclosure Schedule identifies: (a) each material Governmental
Authorization that is held by the Seller; and (b) each other
Governmental Authorization that, to the Knowledge of the Seller, is
held by any employee of the Seller and is used by Seller in
connection with the business of the Seller. The Seller has
delivered to the Purchaser accurate and complete copies of all of
the Governmental Authorizations identified in Part 2.16 of the
Disclosure Schedule, including all renewals thereof and all
amendments thereto. Each Governmental Authorization identified or
required to be identified in Part 2.16 of the Disclosure
Schedule is valid and in full force and effect. The Seller is and
has at all times been in material compliance with all of the terms
and requirements of each Governmental Authorization identified or
required to be identified in Part 2.16 of the Disclosure
Schedule. No event has occurred, and no condition or circumstance
exists, that is reasonably likely to (with or without notice or
lapse of time) (A) constitute or result directly or indirectly
in a violation of or a failure to comply with any term or
requirement of any Governmental Authorization identified or
required to be identified in Part 2.16 of the Disclosure
Schedule, or (B) result in the revocation, withdrawal,
suspension, cancellation, termination or modification of any
Governmental Authorization identified or required to be identified
in Part 2.16 of the Disclosure Schedule. The Seller has never
received any notice or other communication (in writing or
otherwise) from any Governmental Body or any other Person regarding
(I) any actual, alleged, possible or potential violation of or
failure to comply with any term or requirement of any Governmental
Authorization, or (II) any actual, proposed, possible or
potential revocation, withdrawal, suspension, cancellation,
termination or modification of any Governmental Authorization. All
applications required to have been filed for the renewal of the
Governmental Authorizations required to be identified in
Part 2.16 of the Disclosure Schedule have been duly filed on a
timely basis with the appropriate Governmental Bodies, and each
other notice or filing required to have been given or made with
respect to such Governmental Authorizations has been duly given or
made on a timely basis with the appropriate Governmental Body. The
Seller has all of the Governmental Authorizations necessary
(Y) to enable the Seller to conduct its business in the manner
in which such business is currently being conducted by the Seller
and (Z) to permit the Seller to own and use its assets in the
manner in which they are currently being owned and used by the
Seller.
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2.17
Tax Matters . Each Tax required to have been paid, or
claimed by any Governmental Body to be payable, by the Seller has
been duly paid in full on a timely basis. Any Tax required to have
been withheld or collected by the Seller has been duly withheld and
collected; and (to the extent required) each such Tax has been paid
to the appropriate Governmental Body. Part 2.17 of the
Disclosure Schedule accurately identifies each examination or audit
of any Tax Return of the Seller that has been conducted since
December 31, 2003. The Shareholders and the Seller have
delivered to the Purchaser accurate and complete copies of all
audit reports and similar documents (to which any Shareholder or
the Seller has access) relating to such Tax Returns. No claim or
other Proceeding is pending or has been threatened against or with
respect to the Seller in respect of any Tax. There are no
unsatisfied Liabilities for Taxes (including liabilities for
interest, additions to tax and penalties thereon and related
expenses) with respect to any notice of deficiency or similar
document received by the Seller. The Seller has not entered into or
become bound by any agreement or consent pursuant to
Section 341(f) of the Code. There is no agreement, plan,
arrangement or other Contract covering any Seller Employee that,
individually or collectively, could give rise directly or
indirectly to the payment of any amount that would not be
deductible pursuant to Section 280G or Section 162 of the
Code. The Shareholders and the Seller have delivered to the
Purchaser accurate and complete copies of all Tax Returns that have
been filed on behalf of or with respect to the Seller since
December 31, 2003. The information contained in such Tax
Returns is accurate and complete in all respects.
2.18
Employee and Labor Matters .
(a)
Part 2.18(a) of the Disclosure Schedule
accurately sets forth, with respect to each current employee of the
Seller (including any employee of the Seller who is on a leave of
absence or on layoff status) who has accepted employment with
Purchaser (a “ Continuing
Employee ”): (i) the name of such employee and
the date as of which such employee was originally hired by the
Seller; (ii) such employee’s title; (iii) the
aggregate dollar amount of the compensation (including wages,
salary, commissions, director’s fees, fringe benefits,
bonuses, profit-sharing payments and other payments or benefits of
any type) received by such employee from the Seller with respect to
services performed in 2006 and the 11 months ended
November 30, 2007; and (iv) such employee’s
annualized compensation as of immediately prior to the Closing. No
current employee of the Seller holds any Governmental Authorization
that is used by the Seller in the conduct of its business.
(b)
There is no former employee of the Seller who is receiving or is
scheduled to receive (or whose spouse or other dependent is
receiving or is scheduled to receive) any benefits (whether from
the Seller or otherwise) relating to such former employee’s
employment with the Seller.
(c)
The employment of each of the Seller’s employees is
terminable by the Seller at will. The Seller has delivered to the
Purchaser accurate and complete copies of all employee manuals and
handbooks, disclosure materials, policy statements and other
materials relating to the employment of the Continuing
Employees.
(d)
To the Knowledge of the Seller: (i) no employee of the
Seller has received an offer to join a business that Seller
believes is competitive with the Seller’s business;
(ii) no employee of the Seller is a party to or is bound by
any confidentiality agreement, noncompetition agreement or other
Contract (with any Person) that may have an adverse effect on:
(A) the performance by such employee of any of his or her
duties or responsibilities as an employee of the Seller;
(B) the Seller’s business or operations; or (B) the
Purchaser’s business or operations as of or after the Closing
in the event such employee becomes an employee or other service
provider of the Purchaser or an affiliate thereof.
(e)
The Seller has no independent contractors.
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(f)
The Seller is not a party to or bound by, and the Seller has never
been a party to or bound by, any employment agreement or any union
contract, collective bargaining agreement or similar Contract. The
Seller is not engaged, and the Seller has never been engaged, in
any unfair labor practice of any nature. There are no actions,
suits, claims, labor disputes or grievances pending or, to the
Knowledge of the Seller, threatened or reasonably anticipated
relating to any labor, safety or discrimination matters involving
any Seller Employee, including, without limitation, charges of
unfair labor practices or discrimination complaints.
2.19
Employee Benefit Plans and Compensation .
(a)
Part 2.19(a) of the Disclosure Schedule contains
an accurate and complete list as of the date hereof of each Seller
Employee Plan and each Seller Employee Agreement. The Seller does
not intend nor has it committed to establish or enter into any new
Seller Employee Plan or Seller Employee Agreement, or to modify any
Seller Employee Plan or Seller Employee Agreement (except to
conform any such Seller Employee Plan or Seller Employee Agreement
to the requirements of any applicable Legal Requirements, in each
case as previously disclosed to the Purchaser in writing or as
required by this Agreement).
(b)
The Seller has delivered to the Purchaser: (i) correct and
complete copies of all documents setting forth the terms of each
Seller Employee Plan and each Seller Employee Agreement, including
all amendments thereto and all related trust documents;
(ii) the three most recent annual reports
(Form Series 5500 and all schedules and financial
statements attached thereto), if any, required under ERISA or the
Code in connection with each Seller Employee Plan; (iii) if
the Seller Employee Plan is subject to the minimum funding
standards of Section 302 of ERISA, the most recent annual and
periodic accounting of Seller Employee Plan assets; (iv) the
most recent summary plan description together with the summaries of
material modifications thereto, if any, required under ERISA with
respect to each Seller Employee Plan; (v) all material written
Contracts relating to each Seller Employee Plan, including
administrative service agreements and group insurance contracts;
(vi) all written materials provided to any Seller Employee
relating to any Seller Employee Plan and any proposed Seller
Employee Plans, in each case, relating to any amendments,
terminations, establishments, increases or decreases in benefits,
acceleration of payments or vesting schedules or other events that
would result in any liability to the Seller or any Seller
Affiliate; (vii) all correspondence to or from any
Governmental Body relating to any Seller Employee Plan;
(viii) all COBRA forms and related notices; (ix) all
insurance policies in the possession of the Seller or any Seller
Affiliate pertaining to fiduciary liability insurance covering the
fiduciaries for each Seller Employee Plan; (x) all
discrimination tests required under the Code for each Seller
Employee Plan intended to be qualified under
Section 401(a) of the Code for the three most recent plan
years; and (xi) the most recent IRS determination or opinion letter
issued with respect to each Seller Employee Plan intended to be
qualified under Section 401(a) of the Code.
(c)
The Seller and each of the Seller Affiliates have performed all
obligations required to be performed by them under each Seller
Employee Plan and are not in default or violation of, and neither
the Seller nor any of the Shareholders have Knowledge of any
default or violation by any other party to, the terms of any Seller
Employee Plan, and each Seller Employee Plan has been established
and maintained substantially in accordance with its terms and in
substantial compliance with all applicable Legal Requirements,
including ERISA and the Code. Any Seller Employee Plan intended to
be qualified under Section 401(a) of the Code has
obtained a favorable determination letter (or opinion letter, if
applicable) as to its qualified status under the Code. No
“prohibited transaction,” within the meaning of
Section 4975 of the Code or Sections 406 and 407 of ERISA, and
not otherwise exempt under Section 408 of ERISA, has occurred
with respect to any Seller Employee Plan. There are no claims or
Proceedings pending, or, to the best of the Knowledge of each of
the Seller and each Shareholder, threatened or reasonably
anticipated (other than routine claims for benefits), against
any
17
Seller Employee
Plan or against the assets of any Seller Employee Plan. Each Seller
Employee Plan (other than any Seller Employee Plan to be terminated
prior to the Closing in accordance with this Agreement) can be
amended, terminated or otherwise discontinued after the Closing in
accordance with its terms, without liability to the Purchaser, the
Seller or any Seller Affiliate (other than ordinary administration
expenses). There are no audits, inquiries or Proceedings pending
or, to the best of the Knowledge of each of the Seller and each
Shareholder, threatened by the IRS, DOL, or any other Governmental
Body with respect to any S
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