Exhibit 2.1
EXECUTION COPY
ASSET PURCHASE AGREEMENT
BY AND AMONG
JACKSONVILLE TECHNOLOGY ASSOCIATES, INC.
(NOW KNOWN AS WSECI, INC.),
THE SHAREHOLDERS OF JACKSONVILLE TECHNOLOGY
ASSOCIATES, INC.
(NOW KNOWN AS WSECI, INC.)
AND
VERSO TECHNOLOGIES, INC.
Dated as of February 23, 2005
ASSET PURCHASE AGREEMENT
This ASSET
PURCHASE AGREEMENT (this “ Agreement ”) is
entered into as of February 23, 2005, by and among
JACKSONVILLE TECHNOLOGY ASSOCIATES, INC. , a Delaware
corporation now known as WSECI, Inc. (the “ Seller
”), and the shareholders of the Seller signatory hereto (each
a “ Shareholder ” and collectively, the “
Shareholders ”), on the one hand, and VERSO
TECHNOLOGIES, INC. , a Minnesota corporation (the “
Purchaser ”), on the other hand. Certain capitalized
and other terms used herein are defined in Section 8.3
.
RECITALS
WHEREAS , the Seller is engaged in the Business;
WHEREAS , the Seller desires to sell to the Purchaser, and
the Purchaser desires to purchase from the Seller, the Purchased
Assets used or held for use in the Business;
WHEREAS , as a condition to the Closing, the Seller, the
Shareholders and the Purchaser will enter into a Seller
Non-Competition Agreement substantially in the form attached hereto
as Exhibit A (the “ Seller Non-Competition
Agreement ”);
WHEREAS , as a condition to the Closing, the Seller and the
Purchaser will enter into a Registration Rights Agreement
substantially in the form attached hereto as Exhibit B
(the “ Registration Rights Agreement ”);
and
WHEREAS , the Shareholders have approved and adopted this
Agreement and the Related Agreements in all respects and have
approved the transactions contemplated hereby and thereby by
unanimous written consent in accordance with Section 228 of
the Delaware General Corporation Law (the “ DGCL
”), with such consent evidenced by each Shareholder’s
execution hereof;
NOW, THEREFORE , in consideration of the foregoing and the
respective representations, warranties, covenants and agreements
set forth in this Agreement, the parties hereto agree as
follows:
ARTICLE I PURCHASE AND SALE OF THE
ASSETS
SECTION 1.1
Terms of Purchase and Sale . On the terms and subject to the
conditions of this Agreement, the Seller shall sell, assign,
transfer and deliver to the Purchaser, and the Purchaser shall
purchase from the Seller, free and clear of any and all
Encumbrances (except Permitted Liens), all of the Purchased
Assets.
SECTION 1.2
Purchased Assets . The assets to be conveyed to the
Purchaser by the Seller (the “ Purchased Assets
”) are all of the assets and properties that comprise the
Business (excluding the Excluded Assets) including the
following:
(a) All
accounts receivable related to the Business and owed to the Seller
at the Closing Date and all notes, bonds and other evidences of
indebtedness of and rights to receive payments from any person held
by the Seller and related to the Business;
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(b) All
Leases;
(c) All
Tangible Property and all Inventory;
(d) All
Proprietary Rights, including, without limitation, those identified
on Schedule 2.14 ;
(e) All
right, title and interest of the Seller in, to and under all
licenses, permits, orders, certificates or approvals relating to
the Business, to the extent assignable;
(f) All
right, title and interest of the Seller in, to and under all
contracts, purchase orders and sales orders and all outstanding
offers or solicitations made by or to the Seller related to the
Business (the “ Assumed Contracts ”), to the
extent assignable; it being understood that
Schedule 1.2(f) identifies all such Assumed
Contracts;
(g) All
rights, claims, causes of action and choses in action relating to
the Business or the Purchased Assets;
(h) Pre-paid
expenses of the Seller relating to the Purchased Assets and the
Business as set forth on the Final Closing Statement;
(i) All
books of account, general, financial, accounting and personnel
records, files, invoices, customers and suppliers lists and other
data owned or used by the Seller relating to the Purchased
Assets;
(j) All
cash and cash equivalents relating to the Business;
(k) The
Seller’s tradename and trademarks; and
(l) All
other assets and goodwill and going concern value of the Seller
relating to the Business, other than the Excluded
Assets.
SECTION 1.3
Excluded Assets. Assets of the Seller relating to the
Business and not being purchased by the Purchaser pursuant to this
Agreement shall be referred to herein as the “ Excluded
Assets ” and shall include the following:
(a) All
of the stock record books and minutes books of the Seller and
similar corporate records required by law to be retained by the
Seller; and
(b) Such
other assets as are set forth on Schedule 1.3(b)
.
SECTION 1.4
Obligations and Liabilities Assumed . The Purchaser shall
assume the following obligations and liabilities of the Seller (the
“ Purchased Liabilities ”):
(a) All
liabilities accrued on the Final Closing Statement;
(b) All
liabilities identified as “Purchased Liabilities” on
Schedule 1.4 ; and
(c) All
obligations under the Assumed Contracts assigned to the Purchaser
pursuant to Section 1.2(f) with respect to periods
after the Closing Date.
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SECTION 1.5
Obligations and Liabilities Not Assumed . The Purchaser
shall assume no obligations or liabilities of the Seller except as
set forth in Section 1.4 . The obligations and
liabilities not assumed by the Purchaser include, but shall not be
limited to, the following (the “ Excluded Liabilities
”):
(a) Obligations
or liabilities relating to employees or independent contractors or
arising under any employee benefit plan or arrangement or any other
compensatory contract or agreement for periods prior to the Closing
Date;
(b) Obligations
or liabilities for inter-company debt or obligation of the Seller
and its Affiliates as it relates to the Seller;
(c) Obligations
or liabilities associated with the Excluded Assets, provided that
such liabilities are not included on the Final Closing
Statement;
(d) Obligations
or liabilities under the Non-assignable Contracts, except to the
extent provided in Section 5.4 hereof;
(e) All
liabilities incurred by the Seller or the Shareholders in
connection with this Agreement and the transactions contemplated
herein;
(f) Obligations
or liabilities associated with the violation of, or default under
or breach of, any contract, lease, agreement or other arrangement,
including the Seller Material Contracts, on or before the Closing
Date; and
(g) Obligations
or liabilities owed to any Shareholder for any reason
whatsoever.
SECTION 1.6
Purchase Price . The purchase price for the Purchased Assets
and assumption of the Purchased Liabilities, will be One Million
Dollars ($1,000,000) (the “ Purchase Price ”) to
be paid at the Closing by (i) the issuance to the Seller of
shares of the Purchaser’s common stock, $.01 par value per
share (the “ Purchaser Shares ”), having an
aggregate value equal to Nine Hundred Fifty Thousand Dollars
($950,000), where the value of such shares is equal to $1.00 per
share for purposes of this Section 1.6; and (ii) the
payment of cash in the amount of Fifty Thousand Dollars ($50,000);
provided, however, the cash amount shall be reduced on a
dollar-for-dollar basis to the extent Seller receives any amounts
in respect of its accounts receivable prior to the Closing Date.
The Seller shall also be entitled to the additional consideration
set forth in Sections 1.7 and 1.8 , and
notwithstanding anything herein to the contrary, the Purchaser may
pay such additional consideration payable pursuant to
Sections 1.7 and 1.8 in the form of cash in the
sole discretion of the Purchaser in lieu of issuing any Purchaser
Shares pursuant to such sections.
SECTION 1.7
Contingent Consideration . In addition to the Purchase Price
and subject to the limitation set forth in Section 1.14
below:
(a) if,
during the first nine (9) months following October 1,
2004, the Purchaser recognizes revenue (in accordance with GAAP and
the Purchaser’s current revenue recognition policy) equal to
or greater than One Million Dollars ($1,000,000) (the “
First Period Target Amount ”) attributable to sales of
the Seller’s equipment, including, but
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not limited to, hardware and
software, or services comprising a portion of the Purchased Assets
or which the Purchaser may offer and sell directly as a result of
the transactions contemplated hereby (the “ Products
”) to the Persons identified on Schedule 1.7(a)
hereof (the amount of such revenue so recognized by the Purchaser
during such nine-month period is referred to herein as the “
First Period Revenue Amount ”), then the Seller shall
be entitled to receive an additional number of Purchaser Shares
having an aggregate value of Five Hundred Thousand Dollars
($500,000), which shares shall be valued at fair market value as of
the date earned (as determined below) (provided , however, that
notwithstanding the foregoing to the contrary, the aggregate value
of the Purchaser Shares issuable pursuant to this
Section 1.7(a) shall be reduced by $130,879); and
(b) during
the first eighteen (18) months following the Closing, the
Seller shall be entitled to receive an additional number of the
Purchaser Shares having an aggregate value equal to One Hundred
Thousand Dollars ($100,000), which shares shall be valued at the
fair market value as of the date earned (as determined below), for
each (i) One Million Dollars ($1,000,000) in revenue
recognized by the Purchaser (in accordance with GAAP and the
Purchaser’s current revenue recognition policy) attributable
to sales of the Products to the customers or other Persons set
forth on attached Schedule 1.7(b) (the “
Existing Customers ”) and not used as a basis to earn
the consideration set forth in Section 1.7(a) , and
(ii) Two Million Dollars ($2,000,000) in revenue recognized by
the Purchaser (in accordance with GAAP and the Purchaser’s
current revenue recognition policy) attributable to the sales of
the Products to the customers that are not Existing Customers
(“ New Customers ”) and not used as a basis to
earn the consideration set forth in Section 1.7(a) ;
provided, however, that the maximum value of the additional
consideration payable pursuant to this Section 1.7(b)
shall not exceed Five Hundred Thousand Dollars ($500,000) plus, if
(and only if) the First Period Revenue Amount is less than the
First Period Target Amount, Five Hundred Thousand Dollars
($500,000).
The Purchaser will issue the
Purchaser Shares issuable pursuant to this section 1.7 within
thirty (30) business days following the end of the calendar
quarter (commencing with the calendar quarter beginning on
April 1, 2005) in which they are earned with the value of such
Purchaser Shares being issued in respect of such calendar quarter
being determined for this purpose by reference to the arithmetic
average of the daily closing price per share, rounded to four
decimal places, of the Purchaser Shares as reported on The NASDAQ
SmallCap Market (or, if the Purchaser Shares are not then reported
on the NASDAQ SmallCap Market, then as reported on or by the OTC
Bulletin Board or National Quotation Bureau, Inc. or other
comparable service (each a “ Subsequent Market
”)) for each of the ten (10) consecutive trading days
ending (and including) the trading day that occurs one trading day
prior to (and not including) the last day of such calendar
quarter.
SECTION 1.8
Bonus Consideration . In addition to the Purchase Price and
the consideration specified in Section 1.7 above and
subject to the limitation set forth in Section 1.14 below,
if the Seller is entitled to receive Purchaser Shares having an
aggregate value of One Million Dollars ($1,000,000) pursuant to
Section 1.7 above, then during the first eighteen
(18) months following the Closing, the Seller shall also be
entitled to receive an additional number of the Purchaser Shares
having an aggregate value equal to Fifty Thousand Dollars
($50,000), which shares shall be valued at the fair market value as
of the date earned (as determined below), for each (a) One
Million Dollars ($1,000,000) in revenue recognized by
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the Purchaser (in accordance with
GAAP and the Purchaser’s current revenue recognition policy)
attributable to sales of the Products to Existing Customers and not
used as a basis to earn the consideration set forth in
Section 1.7 above, and (b) Two Million Dollars
($2,000,000) in revenue recognized by the Purchaser (in accordance
with GAAP and the Purchaser’s current revenue recognition
policy) attributable to sales of the Products to New Customers and
not used as a basis to earn the consideration set forth in
Section 1.7 above; provided, however, that the maximum
value of the additional consideration payable pursuant to this
Section 1.8 shall not exceed Four Million Dollars
($4,000,000). The Purchaser will issue the Purchaser Shares
issuable pursuant to this section within thirty (30) business
days following the end of the calendar quarter in which they are
earned with the value of such Purchaser Shares being issued in
respect of such calendar quarter being determined for this purpose
by reference to the arithmetic average of the daily closing price
per share, rounded to four decimal places, of the Purchaser Shares
as reported on The NASDAQ SmallCap Market (or, if the Purchaser
Shares are not reported on the NASDAQ SmallCap Market, then as
reported on a Subsequent Market) for each of the ten (10)
consecutive trading days ending (and including) the trading day
that occurs one trading day prior to (and not including) the last
day of such calendar quarter.
SECTION 1.9
Inclusion of Certain Revenue and Limitation .
Notwithstanding anything in Sections 1.7(b) and 1.8 to
the contrary, the Purchaser will take into account, in determining
the rights of the Seller to receive the additional consideration
set forth in such sections, the revenue attributable to
transactions during the 18-month period following the Closing for
which (a) a binding agreement has been entered into by the
Purchaser and the customer and (b) the customer’s financing
is approved and verified by the Purchaser, provided that no
Purchaser Shares shall be deemed earned in respect of such revenue
unless and until it is, in fact, recognized by the Purchaser (in
accordance with GAAP and the Purchaser’s current revenue
recognition policy) prior to the end of the 24-month period
following the Closing. For purposes of Sections 1.7 and
1.8 above, the Purchaser will use its reasonable best efforts
to recognize the revenue that gives rise to the payment of any
additional consideration in connection with the matters
contemplated by such sections at the earliest date permitted by
GAAP and the Purchaser’s current revenue recognition policy.
In addition, notwithstanding anything in Sections 1.7 and
1.8 to the contrary, no sale of the Products shall be taken
into account for purposes of Sections 1.7 and 1.8 above
if the gross margin relating to such sale is less than 50%;
provided, however, that for purposes of Section 1.7(a)
above, the gross margin for the sales of the Products to the
Persons identified on Schedule 1.7(a) hereof shall be
calculated on a combined basis; and for purposes of
Section 1.7(a) above and notwithstanding any statement
contained or referenced herein otherwise relating to the
Purchaser’s revenue recognition policy, the Purchaser will
include for purposes of determining the First Period Revenue Amount
the revenue attributable to up to one year of maintenance services
to be provided to the Persons identified on
Schedule 1.7(a) hereof at the same time that the
Purchaser recognizes the revenue attributable to the product sales
to the Persons identified on Schedule 1.7(a)
.
SECTION 1.10
Allocation and Sales Tax . The Purchase Price shall be
allocated among the Purchased Assets as determined by the
Purchaser, which determination shall be reasonably acceptable to
the Seller (the “ Allocation ”). The Purchaser
shall deliver the Allocation to the Seller no later than sixty
(60) days after the Closing Date. The Seller and the Purchaser
shall use the Allocation for all reporting purposes having to do
with federal,
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state and local income and
franchise Taxes. The Seller and the Purchaser will timely file any
forms required to be filed under Section 1060 of the Code and
any corresponding provision of state or local tax law. In addition,
the Seller and the Purchaser each agree (a) to file all
Returns and determine all Taxes (including, without limitation, for
purposes of Section 1060 of the Code) in accordance with and
based upon the Allocation and (b) not to take any position
inconsistent with such Allocation in any audit or judicial or
administrative proceeding or otherwise. The Seller and the
Purchaser shall cooperate in preparing and filing sales and use
Returns, if required, relating to the sale and purchase of the
Purchased Assets. The Seller agrees to pay all sales and use Taxes,
if any, relating to the sale and purchase of the Purchased
Assets.
SECTION 1.11
Final Closing Statement.
(a) As
promptly as possible after the Closing Date, but no later than
sixty (60) days after the Closing Date, the Purchaser shall
prepare and deliver to the Seller a balance sheet of the Business
as of the Closing Date (the “ Final Closing Statement
”), which will eliminate the Excluded Assets and the Excluded
Liabilities. The Seller shall, and shall cause its independent
accountants to, cooperate and assist, to the extent requested by
the Purchaser and/or its independent accountants, in the
preparation of the Final Closing Statement, including, without
limitation, by making available to the extent necessary books,
records, work papers and personnel.
(b) The
Seller and its independent certified public accountants may review
the Final Closing Statement and may make inquiry of the
representatives of the Purchaser’s accountants and the
Purchaser. The Final Closing Statement shall be binding and
conclusive upon, and deemed accepted by, the Seller unless the
Seller shall have notified the Purchaser in writing thirty
(30) days after receipt the Final Closing Statement of any
objections thereto. A notice under this Section 1.11(b)
shall specify, in reasonable detail, the items calculation that are
being disputed, and the Seller shall be deemed to have agreed with
all other items and amounts contained in the Final Closing
Statement delivered by the Purchaser.
(c) At
the request of either party, any dispute between the parties
relating to the Final Closing Statement that cannot be resolved by
them within thirty (30) days after receipt of notice of any
objections to such calculation pursuant to
Section 1.11(b) shall be referred to the Disputes
Auditor for decision, which decision shall be final and binding on
both parties. In making such decision, the Disputes Auditor shall
consider only those items or amounts as to which the Seller has
disagreed. The parties agree that they will request that the
Disputes Auditor render its decision within thirty (30) days
after referral of the dispute to the Disputes Auditor for decision
pursuant hereto. The fee of the Disputes Auditor for, and relating
to, the making of any such decision shall be borne by the parties
equally.
(d) The
Final Closing Statement shall become binding on both parties upon
the earliest of (i) the expiration of the period within which the
Seller may notify the Purchaser of any objections thereto pursuant
to Section 1.11(b) if no notice of objection has been
given, (ii) agreement by the Seller and the Purchaser that the
Final Closing Statement, together with any modifications thereto
agreed by the Seller and the Purchaser, shall be final and binding
and (iii) the date on which the Disputes Auditor shall issue its
decision with respect to any dispute relating thereto.
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SECTION 1.12
Audit of Calculation of Contingent and Bonus
Consideration.
(a) No
later than the date upon which the Purchaser is obligated to issue
Purchaser Shares pursuant to Sections 1.7 or 1.8 (or
would be obligated to issue such shares if such shares had been
earned pursuant to Sections 1.7 or 1.8 ), the Purchaser
shall provide to the Seller a statement setting forth the
Purchaser’s calculation of the number of Purchaser Shares
earned by the Seller pursuant to Sections 1.7 and 1.8 ,
if any, during the proceeding calendar quarter, which statement
shall include the items, amounts and information used by the
Purchaser in making such calculation (the “ Statement of
Contingent and Bonus Consideration ”). Notwithstanding
anything to the contrary in Sections 1.7 or 1.8 , on
the date the Purchaser may be obligated to issue Purchaser Shares
pursuant to Sections 1.7 or 1.8 , the Purchaser shall
be obligated to issue only such number of Purchaser Shares as
calculated on the Statement of Contingent and Bonus Consideration
delivered on such date.
(b) The
Seller and its independent certified public accountants may review
the Statement of Contingent and Bonus Consideration and may make
inquiry of the representatives of the Purchaser’s accountants
and the Purchaser. The calculation of the number of Purchaser
Shares earned by the Seller as set forth in the Statement of
Contingent and Bonus Consideration shall be binding and conclusive
upon, and deemed accepted by, the Seller unless the Seller shall
have notified the Purchaser in writing thirty (30) days after
receipt of the Statement of Contingent and Bonus Consideration of
any objections to the calculation set forth therein. A notice under
this Section 1.12(b) shall specify, in reasonable
detail, the items, amounts and information set forth in the
Statement of Contingent and Bonus Consideration that is being
disputed, and the Seller shall be deemed to have agreed with all
other items, amounts and information contained in the Statement of
Contingent and Bonus Consideration delivered by the
Purchaser.
(c) At
the request of either party, any dispute between the parties
relating to the calculation of the number of Purchaser Shares
earned by the Seller as set forth in Statement of Contingent and
Bonus Consideration that cannot be resolved by them within thirty
(30) days after receipt of notice of any objections to such
calculation pursuant to Section 1.12(b) shall be
referred to the Disputes Auditor for decision, which decision shall
be final and binding on both parties. In making such decision, the
Disputes Auditor shall consider only those items, amounts or
information in the calculation of the number of Purchaser Shares
earned by the Seller as set forth in the Statement of Contingent
and Bonus Consideration as to which the Seller has disagreed. The
parties agree that they will request that the Disputes Auditor
render its decision within thirty (30) days after referral of
the dispute to the Disputes Auditor for decision pursuant hereto.
The fee of the Disputes Auditor for, and relating to, the making of
any such decision shall be borne by the parties equally.
(d) The
calculation of the number of Purchaser Shares earned by the Seller
as set forth in the Statement of Contingent and Bonus Consideration
shall become binding on both parties upon the earliest of
(i) the expiration of the period within which the Seller may
notify the Purchaser of any objections to the calculation of the
number of Purchaser Shares earned by the Seller as set forth in the
Statement of Contingent and Bonus Consideration pursuant to
Section 1.12(b) if no notice of objection has been
given, (ii) agreement by the Seller and the Purchaser that the
calculation of the number of Purchaser Shares earned by the Seller
as set forth in the Statement of Contingent and Bonus
Consideration, together with any
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modifications thereto agreed by
the Seller and the Purchaser, shall be final and binding and
(iii) the date on which the Disputes Auditor shall issue its
decision with respect to any dispute relating to such calculation.
Promptly, but in no event more than five (5) business days,
after the date on which the calculation of the number of Purchaser
Shares earned by the Seller becomes binding on the Purchaser and
the Seller pursuant to this Section 1.12(d) , the
Purchaser shall issue such additional Purchaser Shares that have
been earned by the Seller in accordance with such binding
calculation but which shares have not yet been issued.
SECTION 1.13
The Closing . The closing of the transactions contemplated
hereby (the “ Closing ”) shall take place
(a) at the offices of Rogers & Hardin LLP, as soon as
practicable on the date on which all the conditions to the
parties’ obligations specified in Article VI have
been fulfilled or waived or (b) at such other place, date
and/or time as the parties may mutually agree. The date on which
the Closing actually occurs is hereinafter referred to as the
“ Closing Date .”
SECTION 1.14
Share Cap . Notwithstanding anything herein to the contrary,
in no event shall Purchaser be obligated to issue more than an
aggregate of 13,177,301 Purchaser Shares pursuant to the terms of
this Agreement.
ARTICLE II REPRESENTATIONS AND
WARRANTIES
OF THE SELLER AND THE SHAREHOLDERS
Except as set
forth in the disclosure schedules delivered by the Seller to the
Purchaser concurrently with the execution of this Agreement (the
“ Seller Disclosure Schedules ”), which shall
identify each exception by reference to the specific Section to
which such exception applies, the Seller and the Shareholders
jointly and severally hereby represent and warrant to the Purchaser
that:
SECTION 2.1
Organization and Qualification; Subsidiaries; Capitalization
. The Seller is a corporation duly organized and validly existing
under the laws of the State of Delaware and has all requisite
corporate power and authority to own, lease and operate its
properties and to carry on its business as is now being conducted.
Other than as set forth on Schedule 2.1 , the Seller
has no Subsidiaries and does not own, either directly or
indirectly, any equity interest in any corporation, partnership,
limited liability company or other entity. The Seller is duly
qualified or licensed to do business and in good standing as a
foreign corporation in each jurisdiction in which the character of
its properties owned or leased or the nature of the business
conducted by it makes such qualification necessary, except where
the failure to be so qualified or licensed could not reasonably be
expected to have a Material Adverse Effect. As of the date hereof,
the authorized capital stock of the Seller consists of 2,440,000
shares of common stock, par value $0.001 per share (“
Seller Common Stock ”), of which as of the date
hereof, 2,440,000 shares are issued and outstanding (none of which
are treasury shares). Schedule 2.1 identifies the name
of each Shareholder and the number of shares of Seller Common Stock
held by each Shareholder as of the date hereof. Other than as set
forth on Schedule 2.1, no Person owns of record any
shares of Seller Common Stock or any other capital stock of
Seller.
SECTION 2.2
Articles of Incorporation and Bylaws . The Seller has
heretofore furnished to the Purchaser complete and correct copies
of the Seller’s Articles of
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Incorporation and Bylaws, in each
case as amended or restated (collectively, the “
Organizational Documents ”), which are in full force
and effect on the date hereof. The Seller is not in violation of
any of the provisions of any of the Organizational
Documents.
SECTION 2.3
Authority; Approval .
(a) The
Seller has all requisite corporate power and authority to execute
and deliver this Agreement and the Related Agreements, to perform
its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. At the time of the
Closing, the execution and delivery of this Agreement and the
Related Agreements by the Seller and the consummation by the Seller
of the transactions contemplated hereby and thereby will have been
duly authorized by all necessary corporate action and no other
corporate proceedings on the part of the Seller are necessary to
authorize this Agreement and the Related Agreements or to
consummate the transactions contemplated hereby and thereby. This
Agreement and the Related Agreements have been duly and validly
executed and delivered by the Seller and, assuming the due
authorization, execution and delivery of this Agreement and the
Related Agreements (as applicable) by the other parties thereto,
constitute legal, valid and binding obligations of the Seller,
enforceable against the Seller in accordance with their respective
terms, except as such enforceability may be limited or affected by
applicable bankruptcy, insolvency, moratorium or other similar laws
affecting or relating to enforcement of creditors’ rights
generally and general equitable principles regardless of whether
such enforceability is considered in a proceeding at law or in
equity.
(b) Each
of the Shareholders understands, acknowledges and agrees that this
Agreement, when executed by each of the Shareholders, shall
evidence the Shareholders’ approval and adoption of this
Agreement and the Related Agreements in all respects and the
Shareholders’ approval of the transactions contemplated
hereby and thereby by unanimous written consent of the Shareholders
in accordance with Section 228 of the DGCL, and that no
further action by the Shareholders is required in order for the
Seller to execute and deliver this Agreement and the Related
Agreements and to consummate the transactions contemplated hereby
and thereby.
SECTION 2.4 No
Conflict.
(a) The
execution and delivery of this Agreement and the Related Agreements
by the Seller do not, and the consummation and performance by the
Seller of this Agreement, the Related Agreements and any other
transaction contemplated hereby and thereby will not,
(i) conflict with or violate the Organizational Documents,
(ii) conflict with or violate any Laws applicable to the
Seller or by which any of its properties or assets is bound or
affected, or (iii) except as set forth on
Schedule 2.4 , result in any breach of or constitute a
default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result
in the creation of any Encumbrance on any of the properties or
assets of the Seller, in each case pursuant to any note, bond,
mortgage, indenture, contract, agreement (including, without
limitation, any Seller Material Contract), lease, license, permit,
franchise or other instrument or obligation to which the Seller is
a party or by which the Seller or any of its properties or assets
is bound or affected.
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(b) Assuming
the accuracy of the Purchaser’s representations and
warranties as contained in this Agreement, the execution and
delivery of this Agreement and the Related Agreements by the Seller
do not, and the consummation and performance by the Seller of this
Agreement, the Related Agreements and any other transaction
contemplated hereby and thereby will not, require any consent,
approval, authorization or permit of, or filing with or
notification to, (i) any Governmental Entities (including,
without limitation, the Federal Trade Commission and the Department
of Justice pursuant to the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended) or (ii) any third Person, other than
(x) any such consents, approvals, authorizations or permits
that have been obtained or such filings or notifications that have
been made and (y) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or
notifications, would not, either individually or in the aggregate,
prevent or delay consummation of the transactions contemplated in
this Agreement or the Related Agreements, or otherwise, either
individually or in the aggregate, prevent the Seller from
materially performing its obligations under this Agreement or the
Related Agreements, or have a Material Adverse Effect or
(z) as set forth on Schedule 2.4 .
(c) This
Agreement and each of the Related Agreements to which the
Shareholders are a party have been (or will be when so executed in
accordance with this Agreement) duly and validly executed and
delivered by the Shareholders (or the Shareholders party thereto,
as applicable) and, assuming the due authorization, execution and
delivery of this Agreement and the Related Agreements (as
applicable) by the other parties thereto, constitute legal, valid
and binding obligations of the Shareholders, enforceable against
the Shareholders in accordance with their respective terms, except
as such enforceability may be limited or affected by applicable
bankruptcy, insolvency, moratorium or other similar laws affecting
or relating to enforcement of creditors’ rights generally and
general equitable principles regardless of whether such
enforceability is considered in a proceeding at law or in
equity.
SECTION 2.5
Permits; Compliance . The Seller is in possession of all
franchises, grants, authorizations, licenses, permits, easements,
variances, exemptions, consents, certificates, approvals and orders
necessary to own, lease and operate its properties and to carry on
its business as it is now being conducted (collectively, the
“ Seller Permits ”), except where the failure to
obtain any such Seller Permit could not reasonably be expected to
cause individually, or in the aggregate with other such failures, a
Material Adverse Effect, and there is no action, proceeding or
investigation pending or, to the Knowledge of the Seller,
threatened regarding impairment, suspension, limitation,
revocation, termination or cancellation of any of the Seller
Permits. Except as set forth on Schedule 2.5 , the
Seller is in compliance with or has complied with (a) each Law
applicable to the Seller or by which any of its properties or
assets is bound or affected and (b) each of the Seller
Permits, except to the extent that any failure to so comply would
be reasonably expected to have a Material Adverse Effect. The
Seller has not received from any Governmental Entity any
notification or any other inquiries with respect to the possible
failure of the Seller to be in compliance with any Law applicable
to the Seller.
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SECTION 2.6
Reports; Financial Statements, Books of Account .
(a) The
Seller has delivered to the Purchaser and attached as part of
Schedule 2.6 true and correct copies of the compiled
balance sheets of the Seller as of December 31, 2003 and
July 31, 2004, and compiled statements of income for the
twelve month period ended December 31, 2003 and the seven
month period ended July 31, 2004 (all such financial
statements being referred to herein collectively as the “
Seller Financial Statements ”). Each such balance
sheet presents the financial condition, assets and liabilities, and
shareholders’ equity of the Seller as of its date and each
such statement of income presents the results of the business of
the Seller for the period indicated. With respect to the compiled
statements, except for the absence of notes to the compiled
statements, the Seller Financial Statements have been prepared in
accordance with GAAP consistently applied throughout the periods
involved and are in accordance with the books and records of the
Seller.
(b) Except
as set forth on Schedule 2.6 , the books, records and
accounts of the Seller accurately and fairly reflect, in reasonable
detail, the transactions and the assets and liabilities of the
Seller. The Seller maintains a system of internal accounting
control sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with
management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP, and
(iii) access to assets, properties, books, records and
accounts is permitted only in accordance with management’s
general or specific authorization.
SECTION 2.7
Absence of Certain Changes or Events . Except as disclosed
in the Seller Financial Statements or on Schedule 2.7 ,
and except as otherwise specifically contemplated by this
Agreement, (a) since December 31, 2003, the Seller has
conducted its business only in the ordinary course and in a manner
consistent with past practice and (b) since December 31,
2003, there has not been:
(i) any
material damage, destruction or loss (not covered by insurance)
with respect to any material asset of the Seller relating to the
Business;
(ii) any
change by the Seller in its accounting methods, principles or
practices, or any changes in depreciation or amortization policies
or rates adopted by it;
(iii) (A) any
declaration, setting aside or payment of any dividends or other
distribution (whether in cash, stock or property) in respect of the
capital stock of the Seller, (B) any direct or indirect
redemption, purchase, retirement or other acquisition by the Seller
of any capital stock of the Seller or other securities convertible
into, exchangeable for or conferring the right to purchase capital
stock of the Seller (or any agreement, arrangement or other
understanding to do the same), or (C) any issuance, pledge or
sale of any capital stock of the Seller, or any other securities
convertible into or exchangeable for or conferring the right to
purchase capital stock of the Seller (or any agreement, arrangement
or other understanding to do the same);
(iv) any
termination or failure to renew, or any threat (that was not
subsequently withdrawn) to terminate or fail to renew, any Seller
Material Contract;
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(v) any
material change to any of the business, operations or policies of
the Seller, including, without limitation, advertising, investment,
marketing, pricing, purchasing, production, personnel, sales,
returns, budget or other product acquisition policies;
(vi) any
loan or advance by the Seller to any of its shareholders, officers,
directors, consultants or employees or other representatives except
for travel and entertainment and moving expense advances made to
employees in the ordinary course of business consistent with past
practice (in amount and kind) or any loan or advance otherwise than
in the ordinary course of business consistent with past practice
(in amount and kind);
(vii) except
for inventory or equipment in the ordinary course of business, any
sale, abandonment, transfer, lease, license or any other
disposition of any properties or assets of the Seller or
acquisition of any capital stock or business of any other person
(or any reaching of an agreement, arrangement or understanding to
do the same);
(viii) (A) any
incurrence of indebtedness or assumption, guarantee or other
responsibility for the debts of any other Person (other than
check-clearing endorsements made in the ordinary course of
business), (B) any loans, advances or capital contributions to
or investments in any other Person (other than advances against
commissions and advances of expenses to sales personnel in the
normal course of business), or (C) any grant of any security
interest or creation or modification of any Encumbrances on any of
its properties or assets, other than in respect of Permitted
Liens;
(ix) any
modification, amendment, termination, transfer or waiver of any
material right under any contract or other agreement of the type
required to be set forth on any Schedule hereto, or any agreement,
arrangement or other understanding to do any of the foregoing, or
any permitted lapse of any rights to the use of any Proprietary
Rights or any sale, assignment, license, transfer or other
disposition of any rights thereto, in each case except in the
ordinary course of business consistent with past practice;
or
(x) any
agreement, arrangement or other understanding to do, cause or
suffer any of the foregoing.
SECTION 2.8
Absence of Litigation . Except as disclosed on
Schedule 2.8 , there is no Litigation pending or, to
the Knowledge of the Seller, threatened against, directly affecting
or directly involving the Seller or any of its properties or
rights, or which seeks to prevent or challenge the transactions
contemplated hereby. The Seller is not subject to any continuing
Orders, including, without limitation, cease-and-desist or other
orders.
SECTION 2.9
Material Contracts; No Default .
(a) Except
as otherwise identified on Schedule 2.9(a) (such
contracts and agreements as are required to be set forth on
Schedule 2.9(a) , together with the leases with respect
to the Leased Real Property (the “ Leases ”),
being referred to herein, collectively, as the “ Seller
Material Contracts ”) and except for the Leases, and
except for contracts that the Seller has substantially performed
all of its obligations with respect to, the Seller is not, as of
the date of this Agreement, a party to or bound by any of the
following contracts, agreements, commitments, or instruments,
whether oral or written, binding upon and relating to the
Business:
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(i) employment,
commission or consulting agreements (other than any such agreement
that is “at will” and the termination of which would
not result in any severance, penalty or similar payment being owed
by the Seller);
(ii) collective
bargaining agreements or other contracts or commitments to or with
any labor unions or other employee representatives or groups of
employees;
(iii) contracts
or agreements limiting the right of the Seller (A) to engage
in, or to compete with any Person in, any business, including each
contract or agreement containing exclusivity provisions restricting
the geographical area in which, or the method by which, any
business may be conducted by the Seller or (B) to solicit any
customer or client;
(iv) indemnity
or guaranty arrangements, business acquisition agreements,
licenses, nondisclosure agreements (other than licenses of rights
to software and nondisclosure agreements entered into with
customers in the ordinary course of business), and joint-venture
agreements;
(v) agreements
or contracts with any officer, director or employee of the Seller,
other than employment, commission and consulting agreements covered
by clause (i) above and other than confidentiality and
nondisclosure agreements in favor of the Seller, copies of which
have been provided to the Purchaser;
(vi) (A) leases
or similar agreements under which (x) the Seller is lessee of,
or holds or uses, any machinery, equipment, vehicle or other
tangible personal property owned by a third person or (y) the
Seller is a lessor or sublessor of, or makes available for use by
any third person, any tangible personal property owned or leased by
the Seller, or (B) continuing contracts for the future
purchase of materials, supplies or equipment;
(vii) except
for licenses of software generally commercially available on a
“shrink wrap” or similar basis, material licenses or
other agreements relating in whole or in part to any Proprietary
Rights (including any material license or other material agreement
under which the Seller has the right to use any of the same owned
or held by any third Person) (with respect to license agreements
where the Seller is the licensee, Schedule 2.9(a) sets
forth the minimum guarantees thereunder, together with performance
to the date set forth thereon with respect to such
guarantees);
(viii) agreements
or contracts under which the Seller has borrowed or loaned any
money or issued any note, bond, indenture or other evidence of
indebtedness or directly or indirectly guaranteed the indebtedness,
liabilities or obligations of others (other than
(A) check-clearing endorsements made in the ordinary course of
business, (B) accounts receivable and accounts payable
generated in the ordinary course of business, and (C) travel
and similar expense advances to employees in the ordinary course of
business and immaterial in amount);
(ix) mortgages,
pledges, security agreements, deeds of trust or other documents
granting a lien (including liens upon properties acquired under
conditional sales, capital leases or other title retention or
security devices) with respect to any property;
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(x) contracts
or commitments affecting ownership of, title to, use of, or any
interest in real estate (other than the Leases);
(xi) contracts
or commitments, whether or not in the ordinary course of business,
which involve future payments, performance of services or delivery
of goods and/or materials, to or by the Seller of an aggregate
amount or value in excess of $25,000;
(xii) other
agreements, contracts, leases, licenses, commitments, arrangements
or instruments to which the Seller is a party or by or to which the
Seller or any of its assets or business is bound or subject which
has an aggregate future liability (as to such contract or
commitment individually) as of the date hereof in excess of
$25,000;
(xiii) contracts
or commitments with distributors, sales representatives and other
third parties providing sales and promotional services with respect
to the Seller’s products; or
(xiv) any
other contract which, if terminated or breached, or if the Seller
otherwise loses the benefits thereof, would result in a Material
Adverse Effect.
(b) Each
Seller Material Contract is in full force and effect and is a
legal, valid and binding contract or agreement of the Seller, and
there is no material default (or any event which, with the giving
of notice or lapse of time or both, would be a material default) by
the Seller or, to the Knowledge of the Seller, any other party, in
the timely performance of any obligation to be performed or paid
under any of the Seller Material Contracts. No notice has been
received by the Seller of any default under or termination of any
Seller Material Contract which has not been cured as of the date
hereof or that cannot be promptly cured without the payment of any
material sums with respect thereto. The Seller has either delivered
or made available to the Purchaser true, complete and correct
copies of all Seller Material Contracts or, in the case of oral
Seller Material Contracts, true, complete and correct summaries
thereof.
SECTION 2.10
Customers, Distributors, Etc.
(a) During
the last twelve (12) months, no Significant Relationship has
(i) canceled or otherwise terminated, or, to the Knowledge of
the Seller, threatened to cancel or otherwise terminate, its
relationship with the Seller, or (ii) materially changed, or,
to the Knowledge of the Seller, requested a material adverse change
in, the price or quantity of the products or services sold or
provided by or to the Seller; provided, however, that the
substantial completion of a project for any such customer shall not
be considered a material change. “ Significant
Relationship ” shall mean any customer of the Seller or
distributor, sales representative or other third party providing
sales or promotional services to the Seller that accounted for
aggregate revenues of the Seller in excess of Twenty-five Thousand
Dollars ($25,000) during the most recent twelve (12) calendar
months. Schedule 2.10(a) sets forth the name of each
Significant Relationship and the percentage of the Seller’s
aggregate revenues from such Significant Relationship.
(b) As
it relates to the Business, Schedule 2.10(b) sets forth
the names of all independent contractors, distributors, agents and
brokers that are entitled to receive from
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the Seller aggregate compensation
of more than $10,000 as a result of performance during either the
current fiscal year or the fiscal year ended December 31, 2003
and sets forth the amount of such compensation (expressed as a
percentage of sales or otherwise) which each such independent
contractor, distributor, agent or broker is entitled to or received
and the date of termination of the contract, agreement or other
arrangement so entitling such independent contractor, distributor,
agent or broker to such compensation.
(c) As
it relates to the Business, Schedule 2.10(c) lists each
outstanding commitment or promise by the Seller to a Significant
Relationship to repair or de-bug any software installed by the
Seller prior to the date hereof or to otherwise provide warranty or
similar benefits with respect to such software where the value of
such services and/or warranty benefits is reasonably expected to
exceed $10,000 and where the full cost of such services and/or
warranty benefits is not paid for by such Significant Relationship.
Such list shall be organized by Significant Relationship and shall
include a reasonably detailed description of the circumstances
giving rise to the commitment or promise.
SECTION 2.11
Employee Benefit Plans; Labor Matters .
(a)
Schedule 2.11(a) contains a true and complete list of
(i) each employee benefit or compensation plan, program,
arrangement or contract (including, without limitation, any
“employee benefit plan,” as defined in
Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended (“ ERISA ”)) which is now or
within the last three years has been sponsored, maintained,
contributed to, or required to be contributed to by the Seller or
any ERISA Affiliate or as to which any of the foregoing has or may
have any material liability, contingent or otherwise (each a
“ Seller Employee Plan ”) and (ii) each
management, employment, severance, consulting, non-compete,
confidentiality or similar agreement or contract (other than the
standard Seller confidentiality and nondisclosure agreements)
currently in effect between the Seller and any current, former or
retired employee, officer, consultant, independent contractor,
agent or director of the Seller (each an “ Employee
”) (each such agreement an “ Employee Agreement
”). Neither the Seller nor any ERISA Affiliate has any plan
or commitment to establish any new Seller Employee Plan, to modify
any Seller Employee Plan (except as required by law or to retain
the tax qualified status of such Seller Employee Plan), or to enter
into or modify any Employee Agreement, except as set forth on
Schedule 2.11(a) . For purposes of this Agreement,
“ ERISA Affiliate ” means any business or entity
which is a member of a “controlled group of
corporations” under “common control” or an
“affiliated service group” with the Seller within the
meaning of any of Sections 414(b), (c), or (m) of the
Code, or required to be aggregated with the Seller under Section
414(o) of the Code or is under “common control” with
the Seller within the meaning of Section 4001(a)(14) of
ERISA.
(b) The
Seller has made available to the Purchaser (i) true and
complete copies of (or otherwise provided access to) all documents
embodying or directly relating to each Seller Employee Plan
currently in effect and each Employee Agreement including all
amendments thereto and written interpretations thereof;
(ii) the two most recent annual reports (Series 5500 and
all schedules thereto), if any, required under ERISA in connection
with each Seller Employee Plan and trust currently in effect;
(iii) the most recent determination letter received from the
Internal Revenue Service (the “ IRS ”), if any,
for each Seller Employee Plan and trust currently in effect; and
(iv) the most recent summary plan
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description together with the
most recent summary of material modifications required under ERISA
with respect to each Seller Employee Plan and all material
communications to any Employee relating to each Seller Employee
Plan and any proposed Seller Employee Plan.
(c) (i) The
Seller has performed all material obligations required to be
performed under each Seller Employee Plan, and, to the Knowledge of
the Seller, each Seller Employee Plan has been established and
maintained in accordance with its terms and in compliance with all
applicable laws, statutes, orders, rules and regulations,
including, but not limited to, ERISA and the Code; (ii) to the
Knowledge of the Seller, each Seller Employee Plan intended to
qualify under Section 401 of the Code is, and since its
inception has been so qualified, and each trust forming a part of
any such Seller Employee Plan is exempt from tax pursuant to
Section 501(a) of the Code and no circumstances exist which would
adversely affect this qualification or exemption; (iii) no
non-exempt “prohibited transaction,” within the meaning
of Section 4975 of the Code or Section 406 of ERISA, has
occurred with respect to any Seller Employee Plan; (iv) there
are no material actions, suits or claims pending or, to the
Knowledge of the Seller, threatened (other than routine claims for
benefits) against the Seller with respect to any Seller Employee
Plan or against any Seller Employee Plan, or against the assets of
any Seller Employee Plan; (v) no action or failure to act and
no transaction or holding of assets by, or with respect to, any
Seller Employee Plan has or, to the Knowledge of the Seller, may
subject the Seller, any fiduciary or other “plan
official” (within the meaning of Section 412 of ERISA)
to any tax, penalty, liability or other disability, whether by way
of indemnity or otherwise; and (vi) each Seller Employee Plan
can be amended, terminated or otherwise discontinued after the
Closing Date, without liability to the Seller, the Purchaser or any
of their respective Affiliates.
(d) Neither
the Seller nor an ERISA Affiliate presently maintains nor in the
past has maintained a “defined benefit plan,” as
defined in Section 3(35) of ERISA.
(e) At
no time since the Seller’s inception has the Seller or an
ERISA Affiliate been required to contribute to, or incurred any
withdrawal liability (within the meaning of Section 4201 of
ERISA) to any “multiemployer plan,” as defined in
Sections 3(37) and 4001(a)(3) of ERISA.
(f) Except
as set forth on Schedule 2.11(f) , the execution of,
and performance of the transactions contemplated by, this Agreement
will not (either alone or upon the occurrence of any additional or
subsequent events constitute an event under any Seller Employee
Plan, Employee Agreement, trust or loan that will or may result in
any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any
Employee.
(g) The
Seller is not presently and since the Seller’s inception has
not been a party to, or bound by, any collective bargaining
agreement or union contract with respect to Employees. There are no
pending or, to the knowledge of the Seller, threatened
representation questions respecting the Employees. The Seller is
neither involved in nor, to the Knowledge of the Seller, threatened
with, any labor dispute, arbitration or lawsuit that is material in
nature and relates to labor and employment matters involving
Employees. There
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are no pending or, to the
Knowledge of the Seller, threatened labor organizing activities,
whether within or without the United States.
(h) The
Seller does not maintain or contribute to any Seller Employee Plan
which provides, or has any liability to provide, life insurance,
medical or other welfare benefits to any Employee(s) upon their
retirement or termination of employment, except as may be required
by law, and the Seller has not represented, promised or contracted
(whether in oral or written form) to any Employee (either
individually or to Employees as a group) that such Employee(s)
would be provided with such benefits upon their retirement or
termination of employment.
(i) The
Seller is in compliance in all material respects with all material
applicable federal, state and local laws, rules and regulations
respecting employment, employment practices, terms and conditions
of employment, wages, hours and withholding, including, without
limitation, the provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985, and payment of all required amounts
(including, without limitation, income and employment
taxes).
(j) The
Seller does not have any material liability (and to the Knowledge
of the Seller, there is no basis for any present or future action,
suit, proceeding, hearing, investigation, charge, complaint, claim
or demand against it giving rise to any material liability) arising
out of any discrimination against or harassment of employees or
prospective employees based on race, sex, religion, ethnicity,
sexual preference or handicap or other physical or mental
impairment or disability.
SECTION 2.12
Tax Matters . Except as set forth on
Schedule 2.12 :
(a) At
all times since inception through the Closing Date, the Seller had
in effect a valid election to be treated as a Subchapter S
corporation for purposes of the Code and any corresponding
provision of state income or franchise tax law. The Seller has
(i) filed in accordance with all applicable laws when due all
Returns required to be filed by it, (ii) paid all Taxes shown
to have become due pursuant to such Returns, and (iii) paid
all Taxes (other than those being contested in good faith) for
which a notice of, or assessment or demand for, payment has been
received or which are otherwise due and payable. All Returns filed
by the Seller with respect to Taxes are true, complete and correct,
in all material respects. The accruals for Taxes set forth on the
most recent balance sheet included in the Seller Financial
Statements fully cover all known or contingent liabilities for
Taxes through the date thereof. The accruals for deferred Tax
liability on such Seller Financial Statements are adequate under
GAAP to cover liability for deferred Taxes through the Closing
Date.
(b) Complete
copies of all federal, state, local and foreign income Tax and
other Returns, including amended Returns, of the Seller, that have
been filed with respect to taxable periods beginning on and after
the date of the Seller’s inception through the date hereof,
have been delivered or made available to the Purchaser prior to the
date hereof. Prior to the date hereof, the Seller has provided to
the Purchaser copies of all revenue agents’ reports and other
written assertions by governmental authorities of deficiencies or
other liabilities for Taxes of the Seller with respect to past
periods for which the limitations period has not run, and each of
such items have been set forth on Schedule 2.12
.
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(c) (i) There
is no action, suit, proceeding, investigation, audit, claim or
assessment pending or, to the Knowledge of the Seller, proposed
with respect to any liability for Tax that relates to the Seller;
(ii) all amounts required to be collected or withheld by the
Seller with respect to Taxes have been duly collected or withheld
and any such amounts that are required to be remitted to any taxing
authority have been duly remitted; (iii) no extension of time
within which to file any Return that relates to the Seller has been
requested, which Return has not since been filed, except that the
2003 return is on extension and has not been filed; (iv) there
are no waivers or extensions of any applicable statute of
limitations for the assessment or collection of Taxes with respect
to any Return that relates to the Seller which remain in effect;
(v) there are no tax rulings, requests for rulings, or closing
agreements to which the Seller is a party or is subject which could
affect its liability for Taxes for any period after the Closing;
(vi) no power of attorney has been granted by the Seller with
respect to any matter relating to Taxes of the Seller which is
currently in force; (vii) the Seller has not filed a consent
under former Section 341(f)(2) of the Code or any comparable
provision of state revenue statutes; (viii) the Seller has
made all payments of estimated Taxes (if any) required to be made
under Section 6655 of the Code and any comparable provisions
of state, local or foreign law; (ix) any adjustment of Taxes
of the Seller made by the IRS in any examination which is required
to be reported to the appropriate state, local or foreign taxing
authorities has been reported, and any additional Taxes due with
respect thereto have been paid; (x) the Seller has not at any
time been a member of any affiliated group (within the meaning of
Section 1504(a) of the Code) or combined or unitary group other
than the group of which the Seller is the common parent;
(xi) the Seller is not and has not been a party to any tax
sharing agreement (including any agreement or arrangement regarding
Taxes with respect to any entity that has been sold or disposed of
by the Seller); and (xii) there are no tax liens on any assets
of the Seller other than liens for Taxes not yet due and
payable.
(d) The
Seller is not a party to any agreement, contract, arrangement or
plan that has resulted, or by reason of the transactions
contemplated in this Agreement would result, separately or in the
aggregate, in the payment of any “excess parachute
payments” within the meaning of Section 280G of the
Code.
(e) For
purposes of this Agreement, “ Tax ” or “
Taxes ” shall mean any and all taxes, charges, fees,
levies, and other governmental assessments and impositions of any
kind, payable to any federal, state, local or foreign Governmental
Entity or taxing authority or agency, including, without
limitation, (i) income, franchise, profits, gross receipts,
minimum, alternative minimum, estimated, ad valorem, value added,
sales, use, service, real or personal property, capital stock,
license, payroll, withholding, disability, employment, social
security, workers compensation, unemployment compensation, utility,
severance, production, excise, stamp, occupation, premiums,
windfall profits, transfer and gains taxes, (ii) customs
duties, imposts, charges, levies or other similar assessments of
any kind, and (iii) interest, penalties and additions to tax
imposed with respect thereto; and “ Returns ”
shall mean any and all returns, reports and information statements
with respect to Taxes required to be filed with the IRS or any
other Governmental Entity or Tax authority or agency, whether
domestic or foreign, including, without limitation, consolidated,
combined and unitary tax returns.
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SECTION 2.13 Proprietary
Rights.
(a)
Schedule 2.13 identifies all of the Seller’s
Proprietary Rights. The Seller owns or possesses sufficient legal
rights to all Proprietary Rights without, to the Seller’s
Knowledge, any infringement of the rights of others except as set
forth on Schedule 2.13(a) . Except as set forth in the
Seller Material Contracts or otherwise disclosed on any Schedule
hereto or Schedule 2.13(a) , to the Seller’s
Knowledge, there are no outstanding options, licenses or agreements
of any kind relating to the foregoing Proprietary Rights, nor is
the Seller bound by or a party to any options, licenses or
agreements of any kind with respect to the patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses,
information or other proprietary rights and processes of any other
person or entity other than such licenses or agreements arising
from the purchase of “off the shelf” or standard
products.
(b) To
the Seller’s Knowledge, the Seller has not violated and, by
conducting the Business as presently conducted, would not violate
any of the patents, trademarks, service marks, trade names,
copyrights or trade secrets or other proprietary rights of any
other person or entity. No claims or demands have been made, or, to
the Seller’s Knowledge, threatened, challenging the legality,
validity, enforceability or ownership of any license, sublicense or
other agreement covering or relating to any Proprietary Right. No
person is violating or infringing upon, or has violated or
infringed upon at any time, any of the Proprietary
Rights.
(c) The
Seller has not (i) used, installed, implemented, copied,
reverse engineered, decompiled, disassembled, or otherwise
attempted to derive the source code for, modified, adapted,
altered, translated or created derivative works from, third party
proprietary software, technology, products, processes, websites,
materials, documents, or any part thereof; (ii) merged,
implemented, integrated or otherwise used any third party
proprietary software, technology, products, processes, materials,
websites, or documents, or any part thereof, into or in any of the
software, technology, products, processes, materials, websites, or
documents of the business; or (iii) otherwise come into
conflict with any third party proprietary software, technology,
products, processes, materials, websites, documents, or any part
thereof; other than to the extent permitted by contract or
applicable law.
(d) The
Seller has historically used its commercially reasonable efforts to
have all of the Proprietary Rights, as applicable, created as a
work for hire (as defined under U.S. copyright law) by regular full
time employees of the Seller. Except as set forth on
Schedule 2.13(d) , all regular full time employees of
the Seller and any author or developer of the Seller who was not a
regular full-time employee of the Seller at the time such person
contributed to any Proprietary Rights have irrevocably assigned to
the Seller in writing all copyrights and other proprietary rights
in such person’s work with respect to such Proprietary
Rights. Except as set forth on Schedule 2.13(d) , none
of the Proprietary Rights is owned by or registered in the name of
any current or former owner, shareholder, member, partner,
director, executive, officer, employee, salesman, agent, customer,
representative or contractor of the Seller or any of its Affiliates
or predecessors nor does any such person have any interest therein
or right thereto, including the right to royalty payments. The
Seller is not aware that any of its employees is obligated under
any contract (including licenses, covenants or commitments of any
nature) or other agreement, or subject to any judgment, decree or
order of any court or administrative agency, that would interfere
with their duties to the Seller
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or that would conflict with the
business as presently conducted. The Seller has historically used
reasonable efforts to have each former and current employee and
consultant of the business execute a proprietary information and
inventions agreement customary in form and substance. No former or
current employee or consultant of the business has excluded works
or inventions made prior to his or her employment with the business
from his or her assignment of inventions pursuant to such
employee’s, officer’s or consultant’s proprietary
information and inventions agreement except for works or inventions
that are not related in any manner to the conduct of the
Seller’s business as it is presently conducted, except for
any such exclusions that could not reasonably be expected
individually or in the aggregate to have a Material Adverse
Effect.
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SECTION 2.14 Certain Business
Practices and Regulations; Potential Conflicts of
Interest.
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(a) Neither
the Seller nor any directors, officers, agents or employees of the
Seller has (i) used any corporate funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to
political activity, (ii) made any unlawful payment to foreign
or domestic government officials or employees or to foreign or
domestic political parties or campaigns from corporate funds or
violated any provision of the Foreign Corrupt Practices Act of
1977, as amended, or (iii) paid or made any bribe, rebate,
payoff, influence payback, kickback or other unlawful
payment.
(b) Except
as set forth on Schedule 2.14 , none of the Affiliates,
officers, directors or agents of the Seller or any spouse, lineal
descendent or entity Controlled by any of the foregoing
(i) owns, directly or indirectly, in whole or in part, any
real or personal property that the Seller uses in the conduct of
its Business; (ii) has any cause of action or other suit,
action or claim whatsoever against, or owes any amount (contingent
or otherwise) to, or is owed any amount (contingent or otherwise)
by, the Seller other than claims in the ordinary course of business
resulting from such Person’s status as an officer, director
or agent of the Seller such as for accrued salary, bonus,
commissions, vacation pay or accrued benefits under employee
benefit plans; (iii) has sold to, or purchased from, the
Seller any assets or property (other than the Seller’s
capital stock) for aggregate consideration in excess of $10,000
since January 1, 2004; or (iv) is a party to any contract
or participates in any arrangement, written or oral, pursuant to
which the Seller provides in-kind services to any such individual
or entity, except to such individual in his capacity as an employee
of the Seller.
SECTION 2.15
Insurance . Schedule 2.15 sets forth a list of
all policies or binders of fire, liability, product liability,
worker’s compensation, vehicular and other insurance held by
or on behalf of the Seller in connection with the Business
(collectively, the “ Insurance Contracts ”),
including the amounts of such in
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