EXHIBIT 2.01
MEMBERSHIP INTEREST PURCHASE AGREEMENT
by and
among
TECHTEAM GOVERNMENT SOLUTIONS, INC.,
NEWVECTORS HOLDING LLC,
ALTARUM INSTITUTE
and
ALTARUM SUPPORTING ORGANIZATION, INC.
DATED
AS OF MAY 23, 2007
1
TABLE OF CONTENTS
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1.
DEFINITIONS
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2. SALE AND
TRANSFER OF INTERESTS; CLOSING
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2.1
Interests
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2.2 Purchase
Price
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2.3
Closing
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2.4 Closing
Obligations
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2.5 Estimated
Purchase Price And Post Closing Adjustment
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3.
REPRESENTATIONS AND WARRANTIES OF SELLER GROUP
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3.1
Organization and Good Standing
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3.2 Authority;
No Conflict
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3.3
Capitalization
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3.4 Financial
Statements
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3.5 Books and
Records
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3.6 Title to
Properties; Encumbrances
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3.7 Condition
and Sufficiency of Assets
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3.8 Accounts
Receivable
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3.9 No
Undisclosed Liabilities
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3.10
Taxes
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3.11 No
Material Adverse Change
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3.12 Employee
Benefits
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3.13 Compliance
with Legal Requirements; Governmental Authorizations
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3.14 Legal
Proceedings; Orders
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3.15 Absence of
Certain Changes and Events
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3.16 Contracts;
No Defaults
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3.17
Insurance
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3.18
Employees
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3.19 Labor
Relations; Compliance
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3.20
Intellectual Property
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3.21 Certain
Payments
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3.22
Relationships with Related Persons
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3.23 Brokers or
Finders
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4.
REPRESENTATIONS AND WARRANTIES OF BUYER
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4.1
Organization and Good Standing
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4.2 Authority;
No Conflict
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4.3 Investment
Intent
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4.4 Certain
Proceedings
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4.5 Brokers or
Finders
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4.6
Solvency
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4.7 No
Knowledge of Misrepresentations or Omissions
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5. COVENANTS OF
SELLER GROUP
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5.1 Access and
Investigation
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5.2 Operation
of the Business of the Company
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5.3 Negative
Covenant
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5.4
Notification; Disclosure Schedule Supplements
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5.5 No
Negotiation
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5.6 ECSS
Receivable
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5.7
Confidentiality
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5.8
Noncompete
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5.9 Non
Solicitation
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5.10 Seller
Group Release
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6. COVENANTS OF
BUYER
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6.1 Approvals
of Governmental Bodies
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6.2 No
Additional Representations; Disclaimer
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6.3
Notification
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6.4 Books And
Records
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6.5 Cooperation
With Respect to Taxes.
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6.6 Non
Solicitation
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6.7
Survival
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7. CONDITIONS
PRECEDENT TO BUYER’S OBLIGATION TO CLOSE
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7.1 Accuracy of
Representations
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7.2
Company’s and Seller Group’s Performance
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7.3
Consents
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7.4 No
Proceedings
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7.5 No Claim
Regarding Interest Ownership or Sale Proceeds
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7.6 No
Prohibition
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7.7 Additional
Documents
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8. CONDITIONS
PRECEDENT TO SELLER’S OBLIGATION TO CLOSE
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8.1 Accuracy of
Representations
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8.2
Buyer’s Performance
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8.3
Consents
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8.4 No
Proceedings
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8.5 No
Injunction
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8.6 No
Prohibition
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8.7 Additional
Documents
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8.8 Termination
of Seller Group Guarantee.
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9.
TERMINATION
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9.1 Termination
Events
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9.2 Effect of
Termination
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10.
INDEMNIFICATION; REMEDIES
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10.1
Survival
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10.2
Indemnification and Payment of Damages By Seller
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10.3
Indemnification and Payment of Damages by Buyer
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10.4 Time
Limitations; Failure to Close
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10.5
Limitations On Amount—Seller
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10.6
Limitations On Amount—Buyer
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10.7 Procedure
For Indemnification—Buyer Indemnification Claims and Seller
Indemnification Claims
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10.8 Procedure
for Indemnification—Third Party Claims
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10.9
Notification of Escrow
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10.10 Exclusive
Remedy; Determination of Damages
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10.11
Insurance
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10.12
Mitigation
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10.13 DCA Audit
Indemnification by Altarum
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11. GENERAL
PROVISIONS
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11.1 Sellers
Representative
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11.2
Expenses
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11.3 Public
Announcements
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11.4
Confidentiality
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11.5
Notices
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11.6
Jurisdiction; Service of Process
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11.7 Further
Assurances
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11.8 Waiver
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11.9 Entire
Agreement and Modification
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11.10
Assignments, Successors, and no Third Party Rights .
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11.11
Severability .
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11.12
Section Headings, Construction
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11.13 Governing
Law
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11.14
Counterparts; Facsimile Signature
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4
EXHIBITS
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Exhibit 2.4(a)(ii)
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Schedule of Amounts, Timing and
Responsibility for Retention Payments |
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Exhibit 2.4(a)(iii)
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Form of Subcontract |
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Exhibit 2.4(a)(v)(1) and (2)
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Forms of Lease Amendments |
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Exhibit 2.4(a)(vi)
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Form of Computer Sublease |
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Exhibit 4.2
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Buyer’s Consent |
5
MEMBERSHIP INTEREST PURCHASE AGREEMENT
THIS MEMBERSHIP INTEREST PURCHASE
AGREEMENT (this “ Agreement ”) is made as of
May 23, 2007, by TechTeam Government Solutions,
Inc. , a Virginia corporation (“Buyer”),
NewVectors Holding
LLC , a Michigan limited liability company (“
Seller ”), Altarum Institute , a
Michigan nonprofit corporation and tax-exempt public charity
(“ Altarum ”), and Altarum Supporting Organization,
Inc. , a Michigan nonprofit corporation and tax-exempt
public charity (“ ASO ”, and together with
Altarum and Seller, the “ Seller Group ”).
RECITALS
Seller desires to sell, and Buyer
desires to purchase, all of the issued and outstanding membership
interests (the “ Interests ”) of NewVectors LLC,
a Michigan limited liability company (the “ Company
”), for the consideration and on the terms set forth in this
Agreement.
AGREEMENT
Buyer and each member of the Seller
Group, intending to be legally bound, agree as follows:
1.
DEFINITIONS
For purposes of this Agreement, the
following capitalized terms not defined above shall have the
following meanings:
“ Accounts
Receivable ” – is defined in
Section 3.8.
“ Applicable
Contract ” – is defined in
Section 3.16(a).
“ Audited Balance
Sheet ” – is defined in
Section 3.4.
“ Audited
Financial Statements ” – is defined in
Section 3.4.
“ Best
Efforts ” – means the efforts that a
prudent Person desirous of achieving a result would use in similar
circumstances to ensure that such result is achieved as
expeditiously as is commercially reasonable and practicable;
provided, however, that an obligation to use Best Efforts
under this Agreement does not require such Person to take actions
that would result in a materially adverse change in the financial
condition, prospects or benefits of or to such Person.
“ Breach
” – means a breach of a representation,
warranty, covenant, obligation, or other provision of this
Agreement or any instrument delivered pursuant to this Agreement
that will be deemed to have occurred if there is or has been any
inaccuracy in or breach of, or any failure to perform or comply
with, such representation, warranty, covenant, obligation, or other
provision.
“ Business
Day ” – means any day other than a
Saturday, Sunday, United States Federal holiday or day on which
banks in Detroit, Michigan are required or permitted by law to be
closed.
“ Buyer’s
Advisors ” – is defined in
Section 5.1(a).
“ Buyer’s
Closing Documents ” – is defined in
Section 2.4(b)(iii).
“ Buyer
Indemnification Claim ” – is defined in
Section 10.4(a).
1
“ Buyer
Indemnified Persons ” – is defined in
Section 10.2.
“ Buyer Material
Adverse Effect ” – means a material
adverse change in the business, operations, properties, assets, or
financial condition of the Buyer other than as a result of: (a)
changes generally adversely affecting the United States economy as
a whole; (b) any legal or regulatory event, change, condition,
fact or effect affecting the federal information technology support
services industry as a whole; (c) the performance by the Buyer
of its obligations under this Agreement; (d) the announcement
or pendency of the Contemplated Transactions; or (e) war, the
outbreak of hostilities or acts of terrorism.
“ Claim
” – is defined in Section 10.7.
“ Closing
” – is defined in Section 2.3.
“ Closing
Date ” – means the date and time as of
which the Closing actually takes place.
“ Closing
Statement ” – is defined in
Section 2.5(b).
“ Company
” – is defined in the Recitals of this
Agreement.
“ Company
Material Adverse Effect ” – means a
material adverse change in the business, operations, properties,
assets, or financial condition of the Company other than as a
result of: (a) changes generally adversely affecting the
United States economy as a whole; (b) any legal or regulatory
event, change, condition, fact or effect affecting the federal
information technology support services industry as a whole;
(c) the performance by the Company or any member of the Seller
Group of its obligations under this Agreement; (d) the
announcement or pendency of the Contemplated Transactions; or
(e) war, the outbreak of hostilities or acts of
terrorism.
“ Company
Operating Agreement ” – means that
certain Operating Agreement of the Company, dated as of
April 1, 2006, between the Company and Seller.
“ Computer
Sublease Amendment ” – is defined in
Section 2.4(a)(vi).
“ Confidential
Information ” – means information
proprietary to the Company that has commercial value in
Company’s business, including, without limitation,
information about software programs and subroutines, source and
object code, algorithms, trade secrets, designs, technology,
know-how, processes, data, ideas, techniques, inventions (whether
or not patentable or copyrightable), works of authorship, formulas,
business and product development plans, customer lists, terms of
compensation and performance levels of Company officers and
employees, Company customers and other proprietary information
concerning Company’s actual or anticipated business, research
or development, or which is received in confidence by or for
Company from any other person or entity; provided, however ,
that Confidential Information shall not include any information
relating to the Company that (a) is generally available to the
public or otherwise in the public domain, (b) subsequent to
the Closing becomes generally available to the public without fault
on the part of any member of the Seller Group, or
(c) otherwise becomes known to any member of the Seller Group
on a non-confidential basis from another source not bound by a
confidentiality agreement with the Company.
“ Consent
” – means any approval, consent, ratification,
waiver, or other authorization (including any Governmental
Authorization).
“ Contemplated
Transactions ” – means all of the
transactions contemplated by this Agreement, including:
2
(a) the sale of the Interests by
Seller to Buyer;
(b) the execution, delivery, and
performance of the Retention Agreement Amendments and the Escrow
Agreement; and
(c) the performance by Buyer and
Seller of their respective covenants and obligations under this
Agreement.
“
Contract ” – means any agreement,
contract, obligation, promise or undertaking (whether written or
oral and whether express or implied) that is legally binding,
including, without limitation, any Applicable Contract.
“ Controlling
Party ” – is defined in
Section 10.8(b).
“ Current
Assets ” – means any amounts showing as
current assets of the Company under such heading on the Estimated
Closing Statement, but excluding cash, cash equivalents and all
ECSS receivables.
“ Current
Liabilities ” – means any amounts shown
as current liabilities of the Company under such heading on the
Estimated Closing Statement, but excluding any portion thereof that
constitutes (a) debt included in current liabilities,
regardless of maturity, and (b) any direct expenses accrued by
the Company for the ECSS Receivable.
“ Damages
” – means the amount of any loss, liability,
claim and expense, including, without limitation, costs of
investigation and defense and reasonable attorneys’ fees, but
excluding (a) for purposes of Article 10 hereof, any such
loss, liability, claim or expense relating to diminution in the
value of the Company, and (b) any exemplary, punitive, special
or incidental damages.
“ Disclosure
Schedule ” – means the schedule
qualifying the representations, warranties and covenants of the
Seller Group in this Agreement, to be delivered by Seller to Buyer,
as the same may be updated or supplemented by a Disclosure
Schedule Supplement.
“ Disclosure
Schedule Supplement ” – is defined
in Section 5.4(b).
“ ECSS
” – means the Airforce Expeditionary Combat
Services Support project for which Computer Sciences Corporation is
the prime contractor and the Company is a subcontractor under a
letter subcontract.
“ ECSS
Receivable ” – means any amount billed
or unbilled for work in respect of ECSS prior to April 1,
2007.
“
Encumbrance ” – means any charge,
claim, equitable interest, lien, option, pledge, security interest,
right of first refusal, or restriction of any kind, including any
restriction on use, voting, transfer, receipt of income, or
exercise of any other attribute of ownership.
“ Enterprise
Solutions Business ” – means the
business of the Company, whether conducted by the Company or by a
member of the Seller Group prior to its transfer to the Company,
which business was commonly referred to as the “Enterprise
Solutions Division” of Altarum prior to its transfer to the
Company.
3
“ ERISA
” – means the Employee Retirement Income
Security Act of 1974, as amended, or any successor law, and
regulations and rules issued pursuant to that Act or any successor
law.
“ Escrow
Agent ” – is defined in
Section 2.4(c).
“ Escrow
Agreement ” – is defined in
Section 2.4(c).
“ ESD
Contract ” – means any Contract that is
effective as of the date hereof and between any member of the
Seller Group and any other Person related to the line of activity
of the Seller Group commonly referred to as the “Enterprise
Solutions Division.”
“ Estimated
Closing Statement ” – is defined in
Section 2.5(a).
“ Estimated
Purchase Price ” – is defined in
Section 2.5(a).
“ Final Purchase
Price ” – is defined in
Section 2.5(b).
“ Financial
Statements ” – is defined in
Section 3.4.
“ GAAP
” – means generally accepted United States
accounting principles, consistently applied.
“ Governmental
Authorization ” – means any approval,
consent, license, permit, waiver, or other authorization issued,
granted, given, or otherwise made available by or under the
authority of any Governmental Body or pursuant to any Legal
Requirement.
“ Governmental
Body ” – means any:
(a) nation, state, county, city,
town, village, district, or other jurisdiction of any nature;
(b) federal, state, local, municipal,
foreign, or other government;
(c) governmental or
quasi-governmental authority of any nature (including any
governmental agency, branch, department, official, or entity and
any court or other tribunal);
(d) multi-national organization or
body; or
(e) body exercising, or entitled to
exercise, any administrative, executive, judicial, legislative,
police, regulatory, or taxing authority or power of any
nature.
“ Indemnification
Cap ” – is defined in
Section 10.5.
“ Indemnification
Deductible ” – is defined in
Section 10.5.
“
Indemnitor ” – is defined in
Section 10.7(a).
“
Indemnitee ” – is defined in
Section 10.7(a).
“ Independent
Auditor ” – is defined in
Section 2.5(b).
“ Intellectual
Property Assets ” – is defined in
Section 3.20(a).
4
“
Interests ” – is defined in the
Recitals of this Agreement.
“ Interim Balance
Sheet ” – is defined in
Section 3.4.
“ Interim Financial
Statements ” – is defined in
Section 3.4
“ IRC
” – means the Internal Revenue Code of 1986, as
amended, or any successor law, and regulations issued by the IRS
pursuant to the Internal Revenue Code of 1986, as amended.
“ IRS
” – means the United States Internal Revenue
Service or any successor agency, and, to the extent relevant, the
United States Department of the Treasury.
“ Key
Employees ” – means the individuals
listed on Schedule 1 of this Agreement.
“
Knowledge ” – means (a) in
the case of the Seller Group, (1) the actual knowledge, or the
knowledge that such person would have after reasonable inquiry, of
Katherine A. Fox, Gary T. Mears, W. Deane Stanley and Charles B.
Torres, (2) only with respect to the representations and
warranties contained in Section 3.9 and 3.16, the actual
knowledge, after reasonable inquiry, of James Boedecker, and
(3) only with respect to the representations and warranties
contained in Section 3.12, the actual knowledge, after
reasonable inquiry, of Patricia H. Ferguson; and (b) in the
case of the Buyer, the actual knowledge of Dennis J. Kelly, Robert
Burleson or Michael A. Sosin.
“ Lease
Amendments ” – is defined in
Section 2.4(a)(v).
“ Legal
Requirement ” – means any administrative
order, constitution, law, ordinance, principle of common law,
regulation, statute, or treaty of any Governmental Body.
“ Net Working
Capital ” – means the Company’s
Current Assets, minus the Company’s Current
Liabilities, in each case as determined as of the close of business
on day before the Closing Date.
“ Net Working
Capital Target ” – means
$1,450,000.
“ Non-controlling
Party ” – is defined in
Section 10.8(b).
“
Novation ” – is defined in
Section 6.1(b).
“ Novation
Documentation ” – is defined in
Section 6.1(b).
“ Objection
Notice ” – is defined in
Section 2.5(b).
“ Order
” – means any award, decision, injunction,
judgment, order, ruling, subpoena, or verdict entered, issued,
made, or rendered by any court, administrative agency, or other
Governmental Body or by any arbitrator that has been given
authority to do so by any Person under a contact enforceable
against such Person.
“ Ordinary Course
of Business ” – an action taken by a
Person that is taken in the ordinary course of such Person’s
business, consistent with the past practices of such Person.
“ Organizational
Documents ” – means: (a) for a
corporation, the articles or certificate of incorporation and the
bylaws; (b) for a limited liability company, the articles of
organization and operating agreement; (c) any charter or
similar document adopted or filed in connection with the creation,
formation, or organization of a Person; and (d) any amendment
to any of the foregoing.
5
“ Permitted
Encumbrance ” means: (a) Encumbrances for
Taxes, assessments and other charges not yet due and payable or for
Taxes, assessments and other charges that the Company is contesting
in good faith through appropriate proceedings and for which a
proper reserve has been established on the books of the Company;
(b) liens of landlords, carriers, warehousemen, workmen,
repairmen, mechanics, and materialmen liens arising in the Ordinary
Course of Business; and (c) in the case of any leased real
property, the rights of any lessor of such property.
“ Person
” – means any individual, corporation (including
any non-profit corporation), general or limited partnership,
limited liability company, joint venture, estate, trust,
association, organization, labor union, or other entity or
Governmental Body.
“
Proceeding ” – means any action,
arbitration, audit, hearing, investigation, litigation, or suit
(whether civil, criminal, administrative or investigative)
commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
“ Purchase
Price ” – is defined in
Section 2.2.
“ Related
Person ” – means (a) with respect
to any Person that is not an individual, (i) any Person that
directly or indirectly controls, is controlled by or is under
common control with such Person, (ii) any Person that owns a
greater than 50% equity interest in such Person, and (iii) each
Person that serves as a director, officer, general partner,
executor or trustee of such Person, and (b) with respect to
any Person that is an individual, (i) any member of such
Person’s immediate family, or (ii) the parents or
grandchildren of such Person.
“
Representative ” – means with
respect to a particular Person, any director, officer, employee,
agent, consultant, advisor, or other representative of such Person,
including legal counsel, accountants and financial advisors.
“ Required Tax
Return ” – is defined in
Section 3.10(a).
“ Retention
Agreements ” – means those Retention
Agreements between the Company and each Key Employee.
“ Retention
Agreement Amendments ” – means those
certain amendments to the Retention Agreements required by
Section 2.4(b)(ii).
“ Securities
Act ” – means the Securities Act of
1933, as amended, or any successor law, and regulations and rules
issued pursuant to that Act or any successor law.
“ Seller Group ” – is
defined in the first paragraph of this Agreement .
“ Seller
Indemnification Claim ” – is defined in
Section 10.4(b).
“ Seller
Indemnified Persons ” – is defined in
Section 10.3.
“ Seller’s Closing
Documents ” – is defined in
Section 2.4(a)(vii).
“ Sellers
Representative ” – is defined in
Section 11.1(a).
“
Subcontract ” – is defined in
Section 2.4(a)(iii).
6
“ Tax
” – means any federal, state, local or foreign
income, gross receipts, franchise, profits, withholding, social
security, unemployment, disability, real property, ad
valorem , personal property, stamp, excise, occupation, sales,
use, transfer, value added, alternative minimum, estimated or other
tax, assessment, duty, fee, levy or other governmental charge,
including any interest, penalty or addition thereto.
“ Tax
Return ” – means any return (including
any information return), report, statement, schedule, notice, form,
or other document or information filed with or submitted to, or
required to be filed with or submitted to, any Governmental Body
with respect to any Tax.
“ Third Party
Action ” – is defined in
Section 10.8(a).
“
Threatened ” – means a claim,
Proceeding, dispute, action, or other matter as to which any demand
or statement has been made in writing or any notice has been given
in writing that would lead a prudent Person to conclude that such a
claim, Proceeding, dispute, action, or other matter is reasonably
likely to be asserted, commenced, taken, or otherwise
pursued.
“ Transition
Services Agreement ” – is defined in
Section 2.4(a)(iv).
2.
SALE AND TRANSFER OF INTERESTS; CLOSING
2.1 Interests
. Subject to the terms and conditions of this Agreement, at
the Closing, Seller will sell and transfer the Interests to Buyer,
and Buyer will purchase the Interests from Seller.
2.2 Purchase
Price . The purchase price for the Interests will be
$40,750,000, as adjusted by the difference between Net Working
Capital and the Net Working Capital Target (the “ Purchase
Price ”).
2.3 Closing
. The purchase and sale (the “ Closing ”)
provided for in this Agreement will take place at the offices of
Honigman Miller Schwartz and Cohn LLP, 130 South First Street, Ann
Arbor, Michigan, 48104, at 10:00 a.m. (local time) on the
first to occur of (a) May 31, 2007, and (b) the
third Business Day after the satisfaction or waiver of the last of
the Closing conditions contained in Articles 7 and 8 of this
Agreement (unless another date, time or place is mutually agreed to
by Buyer and Seller); provided, however , that after the
satisfaction or waiver of the last of the Closing conditions
contained in Articles 7 and 8 of this Agreement, Buyer may, at its
option, exercisable by giving the Seller Group not less than two
(2) days prior written notice, extend the Closing Date to a
date that is on or before June 15, 2007; provided,
further , that Buyer shall, at Closing and together with the
payment due under Section 2.4(b)(i), pay Seller a fee of
$7,500 for each day beyond June 7, 2007 that the Closing does
not occur.
2.4 Closing
Obligations . At the Closing:
(a) Seller will deliver to
Buyer:
(i) duly executed assignments of
membership interest, or other instruments of conveyance,
transferring the Interests to Buyer;
(ii) Retention Agreement Amendments
executed by the Company and each Key Employee to provide for
payments to the Key Employees in the amounts, at the times and in
accordance with the responsibilities therefor as between the
Company and Buyer as shown on Exhibit 2.4(a)(ii)
.
7
(iii) a subcontract between Seller
and the Company, in the form of Exhibit 2.4(a)(iii) (the
“ Subcontract ”), executed by Seller;
(iv) a transition services agreement
between Seller and the Company providing for the performance by
Altarum of contract administration services for Contracts between
the Company and the United States Government and subdivisions
thereof for (A) no charge in respect of such Contracts as are
in effect as of the Closing Date and until such time as such
Contracts expire or are terminated, and (B) for such Contracts
that the Company may enter into after the Closing Date and for
which the Company or Buyer requests such services by written notice
to Altarum, in each case for a fee payable to Altarum equal to two
percent (2%) of the billings in respect of each such Contract,
which services the Company or Buyer may terminate at any time upon
not less than ten (10) days’ notice to Altarum (the
“ Transition Services Agreement ”), executed by
Seller;
(v) an amendment to the leases for
the Company’s space in Ann Arbor, Michigan and Alexandria,
Virginia substantially in the form of
Exhibit 2.4(a)(v)(1) and (2) , executed by
Altarum, as landlord, and the Company, as tenant (the “
Lease Amendments ”);
(vi) an amendment to the Equipment
Lease Agreement substantially in the form of
Exhibit 2.4(a)(vi ), executed by Altarum and the
Company (the “ Computer Sublease Amendment ”;
together with the documents referred to in subsections (i) through
(v) above, the “ Seller’s Closing Documents
”); and
(vii) a certificate executed by each
member of the Seller Group representing and warranting to Buyer
that each of Seller’s representations and warranties in this
Agreement was accurate in all material respects as of the date of
this Agreement and is accurate in all material respects as of the
Closing Date as if made on the Closing Date, giving full effect to
any Disclosure Schedule Supplement.
(b) Buyer will deliver to
Seller:
(i) the Estimated Purchase Price
minus the Escrow Amount, in immediately available funds or
by wire transfer to an account or accounts specified by Seller in
accordance with written instructions therefor provided by Seller to
Buyer prior to the Closing;
(ii) a certificate executed by Buyer
to the effect that each of Buyer’s representations and
warranties in this Agreement was accurate in all material respects
as of the date of this Agreement and is accurate in all material
respects as of the Closing Date as if made on the Closing Date;
and
(iii) the Employment Agreements, the
Transition Services Agreement, the Subcontract, the Lease Amendment
and the Computer Sublease Amendment, all executed by the Company
(collectively, the “ Buyer’s Closing Documents
”).
(c) Buyer and Seller will enter into
an escrow agreement (the “ Escrow Agreement ”)
mutually acceptable to Buyer, the Seller Group and LaSalle Bank
Midwest, N.A., as escrow agent (the “ Escrow Agent
”), and Buyer shall transfer $4,000,000 to the Escrow Agent
in immediately available funds, to be administered as provided in
the Escrow Agreement.
8
2.5 Estimated Purchase
Price And Post-Closing Adjustment .
(a) Estimated Closing
Statement . On the date two (2) Business Days prior to the
Closing Date, Seller shall deliver to Buyer a statement (the
“ Estimated Closing Statement ”) setting forth
Seller’s good faith calculation of its estimate, as of the
Closing Date, of the Purchase Price with any interim adjustments as
a result of the changes in the Company’s Net Working Capital
position from the Net Working Capital Target (the “
Estimated Purchase Price ”).
(b) Final Determination of Net
Working Capital . No later than thirty (30) days after the
Closing Date, Seller shall deliver to Buyer a statement setting
forth Seller’s final calculation of the Purchase Price,
including its calculation of Net Working Capital as of the Closing
Date, prepared in accordance with this Agreement (the “
Closing Statement ”). If Buyer has any objections to
the Closing Statement, Buyer shall deliver to Seller a notice (the
“ Objection Notice ”) specifically setting forth
the basis for any such objections and Buyer’s proposed
resolution thereof. If Buyer fails to deliver the Objection Notice
within thirty (30) days after delivery of the Closing
Statement, then Buyer shall be deemed to have accepted the Closing
Statement and to have irrevocably waived any further right to
object thereto. If Buyer shall have timely delivered the Objection
Notice, Buyer and Seller shall negotiate in good faith to resolve
the objection specified therein; provided, however , that if
they do not reach a final resolution within thirty (30) days
after the delivery of the Objection Notice, Buyer and Seller shall
submit each matter set forth in the Objection Notice that remains
unresolved to Plante & Moran (the “ Independent
Auditor ”) for resolution. The Independent Auditor shall
resolve any such remaining matter within thirty (30) days
following the date of engagement of the Independent Auditor and
shall deliver a written determination to Buyer and Seller prior to
the expiration of such thirty (30) day period. The Independent
Auditor’s resolution of such matters shall be final and
binding upon the parties; provided, however , that no such
determination with respect to any single item subject to an
unresolved dispute or objection shall be any more favorable to any
party than is set forth in the calculation reflected in the Closing
Statement or proposed in the Objection Notice (or, in either case,
as otherwise agreed in writing by Buyer and Seller during the
30-day negotiation period). The costs and expenses of the
Independent Auditor shall be paid in equal amounts by Seller and
Buyer. The Purchase Price, as finally determined pursuant to this
Section 2.5(a) is hereinafter referred to as the “
Final Purchase Price .”
(c) Post-Closing Adjustment .
If the Final Purchase Price is greater than the Estimated Purchase
Price, Buyer shall promptly (but in any event within five
(5) Business Days of the final determination thereof) pay to
Seller the amount of such difference by wire transfer of
immediately available funds to an account or accounts designed by
Seller to Buyer. If, instead, the Final Purchase Price is less than
the Estimated Purchase Price, Seller shall promptly (but in any
event within five (5) Business Days of the final determination
thereof) pay to Buyer the amount of such difference by wire
transfer of immediately available funds to an account designated by
Buyer to Seller.
(d) Cooperation . Following
the Closing, (i) Buyer shall, and shall cause the Company and
its Representatives to reasonably cooperate with Seller relating to
the preparation of the Closing Statement and the review of the
Objection Notice, and to provide any information reasonably
requested by Seller and its accountants in connection therewith,
and (ii) Seller shall, and shall cause its Representatives to
reasonably cooperate with Buyer relating to the review of the
Estimated Closing Statement, review of the Closing Statement and
the preparation of the Objection Notice and to provide any
information reasonably requested by Buyer and its accountants in
connection therewith.
9
3.
REPRESENTATIONS AND WARRANTIES OF SELLER GROUP
Each member of the Seller Group
hereby jointly and severally makes the representations and
warranties contained in this Article 3 to Buyer. The inclusion
of information in the Disclosure Schedule shall not be construed as
an admission that such information is material to any member of the
Seller Group, the Company or Buyer; has resulted in or would result
in a Company Material Adverse Effect; or is outside the Ordinary
Course of Business. In addition, matters reflected in the
Disclosure Schedule are not necessarily limited to matters required
by this Agreement to be reflected in the Disclosure Schedule. Such
additional matters are set forth for informational purposes only
and in no event shall any disclosure of such additional matters be
deemed or interpreted to broaden or otherwise amend any of the
covenants or representations and warranties in this Agreement.
Notwithstanding the location of any disclosure set forth in the
Disclosure Schedule, each of the disclosures, and those in any
supplement thereto, shall apply to each of the representations and
warranties made by the Seller Group in this Article 3 to which
such disclosure could reasonably be expected to apply.
3.1 Organization and
Good Standing .
(a) Part 3.1 of the
Disclosure Schedule contains a complete and accurate list of the
Company’s name, its jurisdiction of organization, other
jurisdictions in which it is qualified to do business, and its
ownership (including the identity of each Interest holder and the
percentage of Interests held by each). The Company is a limited
liability company presently existing in good standing under the
laws of the State of Michigan, with the requisite limited liability
company power and authority to conduct its business as presently
conducted, to own or use the properties and assets that it purports
to own or use, and to perform all of its obligations under the
Applicable Contracts. The Company is duly qualified to do business
as a foreign limited liability company and is in good standing
under the laws of each state or other jurisdiction in which either
the ownership or use of the properties owned or used by it, or the
nature of the activities conducted by it, requires such
qualification.
(b) The Company has made available to
Buyer copies of the Organizational Documents of the Company, as
currently in effect.
3.2 Authority; No
Conflict .
(a) This Agreement constitutes the
legal, valid, and binding obligation of each member of the Seller
Group, enforceable against such member of the Seller Group in
accordance with its terms, except as may be limited by bankruptcy,
insolvency or other laws affecting creditors’ rights
generally and general principles of equity. Upon the execution and
delivery by each member of the Seller Group of the Seller’s
Closing Documents to which it is a party, such Seller’s
Closing Documents will constitute the legal, valid, and binding
obligations of such member of the Seller Group, enforceable against
such member of the Seller Group in accordance with their respective
terms, except as may be limited by bankruptcy, insolvency or other
laws affecting creditors’ rights generally and general
principles of equity. Each member of the Seller Group has the
requisite power and authority to execute and deliver this Agreement
and the Seller’s Closing Documents to which it is a party and
to perform its obligations under this Agreement and the
Seller’s Closing Documents to which it is a party. The
execution and delivery by each member of the Seller Group of this
Agreement and the Seller’s Closing Documents to which it is a
party, and the consummation of the Contemplated Transactions, have
been duly authorized by all requisite company or corporate action
on the part of such member of the Seller Group, and no other
proceedings on the part of the governing body of such member of the
Seller Group or any of its respective members or shareholders, as
applicable, are necessary to authorize
10
the execution,
delivery and performance of this Agreement and the Seller Closing
Documents to which it is a party, or the consummation of the
Contemplated Transactions.
(b) Except as set forth in
Part 3.2 of the Disclosure Schedule, neither the
execution and delivery of this Agreement by Seller, nor the
consummation or performance by Seller of any of the Contemplated
Transactions will, directly or indirectly (with or without notice
or lapse of time):
(i) contravene, conflict with, or
result in a violation of (A) any provision of the
Organizational Documents of the Company or Seller, or (B) any
resolution adopted by the members of the Company or the board of
managers or members of Seller;
(ii) contravene, conflict with, or
result in a violation of, or give any Governmental Body or other
Person the right to challenge any of the Contemplated Transactions,
or to exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which the Company or Seller or any
substantial portion of the assets owned or used by the Company or
Seller may be subject;
(iii) contravene, conflict with, or
result in a violation of any of the terms or requirements of, or
give any Governmental Body the right to revoke, withdraw, suspend,
cancel, terminate, or modify, any Governmental Authorization that
is held by the Company or that otherwise relates to the business
of, or any substantial portion of the assets owned or used by, the
Company;
(iv) contravene, conflict with, or
result in a violation or breach of any provision of, or give any
Person the right to declare a default or exercise any remedy under,
or to accelerate the maturity or performance of, or to cancel,
terminate, or modify, any Applicable Contract; or
(v) result in the imposition or
creation of any Encumbrance upon or with respect to any asset
material to the Company.
(c) Except as set forth in
Part 3.2 of the Disclosure Schedule, neither the Seller
Group nor the Company is or will be required to give any notice to
or obtain any Consent from any Person in connection with the
execution and delivery of this Agreement or the consummation or
performance of any of the Contemplated Transactions.
3.3
Capitalization . The equity securities of the Company
consist solely of the Interests, all of which are owned of record
and beneficially by Seller, free and clear of all Encumbrances. No
legend or other reference to any purported Encumbrance appears upon
any certificate or other documentary evidence representing the
Interests. Other than this Agreement and the Company Operating
Agreement, there are no Contracts relating to the issuance, sale,
or transfer of the Interests or other securities of the Company.
The Interests were issued in compliance with the Securities Act and
other applicable Legal Requirements.
3.4 Financial
Statements . The Company has made available to Buyer:
(a) an audited balance sheet of the Company as at
September 30, 2006 (the “ Audited Balance Sheet
”), and the related audited statements of income, changes in
partners’ equity, and cash flows for the six (6) month
period then ended, together with the report thereon of Ernst &
Young, LLP, independent certified public accountants (the “
Audited Financial Statements ”), and (b) an
unaudited balance sheet of the Company as at March 31, 2007
(the “ Interim Balance Sheet ”) and the related
unaudited statements of income and cash
11
flows
for the six (6) months then ended (the “ Interim
Financial Statements ”; together with the Audited
Financial Statements, the “ Financial Statements
”). The Financial Statements fairly present in all material
respects the financial condition and the results of operations,
changes in partners’ equity and cash flows of the Company as
at the respective dates of and for the periods referred to in the
Financial Statements. Except as set forth in Part 3.4 of the
Disclosure Schedule, the Financial Statements have been prepared in
accordance with GAAP; provided, however , that the Interim
Financial Statements do not include any footnotes or statement of
partners’ equity and are subject to normal recurring year-end
adjustments (which will not be materially adverse). No financial
statements of any Person other than the Company are required by
GAAP to be included in the Financial Statements.
3.5 Books and
Records . The books and records of the Company, all of
which have been made available to Buyer, are complete and correct
in all material respects, have been maintained in accordance with
sound business practices and, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the material
assets of the Company. The minute books of the Company contain
accurate and complete records of all formal meetings held of, and
actions taken by, the Interest holder, the board of managers, and
committees of the board of managers of the Company, all taken
pursuant to the Company Operating Agreement, and no formal meeting
of any such Interest holder, board of managers, or committee has
been held for which minutes have not been prepared and are not
contained in such minute books. At the Closing, all of such books
and records will be in the possession of the Company.
3.6 Title to
Properties; Encumbrances . The Company owns good and
marketable title to, or a valid leasehold interest in, the property
and assets shown on the Interim Balance Sheet or acquired after the
date thereof, other than property or assets disposed of in the
Ordinary Course of Business following the date of the Interim
Balance Sheet. Except as described in Part 3.6 of the
Disclosure Schedule, all material properties and assets reflected
in the Interim Balance Sheet (other than property or assets
disposed of in the Ordinary Course of Business following the date
of the Interim Balance Sheet) are free and clear of all
Encumbrances. The Company does not own any fee interest in any real
property.
3.7 Condition and
Sufficiency of Assets . The assets material to the
operation of the Company are in good operating condition and
repair, normal wear and tear excepted, and are adequate for the
purposes for which they are being used. None of such assets are in
need of maintenance or repairs except for ordinary, routine
maintenance and repairs that are not material in nature or cost.
The assets of the Company are sufficient for the conduct of the
Company’ business as currently conducted. Except as described
in Part 3.7 of the Disclosure Schedule, the Company
owns or leases all of the assets that are sufficient to conduct its
business as it is currently being conducted, free and clear of any
interest of any other Person in such assets, other than Permitted
Encumbrances.
3.8 Accounts
Receivable . All accounts receivable of the Company that
are reflected on the Balance Sheet or the Interim Balance Sheet or
on the accounting records of the Company as of the Closing Date
(collectively, the “ Accounts Receivable ”)
represented or represent valid obligations arising from sales
actually made or services actually performed in the Ordinary Course
of Business of the Company. Unless paid prior to the Closing Date,
to the Knowledge of Seller, the Accounts Receivable are collectible
in full within one hundred eighty (180) days after the date
when first due, net of the respective reserves shown on the Balance
Sheet or the Interim Balance Sheet or on the accounting records of
the Company as of the Closing Date, which reserves are, to the
Knowledge of Seller, adequate and calculated consistent with past
practice of the Company. There is no contest, claim, or right of
set-off pending or, to the Knowledge of Seller, Threatened, with
respect to the amount or validity of any of the Accounts
Receivable, other than reductions in the Ordinary Course of
Business. Part 3.8 of the Disclosure Schedule contains
an accurate and complete list of the accounts receivable of the
Company at March 31, 2007.
12
3.9 No Undisclosed
Liabilities . Except as set forth in Parts 3.10 and
3.13 of the Disclosure Schedule, to the Knowledge of Seller,
the Company has no liabilities or obligations of any nature
(whether known or unknown and whether absolute, accrued,
contingent, or otherwise) except for (a) liabilities or
obligations reflected or reserved against in the Balance Sheet and
the Interim Balance Sheet, (b) current liabilities incurred in
the Ordinary Course of Business since the respective dates thereof,
and (c) liabilities or obligations to perform, after the date
hereof, any Applicable Contract.
3.10 Taxes
.
(a) Since April 1, 2006, the
Company has filed or caused to be filed all Tax Returns that it was
required to file on or before the Closing Date pursuant to
applicable Legal Requirements (the “ Required Tax
Returns ”). The Company has made available to Buyer
copies of the Required Tax Returns. The Company has paid, or made
provision for the payment of, all Taxes that it has been required
to pay pursuant to the Required Tax Returns, or pursuant to any
assessment received by Seller or the Company, except such Taxes, if
any, (a) as are listed in Part 3.10 of the Disclosure
Schedule, and (b) Taxes accrued on the Closing
Statement.
(b) Part 3.10 of the
Disclosure Schedule contains a complete and accurate list of the
Required Tax Returns that are or have been the subject of an audit
and of which the Company has received written notice, including a
reasonably detailed description of the nature and outcome of each
audit. All deficiencies proposed as a result of such audits have
been paid, reserved against, settled, or, as described in
Part 3.10 of the Disclosure Schedule, are being
contested in good faith by appropriate proceedings. Part
3.10 of the Disclosure Schedule describes all adjustments to
the United States federal income Tax Returns filed by the Company
for all taxable years since 2006, and the resulting deficiencies
proposed by the IRS. Except as described in Part 3.10
of the Disclosure Schedule, neither the Seller Group nor the
Company has given or has been requested to give waivers or
extensions (or is or would be subject to a waiver or extension
given by any other Person) of any statute of limitations relating
to the payment of Taxes of the Company or for which the Company or
the Seller Group may be liable based upon the operations of the
Company.
(c) The Company has not received
written notice of any currently proposed Tax assessment against the
Company except as disclosed in the Balance Sheet, the Interim
Balance Sheet or in Part 3.10 of the Disclosure
Schedule. No consent to the application of Section 341(f)(2)
of the IRC has been filed with respect to any property or assets
held, acquired, or to be acquired by the Company. All Taxes that
the Company is or was required by Legal Requirements to withhold or
collect have been duly withheld or collected and, to the extent
required, have been paid to the proper Governmental Body.
(d) All Tax Returns filed by (or that
include on a consolidated basis) the Company are true, correct, and
complete in all material respects. There is no written tax sharing
agreement that will require any payment by the Company after the
date of this Agreement.
(e) The Company has not elected, nor
will it elect on or before the Closing Date, to be taxed as a
corporation under the IRC.
3.11 No Material
Adverse Change . Since the date of the Interim Balance
Sheet, there has not been any Company Material Adverse Effect, and
no event has occurred or circumstance exists that would reasonably
be expected to result in a Company Material Adverse Effect.
13
3.12 Employee
Benefits .
(a) As used in this
Section 3.12, the following terms have the meanings set forth
below.
(i) “ Company
Other Benefit Obligation ” means an Other
Benefit Obligation owed, adopted, or followed by the Company.
(ii) “ Company
Plan ” means all Plans of which the Company is
or was a Plan Sponsor, or to which the Company otherwise
contributes or has contributed, or in which the Company otherwise
participates or has participated.
(iii) “ ERISA
Affiliate ” means, with respect to the
Company, any other person that, together with the Company, is
treated as a single employer under IRC § 414.
(iv) “
Multi-Employer Plan ” has the meaning
given in ERISA § 3(37)(A).
(v) “ Other
Benefit Obligations ” means all obligations,
arrangements, or customary practices, whether or not legally
enforceable, to provide benefits, other than salary, as
compensation for services rendered, to present or former directors,
employees, or agents, other than obligations, arrangements, and
practices that are Plans. Other Benefit Obligations include
consulting agreements under which the compensation paid does not
depend upon the amount of service rendered, sabbatical policies,
severance payment policies, and fringe benefits within the meaning
of IRC § 132.
(vi) “
PBGC ” means the Pension Benefit
Guaranty Corporation, or any successor thereto.
(vii) “
Plan ” has the meaning given in ERISA
§ 3(3).
(viii) “ Plan
Sponsor ” has the meaning given in ERISA
§ 3(16)(B).
(ix) “ Qualified
Plan ” means any Plan that meets or purports
to meet the requirements of IRC § 401(a).
(x) “ VEBA
” means a voluntary employees’ beneficiary
association under IRC § 501(c)(9).
(b) Part 3.12(b) of the
Disclosure Schedule contains a complete and accurate list of all
Company Plans and Company Other Benefit Obligations, and identifies
as such all Company Plans that are Qualified Plans.
(c) The Company has made available to
Buyer, or will make available to Buyer within ten days of the date
of this Agreement:
(i) a summary of each Company
Plan;
(ii) all Company personnel, payroll,
and employment manuals and policies;
(iii) all notifications to employees
of the Company of their rights under ERISA § 601 et seq
. and IRC § 4980B;
14
(iv) the Form 5500 filed in each
of the most recent plan year for each Company Plan, including all
schedules thereto; and
(v) all notices that were given by
the IRS or the Department of Labor to the Company.
(d) Except as set forth in
Part 3.12(d) of the Disclosure Schedule:
(i) The Company has materially
performed all of its obligations under all Company Plans and
Company Other Benefit Obligations. The Company has made appropriate
entries in its financial records and statements for all of its
obligations and liabilities under such Company Plans, and Company
Other Benefit Obligations that have accrued but are not due.
(ii) No statement, either written or
oral, has been made by the Company to any Person with regard to any
Company Plan or Company Other Benefit Obligation that was not in
accordance with the Company Plan or Company Other Benefit
Obligation and that could have an adverse economic consequence to
the Company or to Buyer.
(iii) The Company, with respect to
all Company Plans and Company Other Benefit Obligations is, and
each Company Plan, Company Other Benefit Obligation is, in material
compliance with ERISA, the IRC, and other applicable Laws including
the provisions of such Laws expressly mentioned in this
Section 3.12.
(iv) To the Knowledge of Seller, no
transaction prohibited by ERISA § 406 and no “prohibited
transaction” under IRC § 4975(c) have occurred with
respect to any Company Plan.
(v) Neither the Company nor any ERISA
Affiliate sponsors, maintains, contributes to, has any obligation
to contribute to, or has any liability or potential liability under
or with respect to, any Multi-Employer Plan, or any Plan subject to
IRS §§412 or 4971, ERISA § 302 or Title IV of ERISA,
or otherwise has any liability or potential liability under Title
IV of ERISA. There is no lien pursuant to ERISA § 4068 or IRS
§ 412(n) in favor of, or enforceable by, the PBGC or any other
entity with respect to any of the assets or property of the
Company.
(vi) Neither of the Company nor any
ERISA Affiliate sponsors, maintains, contributes to, has any
obligation to contribute to, or has any liability or potential
liability under or with respect to, any VEBA.
(vii) All filings required by ERISA
and the IRC as to each Company Plan have been timely filed, and all
notices and disclosures to participants required by either ERISA or
the IRC have been timely provided.
(viii) All Company contributions and
payments made or accrued with respect to all Company Plans and
Company Other Benefit Obligations are deductible under IRC §
162 or § 404. No amount, or any asset of any Company Plan is
subject to tax as unrelated business taxable income.
15
(ix) Except as may be required by any
Legal Requirement, each Company Plan can be terminated within
thirty days, without payment of any additional contribution or
amount and without the vesting or acceleration of any benefits
promised by such Plan.
(x) Since the date of the Interim
Balance Sheet, there has been no establishment or amendment of any
Company Plan or Company Other Benefit Obligation.
(xi) No event has occurred or
circumstance exists that could result in a material increase in
premium costs of Company Plans and Company Other Benefit
Obligations that are insured, or a material increase in benefit
costs of such Company Plans and Company Other Benefit Obligations
that are self-insured.
(xii) Other than claims for benefits
submitted by participants or beneficiaries, no claim against, or
legal proceeding involving, any Company Plan or Company Other
Benefit Obligation, is pending or, to the Knowledge of Seller, is
Threatened.
(xiii) Each Company Plan that is a
Qualified Plan is qualified in form and operation under IRC §
401(a); each trust for each such Company Plan is exempt from
federal income tax under IRC § 501(a). No event has occurred
or circumstance exists that will or could reasonably give rise to
disqualification or loss of tax-exempt status of any such Plan or
trust.
(xiv) Except to the extent required
under ERISA § 601 et seq. and IRC § 4980B, neither Seller
nor the Company provides health or welfare benefits for any retired
or former employee or is obligated to provide health or welfare
benefits to any active employee following such employee’s
retirement or other termination of service.
(xv) Seller and Company have complied
with the provisions of ERISA § 601 et seq. and IRC §
4980B.
(xvi) No payment that is owed or may
become due to any director, officer, employee, or agent of the
Company will be non-deductible to the Company or subject to tax
under IRC § 280G or § 4999; nor will the Company be
required to “gross up” or otherwise compensate any such
person because of the imposition of any excise tax on a payment to
such person.
3.13 Compliance with
Legal Requirements; Governmental Authorizations .
(a) Except as set forth in
Part 3.13 of the Disclosure Schedule:
(i) to the Knowledge of Seller, the
Company and the Seller Group are, and at all times during the three
year period preceding the date hereof have been, in compliance with
each Legal Requirement that is or was directly applicable to the
conduct or operation of the Enterprise Solutions Business or the
ownership or use of any assets used in the Enterprise Solutions
Business;
(ii) to the Knowledge of Seller, no
event has occurred or circumstance exists that (with or without
notice or lapse of time) would reasonably be expected to
constitute, or result in, a violation by the Company or the Seller
Group of any material Legal Requirement directly applicable to the
conduct or operation of the Enterprise Solutions
16
Business or the
ownership or use of any assets used in the Enterprise Solutions
Business; and
(iii) neither the Company nor any
member of the Seller Group has received any written notice or other
communication from any Governmental Body regarding any actual,
alleged, possible, or potential violation by the Company, or the
Enterprise Solutions Business during the three year period prior to
the date of this Agreement, of, or failure to comply with, any
Legal Requirement.
(b) Part 3.13(b) of the
Disclosure Schedule contains a complete and accurate list of each
Governmental Authorization that is held by the Company or that
otherwise relates to the business of, or to any of the assets owned
or used by, the Company. Each Governmental Authorization listed or
required to be listed in Part 3.13(b) of the Disclosure
Schedule is valid and in full force and effect. Except as set forth
in Part 3.13(b) of the Disclosure Schedule:
(i) to the Knowledge of Seller, the
Company is, and at all times since April 1, 2006 has been, in
compliance in all material respects with all of the terms and
requirements of each Governm
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