EXECUTION
COPY
PURCHASE
AGREEMENT dated
as of July 6, 2007 by and among ,
Innovative
Health Strategies, Inc. (f/k/a IHS of SC, Inc.),
a
South Carolina corporation ("
IHS "),
AWAC.MD, Inc., a South Carolina corporation ("
AWAC "),
iProcert, LLC, a Georgia limited liability company ("
iProcert ",
and together with IHS and AWAC, the "
Companies ",
and each individually, a "
Company "),
the
shareholders and members of the Companies listed on Schedule I
hereto (the
"
Sellers ",
and each individually, a "
Seller "),
inVentiv
Health, Inc., a Delaware corporation ("
Parent "),
and AWAC LLC ,
a Georgia limited liability company (“
Purchaser ”)
.
The
Companies, the Sellers, Parent and Purchaser are sometimes referred
to herein collectively as the "
Parties "
and each individually as a "
Party ."
WHEREAS
,
the
Sellers own (i) all of the outstanding capital stock of IHS
and AWAC and (ii) all of the membership interests of
iProcert;
WHEREAS
,
each
Seller desires to sell to Purchaser, and Purchaser is willing
to purchase from such Seller, such capital stock and
membership interests of IHS and iProcert, respectively,
subject to the terms and conditions of this
Agreement;
WHEREAS,
AWAC owns certain assets used in the operation of the
Business;
WHEREAS,
AWAC desires to sell to Purchaser all of its assets, including
its assets used in the operation of the Business;
WHEREAS,
in order to induce the Sellers and AWAC to enter into this
Agreement, Parent is executing a guaranty of Purchaser’s
obligations hereunder simultaneously with the execution of
this Agreement;
WHEREAS,
in order to induce Purchaser and Parent to enter into this
Agreement, Dr. John W. Richards, Jr. ("
Dr. Richards ")
is entering into an employment agreement with IHS (the
“
Employment Agreement ”)
simultaneously with the execution of this Agreement;
and
WHEREAS,
certain terms used in this Agreement are defined in Section
10.1.
NOW,
THEREFORE, in consideration of the mutual covenants,
representations and warranties made herein and other good and
valuable consideration, the receipt and sufficiency of which
hereby are acknowledged, the Parties agree as
follows:
ARTICLE I
PURCHASE
AND SALE TRANSACTION
Section
1.1.
Purchase and Sale Transaction .
(a)
Sale of Equity Securities .
On and subject to the terms and conditions of this Agreement, at
the closing of the transactions contemplated hereby (the
“
Closing ”),
each Seller will sell, assign, transfer and deliver to Purchaser,
and Purchaser will purchase from such Seller, (i) the capital stock
of IHS (the “
Capital Stock ”)
and (ii) the membership interests in iProcert (the “
Membership Interests ”,
and together with the Capital Stock, the “
Equity Securities ”),
in each case, set forth opposite such Seller's name on Schedule I
hereto and constituting all of the outstanding capital stock of IHS
and all of the membership interests in iProcert owned by such
Seller.
(b)
Sale of AWAC Assets .
On and subject to the terms and conditions of this Agreement, at
the Closing, AWAC will sell, assign, transfer, convey, and deliver
to Purchaser and Purchaser shall purchase and acquire from AWAC,
all right, title, and interest of AWAC in and to all of its assets,
properties and rights of whatever kind, tangible and intangible
(including goodwill), whether accrued, contingent or otherwise,
including, without limitation, all of its assets, properties and
rights used in the operation of the Business but excluding AWAC's
minute books, corporate seal and similar items (collectively, the
“
AWAC Assets ”),
free and clear from all Liens, other than Permitted Encumbrances,
and Purchaser shall assume the AWAC Assumed Liabilities (as defined
below in Section 1.10). At the Closing, the AWAC Assets shall be
transferred or otherwise conveyed to Purchaser free and clear of
all Liens, other than Permitted Encumbrances, pursuant to a Bill of
Sale, Assignment and Assumption Agreement in the form of
Exhibit A (the
“
Bill of Sale ”)
(c)
Required Consents .
Notwithstanding anything to the contrary in this Agreement, this
Agreement shall not constitute an agreement to assign or transfer
any AWAC Asset or interest therein as to which (i) an assignment or
transfer thereof or an attempt to make such an assignment or
transfer without a Consent (a “
Required Consent ”)
would constitute a breach or violation thereof or of applicable
Law, or would adversely affect the rights or obligations thereunder
to be assigned or transferred to or for the account of Purchaser
and (ii) all such Required Consents shall not have been obtained
with respect to such AWAC Asset or interest therein prior to the
Closing. Any transfer or assignment to Purchaser by AWAC of any
such AWAC Asset or interest therein (a “
Delayed Asset ”),
and any assumption by Purchaser of any corresponding Assumed AWAC
Liability (a “
Delayed Liability ”),
shall be made subject to all such Required Consents in respect of
such Delayed Asset being obtained. If there are any Delayed Assets,
AWAC shall use its reasonable best efforts to obtain all Required
Consents in respect thereof as promptly as practicable following
the Closing, and shall obtain such Required Consents without any
further cost to Purchaser or any of its Affiliates. Until all
Required Consents with respect to each Delayed Asset have been
obtained, (a) AWAC shall hold the Delayed Asset on behalf of
Purchaser, (b) AWAC shall cooperate with Purchaser for no
additional consideration in any lawful arrangement (including
subleasing or subcontracting, or performance thereunder by AWAC as
Purchaser’s agent) to provide Purchaser with all of the
benefits of or under any such Delayed Asset, (c) to the extent of
any benefits received by or for the account of Purchaser under
clause (b) above, Purchaser shall assume and perform any
corresponding Delayed Liabilities and (d) AWAC shall otherwise
enforce and perform for the account of Purchaser and as directed by
Purchaser any other rights of AWAC arising from such Delayed Asset.
At such time and on each occasion after the Closing Date as all
Required Consents with respect to a Delayed Asset have been
obtained, such Delayed Asset shall automatically be transferred and
assigned by AWAC to Purchaser for no additional consideration
without the need for any further act on the part of any
Party.
Section
1.2.
Purchase Price; Allocation .
(a)
On the Closing Date (as defined below): (i) the Net Closing Amount
shall be paid by electronic funds transfer to an account specified
in writing by the Representative to Purchaser no later than three
business days prior to the Closing for allocation among the
Sellers, AWAC and the participants in the Phantom Equity Plan in
accordance with Schedule I to this Agreement and Schedule I to the
Phantom Equity Plan, (ii) Purchaser shall cause to be delivered to
the transfer agent (the "
Transfer Agent ")
for the common stock, par value $0.001 per share, of Parent
(“
Parent Common Stock ”)
irrevocable instructions to issue in the names of Sellers, AWAC and
the participants in the Phantom Equity Plan (allocated in
accordance with Schedule I to this Agreement and Schedule I to the
Phantom Equity Plan, as set forth in written instructions from the
Representative to Purchaser) a number of unregistered shares of
Parent Common Stock equal to the quotient of (x) [***]
divided
by (y) the Fair Market Value of one share of Parent Common Stock as
of the Closing Date
(the
“
Initial Shares ”),
(iii) Purchaser shall deliver [***] (the "
Escrowed Cash ")
to The Bank of New York, as escrow agent (the "
Escrow Agent "),
and shall cause the Transfer Agent to deliver the Initial Shares to
the Escrow Agent, pursuant to an escrow agreement (the "
Escrow Agreement "),
in substantially the form annexed hereto as
Exhibit B .
The Escrowed Cash and the Initial Shares shall be held in escrow
until the [***]
anniversary
of
the Closing Date as more fully set forth in the Escrow Agreement.
The consideration specified in the second preceding sentence (as
the same may be adjusted in accordance with Section 1.4) and the
amounts payable or distributable to Sellers, AWAC and the
participants in the Phantom Equity Plan pursuant to Section 1.5 is
referred to as the "
Purchase Consideration "
and the aggregate amount of the Purchase Consideration is referred
to herein as the "
Purchase Price ".
Except as set forth in the Phantom Equity Plan, neither any Seller
nor AWAC shall pay or transfer any portion of the Purchase Price or
any rights therein to any Person who provides services to the
Business at the time of or at any time following the Closing.
Consideration provided pursuant to the Phantom Equity Plan is fully
vested as of the date hereof. Such consideration is not in lieu of,
and shall not reduce, any compensation to which the participants
are entitled in respect of services and shall be made at the times
provided for in the Phantom Equity Plan irrespective of whether
such beneficiaries continue to render services to the any of the
parties hereto or their affiliates.
(b)
On the Closing Date, IHS shall have adopted the Closing Date Bonus
Plan and shall make the Closing Date payments provided for under
such plan. Payments pursuant to the Closing Date Bonus Plan are
fully vested as of the date hereof in respect of pre-Closing
services provided by the beneficiaries of the Closing Date Bonus
Plan. Such payments are not in lieu of any other compensation to
which the beneficiaries are entitled in respect of services and
shall be made at the times provided for in the Closing Date Bonus
Plan irrespective of whether such beneficiaries continue to render
services to the any of the parties hereto or their affiliates.
Neither any Seller nor AWAC shall provide any consideration to any
Person who provides services to the Business at the time of or at
any time following the Closing in respect of services related,
directly or indirectly, to the Business.
(c)
Three (3) business days prior to the Closing Date, the
Representative shall prepare and deliver to Purchaser (i) a good
faith estimated unaudited balance sheet of the Companies as of the
Closing Date determined in accordance with GAAP and (ii) a
statement setting forth (A) Estimated Closing Working Capital
Amount, (B) the estimated Indebtedness as of the Closing Date
(“
Estimated Indebedness ”)
and (C) a schedule (the “
Closing Transaction Expense Schedule ”)
setting forth a good faith, itemized estimate (“
Estimated Transaction Expenses ”)
of all Transaction Expenses.
(d)
The portion of the Purchase Price allocable to each of AWAC and
iProcert shall be allocated among the AWAC Assets and the assets of
iProcert, respectively, in the manner required by Section 1060 of
the Code and regulations thereunder. Purchaser shall deliver to
Seller an initial draft of such allocation (the "
Purchase Price Allocation "),
and an allocation of the Purchase Price among the Companies (the
"
Entity Allocation "),
within seventy five (75) days after the Closing. Purchaser and
Seller shall work together in good faith and shall agree on final
allocations within sixty (60) days after delivery of the initial
draft by Purchaser. The portion of the Purchase Price, if any,
allocated to one or more covenants set forth in a Transaction
Document shall not be offered by any Party as evidence, or
otherwise taken into account, in connection with a determination of
the damages arising from a breach of any such covenant. Purchaser,
on the one hand, and Sellers or AWAC, as applicable, on the other,
shall file on a timely basis with the IRS substantially identical
initial and supplemental IRS Forms 8594 consistent with such
allocations and which gives effect to any adjustment of the
Purchase Price determined in accordance with Section 1.4 hereof or
any amounts payable or distributable to Sellers pursuant to Section
1.5 below. Purchaser, on the one hand, and Sellers and AWAC, on the
other, agree, for all Tax purposes, to report the transactions
effected pursuant to the Transaction Documents in a manner
consistent with the terms of this Agreement (including the Entity
Allocation and Purchase Price Allocation agreed upon by Purchaser,
Sellers and AWAC pursuant to this Section 1.2(c)) and none of them
shall take a position on any Tax return, before any Tax authority
or in any judicial proceeding that is, in any manner, inconsistent
with such allocation without the consent of the others or unless
specifically required pursuant to a determination by an applicable
Tax authority. The Parties shall promptly advise one another of the
existence of any Tax audit, controversy or litigation related to
any allocation hereunder.
Section
1.3.
Closing Date .
Subject to the satisfaction of the conditions set forth in this
Section 1.3 and Sections 6.1 and 6.2 (or the waiver thereof by the
Party entitled to waive such conditions), the Closing shall take
place at the offices of Akerman Senterfitt LLP, 335 Madison Avenue,
Suite 2600, New York, New York 10017. The Closing shall be
effective as of 12:01 a.m. on July 1, 2007 (the “
Closing Date ”).
On July 6, 2007, as part of the Closing, (i) each Seller will
deliver to Purchaser such evidence of ownership of the Equity
Securities by such Seller, as is reasonably satisfactory to
Purchaser accompanied by a duly executed stock power or assignment,
as applicable, assigning such Equity Securities to Purchaser and
otherwise in good form for transfer, (ii) Purchaser shall deliver
the Purchase Consideration in accordance with Section 1.2 and (iii)
the Parties shall make the deliveries described in Article VI.
Purchaser shall not be required to purchase any Equity Securities
or the AWAC Assets unless all Equity Securities and the AWAC Assets
are properly tendered in accordance with the terms of this
Agreement.
Section
1.4.
Purchase Price Adjustment .
The Purchase Price shall be subject to adjustment after the Closing
Date as follows:
(a)
Within 60 days after the Closing Date, Purchaser shall prepare and
deliver to the Representative a statement (the “
Closing Statement ”)
(i) setting forth the amount of Indebtedness as of the Closing Date
(“
Closing Indebtedness ”)
and the amount of Transaction Expenses as determined by Purchaser
(“
Closing Transaction Expenses ”)
and (ii) calculating the Working Capital (as defined below) of the
Business, in the aggregate, as of the Closing Date (the
“
Closing Working Capital Amount ”).
For purposes of this Agreement, “
Working Capital ”
shall mean the current assets of the Companies as of the Closing
Date (including accounts receivable (net of allowance for doubtful
accounts and restricted cash) and work in process), exclusive of
deferred tax assets, less (x) the current liabilities of the
Companies as of the Closing Date (including all GAAP accruals,
whether or not traditionally reflected on the Companies' balance
sheet as a current liability), (y) the total of all amounts payable
under the Closing Date Bonus Plan and (z) all other Liabilities of
the Companies as of the Closing Date, but excluding the
Indebtedness (including the current portion thereof) and all other
Excluded Liabilities (except to the extent IHS or iProcert is
liable therefor), and shall be calculated in accordance with GAAP
and the accounting policies and procedures employed in the
preparation of Parent's publicly filed financial statements.
Purchaser shall provide the Representative, and a single accounting
firm for the Representative, reasonable access to all (i) work
papers and written procedures used to prepare the Closing Statement
and (ii) Books and Records and personnel to the extent reasonably
necessary to enable the Representative and such accounting firm to
conduct a sufficient review of the Closing Statement and verify the
statements and calculations reflected thereon. If the
Representative disputes any amount as shown on the Closing
Statement, the Representative shall deliver to the Purchaser within
30 days after receipt of the Closing Statement a statement (the
“
Dispute Notice ”)
setting forth the Representative's calculation of such amount and
describing in reasonable detail the basis for the determination of
such different amount. The parties shall use reasonable efforts to
resolve such differences within a period of 30 days after the
Representative has given the Dispute Notice. If the parties resolve
such differences, the Closing Statement agreed to by the parties
shall be deemed to be the “
Final Closing Statement .”
(b)
If Purchaser and the Representative do not reach a final resolution
on the Closing Statement within 30 days after the Representative
has given the Dispute Notice, unless Purchaser and the
Representative mutually agree to continue their efforts to resolve
such differences, the Neutral Accountant shall resolve such
differences, pursuant to an engagement agreement among the
Purchaser, the Representative and the Neutral Accountant (which
Purchaser and the Representative agree to execute promptly), in the
manner provided below. Purchaser and the Representative shall each
be entitled to make a presentation to the Neutral Accountant,
pursuant to procedures to be agreed to among Purchaser, the
Representative and the Neutral Accountant (or, if they cannot agree
on such procedures, pursuant to procedures determined by the
Neutral Accountant), regarding such party’s determination of
the amounts to be set forth on the Closing Statement; and the
Neutral Accountant shall be required to resolve the differences
between Purchaser and the Representative and determine the amounts
to be set forth on the Closing Statement within 20 days after the
engagement of the Neutral Accountant. The Closing Statement
determined by the Neutral Accountant shall be deemed to be the
Final Closing Statement. Such determination by the Neutral
Accountant shall be conclusive and binding upon the parties, absent
fraud or manifest error. Nothing in this Section 1.4(b) shall be
construed to authorize or permit the Neutral Accountant
to:
(i)
determine any questions or matters whatsoever under or in
connection with this Agreement except for the resolution of
differences between Purchaser and the Representative regarding the
determination of the Final Closing Statement; or
(ii)
resolve any such differences by making an adjustment to the Closing
Statement that is outside of the range defined by amounts as
finally proposed by the Purchaser and the
Representative.
Purchaser,
on the one hand, and the Representative, on behalf of Sellers
and AWAC, shall each pay one half of the fees and expenses of
the Neutral Accountant.
(c)
(i) (A)
If
the Net Adjustment Amount is positive, Purchaser shall promptly,
but no later than five business days after the final determination
of the Net Adjustment Amount, pay the Net Adjustment Amount to the
Representative for distribution to the Sellers, AWAC and the
participants in the Phantom Equity Plan in accordance with Schedule
I to this Agreement and Schedule I to the Phantom Equity Plan and
(B) if the Net Adjustment Amount is negative, the
Representative (on behalf of the Sellers, AWAC and the participants
in the Phantom Equity Plan) shall promptly, but no later than five
business days after such final determination, pay the Net
Adjustment Amount to Purchaser.
Section
1.5.
Earnout Payments .
(a)
[***] Sellers and AWAC shall be entitled to additional
consideration from Purchaser (any such additional
consideration an “
Earnout Amount ”)
determined as follows:
(i)
[***]
(ii)
[***]
[***]
shall be delivered to the Representative for allocation among
and delivery to the Sellers, AWAC and the participants in the
Phantom Equity Plan in accordance with Schedule I to this
Agreement and Schedule I to the Phantom Equity Plan. At
Purchaser’s option, up to
[***]
may be satisfied by the issuance to Sellers, AWAC and the
participants in the Phantom Equity Plan of unregistered shares of
Parent Common Stock (allocated in accordance with Schedule I to
this Agreement and Schedule I to the Phantom Equity Plan, which
allocation shall be set forth in written instructions from the
Representative to Purchaser) having an aggregate Fair Market Value
equal to such portion of such Earnout Amount. For purposes of the
preceding sentence, Fair Market Value will be determined as of the
[***] Final Earnout Amount Determination Date. The shares of Parent
Common Stock issued in satisfaction of any portion of an Earnout
Amount are referred to as “
Earnout Shares ”
and, together with the Initial Shares, as the “
Parent Shares ”.
In no event will any Parent Shares be issued hereunder if the
issuance of such Parent Shares would cause (A) the sum of (1) the
total number of Parent Shares issued pursuant to this Agreement,
(2) the number of shares of Parent Common Stock, if any, owned by
Sellers, AWAC and the participants in the Phantom Equity Plan
immediately prior to the Closing and (3) the shares of Parent
Common Stock, if any, issued to Sellers, AWAC and the participants
in the Phantom Equity Plan pursuant to employment-related incentive
grants to exceed 19.9% of the number of shares of Parent Common
Stock outstanding immediately prior to the Closing or (B) the
voting power of the securities described in the preceding clauses
(A)(1) through (3) to exceed 19.9% of the voting power of the
voting securities of Parent outstanding immediately prior to the
Closing. [***] Sellers and AWAC acknowledge and agree that neither
Purchaser nor any other Person makes any guarantee or
representation to Sellers nor to AWAC that any Earnout Amount will
be realized. Any Earnout Amount that is paid in cash or Earnout
Shares to Sellers or AWAC or their designees shall be treated as a
component of the Purchase Price.
(b)
Purchaser shall at its expense deliver to Representative
within 90 days after the completion of:
[***]
[***]
(c)
Purchaser shall provide Representative and the accounting firm
selected by Representative on behalf of the Sellers and AWAC
with reasonable access to all books and records and working
papers to the extent reasonably necessary to enable
Representative and such accounting firm to verify such
calculations after the delivery thereof.
(d)
Such calculations shall be binding on the parties to this Agreement
unless Representative, within 30 days after the delivery of the
calculations by Purchaser to Representative, notifies Purchaser in
writing that it objects to any item or computation in connection
with the calculations and specify in reasonable detail the basis
for such objection. If Representative delivers such a notice and
Representative and Purchaser are unable to agree upon the
calculations within 20 days after any notice of objection has been
given by Representative to Purchaser, then at the election of
either Purchaser or Representative, the dispute shall be submitted
to the Neutral Accountant for a final determination in accordance
with the procedures set forth in Section 1.4(b), which
determination shall be final and binding upon the parties, absent
fraud or manifest error. Sellers and AWAC on the one hand and
Purchaser on the other hand shall each bear one-half of the fees,
costs and expenses of the Neutral Accountant in the event such an
election is made.
(e)
For purposes of this Agreement:
(i)
the
“
Average EBIT ”
shall equal
[***]
[***]
(iii)
the
"
Final Average EBIT Amount "
shall mean
the
Initial Average EBIT Amount, or such other amount as shall have
been agreed to by Purchaser and Representative following a timely
notice of objection as contemplated under this Section 1.5(e), or
such other amount as determined by the Neutral Accountant;
and
[***]
(f)
[***] the portion of an Earnout Amount that is satisfied by the
issuance of shares of Parent Common Stock shall be delivered to
Sellers, AWAC and the participants in the Phantom Equity Plan
promptly after irrevocable instructions are given by Parent to its
transfer agent to issue shares of Parent Common Stock to Sellers,
AWAC and the participants in the Phantom Equity Plan in accordance
with Schedule I to this Agreement and Schedule I to the Phantom
Equity Plan and (y) Parent shall not be required to give such
instructions until the third business day after Representative has
notified Purchaser in writing of the address to which such shares
of Parent Common Stock are to be delivered.
(g)
[***]
(the
“
Earnout Period ”),
the Business shall be conducted as a going concern and in
accordance with applicable Law and the operating standards set
forth on
Exhibit C hereto.
(h)
In the event of a merger, consolidation or other transaction prior
to the Final Earnout Amount Determination Date (a “
Conversion Transaction ”)
as a result of which substantially all of the outstanding shares of
Parent Common Stock are converted into the right to receive, in
whole or in part, equity securities, if such equity securities are
traded on the New York Stock Exchange, the American Stock Exchange,
The Nasdaq Stock Market or another securities exchange or
interdealer quotation system reasonably acceptable to the
Representative (“
Listed Equity Securities ”),
(i) any issued Parent Shares, including shares held pursuant to the
Escrow Agreement, shall be eligible to participate in any
Conversion Transaction on the same basis as other outstanding
shares of Parent Common Stock and (ii) any portion of the Earnout
Amount that would otherwise be permitted to be satisfied through
the issuance of Parent Common Stock shall thereafter be permitted
to be satisfied through the issuance of such Listed Equity
Securities. For such purpose, such Listed Equity Securities shall
be valued at their aggregate Fair Market Value as of the Final
Earnout Amount Determination Date. [***]
(i)
[***]
Section
1.6.
Lock-Up Agreement .
During the applicable Restricted Period neither the Representative,
the Sellers, AWAC nor and the participants in the Phantom Equity
Plan shall sell, pledge, hedge or otherwise dispose of any economic
interest in any of the Parent Shares (including by entering into
any covered or uncovered short transaction) except pursuant to and
in accordance with the terms of a Conversion Transaction, in which
event the restrictions contained in this Section 1.6 shall apply to
any Listed Equity Securities issued in exchange for Parent Shares.
“
Restricted Period ”
means (i) with respect to the Initial Shares, the period ending on
the first anniversary of the Closing Date and (ii) with respect to
the Earnout Shares, if any, the period ending on the first
anniversary of the [***] Final Earnout Amount Determination
Date.
Section
1.7.
Transferability; Resale Registration; Registration Procedures; Rule
144; Legending of Parent Shares
(a)
(i)
The Sellers and AWAC acknowledge that the Parent Shares are
being acquired pursuant to an exemption from registration
under the Securities Act of 1933, as amended (the
“
Securities Act ”)
and that the Parent Shares may be transferred only pursuant to an
effective registration statement or an exemption from registration
under the Securities Act. Each Seller and AWAC represents that it
is familiar with Rule 144 under the Securities Act. Neither any
Seller nor AWAC shall be permitted to transfer any Parent Shares in
the absence of an effective registration statement unless such
Seller or AWAC, as the case may be, if reasonably requested by
Parent, has furnished an opinion of counsel reasonably satisfactory
to Parent that such disposition does not require registration of
such Parent Shares under the Securities Act. Parent shall use its
commercially reasonable efforts to cause opinions required by the
Transfer Agent in connection with the transfer of Parent Shares by
any Seller or AWAC to be provided to the Transfer Agent by counsel
for Parent so long as such Seller or AWAC, as the case may be, and
the broker involved in the transfer has furnished any certification
reasonably requested by such counsel, and neither any Seller nor
AWAC shall be required to provide a duplicative
opinion.
(ii)
[***]
(iii)
In
connection with the obligations of Parent with respect to a
Resale Document, Parent shall:
(A)
prepare and file with the SEC, as specified in this Agreement,
a Resale Document that complies as to form in all material
respects with the requirements of the SEC and includes all
financial statements required by the SEC to be filed
therewith;
(B)
prepare and file with the SEC such amendments and
post-effective amendments to the Resale Registration
Statement as
may be necessary to keep the Resale Registration
Statement effective
for the Applicable Period, respond as promptly as practicable
to any comments received from the SEC with respect to the
Resale Document or any amendment thereto, and
comply with the provisions of the Securities Act with respect
to the disposition of all Parent Shares covered by the Resale
Document in accordance with the sellers’ intended method
of disposition set forth in the Resale Document
;
(C)
furnish to the Sellers and AWAC, without charge,
such
number of copies of the Resale Document, and any amendments
thereto, as such persons reasonably may request in order to
facilitate the public sale or other disposition of the Parent
Shares and Parent consents to such use;
(D)
use commercially reasonable efforts to register
or qualify the Parent Shares covered by the Resale Document
under the securities or blue sky laws of such jurisdictions as
the Sellers and AWAC may request to keep such registration or
qualification effective during the Applicable Period,
provided ,
however ,
that Parent shall not for any such purpose be required to qualify
generally to transact business as a foreign corporation in any
jurisdiction where it is not so qualified or to consent to general
service of process in any such jurisdiction;
(E)
notify the Sellers and AWAC promptly (i) when a Resale
Registration
Statement has
become effective and when any post-effective amendments
thereto become effective, (ii) of the issuance by the SEC or
any state securities authority of any stop order suspending
the effectiveness of a Resale Registration
Statement or
the initiation of any proceedings for that purpose, (iii) of
the happening of any event during the period a Resale
Registration
Statement is
effective as a result of which the Resale Document contains
any untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to
make the statements therein not misleading, and (iv) upon the
occurrence of any such event, use commercially reasonable
efforts to prepare promptly a supplement or post-effective
amendment to the Resale Registration
Statement or
the prospectus or any document incorporated therein by
reference or file any other required document so that, as
thereafter delivered to the purchasers of the Parent Shares,
such prospectus will not contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading;
(F)
use its commercially reasonable efforts to obtain
the withdrawal of any order suspending the effectiveness of a
Resale Registration Statement or any part thereof as promptly
as possible;
(G)
use commercially reasonable efforts to list all Parent Shares
on each securities exchange or quotation system on which the
Parent Common Stock is then listed; and
(H)
pay, or cause to be paid, the expenses of the registration,
provided that Parent shall not be required to pay any counsel
or other advisory fees or expenses, or any underwriting
discounts or commissions, incurred by Sellers or
AWAC.
(iv)
Parent covenants that, so long as it is subject to the
reporting requirements of the Securities Exchange Act of 1934
(the “
Exchange Act ”),
it will timely file reports required to be filed by it under the
Exchange Act so as to enable the Sellers and AWAC to sell such
Parent Shares pursuant to Rule 144 under the Securities Act. Parent
further covenants that so long as the Sellers or AWAC own any of
such Parent Shares, Parent shall upon request furnish a written
statement that it has complied with the reporting requirements of
the Exchange Act and such other reports and documents so filed by
Parent as may be reasonably requested by the Sellers or AWAC in
availing themselves of any rule or regulation permitting the
selling of such Parent Shares without registration. In connection
with any sale, transfer or other disposition by the Sellers or AWAC
of any Parent Shares pursuant to the Resale Document or Rule 144
under the Securities Act, the Company shall cooperate with the
Sellers and AWAC to facilitate the timely preparation and delivery
of certificates representing Parent Shares to be sold and not
bearing any legend, and enable certificates for such Parent Shares
to be for such number of shares as the Sellers and AWAC may
reasonably request at least two (2) business days prior to any sale
of such Parent Shares.
(b)
It is understood that the certificates evidencing the Parent
Shares may bear a legend to the following effect:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH
SECURITIES MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT WITH RESPECT THERETO OR AN APPLICABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF SUCH ACT.
The
certificates evidencing the Parent Shares may also bear any
legends required by applicable blue sky laws.
(c)
(i) Parent may, at its option, but without any obligation to
do so, include in any non-underwritten registration of shares
of Parent Common Stock any or all Parent Shares issued or to
be issued for the account of the Sellers and AWAC hereunder.
The inclusion of any Parent Shares that are subject to the
restrictions set forth in Section 1.6 in a registration
statement filed by Parent, or a prospectus supplement or
amendment thereto, shall not affect the operation of Section
1.6 except as otherwise agreed by Parent in its sole
discretion. For so long as any Parent Shares are included in
an effective registration statement and during the period when
Sellers and AWAC can make sales under such registration
statement, the Sellers and AWAC agree not to dispose of such
Parent Shares in a transaction that would require the filing
of a Form 144. Any Parent Shares not included in an effective
registration statement or, during the period when Sellers and
AWAC cannot make sales under such registration statement, are
so included may, subject to Section 1.6, be disposed of in a
transaction under Rule 144 provided that the requirements of
the rule are met and the applicable seller is not in
possession of material, nonpublic information.
(ii)
(A) Parent will indemnify and hold harmless, to the fullest
extent permitted by law, the Sellers and AWAC, their officers,
directors and agents, affiliates, advisors, brokers and
employees, each person who controls any Seller or AWAC (within
the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act) and the officers, directors, agents,
affiliates, advisors, brokers and employees of any such
controlling person, from and against all losses, claims,
damages or liabilities, as incurred, arising out of or based
upon any untrue or alleged untrue statement of a material fact
contained in a Resale Document arising out of or based upon
any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, or arising out of any
violation by Parent of any rule or regulation promulgated
under the Securities Act applicable to Parent and relating to
any action or inaction required by Parent in connection with
any such registration, except to the extent the same are based
upon information with respect to any Seller or AWAC furnished
in writing to Parent by such Seller or AWAC expressly for use
therein; and Parent will reimburse each such Person for any
legal or other expenses reasonably incurred in connection with
investigating any such claim that is asserted or overtly
threatened;
provided ,
however ,
that Parent will not be liable to such Seller or AWAC to the extent
that any such losses, claims, damages or liabilities arise out of
or are based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in any preliminary prospectus
contained in a Resale Registration Statement if either (x)(i) such
Seller or AWAC failed to send or deliver a copy of the applicable
prospectus and prospectus supplement, if any, with or prior to the
delivery of written confirmation of the sale by such Seller or AWAC
of a Parent Share to the person asserting the claim from which such
losses, claims, damages or liabilities arise and (ii) the
prospectus would have corrected such untrue statement or alleged
untrue statement or such omission or alleged omission or (y) such
untrue statement or alleged untrue statement or such omission or
alleged omission is corrected in an amendment or supplement to the
prospectus previously furnished by or on behalf of Parent with
copies of the prospectus as so amended or supplemented delivered by
Parent, and such Seller or AWAC thereafter fails to deliver such
prospectus as so amended or supplemented prior to or concurrently
with the sale of a Parent Share to the person asserting the claim
from which such losses, claims, damages or liabilities
arise;
provided ,
further ,
however ,
that the indemnity agreement contained in this Section
1.7(c)(ii)(A) will not apply to amounts paid in settlement of any
such losses, claims, damages or liabilities if such settlement is
effected without the consent of Parent (which consent will not be
unreasonably withheld). The rights of the Sellers and AWAC
hereunder will not be exclusive of the rights of the Sellers and
AWAC under any other agreement or instrument.
(B)
Each Seller and AWAC will indemnify and hold harmless, to the
fullest extent permitted by law, Parent and its Affiliates
(including, from and after the Closing, the Companies (other
than AWAC)), the officers, directors and agents, affiliates,
advisors, brokers and employees of each such Person, each
underwriter of securities covered by a Resale Document, each
person who controls any such Person (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange
Act), and the officers, directors, agents, affiliates,
advisors, brokers and employees of any such underwriter or
controlling person, from and against all losses, claims,
damages or liabilities, as incurred, arising out of or based
upon any untrue or alleged untrue statement of a material fact
contained in a Resale Document, or arising out of or based
upon any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statements therein not misleading, but only to the
extent the same are contained in information with respect to
such holder furnished in writing to Parent by such Seller or
AWAC, as applicable, expressly for use therein; and each
Seller and AWAC will reimburse each such Person for any legal
or other expenses reasonably incurred in connection with
investigating any such claim that is asserted or overtly
threatened;
provided ,
however ,
that the indemnity agreement contained in this Section
1.7(c)(ii)(B) will not apply to amounts paid in settlement of any
such losses, claims, damages or liabilities if such settlement is
effected without the consent of such Seller or AWAC, as applicable
(which consent will not be unreasonably withheld). The rights of
Parent and its Affiliates hereunder will not be exclusive of the
rights of Parent and its Affiliates under any other agreement or
instrument. In no event will the liability of any Seller or AWAC
hereunder be greater in amount than the dollar amount of proceeds
(net of payment of all expenses and underwriters' discounts and
commissions) received by such Seller or AWAC, as applicable, upon
the sale of the Parent Shares giving rise to such indemnification
obligation.
(d)
Upon
the execution of an undertaking by each participant in the
Phantom Equity Plan to comply with the obligations and
agreements of each Seller and AWAC pursuant to this Section
1.7, such participant shall be entitled to the benefits of the
covenants granted to the Sellers and AWAC pursuant to this
Section 1.7.
Section
1.8.
Authority of Representative .
Each Seller and AWAC hereunder irrevocably appoints the
Representative to represent it and act as its attorney-in-fact and
agent with respect to any and all matters relating to, arising out
of, or in connection with, the Transaction Documents, including for
purposes of (i) any action taken or omitted on behalf of such
Seller or AWAC thereunder, (ii) any adjustment, disposition,
settlement or other handling of any amounts or claims under
Sections 1.4 and 1.5 and
all rights or obligations arising under Article VIII, (iii)
effecting service of process and (iv) effecting any waiver or
amendment of a Transaction Document. Except to the extent otherwise
explicitly set forth herein or in any other Transaction Documents,
all actions, omissions, notices, communications and determinations
by or on behalf of a Seller or on behalf of AWAC shall be given or
made by the Representative and all such actions, omissions,
notices, communications and determinations by the Representative
pursuant or with respect to any provision of a Transaction Document
shall conclusively be deemed to have been authorized by, and shall
be binding upon and made on behalf of such Seller or AWAC. Parent
and Purchaser shall be entitled to rely on any action or decision
of Representative as the act, omission, notice, communication or
determination of each Seller and AWAC. The Sellers and AWAC hereby
agree to jointly and severally indemnify and hold harmless the
Representative from and against (i) any Losses incurred without
gross negligence or willful misconduct on the part of the
Representative and arising out of or in connection with the
acceptance, performance or nonperformance of his duties hereunder
and (ii) any related out-of-pocket costs and expenses (including
reasonable attorneys' fees). If the person serving as the
Representative dies or becomes legally disabled, an individual
selected by a majority-in-interest of the rights to allocations of
consideration pursuant to Schedule I will be elected as the
successor Representative. The Representative shall have sole
responsibility for allocating the Purchase Consideration among
Sellers, AWAC and the participants in the Phantom Equity Plan and
neither Parent, Purchaser nor any of their affiliates (including,
following the Closing, IHS and iProcert) shall have any obligation
or liability therefore whatsoever. Notwithstanding the preceding
sentence, IHS shall be responsible for reporting payments of cash
and stock to the participants in the Phantom Equity Plan as
compensation for tax purposes and shall comply with applicable
income and payroll tax withholding obligations in respect of such
compensation income.
Section
1.9.
Assumption of Assumed AWAC Liabilities .
Subject to the terms and conditions set forth herein, at the
Closing, Purchaser shall assume and agree to pay and discharge when
due solely the following liabilities and obligations of AWAC
(collectively, the “
Assumed AWAC Liabilities ”)
(i) liabilities and obligations of AWAC under Contracts included in
the AWAC Assets that, by the terms of such Contracts, arise after
the Closing (other than by virtue of a default or violation of any
Contract occurring prior to the Closing), relate to periods
following the Closing and are to be observed, paid, discharged, or
performed as the case may be, at any time after the Closing, and
(ii) the ordinary course operating liabilities of AWAC's business.
Purchaser shall not be responsible for any Liabilities, obligations
or commitments of AWAC, including any Tax Liabilities (whether or
not incurred in the ordinary course of business) that are not
specifically set forth in the immediately preceding sentence
(collectively, the “
Excluded Liabilities ”).
Section
1.10.
Cain Brothers Payments .
The Companies and Cain Brothers & Company, LLC (“
Cain Brothers ”)
are parties to that certain engagement letter dated as of November
9, 2006 (the “
Engagement Letter ”),
pursuant to which the Companies are obligated to pay certain
commissions and fees to Cain Brothers (“
Cain Fees ”)
in the event the transactions contemplated by this Agreement are
consummated. Such Cain Fees are payable upon (i) payment of the Net
Closing Amount to Sellers and AWAC, and (ii) payment of any Earnout
Amounts to the Sellers and AWAC. Prior to the date hereof, Cain
Brothers, the Companies and the Sellers have entered into an
agreement pursuant to which Cain Brothers has (a) agreed that all
Cain Fees shall be payable by Sellers and AWAC and not IHS or
iProcert and (b) waived any and all claims against IHS, iProcert
and Purchaser in connection with the Engagement Letter and the
transactions contemplated hereby.
ARTICLE II
REPRESENTATIONS
AND WARRANTIES REGARDING THE SELLERS
Each
Seller (other than with respect to Section 2.5(b)) and AWAC
(with respect to Section 2.5(b)) represents and warrants to
Purchaser that the following statements are correct and
complete as of the date hereof and as of the Closing
Date.
Section
2.1.
Authorization of Transactions .
Such Seller (or, if a minor, the Representative on such
Seller’s behalf) has full power and authority to execute and
deliver this Agreement and the other Transaction Documents and to
perform such Seller's obligations hereunder and thereunder. This
Agreement and each other Transaction Document constitutes the valid
and legally binding obligation of such Seller, enforceable in
accordance with its terms and conditions.
Section
2.2.
Conflicts; Consents of Third Parties .
The execution and delivery by such Seller of this Agreement
and the other Transaction Documents to which such Seller is a
party, the consummation of the transactions contemplated hereby or
thereby, and compliance by such Seller with the provisions
hereof or thereof will not (i) conflict with, violate, result
in the breach or termination of, or constitute a default under any
Contract to which such Seller is a party or by which such
Seller or such Seller's properties or assets is bound, or
require a Consent from any Person in order to avoid any such
conflict, violation, breach, termination or default; (ii) violate
any Law or any Order by which such Seller is bound; (iii) result in
the creation of any Lien upon the properties or assets of such
Seller; or (iv) if such Seller is other than an individual,
conflict with, or result in the breach of, any provision of the
certificate of incorporation or bylaws or comparable
organizational documents (collectively, “
Organizational Documents ”)
of such Seller. No governmental franchise, easement, permit, right,
application, filing, registration, license or other authorization
(each a “
Permit ”),
Order, waiver, declaration or filing with, or notification to any
Person, including without limitation any Governmental Body, is
required on the part of such Seller in connection with the
execution, delivery and performance of this Agreement or the other
Transaction Documents to which it is a party, or the compliance by
such Seller with any of the provisions hereof or
thereof.
Section
2.3.
Broker’s Fees .
Except as set forth in Section 1.10, such Seller has no liability
or obligation to pay any fees or commissions to any broker, finder,
or agent with respect to the transactions contemplated by this
Agreement for which any Company or the Purchaser could become
liable or obligated. Such Seller shall be solely responsible for
any obligations described in this Section 2.3 or Section 1.10 and
will indemnify and hold the Purchaser Indemnitees (as defined
below) harmless from and against any Losses (as defined below)
resulting from or arising out of or any such obligations or
matters.
Section
2.4.
Equity Securities .
Such Seller holds of record and owns beneficially the Membership
Interests and shares of Capital Stock set forth next to such
Seller's name on Schedule I free and clear of any Lien. Such Seller
is not a party to any option, warrant, purchase right, or other
contract or commitment that could require such Seller to sell,
transfer, or otherwise dispose of any membership interest of
iProcert or any capital stock of IHS (other than this Agreement).
Such Seller is not a party to any voting trust, proxy, or other
agreement or understanding with respect to the voting of any
membership interest of iProcert or any capital stock of
IHS.
Section
2.5
Private Placement .
(a) Such Seller is an “accredited investor” within the
meaning of Rule 501 under the Securities Act and has sufficient
knowledge and experience in investing in companies similar to
Parent in terms of Parent's market capitalization and other
relevant factors so as to be able to evaluate the risks and merits
of his investment in Parent and he is able financially to bear the
risks thereof. Such Seller has had an opportunity to discuss the
terms of the offering and sale of the Parent Shares and Parent's
business, management and financial affairs with Parent's management
and to obtain any additional information regarding the foregoing
which Parent possesses or can acquire without unreasonable effort
or expense. The Parent Shares to be issued to such Seller are being
acquired for such Seller’s own accounts and not with a view
to, or the intention of, any distribution in violation of the
Securities Act or any applicable state securities laws. Such Seller
understands that ( i
)
the Parent Shares have not been registered under the Securities Act
by reason of the issuance of the Shares in a transaction exempt
from the registration requirements of the Securities Act pursuant
to Section 4(2) thereof or Rule 505 or 506 promulgated under the
Securities Act, ( ii
)
the Parent Shares must be held indefinitely unless a subsequent
disposition thereof is registered under the Securities Act or is
exempt from such registration, ( iii
)
the Parent Shares will bear a legend to such effect and (
iv
)
Parent will issue stop transfer instructions to its transfer agent
to such effect.
(b)
AWAC is an “accredited investor” within the
meaning of Rule 501 under the Securities Act and has
sufficient knowledge and experience in investing in companies
similar to Parent in terms of Parent's market capitalization
and other relevant factors so as to be able to evaluate the
risks and merits of his investment in Parent and he is able
financially to bear the risks thereof. AWAC has had an
opportunity to discuss the terms of the offering and sale of
the Parent Shares and Parent's business, management and
financial affairs with Parent's management and to obtain any
additional information regarding the foregoing which Parent
possesses or can acquire without unreasonable effort or
expense. The Parent Shares to be issued to AWAC are being
acquired for AWAC’s own accounts and not with a view to,
or the intention of, any distribution in violation of the
Securities Act or any applicable state securities laws. AWAC
understands that ( v
)
the Parent Shares have not been registered under the
Securities Act by reason of the issuance of the Shares in a
transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof or Rule 505 or
506 promulgated under the Securities Act, ( vi
)
the Parent Shares must be held indefinitely unless a
subsequent disposition thereof is registered under the
Securities Act or is exempt from such registration, (
vii
)
the Parent Shares will bear a legend to such effect and
( viii
)
Parent will issue stop transfer instructions to its transfer
agent to such effect.
ARTICLE III
REPRESENTATIONS
AND WARRANTIES REGARDING THE COMPANIES
The
Companies and the Sellers represent and warrant to Purchaser
jointly and severally that, except as set forth in the
Disclosure Schedule attached hereto (the “
Disclosure Schedule ”),
the following statements are correct and complete as of the date
hereof and as of the Closing Date. The Disclosure Schedule makes
explicit reference to the particular representation or warranty as
to which exception is taken, which in each case shall constitute
the representation and warranty as to which such exception shall
apply, provided that the disclosures in the Disclosure Schedule
that are set forth expressly therein with particularity will apply
to all representations and warranties. The inclusion of an item in
the Disclosure Schedule as an exception to the representation or
warranty shall not be deemed an admission by the Sellers or the
Company that such item represents a material exception or fact,
event or circumstance or that such item is reasonably likely to
result in a Material Adverse Effect.
Section
3.1.
Organization and Good Standing .
Each of the Companies is a corporation or limited liability
company, as the case may be, duly organized, validly existing and
in good standing under the laws of the state of its organization
and has all requisite corporate (or equivalent) power and authority
to own, lease and operate its properties and to carry on its
business. Each of the Companies is duly qualified or authorized to
do business as a foreign corporation and is in good standing under
the laws of each jurisdiction in which it owns or leases real
property and each other jurisdiction in which the conduct of its
business or the ownership of its properties requires such
qualification or authorization, except where the failure to be so
qualified or authorized would not have a Company Material Adverse
Effect. Section 3.1 of the Disclosure Schedule sets forth a true,
correct and complete list of each jurisdiction in which each of the
Companies is qualified or authorized to do business as a foreign
corporation.
Section
3.2.
Authorization and Enforceability .
Each Company has all requisite power and authority to execute and
deliver this Agreement and each other Transaction Document to which
it is a party, and to consummate the transactions contemplated
hereby and thereby. The execution, delivery and performance by each
Company of each of the Transaction Documents to which it is a party
have been duly authorized by all necessary corporate (or
equivalent) action on the part of the Company. This Agreement and
the other Transaction Documents have been duly and validly executed
and delivered by each Company and constitute legal, valid and
binding obligations of each Company, enforceable against such
Company in accordance with their respective terms subject to
applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors’ rights and remedies
generally and subject, as to enforceability, to general principles
of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
Section
3.3.
Capitalization; Subsidiaries .
The authorized capital stock of IHS consists of 100,000 shares of
Common Stock, par value $1.00 per share, of which 200 shares are
issued and outstanding and no shares are held in treasury. The
authorized capital stock of AWAC consists of 100,000 shares of
Common Stock, par value $1.00 per share, of which 200 shares are
issued and outstanding and no shares are held in treasury. 200
membership interests of the iProcert are issued and outstanding.
All outstanding shares of Common Stock of IHS and AWAC have been
duly and validly authorized and issued, are fully paid and
nonassessable, and all such shares are held of record and owned
beneficially by the Sellers in the proportions set forth on
Schedule I. All outstanding membership interests of iProcert have
been duly and validly authorized and issued, are fully paid and
nonassessable, and all such membership interests are held of record
and owned beneficially by the Sellers in the proportions set forth
on Schedule I. No shares of Common Stock of IHS or AWAC or
membership interests of iProcert have been issued in violation of
any preemptive rights. None of the Companies has any outstanding or
authorized options, warrants, purchase rights, subscription rights,
conversion rights, exchange rights, preemptive rights or other
contracts or commitments that could require any Company to issue,
sell, or otherwise cause to become outstanding any of its capital
stock or membership interests, as applicable, or securities
convertible or exchangeable for, or any options, warrants, or
rights to purchase, any of such capital stock or membership
interests, as applicable. There are no outstanding obligations of
any Company to repurchase, redeem or otherwise acquire any of its
capital stock or membership interests. There are no outstanding or
authorized appreciation, phantom equity, profit participation or
similar rights with respect to any Company. Section 3.3 of the
Disclosure Schedule sets forth any direct or indirect interest in
any corporation, partnership, joint venture or other Person owned
by any Company.
Section
3.4.
Company Records .
(a)
Each of the Companies has delivered to Purchaser true, correct
and complete copies of the certificate of incorporation or
other applicable charter documents (certified by the Secretary
of State or other appropriate official of the applicable
jurisdiction of organization) and by-laws (certified by the
secretary, assistant secretary or other appropriate officer)
of such Company.
(b)
The minute books of each of the Companies previously made
available to Purchaser contain complete and accurate records
in all material respects of all meetings and reflect all other
corporate action of the members and board of directors of each
such Company. The ownership records of the Companies
previously made available to Purchaser are true, correct and
complete. All stock transfer taxes levied or payable with
respect to all transfers of interests of each of the Companies
prior to the date hereof have been paid and appropriate
transfer tax stamps affixed where required.
(c)
Each of the Companies maintains and will continue to maintain
a standard system of accounting established and administered
in accordance with GAAP. The books, records and accounts of
each of the Companies accurately and fairly reflect, in
reasonable detail, the transactions and the assets and
liabilities of such entity with respect to its business. None
of the Companies has engaged in any material transaction with
respect to its business, maintained any bank account for its
business or used any of its funds, except for transactions,
bank accounts and funds which have been and are reflected in
all material respects in its normally maintained books,
records and accounts.
Section
3.5.
Conflicts; Consents of Third Parties .
The execution and delivery by each Company of this Agreement and
the other Transaction Documents to which it is a party, the
consummation of the transactions contemplated hereby or thereby,
and compliance by each Company with the provisions hereof or
thereof will not (i) conflict with, or result in the breach of, any
provision of the Organizational Documents of any Company;
(ii) conflict with, violate, result in the breach or
termination of, or constitute a default under any Contract to which
any Company is a party or by which any Company or its properties or
assets is bound, or require a Consent from any Person in order to
avoid any such conflict, violation, breach, termination or default;
(iii) violate any Law or any Order by which any Company is bound;
or (iv) result in the creation of any Lien upon the properties
or assets of any Company, excluding from the foregoing clauses (ii)
and (iii) such conflicts, breaches, terminations, defaults,
violations, Liens or other matters that would not have a Company
Material Adverse Effect. No Permit, Order, waiver, declaration or
filing with, or notification to any Person, including without
limitation any Governmental Body, is required on the part of any
Company in connection with the execution, delivery and performance
of this Agreement or the other Transaction Documents to which it is
a party, or the compliance by any Company with any of the
provisions hereof or thereof.
Section
3.6.
Financial Statements .
Included in Section 3.6 of the Disclosure Schedule are (i) the
audited balance sheets of the Companies as at December 31, 2004,
2005 and 2006 and the related audited statements of income and of
cash flows of the Companies for the years then ended and
(ii) the unaudited balance sheet of the Companies (the
“
Balance Sheet ”)
as at May 31, 2007 (the “
Balance Sheet Date ”)
and the related statements of income and cash flows of the
Companies for the 5-month period then ended and for the comparable
periods in the prior year (such audited and unaudited statements,
including the related notes and schedules thereto, are referred to
herein as the “
Financial Statements ”).
The Financial Statements have been prepared from the books and
records of the Companies and fairly present in all material
respects the financial position and results of operations,
shareholders’ equity and cash flows of the Companies as at
the dates and for the periods reflected thereon in accordance with
GAAP applied on a consistent basis throughout the periods
indicated, except as may be indicated in the notes thereto and
except, in the case of the unaudited financial statements, for the
failure of the unaudited financial statements to include the
footnotes required by GAAP, and subject to normal year-end audit
adjustments. The financial forecasts for the Companies for the
fiscal years 2007 and 2008 included in Section 3.6 of the
Disclosure Schedule (the “
Projections ”)
were prepared based upon assumptions that management believes to be
reasonable and reflect management’s good faith best estimate
of the projected operating performance of the Companies for such
periods. Purchaser acknowledges and agrees that (i) neither the
Companies nor the Sellers make any guarantee or representation that
the results estimated in the Projections will be realized, (ii) the
factors upon which the assumptions and estimate were based may
change from the date hereof and (iii) the results estimated in the
Projections may differ materially from actual results.
Section
3.7.
No Undisclosed Liabilities .
No Company has any material Liabilities except (a) to the
extent specifically reflected and accrued for or specifically
reserved against in the Balance Sheet and (b) for Liabilities
incurred subsequent to the Balance Sheet Date in the ordinary
course of business consistent with past custom and
practice.
Section
3.8.
Absence of Certain Developments .
Since December 31, 2006 (and, with respect to clause (e) below,
December 31, 2005):
(a)
there has not been any Company Material Adverse Change nor has
there occurred any event which is reasonably likely to result in a
Company Material Adverse Change;
(b)
there has not been any damage, destruction or loss, whether or not
covered by insurance, with respect to the property and assets of
any Company having a replacement cost of more than $10,000 for any
single loss or $25,000 in the aggregate for any related
losses;
(c)
none of the Companies has made any change in the rate of
compensation, commission, bonus or other direct or indirect
remuneration payable, or paid or agreed or orally promised to pay,
conditionally or otherwise, any bonus, incentive, retention or
other compensation, retirement, welfare, fringe or severance
benefit or vacation pay, to or in respect of any director, officer,
employee, distributor or agent of any Company, other than increases
in the ordinary course of business consistent with past practice in
the base salaries of employees of any Company other than officers
or senior managers;
(d)
none of the Companies has entered into any employment, deferred
compensation, severance or similar agreement (nor amended any such
agreement);
(e)
there has not been any change by any Company in accounting or Tax
reporting principles, methods or policies or any settlement of any
Tax controversy;
(f)
none of the Companies has conducted its business other than in the
ordinary course consistent with past practice;
(g)
none of the Companies has entered into any other material
transaction;
(h)
none of the Companies has hired employees or engaged independent
contractors to provide services for clients of any Company other
than in the ordinary course of business consistent with, and at a
level consistent with, past practice;
(i)
none of the Companies has breached any Contract in any material
respect;
(j)
none of the Companies has failed to promptly pay and discharge
current Liabilities except where disputed in good faith in an
appropriate manner;
(k)
none of the Companies has made any loans, advances or capital
contributions to, or investments in, any Person or paid any fees or
expenses to any Affiliate of any Company other than intercompany
transactions in the ordinary course of business consistent with
past practice;
(l)
none of the Companies has mortgaged, pledged or subjected to any
Lien any of its assets, or acquired any assets or sold, assigned,
transferred, conveyed, leased or otherwise disposed of any assets
of any Company except for assets acquired or sold, assigned,
transferred, conveyed, leased or otherwise disposed of in the
ordinary course of business consistent with past
practice;
(m)
none of the Companies has discharged or satisfied any Lien, or paid
any obligation or Liability, except in the ordinary course of
business consistent with past practice;
(n)
none of the Companies has canceled or compromised any debt or claim
or amended, canceled, terminated, relinquished, waived or released
any Contract or right except in the ordinary course of business
consistent with past practice and which, in the aggregate, are not
material to any Company;
(o)
none of the Companies has made or committed to make any capital
expenditures or capital additions or improvements in excess of
$50,000 individually or in the aggregate, except as set forth in
the Disclosure Schedule, or otherwise in the ordinary course of
business consistent with past practices;
(p)
none of the Companies has entered into any prepaid services
transactions with any of its customers or otherwise accelerated
revenue recognition or the sales of its services for periods prior
to the Closing;
(q)
except for the iProcert Operating Agreement, none of the Companies
has amended any of its Organizational Documents;
(r)
none of the Companies has issued any equity securities or any
security exercisable or exchangeable for or convertible into equity
securities of such Company; and
(s)
none of the Companies has entered into any agreements to do or
perform in the future any actions referred to in this Section 3.8
which have not been consummated as of the date hereof.
Section
3.9.
Taxes .
(a)
Each Company has timely filed with the appropriate taxing
authorities all Tax Returns that it has been required to file. All
such Tax Returns are true, correct and complete in all material
respects. All Taxes owed by each Company (whether or not shown on
any Tax Return) have been paid. Adequate reserves have been
established on the Financial Statements to provide for the payment
of any Taxes which are not yet due and payable with respect to any
Company for taxable periods or portions thereof ending on or before
December 31, 2006. None of the Companies is the beneficiary of any
extension of time within which to file any Tax Return. No written
claim has ever been made by an authority with respect to a Company
in a jurisdiction where such Company does not file Tax Returns that
it is or may be subject to taxation by that jurisdiction. There are
no Liens on any of the assets of any Company that have arisen in
connection with any failure (or alleged failure) to pay any
Tax.
(b)
Each Company has withheld and paid to the appropriate taxing
authority or other Governmental Body all Taxes required to have
been withheld and paid in connection with amounts paid or owing to
any employee, independent contractor, creditor, stockholder, or
other third party.
(c)
None of the Companies has waived or extended any statute of
limitations in respect of Taxes or agreed to any extension of time
with respect to the assessment, payment or collection of any
Tax.
(d)
To the extent that any Company incurs Taxes after the date hereof
with respect to periods or portions thereof ending on or prior to
the Closing Date, such Company shall pay all such Taxes on or prior
to the Closing Date in compliance with all applicable laws and
regulations, or if such Taxes are not yet due and payable on such
date, the amount of such Taxes shall be accrued for purposes of
preparation of the Closing Statement.
(e)
None of the properties or assets of any Company is property which,
for Tax purposes, is required to be treated as owned by another
Person. None of the Companies is an obligor on, and none of its
assets have been financed directly or indirectly by, any tax-exempt
bonds. No property or assets of any Company is “tax-exempt
use property” within the meaning of Section 168(h) of the
Code.
(f)
No deficiency or proposed adjustment which has not been settled or
otherwise resolved for any amount of Taxes has been asserted or
assessed by any taxing authority or other Governmental Body against
any Company. There has not been, within the past five calendar
years, an audit, examination or written notice of potential
examination of any Tax Returns filed by any Company.
(g)
There is no action, suit, examination, investigation, Governmental
Body proceeding, or audit or claim for refund in progress, pending,
proposed or, to the Knowledge of the Companies, threatened against
or with respect to any Company regarding Taxes.
(h)
None of the Companies has agreed to or been required to make any
adjustment pursuant to Section 481(a) of the Code or any
corresponding provision of state, local or foreign law by reason of
any change in accounting method initiated by it or on its behalf;
no taxing authority has proposed any such adjustment or change in
accounting method; and none of the Companies has an application
pending with any taxing authority requesting permission for any
change in accounting method. None of the Companies will be required
(A) as a result of a change in method of accounting for a taxable
period ending on or prior to the Closing Date, to include any
adjustment under Section 481(c) of the Code in taxable income for
any taxable period (or portion thereof) beginning after the Closing
or (B) as a result of any “closing agreement,” as
described in Section 7121 of the Code, to include any item of
income or exclude any item of deduction from any taxable period (or
portion thereof) beginning after the Closing.
(i)
None of the Companies has been a member of an affiliated group (as
defined in Section 1504 of the Code), or filed or been included in
a combined, consolidated or unitary income Tax Return, and none of
the Companies is a partner, member, owner or beneficiary of any
entity treated as a partnership or a trust for Tax purposes. None
of the Companies has liability for Taxes of any person under
Treasury Regulations Section 1.1502-6 or similar state or local
laws, as a successor or transferee, by contract or
otherwise.
(j)
None of the Companies is a party to or bound by any Tax allocation
or Tax sharing agreement and has no contractual obligation to
indemnify any other Person with respect to Taxes.
(k)
None of the Companies is nor has been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the
Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code.
(l)
True, correct and complete copies of all income and sales Tax
Returns filed by or with respect to the Companies for taxable
periods ending on or after December 31, 2003 have been furnished or
made available to Purchaser.
(m)
None of the Companies has participated in any reportable
transaction as contemplated in Treasury Regulations Section
1.6011-4.
(n)
None of the Companies has taken any action that could defer a
liability for Taxes of such Company from any taxable period ending
on or before the Closing Date to any taxable period ending after
such date.
(o)
None of the Companies is required to include any item of income for
any taxable period ending after the Closing as a result of an
installment sale or open transaction entered into on or prior to
Closing Date.
(p)
Except for the distribution by IHS of the capital stock of AWAC to
its shareholders on January 1, 2000, none of the Companies has
distributed any equity or had any equity distributed in transaction
that could be governed in whole or part by Section 355 or 361 of
the Code.
(q)
None of the Companies is subject to Tax, nor does it have a
permanent establishment, in any foreign jurisdiction.
(r)
None of the Companies has any pending ruling requests filed by it
or on its behalf with any taxing authority or Governmental
Body.
(s)
None of the Companies has ever been a personal holding company
within the meaning of Section 542 of the Code.
(t)
iProcert has never elected to be taxed as a corporation
pursuant to Treasury Regulations Section 301.7701-3, has never
been a publicly traded partnership within the meaning of
Section 7704(b) of the Code and has since inception been
treated as a partnership for federal and state income tax
purposes.
Section
3.10.
Real Property .
None of the Companies owns in fee any real property or interest in
real property. Section 3.10 of the Disclosure Schedule sets forth a
complete list of all real property and interests in real property
leased by any Company (individually, a “
Real Property Lease ”
and the real properties specified in such leases being referred to
herein individually as a “
Company Property ”
and collectively as the “
Company Properties ”)
as lessee. The Company Property constitutes all interests in real
property currently used or currently held for use in connection
with the Business or which are necessary for the continued
operation of the Business as the Business is currently conducted.
The applicable Company has a valid and enforceable leasehold
interest under each of the Real Property Leases, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors’ rights and remedies
generally and subject, as to enforceability, to general principles
of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity). None of the Companies has received
any written notice of any material default or event that with
notice or lapse of time, or both, would constitute a material
default under any of the Real Property Leases and the applicable
Company and, to the Company's Knowledge, each other party thereto
is in compliance with all obligations of such party thereunder. The
Companies have delivered or otherwise made available to Purchaser
complete copies of the Real Property Leases, together with all
amendments, modifications or supplements, if any,
thereto.
Section
3.11.
Tangible Personal Property; Title; Sufficiency of
Assets .
(a)
Section 3.11 of the Disclosure Schedule lists all leases of
personal property (“
Personal Property Leases ”)
involving annual payments in excess of $10,000 relating to personal
property used by any Company or to which any Company is a party or
by which the properties of any Company are bound. The Companies
have delivered or otherwise made available to the Purchaser
complete copies of the Personal Property Leases, together with all
amendments, modifications or supplements thereto.
(b)
Each Company has a valid leasehold interest under each of the
Personal Property Leases under which it is a lessee, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors’ rights and remedies
generally and subject, as to enforceability, to general principles
of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity), and there is no material default
under any Personal Property Lease by any Company, or, to the
Knowledge of the Companies, by any other party thereto, and no
event has occurred that with the lapse of time or the giving of
notice or both would constitute a material default thereunder, and
each Company, and to the Knowledge of the Companies, each other
party thereto is in compliance with all obligations of such Company
or such other party, as the case may be, thereunder.
(c)
Each Company has good and marketable title to all its assets as of
the date hereof (which include, without limitation, all of the
assets reflected in the Balance Sheet), free and clear of any and
all Liens other than the Permitted Encumbrances. All tangible
personal property included in such assets, and all of the items of
tangible personal property used by any Company under the Personal
Property Leases, are in working order and in a state of good
maintenance and repair (ordinary wear and tear excepted) and are
suitable for the purposes used. The assets of the Companies include
all assets, rights and interests used in or reasonably required for
the continued conduct of the Business by the Companies as currently
conducted.
Section
3.12.
Intellectual Property .
(a)
The Companies own, free and clear from all Liens (other than
Permitted Encumbrances) or otherwise possess legally enforceable
rights to use all of the Intellectual Property reasonably necessary
to the conduct of business of the Companies as currently conducted.
The Intellectual Property owned by the Companies (“
Owned Intellectual Property ”)
and the Intellectual Property licensed to the Companies comprise
all of the Intellectual Property that is used or reasonably
required for the continued conduct of in the business of the
Companies as currently conducted.
(b)
Section 3.12(b)(i) of the Disclosure Schedule sets forth a true,
complete and correct list of all Owned Intellectual Property for
which a registration or application has been filed with a
Governmental Body, including patents, trademarks, service marks and
copyrights, issued by or registered with, or for which any
application for issuance or registration thereof has been filed
with, any Governmental Body. Section 3.12(b)(ii) of the Disclosure
Schedule sets forth a complete and correct list of all trademarks,
service marks and other trade designations that are Owned
Intellectual Property and not otherwise identified in Section
3.12(b)(i) of the Disclosure Schedule. Section 3.12(b)(iii) of the
Disclosure Schedule also sets forth a complete and correct list of
all written or oral licenses and arrangements (other than ordinary
course licenses of commercially available software),
(A) pursuant to which the use by any Person of Intellectual
Property is permitted by any Company or (B) pursuant to which
the use by any Company of Intellectual Property is permitted by any
Person (collectively, the “
Intellectual Property Licenses ”).
The Intellectual Property Licenses are in full force and
effect.
(c)
The continued operation of the Business as presently conducted does
not interfere with, infringe upon, misappropriate, or otherwise
come into conflict with, any intellectual property rights of third
parties except as would not reasonably be expected to have a
Company Material Adverse Effect.
(d)
There is no claim or demand of any Person pertaining to, or any
proceeding which is pending or, to the Knowledge of the Companies,
threatened, that challenges the rights of any Company in respect of
any Owned Intellectual Property, or claims that any default exists
under any Intellectual Property License.
(e)
All of the copyrights in any of the products of any Company
(including but not limited to any works of authorship incorporated
in or distributed with such products) are owned by or licensed to
such Company and, if licensed, are subject to Intellectual Property
Licenses that are in full force and effect.
(f)
None of the Companies has created any Intellectual Property under
contract with U.S. government customers.
(g)
Section 3.12(g) of the Disclosure Schedule lists all employees of
the Companies and all other Persons who have been involved in the
development of Owned Intellectual Property, including computer
programs and software (including source code, object code and
databases). Except as specified in Section 3.12(g) of the
Disclosure Schedule, all such employees and other Persons have
entered into confidentiality and assignment of inventions
agreements substantially in the form included in Section 3.12 of
the Disclosure Schedule.
Section
3.13.
Contracts .
(a) Section 3.13 of the Disclosure Schedule sets forth all of the
following types of Contracts to which any Company is a party or by
which it is bound and categorizes such Contracts by the types
described below: (i) Contracts relating to the employment of any
Person, or any bonus, deferred compensation, pension, profit
sharing, stock option, employee stock purchase,
retirem
