EXECUTION
COPY
PURCHASE
AGREEMENT dated
as of July 6, 2007 by and among Chandler Chicco Agency
,
LLC, a New York limited liability company (“
CCA NY ”),
BioSector 2 LLC, a New York limited liability company
(collectively, the “
Company Parties ”
and each individually a “
Company Party ”),
the
members of the Companies listed on Schedule I hereto
(the
“
Members ”,
and individually a “
Member ”),
inVentiv
Health, Inc., a Delaware corporation (“
Parent ”),
and Chandler Chicco
LLC, a Delaware limited liability company (“
Purchaser ”)
.
The
Company Parties, the Members, Parent and Purchaser are sometimes
are referred to herein collectively as the “
Parties ”
and each individually as a “
Party .”
WHEREAS
,
the
Members own all of the membership interests of the Company
Parties and all of the equity interests in Chandler
Chicco Agency SARL, an entity organized under the laws of
France, and BioSector 2, Limited, an entity organized under
the laws of the United Kingdom (collectively with the Company
Parties, the “
Companies ”)
;
and
WHEREAS
,
each
Member desires to sell to the Purchaser, and Purchaser is
willing to purchase from such Member, such membership
interests, subject to the terms and conditions of this
Agreement;
WHEREAS,
in order to induce the Members 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, Robert Chandler (“
Chandler ”)
and Giacomo F. Chicco (“
Chicco ”)
are entering into new employment agreements with
CCA NY (the
“
Employment Agreements ”)
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.
Sale of Membership and Equity Interests .
On and subject to the terms and conditions of this Agreement, at
the closing of the transactions contemplated hereby (the
“
Closing ”),
each Member will sell, assign, transfer and deliver to Purchaser,
and Purchaser will purchase from such Member, the membership and
equity interests of the Companies (“
Membership Interests ”),
set forth opposite such Member’s name on Schedule I hereto
constituting all of the outstanding Membership Interests owned by
such Member.
Section 1.2.
Purchase Price .
(a)
The consideration to be paid by Purchaser for the Membership
Interests (the “
Purchase Price ”)
shall be, in the aggregate, (i) the difference between (A)
[***]
and
(B) the amount of Indebtedness, if any, outstanding immediately
following the Closing (after giving effect to the last sentence of
this Section 1.2) in cash, payable as directed by the
Representative (subject to the last sentence of this Section 1.2)
by electronic funds transfer at the Closing, subject to adjustment
as provided in Section 1.4 (the “
Initial Cash Purchase Price ”),
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 Members, (ii) a number of unregistered
shares of the common stock, par value $0.001 per share, of Parent
(“
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 June 27, 2007 (the “
Initial Shares ”)
and (iii) all amounts payable or distributable to the Members and
the participants in the Phantom Equity Plan in accordance with
Schedule I to this Agreement and Schedule I to the Phantom Equity
Plan pursuant to Section 1.5 below. Notwithstanding the foregoing,
(x) the portion of the fee payable to AdMedia Partners, Inc.
("
AdMedia ")
under the letter agreement dated October 16, 2006 between AdMedia
and CCA NY (the "
AdMedia Engagement Letter ")
shall be accrued by CCA NY as a pre-Closing expense and paid
directly by Purchaser, for the account of CCA NY, to AdMedia and
(y) at Purchaser's election, a portion of the Initial Cash Purchase
Price sufficient to discharge all or any portion of the
Indebtedness outstanding as of the Closing Date may be paid by
Purchaser directly to the holders of such
Indebtedness.
(b)
On
the Closing Date (as defined below), Purchaser shall deliver
to the transfer agent for the Parent Common Stock irrevocable
instructions to deliver the Initial Shares to The Bank of New
York, as escrow agent (the “
Escrow Agent ”)
pursuant to an escrow agreement dated as of the Closing Date among
Purchaser, the Members and the Escrow Agent (the “
Escrow Agreement ”),
in substantially the form annexed hereto as
Exhibit A .
The
Initial Shares shall be held in escrow until the [***]
anniversary
of the Closing Date as more fully set forth in the Escrow
Agreement.
(c)
Except
as set forth in the Phantom Equity Plan, no Member shall pay
or transfer any portion of the Purchase Price or any rights
thereunto to any Person who provides services to the Business
at the time of or any time following the Closing. Such
consideration is not in lieu of, and shall not reduce any
compensation to which the participants are entitled in respect
of services, is fully vested as of the date hereof and shall
be made at the times provided for in the Phantom Equity Plan
irrespective of whether such beneficiaries continue to render
services to any of the parties hereto or their
Affiliates.
(d)
On
the Closing Date, Purchaser shall deliver to the
Representative a proposed allocation of (i) the Purchase Price
among the Companies (the "
Entity Allocation ")
and (ii) the Purchase Price consistent with the requirements of
Section 1060 of the Code and Treasury Regulations Section
1.1060-1(b)(4) and in such detail as Purchaser may determine to be
appropriate, or a method for arriving at such an allocation (the
“
Purchase Price Allocation ”).
The parties shall attempt to reach an agreement regarding the
Entity Allocation and the Purchase Price Allocation as soon as
possible following Buyer’s delivery of the Entity Allocation
and the Purchase Price Allocation to the Representative pursuant to
the preceding sentence. In the event the parties agree on the
Entity Allocation and the Purchase Price Allocation, Purchaser and
the Representative shall prepare and file all the all returns,
declarations, reports, estimates, information returns, and
statements (“
Returns ”)
that may be required with respect to the transaction provided for
herein pursuant to Section 1060 of the Internal Revenue Code of
1986, as amended (the “
Code ”),
any Treasury Regulations promulgated thereunder, any other similar
provision of the Code and any other similar, applicable foreign,
state or local Tax Law or regulation, including IRS Form 8594 based
on and consistent in all respects with the Entity Allocation and
the Purchase Price Allocation. Purchaser and the Representative
shall each provide to the others, on a timely basis, information
that may be reasonably required for the purpose of preparing such
Returns. In the event the parties are not able to reach an
agreement on the Entity Allocation or the Purchase Price Allocation
within thirty (30) days following the Closing, the Entity
Allocation and the Purchase Price Allocation shall be determined as
promptly as practicable by the Neutral Accountant, provided that
Purchaser's proposed Entity Allocation shall be used to complete
title transfer documentation and transfer, stamp or similar tax
returns or declarations at the Closing.
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 on July 6, 2007. The Closing
shall be effective as of 12:01 a.m. on July 7, 2007 (the
“
Closing Date ”).
As part of the Closing, (i) each Member will deliver to Purchaser
such evidence of ownership of the Membership Interests by such
Member, as is reasonably satisfactory to Purchaser accompanied by a
duly executed assignment assigning such Membership Interests to
Purchaser and otherwise in good form for transfer, (ii) Purchaser
shall pay to such Member the portion of the Initial Cash Purchase
Price payable to such Member as set forth on Schedule I, (iii)
Parent shall issue irrevocable instructions to the transfer agent
for the Parent Common Stock to issue the Initial Shares in the name
of such Member as set forth on Schedule I and deliver them to the
Escrow Agent and (iv) the Parties shall make the deliveries
described in Article VI. Purchaser shall not be required to
purchase any Membership Interests unless all Membership Interests
are properly tendered in accordance with the terms of this
Agreement.
Section
1.4.
Working Capital 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 Chandler, as representative for the Members (in
such capacity, the “
Representative ”)
a statement (the “
Closing Working Capital Statement ”)
calculating the Working Capital (as defined below) of the Companies
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 and the Subsidiaries
as of the Closing Date (including accounts receivable (net of
allowance for doubtful accounts) and work in process), exclusive of
deferred tax assets, less the current liabilities of the Companies
and the Subsidiaries as of the Closing Date (including all GAAP
accruals, whether or not traditionally reflected on the
Companies’ or any Subsidiary’s balance sheet as a
current liability) and all other liabilities of the Companies and
the Subsidiaries as of the Closing Date and shall be calculated in
accordance with GAAP and accounting policies and procedures
consistent with those employed in the preparation of Parent’s
publicly filed financial statements. Notwithstanding the foregoing,
(i) current assets of the Companies and the Subsidiaries for
purposes of this computation shall include all of the
Companies’ and the Subsidiaries’ rent security deposits
outstanding and (ii) current liabilities shall exclude the current
portion of Indebtedness that is deducted in determining the
Purchase Price pursuant to clause (i)(B) of Section 1.2(a). Working
Capital shall be calculated on a combined basis and, with respect
to the Subsidiaries, a consolidated basis.
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 Working Capital
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
Working Capital Statement and verify the calculation of the Closing
Working Capital Amount. If the Representative disputes the Closing
Working Capital Amount as shown on the Closing Working Capital
Statement prepared by the Purchaser, the Shareholder shall deliver
to the Purchaser within 30 days after receipt of the Closing
Working Capital Statement a statement (the “
Dispute Notice ”)
setting forth the Representative’s calculation of the Closing
Working Capital Amount and describing in reasonable detail the
basis for the determination of such different Closing Working
Capital Amount. The parties shall use reasonable efforts to resolve
such differences regarding the determination of the Closing Working
Capital Amount within a period of 30 days after the Representative
has given the Dispute Notice. If the parties resolve such
differences, the Closing Working Capital Amount agreed to by the
parties shall be deemed to be the “
Final Closing Working Capital Amount ”
and the Closing Working Capital Statement agreed to by the Parties
shall be deemed to be the “
Final Closing Working Capital Statement .”
(b)
If
Purchaser and the Representative do not reach a final
resolution on the Closing Working Capital Amount 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
Shareholder and the Neutral Accountant (or, if they cannot
agree on such procedures, pursuant to procedures determined by
the Neutral Accountant), regarding such party’s
calculation of the Closing Working Capital Amount; and the
Neutral Accountant shall be required to resolve the
differences between Purchaser and the Representative and
determine the Closing Working Capital Amount within 20 days
after the engagement of the Neutral Accountant. The Closing
Working Capital Amount determined by the Neutral Accountant
shall be deemed to be the Final Closing Working Capital Amount
and the Closing Working Capital Statement, as adjusted to
reflect such determination, shall be deemed to be the Final
Closing Working Capital 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 Closing Working Capital Amount;
or
(ii)
resolve
any such differences by making an adjustment to the Closing
Working Capital 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 the other hand,
shall each pay one half of the fees and expenses of the
Neutral Accountant.
(c)
If the Final Closing Working Capital Amount is less than
[***],
then the Members shall pay to Purchaser in accordance with the
percentages of the Initial Cash Payment to which they are entitled
in accordance with Schedule I an amount equal to the difference
between
[***]
and
the Final Closing Working Capital Amount. If the Final Closing
Working Capital Amount is more than [***], then Purchaser shall pay
to the Members in accordance with the percentages of the Initial
Cash Payment which they are entitled to in accordance with Schedule
I an amount equal to the difference between the Final Closing
Working Capital Amount and
[***]
. Any
payment pursuant to this Section 1.4(c) shall be made in cash
by wire transfer of immediately available funds into one or more
accounts designated in writing by Purchaser or the
Representative, as the case may be, within five business days after
the date on which the Final Closing Working Capital Amount is
determined.
Section
1.5.
Earnout Payments .
(a)
[***]
The
Members and the Phantom Equity Participants (as defined below)
shall be entitled to additional consideration from Purchaser (any
such additional consideration an “
Earnout Amount ”)
determined as follows:
[***]
[***]
[***]
As
used herein:
[***]
[***]
[***]
[***]
[***]
[***]
shall be delivered to the Representative for allocation among
the Members and the participants in the Phantom Equity Plan in
accordance with Schedule I to this Agreement and Schedule I to
the Phantom Equity Plan (which, at Purchaser's request, shall
be specified in written instructions delivered to Purchaser by
the Representative). At Purchaser’s option, up to
[***]
may be satisfied by the issuance to the Members and the Phantom
Equity Plan participants in accordance with Schedule I to this
agreement and Schedule I to the Phantom Equity Plan of unregistered
shares of Parent Common Stock having an aggregate Fair Market Value
equal to [***]
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
Members 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 Members 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. [***] Each Party
acknowledges and agrees that neither Purchaser, the Members nor any
other Person makes any guarantee or representation to any other
Party that any Earnout Amount will be realized. Any Earnout Amount
that is paid in cash or Earnout Shares to Members 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:
(i)
[***]
(ii)
[***]
(iii)
[***]
(c)
Purchaser shall provide Representative and the accounting firm
selected by Representative on behalf of the Members 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 the Representative, within 30 days after the
delivery of the calculations by Purchaser to the
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 the Representative delivers such a notice and the
Representative and Purchaser are unable to agree upon the
calculations within 20 days after any notice of objection has
been given by the Representative to Purchaser, then (i) [***]
within five business days after receipt of such notice and
(ii) at the election of either Purchaser or the
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. The Members 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:
[***]
(f)
[***] Parent shall not be required to give such instructions
until the third business day after the Representative has
notified Purchaser in writing of the address to which such
shares of Parent Common Stock are to be
delivered.
(g)
[***]
(iv)
[***]
(v)
[***]
(vi)
[***]
(vii)
[***]
(viii)
[***]
(ix)
[***]
(x)
[***]
(xi)
[***]
(xii)
[***]
(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 Member
(“
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 [***].
For
such purpose, such Listed Equity Securities shall be valued at
their aggregate Fair Market Value as of the Final Earnout Amount
Determination Date. In the event that, in any Conversion
Transaction, substantially all of the outstanding shares of Parent
Common Stock are converted into the right to receive equity
securities that are not Listed Equity Securities (or are converted
into the right to receive a combination of such equity securities
and cash), then the Earnout Amount, if any, shall be required to be
satisfied entirely in cash.
[***]
Section 1.6.
Lock-Up Agreement .
During the applicable Restricted Period, the Members shall not
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; Legending of Parent Shares; Resale
Registration .
(a) The Members 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 Member represents that they are
familiar with Rule 144 under the Securities Act. No Members shall
be permitted to transfer any Parent Shares in the absence of an
effective registration statement unless such Member has furnished
Parent with an opinion of counsel, reasonably satisfactory to
Parent, that such disposition does not require registration of such
Parent Shares under the Securities Act.
(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 Members 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, the Members agree not to
dispose of such Parent Shares in a transaction that would
require the filing of a Form 144.
(ii)
(A) Parent will indemnify and hold harmless, to the fullest
extent permitted by law, the Members, their officers,
directors and agents, affiliates, advisors, brokers and
employees, each person who controls any Member (within the
meaning of Section 15 of the Securities Act or Section 20 of
the Securities
Exchange Act of 1934 (the “
Exchange Act ”)
)
and the officers, directors, agents, affiliates, advisors, brokers
and employees of any such controlling person, from and against all
damages, as incurred, arising out of or based upon any untrue or
alleged untrue statement of a material fact contained in a
registration statement pursuant to which any of the Parent Shares
are registered for resale (each a “
Resale Registration Statement ”),
any prospectus or form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, 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, except to the extent the
same are based upon information with respect to any Member
furnished in writing to Parent by such Member expressly for use
therein;
provided ,
however ,
that Parent will not be liable to such Member to the extent that
any such damages arise out of or are based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in
any preliminary prospectus if either (x)(i) such Member failed to
send or deliver a copy of the prospectus with or prior to the
delivery of written confirmation of the sale by such Member of a
Parent Share to the person asserting the claim from which such
damages 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 Member 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 damages 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 damages if such settlement is effected without the consent of
Parent (which consent will not be unreasonably withheld). The
rights of the Members hereunder will not be exclusive of the rights
of the Members under any other agreement or
instrument.
(B)
Each Member will
indemnify and hold harmless, to the fullest extent permitted
by law, Parent and its Affiliates (including, from and after
the Closing, the Companies and Subsidiaries), the officers,
directors and agents, affiliates, advisors, brokers and
employees of such Member, each underwriter of securities
covered by a Resale Registration Statement, 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 damages, as incurred, arising out of or based
upon any untrue or alleged untrue statement of a material fact
contained in any registration statement, prospectus or form of
prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, 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 Member expressly for
use therein;
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 damages if such settlement is effected without the consent of
such Member (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
Member 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 Member upon the sale of
the Parent Shares giving rise to such indemnification
obligation.
Section
1.8.
Authority of Representative .
(a) Each Member 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 (i) for
purposes of any action taken or omitted on behalf of such Member
thereunder and (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. 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 Member 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
Member. Purchaser shall be entitled to rely on any action or
decision of the Representative as the act, omission, notice,
communication or determination of each Member. The Members 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, Giacomo Chicci or,
if he is unable or unwilling to serve, an individual selected by a
majority-in-interest of the rights to allocation of consideration
pursuant to Schedule I will be elected as the successor
Representative. The Representative shall have sole responsibility
for allocating the Purchase Price among the Members and the
participants in the Phantom Equity Plan and neither Parent,
Purchaser nor any of their Affiliates (including, following the
Closing, the Companies) shall have any obligation or liability
therefor whatsoever.
ARTICLE II
REPRESENTATIONS
AND WARRANTIES REGARDING THE MEMBERS
Each
Member 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 Member has full power and authority to execute and deliver
this Agreement and the other Transaction Documents and to perform
such Member’s obligations hereunder and thereunder. This
Agreement and each other Transaction Document constitutes the valid
and legally binding obligation of such Member, enforceable in
accordance with its terms and conditions.
Section
2.2.
Conflicts; Consents of Third Parties .
The execution and delivery by such Member of this Agreement
and the other Transaction Documents to which such Member is a
party, the consummation of the transactions contemplated hereby or
thereby, and compliance by such Member 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 Member is a party or by which such
Member or such Member’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 Member is bound; (iii) result in
the creation of any Lien upon the properties or assets of such
Member; or (iv) if such Member 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 Member. 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 Member 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 Member with any of the provisions hereof or
thereof.
Section
2.3.
Broker’s Fees .
Such Member 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 Subsidiary or the Purchaser could become liable or obligated.
Such Member shall be solely responsible for any obligations
described in this Section 2.3 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.
Membership Interests .
Such Member holds of record and owns beneficially the number of
Membership Interests set forth next to such Member’s name on
Schedule I free and clear of any Lien. Such Member is not a party
to any option, warrant, purchase right, or other contract or
commitment that could require such Member to sell, transfer, or
otherwise dispose of any membership interest of any Company (other
than this Agreement). Such Member is not a party to any voting
trust, proxy, or other agreement or understanding with respect to
the voting of any membership interest of any Company.
Section
2.5
Private Placement .
Such Member 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 Member 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 Member are being
acquired for such Member’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 Member
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.
ARTICLE III
REPRESENTATIONS
AND WARRANTIES REGARDING THE COMPANIES AND
SUBSIDIARIES
The
Company Parties and the Members 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 sole 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 disclosure of
the existence of a contract on the Disclosure Schedule shall not,
without more, constitute the disclosure of any particular
provisions of such contract or the actual or potential consequences
thereof.
Section
3.1.
Organization and Good Standing .
Each Company is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization and has
all requisite power and authority to own, lease and operate its
properties and to carry on its business, and each Subsidiary is
duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization and has all requisite
power and authority to own, lease and operate its properties and to
carry on its business. Each Company and Subsidiary is duly
qualified or authorized to do business as a foreign entity 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 Company and Subsidiary is qualified or authorized to
do business as a foreign entity.
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 action on the
part of such 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 such
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 .
Each Member has been validly admitted as a member of each Company
and granted the percentage interest of membership interests of such
Company as set forth in the operating agreement of such Company.
All membership interests of each Company are owned beneficially by
the Members. No membership interests have been issued in violation
of any preemptive rights. No Company 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 such Company to issue,
sell, or otherwise cause to become outstanding any of its
membership interests or securities convertible or exchangeable for,
or any options, warrants, or rights to purchase, any of such
membership interests. There are no outstanding obligations of any
Company to repurchase, redeem or otherwise acquire any of its
membership interests. There are no outstanding or authorized
ownership 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.
Records .
(a)
The Companies have delivered to Purchaser true, correct and
complete copies of the articles of organization or other
charter document (certified by the Secretary of State or other
appropriate official of the applicable jurisdiction of
organization) and operating agreement (certified by the
secretary, assistant secretary or other appropriate officer)
of each Company and each Subsidiary.
(b)
Except as described in Section 3.4(b) of the Disclosure
Schedule, neither any Company or Subsidiary nor the
equityholders of any Company or Subsidiary have taken any
material action of a governance nature.
(c)
Each Company and Subsidiary maintains a standard system of
accounting established and administered in accordance with
GAAP. The books, records and accounts of each Company and
Subsidiary accurately and fairly reflect, in reasonable
detail, the transactions and the assets and liabilities of
such entity with respect to its business. Neither any Company
nor any Subsidiary 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 its normally maintained books, records and
accounts. Each Company and Subsidiary maintains a system of
internal accounting control sufficient to provide reasonable
assurances that (i) transactions are executed in accordance
with management’s general or specific authorization,
(ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP
(or in the case of foreign entities, in accordance with
International Accounting Standards), (iii) access to assets,
properties, books, records and accounts is permitted only in
accordance with management’s general or specific
authorization, and (iv) the recorded accounting for assets is
compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any
differences.
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 such Company or any of
its Subsidiaries; (ii) conflict with, violate, result in the
breach or termination of, or constitute a default under any
Contract to which such Company or any of its Subsidiaries is a
party or by which such Company or any of its Subsidiaries 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 such
Company or any of its Subsidiaries is bound; or (iv) result in the
creation of any Lien upon the properties or assets of such
Company or any of its Subsidiaries. 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 such Company or any of its Subsidiaries 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 Company or any of its Subsidiaries 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
reviewed balance sheets of the Companies and the Subsidiaries as at
December 31, 2004, 2005 and 2006 and the related reviewed
statements of income and of cash flows of the Companies and the
Subsidiaries for the years then ended and (ii) the unaudited
and unreviewed balance sheet of the Companies and the Subsidiaries
as at April 30, 2007 and the related statements of income of the
Companies and the Subsidiaries for the four-month period then ended
and for the comparable periods in the prior year (such reviewed and
unaudited and unreviewed 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 the Subsidiaries and fairly present in
all material respects the financial position and results of
operations, shareholders’ equity and cash flows of the
Companies and the Subsidiaries as at the dates and for the periods
reflected thereon in accordance with GAAP applied on a consistent
basis (or in the case of foreign entities, in accordance with
International Accounting Standards) throughout the periods
indicated, except as may be indicated in the notes thereto and
except, in the case of the unaudited and unreviewed financial
statements, for the failure of the unaudited and unreviewed
financial statements to include the footnotes required by GAAP, and
subject to normal year-end adjustments that will not individually
or in the aggregate be material. The financial forecasts for the
Seller for the fiscal years 2007
included
in Section 3.6 of the Disclosure Schedule (the “
Projections ”)
were prepared based upon reasonable assumptions and reflect
management’s good faith best estimate of the projected
operating performance of the Companies and the Subsidiaries for
such periods. The Projections are the most current financial
forecasts prepared by the Companies and the Subsidiaries. All
assumptions, projections and forecasts used in the preparation of
the Projections are set forth therein and described in reasonable
detail. No event has occurred and no facts or circumstances have
arisen which make the assumptions, projections or forecasts, taken
as a whole, upon which the Projections are based unreasonable or
unrealistic. Purchaser acknowledges and agrees that (i) the
Companies and the Subsidiaries and the Members make no 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 or Subsidiary has any 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 or Subsidiary having a replacement cost of more
than $5,000 for any single loss or $10,000 in the aggregate
for any related losses;
(c)
no
Company or Subsidiary 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 or Subsidiary, other than increases in the ordinary
course of business consistent with past practice in the base
salaries of employees of the Companies and the Subsidiaries
other than officers or senior managers;
(d)
no
Company or Subsidiary 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 or Subsidiary in
accounting or Tax reporting principles, methods or policies or
any settlement of any Tax controversy;
(f)
no
Company or Subsidiary has conducted its business other than in
the ordinary course consistent with past
practice;
(g)
no
Company or Subsidiary has entered into any other material
transaction;
(h)
no
Company or Subsidiary has hired employees or engaged
independent contractors to provide services for clients of the
such Company or Subsidiary other than in the ordinary course
of business consistent with, and at a level consistent with,
past practice;
(i)
no
Company or Subsidiary has materially breached any Contract or
materially amended any Contract;
(j)
no
Company or Subsidiary has failed to promptly pay and discharge
current Liabilities except where disputed in good faith in an
appropriate manner;
(k)
no
Company or Subsidiary has made any loans, advances or capital
contributions to, or investments in, any Person or paid any
fees or expenses to any Affiliate of such Company or
Subsidiary other than intercompany transactions in the
ordinary course of business consistent with past
practice;
(l)
no
Company or Subsidiary 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 such Company or Subsidiary 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)
no
Company or Subsidiary has discharged or satisfied any Lien, or
paid any obligation or Liability, except in the ordinary
course of business consistent with past practice and which, in
the aggregate, are not material to the Companies and the
Subsidiaries;
(n)
no
Company or Subsidiary 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 the Companies and the
Subsidiaries;
(o)
no
Company or Subsidiary has made or committed to make any
capital expenditures or capital additions or improvements in
excess of $10,000 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)
no
Company or Subsidiary 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)
no
Company or Subsidiary has amended any of its Organizational
Documents;
(r)
no
Company or Subsidiary has issued any equity securities or any
security exercisable or exchangeable for or convertible into
equity securities of the such Company or Subsidiary;
and
(s)
no
Company or Subsidiary 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 and Subsidiary 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 respects. All Taxes owed by the Companies and the
Subsidiaries (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 the
Companies and the Subsidiaries for taxable periods or portions
thereof ending on or before December 31, 2006. No Company or
Subsidiary is the beneficiary of any extension of time within
which to file any Tax Return. No claim has ever been made by
an authority in a jurisdiction where any Company or Subsidiary
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 or Subsidiary that have arisen in
connection with any failure (or alleged failure) to pay any
Tax.
(b)
Each
Company and each Subsidiary 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)
No
Company or Subsidiary 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 or Subsidiary incurs Taxes after
the date hereof with respect to periods or portions thereof
ending on or prior to the Closing Date, such Company or
Subsidiary 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 on the Closing Date
Balance Sheet.
(e)
None
of the properties or assets of any Company or Subsidiary is
property which, for Tax purposes, is required to be treated as
owned by another Person. No Company or Subsidiary 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 or Subsidiary 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 or Subsidiary. 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 or Subsidiary.
(g)
There
is no action, suit, examination, investigation, Governmental
Body proceeding, or audit or claim for refund in progress,
pending, proposed or threatened against or with respect to any
Company or Subsidiary regarding Taxes.
(h)
Neither
the Companies nor any of their Subsidiaries 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 no Company or Subsidiary has an application
pending with any taxing authority requesting permission for
any change in accounting method. No Company or Subsidiary 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)
No
Company or Subsidiary has been a member of an affiliated group
(as defined in Section 1504 of the Code), filed or been
included in a combined, consolidated or unitary income Tax
Return, and is not a partner, member, owner or beneficiary of
any entity treated as a partnership or a trust for Tax
purposes. No Company or Subsidiary 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)
No
Company or Subsidiary 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)
No
Company or Subsidiary 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 each Company and
Subsidiary for taxable periods ending on or after December 31,
2004 have been furnished or made available to
Purchaser.
(m)
No
Company or Subsidiary has participated in any reportable
transaction as contemplated in Treasury Regulations Section
1.6011-4.
(n)
No
Company or Subsidiary has taken any action that is not in
accordance with past practice that could defer a liability for
Taxes of such Company or Subsidiary from any taxable period
ending on or before the Closing Date to any taxable period
ending after such date.
(o)
No
Company or Subsidiary is required to include any item of
income for any taxable period ending after the Closing as a
result of an installment sale, open transaction or prepaid
amount received on or prior to Closing Date.
(p)
No
Company or Subsidiary 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)
No
Company or Subsidiary is subject to Tax, or has a permanent
establishment, in any foreign jurisdiction.
(r)
No
Company or Subsidiary has any pending ruling requests filed by
it or on its behalf with any taxing authority or Governmental
Body.
(s)
No
Company or Subsidiary has ever been a personal holding company
within the meaning of Section 542 of the Code.
Section
3.10.
Real Property .
(a)
No
Company or Subsidiary 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 or Subsidiary
(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 Properties 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
and proposed to be conducted. A Company or Subsidiary 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).
No Company or Subsidiary has received any written notice of any
default or event that with notice or lapse of time, or both, would
constitute a default under any of the Real Property Leases and each
Company and Subsidiary and, to the Company's Knowledge, each other
party thereto is in compliance with all obligations of such party
thereunder. All of the Company Property, buildings, fixtures and
improvements thereon owned or leased by the Companies and
Subsidiaries are in good operating condition and repair (subject to
normal wear and tear). The Companies have delivered or otherwise
made available to Purchaser true, correct and complete copies of
the Real Property Leases, together with all amendments,
modifications or supplements, if any, thereto.
(b)
Each
Company and Subsidiary has all certificates of occupancy and
Permits of any Governmental Body necessary or useful for the
current use and operation of each Company Property used by it,
and such Company or Subsidiary has fully complied with all
conditions of the Permits applicable to it. No default or
violation, or event that with the lapse of time or giving of
notice or both would become a default or violation, has
occurred in the due observance of any Permit.
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 $5,000 relating to personal
property used by any Company or Subsidiary or to which any Company
or Subsidiary is a party or by which the properties of any Company
or Subsidiary are bound. The Companies has delivered or otherwise
made available to the Purchaser true, correct and complete copies
of the Personal Property Leases, together with all amendments,
modifications or supplements thereto.
(b)
Each
Company and Subsidiary 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 default under any Personal Property
Lease by such Company or Subsidiary, 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 default thereunder, and such
Companies or Subsidiary and to the Knowledge of the Companies,
each other party thereto is in compliance in all material
respects with all obligations of such Company or Subsidiary or
such other party, as the case may be, thereunder.
(c)
Each
Companies and Subsidiary has good and marketable title to all
the Assets used in the Business 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 or Subsidiary
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 in all material respects suitable for
the purposes used. The assets of the Companies and the
Subsidiaries include all assets, rights and interests
reasonably required for the continued conduct of the Business
by the Companies and the Subsidiaries as now being conducted
and proposed to be conducted.
Section
3.12.
Intellectual Property .
(a)
Each
Company or Subsidiary owns, free and clear from all Liens
(other than Permitted Encumbrances) or otherwise possesses
legally enforceable rights to use all of the Intellectual
Property reasonably necessary to the conduct of business of
such Company or Subsidiary as currently conducted or proposed
to be conducted. The Intellectual Property owned by each
Company or Subsidiary (“
Owned Intellectual Property ”)
and the Intellectual Property licensed to the Companies or their
Subsidiaries comprise all of the Intellectual Property that is used
in or is reasonably necessary to conduct the business of the
Companies and the Subsidiaries as currently conducted or proposed
to be 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 Subsidiary or (B) pursuant to
which the use by any Company or Subsidiary 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 or
reasonably expected to be conducted does not interfere with,
infringe upon, misappropriate, or otherwise come into conflict
with, any Intellectual Property rights of third
parties.
(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 or Subsidiary 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 or
Subsidiary (including but not limited to any works of
authorship incorporated in or distributed with such products)
are owned by or licensed to such Company or Subsidiary and, if
licensed, are subject to Intellectual Property Licenses that
are in full force and effect.
(f)
All
Employees of any Company or Subsidiary and all other Persons
involved in the development of Owned Intellectual Property,
including computer programs and software (including source
code, object code and databases), have entered into
confidentiality and assignment of inventions agreements
substantially in the form included in Section 3.12 of the
Disclosure Schedule.
(g)
No
Company or Subsidiary has created any Intellectual Property
under contract with U.S. government customers.
Section
3.13.
Contracts .
(a) Section 3.13 of the Disclosure Schedule sets forth all of the
Contracts to which any Company or Subsidiary 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, retirement, retention, severance,
change of control or other employee benefit plan or arrangement;
(ii) Contracts other than those described in clause (i) with any
current or former officer, director or employee of any Company or
Subsidiary, or any Affiliate of any Company or Subsidiary or any
such Person; (iii) Contracts with any employee or labor union or
association representing any employee; (iv) Contracts relating
to capital expenditures other than Contracts not exceeding $2,500
individually or $5,000 in the aggregate; (v) Contracts entered into
within the last five years relating to the acquisition or
disposition of any equity interests in or, except in the ordinary
course of business, assets of any Person; (vi) joint venture or
partnership agreements; (vii) Contracts limiting the ability of any
Company or Subsidiary to engage in any line of business or to
compete with any Person or to conduct business in any geographical
area or to solicit any Person for employment; (viii) Contracts
relating to the confidentiality or limitation on use of any
information; (ix) Contracts relating to any indebtedness of any
Company or Subsidiary (other than accounts payable to trade
creditors in the ordinary and usual course of business consistent
with past custom and practice), including credit facilities,
promissory notes, security agreements, and other credit support
arrangements; (x) Contracts relating to any loan (other than
accounts receivable from trade debtors in the ordinary and usual
course of business consistent with past custom and practice) or
advance to (other than ordinary course travel allowances to the
employees of any Company or Subsidiary), or investments in, any
Person; (xi) Contracts relating to any guarantee or other
contingent Liability in respect of any indebtedness or obligation
of any Person (other than the endorsement of negotiable instruments
for collection in the ordinary and usual course of business
consistent with past custom and practice); (xii) all customer
Contracts; (xiii) any license agreement relating in whole or in
part to Intellectual Property (other than standard
“off-the-shelf” or “shrink-wrap” license
agreements); (xiv) any Contract which involves aggregate payments
of $2,500 or more or which is not cancelable without penalty within
120 days, (xv) any Contracts not described above outside the
ordinary and usual course of business consistent with past custom
and practice; and (xvi) all other Contracts. There are no
outstanding powers of attorney executed on behalf of any Company or
Subsidiary.
(b)
Correct
and complete copies of the items required to be set forth in
Section 3.13 of the Disclosure Schedule have previously been
furnished to Parent. All of the Companies’ and any of
their Subsidiaries’ Contracts (including all Real
Property Leases) shall, following the Closing, remain
enforceable by the applicable Companies and Subsidiaries and
binding on the other parties thereto, without the Consent of
any third party. No Company or Subsidiary is in default, nor
has any event occurred which, with the giving of notice or the
passage of time or both, would constitute a default, under any
Contract or any other obligation owed by any Company or
Subsidiary, and no event has occurred which, with the giving
of notice or the passage of time or both, would constitute a
default by any other party to any such Contract. Each of the
Contracts disclosed in Section 3.13 of the Disclosure Schedule
is in full force and effect, is valid and enforceable in
accordance with its terms and is not subject to any claims,
charges, setoffs or defenses.
Section
3.14.
Employee Benefits .
(a)
Section
3.14 of the Disclosure Schedule sets forth a complete and
correct list of (i) all “employee benefit plans,”
as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended (“
ERISA ”),
and any other pension plans or employee benefit agreements,
arrangements, programs or payroll practices (including without
limitation severance pay, other termination benefits or
compensation, vacation pay, company awards, salary continuation for
disability, sick leave, retirement, deferred compensation, bonus or
other incentive compensation, stock purchase arrangements or
policies, hospitalization, medical insurance, life insurance and
scholarship programs) that is currently in effect or was
maintained, sponsored or contributed to by any Company or
Subsidiary within the last six years, or to which any Company or
Subsidiary contributes or is obligated to contribute thereunder
with respect to employees of any Company or Subsidiary, or that has
been approved before the date hereof but is not yet effective
(“
Employee Benefit Plans ”)
and (ii) all “employee pension plans,” as defined in
Section 3(2) of ERISA, maintained by any Company or Subsidiary or
any trade or business (whether or not incorporated) which are under
control, or which are treated as a single employer, of any Company
or Subsidiary under Section 414(b), (c), (m) or (o) of the
(“
ERISA Affiliate ”)
or to which any Company or Subsidiary or any ERISA Affiliate
contributed or is obligated to contribute thereunder
(“
Pension Plans ”)
within t
