LLC INTEREST PURCHASE AGREEMENT

 

Exhibit 2.1

 

 

 

 

 

____________________________________________

 

LLC INTEREST PURCHASE AGREEMENT

____________________________________________

 

 

DATED AS OF FEBRUARY 28, 2005

 

AMONG

 

RENAISSANCE LEARNING, INC.,

 

GENERATION21 LEARNING SYSTEMS, LLC

 

AND

 

JOHN STEARNS

 

 

 

 

RELATING TO ALL ISSUED AND OUTSTANDING

LIMITED LIABILITY COMPANY INTERESTS OF

 

GENERATION21 LEARNING SYSTEMS, LLC

 

 

 

TABLE OF CONTENTS

 

 

SCHEDULES

 

 

Schedule 4.1.6

Assets

Schedule 4.1.8

January 31, 2005 Balance Sheet

Schedule 6.2(a)

Existing Customers

 

Schedule 6.2(b)

Payments

 

 

 

EXHIBITS

 

Exhibit 3.2(a)

Assignment of Membership Interests

Exhibit 3.2(b)

Termination of the Operating Agreement

Exhibit 3.3(b)

Waiver

 

 

 

LLC INTEREST PURCHASE AGREEMENT

 

 

THIS LLC INTEREST PURCHASE AGREEMENT, dated as of February 28, 2005, is made among RENAISSANCE LEARNING, INC., a Wisconsin corporation (the “ Seller ”), JOHN STEARNS (the “ Purchaser ”), and GENERATION21 LEARNING SYSTEMS, LLC, a Wisconsin limited liability company (the “ Company ”).  

RECITALS:

A.

The Seller owns all of the issued and outstanding limited liability company interests (the “ Subject LLC Interests ”) of the Company.

B.

The Purchaser is the President of the Company and is familiar with and responsible for the day to day operations of the Company.

C.

Subject to the terms and conditions hereinafter set forth, the Seller desires to sell and the Purchaser desires to purchase all of the Subject LLC Interests.

D.

The Company’s agreement to be bound by the covenants contained herein is a condition to the Seller’s execution of this Agreement.

E.

The Seller is willing to enter into this Agreement in reliance upon the Company’s agreement to be bound by the covenants contained herein.

F.

The Seller’s agreement to be bound by the covenants contained herein is a condition to the Purchaser’s execution of this Agreement.

NOW, THEREFORE, in consideration of the recitals and of the respective covenants, representations, warranties and agreements herein contained, and intending to be legally bound hereby, the parties hereto hereby agree as follows:

ARTICLE I

DEFINITIONS

As used in this Agreement, the following terms shall have the following meanings, unless otherwise expressly provided or unless the context clearly requires otherwise:

“ Action ” means any claim, action, litigation, suit, arbitration, inquiry, proceeding, audit, complaint or investigation by or before any Governmental Authority

“ Agreement ” or “ this Agreement ” means this LLC Interest Purchase Agreement, dated as of February 28, 2005, among the Seller, the Purchaser and the Company (including all of the schedules and exhibits hereto).

“ Closing ” means the closing of the sale and purchase of the Subject LLC Interests.

“ Closing Date ” means the date of the Closing.

“ Competitor ” means any business, incorporated or otherwise, which competes in the corporate market with the business of the Company as it exists on the Closing Date.

“ Encumbrance(s) ” means any security interest, claim, pledge, mortgage, lien, restriction, easement, covenant, encroachment, charge or other encumbrance of any kind.

“ GAAP ” means generally accepted accounting principles and practices as in effect in the United States at the times and for the periods involved, applied on a consistent basis throughout all such periods.

“ Governmental Authority ” means any United States federal, state, territorial or local or any foreign government, any governmental, regulatory or administrative authority, agency, board, bureau, department or commission or any court, tribunal, or judicial or arbitral body.

“ Intellectual Property Assets ” means all intellectual property owned by the Company, including:

(i)

the proprietary learning content management system software of the Company (the “ Gen21 Software ”), including the source code and the object code related thereto but specifically excluding any third party software embedded in the Gen21 Software;

(ii)

the Company’s name, all assumed fictional business names, trade names, registered and unregistered trademarks, service marks and applications of the Company (collectively, “ Marks ”);

(iii)

all of the Company’s patents, patent applications and inventions and discoveries that may be patentable;

(iv)

all of the Company’s registered and unregistered copyrights in both published works and unpublished works (collectively, “ Copyrights ”);

(v)

all of the Company’s rights in mask works;

(vi)

all of the Company’s trade secrets as defined under applicable law (“ Trade Secrets ”); and

(vii)

all rights in internet web sites and agreements for internet domain name registrations presently used by the Company.

“ Knowledge ” as used in this Agreement, the terms “ to the Knowledge ” of the Seller means the actual, current knowledge of Steven Schmidt or Mary Minch.

“ Membership Interests ” means the limited liability company interests of the Company.

“ Operating Agreement ” means the First Amended and Restated Operating Agreement of the Company dated December 21, 2001.

“ Person ” means any individual, partnership, firm, corporation, limited liability company, association, trust, unincorporated organization or other entity.

“ Securities Act ” means the Securities Act of 1933, as amended.

ARTICLE II

PURCHASE AND SALE

2.1

Purchase and Sale of Subject LLC Interests .  At the Closing, upon and subject to the terms and conditions of this Agreement, the Seller shall sell to the Purchaser, and the Purchaser shall purchase from the Seller, the Subject LLC Interests, free and clear of all Encumbrances.  

2.2

Purchase Price .  The purchase price for the Subject LLC Interests shall be $100,000 (the “ Purchase Price ”).  The Purchase Price shall be paid by wire transfer at the Closing of immediately available funds to a bank account designated in writing by the Seller.

ARTICLE III

CLOSING

3.1

Closing .  The Closing shall take place simultaneously with the execution hereof at such location as may be mutually agreed by the Purchaser and the Seller.

3.2

Items to be Delivered at Closing by the Seller .  At the Closing, the Seller shall deliver to the Purchaser the following:

(a)

the Assignment of Membership Interests of Generation21 Learning Systems, LLC, in the form attached hereto as Exhibit 3.2(a) , duly executed by the Seller.

(b)

the Termination of the Operating Agreement in the form attached hereto as Exhibit 3.2(b) (the “ Termination ”), duly executed by the Seller;

(c)

an assignment of the trademarks “Generation21” and “Generation21 Learning” by the Seller to the Company (the “ Trademark Assignment ”), duly executed by the Seller;

(d)

resolutions of the Board of Directors of the Seller adopted prior to the execution of this Agreement approving the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated under this Agreement, certified by the Seller’s Executive Vice President;

(e)

resignations of such officers of the Company and signatories of the bank and other depository accounts and safe deposit boxes of the Company, as the Purchaser, may direct (if the Seller is unable to deliver such resignations at Closing, the Purchaser and the Seller agree that the Seller and the Company will work cooperatively to obtain such resignations within seven days after Closing); and

(f)

such other agreements, instruments or documents as the Purchaser may reasonably request to carry out the purposes of this Agreement.

3.3

Items to be Delivered at Closing by the Purchaser .  At the Closing and subject to the terms and conditions herein contained, the Purchaser shall deliver to the Seller the following:

(a)

the Purchase Price in the manner specified in Section 2.2, above;

(b)

a waiver for the benefit of the Seller in the form attached hereto as Exhibit 3.3(b) , duly executed by the Purchaser; and

(c)

such other agreements, instruments or documents as the Seller may reasonably request to carry out the purposes of this Agreement.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE SELLER

4.1

Representations and Warranties .  The Seller hereby represents and warrants to the Purchaser, which representations and warranties shall survive the Closing for the periods set forth in Section 4.2, below, that as of the date hereof:

4.1.1

Title to Interests .   The Seller is the beneficial and record owner of and has good, valid and marketable title to the Subject LLC Interests free and clear of all Encumbrances.

4.1.2

Authority of the Seller .  The Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Wisconsin.  The Seller has the corporate power and authority to execute, deliver and perform this Agreement.  The execution, delivery and performance of this Agreement by the Seller have been duly authorized by all necessary corporate action.  This Agreement has been, and the other agreements, documents and instruments required to be delivered by the Seller in accordance with the provisions hereof (the “ Seller’s Documents ”) will be, duly and validly executed and delivered by the Seller.  This Agreement constitutes, and the Seller’s Documents when executed and delivered will constitute, the legal, valid and binding obligations of the Seller enforceable against the Seller in accordance with their respective terms.

4.1.3

No Conflict .   The Seller is not required to give any notice to or obtain any approval, consent, ratification, waiver or other authorization from any Person in connection with the execution and delivery of this Agreement by the Seller or the consummation or performance by the Seller of any of the transactions contemplated by this Agreement.

4.1.4

  Capitalization .  The Subject LLC Interests constitute all of the issued and outstanding Membership Interests.  All of the Subject LLC Interests are fully paid and nonassessable.  The Subject LLC Interests have not been issued in violation of, and are not subject to, any preemptive or subscription rights. Effective as of December 31, 2001, School Renaissance Institute, Inc. (“ School Renaissance ”) merged with and into the Seller (the “ Merger ”) and the Seller was the surviving entity.  As a result of the Merger, the Seller is the record and beneficial owner of the Membership Interests held by School Renaissance immediately prior to the Merger.  To the Knowledge of the Seller, the Company does not, directly or indirectly, own any capital stock of, any equity interest in or any other ownership or investment interest in any corporation, partnership, limited liability company, joint venture or other business entity.  There are no outstanding warrants, options, agreements, subscriptions, convertible or exchangeable securities or other commitments pursuant to which the Company is or may become obligated to issue, sell, purchase, retire or redeem any Membership Interests.

4.1.5

Articles of Organization and Operating Agreement .  True, complete and correct copies of the Company’s Articles of Organization and Operating Agreement have previously been provided to the Purchaser and such documents are in full force and effect without amendment or modification.

4.1.6

Assets .  As between the Seller and the Company only, the assets set forth on Schedule 4.1.6 attached hereto which are physically located at the Golden, Colorado facility of the Company are assets of the Company and not assets of the Seller.  To the Knowledge of the Seller, except for any leases or licenses applicable thereto, all such assets of the Company are owned by the Company free and clear of all Encumbrances.

4.1.7

Intellectual Property .

(a)

To the Knowledge of the Seller:

(i)

upon execution of the Trademark Assignment by the Seller, the Company is the owner of all right, title and interest in and to the Intellectual Property Assets, free and clear of all Encumbrances;

(ii)

all former and current employees of the Company have executed written contracts with the Company that assign to the Company all rights to any inventions, improvements, discoveries or information relating to the business of the Company;

(iii)

none of the products manufactured or sold, nor any process or know-how used, by the Company infringes or is alleged to infringe any patent or other proprietary right of any other Person;

(iv)

none of the Marks used by the Company infringes or is alleged to infringe any trade name, trademark or service mark of any other Person;

(v)

none of the subject matter of any of the Copyrights infringes or is alleged to infringe any copyright of any other Person or is an unauthorized derivative work based upon the work of any other Person;

(vi)

the Company has taken all reasonable precautions to protect the secrecy, confidentiality and value of the Trade Secrets; and

(vii)

the Trade Secrets are not part of the public knowledge or literature and have not been used, divulged or appropriated either for the benefit of any Person (other than the Company) or to the detriment of the Company.  

(b)

No former owner of Membership Interests has a valid right to use or valid ownership interest in the Intellectual Property Assets.

4.1.8

Undisclosed Commitments or Liabilities .  There are no commitments, liabilities or obligations relating to the Company, whether accrued, absolute, contingent or otherwise for which specific and adequate provisions have not been made on the balance sheet of the Company as of January 31, 2005 attached hereto as Schedule 4.1.8 , except those incurred in or as a result of the ordinary course of business since January 31, 2005.

4.1.9

Brokers and Finders .   The Seller has not employed any investment banker, broker or finder or incurred any liability for any investment banking fees, financial advisory fees, brokerage fees, commissions or finder’s fees in connection with the transactions contemplated hereby.

4.2

Warranties Survive Closing .  The warranties and representations of the Seller contained herein shall survive the Closing for a period of eighteen (18) months; provided , however , that the warranties and representations contained in Section 4.1.7(b) shall survive the Closing for a period of twenty-four (24) months; provided , further , that the warranties and representations contained in Sections 4.1.1 and 4.1.2 and the first sentence of Section 4.1.4 hereof shall survive the Closing without a time limit or termination period.  Any claim for indemnification under clause (a) of Section 7.1 hereof made in writing prior to the expiration of such applicable survival period, and the rights of indemnity with respect thereto shall survive such expiration until resolved or judicially determined; and any such claim not so made in writing prior to the expiration of such applicable survival period shall be deemed to have been waived.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

5.1

Representations and Warranties .   The Purchaser hereby represents and warrants to the Seller, which representations and warranties shall survive the Closing for the periods set forth in Section 5.2, below, that as of the date hereof:

5.1.1

Authority of the Purchaser .   The Purchaser has full right, power, legal capacity and authority to purchase the Subject LLC Interests to be sold by the Seller pursuant to this Agreement and to consummate the transactions contemplated herein.  This Agreement has been, and the other agreements, documents and instruments required to be delivered by the Purchaser in accordance with the provisions hereof (the “ Purchaser’s Documents ”) will be, duly and validly executed and delivered by the Purchaser and this Agreement constitutes, and the Purchaser’s Documents when executed and delivered will constitute, the legal, valid and binding obligations of the Purchaser enforceable against the Purchaser in accordance with their respective terms.

5.1.2

No Conflict .  The Purchaser is not required to give any notice to or obtain any approval, consent, ratification, waiver or other authorization from any Person in connection with the execution and delivery of this Agreement by the Purchaser or the consummation or performance by the Purchaser of any of the transactions contemplated by this Agreement.

5.1.3

Purchase for Investment .   The Subject LLC Interests are being acquired by the Purchaser for investment only and not with the view to any public distribution thereof.  The Purchaser acknowledges that the Subject LLC Interests have not and will not be registered by the Company pursuant to the Securities Act.

5.1.4

Brokers and Finders .  The Purchaser has not employed any investment banker, broker or finder or incurred any liability for any investment banking fees, financial advisory fees, brokerage fees, commissions or finder’s fees in connection with the transactions contemplated hereby.

5.2

Warranties Survive Closing .    The warranties and representations of the Purchaser contained herein shall survive the Closing for a period of eighteen (18) months; provided , however , that the warranties and representations contained in Section 5.1.1 hereof shall survive the Closing without a time limit or termination period.  Any claim for indemnification under clause (a)(i) of Section 7.2 hereof made in writing prior to the expiration of such applicable survival period, and the rights of indemnity with respect thereto shall survive such expiration until resolved or judicially determined; and any such claim not so made in writing prior to the expiration of such applicable survival period shall be deemed to have been waived.

ARTICLE VI

ADDITIONAL AGREEMENTS

6.1

Accounts Payable and Accrued Expenses .  The Seller acknowledges and agrees there are no existing liabilities of the Company to the Seller other than pursuant to this Agreement and the Company acknowledges and agrees there are no existing liabilities of the Seller to the Company other than pursuant to this Agreement.  All accounts payable and accrued expenses of the Company that would properly be included on a balance sheet of the Company as of the Closing Date prepared in accordance with GAAP (the “ Existing Payables and Accruals ”) shall be satisfied (other than accrued vacation for those employees the Company does not terminate as of the Closing) by the Seller or the Company in accordance with the remainder of this Section 6.1.  As of the Closing the Company shall have at least $25,000 of cash net of any obligation of the Company to satisfy any Existing Payables and Accruals.  The Seller shall either satisfy the Existing Payables and Accruals directly as they become due or the Company shall satisfy the Existing Payables and Accruals as they become due and the Seller will deposit cash with the Company to the extent necessary to leave the Company with $25,000 net of any obligation of the Company to satisfy Existing Payables and Accruals.  For purposes of clarification, if the Company has no obligation to satisfy Existing Payables and Accruals, the Company would be left with at least $25,000 of cash as of the Closing and if the Company has cash in the amount of $15,000 and is obligated to satisfy Existing Payables and Accruals of $25,000 the Seller would deposit at least $35,000 with the Company.

6.2

Customer Contracts; Continuing Obligations .  The Company acknowledges and agrees that it is now and after the Closing will continue to be contractually obligated to provide services to the customers identified on Schedule 6.2(a) , attached hereto (“ Existing Customers ”).  The Seller shall pay a portion of the costs related to the services to be provided by the Company to the Existing Customers in accordance with Schedule 6.2(b) , attached hereto.  Prior to each scheduled payment by the Seller pursuant to Schedule 6.2(b) , the Company shall certify to the Seller that the Company has performed all of the services the Company is contractually obligated to perform prior to such date for the Existing Customers.  In the event the Company fails to perform services for Existing Customers the Company is contractually obligated to perform:  (a) if the Company is disputing in good faith its obligations pursuant to the contract with such Existing Customer, the Seller shall not be obligated to make payments pursuant to this Section 6.2 with respect to such Existing Customer, or (b) if no good faith dispute described in clause (a) exists, the Seller shall be released from all ob