Exhibit 10.1
MEMBERSHIP INTEREST PURCHASE
AGREEMENT
by and between
L-1 Investment Partners,
LLC
“Buyer”
- and -
Integrated Biometric Technology,
Inc.
“Seller”
-and-
Integrated Biometric Technology,
LLC
“Subsidiary”
November 4,
2005
MEMBERSHIP INTEREST PURCHASE
AGREEMENT
THIS MEMBERSHIP INTEREST PURCHASE AGREEMENT (this “ Agreement ”) is made
and entered into effective as of November 4, 2005 (the
“Effective Date”) by and between Integrated Biometric
Technology, Inc., a Delaware corporation (the “ Seller
”), Integrated Biometric Technology, LLC, a Florida Limited
Liability Company (the “ Subsidiary ”), and L-1
Investment Partners, LLC, a Delaware limited liability company
(“ Buyer ” or “ L-1
”).
A. The Seller is a holding company
that owns one hundred percent (100%) of Subsidiary. Subsidiary
is engaged in the business of providing biometric technology,
including automated electronic fingerprinting technology, to
private and governmental customers (the “ Business
”).
B. The Seller desires to sell to
Buyer, and Buyer desires to purchase from the Seller, fifty-seven
percent (57%) of the issued and outstanding membership
interests of the Subsidiary, including all financial and governance
rights associated therewith (the “Membership
Interests” ) on the terms and conditions set forth in
this Agreement.
C. Simultaneously with closing of
the transfer of the Membership Interests from the Seller to the
Buyer pursuant to the terms of this Agreement, the Buyer shall
contribute to the Subsidiary, in cash, as additional capital, a sum
equal to the outstanding borrowings of the Subsidiary at Closing in
exchange for the issuance to the Buyer by the Subsidiary of
additional membership interests amounting to three percent
(3%) of the issued and outstanding membership interests of the
Subsidiary immediately after such issuance (“Additional
Membership Interests”), and the Subsidiary shall use the
proceeds of such capital contribution to repay in full all of the
outstanding borrowings of the Subsidiary.
N OW , THEREFORE , in consideration of the mutual
representations, warranties and agreements set forth herein, and
for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Sale and
Purchase.
1.1. Agreements to Sell and
Purchase.
(a) On the Closing Date (as
hereinafter defined) the Seller shall sell to Buyer, and Buyer
shall purchase from the Seller, the Membership Interests for the
Purchase Price set forth in Schedule 1.1 (a)
hereof.
(b) On the Closing Date (as hereinafter defined) the
Subsidiary shall sell to Buyer, and Buyer shall purchase from the
Subsidiary, the Additional Membership Interests for the Additional
Purchase Price set forth in Schedule 1.1 (b)
hereof.
1.2. Closing. The
closing of the sale and purchase of the Membership Interests and
the Additional Membership Interests (the “Closing”)
will take place at the offices of Boult, Cummings, Conners &
Berry, PLC in Nashville, Tennessee, on or before November 14,
2005, provided that all conditions set forth in
Article 6 have either been satisfied or, in the case of
conditions not satisfied, waived in writing by the party entitled
to the benefit of such conditions (the “Closing Date”).
At the Closing, the Seller shall deliver, or cause to be delivered,
to Buyer or its designees an assignment and bill of sale
transferring to the Buyer good title to the Membership Interests,
free and clear of any liens, pledges, options, security interests,
trusts, encumbrances or other rights or interests of any person or
entity, together with any taxes, direct or indirect, attributable
to such transfer of the Membership Interests,
and Buyer shall thereupon pay to Seller the
Purchase Price (described in Section 1.3 ). At the
Closing, the Subsidiary shall deliver, or cause to be delivered, to
Buyer or its designees the Additional Membership Interests free and
clear of any liens, pledges, options, security interests, trusts,
encumbrances or other rights or interests of any person or entity,
together with any taxes, direct or indirect, attributable to such
transfer of the Additional Membership Interests, and Buyer shall
thereupon pay to Subsidiary the Additional Purchase Price
(described in Section 1.3 ).
1.3. Purchase Price and
Additional Purchase Price. The consideration to be paid by
Buyer for the Membership Interests (the “ Purchase
Price ”) is described in Schedule 1.1(a). The
consideration to be paid by Buyer for the Additional Membership
Interests (the “ Additional Purchase Price ”) is
described in Schedule 1.1(b) The Purchase Price and the
Additional Purchase Price shall be made in cash (U.S. Dollars) via
wire transfer, or in the alternative, such other payment method as
agreed to by the Buyer and Seller.
2. Representations and Warranties
of the Seller.
Each representation and warranty
contained in this Article 2 is qualified by the
disclosures made in the disclosure schedule attached hereto as
Schedule 2 (the “ Disclosure Schedule
”). This Article 2 and the Disclosure Schedule
shall be read together as an integrated provision. References in
this Article 2 to the Seller’s “ knowledge
” means, unless provided otherwise, the (i) the
actual knowledge of any of the following individuals: Charles
Carroll, Ivan Tennyson, Richard Spencer, Phillip Sandidge and Pat
Haley and/or (ii) what any of such named individuals would be
reasonably expected to know upon the exercise of reasonable due
inquiry. The Seller and the Subsidiary represent and warrant to
Buyer that as of the date hereof and the Closing Date:
2.1. Organization and Good
Standing.
(a) The Seller is a corporation duly
organized, validly existing and in good standing under the laws of
the State of Delaware, with full corporate power and authority to
carry on the Business as it is now and has since its organization
been conducted, and to own, lease or operate its assets and
properties. The Subsidiary is a limited liability company duly
organized, validly existing and in good standing under the laws of
the State of Florida, with full limited liability company power and
authority to carry on the Business as it is now and has since its
organization been conducting, and to own, lease or operate its
assets and properties. The Seller and the Subsidiary are each duly
qualified to do business and are in good standing in every
jurisdiction in which the character of the properties owned or
leased by them or the nature of the business conducted by them
makes such qualification necessary, except where failure to be so
qualified would not have a Material Adverse Effect. For purposes of
this Agreement, the term “ Material Adverse Effect
” shall mean (a) a material adverse effect on the
financial condition, properties, business, or results of operations
of the Seller and/or the Subsidiary, taken as a whole, or
(b) a material adverse effect on the ability of the Seller
and/or the Subsidiary to perform its respective material
obligations under this Agreement; provided, however, that a
Material Adverse Effect shall not include any event, changes,
effect, development, condition or occurrence arising out of or
relating to (i) general economic or political conditions in
the United States of America and (ii) conditions generally
applicable to the industry in which the Seller or the Subsidiary
operates (except in the case of clauses (i) and
(ii) above, if the event, change, effect, development,
condition or occurrence disproportionately impacts the business,
assets, or financial condition of the Seller and the Subsidiary,
taken as a whole). Schedule 2.1 lists all of the
jurisdictions in which the Seller and the Subsidiary are qualified
to do business.
(b) The Seller and the Subsidiary
have each obtained all licenses, permits, easements, variances,
exemptions, consents, certificates, orders, approvals, franchises
and other authorizations (collectively, the “ Subsidiary
Permits ”) and have taken all actions required by
applicable
law or regulations of any supra-national,
national, state, municipal or local government (including any
subdivision, court, administrative agency, competent authority,
notified body or commission or other authority thereof) or any
quasi-governmental body exercising any regulatory, taxing,
importing or other governmental or quasi-governmental authority
(each a “ Governmental Entity ,” and
collectively “ Governmental Entities ”) in
connection with their Businesses as now conducted (or to the extent
such actions are currently required, in connection with the
Businesses reasonably anticipated to be conducted over the next
twelve months), except where the failure to obtain any such
Subsidiary Permits or to take any such action, individually or in
the aggregate, does not and would not reasonably be expected to
have a Material Adverse Effect.
2.2. Ownership of Membership
Interests.
(a) The Seller owns all of the
outstanding membership interests of the Subsidiary free and clear
of all liens, encumbrances, security interests, pledges,
conditional or installment sale agreements, mortgages, charges
and/or any other claim of third parties of any kind (collectively
“Liens”). The Membership Interests and the Additional
Membership Interests being purchased by the Buyer for the Purchase
Price and Additional Purchase Price will collectively constitute
60% of the issued and outstanding membership interests in the
Subsidiary immediately after closing. The remaining 40% of the
issued and outstanding membership interests (the “Remaining
Membership Interests”) shall continue to be owned by the
Seller immediately after consummation of the transactions
contemplated by this Agreement, subject to the terms of the Merger
Agreement described in Section 6.3(g) and the Deposit
Agreement described in Section 6.2(j). All of the membership
interests of the Subsidiary have been, and will be at the Closing,
duly authorized, validly issued and outstanding, fully paid and
non-assessable. Neither the Seller nor the Subsidiary has granted,
issued or agreed to grant or issue and/or will grant, issue or
agree to grant or issue any other equity interest in the Subsidiary
(except the Additional Membership Interests) and/or the Seller and
there are no, nor will there be at the Closing, outstanding
options, warrants, subscription rights, securities that are
convertible into or exchangeable for, or any other commitments of
any character relating to, any equity interest in the Subsidiary
and/or the Seller (collectively “Equity Rights”). No
membership interests in the Subsidiary and/or any capital stock or
equity interests in the Seller are, or will be at the Closing,
subject to any right of first refusal, preemptive, subscription or
other similar right under any provision of applicable law or any
agreement (collectively “Preemptive Rights”). There are
no voting restrictions or restrictions on transfer of the
Membership Interests, the Remaining Membership Interests, the
Additional Membership Interests and/or capital stock or equity
interests in the Seller (collectively “Restrictions”)
except as set forth on Schedule 2.2 .
(b) There are no obligations,
contingent or otherwise, of the Subsidiary to repurchase, redeem or
otherwise acquire any of the Membership Interests, the Additional
Membership Interests and/or the Remaining Membership Interests or
to make any investment (in the form of a loan, capital contribution
or otherwise) in any individual, corporation, company, partnership,
trust, incorporated or unincorporated association, joint venture or
other entity of any kind (collectively “Person”). The
Subsidiary does not own or control any equity security or other
interest of any other Person. The Subsidiary is not a party to any
agreement (i) requiring it to acquire any securities or
ownership interests in any Person; and/or (ii) requiring it to
make any investment in and/or to fund in any manner any Person.
Since its inception, the Subsidiary has not consolidated or merged
with, acquired all or substantially all of the assets of, or
acquired the stock of or any interest in any Person. There are no
outstanding membership interests held in the Subsidiary’s
treasury.
(c) Upon consummation of the
transactions contemplated hereby at the Closing, the Buyer will own
the Membership Interests and the Additional Membership Interests
free and clear of all Liens, Equity Rights, Preemptive Rights
and/or Restrictions. Upon consummation of the transactions
contemplated hereby at the Closing, the Buyer will own 60% of the
outstanding membership interests of the Subsidiary.
(d) On the Effective Date, and on
the Closing Date, Charles Carroll, Ivan Tennyson, Richard Spencer
and Phillip Sandidge own, and will own, 100% of the issued and
outstanding shares of the capital stock and equity interests of the
Seller in the respective amounts set forth on Schedule
2.2(d) .
2.3. Authorization of
Agreement.
The Seller and the Subsidiary have
all requisite corporate and limited liability company power and
authority, respectively, to enter into this Agreement and to
consummate the transactions contemplated hereby. This Agreement and
all other agreements and instruments to be executed by the Seller
and/or the Subsidiary in connection herewith (together with all
other documents to be delivered in connection herewith or
therewith, collectively the “Transaction Documents”)
have (except for Transaction Documents to be executed and delivered
solely by Buyer) been duly and validly approved by the Board of
Directors of the Seller, the shareholders of the Seller and the
members of the Subsidiary (the “Authorizing Parties”)
and no other proceedings on the part of the Seller and/or the
Subsidiary are necessary to approve this Agreement and to
consummate the transactions contemplated hereby or thereby. This
Agreement and the other Transaction Documents to be delivered by
the Seller and/or the Subsidiary have been (or upon execution will
have been) duly executed and delivered by the Seller and the
Subsidiary, have been effectively authorized by all necessary
action, corporate or otherwise, and constitute (or upon execution
will constitute) legal, valid and binding obligations of the Seller
and the Subsidiary, enforceable in accordance with their respective
terms, except as such enforceability may be limited by general
principles of equity and bankruptcy, insolvency and other similar
laws relating to creditors’ rights (the “ Bankruptcy
Exception .”)
2.4. Title to
Assets.
(a) The Subsidiary is the lawful
owner of each of the assets, whether real, personal, mixed,
tangible or intangible, comprising and employed in the operation of
or associated with the Business, including but not limited to the
Owned Intellectual Property as defined in Section 2.6(c) other
than those Assets which the Subsidiary leases, in which case the
Subsidiary has a valid leasehold interest in such Assets. The
Assets owned and/or leased by the Subsidiary (collectively the
“Assets”) include all of the properties and other
assets necessary for the Subsidiary and the Seller to conduct the
Business in the manner presently conducted. The Assets are
sufficient and adequate to conduct the Business as presently
conducted, and are free and clear of all liens, mortgages, pledges,
security interests, restrictions, prior assignments, encumbrances
and claims of any kind, except for (a) leases which apply to
certain assets which the Subsidiary leases from third parties,
(b) security interests and liens consented to in writing by
Buyer, (c) any inchoate statutory liens for real and personal
property taxes not yet due or payable, and (d) liens, security
interests or other encumbrances which are described in Schedule
2.4 (“ Permitted Liens ”). There are no
outstanding agreements, options or commitments of any nature
obligating the (i) Subsidiary to transfer any of the Assets of
the Subsidiary or rights or interests therein to any party; and/or
(ii)Seller to transfer any of the assets of the Seller or rights or
interests therein to any party
2.5. Financial Condition and
Accounting.
(a) Financial Statements .
Schedule 2.5 sets forth true and complete copies of
(i) the balance sheet of the Subsidiary, as of the twelve
month period ended December 31, 2004 and the related
statements of income and cash flows for the year then ended, in
each case audited by independent public accountants whose reports
are attached thereto (the “ Audited Financial
Statements ”), (ii) the unaudited
balance sheet of the Subsidiary and the related
statement of income for the stub period from January 1, 2005
through August 31, 2005 (the “Unaudited Stub Financial
Statements”) and (iii) the unaudited balance sheets of
the Subsidiary, as of the twelve month periods ended
December 31, 2003 and 2002 and the related statements of
income for the years then ended ( the “Unaudited Annual
Financial Statements”). The Audited Financial Statements, the
Unaudited Stub Financial Statements and the Unaudited Annual
Financial Statements present fairly the financial condition and
position and operating results of the Subsidiary as of the
respective dates thereof and for the periods therein indicated. The
Audited Financial Statements, the Unaudited Stub Financial
Statements and the Unaudited Annual Financial Statements reflect
the consistent application of accounting principles throughout the
periods incurred. The Audited Financial Statements (i) were
prepared in accordance with the books and records of the
Subsidiary; and (ii) were prepared in accordance with
generally accepted accounting principles (“ GAAP
”) consistently applied. The Unaudited Stub Financial
Statements and the Unaudited Annual Financial Statements
(i) were prepared in accordance with the books and records of
the Subsidiary; and (ii) were prepared in accordance with
GAAP consistently applied other than required footnote
disclosures and the required statements of cash flows and certain
year end accruals and reserves. The books and records of the
Subsidiary are being maintained in accordance with applicable legal
and accounting requirements as necessary to permit the preparation
of financial statements in accordance GAAP and to maintain asset
accountability The Audited Financial Statements, the Unaudited Stub
Financial Statements and the Unaudited Annual Financial Statements
are collectively referred to in this Agreement as the Financial
Statements.
(b) Absence of Certain
Changes . Except as described in Schedule 2.5 , since
December 31, 2004 there has not been any (i) change in
the assets, liabilities, financial condition, or operations of the
Subsidiary, other than changes in the ordinary course of business,
which had or is reasonably expected to have a Material Adverse
Effect on such assets, liabilities, financial condition, or
operations; (ii) Material Adverse Change; and/or (iii), any
event, action, or circumstance of the kind described in
Section 4.3 . For purposes of this Agreement, a “
Material Adverse Change ” means any event,
circumstance, condition, development or occurrence causing,
resulting in, having, or that could reasonably be expected to have,
a Material Adverse Effect.
2.6. Certain Property of the
Subsidiary and the Seller. .
(a) Real Property . The
Subsidiary does not own any real property.
Schedule 2.6(a) lists all real properties leased by the
Subsidiary.
(i) The Subsidiary has good and
valid title to the leaseholds in the real properties set forth in
Schedule 2.6(a) under written leases (each lease being
referred to herein as a “ Real Property Lease, ”
and collectively the “ Real Property Leases ”)
and each Real Property Lease is a valid and binding obligation of
the Subsidiary, enforceable in accordance with its respective
terms, except as enforceability may be limited by the Bankruptcy
Exception. The Seller has provided to the Buyer true and complete
copies of the Real Property Leases and all other agreements and
documents under which the Subsidiary leases any real property (
collectively with the Real Property Leases the “Lease
Documents”). The Lease Documents are unmodified and in full
force and effect, and there are no other agreements, written or
oral, with respect to any real property lease by the Subsidiary
other that the Lease Documents.
(ii) The Subsidiary is not, and
neither the Subsidiary nor the Seller have any knowledge that any
other party to any Lease Documents, including but not limited to
the Real Property Leases, is in default with respect to any
material term or condition thereof, and no event has occurred which
through the passage of time or the giving of notice, or both, would
constitute a default thereunder or would cause the acceleration of
any obligation of any party thereto or the creation of a lien or
encumbrance upon any asset of the Subsidiary.
(b) Personal Property . All
vehicles, furniture, fixtures, equipment and other items of
tangible personal property owned or leased by the Subsidiary and
material to the operation of the Business (the “ Personal
Property ”) has been maintained in accordance with the
past practice of the Subsidiary and generally accepted industry
practice and is in good operating condition and repair (normal wear
and tear excepted) sufficient to enable the Subsidiary to operate
the Business as presently conducted. The Subsidiary holds valid
leases in all of the Personal Property leased by it, and the
Subsidiary has not granted to any other person or made in favor of
any sublease, license or other agreement granting to any person any
right to use such property (each such lease, sublease, license or
other agreement, a “Personal Property Lease ,”
and collectively the “ Personal Property Leases
”). The Seller has provided to the Buyer true and complete
copies of the Personal Property Leases and all other agreements and
documents under which the Subsidiary leases any personal property (
collectively with the Personal Property Leases the “ Personal
Lease Documents”). The Personal Lease Documents are
unmodified and in full force and effect, and there are no other
agreements, written or oral, with respect to any personal property
lease by the Subsidiary other than the Personal Lease Documents.
The Subsidiary is not, and neither the Subsidiary nor the Seller
have any knowledge that any other party to any Personal Lease
Documents, including but not limited to the Personal Property
Leases, is in default with respect to any material term or
condition thereof, and no event has occurred which through the
passage of time or the giving of notice, or both, would constitute
a default thereunder or would cause the acceleration of any
obligation of any party thereto or the creation of a lien or
encumbrance upon any asset of the Subsidiary..
(c) Intellectual Property
.
(i) Schedule 2.6 (c)(i) sets
forth a true and complete list of all (a) patents and patent
applications, trademarks, trademark registrations and trademark
applications, registered copyrights and copyright applications,
domain names, Software (as defined in this Section 2.6 (c)(i))
and other Intellectual Property (as defined in this
Section 2.6 (c)(i)) that are owned and/or partially owned by
the Subsidiary and/or the Seller (indicating the percentage of
ownership) and material to the business of the Subsidiary
(collectively “Owned Intellectual Property”) and
(b) licenses or sublicenses of Intellectual Property to the
Subsidiary and/or the Seller, and licenses and sublicenses of
Intellectual Property by the Subsidiary or the Seller to any third
party, in each case that are material to the business of the
Subsidiary (collectively “Licensed Intellectual
Property”). For purposes hereof, “Intellectual
Property” means: (i) United States, international, and
foreign patents, patent applications and statutory invention
registrations, (ii) patentable inventions, discoveries,
improvements , ideas, know-how, formula, methodology, processes and
technology, (iii) trademarks, service marks, trade names
including but not limited to the name “Integrated Biometrics
Technology, trade dress, slogans, logos, domain names, and other
source identifiers, including registrations and applications for
registration thereof, (iv) original works of authorship,
copyrightable subject matter, and copyrights, including copyright
registrations and/or applications for copyright registration,
(v) confidential and/or proprietary information, including
trade secrets and/or know-how embodied in any invention, work of
authorship, customer list, database, business information, and/or
Software, and (vi) inventions, extensions, modifications, or
enhancements of the Software or related to the Software. For
purposes hereof, “Software” means all computer software
developed by or on behalf of the Subsidiary and/or the Seller, or
used by the Subsidiary, including all computer software in any form
(such as, source code, object code, assembler code, microcode,
etc.), libraries, user-interfaces (including graphical
user-interfaces, application programming interfaces (APIs), and
other software interfaces), and databases operated by the
Subsidiary or used by the Subsidiary in any way, including use in
internal Subsidiary operations, testing (including alpha and beta
tests), licensing, marketing, sales, and/or in connection with
processing customer orders, storing customer information, or
storing and archiving data.
(ii) The use of the Owned
Intellectual Property and the Licensed Intellectual Property by the
Subsidiary in the ordinary course of business does not conflict
with or infringe upon, violate or misappropriate the Intellectual
Property rights of any third party, and no claim has been asserted
that the use of such Intellectual Property in the ordinary course
of business does or may conflict with or infringe upon, violate or
misappropriate the Intellectual Property rights of any third
party.
(iii) The Subsidiary is the
exclusive owner of the entire and unencumbered right, title and
interest in each item of Owned Intellectual Property in the United
States and worldwide (with the exception of the Owned Intellectual
Property covered by the Subsidiary’s agreements with Lockheed
Martin Corporation (“Lockheed”) which is 50% owned by
the Subsidiary and 50% owned by Lockheed) , and the Subsidiary is
entitled to use all such Owned Intellectual Property in the
ordinary course of business in the United States and worldwide,
subject only to the terms of the licenses of the Owned Intellectual
Property granted by the Subsidiary. The Subsidiary has the right to
use each item of Licensed Intellectual Property as provided in the
license agreements therefore, and the Subsidiary is entitled to use
all such Licensed Intellectual Property in the ordinary course of
business, subject only to the terms of the licenses of the Licensed
Intellectual Property granted by the licensors thereof. The Seller
has provided to the Buyer true and complete copies of all
agreements and documents with respect to the Licensed Intellectual
Property and the Owned Intellectual Property.
(iv) The Owned Intellectual Property
and the Licensed Intellectual Property include all of the
Intellectual Property and Software used in the Business and the
ordinary day-to-day operations of the Subsidiary, and there are no
other items of Intellectual Property or Software that are material
to the Business and/or such ordinary day-to-day operations. The
Owned Intellectual Property and, to the knowledge of the Seller and
the Subsidiary, any Intellectual Property licensed to the
Subsidiary under the Licensed Intellectual Property, is subsisting,
valid and enforceable, and has not be adjudged invalid or
unenforceable in whole or part.
(v) No legal proceedings have been
asserted, are pending, or, to the knowledge of the Seller and/or
the Subsidiary, threatened against the Subsidiary and/or the Seller
(i) based upon or challenging or seeking to deny or restrict
the use by the Subsidiary and/or the Seller of any of the Owned
Intellectual Property or Licensed Intellectual Property,
(ii) alleging that any services provided by, processes used
by, or products manufactured or sold by the Subsidiary and/or the
Seller infringe upon or misappropriate any Intellectual Property
right of any third party, or (iii) alleging that any
Intellectual Property licensed under the Licensed Intellectual
Property infringes upon any Intellectual Property right of any
third party or is being licensed or sublicensed in conflict with
the terms of any license or other agreement.
(vi) To the knowledge of the Seller
and/or the Subsidiary , no person is engaging in any activity that
infringes upon the Owned Intellectual Property or any Intellectual
Property licensed to the Subsidiary and/or the Seller under the
Licensed Intellectual Property. Except as set forth in Schedule
2.6 (c)(vi), the Subsidiary has not granted any license or
other right to any third party with respect to the Owned
Intellectual Property or Licensed Intellectual Property. The
consummation of the transactions contemplated by this Agreement
will not result in the termination, cancellation and/or or
impairment of any of the Owned Intellectual Property and/or the
Licensed Intellectual Property..
(vii) The Subsidiary has delivered
or made available to the Buyer correct and complete copies of all
the licenses and sublicenses of the Licensed Intellectual Property
to which the Seller and/or the Subsidiary is a party. With respect
to each such license and sublicense:
(a) such license and sublicense is
valid and binding and in full force and effect and represents the
entire agreement between the respective licensor and licensee with
respect to the subject matter of such license or
sublicense;
(b) such license or sublicense will
not cease to be valid and binding and in full force and effect on
terms identical to those currently in effect as a result of the
consummation of the
transactions contemplated by this Agreement, nor
will the consummation of the transactions contemplated by this
Agreement constitute a breach or default under such license or
sublicense or otherwise give the licensor or sublicensor a right to
terminate such license or sublicense;
(c) neither the Seller nor the
Subsidiary (i) received any notice of termination or
cancellation under such license or sublicense; (ii) received
any notice of a breach or default under such license or sublicense,
which breach has not been cured, nor (iii) granted to any
other third party any rights, adverse or otherwise, under such
license or sublicense that would constitute a breach of such
license or sublicense; and
(d) neither the Seller, the
Subsidiary, nor, to the Sellers and/or Subsidiary’s
knowledge, any other party to such license or sublicense is in
breach or default in any material respect, and, to the
Seller’s and/or the Subsidiary’s knowledge, no event
has occurred that, with notice or lapse of time would constitute
such a breach or default or permit termination, modification or
acceleration under such license or sublicense.
(viii) To the Seller’s
knowledge, the Software is free of all viruses, worms, Trojan
horses and other material known contaminants, and does not contain
any bugs, errors, or problems of a material nature that disrupt its
operation or have an adverse impact on the operation of other
software programs or operating systems, and no rights in the
Software have been transferred to any third party.
(ix) The Subsidiary has the right to
use all software development tools, library functions, compilers,
and other third party software that is material to the business of
the Subsidiary, or that is required to operate or modify the
Software.
(x) The Seller and the Subsidiary
have taken reasonable steps in accordance with normal industry
practice to maintain the confidentiality of its customer lists and
customer information, trade secrets and other confidential
Intellectual Property. To the knowledge of the Seller and the
Subsidiary (a) there has been no misappropriation of any
material trade secrets or other material confidential Intellectual
Property of the Seller and/or the Subsidiary by any Person,
(b) no employee, independent contractor or agent of the Seller
and/or the Subsidiary has misappropriated any trade secrets of any
other Person in the course of such performance as an employee,
independent contractor or agent and (c) no employee,
independent contractor or agent of the Seller and/or the Subsidiary
is in default or breach of any term of any employment agreement,
non-disclosure agreement, assignment of invention agreement or
similar agreement or contract relating in any way to the
protection, ownership, development, use or transfer of Intellectual
Property.
(xi) No current and former employee,
director, and/or officer of the Seller and/or the Subsidiary has
any rights whatsoever to any of the Owned Intellectual Property
and/or the Licensed Intellectual Property. Neither the Seller nor
the Subsidiary believes it is or will be necessary to utilize any
inventions, trade secrets or proprietary information of any of its
employees made prior to their employment by the Seller and/or the
Subsidiary, except for inventions, trade secrets or proprietary
information that have been assigned to the Subsidiary.
(xii) Neither the execution,
delivery nor consummation of this Agreement or the transactions
contemplated hereby, nor the carrying on of the Subsidiary’s
business after the Closing, will conflict with or result in a
breach of the terms, conditions or provisions of, or constitute a
default under, any agreement contract, license covenant or
instrument under which any of the Owned and/or Licensed
Intellectual Property is owned, used and/or licensed by the
Subsidiary or the Seller, including but not limited to agreements
and contracts with Lockheed Martin Corporation
(“Lockheed”). The Seller and the Subsidiary have
provided to the Buyer true and complete copies of all agreements,
contracts and/or licenses of any
kind between the Seller and/or the Subsidiary
and Lockheed (the “Lockheed Agreements”).The Subsidiary
and Lockheed jointly own all Intellectual Property covered under
the Lockheed Agreements (“Joint Intellectual
Property”). The Subsidiary has the right to utilize any such
Joint Intellectual Property in any server, hardware, application
and/or any other product as well as modify the Joint Intellectual
Property without the permission of Lockheed and without the payment
of any consideration, royalties and/or fees of any kind to
Lockheed, except as may be required by the Lockheed
Agreements.
(d) the Seller does not own, lease
and/or license in any manner any assets, real property, personal
property and/or intellectual property of any kind, other than 100%
of the issued and outstanding membership interests of the
Subsidiary.
2.7. No Conflict or
Violation.
Except as disclosed in Schedule
2.7, the execution, delivery and performance by the Seller of
this Agreement and the other Transaction Documents to be delivered
by the Seller and the consummation of the transactions contemplated
hereby and thereby do not and will not ( with or without notice or
passage of time) : (i) violate or conflict with any provision
of the charter documents or bylaws of the Seller or the Subsidiary;
(ii) violate in any material respect any provision or
requirement of any domestic or foreign, federal, state, or local
law, statute, judgment, order, writ, injunction, decree, award,
rule, or regulation of any Governmental Entity applicable to the
Seller, the Subsidiary and/or the Business; (iii) violate in
any material respect, result in a material breach of, constitute
(with due notice or lapse of time or both) a material default or
cause any material obligation, penalty, premium or right of
termination to arise or accrue under any Intellectual Property
licenses or agreements and/or any Contract (as hereinafter defined
in Section 2.12); (iv) result in the creation or
imposition of any Lien of any kind whatsoever upon any of the
Membership Interests, the Additional Membership Interests, the
Remaining Membership Interests, properties and/or Assets of the
Subsidiary or the Business; or (v) result in the cancellation,
modification, revocation or suspension of any material license,
permit, certificate, franchise, authorization or approval issued or
granted by any Governmental Entity (each a “ License,
” and collectively, the “ Licenses
”).
2.8. Consents.
Schedule 2.8 lists all consents and notices required to be
obtained or given by or on behalf of the Seller and/or the
Subsidiary in connection with the consummation of the transactions
contemplated by this Agreement and the Transaction Documents in
compliance with all applicable laws, rules, regulations, or orders
of any Governmental Entity, the provisions of any material Contract
and/or any Intellectual Property license or agreement, and except
as set forth on Schedule 2. 8 all such consents have been
duly obtained and are in full force and effect, except where the
failure to obtain such consent will not have a Material Adverse
Effect
2.9. Labor and Employment
Matters.
Except as identified on Schedule
2.9 , there are no employment agreements, collective
bargaining agreements or other labor agreements to which the
Subsidiary is a party or by which it is bound. The Seller and the
Subsidiary have provided to the Buyer true and complete copies of
all agreements identified on Schedule 2.9 . Schedule
2.9 also sets forth the name, position and salary of all 13
individuals employed by the Subsidiary (exclusive of independent
contractors and consultants). The Seller has no employees. The
Subsidiary is in compliance, and at all times has complied ,
in all material respects with all applicable laws, rules and
regulations relating to the employment of labor, including those
related to wages, hours, collective bargaining, occupational safety
and health, and the payment and withholding of taxes and other sums
as required by appropriate Governmental Entities (“Employment
Laws”) and has withheld and paid to the appropriate
Governmental Entities or are holding for payment not yet due to
such Governmental Entities, all amounts required to be withheld
from employees of the Subsidiary and are not liable for any arrears
of wages, taxes, penalties or other sums for failure to comply with
any of the
foregoing. There is no (i) unfair labor
practice complaint against the Subsidiary pending before the
National Labor Relations Board or any state or local agency and, to
the knowledge of the Seller, no such complaint is threatened;
(ii) pending, or to the knowledge of the Seller, threatened
labor strike or other material labor trouble affecting the
Subsidiary; (iii) material labor grievance pending or, to the
knowledge of the Seller, threatened against the Subsidiary;
(iv) pending or, to the knowledge of the Seller, threatened
representation respecting the employees of the Subsidiary by a
labor union; (v) pending or, to the knowledge of the Seller,
threatened arbitration proceedings arising out of or under any
collective bargaining agreement to which the Subsidiary is a party;
and (vi) claim currently pending or, to the knowledge of the
Seller, threatened against the Subsidiary alleging the violation of
any Employment Laws, or any other asserted or threatened claim
whatsoever, whether based in tort, contract or law, arising out of
or relating in any way to any person’s employment (actual or
alleged), application for employment or termination of employment
with the Subsidiary. The Seller and the Subsidiary have complied
with all laws, rules, statutes, ordinances, regulations and
requirements of all Governmental Entities (“Applicable
Laws”), including, but not limited to, Employment Laws,
related to the use of independent contractors and consultants in
the conduct of the Business, except for such failures to comply as
will not have a Material Adverse Effect. For purposes of this
Section 2.9 , “employees” includes
employees, independent contractors, consulting employees, and other
persons filling similar functions. All employees of the Subsidiary
reside and perform their job duties solely within the United
States, and none of such employees perform services pursuant to a
visa or similar authorization.
2.10. Employee
Plans.
(a) Except as disclosed on
Schedule 2.10 hereto, all accrued obligations of the
Subsidiary, whether arising by operation of law, by contract or
past custom, or otherwise, for payments by the Subsidiary to trusts
or other funds or to any Governmental Entity, with respect to
unemployment compensation benefits, social security benefits or any
other benefits or obligations, with respect to employment of
employees, independent contractors and/or consultants through the
date hereof have been paid or adequate accruals therefor have been
made in the Financial Statements, and payments or adequate accruals
for all such obligations will be made through the Closing Date.
Except as disclosed on Schedule 2.10 hereto, all reasonably
anticipated obligations of the Subsidiary with respect to
employees, independent contractors and/or consultants whether
arising by operation of law, by contract, by past custom, or
otherwise, for salaries, vacation and holiday pay, sick pay,
bonuses and other forms of compensation payable to employees in
respect of the services rendered by any of them prior to the date
hereof have been or will be paid by the Subsidiary prior to the
Closing Date or adequate accruals therefor have been made in the
Financial Statements, and payments or adequate accruals for all
such obligations will be made through the Closing Date.
(b) Schedule 2.10(b)
lists all bonus, pension, stock option, stock purchase, benefit,
welfare, profit-sharing, deferred compensation, retainer,
consulting, retirement, welfare, disability, vacation, severance,
hospitalization, insurance, incentive, deferred compensation and
other similar fringe or employee benefit plans, funds, programs or
arrangements, whether written or oral, in each of the foregoing
cases which cover, are maintained for the benefit of, or relate to
any or all current or former employees, managers, members
,independent contractors and/or consultants of the Subsidiary, and
any other entity (“ ERISA Affiliate ”) related
to the Subsidiary under Section 414(b), (c), (m) and
(o) of the Internal Revenue Code of 1986, as amended (the
“ Code ”) (all of the foregoing are collectively
the “ Employee Plans ”), together with all
accrued liabilities under such Employee Plans. Neither the
Subsidiary nor any ERISA Affiliate of the Subsidiary has any
liability or contingent liability with respect to the Employee
Plans other than routine claims for benefits, nor will any of the
Subsidiary’s assets be subject to any lien, charge or claim
relating to the obligations of the Subsidiary with respect to
employees or Employee Plans. No party to any Employee Plan is in
default with respect to any material term or condition thereof, nor
has any event occurred which through the passage of time or the
giving of notice,
or both, would constitute a default thereunder
or would cause the acceleration of any obligation of any party
thereto. The Seller and the Subsidiary have provided to the Buyer
true and complete copies of all Employee Plans.
(c) Each of the Employee Plans, and
the administration thereof, is and has been in material compliance
with all Applicable Laws currently in effect, including, without
limitation, the Employee Retirement Income Security Act of 1974, as
amended (“ERISA”), and the Code, and, with respect to
each Employee Plan, there is no violation of any reporting or
disclosure requirement imposed by any Applicable Law including
without limitation, ERISA or the Code. Each of the Subsidiary and
its ERISA Affiliates has made full and timely payment of all
amounts required to be contributed under the terms of each Employee
Plan and Applicable Laws or required to be paid as expenses or
benefits under such Employee Plan, and has made adequate provision
for reserves on the Financial Statements to satisfy contributions
and payments not yet made because they are not yet due under the
terms of such Employee Plan. There is no pending claim, action,
suit or proceeding that has been asserted or instituted against any
Employee Plan, the assets of any Employee Plan, the Subsidiary or
the plan administrator or any fiduciary of any Employee Plan in
respect of the operation of such Employee Plan (other than routine,
uncontested benefit claims) and no Employee Plan is under audit or
is the subject of any audit or investigation by any Governmental
Entity. No act or omission has occurred and no condition exists
with respect to any Employee Plan maintained by the Subsidiary or
any ERISA Affiliate that would subject the Subsidiary, any ERISA
Affiliate or the Buyer to any (i) fine, penalty, tax or
liability imposed under ERISA or the Code (other than liabilities
incurred in the ordinary course of business that are consistent
with the Code and ERISA, including liabilities for benefits,
contributions, premiums and other similar costs), or
(ii) contractual indemnification or contribution obligation
protecting any fiduciary, insurer or service provider with respect
to any Employee Plan. All amendments and actions required to bring
each of the Employee Plans into conformity in all material respects
with all of the applicable provisions of ERISA and other Applicable
Laws have been made or taken except to the extent that such
amendments or actions are not required by law to be made or taken
until a date after the Closing and are disclosed on Schedule
2.9(c) . Each Employee Plan intended to be qualified under
Section 401(a) of the Code has received a determination letter
from the Internal Revenue Service to such effect, no such
determination letter has been revoked and revocation has not been
threatened, and no such Employee Plan has been amended or operated
since the date of its most recent determination letter or
application therefor in any respect, and no act or omission has
occurred, that would adversely affect its qualification. All
contributions or other payments required to be made under the terms
of each Employee Plan or otherwise have been timely made. There are
no unfunded obligations of any kind for which the Subsidiary is
responsible under any Employee Plan.
(d) Neither the Subsidiary nor any
ERISA Affiliate sponsors or has sponsored, maintained, contributed
to, incurred an obligation to contribute to or withdrawn from, any
Multi-Employer Plan (as defined in Section 4000(a)(3) of
ERISA) or any Multiple Employer Plan (as defined in ERISA Sections
4063 or 4064 or Code Section 413), whether or not terminated,
for which any withdrawal or partial withdrawal liability has been
or could be incurred, whether or not any such liability has been
asserted by or on behalf of any such plan. Neither the Subsidiary
nor any ERISA Affiliate sponsors or has ever sponsored, maintained,
contributed to or incurred an obligation to contribute to any
Employee Plan subject to the provisions of Title IV of
ERISA.
(e) There are no contracts,
agreements, plans or arrangements covering any of the
Subsidiary’s employees with “change of control”
or similar provisions. There is no contract, agreement, plan or
arrangement covering the Subsidiary or any employee, that
individually or collectively could give rise to the payment of any
amount that would not be deductible pursuant to the terms of
Section 280G of the Code. Neither the Subsidiary nor any of
its ERISA Affiliates has incurred any liability under the Worker
Adjustment Retraining and Notification Act or any similar state law
relating to employment termination in connection with a mass
layoff, plant closing or similar event.
(f) Other than routine claims for
benefits, there is no claim pending or to the knowledge of the
Seller, threatened, involving any Employee Plan by any person
against such Employee Plan, the Subsidiary or any of its ERISA
Affiliates. There is no pending or, to the knowledge of the Seller,
threatened, proceeding involving any Employee Plan before the IRS,
the United States Department of Labor or any other governmental
authority.
2.11. Litigation.
There are no claims, actions, suits,
or proceedings of any nature pending or, to the knowledge of the
Seller and/or the Subsidiary, threatened by or against the Seller,
the Subsidiary, the managers, or members of the Subsidiary, or any
of their respective Affiliates, including without limitation those
involving, affecting or relating to (i) the Business, any
Assets, properties, prospects and/ or operations of the Subsidiary
and/or the Seller, (ii) any Contracts, (iii) any Owned
Intellectual Property, (iv) any Licensed Intellectual
Property, and/or (v) the transactions contemplated by this
Agreement (collectively “ Claims ” ) .
For purposes of this Agreement, “Affiliate” shall have
the meaning ascribed to such term in Rule 405 under the Securities
Act. Neither the Seller nor the Subsidiary is a party or subject to
the provisions of any order, writ, injunction, judgment or decree
of any court or Governmental Entity. Neither the Seller nor the
Subsidiary has any knowledge that any Governmental Entity is
currently investigating or planning to investigate the Seller
and/or the Subsidiary. There is no action, suit, proceeding or
investigation by the Subsidiary and/or Seller currently pending
against any third party or which the Seller and/or the Subsidiary
intends to initiate.
2.12. Certain
Agreements.
(a) Schedule 2.12 lists all
material contracts, subcontracts, agreements, instruments,
licenses, sublicenses, commitments, understandings, letters of
intent, term sheets and other arrangements to which the Subsidiary
and/or the Seller currently is a party relating to or affecting
(i) the Business, (ii) any of the Subsidiary’s
Assets, properties, prospects and/or operations ,(iii) any
membership interests of the Subsidiary and/or (iv) any of the
capital stock, equity interests, rights and/or assets of the
Seller, including, without limitation, all written or oral
(i) contracts, agreements, subcontracts, memorandum of
understanding, and commitments not made in the ordinary course of
business, (ii) contracts, agreements, subcontracts, memorandum
of understanding, and commitments, which by their terms require
aggregate payments by or to the Subsidiary and/or the Seller of an
amount in excess of $75,000, (iii) service, maintenance and
other customer contracts, (iv) contracts, loan agreements,
letters of credit, repurchase agreements, mortgages, security
agreements, guarantees, pledge agreements, trust indentures,
promissory notes and other documents or arrangements relating to
the borrowing of money or for lines of credit, (v) tax sharing
agreements, real property leases or any subleases relating thereto,
Personal Property Leases, any material agreement relating to
service agreements and insurance contracts, (vi) agreements
and other arrangements for(a) the purchase ,acquisitions, sale,
lease ,disposition, transfer, assignment, license and/or sublicense
in any manner of any Assets, property, rights other than in the
ordinary course of business, or (b) for the grant of any
options or preferential rights to purchase any assets, property or
rights, (vii) documents pursuant to which the Subsidiary has
granted any power of attorney with respect to the affairs of the
Subsidiary, (viii) suretyship contracts, performance bonds,
working capital maintenance or other forms of guaranty agreements,
(ix) contracts or commitments limiting or restraining the
Seller and/or the Subsidiary or any of its employees or Affiliates
from engaging or competing in any lines of business or with any
person or entity, (x) agency, brokerage, partnership or joint
venture agreements, (xi) agreements relating to the issuance
of any securities of the Subsidiary and/or the Seller or the
granting of any voting, transfer, rights of first refusal,
preemptive rights, co sale rights, tag along rights drag
along
rights ,registration rights and/or any similar
rights with respect thereto,(xii) employment contracts or other
contracts to or with individual current, former or prospective
employees, consultants or agents, (xiii) collective bargaining
agreements or other contracts to or with any labor unions or other
employee representatives, groups of employees, (xiv) joint
ventures or other contracts providing for payments based in any
manner on the revenues or profits of the Seller, Subsidiary and/or
the Business, (xv) contracts, agreements and commitments
related to the purchase, acquisition, sale, lease, disposition,
assignment, transfer, license and/or sub license in any manner of
any Owned Intellectual Property and/or Leased Intellectual
Property, (xvi) letters of intent, term sheets, memorandums of
understanding, contracts, agreements and/or commitments related to
the sale of the membership interests and /or any Assets of the
Subsidiary other than in the ordinary course, (xvii) letters
of intent, term sheets, memorandums of understanding contracts,
agreements and/or commitments related to the sale of any capital
stock, equity interests or rights and /or any assets of the Seller,
(xviii) contracts, agreements and commitments related to
granting or restricting the development, manufacture, marketing,
sale, use or distribution of the Subsidiary’s and/or the
Seller’s products or services, (xix) contracts,
agreements and commitments related to the indemnification by the
Seller and/or the Subsidiary with respect to infringements of
Intellectual Property and/or other rights, (xx) contracts,
agreements and commitments related to the sharing of revenues,
profits, losses, costs, or liabilities by the Seller and/or the
Subsidiary with any other Person, (xxi) contracts, agreements
and commitments with any shareholder, officer, director or
consultant of the Seller and/or the Subsidiary (including any
Affiliate of any such person), (xxii) contracts, agreements
and commitments related to confidentiality or non disclosure
requirements, (xxiii) term sheets, letters of intent,
memorandums of understanding, contracts, agreements and commitments
of any kind related to any actual or proposed recapitalization,
merger or similar transaction with respect to the Seller and/or the
Subsidiary which would effect a change in control of the Seller
and/or the Subsidiary and (xxiv) all amendments,
modifications, extensions or renewals of any of the foregoing (each
a “ Contract ,” and collectively, the “
Contracts ”). The Seller and the Subsidiary have
delivered to the Buyer true and complete copies of all Contracts.
There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts payable by
or to the Seller and/or the Subsidiary under any Contract and to
the knowledge of the Seller and the Subsidiary, no oral or written
demand for such renegotiation has been made.
(b) Each Contract is valid, binding
and enforceable against the Subsidiary and/or the Seller, as the
case may be, in accordance with its terms, except as such
enforceability may be limited by the Bankruptcy Exception, and is
in full force and effect on the date hereof. Upon consummation of
the transactions contemplated by this Agreement, each Contract
shall continue to be valid, binding ,enforceable and in full force
and effect without penalty or other adverse consequence. The
Subsidiary and the Seller, as the case may be, has performed all
material obligations required to be performed by it under, and is
not in material default or breach of, any Contract, and no event
has occurred which, with due notice or lapse of time or both, would
constitute such a material default or breach by the Subsidiary
and/or the Seller, as the case may be.
(c) To the knowledge of the Seller
and the Subsidiary , no other party to any Contract is in material
default or breach in respect thereof, and no event has occurred
which, with due notice or lapse of time or both, would constitute
such a material default or breach.
(d) Schedule 2.12(d) sets
forth a complete and accurate list of all pending, submitted
responses to requests for proposals, submitted bids and other
agreements (including amendments and modifications thereto) which,
if accepted, would obligate the Subsidiary and/or the Seller to
deliver any goods or services (“Proposals”). The list
includes the name of the potential customer, the products and
services proposed to be supplied, the price at which such products
and services will be supplied, the date the Proposal was submitted,
and the anticipated date that a response to the Proposal will be
received. The Seller and the Subsidiary have delivered to the Buyer
true and complete copies of all Proposals, including all amendments
and modifications thereto.
(e) Schedule 2.12 includes
certain agreements, contracts, subcontracts, schedules and
statements of work with various suppliers and subcontractors to the
Subsidiary which have not been fully executed (the
“Unexecuted Contracts”) including, but not limited to,
those with USIS, ALS, Logista and Comentix. The Seller and
Subsidiary confirm that the Unexecuted Contracts are being
performed by all parties in accordance with the terms specified
therein. Neither the Seller nor the Subsidiary is aware of any
planned and/or proposed changes to any of the material terms of the
Unexecuted Contracts and/or any changes to the current prices being
charged by and/or paid to any such suppliers and subcontractors by
the Subsidiary. Neither the Seller nor the Subsidiary is aware of
any intention by any such subcontractor and/or supplier to stop
performing their respective services pursuant to and in accordance
with the terms of the Unexecuted Contracts. Neither the Seller nor
the Subsidiary has been told that any such supplier and/or
subcontractor will not execute the Unexecuted Contracts in due
course.
2.13. Compliance with Applicable
Law.
The Seller and the Subsidiary are
not in violation of any Applicable Law that would result in a
Material Adverse Effect. The Business and the operations of the
Subsidiary and the Seller are being conducted in all material
respects in accordance with all Applicable Laws of all Governmental
Entities having jurisdiction over the Subsidiary or its Assets,
properties or operations, including, without limitation, all such
Applicable Laws, orders and requirements relating to the Business
except in any case where the failure to so conduct its operations
would not have a Material Adverse Effect. Neither the Subsidiary
nor the Seller has received any notice of any violation of any
Applicable Law , order or other legal requirement. Neither the
Seller nor the Subsidiary is in material default with respect to
any order, writ, judgment, award, injunction or decree of any
Governmental Entity, applicable to the Seller, the Subsidiary, the
Business and/or any of its respective Assets, properties or
operations.
2.14. Licenses.
(a) Schedule 2.14 lists
all Licenses issued or granted to the Seller and/or the Subsidiary,
and all pending applications therefore (the
“Licenses”).. The Licenses constitute all material
Licenses required, and consents, approvals, authorizations and
other requirements prescribed, by any law, rule or regulation which
must be obtained or satisfied by the Subsidiary and/or the Seller ,
in connection with the Business or that are necessary for the
execution, delivery and performance by the Seller and/or the
Subsidiary of this Agreement and the other Transaction Documents.
The Licenses are sufficient and adequate in all material respects
to permit the continued lawful conduct of the Business in the
manner now conducted and the ownership, occupancy and operation of
the Seller’s an Subsidiary’s properties for its present
uses and the execution, delivery and performance of this Agreement.
No jurisdiction in which the Subsidiary and/or the Seller is not
qualified or licensed as a foreign business entity has demanded or
requested in writing that it qualify or become licensed as a
foreign business entity.
(b) Each License has been issued to,
and duly obtained and fully paid for and is valid, in full force
and effect, enforceable in accordance with its terms subject to the
Bankruptcy Exception, and not subject to any pending or known
threatened administrative or judicial proceeding to suspend,
revoke, cancel or declare such License invalid in any respect.
Neither the Seller nor the Subsidiary is in violation in any
material respect of any of the Licenses. The Licenses have never
been suspended, revoked or otherwise terminated, subject to any
fine or penalty, or subject to judicial or administrative review,
for any reason other than the renewal or expiration
thereof.
2.15. Accounts
Receivable.
All Accounts Receivable reflected on
the Unaudited Stub Financials of the Subsidiary and those that
exist as of the Closing Date (collectively “Accounts
Receivable”) will represent, valid obligations arising from
sales actually made or services actually performed in the ordinary
course of business, and to the knowledge of the Subsidiary and the
Seller, are not subject to any valid counterclaims or set-offs,
disputes or contingencies. To Seller’s knowledge,
substantially all of the Accounts Receivable are fully collectible
and due and payable within 90 days after August 31,
2005.
2.16. Intercompany and Affiliate
Transactions; Insider Interests.
(a) Except as disclosed on
Schedule 2.16 hereto, there are no contracts, transactions,
agreements or arrangements, written or oral, of any kind, direct or
indirect, between (i) the Subsidiary and (a) Charles
Carroll, (b) Ivan Tennyson, (c) Pat Haley, (d) any
manager, member, or officer of the Subsidiary, (e) any
officer, director, or shareholder of the Seller, and/or
(f) any Affiliate and/or any immediate family member of any of
the foregoing persons; and/or (ii) the Seller and
(a) Charles Carroll, (b) Ivan Tennyson, (c) Pat
Haley, (d) any manager, member, or officer of the Subsidiary,
(e) any officer, director, or shareholder of the Seller,
and/or (f) any Affiliate and/or any immediate family member of
any of the foregoing persons. All of the foregoing contracts,
transactions, agreements and arrangements are referred to as the
Related Party Agreements. The Related Party Agreements include,
without limitation, loans, guarantees and/or pledges to, by or for
the Subsidiary and/or the Seller as well as those from, to, by or
for any of the foregoing persons, that are currently in
effect.
(b) Except as disclosed on
Schedule 2.16 , neither (i) Charles Carroll,
(ii) Ivan Tennyson, (iii) any manager, member, and/or
officer of the Subsidiary, (iv) any officer, director, and/or
shareholder of the Seller, nor (v) any Affiliate and/or any
immediate family member of any of the foregoing persons, now has,
or within the last three (3) years had, either directly or
indirectly:
(i) an equity or debt interest in
any corporation, partnership, joint venture, association,
organization or other Person or entity which furnishes, sells
supplies, or during such period furnished, sold or supplied,
services or products to the Subsidiary and/or the Seller, or
purchased, or during such period purchased from the Subsidiary
and/or the Seller, any goods or services, or otherwise does, or
during such period did, business with the Subsidiary and/or the
Seller;
(ii) a beneficial interest in any
Contract, commitment or agreement to which the Seller and/or the
Subsidiary is or was a party or under which it was obligated or
bound or to which its properties may be or may have been subject
;
(iii) any rights in or to any of the
Intellectual Property, Assets, properties and/or rights owned or
licensed by the Subsidiary and/or used by the Subsidiary in the
Business, including, but not limited to, any rights as a secured
party, lender and/or debt holder.
(iv) an equity or debt interest in
any corporation, partnership, joint venture, association,
organization or other Person or entity which is directly or
indirectly in competition with the Seller and/or the Subsidiary
and/or is engaged in any manner in the field of
biometrics.
(v) the right to receive any
payments of any kind from the Subsidiary or the Seller other than
compensation pursuant to employment arrangements with the
Subsidiary or the Seller identified on Schedule 2.9
.
2.17. Insurance.
(a) Schedule 2.17(a)
lists all liability, property, workers’ compensation,
directors’ and officers’ liability and other insurance
policies of any nature whatsoever that insure the business,
operations or employees of the Subsidiary or affect or relate to
the ownership, use or operation of any of the assets of the
Subsidiary (the “ Insurance Policies ”) as well
as all claims pending under such Insurance Policies. The Seller and
the Subsidiary have provided true and complete copies of all
Insurance Policies to the Buyer.
(b) The insurance coverage provided
by any of the Insurance Policies will not terminate or lapse by
reason of the transactions contemplated by this Agreement and the
Transaction Documents, (ii) neither the Seller, nor the
Subsidiary has received notice that any insurer under any Insurance
Policy is denying liability with respect to a claim thereunder or
defending under a reservation of rights clause, or, to the
knowledge of the Seller, indicated any intent to do so or not to
renew any such policy; (iii) the Insurance Policies are
sufficient for compliance with all applicable laws and Contracts to
which the Subsidiary is a party or by which it is bound; and do not
provide for any retrospective premium adjustment or other
experienced-based liability on the part of the Subsidiary; and
(iv) no side agreements or other Contracts exist that alter
the terms of the Insurance Policies.
2.18. No Undisclosed
Liabilities.
Except as and to the extent
specifically reflected or reserved against in the most recent
Financial Statements and except as incurred in the ordinary course
of business since the date of the most recent Financial Statements
and except for obligations arising under those contracts and
agreements to which the Subsidiary is party as described in the
Schedule 2.12 (none of which results from, arises out of,
relates to, is in the nature of, or was caused by any breach of
contract, breach of warranty, tort, infringement, or violation of
law), the Subsidiary has no material debt, liabilities or
obligations of any nature, whether absolute, accrued, contingent or
otherwise, and whether due or to become due (including,
wi
