Exhibit 10.1
ASSET PURCHASE AGREEMENT
by and among
HPI DIRECT, INC.,
RICHARD J. SOSEBEE,
KIRBY P. SIMS, JR.,
FREDERICK L. HILL, III,
and
SUPERIOR UNIFORM GROUP, INC.
Dated as of July 1, 2013
TABLE OF CONTENTS
ARTICLE IDEFINED TERMS | 1 | |
Section 1.1 | Definitions | 1 |
ARTICLE IIPURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES; CLOSING | 8 | |
Section 2.1 | Purchase and Sale of the Assets | 8 |
Section 2.2 | Excluded Assets | 10 |
Section 2.3 | Assumed Liabilities | 10 |
Section 2.4 | Excluded Liabilities | 11 |
Section 2.5 | Consideration for the Assets | 13 |
Section 2.6 | Closing | 13 |
Section 2.7 | Working Capital Adjustment | 15 |
Section 2.8 | Earn-Out | 18 |
Section 2.9 | Delivery of Restricted Buyer Shares | 22 |
Section 2.10 | Purchase Price Adjustment | 22 |
Section 2.11 | Non-Assignable Assets | 22 |
Section 2.12 | Withholding Tax | 23 |
ARTICLE IIIREPRESENTATIONS AND WARRANTIES | 23 | |
Section 3.1 | Representations and Warranties of the Seller and Shareholder | 23 |
Section 3.2 | Representations and Warranties of the Buyer | 37 |
ARTICLE IV COVENANTS | 37 | |
Section 4.1 | Employees | 37 |
Section 4.2 | Restrictive Covenants | 39 |
Section 4.3 | Further Assurances | 41 |
Section 4.4 | Publicity | 42 |
Section 4.5 | Allocation of Purchase Price | 42 |
Section 4.6 | Transfer Taxes | 42 |
Section 4.7 | Proration | 42 |
Section 4.8 | Transition | 42 |
ARTICLE V INDEMNIFICATION | 43 | |
Section 5.1 | Survival | 43 |
Section 5.2 | Indemnification of the Buyer Parties | 44 |
Section 5.3 | Indemnification of the Seller and Shareholders | 44 |
Section 5.4 | Provisions Released to Indemnification of the Buyer Parties | 44 |
Section 5.5 | Indemnification Procedures | 45 |
Section 5.6 | Payments | 47 |
Section 5.7 | Set-Off | 47 |
Section 5.8 | Tax Treatment of Indemnification Payments | 47 |
Section 5.9 | Cumulative Remedies | 47 |
ARTICLE VIADDITIONAL OPERATIVE PROVISIONS | 47 | |
Section 6.1 | Assignment; Binding Effect | 47 |
Section 6.2 | Choice of Law | 48 |
Section 6.3 | Arbitration | 48 |
Section 6.4 | Consent to Jurisdiction and Service of Process; Waiver of Jury Trial | 49 |
Section 6.5 | Notices | 49 |
Section 6.6 | Headings | 50 |
Section 6.7 | Fees and Expenses | 50 |
Section 6.8 | Entire Agreement | 51 |
Section 6.9 | Interpretation | 51 |
Section 6.10 | Waiver and Amendment | 52 |
Section 6.11 | Third-party Beneficiaries | 52 |
Section 6.12 | Severability | 52 |
Section 6.13 | Counterparts; Facsimile Signatures | 52 |
Section 6.14 | Specific Performance | 52 |
ASSETPURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT is made and entered into as of July 1, 2013, by and among HPI DIRECT, INC., a Georgiacorporation (the “Seller”), RICHARD J. SOSEBEE, KIRBY P. SIMS, JR., and FREDERICK L. HILL, III (each a “Shareholder” and collectively the “Shareholders”), and SUPERIOR UNIFORM GROUP, INC., a Floridacorporation (“Buyer”).
Background
Sellerowns and operates the Businessunder the names “HPI Direct” and “UniformZoom”. Buyerdesires to purchase, and Sellerdesires to sell, substantially all of the assetsused by Sellerin the Business, on the terms and conditions of this Agreement.
The Shareholderscollectively own all of the capital stock of Seller, and will substantially benefit from the transactions contemplated by this Agreement.
Operative Terms
The parties agree as follows:
ARTICLE I
DEFINEDTERMS
Section 1.1 Definitions. For purposes of this Agreement, the following capitalized terms have the meanings assigned to them in thisSection 1.1.
“Action” means any action, claim, complaint, litigation, mediation, audit by a Governmental Entity, investigation, petition, suit, arbitration, orderor other proceeding, whether civil or criminal, at lawor in equity by or before any Governmental Entityor arbitration tribunal.
“Affiliate” means, with respect to a specified Person, another Personthat directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such specified Person. A Personshall be deemed to control another Personif such first Personpossesses, directly or indirectly, the power to direct, or cause the direction of, the management and policies of such other Person, whether through the ownership of voting securities, by contractor otherwise, and such control will be presumed if any Personowns 10% or more of the voting capital stock or other ownership interests, directly or indirectly, of any other Person.
“Agreement” means this Asset Purchase Agreement, as the same may be amended or supplemented in accordance with its terms, together with all exhibits and schedules attached hereto.
“Balance Sheet” means the unaudited balance sheet of the Selleras of the Balance Sheet Date.
“Balance Sheet Date” means May 31, 2013.
“Business” means the business of designing, manufacturing, marketing, selling and distributing uniforms and corporate apparel and accessories, promotional products and accessories, and related goods and services.
“Business Day” means any day other than a Saturday, Sunday, or any other day on which banks are permitted or required to be closed in Tampa, Florida.
“CERCLA” means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C.§§ 9601 et seq.
“COBRA Obligations” means any obligation or Liability, whenever arising of the Buyer or any of its Affiliates or any group health plan sponsored, maintained, contributed to, or with respect to which any of such Persons or group health plans have any Liability, related to the Seller’s employees or other service providers including each “M&A Qualified Beneficiary,” and each “Qualified Beneficiary” with respect to any of the foregoing Persons, in connection with their loss of group health plan coverage or any “qualifying event” within the meaning of Treasury Regulation Section 54.4980B-9, Q&A-6(a) with respect to any of the Company Plans including any Liability arising in connection with Treasury Regulation Section 54.4980B-9, Q&A-8(c).
“Code” means the Internal Revenue Code of 1986, as amended.
“Company Plan” means (i) each “employee benefit plan” of the Sellerwithin the meaning of Section 3(3) of ERISA; (ii) any of the following types of plans, programs or arrangements sponsored or contributed to by the Selleror with respect to which the Sellerhas any Liability: severance plan, incentive or bonus plan, deferred compensation plan, retention plan, change in control plan, profit sharing plan, retirement plan, welfare plan, vacation or paid-time-off benefit or plan, stock purchase, stock option or equity incentive plan; and (iii) any other employee benefit plan, program or arrangement that is maintained, sponsored or contributed to by the Selleror with respect to which the Sellerhas any Liability.
“Confidential Information” means all information of a confidential or proprietary nature (whether or not specifically labeled or identified as “confidential”), in any form or medium, that relates to the business, products, financial condition, services or research or development of the Selleror their suppliers, distributors, customers, employees, independent contractors or other businessrelations. Confidential Informationof the Seller includes, but is not limited to, the following: (i) internal businessand financial information of the Seller(includinginformation relating to strategic and staffing plans and practices, business, finances, training, marketing, promotional and sales plans and practices, cost, rate and pricing structures and accounting and businessmethods); (ii) identities of, individual requirements of, specific contractual arrangements with, and information about, the current, former and prospective suppliers, distributors, customers, employees, independent contractors or other businessrelations of the Sellerand their confidential information; and (iii) trade secrets, know-how, compilations of data and analyses, techniques, systems, formulae, research, records, reports, manuals, documentation, models, data and data bases relating thereto. Confidential Information shallnot include: (a) any information that is generally available to the public immediately prior to the time of disclosure unless such is so available due to the actions of a party to this Agreement; (b) information which is independently developed; and (c) information which is disclosed to a party by a third party not itself subject to any obligation of confidentiality in respect of such information.
“Contract” means any oral or written arrangement, contract, agreement, commitment, franchise, indenture, lease or sublease, purchase order, license, note, bond or mortgage, including any amendments, modifications, supplements and other changes thereto.
“Disclosure Schedule” means the disclosure schedule referred to in and delivered to the Buyerpursuant to this Agreementand incorporated hereinby reference. The Disclosure Scheduleshall be considered a “Schedule” to this Agreement.
“Encumbrance” means any lien (statutory or otherwise), encumbrance, easement, covenant, security interest, option, pledge, Tax, proxy, voting agreement, mortgage, deed of trust, hypothecation, preference, priority, charge, conditional sale or restriction on transfer of title or voting, whether imposed by agreement, understanding, law, equity or otherwise.
“Environmental Claim” means any Action, Order, Encumbrance, fine, penalty, or, as to each, any settlement or judgment arising therefrom, by or from any Personalleging Liabilityof whatever kind or nature (including liabilityor responsibility for the costs of enforcement proceedings, investigations, cleanup, governmental response, removal or remediation, natural resources damages, property damages, personal injuries, medical monitoring, penalties, contribution, indemnification and injunctive relief) arising out of, based on or resulting from: (a) the presence, Releaseof, or exposure to, any Hazardous Materials; or (b) any actual or alleged non-compliance with any Environmental Lawor termor condition of any Environmental Permit.
“Environmental Law” means any Law to the extent relating to the protection of the environment, the release of any Hazardous Materials into the environment, the generation, management, transportation, storage, treatment and disposal of Hazardous Materials, or the pollution of air, soil, groundwater or surface water (including the Clean Air Act, the Toxic Substance Control Act, the Clean Water Act, the CERCLA, the Resource Conservation and Recovery Act, and the Occupational Safety and Health Act, all as amended, or their state counterparts or analogues).
“Environmental Notice” means any written directive, notice of violation or infraction, or notice respecting any Environmental Claimrelating to actual or alleged non-compliance with any Environmental Lawor any termor condition of any Environmental Permit.
“Environmental Permit” means any Permit, letter, clearance, consent, waiver, closure, exemption, decision or other actionrequired under or issued, granted, given, authorized by or made pursuant to any Environmental Law.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the related regulations and published interpretations.
“Excluded Inventory” means (a) all inventory that is (i) damaged or otherwise not good and merchantable, (ii) not of usable or saleable quality in the ordinary course of business, or (iii) not covered by an enforceable Contractwith a customer, and (b) all inventory that is in transit to the Seller as of the Effective Time except to the extent that (i) such inventory is fully-paid for by the Seller prior to the Effective Time, meaning that no additional amount is required to be paid after the Effective Time in order to acquire such inventory, or (ii) the amount of any such required post-Effective Time payment is accrued as a current liability of the Seller that is reflected on the Final Closing Balance Sheetand included in the Closing Working Capitalcalculation. Notwithstanding the foregoing, any inventory that is expressly listed onPart 3.1(x)(i) of the Disclosure Schedule shall not be considered Excluded Inventory and shall be an Asset.
“Financial Statements” means, collectively, (i) the reviewed (but not audited)balance sheets and related statements of income, changes in shareholders’ equity and cash flows of the Selleras of and for the fiscal years ended December31, 2010, 2011 and 2012, includingin each case, any notes thereto, and (ii) the Balance Sheetand the related unaudited statement of income as of and for the 5-month interim period ended on the Balance Sheet Date, includingin each case, any notes thereto.
“GAAP” means generally accepted accounting principles in the United States, as in effect from time to time, consistently applied.
“Governmental Entity” means (i) any United States or foreign governmental authority, includingany national, federal, territorial, state, commonwealth, province, territory, county, municipal, district, or local governmental jurisdiction of any nature (includingany governmental department, division, agency, bureau, office, branch, court, commission, tribunal, or other governmental instrumentality) or any political or other subdivision or part of any of the foregoing; or (ii) any self-regulatory, accreditation or certification entities, or quasi-governmental authority of any nature, or any entity contracting with any of the foregoing, exercising, or entitled or purporting to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power.
“Hazardous Materials” means any hazardous or toxic materials, substances, chemicals, products, derivatives, compounds, mixtures, solids, liquids, gases or wastes, includingany petroleum or petroleum product, radon, radioactive materials or wasters, asbestos, lead, urea formaldehyde form insulation, or derivative thereof and any pollutants or contaminants, each, whether naturally occurring or manmade, that is hazardous, toxic or otherwise as defined in any Environmental Law.
“Indebtedness” means, with respect to any Personat any particular time, without duplication: (i) obligations for borrowed money or in respect of loans or advances, (ii) obligations evidenced by any note, debenture, or other similar instrument or debt security; (iii) obligations of any other Personguaranteed in any manner by such Person; (iv) obligations under swaps, hedges, interest rate protection agreements or similar instruments; (v) obligations in respect of letters of credit and bankers’ acceptances, or performance or other bonds, issued for the account of such Person; (vi) obligations arising from cash/book overdrafts, but less any deposits in transit; (vii) obligations for the deferred purchase priceof property or services or the acquisition of a businessor portion thereof or insurance premium financing, in each case, whether contingent or otherwise, as obligor or otherwise; (viii) obligations created or arising under any conditional sale or other title retention agreementwith respect to acquired property; (ix) obligations, contingent or otherwise, arising from deferred compensation arrangements; (x) obligations arising from the redemption of equity or other securities; (xi) obligations under any capitalized leases relating to personal property; (xii) obligations secured by an Encumbrance on any of such Person’s assets, other than a Permitted Encumbrance; and (xiii) all accrued interest, prepayment premiums, penalties, expenses or other amounts due related to any of the foregoing.
“Intellectual Property” means all of the following in any jurisdiction throughout the world: (i) all inventions (whether patentable or unpatentable and whether or not reduced to practice), discoveries, all improvements thereto and all patents, patent applications and patent disclosures, together with all divisional, provisionals, reissuances, continuations, continuations-in-part, revisions, extensions and reexaminations thereof; (ii) all trademarks, service marks, trade dress, logos, slogans, trade names, corporate names, Internet domain names and rights in telephone numbers, together with all translations, adaptations, derivations and combinations thereof (and includingall goodwill associated therewith) and all applications, registrations and renewals in connection therewith; (iii) all works of authorship, expressions, designs and design registrations, whether or not copyrightable,all copyrightable works and copyrights, and all applications, registrations and renewals in connection therewith; (iv) all mask works and all applications, registrations and renewals in connection therewith; (v) all trade secrets and confidential businessinformation (includinglists of current, former and prospective suppliers and customers, pricing and cost information and businessand marketing plans and proposals) and know-how (“Trade Secrets”); (vi) all computer software and systems (includingsource code, executable code, data, databases, specifications and related documentation) (“Software”); (vii) all advertising, marketing and promotional materials, includingwebsite content; (viii) all other proprietary rights; and (ix) all copies and tangible embodiments thereof (in whatever form or medium); and (x) claims and causes of action, with respect to any of the foregoing, whether accruing before, on or after the date hereof, including all rights to and claims for damages, restitution and injunctive relief for past, present and future infringement, dilution, misappropriation, violation, misuse, breach or default, with the right but no obligation to sue for such legal and equitable relief and to collect, or otherwise recover, any such damages.
“Knowledge” means, with respect to the Seller, the actual knowledge of any Shareholder or any other management level employee of the Seller,and such additional knowledge as such individuals would reasonably be expected to obtain after a reasonable investigationof the matter in question or in the normal performance of their duties. For this purpose, “reasonable investigation” means, at a minimum, (i) review of files and other information in the possession of the Seller, and (ii) inquiry of other management-level employees of Sellerwho have responsibilities pertinent to such inquiry or who have access to information in the possession of Sellerpertinent to such inquiry, and the “management level employees” included in the Knowledge group are those employees set forth onSchedule 1.2.
“Law” means any domestic or foreign federal, state, territorial or local law (statutory, common or otherwise), statute, constitution, treaty, convention, ordinance, code, rule, regulation, administrative interpretation, Order, or other similar requirement enacted, adopted, promulgated or applied by a Governmental Entity.
“Liability” means any liability or obligation of any kind, character or description, whether known or unknown, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, vested or unvested, executory, determined, determinable or otherwise, and all of the foregoing shall be included in the definition of “Liability” regardless of whether or not it is: (i) required to be accrued, reserved against or otherwise reflected on financial statementsprepared in accordance with GAAPor any other accounting method or standard, or (ii) disclosed or required to be disclosed on any Scheduleto this Agreement.
“Losses” means all demands, claims, assessments, losses, damages, diminution in value, costs, defense costs, expenses, Liabilities, judgments, awards, fines, interest, sanctions, penalties, charges (includingany amounts paid in settlement), includingreasonable costs, fees and expenses of attorneys, accountants and other representatives of a Personincurring or suffering such Damages or seeking to investigate, mitigate or avoid same. In no event shall Losses include punitive, exemplary, treble or other special damages regardless of legal theory unless they are part of a Third-Party Claim.
“Material Adverse Effect” means any change, effect, event, occurrence or development that occurred before the Closing Date individually or in the aggregate, and has been or reasonably would be expected to be materially adverse to (i) the assets, properties, Business, condition (financial or otherwise), prospects or results of operations of the Seller,(ii) the ability of the Sellerto consummate the transactions contemplated by this Agreementand the other Transaction Documents, or (iii) the ability of the Buyer to conduct the operation of the Business as currently conducted by Seller following the Closing. However, the following results shall not be considered in determining whether there has been a Material Adverse Effect: (x) a customer of Seller puts a request for its required Business services out to bid, or otherwise solicits bid proposals from third parties to provide Business services, in each case after Closing and provided that Seller has not been notified of the customer’s plans to take the applicable action, or (y) a customer of Seller terminates its contract with Seller or Buyer as a result of the transactions contemplated by this Agreement, provided that Seller does not have specific Knowledge before Closing that the applicable customer would terminate its contract if Buyer acquired Seller.
“Order” means any award, decision, injunction, judgment, order, writ, decree, ruling, subpoena, or verdict entered, issued, made, or rendered by any court, administrative agency, or other Governmental Entityor by any arbitrator.
“Permits” means all permits, licenses, franchises, approvals, consents, grants, authorizations, registrations, certificates, variances and similar rights obtained, or required to be obtained, from Governmental Entities.
“Permitted Encumbrance” means (a) liens for Taxes not yet due and payable or for Taxes that Seller is contesting in good faith through appropriate proceedings in a timely manner, in each case for which adequate reserves have been established and shown on the Financial Statements, (b) liens of landlords, carriers, warehousemen, workmen, repairmen, mechanics, materialmen and similar liens arising in the ordinary course of business and not incurred in connection with the borrowing of money and (c) the operating leases set forth onSchedule 2.1(e)(iii).
“Person” means any individual, association (incorporated or unincorporated), corporation, partnership (of any designation - limited partnership, general partnership, limited liabilitypartnership, or otherwise), limited liabilitycompany, trust, or any other entity or organization, public or private, includinga Governmental Entity.
“Real Property Purchase Documents” means the Purchase Agreement and Escrow Instructions by and between TAA Investments, LLC, a Georgia limited liability company, and the Buyer, and the deed and other closing documents and instruments delivered thereunder.
“Records” means (i) all records, files, books and operating data, invoices, databases, manuals and other materials, whether in print, electronic or other media, customer lists, sales data and information, supplier lists, mailing lists, active and inactive customer Contracts, lead boxes, contents of lead boxes and other prospect materials, Confidential Information, equipment maintenance records, books of account, correspondence, financial, sales, market and credit information and reports, drawings, patterns, slogans, market research and other research materials and contractdocuments; and (ii) all personnel files and records, includingany benefit information, relating to any Transferred Employee.
“Release” means any actual or threatened release, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, abandonment, disposing or allowing to escape or migrate into or through the environment (including ambient air (indoor or outdoor), surface water, groundwater, land surface or subsurface strata or within any building, structure, facility or fixture).
“Restricted Buyer Shares” means the number of shares of the Buyer’s Common Stock, par value $0.001 per share, determined in accordance with the following formula (and rounded up or down to the nearest whole share): (a) $2,300,000, divided by (b) the average closing price of the Buyer’s Common Stock, as reported by NASDAQ, over the last twenty (20) trading days before the Closing Date. The Restricted Shares shall not be registered under the Securities Act of 1933, as amended, or under any state securities laws.
“Shareholders’ Agreement” means the Second Amended and Restated Shareholders’ Agreement, dated October 10, 2007, among Seller and the Shareholders, as amended by the Amendment to Second Amended and Restated Shareholders’ Agreement, dated November 1, 2011, among Seller and the Shareholders.
“Tax” means any (i)foreign, federal, state, or local income, sales, use, excise, franchise, alternative minimum, add-on minimum, profits, real and personal property (tangible and intangible), gross receipts, net proceeds, documentary, turnover, license, premium, windfall profits, capital stock, production, businessand occupation, disability, employment, payroll, unemployment, stamp, customs, severance, withholding, social security, Medicare, disability, value added, environmental, transfer, or estimated tax or any similar tax or other tax, duty, fee, assessment or charge of any kind whatsoever imposed by any taxing authority, includingany interest, addition or penalties imposed in respect of the foregoing, (ii) Liabilityof the Sellerfor the payment of any amounts of the type described inclause (i)above arising as a result of being (or ceasing to be) a member of any consolidated, affiliated, combined or unitary group (or being included (or required to be included) in any Tax Returnrelating thereto), and (iii) Liabilityof the Sellerfor the payment of any amounts of the type described in clause (i)above as a result of any express or implied obligation to indemnify or otherwise assume or succeed to the Liabilityof any other Person, whether imposed by Law, Contract, or otherwise.
“Tax Return” means any return, report, declaration, information return, claim for refund, or other document (includingany related or supporting schedules, statements or information) filed or required to be filed in connection with the determination, assessment or collection of any Taxor the administration of any Laws relating to any Tax.
“Transaction Documents” means this Agreement, the Bill of Sale, the Escrow Agreement, the Real Property Purchase Documents, the License Assignment and Assumption Agreements, the Intellectual Property Assignments, and the Restricted Stock Agreements. The Employment Agreements and the Consulting Agreementare not Transaction Documents.
Additional terms defined in the body of this Agreementshall have the meaning given herein, includingthe following:
| Term | Reference in Agreement |
Acceleration Event | 2.8(a)(i) |
Acquired Business | 2.8(a)(ii) |
Acquired Business Change Event | 2.8(a)(i) |
Arbitrators | 6.3 |
Assets | 2.1 |
Assumed Contracts | 2.1(e) |
Assumed Leased Facility | 2.1(d) |
Assumed Liabilities | 2.3 |
Average Working Capital | 2.7(a)(i) |
Bill of Sale | 2.6(c)(iii) |
Buyer | First paragraph |
Buyer Parties | 5.2 |
Buyer Working Capital Statement | 2.7(b)(i) |
Change in Control | 2.8(a)(iv) |
Closing | 2.6(a) |
Closing Balance Sheet | 2.7(a)(ii) |
Closing Cash | 2.5 |
Closing Date | 2.6(a) |
Closing Date Indebtedness | 2.6(b)(i) |
Closing Date Indebtedness Statement | 2.6(b)(i) |
Closing Working Capital | 2.7(a)(iii) |
Commercial Rules | 6.3 |
Company Intellectual Property | 3.1(q)(iii) |
Consulting Agreement | 2.6(c)(vii) |
Contingent Future Payments | 2.8(a)(v) |
Direct Claim | 5.5(c) |
Disputes | 6.3 |
Earn-Out Notice of Dispute | 2.8(c) |
Effective Time | 2.6(a) |
Employment Agreement | 2.6(c)(vi) |
Escrow Agent | 2.6(d)(i) |
Escrow Agreement | 2.6(c)(ii) |
Escrow Fund | 2.6(d)(i) |
Estimated Working Capital Adjustment | 2.6(b)(ii) |
Excluded Assets | 2.2 |
Excluded Liabilities | 2.4 |
Facility Leases | 3.1(h)(ii) |
Final Closing Balance Sheet | 2.7(c) |
Final Working Capital Adjustment | 2.7(c) |
Gross Profit | 2.8(a)(vii) |
Gross Profit Statement | 2.8(b) |
Indemnified Party | 5.5 |
Indemnifying Party | 5.5 |
Intellectual Property Assignments | 2.6(c)(ix) |
Intellectual Property Licenses | 3.1(q)(ii) |
Leased Facilities | 3.1(h)(ii) |
License Assignment and Assumption Agreement | 2.6(c)(iv) |
Measurement Period | 2.8(a)(viii) |
Organizational Documents | 3.1(a) |
Purchase Price | 2.5 |
Registered Intellectual Property | 3.1(q)(i) |
Required Payoff Letters | 2.6(b)(i) |
Restricted Period | 4.2(a) |
Restricted Person | 4.2(a) |
Restricted Stock Agreements | 2.6(c)(viii) |
Restrictive Covenants | 4.2(c) |
Seller | First paragraph |
Seller Contracts | 3.1(k)(i) |
Shareholders | First paragraph |
Special Accountant | 2.7(c) |
Software | “Intellectual Property” definition |
Solvent | 3.1(z) |
Third Party Claim | 5.5(a) |
Trade Secrets | “Intellectual Property” definition |
Transferred Employee | 4.1(a) |
Working Capital | 2.7(a)(iv) |
Working Capital Adjustment | 2.7(a)(v) |
Working Capital Notice of Dispute | 2.7(c) |
ARTICLE II
PURCHASEAND SALE OF ASSETS; ASSUMPTION OF LIABILITIES; CLOSING
Section 2.1 Purchase and Sale of the Assets.Subject to the terms and conditions of this Agreement, at the Closing, the Sellershall sell, transfer, convey, assign and deliver to the Buyer, and the Buyershall purchase and acquire from the Seller, free and clear of all Encumbrances (other than Permitted Encumbrances), all right, title and interest in, to and under all of the assets, properties and rights of the Sellerof every kind and nature used in or relating to the Business, wherever located, and whether or not reflected on the books of the Seller, but excluding the Excluded Assets(collectively, the “Assets”), includingthe Seller’s right, title and interest in, to and under the following:
(a) all inventory, includinginventories of raw materials, work-in-process and finished goods, and including all inventory in transit, along with all related packaging and other supplies, but in each case excluding all Excluded Inventory;
(b) all accounts receivable (both billed and unbilled, and includingbalances owed and post-dated checks), notes receivable, negotiable instruments and chattel paper arising from the operation of the Business;
(c) all vehicles, furniture, fixtures, signs, equipment (includingcomputers, desks, telephones, telephone systems, fax machines and other office equipment, and all related computer software), machinery and other tangible personal property, together with all spare parts, tools, accessories and related supplies, includingall such property located at the Leased Facilities, and includingall of the assetslisted on the fixed asset list attached asSchedule 2.1(c);
(d) the leasehold interests in the Leased Facilitiesexpressly listed onSchedule 2.1(d)(each an “Assumed Leased Facility”), all rights and interests of the Sellerunder the Facility Leases for the Assumed Leased Facilities, and all prepaid expenses and deposits related to the Assumed Leased Facilities(includingsecurity deposits);
(e) all rights and interests of Sellerunder (i) purchase orders and other Contractswith suppliers arising from the operation of the Business and listed onSchedule 2.1(e)(i), (ii) purchase orders and other Contractswith customers arising from the operation of the Business and listed onSchedule 2.1(e)(ii), (iii) the operating leases for equipment listed onSchedule 2.1(e)(iii), and (iv) any other Contractslisted onSchedule 2.1(e)(iv)(together with the Facility Leasesfor the Assumed Leased Facilities, the “Assumed Contracts”);
(f) all Permitsheld by Sellerfor the conduct of the Business, but only to the extent legally assignable;
(g) all Records;
(h) all prepaid expenses and deposits, deferred charges, advance payments, security deposits and prepaid items relating to the Assetsor the operation of the Business;
(i) all telephone numbers, facsimile numbers, email addresses and Internet domain names of Seller(includingthe telephone numbers, facsimile numbers and domain names listed onSchedule 2.1(i)), all sales, promotional or marketing materials, catalogues and advertising literature relating to the Business;
(j) all Intellectual Propertyand other intangible property rights of the Seller(includingall rights to the names “HPI Direct” and “UniformZoom” and derivatives thereof (whether as a trade name, corporate name or otherwise));
(k) all insurance benefits, includingthe right to receive any insurance proceeds relating to the Business, the Assetsor the Assumed Liabilities;
(l) all rights, claims, credits, causes of action, rights of recovery or to refunds or rebates, or rights of set-off of the Seller(includingany express or implied warranties) with respect to or arising out of the Assets;
(m) amounts owed to the Seller under outstanding loans or advances made to the employees of Seller in their capacity, including those loans set forth in Part 3.1(j)(xv);
(n) all other assets, properties and rights owned or used by Sellerin the operation of the Business, whether or not specifically enumerated above; and
(o) all goodwill and going concern value associated with the Businessor any of the assets, properties and rights set forth above.
Section 2.2 Excluded Assets.The Assetsshall not include, and Buyershall not purchase or acquire, any of the following assets, properties or rights of Seller (the “Excluded Assets”):
(a) all cash, cash equivalents, bank accounts, and certificates of deposit;
(b) all Excluded Inventory;
(c) all rights and interests of the Sellerunder all Contractsother than the Assumed Contracts;
(d) all Permitsheld by Sellerfor the conduct of the Businessthat are not legally assignable;provided that Sellershall cooperate with and assist the Buyerin obtaining any such Permit;
(e) all originals of any Recordsthat the Selleris required by applicable Lawto retain, so long as the Sellerdelivers at least one copy thereof to the Buyer;
(f) all rights of the Sellerwith respect to any Taxrefund, and any rights under any Taxallocation or sharing agreement;
(g) the charter, qualification to conduct businessas a foreign corporation, arrangements with registered agents, taxpayer and other identification numbers, seal, minute books, equity transfer books, blank equity certificates and other documents relating to the organization, maintenance and existence of the Selleras a corporation;
(h) all Company Plansand corresponding assetsor any rights of the Sellerin the Company Plans;
(i) all rights of the Sellerunder this Agreementand the other Transaction Documents;
(j) all rights, claims, credits, causes of action, rights of recovery or to refunds or rebates, or rights of set-off of the Seller(includingany express or implied warranties) with respect to or arising out of the Excluded Assets; and
(k) any other asset, property or right of the Sellerexpressly set forth onSchedule 2.2(k), if any.
Section 2.3 Assumed Liabilities.As part of the consideration for the Assets, the Buyershall assume and agree to discharge and perform when due the following liabilities and obligations of the Seller, but in each case only if and to the extent that the liabilityor obligation arises from the operation of the Businessin the ordinary course, consistent with past practices (the “Assumed Liabilities”):
(a) all executory obligations of the Sellerto be performed by the Sellerafter the Effective Timeunder the Assumed Contracts, but excluding (i) any Liabilityarising from or related to any failure to perform, improper performance, warranty or other breach, default or violation of any such Assumed Contractby Seller, (ii) any Liabilityrelated to services performed or goods or products manufactured, sold or delivered prior to the Effective Time, includingunder any express or implied warranty, and (iii) any other Liabilitythat is expressly included within the Excluded Liabilities; and
(b) severance obligations that arise from Buyer’s termination of an employee after Closing; and
(c) Accrued paid time off (“PTO”) of the employees of Seller hired by Buyer pursuant toSection 4.1 of this Agreement, but solely if and to the extent reflected on the Final Closing Balance Sheet and accrued as a current liability in the Closing Working Capital calculation.
Section 2.4 Excluded Liabilities.Except as expressly provided inSection 2.3, the Buyershall not assume and shall not be responsible for or otherwise be liable for any Liabilitywhatsoever of the Selleror any of its Affiliates, whether or not arising from or related to the Business or the Assets (the “Excluded Liabilities”), and the Seller (or its Affiliate)shall pay, perform and discharge, as and when due, each such Excluded Liability, which includethe following:
(a) any and all Liabilitiesrelated to the Seller’s operation of the Businessprior to the Closing Date, including Liabilities(includingexpress or implied warranty obligations and product liabilityclaims) arising out of or related to any products or goods manufactured, distributed, leased, licensed, sold or services performed in connection with the Businessprior to the Closing Date, whether or not such Liabilitiesrelate to products that are defective or improperly designed, manufactured, packaged or labeled, and whether predicated on negligence, gross negligence, other tortious conduct, strict liability, breach of warranty or Contractor any other legal theory;
(b) any and all Liabilities related to any recall, design defect or similar claims of any products manufactured or sold or any service performed by the Seller;
(c) any and all Liabilitiesarising from or related to any failure to perform, improper performance, warranty or other breach, default or violation of any Assumed Contractby the Selleron or prior to the Closing Date; and any and all Liabilitiesunder any Contractto which the Selleris a party that is not an Assumed Contract;
(d) any and all Liabilitiesof the Sellerwith respect to any Action;
(e) any and all Liabilitiesrelated to any actual or alleged violation of any Lawby the Seller;
(f) any and all Liabilitiesof the Sellerfor any Indebtedness; or any extraordinary, contingent or off-balance sheet Liabilities; or any trade accounts payable of the Seller;
(g) any and all Liabilitiesrelating to employees, independent contractors, including the oral independent contractor arrangements set forth inPart 3.1(k)(i)(G)(2) and (3) of the Disclosure Schedule, or other service providers of the Sellerfor all periods ending on or prior to the Closing Dateor thereafter with respect to such individual’s relationship with the Seller, including workers’ compensation and unemployment claims, disability and occupational diseases or any insurance or insurance premiums relating thereto, in each case without regard to whether such injuries, claims, conditions, events and occurrences are known or otherwise manifest on or prior to the Closing Date,and, any bonuses, vacation pay, personal leave, or severance, retention or other compensation obligations of the Seller, except for PTO obligations included in the Assumed Liabilities; all COBRA Obligations; and all Liabilitiesunder the WARN Actthat result from the transactions contemplated by this Agreement;
(h) any and all Liabilitiesarising under or in connection with any Company Plan;
(i) (i) any and all Liabilitiesarising from any generation, storage, use, Release, treatment, transportation, disposal or arranging for storage, treatment, transportation or disposal of any Hazardous Materialsby or on behalf of the Selleror any Affiliateof the Selleror anyone under the control or at the request of the Selleror any Affiliateof the Seller, includingany and all Liabilitiesarising from any Hazardous Materialsbrought onto any Leased Facilityby or on behalf of the Selleror any Affiliateof the Selleror anyone under the control or at the request of the Selleror any Affiliateof the Selleror any contamination or injury to person, property or the environment resulting therefrom, (ii) any and all Liabilitiesarising from or relating to any and all Hazardous Materialsgenerated by or on behalf of the Seller, (iii) any and all Liabilitiesarising from or relating to any environmental condition occurring on or prior to the Closing Dateat any Leased Facilityor any other real property owned, leased, used or operated in connection with the Businesswhether discovered before, on or after the Closing Date, (iv) any and all Liabilitiesarising from, relating to or otherwise associated with any real property, site or facility listed or proposed on or prior to the Closing Datefor listing on the National Priorities List established pursuant to Environmental Lawsor any list established by any other Governmental Entityof sites requiring investigation, response or remediation, or (v) any and all Liabilitiesrelating to any investigation, removal, remediation, restoration, abatement, monitoring and/or reporting relating to any of the matters described in clauses (i) through (iv) of thisSection 2.4(i);
(j) any and all Liabilitiesof the Sellerto the Shareholders, their family members,or their Affiliates;
(k) any and all Liabilitiesof the Sellerfor or relating to any Taxes, includingany taximposed on the Sellerunder Section 1374 of the Code; but excluding any Taxes which are properly assessed against Buyer for its operation of the Business after Closing;
(l) any and all Liabilitiesresulting from the failure of the Sellerto comply with any provisions of “bulk sales,” “bulk transfer” or similar Lawsof any jurisdiction in connection with the transactions contemplated hereunder;
(m) any and all Liabilitiesarising out of any businessactivity of the Sellerother than the Business;
(n) any and Liabilities arising out of the acquisition by the Seller of another business or a material amount of stock or assetsof any other Person(whether by merger, sale of stock, sale of assetsor otherwise), including contingent purchase price payments, royalties, indemnification obligations and any other Liabilities to the seller(s) of such businesses;
(o) any and all Liabilitiesunder or arising by reason of this Agreementand the other Transaction Documents, or incurred in connection with the transactions contemplated by this Agreement, includinglegal and accounting fees and expenses;
(p) any and all Liabilitiesrelating to the acquisition, ownership, operation, use or disposal of any Excluded Assets; and
(q) any and all other Liabilitiesof the Sellerthat do not constitute Assumed Liabilitiesexpressly being assumed by the BuyerunderSection 2.3.
Section 2.5 Consideration for the Assets.In addition to the assumption of the Assumed Liabilitiesby the Buyer, the consideration for the Assets(collectively, the “Purchase Price”) shall be the following, and shall be subject to adjustment in accordance with the terms of this Agreement: (i)the sum of $26,831,244 (the “Closing Cash”), payable at the Closingas provided inSection 2.6,plus (ii)the Working Capital Adjustmentdetermined underSection 2.7(which may be a negative number),plus (iii)the Contingent Future Payments and Additional Contingent Payments, if any, payable as and when provided inSection 2.8 andplus (iv) the Restricted Buyer Shares, to be issued in accordance withSection 2.9.
Section 2.6 Closing.
(a) Closing. Subject to the terms and conditions of this Agreement, the closingof the transactions contemplated by this Agreement(the “Closing”) shall take place simultaneously with the execution of this Agreementby the exchange of documents between the parties via facsimile or other electronic communication, or at such other time, place and manner as the parties agree in writing (the date the Closingoccurs, the “Closing Date”). Unless otherwise agreed by the parties, the purchase and sale of the Assets, and the assumption of the Assumed Liabilities, shall be deemed effective as of the beginning of the day on the Closing Date (the “Effective Time”).
(b) Pre-Closing Deliveries.
(i) Prior to Closing,the Sellershall have delivered to the Buyera statement (the “Closing Date Indebtedness Statement”), signed on behalf of the Sellerby the Chief Financial Officer of the Seller, setting forth, by creditor, the aggregate amount of Indebtednessof the Selleroutstanding as of immediately prior to the Closing(the “Closing Date Indebtedness”), together with, to the extent required to releaseany Encumbranceson any of the Assets, copies of payoff letters from each such creditor in form and substance satisfactory to Buyer(which shall include(A) the aggregate payment necessary to be made at Closingin orderto satisfy in full the Indebtednessowed by the Sellerto such creditor, includingall principal, interest, fees, prepayment penalties or other amounts due or owing with respect thereto, and (B) an agreementby the creditor to release, and authorizing the Buyerand its representatives to release, any Encumbranceson any of the Assetssecuring such Indebtednessupon payment of the amount stated in the payoff letter, includingauthorization to file UCC termination statements) (the “Required Payoff Letters”), wire transfer instructions for each holder of Closing Date Indebtedness, and such additional documentation or information as the Buyermay reasonably request. Seller herebyauthorizes the Buyer, on behalf of the Seller, to take any and all actions that the Selleris authorized to take pursuant to the terms of the Required Payoff Letters in orderto terminate any Encumbranceson any of the Assets.
(ii) Prior to Closing,the Sellershall have delivered to the Buyer(A) a good faith estimated Closing Balance Sheet, prepared in accordance with GAAP, (B)a written calculation of the estimated Closing Working Capitalas of the end of the day immediately preceding the Closing Datederived from such estimated Closing Balance Sheet, and (C) based on such estimated Closing Working Capitalcalculation, a calculation of the estimated Working Capital Adjustment (the “Estimated Working Capital Adjustment”), which shall be subject to Buyer’s reasonable approval.
(c) Sellerand Shareholder ClosingDeliverables. At the Closing, the Sellerand Shareholdersshall deliver or cause to be delivered to the Buyerthe following:
(i) the Real Property Purchase Documents;
(ii) the Escrow Agreementgoverning the Escrow Fundin the form ofExhibit A(the “Escrow Agreement”), duly executed by the Sellerand the Shareholders;
(iii) the Bill of Sale, Assignment and Assumption Agreementin the form ofExhibit B(the “Bill of Sale”), duly executed by the Seller, and such other instruments as may be reasonably requested by the Buyerto transfer the Assetsto the Buyerunder this Agreement;
(iv) a License Assignment and Assumption Agreementin the form ofExhibit Cfor each Assumed Leased Facility (each an “License Assignment and Assumption Agreement”), duly executed by the Sellerand the landlord under the applicable Facility Lease;
(v) [Intentionally deleted].
(vi) an Employment Agreementwith the Buyerfor each of Kirby P. Sims, Jr. and Frederick L. Hill, III, in form and substance satisfactory to the Buyerand such Shareholder(the “Employment Agreements”), duly executed by the applicable Shareholder;
(vii) a Consulting Agreementwith the Buyer for Richard J. Sosebee, in form and substance satisfactory to the Buyerand such Shareholder(the “Consulting Agreement”), duly executed by the applicable Shareholder;
(viii) a Restricted Stock Agreementfor each Shareholder in accordance withSection 2.9, in form and substance satisfactory to the Buyerand such Shareholder(the “Restricted Stock Agreements”), duly executed by the applicable Shareholder;
(ix) assignments in form and substance satisfactory to the Buyer (the “Intellectual Property Assignments”), duly executed by the Seller, transferring all of the Seller’s right, title and interest in and to the Registered Intellectual Property;
(x) a certificate from the Secretary (or another authorized officer) of the Seller, dated as of the Closing Date, in form and substance satisfactory to the Buyer, certifying that: (A)the articles of incorporation, bylaws and any shareholders’ agreementof the Sellerattached to such certificate are true, correct and complete, (B) such documents referred to in clause (A)above have been in full force and effect in the form attached to such certificate from and after the date of the adoption of the resolutions referred to in clause (C)below and no amendment to such document has occurred from and after the date of the last amendment annexed thereto, and (C)the resolutions of the board of directors and shareholdersof the Sellerattached to such certificate, which authorize this Agreement, the other Transaction Documentsto which the Selleris a party, and the transactions contemplated thereby, were duly adopted at a duly convened meeting thereof (at which a quorum was present and acting throughout) or by written consent, remain in full force and effect, and have not been amended, rescinded or modified;
(xi) a certificate from the Sellercertifying as to the Seller’s non-foreign status in accordance with the requirements of Section 1.1445-2(b) of the Treasury Regulations, in form and substance satisfactory to the Buyer;
(xii) a certificate of good standing for the Sellerissued by the Secretary of State of the State of Georgia(and any other state in which the Selleris registered as a foreign corporation), issued no earlier than five (5) days prior to the Closing Date;
(xiii) evidence satisfactory to the Buyerthat all Encumbranceson any of the Assetshave been released, discharged and terminated in full;
(xiv) evidence satisfactory to the Buyerthat the third party consents or approvals listed onSchedule 2.6(c)(xiv)have been obtained;
(xv) a tax clearance certificate, certificate of compliance or similar instrument issued by the State of Georgia,or such other evidence satisfactory to the Buyer (in its sole discretion) that Buyer will not be subject to Liability for any Taxes of the Seller;
(xvi) a legal opinion of Duane Morris LLP, counsel to the Seller, in form and substance satisfactory to the Buyer; and
(xvii) such other documents and instruments as may reasonably be requested by the Buyer, each in form and substance satisfactory to the Buyer.
(d) Buyer ClosingDeliverables. At the Closing, the Buyershall deliver or cause to be delivered to the Escrow Agent, the Sellerand the Shareholders, as applicable, the following:
(i) the Closing Cashplus the Estimated Working Capital Adjustment (which may be a negative number), payable as follows: (A) $1,500,000 (the “Escrow Fund”) shall be paid to SunTrust Banks, Inc. (the “Escrow Agent”) to be held and disbursed in accordance with the Escrow Agreement, (B)the Closing Date Indebtedness shown on the Closing Date Indebtedness Statementshall be repaid on behalf of the Sellerin accordance with the Required Payoff Letters;provided, that Buyer shall not be responsible for any payment of Seller’s obligation to BEG, LLC d/b/a Image First and such obligation is an Excluded Liability, and (C) the balance shall be paid by wire transfer of immediately available funds to a single account designated in writing by the Seller;
(ii) the Escrow Agreement, duly executed by the Buyer;
(iii) the Bill of Sale, duly executed by the Buyer;
(iv) the License Assignment and Assumption Agreements, duly executed by the Buyer;
(v) the Restricted Stock Agreements, duly executed by the Buyer;
(vi) the Employment Agreements and Consulting Agreement, duly executed by the Buyer; and
(vii) such other documents and instruments as may reasonably be requested by the Seller, each in form and substance satisfactory to the Seller.
(e) Effectiveness. All of the foregoing deliveries underSections 2.6(c)and (d)by one party to another party shall be deemed to have occurred simultaneously at the Closingand none shall be effective until and unless all have occurred in accordance with this Agreementor have been waived.
Section 2.7 Working Capital Adjustment.
(a) Definitions. For purposes of this Agreement, the following terms have the meaning specified below:
(i) “Average Working Capital” means $11,569,130.
(ii) “Closing Balance Sheet” means the balance sheetof the Seller as of the end of the day immediately preceding the Closing Date, prepared in accordance with GAAPand thisSection 2.7;provided that such balance sheet must be prepared in detail showing each line item in the general ledger, rather than simply showing current assets and current liabilities in the aggregate.
(iii) “Closing Working Capital” means the Working Capitalas of the end of the day immediately preceding the Closing Date.
(iv) “Working Capital” means, as of any relevant date, the amount calculated by subtracting the current liabilities of the Seller as of that date from the current assets of the Seller as of that date, determined in accordance with GAAP;provided, that (i) the inventory included as current assets shall not include Excluded Inventory, and all inventory shall be valued at the lower of cost or market, on a first-in, first-out (FIFO) basis, (ii) the accounts receivable as of the Closing Date shall include a 100% reserve against any accounts aged more than ninety (90) days, (iii) the full amount of all customeradvance payments, customer deposits and similar customer prepaid items (including the Walgreen’s deposits) and liabilities related to inventory in-transit, outstanding purchase orders and work-in-process shall be accrued as a current liability, (iv) no purchase accounting adjustments arising out of the transactions contemplated hereby shall be made, and (v) no current Liabilities shall be included if they are not Assumed Liabilities and no current assets shall be included to the extent they are not Assets. A detailed illustration of the manner in which the parties calculated the Average Working Capital (based on the Seller’s December 31, 2012 balance sheet) is attached asSchedule 2.7(a). Except as provided in other provisions of this Agreement, the parties acknowledge and agree that the Closing Balance Sheet shall be prepared in a manner consistent with, and including the same line items, classifications and estimation methodologies, as are set forth on the statement of working capital attached hereto asSchedule 2.7(a) for purposes of calculating the Working Capital of the Seller as ofthe end of the day immediately preceding the Closing Date.
(v) “Working Capital Adjustment” means (A) the Closing Working Capital,less (B) the Average Working Capital.
For the avoidance of doubt, the Closing Working Capital, the Estimated Working Capital Adjustmentor the Working Capital Adjustmentmay be a negative amount.
(b) Calculation.
(i) Within one hundred fifty (150) days after the Closing Date, the Buyershall prepare and deliver to the Sellera written statement (the “Buyer Working Capital Statement”) containing the following: (i) a Closing Balance Sheet, prepared in accordance with GAAP, (ii) a calculation of the Closing Working Capitalas of the end of the day immediately preceding the Closing Date derived from such Closing Balance Sheet, and (iii) based on such Closing Working Capitalcalculation, a calculation of the Working Capital Adjustment. During the next 30 days, the Buyershall, at the reasonable request of the Sellerand during normal businesshours, afford the Sellerand its advisors access to the books and recordsof the Buyerrelated to the Acquired Business and otherwise reasonably cooperate with the Sellerand their advisors in orderto permit the Sellerand its advisors to review the Buyer Working Capital Statement. The Selleragrees to keep confidential and not disclose, divulge, or use for any purpose (other than to review the Buyer Working Capital Statement) any financial or other confidential informationobtained from the Buyerpursuant to the terms of thisSection 2.7.
(ii) In calculating the accounts receivable portion of the Closing Balance Sheet and Closing Working Capital, the Seller will receive credit (i.e., current assets will include) only the amount of accounts receivable of the Seller accrued on the Closing Date that are actually collected by the Buyer during the period beginning on the Closing Date and ending on the 120th day after the Closing Date. Seller shall have no right to receive credit for any accounts receivable accrued on the Closing Date but collected after the end of such 120-day period. If any accounts receivable accrued on the Closing Date are not collected by the end of such 120-day period, then Buyer shall continue good faith efforts to collect such accounts from the relevant customer, and Seller may provide reasonable assistance in such collection efforts as approved in advance by Buyer. If any receivable is paid after the 120-day period to Buyer (and Seller has not received credit for such receivable in the calculation of Closing Working Capital), then Buyer shall hold the collected receivable in trust for the benefit of Seller and shall immediately pay the amount of the receivable to Seller.
(iii) For purposes of determining the quantity of the Seller’s inventory as of theend of the day immediately preceding the Closing Date for purposes of calculating the Closing Working Capital, as close as reasonably practicable to the Closing Date, the Buyer shall conduct or cause to be conducted a physical count of the Seller’s inventory;provided,that the inventory included as current assets shall not include Excluded Inventory, as determined by the Buyer in its discretion, and all inventory shall be valued at the lower of cost or market, on a FIFO basis. If, based upon the advice of Buyer’s independent auditors, the Buyer is required to account for the acquired inventory under GAAP and the value of the acquired inventory under GAAP is less than the amount determined under the preceding sentence, then such value of the acquired inventory determined under GAAP shall control, and (A) if such determination is made prior to the calculation of the Final Working Capital Adjustment, it will be taken into account in the calculation of such Final Working Capital Adjustment, and (B) if such determination is made after the calculation of the Final Working Capital Adjustment, the Seller shall pay to the Buyer an amount equal to (1) the value of the inventory used in calculating the Final Working Capital Adjustment,less (2) the value of the acquired inventory determined under GAAP. Such amount shall be paid on demand or, in the Buyer’s discretion, by set-off against other amounts owed to the Seller under this Agreement.
(c) DisputeProcedures. If the Seller disputesany determination by the Buyerpursuant toSection 2.7(b), then the Sellershall give the Buyernotice of such dispute (a “Working CapitalNotice of Dispute”), not more than 30 days after the date on which the Sellerreceives the Buyer Working Capital Statement. In the Working Capital Notice of Dispute, the Seller shall include a request for any and all books, records, documents or other information that Seller requires to analyze the determinations of Seller pursuant to Section 2.7(b). Buyer agrees to provide all books and records requested by Seller pursuant to the Working Capital Notice of Dispute within thirty (30) days. However, if Buyer believes that Seller’s request for books and records is unreasonable, Buyer shall produce all books and records which it does not find objectionable within the 30-day period and shall also deliver a written response specifying those items that it believes are not reasonably necessary to Seller’s review. If the parties are unable to resolve a dispute related to Buyer’s production, then the Special Accountant (as defined below) shall be engaged immediately to resolve the dispute relating to the production of books and records. Within thirty (30) days after the production of the books and records requested in the Working Capital Notice of Dispute, or the decision of the Special Accountant with respect to the production of books and records, whichever is later, the Seller shall deliver an addendum to the Working Capital Notice of Dispute (which shall become part of the original Notice) specifying in reasonable detail any points of dispute and includinga proposed determination of the Closing Working Capitaland the Working Capital Adjustment. The Sellershall be deemed to have accepted any determination by the Buyerin the Buyer Working Capital Statementand each such determination shall be deemed conclusive, binding and final if (i) the Sellerfails to give a Working Capital Notice of Disputewithin the original 30-day period, or (ii) the Sellergives notice to the Buyeraccepting a determination within the original 30-day period. Upon receipt of the Working Capital Notice of Dispute, the Buyerand the Sellershall consult promptly with each other with respect to the points of dispute in an effort to resolve the dispute. If such dispute is resolved by a written, signed agreementof the Sellerand the Buyer, the agreed amount will be deemed conclusive, binding and final. If any dispute is not resolved by the Sellerand the Buyerwithin 30 days after the Working Capital Notice of Disputeis given to the Buyer, either the Selleror the Buyermay elect, by written notice to the other party, to refer the dispute to the Atlanta, Georgia office of Cherry Bekaert(or, if such firm is unwilling or unable to accept such appointment, another national or regional independent accounting firm mutually acceptable to the Buyerand the Seller) (the “Special Accountant”) to finally determine, as soon as practicable, all such disputes. All determinations by the Special Accountant shall be in writing, and shall be conclusive, final, and binding;provided that (i) the scope of the Special Accountant’s engagement will be limited solely to resolving the disputesregarding the determination of the Closing Working Capitaland the Working Capital Adjustmentthat are set forth in the Working Capital Notice of Dispute, including any disputes related to the production of books and records as described above; (ii) the Special Accountant shall be bound by the terms and provisions of this Agreement; and (iii) the Special Accountant shall not ascribe a value to any disputed item or amount higher or lower, as the case may be, than the highest or lowest value ascribed by the Buyeror the Sellerto such item in the Buyer Working Capital Statementor Working Capital Notice of Dispute, respectively. The fees, costs and expenses of such Special Accountantincurred in connection with any dispute will be borne by the non-prevailing party, or if the Special Accountant determines that neither party could be fairly found to be the prevailing party, then such fees, costs and expenses will be borne fifty percent (50%) by the Sellerand fifty percent (50%) by the Buyer. The Working Capital Adjustmentas finally determined pursuant to thisSection 2.7(c)is the “Final Working Capital Adjustment” and the balance sheetprepared by the Buyer, as amended to reflect any modifications agreed to by the Buyerand the Selleror made by the Special Accountant, is referred to hereinas the “Final Closing Balance Sheet.”
(d) Purchase PriceAdjustments.
(i) If the Estimated Working Capital Adjustmentis greater than the Final Working Capital Adjustment, the Sellershall refund to the Buyeran amount equal to such excess.
(ii) If the Estimated Working Capital Adjustmentis less than the Final Working Capital Adjustment, the Buyershall pay to the Seller the amount of such deficiency.
(iii) If the Estimated Working Capital Adjustmentequals the Final Working Capital Adjustment, then no further payment or refund shall be made pursuant to thisSection 2.7.
(iv) Any payment to be made pursuant to thisSection 2.7(d)shall be paid in immediately available funds to a single bank account designated in writing by the Seller or the Buyer, as applicable, and shall be paid within ten (10) Business Daysafter the Final Working Capital Adjustmentis finally determined in accordance withSection 2.7(c).
Section 2.8 Earn-Out.
(a) Definitions. For purposes of this Agreement, the following terms have the meaning specified below:
(i) “Acceleration Event” means (A) a Change in Control occurs,and (B) in connection with such Change in Control, the acquiring Persondoes one of the following (in each case without the consent of the Shareholder(s) then employed by the Buyer)(each an “Acquired Business Change Event”): (1) closes the operations of the Buyerin Alpharetta, Georgia, (2) changes the operations of the Buyerin Alpharetta, Georgia in a manner that will materially adversely affect the ability of the Acquired Businessto achieve the Gross Profittargets, or (3) requires the Shareholder(s) then employed by the Buyerto relocate their principal place(s) of employment more than 50 miles from their then-current principal place(s) of employment.
Notwithstanding the foregoing, an Acquired Business Change Event shall not result in an Acceleration Event unless (x) the Seller first gives written notice to the acquiring Person that references thisSection 2.8 and thatspecifies in reasonable detail the nature and extent of the circumstances constituting the Acquired Business Change Event, and specifies the reasonable steps that the acquiring Personmust take to cure such Acquired Business Change Event, and (y) such Acquired Business Change Event is not cured within sixty (60) days after such notice is provided;provided,however, that if such Acquired Business Change Event is not reasonably capable of being cured within sixty (60) days, such Acquired Business Change Event shall not result in an Acceleration Event if the acquiring Person in good faith commences actions to cure such Acquired Business Change Event within such 60-day period and thereafter does continuously endeavor to cure such Acquired Business Change Event within a reasonable period of time.
(ii) “Acquired Business” shall mean the Assets ofand Businessconducted by the Selleras of the Closing Dateand acquired by the Buyer. For the purpose of calculating the Contingent Future Payment, the Buyershall separately account for the financial results of the Acquired Businessduring each Measurement Periodso that such financial statementsdo not includethe operating results from any other business, customer, segment or division of the Buyer, whether now owned or hereafter acquired by the Buyeror its Affiliates, includingany of the foregoing that is now or at any time hereafter included as part of or consolidated with the Acquired Businessor any division of the Buyeror its Affiliatesunder which the Acquired Businessis organized. For the avoidance of doubt, any business or customer originated by the Acquired Business after the Closing shall be included in the results of the Acquired Business for purposes of the earn-out calculation described in thisSection 2.8.
(iii) “Additional Contingent Payment” means, with respect to any Measurement Period, fourteen percent (14%) of the amount of the Earnings of the Acquired Business in excess of the targets for each Measurement Period set forth onSchedule 2.8(a)(iii). For the avoidance of doubt, the Additional Contingent Paymentshall be determined separately for each Measurement Period based solely on the amount of the Earnings of the Acquired Business for the applicable Measurement Period, and without regard to the amount of the Earnings of the Acquired Business or the Additional Contingent Payment earned for any other time period.
(iv) “Change in Control” means either of the following occurs: (A) the Buyersells all or substantially all of its assets(in a transaction requiring shareholderapproval), or (B) any Personor group of Personswithin the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934becomes the beneficial owner, directly or indirectly, of more than 50% of the Buyer’s outstanding voting stock(whether by way of purchase of stock, merger or otherwise).
Notwithstanding the foregoing, the following transactions shall in no event constitute a Change in Control: (x) any going private transaction with respect to the Buyer (including any transaction subject to Rule 13e-3 under the Securities and Exchange Act of 1934),or (y) any acquisition of stock by any of the Benstockfamily or their Affiliates, including pursuant to transfers for estate planning purposes.
(v) “Contingent Future Payment” means, with respect to any Measurement Period, the amount determined in accordance withSchedule 2.8(a), based on the Gross Profitfor such Measurement Periodrelative to the target Gross Profitfor that Measurement Period. The maximum Contingent Future Paymentfor any Measurement Periodis $2,000,000 ($1,200,000 for calendar year 2014) (the aggregate maximum Contingent Future Paymentfor all Measurement Periodsis $7,200,000). For the avoidance of doubt, the Contingent Future Paymentshall be determined separately for each Measurement Period based solely on the Gross Profit for the applicable Measurement Period, and without regard to the amount of Gross Profit or Contingent Future Payment earned for any other time period.
(vi) “Earnings of the Acquired Business” means the earnings of the Acquired Businessbefore interest, income taxes, and amortization of intangible assets related to the Transaction, as determined by the Company in accordance with GAAP. For clarity, all expenses of the Acquired Business other than those specifically listed in the preceding sentence shall be taken into account in determining the Earnings of the Acquired Business.
(vii) “Gross Profit” means, for any Measurement Period, the gross profit of the Acquired Business, determined in accordance with GAAP.
(viii) “Measurement Period” means each of the following: (A) calendar year 2014, (B) calendar year 2015, (C) calendar year 2016, and (D) calendar year 2017.
(b) Calculation. The Buyershall, within 60 days after filing its Form 10-K for a Measurement Period, prepare and deliver to the Seller: (i) a written statement setting forth the Buyer’s calculation of the Gross Profits andthe Earnings of the Acquired Business for the Measurement Period(“Gross Profit Statement”) and (ii) based on such Gross Profit Statement, a calculation of the amounts of the Contingent Future Payment and theAdditional Contingent Payment for the Measurement Period, if any. During the next thirty (30) days, the Buyershall, at the reasonable request of the Sellerand during normal businesshours, afford the Sellerand its advisors access to the books and recordsof the Buyerrelated to the Acquired Businessand otherwise reasonably cooperate with the Sellerand their advisors in orderto permit the Sellerand its advisors to review the Gross Profit Statementprovided by the Buyerand confirm the Buyer’s determination of the Gross Profit, the Earnings of the Acquired Business, the Contingent Future Payment and theAdditional Contingent Payment for the applicable Measurement Period. The Selleragrees to keep confidential and not disclose, divulge, or use for any purpose (other than to monitor the calculation of the Contingent Future Payments and theAdditional Contingent Payments) any financial or other confidential informationobtained from the Buyerpursuant to the terms of thisSection 2.8. If the parties have a dispute related to Buyer’s production of books and records, then the Special Accountant shall be engaged immediately to resolve the dispute relating to the production of books and records.
(c) DisputeProcedures. If the Seller disputesany determination by the Buyerpursuant toSection 2.8(b), then the Sellershall give the Buyernotice of such dispute (a “Earn-Out Notice of Dispute”), not more than thirty (30) days after the date on which the Sellerreceives the Buyer’s Gross Profit Statement, or the decision of the Special Accountant with respect to the production of books and records, if applicable, whichever is later, specifying in reasonable detail any points of dispute and includinga proposed determination of the Gross Profit andthe Earnings of the Acquired Business for the applicable Measurement Period. The Sellershall be deemed to have accepted any determination by the Buyerin the Gross Profit Statementand each such determination shall be deemed conclusive, binding and final if (i) the Sellerfails to give an Earn-Out Notice of Disputewithin such 30-day period, or (ii) the Sellergives notice to the Buyeraccepting a determination within such 30-day period. Upon receipt of the Earn-Out Notice of Dispute, the Buyerand the Sellershall consult promptly with each other with respect to the points of dispute in an effort to resolve the dispute. If such dispute is resolved by a written, signed agreementof the Sellerand the Buyer, the agreed amount will be deemed conclusive, binding and final. If any dispute is not resolved by the Sellerand the Buyerwithin 30 days after the Earn-Out Notice of Disputeis given to the Buyer, either the Selleror the Buyermay elect, by written notice to the other party, to refer the dispute to the Special Accountant to finally determine, as soon as practicable, all such disputes. All determinations by the Special Accountant shall be in writing, and shall be conclusive, final, and binding;provided that (i) the scope of the Special Accountant’s engagement will be limited solely to resolving the disputesregarding the determination of the Gross Profit and/orthe Earnings of the Acquired Business that are set forth in the Earn-Out Notice of Dispute, including any disputes related to the production of books and records as described above; (ii) the Special Accountant shall be bound by the terms and provisions of this Agreement; and (iii) the Special Accountant shall not ascribe a value to any disputed item or amount higher or lower, as the case may be, than the highest or lowest value ascribed by the Buyeror the Sellerto such item in the Gross Profit Statementor Earn-Out Notice of Dispute, respectively. The fees, costs and expenses of such Special Accountant incurred in connection with any dispute will be borne by the non-prevailing party, or if the Special Accountant determines that neither party could be fairly found to be the prevailing party, then such fees, costs and expenses will be borne fifty percent (50%) by the Sellerand fifty percent (50%) by the Buyer.
(d) Time of Payment. The Contingent Future Payment and Additional Contingent Paymentfor a Measurement Periodshall be paid by the Buyerto the Sellerin immediately available funds to a single bank account designated in writing by the Seller, and shall be paid within ten (10) Business Daysafter the amount of the Contingent Future Payment and Additional Contingent Paymentis finally determined in accordance withSection 2.8(c);provided, that, with respect to the Contingent Future Payment and Additional Contingent Payment for the calendar year 2014 Measurement Period, if any, such payment shall be payable no earlier than the second anniversary of the Closing Date.
(e) Acceleration of Earn-Out Payment. If an Acceleration Eventoccurs during a Measurement Period, then (i) the maximum Contingent Future Paymentfor the Measurement Periodin which the Acceleration Eventoccurs (i.e., $1,200,000 or $2,000,000, as the case may be) shall be deemed earned by the Seller, without regard to the actual Gross Profitfor that period, and (ii) the maximum Contingent Future Payment(s) for the Measurement Period(s) commencing after the Measurement Periodin which the Acceleration Eventoccurs, if any (i.e., $1,200,000 or $2,000,000 for each, as the case may be), shall be deemed earned by the Seller. If an Acceleration Eventoccurs during calendar year 2013, then the maximum aggregate Contingent Future Payment (i.e., $7,200,000) shall be deemed earned by the Seller. If any Contingent Future Payment(s) are payable under thisSection 2.8(e), such amount shall be paid by the Buyerto the Sellerin immediately available funds to a single bank account designated in writing by the Seller, and shall be paid within ten (10) Business Daysafter the occurrence of the Acceleration Event. For the avoidance of doubt, if an Acceleration Event occurs at any time, Seller will remain eligible to receive Additional Contingent Payments for the remaining Measurement Periods.
(f) Forfeiture of Earn-Out Payment. Notwithstanding anything to the contrary:
(i) The Seller’s rights to all Contingent Future Payments and Additional Contingent Payments shall be forfeited, and none shall be paid to the Seller, if Frederick L. Hill, III and Kirby P. Sims, Jr. do not each remain continuously employed by the Buyerfrom the Closing Datethrough the second anniversary of the Closing Date. However, forfeiture under thisSection 2.8(f)(i) shall not occur if Frederick L. Hill, III dies on or before the second anniversary of the Closing Date and Kirby P. Sims, Jr. remains continuously employed by the Buyer during this time period.
(ii) With respect to any Measurement Period, (A) one-third (1/3)of the amount of the Contingent Future Payment andAdditional Contingent Payment otherwise payable to the Sellerfor the Measurement Periodshall be forfeited, and not paid to the Seller, if Frederick L. Hill, III does not remain continuously employed by the Buyerfrom the Closing Datethrough the end of the Measurement Period (including as a result of his death, notwithstanding the provisions ofSection 2.8(f)(i)), and (B) two-thirds (2/3)of the amount of the Contingent Future Payment andAdditional Contingent Payment otherwise payable to the Sellerfor the Measurement Periodshall be forfeited, and not paid to the Seller, if Kirby P. Sims, Jr. does not remain continuously employed by the Buyerfrom the Closing Datethrough the end of the Measurement Period.
(iii) If an Acceleration Eventoccurs, (A) one-third (1/3)of the amount of the Contingent Future Paymentotherwise payable to the Sellerupon the Acceleration Eventshall be forfeited, and not paid to the Seller, if Frederick L. Hill, III does not remain continuously employed by the Buyerfrom the Closing Datethrough the date of the Acceleration Event (including as a result of his death, notwithstanding the provisions ofSection 2.8(f)(i)), and (B) two-thirds (2/3)of the amount of the Contingent Future Payment andAdditional Contingent Payment otherwise payable to the Sellerupon the Acceleration Eventshall be forfeited, and not paid to the Seller, if Kirby P. Sims, Jr. does not remain continuously employed by the Buyerfrom the Closing Datethrough the date of the Acceleration Event.
(g) Post-Closing Operation of Business. The Selleracknowledges that the Buyermakes no representation that this arrangement will generate any particular amount of Contingent Future Payments andAdditional Contingent Payments and, since the amount of any such Contingent Future Payments andAdditional Contingent Payments derives from the financial performance of the Acquired Businessduring the Measurement Period, it is possible that no Contingent Future Payments orAdditional Contingent Payments will be earned. The Buyerdoes not have any obligation or owe any duty (whether fiduciary, contractual or otherwise) to the Sellerto operate its businesswith the focus of maximizing or obtaining any portion of the Contingent Future Payments or theAdditional Contingent Payments. Nothing in this Agreementprovides the Shareholderswith any right to employment or continued employment for any specified period that is in addition to any such rights provided by the Employment Agreements.
Section 2.9 Delivery of Restricted Buyer Shares.At the Closing, and subject to the terms and conditions of the Restricted Stock Agreements (including in reliance on the investment representations and warranties made by the Seller and Shareholders therein), the Buyer shall issue one-third (1/3) of the Restricted Buyer Shares to each Shareholder. The parties acknowledge that the issuance of the Restricted Buyer Shares directly to the Shareholders is for the convenience of the parties, and that all Restricted Buyer Shares will be deemed issued first to the Seller as part of the Purchase Price for the Assets, and then transferred by the Seller pro-rata to the Shareholders.
Section 2.10 Purchase Price Adjustment. For all purposes, including Taxpurposes, the Working Capital Adjustment, Contingent Future Payments and other price adjustments contemplated bySections 2.7 and2.8shall be treated as additional purchase pricepaid by the Buyerto the Seller, or reductions to the purchase price paid,for the Assets(except to the extent a portion of any payment by the Buyer is properly treated as imputed interest for Taxpurposes), and the parties will file all Tax Returnsconsistent with such treatment.
Section 2.11 Non-Assignable Assets.As between any third party or Governmental Entityon the one hand, and the Selleron the other hand, this Agreementshall not constitute an agreementto assign any Contractor any right thereunder if an attempted assignment, without the consent of, or other actionby, such third party or Governmental Entity, would constitute a violation of any applicable Lawor a breach of or in any way adversely affect the rights of such third party, such Governmental Entity, the Buyeror the Sellerthereunder;provided, however, that if such consent is not obtained or such other actionis not taken prior to the Closingthen, as between the Sellerand the Buyer,the Sellershall, to the extent reasonably practicable, (a)provide to the Buyerthe benefits of the applicable Contractor other Asset, (b)reasonably cooperate in any reasonable arrangement designed to provide such benefits to the Buyer, and (c)enforce at the request and expense of the Buyerand for the account of the Buyer, any rights of the Sellerarising from any such Contractor other Asset. The Buyershall use commercially reasonable efforts to perform the obligations under any such Contract, but only if and to the extent that such obligations are Assumed Liabilities. For the avoidance of doubt, nothing in thisSection 2.11shall obligate the Buyerto pay, perform or discharge any Excluded Liability. In addition, the parties will undertake commercially reasonable efforts to obtain the necessary consents of all third-parties to the Assumed Contracts within six (6) months after the Closing Date. If any customer terminates the relevant Assumed Contract based on the failure to obtain a necessary consent, Seller shall satisfy any Liabilities arising from such Assumed Contract, including, without limitation, payment to Buyer for any inventory not purchased by a customer after termination of its Assumed Contract. If, however, any customer refuses to give its consent to the assignment of its Assumed Contract to Buyer, and such customer does not terminate the Assumed Contract within the 6-month period, then Seller may request permission from Buyer to terminate such Assumed Contract. Within ten (10) days of the date of Seller’s request to terminate, the Buyer may either reject or accept the request to terminate from Buyer. If Buyer fails to respond to Buyer’s request, then Buyer shall be deemed to have rejected the request. If Buyer accepts the request of Seller to terminate, then Seller shall terminate such Assumed Contract, and Seller shall satisfy any Liabilities arising from, or relating to, the terminated Assumed Contract including, without limitation, payment to Buyer for any inventory not purchased by a customer after termination of its Assumed Contract. If Buyer rejects the request of Seller to terminate, then Buyer will assume all Liabilities arising from, or relating to, the Assumed Contract. Any payments by a customer of the Acquired Business for inventory shall be retained by Buyer, unless Buyer has already made a reduction for such inventory pursuant to the Final Working Capital Adjustment, in which case, Seller shall retain such payments. To the extent the failure to obtain any consent required for the assignment of any Assumed Contract causes a breach under such Assumed Contract, any Liability resulting from such breach shall be an Excluded Liability (unless Buyer assumes the Liability under such Assumed Contract as described above).
Section 2.12 Withholding Tax. The Buyershall be entitled to deduct and withhold from the Purchase Priceall Taxesthat the Buyermay be required to deduct and withhold under any provision of applicable Law. All such withheld amounts shall be treated as delivered to the Sellerhereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties of the Sellerand Shareholders. The Sellerand the Shareholders, jointly and severally, represent and warrant to the Buyerthat each of the statements contained in thisSection 3.1is true and correct as of the Closing Date, except as set forth in the corresponding section of the Disclosure Schedule, which shall be arranged in paragraphs corresponding to the lettered and numbered paragraphs contained in thisSection 3.1.
(a) Due Organization and Good Standing. The Selleris duly organized, validly existing, and in good standing as a corporation under the Lawsof the State of Georgia. The Sellerhas all requisite power and authority and all Permitsnecessary to own, lease, hold and operate its assetsand properties and to carry on its businesses as now conducted and the Sellerhas all Permitsnecessary to carry out the transactions contemplated by this Agreement. Copies of the articles of incorporation, bylaws and any shareholders’ agreementof the Sellerthat have been made available to the Buyer(the “Organizational Documents”) reflect all amendments thereto and are true, correct and complete.
(b) Capacity, Authorization, Execution and Delivery; Valid and Binding Agreement. The Sellerand each Shareholderhas the power, authority and legal capacity and has taken all required corporate and other actionon its part necessary to permit and duly authorize it to execute and deliver and to carry out and perform the terms of this Agreementand the other Transaction Documents to which it is a party, and to consummate the transactions contemplated herebyand thereby. This Agreement and the other Transaction Documents to which it is a partyhave been duly and validly executed and delivered by the Sellerand each Shareholder, and (assuming the due authorization, execution and delivery by the other parties heretoand thereto) this Agreementand such other Transaction Documentsconstitute the legal, valid and binding obligation of the Sellerand each Shareholder, enforceable against them in accordance with their terms.
(c) Governmental Filings. No filing or registration with, notification to, or authorization, consent or approval of any Governmental Entityis required in connection with the execution, delivery and performance of this Agreementor the other Transaction Documentsby the Selleror the Shareholders, or the consummation by the Sellerand the Shareholderof the transactions contemplated by this Agreementand other Transaction Documents, except for those set forth onPart 3.1(c) of the Disclosure Schedule.
(d) Subsidiaries.
(i) The Sellerdoes not have any subsidiaries and does not own, directly or indirectly, any stock, limited liabilitycompany interest or membership interest, partnership interest or other equity or voting interest in or of any Person.
(e) Financial Statements. The Sellerhas provided true and complete copies of the Financial Statementsto the Buyer. The Financial Statementsare consistent in all material respects with the books and recordsof the Seller(which, in turn, are accurate and complete in all material respects) and have been prepared in accordance with GAAP, subject, in the case of interim statements, to normal recurring year-end adjustments necessary for a fair presentation of interim results (in accordance with GAAP) and the absence of notes thereto. The Financial Statementsfairly present, in all material respects, the financial position of the Selleras of the dates thereof and the results of operations, revenues, expenses and cash flows for the periods then ended, subject, in the case of interim statements, to normal recurring year-end adjustments necessary for a fair presentation of interim results (in accordance with GAAP) and the absence of notes thereto (none of which disclosure notes or adjustments would, alone or in the aggregate, be materially adverse to the business, operations, assets, Liabilities, financial condition, operating results, cash flow or net worth of the Seller).
(f) No Conflict or Violation. Except as set forth onPart 3.1(f) of the Disclosure Schedule, the execution, delivery and performance by the Sellerand the Shareholdersof this Agreementand the other Transaction Documentsand the consummation by the Sellerand the Shareholdersof the transactions contemplated herebyand thereby do not (i) conflict with or result in a violation or breach of any of the terms, conditions or provisions of the Organizational Documents, any Law, or any Orderto which the Selleror any Shareholderis a party or by which the Selleror any Shareholderis bound, or (ii) require the consent, notice or other actionby any Personunder, conflict with, result in a violation or breach of, constitute a default or an event that, with or without notice or lapse of time or both, would constitute a default under, result in the acceleration of or create in any Personthe right to accelerate, terminate, modify or cancel any Contractor Permitto which the Selleror any Shareholderis a party or by which the Seller, any Shareholderor the Acquired Businessis bound or to which any of the Assetsare subject.
(g) Legal Proceedings. Except as set forth onPart 3.1(g) of the Disclosure Schedule, there are (and, since January1, 2007, have been) no Actionspending or threatened in writing or, to the Knowledgeof the Seller, otherwise threatened by or against the Selleror its assetsor properties or against any of the Shareholders, directors, officers, employees or other service providers of the Sellerrelating to or resulting from their services to the Seller. Except as set forth onPart 3.1(g) of the Disclosure Schedule, neither the Sellernor any Shareholderis the subject of any Orderrelated to the Business.
(h) Personal Property; Owned and Leased Real Property.
(i) The Sellerholds good, valid and marketable title to all Assets, free and clear of all Encumbrancesother than Permitted Encumbrances. At the Closing, the Seller will convey to Buyer good, valid and marketable title to the Assets, free and clear of all Encumbrances other than Permitted Encumbrances, without incurring any penalty or other adverse consequence (including any increase in rentals, royalties, or license or other fees imposed as a result of, or arising from, the consummation of the transactions contemplated by this Agreement).
(ii) The Sellerdoes not own any real property. The locations listed onPart 3.1(h)(ii) of the Disclosure Schedule(the “Leased Facilities”) are the only real property leased, subleased or licensed to the Seller.Part 3.1(h)(ii) of the Disclosure Schedulesets forth (A) a list of all leases, subleases and licenses with respect to the Leased Facilitiesand all amendments, modifications or other agreements relating thereto, including any recognition, subordination, nondisturbance, attornment or other agreements in the Seller’s possession with any lenders with mortgages or deeds of trust encumbering the landlord’s interest in the applicable Leased Facility (the “Facility Leases”), and (B)the respective landlord for each such Leased Facility. The Sellerhas made available true, correct and complete copies of all Facility Leasesto the Buyer. Except for collateral lease assignments that will terminate at Closing, the Sellerhas not assigned, subleased, transferred, conveyed, mortgaged, or otherwise encumbered its interest in such Facility Leasesor the Leased Facilities, or granted to any third party any right to occupy the Leased Facilities, and there are no options or right of first offer or refusal to acquire any such rights. The Facility Leasescontain the entire agreementregarding the use or occupancy of the premises subject to the Facility Leases. All of the Facility Leasesare in full force and effect, and afford the Sellerpeaceful and undisturbed possession of the Leased Facilities. All rent and additional rent payments, including operating expenses, property taxes and pass-throughs, are paid current through the Closing Date, subject only to customary year-end reconciliations. No default exists on the part of the Seller, as tenant, or to the Seller’s Knowledgeon the part of the landlords, under the Facility Leases.
(iii) The Assets constitute all of the assets and other properties and rights (whether tangible or intangible and whether real, personal or mixed, but excluding any expenditures or expansion relating to increased or higher volume of business that occurs or is anticipated to occur after Closing) necessary and sufficient to permit the Seller to conduct the Acquired Business before the Closing as currently conducted by the Seller. The tangible assetsincluded in the Assetsare in good operating condition and repair and are adequate for the uses to which they are put, and no such assetsare in need of replacement or maintenance or repair, except for routine replacement, maintenance and repair for ordinary wear and tear, and to Seller’s Knowledge, no such routine replacement, maintenance and repair has been deferred within the past twelve (12) months. All of the tangible personal property and other tangible assetsthat are included as Assetsare located, or will be located as of the Closing, at the Leased Facilities, except to the extent an asset may be in transit as a result of use in the ordinary course of business.
(i) Taxes.
(i) The Sellerhas timely filed all Tax Returnsrequired to be filed by it, each such Tax Returnhas been prepared in material compliance with all applicable Laws, and all such Tax Returnsare true and accurate in all material respects. All Taxesdue and payable by the Seller(whether or not shown or required to be shown on any Tax Return) have been paid and the Sellerhas withheld and paid over to the appropriate taxing authority all Taxeswhich it is required to withhold from amounts paid or owing to any employee, shareholder, creditor, or other third party and has complied with all informational reporting and other requirements of Lawrelated to such withholding obligations.Part 3.1(i)(i) of the Disclosure Schedulelists all audits of any Tax Returns, includinga description of the nature and, if completed, the outcome of each audit.
(ii) The Sellerhas been a validly electing S corporation within the meaning of Sections 1361 and 1362 of the Codeat all times since January 1, 2006and will be an S corporation up to and includingthe Closing Date. The Selleris not, and has never been, a member of any affiliated group of corporations (as defined in Section 1504(a) of the Codeor any similar provision of state, local or foreign Tax Law) or filed or been included in any affiliated, combined, consolidated, or unitary Tax Return. The Selleris not liable for the Taxesof any other Personunder Treasury Regulation Section 1.1502-6or any similar provision of any state, local or foreign Tax Law, as a transferee or successor, by Contract, or otherwise. The Selleris not, and has never been, a party to any joint venture, partnership or other arrangement that is a partnership for income Taxpurposes. The Sellerhas not, in the past 10 years: (i) acquired assetsfrom another corporation in a transaction in which the Seller’s Taxbasis for the acquired assetswas determined, in whole or in part, by reference to the Taxbasis of the acquired assets(or any other property) in the hands of the transferor, or (ii) acquired the stock of any corporation.
(iii) The charges, accruals, and reserves with respect to Taxeson the Balance Sheetare adequate and are at least equal to the Seller’s liability for Taxes as of the date of the Balance Sheet, and the Sellerhas not incurred any Liabilityfor Taxessince the date of Balance Sheet except for Taxesincurred in the ordinary course of businessor Taxesincurred on the Closing Datefrom the consummation of the transactions contemplated by this Agreement.
(iv) Except as set forth onPart 3.1(i)(iv) of the Disclosure Schedule: (A) the Sellerhas not waived any statute of limitations in respect of Taxesor agreed to any extension of time with respect to a Taxassessment or deficiency; (B) there is no dispute or claim concerning any Tax Liabilityof the Seller(or the Shareholderswith respect to their ownership of capital stock of the Seller) either claimed or raised by any taxing authority in writing or, to the Knowledgeof the Seller, other than in writing; (C) no claim has been made by a taxing authority in a jurisdiction where the Sellerdoes not file Tax Returnsthat the Seller(or the Shareholderswith respect to their ownership of capital stock of the Seller) is or may be subject to Taxesassessed by such jurisdiction; (D) there are no Encumbrancesfor Taxesupon the assetsof the Sellerother than Permitted Encumbrances; (E) there is no taxsharing agreement, taxallocation agreement, taxindemnity obligation, or similar agreement, arrangement, understanding, or practice, oral or written, with respect to Taxesthat could require any payment by the Seller, and (F) the Assetsdo not includeany capital stock of a corporation or any interest in a joint venture, partnership, limited liabilitycompany or other arrangement that is a partnership for income Taxpurposes.
(v) The Seller is not a foreign personwithin the meaning of Section 1445(f)(3) of the Code. The Sellerhas not been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Codeduring the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(j) Absence of Certain Changes. Except as set forth onPart 3.1(j) of the Disclosure Schedule, since December 31, 2012, there has not occurred any Material Adverse Effect. Except as set forth onPart 3.1(j) of the Disclosure Schedule, since December 31, 2012 (unless otherwise specified below), the Sellerhas conducted its businessin the ordinary course in all material respects, and the Sellerhas not:
(i) allowed any Encumbranceto be placed upon any of its assets, other than Permitted Encumbrances;
(ii) cancelled, compromised or waived any claims with a potential value in excess of $5,000(individually or in the aggregate);
(iii) accelerated any material obligation or terminated, modified, canceled or waived any material right under any Seller Contract;
(iv) acquired (by merger, consolidation or acquisition of stock or assets), licensed, sold, leased, transferred or otherwise disposed of or abandoned or permitted to lapse any collection of assetsconstituting all or substantially all of a business(includingany Company Intellectual Propertyset forth inPart 3.1(q)(i) of the Disclosure Schedule) or businessunit, corporation, partnership or other businessorganization or division thereof;
(v) acquired, sold, transferred or otherwise disposed of properties or assets, other than in the ordinary course of business;
(vi) changed its accounting methods or principles theretofore adopted or followed, except as required by GAAPand reflected in a note to the Financial Statements, or reversed any accounting accruals or reserves;
(vii) changed its cash management practices and policies, or changed its practices and procedures regarding sales, accounts receivables, inventory, payables or accrued expenses;
(viii) experienced any damage, destruction or casualty loss (other than those covered by insurance) with respect to any of the assetsor properties of the Sellerthat, individually or in the aggregate, exceeds $5,000;
(ix) made any change in compensation paid or payable to any employee from the amounts set forth inPart 3.1(l)(ii) of the Disclosure Schedule;
(x) issued any note, bond, or other debt security, or created, incurred, assumed or guaranteed any Indebtedness;
(xi) implemented any plant closingor layoff of employees that could implicate the WARN Act;
(xii) made any change or amendment to, or adopted or terminated, any Company Plan;
(xiii) made any change to any Taxelection or Tax Return, other than as required by Law, or settled or compromised any Liabilityor Actionrelating to Taxesor entered into any closing agreement;
(xiv) adopted a complete or partial plan of liquidation or resolutions authorizing or providing for such a liquidation or dissolution, consolidation, recapitalization, reorganization or bankruptcy, or made a general assignment for the benefit of creditors;
(xv) made any loan, advance or capital contribution or investment to or in any Person;
(xvi) effected any transfer, assignment or grant of any license or sublicense of any rights under or with respect to any Company Intellectual Property;
(xvii) abandoned, allowed to lapse, cancelled or otherwise forfeited any rights with respect to any current or former Company Intellectual Property; or
(xviii) entered into any Contractto take any of the actions specified in thisSection 3.1(j).
(k) Company Contracts.
(i) Except set forth inSection 3.1(k)(i)(Q) below,Part 3.1(k)(i) of the Disclosure Schedulesets forth a list of Contractsto which the Selleris a party or to which any of its assetsor properties are bound (“Seller Contracts”) and which are in any one or more of the categories listed below:
(A) all Contractsinvolving aggregate consideration in excess of $5,000;
(B) all Contractsthat require the Sellerto purchase or sell a stated portion of the requirements or outputs of the Businessor that contain “take or pay” provisions;
(C) all Contractsthat provide for the indemnification of any Person or the assumption of any Tax,environmental or other Liabilityof any Person;
(D) all Contractsthat relate to the acquisition or disposition of any business, a material amount of stock or assetsof any other Personor any real property (whether by merger, sale of stock, sale of assetsor otherwise);
(E) all broker, distributor, dealer, manufacturer’s representative, franchise, agency, sales promotion, sales representative, market research, marketing consulting and advertising Contracts;
(F) all Contractswith customers;
(G) all employment agreementsand Contractswith independent contractors or consultants (or similar arrangements);
(H) all Contractsrelating to Indebtedness(including guarantees);
(I) all Contractswith any Governmental Entity;
(J) all Contractsnot made in the ordinary course of business, includingany Contractcontaining a covenant not to compete or limiting or purporting to limit the method or scope of conduct of the Businessor preventing the Selleror the Shareholdersfrom engaging freely in the Businessanywhere in the world, in each case binding on the Seller, any Shareholderor any of their employees or other service providers;
(K) all joint venture, partnership or similar Contracts;
(L) all Contractsfor the sale of any of the Assetsor for the grant to any Personof any option, right of first refusal or preferential or similar right to purchase any of the Assets;
(M) all Contractsbetween the Seller, on the one hand, and any Shareholder, director, officer, employee or other service provider of the Seller, or any of their family members, or any of their respective Affiliates, on the other hand;
(N) all powers of attorney with respect to the Businessor any Asset;
(O) all collective bargaining agreements or Contractswith any union, works council or labor organization;
(P) all Contractswith respect to Intellectual Property, including(1) Contractswith current or former employees, consultants, or contractors regarding the ownership, use, protection or nondisclosure of any Intellectual Property, and (2) any Contractrelating to the licensing of Intellectual Propertyby the Sellerfrom or to a third party (except licenses for commercially available, unmodified, off-the-shelf software purchased or licensed for less than a total cost of $5,000in the aggregate entered into by the Sellerin the ordinary course of business);
(Q) other than those Contracts which had been posted as of June 21, 2013 to the “Project Sababa” ShareFile Site maintained by Cross Keys Capital, all Contracts that (1) cannot be terminated by the Seller unless it provides advance notice of sixty (60) days or more, or (2) cannot be terminated by the Seller without incurring a fee, penalty, charge, payment or prepayment obligation;
(R) all other contracts that are material to the Assets or the operation of the Business and not previously disclosed pursuant to thisSection 3.1(k)(i); and
(S) any outstanding binding commitment to enter into any Contractof the type described in subsections (A)through (R)of thisSection 3.1(k)(i).
(ii) Except as set forth onPart 3.1(k)(ii) of the Disclosure Schedule, (A) the Selleris not in breach of or default under any Seller Contract, (B) to the Knowledgeof the Seller, no counterparty is in breach of or default under any Seller Contract, and (C) all certifications and representations submitted by or on behalf of the Sellerin connection with any Seller Contractwere true and correct when given and all notices regarding the updating of such certifications and representations have been given if required. Except as set forth onPart 3.1(f) of the Disclosure Schedule, all of the Seller Contractsare binding and enforceable in accordance with their respective terms, subject to the laws of general application in effect affecting creditors’ rights and subject to the exercise of judicial discretion in accordance with general equitable principles, and the transactions contemplated by this Agreementand the other Transaction Documentswill not afford any other party the right to terminate or make any modifications to the terms of any such Seller Contract. The Sellerhas made availableto the Buyertrue and correct copies of all Seller Contracts(together with all amendments, waivers or other changes thereto) set forth or required to be set forth onPart 3.1(k)(i) of the Disclosure Schedule.
(l) Employees and Compensation.
(i) Except as set forth onPart 3.1(l)(i) of the Disclosure Schedule, the Selleris not subject to any pending labor dispute or other labor-related Action, no such Actionhas occurred within the past five (5) years, and, to the Knowledgeof the Seller, no such Actionis threatened. None of the employees of the Sellerare represented by any labor organization nor is there any collective bargaining agreements otherwise in effect or being negotiated with respect to such employees in connection with their employment by the Seller, and no union organizing activities involving such employees are pending or, to the Knowledgeof the Seller, threatened and no such organizing activities have occurred within the past five (5) years.
(ii) Part 3.1(l)(ii) of the Disclosure Schedulesets forth (A) a true and correct list of the name and current annual salary, commissions and/or bonus paid in respect of the fiscal year ended December 31, 2012, and the maximum salary, commissions (and commission schedule) and/or bonus that may be earned in respect of the fiscal year ended December 31, 2013, of each Shareholder, director, officer or employee (includingany leased or temporary employee) of the Seller, and (B) a description of any other form of compensation or benefits paid, payable or provided by the Sellerto each such personfor the fiscal year ended December 31, 2012 or scheduled to be paid or provided in respect of the fiscal year ended December 31, 2013.Part 3.1(l)(ii) of the Disclosure Schedulealso names any such personwho is absent from work due to a work-related injury, is receiving workers’ compensation or is receiving disability compensation, or is otherwise on any form of leave, whether paid or unpaid. Except as set forth onPart 3.1(l)(ii) of the Disclosure Schedule, there are no special bonuses, sale bonuses or other similar compensation payable to any Shareholder, employee or independent contractor of the Sellerin connection with the transactions contemplated by this Agreementand the other Transaction Documents.
(iii) Except as set forth onPart 3.1(l)(iii) of the Disclosure Schedule, all officers and employees of the Sellerare employees at-will, terminable without penalty; and there are no outstanding agreements or arrangements with respect to severance payments to current or former employees of the Seller. Except as set forth onPart 3.1(l)(iii) of the Disclosure Schedule, there are no agreements with independent contractors of the Seller.
(iv) Except as set forth onPart 3.1(l)(iv) of the Disclosure Schedule, there are no accrued and unpaid wages, bonuses, vacation pay, commissions, personal leave payments, or other amounts owed or potentially owed to the directors, officers, employees or independent contractors of the Seller.
(v) To the Knowledge of the Seller, no officer or key employee or sales / marketing staff person of the Seller and no group of key employees or sales / marketing staff persons of the Seller has any plans to terminate his or her employment with the Seller and none of the foregoing personshas notified the Selleror any Shareholderof his or her intention to terminate his or her employment with the Seller.
(vi) Each employee of the Seller who is in a managerial or sales / marketing position has executed a restrictive covenants agreement in the form set forth inPart 3.1(1)(vi) of the Disclosure Schedule. To Seller’s Knowledge, no employee or sales / marketing staff personof the Selleris subject to any non-compete, nondisclosure, confidentiality, employment, consulting or similar agreements with any Personother than the Sellerrelating to or in conflict with the present Businessof the Seller or the Buyer.
(m) Compliance; Environmental Matters.
(i) The Sellerhas in full force and effect all Permitsnecessary for it to own, lease or operate its assetsand properties and to carry on and conduct its Businessin all respects.Part 3.1(m)(i) of the Disclosure Schedulesets forth a correct and complete list of all Permitsheld by the Seller, includingthe names of the Permitsand their respective dates of issuance and expiration. No event has occurred that, with or without notice or lapse of time or both, would reasonably be expected to result in the revocation, suspension, lapse or limitation of any Permit. The execution, delivery and performance of this Agreementand the other Transaction Documentsand the consummation of the transactions contemplated herebyand thereby will not result in the revocation, suspension, limitation or adverse modification of any Permit. None of the Permitslisted onPart 3.1(m)(i) of the Disclosure Schedule are transferable to the Buyerin connection with the transactions contemplated hereby. The Sellerhas not been notified and presently has no Knowledge that any Permitwill not be renewed in the ordinary course of businessupon its expiration.
(ii) The Selleris not, and has not been since December 31, 2009, in violation or breach of any Orders, Permitsor Lawsapplicable to the Business, the Seller’s assetsor properties, or employees and other service providers conducting the Business. Except as set forth onPart 3.1(m)(ii) of the Disclosure Schedule, no notice or warning from any Governmental Entitywith respect to any failure or alleged failure of the Sellerto comply with any Order, Permitor Lawhas been received by the Sellernor, to the Knowledgeof Seller, is any such notice or warning proposed or threatened.
(iii) Without limiting the foregoing, the operations of the Sellerwith respect to the Businessand the Assetsare currently and have been in compliance with all Environmental Laws. There has been no Release of Hazardous Materialsin contravention of Environmental Lawwith respect to the Businessor the Assetsor any real property currently or formerly owned, leased or operated by Sellerin connection with the Business, and Sellerhas not received an Environmental Noticethat any of the Businessor the Assetsor real property currently or formerly owned, leased or operated by Sellerin connection with the Business(includingsoils, groundwater, surface water, buildings and other structure located thereon) has been contaminated with any Hazardous Materialswhich could reasonably be expected to result in an Environmental Claimagainst, or a violation of Environmental Lawor termof any Environmental Permitby, Seller. The Sellerhas not received from any Person, with respect to the Businessor the Assets, any: (A) Environmental Noticeor Environmental Claim; or (B) written request for information pursuant to Environmental Law, which, in each case, either remains pending or unresolved, or is the source of ongoing obligations or requirements as of the Closing Date. Sellerhas obtained and is in material compliance with all Environmental Permits(each of which is disclosed onPart 3.1(m)(i) of the Disclosure Schedule) necessary for the conduct of the Businessas currently conducted or the ownership, lease, operation or use of the Assetsand all such Environmental Permitsare in full force and effect and shall be maintained in full force and effect by Sellerthrough the Closing Datein accordance with Environmental Law, and Selleris not aware of any condition, event or circumstance that constitutes a violation of an Environmental Law. With respect to any such Environmental Permits, Sellerhas undertaken, or will undertake prior to the Closing Date, all measures necessary to facilitate transferability of the same, and Selleris not aware of any condition, event or circumstance that might prevent or impede the transferability of the same, and has not received any Environmental Noticeor written communication regarding any material adverse change in the status or terms and conditions of the same. Sellerhas not retained or assumed, by Contractor operation of Law, any Liabilitiesof other Persons under Environmental Lawin connection with the Businessor that might affect the Assetsor any real property currently or formerly owned, leased or operated by the Sellerin connection with the Business.
(iv) None of the Businessor the Assetsor any real property currently or formerly owned, leased or operated by the Sellerin connection with the Businessis listed on, or has been proposed for listing on, the National Priorities List (or CERCLIS) under CERCLA, or any similar state list.Part 3.1(m)(iv) of the Disclosure Schedulecontains (A) a complete and accurate list of all active or abandoned aboveground or underground storage tanks owned or operated by the Sellerin connection with the Businessor the Assets, (B) a complete and accurate list of all off-site Hazardous Materialstreatment, storage, or disposal facilities or locations used by Sellerand any predecessors in connection with the Businessor the Assetsas to which the Sellermay retain Liability.
(v) The Sellerhas provided or otherwise made availableto the Buyer and listed onPart 3.1(m)(v) of the Disclosure Schedule: (A) any and all environmental reports, studies, audits, records, sampling data, site assessments, risk assessments, economic models and other similar documents with respect to the Businessor the Assetsor any real property currently or formerly owned, leased or operated by Sellerin connection with the Businesswhich are in the possession or control of the Sellerrelated to compliance with Environmental Laws, Environmental Claimsor an Environmental Noticeor the Releaseof Hazardous Materials; and (B) any and all material documents concerning planned or anticipated capital expenditures required to reduce, offset, limit or otherwise control pollution and/or emissions, manage waste or otherwise ensure compliance with current or future Environmental Laws (including costs of remediation, pollution control equipment and operational changes). Sellerhas no Knowledge, as of the Closing Date, of any condition, event or circumstance concerning the Releaseor regulation of Hazardous Materialsthat might, after the Closing Date, prevent, impede or materially increase the costs associated with the ownership, lease, operation, performance or use of the Businessor the Assetsas currently carried out.
(n) Product Safety; Product Liability; Warranties; Discounts.
(i) Each product sold and/or imported by the Sellerin connection with the Businesshas been designed, constructed, manufactured, packaged, installed, and labeled in compliance with all material regulatory, engineering, industrial, and other codes or Laws applicable thereto, and Sellerhas not received notice of any alleged noncompliance with any such code or Law.
(ii) The Seller does not have any Liability, and no circumstances exist that would reasonably be expected to give rise to any Action against Seller which, if adversely determined, would be reasonably likely to give rise to a material Liability, arising out of any injury to individuals or property as a result of the ownership, possession, or use of any product soldand/or imported by Seller in connection with the Business.
(iii) Part 3.1(n)(iii) of the Disclosure Schedule includescopies of the standard terms and conditions for the sale of products and services by Sellerin the Business(containing applicable guaranty, warranty, indemnity, rebate, volume discount, and refund provisions). Except as set forth onPart 3.1(n)(iv) of the Disclosure Schedule, no product or service sold by Sellerin the Businessis subject to any material rebate, volume discount, or refund term beyond the applicable standard terms and conditions of sale or lease set forth inPart 3.1(n)(iii) of the Disclosure Schedule, and the Seller has no Contract providing for any such non-standard terms.
(o) Absence of Undisclosed Liabilities; Indebtedness. Except as set forth onPart 3.1(o) of the Disclosure Schedule, the Sellerhas no Liabilityarising out of, relating to or in connection with any transaction entered into at or prior to the date hereof, or any actionor inaction at or prior to the date hereof, or any state of facts existing at or prior to the date hereof, other than (i) Liabilitiesreflected in the Balance Sheet; and (ii) Liabilitiesthat have arisen after the Balance Sheet Datein the ordinary course of business(none of which is a Liabilityfor breach of Contract, breach of warranty, tort, infringement, violation of Lawor Action). Except as set forth onPart 3.1(o) of the Disclosure Schedule, the Sellerdoes not have any Indebtedness.
(p) Employee Benefit Plans.
(i) Part 3.1(p)(i) of the Disclosure Schedule sets forth a list of each Company Plan. With respect to each Company Plan, the Seller has made available to the Buyer true and complete copies of: (A) each Company Plan (or, if not written, a written summary of its terms), any related trust agreement, funding instrument and any other material plan texts and agreements; (B) any and all outstanding summary plan descriptions and material modifications thereto; and (C) the most recent annual report, if applicable, with respect to such Company Plan.
(ii) Except as set forth onPart 3.1(p)(ii) of the Disclosure Schedule, each Company Plan has been established, maintained and administered, in form and operation, in all respects in accordance with its terms and applicable Law, including ERISA and the Code. All contributions, premiums or other payments that are due have been paid on a timely basis with respect to each Company Plan. No unfunded liability exists with respect to any Company Plan. Each Company Plan that is intended to meet the requirements of a “qualified plan” under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service (or, if it is a prototype plan, is the subject of a favorable opinion letter issued by the Internal Revenue Service) to the effect that such Company Plan meets the requirements of Section 401(a) of the Code and no events have occurred that would adversely affect such qualified status. The Seller has no Liability with respect to any “employee benefit plan” (as defined in Section 3(3) of ERISA) subject to Title IV of ERISA, including by reason of being treated as a single employer under Section 414 of the Code with any Person other than the Seller. The Seller has no current or potential obligation to provide post-employment health, life or other welfare benefits other than as required under Section 4980B of the Code or any similar applicable law. There does not exist any pending or, to the Knowledge of the Seller, threatened Actions (other than routine undisputed claims for benefits) with respect to any Company Plan. Except as set forth onPart 3.1(p)(ii) of the Disclosure Schedule, the consummation of the transactions contemplated by this Agreementand the other Transaction Documents will not (A) entitle any current or former employee or officer of the Seller to severance pay, unemployment compensation or any other payment, (B) accelerate the time of payment or vesting, or increase the amount of, compensation due any such employee or officer, or (C) result in the forfeiture of compensation or benefits under any Company Plan.
(iii) Each Company Plan has, since January 1, 2005, complied in operation and form with Section 409A of the Code and the Treasury Regulations promulgated thereunder.
(q) Intellectual Property.
(i) Part 3.1(q)(i) of the Disclosure Scheduleidentifies (A) the registered trademarks, trademark applications, patents, patent applications, registered copyrights, copyright applications, trade names, corporate names, and Internet domain names of the Seller (the “Registered Intellectual Property”); (B) any license pursuant to which Company Intellectual Propertyis licensed to the Sellerby another Personor licensed to another Personby the Seller(except licenses to the Seller for commercially available, unmodified, off-the-shelf software purchased or licensed for less than a total cost of $5,000in the aggregate entered into by the Sellerin the ordinary course of business); and (C) unregistered trademarks and material unregistered copyrights of the Seller. Seller has no pending applications for registration of Intellectual Property. All required filings and fees related to the Registered Intellectual Property have been timely filed with and paid to the relevant Governmental Entities and authorized registrars, and all Registered Intellectual Property is in good standing.Part 3.1(q)(i) of the Disclosure Scheduleidentifies any renewals, fee payments, filings or any other action that is or will be required to be taken with respect to any of the Registered Intellectual Property within six (6) months following the Closing Date.
(ii) Each licensepursuant to which Company Intellectual Propertyis licensed to the Sellerby another Personor licensed to another Personby the Seller (including licenses listed onPart 3.1(q)(i) of the Disclosure Schedule and licensesfor commercially available, unmodified, off-the-shelf software not required to be listed onPart 3.1(q)(i) of the Disclosure Schedule) (the “Intellectual Property Licenses”) is valid and binding on the Seller in accordance with its terms and is in full force and effect. Neither the Seller, nor to Seller’s Knowledge, any other party thereto, is in breach of or default under (or is alleged to be in breach or default under), or has provided or received any notice of breach or default of or any intention to terminate, any Intellectual Property License.
(iii) The Sellerowns and possesses all right, title and interest in and to, or has valid and enforceable licenses to use (each of which is set forth onPart 3.1(q)(i) of the Disclosure Schedule, or is with respect to off-the-shelf software not required to be listed on such schedule), free and clear of all Encumbrances, all Intellectual Propertyused or held for use by the Seller, as the case may be, in the conduct of the Businessas currently conducted or proposed to be conducted (the “Company Intellectual Property”). The Seller’s rights in the Company Intellectual Property are valid, subsisting and enforceable. The Seller has taken all reasonable steps to maintain the Company Intellectual Property and to protect and preserve the confidentiality of all Trade Secrets included in the Company Intellectual Property, including requiring all Persons having access thereto to execute written non-disclosure agreements. The Trade Secrets are not part of public knowledge or literature and have not been used, divulged or appropriated to any Person or to the detriment of the Seller. In addition, any research and development in connection with the Company Intellectual Property was not the result of the work and/or contribution of any third party who has, had or may have any right, title or interest in such Company Intellectual Property, other than as granted to the Seller pursuant to an Intellectual Property License.
(iv) Except as set forth onPart 3.1(q)(iv) of the Disclosure Schedule, (A) the conduct of the Business, and the products, processes and services of the Business,has not infringed, misappropriated, diluted or otherwise violated, and does not infringe, misappropriate, dilute or otherwise violate any other Person’s Intellectual Property or other rights, and there is no Actionpending or currently threatened in writing against the Sellerregarding any such matter, and tothe Seller’s Knowledge is otherwise threatened; (B) no Actionchallenging the validity, registrability, enforceability or ownership of any Company Intellectual Propertyis pending or threatened in writing against the Seller, and tothe Seller’s Knowledge, there exists no reasonable basis for any such Action; and (C) no Person has, oris currently, infringing, misappropriating, diluting or otherwise violating any Company Intellectual Propertyand no such claims are pending or threatened in writing against any Personby the Seller, and to the Seller’s Knowledge, are otherwise threatened. Except as set forth onPart 3.1(q)(iv) of the Disclosure Schedule, the Sellerhas not granted to any Personrights to any of the Company Intellectual Property. To the Seller’s Knowledge, there is not any Intellectual Property owned or used by any competitor or third party which reasonably would be expected to supersede or make obsolete any product or process of the Seller or limit its business as currently conducted.
(v) Except as set forth onPart 3.1(q)(v) of the Disclosure Schedule, all personnel, including members of management, employees, agents, consultants, and contractors, who have contributed to or participated in the conception and development of any Company Intellectual Property on behalf of Seller have executed appropriate instruments of assignment, including, if appropriate, “work made for hire” language, in favor of Seller as assignee that have conveyed to Seller full, effective, and exclusive ownership of all tangible and intangible property thereby arising. Each executed agreement has been made available to Buyer. To Seller’s Knowledge, none of Seller’s personnel is in violation thereof. None of the Shareholders, the family members of a Shareholder, or any of their Affiliates, and none of the Seller’s employees, agents, consultants, or contractors, has any right, title or interest in and to the Company Intellectual Property.
(vi) All Software used by the Seller in connection with the Business is licensed to the Seller by a third party. Except as set forth inPart 3.1(q)(vi) of the Disclosure Schedule, Seller has, with respect to all Software it uses in the Business, sufficient and fully paid for licenses with such third parties for the number of users of that Software. Except as set forth inPart 3.1(q)(vi) of the Disclosure Schedule, the Seller has not developed, and is not currently using, or in the past has used, in connection with the Business, any proprietary Software. The Seller has established, implemented and maintained (A) reasonable safeguards against the destruction, loss or alteration of, and unauthorized access to, all of the Seller’s Confidential Information; and (B) reasonable physical, network, electronic and internet security procedures, protocols, security gateways and firewalls with respect to all of the Seller’s Confidential Information, all in accordance with applicable industry standards. There are no known or suspected weaknesses or vulnerability with respect to the security of any of its Software. Further, there have been no known or suspected unauthorized use of or access to any of the Software, including any known or suspected unauthorized access to or disclosure of any Confidential Information. The Seller has installed and updated all Software with patches, updates, fixes and upgrades provided to the Seller by its vendors that are necessary or desirable for the maintenance of security of such Software. Seller is and has been in compliance in all material respects with all Laws relating to data loss, theft and breach of security notification obligations.
(vii) The transactions contemplated by this Agreementand the other Transaction Documentswill not result in the loss or impairment of or payment of any additional amounts with respect to, nor require the consent of any other Person in respect of, or otherwiseadversely affect any right, title or interest of the Sellerin and to any Company Intellectual Property. Immediately following the consummation of the transactions contemplated by this Agreement and the other Transaction Documents, the Company Intellectual Property will be owned by or available for use by the Buyer on terms and conditions identical to those under which the Seller owned or used the Company Intellectual Property immediately prior to the Closing.
(r) Brokers’ Fees. Except as set forth onPart 3.1(r) of the Disclosure Schedule, neither the Sellernor any Shareholderhas dealt with any broker, finder or similar agent with respect to the transactions contemplated by this Agreementand the other Transaction Documents, and neither the Sellernor any Shareholderis under an obligation to pay any broker’s fee, finder’s fee or commission in connection with the consummation of the transactions contemplated by this Agreementand the other Transaction Documents.
(s) AffiliateTransactions; Competing Businesses. Except as set forth onPart 3.1(s) of the Disclosure Scheduleand for employment or independent contractor relationships, the Selleris not currently a party to any Contract, loan or other transaction with any of the following Persons, or in which any of the following Personshave any direct or indirect interest: any Shareholder, director, officer, or employee of the Seller, any family member of any such Person, or any of their respective Affiliates. No such Personowns or provides services to any businessentity which is engaged in a businesswhich competes with or is similar to the Businessof the Seller.
(t) Suppliers. Set forth onPart 3.1(t) of the Disclosure Scheduleis a list of allsuppliers of the Seller sorted by the aggregate dollar amount of purchases of products or services by the Sellerduring the 12 month period ending on the Balance Sheet Date. No supplier identified or required to be identified onPart 3.1(t) of the Disclosure Schedulehas terminated its relationship with the Seller, or, to the Knowledgeof the Seller, has threatened to terminate its relationship with, materially decrease transactions with or otherwise materially adversely alter its relationship with the Seller(whether as a result of the consummation of the transactions contemplated by this Agreementand the other Transaction Documentsor otherwise). To Seller’s Knowledge, no supplier used by the Selleris the sole source of supply of any good or service, such that Buyer could not replace such supplier.
(u) Customers.
(i) Set forth onPart 3.1(u)(i) of the Disclosure Scheduleis a list of the top fifty (50)customers of the Sellerbased on the aggregate dollar amount of purchases of Seller’s products or services during the 5-month period ending on the Balance Sheet Date. No customer identified or required to be identified onPart 3.1(u)(i) of the Disclosure Schedulehas terminated its relationship with the Seller, or, to the Knowledgeof the Seller, has threatened to terminate its relationship with, materially decrease purchases from or otherwise materially adversely alter its relationship with the Seller(whether as a result of the consummation of the transactions contemplated by this Agreementand the other Transaction Documentsor otherwise).
(ii) Part 3.1(u)(ii) of the Disclosure Schedulesets forth a complete and accurate list, as of the date of this Agreement and itemized by customer, of the amount of all advance payments, deposits and similar prepaid items received from customers for goods or services that will be required to be provided on or after the Closing Date.
(v) Insurance. The Sellermaintains or is the beneficiary of insurance policies relating to its Business, assets, and properties that are commercially reasonable and sufficient to insure against the risks of the Business. All such insurance policies are in full force and effect, are valid and enforceable, and all premiums currently due thereunder have been paid. The Sellerhas not received any notice of cancellation or modification in coverage amounts of any such insurance policies. Except as disclosed onPart 3.1(v) of the Disclosure Schedule, there are no potential claims received or known by the Seller, there are no pending claims or notices of any potential claims submitted by the Seller under any insurance policy, and no claims have been submitted by the Seller under any of its current or former insurance policies since January 1, 2010. The Sellerhas made availableto the Buyertrue and complete copies of each of its insurance policies.
(w) Accounts Receivable.Part 3.1(w) of the Disclosure Schedulesets forth a complete and accurate list of all accounts receivable of the Seller as of the date of this Agreement. All accounts receivable shown onPart 3.1(w) of the Disclosure Scheduleor on the Financial Statementsrepresent, as of the applicable date, valid obligations arising from sales actually made or services actually performed by the Sellerin its Business. To Seller’s Knowledge, there is no contest, claim, defense or right of setoff under any account receivable relating to the amount or validity of such account receivable.
(x) Inventory.Part 3.1(x)(i) of the Disclosure Schedulesets forth a complete and accurate list of the inventory of the Selleras of the date of this Agreement. All items included in the Seller’s inventory are good and merchantable and of a quality and quantity usable and saleable in the ordinary course of Businessof the Seller. Except as set forth onPart 3.1(x)(ii) of the Disclosure Schedule,the Selleris not in possession of any inventory not owned by the Seller, includinggoods already sold, or inventory held on a consignment basis. Except as set forth onPart 3.1(x)(ii) of the Disclosure Schedule, Seller has no Excluded Inventory. All of the Seller’s inventory has been valued at the lower of cost or market, on a FIFO basis in accordance with GAAP.
(y) [Intentionally Omitted].
(z) Insolvency. The Selleris, and will be as of immediately prior to the Closing, Solvent. As of immediately following the Closing, and after giving effect to all of the transactions contemplated by this Agreement, the Sellerwill be Solvent. For purposes of this Agreement, “Solvent” means, with respect to the Seller, that (i) the Sellerwill be able to pay its debts and obligations as they become due, (ii) the Sellerdoes not, as of such time, have unreasonably small capital with which to conduct its business, and (iii) as of such time, the Seller’s assets(calculated at fair market value) exceed its Liabilities. The Closing Cashconstitutes sufficient funds to repay all Liabilitiesoutstanding on the Closing Datein full.
(aa) Bulk Sales. The transactions contemplated by this Agreementare not subject to any “bulk sales,” “bulk transfer” or similar Lawsof any jurisdiction.
(bb) Disclosure. No representation or warranty made by the Sellerand the Shareholdersin this Agreementcontains any untrue statement of a material fact or omits to state a fact necessary to make such representation or warranty not materially misleading. There are no facts or circumstances that have had a Material Adverse Effect that have not been disclosed to the Buyer in writing.
Section 3.2 Representations and Warranties of the Buyer. The Buyerrepresents and warrants to the Sellerthat each of the statements contained in thisSection 3.2is true and correct as of the Closing Date.
(a) Due Organization and Good Standing. The Buyeris duly organized, validly existing, and in good standing as a corporation under the Lawsof the State of Florida,with all requisite power and authority to own their properties and to carry on their businessas such businessis now conducted.
(b) Authorization and Execution. The Buyerhas the power and authority and has taken all required corporate and other actionon its part necessary to permit and duly authorize it to execute and deliver and to carry out and perform the terms of this Agreementand the other Transaction Documents to which it is a party, and to consummate the transactions contemplated herebyand thereby. This Agreement, and the other Transaction Documents to which it is a partyhave been duly and validly executed and delivered by the Buyer, and (assuming the due authorization, execution and delivery by the other parties heretoand thereto) this Agreementand such other Transaction Documentsconstitute the legal, valid and binding obligation of the Buyer, enforceable against it in accordance with their terms.
(c) No Conflict or Violation. The execution, delivery and performance by the Buyerof this Agreementand the other Transaction Documentsand the consummation by the Buyerof the transactions contemplated herebyand thereby do not (i)assuming all authorizations, consents and approvals described or referred to inSection 3.2(c)have been obtained or made, violate any applicable Lawor Orderto which the Buyeris subject in a manner that would impair the Buyer’s ability to consummate the transactions contemplated hereby, (ii)require a consent, approval or notification under, conflict with, result in a violation or breach of, or constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate or cancel any Contractto which the Buyeris a party that would impair the Buyer’s ability to consummate the transactions contemplated hereby (other than consents that have been obtained), or (iii) violate the articles of incorporation or bylaws of the Buyer.
(d) Legal Proceedings. There are no Actionspending or, to the knowledgeof the Buyer, threatened against the Buyerwhich challenge the validity or enforceability of this Agreementagainst the Buyeror seek to enjoin or prohibit consummation of the transactions contemplated herebyby the Buyer.
(e) Brokers’ Fees. The Buyerhas not dealt with any broker, finder or similar agent with respect to the transactions contemplated by this Agreement, and is not under any obligation to pay any broker’s fee, finder’s fee, commission or similar amount in connection with the consummation of the transactions contemplated by this Agreement, except for the fee payable to Sundial Group, LLC (which will be paid by Buyer).
ARTICLE IV
COVENANTS
Section 4.1 Employees.
(a) The Buyershall make offers of employment, on an at-will basis, to the employees of the Seller listed onPart 3.1(l)(ii) of the Disclosure Schedule,effective as ofthe Closing Date, in all cases subject to the Buyer’s standard policies for new hires or as otherwise determined in the Buyer’s sole discretion (such employees who accept the terms and conditions of such offer and who are employed by the Buyer, includingthose Shareholdersexecuting Employment Agreements, the “Transferred Employees”). Each such offer of employment shall include minimum salary and payroll compensation for each employee at the level currently being paid by Seller to the employees. In addition, for purposes of calculating PTO accrual rates, all employees hired by Buyer shall be given credit for years of service with Seller. Any other terms and conditions of employment shall be determined by Buyer in its sole discretion (including, if required by the Buyer, the execution of a restrictive covenants agreement). To the extent that Buyer requires any of the Transferred Employees to sign employee offer letters and restrictive covenant agreements with Buyer, to take effect as of the Closing, the Seller agrees to undertake commercially reasonable efforts to assist Buyer in obtaining the employee signatures. The Selleragrees to terminate the employment of a Transferred Employeeeffective as of the end of the day immediately prior to the Closing Date.
(b) The Sellershall remain solely responsible for all Liabilities(includingfor wages, bonuses, severance pay and other compensation, commissions, remuneration or benefits, and claims under the Company Plans or otherwise), unless they constitute Assumed Liabilities, relating to its employees, independent contractors or other service providers of the Seller(including Transferred Employees) for all periods through the Closing Dateor thereafter with respect to such individual’s relationship with the Seller, and shall remain solely responsible for all employees that are not Transferred Employeesand all Liabilitiesrelated thereto, including, in each case, any payments to employees required by the WARN Act.
(c) On or prior to the Closing Date, the Sellershall pay or shall cause to be paid to all Transferred Employeesall amounts due to such employees from the Seller, includingin respect of accrued but unpaid wages, commissions, bonuses, severance pay, and accrued vacation, personal leave or paid-time-off, but excluding any such amounts that constitute Assumed Liabilities and any such amounts that are subject to releases signed by the Transferred Employees. As of the Closing Dateor as soon as administratively practicable thereafter, the Sellershall contribute to the 401(k) accounts for the benefit of the Transferred Employees(i) all contributions due with respect to the last pay period ending prior to the Closing Date, and (ii) all employer and employee contributions for the pay period through that day immediately prior tothe Closing Dateto which the Transferred Employeesare entitled with respect to compensation earned by the Transferred Employeesas of the date of termination of employment. As soon as administratively practicable following the Closing Date, Sellershall allow Transferred Employeesto elect to take a distribution under the Seller’s 401(k) plan in accordance with the terms of the Seller’s 401(k) plan, includingan election to rollover account balances from the Seller’s 401(k) plan to a 401(k) plan sponsored by the Buyer.
(d) Except for Assumed Liabilities, the Buyerwill not assume or continue, and will have no responsibility or liabilityto the Transferred Employeesor any other Personunder or with respect to, any of the Company Plans. Without limiting the foregoing, the parties acknowledge and agree that a Transferred Employee currently enrolled in a group health plan offered by Seller will be eligible to commence coverage under the Buyer’s group health plan on the first day of the calendar month following the employee’s start date with the Buyer, regardless of any otherwise applicable waiting periods (but subject to other eligibility requirements). The Seller shall provide coverage under its group health plan to all Transferred Employees through such date, and the Buyer shall not be obligated to reimburse the Seller for the cost of providing coverage under its group health plan to any Transferred Employee prior to such employee’s eligibility for coverage under the Buyer’s plan, even for the period in which such employee is employed by the Buyer.
(e) The Seller and the Shareholders hereby(i) consent to the employment of the Shareholdersand the other Transferred Employeesby the Buyer, and agrees that the Shareholdersand other Transferred Employeesare permitted to direct all businessopportunities that they develop to the Buyer, regardless of whether such businessopportunities are developed by the Shareholdersor other Transferred Employeesbased on information or relationships he or she possessed while employed by the Sellerand regardless of whether any such information or relationships constituted or was considered confidential or proprietary information of the Seller, (ii) agree that neither the Sellernor any Affiliatethereof will have or acquire or be entitled to any interest or expectancy or participation (such right to any interest, expectancy or participation, if any, being herebyrenounced and waived) in any businessopportunity as a result of the involvement therein of the Shareholdersor other Transferred Employeesor the use of any such information or relationships in developing the businessopportunity, (iii) agree that the involvement of the Shareholdersand other Transferred Employeesin any businessopportunity, or the use of any such information or relationships in developing any businessopportunity, will not constitute a breach of any fiduciary duty or other legal obligation owed by the Shareholdersor other Transferred Employeesto the Selleror its Affiliates, and (iv) agree that none of the Buyeror its subsidiaries, Affiliates, employees (includingthe Shareholdersand other Transferred Employees), agents, independent contractors or other representatives shall be restricted in any manner from soliciting, communicating with, accepting businessfrom, servicing or otherwise dealing with any of the customers of the Sellerand other Transferred Employees, in each case notwithstanding the terms of any restrictive covenants agreementthey have with the Seller or any restrictive covenants contained in any agreements among the Shareholders.
(f) The provisions of this Agreementare for the benefit of the parties hereto, and no employee of the Sellershall have any rights hereunder. Nothing hereinexpressed or implied shall be deemed an amendment of any Company Planor otherwise confer upon any employee of the Seller, or any legal representatives or beneficiaries thereof, any rights or remedies, includingany right to employment or continued employment for any specified period or to be covered under or by any employee benefit plan or arrangement, or shall cause the employment status of any employee to be other than terminable at-will.
Section 4.2 Restrictive Covenants.
(a) The Seller and each Shareholder(each a “Restricted Person”) agrees that, during the period commencing on the Closing Dateand ending on the fifth (5th) anniversary thereof or any longer period provided in an applicable employment or consulting agreement (the “Restricted Period”), it or he will not (and will not permit any of its or his respective Affiliatesto) do any of the following, whether directly or indirectly, whether for itself or himself or on behalf of or with any other Person(includingany division, group or franchise of a larger organization), and whether as a principal, agent, shareholder, participant, partner, promoter, director, officer, manager, member, equity owner, lender, employee, consultant, sales representative or otherwise:
(i) own, control, manage, or participate in the ownership, control or management of, or render services, assistance or advice to, or have a financial interest in, or lend its name to, any businessengaged in, or that is undertaking to become engaged in any businessthat competes with, or is otherwise engaged in, all or any portion of the Business, in each case, within the United States of America;provided, that the foregoing shall not prohibit the ownership by a Shareholder, as a passive investment, of not more than 1% of the capital stock of any corporation that competes with the Businessthat is traded on a national securities exchange so long as he has no active participation in the businessof such corporation;
(ii) (A) solicit, or assist in the solicitation of any customer, former customer or prospective customer of the Seller or the Buyerfor the purpose of selling, providing or soliciting to sell or provide any product or service of the Business; or (B) accept businessfrom (with or without solicitation) any customer, former customer or prospective customer of the Seller or the Buyerwith respect to a product or service of the Business;
(iii) solicit, or assist in the solicitation of, any Transferred Employeeor other Personemployed or engaged by the Buyerin any capacity (as an employee, independent contractor or otherwise) for the purpose of inducing such Personto terminate such employment or other engagement, whether or not such employment or engagement with the Buyeris pursuant to a contractor at-will, or hire any such Transferred Employeeor other Person;provided that, solely in the case of the Seller, the foregoing shall not prohibit the Seller from taking any action it is required to take under the Employee Services Agreement during the term thereof;
(iv) interfere with, or attempt to interfere with, any businessrelationship (whether formed before, on or after the date of this Agreement) between the Buyerand any of its or the Acquired Business’s customers, suppliers, distributers, landlords, or other Personwith which any of them have a businessrelationship, includingpersuading or attempting to persuade any such Person to cease to do businesswith the Buyeror the Acquired Business, reduce the amount of businessthat it historically has done with the Buyeror the Acquired Business, or otherwise adversely alter its businessrelationship with the Buyeror the Acquired Business; or
(v) knowingly or intentionally, directly or indirectly, orally, in writing or otherwise, make any disparaging statement or remark or damage or destroy the goodwill and esteem of the Buyer, any of the Assetsor the Acquired Businesswith suppliers, employees, customers, and any others who may at any time have or have had businessrelations with Buyeror the Acquired Business.
(b) Each Shareholder herebyacknowledges that it is familiar with the Trade Secrets of the Sellerand with other Confidential Information. Each Restricted Personwill not (and will cause its or his respective Affiliatesnot to), directly or indirectly, reveal, divulge, or disclose, for a period of five (5) years after the Closing Date (or any longer period provided in an applicable employment or consulting agreement), or for any reason or in any manner, any Confidential Information, unless such disclosure is on behalf of the Buyerin the course of performing the Shareholder’s duties and responsibilities under his Employment Agreementor Consulting Agreement, or is made with the express written consent of the Buyer. A Restricted Personwill not (and will cause its or his respective Affiliatesnot to), directly or indirectly, use or duplicate any Confidential Informationfor any purpose other than in the performance of his duties and responsibilities for the Buyerunder his Employment Agreementor Consulting Agreement. The foregoing covenants shall not apply to any information that is required to be disclosed by subpoena or other mandatory legal process,provided that the Restricted Personshall promptly give the Buyernotice of any request or demand for disclosure of such Confidential Informationupon receipt of such request or demand along with a copy of any written correspondence, pleading or other communications concerning the request or demand; the Restricted Personshall use reasonable efforts to obtain, and upon request, provide reasonable cooperation should the Buyerseek to obtain, an appropriate protective order; and, if the Buyerdoes not obtain a protective orderafter a period that is reasonable under the circumstances, the Restricted Personmay only disclose that portion of the Confidential Informationthat counsel to the Restricted Personadvises it or him that it or he is legally compelled to disclose or else stand liable for contempt or suffer censure or penalty. Each Restricted Personwill (and will cause its or his respective Affiliatesto) deliver promptly to the Buyer and/or destroy (with a written certification of such submitted to the Buyer), at the request and option of the Buyer, all tangible and electronic embodiments (and all copies) of the Confidential Informationwhich are in its or his possession or under its or his control.
(c) Each Restricted Personacknowledges, stipulates, and agrees that the covenants and restrictions set forth in thisSection 4.2(the “Restrictive Covenants”) are reasonable as to geographical area, time, and line of business,and are reasonably necessary to protect legitimate businessinterests of the Buyer; that their agreementto the Restrictive Covenantsare a material inducement to the Buyerto enter into this Agreementand the other Transaction Documentsand to perform its obligations hereunder and thereunder; and that the Buyerwould not obtain the benefit of the bargain set forth in this Agreementand the other Transaction Documentsas specifically negotiated by the parties heretoif any Restricted Personbreaches a Restrictive Covenant. If a court of competent jurisdiction or arbitration panel shall nevertheless determine that the duration, geographical area, line of business, or other terms of any Restrictive Covenantcauses it to be unenforceable in a particular jurisdiction, the parties agree that the Restrictive Covenantautomatically will be reformed for purposes of enforcement in that jurisdiction to the maximum duration, geographical area, line of businessor other terms that are valid and enforceable in that jurisdiction, and the court or arbitration panel shall be allowed and directed to revise such Restrictive Covenantto effectuate this intent. Reformation and revision of a Restrictive Covenantto validate its enforcement in any particular jurisdiction, however, will not affect the enforcement of the Restrictive Covenantas stated in any other jurisdiction in which it is enforceable as stated. If a Restrictive Covenantis held by a court of competent jurisdiction or arbitration panel to be unenforceable, that provision will be deemed severable from the remaining provisions of this Agreementand will not affect the validity, interpretation, or effect of the other provisions of this Agreementor the application of the Restrictive Covenantto other circumstances in which it is enforceable. The invalidity of a Restrictive Covenantin any particular jurisdiction will not affect the validity or enforcement of the restriction in another jurisdiction where it is otherwise valid.
(d) In the event of the breach or threatened breach by a Restricted Personof a Restrictive Covenant, each Restricted Personagrees that the Buyershall be entitled to injunctions, both preliminary and final, enjoining and restraining such breach or threatened breach and such remedies shall be in addition to all other remedies which may be available to the Buyereither at lawor in equity. Each Restricted Personacknowledges, stipulates, and agrees that a violation of a Restrictive Covenantshall diminish the value of the Acquired Business to the Buyerand cause it to suffer irreparable damages, includingthe inability of the Buyerto prove specific money damages, and the Restricted Personagrees that it or he is estopped from subsequently asserting in any actionto enforce the provisions of a Restrictive Covenantthat the Buyerhas an adequate remedy at lawand therefore is not entitled to injunctive relief. Without limiting other available remedies, the Buyershall be entitled to recover from a Restricted Personall profit, remuneration or other consideration that it or the gains from breaching any Restrictive Covenant, or portion thereof,and recover from the Restricted Person compensation sufficient to make the Buyer whole for all Lossesthat the Buyersuffers as a result of the breach. Further, in orderto provide the Buyerwith the full benefit of the Restricted Period, if a Restricted Personbreaches any Restrictive Covenant, the duration of such Restrictive Covenantshall be automatically extended as to that Restricted Personfor the number of days that such breach continues (provided that if the breach is by the Seller, the duration of such Restrictive Covenant shall also be extended for all of the Shareholders).
(e) The Restrictive Covenantsare intended by each party heretoto be, and shall be construed as, agreements independent of each other and of any other agreementbetween the parties, and the existence of any claim or cause of actionof a Restricted Personagainst the Buyer, whether predicated on this Agreement, another Transaction Document, his Employment Agreementor Consulting Agreementor otherwise, shall not constitute a defense to the enforcement by the Buyerof the Restrictive Covenants.
Section 4.3 Further Assurances. On and after the Closing Date, the Seller, the Shareholdersand the Buyershall cooperate and use all of their respective commercially reasonable efforts to take or cause to be taken all appropriate actions and do, or cause to be done, all things necessary or appropriate to consummate and make effective the transactions contemplated hereby and by the other Transaction Documents. Without limiting the generality of the foregoing, the Sellerand the Shareholdersshall, at any time and from time to time after the Closing, at the request of the Buyerand without additional consideration, execute and deliver such certificates, notices, instruments or documents of sale, transfer, conveyance and assignment, and take such other actions as the Buyermay deem necessary or desirable to (a)effectively sell, assign, transfer, convey and deliver the Assets(and good, valid and marketable title thereto) to the Buyerand its successors and assigns, (b)put the Buyerand its successors and assigns in actual possession and operating control of the Assets, (c)assist the Buyerin exercising all rights with respect to the Assets, (d)confirm to any other Personthe ownership of the Assets, or (e)otherwise carry out the purpose and intent of this Agreement, includingexecuting any required forms or consents to permit Buyerto retain Seller’s existing telephone numbers, facsimile numbers, email addresses and Internet domain names from and after the Closing.
Section 4.4 Publicity.Neither Seller nor any Shareholder shall issue a press releaseor make any other public announcement concerning the transactions contemplated by this Agreement and the other Transaction Documentswithout the prior written consent of the Buyer.Buyer shall be permitted to issue a press release and make other public announcementsconcerning the transactions contemplated by this Agreement and the other Transaction Documentswithout the prior consent of the Seller;provided that, prior to issuing any press release, Buyer shall permit the Seller to review the press release. Buyer and Seller agree that a press release in the form ofExhibit 4.4 is acceptable to both parties.
Section 4.5 Allocation of Purchase Price.The Sellerandthe Buyeragree that the Purchase Price(plus other relevant items) shall be allocated among the Assetsfor taxpurposes in a manner consistent with Sections 1060 of the Codeand the Treasury Regulations promulgated thereunder, based upon the fair market values of such assetsconsistent with an allocation scheduleto be agreed upon by the parties. The parties agree to timely file IRS Form8594 and other Tax Returnsin a manner consistent with the allocation schedule.
Section 4.6 Transfer Taxes.All transfer, documentary, sales, use, stamp, registration, recording and other such transfer Taxesand governmental fees (includingany penalties and interest), as applicable, incurred in connection with the sale and transfer of the Assetsshall be paid by the Seller. The parties will cooperate to the extent reasonably necessary to make such filings or Tax Returnsas may be required. The parties will cooperate with each other and use their reasonable commercial efforts to minimize the Taxesattributable to the transfer of the Assets, subject to Law.
Section 4.7 Proration. Notwithstanding anything hereinto the contrary, any personal property Taxesimposed on or with respect to the Assetsand other expense items (such as rent, utilities and similar expenses), if any, that are Assumed Liabilitiesthat relate to a period beginning before the Closing Dateand ending after the Closing Dateshall be apportioned as of the Closingsuch that the Sellershall be liable for (and shall reimburse the Buyerto the extent that the Buyershall have paid) that portion of such Taxesand other expense items relating to, or arising in respect of, periods through the end of the day immediately preceding the Closing Dateand the Buyershall be liable for (and shall reimburse the Sellerto the extent such party shall have paid) that portion of such Taxesand other expense items relating to, or arising in respect to, periods from and after the Closing Date. All amounts to be prorated will, to the extent reasonably feasible, be taken into account in determining the Working Capital Adjustment. To the extent the amounts of any such proratable items are not taken into account in determining the Working Capital Adjustment, appropriate settlement will made within thirty (30) days after the amount of any such item is finally known.
Section 4.8 Purchase of Software Licenses. As described inPart 3.1(q)(vi) of the Disclosure Schedule, additional seat licenses for various Microsoft software products are required for the current operation of the Business. As soon as possible after the Closing, Seller agrees to pay, or reimburse Buyer, for the software seat licenses that are reasonably required to comply with the Microsoft terms and conditions of use. Buyer agrees to undertake commercially reasonable efforts to assist Seller in securing the lowest pricing for such additional software licenses, including Buyer acquiring the licenses on behalf of Seller, subject to reimbursement by Seller, if Buyer can negotiate a lower price.
Section 4.9 Transition.
(a) Audit. Following the Closing,the Sellerand the Shareholdersshall reasonably cooperate with the Buyerto facilitate an audit of the Seller’s financial results and condition, and shall consent, and herebyconsents, to the filing of the resulting audited financial statementswith the Securities and Exchange Commission.
(b) Name Change. No later than fifteen (15) days, after the Closing, the Sellershall (i) change its name and any trade or other names to names that are sufficiently dissimilar from “HPI Direct” and “UniformZoom” (or any derivatives of such names), to the satisfaction of the Buyer, and (ii)discontinue its use of such names (or any derivatives thereof) for any and all purposes whatsoever. The Sellershall transfer to the Buyerany assumed name filing or registration includingthe words “HPI Direct” or “UniformZoom” (or any derivatives thereof) or, if not transmitted to the Buyer, upon the Buyer’s written request, cancel the same.
(c) Cooperation. After the Closing,the Sellerand the Shareholdersshall reasonably cooperate with the Buyerin its efforts to continue, and maintain for the benefit of the Buyer, those businessrelationships of the Seller and the Shareholdersexisting as of the Closingrelating to the Acquired Business, includingrelationships with customers, suppliers, employees and independent contractors.
(d) Collections. From and after the Effective Time, if the Selleror any of its Affiliatesreceives or collects any funds relating to any accounts receivable or any other Asset, the Selleror its Affiliateshall immediately remit such funds to the Buyerwithout deduction or offset. Without limiting the foregoing, and for the avoidance of doubt, except as set forth inSection 2.7(b)(ii), all payments received from customers of the Acquired Business on the Closing Date shall be for the account of the Buyer and shall be immediately remitted to the Buyer. The Seller herebygrants to the Buyerthe power, right and authority, coupled with an interest, to receive, endorse, cash, deposit, and otherwise deal with, in the name of the Seller, any checks, drafts, documents and instruments evidencing payment of any notes, accounts receivable or other payment rights included in the Assetsand that are payable to, payable to the orderof, or endorsed in favor of the Seller.
(e) Tax Certificates. Seller shall deliver to Buyer within 30 days after the Closing a tax clearance certificate for each of Florida and New York.
(f) Shareholders’ Agreement. The Seller and the Shareholders (i) hereby waive all of their respective rights under Section 4.1 (General Terms of Employment), Section 4.2 (Non-Competition and Non-Solicitation Covenants) and Section 4.3 (Confidentiality and Non-Disclosure; Assignment of Intellectual Property Rights) under the Shareholders’ Agreement, in connection with the transactions contemplated in this Agreement, and (ii) shall enter into an amendment to the Shareholders’ Agreement within 15 days after the Closing to terminate their respective rights under such sections of the Shareholders’ Agreement.
ARTICLE V
INDEMNIFICATION
Section 5.1 Survival.The representations and warranties contained in this Agreementshall survive the Closing for a period ending twenty-four (24) months after the Closing Date (the “Expiration Date”);provided, however, that (i) the Expiration Date for the representations and warranties set forth inSection 3.1(m) (Compliance; Environmental Matters) shall be thirty (30) months after the Closing Date; (ii) the Expiration Date for the representations and warranties set forth inSection 3.1(l) (Employees),Section 3.1(p) (Employee Benefit Plans) and Section3.1(i) (Taxes) shall be the expiration of the applicable statute of limitations, as extended, plus a period of one hundred eighty (180) days; (iii) there shall be no Expiration Date for (A) the representations and warranties set forth inSection 3.1(a) (Due Organization),Section 3.1(b) (Capacity, Authorization),Section 3.1(c) (Governmental Filings),Section 3.1(d) (Subsidiaries),Section 3.1(f) (No Conflict or Violation), andSection 3.1(h) (Title to Assets), and (B) the representations and warranties underlying any claims arising from, in connection with or related to any fraudulent or intentional misrepresentation of any representation or warranty in this Agreement, and (iv) representations or warranties subject to an indemnification claim delivered prior to the expiration date will survive until such claim is finally resolved in accordance with this Agreement; provided, that the Indemnified Party must bring an Action to enforce the indemnification provisions with respect to such claim within twelve (12) months of providing notice to the Indemnifying Party, if such claim has not already been resolved. All of the covenants and agreements of the parties contained in this Agreement shall survive after the date of this Agreement in accordance with their terms.
Section 5.2 Indemnification of the Buyer Parties.From and after the Closing, the Sellerand the Shareholders, jointly and severally, shall indemnify and hold harmless the Buyer, its Affiliates, and each of their respective officers, directors, shareholders, employees, agents, partners, managers, members, representatives, successors and assigns (collectively, the “Buyer Parties” but for the avoidance of doubt, in each case, excluding the Shareholders) from and against any and all Losses, whether or not arising from a Third Party Claim, incurred by a Buyer Partythat arises out of, results from, or is connected with (a)the inaccuracy or breach of any of the representations or warranties of the Sellerand the Shareholdersset forth in this Agreementor any of the other Transaction Documents; (b)the failure or breach of the Selleror the Shareholdersto perform any of their respective covenants or other agreements contained in this Agreementor in any of the other Transaction Documents; or (c)any Excluded Liability.
Section 5.3 Indemnification of the Sellerand Shareholders. From and after the Closing, the Buyershall indemnify and hold harmless the Sellerand the Shareholdersfrom and against any and all Losses, whether or not arising from a Third Party Claim, incurred by the Selleror the Shareholdersthat arises out of, results from, or is connected with: (a)the inaccuracy or breach of any of the representations or warranties of the Buyerset forth in this Agreementor any of the other Transaction Documents, (b)the failure or breach of the Buyerto perform any of its respective covenants or other agreements contained in this Agreementor in any of the other Transaction Documents; or (c)subject to the other provisions of this Agreement, the Assumed Liabilities.
Section 5.4 Limitations on Indemnification.
(a) The Seller and Shareholders will not have any obligation underSection 5.2(a), unless and until the aggregate amount of Losses for which the Seller and Shareholders are obligated thereunder exceeds $100,000 (the "Threshold"); provided, however, that if such aggregate amount of Losses exceeds the Threshold, then the Seller and Shareholders will be obligated for all of such Losses (including those equal to or less than the Threshold), subject to the other terms of this Article V.
(b) The obligations of Seller and the Shareholders underSection 5.2(a), in the aggregate, will not exceed an amount equal to $5,500,000, plus up to $2 million of the amount of the Contingent Future Payments (the "Sellers’ Cap"), subject to the other terms of this Article V.
(c) Buyer will not have any obligation underSection 5.3(a), unless and until the aggregate amount of Losses for which Buyer is obligated thereunder exceeds the Threshold; provided, however, that if such aggregate amount of Losses exceeds the Threshold, then the Buyer will be obligated for all of such Losses (including those equal to or less than the Threshold), subject to the other terms of this Article V.
(d) Buyer’s obligations underSection 5.3(a), in the aggregate, will not exceed an amount equal to $5,500,000 (“Buyer’s Cap”), subject to the other terms of this Article V.
(e) Notwithstanding the foregoing terms of this Section, the Indemnified Parties will be entitled to recover for, and the Threshold, the Sellers’ Cap, and the Buyer’s Cap will not apply to, any Losses arising out of, in connection with or related to: (A) fraud or willful misconduct; (B) fraudulent misrepresentation; or (C) any breach of the representations and warranties inSection 3.1(a) (Due Organization),Section 3.1(b) (Capacity, Authorization),Section 3.1(c) (Governmental Filings),Section 3.1(d) (Subsidiaries),Section 3.1(f) (No Conflict or Violation),Section 3.1(h) (Title to Assets),Section 3.1(i) (Taxes), andSection 3.1(m) (Compliance; Environmental Matters).
(f)�� Payments by an Indemnifying Party pursuant toSection 5.2 andSection 5.3 shall be limited to the amount of any Losses that remain after deducting from such Losses any insurance proceeds and any indemnity, contribution or other similar payment actually recovered by the Indemnified Parties from any third party with respect to such claim. Notwithstanding the foregoing, no Indemnifying Party is required to pursue or attempt to recover any insurance and the Indemnifying Party shall not defer payment of Losses to the Indemnified Party pending the resolution of insurance claims.
(g) Notwithstanding anything in this Agreementto the contrary, for purposes of determining the inaccuracy or breach of any representation or warranty for purposes ofSection 5.2(a), and for purposes of calculating the amount of Lossesof the Buyer Parties, each representation and warranty of the Sellerand the Shareholdersshall be read without regard and without giving effect to any materiality or Material Adverse Effector similar standard or qualification contained therein (as if such standard or qualification were deleted from such representation or warranty).
(h) The representations, warranties and covenants of the Sellerand the Shareholdersand the Buyer Parties’ rights to indemnification with respect thereto shall not be affected or deemed waived by reason of any investigation made by or on behalf of the Buyeror any other Buyer Party(includingby any of their advisors, consultants or representatives) or by reason of the fact that the Buyeror any other Buyer Partyor any of such advisors, consultants or representatives knew or should have known that any such representation or warranty is, was or might be inaccurate. The waiver of any condition based on the accuracy of any representation or warranty, or on the performance of or compliance with any covenant or obligation, will not affect the right to indemnification or other remedy based on such representations, warranties, covenants, and obligations.
Section 5.5 Indemnification Procedures. The party making a claim under thisArticle Vis referred to as the “Indemnified Party,” and the party against whom such claim is asserted under thisArticle Vis referred to as the “Indemnifying Party.”
(a) Third Party Claims. If any Indemnified Partyreceives notice of the assertion or commencement of any Actionmade or brought by any Personwho is not a party to this Agreementor an Affiliateof a party to this Agreementor a representative of the foregoing (a “Third Party Claim”) against such Indemnified Partywith respect to which the Indemnifying Partyis obligated to provide indemnification under this Agreement, the Indemnified Partyshall give the Indemnifying Partyreasonably prompt written notice thereof, but in any event not later than sixty (60) calendar days after receipt of such notice of such Third Party Claim. The failure to give such prompt written notice shall not, however, relieve the Indemnifying Partyof its indemnification obligations, except and only to the extent that the Indemnifying Partyforfeits rights or defenses by reason of such failure. Such notice by the Indemnified Partyshall describe the Third Party Claimin reasonable detail, shall includecopies of all material written evidence thereof and shall indicate the estimated amount, if reasonably practicable, of the Lossthat has been or may be sustained by the Indemnified Party. The Indemnifying Partyshall have the right to participate in, or by giving written notice to the Indemnified Party, to assume the defense of any Third Party Claimat the Indemnifying Party’s expense and by the Indemnifying Party’s own counsel acceptable to the Indemnified Party (the approval of counsel not to be unreasonably withheld, conditioned or delayed), and the Indemnified Partyshall cooperate in good faith in such defense;provided, that if the Indemnifying Partyis the Seller (or a Shareholder), such Indemnifying Partyshall not have the right to defend or direct the defense of any such Third Party Claimthat (x) is asserted directly by or on behalf of a Personthat is a supplier, vendor or customer of the Business, or any other Person that has a business relationship with the Acquired Business or the Buyer, or (y) seeks an injunction or other equitable relief against the Indemnified Party. In the event that the Indemnifying Partyassumes the defense of any Third Party Claim, it shall have the right to take such actionas it deems necessary to avoid, dispute, defend, appeal or make counterclaims pertaining to any such Third Party Claimin the name and on behalf of the Indemnified Party, subject, in each case, to the limitations inSection 5.5(b). The Indemnified Partyshall have the right to participate in the defense of any Third Party Claimwith counsel selected by it subject to the Indemnifying Party’s right to control the defense thereof. The fees and disbursements of such counsel shall be at the expense of the Indemnified Party,provided, that if in the reasonable opinion of counsel to the Indemnified Party, (A) there are legal defenses available to an Indemnified Partythat are different from or additional to those available to the Indemnifying Party; or (B) there exists a conflict of interest between the Indemnifying Partyand the Indemnified Partythat cannot be waived, the Indemnifying Partyshall be liable for the reasonable fees and expenses of counsel to the Indemnified Partyin each jurisdiction for which the Indemnified Partydetermines counsel is recommended. If the Indemnifying Partyelects not to compromise or defend such Third Party Claim, fails to promptly notify the Indemnified Partyin writing of its election to defend as provided in this Agreement, or fails to diligently prosecute the defense of such Third Party Claim, the Indemnified Partymay, subject toSection 5.5(b), pay, compromise or defend such Third Party Claimand seek indemnification for any and all Lossesbased upon, arising from or relating to such Third Party Claim. Seller, the Shareholdersand Buyershall cooperate with each other in all reasonable respects in connection with the defense of any Third Party Claim.
(b) Settlement of Third Party Claims. Notwithstanding any other provision of this Agreement, the Indemnifying Partyshall not enter into settlement of any Third Party Claimwithout the prior written consent of the Indemnified Party, except as provided in thisSection 5.5(b). If a firm offer is made to settle a Third Party Claimwithout leading to liabilityor the creation of a financial or other obligation on the part of the Indemnified Partyand provides, in customary form, for the unconditional releaseof each Indemnified Partyfrom all liabilities and obligations in connection with such Third Party Claimand the Indemnifying Partydesires to accept and agree to such offer, the Indemnifying Partyshall give written notice to that effect to the Indemnified Party. If the Indemnified Partyfails to consent to such firm offer within ten (10) days after its receipt of such notice, the Indemnified Partymay continue to contest or defend such Third Party Claimand in such event, the maximum liabilityof the Indemnifying Partyas to such Third Party Claimshall not exceed the amount of such settlement offer. If the Indemnified Partyfails to consent to such firm offer and also fails to assume defense of such Third Party Claim, the Indemnifying Partymay settle the Third Party Claimupon the terms set forth in such firm offer to settle such Third Party Claim.
(c) Direct Claims. Any Actionby an Indemnified Partyon account of a Losswhich does not result from a Third Party Claim(a “Direct Claim”) shall be asserted by the Indemnified Partygiving the Indemnifying Partyreasonably prompt written notice thereof, but in any event not later than thirty (30) days after the Indemnified Partybecomes aware of such Direct Claim. The failure to give such prompt written notice shall not, however, relieve the Indemnifying Partyof its indemnification obligations, except and only to the extent that the Indemnifying Partyforfeits rights or defenses by reason of such failure. Such notice by the Indemnified Partyshall describe the Direct Claimin reasonable detail, shall includecopies of all material written evidence thereof and shall indicate the estimated amount, if reasonably practicable, of the Lossthat has been or may be sustained by the Indemnified Party. The Indemnifying Partyshall have thirty (30) days after its receipt of such notice to respond in writing to such Direct Claim. If the Indemnifying Partydoes not so respond within such thirty (30) day period, the Indemnifying Partyshall be deemed to have rejected such claim, in which case the Indemnified Partyshall be free to pursue such remedies as may be available to the Indemnified Partyon the terms and subject to the provisions of this Agreement.
Section 5.6 Payments. Oncea Lossis agreed to by the Indemnifying Partyor finally adjudicated to be payable pursuant to thisArticle V, the Indemnifying Partyshall satisfy its obligations within five (5) Business Daysof such final, non-appealable adjudication by wire transfer of immediately available funds. The parties agree that should an Indemnifying Partynot make full payment of any such obligations within such five (5) Business Dayperiod, any amount payable shall accrue interest from and includingthe date of agreementof the Indemnifying Partyor final, non-appealable adjudication to but excluding the date such payment has been made at a rate per annum equal to the prime rate as reported in theWall Street Journalon the day the underlying payment is due (or the next most recent business day, if such day was not a business day) plus five percent (5%), or, if less, the maximum interest rate legally chargeable by applicable Law. Such interest shall be calculated daily on the basis of a 365 day year and the actual number of days elapsed.
Section 5.7 Set-Off. Upon notice to the Seller, after the Escrow Fund has been depleted, the Buyermay set off any amount to which any Buyer Partyclaims to be entitled from the Selleror the Shareholdersagainst amounts otherwise payable to the Selleror the Shareholders. The exercise of such right of setoff by the Buyerin good faith, whether or not ultimately determined to be justified, will not constitute a default under this Agreement, regardless of whether the Selleror Shareholdersdispute such setoff claim, or whether such setoff claim is for a contingent or an unliquidated amount. Neither the exercise of, nor the failure to exercise, such right of setoff will constitute an election of remedies or limit in any manner the enforcement of any other remedies that may be available to the Buyeror any other Person.
Section 5.8 TaxTreatment of Indemnification Payments. All indemnification payments made under this Agreementshall be treated by the parties as an adjustment to the Purchase Pricefor Taxpurposes, unless otherwise required by Law.
Section 5.9 Cumulative Remedies. The rights and remedies provided in thisArticle V are cumulative and are in addition to and not in substitution for any other rights and remedies available at law or in equity or otherwise.
ARTICLE VI
ADDITIONALOPERATIVE PROVISIONS
Section 6.1 Assignment; Binding Effect. This Agreementand the rights hereunder are not assignable unless such assignment is consented to in writing by all of the parties and, subject to the preceding clause, this Agreementand all the provisions hereofshall be binding upon and shall inure to the benefit of the parties heretoand their respective successors or permitted assigns. Notwithstanding the foregoing, (a)the Buyershall be permitted, without the consent of the other parties, to make a collateral assignment of its rights hereunder to its or its Affiliates’ lenders (or an agent thereof) for security purposes and such lenders (or agent thereof) may exercise remedies in connection therewith, and (b)the Buyershall be permitted, without the consent of the other parties, to assign this Agreement(includingits rights under the Restrictive Covenants) in connection with a sale or merger of all or any portion of the Acquired Businessin any form of transaction.
Section 6.2 Choice of Law. This Agreementand all claims arising from and relating to this Agreementand the transactions contemplated herebyshall be governed by and interpreted and enforced in accordance with the Lawsof the State of Delaware, without regard to the conflicts of Lawsrules thereof.
Section 6.3 Arbitration.Any and all claims, counterclaims, demands, causes of action, disputes, controversies, and other matters in question arising out of or relating to this Agreementor any other Transaction Document, includingthe validity or performance hereofand thereof (collectively, “Disputes”), even though some or all of such Disputesallegedly are extra-contractual in nature, and whether such Disputessound in contract, tort or otherwise, shall be resolved by binding arbitration pursuant to this Agreement, following the procedures contained in thisSection 6.3, except that thisSection 6.3shall not apply to Disputesgoverned bySections 2.7(c)or 2.8(c). A panel of three arbitrators (collectively, the “Arbitrators”) shall be selected as follows: (i) one arbitratorshall be selected by the Seller, (ii) one arbitratorshall be selected by the Buyer, and (iii) one arbitratorshall be mutually agreed to by the Sellerand the Buyer;provided that, if the parties cannot mutually agree to the third Arbitrator, the third Arbitratorshall be appointed by the American Arbitration Association from its panel of neutral arbitrators. Each Arbitratormust be independent and have reasonable experience in acquisition transactions of the type provided for in this Agreement. Each party agrees to execute an engagement letter in the customary form required by the Arbitrators. The arbitration shall be conducted in accordance with the Commercial Arbitration Rulesof the American Arbitration Associationin effect from time to time (the “Commercial Rules”), except as modified by the agreementof the parties and the following provisions:
(a) On any conflict between the Commercial Rulesin effect from time to time and the provisions of this Agreement, the provisions of this Agreementshall be controlling.
(b) The forum for arbitration shall be in Tampa, Florida or Pinellas County, Florida, if Buyer is the defendant or respondent in an arbitration proceeding, or the forum shall be in Atlanta, Georgia, if Seller is the defendant or respondent in an arbitration proceeding. Any party may commence arbitration of a Disputeby a demand for arbitration served on the other parties underSection 6.4.
(c) The Arbitratorswill be empowered to hear all Disputes, includingthe determination of the scope of arbitration. Consistent with the expedited nature of arbitration, (i) each party will, on the written request of the other party, promptly provide the other with copies of non-privileged documents relevant to the issues raised in any Dispute, and (ii) at the request of any party, the Arbitrators shall have the discretion to order examination of witnesses to the extent the Arbitrators deem such additional discovery relevant and appropriate based on good cause shown and with due consideration for the nature of the Dispute and the amount in dispute. Any dispute regarding discovery, or the relevance or scope thereof, will be conclusively determined by the Arbitrators.
(d) The Arbitratorsmay enter a default decision against any party who fails to participate in the arbitration proceeding.
(e) The Arbitratorsshall be bound by and shall enforce the terms of the Transaction Documents. The Arbitrators’ decision shall be made by majority vote of the Arbitrators. The Arbitrators’ decision shall in writing and in the form of a reasoned opinion, and a court reporter shall record all hearings. Any award rendered by the Arbitratorsregarding the Disputeshall be final, non-appealable, conclusive and binding upon the parties, and judgment thereon may be entered and enforced in any court of competent jurisdiction,provided that the Arbitratorsshall have no power or authority to grant punitive damages, injunctive relief, specific performance or other equitable relief.
Notwithstanding the foregoing, nothing hereinshall prohibit a party from instituting judicial proceedings to (a)compel arbitration in accordance with thisSection 6.3; (b)obtain orders to require witnesses to obey subpoenas issued by the Arbitratorsor as may otherwise be necessary to facilitate the arbitration proceedings; (c)seek injunctive relief, specific performance or other equitable relief (includingto enforce the Restrictive Covenants); or (d)secure confirmation or enforcement of any arbitration award rendered pursuant to this Agreement.
Section 6.4 Consent to Jurisdiction and Service of Process; Waiver of Jury Trial. SUBJECT TOSECTION 6.3, ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST THE PARTIES ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OBLIGATIONS HEREUNDER, OR THE TRANSACTIONS CONTEMPLATED HEREBY, SHALL BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN EITHER HILLSBOROUGH COUNTY OR PINELLAS COUNTY, FLORIDA, IF BUYER IS THE DEFENDANT, OR IN FULTON COUNTY OR FORSYTH COUNTY, GEORGIA, IF SELLER IS THE DEFENDANT. BY EXECUTING AND DELIVERING THIS AGREEMENT, THE PARTIES IRREVOCABLY (A) ACCEPT GENERALLY AND UNCONDITIONALLY THE EXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS, (B)WAIVE ANY OBJECTIONS WHICH SUCH PARTY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, ANY OBLIGATIONS HEREUNDER OR THE TRANSACTIONS CONTEMPLATED HEREBY BROUGHT IN THE COURTS REFERRED TO IN CLAUSE (A)ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVE AND AGREE NOT TO PLEAD OR CLAIM INANY SUCH COURT THAT SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT INAN INCONVENIENT FORUM, (C)AGREE THAT SERVICE OF ALL PROCESS INANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY HAND DELIVERY OR NATIONALLY RECOGNIZED OVERNIGHT DELIVERY SERVICE, TO SUCH PARTY AT THEIR RESPECTIVE ADDRESSES PROVIDED IN ACCORDANCE WITHSECTION 6.5, AND (D)AGREE THAT SERVICE AS PROVIDED IN CLAUSE (C)ABOVE IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER SUCH PARTY IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAYARISE UNDER THIS AGREEMENTIS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENTAND ANY OF THE AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
Section 6.5 Notices. All notices, requests, demands and other communications under this Agreementshall be in writing and shall be deemed to have been duly given (a) if delivered personally or actually received, as of the date received, (b) if delivered by certified mail, return receipt requested, five (5) Business Daysafter being mailed or, if earlier, the actual date of receipt evidenced by the written receipt, (c) if delivered by a nationally recognized overnight delivery service, one (1) Business Dayafter being deposited with such delivery service for next Business Daydelivery, or (d) if sent via facsimile, electronic mail in portable document format (.pdf) or similar electronic transmission with a hard copy to follow by first class mail or overnight delivery, as of the date received, to such party at its address set forth below (or such other address as it may from time to time designate in writing to the other parties hereto):
If the Buyerto:
Superior Uniform Group, Inc.
10055 Seminole Blvd.
Seminole, FL33772
Facsimile: 727-803-2686
Attn: General Counsel
Email:jalpert@sug.biz
with courtesy copies to (which shall not constitute notice):
Hill Ward Henderson
101 E. Kennedy Boulevard
Suite 3700
Tampa, Florida 33602
Facsimile: 813-221-2900
Attention: David S. Felman
Email:dfelman@hwhlaw.com
If to the Selleror the Shareholders, to:
Richard J. Sosebee
Kirby P. Sims, Jr.
Frederick L. Hill, III
445 Heards Ferry Road
Atlanta, Georgia 30328
Facsimile: (678) 942-1801
Email: rsosebee@hpidirect.net
Email:kirbysims@hpidirect.net
Email:fhill@hpidirect.net
with courtesy copies to (which shall not constitute notice):
Duane Morris LLP
1075 Peachtree Street
Suite 2000
Atlanta, GA 30309
Attention: G. Kirk Domescik
Fax: (404) 393-1031
Email: kdomescik@duanemorris.com
Section 6.6 Headings. The headings contained in this Agreementare inserted for convenience only and shall not be considered in interpreting or construing any of the provisions contained in this Agreement.
Section 6.7 Fees and Expenses. Except as otherwise specified in this Agreement, each party heretoshall bear its own costs and expenses (includinginvestment advisory and legal fees and expenses) incurred in connection with this Agreementand the transactions contemplated by this Agreementand the other Transaction Documents. In the event of a lawsuit, arbitration, or other legal proceeding arising out of or related to this Agreement, the non-prevailing party shall reimburse the prevailing party, on demand, for its reasonable attorneys’ fees and costs, including those for in-house counsel, actually incurred, those incurred in litigating entitlement to attorneys’ fees and costs, and those incurred in determining or quantifying the amount of recoverable attorneys’ fees and costs. The reasonable “costs” to which the prevailing party is entitled to recover shall include costs that are taxable under any applicable Law or guideline, as well as non-taxable costs, including costs of investigation, copying costs, electronic discovery costs, electronic research costs, telephone charges, mailing and delivery charges, consultant and expert witness fees, travel expenses, court reporter fees, and mediator fees, regardless of whether, in each case, such cost is otherwise taxable or non-taxable. Notwithstanding the foregoing, solely in the case of arbitration, (a) each party shall pay all of the fees and costs payable to the Arbitrator that it selects, whether or not it is the prevailing party, and (b) the fees and costs payable to the mutually agreed-upon Arbitrator or Arbitrator appointed by the American Arbitration Association shall be paid by the non-prevailing party. For clarity, all other expenses and costs incurred in arbitration shall be recoverable by the prevailing party in accordance with thisSection 6.7.
Section 6.8 Entire Agreement. This Agreement(includingthe exhibits and schedules hereto), the Transaction Documentsand the other agreements, instruments and documents executed and delivered among the parties heretoat or in connection with the Closingconstitute the entire agreementbetween the parties heretowith respect to the subject matter hereofand supersede all prior agreements and understandings between the parties with respect to such subject matter, including the letter of intent dated May 15, 2013.
Section 6.9 Interpretation.
(a) When a reference is made to an Article, Section or Schedule, such reference shall be to an Article, Section or Scheduleof or to this Agreementunless otherwise indicated. Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” The phrase “ordinary course of business” and variations thereof shall includeconsistent with past practices, includingwithout material deviation from the Seller’s general past practices and experiences regarding the frequency and quantity of the matter in question. Unless the context requires otherwise, words using the singular or plural number also includethe plural or singular number, respectively, and the use of any gender hereinshall be deemed to includethe other genders. References to “dollars” or “$” are to U.S. dollars. The terms “hereof,” “herein,” “hereby,” “hereto” and derivative or similar words refer to this entire Agreement. The phrase “made available” means the referenced document was physically delivered to the Buyer or its agentsat any time prior to the execution of this Agreementor was posted and accessible to the Buyerand its agents in the electronic data room for this transaction no less than three (3) Business Daysprior to the date of this Agreementand remained so through the date of this Agreement.
(b) This Agreementwas prepared jointly by the parties heretoand no rule that it be construed against the drafter will have any application in its construction or interpretation.
(c) The parties intend that each representation, warranty, covenant, and agreementcontained in this Agreementwill have independent significance. The fact that any conduct or state of facts may be within the scope of two or more representations, warranties, covenants, or agreements contained in this Agreement, whether relating to the same or different subject matters and regardless of the relative levels of specificity, shall not be considered in construing or interpreting this Agreement.
(d) No disclosure in any Disclosure Schedulerelating to any possible breach or violation of any Contract, Permitor Lawshall be construed as an admission or indication that any such breach or violation exists or has actually occurred, or shall constitute an admission of liabilityto any third party. Information set forth in one part of the Disclosure Scheduleshall be deemed to be disclosed with respect to other parts of the Disclosure Scheduleif and solely to the extent that application to such other parts is readily apparent from the face of such disclosure (without reference to or analysis or review of any underlying documents, instruments or information). Notwithstanding the foregoing or any other provision of this Agreementor the Disclosure Scheduleto the contrary, nothing in the Disclosure Scheduleshall be adequate to disclose an exception to a representation or warranty unless the applicable part of the Disclosure Scheduleexpressly identifies the exception and describes the relevant facts in reasonable detail.
Section 6.10 Waiver and Amendment. This Agreementmay be amended or modified only by a written agreementexecuted by all of the parties hereto. Any condition or performance due pursuant to the terms of this Agreementmay be waived only by a written instrument specifically identifying the condition or performance which is waived, such waiver shall be executed by all parties for whom such condition or performance would constitute any benefit, and such written waiver shall be delivered by such waiving party to all other parties so as to effect notice of the same in accordance with the notice provisions of this Agreement. No waiver or failure to insist upon strict compliance with any obligations, covenant, agreementor condition shall operate as a waiver of or estoppel with respect to any subsequent condition or performance due.
Section 6.11 Third-party Beneficiaries. Except as otherwise specifically set forth in this Agreement, this Agreementis for the sole benefit of the parties heretoand their permitted assigns and nothing hereinexpress or implied shall give or be construed to give to any Person, other than the parties heretoand such permitted assigns, any legal or equitable rights hereunder, except that the Buyer Partiesare intended third party beneficiaries ofArticle V.
Section 6.12 Severability. If any provision of this Agreementor the application of any such provision to any personor circumstance shall be held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision hereofor such provision to any other personor circumstance or in any other jurisdiction.
Section 6.13 Counterparts; Facsimile Signatures. This Agreementmay be executed in one or more counterpart signature pages, each of which will be deemed to be an original copy of this Agreementand all of which, when taken together, will be deemed to constitute one and the same agreement, which shall be binding upon all of the parties heretonotwithstanding the fact that all parties are not signatories to the same counterpart. The exchange of copies of this Agreementand of signature pages by facsimile transmission, by electronic mail in “portable document format” (“.pdf”) form, or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing an original signature.
Section 6.14 Specific Performance.The Sellerand the Shareholdersacknowledge and agree that the Buyerwould be irreparably harmed if any of the provisions of this Agreementare not performed in accordance with their specific terms and that any breach of this Agreementby the Sellerand the Shareholderscould not be adequately compensated in all cases by monetary damages alone. Accordingly, the Sellerand the Shareholdersagree that, in addition to any other right or remedy to which the Buyermay be entitled at lawor in equity, the Buyershall be entitled to enforce any and/or all provision(s) of this Agreementby a decree of specific performance and to obtain temporary, preliminary, and permanent injunctive relief to prevent breaches or threatened breaches, without posting any bond or giving any other undertaking.
[Signature Pages Follow]
IN WITNESS WHEREOF, the parties heretohave caused this Asset Purchase Agreement to be executed as of the day and year first above written.
“Seller”
HPI DIRECT, INC., a Georgia corporation
By: /s/ Richard Sosebee
Name: Richard Sosebee
Title: CFO/ Partner
“Shareholder”
/s/ Richard J. Sosebee
RICHARD J. SOSEBEE
/s/ Kirby P. Sims, Jr.
KIRBY P. SIMS, JR.
/s/ Frederick L. Hill, III
FREDERICK L. HILL, III
“Buyer”
SUPERIOR UNIFORM GROUP, INC., a Florida corporation
By: /s/ Andrew D. Demott, Jr.
Name: Andrew D. Demott Jr.
Title:Executive Vice President & CFO
Exhibit A
Escrow Agreement
(See attached)
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this “Agreement”), is made and entered into as of this 1st day of July, 2013 (the “Effective Date”), by and among Superior Uniform Group, Inc., a Florida corporation (the “Purchaser”), HPI Direct, Inc., a Georgia corporation (the “Seller”), Richard J. Sosebee, Kirby P. Sims, Jr., and Frederick L. Hill, III (each a “Shareholder,” and collectively, the “Shareholders”) and SunTrust Bank, a Georgia banking corporation, as escrow agent (the “Escrow Agent”). The Purchaser, the Seller, the Shareholders and the Escrow Agent are each referred to herein as a “Party” and collectively as the “Parties.”
BACKGROUND
A. The Purchaser, the Seller and the Shareholders have entered into an Asset Purchase Agreement (the “Purchase Agreement”), dated as of the date hereof.
B. The Purchaser, the Seller and the Shareholders have agreed to establish an escrow fund pursuant to Section 2.6(d)(i) of the Purchase Agreement, providing for the delivery on the date hereof to the Escrow Agent of the sum of One Million Five Hundred Thousand Dollars ($1,500,000).
C. The Escrow Agent is willing to act as escrow agent under this Agreement.
AGREEMENT
In consideration of the premises and the mutual promises and agreements contained herein, the Parties, intending to be legally bound, hereby agree as follows:
ARTICLE VIIDefinitions. Capitalized terms used but not otherwise defined in this Agreement shall have the meanings ascribed to such terms in the Purchase Agreement.
ARTICLE VIIIThe Escrow Agent Appointment. The Purchaser, the Seller and the Shareholders hereby appoint and designate SunTrust Bankas the Escrow Agent, to receive, hold, and distribute the Escrow Fund (as hereinafter defined) in accordance with the terms of this Agreement. The Escrow Agent hereby accepts its appointment as the escrow agent and agrees to accept, hold, administer, invest, and disburse the Escrow Fund in accordance with the terms hereof.
ARTICLE IXEscrow Fund. Simultaneously with the execution of this Agreement, the Purchaser has delivered to the Escrow Agent, by wire transfer of immediately available funds, the amount of One Million Five Hundred Thousand Dollars ($1,500,000) (such sum (the “Escrow Amount,” and as adjusted from time to time pursuant to the terms hereof, together with any interest or other income earned thereon, being referred to collectively herein as the “Escrow Fund”).
Section 9.1 Investment of Escrow Fund. Unless otherwise instructed in joint written instructions signed by the Purchaser and the Seller, the Escrow Agent shall invest all funds held pursuant to this Agreement in accordance with the Investment Selection Instructions set forth as Exhibit C hereto. The Escrow Agent shall have no liability for any loss resulting from investments made in accordance with the provisions of this Agreement in the absence of gross negligence or willful misconduct on its part. All income from such invested cash shall be held and disbursed by the Escrow Agent as part of the Escrow Fund. On or before the execution and delivery of this Agreement, each of the Seller and the Purchaser shall provide the Escrow Agent a completed Form W-9 or W-8, whichever is appropriate. Notwithstanding anything to the contrary herein provided, except as otherwise required by applicable law, the Escrow Agent shall have no duty to prepare or file any federal or state tax report or return with respect to any funds held pursuant to this Agreement or any income earned thereon. The Parties agree to treat the Seller as the owner of the Escrow Amount for federal, state and local tax purposes.Any taxes payable on income earned from the investment of any sums in the Escrow Fund shall be paid by the Seller, whether or not the income was distributed by the Escrow Agent during any particular year, as and to the extent required by law. Escrow Agent shall report to the Internal Revenue Service (the “IRS”), as of each calendar year-end, all income earned from the investment of the Escrow Fund as income of the Seller, whether or not such income has been distributed during such year, as and to the extent required by law. Escrow Agent agrees to prepare a Form 1099 for the Seller. Any other tax returns required to be filed will be prepared and filed by the Seller with the IRS and any other taxing authority as required by law.
Section 9.2 Disbursement of the Escrow Fund.
(a) | If, at any time from the Effective Date until the earliest of (i) eighteen (18) months after the Effective Date (such date, the “Escrow Termination Date”), or (ii) the date on which the amount of the Escrow Fund has been reduced to zero, the Purchaser believes that any Buyer Party is entitled to indemnification from the Seller and/or the Shareholders pursuant to Section 5.2 of the Purchase Agreement, the Purchaser may deliver to the Escrow Agent and the Seller a written notice (a “Claim Notice”) describing in reasonable detail (to the extent then available) (1) the facts constituting the basis for such indemnification claim (a “Claim”), (2) the amount sought therefor, or an estimate thereof, from the Escrow Fund (a “Claimed Amount”) and (3) instructions for disbursement. Beginning on the date that a Claim Notice is received by the Escrow Agent and the Seller, the Seller shall have 30 days (the “Notice Period”) to deliver to the Escrow Agent, with copies to the Purchaser, a notice of written objection disputing in good faith the Claim Notice (or a portion thereof) and describing in reasonable detail the basis for why the Purchaser is not entitled to the Claimed Amount (or portion thereof) and the portion of the Claimed Amount being disputed (such notice, a “Dispute Notice”). If the Escrow Agent does not receive a Dispute Notice prior to 5:00 p.m. (Eastern Time) on the last day of the Notice Period, the Escrow Agent shall within two (2) business days release the Claimed Amount (but, in any event, no more than the Escrow Fund as of such date) in accordance with the disbursement instructions contained in the Claim Notice. If the Escrow Agent receives a Dispute Notice prior to 5:00 p.m. (Eastern Time) on the last day of the Notice Period, the Escrow Agent shall reserve and continue to hold as part of the Escrow Fund the disputed portion of the Claimed Amount until (x) it receives Joint Written Instructions (as defined below) as to the disposition of such sum or (y) it is otherwise directed by a Court Order (as defined below). The delivery to the Escrow Agent of a Court Order shall constitute a representation to the Escrow Agent that such order or decree complies with the requirements of this Section 3.2(a) and the Escrow Agent shall be entitled to rely thereon without any further duty of inquiry. The term “Court Order” shall mean a final, non-appealable order or judgment from a foreign, domestic, federal, territorial, state or local court, tribunal or governmental authority with lawful authority to issue anorder or judgment with respect to the matter in dispute. |
(b) | On the date that is nine (9) months after the Effective Date (or the first business day thereafter if such date is not a business day) (the “Early Release Date”), Escrow Agent shall release to the Seller an amount (the “Early Release Amount”) equal to fifty percent (50%) of the Escrow Amount, including all accrued interest as of the Early Release Date,less (i) the aggregate amount of all Unresolved Claims (as defined below) and (ii) all amounts released to Purchaser prior to the Early Release Date. |
(c) | Notwithstanding anything to the contrary contained in this Agreement, if the Escrow Agent receives joint written instructions from the Purchaser and the Seller, or their respective successors or permitted assigns, as to the disbursement of some or all of the Escrow Fund (“Joint Written Instructions”), the Escrow Agent shall disburse the Escrow Fund (or any portion thereof) pursuant to such Joint Written Instructions. |
(d) | If any Dispute Notice includes an objection to only a portion of a Claimed Amount, the Escrow Agent promptly (but in any event within two (2) business days after receipt of the applicable Dispute Notice) shall release an amount of the Escrow Fund equal to the portion of the Claimed Amount for which there is no objection (but, in any event, no more than the Escrow Fund as of such date) in accordance with the disbursement instructions contained in the Claim Notice;provided, that such partial release by the Escrow Agent shall not terminate or otherwise prejudice the Purchaser’s rights with respect to amounts claimed in any Claim which are in excess of the amounts so released. |
(e) | Promptly following the Escrow Termination Date, but in any event not later than three (3) business days after the Escrow Termination Date, the Escrow Agent shall release to the Seller an amount equal to the Escrow Fund as of the Escrow Termination Date less any Unresolved Claims. “Unresolved Claims” shall mean Claimed Amounts or portions thereof that are the subject of a Dispute Notice or that are otherwise unsatisfied as of the Escrow Termination Date or the Early Release Date, as applicable, including the full amount of any Claims for which a Claim Notice has been delivered but for which the applicable Notice Period has not expired as of the Escrow Termination Date or the Early Release Date, as applicable. With respect to any portion of the Escrow Fund that is held by the Escrow Agent beyond the Escrow Termination Date pursuant to the prior sentence, promptly upon (but in any event within two (2) business days after) (A) the Escrow Agent’s receipt of a Court Order respecting any Unresolved Claims that are the subject of a Dispute Notice or (B) the expiration of the applicable Notice Period for any Unresolved Claims with respect to which no Dispute Notice has been delivered, the Escrow Agent shall release by wire transfer to an account or accounts designated by the Purchaser in the Claim Notice a portion of the Escrow Fund equal to the amount of funds to be released to the Purchaser pursuant to such Court Order or the amount of such Unresolved Claim for which no Dispute Notice has been delivered, as the case may be. After the resolution of each Unresolved Claim after the Escrow Termination Date, and unless otherwise instructed by the Seller, the remaining amount of the Escrow Fund not distributed to the Purchaser pursuant to the immediately preceding sentence less the amount of all remaining Unresolved Claims shall be released promptly (but in any event within two (2) business days) thereafter by the Escrow Agent to the Seller. |
ARTICLE XEscrow Agent.
Section 10.1 Duties. In performing its duties under this Agreement or upon the claimed failure to perform its duties hereunder, the Escrow Agent shall have no liability except for the Escrow Agent’s willful misconduct or gross negligence. The Escrow Agent’s sole responsibility shall be for the safekeeping and disbursement of the Escrow Fund in accordance with the terms of this Agreement. The Escrow Agent shall have no implied duties or obligations and shall not be charged with knowledge or notice of any fact or circumstance not specifically set forth herein. The Escrow Agent shall be entitled to rely upon and shall be protected in acting upon any request, instruction, statement or other instrument, not only as to its due execution, validity and effectiveness, but also as to the truth and accuracy of any information contained therein, which the Escrow Agent shall in good faith believe to be genuine, to have been signed or presented by the person or parties purporting to sign the same and to conform to the provisions of this Agreement. In no event shall the Escrow Agent be liable for incidental, special or punitive damages. The Escrow Agent shall not be obligated to take any legal action or to commence any proceeding in connection with the Escrow Fund, any account in which the Escrow Fund is deposited, or this Agreement, or to appear in, prosecute or defend any such legal action or proceedings. The Escrow Agent may consult legal counsel selected by it in the event of any dispute or question as to the construction of any of the provisions hereof or of any other agreement or of its duties hereunder, and shall incur no liability and shall be fully protected from any liability whatsoever in acting in accordance with the advice, opinion or instruction of such counsel. The Purchaser, the Seller and the Shareholders shall be jointly and severally liable for, and shall promptly pay, upon demand, the reasonable fees and expenses incurred pursuant to the immediately preceding sentence. The Escrow Agent shall have no liability with respect to the transfer or distribution of any funds effected by the Escrow Agent pursuant to wiring or transfer instructions provided to the Escrow Agent in accordance with the provisions of this Agreement. The Escrow Agent shall not be required to take notice of or have any obligations or responsibilities in connection with the Purchase Agreement, the transactions contemplated thereby or any other agreement between any other parties to the Purchase Agreement, other than this Agreement.
Section 10.2 Indemnification.
(a) | From and at all times after the date of this Agreement, the Purchaser, the Seller and the Shareholders shall, jointly and severally, to the fullest extent permitted by law and to the extent provided herein, indemnify and hold harmless the Escrow Agent and each director, officer, employee, attorney, agent and affiliate of the Escrow Agent (collectively, the “Indemnified Parties”) against any and all actions, claims (whether or not valid), losses, damages, liabilities, costs and expenses of any kind or nature whatsoever (including, without limitation, reasonable attorneys’ fees, costs and expenses) incurred by or asserted against any of the Indemnified Parties from and after the date hereof in connection with the Escrow Agent’s good faith acceptance of and performance of its duties and obligations under this Agreement;provided,however, that no Indemnified Party shall have the right to be indemnified hereunder for any liability (or any cost or expense related to such liability, including, without limitation, attorneys’ fees, costs and expenses) finally determined by an arbitrator or a court of competent jurisdiction, subject to no further appeal, to have resulted from the gross negligence or willful misconduct of such Indemnified Party. If any such action or claim shall be brought or asserted against any Indemnified Party, such Indemnified Party shall promptly notify the Purchaser and the Seller in writing, and the Purchaser and the Seller shall assume the defense thereof, including the employment of counsel and the payment of all expenses. Such Indemnified Party shall, in its sole discretion, have the right to employ separate counsel in any such action and to participate in the defense thereof, and the fees and expenses of such counsel shall be paid by such Indemnified Party unless (i) the Purchaser and the Seller agree in writing to pay such fees and expenses, (ii) the Purchaser and the Seller shall fail to assume the defense of such action or proceeding or shall fail, in the reasonable discretion of such Indemnified Party, to employ counsel reasonably satisfactory to the Indemnified Party in any such action or proceeding, or (iii) the named parties to any such action or proceeding (including any impleaded parties) include both the Indemnified Party, on the one hand, and the Purchaser or the Seller, on the other hand, and the Indemnified Party shall have been advised by counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the Purchaser or the Seller. All such fees and expenses payable by the Purchaser and the Seller pursuant to the foregoing sentence shall be paid from time to time as incurred, both in advance of and after the final disposition of such action or claim. All of the foregoing losses, damages, costs and expenses of the Indemnified Parties shall be payable upon demand of such Indemnified Party, jointly and severally, by the Seller, the Purchaser and the Shareholders. The obligations of the Purchaser, the Seller and the Shareholders under this Section 4.2 shall survive any termination of this Agreement and the resignation or removal of the Escrow Agent. |
(b) | The Seller, the Shareholders and the Purchaser agree, solely among themselves, that any obligation for indemnification under this Section 4.2 shall be borne one-half by the Purchaser, and one-half by the Seller and the Shareholders jointly and severally,provided that the Purchaser, on the one hand, and the Seller, the Shareholder(s) or both, on the other hand, shall each have a right of contribution against the other for liability incurred under this Agreement in accordance with the other’s relative fault. |
Section 10.3 Disputes. If, at any time, there shall exist any dispute between the Purchaser and the Seller with respect to the holding or disposition of any portion of the Escrow Fund or any other obligations of the Escrow Agent hereunder, or if at any time the Escrow Agent is unable to determine, to the Escrow Agent’s sole satisfaction, the proper disposition of any portion of the Escrow Fund or the Escrow Agent’s proper actions with respect to its obligations hereunder, or if the Purchaser and the Seller have not, within 30 days of the furnishing by the Escrow Agent of a notice of resignation pursuant to Section 4.4 below, appointed a successor escrow agent to act hereunder, then the Escrow Agent may, in its sole discretion, take either or both of the following actions:
(a) | suspend the performance of any of its obligations under this Agreement until such dispute or uncertainty shall be resolved to the sole satisfaction of the Escrow Agent or until a successor escrow agent shall have been appointed (as the case may be); or |
(b) | petition (by means of an interpleader action or any other appropriate method) any court of competent jurisdiction, for instructions with respect to such dispute or uncertainty, and pay into or deposit with such court all disputed Escrow Funds held by it in the Escrow Fund for holding and disposition in accordance with the instructions of such court, and the Escrow Agent shall thereupon be discharged from all further obligations as Escrow Agent under this Agreement. |
The Escrow Agent shall have no liability to the Purchaser, the Seller or any other person with respect to any such suspension of performance or disbursement into court, specifically including any liability that may arise, or be alleged to have arisen, out of or as a result of any delay in the disbursement of funds held in the Escrow Fund or any delay in or with respect to any other action required or requested of the Escrow Agent.
Section 10.4 Resignation of Escrow Agent. The Escrow Agent may resign from the performance of its duties hereunder at any time by giving 30 days’ prior written notice to the Purchaser and the Seller or may be removed, with or without cause, by the Purchaser and the Seller, acting jointly, at any time by the giving of ten days’ prior written notice to the Escrow Agent. Such resignation or removal shall take effect upon the appointment of a successor escrow agent as provided herein. Upon any such notice of resignation or removal, the Purchaser and the Seller, acting jointly, shall appoint a successor escrow agent hereunder, which shall be a commercial bank, trust company or other financial institution. In the event the Purchaser and the Seller shall fail to appoint a successor escrow agent within 30 days after the resignation or removal of the Escrow Agent, as contemplated hereby, the Escrow Agent may deposit the Escrow Fund into the registry of a court of competent jurisdiction and shall thereupon be discharged from all further duties as Escrow Agent under this Agreement. If the Purchaser and the Seller are unable to agree on a successor escrow agent within such 30-day period, either party may apply to a court of competent jurisdiction for the appointment of a successor escrow agent or other appropriate relief. Upon the acceptance in writing of any appointment as Escrow Agent hereunder by a successor escrow agent, such successor escrow agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Escrow Agent, and the retiring Escrow Agent shall be discharged from its duties and obligations under this Agreement, but shall not be discharged from any liability for actions taken as Escrow Agent hereunder prior to such succession. After any retiring Escrow Agent’s resignation or removal, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Escrow Agent under this Agreement. The Escrow Agent shall have no duty or obligation to name any successor escrow agent.
Section 10.5 Receipt. By its execution and delivery of this Agreement, the Escrow Agent acknowledges receipt of the Escrow Fund.
Section 10.6 Fees. The Purchaser, the Seller and the Shareholders jointly and severally agree to pay the Escrow Agent compensation, and to reimburse the Escrow Agent for out-of-pocket expenses, all in accordance with the provisions ofSchedule A hereto, which is incorporated herein by reference and made a part hereof, and further agree that the Escrow Agent shall have a lien on the Escrow Fund for payment of its fees and expenses from amounts held in the Escrow Fund if such fees and expenses are not otherwise paid and without judicial action to foreclose such lien. The obligations of the Purchaser, the Seller and the Shareholders under this Section 4.6 shall survive any termination of this Agreement and the resignation or removal of the Escrow Agent. The Seller, the Shareholders and the Purchaser (each a “Transaction Party”) agree, solely among themselves, that (i) any Acceptance/Legal Review Fee and the $2,500 annual Administration Fee (collectively the “Covered Fees”), both as described onSchedule A hereto, shall be paid in full by the Purchaser, and (ii) that all fees and compensation to be paid to Escrow Agent hereunder (except the Covered Fees) and reimbursement for Escrow Agent’s out-of-pocket expenses shall be borne one-half by the Purchaser, and one-half by the Seller and the Shareholders jointly and severally. If a Transaction Party is required to pay to the Escrow Agent any compensation, fees or out-of-pocket expenses that are the responsibility of another Transaction Party hereunder (including as a result of any deduction by Escrow Agent from the Escrow Fund), then the Transaction Party that is responsible for such compensation, fees or out-of-pocket expenses (or a portion thereof) that was paid by the other Transaction Party shall promptly reimburse the other Transaction Party for such payment.
ARTICLE XIMiscellaneous.
Section 11.1 Notices. All notices, communications and deliveries required or made hereunder must be made in writing signed by or on behalf of the Party making the same and shall be delivered personally or by telecopy transmission or by email or by a national overnight courier service or by registered or certified mail (return receipt requested) (with postage and other fees prepaid) as follows:
If to Escrow Agent: SunTrust Bank
Mail Code HDQ 5307
919 East Main Street, 7th Floor
Richmond, VA 23219
Phone #: 804-782-7182
Fax #: 804-782-7855
If to Purchaser: Superior Uniform Group, Inc.
1055 Seminole Blvd.
Seminole, FL 33772
Attention: Chief Financial Officer
Email: ademott@superioruniformgroup.com
Tax identification #: 11-1385670
with courtesy copies to (which shall not constitute notice):
Superior Uniform Group, Inc.
1055 Seminole Blvd.
Seminole, FL 33772
Attention: General Counsel
Email:jalpert@sug.biz
and
Hill Ward Henderson
101 E. Kennedy Boulevard
Suite 3700
Tampa, Florida 33602
Facsimile: 813-221-2900
Attention: David S. Felman
Email:dfelman@hwhlaw.com
If to Seller and/or the Shareholders:
Richard J. Sosebee
Kirby P. Sims, Jr.
Frederick L. Hill, III
455 Heards Ferry Road
Atlanta, Georgia 30328
Email: rsosebee@hpidirect.net
Email:kirbysims@hpidirect.net
Email:fhill@hpidirect.net
Seller tax identification #: 58-2143654
with courtesy copies to (which shall not constitute notice):
Duane Morris LLP
1075 Peachtree Street
Suite 2000
Atlanta, GA 30309
Attention: G. Kirk Domescik
Fax: (404) 393-1031
Email: kdomescik@duanemorris.com
or to such other representative or at such other address of a Party as such Party may furnish to the other Parties in writing. Any such notice, communication or delivery shall be deemed given or made (a) on the date of delivery, if delivered in person, or (b) upon transmission by facsimile or email if receipt is confirmed by telephone, (c) on the first business day following timely delivery to a national overnight courier service or (d) on the fifth business day following it being mailed by registered or certified mail; provided, however, that notwithstanding anything to the contrary herein provided, the Escrow Agent shall not be deemed to have received any notice hereunder prior to the Escrow Agent’s actual receipt thereof.
Section 11.2 Time of the Essence; Computation of Time. Time is of the essence for each and every provision of this Agreement. Whenever the last day for the exercise of any privilege or the discharge of any duty under this Agreement shall fall upon a Saturday, Sunday or any date on which banks in Georgia are closed, the Party having such privilege or duty may exercise such privilege or discharge such duty on the next succeeding day which is a regular business day.
Section 11.3 Assignment; Successors in Interest. No assignment or transfer by any Party of such Party’s rights and obligations under this Agreement (including, without limitation, from one Party to another Party to this Agreement) shall be made except with the prior written consent of the other Parties to this Agreement. This Agreement will be binding upon and will inure to the benefit of the Parties and their respective successors (including any party which acquires all or substantially all the assets of any of the Parties) and permitted assigns, and any reference to a Party shall also be a reference to the successors and permitted assigns thereof.
Section 11.4 Captions. The titles, captions and table of contents contained in this Agreement are inserted in this Agreement only as a matter of convenience and for reference and in no way define, limit, extend or describe the scope of this Agreement or the intent of any provision of this Agreement.
Section 11.5 Waiver. Any agreement on the part of a Party to any extension or waiver of any provision of this Agreement shall be valid only if set forth in an instrument in writing signed on behalf of such Party. A waiver by a Party of the performance of any covenant, agreement, obligation, condition, representation or warranty shall not be construed as a waiver of any other covenant, agreement, obligation, condition, representation or warranty. A waiver by any Party of the performance of any act will not constitute a waiver of the performance of any other act or an identical act required to be performed at a later time.
Section 11.6 Construction. The provisions of this Agreement shall be construed according to their fair meaning and neither for nor against any Party hereto irrespective of which Party caused such provisions to be drafted. Each of the Parties acknowledges that it has been represented by an attorney in connection with the preparation and execution of this Agreement.
Section 11.7 No Limitation. The Parties (other than the Escrow Agent) agree that the rights and remedies of any Party under this Agreement shall not operate to limit any other rights and remedies otherwise available to any party under the Purchase Agreement.
Section 11.8 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and it shall not be necessary in making proof of this Agreement or the terms of this Agreement to produce or account for more than one of such counterparts. Delivery of an executed counterpart of a signature page of this Agreement by telecopy or as an attachment to email shall be effective as delivery of a manually executed counterpart of this Agreement.
Section 11.9 Arbitration. Subject to the rights of the Escrow Agent underSection 4.4, any and all claims, counterclaims, demands, causes of action, disputes, controversies, and other matters in question (collectively, a “Dispute”) arising out of or relating to this Agreement shall be resolved by binding arbitration pursuant to the terms and subject to the conditions of Section 6.3 of the Purchase Agreement;provided, that if such Dispute is among the Seller, the Purchaser and the Escrow Agent, then the third Arbitrator shall be appointed by the Escrow Agent (instead of upon mutual agreement of the Purchaser and Seller);provided,further, that if the Escrow Agent does not appoint the third Arbitrator, then the third Arbitratorshall be appointed by the American Arbitration Association from its panel of neutral arbitrators. If the Dispute hereunder involves only the Escrow Agent and the Purchaser or the Seller, then Section 6.3 of the Purchase Agreement shall be interpreted in such a manner that the references in such section to the Purchaser or the Seller, as the case may be, that is not a party to the Dispute shall be read to mean the Escrow Agent.
Section 11.10 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement, and any such prohibition or unenforceability in any jurisdiction will not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by Law, each Party hereby waives any provision of Law that renders any such provision prohibited or unenforceable in any respect.
Section 11.11 Governing Law and Choice of Forum. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF GEORGIA, WITHOUT GIVING EFFECT TO ANY CHOICE OF LAW OR CONFLICTING PROVISION OR RULE (WHETHER OF THE STATE OF GEORGIA OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF GEORGIA TO BE APPLIED. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL LAWS OF THE STATE OF GEORGIA WILL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT, EVEN IF UNDER SUCH JURISDICTION’S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.
Section 11.12 Other Transactions with the Purchaser or the Seller. The Escrow Agent and any stockholder, director, officer or employee of the Escrow Agent may become pecuniarily interested in any transaction in which the Purchaser or the Seller may be interested, and contract and lend money to the Purchaser or the Seller and otherwise act as fully and freely as though it were not Escrow Agent under this Agreement. Nothing herein shall preclude the Escrow Agent from acting in any other capacity for the Purchaser, the Seller or for any other entity.
5.12.Authorized Signatures. Contemporaneously with the execution and delivery of this Agreement and, if necessary, from time to time thereafter, each of the parties to this Agreement (other than the Escrow Agent) shall execute and deliver to the Escrow Agent a Certificate of Incumbency substantially in the form of Exhibit B-1 and B-2 hereto (a “Certificate of Incumbency”) for the purpose of establishing the identity and authority of persons entitled to issue notices, instructions or directions to the Escrow Agent on behalf of each such party. Until such time as the Escrow Agent shall receive an amended Certificate of Incumbency replacing any Certificate of Incumbency theretofore delivered to the Escrow Agent, the Escrow Agent shall be fully protected in relying, without further inquiry, on the most recent Certificate of Incumbency furnished to the Escrow Agent. Whenever this Agreement provides for joint written notices, joint written instructions or other joint actions to be delivered to the Escrow Agent, the Escrow Agent shall be fully protected in relying, without further inquiry, on any joint written notice, instructions or action executed by persons named in such Certificate of Incumbency.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed as of the date first above written.
SunTrust Bank, as Escrow Agent
By:
Name: ____________________________________
Title:
Purchaser:
Superior Uniform Group, Inc.,
a Florida corporation
By:
Name:
Title:
Seller:
HPI Direct, Inc., a Georgia corporation
By:
Name:
Title:
Shareholders:
_____________________________________________
Richard J. Sosebee
_____________________________________________
Kirby P. Sims, Jr.
_____________________________________________
Frederick L. Hill, III
SCHEDULE A
SunTrust Bank Schedule of Fees & Expenses
Acceptance/Legal Review Fee: | $500.00 – one time only payable at the time of signing the escrow agreement |
The Legal Review Fee includes review of all related documents and accepting the appointment of Escrow Agent on behalf of SunTrust Bank. The fee also includes setting up the required account(s) and accounting records, document filing, and coordinating the receipt of funds/assets for deposit to the Escrow Account. This is a one-time fee payable upon execution of the Escrow Agreement.As soon as SunTrust Bank’s attorney begins to review the escrow agreement, the legal review fee is subject to payment regardless if the parties decide to appoint a different escrow agent or a decision is made that the escrow agreement is not needed.
Administration Fee: | $2,500 – payable at the time of signing the escrow agreement and on the anniversary date thereafter, if applicable |
The Administration Fee includes providing routine and standard services of an Escrow Agent. The fee includes administering the escrow account, performing investment transactions, processing cash transactions (including wires and check processing), disbursing funds in accordance with the Agreement (note any pricing considerations below), and providing trust account statements to applicable parties for a twelve (12) month period. If the account remains open beyond the twelve (12) month term, the parties will be invoiced each year on the anniversary date of the execution of the Escrow Agreement. Additional fees will be billed for processing claim notices and/or objections. Extraordinary expenses, including legal counsel fees, will be billed as out-of-pocket. The Administration Fee is due upon execution of the Escrow Agreement.
Out-of-Pocket Expenses: At Cost
Out-of-pocket expenses such as, but not limited to, postage, courier, overnight mail, insurance, money wire transfer, long distance telephone charges, facsimile, stationery, travel, legal (out-of-pocket to counsel) or accounting, will be billed at cost.
Note: This fee schedule is based on the assumption that the escrowed funds will be invested in one of the options listed on Exhibit C.
EXHIBIT B-1
Certificate of Incumbency
(List of Authorized Representatives)
Re: Escrow Agreement dated July ___, 2013, among SunTrust Bank, Superior Uniform Group, Inc., HPI Direct, Inc., Richard J. Sosebee, Kirby P. Sims, Jr. and Frederick L. Hill, III (the “Escrow Agreement”)
Purchaser: Superior Uniform Group, Inc.
As an Authorized Officer of the above referenced entity, I hereby certify that the each person listed below is an authorized signor for such entity, and that the title and signature appearing beside each name is true and correct.
Name | Title | Signature | Contact Number |
| |||
| |||
| |||
| |||
| |||
| |||
IN WITNESS WHEREOF, this certificate has been executed by the duly authorized officer whose name and title are set forth below:
Superior Uniform Group, Inc.
By: __________________________ Date: _____________________
Title: _________________________
EXHIBIT B-2
Certificate of Incumbency
(List of Authorized Representatives)
Re: Escrow Agreement dated July ____, 2013, among SunTrust Bank, Superior Uniform Group, Inc., HPI Direct, Inc., Richard J. Sosebee, Kirby P. Sims, Jr. and Frederick L. Hill, Jr. (the “Escrow Agreement”)
Seller: HPI Direct, Inc.
As an Authorized Officer of the above referenced entity, I hereby certify that the each person listed below is an authorized signor for such entity, and that the title and signature appearing beside each name is true and correct.
Name | Title | Signature | Contact Number |
| |||
| |||
| |||
| |||
| |||
| |||
IN WITNESS WHEREOF, this certificate has been executed by the duly authorized officer whose name and title are set forth below:
HPI Direct, Inc.
By: __________________________ Date: _____________________
Title: _________________________
Exhibit C
To: SunTrust Bank
I direct and authorize you to invest all temporary cash and the portion of my account(s) that is appropriate to maintain in cash or cash equivalents in a SunTrust Bank deposit option or Federated Funds money market fund, as follows:
Check One:
☐ | SunTrust Institutional Money Market Deposit Option | ☐ | SunTrust Non-Interest Deposit Option |
☐ | Federated Prime Obligations Fund (POIXX) | ☐ | Federated Tax Free Obligations Fund (TBIXX) |
☐ | Other: |
I acknowledge and consent that:
1. | I understand that investments in the SunTrust Institutional Money Market Deposit Option and SunTrust Non-Interest Deposit Option are insured, subject to the applicable rules and regulations of the Federal Deposit Insurance Corporation (the “FDIC”), in the standard FDIC insurance amount of $250,000, including principal and accrued interest. The Parties understand that deposits in the SunTrust Institutional Money Market Deposit Option SunTrust Non-Interest Deposit Option are not secured. Further, I understand that the SunTrust Institutional Money Market Deposit Option hasmonthly withdrawal/disbursement restrictions of a maximum of 6 per monthand that should the maximum be reached in any one calendar month, the funds will be moved to a SunTrust Bank Non-Interest Deposit Option until the beginning of the following month unless an alternate investment vehicle is selected for this purpose. |
Alternate Investment Vehicle:
2. | I may view prospectuses and other Federated fund materials, including fee information, athttp://www.federatedinvestors.com/sc?link=products&templ=moneyMarketSearch&ut=unregistered_webuser |
3. | SunTrust Bank may receive compensation in exchange for services (“fees for services”) that it provides to various Federated money market mutual funds. These fees for services shall be in addition to, and will not reduce, SunTrust Bank’s compensation. Such fees for services will not be paid directly by your account, but will be paid to SunTrust Bank by Federated. The fees for services are subject to change without notice. |
4. | I understand no transaction charge will be imposed on the account(s) listed below with respect to that portion of the account(s) invested in Federated Funds; |
5. | I understand that investment funds, except for the SunTrust Deposit options, are not bank deposits and are not obligations of, or insured, endorsed or guaranteed by any SunTrust Bank or their affiliates, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency. I further understand that investment in any mutual fund involves some investment risk, including the possible loss of principal. |
6. | I have full power to direct and authorize investments in account(s) identified below. |
This direction and authorization shall continue in effect until revoked by written instruction delivered to the Bank. Until a replacement fund is provided to the Bank all funds will be held in cash.
Date: |
| |
Account Name and Number: |
| |
X | X | |
Name (printed or typed) | Signature | |
Exhibit B
Bill of Sale
(See attached)
BILL OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT
ThisBILL OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT (this “Agreement”) is made as of July 1, 2013, by and amongSUPERIOR UNIFORM GROUP, INC., a Florida corporation (“Buyer”),HPI DIRECT, INC., a Georgia corporation (the “Seller”),RICHARD J. SOSEBEE (“Sosebee”),KIRBY P. SIMS, JR. (“Sims”) andFREDERICK L. HILL, III (“Hill” and, collectively with Sosebee and Sims, the “Shareholders”).
WHEREAS, pursuant to that certain Asset Purchase Agreement, dated as of the date hereof, by and among Buyer, and Seller and the Shareholders (the “Purchase Agreement”), Seller has agreed to sell, transfer, convey, assign and deliver to Buyer, and Buyer has agreed to purchase and acquire from Seller, certain assets of the Seller, hereinafter specified;
WHEREAS, pursuant to the Purchase Agreement, Seller has agreed to delegate to Buyer, and Buyer has agreed to assume, certain obligations of the Seller, hereinafter specified; and
WHEREAS, the execution and delivery of this Agreement is a condition precedent to Seller’s and Buyer’s obligations at the Closing under the Purchase Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions. Capitalized terms used but not otherwise defined herein have the respective meanings attributed thereto in the Purchase Agreement.
2. Transfer of Purchased Assets. Seller hereby sells, transfers, conveys, assigns and delivers to Buyer, free and clear of all Encumbrances (other that Permitted Encumbrances), all right, title and interest in, to and under the Assets, excepting only the Excluded Assets.
3. Assignment and Assumption of Assumed Liabilities. Seller hereby delegates to Buyer, and Buyer hereby assumes and agrees to discharge and perform, all of the Assumed Liabilities. Notwithstanding the foregoing or any other provision of this Agreement to the contrary, Seller and its Affiliates retain, do not transfer and will pay, perform and discharge, as and when due, and Buyer does not assume or agree to pay, perform, or discharge, any of the Excluded Liabilities.
4. Confirmatory Instruments. The parties to the this Agreement will execute and deliver such other documents, certificates, agreements and other writings and take such other actions as may reasonably be necessary or requested by another party in order to consummate, evidence or implement expeditiously the transactions contemplated by this Agreement.
5. Further Assurances. Seller and Shareholders agree that they will, at any time and from time to time, after the date hereof, upon the reasonable request of Buyer, do, execute, acknowledge, and deliver or will cause to be done, executed, acknowledged and delivered, all such further acts, deeds, assignments, transfers, conveyances, and assurances as may be required in order for Buyer, to receive any and all of the rights, titles, interests, assets and properties transferred hereunder and to give receipts and releases for and in respect of the same, and any part thereof, and from time to time to institute and prosecute, any and all proceedings at law, in equity or otherwise, which Buyer may deem proper for the collection or reduction to possession of any of the Assets, or for the collection and enforcement of any claim or right of any kind hereby sold, conveyed, transferred, assigned, and delivered, or intended so to be, and to do all acts and things in relation to the Assets which Buyer deems desirable.
6. Effect. This Agreement shall be binding upon Buyer, Seller and Shareholders and their respective successors and permitted assigns. This Agreement is intended only to effect the assignment of the Assets and the delegation and assumption of the Assumed Liabilities pursuant to the Purchase Agreement, and nothing contained herein shall in any way supersede, modify, replace, amend, change, rescind, waive, exceed, expand, enlarge or in any way affect the provisions, including the warranties, covenants, agreements, conditions, representations or, in general any of the rights and remedies, and any of the obligations and indemnifications of the any party set forth in the Purchase Agreement.
7. Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument and delivered in person. Signatures transmitted electronically by .pdf file or facsimile shall be binding for all purposes hereof.
8. Governing Law. This Agreement shall be construed in accordance with the laws of the State of Delaware, without regard to the principles of conflicts of law.
(Signature Page Follows)
IN WITNESS WHEREOF, Seller, Buyer and Shareholders have duly executed and delivered this Agreement solely for the purposes set forth above, all as of the date first above written.
BUYER:
SUPERIOR UNIFORM GROUP, INC.
By:
Name: ____________________________________
Title: _____________________________________
SELLER:
HPI DIRECT, INC.
By:
Name: ____________________________________
Title: _____________________________________
SHAREHOLDERS:
RICHARD J. SOSEBEE
KIRBY P. SIMS, JR.
FREDERICK L. HILL, III
Exhibit C
License Assignment and Assumption Agreement
(See attached)
LICENSEASSIGNMENT AND ASSUMPTION AGREEMENT
This LICENSE Assignment and Assumption Agreement (this “Agreement”), is made as of July 1, 2013, by and between HPI Direct, Inc., a Georgia corporation (“Assignor”), and Superior Uniform Group, Inc., a Florida corporation (“Assignee”).
WHEREAS, McDonald Ventures VI, LLC, a Georgia limited liability company (“Licensor”) and Assignor entered into a Temporary License Agreement, dated January 29, 2013, as amended by the First Amendment to Temporary License Agreement, dated June 24, 2013, between Licensor and Assignor (collectively, the “License”), for the license of certain premises (the “Premises”) located in Forsyth County, Georgia, at 1225 Old Alpharetta Road, Suite 220, Alpharetta, Georgia, as such Premises are more particularly described in the License;
WHEREAS, pursuant to the terms and conditions of that certain Asset Purchase Agreement, dated as of the date hereof, by and between Assignor, Assignee, and certain other parties named therein (the “Purchase Agreement”), Assignor has agreed to assign to Assignee its interest in the Premises, all of its rights and interests under the License, and all prepaid expenses and deposits related to the Premises (including security deposits), and Assignee has agreed to assume certain executory obligations of Assignor to be performed after the Closing Date under the License; and
WHEREAS, pursuant to the License, such assignment and assumption of the License is subject to the prior consent of the Licensor.
NOW, THEREFORE,in consideration of the premises and the mutual covenants and agreements set forth herein and in the Purchase Agreement, and for other good and valuable consideration, the receipt, adequacy and legal sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Definitions. Capitalized terms used but not otherwise defined herein have the respective meanings given to them in the Purchase Agreement.
2. Assignment. Effective as of the Closing Date, Assignor hereby sells, transfers, conveys, assigns and delivers to Assignee, and Assignee hereby accepts, all of Assignor’s right, title, and interest in, under and to the License, the Premises, and all prepaid expenses and deposits related to the Premises (including the security deposit previously paid to Licensor under the Lease), TO HAVE AND TO HOLD the same unto the Assignee, its legal representatives, successors and assigns, forever.
3. Assumption. Effective as of the Closing Date, Assignor hereby delegates to Assignee, and Assignee hereby assumes and agrees to discharge and perform when due all of Assignor’s executory obligations to be performed after the Closing Date under the License, but only to the extent such obligations are Assumed Liabilities.
4. Landlord Consent. This Agreement is conditioned on the written consent of Licensor, which consent shall be in the form attached hereto asExhibit A (or in such other form as may be reasonably acceptable to Assignor and Assignee), and this Agreement shall not be effective unless and until such consent has been obtained.
5. Confirmatory Instruments. The parties to this Agreement will execute and deliver such other documents, certificates, agreements and other writings and take such other actions as may reasonably be necessary or requested by another party in order to consummate, evidence or implement expeditiously the transactions contemplated by this Agreement.
6. Effect. This Agreement shall be binding upon Assignor, Assignee and their respective successors and assigns. This Agreement is intended to effect the assignment of the License and the delegation and assumption of the Assumed Liabilities related thereto pursuant to the Purchase Agreement, and nothing contained herein shall in any way supersede, modify, replace, amend, change, rescind, waive, expand, enlarge or in any way affect the provisions of the Purchase Agreement, including the warranties, covenants, agreements, conditions, and representations thereof, or any of the rights and remedies, and any of the obligations and indemnifications, of any party set forth in the Purchase Agreement. In the event of any conflict or other inconsistency between this Agreement and the Purchase Agreement, the Purchase Agreement shall be the controlling document.
7. Governing Law. This Agreement shall be construed in accordance with the laws of the State of Delaware, without regard to the principles of conflicts of law.
8. Counterparts; Effectiveness. This Agreement may be executed in one or more counterpart signature pages, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement, which shall be binding upon all of the parties hereto notwithstanding the fact that all parties are not signatory to the same counterpart. The exchange and delivery of executed copies of this Agreement and of signature pages by facsimile transmission, by electronic mail in “portable document format” (“.pdf”) form, or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing an original signature and shall be binding for all purposes hereof.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto have entered into this Agreement on the date first written above.
HPI DIRECT, INC.
By:
Name:
Title:
SUPERIOR UNIFORM GROUP, INC.
By:
Name:
Title:
[Signature Page to License Assignment and Assumption Agreement]
Exhibit A
Licensor Consent
[See attached pages]
��
Exhibit 4.4
Press Release
(See attached.)
NEWS RELEASE
Superior Uniform Group, Inc.
A NASDAQ Listed Company: SGC
10055 Seminole Boulevard
Seminole, Florida 33772-2539
Telephone (727) 397-9611
Fax (727) 803-9623
Contact: | Superior Uniform Group, Inc. |
|
| Andrew D. Demott, Jr. | Draft Not FOR IMMEDIATE RELEASE |
| (727) 803-7135 |
|
● Superior Uniform Group Announces Acquisition of HPI Direct, Inc |
● Expects Early Accretion to Earnings |
SEMINOLE, Florida – July 1, 2013 –Superior Uniform Group, Inc. (“Superior Uniform Group” or “Superior”) (NASDAQ: SGC), today announced the acquisition of HPI Direct, Inc. (“HPI” or “HPI Direct”) of Alpharetta, Georgia, effective today. Since 1993, HPI Direct has built a stellar reputation for quality and responsiveness as a privately owned company specializing in the design, manufacture and distribution of uniforms to major domestic retailers, foodservice chains, transportation and other service industries throughout the U.S. HPI’s award-winning image apparel is worn by some of the most prestigious brands in the markets that they serve. The transaction is an asset purchase including the assumption of certain liabilities.
The purchase price for the acquisition consists of approximately $32.5 million in cash, subject to adjustment, the issuance of approximately $2.3 million in shares of Superior Uniform Group’s common stock, the potential future payment of up to $7.2 million in additional contingent consideration through 2017, and the assumption of certain liabilities of HPI Direct. The transaction also includes the acquisition of the corporate offices and warehouse distribution facility from an entity related to HPI Direct, Inc. Concurrent with the closing of the acquisition, Superior renewed its $15 million revolver agreement and entered into a new term loan for $30 million. Both credit facilities carry five year terms and variable interest rate of LIBOR plus 0.95%.
"This union brings to Superior Uniform Group an outstanding sales, marketing and customer centric team of people. Their outstanding customer base will further enhance our overall position in the retail, food service, transportation and other markets that they serve" said Michael Benstock, CEO of Superior Uniform Group. “We are very pleased to combine our financial strength and vast resources with HPI’s strong leadership and reputation for excellence. The ability to combine the strengths of what were two competing organizations is very exciting. Together, we will be a powerful force to be reckoned with. HPI’s revenues for the first six months of 2013 were approximately $ 16.0 million. We expect this acquisition to be accretive to our operating results in 2013 exclusive of acquisition related expenses.”
“Since 1993, we've built a reputation for quality and responsiveness, not just for our great products and designs, but for our entire customer support system” said Kirby Sims, President and Shareholder of HPI Direct, Inc. “Our goal to seek improvement every day in our products, service, technology and ultimately our customer satisfaction is very well aligned with Superior’s philosophy of always putting customers first. HPI and Superior have worked very hard to compete to be the most innovative and efficient uniform suppliers in the industry. We believe that this combination with Superior will provide us with the financial backing that we need to continue to provide a great experience for our customers while also allowing us to continue to invest in the future growth of our business. We are very happy that Superior feels strongly about maintaining and fomenting the same culture that has made us successful in the past.”
HPI Direct will continue to service its customers from its location in Alpharetta, Georgia and will operate as a division of Superior Uniform Group. The three principals of HPI Direct will remain with the division under long-term agreements.
ABOUT SUPERIOR UNIFORM GROUP, INC.
Superior Uniform Group, Inc. (NASDAQ: SGC), established in 1920, is one of America's foremost providers of fine uniforms and image apparel. Headquartered in Seminole, Fla., Superior Uniform Group manages award-winning uniform apparel programs for major corporations nationwide. Leaders in innovative uniform program design, global manufacturing and state-of-the-art distribution, Superior Uniform Group helps companies achieve a professional appearance and communicate their brands—particularly those in the healthcare, hospitality, food service, retail and private security industries. The company’s commitment to service, technology, quality and value-added benefits, as well as its financial strength and resources, support customers’ diverse needs while embracing a "Customer 1st, Every Time!" philosophy and culture. For more information, call (800) 727-8643 or visit www.superioruniformgroup.com.
Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements other than historical fact, and may include statements relating to goals, plans and projections regarding new markets, products, services, growth strategies, anticipated trends in Superior’s business and anticipated changes and developments in its industry. Forward-looking statements are based on management’s current expectations and beliefs and involve significant risks and uncertainties that could cause actual results, developments and business decisions to differ materially from those contemplated by these statements. Risk factors that could cause actual results to differ materially from those expressed or implied in Superior’s forward-looking statements are and will be discussed in its most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission as well as other documents that may be filed by Superior from time to time with the Securities and Exchange Commission. Any forward-looking statement made by Superior in this press release is based only on information currently available to Superior and speaks only as of the date on which it is made. You should not rely on the statement as representing our views in the future. Superior undertakes no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.
#####