EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
CYBER-TEST, INC., A DELAWARE CORPORATION
("PURCHASER")
CYBER-TEST, INC., A FLORIDA CORPORATION
("SELLER")
AND THE SHAREHOLDERS
IDENTIFIED HEREIN
MAY 27, 2004
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TABLE OF CONTENTS
ARTICLE I CERTAIN DEFINITIONS
1.1 Accounts Receivable
1.2 Accrued Expenses
1.3 ACT
1.4 Affiliate
1.5 Agreement
1.6 Ancillary Agreements
1.7 Articles of Amendment
1.8 Assignment and Assumption Agreement
1.9 Assumed Liabilities
1.10 Balance Sheet
1.11 Balance Sheet Date
1.12 Bill of Sale\
1.13 Books and Records
1.14 Closing
1.15 Closing Balance Sheet
1.16 Closing Date
1.17 Closing Date Net Working Capital
1.18 Closing Inventory
1.19 Code
1.20 Confidential Information
1.21 Earn Out Shares
1.22 EBIDA
1.23 Employee
1.24 Encumbrance
1.25 Environmental Law
1.26 Environmental Losses
1.27 ERISA
1.28 ERISA Plans
1.29 Escrow Agreement
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1.30 Excluded Assets
1.31 Final Net Working Capital
1.32 GAAP
1.33 Indemnified Liabilities
1.34 Indemnified Party
1.35 Inventory
1.36 Knowledge
1.37 Leased Property
1.38 Losses
1.39 Material Adverse Effect
1.40 Net Working Capital
1.41 Net Working Capital Adjustment
1.42 Net Working Capital Certificate
1.43 Non-Compete Agreement
1.44 Party
1.45 Payables
1.46 Permits
1.47 Permitted Encumbrances
1.48 Person
1.49 Prepaid Expenses
1.50 Products
1.51 Proprietary Rights
1.52 Purchase Price
1.53 Purchased Assets
1.54 Purchaser
1.55 Purchaser General Liabilities
1.56 Purchaser Indemnified Party
1.57 Purchaser Note
1.58 Regulated Substance
1.59 Seller
1.60 Seller General Liabilities
1.61 Seller Indemnified Party
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1.62 Shareholder
1.63 Sutlive
1.64 Sutlive Employment Agreement
1.65 Shareholder
1.66 Taxes
1.67 WARN Act
1.68 Welton
1.69 Welton Employment Agreement
1.70 Usage
ARTICLE II TRANSFER OF ASSETS AND PROPERTIES; CLOSING
2.1 Purchased Assets
2.2 Excluded Assets
2.3 Closing; Effective Time
ARTICLE III PURCHASE PRICE
3.1 Purchase Price
3.2 Allocation of Purchase Price
3.3 Certain Price Adjustments
3.4 Transfer Taxes
3.5 Related Matters
ARTICLE IV ASSUMPTION OF LIABILITIES; EMPLOYEE MATTERS
4.1 General Limitation on Assumption of Liabilities
4.2 Assumed Liabilities and Obligations
4.3 Offer of Employment
4.4 Vacation Liability
4.5 Other Employee Benefits
ARTICLE V CLOSING
5.1 Deliveries by Seller
5.2 Deliveries by Purchaser
5.3 Other Deliveries
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5.4 DELIVERY of Possession
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF SELLER AND THE SHAREHOLDERS
6.1 Organization, Good Standing and Power
6.2 Enforceability and AUTHORIZATION OF AGREEMENT
6.3 No Violation; Consents
6.4 Financial Statements
6.5 Accounts Receivable
6.6 Inventory
6.7 Absence of Certain Changes or Events
6.8 Title to Properties; Absence of Liens and Encumbrances
6.9 Proprietary Rights
6.10 Contracts and Commitments
6.11 Permits, Licenses
6.12 Compliance with Laws
6.13 Legal Proceedings
6.14 Absence of Undisclosed Liabilities
6.15 Books and Records
6.16 Employees
6.17 Labor Disputes
6.18 ERISA
6.19 No Finder
6.20 Interest in Business
6.21 Condition of Assets
6.22 Affiliate Transactions
6.23 Environmental Matters
6.24 Insurance
6.25 No Significant Items Excluded
6.26 No Material Adverse Change
6.27 Solvency
6.28 Securities Law Matters
6.29 Taxes
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6.30 Completeness and Accuracy
ARTICLE VII REPRESENTATIONS AND WARRANTIES OF PURCHASER
7.1 Organization, Good Standing, Power
7.2 Authorization of Agreement and Enforceability
7.3 No Violations; Consents
7.4 Legal Proceedings
7.5 Financial Capacity
7.6 No Finder
ARTICLE VIII COVENANTS OF SELLER PRIOR TO CLOSING DATE
8.1 Required Actions
8.1.1 Access to Information
8.1.2 Conduct of Business
8.1.3 Maintenance of Properties
8.1.4 Maintenance of Books and Records
8.1.5 Compliance with Applicable Law
8.1.6 Performance of Obligations
8.1.7 Approvals, Consents
8.1.8 Notice of Material Damage
8.1.9 Advise of Changes
8.1.10 Update Schedules
8.1.11 Pay Employees to Closing Date
8.1.12 Termination; WARN Act
8.1.13 Compliance with Agreement
8.2 Prohibited Actions
8.2.1 Sale of Purchased Assets
8.2.2 Business Changes
8.2.3 Incurrence of Material Obligations
8.2.4 Incurrence of Liens
8.2.5 Change in Employee Compensation and Benefits
8.2.6 Publicity; Advertisement
8.2.7 No Release
8.2.8 No Termination or Modification
8.3 No Merger, Etc.
ARTICLE IX COVENANTS OF PURCHASER PRIOR TO CLOSING DATE
9.1 Required Actions
9.1.1 Confidentiality
9.1.2 Advise of Changes
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9.1.3 Compliance with Agreement
9.2 Investigation
9.3 Approvals, Consents
ARTICLE X CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
10.1 Accuracy of Representations and Warranties
10.2 Performance of Agreement
10.3 Consents
10.4 Seller's Certificate
10.5 Secretary's Certificate
10.6 Injunction
10.7 Actions and Proceedings
10.8 Net Working Capital
10.9 Financing
10.10 Opinion of Counsel
10.11 Escrow Agreement
10.12 Non-Compete Agreement
10.13 Articles of Amendment
10.14 Nielson Employment Agreement
10.15 Welton Employment Agreement.
10.16 Sutlive Employment Agreement.
10.17 Arrangements with Employees
10.18 Hy-Tech Memo of Understanding
10.19 Appraisal Rights
10.20 Release
10.21 GMAC Loan
ARTICLE XI CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER
11.1 Accuracy of Representations and Warranties
11.2 Performance of Agreement
11.3 Consents
11.4 Purchaser's Certificate
11.5 Secretary's Certificate
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11.6 Injunction
11.7 Actions or Proceedings
11.8 Opinion of Counsel
ARTICLE XII OBLIGATIONS AFTER THE CLOSING DATE
12.1 Confidentiality
12.2 Final Net Working Capital
12.3 Transition of Employees
12.4 Further Assurances of Seller
12.5 Further Assurances of Purchaser
12.6 Accounts Receivable Payment
ARTICLE XIII TERMINATION
13.1 Termination of Agreement
13.2 Return of Documents
13.3 Limitations on Remedies
ARTICLE XIV SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
14.1 Survival of Representations and Warranties
14.2 Indemnification by Seller
14.3 Limitations on Seller's and Shareholders' Obligations to
Indemnify
14.4 Indemnification by Purchaser
14.5 Limitations on Purchaser's Obligation to Indemnify
14.6 Procedures for Indemnification
14.7 Payment of Indemnification Obligations
14.8 Interest on Unpaid Obligations
14.9 Set-Off
14.10 Other Remedies
ARTICLE XV GENERAL
15.1 Expenses
15.2 Press Releases and Public Announcements
15.3 Waivers
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15.4 Binding Effect; Benefits
15.5 Notices
15.6 Entire Agreement
15.7 Counterparts
15.8 Headings
15.9 Governing Law and Choice of Forum
15.10 Cooperation
15.11 Severability
15.12 Attorneys' Fees
15.13 Successors and Assigns
EXHIBIT A - Purchaser Note
EXHIBIT B - Bill Of Sale
EXHIBIT C - Assignment and Assumption Agreement
EXHIBIT D - Escrow Agreement
EXHIBIT E - Non-Compete Agreement
EXHIBIT F - Welton Employment Agreement
EXHIBIT G - Sutlive Employment Agreement
EXHIBIT H - Opinion of Barrett, Chapman & Ruta, P.A. EXHIBIT I - Press Release
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ASSET PURCHASE AGREEMENT
------------------------
ASSET PURCHASE AGREEMENT dated as of the 27th day of May 2004 by and
among CYBER-TEST, INC., a Delaware corporation ("PURCHASER"), CYBER-TEST, INC.,
a Florida corporation ("SELLER"), and the shareholders of Seller identified on
the signature pages of this Agreement (the "SHAREHOLDERS").
RECITALS:
This Agreement sets forth the terms and conditions upon which Purchaser
has agreed to purchase from Seller, and Seller has agreed to sell to Purchaser,
substantially all of the assets used by Seller in the conduct of its business.
In consideration of the mutual agreements, covenants, representations
and warranties contained herein, and in reliance thereon, Purchaser, Seller and
the Shareholders, intending to be legally bound, hereby agree as follows:
ARTICLE I.
CERTAIN DEFINITIONS
As used herein, the following terms shall have the following meanings:
1.1 "ACCOUNTS RECEIVABLE" shall mean as of any date all accounts
receivable associated with Seller's business as of such date in accordance with
GAAP consistently applied, other than from an Affiliate of Seller.
1.2 "ACCRUED EXPENSES" shall mean as of any date accrued payroll and
benefits and other accrued expenses as would appear on a balance sheet of
Seller's business as of such date prepared in accordance with GAAP consistently
applied, including those described in SCHEDULE 1.2, but excluding any amounts
payable to Affiliates of Seller and any compensation to Employees or others
contingent upon or payable as a result of the transactions contemplated hereby.
1.3 "ACT" shall mean Advanced Communications Technologies, Inc.
1.4 "AFFILIATE" shall mean any company or other entity which controls,
is controlled by or is under common control with the designated Party. For
purposes of the foregoing, ownership, directly or indirectly, of twenty percent
(20%) or more of the voting stock or other equity interest in a business shall
be deemed to constitute control.
1.5 "AGREEMENT" shall mean this Asset Purchase Agreement.
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1.6 "ANCILLARY AGREEMENTS" shall mean the documents referred to in
Sections 5.1.1, 5.1.2, 5.1.6, 5.1.7, 5.1.10 and 5.3.1.
1.7 "ARTICLES OF AMENDMENT" shall have the meaning given such term in
Section 3.5.2.
1.8 "ASSIGNMENT AND ASSUMPTION AGREEMENT" shall have the meaning given
to it in Section 5.1.2.
1.9 "ASSUMED LIABILITIES" shall have the meaning given to such term in
Section 4.2.
1.10 "BALANCE SHEETS" shall have the meaning given such term in Section
6.4.
1.11 "BALANCE SHEET DATE" shall have the meaning given such term in
Section 6.4.
1.12 "BILL OF SALE" shall have the meaning given to such term in
Section 5.1.1.
1.13 "BOOKS AND RECORDS" shall have the meaning given to it in Section
6.15.
1.14 CLOSING" shall have the meaning given to such term in Section 2.3.
1.15 "CLOSING BALANCE SHEET" means the balance sheet of Seller as at
11:59 p.m. EST on the day immediately preceding the Closing Date prepared by
Seller in accordance with GAAP reflecting the Purchased Assets and Assumed
Liabilities at Closing.
1.16 "CLOSING DATE" shall have the meaning given to such term in
Section 2.3.
1.17 "CLOSING DATE NET WORKING CAPITAL" shall mean the Net Working
Capital of Seller based on the Closing Balance Sheet.
1.18 "CLOSING INVENTORY" shall mean all Inventory of Seller on the
Closing Date.
1.19 "CODE" shall mean the Internal Revenue Code of 1986, as it may be
amended from time to time, and any successor thereto. Any reference herein to a
specific section or sections of the Code shall be deemed to include a reference
to any corresponding provision of future law.
1.20 "CONFIDENTIAL INFORMATION" shall have the meaning given to such
term in Section 12.1.
1.21 "EARN-OUT SHARES" shall have the meaning given such term in
Section 3.5.1.1.
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1.22 "EBIDTA" shall mean earnings before interest, depreciation, taxes
and amortization.
1.23 "EMPLOYEE" shall mean any individual employed by Seller as listed
on SCHEDULE 1.23 (such Schedule being subject to change between the date hereof
and the Closing Date as a result of employee changes in the ordinary course of
business consistent with past practices).
1.24 "ENCUMBRANCE" shall mean any claim, lien, pledge, option, charge,
easement, security interest, deed of trust, mortgage, right-of-way,
encroachment, building or use restriction, conditional sales agreement,
encumbrance or other right of third parties, whether voluntarily incurred or
arising by operation of law, and includes any agreement to give any of the
foregoing in the future, and any contingent sale or other title retention
agreement or lease in the nature thereof.
1.25 "ENVIRONMENTAL LAW" shall mean any federal (including, but not
limited to, the Clean Water Act, 33 U.S.C. Sections 1251 ET SEQ., the Toxic
Substances Control Act, 15 U.S.C. Sections 2601 ET SEQ., the Clean Air Act, 42
U.S.C. Sections 7401 ET SEQ., the Safe Drinking Water Act, 42 U.S.C. Sections
300f ET SEQ., the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Sections 9601 ET SEQ., the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901 ET SEQ., the River and Harbor Act, 33
U.S.C. Section 407, and the Occupational Safety and Health Act, 29 U.S.C.
Section 651 ET SEQ.), state or local statute, ordinance or promulgated rule or
regulation, any judicial or administrative order or judgment (whether or not by
consent), any duties imposed by common law and any provision or condition of any
permit, license or other operating authorization relating to (i) the protection
of the environment or the public welfare from actual or potential exposure (or
the effects of exposure) to any actual or potential release, discharge, disposal
or emission (whether past or present) of any Regulated Substance or (ii) the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of any Regulated Substance.
1.26 "ENVIRONMENTAL LOSSES" shall mean (i) all Losses imposed or
incurred under Environmental Law resulting from the storage or disposal or the
emission, discharge, release or threatened release into the environment, by any
Person of any Regulated Substance at the Leased Property at any time prior to
the Closing Date, (ii) all Losses resulting from the presence of any Regulated
Substance at any location other than the Leased Property at any time prior to
the Closing Date and (iii) all Losses resulting from the migration, leaking,
leaching, flowing, emitting or other movement of Regulated Substances from the
Leased Property or any such location at anytime prior to the Closing Date, in
each case requiring investigation, removal or remediation under Environmental
Law.
1.27 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
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1.28 "ERISA PLANS" shall mean defined benefit pension plans and defined
contribution pension plans qualified under Section 401(a) of the Code.
1.29 "ESCROW AGREEMENT" shall have the meaning given such term in
Section 5.1.6.
1.30 "EXCLUDED ASSETS" shall mean those assets that are not included in
the sale contemplated hereby and as are further defined in Section 2.2.
1.31 "FINAL NET WORKING CAPITAL" shall mean the Net Working Capital of
Seller on the Closing Date as determined by Purchaser after Closing in
accordance with Section 3.3.3.
1.32 "GAAP" shall mean, as of the applicable date, generally accepted
accounting principles in the United States of America, consistently applied.
1.33 "INDEMNIFIED LIABILITIES" shall mean, collectively, Seller's
Indemnified Liabilities and Purchaser's Indemnified Liabilities.
1.34 "INDEMNIFIED PARTY" shall mean either a Seller Indemnified Party
or a Purchaser Indemnified Party, as the context so requires.
1.35 "INVENTORY" shall mean the inventory of Seller, including raw
materials, supplies, work in process and finished goods.
1.36 "KNOWLEDGE" or "TO THE KNOWLEDGE" of a party (or similar phrases)
means to the extent of matters (i) which are actually known by such party or
(ii) which, based on facts of which such party is aware, would be known to a
reasonable Person in similar circumstances, and when used in the context of
Seller shall be deemed to include the knowledge of each of its executive
officers.
1.37 "LEASED PROPERTY" shall mean the real property leased by Seller
pursuant to leases set forth on SCHEDULE 2.1.2 hereto.
1.38 "LOSSES" shall mean all losses, costs, diminution in value,
claims, liabilities, fines, penalties, damages and expenses, including interest
which may be imposed in connection therewith and court costs and reasonable fees
and disbursements of counsel and consultants, but after taking into account any
insurance proceeds received by the party incurring the Losses (net of any
premium increases resulting therefrom), any net tax benefits to such party
resulting therefrom and any reserves on the books and records relating thereto.
1.39 "MATERIAL ADVERSE EFFECT" shall have the meaning given to such
term in Section 6.3.
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1.40 "NET WORKING CAPITAL" shall have the meaning given to such term in
Section 3.3.4.
1.41 "NET WORKING CAPITAL ADJUSTMENT" shall mean the Final Net Working
Capital less the Closing Date Net Working Capital.
1.42 "NET WORKING CAPITAL CERTIFICATE" shall have the meaning given to
such term in Section 3.3.3.
1.43 "NON-COMPETE AGREEMENT" shall have the meaning given to such term
in Section 5.1.7.
1.44 "PARTY" shall mean either Seller, a Shareholder, or Purchaser,
individually, as the context so requires, and the term "PARTIES" shall mean
Seller, the Shareholders and Purchaser together.
1.45 "PAYABLES" as of any date shall mean any of the accounts payable
and notes payable of Seller as of such date in accordance with GAAP consistently
applied, other than to an Affiliate of Seller.
1.46 "PERMITS" shall have the meaning given to such term in Section
6.11.
1.47 "PERMITTED ENCUMBRANCES" shall mean those Encumbrances as
specifically set forth on SCHEDULE 1.47 hereto.
1.48 "PERSON" shall mean any person or entity, whether an individual,
trustee, corporation, limited liability company, general partnership, limited
partnership, trust, unincorporated organization, business association, firm,
joint venture, governmental agency or authority or any similar entity.
1.49 "PREPAID EXPENSES" as of any date shall mean payments made by
Seller, other than to an Affiliate of Seller, which constitute prepaid expenses
of Seller in accordance with GAAP consistently applied.
1.50 "PRODUCTS" shall mean any of the products manufactured, marketed,
and/or sold by Seller as of the Closing Date.
1.51 "PROPRIETARY RIGHTS" shall have the meaning given to such term in
Section 6.9.1.
1.52 "PURCHASE PRICE" shall have the meaning given to such term in
Section 3.1.
1.53 "PURCHASED ASSETS" shall have the meaning given to such term in
Section 2.1.
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1.54 "PURCHASER" shall have the meaning given to such term in the
preamble of this Agreement.
1.55 "PURCHASER GENERAL LIABILITIES" shall have the meaning given to
such term in Section 14.4.
1.56 "PURCHASER INDEMNIFIED PARTY" shall have the meaning given to such
term in Section 14.2.
1.57 "PURCHASER NOTE" shall have the meaning given to such term in
Section 3.1.1.2.
1.58 "REGULATED SUBSTANCE" shall mean any substance that is identified
(by listing or characteristic) and regulated (or the clean-up of which can be
required) by any federal, state or local law or regulation intended to protect
the environment or the public health or welfare, including, but not limited to,
the statutes, ordinances or regulations relating to clean air, clean water,
hazardous and solid waste disposal, safe drinking water, endangered species,
occupational safety and health, oil spill prevention, groundwater protection and
toxic substances control, among others.
1.59 "SELLER" shall have the meaning given to such term in the preamble
of this Agreement.
1.60 "SELLER GENERAL LIABILITIES" shall have the meaning given to such
term in Section 14.2.
1.61 "SELLER INDEMNIFIED PARTY" shall have the meaning given to such
term in Section 14.4.
1.62 "SHAREHOLDER" shall have the meaning given to such term in the
preamble of this Agreement.
1.63 "SUTLIVE" shall have the meaning given to such term in Section
4.3.2
1.64 "SUTLIVE EMPLOYMENT AGREEMENT" shall have the meaning given to
such term in Section 5.3.2
1.65 "TARGET NET WORKING CAPITAL" shall mean the Net Working Capital of
Seller in the amount of $1,122,000.00.
1.66 "TAXES" shall mean all taxes, duties, charges, fees, levies or
other assessments imposed by any taxing authority, including, without
limitation, income, gross receipts, value -added, excise, withholding, personal
property, real estate, sale, use, ad valorem, license, lease, service,
severance, stamp, transfer, payroll, employment, customs, duties, alternative,
add-on, minimum, estimated and franchise taxes (including any interest,
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penalties or additions attributable to or imposed on or with respect to any such
assessment).
1.67 "WARN ACT" shall mean the Worker Adjustment and Retraining
Notification Act, 29 U.S.C. Sections 1201 ET SEQ.
1.68 "WELTON" shall have the meaning given to such term in Section
4.3.1.
1.69 "WELTON EMPLOYMENT AGREEMENT" shall have the meaning given to such
term in Section 5.3.1.
1.70 USAGE.
1.70.1 INTERPRETATION. In this Agreement, unless a clear contrary
intention appears:
(i) the singular number includes the plural number and
vice versa;
(ii) reference to any Person includes such Person's
successors and assigns but, if applicable, only if such successors and assigns
are not prohibited by this Agreement, and reference to a Person in a particular
capacity excludes such Person in any other capacity or individually;
(iii) reference to any gender includes each other gender;
(iv) reference to any agreement, document or instrument
means such agreement, document or instrument as amended or modified and in
effect from time to time in accordance with the terms thereof;
(v) reference to any legal requirement means such legal
requirement as amended, modified, codified, replaced or reenacted, in whole or
in part, and in effect from time to time, including rules and regulations
promulgated thereunder, and reference to any section or other provision of any
legal requirement means that provision of such legal requirement from time to
time in effect and constituting the substantive amendment, modification,
codification, replacement or reenactment of such section or other provision;
(vi) "hereunder," "hereof," "hereto," and words of similar
import shall be deemed referenced to this Agreement as a whole and not to any
particular Article Section or other provision hereof, unless otherwise
stipulated;
(vii) "including" (and with correlative meaning "include")
means including without limiting the generality of any description preceding
such term;
(viii)"or" is used in the inclusive sense of "and/or";
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(ix) with respect to the determination of any period of
time, "from" means "from and including" and "to" means "to but excluding"; and
(x) references to documents, instruments or agreements
shall be deemed to refer as well to all addenda, exhibits, schedules or
amendments thereto.
1.70.2 ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted and all
accounting determinations hereunder shall be made in accordance with GAAP.
1.70.3 LEGAL REPRESENTATION OF THE PARTIES. This Agreement was
negotiated by the parties with the benefit of legal representation, and any rule
of construction or interpretation otherwise requiring this Agreement to be
construed or interpreted against any party shall not apply to any construction
or interpretation hereof.
ARTICLE II.
TRANSFER OF ASSETS AND PROPERTIES; CLOSING
2.1 PURCHASED ASSETS. Subject to the terms and conditions of this
Agreement, and based upon the representations and warranties contained in this
Agreement, at the Closing, Seller shall sell and convey to Purchaser, free and
clear of all Encumbrances (other than Permitted Encumbrances), and Purchaser
shall purchase from Seller, all of Seller's right, title and interest in and to
the assets, properties and rights of every kind and description, real, personal
and mixed, tangible and intangible, wherever situated which are used or useful
in the conduct of Seller's business (the "PURCHASED ASSETS"), including, without
limitation, the following:
2.1.1 all machinery, equipment, leasehold improvements, trucks,
automobiles, supplies, materials, office furniture and office equipment,
computing and telecommunications equipment and other items of personal property
that are owned or leased by Seller and used in connection with Seller's
business, wherever located;
2.1.2 all of the leases and agreements identified in SCHEDULE
2.1.2 hereto;
2.1.3 all customer lists, sales data, catalogs, brochures,
suppliers, names, mailing lists, art work, photographs and advertising material
that relate to Seller's business, whether in electronic form or otherwise;
2.1.4 all governmental permits, licenses, registrations, orders
and approvals relating to Seller's business, including those listed in SCHEDULE
2.1.4 hereto, to the extent such permits, licenses, registrations, orders and
approvals are transferable to Purchaser;
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2.1.5 all trade secrets, secret processes and procedures,
engineering, production, assembly, design, installation, other technical
drawings and specifications, working notes and memos, market studies,
consultants' reports, technical and laboratory data, competitive samples,
engineering prototypes, and all similar property of any nature, tangible or
intangible, of Seller relating to its business;
2.1.6 all patents, trademarks, trademark registrations, trade
names, service marks, copyrights and copyright registrations including, without
limitation, those described in SCHEDULE 2.1.6;
2.1.7 all other records of Seller, including property records and
copies of personnel records of Employees who become employees of Purchaser;
2.1.8 all right, title and interest of Seller in and to the
goodwill incident to its business;
2.1.9 all Closing Inventory;
2.1.10 all Accounts Receivable existing on the Closing Date;
2.1.11 all deposits and prepaid expenses, claims for refunds and
rights to offset of, or for the benefit of, Seller's business on the Closing
Date;
2.1.12 any insurance policies maintained by Seller with respect
to its business;
2.1.13 All accounts receivable from Affiliates of Seller existing
on the Closing Date;
2.1.14 cash and cash equivalents on hand or in bank accounts and
all short-term investments;
2.1.15 assets constituting any pension or other funds for the
benefit of Employees;
2.1.16 all computer applications software, owned or licensed,
whether for general business usage (e.g., accounting, word processing, graphics,
spreadsheet analysis, etc.) or specific, unique-to-the-business usage (e.g.,
order processing, manufacturing, process control, shipping, etc.) and all
computer operating, security or programming software, owned or licensed by
Seller; and
2.1.17 all other assets (including all causes of action, rights
of action, contract rights and warranty and product liability claims against
third parties, all telephone numbers, telecopier numbers, websites, domain
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names, and email addresses) relating to the Purchased Assets or Seller's
business, regardless of whether any value is ascribed thereto in Seller's
financial statements.
Notwithstanding the foregoing provisions of this Section 2.1, the transfer of
the Purchased Assets pursuant to this Agreement shall not include the assumption
of any liability or obligation related to the Purchased Assets, unless such
liability or obligation is expressly included in the Assumed Liabilities.
2.2 EXCLUDED ASSETS. Notwithstanding Section 2.1, the following assets
of Seller (collectively, the "EXCLUDED ASSETS") shall be excluded from this
Agreement, and shall not be assigned or transferred to Purchaser:
2.2.1 the consideration paid to Seller pursuant to this
Agreement;
2.2.2 corporate minute books, stock books and corporate seals;
2.2.3 any shares of capital stock of Seller held in treasury;
2.2.4 any shares of capital stock of any other Person owned by
Seller;
2.2.5 any claims and rights against third parties (including,
without limitation, insurance carriers), to the extent they relate to
liabilities or obligations that are not assumed by Purchaser hereunder (except
to the extent Purchaser shall have incurred costs and expenses with respect to
such claims and rights);
2.2.6 claims for refunds of Taxes and other governmental charges
to the extent such refunds relate to periods ending on or prior to the Closing
Date;
2.2.7 all Books and Records that Seller is required by law to
retain in its possession;
2.2.8 assets listed on SCHEDULE 2.2.8; and
2.2.9 all rights of Seller under this Agreement and the Ancillary
Agreements.
2.3 CLOSING; EFFECTIVE TIME. Subject to the satisfaction or waiver, if
permissible, of the conditions set forth in Articles X and XI, the closing of
the transactions contemplated by this Agreement (the "CLOSING") shall take place
at the offices of Eckert Seamans Cherin & Mellott, LLC, 1515 Market Street, 9th
Floor, Philadelphia, PA 19102, on June 1, 2004, or on such other date as may be
agreed upon by Purchaser and Seller (the "CLOSING DATE"). The parties agree that
the Closing can be accomplished via overnight delivery of executed documents by
representatives of Seller, together with other procedural safeguards. The
conveyance of the Purchased Assets shall be effective as of 7:00 a.m. local
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time, at the respective locations of such Purchased Assets, on the Closing Date
(the "EFFECTIVE TIME").
ARTICLE III.
PURCHASE PRICE
3.1 PURCHASE PRICE. Subject to any adjustments pursuant to Section 3.3,
as and for the purchase price for the Purchased Assets (the "PURCHASE PRICE"):
3.1.1 Purchaser shall pay and deliver to Seller the following at
the Closing:
3.1.1.1 The sum of Three Million Dollars ($3,000,000.00)
in immediately available funds, by wire transfer to Seller's designated bank
account; and
3.1.1.2 A senior unsecured 6% promissory note of Purchaser
in the original principal amount of Five Hundred Thousand Dollars ($500,000.00)
substantially in the form of EXHIBIT "A" hereto (the "PURCHASER NOTE").
3.1.2 Purchaser shall issue and deliver to Seller 50,000,000
shares of restricted common stock of ACT (priced at $.01 per share or $500,000
in the aggregate) in accordance with Section 3.5, provided that the conditions
set forth in Section 3.5.1 are satisfied.
3.2 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be allocated
in accordance with SCHEDULE 3.2. After the Closing, the parties shall make
consistent use of the allocation, fair market value and useful lives specified
in SCHEDULE 3.2 for all Tax purposes and in all filings, declarations, and
reports with the Internal Revenue Service, including reports required to be
filed under Section 1060 of the Code. Purchaser shall prepare and deliver IRS
Form 8594 to Seller within forty-five (45) days after the Closing to be filed
with the Internal Revenue Service. Seller shall have ten (10) business days upon
receipt of the IRS Form 8594 to confirm the accuracy of the allocation before
the form is submitted to the IRS. In any proceeding related to the determination
of any Tax, neither Purchaser nor Seller shall contend or represent that such
allocation is not a correct allocation.
3.3 CERTAIN PRICE ADJUSTMENTS.
3.3.1 On the Closing Date, Seller shall deliver to Purchaser a
Closing Balance Sheet and a certificate setting forth the Closing Date Net
Working Capital, which shall in no event be less than $750,000.00.
3.3.2 In the event the Closing Date Net Working Capital is less
than the Target Net Working Capital, the cash portion of the Purchase Price
shall be decreased dollar-for-dollar by the amount of the difference. In the
event the Closing Date Net Working Capital is greater than the Target Net
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Working Capital, the original principal amount of the Purchaser Note shall be
increased by such amount.
3.3.3 As soon as practicable following the Closing Date, but not
later than sixty (60) days thereafter, Purchaser shall review the Closing
Balance Sheet and the Closing Date Net Working Capital, shall prepare or cause
to be prepared, and shall submit to Seller a certificate (the "NET WORKING
CAPITAL CERTIFICATE") setting forth (i) the Final Net Working Capital and (ii)
the Net Working Capital Adjustment, if any. In the event there is a Net Working
Capital Adjustment, Purchaser and Seller shall immediately execute an amendment
to the Purchaser Note (i) decreasing the original principal amount thereof, if
the Net Working Capital Adjustment is negative, or (ii) increasing the original
principal amount thereof, if the Net Working Capital Adjustment is positive. In
either event, accrued interest on the principal amount of the Purchaser Note
shall be adjusted accordingly.
3.3.4 For purposes of this Agreement, "NET WORKING CAPITAL" as of
any date shall be deemed to be the aggregate dollar value determined in
accordance with GAAP represented by: (i) cash and cash equivalents, (ii)
Accounts Receivable (net of an allowance for bad debts determined in accordance
with GAAP), (iii) Inventory and (iv) Prepaid Expenses, less (y) Payables and (z)
Accrued Expenses.
3.3.5 In the event Seller does not agree with the Final Net
Working Capital and the Net Working Capital Adjustment, within five (5) days
after delivery of the Net Working Capital Certificate, the Parties shall (i)
retain as arbitrator an independent accounting firm as may be mutually agreed
upon by the Parties to review such matters as to which written agreement has not
be reached and (ii) request such arbitrator to act as promptly as practicable in
accordance with its own rules to resolve all such disputed matters within ten
(10) days after being retained by the Parties. Upon resolution by such
arbitrator to its satisfaction of all such disputed matters, such arbitrator
shall cause to be prepared and shall deliver to the Parties a certificate
setting forth the amount of Net Working Capital as of the Closing Date. The
decision of such arbitrator shall be final, non-appealable and binding on Seller
and Purchaser, and the fees and expenses, if any, of such arbitrator shall be
paid in full by the non-prevailing Party. Seller and Purchaser hereby stipulate
to the value of the inventory and receivables set forth on SCHEDULE 3.3.5
hereto.
3.4 TRANSFER TAXES. Each of Purchaser and Seller shall bear and be
responsible for the payment of one half of all Taxes (excluding Taxes based on
or measured by income) that are or may be imposed by any government or political
subdivision thereof and that are payable or arise as a result of this transfer
of the Purchased Assets, notwithstanding the Party upon which such Taxes are
actually imposed. Purchaser shall furnish to Seller properly completed sales tax
resale exemption certificates for any Taxes from which Purchaser claims to be
exempt as provided in Rule 12A-1.038, Florida Administrative Code or related
statutory provisions.
3.5 RELATED MATTERS.
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3.5.1 EARN-OUT
3.5.1.1 EARN-OUT SHARES. On June 30 of each year during the
three (3) year period commencing July 1, 2004 and ending June 30, 2007, Seller
shall have the right to receive 16,666,667 shares of ACT's common stock at a
price per share of $.01 (the "EARN-OUT SHARES"), provided that Purchaser
achieves the Milestones (as defined below) during such year. In the event that
Purchaser does not achieve the Milestones during any year, the Earn-Out Shares
for such year shall be forfeited and, except as provided below, Seller shall
have no right to re-earn such Earn-Out Shares in a future year; provided further
that such number of Earn-Out Shares shall be adjusted accordingly for
stock-splits, reverse stock-splits and other recapitalizations effected by ACT.
Notwithstanding the foregoing, in the event the Milestones are not achieved in a
given year, the board of directors of ACT shall have the right in its sole and
absolute discretion, to grant to Seller all or a portion of the Earn-Out Shares
that could have been earned during such year.
For purposes hereof, "MILESTONES" shall mean the following revenue and
EBIDTA goals of Purchaser for the applicable year:
FISCAL YEAR END REVENUES EBIDTA
--------------- -------- ------
June 30, 2005 $ 6,600,000 $ 500,000
June 30, 2006 $ 8,600,000 $ 860,000
June 30, 2007 $ 11,600,000 $1,400,000
That Parties agree that Purchaser shall be a stand alone entity for
purposes of calculating EBIDTA and that extraordinary expenses of any Affiliate
of Purchaser shall not be considered in calculating EBIDTA. Notwithstanding the
foregoing, extraordinary expenses of Purchaser for compliance with Section 404
of the Sarbanes-Oxley Act of 2002, in an amount not to exceed $25,000, shall not
be considered for purposes of calculating EBIDTA for the 12-month period ending
June 30, 2005. Moreover, neither the repayment of the Purchaser Note nor any
interest or expenses incurred by Purchaser in connection with the Purchase Price
shall be included in the calculation of EBIDTA for purposes of determining
whether the Milestones have been met.
3.5.1.2 WELTON EMPLOYMENT. In the event that Welton's
employment with Purchaser or any of its Affiliates is terminated for any reason
other than (i) by the Company without "cause" (as defined in the Welton
Employment Agreement) or (ii) due to Welton's death or disability (as provided
in the Welton Employment Agreement) prior to the expiration of the initial
Employment Period (as defined in the Welton Employment Agreement), all of the
Earn-Out Shares shall be forfeited by Seller in their entirety, and Purchaser
and its Affiliates shall have no further obligations to Seller with respect to
the Earn-Out Shares. In the event Welton's employment with Purchaser and its
Affiliates is terminated (i) by Purchaser and its Affiliates without "cause" or
(ii) due to Welton's death or disability prior to the expiration of the initial
Employment Period, Seller shall be permitted to retain solely those Earn-Out
Shares previously earned by Seller and placed in escrow up to and including the
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fiscal year of Purchaser immediately preceding the year of termination of
Welton's employment with Purchaser and its Affiliates. In no event shall Seller
have the right to receive any Earn-Out Shares for the fiscal year during, or any
fiscal year after, which Welton's employment with Purchaser and its Affiliates
is terminated.
3.5.1.3 ESCROW. Upon earning the Earn-Out Shares, if
applicable, the Earn-Out Shares shall be placed in escrow with a mutually
agreeable escrow agent, to be held by the escrow agent and released in
accordance with the terms of the Escrow Agreement. Upon release from escrow, the
Earn-Out Shares shall have piggyback registration rights, subject to customary
underwriters' cutbacks.
3.5.2 USE OF NAME. Immediately following the Closing, Seller
shall cause an amendment to its Articles of Incorporation to be filed with the
Secretary of State of the State of Florida (the "ARTICLES OF AMENDMENT"),
changing Seller's name to a name bearing no resemblance to "Cyber-Test, Inc." At
Closing, Seller shall deliver to Purchaser a duplicate original of such
amendment, duly executed and suitable for filing. After the Closing, neither
Seller nor any Shareholder shall use, or permit any of its or their Affiliates
to use, the name "Cyber-Test, Inc." or any variant or derivative thereof. Seller
shall execute and deliver to Purchaser, at or before the Closing, all consents
requested by Purchaser to enable it to use the name "Cyber-Test" and will
otherwise cooperate with Purchaser in connection therewith.
3.5.3 NON-COMPETE. At Closing, each of Seller and each
Shareholder shall deliver an executed counterpart to the Non-Compete Agreement.
ARTICLE IV.
ASSUMPTION OF LIABILITIES; EMPLOYEE MATTERS
4.1 GENERAL LIMITATION ON ASSUMPTION OF LIABILITIES. Except for
Permitted Encumbrances and as otherwise provided in Sections 4.2 and 4.4 below,
Seller shall transfer the Purchased Assets to Purchaser free and clear of all
Encumbrances, and without any assumption of liabilities and obligations, and
Purchaser shall not, by virtue of its purchase of the Purchased Assets or
otherwise, assume or become responsible for any liabilities or obligations of
Seller or any other Person. For purposes of this Section 4.1, the phrase
"liabilities and obligations" shall include, without limitation, any direct or
indirect indebtedness, guaranty, endorsement, claim, loss, damage, deficiency,
cost, expense, obligation or responsibility, fixed or unfixed, known or unknown,
asserted or unasserted, choate or inchoate, liquidated or unliquidated, secured
or unsecured.
4.2 ASSUMED LIABILITIES AND OBLIGATIONS. Subject to the other
provisions hereof, on the Closing Date, Purchaser shall assume and thereafter
discharge the following, and only the following, liabilities and obligations,
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excluding any liabilities and obligations to Affiliates of Seller (collectively,
the "ASSUMED LIABILITIES"):
4.2.1 all obligations of Seller accruing subsequent to the
Closing Date under the contracts, leases, agreements, orders, guarantees and
commitments identified in SCHEDULE 2.1.2; PROVIDED that the rights thereunder
have been duly and effectively assigned to Purchaser; PROVIDED FURTHER, that
Purchaser shall not assume or discharge any obligation relating to a breach of
the terms of a contract, lease, agreement, order, guarantee or commitment caused
by the assignment thereof to Purchaser at the Closing;
4.2.2 all obligations of Seller accruing after the Closing Date
under the permits and licenses identified in SCHEDULE 2.1.4; PROVIDED that the
rights thereunder have been duly and effectively assigned to Purchaser;
4.2.3 the Payables and Accrued Expenses reflected on the books of
Seller at the Closing Date and included in the calculation of the Net Working
Capital pursuant to Section 3.3.4 hereof; and
4.2.4 service obligations and express warranty obligations of
Seller to repair or replace defective goods sold by Seller under the terms of
any written contract, commitment or sale transaction entered into in the
ordinary course of business relating to products shipped not more than ninety
(90) days prior to the Closing Date; PROVIDED, that Purchaser assumes no
obligation of Seller for incidental or consequential damages or for any personal
injury, or for intellectual property infringement, the sole warranty obligation
of Purchaser assumed hereunder being the obligation to repair or replace
defective goods.
Except for the obligations expressly assumed by Purchaser pursuant to the
foregoing provisions of this Section 4.2, it is understood and agreed that
Purchaser does not and will not assume or become obligated to pay or perform
with respect to third parties any debts, liabilities, contracts or other
obligations of Seller or its Affiliates, whether now existing or hereafter
arising, for which Seller or any of its Affiliates is or may become liable
however arising, including, without limitation, obligations arising pursuant to
the law of contracts, tort, strict liability or other applicable laws, rules,
regulations, or ordinances.
4.3 OFFER OF EMPLOYMENT.
4.3.1 At Closing, Lisa Welton ("WELTON") shall be required to
execute and deliver an employment agreement to serve, for an initial term of
three (3) years, as Executive Vice President of Encompass Group Affiliates,
Inc., President and Chief Executive Officer of Purchaser, and such other
executive and/or board positions of ACT or its respective subsidiaries, as may
be determined by mutual agreement by Welton and ACT, in accordance with the
terms of the Welton Employment Agreement. Prior to Closing, Seller shall release
Welton from any obligations under her employment agreement with Seller, or at
law. At Closing, Seller shall waive any and all rights with respect to Welton
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employment, or the termination of Welton's employment, including, without
limitation, any restriction on her employment or her activities.
4.3.2 At closing, Tom Sutlive ("SUTLIVE") shall be required to
execute and deliver an employment agreement to serve, for an initial term of
three (3) years, in executive and/or board positions of Purchaser or its
Affiliates, in accordance with the terms of the Sutlive Employment Agreement.
Prior to Closing, Seller shall release Sutlive from any obligations under his
employment agreement with Seller, or at law. At Closing, Seller shall waive any
and all rights with respect to Sutlive's employment, or the termination of
Sutlive's employment, including, without limitation, any restriction on his
employment or his activities.
4.3.3 Purchaser shall have the right, but shall not be obligated,
to offer employment to such other employees of Seller, as Purchaser deems
appropriate in its sole discretion.
4.4 VACATION LIABILITY. Purchaser shall assume liability for the
vacation entitlement that each Employee who becomes an employee of Purchaser has
accrued as of the Closing Date. Purchaser shall pay each such Employee's wages
or salary during his or her vacation entitlement from Purchaser, when taken.
4.5 OTHER EMPLOYEE BENEFITS. Seller agrees that, with respect to claims
for workers' compensation and all claims under Seller's employee benefit
programs by persons working for Seller arising out of events occurring prior to
the Closing, whether reported or unreported as of the Closing and whether
insured or uninsured (including, but not limited to, workers' compensation, life
insurance, medical and disability programs), Seller shall, at its own expense,
honor or cause its insurance carriers to honor such claims in accordance with
the terms and conditions of such programs or applicable workers' compensation
statutes. Without limiting the scope of the preceding sentence, Seller shall be
responsible for any and all claims and liabilities arising out of or relating to
(i) its employment of the Employees, (ii) the termination by Seller of such the
employment of any such Employee and (iii) the provision of any employee benefits
to such Employees (and their beneficiaries and eligible dependents) attributable
to their employment with, or their participation in any plans or programs
maintained or contributed to by, Seller or any of its Affiliates.
ARTICLE V.
CLOSING
5.1 DELIVERIES BY SELLER. At the Closing, Seller and each Shareholder,
as applicable, shall execute and deliver the following instruments:
5.1.1 a general bill of sale substantially in the form of EXHIBIT
"B" hereto (the "BILL OF SALE"), transferring to Purchaser good and indefeasible
title to all of the tangible personal property included in the Purchased Assets,
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subject only to Permitted Encumbrances and the Assumed Liabilities;
5.1.2 an instrument of assignment and assumption substantially in
the form of EXHIBIT "C" hereto (the "ASSIGNMENT AND ASSUMPTION AGREEMENT"),
assigning to Purchaser all of Seller's right, title and interest in each of the
contracts, leases, licenses and other agreements included in the Purchased
Assets, together with all consents of third parties that are required to make
each such assignment effective as to such third parties;
5.1.3 Seller's Certificate referred to in Section 10.4 hereof;
5.1.4 the Secretary's Certificate referred to in Section 10.5
hereof;
5.1.5 executed consents referred to in Section 10.3 hereof;
5.1.6 an executed counterpart to an escrow agreement in
substantially the form of EXHIBIT "D" hereto (the "ESCROW AGREEMENT");
5.1.7 an executed counterpart to a non-compete agreement in
substantially the form of EXHIBIT "E" hereto (the "NON-COMPETE AGREEMENT");
5.1.8 the Articles of Amendment;
5.1.9 Such additional instruments of conveyance and transfer as
Purchaser may reasonably require in order to more effectively vest in it, and
put it in possession of, the Purchased Assets.
5.2 DELIVERIES BY PURCHASER. At the Closing, Purchaser shall deliver
the following to Seller:
5.2.1 the cash portion of the Purchase Price required by Section
3.1.1;
5.2.2 the Purchaser Note; and
5.2.3 the Assignment and Assumption Agreement.
5.3 OTHER DELIVERIES. At the Closing,
5.3.1 Welton shall deliver to Purchaser an executed counterpart
of an employment agreement in substantially the form of EXHIBIT "F" hereto (the
"WELTON EMPLOYMENT AGREEMENT").
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5.3.2 Sutlive shall deliver to Purchaser an executed counterpart
of an employment agreement in substantially the form of EXHIBIT "G" hereto (the
"SUTLIVE EMPLOYMENT AGREEMENT").
5.4 DELIVERY OF POSSESSION. Prior to the Closing Date, Seller shall
take such actions as may be necessary or appropriate so that on the Closing
Date, Purchaser shall be placed in actual possession and control of all of the
Purchased Assets.
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF SELLER
AND THE SHAREHOLDERS
To induce Purchaser to enter into this Agreement, Seller and the
Shareholders hereby jointly and severally make, as of the date hereof and as of
the Closing Date, the following representations and warranties to Purchaser,
except as otherwise set forth in written disclosure schedules (the "SCHEDULES")
delivered to Purchaser on or prior to the date hereof, a copy of which is
attached hereto. The Schedules are numbered to correspond to the various
sections of this Article VI setting forth certain exceptions to the
representations and warranties contained in this Article VI and certain other
information required by this Agreement. Unless otherwise specified, no
disclosure made in any particular Schedule shall be deemed made in any other
Schedule unless expressly made therein.
6.1 ORGANIZATION, GOOD STANDING AND POWER. Seller is a corporation duly
organized, validly existing an in good standing under the laws of the State of
Florida, and has all requisite corporate power and authority to own and lease
the Purchased Assets and to carry on its business, to own or use the properties
and assets that it purports to own and use, to perform all its obligations under
contracts to which it is, or may become, a party, to execute and deliver this
Agreement and the Ancillary Agreements, to consummate the transactions
contemplated hereby and thereby and to perform all the terms and conditions
hereof and thereof to be performed by it. Seller is duly qualified to do
business as a foreign corporation and is in good standing under the laws of each
state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted by it,
requires such qualification. SCHEDULE 6.1 contains a complete and accurate list
of jurisdictions in which Seller is required to be qualified, and/or is
qualified, to do business as a foreign corporation. Seller has no subsidiaries
and does not own any shares of capital stock or other securities of any Person.
6.2 ENFORCEABILITY AND AUTHORIZATION OF AGREEMENT . This Agreement
constitutes, and the Ancillary Agreements to which Seller and each Shareholder
is a party, upon Seller's and each Shareholder's execution and delivery thereof,
will constitute, the legal, valid and binding obligations of Seller and each
Shareholder, enforceable against each of them in accordance with their
respective terms. Seller has the absolute and unrestricted right, power and
authority to execute and deliver this Agreement and each Ancillary Agreement to
which is it a party; and Seller has taken all necessary corporate action to
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authorize the execution and delivery of this Agreement and the Ancillary
Agreements, the performance by it of all terms and conditions hereof and thereof
to be performed by it and the consummation of the transactions contemplated
hereby and thereby. Each Shareholder has all necessary legal capacity to enter
into this Agreement and the Ancillary Documents to which they are a party and to
perform his or her obligations hereunder and thereunder. There are no
shareholders of Seller, other than the Shareholders, and the Shareholders have
waived any and all appraisal rights they may have under Florida law.
6.3 NO VIOLATION; CONSENTS. The execution, delivery and performance by
Seller of this Agreement and the Ancillary Agreements, and the consummation of
the transactions contemplated hereby and thereby will not (with or without the
giving of notice or the lapse of time, or both) (i) violate any provision of the
articles of incorporation, as amended, or bylaws of Seller or resolutions of
Seller's board of directors or shareholders, (ii) cause Purchaser to become
subject to, or become liable for the payment of any Tax, (iii) violate, require
any consent, authorization or approval of, or exemption by, or filing under any
provision of any law, statute, rule or regulation to which Seller, its business
or the Purchased Assets are subject, (iv) violate any judgment, order, writ or
decree of any court applicable to Seller, its business or the Purchased Assets,
(v) conflict with, result in a breach of, constitute a default under, or
accelerate or permit the acceleration of the performance required by, or require
any consent, authorization or approval under any contract, agreement or
instrument to which Seller is a party or any of the Purchased Assets is bound or
(vi) result in the creation or imposition of any Encumbrance upon the Purchased
Assets, which violation, conflict, breach, default, acceleration or Encumbrance,
or the failure to make or obtain such filing, consent, authorization or
approval, with respect to the matters specified in clauses (iii) through (vi)
could, individually or in the aggregate, reasonably be expected to have a
material adverse effect on the condition (financial or other), business,
earnings or prospects of Seller or owning of the Purchased Assets (a "MATERIAL
ADVERSE EFFECT") or prevent or delay the consummation of the transactions
contemplated by this Agreement. Neither Seller nor any Shareholder is required
to give any notice to or obtain any consent from any Person in connection with
the execution or the consummation or performance of any of the transactions
contemplated hereby.
6.4 FINANCIAL STATEMENTS. Seller has delivered to Purchaser true and
complete copies of (i) the balance sheets of Seller's business at December 31,
2003 (the "DECEMBER BALANCE SHEET"), 2002 and 2001 and the related statements of
income and cash flows for the years then ended, certified by Chatham, Seland &
Lashley, P.A., independent public accountants; and (ii) unaudited balance sheets
of Seller at March 31, 2004 (the "MARCH BALANCE SHEET" and together with the
December Balance Sheet, the "BALANCE SHEETS") and 2002 and related statements of
income and cash flows for the periods then ended. True and correct copies of
such financial statements are attached hereto as SCHEDULE 6.4. The foregoing
financial statements have been, and the Closing Balance Sheet will be, prepared
in accordance with GAAP consistently applied throughout the periods involved
except as may be noted therein. Such financial statements, including the related
notes, fairly present, and the Closing Balance Sheet will fairly present, the
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financial position of Seller's business at the dates indicated and the results
of operations and cash flows of Seller's business for the periods then ended in
accordance with GAAP. References in this Agreement to the "BALANCE SHEET DATE"
shall be deemed to refer to December 31, 2003.
6.5 ACCOUNTS RECEIVABLE. All Accounts Receivable as set forth on the
Balance Sheets and the Closing Balance Sheet (i) have or will have arisen only
in the ordinary course of business consistent with past practice for goods sold
and delivered or services performed and (ii) are or will be collectible in full
at the recorded amounts thereof (subject to no defenses, setoffs or
counterclaims) in the ordinary course of business (without resort to litigation
or assignment to a collection agency) no later than ninety (90) days after the
Closing Date, net of any allowance for bad debts reflected on the Balance
Sheets.
6.6 INVENTORY. The Inventory as set forth on the Balance Sheets and the
Closing Balance Sheet was or will be acquired and maintained in accordance with
the regular business practices of Seller's business, consists or will consist of
new, defective and unused items of a quality and quantity useable or saleable in
the ordinary course of business consistent with past practice, and is or will be
valued in accordance with GAAP consistently applied and, with respect to
Inventory intended for sale, was or will be saleable at prices at least equal to
the value thereof on the books of Seller. Seller is not in possession of any
inventory not owned by Seller, including goods already sold.
6.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the Balance Sheet Date,
in its conduct of its business, Seller has not:
6.7.1 amended in any material respect or terminated any contract
other than in the ordinary course of its business consistent with past practice;
6.7.2 suffered the occurrence of any events that, individually or
in the aggregate, have had, or could reasonably be expected to have, a Material
Adverse Effect;
6.7.3 incurred any damage or destruction having a Material
Adverse Effect by fire, storm, or similar casualty, whether or not covered by
insurance;
6.7.4 sold, transferred, replaced or leased any of the Purchased
Assets or sold any Inventory at a discount, except for transactions in the
ordinary course of its business consistent with past practice;
6.7.5 waived or released any material rights with respect to the
Purchased Assets or its business;
6.7.6 transferred or granted any rights to any Proprietary
Rights;
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6.7.7 entered into any transaction or made any commitments (for
capital expenditures or otherwise) other than in the ordinary course of its
business consistent with past practice;
6.7.8 changed its methods of accounting;
6.7.9 increased the compensation of Employees, except following
normal review procedures or as reasonably deemed necessary in the ordinary
course of its business consistent with past practice; or
6.7.10 materially altered its conduct in its relations with
suppliers or customers.
6.8 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES. Seller owns
and will transfer to Purchaser at the Closing good, marketable and indefeasible
title to all of the Purchased Assets, free and clear of all Encumbrances, other
than Permitted Encumbrances. Each of the leases covering real property is in
full force and effect and constitutes the legal, valid and binding obligation of
the lessor thereunder, enforceable in accordance with its terms.
6.9 PROPRIETARY RIGHTS.
6.9.1 SCHEDULE 2.1.6 hereto sets forth a correct and complete
list of all patents, logos, trademarks, trade names, service marks and
applications or registrations therefor used in and material to Seller's
business, and SCHEDULE 6.9 sets forth a correct list of all inventions,
intellectual property and trade secret assets used in and material to Seller's
business (collectively, the "PROPRIETARY RIGHTS").
6.9.2 Seller owns or possesses adequate licenses or other valid
right, title and intent to use (without the making of any payment to others or
the obligation or grant rights to others in exchange) all the Proprietary Rights
free and clear of all Encumbrances. The Proprietary Rights included in the
Purchased Assets constitute all such rights necessary to conduct its business in
accordance with past practice and are being conveyed to Purchaser together with
the other Purchased Assets. The validity of the Proprietary Rights and the
rights therein of Seller has not been questioned in any litigation to which
Seller is a party, nor has any such litigation been threatened. The conduct of
Seller's business does not conflict with patent rights, licenses, trademark
rights, trade name rights, copyrights or other intellectual property rights of
others; and Seller has not received any notice from any third party that the
Proprietary Rights conflict with any Person's intellectual property rights.
6.9.3 No use of any Proprietary Rights owned by Seller has
heretofore been, or is now being, made by any Person other than Seller. Seller
has no Knowledge of any infringement of any Proprietary Rights owned or licensed
by Seller. No present or former director or officer or employee, or consultant
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of Seller or any Affiliate of Seller has any interest in any of the Proprietary
Rights.
6.9.4 All personnel, including employees, agents, consultants,
and contractors, who have contributed to or participated in the conception and
development of the Proprietary Rights on behalf of Seller either (1) have been
party to a "work-for-hire" arrangement or agreement with Seller, in accordance
with applicable federal and state law, that has accorded Seller full, effective,
exclusive, and original ownership of all tangible and intangible property
thereby arising, or (2) have executed appropriate instruments of assignment in
favor of Seller as assignee that have conveyed to Seller full, effective, and
exclusive ownership of all tangible and intangible property thereby arising.
6.10 CONTRACTS AND COMMITMENTS. Seller is not, with respect to the
Purchased Assets or its business, a party to any written or oral:
6.10.1 agreement, contract or commitment for the future purchase
of, or payment for, supplies or products, or for the performance of services by
another party, involving in any one case $5,000 or more;
6.10.2 agreement, contract or commitment to sell or supply
products or to perform services, involving in any one case $5,000 or more;
6.10.3 agreement, contract or commitment continuing over a period
of more than six months from the date hereof or exceeding $5,000 in value;
6.10.4 representative, sales agency, dealer or distributor
agreement, contract or commitment;
6.10.5 lease under which Seller is either lessor or lessee other
than the leases included in the Purchased Assets;
6.10.6 note, debenture, bond, conditional sale agreement,
equipment trust agreement, letter of credit agreement, loan agreement or other
contract or commitment for the borrowing or lending of money (including, without
limitation, loans to or from employees) or guarantee, pledge or undertaking of
the indebtedness of any other Person;
6.10.7 agreement, contract or commitment for any charitable or
political contribution;
6.10.8 agreement, contract or commitment limiting or restraining
Seller or any successor or assign from engaging or competing in any lines of
business with any Person;
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6.10.9 license, franchise, distributorship or other agreement,
including those that relate in whole or in part to any patent, trademark, trade
name, service mark or copyright or to any ideas, technical assistance or other
know-how of or used in Seller's business; or
6.10.10 agreement, contract or commitment involving a sharing of
profits, Losses, costs or liabilities by Seller with any other Person;
6.10.11 agreement, contract or commitment that contains or
provides for an express undertaking by Seller to be responsible for
consequential or incidental damages; or
6.10.12 any other material agreement, contract or commitment not
made in the ordinary course of Seller's business.
Each of the agreements, contracts, commitments, leases and other
instruments, documents and undertakings listed on SCHEDULE 2.1.2 is valid and
enforceable in accordance with its terms, the parties thereto are in compliance
with the provisions thereof, no party is in default in the performance,
observance or fulfillment of any material obligation, covenant or condition
contained therein, and no event has occurred that with or without the giving of
notice or lapse of time, or both, would constitute a default thereunder. No such
agreement, contract, commitment, lease or other instrument, document or
undertaking contains any contractual requirement with which there is a
reasonable likelihood Seller or any other party thereto will be unable to
comply. Each party to each of the agreements, contracts, commitments, leases and
other instruments, documents and undertakings listed on SCHEDULE 2.1.2 is, and
has been, in compliance with all terms and requirements applicable to each such
party. No event has occurred or circumstance exists that (with or without notice
or lapse of time) may contravene, conflict with or result in a breach of, or
give Seller or any other Person the right to declare a default or exercise any
remedy under, or to accelerate the maturity or performance of, or payment under,
or to cancel, terminate or modify, any agreement, contract, commitment, lease or
other instrument, document or undertaking listed on SCHEDULE 2.1.2. No event has
occurred or circumstance exists under or by virtue of any agreement, contract,
commitment, lease or other instrument, document or undertaking listed on
SCHEDULE 2.1.2 that (with or without notice or lapse of time) would cause the
creation of any Encumbrance affecting any of the Purchased Assets. There are no
renegotiations of, attempts to renegotiate or outstanding rights to renegotiate
any material amounts paid or payable to Seller under any agreement, contract,
commitment, lease or other instrument, document or undertaking listed on
SCHEDULE 2.1.2 with any Person having the contractual or statutory right to
demand or require such renegotiation and no such Person has made any demand for
such renegotiation. Each agreement, contract, commitment, lease or other
instrument, document or undertaking listed on SCHEDULE 2.1.2 has been entered
into in the ordinary course of Seller's business and has been entered into
without the commission of any act alone or in concert with any other Person, or
any consideration having been paid or promised, that is or would be in violation
of any law, rule or regulation of any federal, state or local authority or
agency. No advance payments have been received by Seller by or on behalf of any
party to any of the agreements, contracts, commitments, leases and other
instruments listed on SCHEDULE 2.1.2 for services to be rendered or products to
be delivered to such party after the Closing Date. No consent or approval of any
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party to any agreement, contract, commitment, lease or other instrument,
document or undertaking listed on SCHEDULE 2.1.2 is required for the execution
of this Agreement or the consummation of the transactions contemplated hereby.
6.11 PERMITS, LICENSES. Seller has all material permits, licenses,
registrations, orders and approvals of federal, state or local government or
regulatory bodies that are required to operate its business (including, without
limitation, those required under any Environmental Law) (collectively, the
"PERMITS") and Seller is in compliance with the material terms and conditions of
the Permits. SCHEDULE 2.1.4 hereto sets forth a correct and complete list of all
material Permits, each one of which is in full force and effect. No suspension
or cancellation of any of the Permits has been threatened and no cause exists
for such suspension or cancellation. Any Permits that cannot be transferred are
identified as such on SCHEDULE 2.1.4 hereto.
6.12 COMPLIANCE WITH LAWS. Seller has at all times conducted, and is
presently conducting, its business so as to comply with all laws, rules,
ordinances and regulations applicable to the conduct or operation of its
business or the ownership or use of the Purchased Assets, in each case except
where the failure to comply would not, individually or in the aggregate, have a
Material Adverse Effect. No event has occurred or circumstance exists that (with
or without notice or lapse of time) may constitute or result in a violation by
Seller of, or a failure on the part of Seller to comply with, any laws, rules,
ordinances or regulations applicable to it, or may give rise to any obligation
on the part of Seller to undertake, or to bear all or any portion of the cost
of, any remedial action of any nature.
6.13 LEGAL PROCEEDINGS. There is no claim, action, suit, proceeding,
investigation or inquiry pending before any federal, state or other court or
governmental or administrative agency or threatened against Seller's business or
any of the Purchased Assets, or relating to the transactions contemplated by
this Agreement that could reasonably be expected to have a Material Adverse
Effect, nor does Seller know or have reasonable grounds to know of any basis for
any such claim, action, suit, proceeding, investigation, or inquiry. Seller is
not a party to or subject to the provisions of any judgment, order, writ,
injunction, decree or award of any court, arbitrator or governmental, regulatory
or administrative official, body or authority that relates to the Purchased
Assets or its business or that might affect the transactions contemplated by
this Agreement. No event has occurred or circumstance exists that is likely to
give rise to or serve as a basis for the commencement of any such claim, action,
suit, proceeding, investigation or inquiry.
6.14 ABSENCE OF UNDISCLOSED LIABILITIES. Seller has no liabilities or
obligations (as defined in Section 4.1) relating to its business except (i)
those liabilities and obligations set forth on the December Balance Sheet or the
March Balance Sheet and not heretofore paid or discharged; (ii) those
liabilities and obligations arising in the ordinary course of business
consistent with past practice under any agreement, contract or commitment
specifically disclosed on SCHEDULE 2.1.2 hereto; and (iii) those liabilities and
obligations incurred in the ordinary course of its business consistent with past
practice since March 31, 2004.
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6.15 BOOKS AND RECORDS. All material books of account and other
financial records of Seller relating to its business (the "BOOKS AND RECORDS")
are complete and correct in all material respects and have been made available
to Purchaser. All of the Books and Records have been prepared and maintained in
accordance with good business practices and, where applicable, in conformity
with GAAP (except as otherwise stated therein) and in compliance in all material
respects with applicable laws, regulations and other requirements.
6.16 EMPLOYEES. SCHEDULE 1.23 sets forth a true and correct list of all
individuals employed by Seller in the conduct of its business and their present
position and rate of compensation. No officer, director, agent, employee,
consultant or contractor of Seller is bound by any contract, agreement or other
investment that purports to limit the ability of such officer, director, agent,
employee, consultant or contractor to (i) engage in or continue to perform any
conduct, activity, duties or practice relating to Seller's business or (ii) to
assign to Seller or Purchaser any rights to any invention, improvement or
discovery. Seller has not violated, and upon consummation of the transaction
contemplated hereunder will not violate, the WARN Act or any similar state or
local requirement. During the ninety (90) day period prior to the date of this
Agreement, Seller has terminated six (6) of its employees, whose names are
listed on SCHEDULE 6.16 hereto. No terminated employees have filed a claim, or
have a basis for any claim, against Seller.
6.17 LABOR DISPUTES. Seller has complied in all respects with all legal
requirements relating to employment practices, terms and conditions of
employment, equal employment opportunity, nondiscrimination, immigration, wages,
hours, benefits, collective bargaining and other requirements under all
applicable legal requirements, the payment of social security taxes and
occupational safety and health. Seller is not liable for the payment of any
Taxes, fines, penalties or other amounts, however designated, for failure to
comply with any applicable legal requirement. There are no discrimination
complaints nor any other kind of employment or labor related disputes against
Seller in connection with its business pending before or threatened before any
federal, state or local court or agency, and no dispute respecting minimum wage
or overtime claims or other conditions or terms of employment exists. Seller's
business has not experienced any labor disputes or any work stoppage due to
labor disagreements within the past three years. With respect to its business
(i) there is no unfair labor practice charge or complaint against Seller pending
or threatened before the National Labor Relations Board; (ii) there is no labor
strike, slowdown or stoppage pending or threatened against or affecting Seller;
and (iii) no question concerning representation has been raised within the past
three years or is threatened respecting the Employees.
6.18 ERISA.
6.18.1 SCHEDULE 6.18 sets forth an accurate and complete list of
each employee benefit plan at any time maintained, sponsored, or contributed to
by Seller or with respect to which Seller has any liability (each a "PLAN" and
collectively the "PLANS").
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6.18.2 Except as disclosed on SCHEDULE 6.18, Seller does not
maintain, contribute to or have any liability under (or with respect to) any
"defined benefit plan" (as such term is defined in ERISA ss. 3(35)), or any
"multiemployer plan" (as such term is defined in ERISA ss. 3(37)). No asset of
Seller is subject to any lien under ERISA or the Code. There are no pending or
threatened actions, suits, investigations or claims with respect to any Plan
(other than routine claims for benefits).
6.18.3 Each Plan that is intended to be qualified under Code ss.
401(a) has received a determination from the Internal Revenue Service ("IRS")
that such Plan is so qualified, and nothing has occurred since the date of such
determination that could adversely affect the qualified status of such Plan.
6.18.4 Each of the Plans and all related trusts, insurance
contracts and funds have been maintained, funded and administered in compliance
with their terms and in compliance with the applicable provisions of ERISA, the
Code and any other applicable laws. With respect to each Plan, all required
payments, premiums, contributions, distributions, or reimbursements for all
periods ending prior to or as of the Closing Date have been made or properly
accrued.
6.18.5 Neither Seller nor any other "disqualified person" (within
the meaning of Code ss. 4975) or any "party in interest" (within the meaning of
ERISA ss. 3(14)) has engaged in any "prohibited transaction" (within the meaning
of Code ss. 4975 or ERISA ss. 406) with respect to any of the Plans which could
subject any of the Plans, Seller, or any officer, director or employee of any of
the foregoing to a penalty or Tax under ERISA ss. 502(i) or Code ss. 4975.
6.18.6 Each Plan which is subject to the health care continuation
requirements of Part 6 of Subtitle B of Title I of ERISA or Code ss. 4980B
("COBRA") has been administered in compliance with such requirements. No Plan
provides medical or life or other welfare benefits to any current or future
retired or terminated employee (or any dependent thereof) of Seller other than
as required pursuant to COBRA.
6.18.7 With respect to each Plan, Seller has provided the Buyer
with true, complete and correct copies of (to the extent applicable): (i) all
documents pursuant to which any Plan is maintained, funded and administered
(including the plan and trust documents, any amendments thereto, the summary
plan descriptions, and any insurance contracts or service provider agreements);
(ii) the three most recent annual reports (Form 5500 series) filed with the IRS
(with applicable attachments); and (iii) the most recent determination letter
received from the IRS.
6.18.8 Neither Seller nor any ERISA Affiliate of Seller has
incurred any liability on account of a "partial withdrawal" or a "complete
withdrawal" (within the meaning of ERISA ss.ss. 4205 and 4203, respectively)
from a "multiemployer plan" (as such term is defined in ERISA ss. 3(37)), no
such liability has been asserted, and there are no events and circumstances
which could result in any such partial or complete withdrawal. Neither Seller
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nor any ERISA Affiliate is bound by any contract or agreement or has any
obligation or liability described in ERISA ss. 4204.
6.19 NO FINDER. Except as set forth on SCHEDULE 6.19, Seller has not
taken any action that would give to any Person a right to a finder's fee or any
type of brokerage commission, contingent or otherwise, in relation to, or in
connection with, the transactions contemplated by this Agreement.
6.20 INTEREST IN BUSINESS. Seller has not granted, and there is not
outstanding, any option, right, agreement or other obligation pursuant to which
any Person could claim a right to acquire in any way all or any part of, or
interest in, Seller's business.
6.21 CONDITION OF ASSETS. All tangible assets and properties which are
part of the Purchased Assets are in good operating condition and repair and are
suitable for immediate use in the ordinary course of Seller's business
consistent with past practice and conform in all material respects to all
applicable laws and regulations relating to their construction, use and
operation.
6.22 AFFILIATE TRANSACTIONS. SCHEDULE 6.22 hereto sets forth a summary
of all purchases and sales of goods or services between Seller and Affiliates of
Seller for the three years ended December 31, 2003 and all other transactions
between Seller and its Affiliates during such three (3) year period. Except as
set forth in SCHEDULE 6.22 hereto, Seller and its Affiliates provide no services
or products to Seller's business.
6.23 ENVIRONMENTAL MATTERS.
6.23.1 Seller has not received any notice relating to its
business or the Leased Property alleging any violation of any Environmental Law
or any written request for information from any governmental agency or other
Person pursuant to any Environmental Law and it is, with respect to its business
and the Leased Property, in compliance in all material respects with all
applicable Environmental Law.
6.23.2 Except as authorized by any valid permit issued pursuant
to an Environmental Law, there are no Regulated Substances released by Seller or
any other Person on or beneath the Leased Property in quantities or
concentrations that could give rise to obligations, responsibilities,
liabilities or debts of Seller or Purchaser under any Environmental Law.
6.23.3 Seller has not received any notice or order from any
governmental agency or private or public entity in connection with its business
advising it that Seller is responsible for or potentially responsible for
remediation or paying for the cost of investigation or remediation of any
Regulated Substance, and Seller has not entered into any agreements pertaining
thereto;
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6.24 INSURANCE. SCHEDULE 6.24 sets forth a complete list of all
insurance policies maintained by Seller or its Affiliates and all insurance
policies known by Seller to have been maintained by any other Person which may
provide any coverage for Losses, including, without limitation, Environmental
Losses. All policies of insurance to which Seller is a party or that provide
coverage to Seller (i) are valid, outstanding and enforceable, (ii) are issued
by an insurer that is financially sound and reputable, (iii) provide adequate
insurance coverage for the Purchased Assets and the operations of Seller for all
risks to which Seller is normally exposed, and (iv) are sufficient for
compliance with all legal requirements applicable to Seller and all contracts
and agreements to which Seller is a party. Seller has not received any refusal
of coverage or any notice that a defense will be afforded with reservation of
rights or any notice of cancellation. Seller has paid all premiums due, and has
otherwise performed all of its obligations, under each such insurance policy.
6.25 NO SIGNIFICANT ITEMS EXCLUDED. Except for Excluded Assets, there
are no assets or properties of Seller or agreements, contract or commitments to
which Seller is a party that would be used or useful to the ongoing operation of
Seller's business by Purchaser.
6.26 NO MATERIAL ADVERSE CHANGE. Since the Balance Sheet Date, there
has not been any material adverse change in the business, operations, prospects,
assets, results of operations or condition (financial or other) of Seller, and
no event has occurred or circumstance exists that may result in such a material
adverse change
6.27 SOLVENCY.
6.27.1 Seller is not now insolvent and will not be rendered
insolvent by any of the transactions contemplated hereunder. As used in this
section, "insolvent" means that the sum of the debts and other probable
liabilities of Seller exceeds the present fair saleable value of Seller's
assets.
6.27.2 Immediately after giving effect to the consummation of the
transactions contemplated hereunder: (i) Seller will be able to pay its
liabilities as they become due in the usual course of its business; (ii) Seller
will not have unreasonably small capital with which to conduct its present or
proposed business; (iii) Seller will have assets (calculated at fair market
value) that exceed its liabilities; and (iv) taking into account all pending and
threatened litigation, final judgments against Seller in actions for money
damages are not reasonably anticipated to be rendered at a time when, or in
amounts such that, Seller will be unable to satisfy any such judgments promptly
in accordance with their terms (taking into account the maximum probable amount
of such judgments in any such actions and the earliest reasonable time at which
such judgments might be rendered) as well as all other obligations of Seller.
The cash available to Seller, after taking into account all other anticipated
uses of the cash, will be sufficient to pay all such debts and judgments
promptly in accordance with their terms.
6.28 SECURITIES LAW MATTERS.
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6.28.1 Seller is acquiring the Purchaser Note and, if applicable,
the Earn-Out Shares for its own account and not with a view to its distribution
with the meaning of Section 2(11) of the Securities Act of 1933, as amended.
6.28.2 Each Seller and each Shareholder confirms that Purchaser
has made available to Seller, each Shareholder and its and their respective
representatives the opportunity to ask questions of the officers and management
employees of Purchaser and to acquire such additional information about the
business and financial condition of Purchaser as Seller has requested, and all
such information has been received.
6.29 TAXES.
6.29.1 Seller has timely filed (including any applicable
extension periods) all tax reports, returns and forms required to be filed by
applicable federal, state, local or foreign tax laws on or before the Closing
Date, and all such reports, returns and forms are correct and complete; copies
of such tax returns have been delivered by Seller to Purchaser and all such
returns are listed on SCHEDULE 6.29.1.
6.29.2 Neither the Internal Revenue Service nor the Florida
Department of Revenue or other state or local taxing authority (each, an
"AUTHORITY"), has asserted any deficiencies with respect to any such tax
returns. No state of facts exists or has existed that would constitute grounds
for the assessment of any tax liability with respect to (i) the periods covered
thereby not set forth on such tax returns or (ii) the period from the last such
filed tax return to and including the Closing Date. There are no outstanding
agreements or waivers extending the statutory period of limitation applicable to
any federal, state or local tax return for any period.
6.29.3 Seller has timely paid all federal, state, local and
foreign Taxes to be due on or before the Closing Date from Seller by the
Internal Revenue Service or any Authority. No tax liens have been filed on any
property or assets of Seller and no claims are being asserted with respect to
any Taxes.
6.29.4 Except as set forth on SCHEDULE 6.29.4, Seller has
complied with all applicable laws, rules and regulations relating to the payment
and withholding of Taxes and has withheld all amounts required by law to be
withheld from the wages or salaries of employees who are employed in Seller's
business, and is not liable for any Taxes or other charges for failure to comply
with such laws, rules and regulations.
6.30 COMPLETENESS AND ACCURACY. All information set forth on any
Schedule hereto is true, correct and complete. No representation or warranty of
Seller contained in this Agreement contains or will contain any untrue statement
of material fact, or omits or will omit to state any material fact necessary to
make the statements made therein not misleading. All contracts, permits and
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other documents and instruments furnished or made available to Purchaser by
Seller are or will be true, complete and accurate originals or copies of
originals and include all amendments, supplements, waivers and modifications
thereto. There is no fact, development or threatened development (excluding
general economic factors affecting business in general) that Seller has not
disclosed to Purchaser in writing that has had a Material Adverse Effect or, so
far as Seller can now foresee, could have a Material Adverse Effect.
ARTICLE VII.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
To induce Seller to enter into this Agreement, Purchaser hereby makes,
as of the date hereof and as of the Closing Date, the following representations
and warranties to Seller:
7.1 ORGANIZATION, GOOD STANDING, POWER. Purchaser is a corporation duly
organized, validly existing an in good standing under the laws of the State of
Delaware, and has all requisite corporate power and authority to own and lease
the Purchased Assets and to carry on its business, to own or use the properties
and assets that it purports to own and use, to perform all its obligations under
contracts to which it is, or may become, a party to execute and deliver this
Agreement and the Ancillary Agreements, to consummate the transactions
contemplated hereby and thereby and to perform all the terms and conditions
hereof and thereof to be performed by it. Purchaser is duly qualified to do
business as a foreign corporation and is in good standing under the laws of each
state or other jurisdiction in which either the ownership or use of the
properties owned or used by it, or the nature of the activities conducted by it,
requires such qualification.
7.2 AUTHORIZATION OF AGREEMENT AND ENFORCEABILITY. This Agreement
constitutes, and the Ancillary Agreements to which Purchaser is a party, upon
Purchaser's execution and delivery thereof, will constitute, the legal, valid
and binding obligations of Purchaser, enforceable against it in accordance with
their respective terms. Purchaser has taken all necessary corporate action to
authorize the execution and delivery of this Agreement and the Ancillary
Agreements, the performance by it of all terms and conditions hereof and thereof
to be performed by it and the consummation of the transactions contemplated
hereby and thereby.
7.3 NO VIOLATIONS; CONSENTS. The execution, delivery and performance by
Purchaser of this Agreement and the Ancillary Agreements, and the consummation
of the transactions contemplated hereby and thereby will not (with or without
the giving of notice or the lapse of time, or both) (i) violate any provision of
the charter or bylaws of Purchaser or resolutions of Purchaser's board of
directors or shareholders, (ii) violate, require any consent, authorization or
approval of, or exemption by, or filing under any provision of any law, statute,
rule or regulation to which Purchaser, its business or its assets are subject,
(iii) violate any judgment, order, writ or decree of any court applicable to
Purchaser, its business or its assets, (iv) conflict with, result in a breach
of, constitute a default under, or accelerate or permit the acceleration of the
performance required by, or require any consent, authorization or approval under
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any contract, agreement or instrument to which Purchaser is a party or any of
its assets is bound or (v) result in the creation or imposition of any
Encumbrance upon its assets, which violation, conflict, breach, default,
acceleration or Encumbrance, or the failure to make or obtain such filing,
consent, authorization or approval, with respect to the matters specified in
clauses (ii) through (v) could, individually or in the aggregate, reasonably be
expected to have a material adverse effect on any of the assets of Purchaser or
the results of operations of Purchaser's business or prevent or delay the
consummation of the transactions contemplated by this Agreement.
7.4 LEGAL PROCEEDINGS. There is no claim, action, suit, proceeding,
investigation or inquiry pending before any federal, state or other court or
governmental or administrative agency or threatened against Purchaser or any of
Purchaser's properties, assets, operations or businesses that might prevent or
delay the consummation of the transactions contemplated hereby.
7.5 FINANCIAL CAPACITY. Purchaser has received a commitment letter from
Cornell Capital Partners, L.P. providing for the borrowing by Purchaser of an
amount sufficient to allow it to perform in a timely manner all of its
obligations under this Agreement.
7.6 NO FINDER. Except as set forth in SCHEDULE 7.6, Purchaser has not
taken any action which would give to any Person a right to a finder's fee or any
type of brokerage commission in relation to, or in connection with, the
transactions contemplated by this Agreement.
ARTICLE VIII.
COVENANTS OF SELLER PRIOR TO CLOSING DATE
8.1 REQUIRED ACTIONS. Between the date of this Agreement and the
Closing Date, Seller covenants that it will, in the conduct of its business,
except as otherwise agreed by Purchaser in writing:
8.1.1 ACCESS TO INFORMATION. Give to Purchaser and its counsel,
accountants, consultants and other representatives, at their sole expense and
risk, reasonable access, during normal business hours, to such of the
properties, books, accounts, contracts and records of Seller as are relevant to
the Purchased Assets and Seller's business, and furnish or otherwise make
available to Purchaser all such information concerning the Purchased Assets and
its business as Purchaser may reasonably request, provided that the
confidentiality of any data or information so acquired shall be maintained as
confidential by Purchaser and its representatives in accordance with Section
9.1.1.
8.1.2 CONDUCT OF BUSINESS. Operate its business only in the
usual, regular and ordinary manner as the business was conducted prior to the
date hereof and, to the extent consistent with such operation, use its best
efforts until the Closing Date to (i) preserve and keep intact its business,
(ii) keep available the services of the Employees and (iii) preserve its
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relationships with customers, suppliers and others having business dealings with
Seller in connection with its business.
8.1.3 MAINTENANCE OF PROPERTIES. Maintain the Purchased Assets,
whether owned or leased, in good repair, order and condition, in accordance with
manufacturers' instructions and Seller's past practices, reasonable wear and
tear excepted.
8.1.4 MAINTENANCE OF BOOKS AND RECORDS. Maintain the Books and
Records in the usual, regular and ordinary manner, on a basis consistent with
past practice.
8.1.5 COMPLIANCE WITH APPLICABLE LAW. Comply in all material
respects with all laws applicable to the Purchased Assets and to the conduct of
its business.
8.1.6 PERFORMANCE OF OBLIGATIONS. Perform all the material
obligations of Seller relating to the Purchased Assets and its business in
accordance with the past practices of Seller.
8.1.7 APPROVALS, CONSENTS. Use its best efforts to obtain in
writing as promptly as possible all other approvals and consents required to be
obtained by Seller in order to effectuate the transactions contemplated hereby
and deliver to Purchaser copies of such approvals and consents.
8.1.8 NOTICE OF MATERIAL DAMAGE. Give to Purchaser prompt written
notice of any material damage by fire or other casualty upon the Purchased
Assets or Seller's business.
8.1.9 ADVISE OF CHANGES. Give prompt notice to Purchaser of (i)
the occurrence, or failure to occur, of any event which occurrence or failure
would be likely to cause any representation or warranty of Seller contained in
this Agreement to be untrue or inaccurate in any respect and (ii) any material
failure of Seller to comply with or satisfy any covenant, condition or agreement
to be complied with or satisfied by it hereunder; PROVIDED, HOWEVER, that such
disclosure shall not be deemed to cure any breach of a representation, warranty,
covenant or agreement or to satisfy any condition. Seller shall promptly notify
Purchaser of any development that occurs before the Closing that could
reasonably be expected to result in a material adverse change to the Purchased
Assets or Seller's business.
8.1.10 UPDATE SCHEDULES. Promptly disclose to Purchaser any
information contained in the representations and warranties of Seller contained
in Article VI or in the Schedules to this Agreement which is no longer complete
or correct (including furnishing updated financial statements); PROVIDED that no
such disclosure shall be deemed to modify, amend or supplement Seller's
representations and warranties.
8.1.11 PAY EMPLOYEES TO CLOSING DATE. Pay all wages, salaries and
other sums due Employees through the close of business on the day prior to the
Closing Date.
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8.1.12 TERMINATION; WARN ACT. Terminate the employment of all
Employees as of the Closing Date. Comply, at its sole cost and expense, with the
provisions of (i) the WARN Act and (ii) state laws, if any, applicable to such
termination of employment.
8.1.13 COMPLIANCE WITH AGREEMENT. Not undertake any course of
action inconsistent with satisfaction of the conditions applicable to it set
forth in this Agreement, and do all such acts and take all such measures as may
be reasonably necessary to comply with the representations, agreements,
conditions and other provisions of this Agreement.
8.2 PROHIBITED ACTIONS. Between the date of this Agreement and the
Closing Date, in the conduct of its business, Seller shall not, except as
otherwise agreed by Purchaser in writing:
8.2.1 SALE OF PURCHASED ASSETS. Sell, transfer, assign, lease,
encumber or otherwise dispose of any of the Purchased Assets other than in the
ordinary course of its business consistent with past practices.
8.2.2 BUSINESS CHANGES. Change in any respect the character of
its business.
8.2.3 INCURRENCE OF MATERIAL OBLIGATIONS. Incur any fixed or
contingent obligation or enter into any agreement, commitment or other
transaction or arrangement that is not in the ordinary course of its business
consistent with past practices.
8.2.4 INCURRENCE OF LIENS. Subject to lien, security interest or
any other Encumbrance, other than Permitted Encumbrances, any of the Purchased
Assets.
8.2.5 CHANGE IN EMPLOYEE COMPENSATION AND BENEFITS. Increase the
rate of compensation paid, or pay any bonus, to anyone connected with its
business, except for those increases or bonuses planned, in the ordinary course
of business consistent with past practices, or establish or adopt any new
pension or profit-sharing plan, deferred compensation agreement or employee
benefit arrangement of any kind whatsoever covering or affecting Employees.
8.2.6 PUBLICITY; ADVERTISEMENT. Except as required by law,
publicize, advertise or announce to any third party, except as required pursuant
to this Agreement to obtain the consent of such third party, the entering into
of this Agreement, the terms of this Agreement or the transactions contemplated
hereby.
8.2.7 NO RELEASE. Except in the ordinary course of its business
consistent with past practices, cancel, release or relinquish any debts of or
claims against others held by Seller with respect to its business or waive any
rights relating to its business.
8.2.8 NO TERMINATION OR MODIFICATION. Terminate or materially
modify any lease, contract, governmental license, permit or other authorization
or agreement affecting its business or the Purchased Assets or the operation
thereof.
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8.3 NO MERGER, ETC. Seller shall not directly or indirectly, (a)
solicit any inquiries or proposals or enter into or continue any discussions,
negotiations or agreements relating to (i) the sale or exchange of Seller's
capital stock, (ii) the merger of Seller with, or the direct or indirect
disposition of the Purchased Assets or its business to, any Person other than
Purchaser or (iii) the licensing of Seller's Proprietary Rights or the Purchased
Assets to any Person other than in the ordinary course of business consistent
with past practice or (b) provide any assistance or any information to or
otherwise cooperate with any Person in connection with any such inquiry,
proposal or transaction. Seller hereby represents that neither Seller nor any of
its Affiliates is now engaged in discussions or negotiations with any party
other than Purchaser with respect to any transaction of the kind described in
clauses (a) (i) through (a) (iii) of the preceding sentence (a "PROPOSED
ACQUISITION TRANSACTION"). Seller agrees not to, and to cause each of its
Affiliates not to, release any third party from, or waive any provision of, any
confidentiality or standstill agreement to which any of them is a party. Seller
shall (w) immediately notify Purchaser (orally and in writing) if any offer is
made, any discussions or negotiations are sought to be initiated, any inquiry,
proposal or contact is made or any information is requested with respect to any
Proposed Acquisition Transaction, (x) promptly notify Purchaser of the terms of
any proposal which it may receive in respect of any such Proposed Acquisition
Transaction, including, without limitation, the identity of the prospective
purchaser or soliciting party, (y) promptly provide Purchaser with a copy of any
such offer, if written, or a written summary (in reasonable detail) of such
offer, if not in writing, and (z) keep Purchaser informed of the status of such
offer and the offeror's efforts and activities with respect thereto. In the
event that Seller shall breach this Section, in addition to any other remedies
which Purchaser may have under this Agreement, in law or in equity, Seller shall
immediately upon written request of Purchaser, pay to Purchaser in cash or by
wire transfer an amount equal to all costs, expenses (including all accounting
and attorneys' fees), losses or liabilities incurred by Purchaser in connection
with the preparation, negotiation and consummation of this Agreement and the
transactions contemplated hereby, including, but not limited to, the due
diligence review of Seller, the Purchased Assets, and Seller's business and
obtaining the financing necessary to the consummation of this Agreement and the
transactions contemplated hereby.
ARTICLE IX.
COVENANTS OF PURCHASER PRIOR TO CLOSING DATE
9.1 REQUIRED ACTIONS. Between the date of this Agreement and the
Closing Date, Purchaser shall, except as otherwise agreed by Seller in writing:
9.1.1 CONFIDENTIALITY. Not publish or disclose and not authorize
or permit any of its officers, employees, directors, agents or representatives
or any third party to publish or disclose any trade secrets or other
Confidential Information or any data or business or financial books, records or
other information of or pertaining to Seller, which have been furnished to
Purchaser by Seller or to which Purchaser, or any of its officers, employees,
directors, agents, attorneys or accountants, or any financial institution have
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had access during any investigation made in connection with this Agreement and
which is not otherwise available to Purchaser, except as required by law.
9.1.2 ADVISE OF CHANGES. Advise Seller promptly in writing of any
fact that, if known at the Closing Date, would have been required to be set
forth or disclosed in or pursuant to this Agreement, or which would result in
the breach in any material respect by Purchaser of any of its representations,
warranties, covenants or agreements hereunder.
9.1.3 COMPLIANCE WITH AGREEMENT. Not undertake any course of
action inconsistent with satisfaction of the conditions applicable to it set
forth in this Agreement, and do all such acts and take all such measures as may
be reasonably necessary to comply with the representations, agreements,
conditions and other provisions of this Agreement (including using commercially
reasonable efforts to satisfy the conditions set forth in the commitment letter
referred to in Section 7.5).
9.2 INVESTIGATION. Prior to the Closing, Purchaser shall use reasonable
efforts to conduct its investigation of Seller's business in such a manner as to
prevent disruption of relations with the employees, customers and suppliers of
Seller.
9.3 APPROVALS, CONSENTS. Assist Seller in fulfilling its covenants in
Section 8.1.7.
ARTICLE X.
CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser hereunder are subject to the fulfillment
at or prior to the Closing of each of the following conditions:
10.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Seller and the Shareholders contained in this Agreement shall
have been true in all material respects (except those that contain an express
materiality qualification which shall have been true in all respects) on the
date hereof and on and as of the Closing Date with the same force and effect as
though made on and as of the Closing Date, without giving effect to any
supplement to the Schedules.
10.2 PERFORMANCE OF AGREEMENT. Seller and Shareholders shall have
performed in all material respects all obligations and agreements and complied
in all material respects with all covenants and conditions contained in this
Agreement to be performed or complied with by it or them at or prior to the
Closing Date.
10.3 CONSENTS. Any third-party and governmental consents, approvals or
authorizations necessary for the conveyance of the Purchased Assets or valid
consummation of the transactions contemplated hereby shall have been obtained,
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including, without limitation, the consent of WAM Enterprises to the assignment
to Purchaser of that certain Lease dated July 31, 2001, between Seller and WAM
Enterprises.
10.4 SELLER'S CERTIFICATE. Purchaser shall have received a certificate
from Seller and the Shareholders, dated as of the Closing Date, reasonably
satisfactory in form and substance to Purchaser and its counsel, certifying as
to the matters specified in Section 10.1, Section 10.2 and Section 10.3 hereof.
The matters set forth in such certificate shall constitute representations and
warranties hereunder.
10.5 SECRETARY'S CERTIFICATE. Purchaser shall have received a
certificate, dated the Closing Date, of the Secretary of Seller (i) with respect
to the incumbency and specimen signature of each officer or representative of
Seller executing this Agreement, the certificate referred to in Section 10.4 and
the Ancillary Agreements to which Seller is a party and (ii) certifying as to
(a) the Articles of Incorporation of Seller, which shall be certified by the
Secretary of State of Seller's state of incorporation not more than five (5)
business days prior to the Closing Date, (b) the Bylaws of Seller, (c)
resolutions duly adopted by the board of directors of Seller and the
Shareholders with respect to the transactions contemplated hereby and (d) a good
standing certificate issued by the Secretary of State of Seller's state of
incorporation not more than five (5) business days prior to the Closing Date.
10.6 INJUNCTION. On the Closing Date, there shall be no injunction,
writ, preliminary restraining order or any order of any nature in effect issued
by a court of competent jurisdiction directing that the transactions provided
for herein, or any of them, not be consummated as herein provided and no suit,
action, investigation, inquiry or other legal or administrative proceeding by
any governmental body or other Person shall have been instituted or threatened
which questions the validity or legality of the transactions contemplated hereby
or which if successfully asserted might otherwise have a Material Adverse Effect
or impose any additional financial obligation on, or require the surrender of
any right by, Purchaser.
10.7 ACTIONS AND PROCEEDINGS. All corporate actions, proceedings,
instruments and documents required to carry out the transactions contemplated by
this Agreement or incidental thereto and all other related legal matters shall
be reasonably satisfactory to counsel for Purchaser, and such counsel shall have
been furnished with such certified copies of such corporate actions and
proceedings and such other instruments and documents as it shall have reasonably
requested.
10.8 NET WORKING CAPITAL. The Closing Date Net Working Capital shall
not be less than $750,000.00.
10.9 FINANCING. Purchaser shall have received, on terms that shall be
satisfactory to Purchaser in its sole discretion, the proceeds of financing in
an amount sufficient to enable Purchaser to pay the cash portion of Purchase
Price required by Section 3.1.1.
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10.10 OPINION OF COUNSEL. Purchaser shall have received the favorable
opinion of Barrett, Chapman & Ruta, P.A., counsel for Seller, in substantially
the form of EXHIBIT "H" hereto.
10.11 ESCROW AGREEMENT. Seller shall have executed and delivered an
executed counterpart to the Escrow Agreement.
10.12 NON-COMPETE AGREEMENT. Seller and each Shareholder shall have
delivered executed counterparts to the Non-Compete Agreement.
10.13 ARTICLES OF AMENDMENT. Seller shall have delivered a duplicate
original of the Articles of Amendment.
10.14 NIELSON EMPLOYMENT AGREEMENT. Martin Nielson shall have executed
and delivered a counterpart to an employment agreement with Purchaser and its
Affiliates containing terms and conditions acceptable to Purchaser and its
Affiliates, in their respective sole discretion; and Nielson shall have resigned
from any and all positions as an executive officer and/or director of HYTT.
10.15 WELTON EMPLOYMENT AGREEMENT. Welton shall have executed and
delivered a counterpart to the Welton Employment Agreement.
10.16 SUTLIVE EMPLOYMENT AGREEMENT. Sutlive shall have executed and
delivered a counterpart to the Sutlive Employment Agreement.
10.17 ARRANGEMENTS WITH EMPLOYEES. Purchaser shall have entered into
arrangements with key Employees of Seller satisfactory to Purchaser in its sole
discretion.
10.18 HY-TECH MEMO OF UNDERSTANDING. Seller shall have delivered
evidence satisfactory to Purchaser that the Memorandum of Understanding between
Seller and Hy-Tech Technology Group, Inc. has expired or has been terminated and
that neither party thereto has any further rights or obligations thereunder.
10.19 APPRAISAL RIGHTS. Shareholders shall have waived any appraisal
rights they may have under Florida law.
10.20 RELEASE. Robert Heynssens ("HEYNSSENS") shall have delivered a
release and waiver satisfactory to Purchaser, (i) releasing Purchaser from any
and all obligations to pay Heynssens any amount that may be due and owing
Heynssens for services previously rendered to Seller or otherwise, and (ii)
waiving any and all rights to receive any amounts from Purchaser, other than a
pro rata portion of the Purchase Price. Purchaser shall prepare the document it
wishes Heynssens to execute and submit at Closing.
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10.21 GMAC LOAN. Seller shall have delivered a payoff letter from GMAC
Financing evidencing payment in full of that certain loan in the original
principal amount of $36,217.44 provided by GMAC to Seller.
ARTICLE XI.
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER
The obligations of Seller are subject to the fulfillment at or prior to
the Closing of each of the following conditions:
11.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Purchaser contained in this Agreement shall have been true in
all material respects (except those that contain an express materiality
qualification which shall have been true in all respects) on the date hereof and
on and as of the Closing Date with the same force and effect as though made on
and as of the Closing Date, without giving effect to any supplement to the
Schedules.
11.2 PERFORMANCE OF AGREEMENT. Purchaser shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants and conditions contained in this Agreement to be
performed or complied with by it at or prior to the Closing Date.
11.3 CONSENTS. Any third-party and governmental consents, approvals or
authorizations necessary for the purchase of the Purchased Assets or the valid
consummation of the transactions contemplated hereby shall have been obtained.
11.4 PURCHASER'S CERTIFICATE. Seller shall have received a certificate
from Purchaser, dated as of the Closing Date, reasonably satisfactory in form
and substance to Seller and its counsel, certifying as to the fulfillment of all
matters specified in Section 11.1, Section 11.2 and Section 11.3 hereof. The
matters set forth in such certificate shall constitute representations and
warranties hereunder.
11.5 SECRETARY'S CERTIFICATE. Seller shall have received a certificate,
dated the Closing Date, of the Secretary of Purchaser with respect to the
incumbency and specimen signature of each officer or representative of Purchaser
executing this Agreement, the certificate referred to in Section 11.4 and the
Ancillary Agreements to which Purchaser is a party.
11.6 INJUNCTION. On the Closing Date, there shall be no injunction,
writ, preliminary restraining order or any order of any nature in effect issued
by a court of competent jurisdiction directing that the transactions provided
for herein, or any of them, not be consummated as herein provided.
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11.7 ACTIONS OR PROCEEDINGS. All corporate actions, proceedings,
instruments and documents required to carry out the transactions contemplated by
this Agreement or incidental thereto and all other related legal matters shall
be reasonably satisfactory to counsel for Seller, and such counsel shall have
been furnished with such certified copies of such corporate actions and
proceedings and such other instruments and documents as it shall have reasonably
requested.
11.8 OPINION OF COUNSEL. Seller shall have received the favorable
opinion of Eckert Seamans Cherin & Mellott, LLC, counsel for Purchaser,
satisfactory to Seller and its counsel as to the matters set forth in Sections
7.1, 7.2 and 7.3 hereof.
ARTICLE XII.
OBLIGATIONS AFTER THE CLOSING DATE
12.1 CONFIDENTIALITY. Seller and Shareholders hereby covenant and agree
that, except as may be required by law, rule or regulation or court order, it
and they will not at any time reveal, divulge or make known to any Person (other
than Purchaser or its agents or Affiliates) any information that relates to this
Agreement, the transactions contemplated hereby or Seller's business (whether
now possessed by Seller or furnished by Purchaser after the Closing Date),
including, but not limited to, customer lists or other customer information,
trade secrets or formulae, marketing plans or proposals, financial information
or any data, written material, records or documents used by or relating to
Seller's business that are of a confidential nature (collectively, the
"CONFIDENTIAL INFORMATION").
12.2 FINAL NET WORKING CAPITAL. Seller and Shareholders shall assist
Purchaser, in any manner requested by Purchaser, in calculating the Final Net
Working Capital and the Net Working Capital Adjustment.
12.3 TRANSITION OF EMPLOYEES. From and after the Closing Date,
Purchaser and Seller shall cooperate to ensure an orderly transition of the
Employees who accept employment with Purchaser.
12.4 FURTHER ASSURANCES OF SELLER. From and after the Closing Date,
Seller shall, at the request of Purchaser, execute, acknowledge and deliver to
Purchaser, without further consideration, all such further assignments,
conveyances, endorsements, deeds, special powers of attorney, consents and other
documents, and take such other action, as Purchaser may reasonably request (i)
to transfer to and vest in Purchaser, and protect its rights, title and interest
in, all the Purchased Assets and (ii) otherwise to consummate the transactions
contemplated by this Agreement. In addition, from and after the Closing Date,
Seller shall afford Purchaser and its attorneys, accountants and other
representatives access, during normal business hours, to any Books and Records
that Seller may retain as may reasonably be required in connection with the
preparation of financial information or tax returns of Purchaser.
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12.5 FURTHER ASSURANCES OF PURCHASER. From and after the Closing Date,
Purchaser shall afford to Seller and its attorneys, accountants and other
representatives access, during normal business hours, to such Books and Records
as may reasonably be required in connection with the preparation of financial
information for periods concluding on or prior to the Closing Date. Purchaser
shall cooperate in all reasonable respects with Seller with respect to its
former interest in its business and in connection with financial account closing
and reporting and claims and litigation asserted by or against third parties,
including, but not limited to, making employees available to assist with, or
provide information in connection with financial account closing and reporting
and claims and litigation, PROVIDED, that Seller reimburses Purchaser for its
reasonable out-of-pocket expenses (including costs of employees so assisting) in
connection therewith.
12.6 ACCOUNTS RECEIVABLE PAYMENT. In the event that either Party hereto
at any time receives any funds from any third party that are properly payable to
the other Party hereto, the Party receiving such funds shall promptly remit such
funds to the Party entitled to such funds.
ARTICLE XIII.
TERMINATION
13.1 TERMINATION OF AGREEMENT. This Agreement may be terminated:
(i) by the mutual consent of Seller and Purchaser;
(ii) by Seller or Purchaser if the Closing has not taken
place on or before June 8, 2004; PROVIDED, HOWEVER, that no Party then in breach
of any obligations hereunder shall have the right to terminate;
(iii) by Purchaser if any of the representations and
warranties of Seller contained in Article VI hereof were incorrect in any
material respect when made or become incorrect in any material respect; and
(iv) by Seller if any of the representations and
warranties of Purchaser contained in Article VII hereof were incorrect in any
material respect when made or become incorrect in any material respect.
13.2 RETURN OF DOCUMENTS. If this Agreement is terminated for any
reason pursuant to this Article XIII, each Party shall return to the other Party
all documents and copies thereof which shall have been furnished to it by such
other Party or, with the agreement of the other Party, shall destroy all such
documents and copies thereof and certify in writing to the other Party any such
destruction.
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13.3 LIMITATIONS ON REMEDIES. If this Agreement is terminated by Seller
or Purchaser as permitted under Section 13.1 and not as a result of a breach of
a representation or warranty or the failure of any Party to perform its
obligations hereunder, such termination shall be without liability of any Party.
If a Party terminates this Agreement as a result of a breach of a representation
or warranty by the other Party or the failure of the other Party to perform its
obligations hereunder, the nonbreaching Party shall, in addition to other
remedies provided by this Agreement, at law, or in equity, be entitled to
reimbursement from the breaching Party for all expenses incurred by the
nonbreaching Party in connection with this Agreement and the transactions
contemplated hereby.
ARTICLE XIV.
SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; INDEMNIFICATION
14.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations,
warranties and agreements of the Parties shall survive for two years after the
Closing Date; PROVIDED, HOWEVER, that any representation, warranty or agreement
with respect to taxes, employee benefit matters and product liability claims
shall survive the Closing for a period equal to the applicable statute of
limitations; PROVIDED FURTHER, HOWEVER, that there shall be no termination of
any such representation or warranty as to which a claim has been asserted prior
to the termination of such survival period. Except as otherwise expressly
provided in this Agreement, all covenants, agreements, undertakings and
indemnities set forth in this Agreement shall survive indefinitely. No
investigation made by any Parties hereto (whether prior to, on or after the
Closing Date) shall in any way limit the representations and warranties of the
other Parties.
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14.2 INDEMNIFICATION BY SELLER. "SELLER GENERAL LIABILITIES" shall mean
all Losses resulting from, arising out of, or incurred by any of Purchaser or
its Affiliates, or any of their respective successors or assigns and their
respective directors, officers and employees (each a "PURCHASER INDEMNIFIED
PARTY") after the Closing Date in connection with (i) any breach of any of the
representations or warranties made by Seller or the Shareholders in this
Agreement, (ii) any material default by Seller in respect of any of the
covenants or agreements made by Seller or any Shareholder in this Agreement or
(iii) any attempt (whether or not successful) by any Person to cause or require
Purchaser to pay any liability of, or claim against, Seller or any Shareholder
of any kind in respect of the operation of Seller's business prior to the
Closing Date, to the extent not specifically assumed or subject to an indemnity
by Purchaser under the terms of this Agreement. Subject to the further
provisions of this Article XIV, Seller and Shareholders jointly and severally
covenant and agree to pay, and to indemnify all Purchaser Indemnified Parties,
and hold them harmless from, against and in respect of, any and all Seller
General Liabilities.
14.3 LIMITATIONS ON SELLER'S AND SHAREHOLDERS' OBLIGATIONS TO
INDEMNIFY.
14.3.1 Seller and Shareholders shall have no obligation to
indemnify any Purchaser Indemnified Party based upon any breach by Seller or
Shareholders of any representation or warranty as to any claim which did not
arise within two years after the Closing Date. In addition, the Shareholders,
other than Welton, shall have no obligation to indemnify any Purchaser
Indemnified Party for claims UNRELATED to representations and warranties made by
Shareholders (i) in this Agreement or (ii) in any agreement entered into in
connection herewith to which any Shareholder is a party.
14.3.2 Nothing herein shall be deemed to limit or restrict in any
manner any rights or remedies available at law, in equity or otherwise against
Seller and Shareholders based on a willful misrepresentation or willful breach
of any warranty by Seller or Shareholders hereunder.
14.4 INDEMNIFICATION BY PURCHASER. "PURCHASER GENERAL LIABILITIES"
shall mean all Losses resulting from, arising out of, or incurred by any of
Seller or its Affiliates, or any of their respective successors or assigns and
their respective directors, officers and employees (each a "SELLER INDEMNIFIED
PARTY") after the Closing Date in connection with (i) any breach of any of the
representations or warranties made by Purchaser in this Agreement, (ii) any
material default by Purchaser in respect of any of the covenants or agreements
made by Purchaser in this Agreement, (iii) any attempt (whether or not
successful) by any Person to cause or require Seller to pay or discharge any
Assumed Liability or any liability of, or claim against, Purchaser of any kind
in respect of the operation of Seller's business on or after the Closing Date to
the extent not specifically subject to an indemnity by Seller under the terms of
this Agreement. Subject to the further provisions of this Article XIV, Purchaser
covenants and agrees with Seller that Purchaser shall pay, and shall indemnify
all Seller Indemnified Parties, and hold them harmless from, against and in
respect of, any and all Purchaser General Liabilities.
14.5 LIMITATIONS ON PURCHASER'S OBLIGATION TO INDEMNIFY. Purchaser
shall have no obligation to indemnify any Seller Indemnified Party based upon
any breach by Purchaser of any representation or warranty as to any claim which
did not arise within two years after the Closing Date.
14.6 PROCEDURES FOR INDEMNIFICATION.
14.6.1 Each Indemnified Party shall promptly give notice
hereunder to the indemnifying Party after becoming aware of any claim as to
which recovery may be sought against the indemnifying Party because of the
indemnity in this Article XIV, and, if such indemnity shall arise from the claim
of a third party, shall permit the indemnifying Party to assume the defense of
any such claim and any litigation or other proceeding resulting from such claim;
PROVIDED, that any Indemnified Party may, in any event, at its own expense,
monitor and participate in, but not control, the defense of any such claim or
litigation. Notwithstanding the foregoing, the right to indemnification
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hereunder shall not be affected by any failure of an Indemnified Party to give
such notice (or by delay by an Indemnified Party in giving such notice) unless,
and then only to the extent that, the rights and remedies of the indemnifying
Party shall have been prejudiced as a result of the failure to give, or delay in
giving, such notice. The notice required hereunder shall specify the basis for
the claim for indemnification to the extent ascertainable at the time of the
notice. Failure by the indemnifying Party to notify an Indemnified Party of its
election to defend any such claim or action by a third party within thirty (30)
days after notice thereof shall have been given to the indemnifying Party shall
be deemed a waiver by the indemnifying Party of its right to defend such claim
or action. Nothing herein shall be deemed to prevent an Indemnified Party from
making a contingent claim for indemnification hereunder, provided the
Indemnified Party has reasonable grounds to believe that the claim or demand for
indemnification will be made and sets forth the estimated amount of such claim
to the extent then ascertainable.
14.6.2 The indemnifying Party shall not, in the defense of such
claim or any litigation resulting therefrom, consent to entry of any judgment
(other than a judgment of dismissal on the merits without costs) or enter into
any settlement, except with the written consent, which consent shall not be
unreasonably withheld, of the Indemnified Party, which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to the
Indemnified Party a release from all liability in respect of such claim or
litigation.
14.6.3 If the indemnifying Party shall not assume the defense of
any such claim by a third party, or litigation resulting therefrom, after
receipt of notice from the Indemnified Party, the Indemnified Party may defend
against such claim or litigation in such manner as it deems appropriate.
14.6.4 If the indemnifying Party shall not, within thirty (30)
days after its receipt of the notice required by Section 14.7.1 hereof, advise
the Indemnified Party that the indemnifying Party denies the right of the
Indemnified Party to indemnity in respect of the claim, then the amount of such
claim shall be deemed to be finally determined between the Parties hereto. If
the indemnifying Party shall notify the Indemnified Party that it disputes any
claim made by the Indemnified Party, then the Parties hereto shall endeavor to
settle and compromise such claim, and if unable to agree on any settlement or
compromise, such claim for indemnification shall be settled by appropriate
litigation, and any liability established by reason of such settlement,
compromise or litigation shall be deemed to be finally determined. Any claim
that is finally determined in the manner set forth above shall be paid promptly
by the indemnifying Party in cash.
14.7 PAYMENT OF INDEMNIFICATION OBLIGATIONS. Each Party shall pay
promptly to any Indemnified Party the amount of all damages, losses,
deficiencies, liabilities, costs, expenses, claims and other obligations to
which the foregoing provisions of this Article XIV relates. Shareholders shall
promptly pay to any Purchaser Indemnified Party upon demand any amount not so
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promptly paid by Seller including, without limitation, amounts payable by Seller
under Section 14.7 hereof.
14.8 INTEREST ON UNPAID OBLIGATIONS. If all or part of any
indemnification obligation under this Agreement is not paid when due, the
indemnifying Party shall pay the Indemnified Party interest on the unpaid amount
of such obligation for each day from the date the amount became due until it is
paid in full, payable on demand, at the rate equal to the lower of (i) the
maximum rate permitted by law or (ii) two percent (2%) per annum plus the "Prime
Rate" as published from time to time in THE WALL STREET JOURNAL.
14.9 SET-OFF. If Seller or any Shareholder is obligated to pay
Purchaser or its Affiliates any amount under this Article XIV, Purchaser shall
have the right to set-off such amounts all amounts due and owing by Purchaser
under the Purchaser Note.
14.10 OTHER REMEDIES. The indemnification rights of any Indemnified
Party under this Article XIV are independent of and in addition to such rights
and remedies as such Indemnified Party may have at law, in equity or otherwise
for any misrepresentation, breach of warranty or failure to fulfill any covenant
or agreement under or in connection with this Agreement on the part of any
Party, none of which rights or remedies shall be affected or diminished hereby.
ARTICLE XV.
GENERAL
15.1 EXPENSES. Except as otherwise provided in this Agreement, and
whether or not the transactions herein contemplated shall be consummated,
Purchaser and Seller shall pay their own fees, expenses and disbursements,
including the fees and expenses of their respective counsel, accountants and
other experts, in connection with the subject matter of this Agreement and all
other costs and expenses incurred in performing and complying with all
conditions to be performed under this Agreement.
15.2 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. Neither Purchaser, on the
one hand, nor Seller, on the other hand, shall issue any press release or make
any public announcement relating to the subject matter of this Agreement without
the prior written approval of the other parties. Purchaser and Seller shall
agree upon the text of, and jointly issue, a press release or other public
communication announcing the consummation of the transactions contemplated
hereunder, a form of which is attached hereto as EXHIBIT "I".
15.3 WAIVERS. The waiver by either Party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach.
15.4 BINDING EFFECT; BENEFITS. This Agreement shall inure to the
benefit of the Parties hereto, and shall be binding upon the Parties hereto and
their respective successors and assigns. Except for the express provisions of
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Article XIV, nothing in this Agreement, express or implied, is intended to
confer on any Person other than the Parties hereto, or their respective
successors and assigns, any rights, remedies, obligations or liabilities under
or by reason of this Agreement.
15.5 NOTICES. All notices, requests, demands, elections and other
communications which either Party to this Agreement may desire or be required to
give hereunder shall be in writing and shall be deemed to have been received (i)
on the same business day, if delivered personally or by confirmed facsimile
transmission, (ii) on the next business day, if delivered by a reputable courier
service which requires a signature upon delivery, and (iii) on the third
business day, if mailed by registered or certified first class mail, postage
prepaid, return receipt requested to the Party to whom the same is so given or
made.
If to Seller or Shareholders, to:
Cyber-Test, Inc.
448 Commerce Way, Suite 100
Florida Central Commerce Park
Longwood, Florida 32750
Attention: Lisa Welton, President
Facsimile: 407.260.0922
With a copy to:
Barrett, Chapman & Ruta, P.A.
18 Wall Street
Orlando, Florida 32801
Attention: Victor Chapman, Esquire
Facsimile: 407.648.1190
If to Purchaser, to:
Cyber-Test, Inc.
c/o Advanced Communications Technologies, Inc.
420 Lexington Avenue, Suite 2739
New York, NY 10170
Attention: Wayne Danson, Chief Executive Officer
Facsimile: 646.227.1666
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With a copy to:
Eckert Seamans Cherin & Mellott, LLC
1515 Market Street - 9th Floor
Philadelphia, PA 19102
Attention: Gary A. Miller, Esquire
Facsimile: 215.851.8383
and
Levinson & Lichtman, LLP
120 E. Palmetto Park Road, Suite 100
Boca Raton, FL 33432
Attention: Jonathan J. Lichtman, Esquire
Facsimile No.: 561-869-3601
or to such other address as such Party shall have specified by notice to the
other Party hereto.
15.6 ENTIRE AGREEMENT. This Agreement (including the Exhibits and
Schedules hereto) and the documents delivered pursuant hereto constitute the
entire agreement and understanding between the Parties hereto as to the matters
set forth herein and supersede and revoke all prior agreements and
understandings, oral and written, between the Parties hereto or otherwise with
respect to the subject matter hereof, including, without limitation, that
certain Letter of Intent, dated May 3, 2004, by and among Purchaser, Seller and
the other parties named therein. No change, amendment, termination or attempted
waiver of any of the provisions hereof shall be binding upon any Party unless
set forth in an instrument in writing signed by the Party to be bound or their
respective successors in interest.
15.7 COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
15.8 HEADINGS. The article, section and other headings contained in
this Agreement are for reference purposes only and shall not be deemed to be a
part of this Agreement or to affect the meaning or interpretation of this
Agreement.
15.9 GOVERNING LAW AND CHOICE OF FORUM. The validity and interpretation
of this Agreement shall be construed in accordance with, and governed by the
internal laws of the State of Delaware, without giving effect to principles of
conflicts of laws. All claims, disputes or causes of action (with the exception
of those to be arbitrated in accordance with Section 3.3.5) relating to or
arising out of this Agreement shall be brought, heard and resolved solely and
exclusively by and in a federal or state court situated in the State of
Delaware. Each of the parties hereto agrees to submit to the jurisdiction of
such courts shall be proper for all purposes of this Agreement.
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15.10 COOPERATION. The Parties hereto shall cooperate fully at their
own expense, except as otherwise provided in this Agreement, with each other and
their respective counsel and accountants in connection with all steps to be
taken as part of their obligations under this Agreement.
15.11 SEVERABILITY. If any term, covenant, condition or provision of
this Agreement or the application thereof to any circumstance shall be invalid
or unenforceable to any extent, the remaining terms, covenants, conditions and
provisions of this Agreement shall not be affected thereby and each remaining
term, covenant, condition and provision of this Agreement shall be valid and
shall be enforceable to the fullest extent permitted by law. If any provision of
this Agreement is so broad as to be unenforceable, such provision shall be
interpreted to be only as broad as is enforceable.
15.12 ATTORNEYS' FEES. If a dispute arises among the Parties as a
result of which an action is commenced to interpret or enforce any of the terms
of this Agreement, the losing Party shall pay to the prevailing Party reasonable
out-of-pocket attorneys' fees, costs and expenses incurred in connection with
the prosecution or defense of such action.
15.13 SUCCESSORS AND ASSIGNS. The covenants, agreements and conditions
contained herein or granted hereby shall be binding upon and shall inure to the
benefit of Parties hereto and each of their respective successors and permitted
assigns. Neither Seller nor Purchaser shall assign, or otherwise transfer any
interest in this Agreement to any other Person except for a Person which is an
Affiliate of Purchaser or a purchaser of the Purchased Assets from Purchaser.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed as of the date first written above.
PURCHASER:
CYBER-TEST, INC., a Delaware corporation
By: /s/ Wayne I. Danson
--------------------
Wayne I. Danson, President
SELLER:
CYBER-TEST, INC., a Florida corporation
By: /s/ Lisa Welton
--------------------------
Lisa Welton, President
SHAREHOLDERS:
/s/ Lisa Welton
--------------------------
Lisa Welton
/s/ Robert Heynssens
--------------------------
Robert Heynssens
/s/ Alan Heynssens
--------------------------
Alan Heynssens
/s/ Lori Peterson
--------------------------
Lori Peterson
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EXHIBIT A
TO
ASSET PURCHASE AGREEMENT
Purchaser Note
--------------
EXECUTION COPY
EXHIBIT B
TO
ASSET PURCHASE AGREEMENT
Bill of Sale
------------
EXECUTION COPY
EXHIBIT C
TO
ASSET PURCHASE AGREEMENT
Assignment and Assumption Agreement
-----------------------------------
EXECUTION COPY
EXHIBIT D
TO
ASSET PURCHASE AGREEMENT
Escrow Agreement
----------------
EXECUTION COPY
EXHIBIT E
TO
ASSET PURCHASE AGREEMENT
Non-Compete Agreement
---------------------
EXECUTION COPY
EXHIBIT F
TO
ASSET PURCHASE AGREEMENT
Welton Employment Agreement
---------------------------
EXECUTION COPY
EXHIBIT G
TO
ASSET PURCHASE AGREEMENT
Sutlive Employment Agreement
----------------------------
EXECUTION COPY
EXHIBIT H
TO
ASSET PURCHASE AGREEMENT
Opinion of Barrett, Chapman & Ruta, P.A.
----------------------------------------
EXECUTION COPY
EXHIBIT I
TO
ASSET PURCHASE AGREEMENT
Press Release
-------------