Exhibit 2.1
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
THE SHAREHOLDERS OF
NETWORK SYSTEM TECHNOLOGIES, INC.
AND
INCENTRA SOLUTIONS, INC.
DATED AS OF APRIL 13, 2006
TABLE OF CONTENTS
PAGE
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RECITALS 8
ARTICLE I
PURCHASE AND SALE OF SHARES 8
SECTION 1.1. PURCHASE AND SALE OF SHARES 8
SECTION 1.2. CONSIDERATION 8
SECTION 1.3 CLOSING 11
ARTICLE II
REPRESENTATIONS AND WARANTIES OF THE COMPANY 12
SECTION 2.1 ORGANIZATION, STANDING AND CORPORATE POWER 12
SECTION 2.2 SUBSIDIARIES 12
SECTION 2.3 CAPITAL STRUCTURE 12
SECTION 2.4 AUTHORITY; NONCONTRAVENTION 13
SECTION 2.5 FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES 14
SECTION 2.6 MATERIAL CONTRACTS 16
SECTION 2.7 PERMITS; COMPLIANCE WITH APPLICABLE LAWS 17
SECTION 2.8 ABSENCE OF LITIGATION 17
SECTION 2.9 TAX MATTERS 17
SECTION 2.10 EMPLOYEE BENEFIT PLANS 19
SECTION 2.11 LABOR MATTERS 22
SECTION 2.12 ENVIRONMENTAL MATTERS 23
SECTION 2.13 INTELLECTUAL PROPERTY 25
SECTION 2.14 INSURANCE MATTERS 27
SECTION 2.15 TRANSACTIONS WITH AFFILIATES 27
SECTION 2.16 VOTING REQUIREMENTS 27
SECTION 2.17 BROKERS 28
SECTION 2.18 REAL PROPERTY 28
SECTION 2.19 TANGIBLE PERSONAL PROPERTY 29
SECTION 2.20 INVESTMENT COMPANY 29
SECTION 2.21 BOARD APPROVAL 29
SECTION 2.22 BOOKS AND RECORDS 29
SECTION 2.23 STATUS OF SHARES BEING TRANSFERRED 29
SECTION 2.24 INVESTMENT IN PURCHASER COMMON STOCK 29
SECTION 2.25 DISCLOSURE 30
Page 2
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER 31
SECTION 3.1 ORGANIZATION; STANDING AND CORPORATE POWER 31
SECTION 3.2 CAPITAL STRUCTURE 31
SECTION 3.3 AUTHORITY; NONCONTRAVENTION 32
SECTION 3.4 PURCHASER DOCUMENTS 33
SECTION 3.5 VOTING REQUIREMENTS 33
SECTION 3.6 BROKERS 34
SECTION 3.7 BOARD APPROVAL 34
SECTION 3.8 BOOKS AND RECORDS 34
SECTION 3.9 SARBANES OXLEY ACT COMPLIANCE 34
SECTION 3.10 ADDITIONAL REPRESENTATIONS 34
SECTION 3.11 LITIGATION 34
SECTION 3.12 SOLVENCY 34
SECTION 3.13 COMPLIANCE 34
SECTION 3.14 CONTRACTS WITH THIRD PARTIES 34
SECTION 3.15 DISCLOSURE 34
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS 34
SECTION 4.1 CONDUCT OF BUSINESS BY THE COMPANY 34
SECTION 4.2 ADVICE OF CHANGES 36
SECTION 4.3 NO SOLICITATION BY THE COMPANY 36
SECTION 4.4 CONDUCT OF BUSINESS BY PURCHASER 37
SECTION 4.5 TRANSITION 37
ARTICLE V
ADDITIONAL AGREEMENTS 37
SECTION 5.1 ACCESS TO INFORMATION; CONFIDENTIALITY 37
SECTION 5.2 COMMERCIALLY REASONABLE EFFORTS 38
SECTION 5.3 FEES AND EXPENSES 38
SECTION 5.4 PUBLIC ANNOUNCEMENTS 38
SECTION 5.5 REGULATION D 38
SECTION 5.6 INTENTIONALLY OMITTED 39
SECTION 5.7 PURCHASER'S ASSUMPTION AND PAYMENT OF
OBLIGATIONS PERSONALLY GUARANTEED BY SHAREHOLDERS 39
SECTION 5.8 RULE 144 COMPLIANCE 37
SECTION 5.9 SHAREHOLDERS COVENANT NOT TO COMPETE 39
Page 3
ARTICLE VI
CONDITIONS PRECEDENT 40
SECTION 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO
EFFECT THE PURCHASE 40
SECTION 6.2 CONDITIONS TO OBLIGATIONS OF PURCHASER 41
SECTION 6.3 CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDERS 43
SECTION 6.4 FRUSTRATION OF CLOSING CONDITIONS 44
ARTICLE VII
INDEMNIFICATION; ARBITRATION 44
SECTION 7.1 INDEMNIFICATION 44
SECTION 7.2 CLAIMS AND PROCEDURE 46
SECTION 7.3 ARBITRATION 47
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER 48
SECTION 8.1 TERMINATION 48
SECTION 8.2 EFFECT OF TERMINATION 49
SECTION 8.3 AMENDMENT 50
SECTION 8.4 EXTENSION; WAIVER 50
ARTICLE IX
GENERAL PROVISIONS 50
SECTION 9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS 50
SECTION 9.2 NOTICES 50
SECTION 9.3 DEFINITIONS 51
SECTION 9.4 INTERPRETATION 52
SECTION 9.5 COUNTERPARTS 52
SECTION 9.6 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES 52
SECTION 9.7 GOVERNING LAW 52
SECTION 9.8 ASSIGNMENT 53
SECTION 9.9 CONSENT TO JURISDICTION 53
SECTION 9.10 HEADINGS 53
SECTION 9.11 SEVERABILITY 53
SECTION 9.12 ENFORCEMENT 53
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EXHIBITS
Exhibit A - Form of Convertible Promissory Note
Exhibit B - Form of Consulting and Subcontractor Agreement
Exhibit C - Form of Registration Rights Agreements
Exhibit D - Form of Legal Opinion of Counsel to the Company and Shareholders
Exhibit E - Form of Legal Opinion of Counsel to the Purchaser
SCHEDULES
Company Disclosure Schedule
Purchaser Disclosure Schedule
Page 5
INDEX OF DEFINED TERMS
DEFINED TERMS SECTION DEFINED
- ------------- ---------------
affiliate Section 9.3(a)
Agreement Preamble
Closing Section 1.3
Closing Date Section 1.3
Closing Payment Section 1.2(a)
Code Section 2.9(e)
Company Preamble
Company Acquisition Proposal Section 4.3(a)
Company Certificate of Incorporation Section 2.2(b)
Company Common Stock Section 2.3(a)
Company Disclosure Schedule Article II
Company Financial Statements Section 2.5(a)
Company IP Agreements Section 2.13(g)
Company Material Contracts Section 2.6(b)
Company Permitted Lien Section 2.19
Competing Business Section 5.9
Dispute Section 7.3
Earn Out Payment Section 1.1
EBITDA Section 1.2(b)
Employee Plans Section 2.10(a)
Employment Agreements Section 6.2(h)
encumbrance Section 9.3(c)
Environmental Laws Section 2.12(d)(i)
Environmental Permits Section 2.12(d)(ii)
ERISA Section 2.10(a)
ERISA Affiliate Section 2.10(a)
Fiduciary Section 2.10(e)
GAAP Section 2.5(a)
Government Entities Section 2.4(c)
Governmental Entity Section 2.4(c)
Hazardous Substances Section 2.12(d)(iii)
indemnified party Section 7.2(a)
indemnifying party Section 7.2(a)
Initial Consideration Section 1.1
Intellectual Property Section 2.13(a)
IRS Section 2.10(g)
knowledge Section 9.3(d)
Liens Section 2.4(d)
material adverse change Section 9.3(e)
material adverse effect Section 9.3(e)
Page 6
Multi-Employer Plans Section 2.10(d)
Other Company Documents Section 2.7(c)
person Section 9.3(f)
Purchaser Preamble
Purchaser Common Stock Section 3.2(a)
Purchaser Employee Stock Options Section 3.2(a)
Purchaser Indemnified Parties Section 7.1(a)
Purchaser Losses Section 7.1(a)
Purchaser SEC Documents Section 3.4(a)
Purchaser Preferred Stock Section 3.2(a)
Purchaser Stock Plans Section 3.2(a)
Permits Section 2.7(a)
Release Section 2.12(d)(iv)
Registration Rights Agreement Section 6.2(i)
Requisite Regulatory Approvals Section 6.1(b)
Restraints Section 6.1(c)
Sarbanes Oxley Act Section 3.9
SEC Section 3.4(a)
Securities Act Section 2.24(a)
Seller Indemnified Parties Section 7.1(b)
Seller Losses Section 7.1(b)
Shareholders Preamble
Shares Recitals
Software Section 2.13(a)
subsidiary Section 9.3(g)
Tangible Personal Property Section 2.18
Tax Section 2.9(i)(i)
Taxes Section 2.9(i)(i)
Tax Return Section 2.9(i)(ii)
Third Party Rights Section 2.13(d)
working capital Section 6.2(e)
Page 7
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement") dated as of April 13, 2006,
by and between INCENTRA SOLUTIONS, INC., a Nevada corporation ("Purchaser") and
the persons whose names and signatures appear at the end of this Agreement, all
of whom are shareholders of NETWORK SYSTEM TECHNOLOGIES, INC., an Illinois
corporation (the "Company"), referred to collectively as "Shareholders" and
individually as "Shareholder".
RECITALS
WHEREAS, Shareholders own all of the outstanding shares of capital stock
(the "Shares") of the Company;
WHEREAS, Shareholders intend to sell and Purchaser intends to purchase
the Shares;
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto intending to be legally bound do hereby agree
as follows:
ARTICLE I
PURCHASE AND SALE OF THE SHARES
SECTION 1.1. PURCHASE AND SALE OF THE SHARES. Upon the terms and subject
to the conditions of this Agreement, Shareholders agree to sell, convey, assign
and transfer, and Purchaser agrees to purchase, the Shares, free and clear of
all Encumbrances (as defined in Section 9.3(b) hereof) for the initial
consideration of Five Million Five Hundred Thousand Dollars ($5,500,000.00) in
cash, , an unsecured promissory note in the amount of One Million Five Hundred
Thirteen Thousand Dollars ($1,513,000.00), and 1,034,483 shares of Purchaser's
unregistered and restricted common stock. Purchaser shall pay Shareholders
additional consideration pursuant to the provisions of Section 1.2(b), if, and
only if, the conditions of such Section 1.2(b) are satisfied and only to the
extent satisfied (the "Earn Out Payment"). At the Closing (as defined in Section
1.3) each Shareholder will transfer to Purchaser the Shares listed after his or
her name in Section 1.1 of the Company Disclosure Schedule, which together will
constitute all of the issued and outstanding Shares of the Company.
Page 8
SECTION 1.2. CONSIDERATION.
(a) Upon the terms and subject to the conditions of this Agreement, in
consideration of the sale, conveyance, assignment and transfer of the Shares to
Purchaser at the Closing, Purchaser agrees to:
(1) Pay to each Shareholder his or her pro rata share, as
defined below, of Five Million Five Hundred Thousand Dollars ($5,500,000.00) at
the Closing;
(2) As of the Closing Date, issue to each Shareholder, his or
her pro rata share, as defined below, of 1,034,483 shares of Purchaser's
unregistered common stock; and
(3) As of the Closing Date issue to each Shareholder, an
unsecured promissory note in an amount equal to his or her pro rata share, as
defined below, of One Million Five Hundred Thirteen Thousand Dollars
($1,513,000.00) and in substantially the form attached hereto as Exhibit A.
(b) On or before May 15, 2008, and subject to the conditions set forth
below, Purchaser will pay Transitional Management Consultants, Inc., an Illinois
corporation ("TMC"), owned by Shareholders, the Earn Out Payment to be computed
as follows:
(1) In the event Earnings Before Interest, Taxes, Depreciation
and Amortization, as defined below, ("EBITDA") of the Company for
the twenty-four (24) months ended March 31, 2008 is equal to or
greater than Four Million Dollars ($4,000,000.00) and provided
that either (i) the services of Shareholder are still being
provided to Company through an Consulting and Subcontractor
Agreement by and between the Company and TMC (the "Consulting and
Subcontractor Agreement"); or (ii) the Shareholder is no longer
providing services to the Company under the Consulting and
Subcontractor Agreement but that such failure to continue to
provide services was not due to a "for cause" cancellation as
defined in the Consulting and Subcontractor Agreement or a
voluntary and unilateral termination of the same by TMC; then
Purchaser shall issue to TMC 1,120,690 shares of Purchaser's
unregistered common stock; adjusted for any stock split, reverse
split, stock dividends, merger, acquisition, consolidation or
other adjustments to Purchaser common stock from and after the
date of this Agreement; or,
(2) In the event EBITDA of the Company for the twenty-four (24)
months ended March 31, 2008 is greater than Two Million Dollars
($2,000,000.00), but less than Four Million Dollars
($4,000,000.00) and provided that either (i) the services of
Shareholder are still being provided to Company through the
Consulting and Subcontractor Agreement; or (ii) the Shareholder is
no longer providing services to the Company under the Consulting
and Subcontractor Agreement but that such failure to continue to
provide services was not due to a "for cause" cancellation as
defined in the Consulting and Subcontractor Agreement or a
voluntary and unilateral
Page 9
termination of the same by TMC; then Purchaser shall issue to TMC
a number of shares of Purchaser's unregistered common stock equal
to the excess EBITDA over Two Million Dollars ($2,000,000.00)
divided by Two Million Dollars ($2,000,000.00) times1,120,690
shares, the resulting amount being the Pro Rated Earn Out Payment;
adjusted for any stock split, reverse split, stock dividends,
merger, acquisition, consolidation or other adjustments to
Purchaser common stock from and after the date of this Agreement;
or,
(3) In the event EBITDA of the Company is Two Million Dollars
($2,000,000.00) or less, there shall be no Earn Out Payment
(4) For purposes of this Agreement, EBITDA shall be defined as
the net income of the Company, as determined by generally accepted
accounting principles, plus interest, taxes, depreciation and
amortization and subject to the other restrictions or limitations
on allocation of expenses as provided in this Agreement. The
parties agree that no headquarters or overhead expenses or costs
of Purchaser or its affiliates or subsidiaries or other charges of
or from Purchaser will be allocated or charged to Company for
purposes of determining EBITDA under this Agreement, except that
direct costs of Purchaser, its affiliates or subsidiaries related
to the provision of revenue producing services for the Company
shall be allocated to the Company for purposes of determining
EBITDA hereunder. The parties agree that any outside or indirect
costs or expenses not directly associated with the sale of new
products or services shall not be permitted to be included as an
expense in arriving at this EBITDA computation and that no new
"line items" reflecting costs or expenses shall be permitted to be
included as an expense in arriving at this EBITDA, unless
previously approved by Graziano or his designated staff at the
Company. In the event of a merger, consolidation or other
combination of the Company with another entity, the EBITDA
calculation, for purposes of this Agreement, shall be made in a
manner that as nearly as is reasonably possible reflects the
EBITDA of the Company as it would have been but for such merger,
consolidation or combination. Nothing in this Section 1.2(b)(4)
shall, however, be construed to prevent any such merger,
consolidation or combination or the introduction of new goods
and/or services to the line of goods and services provided by the
Company. An accountant of Shareholder's choosing shall be
permitted to review and approve the computation of EBITDA
following each of the years in question, which approval will not
be unreasonably withheld.
(5) Notwithstanding anything to the contrary stated above, in
the event that Shareholder ceases to provide services to the
Company under the Consulting and Subcontractor Agreement during a
period less than two (2) years from the Closing Date and if such
failure to continue to provide
Page 10
services (i) was due to Shareholder's voluntary and unilateral
termination of the Consulting and Subcontractor Agreement; or (ii)
was because the Consulting and Subcontractor Agreement was
cancelled "for cause" as defined in the Consulting and
Subcontractor Agreement, then any Earn Out Payment or Pro Rated
Earn Out Payment which would be paid to Shareholders shall be
reduced to a pro rata percentage equal to the percentage of such
two (2) years that Shareholder continued to provide services to
the company under the Consulting and Subcontractor Agreement.
(c) Intentionally deleted.
SECTION 1.3 CLOSING. Subject to the satisfaction or, to the extent
permitted by applicable law, waiver of the conditions to consummation of the
Purchase contained in Article VI hereof, the closing of the Purchase (the
"Closing") shall take place at 10:00 a.m., Denver time, on a date specified by
the parties (the "Closing Date"), which date shall not be later than the third
business day following satisfaction or, to the extent permitted by applicable
law, waiver of the conditions to consummation of the Purchase contained in
Article VI (other than those conditions that by their nature are to be satisfied
at the Closing, but subject to the fulfillment or, to the extent permitted by
applicable law, waiver of those conditions), unless another time or date is
agreed to by the parties hereto; provided that in all events, the Closing Date
shall not be later than April 17, 2006. The Closing will be held at the offices
of Purchaser, located at 1140 Pearl Street, Boulder, CO 80302 or at such other
location as is agreed to by the parties hereto.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Disclosure Schedule delivered by the Company
to Purchaser prior to the execution of this Agreement which hereby is
incorporated by reference in and constitutes an integral part of this Agreement
(the "COMPANY DISCLOSURE SCHEDULE"), the Shareholders hereby represent and
warrant to Purchaser as follows:
SECTION 2.1 ORGANIZATION, STANDING AND CORPORATE POWER.
(a) Each of the Company and its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation or organization and has the requisite corporate power and
authority to carry on its business as presently being conducted. Each of the
Company and its subsidiaries is duly qualified or licensed to conduct business
and is in good standing in each jurisdiction in which the nature of its business
or the ownership, leasing or operation of its properties makes such
qualification or licensing necessary, except for those jurisdictions where the
failure to be so qualified or licensed or to be in good standing individually or
in the aggregate would not reasonably be expected to have a material adverse
effect on the Company.
Page 11
(b) The Company has delivered or made available to Purchaser prior to
the execution of this Agreement complete and correct copies of the certificate
of incorporation and by-laws of the Company and each of its subsidiaries, each
as in effect at the date of this Agreement. (c)
SECTION 2.2. SUBSIDIARIES. Section 2.2 of the Company Disclosure Schedule
lists the names and jurisdiction of incorporation or organization of all the
subsidiaries of the Company, whether consolidated or unconsolidated. The
outstanding securities of the subsidiaries of Company are set forth in Section
2.2 of the Company Disclosure Schedules and all outstanding shares of capital
stock of, or other equity interests in, each such subsidiary: (i) have been duly
authorized, validly issued and are fully paid and nonassessable and (ii) are
owned directly or indirectly by Company, free and clear of all Liens. Except as
set forth above or in Section 2.2 of the Company Disclosure Schedule, the
Company does not own, directly or indirectly, any capital stock of or other
equity or voting interests in any person.
SECTION 2.3. CAPITAL STRUCTURE. As of the date hereof:
(a) (i) The only class of capital stock authorized by the
Company is common stock ("Company Common Stock"); (ii) 10,000 shares of Company
Common Stock are authorized and 1,000 shares of Company Common Stock are issued
and outstanding, all held by Shareholders in the amounts set forth next to their
respective names in Section 2.3(a) of the Company Disclosure Schedule; and (iii)
no shares of Company Common Stock are held by the Company in its treasury and no
shares of Company Common Stock are held by subsidiaries of the Company
(b) Except as set forth on Section 2.3(b) of the Company
Disclosure Schedule, all outstanding shares of capital stock of the Company have
been duly authorized and validly issued and are fully paid and nonassessable and
are not subject to preemptive rights created by statute, the Company's Articles
of Incorporation (the "COMPANY CERTIFICATE OF INCORPORATION") or any agreement
to which the Company is a party or by which the Company may be bound.
(c) Except as set forth in Section 2.3(c) of the Company
Disclosure Schedule, there are outstanding (i) no shares of capital stock or
other voting securities of the Company, (ii) no securities of the Company
convertible into or exchangeable for shares of capital stock or voting
securities of the Company, and (iii) no options or other rights to acquire from
the Company, and no obligation of the Company to issue, any capital stock,
voting securities or securities convertible into or exchangeable for capital
stock of the Company.
Page 12
SECTION 2.4. AUTHORITY; NONCONTRAVENTION.
(a) Shareholders have the power and authority to execute,
deliver and perform this Agreement and the other agreements to be executed and
delivered by Shareholders in connection herewith and to consummate the
transactions contemplated hereby and thereby. All acts and proceedings required
to be taken by or on the part of Shareholders to authorize Shareholders to
execute, deliver and perform this Agreement and the other agreements to be
executed and delivered by Shareholders in connection herewith and to consummate
the transactions contemplated hereby and thereby have been duly and validly
taken. This Agreement constitutes a valid and binding agreement, and the other
agreements to be executed and delivered by Shareholders in connection herewith
when so executed and delivered will constitute valid and binding agreements, of
Shareholders.
(b) Except as set forth in Section 2.4(b) of the Company
Disclosure Schedule, the execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated hereby will not, conflict with
or result in a violation of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any material obligation under (i) any provision of the Company
Certificate of Incorporation or by-laws, (ii) any material loan or credit
agreement, note, mortgage, indenture, lease or other material agreement or (iii)
material instrument, permit, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or its properties or
assets.
(c) The execution, delivery and performance by the Shareholders
of this Agreement and the consummation of the purchase and sale of the Shares by
the Shareholders require no consent, approval, order or authorization of, action
by or in respect of, or registration or filing with, any governmental body,
court, agency, official or authority (each, a "GOVERNMENTAL ENTITY",
collectively "GOVERNMENT ENTITIES").
(d) The execution and delivery of this Agreement and the
consummation of the purchase and sale of the Shares will not result in the
creation of any pledges, claims, liens, charges, encumbrances, adverse claims,
mortgages and security interests of any kind or nature whatsoever (collectively,
"LIENS") upon any asset of the Company.
(e) Except as set forth in Section 2.4(e) of the Company
Disclosure Schedule, no consent, approval, waiver or other action by any person
(other than the Governmental Entities referred to in (d) above) under any
Company Material Contract is required or necessary for, or made necessary by
reason of, the execution, delivery and performance of this Agreement by the
Shareholders or the consummation of the purchase and sale of the Shares.
Page 13
SECTION 2.5. FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES.
(a) The Company has furnished to the Purchaser true, correct
and complete copies of a balance sheet, income statement for each of the fiscal
years ended December 31, 2003, December 31, 2004, and December 31, 2005 compiled
by the Company's independent accountants, and Company prepared statements of
cash flow and stockholders' equity for the fiscal years ended December 31, 2004
and December 31, 2005 (collectively, the "Company Financial Statements"). Except
as set forth in Section 2.5(a) of the Company Disclosure Schedule, The Company
Financial Statements fairly present in all material respects the financial
condition of the Company and its subsidiaries as at the respective dates
thereof; provided that Purchaser acknowledges that certain accruals and
expenses, as set forth in Section 2.5(a) of the Company Disclosure Schedule, are
excluded from this statement.
(b) Except for liabilities (i) set forth in Section 2.5 of the
Company Disclosure Schedule, (ii) reflected in the Company Financial Statements
or described in any notes thereto (or for which neither accrual nor footnote
disclosure is required pursuant to GAAP), or (iii) incurred in the ordinary
course of business, consistent with past practice or in connection with this
Agreement or the transactions contemplated hereby, neither the Company nor any
of its subsidiaries has any material liabilities or obligations of any nature.
The Company is not in default in respect of any terms or conditions of any
indebtedness.
(c) Other than changes in the usual and ordinary conduct of
business since December 31, 2005, there have been, and at the Closing Date there
will be, no material, adverse changes in the financial condition of the Company.
Specifically, but, not by way of limitation, since its balance sheet of December
31, 2005 the Company has not, and prior to the Closing Date will not have:
(i) Issued or sold any stock, bond, or other Company
securities;
(ii) Except for current liabilities incurred and obligations
under contracts entered into in the ordinary course of business and except as
set forth in Section 2.5(c)(ii) of the Company Disclosure Schedule, incurred any
obligation or liability, whether absolute or contingent (in excess of $50,000
individually or in the aggregate);
(iii) Except for current liabilities shown on the balance sheet
and current liabilities incurred since that date in the ordinary course of
business and except as set forth in Section 2.5(c)(iii) of the Company
Disclosure Schedule, discharged or satisfied any lien or encumbrance, or paid
any obligation or liability, absolute or contingent;
Page 14
(iv) Mortgaged, pledged or subjected to lien or any other
encumbrance, any of its assets, tangible or intangible;
(v) Except in the ordinary course of business, sold or
transferred any of its tangible assets or canceled any debts or claims, except
any excluded assets, or canceled debts or claims as listed in Section 2.5(c)(v)
of the Company Disclosure Schedule;
(vi) Sold, assigned, or transferred any patents, formulas,
trademarks, trade names, copyrights, licenses, or other intangible assets;
(vii) Suffered any extraordinary losses, been subjected to any
strikes or other labor disturbances, or waived any rights of any substantial
value; or
(viii) Except for transactions contemplated by this Agreement,
entered into any transaction other than in the ordinary course of business.
(d) Subject to any changes that may have occurred in the
ordinary and usual course of business, the assets of the Company at the Closing
Date will be substantially those owned by it and shown on the Company Financial
Statements.
(e) Except to the extent that a reasonable allowance for
uncollectible accounts has been established on its books and is reflected in the
Company Financial Statements, all accounts receivable and notes receivable of
the Company are current and collectible. Such accounts receivable of the Company
have arisen in the ordinary course of business in arms-length transactions for
goods actually sold and services actually performed or to be performed.
Purchaser is hereby notified and acknowledges that the reasonable allowance for
uncollectible accounts has just been recently established on the books of the
Company, possibly subsequent to Purchaser's conduct of due diligence.
(f) All inventory to be transferred to Purchaser pursuant to
this Agreement is generally, obsolete or unsaleable.
SECTION 2.6. MATERIAL CONTRACTS.
(a) Each Company Material Contract is valid and binding on and
enforceable against the Company (or, to the extent a subsidiary is a party, such
subsidiary) and each other party thereto and is in full force and effect. Except
as set forth in Section 2.6 of the Company Disclosure Schedule, neither the
Company nor any of its subsidiaries is in breach or default under any Company
Material Contract. Except as set
Page 15
forth in Section 2.6 of the Company Disclosure Schedule, neither the Company nor
any of its subsidiaries knows of, and has not received notice of, any violation
or default under (nor, to the knowledge of the Shareholders, does there exist
any condition which with the passage of time or the giving of notice or both
would result in such a violation or default under) any Company Material Contract
by any other party thereto. Prior to the date hereof, the Company has made
available to Purchaser true and complete copies of all Company Material
Contracts.
(b) As used in this Agreement, "COMPANY MATERIAL CONTRACTS"
shall mean any contract, license agreement, commitment, lease, or restriction of
any kind to which the Company is a party or by which the Company or any of its
subsidiaries is bound or to which any of the Company's or any of its
subsidiaries' assets are subject which involve payments to or from the Company
of at least $50,000.
SECTION 2.7. PERMITS; COMPLIANCE WITH APPLICABLE LAWS.
(a) The Company and its subsidiaries own and/or possess all
material permits, licenses, variances, authorizations, exemptions, orders,
registrations and approvals of all Governmental Entities which are required for
the operation of the business of the Company and its subsidiaries (the
"PERMITS") as presently conducted. The Company and its subsidiaries are in
compliance in all material respects with the terms of the Permits. All the
Permits are in full force and effect and no suspension, modification or
revocation of any of them is pending or threatened nor do grounds exist for any
such action.
(b) Except as set forth in Section 2.7(b) of the Company
Disclosure Schedule, each of the Company and its subsidiaries is in compliance
in all material respects with all applicable statutes, laws, regulations,
ordinances, Permits, rules, writs, judgments, orders, decrees and arbitration
awards of each Governmental Entity applicable to the Company or any of its
subsidiaries.
(c) Except for filings with respect to Taxes, which are the
subject of Section 2.9 and not covered by this Section 2.7(c) and except as set
forth in Section 2.7(c) of the Company Disclosure Schedule, the Company and each
of its subsidiaries has timely filed all regulatory reports, schedules, forms,
registrations and other documents, together with any amendments required to be
made with respect thereto, that they were required to file with each
Governmental Entity (the "OTHER COMPANY DOCUMENTS"), and have timely paid all
fees and assessments, if any, due and payable in connection therewith, except
where the failure to make such payments and filings individually or in the
aggregate would not have a material adverse effect on the Company.
Page 16
SECTION 2.8. ABSENCE OF LITIGATION. Section 2.8 of the Company Disclosure
Schedule contains a true and current summary description of each pending and, to
the Shareholders' knowledge, threatened litigation, action, suit, case,
proceeding, investigation or arbitration. Except as set forth in Section 2.8 of
the Company Disclosure Schedule, no action, inquiry, demand, charge, requirement
or investigation by any Governmental Entity and no litigation, action, suit,
case, proceeding, investigation or arbitration by any person or Governmental
Entity, in each case with respect to the Company or any of its subsidiaries or
any of their respective properties or Permits, is pending or, to the knowledge
of the Shareholders, threatened.
SECTION 2.9. TAX MATTERS.
(a) Except as set forth in Section 2.9 of the Company
Disclosure Schedule, each of the Company and its subsidiaries has (i) filed with
the appropriate Governmental Entities all United States federal and state income
and other material Tax Returns required to be filed by it (giving effect to all
extensions) and such Tax Returns are true, correct and complete in all material
respects; (ii) paid in full all United States federal income and other material
Taxes required to have been paid by it; and (iii) made adequate provision for
all accrued Taxes not yet due. The accruals and provisions for Taxes reflected
in the Company Financial Statements are adequate for all Taxes accrued or
accruable through the date of such statements.
(b) Except as set forth in Section 2.9 of the Company
Disclosure Schedule, as of the date of this Agreement, no Federal, state, local
or foreign audits or other administrative proceedings or court proceedings are
presently pending with regard to any Taxes or Tax Returns of the Company or any
of its subsidiaries, and neither the Company nor any of its subsidiaries has
received a written notice of any material pending or proposed claims, audits or
proceedings with respect to Taxes.
(c) Except as set forth in Section 2.9 of the Company
Disclosure Schedule, no deficiency or proposed adjustment which has not been
settled or otherwise resolved for any amount of Tax has been proposed, asserted,
or assessed in writing by any Governmental Entity against, or with respect to,
the Company or any of its subsidiaries. There is no action, suit or audit now in
progress, pending or, to the knowledge of the Company, threatened against or
with respect to the Company or any of its subsidiaries with respect to any
material Tax.
(d) Neither the Company nor any of its subsidiaries has been
included in any "consolidated," "unitary" or "combined" Tax Return (other than
Tax Returns which include only the Company) provided for under the laws of the
United States, any foreign jurisdiction or any state or locality with respect to
Taxes for any taxable year.
Page 17
(e) No election under Section 341(f) of the Internal Revenue
Code as from time to time amended (the "Code") has been made by the Company or
any of its subsidiaries.
(f) No claim has been made in writing by any Governmental
Entities in a jurisdiction where the Company or any of its subsidiaries does not
file Tax Returns that the Company is, or may be, subject to taxation by that
jurisdiction.
(g) Except as set forth in Section 2.9 of the Company
Disclosure Schedule, each of the Company and its subsidiaries has made available
to Purchaser correct and complete copies of (i) all of its material Tax Returns
filed within the past three (3) years, (ii) all audit reports, letter rulings,
technical advice memoranda and similar documents issued by a Governmental Entity
within the past three (3) years relating to the Federal, state, local or foreign
Taxes due from or with respect to the Company or any of its subsidiaries, and
(iii) any closing letters or agreements entered into by the Company with any
Governmental Entities within the past three (3) years with respect to Taxes.
(h) Except as set forth in Section 2.9 of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries has
received any notice of deficiency or assessment from any Governmental Entity for
any amount of Tax that has not been fully settled or satisfied, and to the
knowledge of the Company, no such deficiency or assessment is proposed.
(i) For purposes of this Agreement:
(i) "TAX" or "TAXES" shall mean all federal, state,
county, local, foreign and other taxes of any kind whatsoever
(including, without limitation, income, profits, premium, excise,
sales, use, occupancy, gross receipts, franchise, ad valorem,
severance, capital levy, production, transfer, license, stamp,
environmental, withholding, employment, unemployment compensation,
payroll related and property taxes, import duties and other
governmental charges and assessments), whether or not measured in
whole or in part by net income, and including deficiencies,
interest, additions to tax or interest, and penalties with respect
thereto, and including expenses associated with contesting any
proposed adjustment related to any of the foregoing.
(ii) "TAX RETURN" shall mean any return, information
report or filing with respect to Taxes, including any schedules
attached thereto and including any amendments thereof.
Page 18
SECTION 2.10. EMPLOYEE BENEFIT PLANS.
(a) Section 2.10 of the Company Disclosure Schedule contains a
true and complete list of all pension, stock option, stock purchase, benefit,
welfare, profit-sharing, retirement, disability, vacation, severance,
hospitalization, insurance, incentive, deferred compensation and other similar
fringe or employee benefit plans, funds, programs or arrangements, whether
written or oral, in each of the foregoing cases which (i) covers, is maintained
for the benefit of, or relates to any or all current or former employees of the
Company or any of its subsidiaries and any other entity ("ERISA AFFILIATE")
related to the Company under Section 414(b), (c), (m) and (o) of the Code and
(ii) is not a "multiemployer plan" as defined in Section 3(37) or Section
4001(a)(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") or Section 414 of the Code (the "EMPLOYEE PLANS"). Section 2.10 of the
Company Disclosure Schedule identifies and includes but is not limited to, each
of the Employee Plans that is subject to Section 302 or Title IV of ERISA or
Section 412 of the Code. Neither the Company, any of its subsidiaries nor any
ERISA Affiliate of the Company or any of its subsidiaries has any commitment or
formal plan, whether or not legally binding, to create any additional employee
benefit plan or modify or change any existing Employee Plan other than as may be
required by the express terms of such Employee Plan or applicable law.
(b) With respect to each Employee Plan that has been qualified
or is intended to be qualified under the Code or that is an "Employee Benefit
Plan" within the meaning of Section 3.3 of ERISA, such Employee Plan has been
duly approved and adopted by all necessary and appropriate action of the Board
of Directors of the Company (or a duly constituted committee thereof).
(c) Except as set forth in Section 2.10 of the Company
Disclosure Schedule, with respect to the Employee Plans, all required
contributions for all periods ending before the Closing Date have been or will
be paid in full by the Closing Date. Subject only to normal retrospective
adjustments in the ordinary course, all required insurance premiums have been or
will be paid in full with regard to such Employee Plans for policy years or
other applicable policy periods ending on or before the Closing Date by the
Closing Date. As of the date hereof, none of the Employee Plans has unfunded
benefit liabilities, as defined in Section 4001(a)(16) of ERISA.
(d) The Company has no "multi-employer plans," as defined in
Section 3(37) or Section 4001(a)(3) of ERISA or Section 414 ("MULTI-EMPLOYER
PLANS"), and never has had any such plans.
(e) With respect to each Employee Plan (i) no prohibited
transactions as defined in Section 406 of ERISA or Section 4975 of the Code have
occurred or are expected to occur as a result of the Purchase or the
transactions contemplated by this
Page 19
Agreement, (ii) no action, suit, grievance, arbitration or other type of
litigation, or claim with respect to the assets of any Employee Plan (other than
routine claims for benefits made in the ordinary course of plan administration
for which plan administrative review procedures have not been exhausted) is
pending or, to the knowledge of the Company, threatened or imminent against the
Company, any ERISA Affiliate or any fiduciary, as such term is defined in
Section 3(21) of ERISA ("FIDUCIARY"), including, but not limited to, any action,
suit, grievance, arbitration or other type of litigation, or claim regarding
conduct that allegedly interferes with the attainment of rights under any
Employee Plan. To the knowledge of the Company, neither the Company, nor its
directors, officers, employees nor any Fiduciary has any liability for failure
to comply with ERISA or the Code for any action or failure to act in connection
with the administration or investment of such plan. None of the Employee Plans
is subject to any pending investigations or to the knowledge of the Company
threatened investigations from any Governmental Agencies who enforce applicable
laws under ERISA and the Code.
(f) Except as set forth in Section 2.10 of the Company
Disclosure, each of the Employee Plans is, and has been, operated in accordance
with its terms and each of the Employee Plans, and administration thereof, is,
and has been, in all material respects in compliance with the requirements of
any and all applicable statutes, orders or governmental rules or regulations
currently in effect, including, but not limited to, ERISA and the Code. Except
as set forth in Section 2.10 of the Company Disclosure Schedule, all required
reports and descriptions of the Employee Plans (including but not limited to
Form 5500 Annual Reports, Form 1024 Application for Recognition of Exemption
Under Section 501(a), Summary Annual Reports and Summary Plan Descriptions) have
been timely filed and distributed as required by ERISA and the Code. Any notices
required by ERISA or the Code or any other state or federal law or any ruling or
regulation of any state or federal administrative agency with respect to the
Employee Plans, including but not limited to any notices required by Section
4980B of the Code, have been appropriately given.
(g) The Internal Revenue Service (the "IRS") has issued a
favorable determination letter or opinion letter with respect to each Employee
Plan intended to be "qualified" within the meaning of Section 401(a) of the Code
that has not been revoked and, to the knowledge of the Shareholders, no
circumstances exist that could adversely affect the qualified status of any such
plan and the exemption under Section 501(a) of the Code of the trust maintained
thereunder. Each Employee Plan intended to satisfy the requirements of Section
125, 501(c)(9) or 501(c)(17) of the Code has satisfied such requirements in all
material respects.
(h) With respect to each Employee Plan to which the Company or
any ERISA Affiliate made, or was required to make, contributions on behalf of
any employee during the five-year period ending on the last day of the most
recent plan year end prior to the Closing Date, (i) no liability under Title IV
or Section 302 of ERISA has been incurred by the Company or any ERISA Affiliate
that has not been satisfied in full, and
Page 20
(ii) to the knowledge of the Shareholders, no condition exists that presents a
material risk to the Company or any ERISA Affiliate of incurring any such
liability and (iii) the present value of accrued benefits under such plan, based
upon the actuarial assumptions used for funding purposes in the most recent
actuarial report prepared by such plan's actuary with respect to such plan did
not exceed, as of its latest valuation date, the then current value of the
assets of such plan allocable to such accrued benefits. No Employee Plan or any
trust established thereunder has incurred any "accumulated funding deficiency"
(as defined in Section 302 of ERISA and Section 412 of the Code), whether or not
waived, as of the last day of the most recently ended fiscal year.
(i) Except as set forth in Section 2.10 of the Company
Disclosure Schedule, no Employee Plan provides medical, surgical,
hospitalization, death or similar benefits (whether or not insured) for
employees for periods extending beyond their retirement or other termination of
service, other than (i) coverage mandated by Section 4980B of the Code, Section
601 of ERISA or other applicable law, (ii) death benefits under any "pension
plan," (iii) benefits the full cost of which is borne by the employee (or his
beneficiary) or (iv) Employee Plans that can be amended or terminated by the
Company without consent. The Company does not have any current or projected
liability with respect to post-employment or post-retirement welfare benefits
for retired, former, or current employees of the Company.
(j) No material amounts payable under the Employee Plans will
fail to be deductible for Federal income tax purposes by virtue of Section
162(m) of the Code.
(k) To the extent that the Company is deemed to be a fiduciary
with respect to any Plan that is subject to ERISA, the Company (i) during the
past five years has complied with the requirements of ERISA and the Code in the
performance of its duties and responsibilities with respect to such employee
benefit plan and (ii) has not knowingly caused any of the trusts for which it
serves as an investment manager, as defined in Section 3(38) of ERISA, to enter
into any transaction that would constitute a "prohibited transaction" under
Section 406 of ERISA or Section 4975 of the Code, with respect to any such
trusts, except for transactions that are the subject of a statutory or
administrative exemption.
(l) No person will be entitled to a "gross up" or other similar
payment in respect of excise taxes under Section 4999 of the Code with respect
to the transactions contemplated by this Agreement.
(m) None of the Employee Plans have been completely or
partially terminated and none has been the subject of a "reportable event" as
that term is defined in Section 4043 of ERISA. No amendment has been adopted
which would require the Company or any ERISA Affiliate to provide security
pursuant to Section 307 of ERISA or Section 401(a)(29) of the Code.
Page 21
SECTION 2.11. LABOR MATTERS.
(a) With respect to employees of the Company or its
subsidiaries: (i) to the knowledge of the Shareholders, no senior executive or
key employee has any plans to terminate employment with the Company or any of
its subsidiaries; (ii) there is no unfair labor practice charge or complaint
against the Company pending or, to the knowledge of the Shareholders, threatened
before the National Labor Relations Board or any other comparable Governmental
Entity; (iii) there is no demand for recognition made by any labor organization
or petition for election filed with the National Labor Relations Board or any
other comparable Governmental Entity; (iv) no grievance or any arbitration
proceeding arising out of or under collective bargaining agreements is pending
and, to the knowledge of Shareholders, no claims therefor have been threatened
other than grievances or arbitrations incurred in the ordinary course of
business; (v) the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby and thereby will not give rise to
termination of any existing collective bargaining agreement or permit any labor
organization to commence or initiate any negotiations in respect of wages,
hours, benefits, severance or working conditions under any such existing
collective bargaining agreements; and (vi) there is no litigation, arbitration
proceeding, governmental investigation, administrative charge, citation or
action of any kind pending or, to the knowledge of the Shareholders, proposed or
threatened against the Company relating to employment, employment practices,
terms and conditions of employment or wages, benefits, severance and hours.
(b) Section 2.11(b) of the Company Disclosure Schedule lists
the name, title, date of employment and current annual salary of each current
salaried employee whose annual salary exceeds $100,000. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby and thereby will not, except to the extent of amounts owed to certain
employees which are obligations of TMC as disclosed in Section 2.11(b) of the
Company Disclosure Schedule (i) result in any payment (including severance,
unemployment compensation, tax gross-up, bonus or otherwise) becoming due to any
current or former director, employee or independent contractor of the Company or
any of its subsidiaries, from the Company or any of its subsidiaries under any
Employee Plan or other agreement, (ii) materially increase any benefits
otherwise payable under any Employee Plan or other agreement, or (iii) result in
the acceleration of the time of payment, exercise or vesting of any such
benefits.
(c) Section 2.11(c) of the Company Disclosure Schedule sets
forth all contracts, agreements, plans or arrangements covering any employee of
the Company or its subsidiaries containing "change of control," "stay-put,"
transition, retention, severance or similar provisions, and sets forth the names
and titles of all such employees, the amounts payable under such provisions,
whether such provisions would become payable as a result of the Purchase and the
transactions contemplated by this Agreement, and when such amounts would be
payable to such employees, all of which are in writing, have heretofore been
duly approved by the Company's Shareholders, and true and complete
Page 22
copies of all of which have heretofore been delivered to Purchaser. There is no
contract, agreement, plan or arrangement (oral or written) covering any employee
of the Company that individually or collectively could give rise to the payment
of any amount that would not be deductible pursuant to the terms of Section 280G
of the Code.
SECTION 2.12 ENVIRONMENTAL MATTERS. Except for such matters which would
not, individually or in the aggregate, reasonably be expected to result in a
material adverse effect on the Company or are listed in Section 2.12 of the
Company Disclosure Schedule, to the best of Shareholder's knowledge:
(a) COMPLIANCE. (i) The Company and its subsidiaries are in
compliance in all material respects with all applicable Environmental Laws; (ii)
neither the Company nor any of its subsidiaries has received any written
communication from any person or governmental entity that alleges that the
Company or any of its subsidiaries is not in compliance with applicable
Environmental Laws; and (iii) there have not been any Releases of Hazardous
Substances by the Company or any of its subsidiaries, or, by any other party, at
any property currently or formerly owned or operated by the Company or any of
its subsidiaries that occurred during the period of the Company's or any of its
subsidiaries' ownership or operation of such property.
(b) ENVIRONMENTAL PERMITS. The Company and its subsidiaries
have all Environmental Permits necessary for the conduct and operation of its
business, and all such permits are in good standing or, where applicable, a
renewal application has been timely filed and is pending agency approval, and
the Company or its subsidiaries are in compliance with all terms and conditions
of all such Environmental Permits and is not required to make any expenditure in
order to obtain or renew any Environmental Permits.
(c) ENVIRONMENTAL CLAIMS. There are no Environmental Claims
pending or, to the Company's knowledge, threatened, against the Company, or
against any real or personal property or operation that the Company owns, leases
or manages.
(d) As used in this Agreement:
(i) "ENVIRONMENTAL LAWS" shall mean any and all binding and
applicable local, municipal, state, federal or international law,
statute, treaty, directive, decision, judgment, award, regulation,
decree, rule, code of practice, guidance, order, direction,
consent, authorization, permit or similar requirement, approval or
standard concerning (a) occupational, consumer and/or public
health and safety, and/or (b) environmental matters (including
clean-up standards and practices), with respect to buildings,
equipment, soil, sub-surface strata, air, surface water, or ground
water, whether set forth in applicable law or applied in
Page 23
practice, whether to facilities such as those of the Company
Properties in the jurisdictions in which the Company Properties
are located or to facilities such as those used for the
transportation, storage or disposal of Hazardous Substances
generated by the Company or otherwise.
(ii) "ENVIRONMENTAL PERMITS" shall mean Permits required by
Environmental Laws.
(iii) "HAZARDOUS SUBSTANCES" shall mean any and all dangerous
substances, hazardous substances, toxic substances, radioactive
substances, hazardous wastes, special wastes, controlled wastes,
oils, petroleum and petroleum products, computer component parts,
hazardous chemicals and any other materials which are regulated by
the Environmental Laws or otherwise found or determined to be
potentially harmful to human health or the environment.
(iv) "RELEASE" shall mean any spilling, leaking, pumping,
emitting, emptying, discharging, injecting, escaping, leaching,
migrating, dumping or disposing of Hazardous Substances (including
the abandonment or discarding of barrels, containers or other
closed receptacles containing Hazardous Substances) into the
environment.
SECTION 2.13 INTELLECTUAL PROPERTY.
(a) Section 2.13(a) of the Company Disclosure Schedule sets
forth, for the Intellectual Property (as defined below) owned or purported to be
owned by the Company or any of its subsidiaries, a complete and accurate list of
all U.S. and foreign (i) patents and patent applications, (ii) trademarks and
service marks which are registered or the subject of an application for
registration and material unregistered trademarks or service marks , (iii)
copyrights which are registered or the subject of an application for
registration, and (iv) Internet domain names. The Company or one of its
subsidiaries owns or has the valid right to use all patents and patent
applications, patent rights, trademarks, service marks, trademark or service
mark registrations and applications, trade names, logos, designs, Internet
domain names, slogans and general intangibles of like nature, together with all
goodwill related to the foregoing, copyrights, copyright registrations, renewals
and applications, Software (as defined below), technology, inventions,
discoveries, trade secrets and other confidential information, know-how,
proprietary processes, designs, processes, techniques, formulae, algorithms,
models and methodologies, licenses, and all other proprietary rights
(collectively, the "INTELLECTUAL PROPERTY") that it owns or purports to own or
is licensed to Company in a manner sufficient for the conduct of the business of
the Company as it currently is conducted. "SOFTWARE" means any and all (i)
computer programs, including any and all software implementations of algorithms,
models and methodologies, whether in source code or object code, (ii)
Page 24
databases and compilations, including any and all data and collections of data,
whether machine readable or otherwise, (iii) descriptions, flow-charts and other
work product used to design, plan, organize and develop any of the foregoing,
(iv) the technology supporting and content contained on any owned or operated
Internet site(s), and (v) all documentation, including user manuals and training
materials, relating to any of the foregoing.
(b) Except as set forth in Section 2.13(b) of the Company
Disclosure Schedule, all of the Intellectual Property owned or purported to be
owned by the Company or any of its subsidiaries is free and clear of all Liens.
The Company or one of its subsidiaries is listed in the records of the
appropriate United States, state or foreign agency as, the sole owner of record
for each patent and patent application and trademark, service mark and copyright
which is registered or the subject of an application for registration that is
listed in Section 2.13(a) of the Company Disclosure Schedule.
(c) All of the patents, patent applications, trademarks,
service marks and copyrights owned or purported to be owned by the Company which
have been issued by, or registered or the subject of an application filed with,
as applicable, the U.S. Patent and Trademark Office, the U.S. Copyright Office
or in any similar office or agency anywhere in the world, including, but not
limited to the items listed in Section 2.13(a) of the Company Disclosure
Schedule are subsisting, enforceable, in full force and effect, and have not
been cancelled, expired, abandoned or otherwise terminated and all renewal fees
in respect thereof have been duly paid and are currently in compliance with all
formal legal requirements (including the timely post-registration filing of
affidavits of use and incontestability and renewal applications) and are, to the
Shareholders' knowledge, valid. There is no pending or, to the Shareholders'
knowledge, threatened opposition, interference, invalidation or cancellation
proceeding before any court or registration authority in any jurisdiction
against any of the items listed in Section 2.13(a) of the Company Disclosure
Schedule or, to the Shareholders' knowledge, against any other Intellectual
Property used by the Company or its subsidiaries.
(d) To Shareholder's knowledge, the conduct of the Company's or
each of its subsidiaries' business as currently conducted does not infringe upon
(either directly or indirectly such as through contributory infringement or
inducement to infringe), dilute, misappropriate or otherwise violate (i) any
Intellectual Property owned or controlled by any third party ("THIRD PARTY
RIGHTS"), other than the rights of any third party under any patent, or (ii) to
the Shareholders' knowledge, the rights of any third party under any patent.
Neither the Company nor the Shareholders have received any communication
alleging or suggesting that the Company has been or may be engaged in, liable
for or contributing to any infringement of any Third Party Rights, nor does the
Company or the Shareholders have any reason to expect that any such
communication will be forthcoming. There are no pending, or, to the knowledge of
the Shareholders, threatened claims against the Company or any of its
subsidiaries alleging that the
Page 25
operation of the business as currently conducted, infringes on or conflicts with
any Third Party Rights.
(e) To the Shareholders' knowledge, no third party is
misappropriating, infringing, diluting, or violating any Intellectual Property
owned or purported to be owned by or licensed to or by the Company or its
subsidiaries and no such claims have been made against a third party by the
Company or any of its subsidiaries.
(f) Each material item of Software, which is used by the
Company or any of its subsidiaries in connection with the operation of its
business as currently conducted, is either (i) owned by the Company or any of
its subsidiaries, (ii) currently in the public domain or otherwise available to
the Company without the need of a license, lease or consent of any third party,
or (iii) used under rights granted to the Company or any of its subsidiaries
pursuant to a written agreement, license or lease from a third party.
(g) Section 2.13(g) of the Company Disclosure Schedule sets
forth a complete list of all agreements under which the Company or any of its
subsidiaries is granted rights to acquire or use the Intellectual Property of a
third party (other than shrink-wrap or click on-downloadable general purpose
software) (the "COMPANY IP AGREEMENTS"). Except as set forth in Section 2.13(g)
of the Company Disclosure Schedule, the Company is not under any obligation to
pay royalties or other payments in connection with any Company IP Agreement, nor
restricted from assigning its rights respecting Intellectual Property nor will
the Company otherwise be, as a result of the execution and delivery of this
Agreement or the performance of its obligations under this Agreement, in breach
of any Company IP Agreement. Each Company IP Agreement is in full force and
effect and has not been amended. Neither the Company nor, to the knowledge of
the Shareholders, any other party thereto, is in default or breach under any
such Company IP Agreement. No event has occurred which, with the passage of time
or the giving of notice or both, would cause a breach of or default by the
Company under any of the Company IP Agreements and, to the knowledge of the
Company, there is no breach or anticipated breach by any other party to any
Company IP Agreement.
(h) To the Shareholders' knowledge, the Company does not sell
any products that intentionally contain any "viruses", "time-bombs",
"key-locks", or any other devices intentionally created that could disrupt or
interfere with the operation of the products or the integrity of the data,
information or signals they produce in a manner adverse to the Company, any of
its subsidiaries or any licensee or recipient.
(i) To the Shareholders' knowledge, neither the Company nor any
of its subsidiaries has embedded any open source, copyleft or community source
code in any of its Products which are generally available or in development,
including but not limited
Page 26
to any libraries or code licensed under the GNU General Public License, GNU
Lesser General Public License or similar license arrangement.
SECTION 2.14 INSURANCE MATTERS. All policies providing insurance
coverage as set forth in Section 2.14 of the Company Disclosure Schedule are in
full force and effect, all premiums due and payable thereon have been paid and
no written or oral notice of cancellation or termination has been received and
is outstanding.
SECTION 2.15 TRANSACTIONS WITH AFFILIATES. Except as set forth on
Section 2.15 of the Company Disclosure Schedule, there are no outstanding
amounts payable to or receivable from, loans, leases or other existing
agreements between the Company or any of its subsidiaries, on the one hand, and
any member, officer, manager, employee or affiliate of the Company or any of its
subsidiaries or any of the Shareholder affiliated companies, or any family
member or affiliate of such member, officer, manager, employee or affiliate on
the other hand.
SECTION 2.16 VOTING REQUIREMENTS. The affirmative vote (in person
or by duly authorized and valid proxy at a Company Shareholders' meeting or by
written consent) of the holders of all of the outstanding Shares in favor of the
adoption of this Agreement is the only vote of the holders of any class or
series of the Company's Shares required by applicable law and the Company's
organizational instruments to duly effect such adoption.
SECTION 2.17 BROKERS. No broker, investment banker, financial
advisor, finder, consultant or other person other than Pagemill Partners, LLC
and HT Capital Advisors are entitled to any broker's, finder's, financial
advisor's or other similar fee, compensation or commission, however and whenever
payable, in connection with the Purchase and the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Company.
Purchaser shall be solely responsible for any fees charged by Pagemill Partners
LLC, and Shareholders shall be solely responsible for any fees charged by HT
Capital Advisors, except that Purchaser is hereby informed that Company has
already paid to HT Capital Advisors a $25,000 deposit, which Purchaser agrees is
acceptable.
SECTION 2.18 REAL PROPERTY.
(a) Each of the Company and its subsidiaries has good and
marketable title in fee simple to all real properties owned by it and all
buildings, structures and other improvements located thereon and valid
leaseholds in all real estate leased by it, other than Company Permitted Liens.
Section 2.18(a) of the Company Disclosure Schedule sets forth a complete list of
all (i) real property owned by the Company or its subsidiaries as of the date
hereof and (ii) real property leased, subleased, or otherwise occupied or used
by the Company or any of its subsidiaries as lessee. With respect to each parcel
of real property leased, subleased, or otherwise occupied or used by the Company
or any of its subsidiaries as lessee: (i) the Company or the applicable
subsidiary has a valid leasehold interest or other right of use and occupancy,
free and clear of any Liens on such
Page 27
leasehold interest or other rights of use and occupancy, or any covenants,
easements or title defects known to or created by the Company or the applicable
subsidiary, except as do not materially affect the occupancy or uses of such
property. Each of the Company's and its subsidiaries' agreement with respect to
real property leased, subleased, or otherwise occupied or used by the Company as
lessee is in full force and effect and has not been amended. Neither the Company
nor the applicable subsidiary nor, to the knowledge of the Shareholders or the
applicable subsidiary, any other party thereto, is in material default or
material breach under any such agreement. No event has occurred which, with the
passage of time or the giving of notice or both, would cause a breach of or
default by the Company or the applicable subsidiary under any of such agreement
and, to the knowledge of the Company or the applicable subsidiary, there is no
breach or anticipated breach by any other party to such agreements.
(b) As used in this Agreement, Company Permitted Liens shall
mean: (i) Any Lien reflected in Section 2.18(b)(i) of the Company Disclosure
Schedule, (ii) Liens for Taxes not yet due or delinquent or as to which there is
a good faith dispute and for which there are adequate provisions on the books
and records of the Company, (iii) with respect to real property, any Lien,
encumbrance or other title defect which is not in a liquidated amount (whether
material or immaterial) and which does not, individually or in the aggregate,
interfere materially with the current use or materially detract from the value
or marketability of such property (assuming its continued use in the manner in
which it is currently used) and (iv) inchoate materialmen's, mechanics',
carriers', workmen's and repairmen's liens arising in the ordinary course and
not past due and payable or the payment of which is being contested in good
faith by appropriate proceedings.
SECTION 2.19 TANGIBLE PERSONAL PROPERTY. Except as would not
materially impair the Company and its operations, the machinery, equipment,
furniture, fixtures and other tangible personal property (the "Tangible Personal
Property") owned, leased or used by the Company or any of its subsidiaries is in
the aggregate sufficient and adequate to carry on business in all material
respects as presently conducted and is, in the aggregate and in all material
respects, in operating condition and repair, normal wear and tear excepted. The
Company is in possession of and has good title to, or valid leasehold interests
in or valid rights under contract to use, the Tangible Personal Property
material to the Company, taken as a whole, free and clear of all Liens, other
than the Company Permitted Liens as set forth in Section 2.18(b) of the Company
Disclosure Schedule.
SECTION 2.20 INVESTMENT COMPANY. Neither the Company nor any of
its subsidiaries is an investment company required to be registered as an
investment company pursuant to the Investment Company Act.
SECTION 2.21 BOARD APPROVAL. Pursuant to meetings duly noticed and
convened in accordance with all applicable laws and at each of which a quorum
was present, or by written consent as permitted by applicable law and governing
documents, the Board of Directors of the Company, after full and deliberate
consideration,
Page 28
unanimously (other than for directors who abstain) has (i) duly approved this
Agreement and resolved that the transactions contemplated hereby are fair to,
advisable and in the best interests of the Company's shareholders, (ii) resolved
to unanimously recommend that the Company's shareholders approve the
transactions contemplated hereby and (iii) directed that the Purchase be
submitted for consideration by the holders of the Shares.
SECTION 2.22 BOOKS AND RECORDS. Except as to certain accruals and
expenses as set forth in Section 2.5(a) of the Company Disclosure Schedule, each
of the Company and its subsidiaries maintains and has in all material respects,
maintained accurate books and records reflecting its assets and liabilities and
accounts, notes and other receivables and inventory are recorded accurately, and
proper and adequate procedures are implemented to effect the collection thereof
on a current and timely basis.
SECTION 2.23 STATUS OF SHARES BEING TRANSFERRED. Subject to
Section 2.23 of the Company Disclosure Schedule, the Shareholders own all of the
issued and outstanding shares of capital stock of the Company. The Shareholders
have full power to convey good and marketable title to their Shares, free of any
liens, charges, or encumbrances of any nature.
SECTION 2.24 INVESTMENT IN PURCHASER COMMON STOCK.
(a) Each Shareholder is an "accredited investor" as defined in
Rule 501(a)(5) or (6) under the Securities Act of 1933, as amended (the
"Securities Act").
(b) Each Shareholder is acquiring the shares of common stock of
Purchaser to be issued hereunder for investment for his or her own account, and
not for the account of another Person (except to the extent any such common
stock of Purchaser is to be given to TMC, an entity owned and controlled by
Shareholders, for the Earn Out Payment or the Pro Rated Earn Out Payment, in
accordance with the provisions of this Agreement) and not with a view to, or for
sale in connection with, any distribution, assignment, or resale of any part
thereof in violation of the Securities Act of 1933 (the "Securities Act"), nor
with any present intention of any such distribution, assignment, or resale,
except that TMC may transfer some or all of the common stock issued to it as an
Earn Out Payment or Pro Rated Earn Out Payment, in proportions as TMC determines
appropriate, to any or all of Vincent Buscareno, Walter Lange, and Michael
Simms, based upon their performance as employees of the Company (the "Restricted
Stock Grants") and provided that each such transferee has been provided, by
Graziano, any information related to Purchaser that Graziano obtained in the due
diligence process leading to this Agreement, including but not limited to, the
information set forth in Section 2.24(c) below. Each Shareholder understands
that the shares of Purchaser Common Stock to be issued to him or her hereunder
have not been and will not be, registered in the United States under the
Securities Act or applicable state securities laws, and may not be sold,
hypothecated or otherwise disposed of unless subsequently registered under the
Securities Act and applicable state securities laws or unless disposed of in a
transaction exempt from such laws, such as in compliance with Rule 144
promulgated by the SEC, and that certificates representing the shares of
Purchaser
Page 29
Common Stock shall bear legends to this effect. Each Shareholder understands
that Purchaser's issuance of shares of Purchaser Common Stock contemplated by
this Agreement are intended to be exempt from the registration provisions of the
Securities Act, the availability of which depends upon, among other things, the
bona fide nature of the investment intent and the accuracy of Shareholders'
representations as expressed herein. Each of Shareholders is neither a party to
nor bound by any agreement regarding the ownership or disposition of the shares
of Purchaser Common Stock other than this Agreement and the Restricted Stock
Grants.
(c) Shareholders, and each of them, have made independent
investigation of Purchaser and related matters as (i) he or she deems to be
necessary or advisable in connection with the his or her investment in and
acceptance of the shares of Purchaser Common Stock to be issued to him or her
hereunder and (ii) he or she believes to be necessary in order to reach an
informed decision as to the advisability of making an investment in and
accepting the shares of Purchaser Common Stock to be issued to him or her
hereunder. Without limiting the foregoing, each Shareholder has reviewed the
Purchaser SEC Documents (as hereinafter defined) and the Purchaser's other
publicly-available SEC filings. In evaluating his or her investment in and
acceptance of the shares of Purchaser Common Stock to be issued to them
hereunder, Shareholders have not relied upon any representation or other
information (oral or written) other than as set forth in this Agreement or in
such Purchaser SEC Documents and other SEC filings.
(d) Each Shareholder has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of his investment in the Purchaser Common Stock as contemplated by this
Agreement, and is able to bear the economic risk of such investment for an
indefinite period of time. Shareholders are not relying on Purchaser for advice
with respect to economic considerations involved in its acquisition and
acceptance of the shares of Purchaser Common Stock.
SECTION 2.25 DISCLOSURE. On the date of this Agreement, the
Shareholders have, and at the Closing Date they will have, disclosed all events,
conditions, and facts materially affecting the business of the Company.
Shareholders have not now and will not have, at the Closing Date, withheld
knowledge of any such events, conditions, and facts which they know, or have
reasonable ground to know, may materially affect the business of the Company.
None of the representations and warranties made by Shareholders in this
Agreement and contained in any certificate or other instrument furnished or to
be furnished to Purchaser pursuant to this Agreement contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary in order to make the statements contained in this
Agreement not misleading.
Page 30
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Shareholders as follows:
SECTION 3.1 ORGANIZATION, STANDING AND CORPORATE POWER.
(a) Each of Purchaser and its subsidiaries is a corporation or
other legal entity duly organized, validly existing and in good standing under
the laws of the jurisdiction in which it is organized and has the requisite
corporate power and requisite authority to carry on its business as presently
being conducted. Each of Purchaser and its subsidiaries is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership, leasing or operation of its
properties makes such qualification or licensing necessary, except for those
jurisdictions where the failure to be so qualified or licensed or to be in good
standing individually or in the aggregate would not reasonably be expected to
have a material adverse effect on Purchaser.
(b) Purchaser has delivered or made available to the Company
prior to the execution of this Agreement complete and correct copies of the
certificate of incorporation and by-laws or other organizational documents of
Purchaser and its subsidiaries, each as in effect at the date of this Agreement.
SECTION 3.2 CAPITAL STRUCTURE.
(a) The authorized capital stock of Purchaser consists of
200,000,000 shares of common stock, $.001 par value (the "Purchaser Common
Stock"), and 5,000,000 shares of Series A Preferred Stock, par value $.001 per
share, of Purchaser ("PURCHASER PREFERRED STOCK"). As of the date hereof: (i)
13,326,810 shares of Purchaser Common Stock were issued and outstanding; (ii) no
shares of Purchaser Common Stock were held by Purchaser in its treasury; (iii)
no shares of Purchaser Common Stock were held by subsidiaries of Purchaser; (iv)
approximately 2,477,589 shares of Purchaser Common Stock were reserved for
issuance pursuant to stock-based plans (such plans, collectively, the "PURCHASER
STOCK PLANS"), all of which are subject to outstanding employee stock options or
other rights to purchase or receive Purchaser Common Stock granted under the
Purchaser Stock Plans (collectively, "PURCHASER EMPLOYEE STOCK OPTIONS"); (v)
2,625,148 shares of Purchaser Common Stock are reserved for issuance pursuant to
convertible notes, (vi) 3,252,736 shares of Purchaser Common Stock were reserved
for issuance pursuant to outstanding warrants. As of the date hereof, (w)
2,466,971 shares of Purchaser Preferred Stock were issued and outstanding; (x)
no shares of Purchaser Preferred Stock were held by Purchaser in its treasury;
(y) no shares of Purchaser
Page 31
Preferred Stock were held by subsidiaries of Purchaser; and (z) 33,029 shares of
Purchaser Preferred Stock were reserved for issuance pursuant to outstanding
warrants.
(b) All outstanding shares of capital stock of Purchaser have
been, and all shares thereof which may be issued pursuant to this Agreement or
otherwise (including upon the conversion of the Purchaser Series A Preferred
Stock) will be, when issued, duly authorized and validly issued and are fully
paid and nonassessable and are not subject to preemptive rights created by
statute, the Purchaser's articles of incorporation or any agreement to which
Purchaser is a party or by which Purchaser may be bound. Except as set forth in
this Section and except for changes since the date of this Agreement resulting
from the exercise of Purchaser's employee stock options outstanding on such
date, there are outstanding (i) no shares of capital stock or other voting
securities of Purchaser, (ii) no securities of Purchaser convertible into or
exchangeable for shares of capital stock or voting securities of Purchaser, and
(iii) no options or other rights to acquire from Purchaser, other than Employee
Stock Options, and no obligation of Purchaser to issue, any capital stock,
voting securities or securities convertible into or exchangeable for capital
stock of Purchaser.
(c) Purchaser has a sufficient number of duly authorized but
unissued shares of Purchaser Common Stock to issue the maximum number of such
shares contemplated by Article I of this Agreement as the Purchase
Consideration. The shares of Purchaser common stock to be issued and delivered
hereunder will be duly and validly issued, fully paid and non-assessable, free
and clear of all Encumbrances.
SECTION 3.3 AUTHORITY; NONCONTRAVENTION. Purchaser has the
corporate power and authority to execute, deliver and perform this Agreement and
the other agreements to be executed and delivered by Purchaser in connection
herewith and to consummate the transactions contemplated hereby and thereby. All
corporate acts and proceedings required to be taken by or on the part of
Purchaser to authorize Purchaser to execute, deliver and perform this Agreement
and the other agreements to be executed and delivered by Purchaser in connection
herewith and to consummate the transactions contemplated hereby and thereby have
been duly and validly taken. This Agreement constitutes a valid and binding
agreement, and the other agreements to be executed and delivered by Purchaser in
connection herewith when so executed and delivered will constitute valid and
binding agreements, of Purchaser.
SECTION 3.4 PURCHASER DOCUMENTS.
(a) As of their respective filing dates, (i) all reports filed
by Purchaser and which must be filed by Purchaser in the future with the
Securities and Exchange Commission (the "SEC") pursuant to the Exchange Act (the
"PURCHASER SEC DOCUMENTS") complied and, with respect to future filings, will
comply in all material respects with the requirements of the Exchange Act, as
the case may be, and the rules and
Page 32
regulations of the SEC thereunder applicable to such Purchaser SEC Documents,
and (ii) no Purchaser SEC Documents, as of their respective dates contained any
untrue statement of a material fact or omitted, and no Purchaser SEC Document
filed subsequent to the date hereof will omit as of their respective dates, to
state a material fact required to be stated therein or necessary to make the
statements therein (in the case of registration statements of the Purchaser
under the Securities Act, in light of the circumstances under which they were
made) not misleading.
(b) The financial statements of Purchaser included in the
Purchaser SEC Documents (including the related notes) complied as to form, as of
their respective dates of filing with the SEC, in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with GAAP
(except, in the case of unaudited statements, as permitted by Quarterly Report
Form 10-Q of the SEC) applied on a consistent basis during the periods and at
the dates involved (except as may be indicated in the notes thereto) and fairly
present the consolidated financial condition of Purchaser and its subsidiaries
at the dates thereof and the consolidated results of operations and cash flows
of Purchaser and its subsidiaries for the periods then ended (subject, in the
case of unaudited statements, to notes and normal year-end audit adjustments
that were not material in amount or effect). Except for liabilities (i)
reflected in Purchaser's unaudited balance sheet as of December 31, 2005 or
described in any notes thereto (or for which neither accrual nor footnote
disclosure is required pursuant to GAAP), or (ii) incurred in the ordinary
course of business since December 31, 2005 consistent with past practice or in
connection with this Agreement or the transactions contemplated hereby, neither
Purchaser nor any of its subsidiaries has any material liabilities or
obligations of any nature.
SECTION 3.5 VOTING REQUIREMENTS. No consent or approval of the
holders of the outstanding shares of Purchaser Common Stock or any other class
of Purchaser capital stock is required to approve the Purchase and the
transactions contemplated by this Agreement under applicable law or the
Purchaser's organizational instruments.
SECTION 3.6 BROKERS. Except for Pagemill Partners, LLC, and HT
Capital Advisors no broker, investment banker, financial advisor, finder,
consultant or other person is entitled to any broker's, finder's, financial
advisor's or other similar fee, compensation or commission, however and whenever
payable, in connection with the Purchase and the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Purchaser.
Purchaser shall be solely responsible for any fees charged by Pagemill Partners
LLC, and Shareholders shall be solely responsible for any fees charged by HT
Capital Advisors, provided that Purchaser agrees that the $25,000.000 deposit
already paid to HT Capital Advisors by Company is acceptable, and Shareholder
shall not be liable to repay the Company said $25,000.00 deposit.
Page 33
SECTION 3.7 BOARD AND OTHER APPROVALS. Pursuant to meetings duly
noticed and convened in accordance with all applicable laws and at each of which
a quorum was present, or by written consent as permitted by applicable law and
governing documents, the Board of Directors of Purchaser, after full and
deliberate consideration, unanimously (other than for directors who abstain) has
duly adopted this Agreement and resolved that the Purchase and the transactions
contemplated hereby are fair to, advisable and in the best interests of
Purchaser's Shareholders. The Board of Directors of Purchaser unanimously has
duly approved this Agreement and has determined that the Purchase is advisable.
Purchaser has obtained all other approvals or consents required in connection
with the execution and delivery of this Agreement or the consummation or
performance of any of the transactions contemplated herein.
SECTION 3.8 BOOKS AND RECORDS. Each of Purchaser and its
subsidiaries maintains and has maintained accurate books and records reflecting
its assets and liabilities and accounts, notes and other receivables and
inventory are recorded accurately, and proper and adequate procedures are
implemented to effect the collection thereof on a current and timely basis.
SECTION 3.9 SARBANES OXLEY ACT COMPLIANCE. Purchaser is in
compliance with all presently effective and applicable provisions of the
Sarbanes Oxley Act of 2002 (the "SARBANES OXLEY ACT") and is actively taking
steps to ensure that it will be in compliance with other provisions of the
Sarbanes Oxley Act upon the effectiveness or applicability to Purchaser of such
provisions. Purchaser is currently in compliance and will use its reasonable
efforts to continue to comply in all material respects with all public reporting
requirements necessary to permit sales of its restricted shares by Shareholders
pursuant to Rule 144.
SECTION 3.10 ADDITIONAL REPRESENTATIONS.
Neither the execution nor delivery of this Agreement nor the
consummation or performance of any of the transactions contemplated herein will,
directly or indirectly (with or without notice or lapse of time):
(i) Breach (a) any provision of any of the governing
documents of Purchaser or (b) any resolution adopted by the Board of Directors
or the shareholders;
(ii) Breach or give any Governmental Entity or other
Person the right to challenge any of the transactions contemplated herein, or to
exercise any remedy or obtain any relief under any rule, ordinance, contract,
order, decree, or agreement under any legally binding arrangement to which
Purchaser is subject;
(iii) Contravene, conflict with or result in a violation
or breach of any of the terms or requirements of, or give any Governmental
Entity the right to revoke, withdraw, suspend, cancel, terminate or modify, any
Permit or governmental authorization that is held by Purchaser or that otherwise
relates to the business of Purchaser;
Page 34
(iv) Cause Shareholder or Company to become subject to,
or to become liable for the payment of, any Tax, penalty or fine resulting from
the contemplated transaction subsequent to the Closing Date; or
(v) result in a violation or Breach of, or constitute a
default under, any of the terms, conditions or provisions of any agreement or
other instrument or obligation to which Purchaser is a party or by which
Purchaser or any of its properties or assets may be bound.
SECTION 3.11 LITIGATION. Except as set forth in the Purchaser SEC
Documents or Section 3.11 of the Purchaser Disclosure Schedule, there is no
suit, claim, action, proceeding or investigation pending or to the knowledge of
Purchaser threatened against Purchaser or its Affiliates that is reasonably
likely to have a material adverse effect on Purchaser or would prevent Purchaser
from consummating the transactions contemplated herein. Purchaser is not subject
to any outstanding order, writ, injunction or decree which in so far as can be
reasonably foreseen, individually or in the aggregate, which now or in the
future would have a material adverse effect or result in adverse consequences,
or would prevent Purchaser from consummating the transactions contemplated
herein.
SECTION 3.12 SOLVENCY. No voluntary or involuntary petition in
bankruptcy, receivership, insolvency or reorganization with respect to
Purchaser, or petition to appoint a receiver or trustee of Purchaser's property,
has been filed by or against Purchaser, nor shall Purchaser file such a petition
prior to the Closing Date or for one hundred days thereafter, and if such
petition is filed by others, the same shall be promptly discharged. Purchaser
has not made any assignment for the benefit of creditors or admitted in writing
insolvency or that its property at fair valuation shall not be sufficient to pay
its debts, nor shall Purchaser permit any final and unappealable judgment,
execution, attachment or levy against it or its properties to remain outstanding
or unsatisfied for more than ten days. Purchaser shall not become "insolvent" as
defined in the UFTA or any other applicable law, as a result of consummating the
transactions contemplated herein, nor shall any of the contemplated transactions
constitute a transfer fraudulent as to Purchaser's present or future creditors
under the UFTA or any other applicable law. Purchaser has the adequate financial
resources and capability to consummate the transactions contemplated herein and
to honor its continuing obligations under this Agreement.
SECTION 3.13 COMPLIANCE. Purchaser holds all Permits, and is in
material compliance with the terms of the Permits. Purchaser is not in violation
of any legal or governmental requirement, except where such a failure to comply
would not have a material affect on Purchaser.
SECTION 3.14 CONTRACTS WITH THIRD PARTIES. Purchaser and its
Affiliates have no contract, agreement, or understanding with a third party
concerning the potential sale of the assets, stock or business acquired under
the terms of this Agreement, or any portion thereof, following the closing.
Page 35
SECTION 3.15 DISCLOSURE. On the date of this Agreement, the
Purchaser has, and at the Closing Date Purchaser will have, disclosed all
events, conditions, and facts materially affecting the business of the
Purchaser. Purchaser has not now and will not have, at the Closing Date,
withheld knowledge of any such events, conditions, and facts which they know, or
have reasonable ground to know, may materially affect the business of the
Purchaser. None of the representations and warranties made by Purchaser in this
Agreement and contained in any certificate or other instrument furnished or to
be furnished to Shareholder pursuant to this Agreement contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary in order to make the statements contained in this
Agreement not misleading.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 CONDUCT OF BUSINESS BY THE COMPANY. Except as required
by applicable law or regulation and except as otherwise contemplated by this
Agreement, until the earlier of the termination of this Agreement or the Closing
Date, the Company shall, and shall cause each of its subsidiaries to, conduct
its and their respective businesses in the ordinary course and consistent with
past practices. Except as set forth in Section 4.1 of the Company Disclosure
Schedule, as required by applicable law or regulation and except as otherwise
contemplated by this Agreement or except as previously consented to by
Purchaser, in writing, after the date hereof and until the earlier of the
termination of this Agreement or the Closing Date, the Company shall not and
shall not permit any of its subsidiaries to:
(a) amend or otherwise change its Certificate of Incorporation
or by-laws;
(b) issue, sell, pledge, dispose of, encumber, or authorize the
issuance, sale, pledge, disposition, grant or encumbrance of (i) any shares of
any class, or options, warrants, convertible securities or other rights of any
kind to acquire shares, or any other ownership interest, thereof, or (ii) any of
its assets, tangible or intangible;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, property or otherwise, with respect to its
shares;
(d) reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its shares;
(e) (i) acquire (including, without limitation, for cash or
shares of stock, by Purchase, consolidation, or acquisition of stock or assets)
any interest in any
Page 36
corporation, partnership or other business organization or division thereof, or
make any investment either by purchase of stock or securities, contributions of
capital or property transfer, or, except in the ordinary course of business,
consistent with past practice, purchase any property or assets of any other
person, (ii) except in the ordinary course of business, incur any indebtedness
for borrowed money or issue any debt securities or assume, guarantee or endorse
or otherwise as an accommodation become responsible for, the obligations of any
person, or make any loans or advances, or (iii) enter into any Company Material
Contract;
(f) make any capital expenditure in excess of $50,000 or enter
into any contract or commitment therefore;
(g) amend, terminate or extend any Company Material Contract;
(h) delay or accelerate payment of any account payable or other
liability of the Company beyond or in advance of its due date or the date when
such liability would have been paid in the ordinary course of business
consistent with past practice; or
(i) agree, in writing or otherwise, to take or authorize any of
the foregoing actions or any action which would make any representation or
warranty contained in Article III untrue or incorrect.
SECTION 4.2 ADVICE OF CHANGES. Each of the Shareholders and the
Company shall promptly advise the Purchaser orally and in writing to the extent
it has knowledge of (i) any representation or warranty made by them contained in
this Agreement that is qualified as to materiality becoming untrue or inaccurate
in any respect or any such representation or warranty that is not so qualified
becoming untrue or inaccurate in any material respect, (ii) the failure by any
of them to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by them under this Agreement; (iii) any suspension,
termination, limitation, modification, change or other alteration of any
material agreement, arrangement, business or other relationship, in any material
respect, with any of the Company's customers, suppliers or sales or design
personnel; or (iv) any change or event having, or which, insofar as reasonably
can be foreseen, could have a material adverse effect on the Company or on the
accuracy and completeness of its representations and warranties or the ability
of the Shareholders or the Company to satisfy the conditions set forth in
Article VII; PROVIDED, HOWEVER, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties (or remedies
with respect thereto) or the conditions to the obligations of the parties under
this Agreement; and PROVIDED FURTHER that a failure to comply with this Section
4.2 shall not constitute a failure to be satisfied of any condition set forth in
Article VII unless the underlying untruth, inaccuracy, failure to comply or
satisfy, or
Page 37
change or event would independently result in a failure of a condition set forth
in Article VII to be satisfied.
SECTION 4.3 NO SOLICITATION BY THE COMPANY.
(a) The Company will promptly notify Purchaser after receipt of
any offer or indication that any person is considering making an offer with
respect to a Company Acquisition Proposal or any request for nonpublic
information relating to the Company or for access to the properties, books or
records of the Company by any person that may be considering making, or has
made, an offer with respect to a Company Acquisition Proposal and will keep
Purchaser fully informed of the status and details of any such offer, indication
or request. "Company Acquisition Proposal" means any proposal for a Purchase or
other business combination involving the Company or the acquisition of any
equity interest in, or a substantial portion of the assets of, the Company,
other than the transactions contemplated by this Agreement.
(b) From the date hereof until the termination hereof pursuant
to Section 8.1, the Company and the officers of the Company will not and the
Company will use its best efforts to cause its directors, employees and agents
not to, directly or indirectly, (i) take any action to solicit, initiate or
encourage any offer or indication of interest from any person or entity with
respect to any Company Acquisition Proposal, (ii) engage in negotiations with,
or disclose any nonpublic information relating to the Company or (iii) afford
access to the properties, books or records of the Company to, any person or
entity that may be considering making, or has made, an offer with respect to a
Company Acquisition Proposal.
SECTION 4.4 CONDUCT OF BUSINESS BY PURCHASER. Purchaser will
conduct its business in substantially the same manner as before.
SECTION 4.5 TRANSITION. To the extent permitted by applicable law,
Purchaser and the Company shall, and shall cause their respective subsidiaries,
affiliates, officers and employees to, use their commercially reasonable efforts
to facilitate the integration of the Company and its subsidiaries with the
businesses of Purchaser and its subsidiaries to be effective as of the Closing
Date.
Page 38
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) The Company and Shareholders shall, and shall cause the
Company's subsidiaries to, afford to Purchaser and to the officers, current
employees, accountants, counsel, financial advisors, agents, lenders and other
representatives of Purchaser, reasonable access during normal business hours
during the period prior to the Effective Date to all the Company's properties,
books, contracts, commitments, personnel and records and, during such period,
shall furnish promptly to Purchaser (i) a copy of each material report,
schedule, registration statement and other document filed by it with any
Governmental Entity, and (ii) all other information concerning its business,
properties and personnel as Purchaser may reasonably request; provided, however,
that prior to the Closing, the Company and the Shareholders shall not be
required to divulge any information precluded from being divulged under the
Confidentiality Agreement between the parties dated as of January 9, 2006, as
amended (the "Confidentiality Agreement"). Notwithstanding any provision to the
contrary contained herein, in no event shall Shareholder be required to disclose
personal or personal financial information unless required by applicable law or
regulation.
(b) The parties will hold, and will use their best efforts to
cause their officers, directors, employees, consultants, advisors and agents to
hold, in confidence, unless compelled to disclose by judicial or administrative
process or by other requirements of law, all confidential documents and
information concerning the other party and its subsidiaries furnished to it in
connection with the transactions contemplated hereby, except to the extent that
such information can be shown to have been (i) previously known on a
nonconfidential basis by the receiving party, (ii) in the public domain through
no fault of the receiving party, or (iii) later lawfully acquired by the
receiving party from other sources; PROVIDED that each party may disclose such
information to its officers, directors, employees, consultants, advisors and
agents in connection with the Purchase so long as such persons are informed of
the confidential nature of such information and are directed to treat such
information confidentially. Each parties' obligation to hold such information in
confidence shall be satisfied if it exercises the same care with respect to such
information as it would exercise to preserve the confidentiality of its own
similar information. Notwithstanding any other provision of this Agreement, if
this Agreement is terminated, such confidentiality shall be maintained and all
confidential materials shall be destroyed or delivered to their owner, upon
request. Notwithstanding any provisions of this Agreement to the contrary, this
Agreement shall not be deemed to supersede, cancel or otherwise alter the
Confidentiality Agreement until the Closing, at which time such Confidentiality
Agreement shall be deemed superseded by the provisions herein.
SECTION 5.2 COMMERCIALLY REASONABLE EFFORTS. Except where
otherwise provided in this Agreement, each party will use its commercially
reasonable efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate the
Page 39
Purchase as soon as practicable after the satisfaction of the conditions set
forth in Article VI hereof, PROVIDED that the foregoing shall not require the
Company or Purchaser to take any action or agree to any condition that might, in
the reasonable judgment of the Company or Purchaser, as the case may be, have a
material adverse effect on the Company or Purchaser, respectively; and FURTHER
PROVIDED, that any action and the cost thereof shall be borne by the party
hereto on which the burden of compliance is placed in order to permit
consummation of the transaction. By way of example and not limitation, if a
Governmental Entity must grant a Requisite Regulatory Approval to a party hereto
to permit said party to consummate this transaction, then said party must bear
the cost and expense including but not limited to attorneys' fees, to attempt to
obtain such Requisite Regulatory Approval, and the other party shall not have to
participate in, contribute or otherwise pay any costs in obtaining such
Requisite Regulatory Approval.
SECTION 5.3 FEES AND EXPENSES. All costs, fees and expenses
incurred in connection with the Purchase, this Agreement (including all
instruments and agreements prepared and delivered in connection herewith), and
the transactions contemplated by this Agreement shall be paid by the party
incurring such fees or expenses.
SECTION 5.4 PUBLIC ANNOUNCEMENTS. Purchaser, Shareholders and the
Company shall consult with each other before issuing, and shall provide each
other the opportunity to review, comment upon and concur with, and shall use
reasonable efforts to agree on, any press release or other public statements or
announcements (including pursuant to Rule 165 under the Securities Act and Rule
14a-12 under the Exchange Act) and any broadly distributed internal
communications with respect to the Purchase, this Agreement and the transactions
contemplated by this Agreement, and shall not issue any such press release or
make any such public statement or announcement prior to such consultation,
except as either party may determine is required by applicable law or court
process (provided prior notice is given to the other party with a copy of any
such disclosure). The parties agree that the initial press releases (or joint
press release if the parties so determine) to be issued with respect to the
Purchase, this Agreement and the transactions contemplated by this Agreement
shall be in the form heretofore agreed to by the parties.
SECTION 5.5 REGULATION D. Each party hereto shall use all
reasonable efforts to cause the shares of Purchaser Common Stock to be issued
hereunder in connection with the Purchase to be issued in accordance with
Regulation D promulgated under the Securities Act. Each party hereto shall
cooperate with the other parties hereto with respect to all filings required
pursuant to Regulation D promulgated under the Securities Act and shall not
knowingly take any action or fail to act to the extent such action or failure to
act would jeopardize the issuance of the shares of Purchaser Common Stock
hereunder in accordance with such Regulation D. Notwithstanding the foregoing,
Shareholder shall not have to expend funds or pay legal fees to undertake the
actions indicated in this Section 5.5.
SECTION 5.6 Intentionally Deleted.
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SECTION 5.7 PURCHASER'S ASSUMPTION AND PAYMENTS OF OBLIGATIONS
PERSONALLY GUARANTEED BY SHAREHOLDERS. Purchaser shall use its reasonable
efforts to obtain the release at Closing of all Shareholder personal guarantees
of Company debts set forth in Section 5.7 of the Company Disclosure Schedule. If
after reasonable efforts such releases cannot be obtained, then Purchaser shall
indemnify and hold Shareholders harmless from any claims and/or liability
arising from such personal guarantees of Shareholders. Purchaser's obligation
under this Section to indemnify and hold Shareholder's harmless from such
guarantees shall not be subject to or limited by the minimum damage amounts and
time limitations for bringing claims which are described in Section 7.1 (b), (c)
and (e) below.
SECTION 5.8 SHAREHOLDERS COVENANT NOT TO COMPETE. Without the
prior written consent of the Purchaser's Chief Executive Officer, for the term
set out in the Consulting and Subcontractor Agreement, Shareholders (i) will
not, directly or indirectly, whether as owner, partner, shareholder, consultant,
agent, employee, co-venturer or otherwise, engage, participate, assist or invest
in any Competing Business (as hereinafter defined); (ii) will refrain from
directly or indirectly employing, attempting to employ, recruiting or otherwise
soliciting, inducing or influencing any person to leave employment with the
Company or Purchaser; and (iii) will refrain from soliciting or encouraging any
customer or supplier to terminate or otherwise modify adversely its business
relationship with the Company or Purchaser. Each of the Shareholders understands
that the restrictions set forth in this Section 5.8 are intended to protect the
Purchaser's and Company's interests in their respective Confidential Information
and established employee, customer and supplier relationships and goodwill, and
agrees that such restrictions are reasonable and appropriate for this purpose.
For purposes of this Agreement, the term "Competing Business" shall mean any
business that provides the same or similar types of services or products as
those currently provided by the Company in any geographic area now served or
targeted by the Company. Notwithstanding the foregoing, each of Shareholders may
own up to two percent (2%) of the outstanding stock of a publicly held
corporation that is engaged in a Competing Business.
Notwithstanding the foregoing, this Section 5.8 shall be null and
void if the Purchaser is in material breach of this Agreement, which is defined
solely for the purposes of this Section 5.8 as (i) nonpayment by Purchaser of
the payment obligation under Section 1.2(a)(1) of this Agreement; (ii)
nonpayment by Purchaser of the Note, (iii) nonpayment by the Purchaser of the
Consulting and Subcontractor Agreement, absent a termination of the Consulting
and Subcontractor Agreement in accordance with its terms which termination
relieves Purchaser of its payment obligations thereunder; (iv) non issuance by
Purchaser of its stock as prescribed in Sections 1.2(a)(2) and 1.2(b) of this
Agreement, (whether to Shareholder or TMC); or (v) if Purchaser or Company files
a petition seeking relief under the liquidation provisions, and only under the
liquidation provisions, of applicable federal or state bankruptcy law, or is
otherwise adjudicated bankrupt under such liquidation provisions of the
bankruptcy law, or consents to the appointment of a liquidator of the Company.
For avoidance of doubt, Purchaser's or
Page 41
Company's filing for relief under any reorganization provisions of applicable
federal or state bankruptcy law shall not render this Section 5.8 null and void.
SECTION 5.9 COMPANY TAX RETURNS; SUBCHAPTER S TERMINATION. The parties
hereto agree that they will give written notice to each other as to any income
tax elections made with regard to this transaction under Section 338(g) of the
Code (a "Section 338 Election"). If Purchaser makes a Section 338 Election,
Purchaser agrees to pay Shareholders immediately as and for an additional amount
hereunder, the amount by which (i) the total federal and state income tax
collectively paid by Shareholders as a result of the receipt of the purchase
price exceeds (ii) the amount of total federal and state income tax which
Shareholders would collectively pay as a result of the receipt of the purchase
price as if no Section 338 Election had been made. The parties agree that the
valuation of certain components of the purchase price may take into account
discounts for lack of marketability, restrictions on transfer or lock up
periods. The parties agree to coordinate the filing of the income tax returns
for 2006, and any such tax treatment, tax computations, and the additional
payments hereunder are subject to review and approval of Shareholders, and
Shareholder's accountant, attorneys and any other persons Shareholders choose to
hire to review or value same, which approval shall not be unreasonably withheld.
The Shareholders shall prepare and file income tax returns on behalf of
the Company for the tax year ended December 31, 2005 (the "2005 Return"), and
for the period beginning January 1, 2006 and continuing through and including
the day immediately prior to the Closing Date (the "Short Year S Return") in a
timely manner. Shareholders shall be responsible for all expenses incurred in
such filings, including, but not limited to, any taxes due pursuant to such tax
returns. From and after the Closing Date, Purchaser agrees to account for and
report the income or loss of the Company as Purchaser deems appropriate.
Purchaser agrees and acknowledges that Purchaser's ownership of the Shares shall
terminate the Company's Subchapter S election.
SECTION 5.10 COMPANY INSURANCE POST CLOSING, Purchaser agrees that, for a
period of not less than five (5) years after the Closing Date, it will cause the
Company to carry or be covered by insurance with coverage and liability limits
not less than those set forth in Section 2.14 of the Company Disclosure Schedule
as being in full force and effect as of the Closing Date.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
PURCHASE. The respective obligation of each party to affect the Purchase is
subject to the satisfaction or, to the extent permitted by applicable law,
waiver by each of Purchaser and the Company on or prior to the Closing Date of
the following conditions:
Page 42
(a) SHAREHOLDER APPROVALS. Each of the Company and Purchaser
shall have obtained the consent of its Board of Directors to the Purchase, this
Agreement and the transactions contemplated hereby as in each case required.
(b) GOVERNMENTAL AND REGULATORY APPROVALS. All consents,
approvals and actions of, filings with and notices to any Governmental Entity
required by the Company, Purchaser or any of their subsidiaries under applicable
law or regulation to consummate the Purchase and the transactions contemplated
by this Agreement, the failure of which to be obtained or made would result in a
material adverse effect on Purchaser's ability to conduct the business of the
Company in substantially the same manner as presently conducted, shall have been
obtained or made (all such approvals and the expiration of all such waiting
periods, the "REQUISITE REGULATORY APPROVALS"), provided that, the party which
is required to procure such Requisite Regulatory Approvals shall bear the cost
of such procurement.
(c) NO INJUNCTIONS OR RESTRAINTS. No judgment, order,
restraining order and/or injunction (temporary or otherwise), decree, statute,
law, ordinance, rule or regulation, entered, enacted, promulgated, enforced or
issued by any court or other Governmental Entity or other legal restraint or
prohibition (collectively, "RESTRAINTS") shall be in effect preventing or
materially delaying the consummation of the Purchase; PROVIDED, HOWEVER, that
each of the parties shall have used its commercially reasonable efforts to have
such Restraint lifted, vacated or rescinded, and; provided, further, that such
efforts shall be all at the sole cost and expense of the party hereto which is
the subject of the Restraint.
SECTION 6.2 CONDITIONS TO OBLIGATIONS OF PURCHASER . The
obligation of Purchaser to affect the Purchase is further subject to
satisfaction or waiver as part of Closing or on or prior to the Closing Date of
the following conditions:
(a) REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
representations and warranties of the Company set forth herein and in the
Company Disclosure Schedule shall be true and correct in all material respects
at and as of the Closing Date, as if made at and as of such time (except to the
extent expressly made as of an earlier date, in which case such representations
and warranties shall be true and correct as of such date). Purchaser shall have
received a certificate of the Company's Chief Executive Officer and Treasurer to
the foregoing effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company and
the Shareholders shall have performed in all material respects all obligations
required to be performed by them at or prior to the Closing Date under this
Agreement. Purchaser shall have received a certificate of the Company's Chief
Executive Officer and Treasurer to the foregoing effect.
Page 43
(c) REGULATORY CONDITION. No condition or requirement shall
have been imposed by one or more Governmental Entities in connection with any
required approval by them of the Purchase that requires the Company or any of
its subsidiaries to be operated in a manner that would have a material adverse
effect on the Company.
(d) NO COMPANY MATERIAL ADVERSE EFFECT. There shall not be or
exist any change, effect, event, circumstance, occurrence or state of facts that
has had, has or which reasonably could be expected to have, a material adverse
effect on the Company.
(e) INTENTIONALLY DELETED.
(f) CONSULTING AND SUBCONTRACTOR AGREEMENT. TMC and Company
shall have executed the Consulting and Subcontractor Agreement procuring the
services of Joseph J. Graziano to be furnished to Company, all in the form
attached hereto as EXHIBIT B.
(g) REGISTRATION RIGHTS AGREEMENT. Purchaser and the
Shareholders shall have entered into a Registration Rights Agreement in the form
attached hereto as Exhibit C (the "Registration Rights Agreement").
(h) SATISFACTORY COMPLETION OF DUE DILIGENCE. Purchaser shall
have completed to its satisfaction legal, accounting and business due diligence
as to the Company.
(i) RESIGNATION OF DIRECTORS. There shall have been delivered
to Purchaser the written resignations of the directors of the Company.
(j) CERTIFICATE OF GOOD STANDING. Purchaser shall have received
prior to or at the Closing a certificate of good standing regarding the Company
from the Secretary of State of the State of Illinois dated not more than fifteen
(15) days prior to Closing.
(k) LEGAL OPINION. Purchaser shall have received an opinion of
attorney Jeffrey Hucek, counsel to the Company and Shareholders, in
substantially the form attached hereto as Exhibit D.
SECTION 6.3 CONDITIONS TO OBLIGATIONS OF THE SHAREHOLDERS. The
obligation of the Shareholders to affect the Purchase is further subject to
satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Purchaser set forth herein and in the Purchaser Disclosure
Schedule shall be
Page 44
true and correct in all material respects at and as of the Closing Date, as if
made at and as of such time (except to the extent expressly made as of an
earlier date, in which case such representations and warranties shall be true
and correct as of such date). The Company shall have received a certificate of
Purchaser's Chief Executive Officer and Chief Financial Officer to the foregoing
effect.
(b) PERFORMANCE OF OBLIGATIONS OF PURCHASER. Purchaser shall
have performed in all material respects all obligations required to be performed
by it at or prior to the Closing Date under this Agreement. The Company shall
have received a certificate of Purchaser's Chief Executive Officer and Chief
Financial Officer to the foregoing effect.
(c) REGULATORY CONDITION. No condition or requirement shall
have been imposed by one or more Governmental Entities in connection with any
required approval by them of the Purchase that requires Purchaser or any of its
subsidiaries to be operated in a manner that would have a material adverse
effect on Purchaser.
(d) NO PURCHASER MATERIAL ADVERSE EFFECT. There shall not be or
exist any change, effect, event, circumstance, occurrence or state of facts that
has had, has or which reasonably could be expected to have, a material adverse
effect on Purchaser.
(e) CONSULTING AND SUBCONTRACTOR AGREEMENT. TMC, Company and
Purchaser shall have executed the Consulting and Subcontractor Agreement
procuring the services of Joseph J. Graziano to be furnished to Purchaser or
Company, all in the form attached hereto as EXHIBIT B.
(f) LEGAL OPINION. Shareholder shall have received an opinion
of counsel to the Purchaser, attorney Reed Guest, in substantially the form
attached hereto as Exhibit E.
(g) REGISTRATION RIGHTS AGREEMENT. Purchaser and the
Shareholders shall have entered into the Registration Rights Agreement in the
form attached hereto as Exhibit C.
(h) CERTIFICATE OF GOOD STANDING. Shareholder shall have
received prior to or at the Closing a certificate of good standing regarding the
Purchaser from the Secretary of State of the State of Nevada dated not more than
fifteen (15) days prior to Closing.
SECTION 6.4 FRUSTRATION OF CLOSING CONDITIONS. Neither Purchaser
nor the Company may rely on the failure of any condition set forth in Section
6.1, 6.2 or 6.3, as the case may be, to be satisfied if such failure was caused
by such party's failure to use its own commercially reasonable efforts to
consummate the Purchase and the other transactions contemplated by this
Agreement, as required by and subject to Section 5.2.
Page 45
ARTICLE VII
INDEMNIFICATION; ARBITRATION
SECTION 7.1. INDEMNIFICATION.
(a) Subject to the limitations and compliance with the
procedure set forth herein and in Section 7.2 below, Purchaser and its officers,
directors and Affiliates (the "Purchaser Indemnified Parties") shall be
indemnified and held harmless by the Shareholders, and each of them, jointly and
severally, against all claims, losses, liabilities, damages, deficiencies, costs
and expenses, including reasonable attorneys' fees and expenses of investigation
(hereinafter individually a "Purchaser Loss" and collectively "Purchaser
Losses") incurred by the Purchaser Indemnified Parties directly or indirectly as
a result of: (i) any inaccuracy of a representation or warranty of Shareholders
contained in this Agreement, (ii) any agreement between Graziano and/or the
Company and Walter Lang ("Lang"), Michael Simms ("Simms") and/or Vince Buscareno
("Buscareno") for the distribution of any proceeds of a sale of the Company or
the agreements between Graziano, TMC, the Company, and the aforesaid individuals
which purport to replace any such earlier agreements and (iii) any failure by
Shareholders to perform or comply with any covenant contained in this Agreement;
PROVIDED that, except as specifically provided above, no Purchaser Indemnified
Party shall be entitled to receive indemnification payments under clauses (i)
and (iii) above with respect to any Purchaser Loss unless and until the
aggregate deductible amount of the Purchaser Losses exceeds $100,000.00 and then
only to the extent of the Purchaser Losses in excess of such aggregate amount;
and PROVIDED FURTHER that in determining the amount of any Purchaser Losses
suffered by any Purchaser Indemnified Party which give rise to liability of
Shareholders hereunder, there shall have been taken into account (x) the amount
of any tax benefits actually realized by such Purchaser Indemnified Party
attributable to such Purchaser Losses or derived therefrom in any period to and
including the end of the taxable year following the year in which the Purchaser
Losses were incurred; and (y) the amount of any insurance benefits actually
realized by such Purchaser Indemnified Party attributable to such Purchaser
Losses or derived therefrom. At the Shareholders' sole option, the Shareholders
may pay any indemnification amount that may become due and payable for any
Purchaser Losses hereunder (i) by directing Purchaser to first set off such
amount against the amount of unpaid principal and interest under the Promissory
Note in the inverse order of their maturities (i.e., without interrupting
Purchaser's obligations to pay the unpaid principal and interest installments on
their scheduled due dates); and, in the event that the aggregate amount of any
such indemnification liability exceeds the amount of unpaid principal and
interest under the Promissory Note, then, and only then, the Shareholders may
satisfy such excess indemnification amount (ii) by using shares of Parent Common
Stock, without any discounts for brokerage or underwriting commissions. The per
share value of such shares
Page 46
for purposes of this Section 7.1(a) shall be the closing price of Purchaser
Common Stock on the Closing Date.
(b) Shareholders (the "Seller Indemnified Parties") shall be
indemnified and held harmless by Purchaser against all claims, losses,
liabilities, damages, deficiencies, costs and expenses, including reasonable
attorneys' fees and expenses of investigation (hereinafter individually a
"Seller Loss" and collectively "Seller Losses") incurred by the Seller
Indemnified Parties directly or indirectly as a result of: (i) any inaccuracy of
a representation or warranty of Purchaser contained in this Agreement or (ii)
any failure by Purchaser to perform or comply with any covenant contained in
this Agreement; provided, that the Seller Indemnified Parties shall not be
entitled to receive indemnification payments with respect to any Seller Loss
under (i) or (ii) above unless and until the aggregate deductible amount of the
Seller Losses exceeds $100,000.00 and then only to the extent of such Seller
Losses in excess of such aggregate amount; provided, however, such aggregate
deductible amount shall not apply to Purchaser's failure to make payments under
Section 1.2(a)(1) hereof, under the Note, or under the Consulting and
Subcontractor Agreement, so long as there has been no termination of the
Consulting and Subcontractor Agreement in accordance with its terms which would
relieve Purchaser of its payment obligations thereunder, or to Purchaser's
obligation to issue its Common Stock in accordance with the provisions of
Sections 1.2(a)(2) and 1.2(b) of this Agreement. In determining the amount of
any Seller Losses suffered by any Seller Indemnified Party which give rise to
liability of Purchaser hereunder, there shall have been taken into account (x)
the amount of any tax benefits actually realized by such Seller Indemnified
Party attributable to such Seller Losses or derived therefrom in any period to
and including the end of the taxable year following the year in which the Seller
Losses were incurred; and (y) the amount of any insurance benefits actually
realized by such Seller Indemnified Party attributable to such Seller Losses or
derived therefrom.
(c) Notwithstanding anything to the contrary herein,
Shareholders' representations and warranties made herein, Shareholders'
indemnification obligations for Purchaser Losses incurred by the Purchaser
Indemnified Parties directly or indirectly as a result of any inaccuracy of a
representation or warranty of Shareholders contained in this Agreement, or any
failure by Shareholders to perform or comply with any covenant contained in this
Agreement, shall all terminate on April 13, 2008 and in all events the aggregate
of all claims for indemnity by Purchaser Indemnified Parties under this
Agreement shall be limited to and not exceed the actual purchase price paid to
Shareholders. Notwithstanding anything to the contrary herein, Purchaser's
representations and warranties made herein, Purchaser's indemnification
obligations for Seller Losses incurred by the Seller Indemnified Parties
directly or indirectly as a result of any inaccuracy of a representation or
warranty of Purchaser contained in this Agreement, or any failure by Purchaser
to perform or comply with any covenant contained in this Agreement, shall all
terminate on April 13, 2008.
(d) Anything herein to the contrary notwithstanding, and in all
events, any claim for indemnification under this Agreement, whether as a
Purchaser Loss, Purchaser Losses, Seller Loss or Seller Losses, shall be
strictly limited to direct, actual
Page 47
damages, out-of-pocket costs, out-of-pocket expenses and out-of-pocket
deficiencies arising out of, based upon or otherwise in respect of such breach
or claim and shall in no event include special, consequential or punitive
damages of any kind or nature arising out of or in connection with this
Agreement, including but not limited to, loss of data or loss of business
opportunities, even if one party hereto has been advised by the other party of
same or is aware of the possibility of such damages.
(e) Notwithstanding anything to the contrary herein, the
existence of this Article VII and of the rights and restrictions set forth
herein do not limit any legal remedy for claims based on common law fraud.
(f) Any claim for the recovery of Seller Losses or Purchaser
Losses shall be made by giving notice thereof in accordance with Section 7.2
below and, such notice shall be given prior to April 13, 2008.
(g) Anything in this Agreement to the contrary notwithstanding,
and in all events, prior to asserting any claim pursuant to the preceding
provisions, the party seeking indemnification shall file, or cause to be filed,
a claim with respect to the liabilities in question under any applicable
insurance policies maintained by such party.
SECTION 7.2 CLAIMS AND PROCEDURE
(a) Claims. Whenever any claim shall arise for indemnification, the
party seeking indemnification hereunder (the "INDEMNIFIED PARTY") shall notify
the party or parties from whom indemnification is sought (collectively, the
"INDEMNIFYING PARTY") of the claim pursuant to SECTION 7.2 (c) hereunder and,
when known, the facts constituting the basis for such claim and the amount or
estimate of the amount of the liability arising from such claim. The indemnified
party shall not settle or compromise any claim by a third party for which the
indemnified party is entitled to indemnification hereunder without the prior
written consent of the indemnifying party unless (i) suit shall have been
instituted against the indemnified party and (ii) the indemnifying party shall
not have taken control of such suit as provided in SECTION 7.2 (b) within 25
days after notification thereof.
(b) Defense by Indemnifying Party. In connection with any claim giving
rise to indemnity hereunder resulting from or arising out of any claim or legal
proceeding by a third party, the indemnifying party, at its sole cost and
expense, may, upon written notice to the indemnified party, assume the defense
of any such claim or legal proceeding. If the indemnifying party assumes the
defense of any such claim or legal proceeding, the indemnifying party shall
select counsel reasonably acceptable to the indemnified party to conduct the
defense of such claims or legal proceedings and at the indemnifying party's sole
cost and expense shall take all reasonable steps necessary in the defense or
settlement thereof. The indemnifying party shall not consent to a settlement of,
or the entry of any judgment arising from, any such claim or legal proceeding,
without the prior written consent of the indemnified party, which consent shall
not be unreasonably withheld, conditioned or delayed, if (a) the indemnifying
party admits in writing its liability to hold the indemnified party harmless
from and against any losses,
Page 48
damages, expenses and liabilities arising out of such settlement, (b)
concurrently with such settlement the indemnifying party pays into court the
full amount of all losses, damages, expenses and liabilities to be paid by the
indemnifying party in connection with such settlement and obtains a full release
of any liability of the indemnified party which is not conditioned upon any
further payment and (c) such settlement would not otherwise have a material
adverse effect on the indemnified party. The indemnified party shall be entitled
to participate in (but not control) the defense of any such action, with its own
counsel and at its own expense. If the indemnifying party does not assume the
defense of any such claim or litigation resulting therefrom in accordance with
the terms hereof, the indemnified party may defend against such claim or
litigation in such manner as it may deem appropriate including, but not limited
to, settling such claim or litigation, after giving notice of the same to the
indemnifying party, on such terms as the indemnified party may deem appropriate.
The indemnifying party shall be required to participate in the defense of any
action by providing information necessary to permit the indemnified party to
defend such action as indicated in (d) below and shall be advised of its status.
In any action by the indemnified party seeking indemnification from the
indemnifying party in accordance with the provisions of this Section, if the
indemnifying party did not assume the defense of any such claim or litigation,
the indemnifying party shall not be entitled to question the manner in which the
indemnified party defended such claim or litigation or the amount or nature of
any such settlement.
(c) Notice. In the event of any occurrence which may give rise to a
claim by an indemnified party against an indemnifying party hereunder, the
indemnified party will give notice thereof to the indemnifying party within 20
days of the indemnified party becoming aware of events giving rise to the
possibility of a right to indemnification and the first opportunity to reduce,
remedy or incur the damages or potential damages caused by such occurrence;
PROVIDED, HOWEVER, that failure of the indemnified party to timely give the
notice provided in this SECTION 7.2 (c) shall not be a defense to the liability
of an indemnifying party for such claim, but such indemnifying party may recover
from the indemnified party any actual damages arising from the indemnified
party's failure to give such timely notice; provided, further that Purchaser may
take preemptive legal action of a pressing nature, with respect to a third party
Claim, only after providing notice to the Shareholders in the manner provided
for in Section 9.2 hereof.
(d) Access to Information. Regardless of which party shall assume the
defense of a claim, each party shall provide to the other parties, upon written
request, all information and documentation in the possession or control of such
party and reasonably necessary to support and verify any Purchaser or Seller
Losses which give rise to such claim for indemnification and shall provide
reasonable access to all books, records and personnel in such party's possession
or control which would have a bearing on such claim.
(e) Tax Audits. Notwithstanding any provision to the contrary
contained herein, in all events Shareholder shall be permitted to retain legal
counsel, accountants, and any and all professional assistance Shareholder
desires, (all at Shareholder's sole cost and expense) to defend against any
audits involving taxes relating to the time during which Shareholder owned the
Company. Purchaser agrees to give Seller notice in the event Purchaser has
received notice of any such tax audit.
Page 49
SECTION 7.3 ARBITRATION. Any dispute, controversy or claim arising
out of or relating to this Agreement (a "Dispute"), shall be settled by binding
arbitration. Any such arbitration proceeding shall be conducted by one
arbitrator mutually agreeable to Shareholders and Purchaser. In the event that
within 45 days after submission of any Dispute to arbitration, Shareholders and
Purchaser cannot mutually agree on one arbitrator, Shareholders and Purchaser
shall each select one arbitrator, and the two arbitrators so selected shall
select a third arbitrator who will arbitrate the case on his own. The agreed
upon arbitrator or the third arbitrator, as the case may be, shall set a limited
time period and establish procedures designed to reduce the cost and time for
discovery while allowing the parties an opportunity, adequate in the sole
judgment of the arbitrator or third arbitrator, as the case may be, to discover
relevant information from the opposing parties about the subject matter of the
Dispute. The arbitrator or the third arbitrator, as the case may be, shall rule
upon motions to compel or limit discovery and shall have the authority to impose
sanctions, including attorneys' fees and costs, to the same extent as a
competent court of law or equity, should the arbitrator or third arbitrator, as
the case may be, determine that discovery was sought without substantial
justification or that discovery was refused or objected to without substantial
justification. The decision of the arbitrator shall be binding and conclusive
upon the parties to this Agreement. Such decision shall be written and shall be
supported by written findings of fact and conclusions which shall set forth the
award, judgment, decree or order awarded by the arbitrator(s). Judgment upon any
award rendered by the arbitrator(s) may be entered in any court having
jurisdiction. Any such arbitration shall be held in Denver, Colorado or Chicago,
Illinois, under the rules then in effect of Judicial Arbitration and Mediation
Services. The substantially non-prevailing party shall pay all expenses relating
to the arbitration, including without limitation, the respective expenses of
each party, the fees of each arbitrator and applicable administrative fees.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 TERMINATION. This Agreement may be terminated at any
time prior to April 17, 2006 by mutual written consent of Purchaser and the
Shareholders.
SECTION 8.2 EFFECT OF TERMINATION.
(a) If this Agreement is terminated as provided in Section 8.1,
this Agreement forthwith shall become void and have no effect, without any
liability or obligation on the part of Purchaser or the Shareholders; PROVIDED,
HOWEVER, that nothing herein shall relieve any party from any liability (in
contract, tort or otherwise, and whether pursuant to an action at law or in
equity) for any knowing or willful breach by such party of any of its
representations, warranties, covenants or agreements set forth in this Agreement
or in respect of fraud by any party. Notwithstanding the foregoing, the
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provisions of this Article VIII, Section 5.1(b), Section 5.3, Section 5.4,
Section 9.8 and Section 9.11 shall survive any termination of this Agreement.
(b) Anything in this Agreement to the contrary notwithstanding,
if any of the conditions specified in Article VI hereof for its benefit have not
been satisfied, Purchaser, Shareholder or the Company (as applicable) shall have
the right to waive the satisfaction thereof and to proceed with the transactions
contemplated hereby.
SECTION 8.3 AMENDMENT. This Agreement may be amended by the
parties at any time. This Agreement may not be amended except by an instrument
in writing signed on behalf of all of the parties to be bound thereby.
SECTION 8.4 EXTENSION; WAIVER. At any time prior to the Closing, a
party may (a) extend the time for the performance of any of the obligations or
other acts of the other party, (b) waive any inaccuracies in the representations
and warranties of the other party contained in this Agreement or in any document
delivered pursuant to this Agreement or (c) subject to the provisions of Section
8.3, waive compliance by the other party with any of the agreements or
conditions contained in this Agreement. Any agreement on the part of a party to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of such rights.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. The representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Closing Date
for a period of one (1) year. This Section 9.1 shall not limit any covenant or
agreement of the parties which by its terms contemplates performance after the
Closing Date.
SECTION 9.2 NOTICES. All notices, requests, claims, demands and
other communications under this Agreement shall be in writing and shall be
deemed given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) If to Purchaser, to:
Incentra Solutions, Inc.
1140 Pearl Street
Boulder, Colorado 80302
Fax No.: (303) 440-7114
Attention: Thomas P. Sweeney III
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with a copy (which shall not constitute notice pursuant to this
Section 9.2) to:
Reed Guest, Esq.
94 Underhill Road
Orinda, CA 94563
Fax No.: (925) 254-9226.
(b) if to the Shareholders, to:
Joseph J. Graziano
2050-80 Finley Road
Lombard, Illinois 60148
with a copy (which shall not constitute notice pursuant to this
Section 9.2) to:
Jeffrey Hucek, Esq.
1900 Spring Road, Suite 200
Oak Brook, IL 60523
Fax No.: 630.586.9610
Telephone No. 630.586.9600
SECTION 9.3 DEFINITIONS. For purposes of this Agreement:
(a) an "AFFILIATE" of any person means another person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first person, where
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management policies of a person, whether through
the ownership of voting securities, by contract, as trustee or executor, or
otherwise.
(b) Intentionally deleted;
(c) "ENCUMBRANCES" shall mean Liens, security interests, deeds
of trust, encroachments, reservations, orders of Governmental Entities, decrees,
judgments, contract rights, claims or equity of any kind.
(d) "KNOWLEDGE" means, (i) with respect to the Shareholders,
the actual knowledge after reasonable due inquiry of Joseph J. Graziano, Vincent
Buscarino, Devin
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Nomakowski, and Dayna Berkery; and (ii) with respect to Purchaser, the actual
knowledge after reasonable due inquiry of any of Purchaser's executive officers.
(e) "MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT"
means, when used in reference to the Company or Purchaser, any change, effect,
event, circumstance, occurrence or state of facts that is, or which reasonably
could be expected to be, materially adverse to the business, assets,
liabilities, condition (financial or otherwise), cash flows or results of
operations of such party and its subsidiaries, considered as an entirety.
(f) "PERSON" means an individual, corporation, partnership,
limited liability company, joint venture, association, trust, unincorporated
organization or other entity.
(g) a "SUBSIDIARY" of any person means another person, an
amount of the voting securities, other voting ownership or voting partnership
interests of which is sufficient to elect not less than a majority of its Board
of Directors or other governing body (or, if there are no such voting interests,
50% or more of the equity interests of which) is owned directly or indirectly by
such first person.
SECTION 9.4 INTERPRETATION. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." The words "hereof," "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. The parties have participated jointly in the negotiation and drafting
of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement.
SECTION 9.5 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties. A facsimile copy of a
signature page shall be deemed to be an original signature page.
SECTION 9.6 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement (including the documents and instruments referred to herein, but
excluding the Confidentiality Agreement to the extent stated herein) (a)
constitutes the entire agreement, and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter of this Agreement, and; (b) except for the provisions of Section
6.4 which shall inure to the benefit of and be enforceable by the persons
referred to therein, are not intended to confer upon any person
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other than the parties any rights or remedies; and (c) all Exhibits and
Schedules to this Agreement are incorporated into this Agreement by reference.
SECTION 9.7 GOVERNING LAW. This Agreement shall be governed by,
and construed in accordance with, the internal substantive and procedural laws
of the State of Illinois, regardless of the laws that might otherwise govern
under applicable principles of conflicts of law of such state.
SECTION 9.8 ASSIGNMENT. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties hereto
without the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.
SECTION 9.9 CONSENT TO JURISDICTION. Each of the parties hereto
(a) consents to submit itself to the personal jurisdiction of any State or
Federal court located in the State of Colorado in the event any dispute arises
out of this Agreement or any of the transactions contemplated by this Agreement
and arbitration is first demanded or suit is first filed by Purchaser, (b)
consents to submit itself to the personal jurisdiction of any Federal court
located in the State of Illinois in the event any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement and
arbitration is first demanded or suit is first filed by Shareholders, (c) agrees
that it will not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court, and (d) agrees that it will not
bring any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than a court as provided in
(a) above with respect to claims by Purchaser or (b) with respect to claims by
Shareholders. The parties irrevocably and unconditionally waive any objection to
the laying of venue of any action, suit or proceeding arising out of this
Agreement or any of the transactions contemplated by this Agreement in any State
or Federal court as provided above, and hereby further irrevocably and
unconditionally waive and agree not to plead or claim in any such court that any
such action, suit or proceeding brought in any such court has been brought in an
inconvenient forum.
SECTION 9.10 HEADINGS. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 9.11 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the fullest
extent permitted by applicable law in a reasonably acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible.
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SECTION 9.12 ENFORCEMENT10.9 . The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement, this being in addition
to any other remedy to which they are entitled at law or in equity. If any
litigation or arbitration shall be commenced to enforce, or relating to, any
provision of this Agreement, the prevailing party shall be entitled to an award
of reasonable attorneys fees and reimbursement of such other costs as it incurs
in prosecuting or defending such litigation. For purposes of this section,
"prevailing party" shall include a party awarded injunctive relief or a party
prevailing based upon final, unappealable order.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, Shareholders, and Purchaser have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
INCENTRA SOLUTIONS, INC.
By /s/ Thomas P. Sweeney III
-------------------------
Name: Thomas P. Sweeney III
Title: Chief Executive Officer
SHAREHOLDERS:
/s/ Joseph Graziano
-------------------
Joseph J. Graziano
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